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Our experts provide information on the latest business developments

Issue 3 - December 2013

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Foreword 3

Articles of interest

EMIR changes the derivatives market 4

TCS Group completes the largest Russian IPO for 2013 to date in the London Stock Exchange Main Market via a Cyprus Listing Vehicle

6

Millennial Workers Want Greater Flexibility, Work/Life balance, global opportunities

7

Many are Defending Future Threats with Yesterday’s Strategies, finds PwC, CIO and CSO’s The Global State of Information Security® Survey 2014

8

Tax & Accounting news

Shifting the balance from direct to indirect taxes: perspectives and challenges 10

Straight away - IFRS bulletin from PwC IASB publishes exposure draft of proposed amendments to the IFRS for SMEs

13

Straight away - IFRS bulletin from PwCRevenue recognition – Boards wrap up redeliberations

15

Straight away - IFRS bulletin from PwCESMA European common enforcement priorities for 2013 financial statements

16

Moving to an expected loss impairment model for financial assets 17

Leasing – has the case for change been made? 19

PwC events and activities 22

Recent publications 31

PwC profile 32

PwC offices in Cyprus 34

Contents

PwC newsletter - December 2013 3

We are pleased to share the new issue of our PwC newsletter which aims at providing an update on the latest technical and industry developments as well as other business news to our clients.

This issue covers the requirements of the new European Market Infrastructure Regulation (EMIR), information about the largest Russian IPO for 2013 to date in the London Stock Exchange Main Market via a Cyprus Listing Vehicle. Articles cover a variety of subjects such as HR, Information Security an update on the Leasing debate as well as the latest IFRS news issued by the International Accounting Standards Board and the Financial Accounting Standards Board.

Our tax experts also discuss the perspectives and challenges of the balance shift from direct to indirect taxes.

Finally, our newsletter provides an overview of our events, activities and CSR initiatives.

We hope that you enjoy reading our newsletter. Our people are always at your disposal for any further information or clarifications you may need.

Foreword

Liakos M Theodorou PartnerHead of Assurance & Advisory

4 PwC Cyprus

EMIR changes the derivatives market

Demetra EllinaSenior ManagerRisk Assurance Consulting

The collapse of Lehman Bros, AIG and Bear Stearns in 2008 exposed fundamental weaknesses in the regulation of the global US$650trillion over the counter (OTC) derivatives market. In 2009 the G20 group of nations agreed on a set of OTC market reforms designed to reduce systematic risks and to improve market transparency.

Derivatives contracts will be traded on exchanges or electronic platforms, cleared through central counterparties (CCPs), reported to trade repositories (TRs) and will be subject to capital or other requirements to reflect the risk of transactions.

For this reason, the Dodd-Frank Act (DFA) was passed in the United States while the EU is implementing most of these requirements through the European Market Infrastructure Regulation (EMIR), which came into force on 16 August 2012.

Some EMIR obligations are already being implemented and some further ones are due to be phased in over the next few months, once they are finalised. For example, the reporting requirements, which are expected to affect a significant number of Cypriot firms, are due for implementation on 12 February 2014.

Who is subject to EMIR?

EMIR stipulates uniform requirements for the performance of activities of CCPs and TRs while it also specifies the obligations of counterparties who enter into OTC derivative contracts.

Financial firms and non-financial firms established in the EU which are counterparties to derivatives contracts are subject to the requirements of EMIR. Financial counterparties (FCs) include investment firms, credit institutions as well as insurance, assurance and reinsurance undertakings. UCITS, and where relevant, their management companies as well as alternative investment funds and institutions for occupational retirement provision also fall under the FCs umbrella.

Non-financial counterparties, (NFCs) include any counterparty established in the EU that is not defined under EMIR as a financial counterparty.

EMIR also extends its requirements to entities outside of the EU (Third Country Entities), under certain circumstances.

What does EMIR require firms to do?

EMIR introduces three sets of core obligations for derivative counterparties, aimed at increasing transparency and decreasing counterparty credit risk.

Reporting obligations

Firms will be required to report exchange traded and OTC traded derivatives contracts to TRs. The reporting requirements will allow regulators to monitor the build-up of systemic risk through excessive risk concentrations.

In order to be ready to comply with their reporting obligations, firms will be required to assess the data reporting requirements against their system capabilities and strategies. EMIR stipulates that firms may delegate reporting to third parties and therefore firms should assess reporting services as part of a suite of clearing related services. Clearing obligations

As regards clearing obligations, firms must arrange for all derivatives contracts deemed ‘clearing eligible’ by


the European Securities and Markets Authority (ESMA) to be centrally cleared by a CCP. Central clearing imposes a CCP between each side of a trade, thus reducing credit risk between market participants. EMIR also sets out margin and collateral standards for trades cleared through European CCPs. Non-financial counterparties will be subject to clearing requirements only if their derivatives positions exceed a clearing threshold set out under EMIR and are not held for hedging.

Risk management techniques

Operational risk refers mainly to transaction risks and risk management processes. By imposing minimum requirements in these areas, ESMA expects to increase efficiency and security in the OTC derivative market. EMIR states that risk management procedures of counterparties need to be robust, resilient and auditable.

Firms must comply with capital and margin requirements for derivative contracts which remain outside the clearing obligation. In addition, firms must comply with certain risk management requirements for uncleared contracts, including timely trade confirmations, daily mark-to-market or mark-to-model, reconciliations, etc.

Impact of EMIR

With the need for greater transparency and safety in the derivatives markets in mind, EMIR may impact the market in the following key ways:

• Evolution of two-tier market for centrally cleared and bilaterally cleared trades

• Global squeeze on high quality collateral

• Rise of Central Counterparties (CCPs)

• Reduction in hedging • Development of new business

model

The key benefits and detriments for the market are outlined below:

Benefits Detriments

Reduction in counterparty risk Initial fall in trading volumes

Reduction in systemic risks More IT and compliance resource

Increased transparency Increased clearing fees, default fund contributions

Improved trade processing efficiency Collateral crunch

More standardisation Reduction in liquidity

Tighter spreads CCP risk concentration

6 PwC Cyprus

Michalis ChristoforouManagerCapital Markets Group

TCS Group completes the largest Russian IPO for 2013 to date in the London Stock Exchange Main Market via a Cyprus Listing Vehicle

TCS Group Holdings PLC, the Cyprus registered holding company of the Group, has successfully raised $1.1 billion in an oversubscribed London (Main Market) IPO in October 2013. This is the biggest Russian cross-border IPO on the LSE so far this year.

There were also other significant IPO out of Russian over the last year. Megafon was the last large IPO of a Russian company in London, which raised $1.7bn last year. Earlier this year, Moscow Exchange raised $500m in an offering conducted on its own exchange, Qiwi, a Russian payments company, raised more than $200m in a New York IPO and Alrosa, a diamond producer, raised $1.3 bln in a Moscow IPO.

TCS Group is an innovative provider of online retail financial services operating in Russia through a high-tech branchless platform. Since its inception in 2006, TCS has grown into a key player in credit cards and has developed a successful online retail deposits program. While credit cards and online retail deposits are the mainstay of TCS’s business, it is broadening its product offering to bring other online products and services to Russian consumers.

While TCS originally planned to raise as much as $750m in the deal, it later expanded the offering amount to more than $1bn due to high investor demand. TCS priced its global depositary receipts at $17.50 each – the very top of its $14 to $17.50 intended price range, as reported by the Financial Times.

TCS Group Holding PLC will use the substantial majority of the primary proceeds from the offering to enhance the capital position of TCS Bank, to allow it to further grow its retail lending business (mainly comprising credit cards), with the remaining proceeds will be used to support the future development of TCS’s other lines of business including insurance and payment solutions.

