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

 

US Tax Reform – Impact on US GAAP / IFRS Financial Reporting for FY 2017

Following the House passage of HR 1, the Tax Cuts and Jobs Act, the Senate Finance Committee has approved its version of the tax reform legislation on November 16. The tax reform legislation keeps pace despite the derailed budget meeting. Last night the next hurdle was taken and the bill will now be debated on Senate floor starting today, November 29 with expected Senate conclusion this Friday.

Following the Senate floor debate, the reconciliation process of the two bills will start with the expectation to have it completed shortly. Surprises in the Senate floor and reconciliation are expected and it will not be a straight forward debate but the intention for completion is significant.

With House passage complete and Senate floor discussion coming up, the US tax reform makes strong headway. If the process continues without delay, a feasible timeline may be for House and Senate to resolve differences and vote to pass a final bill which would then be signed into law by President Trump still in December 2017 or early 2018.

Why US tax reform might impact FY 2017 Financial Reporting for Swiss Groups?

Swiss groups that apply  international accounting and reporting standards with operations in the US (US (sub)-holding companies or local US operating companies or activities), will need to consider the ongoing US tax reform development in their 2017 financial statements either due to (substantive) enactment or potentially for disclosure.

What if the US Tax Reform is (substantively) enacted in 2017?

Accounting for income tax requires the effects of changes in tax laws or rates to be recognized in the period in which the law is (substantively) enacted regardless of the effective date.

For US federal tax purposes, the enactment date is most often the date the President signs the bill into law. While the release of the bill does not constitute enactment, companies should stay abreast of current legislative developments and evaluate the potential implications on financial reporting to ensure they are prepared to account for any changes in the period of enactment.

The current bill proposes significant changes that, if (substantively) enacted, will have pervasive financial reporting implications. For example, lowering the corporate tax rate and mandatory taxation of deferred foreign income will impact measurement of deferred taxes and taxes payable in the period of enactment.

Other changes, such as elimination or limitation of certain deductions and changes to international taxation, will impact both current and deferred taxes on a prospective basis. Changes in (substantively) enacted tax law may also require the reassessment of realizability of deferred tax assets. In the period of (substantive) enactment, critical analysis of the resulting changes in US tax law will be needed to determine the appropriate financial statement effects.

Disclosure requirements if US Tax Reform is not (substantively) enacted in 2017?

In periods prior to (substantive) enactment, consideration should be given to potential requirements for disclosure within management’s discussion and analysis (MD&A) where the potential impacts on the financial statements may be significant.

The emphasis should be on the potential effect of the proposed legislation on the variability of earnings, financial condition, and liquidity. As future tax law or rate changes cannot be anticipated and should not be recognized until enacted, it generally is expected that disclosures in the period prior to enactment should be limited to the MD&A.

Nevertheless, if enactment occurs after the balance sheet date but before issuance of financial statements it may be necessary to include more transparent disclosures regarding the change in tax law and an estimate of its impact on the financial statements, or include a statement that such an estimate cannot be made.

Are you prepared?

For many companies, depending on the footprint and structure, the assessment of tax accounting impacts including disclosure will be complex and may require significant effort.

What companies should do if not done so yet is to take stock of existing positions, understand the company’s facts, risks and strategies, closely follow the US tax reform and other global tax developments, manage communication and ensure discussion with management, audit committee and board are up to date.

How can PwC help?

PwC has developed various tools and has a fully dedicated tax policy group that can assist you with:

  • Model the potential impact including potential corporate tax rate changes or of mandatory repatriation, as well as E&P and tax pool studies, using our proprietary tools – the Toll Charge Analytic Tool and the E&P Tool.
  • Model the potential impact of a territorial tax system using our high-level analytic tool, Tax Restructuring Impact Modelling (TRIM).
  • Assist treasury departments with evaluating capital structures and options for deploying repatriated cash (e.g., shift from debt to equity, reduction in need to borrow for acquisitions, investments, and R&D expansion).
  • Visit our website to stay up to date on US Tax Reform developments on a daily basis – on demand daily video subscription available with tax policy analysis and insider briefings.

