Beyond the tipping point: private wealth in a transparent world

“Tax transparency? Information exchange? White money? What does this mean for me and my family’s wealth?” These are the all too familiar questions and concerns being voiced by private clients. How should you respond to these concerns? How do changes impact your relationships with clients?

To address these crucial questions, we are pleased to invite you to our seminar Beyond the tipping point: private wealth in a transparent world on 22 September 2015. This practical seminar focuses on the transition of private clients to a tax compliant environment. This workshop is intended for practitioners dealing with Swiss and foreign international private clients, including private bankers, relationship managers, asset managers, trustees, wealth planners, fiduciaries and lawyers who want to discuss the impact of changes from a client’s point of view.

In addition to hot topics such as automatic information exchange and tax transparency, we have structured, individual deep-dive sessions dedicated to specific issues in focus countries, which include Russia, Kazakhstan and Ukraine, China, Turkey, Greece and Switzerland. In these sessions we will cover topics such as restrictions applicable to current and prospective private clients, specific threats in selected markets, as well as strategies for ensuring your clients remain tax compliant.

We look forward to welcoming you on 22 September 2015.

Please register here.

News on IFRS: July/August 2015

Our latest IFRS news contains some information about revenue recognition, pension accounting requirements and revenue recognition.

IASB proposes clarifications to IFRS 15

The IASB has proposed amendments to IFRS 15 in some of the areas discussed by the TRG. These areas include accounting for licences, principal versus agent guidance and practical expedients on transition. The proposed amendments differ from those suggested by the FASB. Sallie Deysel from Accounting Consulting Services brings us up to speed on the ED.
Read more…

IASB issues ED on pensions

Richard Davis from Accounting Consulting Services brings us up to speed on the new Exposure Draft proposing amendments to IAS 19 and IFRIC 14.
Read more…

Revenue TRG weighs in again on IFRS 15 implementation issues

The Revenue Transition Resource group (TRG) continues to debate implementation issues related to the new revenue standard.
Read more…

Cannon Street Press

  • Insurance and IFRS 9
  • IFRS Implementation Issues
  • Fair value Measurement
  • IFRS 3 post implementation review
  • Financial Instruments with characteristics of equity

Read more…

IFRS rejections in short – IAS 2

Yelena Belokovylenko of Accounting Consulting Services examines the practical implications of IFRIC rejections related to IAS 2.
Read more…

Are you interested in more regular updates?

In brief – A look at current financial reporting issues

IFRS in brief

  • Consequences of the Greek financial crisis
    Read more…
  • Accounting for priority review vouchers (pharma industry)
    Read more…

Update Free Trade Agreements in Asia – Regional Comprehensive Economic Partnership

Newspapers in Europe including Switzerland talk about TPP (Trade Pacific Partnership) and TTIP (Transatlantic Trade and Investment Partnership). Swiss based companies are well advised to follow the discussions about TTIP (negotiating parties are the U.S. and the EU) since it will have an impact on the future trade landscape. Anyway, a post on those topics will follow later.

There is little information to read in the newspapers about the Regional Comprehensive Economic Partnership, short RCEP. RCEP will be an important Free Trade Agreement for Swiss and European companies doing business or manufacturing activities in Asia. For the ones looking to expand to Asia and define a strategy to enter into Asia it may as well be of high importance. The RCEP aims for a harmonisation of Rules of Origin, which currently differs in each different FTA the ASEAN members (Association of Southeast Asian Nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) have concluded with its trading partners Australia / New Zealand, China, India, Japan and South Korea. Amongst many other topics, RCEP aims to reduce non-tariff barriers as well as sanitary and phyto-sanitary measures and Technical Barriers to Trade.

Negotiations on RCEP started in November 2012 with nine rounds of negotiations. The last one took place in Nay Pyi Taw, Myanmar, between the 3rd and 7th August 2015 and the 10th round will take place next October in South Korea.

As TPP negotiations were not concluded end of July in Hawaii, the RCEP is gaining more importance. Why?

The RCEP is perceived as a counteraction of China against the US-led TPP negotiated between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the U.S. RCEP countries account for 45 per cent of the world population. The aim is to finalise the agreement by the end of this year although the deadline might be pushed to 2016.

