Thomson Background

Last modified 23:51, 9 Oct 2012

Thomson Financial Fundamental Data

vgthomsonicontrnsprnt.gifThe Fundamental Data used in ValueGain is sourced from Thomson Financial's WorldScope Global Database.

Currently Fundamental Data for the United States and Australian markets are available in Your SOFTWARE.

WorldScope provides the most comprehensive, accurate and timely data on publicly-quoted companies around the world. Based on data reported by the companies and other reliable sources, WorldScope data analysts extract the data to global templates that are specific to industry groups. The templates take into consideration the variety of accounting conventions and are designed to facilitate comparisons between companies and industries within and across national boundaries.

WorldScope highly disciplined approach to active company coverage, collection of timely information, and rigorous quality assurance process allows users to rely upon the data with confidence.

The following paragraphs contain information on WorldScope approach to collecting and presenting worldwide financial data in a commonly accessible format.

Accounting Practice Variations

Despite recent advances by major exchanges, organizations such as the International Accounting Standards Committee (IASC) and the Financial Accounting Standards Board (FASB), and other regulatory bodies, financial accounting practices are remarkably diverse around the world.

Linguistic and cultural diversity in the environments in which accounts are prepared are probably the most obvious difference, other less obvious factors influence their form and content such as the legal and taxation systems, transparency of corporate ownership, methods of corporate financing, the prominence of the accounting and auditing professions, and so on.

In recent years the need for common standards has increased enormously as the amount of transnational business and investment has expanded.

WorldScope's approach is designed to minimize the effect of these differences and its analysis of financial statements from around the world is focused on two main areas from which differences can arise that may frustrate useful comparisons:

Valuation

Companies and accounting systems differ in the cost basis used in financial statements; in the utilization of accruals and provisions; as well as in the accounting methods for business combinations, depreciation, research and development, foreign currency translation, leases, and so on.

It is important to note that WorldScope does not "change" the valuation of data reported by the company in its accounts. However, the components each reported figure is made up of will be scrutinized exactly and, if necessary, the accounts will be "rebuilt" using the same components the company originally used, to populate more uniform reporting templates.

The use of templates is central to WorldScopes approach, but the use of these template will not alter the initial valuations.

Disclosure or Presentation

Variations in the terminology used, definitions of individual accounting items, the format of accounts and the depth of detail contained in the statements themselves and in the notes to the accounts can be extreme, even within internationally accepted accounting systems,

WorldScope's analysts closely examining the nature and components of financial statements, footnotes and related disclosures, and then employ standard data definitions in the coding of financial accounts in standard industry templates. In this way differences in accounting terminology, presentation, and language are easily and effectively minimized.

WorldScope Analysts

Obviously such a system can only be as good as the analysts examining the components, and the systems and processes employed to ensure a consistent result.

WorldScope, quality assurance begins with the recruitment of multilingual corporate data analysts, generally with accounting or financial academic qualifications. About twenty-five major languages are represented within WorldScope.

The WorldScope Database was originally developed by the investment management and financial advisory firm Wright Investors' Service, headquartered in Milford, Connecticut. From this base, WorldScope in 1987 established a second research centre in Shannon, Ireland, to maintain and develop the database. In 1995, a third major research and data collection centre in Bangalore, India and in 1999 the fourth major research and data collection centre was acquired in Manila, Philippines. In 2000 WorldScope was acquired by Thomson Corporation.

Regardless of their location, each WorldScope data analyst undergoes thorough training under close supervision.

In addition, a comprehensive quality assurance program is followed throughout the organization. Detailed country-specific accounting and financial practices documentation has been developed to assist WorldScope data analysts in their understanding of international accounting and reporting practices. These manuals define each discrete database item in considerable detail, so that information is interpreted accurately and consistently throughout all countries across all analysts.

Supervision/Auditing

When data for any company is updated, the computer automatically generates a report for that company, listing the last five years of historical information, including the year that has just been updated. This is reviewed by the analyst's group leader for consistency and accuracy. The group leader must be satisfied that errors have been corrected before 'signing-off' on that company.

All quality is monitored and controlled by a team of auditors. This department is charged with the task of examining and rechecking in great detail a random sample of each analyst's and country group’s work, generating regular performance and quality reports for management, supervisors and analysts.

Automated Testing

As well as the individual review processes, Worldscope has developed a series of automated quality assurance processes.

Every piece of information entered into the database is subjected to a rigorous series of 2,300 computerized balance, magnitude, correlation and alpha tests, many of which are industry or country specific. The following types of tests are included:

Balance Tests

Employed  to check that formulas which should theoretically add up actually do.

Magnitude Tests

Compare data items in the current fiscal period with the same items for prior periods, and query items which exceed predetermined variances.

Correlation Tests

Similar to Magnitude checks, these are designed to examine the relationships between appropriate data items in the same period.

Alpha Tests

Check the validity of alphanumeric (textual) data, e.g. checks for correct date formats, valid industry codes and correct field lengths, etc.

Where these tests fail, analysts must recheck and if necessary make corrections. No information is allowed onto the database if any failed tests remain unresolved.

Timeliness

The huge number of listed companies together with the sheer volume of financial data required to be reported by each presents the issue of which company's data is to be processed as a priority.

WorldScope prioritizes the collection, analysis, and input of company information based on two key criteria:

Inclusion in a major Index

First, membership in one of a set of major global benchmark indices or local key indices including the Dow Jones, ASX, etc.

Market Capitalization / Investor Interest

Second, all companies within a country are prioritized by market capitalization or indicators of investor interest with the largest companies or companies having more than 5 individual broker forecasts updated first.

In this manner, timeliness is related to these two objective criteria and those companies that meet more of the criteria will have a their financial data processed as a priority.

Fast Update Fields

In addition to this process, for all companies the delay between publication of information and its availability to users is ameliorated through the use of Fast Update Fields (approximately 70 key items) which are updated at the earliest possible time.

More information

For more information on Thomson Financial and its WorldScope product and processes, go to the Thomson Financial website and follow the links to the WorldScope Fundamentals Overview page:

www.thomson.com

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