IFRS News January 2018

Our latest IFRS News contains some information about the US Tax reform, IFRS IC decision, cryptocurrency and more.

US Tax reform – accounting under IFRS

President Trump signed into law on 22 December 2017 extensive changes to the US tax system. These changes are substantively enacted for accounting purposes in 2017 and should be reflected in the financial statements at 31 December 2017.

IFRS News – January 2018

IFRS IC decision on interest and penalties related to income taxes

The IFRS Interpretations Committee (IC) issued an agenda decision in September 2017 on interest and penalties related to income taxes.

IFRS News – January 2018

IFRS Blog: Accounting for Cryptocurrency

Guest blogger Gary Berchowitz, PwC Partner discusses the issues of the month: What is cryptocurrency? So what’s the accounting issue? What is wrong with today’s accounting?

IFRS News – January 2018

Cannon street press

The January 2018 IASB Update has been published and the work plan updated.

IFRS News – January 2018

Read last quarter’s IFRS News issue from October 2017

Read more

Disclose – PwC’s online magazine

Reading our latest issue of Disclose you’re sure to get an adrenaline rush as we investigate a topic with particularly close connections to sport: high-performing organisations.

Read more about “IFRS: the impact of IFRS 15 on your financial statements prepared under the Swiss Code of Obligations” in our latest Disclose 27 issue here.

Far-reaching consequences of disruptive innovations for the Liechtenstein financial market

The Liechtenstein financial market has demonstrated its ability to adapt in recent years by keeping pace with changing framework conditions. Financial industry stakeholders manage more assets today than before the outbreak of the financial crisis. Liechtenstein remains as attractive as ever as a location for private banking and wealth management. The Principality of Liechtenstein is not the only country in which the financial sector is undergoing fundamental change. Digitisation is the main driver of this transformation, and banks are the hardest hit. More and more so-called “digital disruptors” are offering banking services without actually choosing to adopt a banking model themselves.

The challenge of digitisation

Customer behaviour and expectations have evolved. New competitors (e.g. FinTechs) and new technologies (e.g. blockchain) are provoking a fundamental shift in the business model of banks. Digitisation offers new opportunities, but also generates risks. Traditionally structured banks operate an integrated business. They sell products that they have developed themselves via their own distribution channels. All transaction and support services are provided internally. In contrast, new technologies enable a high degree of standardisation to be achieved, leading to a fragmentation of the value chain. According to the PwC Global FinTech Report 2017, 82% of the study participants questioned want to enter into partnerships with FinTech companies within the next three to five years. 77% expect blockchain technology to have become a part of their company’s productive system environment by 2020. Banks in Liechtenstein will not be able to escape this development. They need to carefully analyse the strategic options for action before putting appropriate measures into practice.

Attractive framework conditions

The government is supporting technological change by means of its “Impuls Liechtenstein” programme and the “Regulatory Laboratory” set up within the Financial Market Authority Liechtenstein (FMA). The FMA pursues a forward-looking regulation policy in line with European law. The team of experts from the Regulatory Laboratory advises financial intermediaries at the interface between regulations and the market. At statutory level, modifications have been made to banking legislation which permit the needs-based approval of service providers. Furthermore, there are specific statutory provisions applicable to payment and electronic money institutions. In addition, service providers and organisations benefit from private initiatives which help to establish extensive networking within the FinTech industry in Liechtenstein.

Healthy prospects

There are healthy prospects for overcoming the technological transformation. Liechtenstein as a financial centre has significant expertise in the field of finance, responds rapidly thanks to its short decision-making channels, and is capable of implementing practical solutions. This creates stability and legal certainty. These are good basic conditions to ensure its continued survival in a competitive environment in such fast-moving times. In the future, financial intermediaries will however be required to prove their ability to adapt more than ever before.

Contact

Martin_Meyer_09723
Claudio Tettamanti
PwC | Partner | Market Leader Liechtenstein
Office: +423 233 10 02
Mobile: +41 79 696 45 89
Email
PricewaterhouseCoopers GmbH
Austrasse 52 | Postfach | FL-9490 Vaduz

Discontinuation of LIBOR – are you ready?