The ambition to come up with a “high-end mega-FTA” is not a priority for all negotiating partners. Where Australia wants customs duty cuts on over 90 per cent tariff lines, India has a different view. India is reluctant to offer too high tariff reductions and the domestic industry is against giving more access to goods from China. According to the latest information, India decided to offer 80 to 85 per cent of tariff lines for duty cuts to South Korea and Japan, 70 to 75 per cent tariff lines to ASEAN and about 40 to 50 per cent to China, Australia and New Zealand. Because of this, the RCEP loses some of the initial expected impacts. Still, RCEP will facilitate and enhance trading activities in the Asian region. It is therefore crucial for Swiss and European companies to carefully analyse future opportunities for doing business in Asia.

Further information click here.

EUDTG Newsletter 2015 – nr. 004 (May – June 2015)

This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax Group (EUDTG). If you would like to receive future editions of this newsletter, or wish to read previous editions, please refer to: www.pwc.com/eudtg.

The following topics are covered in this issue of EU Tax News:

CJEU Cases

  • France: AG Opinion on cross-border distributions of profits and non-deductible charges relating to the holding: Groupe Steria SCA
  • Germany: CJEU Judgment on the tax treatment of participations in “black funds”: Wagner-Raith
  • Germany: CJEU Judgment on exit taxation in case of transfer of assets from a German partnership to its Dutch PE: Verder LabTec
  • Netherlands:  AG Opinion on possible discriminatory treatment of foreign shareholders receiving dividends from a Dutch source: Miljoen, X and Société Générale
  • Sweden: CJEU Judgment on deductibility of FOREX losses in cross-border situations: X AB

National Developments

  • Finland: Recent developments with respect to Finnish Fokus Bank claims for non-UCITS SICAVs
  • Germany: Final Fiscal Court judgment on the DMC case
  • Italy: Provincial Tax Court rules that withholding tax levied on dividends distributed to a US pension fund is incompatible with EU law, orders refund
  • Italy: Supreme Court allows Tax Court appeals regarding the denial of access to the EU Arbitration Convention
  • United Kingdom: Court of Appeal allows compound interest claim in relation to overpaid VAT
  • United Kingdom: Clawback of UK shale aggregate waste relief

EU Developments

  • EU: European Commission presents Action Plan for fundamental reforms of business taxation in the EU
  • EU: 6-monthly ECOFIN Report to the European Council on Tax Issues
  • EU: Luxembourg EU Council Presidency tax priorities for July-December 2015
  • EU: June ECOFIN Council debates on mandatory AEOI / tax rulings and recast of Interest & Royalties Directive
  • EU: Mandate of EU Parliament’s TAXE special committee on tax rulings extended

Fiscal State aid  

  • Belgium: European Commission publishes non-confidential version of its decision to investigate the Belgian excess profit regime
  • EU: European Commission takes next step in its EU-wide State aid review of tax ruling practices

Read the full Newsletter here.

Should you have any questions, please contact your usual PwC contact or me.

Cloud computing: harnessing the opportunities and managing the risks

Cloud computing is an essential part of the ‘digital revolution’ driving sweeping changes through society and the way enterprises operate, and a huge opportunity for organisations of all sizes. To some the risks may appear daunting, but there’s plenty of good guidance available to successfully negotiate the path to the cloud.

Topics of this article

  • Compelling reasons for the cloud
  • The cloud in action
  • The real benefits of the cloud
  • What about the risks?
  • Help is at hand!

Read more

Summary

The cloud is already revolutionising the way business is done throughout the private and public sectors. There are risks, but all of them are manageable. Some are already well understood, and comprehensive best practice guidance is available. Other challenges simply have to be worked through carefully – but again, support is available. The most important thing is to see the cloud as part of the big picture: as an enabler that allows organisations to dynamically reconfigure their supply chain to deliver value more intelligently and effectively. Ultimately, can you afford not to be in the cloud?

