profiling in an esbrs perspective essnet workshop / esbrs session 3/12/2012

Pierre TeilletCoordinator

a Eurostat project, a partnership of:

Profiling in an ESBRs perspective

ESSnet workshop / ESBRs session 3/12/2012

ESSnet Workshop / ESBRs session 3/12/201222

Overview of presentation

Main objectives of profiling slide 3

Modelling the process (summary) slides 4 to 9

Profiling and registers slides 10 to 14

Annexes slides 15 to 34


Main objectives of the ESSnet Profiling

“To see more clearly the whole elephants” i.e to understand the global structure of a group and its national parts

the ESSnet Profiling has been initially assigned to prepare, for the future, to:

describe consistently the same GEG in all EU+EFTA countries => “enterprises” linked between countries,presently through the EGR

support efficient data collection through surveys (SBS, FATS, FDI, STS) + admin-type data => a system of statistical units for all business statistics

for direct dissemination and indirect use (National accounts etc) => most statistical productions concerned

and now, perhaps, to: allow for a good description of the global value chains


Like in the tale, a multinational is an elephant for “blind statisticians”

ESSnet Workshop / ESBRs session 3/12/20125 Riga Consistency workshop5

What description of a complex multinational? Example of Bolloré (2009)


Profiling : a process

Profiling is a method:

to analyse the legal – operational – accounting structure of a Global Enterprise Group (GEG)

in order to establish - the statistical units within this group :Global ENterprises (GENs)

Truncated ENterprises (TENs)

- their links with the Legal Units (LeUs)

validate they are efficient structures for the collection of statistical data


Profiling : a process => that also helps to structure the BRs

Profiling is a method:

to analyse the legal – operational – accounting structure of a Global Enterprise Group (GEG) => top / down

analysis

in order to establish - the statistical units within this group :Global ENterprises (GENs) => conceptually multinational & autonomous

Truncated ENterprises (TENs) => their pure national part

- their links with the Legal Units (LeUs)

validate they are efficient structures for the collection of statistical data

and include “enterprises” (GENs / TENs) in a “global / national” System of Statistical Units

ESSnet Workshop / ESBRs session 3/12/201288 8

Profiling process applied to Bolloré

GEN 1

GEN 2

GEN 3

GEN 4

GEN 5

GEN 6 & 7

GEN 8

Minority ownership => incl. in quasi-ent

Quasi-Ent 9


Profiling process result: a “global / national” system of Statistical Units

Economic/statistical world (global)

Global Enterprise group

Legal Unit

Legal/administrative world (global)

Local (legal) unit

Global Enterprise

Local unit

Economic/statistical world (sub-global)

Truncated Enterprise group

Truncated Enterprise

Local unit

Legal/administrative world (sub-global)

Legal or operational unit (sub global)

Local unit legal or operational

SPE SPE

Global level

Step 1

Step 2

Step 1 bis

Step 3

the order of steps is strategic

Step 4 ??

National level


Profiling model and SBR: practice Common SU definition with Consistency Applicable to purely domestic enterprise groups; Intensive / light profiling according to size and complexity

Linkages with: - the enterprise group register (EGR), that is at the beginning and is

the efficient store for “enterprise” statistical units;

- the Legal Units registers (administrative and/or statistical): LeUs perimeter of the profiled GEGs / links to the GENs/TENs;

- the local units (economic viewing);

Tested ability to collect data at both levels: GENs and TENs

Comments, validation and agreement (looked for): - from the partnering EU+EFTA NSIs (countries where the GEG operates);- from the GEG itself

“Light profiling” (LP) method will be specified in more details later on.(will include desk profiling; probable intense links with O-FATS; light contacts with the

GEG; cooperation work between NSIs to be studied)


Profiling model and SBR: practice Common SU definition with Consistency =>enables EU countries comparability Applicable to purely domestic enterprise groups; => use in National BRs Intensive / light profiling according to size and complexity

=> enables feasibility (cost efficiency)Linkages with:

- the enterprise group register (EGR), that is at the beginning and is the efficient store for “enterprise” statistical units; => enables EU aggregates

- the Legal Units registers (administrative and/or statistical): LeUs perimeter of the profiled GEGs / links to the GENs/TENs; => enables use of ADMIN data

- the local units (economic viewing); => enables use of other data (social, environmental / survey, ADMIN) Tested ability to collect data at both levels: GENs and TENs

Comments, validation and agreement (looked for): - from the partnering EU+EFTA NSIs (countries where the GEG operates);- from the GEG itself

“Light profiling” (LP) method will be specified in more details later on.(will include desk profiling; probable intense links with O-FATS; light contacts with the

GEG; cooperation work between NSIs to be studied)


Profiling model & admin/commercial registers: a path?

