Financial Accounting Advisory Services
This bi-weekly provides regular thought leadership and events on accounting, regulatory and financial services industry topics to help readers better understand trends and developments in Asia Pacific and prepare for navigating the rapid changes.
December 21, 2012: The IASB proposes limited amendments to IFRS 9 classification and measurement model
Read a summary of the main amendments proposed in the ED (pdf 563.kb).
The amendments are primarily aimed at:
• Addressing specific application issues raised by early adopters of IFRS 9
• Addressing income statement accounting mismatches and short-term volatility issues which have been identified as a result of the insurance contracts project
• Reducing key differences between IFRS 9 and the FASB’s tentative classification and measurement model
Click the links below to read the past issues:
- December 14, 2012: Applying IFRS: Fair Value Measurement (November 2012)
Fair value measurement under IFRS is changing.
This publication outlines the requirements of IFRS 13, its definitions, measurement framework and disclosure requirements. It also addresses some of the key questions that are being asked about how to apply IFRS 13.
Read about the new requirements (pdf 7.2 MB).
- December 7, 2012: Financial regulatory reform: what it means for bank business models
Given the unprecedented interrelationship between regulatory reform and business strategy, banks will have to ensure that their governance frameworks treat these two disciplines in an integrated manner. In doing so, banks will have to find ways to manage through a number of challenges and constraints.
This paper presents an overview of the global regulatory reform agenda (pdf 1.2mb) and the impact it will have on banks’ business and operating models.
- November 23, 2012: IFRS resources
Frequent changes to IFRS add to the challenges you face when approaching key points in your financial reporting cycle. Our publications are designed to give you a snapshot of key IFRS developments.
IFRS Update of standards and interpretations in issue at 30 September 2012 (pdf 2.3mb)
The challenge for IFRS preparers is to gain an understanding of what lies ahead. This publication provides an overview of the upcoming changes in standards and interpretations.
International GAAP® Disclosure Checklist (pdf 3.1mb)
This checklist assists with the preparation of financial statements in accordance with IFRS and is applicable for entities with a year-end of 31 December 2012 or thereafter.
Good Group (International) Limited (pdf 2.6mb)
Resulting restatements could jeopardise a company’s reputation and have potential financial or regulatory consequences. This set of illustrative financial statements assists you in preparing your own financial statements.
- November 16, 2012: IFRS Developments Issue 44
Investment entities final amendment - exception to consolidation – November 2012 (pdf 1.3mb).
The International Accounting Standards Board (IASB) has issued an amendment to IFRS 10 Consolidated Financial Statements to provide an exception to the consolidation requirement for entities that meet the definition of an investment entity.
The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss in accordance with IFRS 9 Financial Instruments.
- November 9, 2012: European IFRS Banking Conference insights
Banks continue to face unprecedented challenges rebuilding consumer trust following the financial crisis, whilst facing intense margin pressure and slow balance sheet growth in an uncertain economic environment. At the same time, they are also addressing a huge swathe of accounting and regulatory reform.
In response to this change, representatives from 57 different banks, standard-setters and industry bodies gathered at EY’s European IFRS Banking Conference in October 2012 to discuss the ongoing challenges arising from the changes to accounting and regulatory standards (pdf 2.4mb):
• Overview of IASB programme
• Fair value measurement
• IFRS 9 update: classification and measurement
• IFRS 9 update: impairment
• Macro hedging
• Regulatory developments
• The accounting impacts of the Eurozone economic environment
This report captures discussions and findings drawn from real-time polls on the issues taken during the conference. Hot topics covered - from cutting-edge developments in financial instruments accounting to the implications of regulatory change - served to re-emphasise that the change agenda that banks are facing is complex, with many linkages and cross-dependencies between projects. As a result, banks must start their preparation even before all the standards are finalised.