PwC Cyprus was the signing office on the deal, working closely with PwC Moscow and PwC UK. Goldman Sachs, Morgan Stanley, Sberbank, J.P Morgan and Renaissance Capital were involved in the deal.

This successful IPO is an important vote of confidence for Cyprus despite the recent adverse developments regarding the Cypriot economy. The Group’s parent company is registered in Cyprus, taking advantage of the tax, regulatory, legal and other benefits that Cyprus has to offer as an international business centre. The experience of TCS Group has been testimony to Cyprus established track record as a listing jurisdiction in major cross-border transactions and PwC strong expertise in such transactions.


Millennial Workers Want Greater Flexibility, Work/Life balance, global opportunities

Study of 44,000 PwC Employees Both Dispels and Confirms Gen Y Global Study Stereotypes

University of Southern California, London Business School Conducted

Two-Year Research into Attitudes of PwC Employees Worldwide

The Millennial generation, those born between 1980 and 1995, seek more workplace flexibility, better balance between their work and home life, and opportunity for overseas assignments as keys to greater job satisfaction, according to the largest, most comprehensive study conducted into the attitudes and behaviors of Gen Y – a two-year undertaking initiated by PwC.

The research both confirmed and dispelled stereotypes about the Millennials who already make up about two-thirds of PwC’s global workforce. While younger workers are more tech savvy, globally focused, and willing to share information, the study found they did not feel more entitled or less committed than their older, non-Millennial counterparts, and are willing to work just as hard. The global survey also found that many of the Millennials’ attitudes are consistently shared by their more senior colleagues.

PwC’s NextGen: A global generational study, which was conducted in conjunction with the University of Southern California and the London Business School, represents the most ambitious research into the millennial generation, or ‘Generation Y’. The study included responses from 44,000 employees throughout PwC’s global

network of professional service firms, with almost one quarter of the responses coming from Millennials. The research, compilation and analysis of its findings took place over two years.

The study sought to measure factors relating to workplace retention, loyalty and job satisfaction. It compared responses among Millennials to those of non-Millennials at the same stage of their careers to assess generational differences between the two sets of employees.

Among the major findings of PwC’s NextGen study:

• Millennial employees want greater flexibility…and so does everyone else.

• Millennials and non-Millennials alike want the option to shift their work hours to accommodate their own schedules and are interested in working outside the office where they can stay connected by way of technology. Employees across all generations also say they would be willing to forego some pay and delay promotions in exchange for reducing their hours.

• Millennials put a premium on work/life balance. Unlike past generations, who put an emphasis on their careers and worked well beyond a 40-hour work week in the hope of rising to higher-paying positions later on, Millennials are not convinced that such early career sacrifices are worth the potential rewards. A balance between their personal and work lives is more important to them.

Other findings:

• 71% of Millennials (vs. 63% of non-Millennials) say that their work demands significantly interfere with their personal lives.

• Gobally-focused. More than one third (37%) of Millennials would like the opportunity to go on a global assignment (vs. 28% of non-Millennials).

• Transparent. Almost half (43%) of Millennials say they have discussed their pay with co-workers (vs. 24% of non-Millennials).

• Not entitled. Millennials say they do not deserve special treatment and are equally as committed as non-Millennials.

8 PwC Cyprus

Many are Defending Future Threats with Yesterday’s Strategies, findsPwC, CIO and CSO’s The Global State of Information Security® Survey 2014

While information security programs have advanced, few organisations are prepared for tomorrow;

New and continually evolving models of information security are needed to keep pace with today’s determined adversaries

Executives have increased security spending and have substantially improved technology safeguards, processes, and strategies. Their adversaries, however, continue to outpace them, according to The Global State of Information Security® Survey 2014 released by PwC US in conjunction with CIO and CSO magazines.

“Our survey results reveal that while there have been improvements in security at companies today–which is a positive sign–many organizations are lagging their opponents, and this poses significant problems for the future,” said Mark Lobel, a PwC Advisory principal focused on cybersecurity. “It is essential that executives actively re-evaluate and update their security strategies and practices on a continual basis to keep pace with today’s threat actors. Without an agile approach to information security, organizations will be underprepared for the evolving and increasingly sophisticated attacks that may be more complicated, complex, and damaging.”

According to the global survey of more than 9,600 executives, the number of security incidents detected in the past 12 months increased by 25 percent over last year; however, the number of respondents who do not know how many incidents occurred has doubled over the past two years.

“Given today’s escalating threats, organizations need to implement new technologies that can continually monitor the network, applications and data for anomalous activity that might indicate a security incident in progress,” said Bob Bragdon, publisher of CSO.

Smart phones, tablets, the “bring your own device” (BYOD) trend, and the proliferation of cloud computing have elevated security risks, yet efforts to implement mobile security programs do not show significant gains over last year and continue to trail the increasing use of mobile devices. While 47 percent of respondents use cloud computing—and among those who do, 59 percent say security has improved—only 18


percent include provisions for cloud in their security policy. The survey found that while most respondents have implemented traditional security safeguards (such as VPNs, firewalls, encryption of desktop PCs), they are less likely to have deployed tools that monitor data and networks to provide real-time intelligence about today’s risks.

In today’s elevated threat landscape, it is critical that organizations rethink their security strategy so that it is integrated with business needs and strategies and is prioritized by top executives. Yet the survey found many respondents have not done so. Collaboration with others to improve security has become a key way to gain knowledge of dynamic threats and vulnerabilities, however only 50 percent of respondents said they collaborate.

“Integrated security should be a pivotal part of an organization’s business agenda and organizational culture – and every employee, supplier and partner should understand and agree to follow your security policy,” said David Burg, PwC’s Global and U.S. Advisory Cybersecurity Leader. “Building and sustaining a culture of security awareness will also require the full support of top executives, including the CEO and board members. It cannot happen without them.”

Respondents say the top three obstacles to improving security are: insufficient capital funding, a lack of vision on how future business needs will impact security, and a lack of leadership from the CEO or Board.

“You can’t fight today’s threats with yesterday’s strategies,” said Gary Loveland, a PwC Advisory principal focused on cybersecurity. “What’s needed is a new model of information security, one that is driven by knowledge of threats, assets and the motives and targets of potential adversaries.”

Insiders, particularly current or former employees, are cited as a source of security incidents by most respondents. And while many believe nation-states cause the most threats, only 4 percent of respondents cited them, whereas 32 percent pinpoint hackers (those who gain unauthorized access to a computer or network to steal information or cause harm) as a source of outsider security incidents.

To explore the survey findings visit: www.pwc.com.cy/technology-consulting (under "Our Publications" section) or www.pwc.com/gsiss2014.

10 PwC Cyprus

Shifting the balance from direct to indirect taxes: perspectives and challenges

The spread of Value Added Tax (VAT) or Goods and Services Tax (GST) across the world is continuing at a rapid pace. The design of these taxes is constantly under review too for those jurisdictions that already have them; there are notably fundamental reforms being contemplated by India and China, with the latter moving swiftly to the transition from business tax to full VAT. On the other side of the Pacific Ocean, the US is still considering VAT but with no major changes expected in the near future. Customs and excise duties and other trade charges or levies, that are typically not identified as taxes in the traditional sense and are usually buried in the cost of goods, are also gaining profile, while the impacts of environmentally-based taxes, albeit still not comparable to those of more traditional taxes such as VAT, are surely set to rise.

