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2.Facing the Mulit-GAAP Challenge v3 EN

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  • 1. Paul Rothenberger, Managing Director EMEA Nov. 4th 2009 Facing the Multi-GAAP Challenge Istanbul Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes.
  • 2. Agenda 1. Origins and Tendencies 2. Investment traps 3. Basic options 4. Case study: GE Money Bank © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 2
  • 3. The Multi-GAAP Challenge Every country specifies its own national accounting practices. The EU and the markets require that balance sheets be prepared according to international standards. Multinational groups conform to their head office standards, e.g. US-GAAP. Management needs a base for internal planning. Each set of specifications has its own individual goals and addressees different interests - creditors, shareholders, management. © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 3
  • 4. The IT Aspect of the Challenge Many IT architectures are designed for accounting requirements at the time of their introduction. • Overlooked aspects include: IFRS reporting, multiple accounting practices, group consolidation, management accounting etc. Major international banks run more than 10 operating systems 10 Systems x 2 GAAPs = 20 Sets of accounting rules to maintain IFRS compliant valuations are partly available in existing systems. How about hedge fair value, EIR, effectiveness, impairment, …? IFRS require a specific security position keeping. © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 4
  • 5. Increasing IT Costs and Workload Drastic increase in costs for introducing new or upgrading existing systems. Source: IFRS Embracing change, July 2006, PwC UK Source: Has the dust settled yet?, June 2007, PwC UK © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 5
  • 6. Investment Trap: Adjustment Accounting local GAAP IFRS local IFRS GAAP common accounts common accounts Figure according to KPMG © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 6
  • 7. Adjustment vs. Parallel Accounting General Ledger General Ledger IFRS S I FR Local GAAP Local GAAP IFRS Deals (unaffected by the accounting view) © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 7
  • 8. Adjustment or Parallel Accounting? Pro Con Adjustment Accounting Low-cost introduction High operating + adaptation costs No repeated accounting entries Operational risk Poor audit trail Limited number of secondary GAAPs Parallel Accounting Low operating costs Low operating costs Higher introduction costs Higher introduction costs Independent accounting standards Independent accounting standards Implementation resources needed Implementation resources needed Audit trail via drilldown Audit trail via drilldown "n" parallel standards possible "n" parallel standards possible Knowledge available on the market Knowledge available on the market © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 8
  • 9. Options In-house development • Expansion and development of the proprietary application Tools and tool suppliers • Tools for valuation, hedging, impairment, generic rule engines Reporting soultions • BI systems that still need the functional input Dedicated accounting systems • Balance Analyzer projects: project costs from 120 to +180 million €. • FERNBACH-Oracle projects: more efficient by a factor of 30 to 40 (!) © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 9
  • 10. Parallel Accounting, centralized Accounting In An Ideal World Lending Systems IFRS Reporter Data Modell Treasury Cashflow Systems Projection IFRS IFRS EIR Securities Set of Books Reports Systems Valuation Posting Engine Hedging Core Banking National National System Set of Books Reports Performance Financials Management © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 10
  • 11. Case Study: GE Money Bank, Prague 4th largest bank in the Czech Republic Focussed on retail banking and consumer finance 960.000 customers / 221 branches 2‘342 employees Total assets CZK 98 billion (€ 3.6 billion) Profit CZK 3 billion (€ 113 million) © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 11
  • 12. Case study: GE Money Bank, Prague ICBS MIS asynchronous storage area for extracts IBS ODS global data record Vision + DataHub IFRS Reporter transactions Preprocessor ... Data Analysis Splitting CZ-GAAP CZ-GAAP Valuation postings Set of Books Event Generation Posting US-GAAP Indus US-GAAP Engine postings Set of Books Hedge Manager IFRS IFRS FEIS postings Set of Books Financials © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 12
  • 13. Case study: GE Money Bank, Prague Tasks Milestone Software Delivery Scoping Implementation/Customising Test Production Installation of FS Sample Portfolio Processing FS Sample Portfolio FS Sample PF Processing OK Project Project Preparation OK Concept and Preparation of Preparation Opening Balance Sheets Deal Type Inventory Interface Completion & Reconcil. Data Set Sample Portfolio OK Workshops Sample Portfolio Mapping against Default Implementat. Default Configuration Checked, Differences Documented Support Configuration Processing of Sample Portfolio Processing of and Check of Results Sample Portfolio OK Processing of Interface Programming Mass Data Project Management © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 13
  • 14. Paul Rothenberger FERNBACH-Software AG Member of the Board Gräfstraße 99 60487 Frankfurt am Main paul.rothenberger@fernbach.com T: +49 / 69 / 7 16 73 38-0 M: +49 / 173 / 70 33 55 8 www.fernbach.com | info@fernbach.com
  • 15. Case study: Raiffeisen Bank Aval Bankmaster Accounts Payroll Stock / Fixed Assets Rec./Pay. HR Small Sys. Inv. G/L FI Transactions Static Data Non Financial Instruments Oracle Financials Market Data UA GAAP IFRS UA-GAAP Postings IFRS postings Financials MidasPlus Posting Engine FlexFinance® FlexFinance® DMS FI Transactions IFRS Static Data Financial Instruments Data Mart Reporting Reporting Data Market Data Static Data Market Data © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 15
  • 16. Centralised Modernisation Strategy Lending Preprocessor Systems Data Analysis IFRS Reporter Splitting valuation Treasury Event generation IFRS Systems Posting Hedge Engine Manager IFRS IFRS Securities Set of Books Reports Systems Core Banking National National System Set of Books Reports Performance Financials Management © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 16
  • 17. Strategic Model – Parallel Accounting Decentralised Parallel Accounting Strategy Approach 3 Lending IFRS Enhancer Preprocessor + Systems Posting Engine Treasury IFRS IFRS Reporter Systems Enhancer Securities IFRS IFRS IFRS Systems Enhancer Set of Books Reports Core Banking IFRS System Enhancer Performance Financials Management © FERNBACH-Software | Drives Multi-GAAP. Manages Risk & Compliance. Optimises Lending Processes. 17
  • 18. 3. ŞĐFRE 3. şifre 30 18

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