Global Financial Reporting and Valuation conference · — Model Review Tools and procedures — Basic design principles — Helpful modeling techniques — Adding automation and

Global Financial Reporting and Valuation conferenceFontainebleau Miami Beach, FL

December 8–10, 2019

2© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDP036451-5D

Notice

The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

MAP: Charting the course

Modeling, Analytics & Planning (MAP)

A portfolio of technology-based analytics and visualization tools/services that harmonize data from divergent sources into standardized frameworks for purposes of valuation, forecasting, benchmarking and tax analyses.

The vision…


What is MAP? A detailed breakdown

MAP

MAP is an overall umbrella for a series of models, accelerators, and processes that can be used to provide variety of EVS services.

Other completed and near-term modules include org. chart roll-ups, forecasting/PFI, loan valuation, and synthetic credit rating.

MAP utilizes a modular approach to developing incremental service offerings as a portfolio of solutions or individual solutions, depending on client need.

The Multi-Entity Valuation (MEV) model is the first MAP module and the inspiration for the MAP concepts of data harmonization and standardized frameworks.


Modeling as a service

Managing modeling risks

Model development leading practices

Financial modeling tools

Developing PFI/Strategic analysis

— Model errors and risk areas

— Model controls — Modeling techniques

to avoid— Model Review Tools

and procedures

— Basic design principles— Helpful modeling

techniques — Adding automation

and scalability— Incorporating

visualizations

— Power Pivot— Power Query— Power BI— Tableau— Alteryx— Reporting tools

— Common challenges— Assessing forecasting

accuracy— Simulations,

scenarios, and sensitivity analysis

— Economic modeling— Predictive tools — Financial reporting

considerations— Strategic value

analysis


MAP: A visual representation

Client Enterprise Data

Valuation Module + Debt Valuation & Benchmarking Modules + Forecast Module + TP Modules

Market Data (CIQ, EIU, etc.)

Client TP Policies,

Org. Chart, etc.

Frequent Data Updates Frequent Data Updates

Data Population

MAP Dashboard Interface

Tax view TP viewFinancial reporting view Treasury view

Client Financial

ERP Systems

Data Acquisition

and Structuring

(Alteryx, Power Pivot/Query)

Modelling and

Calculations (Excel)

Analytics(Power BI)

7© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDP036451-5D 7© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDP036451-5D

Specific Use CasesHow does MAP/BMS Alleviate Pain Points

Processes/Client JobsPain Points

Business modeling services overview


Business modeling services

The Business Modeling Services Practice is KPMG’s business modeling and operations analytics practice.

BMS employs industry leading practices and an established model development framework to help our Clients distill strategic decisions or transactions down to fundamental drivers and decision points.

Critical business decisions are increasingly underpinned by complex, bespoke quantified analysis. The need for specialized modeling is often heightened when the financial exposure is significant, the situation is complex, and where multiple stakeholders are involved.

Financial models for M&A, refinancing, strategic alliances, joint ventures and other inorganic growth initiatives

Models that help with decision-making to help analyze business operations and forecast revenue, profitability and liquidity movements for planning purposes, business cases, and considering strategic options

Valuation models such as impairment analysis, debt valuation, etc.Advanced econometric methods, statistics, advanced scenario-building in contexts that require extracting insight from complex data or involving critical decisions

Reviewing existing models and providing comments, advice, recommendations, and training. Also known as “model audit” or “model validation”

Transaction modeling

Business planning

Specialty modeling

Model advice


Sample outputs and functionality from past transaction and business planning models

Instructions

Step-by-Step, with links, & automated completion status

Checks and controls

Centralized checks shown on every sheet

Clear centralized inputs

Dates, project name, and value inputs

Model map

Overview of model contents & ease of navigation

Dashboard

Summary analytics of key inputs & outputs

Consistent structure and timeline

Timeline to enable flexibility & robustness on each sheet

Scenario manager

Structured to test the impact of individual inputs and/or entire “scenarios”

Version control and change log

Recorded log of value changes and description

Opening B/S

Clearly broken out purchase accounting, financing, etc.

Synergy outputs

Outputs to separate individual synergy impacts on each line item


Sample outputs and functionality from past valuation models

Instructions

Step-by-Step with links

Checks and controls

Centralized checks shown in the same location on every sheet

Clear centralized inputs

Dates, project name, and value inputs

Model map

Overview of model contents & ease of navigation

Valuation Summary

Summary of asset values with visualizations

IRR & WARA Reconciliation

Reconcile asset return with transaction IRR & WACC

MPEEM

Turnkey valuation templates including the MPEEM, Relief-from-Royalty, & With-without method

Version control and change log

Recorded log of value changes and description

Table of Contents Creator

Macro to Create ToC automatically based on existing tabs in the model

Historical B/S w/ Inventory Values

Consolidated Summary

Inputs Calculations Outputs

Assumptions FV of franchise agreements by store

Carrying Value of Franchise Rights

Management Fees

Historical CYE P&L by store

Summary of CV, FV and impairment amount by store

Stub P&L by store (LTM 03/2016-03/2017)

Trailing Twelve Months (TTM) P&LFranchise Data

Discount rate

NOL, Assembled Workforce, etc.

