Legacy Top-Sides in an EPM Environment

New Enterprise Performance Management (EPM) solutions leveraging the latest technology can mean so many exciting things. Whether it’s an accelerated close process, access to greater levels of information, automated reporting and forecasting, or reduced resource constraints, an EPM solution offers a tantalizing number of benefits to almost any organization.

However, with a new system, challenges can arise in how to bridge the past with the future. This may come in the form of redesigning business processes to leverage the new solution’s capabilities or it may be the challenge of unwinding reporting shortcuts in the past to fit them into the multidimensional datasets available today. One example of this can be the handling of historical top-sides that are prevalent in most complex organizations.

It is not uncommon to encounter situations where top-sides were never pushed down to individual ledgers. The reasons for these top-sides vary, but they often have their genesis in one of the following categories:

  • Acquisition Accounting – these top-sides often resulted from fair value adjustments applied to a group of acquired entities … the adjustments may have never been calculated nor allocated to the individual entities. Instead, they have been carried as a top-side adjustment on a corporate ledger.
  • US GAAP/IFRS Adjustments – these top-sides can be a function of variances between the treatment of certain items between US GAAP or IFRS and local statutory reporting. For example, certain pension liabilities may have a different valuation and/or treatment for US GAAP than they do for local statutory reporting.
  • Handling these top-sides in a new EPM which is designed to handle multidimensional reporting for both internal and external (SEC, Tax, Bank, etc.) reporting can require not only a thorough understanding of the EPM’s technical capabilities, but also a sophisticated understanding of international finance & accounting standards and reporting requirements.

The good news is, that with a little bit of effort, these top-sides can often be unwound to maximize the potential of the EPM solution whereby data can be allocated to each legal entity/business unit dimension. The outcome is not only a more timely and controlled close process, but also more accurate reporting and analysis of financial data.

John L. Sheldon, CMAA.,

President – The EGP Family of Companies