In July 2017 it was announced that LIBOR will be phased out by 2021. Because globally securities of more than $350 trillion are based on the LIBOR reference rate, its discontinuation will be a paradigm shift in the financial industry impacting the whole value chain of banks from retail to treasury to trading. Market participants should adapt to those upcoming changes in an early stage to be prepared and benefit from the new market environment.

 

Read paper

 

Do you have any questions? Please get in contact with us:

Christian Schmitt
Advisory Partner
christian.schmitt@ch.pwc.com

Manuel Plattner
Advisory Director
manuel.plattner@ch.pwc.com

Sebastian Gerigk
Senior Manager Advisory
sebastian.gerigk@ch.pwc.com

Non-performing loans: Leveraging the right strategy to optimise your company’s balance sheet

The market for non-performing loans (NPLs) has been growing continuously over the past decade because credit quality has been deteriorating across the globe. While there have been positive signs in some markets, such as the EU as a whole, there are still some countries, such as Italy, Portugal and Greece, which are increasingly struggling with NPLs.

• This white paper aims to give you an overview of how you can assess and address your potential challenges relating to NPLs, from NPL strategy to operations, IT, people and change. We summarise our observations, experience and understanding of financial companies’ activities to optimise their NPL management. A key point is elaborating approaches to assess your NPL landscape (portfolio processes, KPIs, staff readiness, etc.), the subsequent NPL strategy design and its implementation.

• We outline our recent experiences with NPL actors in Europe, which have helped us gain a solid understanding of the needs of the NPL market and stakeholders’ expectations and how these interact and interdepend as well as how banks, and other market participants should approach NPLs. We extend the view beyond the simple management of NPLs to implications of current regulation (the European Central Bank’s guidance and IFRS 9) and how these create opportunities that can help institutions improve their overall business.

• We present potential solutions to the challenges of NPL, which we have gathered from our work. We lay out how well-defined quantitative and qualitative long-term objectives under appropriate portfolio segmentation and with specifically developed strategy options and early warning indicators (EWIs) as well as a decision tree for the strategy options and well-trained/experienced staff are all key elements to reduce NPLs successfully.

In this way, we hope to provide you some ideas to help you build expertise in your business to improve NPLs and general loan management. Implementing the suggested options (strategically and operationally) can increase profitability by means of a strategic NPL reduction accompanied by maximum recovery. We also point out the main risks of selecting the wrong strategy and how they can disadvantage your company. We present two case studies to help you understand what the risks are and how taking the right action can make a substantial difference. Finally, we link the NPL market’s and investors’ expectations to individual institution’s activities. This ties into the wider economic impact of the current NPL situation in Europe and the NPL market situation.

Read the full white paper here

Contact Us

Patrick Akiki
Partner
Advisory Partner
Tel. +41 58 792 2519
akiki.patrick@ch.pwc.com

Intensive Course on IFRS 2018

June 2018 | Swissôtel | Zurich

Does your company report in accordance with International Financial Reporting Standards (IFRS), or are you responsible for preparing the financial statements in compliance with IFRS? Is your company considering a move to IFRS? Or do you simply want to extend or to refresh your IFRS expertise? Then PwC’s intensive course on IFRS is right for you.

Objectives

Our module based IFRS course will help you deal with IFRS professionally and apply the standards competently by giving you:

  • a solid basic understanding of the most important IFRS/IAS standards and of recent developments
  • detailed knowledge of the content of these standards and how they are applied.

You will learn how IFRS facilitates transparent external reporting. But you will also find out how to use it as a helpful instrument that supports you in assessing the financial position of your company and in recognising priorities. The course shows you how to put the theory into practice.

Dates and Topics

The course will be held in four modules, each lasting one day from 8:30 am to approx. 6 pm, in English.

Monday, 4 June 2017
Module 1: Revenue (IFRS 15), Share based payments and others

Tuesday, 5 June 2017
Module 2: Leases (IFRS 16), Taxes, Pension, Foreign exchange rates

Monday, 11 June 2017
Module 3: Consolidation & Business combinations

Tuesday, 12 June 2017
Module 4: IFRS 9 Financial instruments

Organisation

All modules are specially designed for finance specialists and users of IFRS. In class you have presentations, group work, case studies and sharing sessions to expand and apply what you have learned.

