Reconciliation of Earnings between Internal and External Reporting

In addition to meeting regulatory requirements, such as the Minimum Requirements for Risk Management (MaRisk), the reconciliation of earnings between internal and external reporting often serves as a tool for harmonizing the data budget of financial institutions and the associated avoidance of misinformation and incorrect controlling approaches.

Differences in Internal & External Reporting

Reported Information

Internal and external reporting differ not only in terms of the target group, but also primarily in terms of the information provided. While external reporting is strongly influenced by external guidance such as accounting standards (IFRS, US GAAP, German Commercial Code (HGB), etc.) or other regulatory requirements (Minimum Requirements for Risk Management (MaRisk), CRD/CRR, etc.), internal reporting is ideally geared to the wishes and ideas of the respective target group.

Organization

These differences often lead to internal and external reporting being located in different organizational units and controlled by them.

Historical vs. Future-oriented Analysis

While external reporting usually provides a view of the history of the institution, internal reporting is responsible for providing a view of the expected future as well as target/actual comparisons in addition to the historical view.

Underlying Data for Internal & External Reporting

Despite the differences mentioned above, both internal and external reporting are ideally based on the same underlying data. The fact that this is sometimes not the case is often due to restructuring as well as a large number of IT systems in connection with past takeovers and mergers.

Different underlying data for internal and external reporting leads in the best case to additional expenditure in the context of data provision, data analysis and data preparation, in the worst case however to misinformation and misguided controlling impulses.

The transfer of results from internal and external reporting serves not only to identify and eliminate erroneous and inconsistent information, but also to optimize the informative value of the respective reporting.

WTS Advisory Support in Setting up a Powerful Internal & External Reporting System 

Based on many years of experience in setting up external and internal reporting structures and implementing harmonization projects, WTS Advisory will support you in structuring and implementing an appropriate reconciliation of results. The experience and knowledge gained from such projects, for example about classic sources of reconciliation differences such as

• market data
• FX rates
• day count convention
• late bookings
• internal transactions
• etc.

have already proven in the past to be an excellent basis for a targeted and streamlined project procedure and the associated project success.

If you are interested or have any questions, please contact us.