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Item III.1

Profiling methodologyD. FRANCOZ

Eurostat

ESTP Course

How to compile statistics on global enterprises

Eurostat

A little bit of terminology and acronyms

• GEG: global enterprise group, also known as

�MNE: MultiNational Enterprise group

• UCI: Ultimate Controlling Institutional Unit, aka

�GDC: Global Decision Center

• GEN: Global ENterprise

• TEN: Truncated Enterprise

• NSI: National Statistical Institute

• UCI NSI: main profiler

• Partnering NSI: country which has subsidiaries in the

profiled GEG, but not the UCI

Before to start

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What is profiling

• Profiling is a method

�which analyses the legal – operational and –

accounting structure of an enterprise group

� in order to establish enterprise units within that group

(and their links to legal units)

� and explores the most efficient structures for the

collection of statistical data.

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A need for looking at the whole elephant

Why to profile

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Why to profile

• Need to better take into account the globalisation of the economy

�The GEGs organise themselves at the global level

� The statistical representation of the GEGs may be different from the GEG’s own vision

� National statistics don't take properly into account this global dimension

�Need to improve the consistency of business statistics in

the EU

� Currently, practices differ from one country to another one

� In most countries, the legal unit is used for the enterprise as statistical unit

�To take into account the global dimension may change the

statistics and the economic analysis

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Why to profile

• Need to better take into account the globalisation of the economy

�To take into account the global dimension may change the

national statistics and the economic analysis

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Why to profile

• European Profiling will reconcile

�Global vision of the groups on their activity

�National needs to observe economic activity

• European Profiling is the only way to properly delineate "enterprises" in multinational and complex EG. �describe consistently the same GEG in all EU+EFTA countries

�Ensure consistency of treatment between countries

�Allow producing statistics at different geographical levels

� Fulfil both needs of national statistics and statistics on globalisation

� support efficient data collection in SBS, FATS, FDI & if possible in STS

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The profiling project

• Proposes a top down approach to define the new

enterprises at two levels:

� The global enterprises (GEN) defined regardless of the

geographic dimension

� The truncated enterprises (TEN): the national parts of

the GEN

� GEN and TEN delineated in terms of legal units

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Profiling: A collaborative

process1-With the Group

2-Within NSI: between

profilers and Business

statisticians3-Between profilers in

different NSIs

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• Centrally defining “enterprises” in the frame of

multinational enterprise groups (GEG)� Not only delineate the enterprises but also ensure that the enterprises

defined are suitable for data collection and follow up

� The NSI of the UCI has the responsibility of defining the GENs and TENs

� The “partnering” NSIs have the responsibility to confirm the TENs in

their country

� In both cases: discussion with statistical users is essential

• The main process steps are:� Desk profiling (UCI NSI)

� Contact with the GEG (UCI NSI)

� Assess the UCI proposal (Partnering NSIs)

European Profiling

consists in

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2 types of profiling

• Intensive profiling

� For the largest and most complex GEG

�600 GEGs in the target

• Light profiling

� For the less complex GEG but still large enough

�1100 GEGs in the target

• Differences between intensive and light profiling

� Same desk activity

� Contact with the GEG not mandatory in light profiling

� Partnering exercise not mandatory, but highly

recommended

How to profile

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The steps of

profiling

UCI: Desk research1st delineation of

GENs and TENs

Identify GEG

for profiling

Contact the

GEG

Visit GEG,Obtain perimeter,

employment and

turnover variables Partnering exerciseConfirmation of TENs

Agreement on TENs

and GENsEnd of the profiling

process

UCI: Preparing for partnering

exercise2d delineation of GENs and TENs

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The tools for profiling

• Current templates:

• In the future: an interactive tool (the Interactive

Profiling Tool)

Detailed

information

per legal units

All about

the profiling

process

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The steps for profiling

• Selection of the GEGs to be profiled in the EGR�Target population: the 600 largest and most complex

GEG in the EU

• Preparation, identification and defining at the global group level centrally by the NSI of the UCI�Defining the UCI, that determines the responsibility for

the profiling of the GEG� Theoretically already done in the EGR

� Check the EGR information

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• Desk preparation: �Collect information on the legal structure, using EGR data

�determine the countries in which the GEG operates, and so determine the NSIs involved (partnering NSIs)

