Restatements Rocket
The number of companies that issued corrections to their financial reports hit a new high last year, according to a study by research and proxy advisory firm Glass, Lewis & Co. A total of 1,195 U.S. public companies -- or about 8.5 percent -- filed restatements in 2005, nearly dou-ble the previous year's total of 613. In many cases, the corrections were the result of management's failure to apply basic accounting rules. For example, Solectron Corp., Baxter International Inc. and Sirva Inc. restated because they had failed to perform basic reconciliation of their accounts, according to Glass Lewis.
The top driver of restatements was expense recognition, which soared 165 percent from 2004 and accounted for 25 percent of all reported errors. More than half of the errors in this category stemmed from improper lease accounting practices. Hundreds of organizations simply hadn't been following GAAP, the report notes.
"Lease accounting restatements caught the financial reporting world by surprise," comments Jeffrey Szafran, managing director with Chicago-based Huron Consulting Group. "Most companies had a good-faith belief that they were getting their financial reporting right but found out that they were not when it came to lease accounting. This created a ripple effect through the financial report world. The good news is that this was likely a one-time event."
The number of companies that filed restatements due to errors in hedge accounting also rose sharply, from 25 in 2004 to 57 last year. Among them were General Electric Co. and insurance giant American International Group Inc.
The share-price volatility that generally follows a restatement can be severe. For example, in the three months after its first restatement in 2005, AIG saw a market capitalization decline of $54.8 billion as measured from its high in the three months before the restatement, according to the report.
alt="" border="0" />SEC To Host XBRL Roundtables
The SEC's voluntary XBRL filing program is a year old this month, and even though only a handful of organizations have signed up so far, the commission is pressing forward with its drive to introduce the interactive data format into the mainstream of financial reporting. As part of that effort, the SEC will hold a series of roundtables this year at its headquarters in Washington, D.C., to review its experiences from the first year of the pilot program.
"It is now within our reach to get dramatically more useful information in the hands of investors," said SEC chairman Christopher Cox in announcing the roundtables. "We look forward to these discussions on implementing interactive data initiatives that can benefit investors as quickly as possible, and we welcome the opportunity to learn from investors and other users of financial information how the SEC can improve our own disclosure program." The first roundtable will be held on June 12.
CFOs who want to stay ahead of the XBRL curve should check out new offerings from XBRL-US, the U.S.-based arm of XBRL International. The nonprofit consortium now offers a range of resources for free or a nominal charge to companies that plan to participate in the SEC's pilot initiative, including access to a coaching pool of XBRL experts from the software, accounting and consulting communities; training classes on preparing XBRL financial reports; and a comprehensive listing of XBRL document creation software.
Accenture Deal Targets Midmarket BPO
Global management consulting and outsourcing giant Accenture inked an agreement in March to buy the HR and F&A business process outsourcing assets of Savista. Privately held Savista has concentrated on the middle market -- organizations with fewer than 12,000 employees. Industry analysts expect this segment of the business process outsourcing (BPO) sector to grow to more than $25 billion by 2009, according to Accenture.
"This arrangement will allow Accenture to offer industry-defining outsourcing services to an expanded set of clients," notes Joellin Comerford, group chief executive, outsourcing, with Accenture. "It demonstrates our commitment to aggressively pursue a leadership position among BPO service providers."
Accenture will continue to provide BPO services to Fortune 500 clients. In February, the company signed a five-year BPO contract with Redmond, Wash.-based Microsoft Corp. to provide credit and collection services in Europe, the Middle East and Africa.
On-Demand Invoicing
The order-to-pay process at many orga-nizations is plagued with delays and uncertainties that mask visibility into cash flow and generate extended order processing cycle times and endless calls from suppliers to the A/P department. Paper invoices and the manual reconciliation processes associated with them are often the root cause of extended settlement cycles that delay payments to suppliers, preventing companies from capturing discounts.
Effective procurement practices can trim pricing by 5 percent to 20 percent through better sourcing agreements and resulting volume discounts, according to Andrew Bartels, a research analyst with Cambridge, Mass.-based Forrester Research.
Finance executives who are looking for those kinds of results from their purchasing department may want to inves-tigate Ketera Invoice Management, an integrated, on-demand solution that helps companies reduce costs and increase control of critical spend management processes. The product, from Ketera Technologies Inc., replaces paper-driven invoice processes with automated and Web-based workflows. It leverages a network of more than 750,000 suppliers.
The solution provides complete visibility and traceability into order-to-pay procedures as well as online invoice status tracking and real-time invoice validation and matching. Automated approval workflow processes help companies filter out maverick spending.
Ketera Technologies Inc.: www.ketera.com [1]
Operational Performance Management
Is the market for business performance management (BPM) software losing momentum? Several signs point that way, according to some industry observers who cite ongoing vendor consolidation and the relatively limited distribution of BPM tools within the enterprise as among the reasons why this technology is not catching on as fast as has been hoped and hyped.
Leaders at Pilot Software see low levels of adoption as a key issue facing BPM deployments, and they're taking on that challenge with PilotWorks 2006, the latest iteration of the company's flagship operational performance management offering. "Knowing that adoption is key to sustaining performance management success, many of the features in PilotWorks 2006 are geared toward enhancing the end-user experience," notes Jonathan D. Becher, CEO and president.
The product can be structured to reflect the outlooks and objectives of specific groups within the enterprise. For example, the sales and marketing departments can track their own goals and metrics, which are managed separately but roll up to shared corporate priorities.
PilotWorks 2006 can also be personalized at the level of the individual user. Managers can track the key performance indicators, objectives and initiatives that are important to them, and they can select the specific content they want to display on their home page.
The product also offers a single interface for metrics management, enabling companies to streamline the collection, entry, approval and publishing of metrics across multiple users and data models.
Pilot Software: www.pilotsoftware.com [2]
Fast-Track Ex-Im Loans
As the U.S. government's official export credit agency, the Export-Import Bank of the United States is charged with helping the private sector create and maintain American jobs by financing exports. Ex-Im Bank's fast-track lender program helps banks expedite loans to U.S.-based companies that produce goods and services for export.
JPMorgan Chase has a longstanding relationship with Ex-Im Bank that enables it to make the credit decision and issue Ex-Im Bank guarantees for loans up to $10 million. And now, as a participant in the fast-track lender program, JPMorgan Chase can quickly approve loans up to $25 million per borrower with a 90 percent guarantee by Ex-Im Bank. Corporate borrowers can use the loan to expand their overseas sales and to extend favorable terms to their foreign customers.
In January, JPMorgan Chase became the first lender participating in Ex-Im Bank's fast-track program to close a deal with a corporate client.
JPMorgan Chase: www.jpmorganchase.com [3]