Global Communications GAAP Summit 2014 - PwC · 2015. 6. 3. · PwC Global Communications GAAP...

Global Communications GAAP Summit 2014

Eurostars Madrid Tower, Madrid 23-24 June

Introduction Paul Barkus

PwC

Global Communications GAAP Summit June 2014

Agenda

Tuesday 24 June

Time Session

08.00 – 08:15 Introduction

08.15 – 09:00 What’s new in accounting?

09:00 – 09:30 Telefónica market update

09:30 – 10:15 Coffee break

10.15 – 12:15 Workshop 1: Inorganic growth

12.15 – 13.30 Lunch

13.30 - 15.30 Workshop 2: Organic growth

15.30 - 16.00 Closing remarks

Today

Slide 3

PwC

Question time In which region are you based?

1) Africa

2) Americas

3) Europe

4) Middle East

5) Asia Pacific

Global Communications GAAP Summit

Slide 4

June 2014

PwC

Question time

Who were the 2014 champions of the La Liga football league?

1) Real Madrid

2) Barcelona

3) Atlético Madrid

4) Rayo Vallecano


Slide 5

June 2014

PwC

Question time

Which one of the following facts about Madrid is true?

1) It is located 150km from the sea

2) It is located on a plateau 650 metres above sea level

3) It is the highest capital city in Europe

4) It has been the capital of Spain since the 15th Century


Slide 6

June 2013

June 2014

PwC

Question time

Who will be the 2014 World Cup Champions?

1) Argentina

2) Germany

3) Belgium

4) Brazil

5) Italy

6) France

7) Netherlands


Slide 7

June 2014

What’s new in accounting? Peter Hogarth

Agenda

What’s new in 2014?

The future – The IASB’s agenda

IFRS 15, ‘Revenue from contracts with customers’

Leases

Disclosure

Regulator perspectives

Final thoughts

PwC

What’s new in 2014?

This year ...

It depends!

June 2014 Global Communications GAAP Summit

Slide 10

PwC

What’s new in 2014 as far as the IASB is concerned?


Slide 11

IFRIC21, ‘Levies’

PwC

What’s new in 2014 for EU companies?


Slide 12

IFRS 10, ‘Consolidated

financial statements

IAS 27, ‘Separate financial

statements

IFRS 12, ‘Disclosure of

interests in other entities’

IFRS 11, ‘Joint arrangements’

IAS 28, ‘Associates

and JVs’

PwC

IFRS 11 Joint Arrangements

• Greater emphasis on contractual rights and obligations:

- Right to share in net assets joint venture

- Right to share in individual assets and liabilities of the joint arrangement joint operation


Jointly controlled assets

Jointly controlled operations

Jointly controlled entities

Joint operations

Joint ventures

IAS 31 IFRS 11

Slide 13

PwC

Accounting for joint arrangements


Joint operation Recognise:

• Share of assets and liabilities

• Share of revenue and expenses

• Accounting entries booked in operator’s own financial statements

Joint venture • Equity method of accounting under IAS 28

• Proportionate consolidation prohibited

• Accounting entries differ in a venturer’s separate financial statements

Slide 14

PwC

Other amendments to standards


Standard Nature of amendment

Amendments to IFRS 10, 11, 12 Investment entities

IAS 32, ‘Financial instruments: Presentation’

Offsetting

IAS 36, ‘Impairment of assets’ Recoverable amount disclosures

IAS 39, ‘Financial instruments: Recognition and measurement’

Novation of derivatives and continuation of hedge accounting

IAS 19, ‘Employee benefits’ Employee contributions (from 7/14)

Annual improvements Various (from 7/14)

Slide 15

PwC

A useful publication!


Slide 16

The future – the IASB’s agenda

PwC

IASB’s current work plan


• Leases ?

• Insurance?

• Business combinations (PIR)?

• Disclosures

• Agenda consultation

2015+

• Revenue - IFRS

• Financial instruments – IFRS

• ‘Net debt reconciliation’ – ED

• Conceptual framework - ED

• Various amendments:

− Joint operations - IFRS

− Equity method – IFRS/ED

− Share-based payment - ED

− Depreciation/amortisation - IFRS

− Fair value measurement - ED

− Deferred tax - ED

2014

Slide 18

PwC

The future agenda

• IASB consulted on its agenda in late 2011, and will do so again next year

• Key points last time were:

- Complete conceptual framework

- Develop a presentation and disclosure framework

- Focus on post-implementation reviews and responding to implementation issues

- Limit the number of new standards

• IFRS/US GAAP convergence – not an objective


Slide 19

PwC

Noises from the US?

