Stay Smart – Recording of our Financial Reporting Webcast

On Thursday, June, 15, we gave you the opportunity to find out about and discuss important changes in financial reporting and compact form. Besides that, you had the great opportunity to interact live with peers and PwC’s specialists what made the interaction very lively and dynamic.

This year’s spring programme took the form of a one hour webcast including a Q & A session, accompanied by a live chat throughout. During this webcast, we had a focus on the upcoming interim reports and also at the areas of focus recently published by the SIX exchange regulation. You were updated on the latest developments and trends in pension accounting, including risk sharing. Furthermore, we also shared insights on the implementation of the new revenue and leasing standards.

Access the Recording

Topics

Contacts

David Mason
Assurance Partner
+ 41 58 792 94 90
david.mason@ch.pwc.com

David Baur
Assurance Director
+41 58 792 26 54
david.baur@ch.pwc.com

IFRS News July 2017

Our latest IFRS News contains some information about
IFRIC 23, the leases lab, demistifying IFRS 9 for corporates, IFRIC rejections and more.

IFRIC 23 – Putting some certainty into uncertain tax positions.

Ernesto Mendez highlights the key elements of IFRIC 23, the new Interpretation on uncertain tax treatments.

IFRS News IFRS News – July 2017

The Leases Lab

IFRS 16 brings significant changes to accounting for lessees, but what about lessors? Can Professor Lee Singh help you solve the disclosure Problem? Let’s experiment!

IFRS News – July 2017

Scene 4, Take 1: Demistifying IFRS 9 for corporates: Factoring and business model

Holger Meurer, Financial Instruments expert, explains how Factoring can affect the measurement of receivables.

IFRS News – July 2017

IFRIC Rejections Supplement – IAS 37

Looking for an answer? Maybe it was already addressed by the experts. Joanna Demetriou investigates.

IFRS News – July 2017

The IFRS 15 Mole

PwC revenue specialist Ruth Preedy investigates how to account for licenses under IFRS 15 with the help of the Mole.

Suspects: A licence Arrangement establishes a customer’s rights to an entity’s intellectual property (IP) and the entity’s obligations to provide those rights. Common licenses include patents, software, motion picture and trademarks.
Incident description: Management should assess whether the contract includes a license that is distinct and therefore treated as a separate performance obligation.

IFRS News – July 2017

Cannon Street Press

  • Definition of a business
  • IAS 8 –  Accounting policy changes resulting from IC agenda decisions
  • Rate regulated

IFRS News – July 2017

Read the latest issue on IFRS News from June 2017

Read more

In brief – A look at current
financial reporting issues

  • SEC announces policy changes designed
    to facilitate capital formation:

    PwC In brief US2017-20
    Read more
  • GASB issues new lease accounting rules:
    PwC In brief US2017-19
    Read more
  • FASB proposal would amend related party consolidation guidance for VIEs:
    PwC In brief US2017-18
    Read more

 

New Swiss FinTech rules

Switzerland adopts revised banking regulations in order to facilitate the business activities of “FinTech” companies

On February 1, 2017 the Federal Council initiated a public consultation suggesting modifications to Swiss banking regulations. The purpose of the proposed revision was to create appropriate regulations for FinTech companies operating outside the traditional financial sector, taking into account the specific risk potential of their respective business models. The proposed revision included amendments to both the Banking Act (“BA”) and the Banking Ordinance (“BO”). The public consultation lasted until May 2017.

On July 5, 2017 the Federal Council finally adopted the new Swiss regulatory framework with regard to the BO. The new regime will formally enter into force on August 1st, 2017 so that FinTech companies will be able to benefit from these new rules as quickly as possible.

The amended rules provide for the following:

  1. Settlement account exemption: An exemption for settlement accounts will be created. This will allow companies to hold funds in a settlement account for 60 days without the operation of such account being deemed an acceptance of public funds subject to licensing under the BA (Art. 5 para 3 let. c BO). The BO in its current version did not contain a 60-day period of this kind, thereby creating some uncertainty.
     