Varnavas N NicolaouDirectorIndirect Tax Services

Snapshot of taxes in the current global landscape

The financial crisis has made countries look very carefully at the composition of their tax revenues, coupled with an assessment of the best way of introducing austerity measures. The International Monetary Fund (IMF), the Organisation of Economic Cooperation and Development (OECD) and the European Commission all promote the shift from direct to indirect taxes to help solve the crisis, by reducing costs on businesses to render them more competitive. Indicatively, VAT in the OECD countries today accounts for 20% of total tax revenue, a 70% greater share than in the mid 1980s, and excise duties are at 11%. As regards environmental taxes, little has yet been raised in revenues relative to other indirect taxes. Overall, revenues from taxes on goods and services are now very close to revenues raised from direct taxes such as personal income tax (25%) and corporate income tax (8%). Furthermore, the number of countries with only a sales tax, a unique consumption tax or no real substitute for a VAT is shrinking. The members of the EU VAT system and the 127 or more other countries which have a VAT system are already being joined by those

fairly committed to a VAT system (e.g. Malaysia) and those actively considering VAT plans (e.g. the Gulf Cooperation Council states). These changes pose particular challenges for traders operating in those territories as well as for businesses engaged in international transactions.

VAT is a growth-friendly tax

The OECD has performed a series of studies during the period 2006-2012 with the objective of examining which economic policy reforms could lead to growth. From these studies it transpired that policies which shift the tax mix to less distorting taxes, such as consumption and real estate taxes, would improve incentives to work, save and invest, although they could undermine equity. Another aspect emanating from the said studies is that globalisation has brought with it increased mobility of capital and income. In line with the findings of the aforementioned OECD studies, it was deduced that VAT is neutral as to where economic activity is located whereas high rates of corporate income tax discourage investment. VAT is also neutral as to where income is located whereas the higher the corporate tax rate, the bigger


the incentive to shift income to lower tax jurisdictions. An additional factor to be taken into consideration is the increasing influence of multi-territory indirect tax systems, which add complexity to an already complex set of rules. For instance, the application of the EU VAT regime is a requirement for EU membership, hence existing Member States are tied in and new accession states must comply if they wish to join. The same is envisaged by the Gulf Cooperation Council and the Commonwealth of Independent States.

Focus on the EU: Need for ongoing redesign of the EU VAT regime

A range of proposals should be investigated to confirm that they provide the necessary safeguards for business and tax authorities, in a number of critical areas, to substantially reduce the significant VAT gap within the EU, which is estimated at EUR 107bn annually.Firstly, the tax authorities should further improve the cooperation between them in the following three main areas:

• Transfer pricing and customs valuation

• Compliance and enforcement, including information exchange and risk management

• Capacity building with a focus on developing the right knowledge, skills and tools for civil servants to administer a viable tax system

During the OECD’s Global Forum on VAT, held in November 2012, it was identified that strategies to combat VAT fraud need to be aligned and countries should collaborate more in specific issues and in establishing best practice in VAT administration and compliance. Looking ahead, the OECD International VAT/GST Guidelines are set to deal with the following matters:

• Ways of ensuring VAT-neutrality in practice

• Application of the destination principle on B2B and B2C cross-border supplies of services and intangibles

• Anti-abuse provisions • Mutual cooperation and dispute

resolution

What are the pivotal challenges in the horizon for indirect taxes?

The need for a continuous redesign and fine-tuning of indirect tax regimes will undoubtedly give rise to a number of challenges for businesses, some of which are set out below.

Environmental taxation is set to increase in incidence, scope and magnitude

In coming years, the environmental tax base is expected to broaden significantly as governments will be looking for new ways to raise revenues and will also come under increasing international pressure to transition towards sustainable development while at the same time responding to challenges of climate change and energy scarcity. Over time, environmental tax rates could thus increase to levels that make “business as usual” activities uneconomical and instigate a drive for technological adaptation and innovation. Further, national policymakers are anticipated to continue to add to the existing suite of environmental taxes, fees, charges and incentives. Such environmental taxes can become a hidden cost to businesses, one which may be going unnoticed to the tax department.

Transitioning to new VAT/GST regimes

A number of countries, including key players such as the likes of China, India and the Middle East, are in the process of changing substantial parts of their tax regimes towards a more VAT/GST-focused approach. New transactions envisaged by businesses should better take into account such upcoming changes in order to avoid subsequent surprises. In addition, key changes in the EU regime for B2C supplies of certain services will take effect from 2015 onwards and, following the white paper on redesigning the system, fundamental reform is expected to also arrive.

Customs and trade considerations in business structure changes

Multinationals will likely be called to assess their operations and priorities around the world as a result of the rapidly changing world economy, and this might mean a significant restructuring or a shift in economic activity towards new jurisdictions. A part of the business that can be impacted by such considerations is the one which deals with customs and trade. It would therefore be wise to have the answers before embarking on a restructuring journey.

12 PwC Cyprus

Approach of tax authorities

In times of falling government revenues, tax authorities will be looking to ensure that all taxes due are timely collected. At the same time, the inherent complexity of the application of indirect taxes and the fact that minor differences in the interpretation of transactions can lead to widely different tax treatments and results, both coupled with the increasing complexity of administrative procedures put in place, have given rise to large revenue risks and high compliance costs for businesses.

Being innocently caught up in tax fraud

In order to minimise fraud revenue loss, tax authorities may impose blanket rules on legitimate businesses, such as onerous reporting obligations and joint and several liability. To avoid an increased burden on legitimate traders, businesses need to be vocal and help identify the impact of such anti-fraud measures. Governments, in their turn, should do a thorough impact assessment of such measures and consider changing their approach to risk management (e.g. better screening of VAT registration applications to understand who it is that is trying to enter the VAT system) and fraud detection.

Cashflow impacts on business

The OECD advocates that VAT (and, in principle, indeed all indirect taxes) should not be a cost to businesses but should be neutral, a principle reconfirmed on numerous occasions in rulings issued by the European Court of Justice. However, in countries where the tendency is to manage governmental cash by postponing refunds for valid deductions, the action required by businesses to get what is rightly due to them can be onerous and could even involve costly court action in the case where this is the only or a speedier route to the recovery of taxes.

Poor quality of the data being processed by the financial systems of a business

The financial systems have to reflect the latest legislative developments and the people inputting the data need to be appropriately trained and supervised as the capture of information at point of sale must be absolutely correct. Businesses then need that data to be processed for indirect tax reporting in an efficient and effective fashion. It is likely that in some territories in the future, senior tax personnel may be required to personally provide assurances to their tax authorities about the quality of these systems.

Complexity versus compliance

Internationally indirect tax rules are becoming more complex and cumbersome. Businesses are often penalised for errors and mistakes due to the submission of inaccurate returns caused by lack of clarity in both the law and the compliance process. In the event that a business operates in a number of countries, all operating different place of supply determination rules, with different tax rates, different numbers of payments and different reporting enforcement arrangements, the levels of complexity and therefore the risks run by the organisation can be particularly high.

What does the future hold for indirect taxes and businesses?

The spread of indirect tax systems - particularly VAT - around the world has continued, whether as new taxes or as replacements of other narrower forms of consumption tax. In the 2013 Paying Taxes study undertaken by PwC and the World Bank, it was identified that a consumption tax is currently in place in 154 (84%) of the 184 countries surveyed. This number is set to rise further in the future. At the same time, it is a fact that countries vary considerably as to how much they see the potential in taxing consumption, with implicit tax rates varying from less than 15% (Spain) to more than 31% (Denmark). One thing is, nevertheless, clear for businesses: unless they consider the make-up of their tax bills in the future, they will not be geared up with the right systems and resources to manage them effectively. This might necessitate a fundamental rethinking of the structure of their tax function as well as their broader finance and procurement departments so as to ensure they actually identify the tax costs which need to be controlled.


Straight awayIFRS bulletin from PwC

What is the issue?

The IASB has published an exposure draft of proposed amendments to the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). SMEs include all entities that are not publicly traded and that are not banks or similar financial institutions.