- October 29, 2012: Dodd-Frank’s Title VII – OTC derivatives reform
- October 12, 2012: IFRS 9 classification and measurement – IASB deliberations are now substantially complete
At its September meeting, the IASB tentatively decided to propose amendments to IFRS 9 Financial Instruments to allow an entity to apply the requirements for the presentation of fair value gains or losses attributable to changes in its own credit risk, without the need to early adopt IFRS 9 in its entirety. With the announcement of this proposal, the IASB has now substantially completed its deliberations of the limited amendments to IFRS 9.
This edition of IFRS Developments (pdf 917kb) looks at the IASB’s decisions and the next steps.
- September 28, 2012: IFRS changes impacting the banking industry
Financial institutions reporting under IFRS continue to face a steady flow of new standards and interpretations. The volume of changes will be substantial over the next three or four years. The challenge for preparers is to gain an understanding of what lies ahead, evaluate the implications, consider the timing of adoption, and plan for timely implementation of the changes.
This publication for CFOs (pdf 3.2mb) provides an overview of both finalised and forthcoming changes in standards that are of particular significance for financial institutions.
- September 21, 2012: Applying IFRS: Leases project on the brink of re-exposure
The IASB and FASB have made significant changes to their 2010 exposure draft on leases and expect to issue a revised proposal in the fourth quarter. We summarise their tentative decisions to revise their leases proposal and highlight some of the key differences between the revised proposal and the current accounting.
Download Applying IFRS: Leases project on the brink of re-exposure (pdf 2.3mb)
- September 14, 2012: IFRS Developments Issue 40 - The general hedge accounting project on the home straight
On 7 September 2012, the IASB issued a Review Draft (the RD) of the standard on general hedge accounting. During the redeliberations, the Board made some significant changes to certain aspects of the proposals contained in the Exposure Draft (the ED) that was issued in December 2010. We encourage you to study the RD to understand the potential impact of the proposed changes. The RD is available on the IASB’s website and can be accessed for a period of 90 days.
This edition of IFRS Developments (pdf 1.52mb) summarises the main changes in the RD and compares them to the proposals in the ED.
- September 7, 2012: Worldwide Corporate Tax Guide
The Worldwide Corporate Tax Guide (pdf 3.8mb) is part of a suite of premier tax guides published by EY. The others are the Worldwide VAT, GST and Sales Tax Guide, The Global Executive and, new this year, the Estate and Inheritance Tax Guide. Each represents thousands of hours of tax research, and within the limits of annual publications, they are the most reliably comprehensive guides available.
Since the global financial crisis, many governments have reduced their corporate taxes, some several times. Meanwhile, they have also enacted many corporate tax subsidies and penalties for various industries. This churning of corporate tax law makes a current, detailed guide like this one all the more valuable.
The content of the Worldwide Corporate Tax Guide is straightforward. Chapter by chapter from Afghanistan to Zimbabwe, we summarize corporate tax systems in 154 jurisdictions. The content is current on 1 January 2012, with exceptions noted.
- August 31, 2012: Asia Pacific Voice of the Customer
EY's Asia Pacific Voice of the Customer (pdf 3.04mb) provides insights about the buying behaviors, attitudes and preferences of insurance customers worldwide are changing.
To understand this transformation and help insurers in Asia Pacific determine how they must adapt to attract, deepen and preserve customer relationships, we and market research firm Ipsos surveyed 24,000 insurance customers across seven global regions. Our insurance teams around the world then analyzed the customer responses.
We hope that the survey data and our perspectives will test your thinking, challenge your implicit assumptions and reassess your customer strategy.
Our survey findings suggest that to remain competitive, providers of life insurance and non-life insurance products must:
• Recognize that the internet allows easy comparison of products and prices, requiring simple and transparent products that consumers can buy with confidence.
• Seamlessly integrate existing distribution channels with online channels.
• Invest in customer service and brand equity, given these factors are as important (if not more so in some regions) than price.
• Determine ways to reward valuable customers to improve retention and cross-selling efforts.
• Build brand value, as customers evaluating similarly priced products often revert to secondary buying factors like brand and reputation.
- August 24, 2012: Beyond Asia: Strategies to support the quest for growth
EY's latest Growing Beyond report Beyond Asia: Strategies to support the quest for growth (pdf 2.3mb) is essential reading for Asian companies investing globally and their competitors, worldwide.