Outsourcing for SMEs: corporate support services

Small and medium-sized businesses (SMEs) have been working with accountants and fiduciaries regularly for many years. With the emergence of new business models and the trend to outsourcing administrative functions, the role of the traditional accounting firm is changing. Some have evolved to become experts in providing support services, managing and running integrated financial functions, IT systems and service processes.

Topics of this article:

  • Many aspects to consider when outsourcing
  • Complex HR processes

Read more

Summary

The role of the traditional accountant-fiduciary is changing. While not everyone in the profession is following the trend, some larger firms in the accounting and fiduciary industry have already established themselves as providers of outsourcing services (corporate support services). They do this by enabling their clients to reduce the burden of time-consuming administrative processes and rationalise repetitive financial functions by transferring them to a shared service centre (SSC). In many cases these clients are less interested in cost savings than in profiting from targeted technical, legal and process expertise.

Reputable firms offering outsourcing services do much more than just making electronic platforms available. Besides the know-how and expertise they provide, a particular benefit is that they manage the risks entailed in outsourcing processes. Companies outsourcing processes shouldn’t make the mistake of assuming that ‘out of sight’ means ‘out of mind’. Client/provider relationships tend to function well, for example, if the client appoints a contact to take responsibility for supplying the provider with the necessary information.

Outsourcing and offshoring finance functions

Large companies started delegating financial functions to external providers a long time ago. In recent years, more and more small and medium-sized enterprises have also been outsourcing their financial processes. This is a decision with strategic implications that can only be made properly on the basis of a well thought-out business case.

Topics of this article:

  • Nearshoring for SMEs
  • Pressure on costs and margins
  • Concentrating on core competencies
  • Operational readiness
  • Strategies for implementation

Read more

Summary

There are various reasons why the trend towards shared services remains unbroken, with no end in sight: time and margin pressure, the desire and necessity of concentrating on core competencies while farming out as much of the rest as possible, and the need to maximise operational readiness.

Now that an increasing number of highly specialised service providers are offering shared services for many different small companies rather than just large organisations, outsourcing has become an interesting proposition for SMEs as well as big players. Since SMEs can rarely afford internal centralised shared services, nearshoring is generally more feasible than farshoring.

It’s important to bear in mind that processes at SMEs are often not as mature or standardised, meaning they’re only suitable candidates for outsourcing if the business case has been thought through properly.

SMEs in particular have to be aware that the processes set in motion by outsourcing have major implications in terms of culture change. If management fails to explain the intentions behind outsourcing clearly, they run the risk of losing staff with the best labour market profile who can find a new job most easily.

There are signs of imminent consolidation among providers of shared services to SMEs; they too have to go for volume, and providers who don’t have the critical mass won’t be able to compete.

Drop that jargon: It’s time for new HR metaphors

„All the world’s a stage, And all the men and women merely players: They have their exits and their entrances; And one man in his time plays many parts.” – William Shakespeare 

Shakespeare has an invitation for us: “Imagine that we were all actors”, he asks. With his analogy between life and stage play, he chooses a lens through which the reader can look at the world. This makes it easy understand what he means; it also allows us to take the analogy further and to ask interesting questions: Are our possessions just props? Can we go “off stage”? Who is our audience?

The Power of Metaphors

Metaphors and analogies are an example of how language influences thinking in a subtle yet powerful way. On the one hand, they provide an easily accessible toolbox of mental models which ease thinking and communication. On the other hand, those very mental models rely on unspoken assumptions. Shakespeare’s analogy above suggest that there are two layers of reality (stage/audience), and that people play only one role at a time. Those assumptions remain unchallenged if we choose to use the metaphors.

Business contexts are not immune from language’s influence, as the abundance of jargons shows. Technical terms, abbreviations and buzzwords are an integral part of any discipline. Some of them cross boundaries and infect other areas. Young, conceptual disciplines such as HR are especially prone to borrowing jargon, as their language is still much more in flux as opposed to established areas such as chemistry. But if language influences thinking, wouldn’t the jargon we use influence (or bias) our decisions?