“Considering whether to further incorporate IFRS into the US financial reporting system has also been a priority for me.”

“I hope to be able to say more in the relatively near future.”

Mary Jo White, Chair of SEC 20 May 2014 “This parrot is no more. It’s not simply resting or momentarily stunned. The prospect of full scale IFRS in our lifetimes has ceased to be. It is bereft of life. It rests in peace.” Christopher Cox, former Chair of SEC 5 June 2014


Slide 20

IFRS 15, ‘Revenue from contracts with customers’

PwC

Where are we now?

• Standard issued 28 May

• Effective from 1 January 2017 with early adoption permitted

• EU endorsement?

• Joint Transition Resource Group


Slide 22

PwC

Revenue recognition model

IAS 18 /11

Separate models for:

• Construction contracts • Goods • Services

Focus on risk and rewards

Limited guidance (77 pages, inc. IFRICs):

• Multiple element arrangements

• Variable consideration • Licences

IFRS 15

Single model for performance obligations:

• Satisfied over time • Satisfied at a point in time

Focus on control

More guidance (169 pages):

Separating elements, allocating the transaction price, variable

consideration, licences, options, repurchase arrangements

and so on…. June 2014 Global Communications GAAP Summit

Slide 23

PwC


Step 1 - Identify the contract with the customer

Step 2 - Identify the performance obligations in the contract

Step 3 - Determine the transaction price

Step 4 - Allocate the transaction price

Step 5 - Recognise revenue when (or as) a performance obligation is satisfied

Core principle Revenue recognised to depict transfer of goods or services


Slide 24

PwC


An simple example….

• Contract: Entity sells products X, Y and Z to the customer

• Transaction price: C12m, 50% upfront, 50% when all three delivered

• Stand alone price: Each sold separately for C5m each

• Nature of products:

- Product X: Good, control transferred at a point in time

- Product Y: Good, control transferred at a point in time

- Service Z: Service transferred over one year


Slide 25

PwC

Revenue recognition model – a simple example

Step 1 - Identify the contract with the customer

Step 2 - Identify the performance obligations in the contract

Step 3 - Determine the transaction price

Step 4 - Allocate the transaction price

Step 5 - Recognise revenue when (or as) a performance obligation is satisfied

Step 1 – Signed contract exists

Step 2 – Customer can benefit from X, Y and Z separately as they are sold separately - three performance obligations

Step 3 – The transaction price is fixed at C12m.

Step 4 – 20% discount is allocated evenly across X, Y, Z

Total stand alone price = C15m

Total transaction price = C12m

Total discount = 20%

Discount * stand alone = C4m

Step 5 – C4m each = recognise when control of X / Y transfers

C4m = recognise over the period that Z is provided

Slide 26


PwC

Other hot topics….

Modifications & options

Disclosures

Contract costs

• Determining whether customer has any ‘material right’ to acquire more

• When to use cumulative catch up or ‘new contract’ / prospective approach

• Lots more of them…

• Cost to obtain a contract must be capitalised if recoverable unless contract less than one year

• Guidance on costs to fulfil


More on these subjects in the organic growth workshop

Transition • Data and systems issues to address. And will

you take advantage of the ‘practical expedient’?

Slide 27

PwC

Where have we ended up


November 2011 Exposure Draft

• Distinct devices (e.g. mobile phone) are a separate performance obligation

• Collectability is not a recognition criterion

• Bad debt is a reduction to revenue

• Stand-alone selling price (SSP) must be estimated if a market for the item does not exist

• Contract modification can result in a cumulative catch-up

• Costs to acquire customer contracts to be capitalised

• Revenue should be discounted if the contract includes a significant financing component

Last year

7

IFRS 15

7

7

Slide 28

Leases

PwC

What’s going on with leases?


Exposure

Draft issued

Comment

period ended

Re-deliberations

begin

Re-exposure

Aug 2010

Dec 2010

May 2013

Jan 2011

Sep 2013

Comment

period ended

• Redeliberations began January 2014

• Hope to conclude this year

• But …

Slide 30

?

