Highly technical, Market-Driven IFRS training Courses

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IFRS 9 - The Latest UpdatesRisk & Capital Management Under Basel III and IFRS 9IFRS 9 Accounting For Financial InstrumentsIFRS Accounting for Transactions in Corporate Control (M&A)IFRS Accounting for InvestmentsIFRS Accounting for Real Estate

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Course Content

IFRS 9: The Latest UpdatesDate: 21 Mar 2018, 18 Oct 2018

Location: London Standard Price: £625 + VAT Membership Price: £500 + VAT

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Course Overview

International Financial Reporting Standard 9 (“IFRS 9”) is the accounting standard for financial instruments, which defines the classification, measurements and impairment of financial instruments. It is designed to make annual reports more meaningful to investors as well as simplify how auditors implement the rules and introduce safeguards to limit credit losses.

In July 2014, after several years of delay, the accounting regulators published the final text of IFRS 9. This combines revised versions of previously published sections with the first publication of the final and most controversial impairment section. IFRS 9 will become effective in 2018.

Through a mix of lecture and case studies, the workshop will equip participants to achieve a detailed understanding of the latest IFRS 9 standard, both for financial assets, liabilities and derivatives, including: ■ The classification and measurement of financial instruments; ■ The new impairment methodology based on expected losses; ■ The fair value of financial liabilities and deterioration of institutions’ own credit; ■ The different types of hedge accounting and the recent IFRS changes.

Session 1 - Introduction ■ What is IFRS 9? How does it differ from IAS

39? ■ What are financial assets and financial liabili-

ties? ■ IFRS 9 history and implementation overview

Session 2 – Financial Assets Classification & Measurement ■ Presentation of the three different categories

• Amortised Costs;• Fair value through Profit & Loss (FVTPL);• Fair value through Other Comprehensive

Income (FVTOCI) ■ Accounting treatment determined by (i)

business model (ii) nature of cash flows ■ Decision tree to decide on classification of

financial instruments ■ Balance sheet and P&L calculation of a bond

at amortized cost• Based on the Internal Rate of Return

(IRR) of future cash flows• Treatment of fees in the IRR calculation

■ Balance sheet and P&L calculation of a bond at FVTPL and FVTOCI• Effective interest rate method for inter-

ests (same as amortised costs)• Unrealised gain based on NPV at current

yield of future cash flows ■ Reminder on determining fair value

• Level 1 based on unadjusted quoted price• Level 2 based on quoted price in inactive

markets or observable model input• Level 3 based on unobservable but signifi-

cant inputs to the overall value

Case Study #1: participants will be presented with a few financial instruments and will classify them in their relevant categories

Case Study #2: participants will compute on Excel the impact on balance and P&L for different types of debt & equity instruments

Session 3 – Financial Assets Impairments ■ Applies to amortized cost and FVTOCI man-

datory fixed income instruments ■ Incurred losses (IAS 39) has been replaced

by expected losses (IFRS 9) ■ Three stages process to determine impair-

ments• Stage 1: “12-month expected credit loss-

es” with effective interest rate on gross on gross carrying amount

• Stage 2: “life-time expected credit losses” with effective interest rate on gross on gross carrying amount

• Stage 3: “life-time expected credit losses” with effective interest rate on gross on amortised costs

■ Accounting treatment for financial instru-ments already impaired when acquired

Case Study #3: participants will assess the credit deterioration of a Greek bond throughout the crisis and its different stages

Session 4 – Financial Liabilities & Own Credit ■ Financial liabilities at amortised cost or FVT-

PL ■ Own credit deterioration reduces institutions’

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liabilities ■ Liability reduction due to rating downgrade

to be now classified in OCI

Case Study #4: participants will assess the impact on credit deterioration on institutions’ own bonds Session 5 – Hedge Accounting ■ Qualification for hedge accounting ■ Different types of hedge accounting, same

as IAS 39, except for time value of mon-ey and forward points in foreign exchange forward• Cash flow hedge• Fair value hedge• Net investment hedge for foreign subsid-

iaries ■ Accounting treatment for time value of

money for options: a two-step process through OCI

■ Accounting treatment for foreign currency forward points in OCI

■ IFRS 9 hedge accounting more closely aligned to risk management policy• Removal of hedge effectiveness criteria