Presenters and instructors

The course is presented by experienced PwC IFRS specialists.

Register here

Fee

Module 1: CHF 1,300 including VAT
Module 2: CHF 2,500 including VAT
Module 3: CHF 3,600 including VAT
Module 4: CHF 4,500 including VAT

For further information please visit our website Intensive Course on IFRS

Contacts

David Mason
PwC ACS Leader
+41 58 792 9490
david.mason@ch.pwc.com

Gesa Mannigel
PwC Assurance Director
+41 58 792 2454
gesa.mannigel@ch.pwc.com

The road to success in wealth management

Enabling client centricity

The basic point of view expressed in this paper is that banks and wealth managers urgently need to consider how they align their strategy and operating model to the two prevailing distinct client segments – Global Active and Local Affluent. Maintaining their right to win and growing required them to respect their clients’ behaviours and focus on their needs in a much more consistent and sustained way. Clients must be the basis of all strategic and organisational decisions.

Why does the focus need to change? Basically because in an increasingly industrialised financial services sector and fast changing regulatory requirements and technological possibilities, wealth managers have to find ways of reconciling apparently contradictory customer needs.

Read the full paper

 

PwC Switzerland is the Center of Excellence for Wealth Management.
Please do not hesitate to get in contact with our experts:

Contacts

Dr. Marcel Tschanz
Partner, Head of Wealth Management Switzerland
+41 58 792 20 87
Email: marcel.tschanz@ch.pwc.com

Dr. Sebastian Hersberger
Wealth Management Center of Excellence Switzerland
+41 76 519 49 35
Email: sebastian.hersberger@ch.pwc.com

Kristof Trautwein
Wealth Management Center of Excellence Switzerland
+41 79 257 80 19
Email: kristof.trautwein@ch.pwc.com

Regulatory developments (TCFD)

Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD)

Context
The G20’s Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD) was convened to address concerns that companies are not sufficiently disclosing the impacts that climate change poses to their strategy, businesses and financial plans. Without adequate disclosure markets cannot function efficiently and risks are not appropriately priced.

Broadly climate risks can be divided into:

  • Transition risks such as climate policy (e.g. a carbon tax) or technological shifts (e.g. the rise of electric vehicles) which impact demand and costs of supply; and
  • Physical risks such as the impacts of more frequent/extreme weather events on assets, operations or supply chains.

Scope
The TCFD’s recommendations were launched in June 2017 and presented to the G20 Summit on 7–8 July. The report’s scope covers all companies with listed equity/debt in the G20.

Additionally, to address where concentrations of risk might lie, the scope also includes asset managers and asset owners e.g. pension funds, so covering the whole investment chain. Shareholders and other capital providers are increasingly looking to understand the resiliency of the companies they are invested in or lend to. Major institutional investors have publicly called for companies to make disclosure of climate risks a priority or face shareholder action.

TCFD recommendations and implications
The TCFD structured its recommendations on climate-related disclosures around four thematic areas:

  • Governance: extent of board and senior management oversight on the issue;
  • Strategy: risks and impacts on strategy, business and forward looking scenario analysis;
  • Risk Management: how climate risks are identified, assessed, managed and integrated into existing risk management frameworks; and
  • Metrics and Targets: how is performance on climate risk being measured.

The TCFD recommends disclosure in mainstream annual reports. It is a major shift away from sustainability reports where climate issues typically currently reside. This means that functions such as Finance and Investor Relations as well as the Audit Committee need to understand the financial implications of climate change and be in a position to explain whether such implications are material and how this is being governed, managed and disclosed.

Strategy functions will also need to consider how to incorporate such implications into long term plans. The TCFD recommends that companies conduct forward-looking scenario analyses to understand how their businesses will be impacted by climate change.

Contacts

Stephan Hirschi
PwC ADV Consulting | Adv Consulting TIS
+41 58 792 2789
stephan.hirschi@ch.pwc.com

Raphael Rutishauser
ADV Consulting | Adv Consulting TIS
+41 58 792 52 15
raphael.rutishauser@ch.pwc.com

 

Asset & Wealth Management Revolution: Embracing Exponential Change

Change in the asset and wealth management industry (the ‘AWM industry’) is now accelerating at an exponential rate. Although the industry is set for growth over the next ten years, asset and wealth managers must become business revolutionaries, even disruptors, if they’re to survive and prosper.
Now is the time for action.