� collect information on the operational structure of the GEG, using the annual reports and information at GEG websites

�Collect the GEG information that is already available at the NSIs (e.g. from surveys)

• Derive and classify GENs at the global level as a proposal ( including identification)�Analyse the operational structure of the GEG

�Prepare a proposal for the GEN structure

� List the legal units for each GEN

The steps for profiling

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• Contact and visit the GEG

� To confirm the global perimeter of the GEG, the GENs and

their delineation

� 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)

� To collect data on the GENs and TENs (check the ability to

produce consistent data at these levels)

� Ability for the GEG to produce at GEN/TEN level the minimum set of

variables (employment, turnover, NACE)

� Ability to produce SBS variables (SBS are main providers of NA).

� Ability to produce other variables such as STS.

� Special attention to O-FATS information collected at the GEG level on

“country x Nace CODE”, a concept close to “enterprises” in most cases

The steps for profiling

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• Contact and visit the GEG

�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

� 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.

The steps for profiling

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• Derive and classify TENs at the national level (including

identification)

� List the legal units for each TEN

�Discuss the GENs and TENs with the statistical users

� Fill the templates that will be transmitted to the partnering

countries

� Inform the NSIs of EU-countries in which the GEG operates on

the draft profile and ask for comments

�Pass the TENs (and the lists of legal units) to the relevant NSIs

for use as supplied in the national business register and for

data collection.

The steps for profiling

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• Partnering NSIs confirm the TEN

� receive proposed TENs (and links with leUs) from the

leader NSI

� validate them through discussion with statistical users

� existence,

� Contents in terms of LeUs,

� suitability for data collection,

� organisation of data collection (which unit to follow?)

� agreement from the national GEG managers

� accept or re-discuss TENs with the UCI NSI

� Feedback process between the partnering and the UCI NSI until an

agreement is reached

The steps for profiling

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Variables to be collected

• For the GENs and TENs

�NACE

�Employment

�Turnover

�Variables in the BR regulation

�mandatory

• In addition: core variables

�Variables of the SBS regulation, annex1

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Main output of each step

desk

profiling contact with the group

partnering exercise

GEN GENs delineation in terms of

legal units X X

activity code X X

employment X X

turnover X X Other core variables (operating surplus and investments)

X X

Quality of the legal units X

Identification of new legal units

X

TEN

TENs delineation X X X activity code X X X

employment X X X

turnover X X X other core variables X X

Identification of new legal units

X

Quality of the legal units X changes in the delineation of the TEN

X X

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Sources of information

GEG GENs TENs Legal units

BR data

UCI,

Partnering

UCI,

Partnering

SBS data (surveys or admin data)

UCI,

Partnering

OFATS data UCI

other national data available (STS,

…)

UCI,

Partnering

GEG annual report or web site UCI UCI

GEG visit UCI UCI

OFATS data is a valuable source of information for profiling and can be used

as the source of turnover, employment and NACE to populate TENs' variables

• OFATS data supplied at the TEN level can be used alongside published

annual accounts to validate national data.

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Organisation of data

collection

• Organisation inside the NSI

� May differ from one NSI to another

� Profiling together with BR and EGR

� Profiling together with SBS

� Profiling independent from both

� In small countries: multi-disciplinary teams (BR, SBS, STS, FATS)

working part-time on profiling

� In any case, need for a good coordination between all actors

– Efficiently update EGR with profiling information– Efficiently collect data for SBS (FATS) purposes

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• Different ways of collecting data for SBS purposes:

� Decentralised

� The UCI NSI collects only the minimum set of data for GEN and TEN

� National collection for SBS:

– By specific collection from TENs or GEG's national representative– By consolidation of existing information (surveys or use of

administrative data)

� Fully centralised

� By the UCI NSI for all the partnering countries

� On request of the GEG

� Requires an agreement with the GEG

� Requires a good coordination between involved countries

Organisation of data

collection

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Light vs. Intensive

profiling

Intensive profiling

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Light vs. Intensive

profiling

Light profiling

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Conditions for light

profiling

• Availability of the mandatory information of the

following documents:

�Consolidated annual accounts

� With segment information by activity and country

� With the delineation of segments in terms of legal units

�Answer to the O-FATS survey

� That allows to delineate the GENs and TENs

� That allows to derive economic information on GEN (and TEN)

�These two sources are complementary.