  2. Innovation space (“sandbox”): Companies are allowed to hold public deposits of up to CHF 1 million without having to obtain a banking license (“sandbox”). Consequently, holding public funds of less than CHF 1 million does not qualify as “operating on a commercial basis”, which is a requirement in order to fall within the scope of the BA and the BO (Art. 6 para 2 let. a BO). According to the BO in its current version, taking public funds from more than 20 persons is deemed as “operating on a commercial basis”. Under the revised version of the BO, the number of persons providing funds is irrelevant as long as the threshold of CHF 1 million is not exceeded. Furthermore, the funds raised may neither be invested nor be subject to interest payments (Art. 6 para 2 let. b BO). Finally, the persons providing the funds must be informed that the respective business model is not subject to supervision by the Swiss Financial Market Supervisory Authority (FINMA) and that the rules on deposit insurance do not apply (Art. 6 para 2 let. c BO). This new innovation space will enable FinTech companies to try out experimental new business models without immediately having to obtain a banking license.

All in all, these innovative amendments to the BA and the BO will substantially facilitate the operation of FinTech business models in Switzerland. Moreover, the revision of the BA and the BO is further evidence of the Swiss government’s commitment to constantly improving and redesigning the regulatory environment in order to boost Switzerland as a major FinTech hub.

Your contacts:

Guenther Dobrauz
Partner|Leader PwC Legal Services Switzerland
Tel. +41 58 792 1497
guenther.dobrauz@ch.pwc.com

Tina Balzli
Director|Legal FS Regulatory & Compliance Services
Tel. +41 58 792 1554
tina.balzli@ch.pwc.com

Simon Schären
Manager |Legal FS Regulatory & Compliance Services
Tel. +41 58 792 1463
simon.schaeren@ch.pwc.com

A look at current financial reporting issues

IFRS 17 marks a new epoch for insurance contract accounting

In May 2017, the International Accounting Standards Board (IASB) issued IFRS 17, ‘Insurance Contracts’, and thereby started a new epoch of accounting for insurers. Whereas the current standard, IFRS 4, allows insurers to use their local GAAP, IFRS 17 defines clear and consistent rules that will significantly increase the comparability of financial statements. For insurers, the transition to IFRS 17 will have an impact on financial statements and on key performance indicators.

Under IFRS 17, the general model requires entities to measure an insurance contract at initial recognition at the total of the fulfilment cash flows (comprising the estimated future cash flows, an adjustment to reflect the time value of money and an explicit risk adjustment for non-financial risk) and the contractual service margin. The fulfilment cash flows are remeasured on a current basis each reporting period. The unearned profit (contractual service margin) is recognised over the coverage period.

Aside from this general model, the standard provides, as a simplification, the premium allocation approach. This simplified approach is applicable for certain types of contract, including those with a coverage period of one year or less.

For insurance contracts with direct participation features, the variable fee approach applies. The variable fee approach is a variation on the general model. When applying the variable fee approach, the entity’s share of the fair value changes of the underlying items is included in the contractual service margin. As a consequence, the fair value changes are not recognised in profit or loss in the period in which they occur but over the remaining life of the contract.

The new standard is applicable for annual periods beginning on or after 1 January 2021. Early application is permitted for entities that apply IFRS 9, ‘Financial Instruments’, and IFRS 15, ‘Revenue from Contracts with Customers’, at or before the date of initial application of IFRS 17. The standard can be applied retrospectively in accordance with IAS 8, but it also contains a ‘modified retrospective approach’ and a ‘fair value approach’ for transition depending on the availability of data.

Read the full report on IFRS 17


Contact:

Immy Pandor
Assurance Partner
Tel. +41 58 792 48 78
immy.pandor@ch.pwc.com

IFRS News June 2017

Our latest IFRS News contains some information about
IFRS 17, the leases lab, demistifying IFRS 9 for corporates, IFRIC rejections and more.

