1. A presentation by Pierre-hugues Bonnefoy 22 November 2005 International Financial Reporting Standards (IFRSs): What are the impacts for SICAFIs?

2. © 2005 Deloitte 2 Overview of the presentation 1. What is the IASB 2. IFRS in Europe 3. IFRS in Belgium 4. Conceptual differences with Belgian GAAP 5. Major areas of change for SICAFIs 6. Other significant changes that may impact SICAFIs 7. Conclusions

3. © 2005 Deloitte 3 What is the IASB ? (1) The IASB is a private organisation with independent responsibility for the development of international accounting standards. Created in 1973 by the following members of IFAC : Australia, Canada, France, Germany, Japan, Mexico, The Netherlands, the United Kingdom and Ireland, the US.

4. © 2005 Deloitte 4 What is the IASB ? (2) Objectives of IASB : –Formulate, publish and promote international financial reporting standards –Harmonisation –! No legislative power Results of IASB : –32 IASs / 6 IFRSs and 16 SICs / IFRICs –Stable platform for 2005 but in continuing evolution

5. © 2005 Deloitte 5 Ke y Appoints Reports to Memberships links Advises Director of Operations & Non-Technical Staff Director of Technical Activities & Tech. staff IAS Board (14) (approve and set IASs, IFRSs, EDs, SICs, IFRICs) IFRIC (12) Trustees (19) (appoint Board, IFRIC, Trustees) - Governance - Fund raising - Public awareness Advisory Committees (or other specialist advisory groups) Standards Advisory Council organize wider participation in the standard setting process National standard setters and other interested parties What is the IASB ? (3)

6. © 2005 Deloitte 6 IFRS in Europe (1) Mandatory application in Europe at the latest in 2005 for listed companies with consolidated financial statements (1 year of comparatives : transition date 1/1/2004) Optional for consolidated financial statements of non listed companies and for stand-alone financial statements Endorsement mechanism : –All IASs, IFRSs and SICs/IFICs have to be endorsed by the EU

7. © 2005 Deloitte 7 IFRS in Europe (2) Political level ARC European Commission EFRAG Technical expert group Board Advisory forum of all European Standard Setters Observers

8. © 2005 Deloitte 8 IFRS in Belgium 2005 IAS/IFRS not permitted Amendment of Belgian accounting rules to IAS/IFRS STATUTORYSTATUTORY CONSOLIDATEDCONSOLIDATED IAS/IFRS permitted public and non-public entities “IAS exemption” IAS/IFRS mandatory for public entities (European Regulation) IAS/IFRS permitted for non-public entities (exemption) IAS/IFRS mandatory for non- public entity (effective date to be determined) IAS/IFRS permitted for SICAFIs ? 2007

9. © 2005 Deloitte 9 Conceptual differences with Belgian GAAP Economic criteria “tax pollution” “Substance over form” Legal form Flexibility of presentation Strict reporting format Fundamental trend : fair value

10. © 2005 Deloitte 10 Major areas of change for SICAFIs : overview net asset earnings earnings change impact volatility Financial instr. & hedge accounting Provisions Fair value investment properties Dividend

11. © 2005 Deloitte 11 Other significant changes that may impact SICAFIs Income statement, balance sheet presentation Lease incentives Securitisation Other

12. © 2005 Deloitte 12 Financial Instruments and hedge accounting (IAS 32/39) Fair value (FV) for financial derivatives and some financial instruments (i.e. shares held in other entities) Hedge accounting –Fair value hedge : change in FV of the debt (for the risk hedged) and the hedging instruments in the income statement –example : hedging of a fixed rate debt using a interest rate swap fix to floating –Cash flow hedge : change in FV of the hedging instrument in equity and recycle to income statement when the risk hedged affect the income statement –example : hedging of a floating rate debt using a interest rate swap floating to fix –Documentation and effectiveness issues Transaction costs Treasury shares

13. © 2005 Deloitte 13 Provisions (IAS 37) Rules on provisions - No general and tax based provisions - Definition : - Present obligation (legal or constructive) - Probable outflow of resources - Reliable estimate Overhauls and major repairs - No longer allowed Discounting of provisions - Mandatory under IFRS - Unwinding financial costs

14. © 2005 Deloitte 14 Fair value investment properties (IAS 40) Investment properties to be valued at fair value with change in fair value through income statement –What is the fair value ? “The fair value is the price at which the property could be exchanged between knowledgeable, willing parties in an armth’s length transaction” –Is the value carried out by the real estate expert a good representation of the fair value ? “An entity is encouraged … to determine the fair value … on the basis of a valuation by an independent valuer …” – How to address the registration rights ? –Not specifically dealt with by IAS 40 –Probably more a valuation issue than a GAAP issue –Management’s judgement

15. © 2005 Deloitte 15 Other significant changes that may impact Sicafis Dividend : financial statements are presented before allocation of results Income statement, balance sheet presentation –2005 annual report – full compliance with one year of comparatives (2004) –No strict rules for presentation under IFRS –Opportunity for a consistent presentation among the Sicafis Lease incentives : to be spread over the lease term on a straight line basis as a reduction of rental income –Normally already taken into consideration in the valuation of the building –If significant could be a classification issue in the income statement Securitisation : securitisation of operating lease does not qualify for derecognition –Partial derecognition of an investment property not allowed under IFRS

16. © 2005 Deloitte 16 Conclusions IFRS is probably not a big deal for SICAFIs ? Most changes are (relatively) easy to understand… … but IAS 39 and some others are hard Be patient, the answers aren’t all clear And there will be different answers But remember, this is mere accounting ! And Cash flows are “likely” to be unchanged

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