• If mandatory information cannot be completed

� contact the GEG to complete the profiling. In that case, it will

become an intensively profiled GEG

� If the GEG is small enough, convert to automatic procedure

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IPT: a tool to make

coordination easier

• IPT: Interactive Profiling Tool

�Allow profiling teams to smoothly exchange information

during the profiling process, but respecting the

confidentiality rules in force concerning exchanges of

individual data.

�Centralise information on the GEN and the TEN for the

group under profiling process.

�Release information on profiling to the users

�Be the central place of guidelines, metadata, templates

and other documents related to International profiling.

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IPT: a tool to make

coordination easier

• What could be done with the ITP

�Exchange information between the EGR and the IPT (direct

transfer from EGR to IPT)

�Exchange information between the national environment

and the IPT (batch procedure)

�Modify information online for authorised members

(profiling teams of the UCI or partnering countries)

�Read information on a given group

�Add new legal units

� Send notifications to the partnering or UCI countries during

the profiling process (this should be done automatically

according to some trigger signal)

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Example 1: SIEMENS

• Initial operating segments

• Geographical

organisation

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• Going in the detail

of segments

Split of the "energy" segment

Example 1: SIEMENS

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• Split of the segments

� Industry segment

� Energy segment

� Infrastructures &

Cities

Example 1: SIEMENS

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Example 1: SIEMENS

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• Employment figures

Example 1: SIEMENS

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• List of subsidiaries: an extract

To be compared with the EGR list

Example 1: SIEMENS

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First step: desk profiling

• Several options for GEN

�Consider only the 4 operational segments (Industry, Energy,

Healthcare and Infrastructures and cities) and integrate the

activity of the 3 cross-sector segments into them

� Requires information to split the activity of the cross sector

businesses

� Siemens publishes information for these three cross sector

businesses, but information is very poor for equity investments

Example 1: SIEMENS

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First step: desk profiling

� Split the Industry, Energy and Infrastructure segments into

several global enterprises

� Segment information presented in the annual report detailed by

sub-segments

� Requires checking the autonomy of enterprises defined in the

frame of the segments

�Consider 6 global enterprises in line with the segments

� exclude equity investments

� Consider transversal activities in a segment "others"

• Need for a contact with the group

Example 1: SIEMENS

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A possible operational structure:

GEN

NACE 3Digit

employmentturnover (external

revenue) in M€

Energy 351 86,000 27,302

Healthcare 266 51,000 13,600

Industry automation 27105,000

9,563

Drive technologies 281 9,640

Instrastructures&Cities 302 89,000 16,731

financial services 649 3,000 859

others 701 36,000 1,031

Example 1: SIEMENS

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French

organisation

Example 1: SIEMENS

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French

organisation

Example 1: SIEMENS

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French

organisation

Example 1: SIEMENS

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French

organisation

Example 1: SIEMENS

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• Operational structure:

� a national restriction of the GENs

• Legal structure:

�Transversal to the economic structure

� One sub-holding which controls the most part of LeUs

� One LeU with activity in the 5 GENs

– Should be split into the different TENs� 6 LeU which directly depend from SIEMENS AG

• GEN structure should be suitable for national

purposes

• Way to collect information on TENs:

� See if SIEMENS SAS or SIEMENS SA could report for all the

TENs

Example 1: SIEMENS

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• Suitable for light profiling:

�Medium size group: 3510 employees

�Active in 3 other EU countries

�Quasi monoactive

�Detailed segmental information incl. by country

�Detailed list of subsidiaries

�Possibility to delineate the global enterprises in terms of

legal units

Example 2: BRICORAMA

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Legal structure of the GEG

Example 2:

BRICORAMA

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Detailed list of subsidiaries

Example 2: BRICORAMA

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• Intra-group flows

Example 2: BRICORAMA

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Income statement

by TEN

Example 2:

BRICORAMA

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Balance sheet by TEN: assets

Example 2: BRICORAMA

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Balance sheet by TEN: liabilities

Example 2: BRICORAMA

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Conclusion:

• 1 GEN

�NACE: 475 "Retail trade of other household equipment in

specialised stores"

�Additional activity: windmill (NACE:3411: production of

electricity)

