Pierre Teillet Coordinator a Eurostat project, a partnership of: Profiling in an ESBRs perspective ESSnet workshop / ESBRs session 3/12/2012

ESSnet Workshop / ESBRs session 3/12/ Overview of presentation Main objectives of profiling slide 3 Modelling the process (summary) slides 4 to 9 Profiling and registers slides 10 to 14 Annexes slides 15 to 34

ESSnet Workshop / ESBRs session 3/12/ Main objectives of the ESSnet Profiling “To see more clearly the whole elephants” i.e to understand the global structure of a group and its national parts the ESSnet Profiling has been initially assigned to prepare, for the future, to:  describe consistently the same GEG in all EU+EFTA countries => “enterprises” linked between countries,presently through the EGR  support efficient data collection through surveys (SBS, FATS, FDI, STS) + admin-type data => a system of statistical units for all business statistics  for direct dissemination and indirect use (National accounts etc) => most statistical productions concerned and now, perhaps, to:  allow for a good description of the global value chains

ESSnet Workshop / ESBRs session 3/12/ Like in the tale, a multinational is an elephant for “blind statisticians”

ESSnet Workshop / ESBRs session 3/12/ Riga Consistency workshop 5 What description of a complex multinational? Example of Bolloré (2009)

ESSnet Workshop / ESBRs session 3/12/ Profiling : a process Profiling is a method:  to analyse the legal – operational – accounting structure of a Global Enterprise Group (GEG)  in order to establish - the statistical units within this group : G lobal EN terprises (GENs) T runcated EN terprises (TENs) - their links with the Legal Units (LeUs)  validate they are efficient structures for the collection of statistical data

ESSnet Workshop / ESBRs session 3/12/ Profiling : a process => that also helps to structure the BRs Profiling is a method:  to analyse the legal – operational – accounting structure of a Global Enterprise Group (GEG) => top / down analysis  in order to establish - the statistical units within this group : G lobal EN terprises (GENs) => conceptually multinational & autonomous T runcated EN terprises (TENs) => their pure national part - their links with the Legal Units (LeUs)  validate they are efficient structures for the collection of statistical data  and include “enterprises” (GENs / TENs) in a “global / national” System of Statistical Units

ESSnet Workshop / ESBRs session 3/12/ Profiling process applied to Bolloré GEN 1 GEN 2 GEN 3 GEN 4 GEN 5 GEN 6 & 7 GEN 8 Minority ownership => incl. in quasi-ent Quasi-Ent 9

ESSnet Workshop / ESBRs session 3/12/ Profiling process result: a “global / national” system of Statistical Units Global level Step 1 Step 2 Step 1 bis Step 3 the order of steps is strategic Step 4 ?? National level

ESSnet Workshop / ESBRs session 3/12/ Profiling model and SBR: practice  Common SU definition with Consistency  Applicable to purely domestic enterprise groups;  Intensive / light profiling according to size and complexity  Linkages with: - the enterprise group register (EGR), that is at the beginning and is the efficient store for “enterprise” statistical units; - the Legal Units registers (administrative and/or statistical): LeUs perimeter of the profiled GEGs / links to the GENs/TENs; - the local units (economic viewing);  Tested ability to collect data at both levels: GENs and TENs  Comments, validation and agreement (looked for) : - from the partnering EU+EFTA NSIs (countries where the GEG operates); - from the GEG itself “Light profiling” (LP) method will be specified in more details later on. (will include desk profiling; probable intense links with O-FATS; light contacts with the GEG; cooperation work between NSIs to be studied)

ESSnet Workshop / ESBRs session 3/12/ Profiling model and SBR: practice  Common SU definition with Consistency =>enables EU countries comparability  Applicable to purely domestic enterprise groups; => use in National BRs  Intensive / light profiling according to size and complexity => enables feasibility (cost efficiency)  Linkages with: - the enterprise group register (EGR), that is at the beginning and is the efficient store for “enterprise” statistical units; => enables EU aggregates - the Legal Units registers (administrative and/or statistical): LeUs perimeter of the profiled GEGs / links to the GENs/TENs; => enables use of ADMIN data - the local units (economic viewing); => enables use of other data (social, environmental / survey, ADMIN)  Tested ability to collect data at both levels: GENs and TENs  Comments, validation and agreement (looked for) : - from the partnering EU+EFTA NSIs (countries where the GEG operates); - from the GEG itself “Light profiling” (LP) method will be specified in more details later on. (will include desk profiling; probable intense links with O-FATS; light contacts with the GEG; cooperation work between NSIs to be studied)

ESSnet Workshop / ESBRs session 3/12/ Profiling model & admin/commercial registers: a path?  Use of IFRS consolidation-type accounting data from the GEG: - global control perimeter (LeUs), - highest level of consolidation, - consolidation perimeter, - operating segments as starting points for enterprises - a set of “core variables” derived from the P&L by nature and from some data of the financial statement.  Exchange for comments, validation and agreement with the NSIs of the other EU+EFTA countries where the GEG is located.  “Light profiling” (LP) method will be specified in more details later on. (will include desk profiling; probable intense links with O-FATS; light contacts with the GEG; cooperation work between NSIs to be studied)