Supplemental worksheets tailored to purchase accounting

High-Level spreadsheet diagnostics sample


Below are some of the leading practice spreadsheet design principles we tested your spreadsheet against and observed the below issues/risks:

Assessment of better practice design

Principle Observation Explanation Example

Separation of inputs, calculations, and outputs

Inputs, calculations & outputs are not separated in the model.

Better practice is to separate these model components, so that inputs and assumptions made in the models are transparent, and to reduce error rates.

Consistency of formulae Formulae are not always consistently applied across an entire row or down a whole column in the model.

Better practice is to ensure formula consistency, so that any required formula are embedded in the formula logic are clear in the first formula in a row or column, and so that updates to model inputs do not require changes to formulae part-way down a column.

Use of External linked cells

There is no use of formula cells referencing externally linked files.

Better practice is to avoid the use of externally linked files in formula cells, as this can decrease the performance of the workbook and increase the risk of outdated and unexpected results.

No external links detected with the Model named ““Goodwill Impairment Testing Model.xlsx” .

Excess formats, corrupt names, and #REF!s

Workbook contains 19 formula with #errors that could impact the performance and outputs

Better practice is to eliminate redundant components such as excel cell styles, redundant names, redundant worksheets,formula #errors etc.

Use of error checks Error checks are not always used in the model.

Better practice is to include error checks wherever one model calculation should reconcile to another, to ensure that any differences can be investigated and corrected or explained.

Absence of circular references

No circular references have been observed in the model.

Better practice is to avoid the use of circular references, as Excel can mask unresolved iterative calculations, or those that have resolved to one out of many possible solutions.

2014 2015 2020 2021 2022Actual

Meeting Revenue 1,028 805 837 837 850 % vs. prior -21.7% 2.0% 0.0% 1.5%

OI 311 190 351 372 413 % vs. prior -38.9% 21.9% 6.0% 11.0%

OIM 21.0% 16.3% 22.6% 23.3% 24.7%

Tab name: Growth projections by countryAlso refer to spreadsheet maps example in Appendix 2

2014 2015 2020 2021 2022Online Revenue - - -

% vs. prior #DIV/0! #DIV/0! #DIV/0!

Tab name: Growth projections by countryAlso refer to spreadsheet maps example in Appendix 1

Appendix 1 –High-Level review analysis


1. Formula analysis

Unique formulae

Total inputs

Total formulae

% of unique

formulae

Number of sheets

1197 2142 4458 27% 25

List of Sheets

Worksheet Name Unique Formulae

Numeric Input

Formula % Unique

notes 0 15 0 N/ASummary 83 33 308 27%2019 vs 2018 82 56 208 39%GW US 34 22 79 43%GW Canada 35 21 81 43%GW UK 35 21 81 43%GW Germany 35 21 81 43%GW France 35 21 81 43%GW Sweden 35 21 81 43%FRA Belgium TAB 7 4 8 88%FRA Netherlands TAB 7 4 8 88%FRA AU TAB 7 4 8 88%FRA NZ TAB 7 4 8 88%GW Australia 35 21 81 43%GW FRA 49 139 176 28%Carrying Value 43 434 201 21%GW assumptions 142 30 177 80%Unlevered FCF 221 399 994 22%growth projections by country 221 363 1330 17%LE capex 10 56 98 10%Rev 12 88 66 18%Rev & OI_USD_GEO 48 193 271 18%WACC 2 2 2 100%inflation rate 7 145 24 29%Fx 5 25 6 83%

1197 2142 4458 27%

Item Value Description

File Size 3.66MB The file size may be larger than necessary.

Formulae with #Errors

19 Cells resulting in #REF!s, if linked to other formula cells, may impact the final outputs.

# Linked Workbooks 0

Formulae using data connections in the formulae may result in slower performance of the workbook.

Names with Errors 5603

An excessive number of defined names, or defined names referencing external workbooks, can reduce transparency and lead to poor workbook performance.

# External linked formulae

0Linking to external files in formulae can become outdated resulting in unexpected and/or incorrect results.

When assessing a model against best practice, we look for:

— A low % of Unique Formulae as a proportion of Total Formulae

— Separation of inputs and calculations

— A Unique Formula (UF) is one that is not a copy of the formula above or to the left.

— A low % of UF suggests that formulae have been copied consistently, increasing transparency and making a model easier to review and update.