� Currently side activity

• 5 TENs

� France, Belgium, Netherlands, Spain, Hong-Kong (small

activity)

• Central collection of data at the UCI level is possible

Example 2: BRICORAMA

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EGR and profiling: two different visions of the same "object"

• EGR: legal structure of the global enterprise group

• Profiling: economic structure of the global enterprise

group

Profiling and EGR

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Interactions between the EGR and the profiling project

• The EGR: a fundament for profiling

�EGR: starting point of profiling� Profiling population selected in the EGR

� UCI in EGR defines the profiling country

� EGR perimeter starting point for profiling

• Profiling: a fundament for EGR quality

� Global economic information on the GEG

� Delineation of GEN and TEN in terms of legal units and economic information on GEN and TEN

� Updated information on legal units

Profiling and EGR

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Principles for a coordinated view between EGR and profiling

• The perimeter of the groups treated in the IPT should

be identical in the EGR and the IPT database at the

beginning of the profiling process and at the end

(when the country of the UCI considers the profiling

to be achieved).

�The EGR should be updated by the IPT data (set of

information to be defined).

• The common units in the EGR and on the IPT should

be identified with to the same ID number

� It could be the LEID number for the legal unit and the

group ID number for the group.

Profiling and EGR

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Profiling and FATS

• FATS among the main statistical users for profiling (with SBS)

• Analytically:

� Same statistical unit "enterprise" followed in FATS and defined

through profiling

� TEN are defined not only in EU, but worldwide

� TEN allow to produce information by country and activity

• Operationnally

� FATS can help profiling

� To delineate the GENs and TENs: especially for light profiling�

complete the annual report information to produce data by country and

activity

�Profiling can collect information for FATS purposes

� Information collected on TENs (turnover, employment, NACE) also

available for non-EU countries

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Thank you for your attention

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Annex: core

variables

1- Strategic need: the main aggregates of the P&L by nature:needed as proxies of the GDP (productive analysis and NA providing)

P & L by nature

(not by function) (consolidated for the GE or the TE)

Content of the boxes

1st evaluation of VA ( by the production

side )

=

“Production” = Proxy of the “Revenue” variable?

+ pure T-O

+ other activity products

+- � produced inventories

T-O (sales to 3rd parties) net of granted discounts & rebates (IAS18) if possible split between sales of merchandise and other sales. Newly produced inventories and fixed assets (incl grants on fixed assets)

+- Other products and expenses Patent, franchise & brand royalties etc ; more useful if split between products and charges.

- Used purchases

- Other external expenses

Purchases of goods (raw material, equipments and parts etc), services and merchandises, net of � in inventories of received discounts and rebates +anciliary costs on purchases (CIF etc)

2nd evaluation of VA ( by the components)

=

+ Employees wages and salaries Including bonuses and share of results + Taxes on products and indirect taxes

+Depreciations Physical and value change

= Current operating result (optional for the MNEs)

Close to net operating result of the NA

+- Other current products and charge Other current non recurring products & charges (e.g sellings of assets, depreciations of goodwill)

Operational result

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Annex: core

variables

2- Completion of the P&L: useful to check consistency between operating and net results

Financial result

+ Treasury products Net costs of net financial debt - Cost of debt

+- Other financial products and costs - Taxes costs Taxes on result + deferred taxes + participations

des salariés aux résultats +- Net result quota-share of minority owning of non-consolidated interests

When the MNE has a real influence on decisions

+- Pre-tax net result of: . non-continued activities

. ceased or being sold activities

IFRS 5

Net result

- Minority interests

Part of the Net result accruing to minority holders, for globally consolidated affiliates

Net result, share of the group

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Annex: core

variables

3- Identification, through the Financial Assessment, of the « investment »

ASSETS

Content of the boxes

Non floating assets

Tangible assets

Equipment, machines etc Activity-used buildings Buildings for hire Biological non current assets (forest, orchard, cattle, etc)

Intangible assets

Goodwill Other intangible (patents, brands, etc)

Financial assets

Equity share in associate enterprises (Equity share in TEs of other countries) Other disposable (sellable) financial assets Non current assets, disposable to be sold ??

Floating assets

Inventories Goods and merchandise Biological current assets (crops, vegetable and fruits, animal products, etc)

Financial floating assets Credits to clients Other financial current assets Cash and similar

Total Assets