The exposure draft lists 57 proposed amendments. However most of the proposed amendments clarify existing requirements or add supportingguidance, rather than propose changes to the existing requirements in the IFRS for SMEs.

The most significant proposed change is to align the principles of the income tax guidance with those of IAS 12, Income Taxes for the recognition and measurement of deferred tax.

The amendments are expected to apply one year after being issued in final form with early adoption permitted. The deadline for comments is 3 March 2014.

The main proposed amendments are summarised below.

Section 1- Small and Medium-sizedEntities

The amendment clarifies that those entities that hold assets in a fiduciary capacity are not automatically publicly accountable. It also clarifies that a parent entity that does not itself have public accountability, may present its separate financial statements in accordance with IFRS for SMEs, even if it presents its

If you would like further information, please contact:

Tasos N Nolas, Partner Assurance [email protected]

Anna G Loizou, PartnerAssurance [email protected]

T: +357 25 555000F: +357 25 555001

IASB publishes exposure draft of proposed amendments to the IFRS for SMEs

consolidated financial statements in accordance with full IFRS or another GAAP.

Section 2 – Concepts and PervasivePrinciples

The amendment provides guidance on the “undue cost or effort” exemption. The guidance clarifies that an entity is exempt from a specific requirement ifobtaining or determining the information necessary to comply with that requirement would result in excessive incremental cost or excessive additional effort. This guidance is used in several sections of the IFRS for SMEs: measurement of investments in equity instruments at fair value (sections 11 and12), recognition of intangible assets separately in a business combination (section 19), and offsetting of income tax assets and liabilities (section 29).

Section 9 – Consolidated and SeparateFinancial Statements

The amendment clarifies that subsidiaries acquired with the intention of sale or disposal within one year should be excluded from consolidation. It also explains that the cumulative translation adjustment arising from the translationof a foreign subsidiary is not recycled toP&L on disposal of the subsidiary.

The ED proposes an amendment to the definition of ‘combined financial statements’ to refer all entities under common control, rather than only those under the common control of a single investor, and provides guidance on the preparation of consolidated financial statements if group entities have different reporting dates.

14 PwC Cyprus

Section 18 and 19 – Intangible Assets and Goodwill

The amendment proposes that the useful life should not exceed 10 years (rather than be fixed at 10 years) if an entity is unable to make a reliable estimate of the useful life of an intangible asset (including goodwill).

Section 19 – Business Combination andGoodwill

The amendment replaces the undefined term ‘date of exchange’ to ‘date of acquisition’.

It clarifies the measurement requirements for employee benefit arrangements and deferred tax when allocating the cost of a business combination.

The amendment also provides guidance on the calculation of non-controlling interest in the acquiree.

Section 29 – Income Tax

This section is substantially changed to align the main principles with IAS 12,‘Income taxes’, for recognition and measurement of deferred tax. A ‘clean version’ of section 29 is provided in the appendix of the ED.

Other proposed alignments with fullIFRSs

Section 5 – incorporates the main change under IAS 1 (2011 amendment),‘Presentation of items of othercomprehensive income’.

Section 6 – incorporates IAS 1,‘clarification of statement of changes in equity’ from Improvements to IFRSs, issued in May 2010.

Section 17 – incorporates IAS 16,‘Classification of servicing equipment’, from Improvements 2009-2011 Cycle, issued in May 2012.

Section 22 – incorporates (i) the conclusions of IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’; (ii) IAS 32, ‘Tax effect of distributions to holders of equity instruments’, from Improvements 2009-2011 Cycle, issued in May 2012.

Section 26 – aligns the scope and the definitions with IFRS 2, ‘Share-based payment’.

Section 33 – align the definition of‘related party’ with IAS 24, ‘Related partydisclosures’ (2009).

Section 35 – incorporates various limited scope amendments and improvements to IFRS 1 issued in 2010 and 2012.

Am I affected?

Entities that apply IFRS for SMEs will be affected by the proposed changes.

What do I need to do?

Management should read the proposed amendments in their entirety to determine the impact and consider commenting on the proposals.



Revenue recognition – Boards wrap up redeliberations

What’s new?

The IASB and FASB (the ‘Boards’) met to finalise the outstanding issues related to their joint revenue recognition project. Their decisions are tentative and subject to change, but they do not intend to jointly discuss revenue again, and expect to issue a final revenue standard in late2013 or early 2014.

What are the key decisions?

Constraint on variable consideration including sales- or usage-based royalties

The Boards confirmed that an estimate of variable consideration is included in the transaction price if it is ‘highly probable’ under IFRS (‘probable’ under US GAAP) that the amount would not result in a significant revenue reversal. The estimate recorded is a portion of the total variable consideration (that is, a minimum amount) when only that portion is ‘highly probable’ of not being reversed. Management must reassess this each reporting period.

The Boards reversed an earlier decision by reintroducing an exception for revenue from sales- or usage-based royalties from licences of intellectual property (IP). Royalties from licences of IP are not included in the transaction price until they are no longer variable (that is, when customer’s subsequent sales or usages occur). The exception does not apply to other sales- or usage- based royalty arrangements.

Licences

The Boards decided on a model that distinguishes between two types of licences – one that provides a right to use IP, and one that provides access to IP.The type of licence largely depends on whether the nature of the underlying IP is ‘dynamic’ or ‘static’. A licence of static IP is considered a right to use IP and results in revenue recognition when control has transferred to the licensee and the licence period has begun. Alicence that allows the customer to access an entity’s IP – as it exists at the time of access – results in revenue recognition over time, because the underlying IP is dynamic.

Licences that meet the following criteria are dynamic:

• The licensor will undertake (either contractually or based on practice) activities that significantly affect the IP to which the customer has rights.

• The activities do not otherwise transfer a good or service to the customer as they occur.

• The rights granted by the licence directly expose the customer to any effects (both positive and negative) of those activities on the IP, and the customer entered into the contract with the intent of being exposed to those effects.

The Boards emphasised that an entity should apply the five-step model to determine whether the licence is ‘distinct’ from other goods or services in the arrangement. The boards intend to provide additional implementation guidance for licences in the finalstandard.

Collectibility

The Boards introduced a collectibility threshold. An entity only applies the revenue guidance to contracts when it is‘probable’ the entity will collect the consideration it will be entitled to in exchange for the goods or services it transfers to the customer. This assessment is based on both the customer’s ability and intent to pay as amounts become due.

The introduction of the threshold could result in differences between entities reporting under IFRS and those reporting under US GAAP, because‘probable’ is defined differently underIFRS and US GAAP.

Am I affected?

The final standard will affect most entities that apply IFRS and US GAAP. Entities that currently follow industry- specific guidance should expect the greatest impact.

What’s next?

A final standard is expected in late 2013 or early 2014.

The final standard will be effective for the first interim period within annual reporting periods beginning on or after 1January 2017. Early adoption is permitted.




T: +357 25 555000F: +357 25 555001

16 PwC Cyprus


What is the issue?

The European Securities and Markets Authority (ESMA) issued its 2013 public statement on 11 November 2013. In the statement, ESMA identifies the common enforcement priorities for financial statements for the year ending 31December 2013.

What are the key messages?

The 2013 statement identifies five financial reporting topics as priorities:

1. Impairment of non-financial assets

European enforcers, co-ordinated by ESMA, collected data on the quality of disclosures about impairment of non- financial assets. Based on this review, ESMA emphasises:

• Cash flow projections should be based on reasonable and supportable assumptions.

• Key assumptions should be disclosed at an appropriate level of disaggregation.

• Sensitivity analysis disclosure should be improved.

