FS Instruments Accounting

The chief financial officer and the accounting system face complex challenges. On the one hand, business activities must be reflected in the accounts in such a way that they comply with the provisions of the respective accounting standards. In addition, there is the challenge of reflecting the economic results of the business as far as possible in external accounting and reporting.

Differences between the perspectives must be made transparent with regard to the effects on valuation and results so that they can be managed and explained to external stakeholders. Internationally active business entities in particular have to consider several accounting standards (HGB, IFRS, and US GAAP) at the same time. In addition, the CFO is confronted with ever-increasing information requirements from regulators, shareholders and rating agencies.

The complexity is particularly high in the area of financial instruments and derivatives. In addition to accounting and valuation, this also concerns the appropriate presentation of hedging relationships. The new IFRS 9 regulations, which include a comprehensive revision of the regulations on classification, impairment and hedge accounting, are increasingly bringing these topics back onto the CFO’s agenda.

However, it is by no means just a matter of interpreting accounting standards. Rather, it is about understanding the accounting process as part of the value chain and part of an active management process. Financial institutions and industrial companies must align methods and the process chain so efficiently that, for example, the timely introduction and mapping of new products or the forward-looking management of accounting effects becomes possible. Only then can the accounting value proposition, its "added value" for the business, be increased.

• What impact do new transactions have on the monthly or annual financial statements and on the volatility of results in the P&L?
• What are the effects of dissolving hedge relationships?
• How can treasury, trade and accounting be provided with tools to answer such questions in an acceptable amount of time?
• How can accounting be integrated into the relevant strategic and operational issues and processes as early as possible?

KPMG's specialists offer you the technical know-how with regard to accounting standards to be implemented now and in the future. We take a holistic approach that looks at the entire value chain – from the front office or treasury to the mapping of the business in the accounting system. The basis for this is a comprehensive understanding of your business:

• Deep product understanding in the area of financial derivatives and their representation under different accounting standards and under regulatory law
• Understanding of risk management methods and processes and their implications for reporting
• Extensive benchmark knowledge of hedge accounting models and their implementation
• Extensive experience in implementing accounting systems.

• Gap analyses related to performance and quality of the accounting process as well as to the actual state of the compliance organisation (with regard to IFRS, BilMoG, etc.)
• Design and optimisation of organisational structures and processes in accounting or treasury organisational units
• Development, optimisation and implementation of accounting policies, procedures and methods, including specific accounting catalogues and instructions (at instrument or division level and broken down to individual workplaces)
• Analysis and evaluation of potential impacts from financial instruments on financial statements (financial transactions, reorganisation of the financing structure, hedging strategies, development of portfolio structures from an accounting perspective, etc.)
• Design and implementation of hedge accounting models (incl. IFRS 9/IAS 39 replacement effects), including methods for measuring effectiveness or for proving hedging effects (via technical mathematical methods such as regression analyses) or advice on the interface design between the trading and banking books
• Analysis of contracts with regard to the valuation of embedded derivatives based on their fair value (under IFRS), particularly on the liabilities side
• Advice on adjustments in accordance with further IFRS accounting issues: Strategic Planning, Controlling, Operating Segments (IFRS 8) and Financial Instruments Disclosures (IFRS 7)
• "Quality Close" solution for the accounting of financial instruments, to make year-end closing processes faster and more efficient
• Selection and implementation of treasury management and accounting software: Test concepts and sample cases for functional tests, business blueprints and technical concepts for embedding this software in the business organisation and processes (for example, technical concepts that translate the requirements of the accounting standards into the parameters that the system specifies in order to be able to actually use the stored or prepared information in a meaningful way in the respective environment)
• Design and implementation of solutions for the accounting of foreign currency transactions ("multi-currency accounting")

KPMG is also the right partner when it comes to innovatively taking up the latest developments in accounting for financial instruments and hedge accounting. While interest rate and currency risks have been the primary object of hedge accounting up to now, the focus is now on credit hedge accounting for creditworthiness and credit spread risks. KPMG has developed special, highly complex methods for this purpose, which are expressly recognised by the International Accounting Standards Board (IASB).