20 years in the making: IFRS 17 has
finally been issued.

Gail Tucker, Global Insurance Accounting leader, walks through the main elements of the new standards.

Read more

The Leases Lab

IFRS 16 brings significant changes to accounting for lessees, but what about lessors? Can Professor Lee Singh and his assistant Derek Carmichael help you separate the truth from the fiction? Let’s experiment!

Read more

Scene 3, Take 1: Demistifying IFRS 9 for corporates: Good news for
financial liabilities

Nitassha Somai, Financial Instruments expert, works through one of the biggest impacts of IFRS 9 on corporates.

Read more

IFRIC Rejections Supplement – IAS 36

Paul Shepherd of Accounting Consulting Services examines the practical implications of IFRIC rejections (NIFRICs) related to IAS 36.

Read more

The IFRS 15 Mole

PwC revenue specialists investigate how to account for warranties under IFRS 15.

Suspects: Warranties – are they distinct?
Incident description: Sellers often provide customers with warranties, a type of guarantee that the seller will replace or repair a product that becomes defective within a particular time period. The nature and terms of such agreements vary across entities, industries, products and/or contracts.

Read more

Cannon Street Press

  • IFRIC Interpretation Ratification
  • Amendments to IAS 28 – Long-term interests in associates and joint ventures
  • Research projects: Goodwill and impairment

Read more

Read the latest issue on IFRS News from May 2017

Read more

In brief – A look at current
financial reporting issues

  • FASB to permit adoption of new hedging guidance
    at issuance, expected in Q3:

    PwC In brief US2017-17
    Read more
  • PCAOB issues proposals on auditing estimates
    and using specialists:
    PwC In brief US2017-16
    Read more
  • PCAOB adopts new standard enhancing
    auditor reporting:
    PwC In brief US2017-15
    Read more

 

IFRS News May 2017

Our latest IFRS News contains some information about
solving carve-outs, IFRS 8 ED, demistifying IFRS 9 for corporates,
IFRIC rejections, the leases lab and more.

Solving the mystery of carve-out
financial statements

Rich Jones, divestment specialist, explains what carve-out financial statements are and what they may be used for.

Read more

The Leases Lab

The lease term is key when calculating the lease liability. Professor Lee Singh and his assistant Holger Meurer explore how to determine the lease term. Let’s experiment!

Read more

Proposed tweak to IFRS 8,
Operating Segments

Joanna Demetriou provides the latest from the standard setter – the IFRS 8 Exposure Draft.

Read more

Scene 2, Take 1: Demistifying IFRS 9 for Corporates: Intra-Group loans

Nitassha Somai, Financial instruments expert, works through one of the biggest impacts of IFRS 9 on corporates – Intragroup loans.

Read more

IFRIC Rejections Supplement – IAS 34

Looking for an answer? Maybe it was already addressed by the experts.

Read more

The IFRS 15 Mole

PwC revenue specialists and the IFRS 15 Mole investigate how to identify a principal or an agent in a revenue transaction.

Suspects: Accounting for variable consideration.
Incident description: It can be difficult to determine revenue when the amount of consideration due from a customer is dependent on the outcome of a future event. Examples include:

  • contracts with early completion bonuses in the construction industry or;
  • volume related discounts or rebates.

Read more

Cannon Street Press

  • Definition of a business exposure draft (ED)
  • Fees included in the ’10 per cent’ test
  • Amendments to IAS 19 and IFRIC 14
  • Amendments to IFRS 3 and IFRS 11 – previously held interests in joint operations

Read more

Read the latest issue on IFRS News from April 2017

Read more

In brief – A look at current
financial reporting issues

  • FASB clarifies share-based payment
    modification guidance:

    PwC In brief US2017-13
    Read more
  • FASB changes made to premium
    amortization period on callable
    debt securities:
    PwC In brief US2017-12
    Read more
  • Brexit – income tax accounting
    implications:
    PwC In brief US2017-11
    Read more

 

 

 

IFRS News April 2017

Our latest IFRS News contains some information about
uncertainty in income tax accounting, demistifying IFRS 9, the leases lab, the IFRS 15 mole and more.