ESSnet Workshop / ESBRs session 3/12/ Profiling model & admin/commercial registers: a path?  Use of IFRS consolidation-type accounting data from the GEG: - global control perimeter (LeUs), => links to financial supervisory data - highest level of consolidation, => close to the UCI - consolidation perimeter, - operating segments as starting points for enterprises - a set of “core variables” derived from the P&L by nature and from some data of the financial statement. => works like a consistent EU+EFTA global ADMIN source  Exchange for comments, validation and agreement with the NSIs of the other EU+EFTA countries where the GEG is located. => towards consistency of SUs in the EU  “Light profiling” (LP) method will be specified in more details later on. (will include desk profiling; probable intense links with O-FATS; light contacts with the GEG; cooperation work between NSIs to be studied)

ESSnet Workshop / ESBRs session 3/12/ Thank you for our cooperation Comments and questions are welcome

ESSnet Workshop / ESBRs session 3/12/ Annexes

ESSnet Workshop / ESBRs session 3/12/ Suitability to produce national statistics Three main partners : “UCI NSI”, “Partnering NSIs” and the GEG

ESSnet Workshop / ESBRs session 3/12/ A cooperative and integrated process between NSIs  For the NSI of the UCI (leading profiler): - check the global perimeter of the GEG, - visit the GEG, - propose GENs and TENs in agreement with the GEG - link the GENs with legal units (can be “m to n” links), - send the resulting TENs to partnering NSIs and discuss with them, - check at EU level (then at national level) the ability to produce adequate statistics : SBS, STS, FATS, FDI.  For the partnering NSIs : - receive proposed TENs (and links with leUs) from the leader NSI - validate them (existence, LeUs contents, ability for data collection, agreement from the national managers) - accept or re-discuss them with the leading NSI, Leading to an eventual new round of discussion with the GEG which is a major actor in the process « networking » the global and national statistical units Specific tasks to adequate actors : “NSI of the UCI” / “partnering NSIs” Each NSI plays alternatively the 2 roles

ESSnet Workshop / ESBRs session 3/12/ GEG Visit : an important part of the cooperative process Statistician requests  Global perimeter of the GEG/Profiling - perimeter of the GEG (consolidation perimeter or list of the controlled affiliates) - Number and name of GENs and TENs (IFRS 8 as a starting point)  Ability to produce consistent data at these levels - Ability for the GEG to produce at UCI level/country level “core variables” - Ability to produce SBS variables (SBS are main providers of NA). - Ability to produce other variables such as STS. - Special attention to outward-FATS statistics, that operate at Group level on “country  Nace CODE” a concept close to “enterprises” in most cases GEG requests - they know better financial and accounting data than any other - they ask for a priority list and for a common list of variables (“core variables”?) - they ask for common questionnaires to all European countries ; - When consolidation is centralised they prefer to provide consistent information for each country at UCI level than at country level.  priority to value added components in an accounting shape, + employment = “the core variables”

ESSnet Workshop / ESBRs session 3/12/ options discussed to collect core variables at TEN level At this stage we propose 3 options : 1 & 2 for large, 3 for smaller GEGs

ESSnet Workshop / ESBRs session 3/12/ A cooperative process to share and exchange information on Profiling A set of common tools presently tested : + Guidelines to propose a shared methodological framework for profiling  Profiling Template + metadata - using the EGR as the starting point to enable the match with profiling; - complementing it by 2 sets of “profiling variables” (UCI NSI / partnering NSIs)  Profiling Report - populated by the NSI of the UCI - to sum up the main characteristics of the GEG and of the profiling process  Timing Model: - to assess the time spent to profile and fill the templates of each profiled GEG - to prepare a cost model. Excel files populated by both “UCI NSI” and “partnering NSIs” (e-Damis). An “IPT” webplatform currently developed in order to ease and improve the exchange of profiling information between NSIs. The IPT to be interlinked with the EGR platform

ESSnet Workshop / ESBRs session 3/12/ Profiling intends to be part of the European system of BRs: EGR is the “starting point” and the “foreseen store” for profiling: - it allows to list the GEGs to profile, - if provides the initial perimeter in Legal Units, - it allows to display economic “enterprise units” and to link them between NSIs. BUT it happens difficult to match EGR and profiling perimeters First tests reveal specific issues to be discussed : - discrepancies between EGR and the profiling perimeters: 1- EGR : as calculated from financial links files; 2- Profiling : as using GEG perimeters (Consolidated and/or controlled LeUs); - year base differences: GEGs perimeter usually more recent than EGR. Examples (Annex) illustrate this and the potential improvement of EGR by Profiles. It raises the question of the best priority for“authentic source” in checking the perimeters of the GEG

