11. Rules of consolidation ESTP Course on the EGR 3-4-5 December 2014 11. Rules of consolidation

NSA DnB BvD EGR Data providers COMMERCIAL DATA PROVIDERS (CDP) So our main input comes from 3 different sources. The “National Statistical Authorities” from the participating countries and 2 commercial data providers.

Data entities Legal Units (LEU) Relationships (REL) Enterprises (ENT) Links Enterprise Groups (GRP) The data providers mainly provide us with information on 5 “Entities” Entity is an abstract definition. Color coding Links intentionally left out

Data entities per provider NSA LEU REL ENT GRP DnB BvD COMMERCIAL DATA PROVIDERS (CDP)

Data per entity and frame year (FRY) 2014 2014 NSA NL 2014 2014 NSA UK All the sources provide data per entity and per frame year. Color coding. 2014 NSA ..

Data per entity and frame year (FRY) 2014 2014 NSA NL 2014 2013 2014 NSA UK More frames open at the same time possible. Processing only 1 year at a time! 2014 NSA ..

Consolidate 2014 2014 2014 rEGR VALIDATE TRANSFORM CONSOLIDATE Validate (BR, LEID) , transform (Unify) , consolidate.

Goal of consolidation [EX] Enterprise Group Swedish Enterprise Dutch Enterprise LEU SW REL REL LEU SW LEU NL REL REL REL All the data from the different providers and countries should be combined and prioritized to form the global enterprise group. The internationals. We will use this picture as our goal in upcoming examples! LEU SW LEU SW LEU NL

Combining (national) data IKEA Global Group Swedish Enterprise Dutch Enterprise LEU SW REL REL LEU SW LEU NL REL REL REL NGH GGH LEU SW LEU SW LEU NL

Prioritizing data IKEA Global Group Swedish Enterprise Dutch Enterprise LEU SW REL REL CB REL REL LEU SW LEU NL LEU DnB LEU BvD REL REL REL Some sources will deliver the same legal units and relationships to the same subsidiary. Resident rel before cross-border LEU SW LEU SW LEU NL

Consolidation process Cons. Legal units Cons. Relationships Create cluster of control Cons.Enterprise group (and Enterprise)

Consolidate legal units (overview) Select preferred source Determine continuity

Consolidate legal units (select source) Source provided Transformed Consolidated NSA(3) LEID X NSA(3) LEID X NSA(1) LEID X NSA(2) LEID X DnB(1) LEID X BvD(2) LEID X BvD(1) LEID X WITHIN ONE FRAMEYEAR Collect LEID Priority: NSA DNB BVD Prioritize Update

Consolidate legal units (continuity) Source provided Transformed Consolidated NSA(3) LEID X NSA(3) LEID X NSA(1) LEID X NSA(2) LEID X DnB(1) LEID X BvD(2) LEID X BvD(1) LEID X WITHIN ONE FRAMEYEAR Collect LEID Same EGR identification? UNIT in T or T-1 Priority: NSA DNB BVD Prioritize Update

Consolidate legal units (continuity) This is little complex, what it comes down to that NSA_ID is primarely used to identify. If not available, LEID will be used

Consolidate legal units (continuity) LEID NSA ID EGR ID 2010 oktober CCRRRRR12345 100000000 2010 november 88888888 2011 oktober CCRRRRR23456 CCRRRRR98234 99999999 2222222222

Consolidated legal units [EX] LEU FR 28385738 LEU SW 28374756 94764636 39483945 23947374 LEU NL 23644364 LEU NL 64264423 LEU NL 45379864 So then we have consolidated legal units.

Goal of consolidation [EX] Enterprise Group Swedish Enterprise Dutch Enterprise LEU SW REL REL LEU SW LEU NL REL REL REL We are not there yet!  LEU SW LEU SW LEU NL

Consolidate relationships Start form “scratch”, per subsidiary EGR identification Collect all transformed direct relationships with same subsidiary EGR identification (can be more than one LEID) Determine highest prio per parent – subsidiary combination Create direct relationships in order of prio if no BR violation (for example, no more than 100%) Collect transformed indirect relationships with same subsidiary LEID Discard superfluous for which there is direct control Discard lower priority if more than 1 parent Establish indirect relationship. End the ones that are not recreated

Consolidate relationships (1) 46281460 93758347 12348348 38784738 93746326 P2 20% P3 40% Transformed relationships, explain percentages and P1, P2. Refer back to sheet 19 P1 55%% P4 20% P2 45% 27384738

Consolidate relationships (2) 46281460 93758347 12348348 38784738 93746326 P2 20% P1 55%% P4 20% 27384738

Consolidated units and relations [EX] LEU FR 28385738 LEU SW 28374756 94764636 39483945 23947374 LEU NL 23644364 LEU NL 64264423 LEU NL 45379864 So if we go back to our example let’s say the following relationships remain after consolidation.

Consolidated legal units and control [EX] LEU FR 28385738 LEU SW 28374756 94764636 39483945 23947374 LEU NL 23644364 LEU NL 64264423 LEU NL 45379864 100% 100% No priority 100% 100% 100% 40% Controlling relationships determine the cluster as we will see during deriving the cluster of control.

Consolidated legal units and control [EX] LEU SW 28374756 94764636 39483945 23947374 LEU NL 23644364 LEU NL 64264423 So this is what remains from our original example.