2. Measurement and disclosure of post- employment benefit obligations

Determining the discount rate for measuring defined benefit obligations has been a hot topic in the accounting community in 2013. IAS 19 requires companies to use a rate based on high quality corporate bonds (HCQB). This has been discussed a number of times at the Interpretations Committee, which noted that a reduction in the

number of HQCB should not result in a policy change. ESMA expects entities to maintain their current approach in determining discount rates.

ESMA also reminds issuers of the importance of disclosing significant actuarial assumptions.

3. Fair value measurement and disclosure

Issuers should assess the impact of IFRS13 on their fair value measurement. ESMA draws attention to three areas:

• Non-performance risk should be reflected in the fair value of a liability.

• The unit of account should be disclosed clearly.

• There are a number of enhanced disclosure requirements.

4. Disclosures related to significant accounting policies, judgements and estimates

ESMA expects issuers to focus on the quality and completeness of disclosures that are relevant to the entity’s financial statements. These should be entity- specific, not boiler-plate.

ESMA believes that disclosures could be improved in the following areas:

• Significant accounting policies. • Judgements made by management. • Sources of estimation uncertainty. • Going concern. • Sensitivities. • New standards issued but not

effective.

5. Financial instruments

ESMA states that issuers should:

• Ensure that they meet the IFRS 7 requirements for qualitative and quantitative disclosures.

• Assess whether there is objective evidence of impairment.

• Provide disclosures sufficient to provide a comprehensive picture of the liquidity risk and funding needs of the entity.

ESMA European common enforcement priorities for 2013 financial statements

Am I affected?

The statement gives areas of particular focus for listed companies’ financial statements for the year ended 31December 2013. It should be used as a best practice guide for both preparers and auditors.

ESMA, together with the European national enforcers, will monitor and assess the application of IFRS requirements relating to the items mentioned in the 2013 public statement.




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Moving to an expected loss impairment model for financial assets

Following several years of discussions and two previously published proposals, the IASB has issued an exposure draft (ED), ‘Financial instruments: Expected credit losses’. It proposes an expected loss impairment model that will replace the current incurred loss model of IAS 39. The ED addresses the criticisms of ‘too little, too late’ that arose during the recent financial crisis. So it is expected that impairment losses will not only be larger but will also be recognised earlier.

Key provisions

General model

Under the proposed model, an entity should recognise an impairment loss equal to 12-month expected credit loss; or, if the credit risk on the financial instrument has increased significantly since initial recognition, it should recognise a lifetime expected credit loss.

12-month expected credit losses are all cash flows not expected to be received over the life of the financial instrument (‘cash shortfalls’) that result from those default events that are possible within 12 months after the reporting date.

Lifetime expected credit losses are cash shortfalls that result from all possible default events over the life of the financial instrument.

Calculation of the impairment

Expected credit losses are determined using an unbiased and probability-weighted approach, and they take into account the time value of money. The calculation is not a best-case or worst-case estimate; rather, it should

incorporate at least the probability that a credit loss occurs and the probability that no credit loss occurs.

Assessment of credit deteriorationWhen determining whether lifetime expected losses should be recognised, an entity should consider the best information available, including actual and expected changes in external market indicators, internal factors and borrower-specific information.

Where more forward-looking information is not available, delinquency data can be used as a basis for the assessment. But, in this case, there is a rebuttable presumption that lifetime expected losses should be provided for if contractual cash flows are 30 days past due.

An entity does not recognise lifetime expected credit losses for financial instruments that are equivalent to ‘investment grade’.

Interest income

Interest income is calculated using the effective interest method on the gross carrying amount of the asset. But, once there is objective evidence of impairment (that is, the asset is impaired under the current rules of IAS 39), interest is calculated on the net carrying amount after impairment.

Purchased or originated credit impaired assets

Impairment is determined based on full lifetime expected credit losses for assets where there is objective evidence of impairment on initial recognition. Lifetime expected credit losses are included in the estimated cash flows when calculating the asset’s effective interest rate (‘credit-adjusted effective interest rate’), rather than being recognised in profit or loss. Any later changes in lifetime expected credit losses will be recognised immediately in profit or loss.

Trade and lease receivables

The ED includes a simplified approach for trade and lease receivables. An entity should measure impairment losses at an amount equal to lifetime expected losses for short-term trade receivables resulting from transactions within the scope of IAS 18, ‘Revenue’. For long-term trade receivables and for lease receivables under IAS 17, ‘Leases’, an entity has an accounting policy choice between the general model and the model applicable for short-term trade receivables.

The use of a provision matrix is allowed, if appropriately adjusted to reflect current events and forecast future conditions.

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Scope

The ED should be applied to: financial assets measured at amortised cost under IFRS 9; financial assets measured at fair value through other comprehensive income under draft ‘Classification and Measurement: Limited amendments to IFRS 9’; loan commitments when there is a present legal obligation to extend credit, except for loan commitments accounted for at fair value through profit or loss (FVPL) under IFRS 9; financial guarantee contracts within the scope of IFRS 9 that are not accounted for at FVPL; and lease receivables within the scope of IAS 17.

Disclosures

Extensive disclosures are proposed, including reconciliations of opening to closing amounts and disclosure of assumptions and inputs.

Effective date and transition

The proposal does not specify its effective date, but it refers to IFRS 9 that currently sets it as 1 January 2015. The IASB is seeking comments on the appropriate mandatory effective date for all phases of IFRS 9.

The proposal is to be applied retrospectively; but restatement of comparatives is not required.

Is convergence achieved?

Convergence is not yet achieved, because the IASB and the FASB are proposing different impairment models. The FASB issued an exposure draft on ‘Financial Instruments – Credit losses’ in December 2012. The major difference between the IASB’s proposed model and the FASB’s ‘Current expected credit loss’ model is that, under the FASB’s proposal, a full lifetime expected loss is recorded on initial recognition, whereas the IASB requires a significant increase in credit risk before recognising full lifetime expected losses.

Comments

Following release of the ED, the IASB continued deliberations and made several tentative decisions as they addressed feedback from the comments letters and other outreach. The key decisions include:

• Clarification that the 12 month expected credit losses (ECL) are a portion of the lifetime ECL and are not the cash shortfalls that are predicted over the next 12 months.

• Confirmation that the rebuttable presumption that a financial asset has increased its credit risk when payments are more than 30 days past due.

• Confirmation that entities may assume, as a practical expedient, that there has not been a significant deterioration in low credit risk instruments.

• The effective interest rate (EIR) is the appropriate discount rate. If the EIR is not known, an approximation should be calculated on a reasonable basis. If an approximation cannot be made, a risk-free rate is used.

Am I affected?

The ED will affect all entities; but financial institutions will be most significantly impacted.

What next?

Deliberations continue. A standard is expected in the first half of 2014.




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Leasing – has the case for change been made?

IASB/FASB publish revised exposure draft on leases

On 16 May 2013, after more than two years of deliberations, the IASB and FASB issued a revised exposure draft (ED) of a standard for leases.

This ED attempts to address many of the criticisms of the 2010 ED. At a high level, the proposed model appears simpler to apply than the previous proposals. But this might underestimate the impact of having to identify and recognise assets and liabilities in respect of all leases, as well as the need to re-think which accounting model to apply to different types of lease.

Key proposals

Lessee accounting

Consistent with the 2010 proposals, the ED eliminates off balance sheet accounting for lessees. The balance sheet distinction between operating and finance leases is removed, and a new asset (representing the right to use the leased item for the lease term) and liability (representing the obligation to pay rentals) are recognised for all leases (except short-term leases – see below).

The definitions of ‘lease term’ and ‘lease payment’ have changed since the 2010 ED. The lease term will include optional extension periods only where there is a significant economic incentive to extend. Lease payments used to measure the asset and liability will exclude contingent rents that vary on the basis of usage or performance (such as sales from a retail store or distance flown by an aircraft). These bases of measurement will result

in lower carrying values for lease assets and liabilities than those under the 2010 proposals, and are not significantly different from current accounting for finance leases under IAS 17.

