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SNB Abandon
of Euro Cap 
Actions for
Finance Directors
Expert Webcast
Friday, 23 January 2015
Welcome
Lukas Marty
Head of Audit
2© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of i...
Accounting and Disclosure
Reto Eberle
Department of Professional Practice
4© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of i...
5© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of i...
6© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of i...
7© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of i...
8© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of i...
Business Plan Modelling
and Cost of Capital
Johannes Post
Head of Valuation and Financial Modeling
10© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
11© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
12© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
13© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
14© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
15© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
Specific Implications for
Financial Institutes
Philipp Rickert
Head of Financial Services
17© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
18© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
Business Improvements
and Risk Management
Anne van Heerden
Head of Advisory
20© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
21© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
Tax Implications
Peter Uebelhart
Head of Tax
23© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
24© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
25© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of ...
© 2015 KPMG AG/SA, a Swiss corporation, is a
subsidiary of KPMG Holding AG/SA, which is a
member of the KPMG network of in...
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SNB Abandon of Euro Cap - Actions for Finance Directors

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SNB Abandon of Euro Cap - Actions for Finance Directors

  1. 1. SNB Abandon of Euro Cap  Actions for Finance Directors Expert Webcast Friday, 23 January 2015
  2. 2. Welcome Lukas Marty Head of Audit
  3. 3. 2© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Agenda 1. Accounting and Disclosure 2. Business Plan Modelling and Cost of Capital 3. Specific Implications for Financial Institutes 4. Business Improvements and Risk Management 5. Tax Implications
  4. 4. Accounting and Disclosure Reto Eberle Department of Professional Practice
  5. 5. 4© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Accounting and Disclosure Situation: You as the Finance Director have been contacted by the head of the Audit Committee. She would like to know what impact the recent SNB decision will have on the 2014 financials. Question: What would be your answer by considering impacts on the balance sheet / the income statement as well as on disclosures? SNB decision cease support EUR/CHF 15 Jan 2015 28 Feb 2015 31 March 2015 EUR ex/r ~1.20 ~1.00 Press release + media conference BoD approves annual report + dividend proposal Annual General Meeting Reporting date Reporting period 2015 Q1 Reporting 31 Jan 201531 Dec 2014 Reporting period 2014
  6. 6. 5© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Answer: Impact on balance sheet and income statement 2014 ■ Bankruptcy of debtor already recorded in the balance sheet at December 31, 2014: yes ■ Decrease in the EUR/CHF exchange rate as of January 15, 2015: no SNB decision cease support EUR/CHF 15 Jan 2015 28 Feb 2015 31 March 2015 EUR ex/r ~1.20 ~1.00 Press release + media conference BoD approves annual report + dividend proposal Annual General Meeting Reporting date Reporting period 2015 Q1 Reporting 31 Jan 201531 Dec 2014 Reporting period 2014 Does the event confirm a condition at the reporting date? Event after the reporting period – Impact on BS and IS
  7. 7. 6© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Answer: Impact on disclosures ■ Event needs to be disclosed, if relevant to users ■ Nature and financial effect to be disclosed. Extent of disclosure depends on the applicable accounting framework (IFRS, Swiss GAAP FER, Swiss Code of Obligation) ■ Disclosure of uncertainties regarding going concern ■ User relevance SNB decision cease support EUR/CHF 15 Jan 2015 28 Feb 2015 31 March 2015 EUR ex/r ~1.20 ~1.00 Press release + media conference BoD approves annual report + dividend proposal Annual General Meeting Reporting date Reporting period 2015 Q1 Reporting 31 Jan 201531 Dec 2014 Reporting period 2014 Event after the reporting period – Impact on disclosures
