Financial Accountability: the technology's ready ... Are you?

• Author: Kopcke, John L.
• Position: Corporate Reporting

New technology that improves decision-making and ensures financial accountability is widely available, but there's one problem: It's not used much.

Most financial executives are pressured to deliver financial information on a timely basis. Yet, they are tied to period-end financial closing and reporting processes that take weeks to complete and don't deliver the right details required by decision-makers. A recent survey by Cap Gemini/Ernst & Young found that 63 percent of the CFOs surveyed indicated that their financial systems are inadequate for the new reporting requirements.

And now, there are new financial reporting pressures on the horizon. In August, the Securities and Exchange Commission passed new disclosure rules aimed at giving investors a better picture of publicly traded companies, and sooner. Among the rules are requirements to accelerate the filing of l0-Q quarterly financial statements from the current 45 days to 35 days from a quarter's end and 10-K annual reports from the current 90 days to within 75 days of fiscal year end, with the changes phasing in over a three-year period.

Also in August, CEOs and CFOs of the largest publicly traded companies in the U.S. began signing off and attesting to the accuracy and integrity of their financial statements, with strict penalties now in place for fraudulent financial statements.

Challenges in Financial Consolidation and Reporting

Because most companies don't have a single, standard general ledger system, the consolidation system must be able to collect data from multiple sources across an organization and create a common view, or chart of accounts, for corporate reporting.

Once the data is collected, the financial consolidation process can finally begin -- while complying with a plethora of accounting rules defined separately by regulatory bodies: the Financial Accounting Standards Board (FASB), the International Accounting Standards Board (IASB) and other local bodies. The rules cover factors that include currency translation, elimination of inter-company transactions, accruals, minority ownership calculations and goodwill accounting related to M&As.

Reporting is further complicated by the need to deliver different information to multiple internal and external audiences in various formats. These can include:

* Summary balance sheets, income statements and cash flows for external audiences (SEC, Internal Revenue Service, Federal Deposit Insurance Corp., creditors, local...