Asian companies are transforming the global business landscape. Gone are the days when traditional multinationals – based almost exclusively in the West – looked to Asia mainly for cheap labor and low-cost manufacturing. Today, Asian companies are major players in international business, forming 87 of the Fortune Global 500 largest firms.
The impact of this trend should be momentous, creating new spheres of competition, a new generation of global companies, and changing patterns of trade flows and foreign direct investment both within and outside the region. But it’s not without its challenges.
Our report highlights the such key challenges as well as advice facing Asian companies, including:
• Put in place robust risk management.
• Make the transition from investment to profitability.
• Take steps to make the corporate culture more international.
• Choose which functions should be global or local.
- August 17, 2012: Reflecting credit and funding adjustments in fair value - Insight into practice - A survey
Determining the fair value of derivatives and issued debt continues to be one of the key issues for the banking sector in 2012. The continuing financial crisis has led to a number of banks introducing new valuation methodologies. The new IFRS accounting standard on fair value measurement (IFRS 13), and the new charge under Basel III related to valuation adjustments as a result of credit, also mean that institutions have to fundamentally re-think their approach to managing counterparty credit risk.
In the autumn of 2010 we surveyed a number of financial institutions to identify emerging trends and note different approaches taken in relation to credit adjustments when determining the fair value of derivative contracts and issued debt instruments.
Following a significant level of interest in our original survey, we are pleased to present this follow-up survey (pdf 4.8mb), which we believe offers a deeper insight into crucial industry issues around capital, modelling, risk management and accounting issues relating to fair value adjustments.
We hope that you find this second survey both insightful and informative. Please do not hesitate to contact us should you have further questions.
- August 10, 2012: IFRS Developments Issue 37: Impairment of financial assets – the last details?
At their joint meeting in July 2012, the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board discussed the disclosures required to accompany the proposed IFRS 9 Financial Instruments expected loss impairment model and its application to loan commitments and financial guarantee contracts.
At a separate meeting, the IASB also discussed IFRS-only disclosures, transition provisions and application to: originated credit-impaired financial assets; deteriorated credit-impaired financial assets; and reclassified assets.
This issue of IFRS Developments(pdf 875kb) summarises what you need to know of these recent tentative decisions made by the Boards.
- August 3, 2012: Surveying IFRS: Lessons learned from year-end reporting - current and future challenges
This publication (pdf 2.1mb) provides an evaluation of the effect of the deteriorating economy on the 2011 financial statements of more than 50 large companies across 10 sectors by analysing the results of a financial statements survey.
It highlights key accounting issues that arose due to the economic environment, and discusses trends in financial reporting, including: the levels of acquisitions and disposals; disclosures of judgemental areas; and the impact of future accounting standards such as IFRS 11 Joint Arrangements and the proposed standard on Leases.
- July 27, 2012: Power in the banking relationship shifts dramatically to the consumer
Retail banking customers are taking more control over their banking relationships and banks need to respond by adjusting business models, according the EY's second annual Global Consumer Banking Survey, The customer takes control (pdf 2.6mb). The survey polled 28,560 global banking customers and finds that they are increasingly likely to change banks and expect to be rewarded for their loyalty.
The survey also finds that pricing of financial products is the single most important driver of customer satisfaction, as customers across the globe are ever-more sensitive to fee increases. In addition, customers have become much more active when it comes to educating themselves about financial products, with 65% reporting usage of financial comparison websites and 44% using social networking websites.
In this atmosphere, it is essential for banks to fundamentally change their relationships with customers to improve pricing, service quality and mobile offerings.
- July 20, 2012: How public companies adopted the disclosure requirements of ASU 2011-04
In accordance with US GAAP's ASU 2011-04 which is equivalent to IFRS, public companies were required to provide several new fair value measurement disclosures in their quarterly filings for periods ending 31 March 2012.