Use of IFRS consolidation-type accounting data from the GEG:- global control perimeter (LeUs), - highest level of consolidation,- consolidation perimeter,- operating segments as starting points for enterprises- a set of “core variables” derived from the P&L by nature and from some data of the financial statement.

Exchange for comments, validation and agreement with the NSIs of the other EU+EFTA countries where the GEG is located.

“Light profiling” (LP) method will be specified in more details later on.(will include desk profiling; probable intense links with O-FATS; light contacts

with the GEG; cooperation work between NSIs to be studied)


Profiling model & admin/commercial registers: a path?

Use of IFRS consolidation-type accounting data from the GEG:- global control perimeter (LeUs), => links to financial supervisory data- highest level of consolidation, => close to the UCI - consolidation perimeter, - operating segments as starting points for enterprises- a set of “core variables” derived from the P&L by nature and from some data of the financial statement.

=> works like a consistent EU+EFTA global ADMIN sourceExchange for comments, validation and agreement with the NSIs of the other EU+EFTA countries where the GEG is located.

=> towards consistency of SUs in the E U

“Light profiling” (LP) method will be specified in more details later on.(will include desk profiling; probable intense links with O-FATS; light contacts

with the GEG; cooperation work between NSIs to be studied)


Thank you for our cooperation

Comments and questions are welcome

[email protected]


Annexes


UCI NSI (profiling) GEG

Partnering NSI

DEFINE GEN AND TEN

ASSESS TEN

Suitability to produce national statistics

Three main partners : “UCI NSI”, “Partnering NSIs” and the GEG


A cooperative and integrated process between NSIs

For the NSI of the UCI (leading profiler):- check the global perimeter of the GEG, - visit the GEG,- propose GENs and TENs in agreement with the GEG - link the GENs with legal units (can be “m to n” links), - send the resulting TENs to partnering NSIs and discuss with them,- check at EU level (then at national level) the ability to produce adequate statistics : SBS, STS, FATS, FDI.

For the partnering NSIs : - receive proposed TENs (and links with leUs) from the leader NSI- validate them (existence, LeUs contents, ability for data collection, agreement from the national managers) - accept or re-discuss them with the leading NSI,

Leading to an eventual new round of discussion with the GEG which is a major actor in the process

« networking » the global and national statistical unitsSpecific tasks to adequate actors : “NSI of the UCI” / “partnering NSIs”

Each NSI plays alternatively the 2 roles


GEG Visit : an important part of the cooperative process

Statistician requests

Global perimeter of the GEG/Profiling- perimeter of the GEG (consolidation perimeter or list of the controlled affiliates) - Number and name of GENs and TENs (IFRS 8 as a starting point)

Ability to produce consistent data at these levels- Ability for the GEG to produce at UCI level/country level “core variables”- Ability to produce SBS variables (SBS are main providers of NA). - Ability to produce other variables such as STS.- Special attention to outward-FATS statistics, that operate at Group level on “country Nace CODE” a concept close to “enterprises” in most cases

GEG requests- they know better financial and accounting data than any other- they ask for a priority list and for a common list of variables (“core variables”?)- they ask for common questionnaires to all European countries ; - When consolidation is centralised they prefer to provide consistent information for each country at UCI level than at country level.

priority to value added components in an accounting shape, + employment = “the core variables”


3 options discussed to collect core variables at TEN level

At this stage we propose 3 options : 1 & 2 for large, 3 for smaller GEGs

Opt 1 Opt 2 Opt 3

Desk profiling by the UCI NSI + involvment and agreement of the

GEG + agreement of the partnering countries

Idem V1

Desk profiling + incl.O-FATS type information

+ agreement of the partnering countries

+ results sent to the GEG for remarks (disagreement?)

Common perimeters of GEG in terms of LeUs + common GENs +

TENs defined and listed commonly (if more TENs, then

more GENs)

Idem V1

Common perimeters of GEG in terms of LeUs

+ common GENs + TENs agreed (eventualy

specific national TENs added)

Ability to produce significant data tested.

Core variables produced "top-down" for all concerned countries

by the UCI HQ officials of the GEG

Ability to produce significant data tested positively (consistent

answers possible)> T/O and employment gathered

from the UCI > other core variables gathered

at country level

All core variables collected nationaly;

or T/O and employment collected centraly at GENs level

referred to as "option E" in the Feasiblity study

referred to as "option D" in the Feasiblity study

Is it not the standard "light profiling" ?


