fallout from the credit crunch fei breakfast seminar 3 december 2008
TRANSCRIPT
Fallout from the credit crunch
FEI Breakfast Seminar
3 December 2008
Current state of the capital marketsFEI: Managing funding requirements
Stephen Lewis, CA , MBASenior Vice-PresidentErnst & Young Orenda Corporate Finance [email protected]
3 December 2008 When the taps run dry: getting things done during a credit crunchPage 3
Table of contents
► Current Market Conditions – Subprime Impact► Market Stabilization – Money Market Indicators► Canadian Perspective► Availability of Financing► Treasury – Focus on Short Term Liquidity► Financing Today – Conclusion
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Current market conditions – subprime impact
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► Despite repeated efforts by Congress and the Federal Reserve, including the passing of the $700 billion bailout and the takeover of Fannie Mae and Freddie Mac and the reduction in the benchmark rate, the U.S. economy continues to slide towards recession ► Consumers face pressure to cut spending due to an uncertain
housing market and weak job market► Of the 75.5 million U.S. households that own their homes, 16%
owe more than their homes are worth1
► The International Monetary Fund states that the global economy is headed for a recession in 2009 and estimates losses from the financial crisis to be $1.4 trillion
Where we are today
1Moody’s Economy.com
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Subprime related losses
► To date, financial institutions have incurred $966 billion of asset write-downs and credit losses - $708 billion are from over 100 of the world’s largest banks and securities firms
Worldwide Subprime-Related Losses to Date
$0
$200
$400
$600
$800
$1,000
$1,200
Losses Capital Raised Losses Capital Raised
Banks All Financial Institutions
U.S. Europe Asia
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Subprime’s impact on financial services
► The impact of the increasing defaults in the subprime market began to trickle into the financial services sector in late 2006 and early 2007► In July 2007, credit rating agencies began to
downgrade certain mortgage backed securities resulting in the evaporation of the subprime market
► Financial institutions were forced to write-down the value of the securities held as assets on their books► Some of the highest losses have been incurred by U.S. banks
such as Citigroup ($68B), Merrill Lynch ($56B), UBS ($44B) and Wachovia ($97B)
► Canadian banks CIBC and RBC have also had write-downs
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Subprime’s impact on financial services (cont’d)
► As a result of these write-downs, lenders further tightened borrowing terms to preserve their remaining capital► Covenant lite loans disappeared while the use of PIKs became
heavily restricted
► The subprime crisis came to a dramatic head when the Federal Reserve facilitated the purchase of Bear Stearns by JP Morgan in the spring of 2008
► And credit markets, which began seizing up after BNP Paribas SA halted withdrawals on three funds in August 2007, froze after Lehman Brothers Holdings Inc. collapsed on September 15, 2008, negatively impacting lenders’ confidence of repayment
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Funding scarcity
► The fallout of the credit crisis has been a scarcity of capital as the lender base continues to shrink and remaining banks look to governments for help in repairing their balance sheets
► U.S. loan issuance, particularly leveraged and investment grade loans, have significantly declined since the credit crunch took hold in the summer of 2007
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Funding scarcity
U.S. Loan Issuance
$0
$100
$200
$300
$400
$500
$600
1Q
00
2Q
00
3Q
00
4Q
00
1Q
01
2Q
01
3Q
01
4Q
01
1Q
02
2Q
02
3Q
02
4Q
02
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
Leverage Investment Grade Other
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Funding scarcity (cont’d)
► In the secondary market, the average bid for multi-quote term loans is at its lowest point ever with loans available for purchase at just over 75 cents on the dollar
► As of October 2008, it appeared that the bailout had not stopped the downhill trend in bid prices
Historic Average Bid Prices
75
80
85
90
95
100
J an-00 J an-01 J an-02 J an-03 J an-04 J an-05 J an-06 J an-07 J an-08
Avg
. bid
(% o
f par
)
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Funding scarcity (cont’d)