Four interconnected trends will drive the AWM industry’s revolution. Between them, they will squeeze industry margins, making scale and operational efficiency far more important, and meaning that all firms need to integrate technology in all areas of the business and develop a clear strategy for the future.

These four transforming trends are:
1 Buyers’ market
2 Digital technologies: do or die
3 Funding the future
4 Outcomes matter

It’s difficult to predict how quickly these trends will play out. But they’ve been under way for some time and are accelerating. The difference is that firms must act now to fully understand them and adapt their business strategies accordingly.

 

Read the full report

 

Contact

Jean-Sébastien Lassonde
Partner, Swiss Leader Asset & Wealth Management
Tel: +41 58 792 81 46
Email: jean.sebastien.lassonde@ch.pwc.com

Regulatory developments

Non-financial reporting – International Integrated Reporting Framework

Background
The International Integrated Reporting Council (IIRC) launched the first version of the Integrated Reporting (IR) Framework in December 2013. The IICR unites representatives from all major international standards setting bodies and regulators with company representatives, investors and other key representatives to develop an internationally recognised framework. The IR Framework identifies investors and capital providers as the primary addressees for an integrated report.

Key elements
The Framework is intended to show how companies create long-term value by incorporating information on the environment, strategy, governance, performance and outlook. Investors should be informed about how a company’s strategy can create value in the long term as well as where a company actually stands regarding the achievement of its goals as defined in the strategy.
The Framework focuses on different types of capital, which are created and used by an entity. Based on the respective business model, the different types of capital (e.g. financial, produced, intellectual, human, social and natural capital) are used to create value (also a type of capital). These types of capital are said to have ‘connectivity’. Such connectivity can be illustrated particularly well in the case of pharmaceutical companies in the field of intellectual capital, the investments it makes in potential products and the sales that are subsequently generated.

It can also be demonstrated in other areas, such as human capital, for example: investing in the development of employees’ competencies has an influence on resource management and, ultimately, on the financial performance of a company. Non-financial objectives can also lead to the achievement of financial objectives.

Importance and implementation in practice
Within the Framework of the IIRC Pilot Program Business Network, more than 100 companies from 25 countries have implemented the principles of the Framework. However, apart from companies listed in South Africa (where IR is mandatory), almost no companies apply the entire Framework at present, although most of them intend to continue to work towards it.
The same dynamic is visible in Switzerland. To date, no single company has applied the Framework as such. However, more and more Swiss companies are moving towards adopting the Framework, as the implementation of individual elements from the IR concept is becoming evident. Most of the companies are developing the concept by integrating elements of the Framework in their annual reports. Some companies publish a short report (‘review report’), in addition to their annual report, using the Framework as a base. Detailed information on sustainability is generally published in a separate and distinct ‘sustainability report’.

Non-financial reporting – SIX Directive on Sustainability Reports

Key elements
In July 2017, SIX issued new regulations regarding sustainability reporting by amending the Directive on Information relating to Corporate Governance (DCG). Issuers have the opportunity to inform SIX that they issue a sustainability report in accordance with an internationally recognised standard (art. 9 DCG in conjunction with art. 9 para. 2.03 DRRO). SIX will make public the names of those companies that decide to publish sustainability information (‘opting in’) on their websites.

If an issuer decides to opt in, the sustainability report has be produced in accordance with an internationally recognised standard as published by the SIX:

  • Global Reporting Initiative (GRI)
  • Sustainability Accounting Standards Board Standard (SASB Standard)
    United Nations Global Compact (UNGC)
  • European Public Real Estate Association Best Practices Recommendations on Sustainability Reporting (EPRA Sustainability BPR)

The sustainability report must be published on the issuer’s website within eight months of the balance sheet date for the annual financial statements. It must subsequently remain available in electronic form on the issuer’s website for five years from the date of publication.

Companies remain free to issue and publish a sustainability report in line with an internationally recognised standard without reporting this to SIX. It is also permissible to include certain sustainability topics in their annual report.

