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Modern Finance Reporting

Modern Finance Reporting
BEPS: why successful globalization today is all in the detail

Nigel Youell, Director of Product Marketing,
Enterprise Performance Management @nigelyouell

With little time to get BEPS compliant, what should finance departments be thinking about today?


The globalization of businesses is by no means a new concept. From the rise of the Silk Road in the 1st century BC to the boom in low-cost communications of the 80s and 90s, companies have been planting new roots overseas for centuries.

With international growth have always come new challenges – from the need to understand pricing strategies in new regions, to avoiding cultural faux pas when dealing with clients in a completely foreign market.

The latest challenge faced by multinational businesses is the growing scrutiny with which both governments and the public are assessing their tax structures. In response, the impending Base Erosion and Profit Shifting (BEPS) initiative has been launched to standardize tax practices for all multinational companies by 2017 by increasing tax transparency and accountability. Part of these new rules will include country-by-country reporting, which will be introduced for companies with revenues over £568 million as of 2016.

With little over a year to get BEPS compliant, what should finance departments at multinational organizations be thinking about today?

 With international growth have always come new challenges. 

The new country-by-country reporting rules may seem relatively straightforward, but businesses that don’t give the risks and requirements full consideration may find themselves under the regulator’s spotlight – an uncomfortable (and potentially costly) place to be.

Thoroughness, transparency and consistency are key. Companies across the globe must be able to assign reasonable costs when moving money between jurisdictions, not to mention internally.

This places additional pressure on finance teams to accurately identify and allocate costs, particularly as the value of a business shifts away from tangible products and assets and towards services. It’s simple enough for an organization to quantify the materials, time, and labor that go into developing its products but allocating value to less tangible assets like its brand and marketing impact is a much more nebulous and complex exercise.

 Thoroughness, transparency and consistency are key. 

For example, let’s say the German office of a US-based multinational uses 32% of an HR consultant’s time. Should they be invoiced by the parent company? Once decided, should this figure be consistent across the group or be applied on a market-by-market basis?

The swift uptake of cloud technology by finance departments in recent months has helped many simplify and speed up complex back office processes like planning, budgeting, and forecasting. The cloud allows companies to collect relevant up-to-date information from all the different segments of their business and the jurisdictions they operate in and consolidate it into a form that is much easier to quantify – which also greatly simplifies reporting.

Just as importantly, the cloud helps large businesses become more agile. By helping the company better to understand its assets and providing crucial real-time data on operations across the board, cloud applications put businesses in a position to respond more efficiently to big, sudden changes to their reporting needs – not mention helping to drive through transformative change.

 Transparency has never been more vital. 

With tax authorities around the world now preparing their guidelines on how BEPS will be applied in their jurisdiction, it would be prudent for multinational companies to ready themselves for one of the biggest overhauls to their tax strategy in years. The visibility across an organization that the cloud affords large companies will prove indispensable in helping them achieve this, especially at a time when transparency has never been more vital.

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