Reporting Effectiveness: Case Study

FINREP and COREP reporting alignment

 

The Issue

The CSSF has decided to revise its reporting framework as from 1st January 2008 following the adoption of the new prudential provisions relating to the regulatory capital adequacy ration (CAD III) and the introduction of European regulation on IFRS. As from this date, all European quoted banks will have to convert their prudential reporting to IFRS. The use of IFRS standards for the preparation of their consolidated accounts will be obligatory, while their use for local statutory reports will remain optional.

Our client, a Luxembourgish subsidiary of an international bank, is currently using US GAAP for group reporting and Lux GAAP for local statutory reporting. In order to prepare for the changes envisioned in 2008 and to optimise their reporting processes, our client decided to adopt the “IFRS option” for the preparation of their statutory accounts as from April 1st 2007.

By doing this the bank will not be obliged to produce Lux GAAP reports in the future.

Our Approach

PricewaterhouseCoopers assisted the bank by setting-up a multi-disciplinary team with IFRS, reporting system and XBRL standards specialists. The 5-step-approach developed to help the bank in its transition from Lux GAAP to IFRS reporting consisted of the following:

1. Preliminary analysis to understand the required key changes
2. Definition and proposition of new IFRS compliant accounting procedures
3. Documentation of the underlying processes and system changes required
4. Development of an IFRS transition roadmap (under definition) and monitoring of the underlying actions
5. Test and validation of the new IFRS reporting infrastructure

The Outcome

The new IFRS compliant reporting infrastructure enabled the bank to meet the 2008 FINREP and COREP reporting requirement deadlines set-up by the CSSF.

Considering that the new periodic reports will have to be submitted in XBRL (eXtended Business Reporting Language) format, the bank can now use its IFRS accounting base to assess the impact of adopting the XBRL format.