1. Pierre Teillet Coordinator, a Eurostat project, a partnership of: 30/11/2011 ESSnet on profiling: developping a method to treat Complex Enterprises Rome joint Workshop

2. 29-30/11 & 01/12 2011 ROME joint Workshop 2 ESSnet on « profiling large and complex MNEs » The present situation of enterpriseslide 3 to 5 Objectives and main features of profilingslide 6 Change in the approachslides 7 to 13 « Process » changes incoming slides 14 and 15 Future work: tests, tests, testsslide 16 Consultation and disseminationslide 17 Annexslides 12 to 15

3. 29-30/11 & 01/12 2011 ROME joint Workshop 3 ESSnet on « profiling large and complex MNEs » present situation of the statistical unit « enterprises » (1) > they are theoretically included in the EGR > supposed to be largely used, e.g in Structural Business Statistics > defined as - the smallest combination of legal units - that is an organisational unit - producing goods and services (for the market) - … with a certain degree of autonomy in decision making - especially for the allocation of its current resources

4. 29-30/11 & 01/12 2011 ROME joint Workshop 4 ESSnet on « profiling large and complex MNEs » present situation of the statistical unit « enterprises » (2) > but created nationally without international comparability: - the sum of the parts usually differs from the total - the required level is not specified (national, European or global?) - standards not consistent for data collection > with consequences of the increasing “globalisation”: - a deepening gap between managerial structure and legal units - amplifying problems in statistics (intra group flows, M-X port, split of VA among countries, R&D, ancillary activities etc) > so that national as well as European statistics are loosing their accuracy

5. 29-30/11 & 01/12 2011 ROME joint Workshop 5 ESSnet on « profiling large and complex MNEs » present situation of the statistical unit « enterprises » (3) > national and international studies for a long time: - “enterprise”-type units operational for years in NL and UK - decision to change soon in France (2011/2012 program), etc - “international 2005 study” on MNEs (CN, UK, NL, FR, IT, etc) which results are known as “seeing the whole elephant”: > leading to MEETS decision to work on better accuracy and consistency of: - statistical units for national collection of data - statistical European aggregates > embedded in the ESSnet Profiling, part of the EGR program, towards an economic definition of enterprises.

6. 29-30/11 & 01/12 2011 ROME joint Workshop 6 ESSnet on « profiling large and complex MNEs » the main objectives of the ESSnet Profiling project “To see more clearly the whole elephant” (and its different parts), the ESSnet has been assigned to prepare, for the future, to: > describe consistently the same MultiNational Enterprises (MNEs) in all the EU countries => “enterprises” linked between countries through the EGR > support efficient data collection in SBS, FATS, FDI and if possible in STS => a system of statistical units for all business statistics > for direct dissemination and indirect use (National accounts etc) => most statistical productions concerned

7. 29-30/11 & 01/12 2011 ROME joint Workshop 7 ESSnet on « profiling large and complex MNEs » change in the approach (1): operational & accounts analysis Profiling is a method: > to analyse the legal – operational and – accounting > structure of an enterprise group > in order to - establish the statistical units within that group and - their links and - the most efficient structures > for the collection of statistical data Analysis of business structures is used instead of pre-existent units (admin or legal background); the SUs must have collection capabilities

8. 29-30/11 & 01/12 2011 ROME joint Workshop 8 ESSnet on « profiling large and complex MNEs » change in the approach: (2): negociation with MNEs Profiling : > uses the MNEs information system for accounting consolidation > takes the (organisational or management) operating segment as a starting point for delineation of economic “enterprises” (IFRS8), but can differ at the end > with the result that an enterprise is (can be): - a single legal unit (if independant) - an enterprise group (i.e a set of legal unit under common control) - a part of an enterprise group. > as “enterprises” are organisational units, their autonomy (in decision making for allocation of their current resources) is an essential characteristic. Delineation, list, names of “enterprises” built with & agreed by the MNEs.

9. 29-30/11 & 01/12 2011 ROME joint Workshop 9 ESSnet on « profiling large and complex MNEs » change in the approach (3): Intra-ESS cooperation to list the SUs Profiling proposes to: > drop the previous “smallest combination of legal units” which is usually: - national - bottom-up - usually non autonomous as basis of the enterprise; > use “a part of an enterprise group” called “global enterprise (GEN)” which is usually: - top-down - multinational - compulsarily autonomous > complement it by “truncated enterprises” as national parts of GENs. > and include “enterprise” in a system of statistical units From bottom-up/national to top-down/global analysis

10. 29-30/11 & 01/12 2011 ROME joint Workshop 10 ESSnet on « profiling large and complex MNEs » change in the approach (4): the system of Statistical Units

11. 29-30/11 & 01/12 2011 ROME joint Workshop 11 ESSnet on « profiling large and complex MNEs » change in the approach(5): testing « ability » > For the majority of EU statisticians, a large change to the usual way: - from surveying SUs (statistical units), predetermined in the BR, - to a dialog with MNEs, - using their common language: the standardised business accounting > Leads to necessary pre-checkings, from BR staff: - are the priority variables we need available in the MNE information system at the level of the “enterprises”? - if yes, are they economically significant? > The checks are to be made first at EU level (then at national level): - are there theoretically consistent data all over the EU? - will we be able to gather them consistently from the truncated national parts of the “enterprises”? Is the « enterprise » able to produce structural statistical data ?