Background
More and more stock exchanges (about one-third worldwide) provide guidelines for disclosing information on the environment, social and governance (ESG) matters. The UN Sustainable Stock Exchanges Initiative (SSE) recommends exchanges provide companies with principles-based guidelines, whilst the World Federation of Exchanges (WEF) proposes that stock exchanges provide companies with specific ESG indicators. This has already been done by a number of stock exchanges, in particular in emerging economies such as Brazil, South Africa, Singapore and Taiwan. ESG indicators are provided, which are to be reported either on a voluntary or binding basis and which can often be derogated in justified cases (‘report or explain’).

In contrast to this, SIX requires only those companies that opt in on a voluntary basis to adopt an internationally recognised standard.

Non-financial reporting – EU Directive on the disclosure of non-financial and diversity information

EU Directive on the disclosure of non-financial and diversity information
The purpose of the EU Directive as regards the disclosure of non-financial and diversity information is that companies of public interest with more than 500 employees (in particular, listed companies) provide information on environmental, social and workers’ rights topics, respect for human rights and the fight against corruption as well as its strategy, results, risks and business model. If the undertaking does not pursue a strategy on one or more of those topics, this has to be explained (‘report or explain’).

In addition, listed and certain other capital-market-oriented companies must describe their diversity policy with regard to management and control bodies in the corporate governance report. This disclosure should also include information on age, gender, educational background and the objectives of this policy and its implementation and results.

Member States were obliged to transpose the directive into national law by 6 December 2016. The directive applies to financial years beginning after 1 January 2017.

This EU Directive is also relevant to Swiss companies whose subsidiaries are active in the EU and which are regarded as companies with a public interest (such as banks and insurance companies).

Contacts

Stephan Hirschi
PwC ADV Consulting | Adv Consulting TIS
+41 58 792 2789
stephan.hirschi@ch.pwc.com

Raphael Rutishauser
ADV Consulting | Adv Consulting TIS
+41 58 792 52 15
raphael.rutishauser@ch.pwc.com

 

IFRS 17 Technology Day

Thursday 14th December 2017

Systems, data and processes are likely to make up a significant proportion of most insurance company’s capital outlay to adhere to IFRS 17. Given legacy systems estate within many insurers and the changes in reporting required, insurers are heading towards a significant cross-roads around their technology and data roadmap.

You need to be fully equipped with the best view of the options available and the key factors that will influence your decision making process.

Join us at our IFRS 17 Technology Day on Thursday 14th December 2017, where you will get to:

  • Hear from your peers about the process, data and systems challenges they have seen arising from IFRS 17
  • Discuss the key issues and opportunities presented by IFRS 17 with a panel of experts drawn from insurance companies and PwC subject matter specialists
  • Engage with leading technology vendors to learn about their IFRS 17 solutions
  • Understand what you need to do to move from IFRS 17 strategy to execution

Our IFRS Technology Day is a platform on which finance practitioners, vendors and PwC experts can learn, interact and discuss about technological solutions and hot topics.

In the afternoon eight software vendors will present their IFRS 17 solution and you have the chance to raise your questions.

This event is aimed at CFOs, Chief Actuaries, CIOs, CTOs, COOs, Finance Directors, Financial Controllers, FP&A Directors, Finance Business Partners, Program Directors & Managers, Heads of Finance Systems, Data Warehousing Managers and Heads of Innovation in the insurance sector.

Register online

Please note that seats are limited to 85 participants, which will be assigned by the “first come, first serve”-principle.
Therefore please register no later than Nov 12th 2017 to secure your place.

Date and Time
Thursday, 14th December, 2017
09.30 – 17.00 (incl. finger food lunch)

Venue
PwC Experience Center
Room “Sandbox”
Rieterstrasse 6
8002 Zurich

Programme
You can find the detailed programme here.

Your hosts are looking forward to welcoming you soon.

Patrick Mäder
Partner and Leader in Financial Services
PwC Switzerland

Eva Dewor
EMEA Risk & Finance Transformation
PwC Germany

Sven Stark
Advisory Partner
PwC Switzerland

Contact

Maren Rickert
Consulting
PwC Switzerland
+41 58792 1639
maren.rickert@ch.pwc.com
www.pwc.ch