  8. 8. 7© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Dividend Question: Will the SNB decision have an impact on the company’s ability to distribute dividends? Answer: ■ Maybe. Consider impairments, foreign exchange and operating losses in January and February 2015 (in this example) ■ Take into consideration financial situation as of end of February 2015 (in this example) SNB decision cease support EUR/CHF 15 Jan 2015 28 Feb 2015 31 March 2015 EUR ex/r ~1.20 ~1.00 Press release + media conference BoD approves annual report + dividend proposal Annual General Meeting Reporting date Reporting period 2015 Q1 Reporting 31 Jan 201531 Dec 2014 Reporting period 2014
  9. 9. 8© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Impairment Question: The head of the audit committee wants to know whether the impairment tests done in 2014 need to be updated? Answer: ■ Impairment test for 2014: no ■ SNB decision may be a triggering event for performance of a test in 2015. In this case, consider extended disclosures in 2014 annual report SNB decision cease support EUR/CHF 15 Jan 2015 28 Feb 2015 31 March 2015 EUR ex/r ~1.20 ~1.00 Press release + media conference BoD approves annual report + dividend proposal Annual General Meeting Reporting date Reporting period 2015 Q1 Reporting 31 Jan 201531 Dec 2014 Reporting period 2014
  10. 10. Business Plan Modelling and Cost of Capital Johannes Post Head of Valuation and Financial Modeling
  11. 11. 10© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Business plan modelling and cost of capital Purposes of financial planning ■ Impairment testing ■ Annual budgets ■ Mid-term planning ■ Short-term liquidity planning Use of forward looking financials ■ Disclosures to financial reporting 2014 ■ Ad-hoc media questions ■ Guidance for the IR department ■ Next earnings call ■ Tax planning and transfer pricing ■ Debt financing and related coverage ratios
  12. 12. 11© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Level of FX exposure Different business models ■ Natural hedges ■ High value creation in Switzerland and – sales in CHF – exports sales in foreign currencies – domestic sales to a non-Swiss customer base ■ Banking and insurance What is the mix of your business model? It’s not only about the Euro! Swisscom Swatch Group Jungfraubahn SWX ID Finance Index Holcim 75 80 85 90 95 100 105 110 Selected Swiss shares (indexed) Source: SIX Swiss Exchange (2015), KPMG analysis EUR/CHF USD/CHF RUB/CHF 75 80 85 90 95 100 105 110 Selected exchange rates and the CHF (indexed) Source: OANDA Corporation (2015), KPMG analysis
  13. 13. 12© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Application of FX rates in the business plan Technical adjustments of the FX rates in the business model ■ Uncertainty about the FX rates in terms of magnitude and timing ■ Spot rates or forward looking rates ■ Simulations, scenarios and sensitivities help to cope with this uncertainty What is the appropriate granularity of my model? Is my model integrated and flexible to assess scenarios and sensitivities? What is the right balance of accuracy and practicality?
  14. 14. 13© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Assessment of the business impact Economic impact of the unexpected appreciation of the FX ■ Reduction of sales volume ■ Adjustments of cost basis – Positive if importing goods and services – Personnel costs – timing and magnitude? – Suppliers pass on their price and margin effects? – Related costs with new hedging strategies ■ Revaluation of financial investments ■ Investments in CAPEX, Working Capital or M&A ■ Interest expenses
  15. 15. 14© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Verification of assumptions Sound verification of assumptions may include: ■ Historical trends of the own business ■ Sector expectations regarding growth and profitability ■ Benchmark data of peer companies ■ Macroeconomic trends ■ Analyst reports and capital market consensus How reliable are those data in the current environment?  Under IFRS the application of the concepts Value in Use or Fair Value less Cost of Disposal should be reconsidered  Market capitalization of publicly listed companies might currently deviate substantially from a fundamental value