PwC

Lessee accounting

IASB model Balance Sheet Income Statement

Finance (Type A)

Right of use (ROU) asset

Lease liability

Amortisation expense Interest expense

FASB model – lease classification to be consistent with existing IAS 17

FASB model Balance Sheet Income Statement

Finance (Type A)

Right of use (ROU) asset

Lease liability

Amortisation expense Interest expense

Operating (Type B)

Lease expense

IASB model – a single approach where all leases would be accounted for as Type A leases


Slide 31

PwC

Lessor accounting

Balance Sheet Income Statement

Net investment in the lease (Type A)

Derecognise the underlying asset and record: Net investment in the lease

Interest income on the net investment Any selling profit or loss on the underlying asset

Straight line (Type B) Underlying asset remains on balance sheet

Lease income – straight line over term of lease

Classification as Type A or Type B is based on the concept underlying IAS 17


Slide 32

In other words, no change!

PwC

Small ticket leases

• Leases guidance to be applied at a portfolio level

Support from the IASB, but FASB will consider only a reference in the

basis for conclusions .

• Explicit exemption for leases of small assets

Support from the IASB – wording still to be determined. The FASB did

not support, but asked staff to do more research on the magnitude of

leases of small assets.


Slide 33

Disclosure

PwC

Annual reports are getting longer

Slide 35


PwC

But how much is ‘enough’?

Give us more….

Less is more….

WHICH IS IT?

Slide 36


PwC

IASB’s disclosure initiative Hans Hoogervorst’s 10-point plan Short term projects

Medium term ‘research’ projects

• Proposed amendments to IAS 1

• Materiality

• Principles of disclosure - replacing IAS 1, IAS 7 and IAS 8?

• General disclosure review - review of disclosures in existing standards

• Current and non-current liabilities classification

• Reconciliation of liabilities from financing activities

ED in Q3 2014

Research project in 2014

Slide 37

ED in Q4 2014


Regulator perspectives

PwC

Where are reporting regulators focused?

• Revenue

• Segments

• Business combinations and impairment

• Fair value measurement and disclosure

• Disclosure of significant accounting policies, judgements and estimates

• Measurement and disclosure of financial instruments and related risks

• Narrative, including non-GAAP measures

• Income taxes


Slide 39

Final thoughts

PwC

Final thoughts

Many small changes to come

Revenue standard is finally here!

Leases some way off

Focus on presentation and clarity


Slide 41

Workshops

PwC

Workshops

• Your group number is on the attendance lists on your table.

• All delegates will cover the same materials in their workshops.

• The groups will be in the following rooms:

› Group 1 – Barcelona I+II (plenary room)

› Group 2 – Sala Seúl I+II – Level 28

› Group 3 – Sala Sydney I+II – Level 6

› Group 4 – Sala Pekín I+II – Level 6

• Lunch will be served at 12:15 in Barcelona IV (this is near the plenary room)

Global Communications GAAP Summit June 2014

Slide 43

PwC

Coffee break


Slide 44

June 2014

Closing remarks Paul Barkus

PwC

From yesterday Navigating change and putting it into practice - how do you tell your story? How relevant was this session?

1) Very relevant

2) Relevant

3) Somewhat relevant

4) Not at all relevant


Slide 46

June 2014

PwC

What’s new in accounting


Slide 47

June 2014

How relevant was this session?

1) Very relevant

2) Relevant



PwC

Telefónica Market Update


1) Very relevant

2) Relevant




Slide 48

June 2014

PwC

Workshop 1: Inorganic growth


1) Very relevant

2) Relevant




Slide 49

June 2014

PwC

Workshop 2: Organic growth


1) Very relevant

2) Relevant




Slide 50

June 2014

PwC

Overall, how do you rate the 2014 Global Communications GAAP Summit?

1) Very useful

2) Useful

3) Okay

4) Poor


Slide 51

June 2014

PwC

If we hold a similar event next year are you or someone from your company likely to attend?

1) Yes

2) No


Slide 52

June 2014

PwC

Where would you like the next Global Communications GAAP Summit to be held?


Slide 53

June 2014

1) London

2) Paris

3) Munich

4) Berlin

5) Prague

6) Brussels

7) Amsterdam

8) Toronto

9) Athens

10) Other

Thank you and have a safe journey

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Global Communications GAAP Summit 2014 - PwC · 2015. 6. 3. · PwC Global Communications GAAP...

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