Probably the most significant change since the 2010 ED (although it represents less of a change from current requirements) is that the boards are now proposing two different expense recognition patterns for different types of lease: some (termed ‘type A’ leases) will apply the approach proposed in 2010, similar to current finance lease accounting with its resultant expense front-loading; and others (‘type B’ leases) will apply a straight-line expense recognition pattern, similar to current operating lease accounting. The approach to be applied will depend on whether the lessee acquires or consumes more than an insignificant portion of the underlying asset. Where this is the case, the lease will be treated as a type A lease; otherwise, it will be treated as type B.

Acknowledging the practical difficulties inherent in this approach, the boards have proposed a series of presumptions depending on the nature of the underlying asset. Leases of property should be treated as type B, unless the lease term is for the major part of the property’s remaining economic life, or the present value of the lease payments accounts for substantially all of its fair value. Leases of assets other than property (such as vehicles or equipment) should be treated as type A, unless the lease term represents an insignificant portion of the underlying asset’s total economic life, or the present value of the fixed lease payments is insignificant relative to the fair value of the underlying asset.

Lessor accounting

The proposals for lessor accounting have also changed since the 2010 ED. Consistent with lessee accounting, lessors will identify leases as either type A or type B, using the same criteria. For type B leases, the lessor will follow accounting that is similar to current operating lease accounting. For type A leases, the lessor will derecognise the underlying asset and replace it with a lease receivable (measured at the present value of the lease payments) and a residual asset (measured at the present value of the estimated residual value at the end of the lease term plus the present value of any expected variable lease payments). Any profit relating to the receivable component is recognised immediately, whereas profit relating to the residual component is deferred until the underlying asset is re-leased or sold by the lessor. Interest income on both the receivable and the residual asset is recognised over the lease term.

Distinguishing between a lease and a service

The ED includes new guidance on assessing whether a contract contains a lease or a service, or both. This guidance is different from the current IFRIC 4 analysis and might result in some contracts being treated differently.

Disclosures

The proposed model will require more extensive disclosures – both qualitative and quantitative – than under current standards.

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Transition

Pre-existing leases will not be grandfathered. All leases will need to be reassessed, and the new model will be applied using either a fully retrospective approach or a simplified retrospective approach.

The ED does not propose an effective date. We anticipate that the final standard will be effective no earlier than 2017.

Am I affected?

Almost all companies enter into lease arrangements, so the proposals will have a pervasive impact. But certain types of leases are excluded from its scope, namely:

• leases of intangible assets; • leases to explore for or use natural

resources; • leases of biological assets; and • service concession arrangements

within the scope of IFRIC 12.

In addition, both lessees and lessors can elect, by class of underlying asset, to account for leases with a maximum term of up to 12 months in a similar way to current operating lease accounting.

Comments on exposure draft

The comment period for the proposed leasing standard has come to an end. But it looks like the debate has just begun.Over 600 letters were received by the IASB and FASB in response to the ED. The responses, discussed in more detail below, reveal mixed support. Many reactions have been less than positive and some go as far as implying financial meltdown if the proposals were to go ahead. More recently the Investor Advisory Committee (IAC)1 expressed that lease proposal is not an improvement to current lease accounting and supported a comprehensive disclosure package that would allow investors to better understand the risks and uncertainties related to lease contracts.

It has already been a long journey and after two years of re-deliberations, a clear ending is still not in sight. Does anyone remember how we got here?

How did we get here?

The IASB reminded us recently why this project was initiated. Investors and analysts go to the trouble of adjusting a lessee’s balance sheet to capitalise operating leases and recognise an obligation for future payments. Such adjustments can unfortunately result in inaccurate estimations and lack of comparability among entities.

The need to adjust is a consequence of the current accounting model which only requires a lease to be reported on the balance sheet when it is economically similar to purchasing an asset. So the majority of the leases (operating leases) are reported off-balance sheet. The new proposal aims to address this issue and improve the quality of information in other areas, such as lessor accounting.

The following summary of the responses received details some of the concerns and at the same time highlights the key effects of the proposal if it goes ahead.

The comments received

Lessee model

The proposed model requires a lessee to recognise a right-of-use asset and a lease liability for all leases greater than 12 months. The expense recognition pattern depends on the nature of the underlying asset. Expense is recognised on a straight-line basis for most property leases (type B), while non-property leases (type A) result in front-loaded expense.

Most respondents support the principle that an entity should recognise assets and liabilities arising from a lease. However, only a few support the dual approach for expense recognition. Most felt that a concept based solely on the nature of the leased asset introduces a bias for one approach or the other. They said that the economics are not always based on the asset type. In addition, leases often include both asset types as components, which leads to complexity.

A number of alternatives have been suggested. Some advocate going back to the original ED with only one type of lease. Others go as far as to suggest retaining IAS 17 with additional disclosures.

Type A or B?

Many commented that a new dividing line based on the nature of the underlying asset reduces usefulness and does not represent an improvement over the current accounting model.


Lessor model

The ED proposes few changes to lessor accounting for finance leases. For operating leases, a lessor distinguishes between leases of property and non-property in the same way as a lessee. Fewer comments were made about the lessor model. For those who did comment, there was little appetite for change. Most do not believe symmetry between lessee and lessor income statement models is necessary. Some called for consistency with the proposed revenue standard which covers accounting for licences.

Lease term

The lease term is the non-cancellable term plus any options to extend when a significant economic incentive to exercise such options exists. Respondents requested more clarity on what ‘significant economic incentive’ means and how it is different from the existing guidance of ‘reasonably certain’ in IAS 17 today.

Variable payments – reassessment

Lease payments include both variable amounts based on a rate or an index and those that are in substance fixed. The proposals require that the lease liability is remeasured for changes in the rate or index.

Many respondents found the requirement to reassess complex and burdensome. Some suggested applying a materiality threshold since changes in value driven by variables like CPI are too small to warrant the effort.

Transition and disclosures

Many respondents noted that the proposed disclosure requirements are extensive and complex. Many also noted that it will be costly and time consuming to implement.

Most support the proposed modified retrospective application. Suggestions to ease the transition included applying a prospective method and excluding leases that have expired by the effective date.

Do the costs outweigh the benefits?

Comments expressed concerns regarding complexity and costs to implement the new proposals.

Where to go from here?

The IASB will begin redeliberations in the next few months, but the future is not clear. Although many expressed dissatisfaction with the current proposals, no action at all seems unlikely given the origins of the project.

There also remains a question of convergence with US GAAP. There were some rather negative responses from US constituents. So it will be interesting to see if the FASB still remains committed to convergence.




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PwC events and activities

You can talk the talk, but can you walk the walk?

The sponsored walk event organised by the Women in PwC committee on Sunday, 3 March gathered more than 120 participants in an effort to collect money for ‘Paidiki Stegi’ in Nicosia and Limassol.

The PwC Classic & Sports Car Club has actively supported this initiative by offering free transportation to participants from Nicosia to Limassol in classic cars, generously provided and driven by members and friends of the club.

Congratulations to the walkers, participants and sponsors who managed to collect more that €7.500 for this cause.

You talk the talk, but can you walk the walk?

Limassol Marathon GSO

Corporate Responsibility

The 2013 Limassol Marathon GSO was organised on 24 March 2013 at the Limassol Molos area. This is the official marathon of our country, accredited by the international federations of AIMS and IAAF and includes a Marathon, Half Marathon, Health Race, Corporate Race and a Children / Student Race.

This year's slogan ‘Run along the Waves’ represents the true experience of participants running along the beautiful Limassol coastline.