(80% to 125%)• Extends eligibility of risk component to

include non-financial items • Permits aggregate exposure that includes

a derivative to be eligible hedged item• Group of items and a net position (e.g.

assets & liabilities or forecast sales & purchases) hedged collectively as group

Case Study #5: participants will classify a few hedging transactions in their relevant categories

Case Study #6: participants will value an interest rate swap accounted for as a cash flow hedge

Case Study #7: participants will review and assess different hedge scenarios including risk component hedging, aggregate exposures and net position

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Course Content

Risk & Capital Management Under Basel III and IFRS 9Date: 4-8 Dec 2017

Location: London Standard Price: £3,250 + VATMembership Price: £2,600 + VAT

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Course Overview

Who Should Attend? ■ Board of Directors ■ Senior Bank Management Members ■ Central Bankers (Supervision Department) ■ ALCO Managers ■ Chief Risk Officers ■ Treasury Executives ■ Risk Managers ■ Chief Finance Officers ■ Finance Directors ■ Comptrollers ■ Portfolio Managers ■ Securities Analysts ■ Insurance Executives ■ Pension Fund Managers ■ Pension Fund Trustees ■ Investment Professionals ■ MIS and Operations Executives ■ Budgeting & Planning Executives

DAY ONE

Overview and dynamics of Capital Management ■ Concepts & Definition ■ The role of capital and its significance ■ Key aspects to capital management ■ The development of capital standards for

banks ■ Overview of capital allocation in banking ■ Perspectives on Capital; Treasurer’s view,

Regulators’ Views, Risk Manager’s view & shareholders’ view

■ Composition of capital- Tier 1, Tier 2 & Tier 3

■ Regulatory vs. Economic Capital ■ The concepts pf Expected vs. Unexpected

Losses ■ The concept of capital efficiency ■ Structure and dynamics of Balance Sheet

Capital Allocation Models ■ Concept & Overview ■ Approaches to Optimization ■ Assets volatility Approaches ■ Regulatory Capital Approaches ■ Risk-adjusted Models

• RAPM- Risk-adjusted Performance Measure

• RAROA- Risk-adjusted Return on Assets• RAROC- Risk-adjusted Return on Capital

■ Earnings Volatility Models ■ EAR- Earnings-at-Risk Model

Functioning of Capital Management ■ The four As of Capital Management

• Adequacy• Attribution• Allocation• Architecture

■ Determining the optimal level & mix of capital ■ Strategic considerations for optimum capital ■ Bank’s Insolvency probability ■ Managing the bank’s capital adequacy ■ Determining the bank’s overall capital plan

CASE STUDY: Group discussion on the different variables that should be considered for determining the optimum level of capital and the various models for capital allocation.

DAY TWO

Liquidity Risk & Management ■ Liquidity Concepts ■ Bank Liquidity Risk ■ Concept & Definition

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Course Content

Risk & Capital Management Under Basel III and IFRS 9

■ Types of Liquidity Risks ■ The Role of Confidence ■ Liquidity & Activity Ratios ■ Leverage & Default Issues ■ Contingency Planning

Measuring Bank Liquidity ■ The Cash-Flow Approach ■ Large Liability Dependence ■ Core Deposits To Assets ■ Loans & Leases to Assets ■ Loans & Leases to Core Deposits ■ Temporary Investments to Assets ■ Brokered Deposits to Total Deposits ■ Market-to-Book Value

Dynamics of Liquidity Management ■ The Formation of Expectations ■ Liquidity Planning ■ Faces of Liability Management

• Minimizing Deposit Interest Costs• Customer Relationships• Circumventive Regulatory Restric-

tions ■ Deposit Rate Ceilings ■ Reserve Requirements ■ Pricing & Methods of Deposit Insurance

CASE STUDY: Hypothetical numerical cases on assessing & quantifying the sensitivity of the bank’s financial transactions on its cash flows & NII.

