Dear,
Last February I commented in a blog, that IFRS 15 presented important implications for the Banks Information Systems.
https://www.linkedin.com/pulse/fulfilling-ifrs-9-ifrs-15-sub-ledger-requirements-sap-ferran-frances?trk=mp-reader-card
As a consequence, some colleagues and readers of this blog have come back to me privately reminding me that IFRS 15 does not apply for contracts with leases, that are subject to IFRS 9.
I always appreciate very much this feed-back, I'm sure I make many mistakes that I can fix with your help, and on the other hand; there's no better way of learning, than opening a discussion with other colleagues.
By the way, this is the basis of the Hegelian dialectic “Thesis, Antithesis, Synthesis”
In this particular case, it's true that IFRS 15 does not apply for contracts with leases, but this doesn't mean that Bank's information systems are not impacted by the IFRS 15 regulation, which should be implemented by January 1, 2018.
The reality is that Bank's have always offered non-lending services, Foreign Exchange Services, Locker Services, Debit Cards, Local and International Payment Services, and these services conditions must be specified on contracts, that according to IFRS 15 must be valuated individually.
And keep in mind, that as consequence of the current, historically low interest rates, revenues generated by not-lending services are more important in the operating results of banks, making them more relevant in the analysis of the banks' results.
If you're interested in this topic, I recommend you to read the working paper of the Bank for International Settlements “The influence of monetary policy on bank profitability”, that you can find in the following link.
http://www.bis.org/publ/work514.pdf
Fortunately, SAP Bank Analyzer capabilities, integrated with the cost and revenue recognition functionalities of other SAP Components (Cost Center Accounting, Activity Based Costing, Controlling Orders, CRM, Profit and Cost Distribution tools of Business Planning and Consolidation, etc), offer powerful functionalities for the tracking and analysis of non-lending profits and costs.
The main competitive advantage of the SAP Business suite is the seamless integration of business process incorporating lending and non-lending business processes.
In some cases, separating the lending and non-lending components of a contract can be very challenging for the Information System of a Bank. For instance, one bank can offer a locker to a client who also has a mortgage loan, and both services payments are cleared in a current account with an overdraft facility.
Integrating the lending and non-lending contracts in Bank Analyzer will have many advantages.
Bank Analyzer supports the tracking of all the revenues and costs amounts, generated by the lending and non-lending services, posted with Business Transactions and Items.
These amounts will be accumulated in the correspondent Posting Key Figures by the multi-accounting logic of the Process and Methods Layer.
Finally, the Processing Categories of the Posting Key Figures will provide us the technical classification of the nature of the Profits and Costs, under the interpretation of the implemented Accounting Principles.
On the other hand, tracking accurately the costs associated to some of the services can be very challenging. In Bank Analyzer we can easily post the Standard Cost associated to a service, but the key point is determining an accurate and valid amount of the Standard Cost.
With decades of successful implementations in manufacturing and services companies, SAP ECC, CRM and Business Planning components have proved to be very useful for determining the actual and planned costs associated to non-lending services. This know-how can be leveraged in the determination of the costs associated to non-lending services of banks.
Finally, the open architecture of the Financial Database will provide the integration layer of the above calculations. Once they've been incorporated as accounting entries of the Results Data Layer, they will be transferred to the General Ledger with the standard capabilities of the General Ledger Connector, fulfilling the reconciliation requirements of IFRS 15.
Join my SAP Banking Group at: http://www.linkedin.com/e/gis/92860
Looking forward to read your opinions.
K. Regards,
Ferran.
Last February I commented in a blog, that IFRS 15 presented important implications for the Banks Information Systems.
https://www.linkedin.com/pulse/fulfilling-ifrs-9-ifrs-15-sub-ledger-requirements-sap-ferran-frances?trk=mp-reader-card
As a consequence, some colleagues and readers of this blog have come back to me privately reminding me that IFRS 15 does not apply for contracts with leases, that are subject to IFRS 9.
I always appreciate very much this feed-back, I'm sure I make many mistakes that I can fix with your help, and on the other hand; there's no better way of learning, than opening a discussion with other colleagues.
By the way, this is the basis of the Hegelian dialectic “Thesis, Antithesis, Synthesis”
In this particular case, it's true that IFRS 15 does not apply for contracts with leases, but this doesn't mean that Bank's information systems are not impacted by the IFRS 15 regulation, which should be implemented by January 1, 2018.
The reality is that Bank's have always offered non-lending services, Foreign Exchange Services, Locker Services, Debit Cards, Local and International Payment Services, and these services conditions must be specified on contracts, that according to IFRS 15 must be valuated individually.
And keep in mind, that as consequence of the current, historically low interest rates, revenues generated by not-lending services are more important in the operating results of banks, making them more relevant in the analysis of the banks' results.
If you're interested in this topic, I recommend you to read the working paper of the Bank for International Settlements “The influence of monetary policy on bank profitability”, that you can find in the following link.
http://www.bis.org/publ/work514.pdf
Fortunately, SAP Bank Analyzer capabilities, integrated with the cost and revenue recognition functionalities of other SAP Components (Cost Center Accounting, Activity Based Costing, Controlling Orders, CRM, Profit and Cost Distribution tools of Business Planning and Consolidation, etc), offer powerful functionalities for the tracking and analysis of non-lending profits and costs.
The main competitive advantage of the SAP Business suite is the seamless integration of business process incorporating lending and non-lending business processes.
In some cases, separating the lending and non-lending components of a contract can be very challenging for the Information System of a Bank. For instance, one bank can offer a locker to a client who also has a mortgage loan, and both services payments are cleared in a current account with an overdraft facility.
Integrating the lending and non-lending contracts in Bank Analyzer will have many advantages.
Bank Analyzer supports the tracking of all the revenues and costs amounts, generated by the lending and non-lending services, posted with Business Transactions and Items.
These amounts will be accumulated in the correspondent Posting Key Figures by the multi-accounting logic of the Process and Methods Layer.
Finally, the Processing Categories of the Posting Key Figures will provide us the technical classification of the nature of the Profits and Costs, under the interpretation of the implemented Accounting Principles.
On the other hand, tracking accurately the costs associated to some of the services can be very challenging. In Bank Analyzer we can easily post the Standard Cost associated to a service, but the key point is determining an accurate and valid amount of the Standard Cost.
With decades of successful implementations in manufacturing and services companies, SAP ECC, CRM and Business Planning components have proved to be very useful for determining the actual and planned costs associated to non-lending services. This know-how can be leveraged in the determination of the costs associated to non-lending services of banks.
Finally, the open architecture of the Financial Database will provide the integration layer of the above calculations. Once they've been incorporated as accounting entries of the Results Data Layer, they will be transferred to the General Ledger with the standard capabilities of the General Ledger Connector, fulfilling the reconciliation requirements of IFRS 15.
Join my SAP Banking Group at: http://www.linkedin.com/e/gis/92860
Looking forward to read your opinions.
K. Regards,
Ferran.
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