EY's The new fair value disclosures - A snapshot of how public companies adopted the disclosure requirements of ASU 2011-04 (pdf 3.6mb) reviewed the fair value disclosures provided by 60 public companies across various industries in order to gain insights into how companies adopted the new requirements.
The results of our analysis, including a specific Banking, Asset Management and Insurance appendix, are presented in this publication.
- July 13, 2012: What progress has been made in risk management since the financial crisis?
Find out in the third annual risk management survey, Progress in financial services risk management (pdf 4.67mb), conducted by EY on behalf of the Institute of International Finance (IIF). Overall, the results of the survey demonstrate that the structure of risk management has undergone significant change since the 2008 financial crisis. However, there is still much to be done to change and fully embed new methodologies and processes.
Risk appetite, which post-crisis emerged as a critical foundation of the risk management process, remains a key challenge for many firms. While most have established an enterprise-wide risk appetite, many have not yet been able to embed it into their businesses, with only 37% of this year’s survey participants indicating they have linked it to day-to-day business decisions. Data and systems are persistent impediments to risk management. While many are investing substantial time and resources to improvement initiatives (77% reported an increase in IT spending post-crisis and 63% predict it will continue for at least the next several years), it will be many years before all these upgrades are fully operational.
Changing the culture to make risk "everyone’s business" is an ongoing effort.
- July 6, 2012: Financial instruments: Classification and measurement
The IASB and the FASB have taken further decisions this month on their classification and measurement model for financial instruments in the fair value through other comprehensive income category.
This IFRS Developments publication (pdf 739kb) highlights these tentative decisions and their impact on the classification and measurement model for such instruments.
- June 29, 2012: Investment entities - the plot thickens
The IASB and the FASB (the Boards) began joint redeliberations of the Investment Entities proposals in May 2012, following the conclusion of the exposure draft comment period earlier this year. Some of the changes to the proposals in the exposure drafts have been tentatively decided, such as to replace the proposed six criteria with a definition of an investment entity, with factors to be considered alongside that definition. In addition, the Boards made some other tentative decisions regarding roll-up and the consequential amendment to IAS 28.
This issue of IFRS Developments (pdf 553kb) summarises what you need to know.
- June 22, 2012: European IFRS Banking Conference: Insights on accounting changes
On 10 May, EY in Europe hosted over 100 delegates from 52 banks, standard setters and industry bodies in Brussels for our latest European IFRS Banking Conference. This biannual event continues to grow and evolve, and is now recognised as one of the premier events for senior banking finance professionals to network whilst learning about the practical challenges of emerging financial and regulatory reporting developments.
During the conference we asked a number of polling questions to participants who responded in real-time using individual voting technology. We have captured some of the most interesting and relevant questions and responses in a publication which is included in: "European IFRS Banking Conference: Insights on accounting changes". Of particular interest to you will be the panel discussion on the impacts of the changes to impairment accounting under IFRS 9, which was discussed in detail by a panel of industry experts from the IASB, BBVA, UBS, Barclays and HSBC. The responses to polling questions and discussion on the panel highlighted that this is likely to be one of the most significant changes facing banks' finance teams over the next three years.
Insights on accounting changes (pdf 1.7mb) addresses the following:
• IASB progress update
• Regulatory developments
• The disclosure challenge
• Macro hedge accounting
• Fair value measurement
- June 15, 2012: Financial Instruments: classification and measurement - the GAAP differences continue to narrow
The IASB and the FASB continue to make significant progress in aligning their classification and measurement models for financial instruments.
Our IFRS Developments (pdf 819kb) publication highlights their latest tentative decisions.
- June 8, 2012: IFRS Developments – Issue 30 – The IASB decouples macro hedge accounting from the IFRS 9 project (May 2012)
At its May 2012 meeting, the IASB decided to work towards a discussion paper on macro hedge accounting as a next due process step before issuing an exposure draft. The Board also decided to decouple the macro hedge accounting project from the IFRS 9 Financial Instruments project and to continue permitting current macro hedge accounting guidance until the project is finalised.
Our IFRS Developments publication (pdf 630kb) summarises what you need to know about these decisions.