A cooperative process to share and exchange information on ProfilingA set of common tools presently tested :

+ Guidelines to propose a shared methodological framework for profiling

Profiling Template + metadata - using the EGR as the starting point to enable the match with profiling; - complementing it by 2 sets of “profiling variables” (UCI NSI / partnering NSIs)

Profiling Report- populated by the NSI of the UCI - to sum up the main characteristics of the GEG and of the profiling process

Timing Model:- to assess the time spent to profile and fill the templates of each profiled GEG - to prepare a cost model.

Excel files populated by both “UCI NSI” and “partnering NSIs” (e-Damis). An “IPT” webplatform currently developed in order to ease and improve

the exchange of profiling information between NSIs. The IPT to be interlinked with the EGR platform


Profiling intends to be part of the European system of BRs:

EGR is the “starting point” and the “foreseen store” for profiling: - it allows to list the GEGs to profile,

- if provides the initial perimeter in Legal Units,- it allows to display economic “enterprise units” and to link them between NSIs.

BUT it happens difficult to match EGR and profiling perimeters

First tests reveal specific issues to be discussed :- discrepancies between EGR and the profiling perimeters:

1- EGR : as calculated from financial links files;2- Profiling : as using GEG perimeters (Consolidated and/or controlled LeUs);

- year base differences: GEGs perimeter usually more recent than EGR.

Examples (Annex) illustrate this and the potential improvement of EGR by Profiles.

It raises the question of the best priority for“authentic source” in checking the perimeters of the GEG


IFRS and other topics relating to GEGs

-Adoption of IFRS as a common language between statisticians and GEGs Very convenient and useful, under respect of some constraints :

1- Dissemination standards: We need at least the details figures (“blocks”) which enable to “build” added value.

In some cases, IFRS displayed accounts are very poorly detailed.

2- Information by nature for present statistics:Many GEGs published only P&L by large functions (sales / cost of sales; distribution costs,

administrative costs…), not by nature (purchases, employees costs, other external costs …).

Insistance that a common and standardized accounting format would be of help.

1- Working on “functions” for GVC purposes: The reverse side of profiling:

-GVC looks at “intercos” (mostly consolidated in profiling) as “insourcing”, and at part of other supplies as “outsourcing”;

- GVC has a functional approach when profiling analyses the production process

But the statistical units are most probably the same


IFRS and other topics relating to GEGs

-Adoption of IFRS as a common language between statisticians and GEGs Other important comments of our contacts at the UCI of the GEG :

- they ask for a priority list of variables, common to all European countries; - their UCI often prefers to be the provider of consistent information for all the concerned countries.

Since it is not mandatory to produce sub-consolidation at country level, - only HQ can estimate them; - to do so they produce the “interco” flows and stocks that are of interest for GVC.


Next steps

Past program: 2010: feasibility study; 2011: manual, first tests; 2012: guidelines + templates +

new testing countries

Incoming agenda:

manual, guidelines, etc - manual: final: end of 2012 / validated: end 2013 - templates: stable version: summer 2012

- guidelines: version “0”: March 2012 / final version end of 2013 - material for training: initial: June 2012 / final February 2013- organisational and financial models for profiling: June 2013

Tests: - present partners : 2011: 20 GEGs / 2012-13: 40 “intensive” + 40 “light” -> on time- 5 new testing countries in 2012 -> follow-up meeting 11-12 October- all other ESS countries invited as “piloting” countries in 2013

Implementation in the future operational process (from 2014-15): - an indicative target population of 500 GEGs for “intensive profiling” - a target to be defined for “light profiling”

24


Research & dissemination

Cooperation with: - EGR ESSnet: - interconnection through the Profiling Web Platform - same perimeters of GEGs - Profiling results incorporated in the EGR- Consistency ESSnet: common proposal for SU regulation (in FRIBS)- EU studies on globalisation (with stress coming on global value chains), on MNEs, etc

Dissemination to and discussion with:- Eurostat groups on EGR, SBS, FATS, NA, etc: for use in their stats- other interested countries (US, Canada, Australia, China, …)- international bodies such as OECD, UN, etc (e.g participation in the UNECE-OECD-Eurostat world manual on BR)

25 25


ESSnet on “profiling large and complex MNEs”

Core variables: the highest priority to test ability for SBS & NA:

P & L by nature

(not by function) (consolidated for the GE or the TE)

Content of the boxes

“Production” = Proxy of the “Revenue” variable?

+ pure T-O

+ other activity products

+- produced inventories

T-O (sales to 3rd parties) net of granted discounts & rebates (IAS18) if possible split between sales of merchandise and other sales. Newly produced inventories and fixed assets (incl grants on fixed assets)

+- Other products and expenses Patent, franchise & brand royalties etc ; more useful if split between products and charges.

