IFRS conversion process for a Luxembourg Bank
The Issue
Following the European regulation requiring its parent
company to apply the International Reporting Financial
Standards (IFRS) as from 2005, a major Luxembourg
incorporated bank ("the Bank"), which is
part of a European banking group quoted on the Euronext,
is requested to produce IFRS reporting package.
The Bank had to deal with different challenges including:
- Setup of an opening balance as at January 1, 2004;
- Evaluation of the pension schemes and other
long term employee benefits;
- Assimilate this new framework, especially with
the standards on financial instruments (IAS 32
and 39);
- Definition of a new consolidation perimeter;
- Streamlining its internal financial reporting
in order to avoid duplication of reporting tasks;
- Training of staff.
Our Approach
We assisted the Bank in its IFRS implementation project
and our primary objective was to anticipate and avoid
last minute issues in the conversion process.
We were asked to support the Bank for the project
management and to provide technical expertise solutions
or advise on specific issues, transactions or processes
(i.e. hedging, impairment test, valuation of financial
instruments, derecognition of assets/liabilities,
goodwill, pension plan).
We started with an impact analysis, which provided
the Bank's management with a summary of the IFRS conversion
impact on the processus (IT, data collection, consolidation,…)
and on the financial reporting (impact on balance
sheet, result, ratio,…) for each major Bank's
activity in order to set up the right priority to
be addressed.
PwC
Academy provided dedicated training to the persons
involved in the IFRS transition and to those who will
need to apply IFRS on a day-to-day basis.
The Outcome
The Bank has actually improved its internal reporting
process and is able to report under IFRS to its parent
company. Our involvement in this project also allowed
fulfilling some common objectives, including:
- Smooth process in the audit and review of the
new parent company reporting package;
- Sharing of IFRS awareness and knowledge of the
new standards;
- Efficient financial reporting;
- Improvement of internal management reporting.