- June 1, 2012: Offsetting financial instruments: clarifying the amendments
The December 2011 amendments to the offsetting criteria in IAS 32 Financial Instruments: Presentation and the disclosures on offsetting financial assets and financial liabilities in IFRS 7 Financial instruments: Disclosures have raised a few interpretation issues.
In this edition of Applying IFRS (pdf 1mb), we summarise some of these issues and explores the related challenges in interpretation.
- May 25, 2012: Reflecting on the future - A study of global corporate treasuries
EY's Corporate Treasury team recently conducted Reflecting on the future - A study of global corporate treasuries (pdf 3.9mb) survey of over 100 global corporate treasurers of leading international companies -- covering 14 countries and 21 industry sectors -- in order to better understand the extent to which the treasury has been impacted by recent changes, the key challenges they face, and where treasurers see their role in the future.
The survey's key findings include:
• 40% of treasurers highlighted financing as the biggest issue they had to deal with in
the past year, while accuracy of cash forecasts and cash management remain a
• Financial risks dominate treasurers’ top concerns while operational risk is not high
on their agenda
• Almost half of treasurers believe better use of technology is key but admitted that
their use of technology is out of date
• Over 60% of treasurers reported difficulty in recruiting
- May 18, 2012: IFRS Update of standards and interpretations in issue at 31 March 2012
This publication provides an overview of the upcoming changes in IFRS and related interpretations (pdf 1mb), highlighting key aspects of these changes. It focuses on the 30 June 2012 year-end reporting period and considers the effect on periods subsequent to the next reporting period.
The publication provides high-level summaries of the IFRS pronouncements together with possible financial statement implications.
This publication can be used for audit committee presentations about new IFRS standards, amendments and interpretations in issue at 31 March 2012 that are effective for annual periods beginning on or after 1 July 2011.
- May 11, 2012: Toward effective governance of financial institutions
Toward effective governance of financial institutions (pdf 2.8mb), a report with research works carried by Tapestry Networks in collaboration with EY, discusses a detailed post-crisis governance action plan and enhancements to risk governance.
In this report, the Group of Thirty, the international forum of public and private sector financial leaders, states that although many financial services firms have drawn lessons from the 2008-2009 financial crisis and implemented substantial governance reforms, governance in leading financial institutions has not yet been fully addressed.
The stability of individual financial institutions and the global financial system itself demands far-reaching governance reforms on the parts of boards of directors, firm management, regulators and supervisors, as well as long-term shareholders. Improvements in governance need to fully complement the extensive regulatory reforms that are now being implemented.
- May 4, 2012: Classification and measurement of financial instruments–narrowing the GAAP
- April 27, 2012: IFRS 9 Impairment of financial assets — a step closer to completion
The IASB and the FASB (collectively, the Boards) continue to make progress on their "three-bucket" expected loss approach for estimating the impairment of financial assets.
This issue of IFRS Developments (pdf 591kb) summarises the discussions and clarifications of certain terms and methods made by the Boards at their joint meeting, including:
• The clarification of the key components of an expected loss calculation
• The clarification of the impairment measurement objective for financial assets classified in Bucket 1
• The application of an expected loss approach to all trade receivables without a significant financing component
- April 20, 2012: Market risk management
This publication focuses on the market risk management for banks (pdf 921kb) planning to set up a dedicated market risk management function or invest in the required tools. It provides a high-level summary of how each component can be put together for a risk management system, as well as how market risk management fits in.
- April 13, 2012: The new FASB and IASB impairment model: financial institutions weigh in
Read our survey of credit risk and accounting policy (pdf 901kb) executives at 14 different financial institutions to learn their reactions to the three-bucket proposal. The survey was designed to determine how financial institutions view the Boards’ direction, including whether they think it is operationally viable and consistent with current internal credit risk management practices.
- April 6, 2012: Navigating global business issues
The April issue of BoardMatters Quarterly focuses on international business matters and discusses the risks and key considerations related to global economic events, international taxes, changing trade patterns and political instability.
