UK: IFRS For Financial Instruments: Technical Accountants And Financial Instrument Experts Providing IFRS Advisory Services

Last Updated: 5 June 2007
Article by Deloitte's Treasury Capital Markets Group

Most Read Contributor in UK, August 2017

The rapidly shifting sands of the financial reporting landscape has led to a huge growth in demand for client facing, expert IFRS advice and project services. This is particularly true in the complex area of financial instrument accounting. Deloitte IFRS specialists are unique in combining deep technical accounting expertise, quantitative skills and project management experience.

Step change

With the adoption of IFRS by listed companies in the EU as from January 2005 and the adoption of IFRS 7 by entities in 2007, the mainstay of our current service offering is GAAP conversion and implementation work. Through our involvement in dozens of projects, we have refined our approach to conversion for small and mid-sized companies to a streamlined, step-by-step conversion framework. Our service offering is flexible but typically includes:

  • Conversion projects

    Many companies recognise that the once-off conversion can be effectively addressed by outsourcing much of the work to experienced experts rather than building up resources internally. We can run the whole conversion project or fill resource gaps. We always provide training to client staff to ensure a successful transition to business as usual.

  • Gap analysis

    We have been engaged to assess the impact of the new accounting regime in companies and identify the necessary changes to accounting policies. A gap analysis is the starting point in GAAP conversion projects for companies of all sizes.

  • Embedding IFRS

    Subsequent to first time adoption, the emphasis shifts to attestation, controls and systems.

  • Benchmarking

    Many clients find our insight into emerging market practice to be very valuable. We can benchmark accounting policies and disclosures against our view of best practices as well as our experience of the approach taken by peers.

  • Training

    We have run training sessions and workshops for groups of all sizes as well as one-on-one training for key individuals. Technical update sessions are in high demand as a result of the rapid changes in the accounting standards and interpretations.

  • Effective interest rate

    Modelling the effective interest rate of debt instruments under IFRS can be complex and requires both technical accounting and quantitative skills. We have helped our clients develop intuitive and simple approaches to EIR calculation.

  • Embedded derivatives

    We have helped a number of clients to identify and deal with embedded derivatives. We believe that training and appropriate internal control procedures are critical in this area.

  • Hedge accounting

    Hedge accounting is the most complex aspect of financial instrument accounting and many companies seek expert advice. We help clients to:

    • Understand and interpret the hedge accounting requirements.

    • Keep abreast of changing standards and interpretations.

    • Select an appropriate hedge accounting strategy.

    • Perform scenario analysis and stress testing to inform decisions.

    • Design and embed hedge effectiveness testing methodology.

    • Understand the accounting entries that result from hedge accounting.

    • Perform forensic investigation of identified hedge ineffectiveness.

  • Impairment

    Modelling the impairment of financial instruments (provision for bad debt) under IFRS and new Basel Capital Accord is complex. We have helped a number of clients.

  • IFRS 7

    The arrival of IFRS 7 in January 2007 will be the most significant change in financial instrument accounting since the introduction of IAS 39. The new standard will greatly increase the detail of disclosure surrounding financial instruments as well as requiring complex new quantitative disclosures.

Deloitte experience

Our IFRS specialists work very closely with the firm’s national technical accounting departments to stay up to speed with the latest thinking and to share with them insights into the practical application issues that we encounter. Some members of the team come from a technical accounting background – others have quantitative skills and come from treasury, audit or banking. All have significant experience in dealing with financial instrument accounting challenges.

The combined experience of our IAS 39 technical accountants, gained through years of applying the standard around the world, is unrivalled. With the move towards fair value accounting and the increasing emphasis on quantitative measures in financial reporting, we have focussed on developing strong credentials in the quantitative area.

The Deloitte team are experts in implementing and embedding IFRS. We have refined our approach to IFRS conversion through our involvement in dozens of implementation projects of all sizes. Once over the hurdle of first time adoption, we have helped many clients to simplify, strengthen and embed their IFRS accounting processes.

Our financial instrument specialists are often called on to provide expert advice in transactions and due diligence as the accounting and financial risk considerations become increasingly important. In addition, entities seeking assurance over their financial instrument policies, models and controls regularly engage us to provide assurance and benchmarking services.

We service both audit and non-audit clients, financial services companies and corporates and have advised companies ranging from the stock exchange listed companies to small private companies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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