  16. 16. 15© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Interests, risks and cost of capital Appropriate cost of capital reflecting the risk and the maturity of the underlying cash flows Swiss gov. bonds versus equity risk premium (ERP) Note: ---------- represent 3 year moving averages, …….. annual averages Source: Pictet Group (2015),Swiss National Bank (2015), KPMG analysis ■ Decreasing bond yields are offset by increasing Equity Risk Premiums ■ Additional economic risks can be factored into the cost of capital or in probability weighted cash flows – the latter approach offers a higher transparency Has the return expectation of the investor changed? Has the risk of the expected cash flows changed? LIBOR (3 Months, CHF) Yield of Swiss Government Bonds (30Y Maturity, CHF) -1.0% - 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% CHF-LIBOR versus Swiss government bonds Source: Swiss National Bank (2015), KPMG analysis Swiss Gov. Bond Yield (30Y, CHF, nominal values) ERP 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%
  17. 17. Specific Implications for Financial Institutes Philipp Rickert Head of Financial Services
  18. 18. 17© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Implications for Financial Institutions - immediately How does the unexpected increase in credit risk impact your financials? collateral shortfalls, highly leveraged derivatives …  Additional disclosures in subsequent events  Considerations in risk management section …FXCM, the largest U.S. retail foreign-exchange broker, got a $300 million cash infusion from Leucadia National Corp. after warning Thursday that client losses threatened its compliance with capital rules…. 17 January 2015
  19. 19. 18© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. … Having looked over their business model, which involved setting up shop with only off-the-shelf online trading software and a slender amount of starting capital, the consultant quizzed the entrepreneurs about their risk management... 21 January 2015 20 January 2015 Implications for Financial Institutions – mid term
  20. 20. Business Improvements and Risk Management Anne van Heerden Head of Advisory
  21. 21. 20© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. The strong Swiss Franc increases buying power of Swiss companies. Procurement is a key lever to take advantage of the situation. ■ Review all open contracts, purchase orders and existing suppliers that are affected. ■ Identify immediate actions such letters to suppliers, etc. ■ Identify opportunities to source from suppliers in weaker currencies (also from Swiss suppliers) ■ Analyze cost structures of bought-in materials and services: Which parts of the costs are influenced by the Swiss Franc? ■ Renegotiate with relevant suppliers ■ Introduce a currency index with key suppliers to constantly adapt prices to fluctuating currencies. Include the index in contracts. ■ Consolidate supplier contracts within the group. Source from existing group suppliers from other countries. ■ Communicate with your clients and be transparent on the impacts of the Swiss Franc 20% Procurement spend New spend Savings potential Savings from increased buying power
  22. 22. 21© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Immediate FX Risk Management Measures 2.Gain Transparency 4.Developnew HedgingStrategy 5.MonitorRisk 3.ReviewexistingHedgingStrategy Please insert your text 6.Setup RiskReportingCockpit Are you prepared for the new CHF volatility and next FX meltdown? 1.Identify Risk
  23. 23. Tax Implications Peter Uebelhart Head of Tax
  24. 24. 23© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Tax implications Year-end considerations ■ Depreciation / Value adjustment: Relevant period ■ Implications of losses – Revaluation of Investments: Claw-back / Set-off against profits – Reduction of distributable reserves / Upstream loans Considerations for the current year ■ Internal loans, services, supplies ■ P/L implications of FX movement in the current year ■ Allocation of currency risk, interest rates ■ Relocation of business activities
  25. 25. 24© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Q&A
  26. 26. 25© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks. Contacts Lukas Marty Partner Head of Audit +41 58 249 36 49 lmarty@kpmg.com Philipp Rickert Partner Head of Financial Services +41 58 249 42 13 prickert@kpmg.com Anne van Heerden Partner Head of Advisory +41 58 249 28 61 annevanheerden @kpmg.com Peter Uebelhart Partner Head of Tax +41 58 249 42 24 puebelhart@kpmg.com KPMG AG Badenerstrasse 172 P.O. Box 1872 CH-8026 Zurich www.kpmg.ch Reto Eberle Partner Department of Professional Practice +41 58 249 42 43 reberle@kpmg.com Johannes Post Partner Head of Valuation & Financial Modelling +41 58 249 35 92 jpost@kpmg.com
  27. 27. © 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

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