CASE STUDY: Group discussion on the different variables affecting the bank’s liquidity position & the main contributions for illiquidity- A focus on Lehman Brothers’ rise & fall in 2008

DAY THREE

Interest Rate Risk- Overview & Measurement ■ Modeling interest rate risk ■ Deterministic vs. Stochastic models ■ Arbitrage models ■ Equilibrium models ■ Types of Interest Rate Risks ■ Yield Curve Risk ■ Basis Risk ■ Macaulay Duration ■ Modified Duration ■ Core Elements of Duration ■ Convexity Concept ■ Duration gap of Equity ■ Earnings versus Shareholder Value ■ Effective Duration & Effective Convexity

■ Hedging Duration & Convexity ■ Concept of Negative Duration ■ Key Rate Duration ■ Math of Sensitivity Parameters

Measuring Risk Techniques ■ Sensitivity Parameters ■ Simulation Methodologies ■ Rate Shocks ■ Simple Simulation ■ Historical Simulation ■ Monte Carlo Simulation ■ Transfer Pricing as a Tool ■ Value-at-Risk ■ Core Elements of VAR ■ VaR Greeks & Math ■ Correlation & Covariance ■ VaR Methodologies ■ Implementation of VaR

CASE STUDY: Hypothetical numerical cases on assessing & quantifying the sensitivity of bonds & other option-embedded fixed-income securities to different parallel & un-parallel changes & twists in the yield curve.

Interest Rate & Credit Management Techniques ■ Interest Rate Derivatives ■ Interest Rate Swaps ■ Generic versus complex structures of

Swaps ■ Interest Rate Options ■ Interest Rate Futures ■ Forward-Rate Agreements ■ Credit Derivatives ■ Types of Credit Derivatives

• Credit Default Swaps• Total Return Swaps• Credit Options; Standard and Exotic • Spread Options• Credit-Lined Noted (CLNs)• Collateralized Bond Obligations (CBOs)• Collateralized loan Obligations (CLOs)

CASE STUDY: Hypothetical numerical live case on the use of a wide gamut of derivatives instruments & structured products for coping with negative as well as positive duration gaps in a bank’s balance sheet .

CASE STUDY: Hypothetical numerical live cases on valuing & pricing different traditional & exotic on & off balance-sheet products and their implications on the bank’s gap position .

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Course Content

Risk & Capital Management Under Basel III and IFRS 9

CASE STUDY: Hypothetical numerical case on the concept of Bootstrapping & constructing the zero-coupon yield curve .

DAY FOUR

From Basel II to Basel III ■ Basel III Structure & main elements ■ Chronology of phasing-in the new Basel 3

standards ■ Basel III Pillars & new limits ■ Risk-based Capital Measures ■ Basel III new capital requirements

• Redefining Capital• Capital Ratios• Capital Buffers

■ Components of Capital ■ New concepts of Common Equity & Tier 1

capital ■ Basel 3 Treatment limits for Tier 1 and

Tier 2 & 3 Capital ratios ■ Allowable Capital Deductions ■ Basel 3 treatment for hybrid investments ■ Basel 3 Standards for Minority interests

• Unconsolidated Financial Institutions• Deferred Tax Assets• Mortgage servicing-rights

■ Total risk-based capital ■ Capital Conservation ratio & Countercy-

clical ratio ■ Non-risk-based measures ■ Leverage ratio ■ Concept of Systematic Banks ■ Timing & Transitional Arrangements

Basel III Liquidity Kit ■ Definitions and scope ■ Objectives of Basel 3 Liquidity package ■ New liquidity standards ■ Liquidity coverage ratio- LCR ■ Appropriate Asset Levels for LCR Inclu-

sion ■ Net Stable Funding Ratio ■ Timing & Transitional Arrangements

Interfacing between Basel III & Risk Management ■ Changing rules of the game ■ Modus operandi of Basel III ■ Basel III Mechanics for credit risk ■ Basel III Mechanics for liquidity risk ■ Basel III Mechanics for Ops Risk

DAY FIVE

IFRS 9: Overview & Concepts ■ Definitions and scope ■ Background & Objectives

■ Effective date & transition ■ Key differences between IFRS 9 and old

IAS 39 rules ■ New standards for the accounting of finan-

cial standards ■ Convergence with U.S. GAAP ■ Phases of IFRS 9 Standard

• Classification & Measurement of financial assets & liabilities

• Impairment• Hedge Accounting

Dynamics & Modus Operandi of IFRS 9 ■ Measurements of Financial Assets

• Amortized Cost Models; “Hold-to-Collect” Business Model and SPPI “Contractual Cash Flow Characteristics Test”- Pay-ments of Principal & Interest

• Fair Value through other Comprehensive Income (FVOCI) for debt instruments and equity investments.