Talent Management: An Engineering Domain

Let’s take the example of Talent Management, where practitioners have become used to expressions such as “talent pipelines”, “platforms”, “lifecycles” or “recruiting”. All those terms are derived from other disciplines. In a quick and dirty text analysis of the most recent 25 articles from Harvard Business Review’s “Talent Management” category, I have found that 6 out of 10 jargon terms come from the engineering/physics area (e.g. “process”, “build”, “potential”, “system”), followed by military terms (“engage”, “recruit”, “strategy”). There are some, but only few terms from other areas.

When using these metaphors, we rely on assumptions from those very disciplines – be it a mechanistic engineering view that a “system” can be “built”, or the strategic military considerations that a “war for talent” can be “won”. But do we really want to accept those assumptions?

Where are the Other Metaphors?

Creativity techniques emphasize the importance of outside influence, stimulating “out of the box” thinking. How about using a different vocabulary for Talent Management? A change of language would introduce different mental models, challenge assumptions and help us find new approaches. Chemistry could help us find talent oxidation, free radicals and leadership crystallization; biology would introduce cross-pollination of skills, symbiotic development and talent spores; the arts might lead us to leadership genres, talent rituals and the right balance between skill expression and technique.

In the end, we might find out that the engineering language is still the best of all of those jargons – but borrowing a different toolbox for a project, workshop or strategy meeting might help you think differently about that well-worn hammer you’ve been using all those years.

What metaphors could help you rethink your talent strategy? Please contact me if you would like to discuss this topic.

PwC Actuarial Services Newsletter – July 2015

The PwC Actuarial Services Newsletter is a joint venture of three of our worldwide PwC actuarial practices. In recent years, there have been a number of collaborations on client projects, initiatives and content development between the three entities, Switzerland, Germany and the Netherlands. This newsletter will examine current topics of the industry from different regional and thematic perspectives, and is aimed at insurance professionals working in or closely with actuarial departments.

Topic 1: How do you eat an elephant?

IFRS 4 Phase 2 requires more from insurers than Solvency II. Insurers that are well advanced in their preparations for IFRS 4 Phase 2 estimate that the costs of implementation of IFRS range from around the same as for the implementation of Solvency II to costs that are three times as much.

Topic 2: What does phase 2 of IFRS 4 mean for general insurers?

IFRS 4 Phase 2 is expected to be finalised during 2016, however there is enough certainty around key elements of the standard to start thinking about what it will mean for general insurers. Many believe that the impact on standard general insurance contracts will be minimal, there is even a ‘simplified’ approach for short term contracts which suggests relatively low impact; we question, though, whether this conclusion is correct.

Topic 3: Need for quality in actuarial reserving GI

Getting loss reserves right is crucial. Not only to avoid major run-off losses when trends in the underlying claims are discovered too late, it is also obligatory for Solvency II and IFRS 4 Phase 2 to assure the quality and reliability of the calculation of best estimates and inherent uncertainty in technical provisions. In some heavy-tailed LoBs reserving is the most important driver for pricing the business correctly, e.g. in some areas of commercial liability books.

Interview on reserve quality with Dirk Grönke, new Director for Actuarial Services in Germany

On April 1st, Dirk Grönke started as a director with PwC Actuarial Services in Germany. His focus is on actuarial consultancy for non-life (re-)insurance undertakings and the quantitative areas of risk management. One of his main hobbies is soccer, the active as well as the passive part.

Read more

If you would like to discuss one of the topics, please contact me.

IFRS 9: all users affected

The new financial reporting standard for financial instruments doesn’t just impact banks. Implementing the expected loss impairment model involves time and investment, while the new hedge accounting rules give greater scope. Users should address IFRS 9 in good time.

Topics of this article

  • Classifying and measuring financial assets
  • Classifying and measuring financial liabilities
  • Impairment
  • Overview of financial assets
  • Hedge accounting

Read more here.

Summary

The implications of IFRS 9 can be summarised as follows:

  • IFRS 9 affects all types of entities.
  • Certain requirements, especially the introduction of the new expected loss impairment model for large portfolios, will require a great deal of effort.
  • The new hedge accounting rules offer attractive simplified approaches and new options for industrial companies.
  • Entities should begin to assess the implications of IFRS 9 for their organisation as soon as possible, as implementation can take a considerable amount of effort and resources, and changes to systems and processes.