Is your ERP system blinding you from your international statutory reporting? Posted In: CFO / FD 27 Mar 2012

ERP systems will more often then not consolidate the financials from all your branches and subsidiaries on a worldwide basis. This is fantastic for allowing the HQ to have ready access to all the reporting entities numbers, with an ability to drill down in to the details as required.

However, there is one potential downside and if you are an FD / CFO with international subsidiaries you may want to consider how this issue is being managed in your organisation.

Regional accounting teams will invariably book transactions in the ERP system as they are instructed to. This will include central admin charges, intergroup debtors and creditors, depreciation according to the HQ policy etc.

However, often local statutory requirements will dictate that the local entity as registered with the local authorities must follow local accounting. As Such differences between the local accounting and group ERP accounts can include:

No HQ recharging of expenses
Strict rules on inter group debtors and credits
Depreciation rates
Revenue recognition rules
To account for these differences a local subsidiary will perhaps be using a local set of books, completely separate from the global ERP system. If this is the case, the one question for the FD / CFO is – are the local books reconciled to the HQ ERP generated accounts?

If they are not, in effect your local subsidiary are reporting financials that you have no visibility of. Quite possibly even internal audit and the global external auditors are all relying on the ERP generated accounts.

Ian Kaye