• Fair Value through Profit & Loss (FVTPL) ■ Implications of the new accounting rules

on financial reporting, thereby on business decisions as well as capital and risk man-agement

■ Overview of the new Impairment model ■ General Impairment Model

• Recognition of Impairment- 12-month ECL (Expected Credit Losses)

• Lifetime Expected Credit Losses ■ Hedge Accounting

• Qualifying criteria & Effectiveness testing• Hedged Items• Aggregate Exposures• Hedging Instruments• Derivatives & Hybrid contracts

■ Expected Credit Loss Module (ECL)• PD (probability of default)• LGD (Loss given default)• EAD (Exposure at default)• CCF (Credit Conversion Factor)

■ Bridging the gap between IFRS 9 standard and ALM activities

■ Impact of IFRS 9 ECL on balance sheet management

■ Credit Adjusted ALM

CASE STUDY: Group discussion on the challenges facing banks & financial institutions, struggling for the implementation of IFRS 9, prior to the final date of January 2018.

CASE STUDY: Group discussion on the differences between the new IFRS 9 and the old IAS 39; and the eventual impact on business and financial decisions as well as risk dimensions.

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Course Content

IFRS 9: Accounting For Financial InstrumentsIn House

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Course Overview

This course has been designed to provide both a strategic overview and technical insight into the new IFRS 9 regime for financial instruments, with special emphasis on how the radical changes from the existing IAS 39 regime will affect the work of investors, advisers, deal-doers and analysts.

After several years’ delay, the IASB published in July 2014 the final text of the comprehensive new standard IFRS 9 Financial Instruments. This combines revised versions of previously published sections (Classification and Measurement of Financial Assets and Liabilities, and Hedge Accounting) with the first publication of the final and most controversial section: Impairment.

Despite the deceptively long lead time for adoption of the new standard (it becomes mandatory only for accounting periods beginning on or after 1st January 2018), the transition process confronts preparers and users with operational and commercial challenges comparable only with those posed by the original adoption of IFRS in 2005.

Overall, the jury is firmly out, and will remain so for several years, on the key question: how will IFRS 9 affect the comparability of reporting institutions, across business types, across borders, and across time?

Course Themes ■ The systematic shift away from rules and towards principles radically increases the importance

of management intention (in entering into transactions), and the scope for management judge-ment (in estimating their accounting value and commercial impact).

■ The new regime calls for very substantial increase in disclosures, especially in the commercially and political sensitive area of impairament.

■ The IFRS 9 methods for measuring revenue, expense, gains and losses from financial instru-ments are broadly similar to IAS 39, but the criteria for employing each of them are radically different. This will cause major and unpredictable shifts in P&L recognition, both between the in-come statement and equity (via other comprehensive income), and between accounting periods.

■ The shift from an ‘incurred loss’ to an ‘expected loss’ model for impairment will result in earlier and higher provisioning, but its implementation will be both complex and subjective, and the outcome will still fall short of ‘through-the-cycle’ methodology espoused by the regulators in the wake of the global financial crisis.

■ The new regime for hedge accounting, while partially achieving its avowed objective of reflecting real-life risk management, might actually bring little if any additional transparency to the user’s perspective.

IFRS 9 Overview - 1: Some good news ■ More principle-based than the existing

rules-based IAS 39 regime ■ Fewer categories, fewer specific and con-

fusing rules for classification and reclassifi-cation

■ Accounting treatment to be determined by (i) business model and (ii) nature of cash flows

■ All-new impairment model based on indus-try-standard ‘expected loss’, not ‘incurred loss’

■ Hedge accounting more flexible and aligned to risk management policy and practice

IFRS 9 Overview - 2: Some not-so-good news ■ Criteria for basic accounting treatment:

vague and untried (either in IFRS or else-where)

■ Default treatment for financial assets: Fair Value through Profit or Loss (no longer AFS)

■ Accounting mismatches: still not eradicated ■ Disclosures of credit risk (impairment) and

hedge accounting: substantially more oner-ous

■ Still no hedge accounting for dynamic (port-folio-based) hedging operations

■ Still no IFRS standard for insurance activities ■ Resource implications are unclear, but some

areas (impairment) are clearly problematic Problem areas in classification and measurement of financial assets / liabilities ■ Applying the business model test: does it

reflect how the entity actually runs its busi-ness?