Cluster of control [EX] Enterprise Group Swedish Enterprise Dutch Enterprise LEU SW REL REL LEU SW LEU NL REL REL REL How the group and enterprise are projected on the structure will be explained later on. LEU SW LEU SW LEU NL

Deriving the cluster of control The ‘cluster of control’ defines legal units that are involved in [controlling] relationships with each other, ultimately all being under control of the defined topmost legal unit (the head of the group). [controlling] : A legal unit can have control with a single relationship in two cases: ‘Type of ownership’ = ‘I'(ndirect)’ (‘Type of ownership’ = ‘D(irect)’ and voting power > 50%) Combine clusters with cumulative direct control > 50%!

Deriving the cluster of control So if we look at the direct relationship (incl. cumulative) which clusters of more than 1 legal unit do we see?

Deriving the cluster of control (direct)

Combining cluster using indirect rel. For each ‘cluster’ C found until now: If the top-most legal unit is involved as a subsidiary in an indirect relationship with a legal unit that is not yet in cluster C : ‘combine’ cluster C with the cluster of the parent. For all legal units in the ‘cluster’ C, including the top-most legal unit: If the legal unit is involved as a parent in an indirect relationship with a legal unit that is not yet in cluster C : ‘combine’ cluster C with the cluster of the subsidiary. Repeat the above with the newly formed clusters until no more clusters can be combined. Explain on previous sheet

Deriving the cluster of control (indirect)

From cluster to enterprise group The identification of the cluster as defined by the EGR is the linking pin to the Enterprise Group data supplied. The identification (continuity) of the Enterprise Group is determined by looking at the overlapping Enterprises and the number of persons employed.

From enterprise to enterprise group The enterprise is linked to the cluster (enterprise group) by the reporting legal unit. Enterprise.reporting legal unit

Continuity of cluster (enterprise group)

Continuity of enterprise group Final Enterprise Group Preliminary Enterprise Group Persons Employed Enterprise in Final Frame Persons Employed Enterprise in Consolidation Area E1 FG1 - 10 E2 4 E3 PG1 15 E4 11 E5 PG2 54 77 E6 FG2 PG3 45 E7 12 E8 FG3 32 E9 PG4 14

Continuity of enterprise group C1 = Collection of enterprises which are related with the final enterprise group but not with the preliminary enterprise group. C1 PG1 PG2 PG3 PG4 FG1 E1,E2,E5 E1, E2, E3, E4 No overlap FG2 E7 FG3 -

Continuity of enterprise group C2 = Collection of enterprises which are related with the preliminary enterprise group but not with the final enterprise group. C2 PG1 PG2 PG3 PG4 FG1 - No overlap FG2 FG3

Continuity of enterprise group C3 = Collection of enterprises which are related with the preliminary enterprise group and also with the final enterprise group. C3 PG1 PG2 PG3 PG4 FG1 E3, E4 E5 No overlap FG2 E6 FG3 E8

Continuity of enterprise group Calculate total number of persons employed per collection: PE_P_C1 = Persons Employed of the Preliminary enterprise group delimited to collection C1. PE_F_C1 = Persons Employed of the Final enterprise group delimited to collection C1. Analogous for PE_P_C2, PE_F_C2, PE_P_C3, PE_F_C3.

Continuity of enterprise group For example, collections for checking if PG1 is a continuation of FG1:   PG1=>FG1 Note PE_P_C1 Always 0 PE_F_C1 68 E1 (10), E2 (4), E5 (54) PE_P_C2 E3 and E4 both are also in FG1 PE_F_C2 PE_P_C3 26 E3 and E4 are in PG1 PE_F_C3 25 E3 and E4 are in FG1

Continuity of enterprise group Define X0 IF PE_F_C3 >= 70% * (PE_F_C1 + PE_F_C3) AND PE_P_C3 >= 70% * (PE_P_C2 + PE_P_C3) THEN X0 = 0 (possible continuation) ELSE X0 = 1 In the example for PG1 as a possible continuation of FG1 : 25 >= 70% * (68 + 25) == False AND 26 >= 70% * (0 + 26) == False Therefore X0 = 1 (no continuation)

Continuity of enterprise group Define X1 (absolute values between pipes ||)   IF (i11 ≤ MIN_PE < i21 AND |PE_P – PE_F| ≥ a11 + (b11 * MIN_PE)) OR (i21 ≤ MIN_PE < i31 AND |PE_P – PE_F| ≥ a21 + (b21 * MIN_PE)) OR (i31 ≤ MIN_PE < i41 AND |PE_P – PE_F| ≥ a31 + (b31 * MIN_PE)) OR (i41 ≤ MIN_PE < i51 AND |PE_P – PE_F| ≥ a41 + (b41 * MIN_PE)) OR (MIN_PE ≥ i51 AND |PE_P – PE_F| ≥ a51 + (b51 * MIN_PE)) THEN X1 = 1 ELSE X1 = 0 PE_P : Total number of persons employed of the preliminary enterprise group PE_F : Total number of persons employed of the final enterprise group MIN_PE : The minimum of PE_P and PE_F Default values for parameters: i1=0, i2=10, i3=50, i4=100, i5=500, a1=20, b1=0, a2=0, b2=2, a3=0, b3=1, a4=0, b4=0.5, a5=0, b5=0.25

Continuity of enterprise group

Thanks for your attention Questions?