► The bid/ask spreads for both U.S. and European loans also indicates lower levels of liquidity
► As of October 2008, spreads were 219 basis points in the U.S. and 266 basis points in Europe
U.S. and European Bid/Ask Spreads
0
50
100
150
200
250
300
Jan
-07
Feb
-07
Mar
-07
Apr
-07
May
-07
Jun
-07
Jul
-07
Aug
-07
Sep
-07
Oct
-07
Nov
-07
Dec
-07
Jan
-08
Feb
-08
Mar
-08
Apr
-08
May
-08
Jun
-08
Jul
-08
Aug
-08
Sep
-08
Oct
-08
Bid
/ask
spr
ead
(bps
)
U.S. liquid loansEuropean liquid loans
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Defaults in the global bond markets
► Moody’s is forecasting default rates to climb to 6.3% globally and 7.2% in the U.S.► The U.S. speculative grade default rate has also increased from
2.5% in Q208 to 3.4% in Q308 (it was 1.2% in Q307)
Number of U.S. Speculative Grade Defaults
0
1
2
3
4
5
6
7
8
9
10
Jan
-07
Feb-
07
Mar
-07
Apr
-07
May
-07
Jun
-07
Jul
-07
Aug
-07
Sep
-07
Oct
-07
Nov
-07
Dec
-07
Jan
-08
Feb-
08
Mar
-08
Apr
-08
May
-08
Jun
-08
Jul
-08
Aug
-08
Sep
-08
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Market stabilization – money market indicators
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Market stabilization
► Markets have not yet stabilized; credit markets are still tight
► According to Standard & Poor’s, the credit crunch will come to an end once four key economic and market variables are satisfied:
1. Real estate values stabilize or increase
2. Rebound in home sales
3. Easing of credit
4. Decline in crude oil prices
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Market stabilization (cont’d)
► The October 2008 bankruptcy of Lehman Bros. had a major impact on credit and financial markets by escalating the severity of the crisis
► The significant steps taken by the U.S. government and governments worldwide will hopefully help restore confidence in the coming months
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Market indicators
► Although LIBOR has come down significantly from its high of 4.81% on October 10, 2008, credit conditions remain tight► 3-month U.S. LIBOR is currently at levels not seen since October
2004► The cause for the decline is primarily due to the provision of
virtually unlimited funding from central banks as well as government offered bailouts and guarantees to financial institutions
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Market indicators (cont’d)
3-Month U.S. LIBOR
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
September 1, 2008 October 1, 2008 November 1, 2008
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Market indicators (cont’d)
► Prior to the credit crunch the average spread between the 3-month U.S. LIBOR rate and the effective Federal funds rate was approximately 12 basis points
► On October 10th, 3-month U.S. LIBOR peaked at 4.82% representing a spread over the effective FFR of over 4.00%
► The spread is currently just over 160 basis points► A narrowing of this spread to 25 basis points would be
positive, however forward markets indicate that this will not happen until the middle of 2010
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Market indicators (cont’d)
LIBOR vs U.S. Federal Funds Rate
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
J an-98 J an-99 J an-00 J an-01 J an-02 J an-03 J an-04 J an-05 J an-06 J an-07 J an-08
Effective Federal Funds Rate
3-Month U.S. LIBOR
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Market indicators (cont’d)
► The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by major brokers and is calculated by the Federal Reserve Bank of New York
Federal Funds Effective Rate
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
J an-98 J an-99 J an-00 J an-01 J an-02 J an-03 J an-04 J an-05 J an-06 J an-07 J an-08
TECH BUBBLE LOW INTEREST RATES HOUSING BUBBLE SUBPRIME
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Market indicators (cont’d)
► A key indicator of credit conditions is the LIBOR-OIS spread which compares the 3-month U.S. LIBOR rate and the overnight index swap (OIS) rate► A widening spread indicates that banks believe other banks to
which they are lending have a higher risk of default so they charge a higher interest rate to offset this risk
► The spread, currently around 170 bps, compares with 87 bps on the last trading day before Lehman declared bankruptcy, and an average of 11 bps in the five years prior to the financial crisis
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Market indicators (cont’d)
LIBOR - OIS Spread