■ Applying the cash flow test: do all products fall readily into the ‘right’ category?

■ Does the new regime eliminate existing ac-counting mismatches (e.g. between cash and derivative positions) – or does it create new ones?

Problem areas in Impairment ■ How does the entity estimate ‘12-month ex-

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pected credit losses’? (Stage 1) ■ How does the entity determine whether

credit risk has ‘increased significantly’? (Stage 2)

■ To what extent does the new regime result in earlier provisioning and lower published profits?

■ Does the new regime mitigate or aggra-vate the existing tensions between the accounting and regulatory numbers, and how will management reconcile them?

Hedge accounting ■ Taken as a whole, is the new regime more

or less friendly to how the entity does business?

■ How does the new regime affect the en-tity’s ability to support customer needs and manage its own interest rate, foreign currency and liquidity risk?

Presentation and disclosures ■ How does IFRS 9 redistribute the entity’s

results as between P&L and OCI? ■ How does IFRS 9 relate to the regulatory

regime?

And finally ■ How will IFRS9 affect the perceptions and

behaviours of shareholders and other stake-holders?

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Course Content

IFRS Accounting for Transactions in Corporate Control (M&A)

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Course Overview

This intensive course is designed to give a comprehensive insight into the principles and practice of IFRS accounting and reporting for the full range of transactions under the general umbrella of M&A. In addition to transactions where there is a full change of control, it also considers transactions involving joint control and ‘significant influence’ (i.e. associate status) and transfers among each of these categories. Transactions are considered from the perspectives of all participants (i.e. selling and target entities as well as buyer).

The course will reflect the latest state of the following recently introduced or amended accounting standards and of emerging practice with regard to each of them:

■ IFRS 3 - Business Combinations ■ IFRS 10 - Consolidated Financial Statements ■ IFRS 11- Joint arrangements ■ IFRS 12 - Disclosure of Interests in Other Entities ■ IFRS 13 - Fair Value Measurement ■ IAS 27 - Separate Financial Statements ■ IAS 28 - Investments in Associates and Joint Ventures

The course will also offer a preview of the principal relevant changes resulting from the impending replacement of IAS 39 Financial Instruments: Recognition and Measurement by IFRS 9 Financial Instruments, as well as an insight into the main differences between IFRS as published by the IASB (‘full IFRS’) and the UK’s recently introduced FRS 102 and associated regulations (so-called ‘IFRS-lite’).

The course is interactive in approach and participants are encouraged to bring their own experience (and problems) to bear on group discussions and on the many (almost exclusively real-world) case studies and exercises with which the course is illustrated - and enlivened.

The concept of control ■ Parent and subsidiary undertakings ■ Special purpose entities and arrangements ■ Quasi-subsidiaries

Review of key concepts for business combinations and associated transactions: principles and applications ■ ‘Control’ ■ ‘Significant influence’ ■ ‘Joint control’ ■ ‘A business’

Accounting for acquisition and disposal of full control ■ Deciding whether the subject is a business

or a collection of assets: pros and cons of each

■ Identifying the acquirer, the seller and the date of acquisition

■ Identifying all assets and liabilities (including previously unrecognised intangibles)

■ Establishing fair values ■ Treatment of transaction costs ■ Calculating goodwill (also negative goodwill) ■ Acquiring control in stages ■ Treatment of deferred and contingent con-

sideration ■ Provisional and final valuations ■ Relinquishing control in stages ■ Transitions to and from associate or JV sta-

tus ■ Accounting for acquisition in standalone ac-

counts of parent ■ Consolidation procedures

• Adjustment to parent company accounting policies

• Adjustment to fair values• Elimination of intercompany items• Non-controlling interests: share of net as-

sets or ‘full goodwill’ basis?• Allocation of goodwill across CGUs for fu-

ture impairment reviews• Treatment of foreign currency translation

gains and losses• Special cases – 1: Parent and subsidiary

with different functional currencies• Special cases – 2: Exemption for consoli-

dation for assets held for resale• Special cases – 3: SPVs – consolidate or

not? Does accounting treatment necessari-ly follow regulatory treatment?

