IFRS 9: hedge accounting heaven or hell?

IFRS9 was billed as being heaven-sent to corporates who undertake to hedge market risks, presenting not only new opportunities to hedge many more exposures but also to make current hedging mechanics that bit easier. And if IAS39 had never existed, heaven IFRS9 would certainly be. Unfortunately, IAS39 did exist and has done so since 1998. Having become familiar with IAS39, IFRS9 Hedge Accounting adoption may turn out to be hell for some corporates. Systems, auditors, hedge documentation and treasury policies have evolved to ensure compliance with IAS39. Those just about getting comfortable with IAS39, including myself, who do not expect

Gilt yield – time to return to normality, whatever that is

The UK has not usually been known for economic orthodoxy. Yield curves can be inverted for years. Asset values bear no relation to asset replacement costs. Government has foreseen closing down its own funding market. We never saw anything impractical about switching from industry to fund management as an important component of our GDP. These are all situations we have created ourselves. We cannot blame Brussels, although Brexit may yet have an uncomfortable effect on the last. Since 2008 we have nurtured the inversion of Gilt yields and inflation. We target 2% inflation otherwise the Bank of England governor has

Six things to plan for in 2018

As we head rapidly towards the end of the year, we offer some thoughts for issues that may not be front of mind, but which, nevertheless, you may want to consider as we enter the year ahead. 1. Rising Interest Rates The period of very low interest rates may be coming to an end. Now is the time to make sure your teams appreciate the potential impact of operating in a higher interest rate environment, something many of them will not have experienced. As well as checking covenant triggers, the organisation’s fixed/floating mix and interest rate policy should all be

What do treasurers need to know about bank ring-fencing?

To prevent a repeat of the 2008 financial crisis, UK regulators have set out to drastically reform the banking system – by separating the retail and riskier investment arms of UK banks into separate legal entities. Known as ring-fencing, the objective of these new rules is to achieve greater resilience and financial stability for the banking system. Ring-fencing applies to any UK bank with over £25bn of retail deposits, including all major high street banks, and they must be ring-fenced by 1st January 2019. The changes will impact corporates as well as personal customers. Most recently, Barclays announced that it

Pension Deficits – Do these still keep treasurers awake at night?

This month’s PPF 7800 index (1) revealed an aggregate deficit of £180bn for the defined benefit (DB) pension schemes within its sphere, at 31 July 2017. Although this is a significant level, it compares favourably with the deficit position at July 2016 (2), when the level was £333bn. Funding comparisons July 2016 June 2017 July 2017 Aggregate balance -£333.5bn -£186.2bn -£180.1bn Funding ratio 81.4% 89.1% 89.4% Aggregate assets £1,458.4bn £1,514.6bn £1,524.7bn Aggregate liabilities £1,791.8bn £1,700.8bn £1,704.8bn Data set / assumptions Purple 16 – A7 Purple 16 – A8 Purple 16 – A8 PPF7800 Index August 2017 The improvement in the

Shared Service Centres – treasury trends

Treasury is a constantly evolving profession, as the ACT’s current Business of Treasury research shows, with treasurers’ strategic engagement with their organisations increasing. One area where I have seen this happening is with treasurers’ involvement with their organisation’s Shared Service Centre (SSC). Shared Service Centres – why the interest? Evidence came from two key sources. Firstly, an increased number of requests to provide learning support for treasury teams within SSCs and secondly, discussions with treasurers who were being asked to take responsibility for the treasury aspects of the SSC teams. As this increased, the ACT felt that it would be

No cash management, no long-term future

Cash management is often seen as the routine part of the job, the bit where process can be perfected and no-one in the company takes much interest until something goes wrong, like a supplier is not paid. That is a myth! Cash management is the glue which holds the company together and it is the start of the whole strategic process. It’s also a way for the treasurer to get their foot in the door of operations and really find out what is going on. Funding the company is arguably the only job which the treasurer must always get right

Will Brexit cause walls to collapse or only cracks to appear?

The Brexit topic continues to draw in the crowds at any seminar and this morning (31 January 2017) was no exception.  It was ‘standing room only’ at Slaughter and May’s client seminar titled: Tremors and Aftershocks: How to manage the impact of the Brexit earthquake and recent world events. How to manage the impact of the Brexit earthquake?  It was clear that we’re not yet sure exactly when the earthquake will happen, the magnitude, or even where the epicentre will be.  From a poll of attendees 37% thought it was too early to understand how Brexit was going to impact