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
September
1, 2008
October 1,
2008
November
1, 2008
Rat
e
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Spread
OIS Rate
3-Month LIBOR
LIBOR spread over OIS
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Canadian perspective
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Canadian perspective
► The Canadian market has also been impacted by the U.S. financial crisis as evidenced by the widened spread between the 3-month Canadian T-bills and 3-month BAs in Q2 and Q3 of 2008
3-Month BAs over 3-Month Canadian Treasuries
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Jul
-07
Aug
-07
Sep
-07
Oct
-07
Nov
-07
Dec
-07
Jan
-08
Feb
-08
Mar
-08
Apr
-08
May
-08
Jun
-08
Jul
-08
Aug
-08
Sep
-08
Oct
-08
Nov
-08
Rat
e
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Spread
3-Month Treasuries
3-Month BAs
Spread
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Canadian perspective (cont’d)
► On September 5th, Canadian banking executives met for roundtable discussions and the overall view is that the subprime mortgage crisis and credit crunch will significantly impact global banking► “The days of cheap money are over, and credit spreads across
the board have, and will continue to significantly increase the cost of financing.” – Gord Nixon, CEO, of Royal Bank of Canada
► “It needs to be determined which regulators will oversee financial companies in the U.S….that process could last a year or more” – Rick Waugh, CEO, Bank of Nova Scotia
► Overall, the banking industry is facing more transparency and scrutiny of their balance sheets and the expectation is that regulatory capital requirements will be increased
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Canadian perspective (cont’d)
“Three major interrelated developments are having a profound impact on the Canadian economy. First, the intensification of the global financial crisis has led to severe strains in financial markets. The associated need for the global banking sector to continue to reduce leverage will restrain growth for some time. Second, the global economy appears to be heading into a mild recession, led by a U.S. economy already in recession. Third, there have been sharp declines in many commodity prices. The outlook for growth and inflation in Canada is now more uncertain than usual.”
- Bank of Canada press release dated October 21, 2008
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Availability of financing
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Availability of financing
► Credit markets in Canada are changing daily► Many international and U.S. institutions have pulled away
from the Canadian market or are in a state of uncertainty:► CIT► GMAC► Wachovia
► Remaining institutions may be “open for business” but there is effectively no secondary market to syndicate or sell down exposure► Lending institutions are focused on optimizing the allocation of
scarce capital
► GE Capital► Deutsche Bank► ABN Amro / LaSalle
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Availability of financing (cont’d)
► Capital that may be made available for new funding has changed dramatically, as illustrated below:
Rate Rate EBITDAPre-Credit Crunch Post-Credit Crunch (Multiple)
Senior DebtTraditional/Asset Based Loans
Second LienLoans
Subordinated / MezzanineDebt
Equity < 20% > 25%
12% - 14% 3.0x - 4.0x
BA + 150bps 2.5x - 3.0x
BA + 500bps 3.0x - 4.0x
BA + 300bps
BA + 1,000bps
15% - 20%
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Availability of financing (cont’d)
► Lending is being governed by greater discipline as underwriting standards have become more stringent resulting in lower multiples, higher pricing and tighter covenants► The impact of the credit crunch to senior cash flow lending has
resulted in lower debt to EBITDA multiples which are currently in the 2.5 – 3.0x range with up to 1.5x incrementally available from mezzanine lenders
► Moreover, subjective “addbacks,” “adjustments” or “normalizing entries” to earnings are also coming under greater scrutiny
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Availability of financing (cont’d)
► Borrowers are being faced with increased due diligence from an ever shrinking base of lenders resulting in elongated deal timetables
► “Fully underwritten” transactions are history► Borrowers are being forced to piece together club deals to meet
capital needs
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What can get done?
► Asset based loans are becoming increasingly attractive to certain borrowers► Loans > $30MM pose a syndication risk► Market flex risk on terms, structure, pricing, etc.► Spreads in the range of 300 bps
► Cashflow loans to borrowers of “strategic relevance” to lenders► Leverage < 3.0x► Industry specific► Sponsor makes deal “easier”► Spreads in the range of 400 bps
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Treasury – focus onshort term liquidity
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Treasury – focus on short term liquidity
► Current market dislocations require Treasurers to more closely focus on short term liquidity
► A more disciplined approach is in order► Stronger focus on quality of investments► Better understanding of organizations liquidity
requirements
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Treasury – focus on short term liquidity (cont’d)
► A portfolio approach to manage risk makes sense:► Understand the liabilities, i.e. the liquidity needs of the company► Measurement/forecasting needs to be done on a weekly if not daily
basis► Manage investments or borrowings to meet that liability stream
► Manage portfolio to:1. Understand degree of counterparty risk
► Review investment policy
2. Align maturities with requirements► Limit exposure to any single point in time► Ladder portfolio to reduce exposure to short term market
dislocations
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Treasury – focus on short term liquidity (cont’d)
► Manage counterparty risk► Traditional approach of heavy reliance on debt ratings needs
review► Additional due diligence required
► Clearly define goal of investment policy: income generation, or secure and efficient store of liquidity► Increase requirement for lower yielding but more secure
investments► Governments► BAs from Canadian chartered banks► Careful review of money market funds
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Financing today –conclusion
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Financing today – conclusion
► To obtain financing in today’s market, businesses need to be cognisant of the supply and demand constraints with which they are faced
► Transactions are subject to more scrutiny and aggressive due diligence requirements
► The terms under which different lending institutions are willing to lend may vary significantly
► To succeed in this market, businesses must recognize that the path to funding starts significantly ahead of the formal financing process
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Financing today – conclusion (cont’d)
► Plan early to deal with debt maturities► Expect increased pricing and tighter covenants► Expect a reduction in unutilized credit availability/carve
back of acquisition and expenditure accommodations► In large syndicates, plan for fall-out of fringe
participants
► Review short to mid-term capital needs and strive to preserve capital► Review working capital cycle► Capital expenditures► Sale of non-core/redundant assets
Taxes: Creating value andminimizing risk in turbulent times
Steve Landau, PartnerTransaction Advisory ServicesTransaction TaxErnst & Young [email protected]
Grant Smith, Senior MangerTransaction Advisory ServicesTransaction TaxErnst & Young [email protected]
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Agenda
► Tax perspective of the current economic conditions
► Issues to consider
► Tax strategies to preserve cash
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Tax perspective of the current economic conditions
► The current economic climate is a crucial time to leverage tax opportunities to create and preserve value
► Tax strategies may need to shift in focus to:►Releasing cash►Reducing costs ►Efficient refinancing/restructuring
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What is the impact to your business?
Accounting for tax
Structures
Cash
Tax functionDivestments
Acquisitions
Closures
Current
Market
Conditions
Refinancing or Recaps
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Cash [
► Converting tax assets to cash► Review capital and current expenditures► Utilization of losses ► Tax instalments, payments and refunds
► Realizing or securing tax benefits► SR&ED tax credits► Carry back of losses► Clearing out Capital Dividend Account before losses► Crystallize Capital Gains Exemption while eligible
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Cash [
► Deferral of Tax► Timing of recognition of profits► Capitalize new business ► Intellectual property planning
► Repatriation and Cross Border► Tax efficient repatriation of cash► Review existing transfer pricing and financing
structures
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Cash
► Factoring receivables► Sale and lease back► Loss planning
► Crystallizing losses when required and preserving losses and adjusted cost base
► Accuracy of forecasts► Ensure tax assumptions reflect business expectations in a
downturn – can tax payments be deferred, are instalments correct
► Tax Audit Management
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Cash
► Commodity taxes - Apply a variety of strategies to improve commodity taxes cash flow:
► Offsetting payroll remittances against GST/HST/QST refunds
► Accelerating GST/HST/QST input tax credit
► For significant purchases with GST/HST/QST payable, use a legal entity that is in a net GST/QST payable position for the purchase and resupply
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Review of current structure
► Is the current group / tax structure optimal for the current downturn?
► Matching profits and losses► Reviewing tax structures for revised profit or loss forecast► Taxable reorganization of corporate group ► Revisit management compensation planning
► Transfer pricing► Determine if intercompany transactions are being created to deal with
cash shortages and to crystallize losses in certain jurisdictions► Review current practice to ensure compliance with transfer pricing rules
► International Assignment Policy► Review international assignment policies to introduce cost efficiencies► Social security tax agreements should be reviewed for employer tax
savings► Are there outstanding tax equalizations for assignees that should be
completed
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Refinancing or recaps
► Refinancing► Debt/equity swaps – ensuring debt is not inadvertently
extinguished and taxed under debt forgiveness rules► Thin capitalization – determine how the position will change
subsequent to refinancing and changes in the balance sheet
► Acquisition of debt at a discount► Ensure undertaken in most tax efficient manner
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Closures
► Closure costs► Maximize tax relief for costs e.g., which entity should incur the costs,
when costs are incurred
► Redundancies► Maximize tax relief for costs and consider impact on share valuations
► Losses► Efficient utilization of losses and potential creation of losses as a result of
closures► Timing for merging of entities to optimize use of tax attributes
► Pensions► Maximize tax relief for contributions
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Divestitures
► Preparation for exit► Tax efficient restructuring to package assets/companies for sale, including
elimination of intercompany debts► Maximizing value when selling companies with losses by preserving tax
attributes► Consider US golden parachute provisions for any US executives► Tax efficient exercise of incentive compensation plans
► Using an insolvency process to effect the sale of assets
► Tax planning to ensure divestitures are tax efficient► Creation of losses to offset gains on disposal► Any unrealized losses in the group that can be accessed?► Consider deferral mechanisms on sale such as capital gains reserves and
timing of sale
Financial reporting implications of current market conditionsDeanna Monaghan, FCAManaging PartnerErnst & Young [email protected]
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Fair value in financial reporting - the debate
► Debate about merits of fair value in financial reporting ► Contributed to the current credit crunch conditions► Or has the credit crisis highlighted the benefits of fair value in
financial reporting while exposing some of its limitations► Fair value measures necessarily reflect conditions at the balance
sheet date; they are not forecasts of future market prices► Nonetheless investors want current fair value information and that
transparency about fair values is important ► Implications
► Fair value in financial reporting is not going away► New guidance provided for making fair value estimates► Good modelling and scenario analysis capabilities are required
when active market prices do not exist► Critical to have disclosure of assumptions and sensitivities
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Recent market events: accounting and reporting considerations
Valuation of investments► Measuring the fair values of certain asset classes has been
challenging in the current environment► The number of factors affecting an investments fair value can be
extensive ► Evidence supporting the fair value may not come from trading in
active primary or secondary markets► Valuation models should reflect assumptions that market
participants would use in pricing an asset in a current transaction (fair value is a current value and not a potential future value) and therefore should reflect current credit, interest, liquidity and risk premium conditions
► Inputs should be restricted to information available to market participants at the reporting date
► No forward looking perspective
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Recent market events: accounting and reporting considerations
► Valuation of Investments (cont’d)► IAS 39 Amendments – Reclassifications of financial assets
► Allowed to reclassify out of HFT or AFS in certain circumstances and intended to more closely align IAS 39 with US GAAP
► Distinguishes loans and receivables from other securities► Loans and receivables may be reclassified from HFT or AFS to loans and
receivables if intentions have changed such that► not held for the purpose of trading in the near term; and ► intention and ability to hold for the foreseeable future
► Other securities (excluding derivatives and those designated at FVTPL at inception) may be reclassified out of HFT into AFS or HTM “in rare circumstances”► IASB has indicated that current financial market conditions are such a
“rare circumstance”► Also must no longer be held for the purpose of trading in the near term
► Reclassification to take place at fair value► Effective date is July 1, 2008, entities can make transfers as of that date
provided this aligns with intent as of that date► Extensive disclosure requirements when reclassifications are made
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Recent market events: accounting and reporting considerations
► Valuation of Investments (cont’d)► CICA Amendments to Canadian Accounting Standards
► “Trading” securities are carried at fair value and changes in fair value are included in earnings.
► Reclassifications out of trading were not permitted – abuse of hindsight► Accounting Standards Board has introduced amendments to CICA 3855 in
response to the similar recent IAS 39 amendments► Permit reclassifications of securities (excluding derivatives and securities
designated as trading at inception) out of trading (to AFS or HTM)► “in rare circumstances” and► no longer held for the purpose of trading
► To be effective for reclassifications made on or after July 1, 2008 provided statements have not previously been issued
► Amendments implemented on emergency basis without public comment period► Amendments posted to the CICA AcSB website
3 December 2008 When the taps run dry: getting things done during a credit crunchPage 58
Recent market events: accounting and reporting considerations
Internal controls over financial reporting
► Current market conditions have changed the nature and extent of risks and the related internal and disclosure controls & procedures necessary to address them
► Processes and controls relating to the development of inputs and assumptions for the valuation of significant assets and liabilities
► Review of assets for recoverability or impairment► The need for external specialists (e.g. valuation or actuarial expert) to assist in
the determination of the recorded amounts of certain assets and liabilities► Processes and controls for monitoring compliance with covenants► Internal auditors should reconsider their current audit plans in light of any new
or increased risks facing the company► Potential changes to disclosure controls to ensure risks are identified and
disclosure obligations are met (financial statements and MD&A disclosures including market and liquidity risk, capital resources, material events, discussion of risk factors, significant estimates)
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Recent market events: accounting and reporting considerations
► Credit risk and derivatives
► Non-performance risk (including credit risk) of both parties impacts fair value
► Recent events may have effected the credit worthiness of both parties to a derivative instrument
► Deterioration of a derivative counterparty’s credit worthiness or company’s own creditworthiness can cause hedge ineffectiveness
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Recent market events: accounting and reporting considerations
► Impairment of depreciable long-lived assets► Impairment indicators are more likely to be prevalent, requiring
assets to be evaluated for impairment► Long-lived assets to be held and used are reviewed for
impairment and tested for impairment whenever impairment indicators are present► Due to the current economic environment, it may be more likely
that impairment indicators exists► Impairment must be considered at both interim and annual
reporting dates► When a long-lived asset is tested for recoverability, it may also be
necessary to review depreciation and amortization estimates and methods
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Recent market events: accounting and reporting considerations
► Impairment of goodwill and indefinite life intangible assets► Impairment test for goodwill and indefinite life intangible assets
may be required to be performed on more than an annual basis► Tests for impairment of goodwill are required between annual
tests if circumstances suggest it is more likely than not that the fair value is less than its carrying value
► Tests for impairment of indefinite life intangible assets are required between annual tests if circumstances indicate the asset might be impaired
► Current economic and market conditions increase the risk that impairment indicators exist
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Recent market events: accounting and reporting considerations
Income taxes► Losses in recent years must be considered in evaluating deferred
tax assets for realization► Sufficient taxable income must exist to support realization
► Cumulative losses or expectations of cumulative losses generally indicate the need for valuation allowance
► Appropriate disclosures should be made to support either the absence or existence of the valuation allowance
► Liquidity concerns may cause companies to consider repatriation of earnings from foreign operations ► Such cash transfers could have tax implications.
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Recent market events: accounting and reporting considerations
Inventory► Excess or obsolete inventories and lower of cost or market
adjustments may be necessary► Current market conditions and corresponding effects on
spending may result in excess and obsolete inventories ► Financial condition of major customers could impair the
recoverability of inventory on hand► Valuation issues associated with returns from merchants and
leftover merchandise from the retail season► SEC staff has recently issued comments asking registrants how
they have determined that inventories are stated at a lower cost or market► Companies should disclose the manner in which lower of cost
or market is determined
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Recent market events: accounting and reporting considerations
Post retirement benefits
► Current market conditions suggest that benefit plan accounting expense and funding requirements will increase
► Increased credit risk and reduced liquidity in the marketplace have likely affected the fair value of plan assets used in determining funded status and resulted in experience losses
► These factors will also make it challenging to choose an appropriate discount rate
► Assumed returns on plan assets should reflect current expectations about long term rates of return
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Recent market events: accounting and reporting considerations
Debt► Compliance with provisions in covenants► Ability to refinance maturing debt► Classification of debt as long-term vs. current
Share-based payments► Accounting impacts of modifying, cancelling or replacing a share-
based payment award► Modifications of share-based payment awards may result in
the recognition of additional compensation cost► Impacts of equity restructuring on share-based payment awards
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Recent market events: accounting and reporting considerations
► Revenue recognition► Impact of any enhanced rights of return will require more attention
on estimating returns► Customer requests for extended payment terms could change the
timing of revenue recognition
► Disclosure requirements- Re-evaluate financial statement and MD&A disclosure around
interest, FX, credit and liquidity risks- Re-evaluate financial statement and MD&A disclosure around
capital management- Re-evaluate critical accounting estimates disclosures- Assess going concern based on current market conditions
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Q & A