ESSnet Workshop / ESBRs session 3/12/ IFRS and other topics relating to GEGs -Adoption of IFRS as a common language between statisticians and GEGs Very convenient and useful, under respect of some constraints : 1- Dissemination standards: We need at least the details figures (“blocks”) which enable to “build” added value. In some cases, IFRS displayed accounts are very poorly detailed. 2- Information by nature for present statistics: Many GEGs published only P&L by large functions (sales / cost of sales; distribution costs, administrative costs…), not by nature (purchases, employees costs, other external costs …).  Insistance that a common and standardized accounting format would be of help. 1- Working on “functions” for GVC purposes: The reverse side of profiling: -GVC looks at “intercos” (mostly consolidated in profiling) as “insourcing”, and at part of other supplies as “outsourcing”; - GVC has a functional approach when profiling analyses the production process But the statistical units are most probably the same

ESSnet Workshop / ESBRs session 3/12/ IFRS and other topics relating to GEGs -Adoption of IFRS as a common language between statisticians and GEGs Other important comments of our contacts at the UCI of the GEG : - they ask for a priority list of variables, common to all European countries; - their UCI often prefers to be the provider of consistent information for all the concerned countries. Since it is not mandatory to produce sub-consolidation at country level, - only HQ can estimate them; - to do so they produce the “interco” flows and stocks that are of interest for GVC.

ESSnet Workshop / ESBRs session 3/12/ Next steps Past program: 2010: feasibility study; 2011: manual, first tests; 2012: guidelines + templates + new testing countries Incoming agenda:  manual, guidelines, etc - manual: final: end of 2012 / validated: end templates: stable version: summer guidelines: version “0”: March 2012 / final version end of material for training: initial: June 2012 / final February organisational and financial models for profiling: June 2013  Tests: - present partners : 2011: 20 GEGs / : 40 “intensive” + 40 “light” -> on time - 5 new testing countries in > follow-up meeting October - all other ESS countries invited as “piloting” countries in 2013  Implementation in the future operational process (from ): - an indicative target population of 500 GEGs for “intensive profiling” - a target to be defined for “light profiling” 24

ESSnet Workshop / ESBRs session 3/12/ Research & dissemination  Cooperation with: - EGR ESSnet: - interconnection through the Profiling Web Platform - same perimeters of GEGs - Profiling results incorporated in the EGR - Consistency ESSnet: common proposal for SU regulation (in FRIBS) - EU studies on globalisation (with stress coming on global value chains), on MNEs, etc  Dissemination to and discussion with: - Eurostat groups on EGR, SBS, FATS, NA, etc: for use in their stats - other interested countries (US, Canada, Australia, China, …) - international bodies such as OECD, UN, etc (e.g participation in the UNECE-OECD-Eurostat world manual on BR) 25

ESSnet Workshop / ESBRs session 3/12/ ESSnet on “profiling large and complex MNEs” C ore variables: the highest priority to test ability for SBS & NA:

ESSnet Workshop / ESBRs session 3/12/ ESSnet on “profiling large and complex MNEs” Core variables: reconciliation with the P&L

ESSnet Workshop / ESBRs session 3/12/ ESSnet on “profiling large and complex MNEs” C ore variables: where to find the right variables in the financial statement?

ESSnet Workshop / ESBRs session 3/12/ ESSnet on “profiling large and complex MNEs” Core variables: what if a complete balance-sheet for the enterprise?

ESSnet Workshop / ESBRs session 3/12/ ESSnet on “profiling large and complex MNEs” An integrated process: from “accounting” to enterprise structure  Details : - number of GENs : number of previous “national enterprises”, - if the GEN is too global, it might not well represent “specific” activities operating in only “one-country”: - structure / data / significance of the activity have to be assessed, but: “marketed products  autonomous activity”, - possible result : create a new GEN to allow to create a new TEN  Classification: the GEN code does not represent the activity of the concerned country => proposal of the “good” TEN NACE code; which leads to double coding of a TEN: this of the GEN, its own (national), - secondary activities possible even in the UCI country (manufacturing + wholesale or retail) “ networking” for global and national SUs: practical issues to be discussed between UCI and partnering NSIs:

ESSnet Workshop / ESBRs session 3/12/ ESSnet on “profiling large and complex MNEs” Special technical issues  Ancillary activities: - if serving different GENs & different countries (e.g R&D) – => a quasi-enterprise –- if serving different TENs in one country (e.g HR management) – => needs to be split –- example of dilemma: transportation – => partnership discussion (includes discussion on the collection strategies, via or not LeUs)  SPEs: - pm  Attempts on specific insights: - description of sectors : do they converge in the EU? e.g oil companies; - other typologies: e.g Pr Spina’s presentation in Rome “ networking” for global and national SUs: practical issues to be discussed between UCI and partnering NSIs: