The last mile of finance: growing scrutiny.

AuthorDriscoll, Mary
PositionFinancial Reporting

The "last mile" of finance is finally get-ting the attention it deserves. That's not because chief financial officers and controllers have run out of things to fix. They don't have a choice - the close-to-disclose process, particularly the final stretch of financial statement preparation, is rife with inefficiency and complexity. Previous gains made in cycle-time compression are gone. Risks of financial error and internal control failures are on the rise. Experts in U.S. Securities and Exchange Commission (SEC) reporting predict things will get worse.

The close to disclose process in-volves all activities needed to close an organization' books, per-form all nec-essary inter-company ac-counting and reconciliation steps, finalize consolidated financial statements earnings and publish official statements with regulators such as the SEC. Global corporate expansions in recent years, along with a steady pace of acquisitions, have created accounting and systems problems at many large companies and have made financial statement preparation a high-wire act.

"Intercompany accounting and balance sheet reconciliations pose significant challenges to multinational companies today, says Kyle Cheney, a partner at Deloitte & Touche LLP. "There is a pervasive lack of cen-tral/corporate visibility to these activities, which creates risk from a Sarbanes-Oxley an SEC reporting standpoint."

These organizations, he adds, "need to improve core processes and technology solutions, thereby providing transparent ability to initiate, settle, clear and reconcile balances. Leading companies have structured initiatives to accomplish this on a global scale, and they are gaining efficiency by doing so."

Cheney is not alone in calling for serious change. A growing crowd of experts say financial statement integrity is at stake.

Disclosure Explosion

"Yes, more people are taking a look at the close process because financial reporting timetables and disclosure requirements are getting more condensed and expansive simultaneously," says William Curry, corporate controller and principal accounting officer at Waters Corp. "Over the past 10 years, the level of complexity and the amount of required disclosures have grown enormously.

"Two examples involve fair value and pension disclosures. It's fair to say there hasn't been anything like this since the '33 and '34 Acts came out the birth of the SEC after the Wall Street Crash of 19291." Curry also serves as an instructor at the SEC...

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