The PwC team, consisting of more than 60 PwC members, family and friends achiev the 9th place among the 92 teams participating in the corporate race.


University Awards

George Kazamias, Partner, Assurance Services attended the graduation ceremony at the University of Cyprus which was organised on 26 June, to deliver the awards sponsored by PwC to three Honours students of the Department of Economics and Management.

University of Cyprus Intercollege Limassol Campus

Vasilis Hadjivassiliou, Partner, Assurance Services attended the graduation ceremony at the Intercollege Limassol Campus on 25 June to present the PwC award to the top accounting student.

Frederick University

During the graduation ceremony of Frederick University, the top student of the Business Administration programme was presented with an award sponsored by PwC.

48-Hour Cyprus Rally Within the context of our corporate responsibility activities, the "PwC CSC Club" participated for the 5th consecutive year to the 48-Hour Cyprus Rally charity event, which took place between 5-6 October 2013 at Platres and was open to all classic vehicles over 30 years of age.

The event was organised for the 11th consecutive year, in cooperation with the Cyprus Federation of Classic Vehicles (FIPA), and the Platres Improvement Board, in an effort to raise funds for the Cyprus Anti-cancer Society.

Corporate Responsibility

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Cyprus Hotels Association 35th Annual conference

PwC Cyprus was the official sponsor of the 35th Annual Conference of the Cyprus Hotels Association (CHA) which was organised on Wednesday, 13 February 2013.

The conference attracted high profile speakers such as the Director of the World Tourism Organisation, Mr Martin Brackenbury, representatives of the Russian and Ukrainian tourism industries as well as top officials from the Cyprus Investment Promotion Agency and Hermes Airports.

The conference was addressed by the Minister of Commerce, Industry and Tourism, Mr Neoklis Sylikiotis, the CEO of PwC Cyprus, Evgenios Evgeniou and the President of CHA, Mr Haris Loizides.

Through their presentations, speakers analysed the ways for “building our future with sustainable strategic alliances capitalising on our proven strengths” which was the overall theme of the conference.

Speakers also participated in a panel discussion which was coordinated by Angelos Loizou, Partner in charge of Hospitality and Leisure Services at PwC Cyprus. An Exhibition of Products and Services was also held during the day of the conference.

Debating on Europe’s futureWhat lies ahead for Cyprus with a new government?

PwC was the founding sponsor of the "Debating on Europe's future" conference which was organised by The Economist on 22 March 2013 at the Hilton Park Hotel.

Mr Rolf E. Meakin, Global Telecoms Advisory Leader, PwC U.K., Mr Costas Mitropoulos, PwC Greece Partner and former Managing Director of the Hellenic Republic Asset Development

Fund as well as Mr Arnold Hansjoerg, PwC Germany Partner, Member of the Transport Infrastructure Commission of the State of Hessen and Head of PPP Commission, Forum on the future of finance, Frankfurt, participated in the session which focused on privatisations and discussed the lessons learnt from European Experiences.

Real Estate: The Chinese connection with Cyprus

The real estate conference was organised by the Cyprus Chamber of Commerce and Industry and the Cyprus - China Business Association on 21 March 2013 at the Hilton Cyprus Hotel in Nicosia.

The conference which was sponsored by PwC, focused on global real estate investment opportunities, on the needs of Chinese real estate buyers and risk management in real estate.

The conference was addressed among others by the President of the Cyprus Chamber of Commerce and Industry, the Ambassador of the People’s Republic of China and by Panicos Kaouris, Direct Tax Services Partner in PwC Cyprus.


Global Russia Business Meeting

The Global Russia Business Meeting is the leading annual gathering of Russian business leaders outside Russia. Our firm was a Knowledge Partner of the 4th Global Russia Business Meeting which gathered more than 300 senior leaders from business and government in Limassol, from 14 to 15 April 2013.

Mr Nicos Anastasiades, President of the Republic of Cyprus, addressed participants during the opening dinner. Evgenios Evgeniou, CEO of PwC Cyprus and Theo Parperis, Partner, In charge of Global Compliance Services participated in a boardroom dialogue session which focused on Cyprus as an international business and investment hub.

Cyprus Business and Real Estate Forum 2013

The Cyprus Business and Real Estate Forum 2013 was organised on 29 March 2013 in Kiev by the Embassy of Cyprus in Ukraine, the Cyprus Chamber of Commerce & Industry, the Cyprus Investment Promotion Agency, the Cyprus Tourism Organisation and MIBS group.

The forum, sponsored by PwC Cyprus, aimed to present Cyprus as an investment destination providing comprehensive knowledge on living and investing in Cyprus. During the conference, Nicos Chimarides, Partner in charge of Direct Tax Services at PwC Cyprus delivered a presentation on the use of Cyprus in real estate structuring.

The Cypriot-Greek Oil & Gas 2013 Summit

PwC was one of the sponsors of the 2nd Annual Cypriot-Greek Oil & Gas 2013 Summit that was held from 18 to 19 April 2013 in Limassol.

The forum examined the outcome of the first licenses awarded and assessed the real opportunities arising, from the upstream operations, to the necessary developments in the promising downstream sector of both countries, as well as in the East Mediterranean region.

The agenda of the two day Summit covered key areas such as the exploratory advancements, operational prospects, challenges and the regulations that will affect the exploration and offshore activities.

Constantinos Taliotis, Partner, In charge of Energy team, delivered a presentation on developing and supporting energy projects in Cyprus.

Cyprus: New Realities and OpportunitiesBusiness Breakfast at Baker McKenzie Moscow

On 4 June 2013 a client event with the title ‘Cyprus New Realities and Opportunities’ was organised by Baker McKenzie at their Moscow offices.

Upon invitation, Theodoros Parperis, Partner, In charge of Global Compliance Services and Stelios Violaris Direct Tax Services Partner at PwC Cyprus presented on the latest Cyprus economic situation, tax regime status and the newly relaxed citizenship criteria. The conference was received very

well by all clients in presence and concluded with very positive comments by the Baker Partners themselves, Igor Makarov (Legal) and Sergei Zhestkov (Tax) highlighting that Cyprus remains overall the best package for Russia inbound investments expressing their intention to continue offering Cyprus to their clients as the obvious choice.

26 PwC Cyprus

Cypriot businesses survival conference

The Cypriot businesses survival conference was organised with great success on Wednesday, 26 June 2013 at the Holiday Inn Hotel in Nicosia. The conference aimed at addressing all aspects of the current economic crisis affecting Cypriot companies and the economy in general and to provide useful and practical tools that will support companies in their recovery efforts. The conference which was supported by the Cyprus Chamber of Commerce and Industry and organised in association with IMH, attracted 400 leaders and executives from the local business community.

The conference was addressed by Mr Phidias Pilides, President of the Cyprus Chamber of Commerce and Industry, the CEO of PwC, Evgenios Evgeniou and the Head of Assurance & Advisory Services at PwC, Liakos Theodorou who was also the Chairman of the conference.

Distinguished speakers included Messrs George Vassiliou, former President of the Republic, Stavros Zenios, Professor at the University of Cyprus, Olympios Toumazou, Executive President of RAI Consultants, George Georgiou, Managing Director of Alpha Bank and Ploutarchos Sakellaris, Professor at the Athens University of Economics and Business and Vice President of the European Investment Bank.

Presentations were also delivered by PwC Advisory Partners, Philippos Soseilos and George Lambrou, by Socrates Paschalis, Director and by Michalis Stephanou, Senior Manager in Assurance & Advisory Services.

The new business environment under the MoUProspects and challenges

In the context of providing support to local businesses, PwC Cyprus organised an event with the topic “The new business environment under the MoU. Prospects and challenges” on Wednesday, 29 May 2013 at Aliathon Hotel in Paphos.