Highlights of this issue include:
1. European debt crisis affects business worldwide: companies with exposure to the Eurozone are becoming increasingly concerned with the financial and political crisis in the European Union and are preparing their businesses to meet these challenges.
2. Considering global tax risk and uncertainty: the global tax environment is volatile and contentious. Find out why — and what audit committee members think about the issue.
3. The shifting tide of international trade: world trade recovered strongly from the global financial crisis, but it’s not necessarily a return to business as usual.
4. International political risk: considerations for audit committees: audit chairs are increasingly concerned about political instability, economic uncertainty and the related risks to overseas investments.
- March 30, 2012: Global banking outlook 2012-13
This paper discusses the issues that banks need to consider as they adapt to a new global banking landscape and highlights the urgent need for change (pdf 1.83mb). In addition to a global outlook, the report provides an outlook for select markets, including Asia-Pacific. We examine three key areas:
1. Renew focus on the right customers and develop a "whole-customer" view to increase share-of-wallet with current clients
2. Conduct a thorough review of products, services and markets to define the institution's core business and develop new business and operating models
3. Deploy technology to aid and differentiate product delivery, improve customer management and strengthen regulatory compliance
- March 23, 2012: Good Bank (International) Limited
- March 16, 2012: Boards weighing effects of leases on the balance sheet
The IASB and the FASB remain committed to putting leases on the balance sheet. However, they continue to struggle with how to recognise related lease revenue and expense. This will likely to delay the issuance of a new exposure draft.
IFRS Developments Issue 25 (pdf 110kb) summarises what you need to know about the status of the leases project.
- March 9, 2012: Impairment – assessing the impact of the new proposal
- March 2, 2012: US GAAP versus IFRS the basics December 2011
- February 24, 2012: Audit committee: leading practices and trends
- February 17, 2012: Global Banking Recovery and Resolution Planning Survey 2012
According to our Global Banking Recovery and Resolution Planning Survey 2012, considerable progress has been made by financial institutions regarding recovery and resolution plans (RRPs), also known as living wills. However, their approach to living wills still varies considerably from region to region across cost, timescales, and definition of what a complete plan looks like.
The survey secured responses from 19 globally systemically important financial institutions, including Japanese financial institutions in the Asia Pacific region. The majority of respondents agree the living wills process has potential business benefits. The development of living wills, however, has proved more complex and expensive than expected.
National regulators are interpreting the policy in a variety of ways. They are at different stages of implementation and are providing different levels of guidance.
From a cost and operational perspective, it is important that financial institutions work on living wills and other related regulations, such as Basel, and capital and liquidity requirements.
- February 10, 2012: Facing the challenge: Business implications of IFRS 4, 9 and Solvency II for insurers
Insurers in Asia Pacific face a huge challenge in synchronising the implementation of IFRS 4 Phase II with IFRS 9 in the coming years. (pdf 2.7mb)
Managing the timelines and interdependencies between these frameworks, along with other new IFRS standards, Solvency II and other finance transformation and change programmes that may be underway will place many companies in a conflicting position.
Systems and processes are being significantly updated to comply with an earlier regulatory deadline to implement Solvency II. This heightens the need to assess overlapping requirements with other projects, and evaluate the risk and cost of making large investments - data warehouses and actuarial systems - against the risk and cost of deferring them with interim solutions.
- February 3, 2012: Coping with the global economic slowdown: a survey of China’s leading entrepreneurs
- January 27, 2012: Applying IFRS in Banking and Capital Markets
The recent financial crisis highlighted the need for better accounting to reflect the substance of relationships between entities. It also highlighted the need for consistency, transparency and comparability in the accounting for and disclosure of such relationships.
In May 2011, the International Accounting Standards Board issued IFRS 10 and IFRS 12 (pdf 939kb) Disclosure of Interests in Other Entities, with the aim of increasing consistency, transparency and comparability across these areas. These new standards are effective for annual periods beginning on or after 1 January 2013, and must be applied retrospectively.
- January 20, 2012: A tale of two markets