Download 2005 - Larcier

International Financial Reporting Standards
(IFRSs): What are the impacts for SICAFIs?
A presentation by
Pierre-hugues Bonnefoy
22 November 2005
Overview of the presentation
1. What is the IASB
2. IFRS in Europe
3. IFRS in Belgium
4. Conceptual differences with Belgian GAAP
5. Major areas of change for SICAFIs
6. Other significant changes that may impact SICAFIs
7. Conclusions
2
© 2005 Deloitte
What is the IASB ?
(1)
• The IASB is a private organisation with
independent responsibility for the development
of international accounting standards.
• Created in 1973 by the following members of
IFAC : Australia, Canada, France, Germany,
Japan, Mexico, The Netherlands, the United
Kingdom and Ireland, the US.
3
© 2005 Deloitte
What is the IASB ?
(2)
• Objectives of IASB :
– Formulate, publish and promote international
financial reporting standards
– Harmonisation
– ! No legislative power
• Results of IASB :
– 32 IASs / 6 IFRSs and 16 SICs / IFRICs
– Stable platform for 2005 but in continuing
evolution
4
© 2005 Deloitte
What is the IASB ?
(3)
Trustees (19)
(appoint Board, IFRIC, Trustees)
- Governance
- Fund raising
- Public awareness
Standards Advisory Council
National
standard
setters and
other
interested
parties
organize wider participation in the
standard setting process
Advisory Committees
IAS Board (14)
(approve and set IASs,
IFRSs, EDs, SICs,
IFRICs)
(or other specialist advisory groups)
IFRIC (12)
Ke
y
Appoints
Reports to
Memberships links
Director of Operations
& Non-Technical Staff
Director of Technical
Activities & Tech. staff
Advises
5
© 2005 Deloitte
IFRS in Europe
(1)
• Mandatory application in Europe at the latest in
2005 for listed companies with consolidated
financial statements (1 year of comparatives :
transition date 1/1/2004)
• Optional for consolidated financial statements of
non listed companies and for stand-alone financial
statements
• Endorsement mechanism :
– All IASs, IFRSs and SICs/IFICs have to be endorsed by
the EU
6
© 2005 Deloitte
IFRS in Europe
(2)
Political level ARC
European Commission
EFRAG
Technical
expert group
Observers
Board
Advisory forum of all
European Standard
Setters
7
© 2005 Deloitte
IFRS in Belgium
S
T
A
T
U
T
O
R
Y
Amendment of Belgian accounting rules to IAS/IFRS
IAS/IFRS not permitted
IAS/IFRS permitted for SICAFIs ?
2005
C
O
N
S
O
L
I
D
A
T
E
D
IAS/IFRS permitted
public and non-public
entities
“IAS exemption”
8
2007
IAS/IFRS mandatory for public entities
(European Regulation)
IAS/IFRS permitted
for non-public
entities
(exemption)
IAS/IFRS mandatory for nonpublic entity (effective date to be
determined)
© 2005 Deloitte
Conceptual differences with
Belgian GAAP
• Economic criteria
“tax pollution”
• “Substance over form”
Legal form
• Flexibility of presentation
Strict reporting
format
• Fundamental trend : fair value
9
© 2005 Deloitte
Major areas of change for SICAFIs :
overview
net asset
change
•Financial instr. & hedge
accounting
•Provisions
•Fair value investment
properties
•Dividend
10
earnings
impact
earnings
volatility









© 2005 Deloitte
Other significant changes that may
impact SICAFIs
• Income statement, balance sheet presentation
• Lease incentives
• Securitisation
• Other
11
© 2005 Deloitte
Financial Instruments and hedge
accounting (IAS 32/39)
• Fair value (FV) for financial derivatives and some financial
instruments (i.e. shares held in other entities)
• Hedge accounting
– Fair value hedge : change in FV of the debt (for the risk
hedged) and the hedging instruments in the income
statement
– example : hedging of a fixed rate debt using a interest rate swap fix to
floating
– Cash flow hedge : change in FV of the hedging instrument in
equity and recycle to income statement when the risk
hedged affect the income statement
– example : hedging of a floating rate debt using a interest rate swap
floating to fix
– Documentation and effectiveness issues
• Transaction costs
• Treasury shares
12
© 2005 Deloitte
Provisions (IAS 37)
•Rules on provisions
- No general and tax based provisions
- Definition :
- Present obligation (legal or constructive)
- Probable outflow of resources
- Reliable estimate
•Overhauls and major repairs
- No longer allowed
•Discounting of provisions
- Mandatory under IFRS
- Unwinding
financial costs
13
© 2005 Deloitte
Fair value investment properties
(IAS 40)
• Investment properties to be valued at fair value with change in
fair value through income statement
– What is the fair value ?
“The fair value is the price at which the property could be
exchanged between knowledgeable, willing parties in an
armth’s length transaction”
– Is the value carried out by the real estate expert a good
representation of the fair value ?
“An entity is encouraged … to determine the fair value … on
the basis of a valuation by an independent valuer …”
–
How to address the registration rights ?
– Not specifically dealt with by IAS 40
– Probably more a valuation issue than a GAAP issue
– Management’s judgement
14
© 2005 Deloitte
Other significant changes that may
impact Sicafis
• Dividend : financial statements are presented before allocation
of results
• Income statement, balance sheet presentation
– 2005 annual report – full compliance with one year of
comparatives (2004)
– No strict rules for presentation under IFRS
– Opportunity for a consistent presentation among the Sicafis
• Lease incentives : to be spread over the lease term on a
straight line basis as a reduction of rental income
– Normally already taken into consideration in the valuation of
the building
– If significant could be a classification issue in the income
statement
• Securitisation : securitisation of operating lease does not
qualify for derecognition
– Partial derecognition of an investment property not allowed
under IFRS
15
© 2005 Deloitte
Conclusions
• IFRS is probably not a big deal for SICAFIs ?
• Most changes are (relatively) easy to understand…
• … but IAS 39 and some others are hard
• Be patient, the answers aren’t all clear
• And there will be different answers
• But remember, this is mere accounting !
• And Cash flows are “likely” to be unchanged
16
© 2005 Deloitte
A member firm of
Deloitte Touche Tohmatsu