■ Disclosures:• Initial disclosure of the transaction itself• Subsequent disclosures, e.g. related party

transactions

Accounting for equity method investments ■ Applying the ‘significant influence’ and ‘joint

control’ criteria in practice: some ‘counter-in-tuitive’ cases

■ Equity accounting for associates in consoli-dated financial statements• Establishing the initial share of net assets• Goodwill (initial and after subsequent re-

view)• Changes in value of share of net assets:

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distributions• Elimination of proportion of intercompa-

ny profits and losses ■ Special considerations for accounting for

joint arrangements:• Joint operations or joint venture?• Equity accounting for joint venture (no

more ‘proportional consolidation’) ■ Transitions to and from associate/JV status

Some special topics ■ Secondary impact of transactions on eps,

banking covenants, investor ratios and public perceptions

■ Impact of IFRS 13 Fair Value Measurement on initial accounting and on subsequent impairment and impairment reversal re-views

■ Hedging / hedge accounting for M&A trans-actions (under IAS 39 and IFRFS 9)

■ Hedging / hedge accounting for ongoing net investment in foreign undertaking (un-der IAS 39 and IFRS 9)

■ Overview of principal changes in IFRS 9 as regards accounting for ‘portfolio’ equity instruments:• introduction of new ‘Fair Value through

OCI’ category• new enhanced disclosure requirements

IFRS Accounting for Transactions in Corporate Control (M&A)

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Course Content

IFRS Accounting for InvestmentsIn-House

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Course Overview

This course is intended as a detailed workshop on IFRS for participants who are already familiar with the basics of accounting for investment activities, and who need to deepen and reinforce their understanding of this particularly complex area of accounting, both at the strategic and at the technical level.

The course will primarily focus on the problems of applying general-purpose accounting standards to the special circumstances of the client’s own investment activities.

Training Methodology:This intensive programme is strongly focused on the application of the relevant provisions of IFRS to a wide variety of real-life situations. It is designed as a hands-on experience for the participants, with a minimum of ‘chalk-and-talk’ and a maximum of interaction among participants and between them and the trainer. Participants will be encouraged to bring their own experience – and problems – to bear on the topics covered by the programme.

The outline is to be taken as indicative only, and subject to detailed discussion of the client’s specific needs. For instance, it can readily be modified to accommodate sessions on IAS 20 (Government Grants) and IAS 24 (Related Parties) if these were to be of interest.

Day One:

Investment asset classification under IFRS ■ Financial investments, and the principal cri-

teria for distinguishing between:• Equity interests in subsidiaries• Equity interests in associates and joint

ventures• Financial instruments (i.e. portfolio invest-

ments) ■ Non-financial investments:

• Property (real estate)• Alternative investments

Financial instruments in detail - 1: the balance sheet ■ Detailed rules for;

• Recognition• Initial measurement• Subsequent remeasurement• Derecogntion

■ Difference between equity and debt ■ The Fair Value categories: Fair Value through

Profit and Loss, and Available for Sale ■ The amortised cost categories: Held To Ma-

turity, and Loans and Receivables ■ Permitted reclassifications ■ Making sense of the available alternatives:

why HTM is so unpopular and AFS is so pop-ular

■ Accounting for derivatives including embed-ded derivatives

■ Impairment

Financial instruments in detail - 2: the income statement ■ The amortised cost (effective interest rate)

model, and its detailed application to special cases such as;• Floating rate investments• Foreign currency investments• Prepayments and restructurings

Non-financial investments ■ Real estate: the cost model and the fair val-

ue model ■ Accounting for leases, both as lessor and

lessee

■ Impairment and impairment reversal ■ Special cases: unique (‘iconic’) buildings for

which no market price is available ■ Commodities and other alternative invest-

ments

Day Two:

Valuing listed and marketable equity investments ■ The fair value hierarchy:

• Mark to market• Mark to model (observable inputs only)• Mark to model (some unobservable inputs)

■ Problems associated with large (i.e. potential-ly unmarketable) holdings: when premiums and discounts should be applied

Valuing equity investments 2: Strategic and unlisted holdings ■ Basics of company valuation: the three fami-

lies of methods and their limitations;• Book value• Market multiples• Discounted cash flow

