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