Top 4 Challenges in Financial Reporting and How to Overcome Them

Top 4 Challenges in Financial Reporting and
How to Overcome Them

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2
Financial reporting is entering a
new age of regulation.

3
With each added rule or changing standard, more
responsibility is placed on ﬁlers to comply.

4
This pressure comes from:

5
Regulating bodies like the SEC...

6
…investors and stakeholders…

7
…and even from within the ﬁling company.

8
Public companies
satisfywant to
everyone’s interests.

9
This means pleasing stakeholders,
maintaining regulatory favourability and
doing so cheaply and efficiently.

10
Here are 4 ﬁnancial reporting
challenges currently faced by
public companies:

11
Finding and
Keeping Talent
Keeping Track of
Changing Financial
Reporting Standards
Managing
Internal Controls
Staying Ahead
of Peers
NO.
1
NO.
2
NO.
3
NO.
4

12
Finding and
Keeping Talent
NO.
1

13
REALITY
THE

14
45% of CFOs anticipate they will be hiring in 2013.

15
To handle forthcoming changes, hiring strategies will
emphasize roles that specialize in a niche area of the
ﬁnance department.

161
McCann, David. “Six Finance Jobs Ripe for Hiring in 2013.” CFO.com. N.p., 3 Feb. 2013. Web. 5 May 2013. <http://www3.cfo.com/article/2013/2/hiring_ctpart-
ners-careers-hot-finance-positions-2013>
Expect to see more positions for:1
In-house
XBRL experts
Compliance
managers
Risk officers Government
and regulatory
affairs officers

17
CHALLENGE
THE

18
Many executive leaders are complaining about
a talent shortage.
OPENINGS TALENT

19
We ﬁnd it difficult to ﬁnd highly skilled people
with the combination of the exact skill set and
experience that we are looking for.2
2
“Human-Capital Strategies in a Slow Recovery.” CFO.com. CFO Research Services, 2012. Web. 30 May 2013. <http://secure.cfo.com/whitepapers/index.cfm/
download/14660274>

20
SOLUTION
THE

21
Hire and educate from within the company
Purchase top of the line technology to
supplement skilled labour
Attract top talent with appealing compensation
and pension plans

22
The Dodd-Frank Act, BASEL III, changes to U.S. GAAP
and the end of the XBRL grace period are four prime
opportunities for ﬁnancial professionals on the move
to specialize their skills.

23
(Knowing XBRL) has improved my career
exponentially. It has given me a valuable niche in
the company.
Jeff Petka — Financial Accountant at Southern Company
and a member of the XBRL team.3
3
Sheridan, Bill, and Jeff Drew. “The Future Is Now: XBRL Emerges as Career Niche.” The Future Is Now: XBRL Emerges as Career Niche. N.p., June 2012. Web.
30 May 2013. <http://www.journalofaccountancy.com/Issues/2012/Jun/20124962.htm>

24
Keeping Track of
Changing Financial
Reporting Standards
NO.
2

25
REALITY
THE

26
In the wake of the 2008 ﬁnancial crisis,
regulatory and standards bodies are building
stronger and more complex safety nets.

27
This has resulted in a surge of accounting
standard updates coming to U.S. GAAP.

28
Finance professionals strive to prepare for changes
to accounting standards as FASB and the IASB
make changes to:
Financial Instruments
Leases
Revenue Recognition

29
Finance professionals will also be affected by:
Pay or Play rules under
ObamaCare
The
Dodd-Frank Act
Basel III
The
JOBS Act

30
CHALLENGE
THE

31
These changes affect daily reporting procedures as
well as internal controls and audits.

32
I cringe when I hear talk about more reporting
requirements and disclosure. Those requirements
are very burdensome for a small-cap or midcap
company. Further ﬁnancial reporting and
disclosures would just add to that burden.4
4
McCann, Dave. “Power from the People.” CFO.com. N.p., 1 Nov. 2011. Web. 30 May 2013. <http://www.cfo.com/printable/article.cfm/14604427>

33
SOLUTION
THE

34
Monitor upcoming accounting standard updates
Contribute to comments on exposure drafts if
your company will be negatively impacted
Keep tabs on early adopters, using their ﬁlings as
benchmarks for your own

