Conceptual design of business segment reporting

Teaser-Kachel_Referenz_DZ_Bank.svg

Conceptual design of business segment reporting

DZ BANK AG, Deutsche Zentral-Genossenschaftsbank, a central cooperative bank with its headquarters in Frankfurt am Main, Germany, is the central institution for approximately 1,000 cooperative banks in Germany. Measured by total assets, it is the third-largest commercial bank in Germany.

The bank launched a project to measure the contribution of individual business segments to the accounting profit (IFRS) of DZ BANK AG. The project aims to present the accounting profit and asset / liability figures in the business segment dimension and its changes over time, while also integrating external accounting (balance sheet / full comprehensive income (FCI)) and internal management reporting.

Together with zeb and the IT departments of DZ BANK AG, the bank’s Group Strategy and Controlling, Group Finance and Group Treasury departments designed a concept for business segment reporting and implemented it subsequently.

1. Systematic:
Conceptual design

The starting point for conceptual design (see figure) was the use of accounting profit and asset / liability figures according to IFRS accounting rules. Granular information (single deal information) in the implemented SAP sub-ledger technology could be used. Through the linking of information from external accounting with information from internal accounting, transactions could be assigned to the individual business segments. This approach ensures that the overall profit and loss of business segment reporting corresponds to the accounting IFRS profit and loss.

Moreover, all internal transactions were integrated with their accounting profit and asset / liability figures to reflect the performance relationships between business segments. The presentation model was completed by adding a consideration of relevant profit implications in the non-financial business segment, such as the allocation of commissions or administrative expenses.

The conceptual design led to a presentation scheme which besides the relevant P&L components also includes other profit implications such as the changes to the revaluation surplus and the hidden reserves (other comprehensive income) to ensure reconcilability with present value-influenced, economic income statement.

In addition, during the conceptual design process, the project team analyzed and reconciled questions about considering profit and loss from hedge accounting, categorizing internal transactions in analogy to the provisions of commercial law and presenting the foreign exchange profit and loss. The concept considered the possible future positioning of the IT architecture at DZ BANK AG. This included using SAP Business Objects as an analysis tool, for example.

2. Effective:
Implementation

Initially, a rough concept was created for a commercial law-oriented business segment reporting and coordinated with the involved units. Shortly after, the team started to build a prototypical solution. This allowed the relevant data supply systems to be determined and missing data or required further details to be identified. Solutions were developed for the identified matters, which could quickly be tested by means of the prototype.

Through the prototypical approach, analyses and reports were available early on and could be used as part of the dialog with the involved units for plausibility purposes and established early transparency about the expected end product.

Another benefit was that the basis was specific enough for the subsequent implementation into systems of DZ BANK AG.

 

Conceptual design of business segment reporting

Referenzen_Banking_Report_2016_2017_DZ_Bank_AG_en

3. Future-proof:
Outlook and conclusion

The established business segment reporting under commercial law represents a crucial step towards integrating internal and external reporting. By creating the business segment report, DZ BANK AG has taken a major step towards future-proof bank management.