Meet the requirements of IFRS

Measurements according to IAS 39 or IFRS 9 and Hedge Accounting

Your Contact Person

Martin Danne | Managing Partner
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48153 Münster
Germany
Germany

Bank accounting functionalities

zeb.control.accounting

The following functionalities are provided:

  • Customer-specific classification of assets in line with IAS 39 and IFRS 9 in the categorizer.
  • An IAS-39 and IFRS 9-compliant valuation module ensures that individual transactions are valued at amortized costs and at the full fair value.
  • The hedge engine covers both cash flow and fair value hedge accounting and offers a fair value option, including management at the bank-wide level and integration of the processes in controlling and treasury management.
  • The multi-curve ability of hedge engine covers current test requirements.
  • The impairment solution allows banks to implement the multi-step impairment process from data supply to posting and to determine itemized and portfolio value adjustments as well as the unwinding effect according to IFRS.
  • The user-configurable posting engine transfers posting information – for example, the hedge result – to the bank's accounting system for posting.
  • The freely scalable system architecture can be tailored to the size of your enterprise and dynamically expanded when requirements rise.

Please compare our booklet for more information.


Functionalities

Meeting International Financial regulations confidently

zeb.control.accounting - Valuation software module

Finance asstets categorisation

The starting point of IAS 39 or IFRS 9 is the clear assignment of financial assets and liabilities to categories. Apart from offering technical solutions, zeb has also gathered ample project expertise in the functional design of IFRS classification over many years. Only a few banking systems permit the direct input of the IFRS category so that, as a rule, it has to be derived from the existing characteristics of the financial instruments. Via the graphic user interface of the categorizer, this task can be performed in line with IAS while taking account of customer-specific requirements and ensuring audit acceptability. The  accounting software allows you to access any data fields and characteristics (e.g. products, feeder systems, and custody account numbers) for defining classification rules. The classification determines the following valuation of the financial instruments.

IFRS valuation methods, covering amortized cost and full fair value

Valuation is a core element of the IFRS accounting concept. As opposed to the most local GAAPs, IFRS concentrates on the one hand on a different determination of amortised acquisition costs (effective interest constant accruals/deferrals of acquisition costs). On the other hand, IFRS places much more emphasis on valuation at market prices (fair values), which can be derived among other things from exchange prices (mark-to-market) or with finance mathematic models (mark-to-model). The required calculation functions bring about a considerable adaptation effort in a credit institution’s IT landscape.

zeb.control.accounting - IFRS valuation covers both valuations at amortized cost and full fair value. According to IFRS amortized costs are calculated by using the effective interest method. Full Fair Value valuation is optionally realised with externally supplied market pricing or with the help of finance mathematic models in zeb.control.accounting. All IFRS relevant valuation methods are supported (effective interest constant accruals/deferrals, linkage to an external pricing provider, mark-to-model valuation). Furthermore it is possible to flexible determine the product portfolio to be calculated.

Its functionalities include the representation of all product types both in transactions for customers and for own accounts as well as the consideration of fictions, model assumptions and impaired performance. The mapping of all product types both in the commercial business and also in the own book trading area is as well part of the scope of services, as the consideration of fictional structures, model assumptions and defaults.

Optimising Risk Management

zeb.control.accounting - Impairment software module

Impairment process

With this impairment solution, you can compute single, general and portfolio value adjustments as well as the unwinding effect in accordance with IFRS. The browser interface makes it simple to navigate from the overview of all impairment cases and individual accounts to the expected cash flow profile. The provisioning calculated by the accounting software can be adopted or adjusted on the basis of diverging expectations with regard to cash flows and liquidation of collaterals. The integrated table of itemized value adjustments shows how the allowances may change over time.

Data preparation

The impairment component of zeb.control.accounting supports all steps of the impairment process. For data preparation optionally, either data supply from the source systems or impairment detection by zeb.control.accounting is possible. The significance test uses the “Receivables Volume per Counter party“ criterion.

Subsequently cash flows for individual transactions are generated and the present values of the collaterals are determined on the basis of utilisation forecasts. The specific provision calculation uses the delta of the individual transaction CF PV “before impairment“ and ”with impairment”.