35
Financial-and-administrative-process
improvement would yield a meaningful
ﬁnancial beneﬁt to my company.5
A CFO research study cited that 78% of respondents
said their companies make extensive use of benchmarks and agree
strongly with the statement that,
5
Surka, Matt, and Josh Hyatt. “The Long and Winding Road.” CFO.com. N.p., 8 Oct. 2012. Web. 30 May 2013. <http://www3.cfo.com/article/2012/10/benchmark-
ing_cfo-research-benchmarking-business-processes?currpage=1>

36
Managing
Internal Controls
NO.
3

37
REALITY
THE

38
SEC regulations and FASB pronouncements
have resulted in
SUBSTANTIAL
CHANGES
to disclosure, U.S. GAAP and XBRL.

39
Public companies must adjust their reporting
practices to comply.

40
CHALLENGE
THE

41
As a result of changing standards, internal controls
have to adapt to ﬁt or else the risk of deﬁciencies
and material weaknesses increases exponentially.

42
Large scale accounting changes may be difficult
because they can involve revamping processes,
reassessing emerging risks and retraining staff.

43
CFOs and their staff who have put off updating
their internal controls until new guidelines are
released may ﬁnd out they have a lot more work
to do. That's especially so for ﬁnance folks who
work for small and medium size entities, which
tend to have fewer resources than their peers at
bigger companies do.6
6
Brands, Kristine. “Growing Companies Need Internal-Controls Help.” CFO.com. N.p., 16 Apr. 2013. Web. 30 May 2013. <http://www3.cfo.com/article/2013/4/
gaap-ifrs_coso-financial-reporting-compendium->

44
SOLUTION
THE

45
Monitor exposure drafts and upcoming changes to SEC regulations
in order to anticipate how changes will affect the controls
An internal auditing team that has access to changing regulations
and can identify weaknesses in reporting practices will be more
prepared to catch errors
Use available resources as benchmarks, like peer ﬁlings and
disclosures, to help implement best practices into risk
management systems
You need to stop the bleeding,” says Ralph Geertsema, a director of
SeventyOne. “However many resources you need, that’s what it takes7
7
Surka, Matt, and Josh Hyatt. “The Long and Winding Road.” CFO.com. N.p., 8 Oct. 2012. Web. 30 May 2013. <http://www3.cfo.com/article/2012/10/benchmark-
ing_cfo-research-benchmarking-business-processes?currpage=1>

46
With only 45% of respondents saying the
majority of their critical risks are well managed,
the door to an expanded role is open and
internal audit must walk through it and take on
the attendant challenges.8
8
“Aligning Internal Audit Are You on the Right Floor?” PricewaterhouseCoopers LLP. N.p., 2012. Web. 30 May 2013. <http://www.pwc.com/en_US/us/risk-assur-
ance-services/internal-audit/publications/assets/pwc-2012-state-of-internal-audit-survey.pdf>

47
Staying Ahead
of Peers
NO.
4

48
REALITY
THE

49
It’s survival of the ﬁttest out there.

50
There is a need for companies to think forward
using information substantiated by real evidence
and competitive intelligence.

51
CHALLENGE
THE

52
In order to keep up, companies are investing in
technologies and talent — even changing their
business strategies in order to keep up.

53
And yet, many must grapple with the challenges of
choosing the right direction.

54
SOLUTION
THE

55
Monitor peers and all industry players with
real-time information and enhanced data analysis
Make strategic business partnerships based on
informed and compatible interests

56
In organizations that excel at making critical
judgments, the CFO and CIO understand the
speciﬁc decisions facing business leaders, the
ﬁnancial information that can be used to help
drive those decisions, and the techniques
available to produce information quickly, easily,
and accurately,
says Robert Comeau, a principal with Deloitte Consulting LLP’s Finance
Transformation service.9
9
“CIO, CFO Unite to Improve Business Decision-Making.” Wall Street Journal. Deloitte, 10 Jan. 2013. Web. 30 May 2013. <http://deloitte.wsj.com/cio/2013/01/10/
cio-cfo-collaboration-can-improve-business-decision-making/>

57
Learn more about how disclosure research
solutions can help you solve and enhance your
financial reporting processes so that reporting
challenges become opportunities.

58
Contact us.
DisclosureNet™
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Toronto, ON M5H 2S8
T: 866.974.3638
F: 416.913.0446
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T: 866.974.3638 x0
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