1st evaluation of VA ( by the production

side )

=

- Used purchases

- Other external expenses

Purchases of goods (raw material, equipments and parts etc), services and merchandises, net of in inventories of received discounts and rebates +anciliary costs on purchases (CIF etc)

+ Employees wages and salaries Including bonuses and share of results + Taxes on products and indirect taxes

+Depreciations Physical and value change

2nd evaluation of VA ( by the components)

=

= Current operating result (optional for the MNEs)

Close to net operating result of the NA

+- Other current products and charge Other current non recurring products & charges (e.g sellings of assets, depreciations of goodwill)

Operational result

francdu

Je ne sais pas si cela va intéresser les gens du BR WG.Par contre, je serais d'avis d'ajouter une slide sur la suite des opérations:- rédiger une note proposant un data model pour les entreprises à l'EGR- début de la phase de test et rédaction de guidelines puis, en année 3 et 4 diffusion de la méthode aux EM pour qu'ils puissent mettre en oeuvre le profilage dans leur pays.


ESSnet on “profiling large and complex MNEs” Core variables: reconciliation with the P&L

+ Treasury products - Cost of debt

Financial result

+- Other financial products and costs

Net costs of net financial debt

- Taxes costs Taxes on result + deferred taxes + participations des salariés aux résultats

+- Net result quota-share of minority owning of non-consolidated interests

When the MNE has a real influence on decisions

+- Pre-tax net result of: . non-continued activities

. ceased or being sold activities

IFRS 5

Net result

- Minority interests

Part of the Net result accruing to minority holders, for globally consolidated affiliates

Net result, share of the group

francdu



ESSnet on “profiling large and complex MNEs” Core variables: where to find the right variables in the financial statement?

ASSETS


Tangible assets

Equipment, machines etc Activity-used buildings Buildings for hire Biological non current assets (forest, orchard, cattle, etc)

Intangible assets

Goodwill Other intangible (patents, brands, etc)

Non floating assets

Financial assets

Equity share in associate enterprises (Equity share in TEs of other countries) Other disposable (sellable) financial assets Non current assets, disposable to be sold ??

Inventories Goods and merchandise Biological current assets (crops, vegetable and fruits, animal products, etc)

Floating assets

Financial floating assets Credits to clients Other financial current assets Cash and similar

Total Assets

francdu



ESSnet on “profiling large and complex MNEs” Core variables: what if a complete balance-sheet for the enterprise?

LIABILITIES


Shareholders funds

Shareholders funds

+ Equities + Other non distributed reserve funds + Non distributed net results + Value of non current assets disposable for sale (directly accounted for in the shareholders funds) = Total of shareholders funds - Minority shareholding = Shareholders funds, part of the group

Non current liabilities

Long term debt Deferred taxes Long term reserves

Current liabilities

Supplyers credit Short term financial debt Short term part f long term debt Exigible taxes Short term reserves Liabilities directly linked to non current assets disposable for sale

TOTAL LIABILITIES

francdu



ESSnet on “profiling large and complex MNEs” An integrated process: from “accounting” to enterprise structure

Details : - number of GENs : number of previous “national enterprises”,

- if the GEN is too global, it might not well represent “specific” activities operating in only “one-country”: - structure / data / significance of the activity have to be assessed, but: “marketed products autonomous activity”, - possible result : create a new GEN to allow to create a new TEN

Classification: the GEN code does not represent the activity of the concerned country => proposal of the “good” TEN NACE code; which leads to double coding of a TEN: this of the GEN, its own (national), - secondary activities possible even in the UCI country (manufacturing + wholesale or retail)

“ networking” for global and national SUs: practical issues to be discussed between UCI and partnering NSIs:


ESSnet on “profiling large and complex MNEs”

Special technical issues

Ancillary activities: - if serving different GENs & different countries (e.g R&D) – => a quasi-enterprise – - if serving different TENs in one country (e.g HR management) – => needs to be split – - example of dilemma: transportation – => partnership discussion (includes discussion

on the collection strategies, via or not LeUs)

SPEs: - pm

Attempts on specific insights: - description of sectors : do they converge in the EU? e.g oil

companies; - other typologies: e.g Pr Spina’s presentation in Rome

“ networking” for global and national SUs: practical issues to be discussed between UCI and partnering NSIs:

profiling in an esbrs perspective essnet workshop / esbrs session 3/12/2012

Documents

essnet profiling

process profiling

riga consistency workshop

global structure

profiling model

brs profiling

profiling process result

global enterprise group