Manual post-processing and booking

In the next step manual post-processing is done. Calculated values are available for release and booking for each individual transaction. But manual changes are also possible (e.g. PV, essentiality, collateral value, percentage indication of recoverable Cash Flow, risk provisions).

Afterwards specific provision booking (inclusion / unwinding) takes place via the own system process. The flagging concerning impairment of an individual transaction automatically triggers a change in booking rules e.g. concerning unwinding; unexpected incoming payments of changes in the specific provision level on the basis of changed CF forecasts.

Reporting wizard

With the report wizard impairment-cases can be selected and isolated. For example it is possible to filter by status, unit of organisation and/or product. Furthermore states of different periods can be viewed and the consequences for the P&L are directly shown.

Hedge accounting proper to IAS 39 and IFRS 9

zeb.control.accounting - Hedge software module

IAS.Hedge-Engine

The IAS.Hedge-Engine covers hedge accounting for interest rate risks pursuant to IAS 39 and IFRS 9. The module supports cash-flow and fair value hedge accounting as well as the fair value option with bank-wide controlling. The multi-curve ability of hedge engine covers current audit requirements. The controlling and treasury management processes are fully supported from the creation of hedging relationships to the performance of efficiency tests and from determining posting consequences to subsequent plausibility checks. The functionalities are rounded off by comprehensive simulation options, the audit-proof documentation of the hedge process and a competency system with logging function. The IAS.Hedge-Engine can be set up as an add-on to existing IFRS systems and posting approaches requiring the integration of a minimum number of components and can import portfolio and market data from existing data sources.

Hedge selection and effectiveness test

Via an optimized hedge selection residual volatilities are mostly reduced and the following advantages are offered: simulation and control options, an efficient P&L rejection and a reduction of deflections of sensitivities. Detailed information of prospective and retrospective effectiveness tests is presented clearly in table format and there is the possibility of a detailed graphical analysis.

The retrospective measurement of effectiveness is carried out using interest rate-related effects. With completion of the first hedge period or after termination of the hedge relationship the underlying transaction is amortized.

Recognition of changes in the Fair Value Hedge

According to an economically sensible treatment the IAS.Hedge-Engine divides the changes in hedge fair values in the components rate-P&L (change in market interest rates) and interest-P&L (remaining term effect). This method is seen as state-of-the-art method and is also from zeb experience the consistently applied method, because she guarantees transparency.

The zeb.control.accounting – Hedge Engine offers a variety of standard reports that partly can be adapted to the individual client. Within the report “Amortisation” for example the development of the line items can be reconstructed and the analysis report parses the reasons for inefficiencies between hedge items and hedge instruments.

Connection to the general ledger

zeb.control.accounting - Accounting Hub

Accounting Hub is an optional software module that operates as a link between the other modules of zeb.control.accounting and the core posting system of the bank. The role of Accounting Hub is to merge, analyze and transfer information according to local GAAP and IFRS. It transforms the transactions supplied by the zeb.control.accounting modules into posting entries adjusted to the specific account classification and the bank's individual posting approach. Further it transfers them to the core posting system via an export interface. The posting engine has an object-oriented accounting system in which measures with asset and profit information are maintained for each financial object. All transactions according to IFRS or local GAAP are supported as wells as trade date and settlement date accounting. By means of a flexible configurable and rule based framework for accounting record generation, the object-oriented accounting system generates IFRS-compliant postings on the basis of the posting amounts supplied by zeb.control.accounting – Valuation. The graphical interface enables analysis options for three perspectives: business transactions, figures and general ledger postings. In the business transactions perspective it is possible to set filters for financial instruments or flexible filters for functional units and business transactions. In the figures perspective multi-GAAP key figures can be measured on single contract level. The illustration is freely configurable and thematically arrangements are realized by filters.  Beside general ledger postings for single contracts, single postings can also be aggregated to collective postings. In case of collective postings the perspective general ledger postings shows the posting relevant ratio of the selected financial instruments. Data are stored related to single transactions and their quality is reviewed regularly and audit-proof data corrections are done.

Export interfaces

The data generated in the scope of IFRS can be of course also used for further reports and other analysis purposes. Therefore flexible export interfaces for booking records can be used. The scope of services also offers the supply of any general ledger systems (e.g. Oracle Financials or SAP FI) and the preparation of customised, multidimensional analyses (segment reporting).