Article 50 triggers uncertainty in income tax accounting

John Chan, IAS 12 specialist, explains the deferred tax implications of article 50.

Read more

Demystifying IFRS 9

IFRS 9 expected credit loss model 2. Emma Edelshein, Financial Instruments Director, explains more on expected credit losses in IFRS 9

Read more

The Leases Lab

IFRS 16 contains new guidance on separating lease components from other lease components to be considered by both lessees and lessors. Can Professor Lee Singh and his assistant Derek Carmichael help you separate the truth from the fiction? Let’s Experiment!

Read more

Scene 1, Take 1: Demistifying IFRS 9 for Corporates

Nitassha Somai, Financial instruments expert takes us through the first in the series of demystifying IFRS 9 for corporates.

Read more

The IFRS 15 Mole

PwC revenue specialists and the IFRS 15 Mole investigate how to identify a principal or an agent in a revenue transaction

Suspects: Accounting as principal or as agent
Incident description: There are many arrangements in which two or more unrelated parties are involved in providing a specified good or Service to a customer. IFRS 15 requires an entity to determine whether it is the principal or the agent.

Read more

Cannon Street Press

  • Board’s Primary Financial Statement Project
  • The Conceptual Framework for Financial Reporting
  • Financial Instruments with Characteristics of Equity

Read more

IFRIC Rejections Supplement – IAS 32

Helen Wise of Accounting Consulting Services examines the practical implications of IC rejections related to IAS 32.

Read more

Read the latest issue on IFRS News from March 2017

Read more

In brief – A look at current
financial reporting issues

  • FASB Changes made to premium amortization period on callable debt securities:
    PwC In brief US2017-12
    Read more
  • Brexit – income tax accounting implications:
    PwC In brief US2017-11
    Read more
  • FASB proposal would align the accounting for all share-based payment awards:
    PwC In brief US2017-10
    Read more

Risk sharing of Swiss pensions plans

Valuing Swiss pension plans under International Financial Reporting Standard (IFRS) IAS19 has been a long-running debate and discussion among experts and companies. IAS19 shapes the assumptions and methods for calculating the income statement and balance sheet entries and different approaches are possible.

An employer’s obligation towards its Swiss pension plan can be hard to define. Under local rules, pension funds are typically considered “fully funded”, with only a subsidised risk of a liability for the employer to fund a shortfall. Under IAS19 though, there is typically a liability – in the IFRS view the employer will have to pay more than just regular contributions to fund pension promises and the guarantees from a Swiss pension plan.

In reality, many steps are taken before a true cash liability emerges. These steps can involve changing benefits of employees. This means the risk is shared between the employer and employees. The question is how to reflect this under IAS19.

Is allowing for “risk sharing” acceptable under IFRS?

The actions a pension fund might take in response to a local funding shortfall include:

  1. Reducing interest credited to savings capital for employees;
  2. Changing the conversion rates using to turn retirement capital into a pension; and
  3. Requiring additional contributions from employees and employer.

The accounting position should be a realistic reflection of the expected future pension obligations and situation of the fund. When valuing the balance sheet it can be acceptable to assess the impact and likelihood of such measures in advance.

How to allow for risk sharing

The impact of risk sharing depends on how the company expects the future of the pension fund to unfold and the actions taken in light of that development. The impact depends on the specific circumstances and rules of the fund, the company and its employee group.

A typical analysis would project the future local funding level based on expected returns on plan assets, developments in interest rates, mortality, plan parameters and funding of technical provisions. The company can then analyse what needs to happen to key plan parameters like the conversion rate and interest credit over time. Any analysis also needs to reflect minimum benefits and within the flexibility allowed in the current plan rules and governing law. The company has to reflect what is allowed and expected to happen.