Contact Us

Martina Walt
Partner – International Tax Services
+41 58 792 68 84
martina.walt@ch.pwc.com

Reto Inauen
International Tax Senior Manager
+41 58 792 42 16
reto.inauen@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

 

EU – Register of beneficial owners

Under the 4th anti-money laundering directive of the European Union, all European countries are obliged to introduce legislation that will create a register of the ultimate beneficial owners (UBOs) of structures. Who qualifies as a UBO? What information will be collected? Who will have access to the data?

The 4th Anti-Money Laundering directive entered into force on 26 June 2017. Each member state should by now have transposed the directive into their national law. What follows is a discussion of the provisions of the directive itself at EU level.

To read more about the discussion, please click below.

Read Full Attachment

Contact Us

Marcel Widrig
Partner | Leader Private Wealth Services Switzerland
+41 58 792 44 50
marcel.widrig@ch.pwc.com

Albrecht Herholdt
Senior Manager | Tax & Legal Services: International Private Wealth & Entrepreneurs
+41 79 278 72 38
albrecht.herholdt@ch.pwc.com

Rescuing struggling projects

When managing the project recovery process it’s crucial to avoid taking action for action’s sake, treating the situation as a fire drill, or only addressing the superficial symptoms rather than the real underlying issues. You have to take a structured approach, starting with stabilising the project on the basis of the visible symptoms, and going on to do an in-depth root cause analysis as the basis for defining a recovery plan. This will help the project move beyond mere survival to achieve a sustainable solution in the long term.

Move beyond mere survival to find a sustainable path to recovery

Businesses today are facing challenges like never before which is driving an increased demand for transformation projects, each one more complex than the last. Over half of projects fail completely or exceed their budget significantly. It is no longer about if a project struggles, but when. Is your project is in trouble? What will it take to rescue it for the long-term? Read more …

Contact

Marc Lahmann
Director and Leader Transformation Assurance
+41 58 792 27 99
marc.lahmann@ch.pwc.com

Manuel Probst
Assurance Senior Manager
+41 58 792 27 62
manuel.probst@ch.pwc.com

Stay Smart – Financial Reporting Autumn 2017

It is our pleasure to invite you to Stay Smart – Financial Reporting Autumn 2017. Our seminar on IFRS and other important accounting and reporting issues is the ideal way to continue your professional education!

IASB and regulatory update
• Overview of recent developments and current work plan of the IASB
Implementing the new revenue, leasing and financial
instruments standards
• Implementation issues
• Impact on statutory accounts – are you able to align the accounting treatments? How to deal with transition impacts in statutory accounts
IFRS Pension accounting – current developments in Switzerland
• Risk sharing – an introduction to the debate and the options available
• Accounting for 1e plans

Dates and locations:
22 November 2017, Geneva
23 November 2017, Lugano
27 November 2017, Lucerne
28 November 2017, Zurich
29 November 2017, Basel
30 November 2017, Berne

As usual, you are invited to discuss these topics with experts from PwC’s technical department before, during and after the event. Stay smart! We look forward to welcoming you.

For further information and registration,
please visit:
www.pwc.ch/financialreporting

Contact

Regina Schütz
Assurance Assistant
Tel. +41 58 792 29 62
regina.schuetz@ch.pwc.com

Enterprise Performance Management (Budgeting, Planning and Reporting)

 Leverage Innovations and fix the Basics

The latest edition of PwC’s Finance Effectiveness Benchmark report shows that many finance functions are trailing in their adoption of latest technologies, and in most businesses finance struggles to find the optimal model to deliver real commercial impact effectively.

PwC Study: Stepping up: How finance functions are transforming to drive business results

How to adapt to the rapidly succeeding technological breakthroughs and how to treat them as opportunities?