— Separation of inputs and calculations increases transparency, and reduces the risk of unintentional changes to a model when inputs are updated.

Risk areas


2. Used range analysis

Maximum used range in Workbook

5428

— The Used Range determines the size of a model. Used Ranges can become inflated, impacting model performance.

— The used range of a worksheet covers the cell A1 to the last used column and last used row

— The used range can be larger than the range containing values as it can take into account formatting and even cells that were previously populated.

— The used range is found by pressing CTRL + End and checking if the last cell has any values in it.

Sheet Name Used Range Rows in Used Range Colums in Used Range Cells in Used Rangenotes $A$1:$L$15 15 12 180Summary $A$1:$X$47 47 24 1,1282019 vs 2018 $A$1:$W$104 104 23 2,392GW US $A$1:$O$76 76 15 1,140GW Canada $A$1:$U$100 100 21 2,100GW UK $A$1:$U$100 100 21 2,100GW Germany $A$1:$U$100 100 21 2,100GW France $A$1:$S$100 100 19 1,900GW Sweden $A$1:$Z$80 80 26 2,080FRA Belgium TAB $A$1:$R$78 78 18 1,404FRA Netherlands TAB $A$1:$R$78 78 18 1,404FRA AU TAB $A$1:$R$78 78 18 1,404FRA NZ TAB $A$1:$R$78 78 18 1,404GW Australia $A$1:$P$82 82 16 1,312GW FRA $A$1:$L$108 108 12 1,296Carrying Value $A$1:$N$174 174 14 2,436GW assumptions $A$1:$W$62 62 23 1,426Unlevered FCF $A$1:$O$167 167 15 2,505growth projections by country $B$1:$X$236 236 23 5,428LE capex $A$1:$U$17 17 21 357


3. Name range analysis

# of defined names

# of names with errors

# of hidden names

# of locally defined names

6679 5603 542 5054

— Names can be used to make navigation and selection easier, and can be used in place of cell references to make formulae easier to understand.

— However, an excessive number of defined names, or defined names referencing external workbooks, can reduce transparency and lead to poor workbook performance.

— A high number of locally defined names can cause the model to break because of how names are handled in Excel.

Name_ID Name Refers To1 __FDS_HYPERLINK_TOGGLE="ON"2 _1_255_Final_NACO =#REF!#REF!3 _2_255_Final_NACO_ACS =#REF!#REF!4 _3_255_Final_NACO_Memb =#REF!#REF!5 _4_255_Final_NACO_Print =#REF!#REF!6 _5_255_Final_NACO_Product =#REF!#REF!7 _6_255_Final_NACO_Scales =#REF!#REF!8 2019 vs 2018'!_bdm.7569FE6B =#REF!#REF!9 WACC!_bdm.7569FE6B70CE4=#REF!#REF!

10 _bdm.7569FE6B70CE4E5F96E=#REF!#REF!11 2019 vs 2018'!_Fill =#REF!#REF!12 Carrying Value'!_Fill =#REF!#REF!13 FRA AU TAB'!_Fill =#REF!#REF!14 FRA Belgium TAB'!_Fill =#REF!#REF!15 FRA Netherlands TAB'!_Fill =#REF!#REF!16 FRA NZ TAB'!_Fill =#REF!#REF!17 GW France'!_Fill =#REF!#REF!18 GW Germany'!_Fill =#REF!#REF!19 GW UK'!_Fill =#REF!#REF!20 Unlevered FCF'!_Fill =#REF!#REF!21 WACC!_Fill =#REF!#REF!22 _Fill =#REF!#REF!

Appendix 2 –Spreadsheet maps review


Spreadsheet maps review approach:— A spreadsheet cell map helps us quickly identify anomalies in model logic, giving an early indication of risk areas.— Color coded cell maps highlight inconsistencies in formulae, hard-coded cells, numbers entered as text, etc., thereby alerting

the developer of any early indication of potential errors.— Model architecture and design risks are often identified at this stage.— There are some instances in the workbook which are not in line with best practice principles, and structural weakness

indicating this workbook could be very difficult to operate and maintain.

Spreadsheet maps review

Cell format Description

Unique formula

Formula copied from above

Formula copied from the left cell

Formula copied from above and left

Errors

Hard-coded numbers

Text values in cell

F

^

<

+

E

N

L


Spreadsheet maps review exampleLLL N N N N F < < < < < < <LL N N N N N N N N N N N N N