12. 29-30/11 & 01/12 2011 ROME joint Workshop 12 ESSnet on « profiling large and complex MNEs » change in the approach (6): testing « ability » (continued) > What are the priority variables to check, (statisticians view)? - the usual BR variables (to identify, assess the continuity and link different kind of units, split the populations and stratify); - the SBS variables; as such and as SBS are main providers of NA; the NA themselves; - special attention to outward-FATS statistics, that operate at the MNE level on “enterprises” > How can the MNEs work on checkings (the business view)? - they ask for a priority list; - they want this list to be common to all European countries; - they ask for common questionnaires for priority variables; - they know better accounting data than any other. => priority to components of value added (in an accounting shape), the “core variables” Is the « enterprise » able to produce structural statistical data ?

13. 29-30/11 & 01/12 2011 ROME joint Workshop 13 ESSnet on « profiling large and complex MNEs » change in the approach (7): the common language to use Profiling proposes to use (largely) the IFRS (the EU-GAAP): knowing their pros and cons:  Pros: -Widespread and the only “administrative” “ EU standards -Good standardisation of elementary flows and stocks -Compulsory for stock-traded and bond-traded groups -Include “operational segments” (with usually displayed turn-over, operational results and employment figures)  Cons: -Consolidated data at world level (needs extra data if intra-group flows) -Sometimes at levels lower than UCI -No standardised publication tables -Still uncertain stability for operational segments (as compared to legal units ?) -“operational segments” can be geographical splits not segmental ones talking the business only common language: the « IFRS »

14. 29-30/11 & 01/12 2011 ROME joint Workshop 14 ESSnet on « profiling large and complex MNEs » Process changes incoming: networking and platforming (1) > For the NSI of the UCI country of a MNE, the tasks are: No more registering SUs (statistical units) directly from admin or legal world, but: - check the global perimeter of the MNE, - visit the MNE, - propose GENs (global enterprises in agreement with the MNE) and TENs, - link the GENs with legal units (can be “m to n” links), - test at EU (then at world) level the ability to produce adequate statistics, - send the resulting TENs to partnering NSIs and discuss with them, > For the partnering NSIs: - receive proposed TENs (and links with legal units) from the leader NSI - validate them (existence, ability, agreement from the national managers) - accept or re-discuss them with the leader NSI > Each NSI plays alternatively the 2 roles « networking » the global and national statistical units

15. 29-30/11 & 01/12 2011 ROME joint Workshop 15 ESSnet on « profiling large and complex MNEs » Process changes incoming: networking and platforming (2) > For the profilers, a WEB platform (mid-2012) will support the process : - maintaining the global perimeter of the MNE (if updates), - supporting the dialog UCI NSI / partnering NSIs, - recording the GENs, TENs, and their characteristics - recording the GENs / TENs links with Legal Units (can be “m to n” links), - recording the tested ability to produce adequate statistics, > For the EGR, consistency & completion will be organised (end 2012-13): - all new LeU will be identified through the EGR ID service - all GENs will be introduced by the UCI country of the MNE - all TENs will be introduced by its country > Each NSI is potentially a profiler and an EGR contributor : - but the services can be, or not, different > Enterprises are EGR SUs Profiling web platform and links with the EGR

16. 29-30/11 & 01/12 2011 ROME joint Workshop 16 ESSnet on « profiling large and complex MNEs » Future work: manual, guidelines … and tests, tests, tests ! > manual, guidelines, etc - manual: version 1 at the end of 2011; final version end of 2013 - guidelines: version 1 March 2012; final version end of 2013 - material for training: initial June 2012; final February 2013 - organisational and financial models for profiling: June 2013 > Tests, tests, tests ! : - partners profiling tests: 20 MNEs in 2011; 40 in 2012-13 + 40 “light” - 5/6 new testing countries in 2012 - all other ESS countries invited as “piloting” countries in 2013 > Implementation in the future operational process (from 2014): - a target population of 500 MNEs for “complete profiling” - a target to be defined for “light profiling” Partnering, testing, piloting … and implementation

17. 29-30/11 & 01/12 2011 ROME joint Workshop 17 ESSnet on « profiling large and complex MNEs » consultation and dissemination Our project lasts until the end of 2013, now mainly on testing We are in constant coordination with: - the EGR ESSnet - the Consistency ESSnet - the EU studies on globalisation (e.g on value chains) and on MNEs - the Eurostat groups on BR, SBS, FATS, NA etc - other interested countries (US, Canada, Australia, China, …) - international bodies such as OECD, UNECE, etc We will appreciate your comments: pierre.teillet@insee.fr --------------------------------------------------------------------------------------------------- Thank you for your attention

18. 29-30/11 & 01/12 2011 ROME joint Workshop 18 ESSnet on « profiling large and complex MNEs » Annex Core variables: the highest priority to test ability for SBS & NA:

19. 29-30/11 & 01/12 2011 ROME joint Workshop 19 ESSnet on « profiling large and complex MNEs » Annex Core variables: reconciliation with the P&L

20. 29-30/11 & 01/12 2011 ROME joint Workshop 20 ESSnet on « profiling large and complex MNEs » Annex Core variables: where to find the right variables in the financial statement?

21. 29-30/11 & 01/12 2011 ROME joint Workshop 21 ESSnet on « profiling large and complex MNEs » Annex Core variables: what if a complete balance-sheet for the enterprise?