Important questions to address

Allowing for risk sharing triggers some important questions:

  • How will the company really respond to underfunding? How has the company dealt with any underfunding in the past? Did employees pay a proportion of any additional contributions? Or was some aspect of the benefits increased to compensate for a reduction elsewhere? Are some mechanism of change stipulated in the formal terms of the plan?
  • Any allowance for risk sharing should reflect the net effect of any future changes and also be consistent with the expectations of employees. What are employees’ expectations and what messages have been sent by the company and fund?
  • How will the company disclose the impact? Readers of the accounts must be able to understand what actions are expected, how the company has reached that conclusion and the impact on the accounts and members.

The chamber of pension fund experts in Switzerland has published some general principles for valuation and reporting of the risk sharing features of Swiss pension plans. These features should also be considered when assessing the impact.

Risk sharing debate a sign of rising complexity

Risk sharing is only one aspect of the complexity facing IFRS reporting for companies with a Swiss pension plan. Declining interest rates, rising life expectancy and lower expected investment returns have pushed the financial position of Swiss funds into sharp focus. This is more pronounced under IFRS as it uses market-based assumptions to value the pension position. The IFRS position shows us that if the current economic situation remains, there may be tough choices ahead between further cuts in future actives’ benefits and paying additional contributions to maintain the financial position of Swiss pension plans.

Contact

Chris Rutherford
People and Organisation
+41 75 413 18 43
christopher.rutherford@ch.pwc.com

Swiss GAAP FER checklist for consolidated and stand-alone financial statements

Swiss GAAP FER is a recognised financial reporting standard in Switzerland according to art. 962 Swiss Code of Obligation. This checklist allows users to review the completeness of the disclosures in the financial statements prepared according to Swiss GAAP FER. It covers all requirements of the currently applicable Swiss GAAP FER standards (status 10 December 2014).

The checklist follows the modular structure of Swiss GAAP FER. It is structured in relation to the items in the financial statements and differentiates between the core FER and the other standards of the FER as well as the special requirements for consolidated financial statements and for listed companies.

You can download the file here.

IFRS News February 2017

Our latest IFRS News provides new year’s resolutions every company should take on board, presents the five stages of grief concerning
IFRS 17, current IC rejections and the PwC leases lab.

New year’s resolutions every company should take on board

Elana Du Plessis, PwC Senior Manager, shares the new year’s resolutions all companies should consider.

Read more

Demystifying IFRS 9

Incorporating forward looking information is a big change under IFRS 9. Nitassha Somai, Financial instruments specialist, looks into her crystal ball to make some predictions!

Read more

The five stages of grief

Irina Sedelnikova, PwC Insurance specialist, explains how to work
towards accepting IFRS 17.

Read more

IC rejections

Joanna Demetriou of Accounting Consulting Services examines the
practical implications of IFRIC rejections related to IAS 28.

Read more

IFRS 15 Mole

The IFRS 15 mole is back and has a new case! Katie Woods, PwC revenue specialist, is helping him get to the bottom of accounting for free gifts!

Suspects: Accounting for free gifts
Incident description: Performance obligations (POs) are promises to a customer that arise every time they enter a contract to supply a good or service.
Once the contract has been identified, the next step is to identify the POs. The ‘incidents’ start when not all of the POs are identified resulting in the incorrect measurement of revenue or recognition in the wrong period.

Read more

Cannon Street Press

  • Post Implementation Review of IFRS 13, Fair Value
  • Insurance
  • Conceptual Framework
  • IFRS 9 – Symmetric Prepayment options

Read more

The PwC leases lab

IFRS 16 gives rise to many challenges, so Professor Lee Singh starts a new experiment – this time with his assistant Dr Holger Meurer.

Read more

In brief – A look at current
financial reporting issues

  • FASB simplifies measurement of goodwill     impairment:
    PwC In brief US2017-05
    Read more
  • NFP consolidation: FASB clarifies how to
    evaluate limited partnerships:
    PwC In brief US2017-04
    Read more
  • FASB proposes new inventory disclosures: PwC In brief US2017-03
    Read more