Wednesday, August 16, 2017

Standard Business Reporting Makes Sense


SBR (Standard Business Reporting) is a strategy concept that, at its root, is very simple. It involves eliminating duplication in reporting. Governments have been finding it very useful for reducing costs, both for themselves and for the organizations that report to them.

Essentially, SBR involves identifying all duplication in reporting requirements, standardizing those requirements, where possible, and then eliminating the duplication. For example, a national government normally has agencies to collect income tax information, statistical information and, in many cases, regulatory information.

Each of these agencies will usually collect information like sales, payroll expense, net income, etc. That means the filers must submit the same information to each of the agencies. Each filing costs them money. If the duplication were eliminated, their filing costs could be reduced substantially. If you think about it, there are many different kinds of information collected, and duplication in many of them. So the savings can be very large.

Of course, the items being collected by different agencies might be defined differently, so the duplication may not be exact in some cases. For example, net income for tax purposes maybe different than net income for statistical purposes. This is where standardization comes in. The definitions can be standardized so that elimination of duplication is possible. Sometimes this is straightforward; other times, it cannot be done, whether because of legislative constraints, or administrative constraints in one or more of the agencies. But often it can be accomplished, perhaps by identifying common elements to those items, as long as the standardization is diligently pursued.

Once standardization is accomplished to a satisfactory degree, the items of information can be collected by a data collection agency, working in cooperation with the agencies involved, so that the data only needs to be collected once, thus achieving the objective of making life simpler and less expensive for the filers and cutting red tape.

Numerous governments around the world have been implementing SBR. The most notable are Australia and The Netherlands, both of whom have achieved considerable savings. New Zealand has implemented SBR and most recently, the State of Indiana reported beginning an SBR effort. Other governments have conducted exploratory or preliminary work, including Denmark, Sweden, Finland, Turkey and Poland, among others.

The starting point for implementing SBR is to identify the information items being collected by a government and then exploring the ability to standardize and eliminate the duplication. This is the core of the effort and is a big job. Then a technology needs to be selected that is good for transmitting information among different platforms and computer systems. XBRL (extensible business reporting language) is most often used for this purpose, but there are alternatives, including XML, JSON, even Excel. This is a significant decision that needs to take into account the advantages and disadvantages of each technology. There are advantages and disadvantages of each.

SBR is an ongoing significant activity, but the benefits are likely to exceed the costs. It makes a lot of sense. More information is available from the SBR websites of Australia and The Netherlands.

  

Friday, August 11, 2017

How Companies Use their Websites for Financial Reporting


For about twenty years, public companies have been using their websites for financial reporting purposes. Initially, they placed their financial statements and perhaps a few other elements of reporting on their sites. It was regarded as a very peripheral activity. The printed reports were the prime vehicle of financial reporting. In 1997, some companies did not put anything on their websites for financial reporting.

Since then, the use of websites for financial reporting purposes has increased dramatically. Now it is a major part of a company’s financial reporting activity; some say the main part.

The information presented on websites now includes not only the financial statements, but also everything that would be included in the annual report and in addition, some interactive elements like data banks and Excel financials. For several years, companies simply put on their websites the same information they out into their paper reports, thinking it would be used the same way.

But this thinking has changed. Most companies now recognize that the nature of the web as a medium of financial disclosure is very different from that of paper. Besides the ability of the web to present interactive material and multi-media, people use the web differently. Paper tends to be read sequentially. The web, decidedly not. Web users click on the information they want. They want it fast – within a click or two. No wading through tables of contents, indexes and menus. As a result, the companies realized that organization of the information and the ability to navigate it was of paramount importance.

Recently, there has been a move beyond websites into social media. Twitter is a favourite for providing quick items of disclosure. It is widely expected that this trend will grow. LinkedIn and YouTube are also often used to convey financial information. Often, you will see the YouTube videos on the websites as well.

The emergence of data analytics and big data has begun to have some influence on website disclosure. Already, companies are including data groupings as separate disclosures, complete, in some cases, with data analysis tools. This is a far cry from the days of rigid financial statements, opening the world of financial disclosure to user-created reports, wide ranging data analytics and increased user judgement in determining information relevance.

Website disclosure of financial information is changing the nature of financial reporting. This area will continue to evolve, probably quite quickly.












Tuesday, August 08, 2017

Blockchain Useful in Accounting Control and Reporting

Blockchain has the potential of being very useful in a collaborative environment, which is increasingly common in business. There are many aspects of a business where people from different parts of the business need to work together for a common purpose. An example is the workings of the supply chain, which affects an organization from the point of purchase to the ultimate sale of the product. Along the way, people in purchasing, production, manufacturing, logistics, finance, marketing and sales need to have access to information about the flow of goods and the related financial aspects of the processes.

Blockchain is essentially a centralized database, that utilizes cryptography to protect the data from being changed and also facilitates the sharing of the information in a transparent and open manner. The sharing of the information becomes more viable because of the protection against change that the cryptography provides. And the data can provide a clear record of the flow of data and money throughout the supply chain. Another way it is usually described is as a distributed ledger technology, which means that transactions are recorded but are immediately available to others in the blockchain. So any changes can be detected by any of the participants. This reduces the chances of unauthorized changes being made.

Because blockchain offers a means of management control of goods as well as money, it is not only potentially useful for control purposes but also for reporting purposes. With blockchain, a vast array of information can be available on the transactions within the supply chain, including the people involved in those transactions, dates, quantities, products and other aspects of the transactions and assets involved.

Use of blockchain for accounting purposes is in its infancy, but the recognition of the power of this technology is beginning to be recognized more broadly.

There are various good references to follow up on in this area. Deloitte released a very good paper that provides a great overview. It can be found here.