L L L L L

L L N N N N N N F F F F F < <L F < < < < < < < < < < <

L N N N N N N F F F F F < <L F < < < < < < < < < < <

L N F < < < < < < < < < < <L F < < < < < < < < < < <

L N N N N N N N N N N F < <L F < < < < < < < N N N N

L N F < < < < < < < < < < <

LL N N N N N N N

L F < < < < < <

L L N N N N N N F F F < F < <L F < < < < < < < < < < <

L N N N N N N F F F < F < <L F < < < < < < < < < < <

L N F < < < < < < < < < < <L F < < < < < < < < < < <

L N N N N N N F F < < < < <L F < < < < < < < < < < <

L N F < < < < < < < < < < <L L N N N N N N F F F < F < <

L F < < < < < < < < < < <

L N N N N N N F F F < F < <L F < < < < < < < < < < <

L N F < < < < < < < < < < <L F < < < < < < < < < < <

L N N N N N N F < < < < < <L F < < < < < < < < < < <

L N F < < < < < < < < < < <

AU adj 6/ 7/ 9 0 4 0 5 0 6 0 7 0 8 0 9 0 0 0 0 0 3 0 4 0 5 0 6Total company Meeting Revenue 1,028 805 813 879 933 821 837 837 850 863 889 916 943

% vs. prior -21.7% 1.0% 8.1% 6.1% -12.0% 2.0% 0.0% 1.5% 1.5% 3.0% 3.0% 3.0%

Online Revenue 452 359 351 427 581 608 712 762 820 881 961 1,047 1,141 % vs. prior -20.5% -2.1% 21.6% 35.9% 4.6% 17.2% 7.0% 7.5% 7.5% 9.0% 9.0% 9.0%

Total Revenue 1,480 1,164 1,165 1,307 1,514 1,429 1,550 1,600 1,670 1,745 1,850 1,963 2,085 % vs. prior -21.3% 0.0% 12.2% 15.9% -5.6% 8.5% 3.2% 4.4% 4.5% 6.0% 6.1% 6.2%

OI 311 190 201 267 389 288 351 372 413 445 481 519 561 % vs. prior -38.9% 5.7% 33.1% 45.5% -26.0% 21.9% 6.0% 11.0% 8.0% 8.0% 8.0% 8.0%

OIM 21.0% 16.3% 17.2% 20.5% 25.7% 20.2% 22.6% 23.3% 24.7% 25.5% 26.0% 26.4% 26.9%

Marketing +G&A as % of Revenue 32.8% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0%

Implied Gross Margin 55.4% 54.3% 55.7% 56.5% 57.0% 57.4% 57.9%

US Meeting Revenue 586 471 515 576 611 544 555 555 563 572 589 607 625 % vs. prior -19.7% 9.5% 11.7% 6.1% -10.9% 2.0% 0.0% 1.5% 1.5% 3.0% 3.0% 3.0%

Online Revenue 283 230 228 271 364 373 437 467 502 540 589 642 699 % vs. prior -18.6% -0.9% 18.6% 34.6% 2.5% 17.0% 7.0% 7.5% 7.5% 9.0% 9.0% 9.0%

Total Revenue 870 701 744 846 975 918 992 1,022 1,066 1,112 1,178 1,248 1,324 % vs. prior -19.4% 6.1% 13.8% 15.2% -5.9% 8.1% 3.1% 4.2% 4.3% 5.9% 6.0% 6.1%

OI 221 127 161 229 331 270 317 333 366 390 417 446 477 % vs. prior -42.3% 26.3% 42.4% 44.4% -18.4% 17.5% 4.9% 9.9% 6.7% 6.9% 6.9% 6.9%

OIM 25.4% 18.2% 21.6% 27.1% 33.9% 29.4% 32.0% 32.5% 34.3% 35.1% 35.4% 35.7% 36.0%Canada Meeting Revenue 49 36 38 43 45 38 39 39 40 40 42 43 44

% vs. prior -27.4% 5.7% 14.3% 4.2% -14.7% 2.0% 0.0% 1.5% 1.5% 3.0% 3.0% 3.0%

Online Revenue 29 18 17 21 27 29 34 37 39 42 46 50 55 % vs. prior -36.0% -6.2% 20.4% 31.1% 6.9% 17.0% 7.0% 7.5% 7.5% 9.0% 9.0% 9.0%

Total Revenue 78 54 55 64 72 68 73 76 79 83 88 93 99 % vs. prior -30.6% 1.6% 16.2% 13.0% -6.5% 8.5% 3.3% 4.4% 4.5% 6.1% 6.2% 6.2%

OI 28 14 14 19 21 15 18 19 21 22 24 25 27 % vs. prior -50.2% 0.7% 30.2% 12.2% -28.4% 20.1% 4.9% 9.9% 6.7% 6.9% 6.9% 6.9%

OIM 36.4% 26.1% 25.8% 29.0% 28.8% 22.0% 24.4% 24.8% 26.1% 26.6% 26.9% 27.0% 27.2%

Thank you

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDP036451-5D

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

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Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.

Global Financial Reporting and Valuation conference · — Model Review Tools and procedures — Basic design principles — Helpful modeling techniques — Adding automation and

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