■ Theoretical and practical challenges associat-ed with each

Case studies

Hedging and hedge accounting ■ Rationale for hedge accounting, and compari-

son with Fair value Option ■ Mechanics of hedge accounting for ■ Fair value hedges ■ Cash flow hedges

Update on recent and impending developments ■ Progress report on those parts of IFRS 9 (re-

placement for IAS 39) so far published ■ Pending changes to the rules on:

• Amortised cost and impairment• Hedge accounting

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Course Content

IFRS Accounting for Real EstateIn House

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Course Overview

After a long period of stability, the IFRS regime for real estate assets and transactions is entering a period of rapid change and elevated uncertainty, with the imminent introduction of three major new financial reporting standards. IFRS 16 Leases, effective from 1st January 2019, substantially and controversially redraws the boundaries between operating and finance leases: IFRS 9 Financial Instruments, effective from 1st January 2018, brings all lease receivables into the scope of compulsory impairment provisioning based on expected credit losses; and IFRS 15 Revenue from Contracts with Customers, also effective from 1st January 2018, whilst retaining the basic IFRS principles for revenue recognition, calls for much more attention to be paid to the unbundling of the separate components in longer-term contracts.

At the same time, continued dissatisfaction with IFRS-based numbers, specifically as a basis for cross-border intercompany comparisons, underlines the importance of the industry-specific non-GAAP performance measures developed by EPRA.

This course has four principal objectives. It is intended: ■ to give preparers and users alike a comprehensive and tailored overview of the forthcoming changes to the

IFRS regime as it impacts entities exposed to the real estate sector, as investors, owner-occupiers, lessors or lessees

■ to give preparers of accounts a firm basis for planning the practical implementation of the IFRS and EPRA reporting regimes

■ to enable senior managers of entities exposed to the real estate sector (in whatever capacity) to modify their decision-making processes to take account of the new accounting environment, especially in those areas where the standards permit or require the exercise of significant judgement

■ to equip investors and analysts with the necessary new knowledge and skills to make informed judgements about the financial performance, condition and prospects of entities exposed to the real estate sector

The course is essentially forward-looking and is accordingly based on IFRS accounting standards as published, regardless of their EU-endorsement status or their effective dates for mandatory adoption.

At every stage, the course will pinpoint the areas of continuing uncertainty and difficulty in the new standards, whether in their interpretation, application or implementation by preparers, or in their analysis by external users.

The course makes extensive use of real-life comparative case studies and of fully worked examples.

Owned property: refresher on the (largely unchanged) accounting requirements:IAS 16, IAS 23 and IAS 40 ■ Choosing between cost model and fair value

model ■ Cost model: how to determine

• Initial cost including borrowing costs and appropriate depreciation schedule

• Identification and allocation of cost to separable elements

• Identifying relevant indicators for impair-ment review

• Estimating recoverable amount: ‘Value in use’ versus ‘Fair value less costs to sell’

■ Fair value model:• Estimating fair values (a) of unique as-

sets and (b) in illiquid markets• Setting valuation assumptions• Trading and development properties

The shifting boundary between ownership and leasing IAS 17 and IFRS 16Overview of the key differences between IAS 17 and IFRS 16

• ‘Right-of-use’ asset defined• Identifying a lease• Allocating consideration to lease and non-

lease (service) components of a contract• Interaction between IFRS 16 and IFRS 15• Measuring a lease• Leases with variable payments• Lease modifications and options (exten-

sions, terminations)• Subleases• Sale and leaseback transactions• Available options and how/when to use

them ■ Detailed examination (from perspective of all

parties) of typical transactions whose classifi-cation will change after transition to IFRS 16

■ Financial impacts• Impact of IFRS 15 and 16 on published financial statements• Impact of the IFRS 9 expected loss impairment regime for all lease receivables• Impact on bank covenants and on modification of financings

Other continuing issues (examples only) ■ Rent-free periods and other incentives ■ Tenants’ improvements ■ Step-up rents ■ Disclosures, especially regarding management

judgements, impairment and revaluations ■ EPRA performance measures, and the EPRA-

to-IFRS reconciliation

The specialist in highly technical, market-driven banking and corporate finance training

web: redliffetraining.com email: enquiries@redcliffetraining.co.uk phone: +44 (0)20 7387 4484