How to navigate best through the turbulence resp. how helps an up-to-date enterprise performance management (EPM)?

We will discuss latest trends and developments. We will do so together with our clients and expert network to share real experience and challenges:

  • Key note speech: “Top Trends in Business Intelligence and Analytics 2018”, Herbert Stauffer, CEO Business Application Research Center (BARC), Switzerland
  • Key findings of the latest PwC report: “Stepping up: How finance functions are transforming to drive results”
  • Case 1: EPM at UEFA, Fabian Egli, Head of Corporate Controlling
  • Case 2: Driver-based Planning at an international Pharma Company (Tillotts Pharma), Oliver Isch, Corporate Controlling

The floor will be open for any questions, comments and contributions from your side. Following, you will have the opportunity to explore the potential of leading technological solutions and connect with people in person during an apéro.

We are looking forward to welcoming you to this event

Register online

Date and Time

9th November 2017
Start of the event will be 16:30

Venue

Mariott Courtyard
Max-Bill-Platz 19
8050 Zürich

Contact

Jana Moser
PwC
Tel.+41 58 792 4360
jana.moser@ch.pwc.com

 

2017 Corporate Reporting event

We have the pleasure to invite you to PwC’s latest ‘Corporate Reporting: Investors’ focus’ event to be held in Zurich on Monday, 6 November 2017.

A focus on corporate reporting from an investor’s perspective means taking an in-depth look at what investment professionals actually need from corporate reports in order to make their decisions. PwC has been engaging actively with the investment community for well over a decade now. As part of this, our Corporate Reporting event brings together business and investors to promote a better understanding of the reporting process and its deliverables.

Once again, we have a selection of distinguished speakers who will provide a wide range of perspectives. They include representatives from analysts, ratings agencies, regulators and preparers of corporate reports.

Together, we will discuss the opportunities, challenges and priorities in the area of corporate reporting. We are particularly pleased to welcome Aswath Damodaran of New York University Stern School of Business as our keynote speaker this year. Professor Damodaran’s presentation covers some of the highlights from his book ‘Narrative and Numbers’ published this year. He will argue that the power of a story drives corporate value and that a business can deliver and sustain value only if it knows how to combine both ‘storytelling’ and ‘number-crunching’.

We look forward to welcoming you to this full-day event or, if you wish, you can join us for just the morning session or afternoon session.

Find more information about our programme here.

Registration

Contact

Peter Eberli
Assurance Partner
+41 58 792 2838
peter.eberli@ch.pwc.com

Elena Serova
Assurance Senior Manager
+41 58 792 7670
elena.serova@ch.pwc.com

 

Are public projects doomed to failure from the start? – Transformation Assurance

Public projects have a bad reputation. Is it deserved, or more a matter of expectations and the way success and failure are defined? In this critical review we take a close look at what makes public-sector IT and transformation projects different from those in other areas, the specific challenges they face, and tried-and-tested approaches to making them a success. Read more…

Contact

Marc Lahmann
Director and Leader Transformation Assurance
+41 58 792 27 99
marc.lahmann@ch.pwc.com

Enhanced auditor’s report: towards trust and transparency

The new auditor’s report required by Swiss legislation is designed to be more informative and insightful, and give the stakeholders of reporting entities greater assurance. We at PwC welcome the new reporting requirements as an opportunity to unlock the ‘black box ’of what we actually do as auditors and increase trust in our role.

We also realise, though, that the new reports and their potential impact on governance have to be discussed and understood – not only by the auditors who produce them, but by reporting entities and their stakeholders, from shareholders to regulators. For this reason we’ve produced a short flyer explaining the major changes and their implications, including a commented overview of the structure of the new report.

You can read the flyer via the link below. Feel free to contact us if you’d like to discuss the new auditor’s report and its implications in more detail.

Download flyer