Dear,
One of the main concerns of the banks' IT executives today is the implementation of the International Accounting Standard IFRS 9 Standard, “Financial Instruments”
Impairment Calculations, Fair Value and Hedge Accounting adjustments represent a challenge for current Banking Information Systems and an opportunity to replace some of their components with modern technologies, like the Accounting for Financial Instruments module of SAP Bank Analyzer.
SAP Bank Analyzer covers the three main groups of calculation requirements of the IFRS-9 standard.
- Fair Value calculation of Over the Counter, Securities and Listed Derivatives contracts.- Financial Instruments and Financial Transactions. (Mark-to-Market, Cash Flow Discounting, Forward Transactions, Options, Futures and Structured Products).
- Impairment Adjustments.- Calculation of the Risk Provisions, write-down, write-off and the unwinding with full integration with Accounting.
- Hedge Accounting Adjustments for Fair Value, Cash-Flow and Portfolio Fair Value Hedging.
On the other hand, there's a common difficulty on understanding the implications of the IFRS requirements; many clients see IFRS 9 just as a reporting requirement that must be fulfilled before January 2018.
But limiting an IFRS compliance program to the IFRS 9 requirements is an incomplete vision of the implications of the new IFRS Regulatory framework. IFRS requirements must be seen as a transformation process, and not as unconnected pieces of regulation.
An interesting example of the above is the Accounting Standard IFRS 15 “Revenue from Contracts with Customers”.
IFRS 15 puts the focus in the Revenue Recognition of the customer contracts individually. While this standard has not been specifically designed for banks, underestimating the impact of the “Revenue from Contracts with Customers” in the bank's architecture would be a serious mistake.
Banks have to disclosue the revenues generated when they charge their customers for the services they're receiving; services like securities broking, wire transfers, accounts maintenance fees, etc. Accounting adjustments must be allocated to every customer contract, challenging portfolio-based adjustments, which are very common in the banking industry.
Bank Analyzer AFI (subledger scenario) provides a complete Financial Statement (Profit & Loss, Balance Sheet and Off-balance positions) per customer contract, and fully reconcilable with the General Ledger. This is the main requirement of IFRS 15.
By implementing the AFI module of SAP Bank Analyzer, we're not only fulfilling the accounting requirements of IFRS 9, but also preparing our system for the future requirements of IFRS 15.
We also must remember that Inefficient integration between the Operational and Analytical Systems limits the capacity of providing reporting Profit and Loss analysis functionalities on contract level.
Current Banking Information Systems, supported by Legacy systems suffer from inefficient integration between the Operational and Accounting Systems. Even some banks which have replaced some of their Information Systems in the last years have failed in improving the integration between their Operational and Analytical-Accounting Information Systems.
Typically, Operational and Analytical banking Systems come from different vendors with heterogeneous data-models, in which the incompatibilities between the data-models must be overcome with “reasonable” hypothesis developed as conversion routines in the Extraction and Transformation Layer.
In this scenario contract-base valuations and adjustments are usually replaced by portfolio-based adjustments which contradicts the requirements of IFRS 15.
SAP Banking has provided a seamless integration between the Operational and Analytical Banking components of Banking Services by using Integration Operational Analytics technology, this is the base for transferring all the necessary information to the Accounting System, according to the IFRS requirements.
As a conclusion, Financial institutions need to look at the IFRS requirements as a process; while IFRS 9 are increasing the effort on determining the value of the Financial Instruments and the recognitions of the related revenue, IFRS 15 puts the focus in reporting determining the revenue recognition contract by contract.
Join the SAP Banking Group at: http://www.linkedin.com/e/gis/92860
Looking forward to read your opinions.
K. Regards,
Ferran.
One of the main concerns of the banks' IT executives today is the implementation of the International Accounting Standard IFRS 9 Standard, “Financial Instruments”
Impairment Calculations, Fair Value and Hedge Accounting adjustments represent a challenge for current Banking Information Systems and an opportunity to replace some of their components with modern technologies, like the Accounting for Financial Instruments module of SAP Bank Analyzer.
SAP Bank Analyzer covers the three main groups of calculation requirements of the IFRS-9 standard.
- Fair Value calculation of Over the Counter, Securities and Listed Derivatives contracts.- Financial Instruments and Financial Transactions. (Mark-to-Market, Cash Flow Discounting, Forward Transactions, Options, Futures and Structured Products).
- Impairment Adjustments.- Calculation of the Risk Provisions, write-down, write-off and the unwinding with full integration with Accounting.
- Hedge Accounting Adjustments for Fair Value, Cash-Flow and Portfolio Fair Value Hedging.
On the other hand, there's a common difficulty on understanding the implications of the IFRS requirements; many clients see IFRS 9 just as a reporting requirement that must be fulfilled before January 2018.
But limiting an IFRS compliance program to the IFRS 9 requirements is an incomplete vision of the implications of the new IFRS Regulatory framework. IFRS requirements must be seen as a transformation process, and not as unconnected pieces of regulation.
An interesting example of the above is the Accounting Standard IFRS 15 “Revenue from Contracts with Customers”.
IFRS 15 puts the focus in the Revenue Recognition of the customer contracts individually. While this standard has not been specifically designed for banks, underestimating the impact of the “Revenue from Contracts with Customers” in the bank's architecture would be a serious mistake.
Banks have to disclosue the revenues generated when they charge their customers for the services they're receiving; services like securities broking, wire transfers, accounts maintenance fees, etc. Accounting adjustments must be allocated to every customer contract, challenging portfolio-based adjustments, which are very common in the banking industry.
Bank Analyzer AFI (subledger scenario) provides a complete Financial Statement (Profit & Loss, Balance Sheet and Off-balance positions) per customer contract, and fully reconcilable with the General Ledger. This is the main requirement of IFRS 15.
By implementing the AFI module of SAP Bank Analyzer, we're not only fulfilling the accounting requirements of IFRS 9, but also preparing our system for the future requirements of IFRS 15.
We also must remember that Inefficient integration between the Operational and Analytical Systems limits the capacity of providing reporting Profit and Loss analysis functionalities on contract level.
Current Banking Information Systems, supported by Legacy systems suffer from inefficient integration between the Operational and Accounting Systems. Even some banks which have replaced some of their Information Systems in the last years have failed in improving the integration between their Operational and Analytical-Accounting Information Systems.
Typically, Operational and Analytical banking Systems come from different vendors with heterogeneous data-models, in which the incompatibilities between the data-models must be overcome with “reasonable” hypothesis developed as conversion routines in the Extraction and Transformation Layer.
In this scenario contract-base valuations and adjustments are usually replaced by portfolio-based adjustments which contradicts the requirements of IFRS 15.
SAP Banking has provided a seamless integration between the Operational and Analytical Banking components of Banking Services by using Integration Operational Analytics technology, this is the base for transferring all the necessary information to the Accounting System, according to the IFRS requirements.
As a conclusion, Financial institutions need to look at the IFRS requirements as a process; while IFRS 9 are increasing the effort on determining the value of the Financial Instruments and the recognitions of the related revenue, IFRS 15 puts the focus in reporting determining the revenue recognition contract by contract.
Join the SAP Banking Group at: http://www.linkedin.com/e/gis/92860
Looking forward to read your opinions.
K. Regards,
Ferran.
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