The conference which was mainly addressed to owners and executives of businesses operating in the city of Paphos focused on the new business environment after the signing of the MoU as well as on overcoming the current business challenges.

The event was addressed by the Mayor of Paphos, Mr Savvas Vergas and by the President of Paphos Chamber of Commerce and Industry, Mr George Leptos. Pantelis Evangelou, Direct Tax Services Partner at PwC analysed the main provisions of the memorandum and their impact on entrepreneurship, while Mr Elias Dinenis,

Rector of the Neapolis University focused on the ways of exiting the economic crisis using examples from other countries.

Particular emphasis was placed on the ways of supporting entrepreneurship both through the presentation of Philippos Soseilos, Advisory Partner and the panel discussion which followed. Participants of

the panel discussion included Messrs Elias Dinenis, Pantelis Evangelou, Marios Kedaritis, Hellenic Bank, Polys Polydorou, Piraeus Bank and Matheos Charalambides, Eurobank. The discussion was moderated by Angelos Loizou, Partner, In charge of Local Compliance Services.


Future of Government

The Future of Government event was organised on Wednesday, 25 September at the Ministry of Finance. The purpose of the event was to present the findings of the international report “Future of Government” which focuses on the efforts of national governments to meet the changing expectations of the society as well as on the rapid technological developments, during a period of austerity and budget cuts.

The event gathered officials and representatives from the public and semi-government sectors as well as members of the local administration and other stakeholders. It was addressed by the Minister of Finance, Mr Harris Georgiades and by Evgenios Evgeniou, CEO of PwC Cyprus. The findings of

the report were presented by Mr Jan Sturesson, Global Leader of Government and Public Services at PwC. Following the presentation of the findings, Mrs Emmanuela Lambrianides, Commissioner for the Reform of the Civil Service delivered a presentation on reforming the Civil Service of Cyprus.

Mrs Lambrianides and Mr Sturesson also participated in a panel discussion coordinated by Philippos Soseilos, Partner, Performance Improvement Consulting. The discussion focused on the reform and economic challenges faced by the public sector as well as on the actions that should be taken in order for the public sector to meet the expectations of the society.

CIPA International Investment AwardsHonouring foreign investments in Cyprus

PwC Cyprus was the platinum sponsor of the CIPA (Cyprus Investment Promotion Agency) awards organised on Tuesday, 10 September. For the second consecutive year, CIPA awarded foreign investors, companies and people who contributed to establishing Cyprus as an attractive destination for foreign investment.

The event, which was organised by IMH, Gold Magazine and CIPA, took place at the Presidential Palace under the auspices of the President of the Republic of Cyprus, Mr Nicos Anastasiades.

Evgenios Evgeniou, CEO of PwC Cyprus addressed the award ceremony and together with the Minister of Finance, Mr Harris Georgiades, delivered an award to Mr Philip Van Dalsen, CEO of MTN Cyprus.

28 PwC Cyprus

Ireland - Cyprus: A journey towards economic and social renascence

PwC Cyprus was a proud sponsor of the “Ireland-Cyprus: Our journey towards economic and social renascence” event organised on Thursday, 26 September by M. Eliades & Partners law firm, the Cyprus Chamber of Commerce and Industry and the University of Cyprus.

The keynote speaker of the event was Mr John Gerard Bruton, Former Prime Minister of the Republic of Ireland. Mr Bruton noted that the countries – members of the European Union should think and act as Europeans and should not focus exclusively on their national goals. He also emphasised on the need

to proceed with the necessary structural changes that will lead to growth.

During his speech, Mr Athanasions Vamvakides, CEO of Bank of America Merrill Lynch Europe, emphasised on the need for Cyprus to stay in the Euro zone in order to overcome the economic crisis.

Participants in the round table discussion that followed included Messrs John Bruton, Athanasios Vamvakides, Michalis Sarris, Former Minister of Finance and Marios Clerides, Chairman of the Cyprus Economic Society and the Cyprus Banking Association.

Mediterranean Oil & Gas Exploration & Production Summit

PwC Cyprus was the Gold sponsor of the 2nd Annual European Mediterranean Oil & Gas Exploration & Production Summit organised by EPG Summit from 7 to 9 October 2013 in Limassol.

The Summit discussed the geo-strategic, commercial, technology and regulatory issues that will shape the future of development and commercialisation of the oil and gas industry in the East Mediterranean region.

PwC Partners, Constantinos Taliotis, Nicos Chimarides, Chrysilios Pelekanos, Spyros Evangelou and Philippos Soseilos delivered a presentation on establishing a strategic presence in Mediterranean Oil & Gas E&P growth markets and discussed financial reporting, tax, legal and human capital issues that companies in the industry may face when setting up in Cyprus and the region.

Stefano Tonetti, Tax & Legal Services Energy Partner at PwC Russia and the CIS delivered a presentation on the main challenges and suggested solutions in relation to cost recoverability in E&P projects.

PwC also led the political risk, financial and legal private round table discussion held during the course of the summit.

Cyprus as a regional centre for US multinationalsEnhancing your Cyprus presence in a tax efficient manner

The “Cyprus as a regional centre for US multinationals” client event was organised on Monday, 21 October 2013 in Nicosia. The aim of the event was to share our Value Chain Transformation (VCT ) experience with US headquartered multinational companies with a certain level of presence in Cyprus and to provide participants with the tools to promote Cyprus within their organisation aiming to strengthen local presence within their regional or even global setup.

The event was coordinated by Stelios Violaris, Direct Tax Partner and partner responsible for our US business development efforts and was addressed

by Costas Mavrocordatos, Head of Tax & Legal Services, Constantinos Leontiou, International Tax Services Director seconded to PwC US where he set up the Cyprus international tax desk, delivered a presentation on how can Cyprus be attractive to US MNCs.

Jennifer De Ville, a New York based Tax Director who specialises on driving VCT projects was the main speaker of the event, delivering a very good insight of the nature, scope and benefits of VCT.


Annual International Fraud Awareness Week

The week 3 to 9 November 2013 was dedicated to fraud awareness, identification and prevention. PwC joined forces with the Cyprus Police and the Association of Certified Fraud Examiners (ACFE), the world’s largest anti-fraud organisation and premier provider of anti-fraud training and education, for the yearly international campaign also known as “Fraud Week.”

On Monday, 11 November, an event

focusing on the prevention and fight against economic crime was organised in collaboration with the Cyprus Police. The event was addressed by the Cyprus Chief of Police, Mr Michalis Papageorgiou and by Liakos Theodorou, Head of Assurance & Advisory.

Christos Tsolakis, Partner, Assurance Services delivered a presentation which focused on prevention, raising awareness

12th HR Management & Human Capital Conference

The 12th HR Management & Human Capital Conference was organised by PwC Cyprus and IMH on 14 November 2013 in Nicosia. The HR Conference is the largest gathering of human resource professionals, general managers and managers from all sectors of economic activity. This year’s conference focused on “How to energise people and promote entrepreneurship when times are tough”.

The keynote speaker was Dr. Constantinos Markides, one of the most influential people in HR and faculty member in Strategic and International Management at London Business School. Dr. Markides is a Cypriot native

who according to Harvard Business Review is «one of the 50 most influential management gurus».

Philippos Soseilos, Head of Human Capital was the chairman of the conference and the coordinator of the closing panel discussion which focused on how to energise people and promote entrepreneurship during difficult times. Members of the panel included senior executives from Dixons South-East Europe AEVE Greece, PHC Franchised Restaurants Public Ltd, IKEA , La Mode Ltd, Tofarco, the University of Nicosia and Evgenios Evgeniou, CEO of PwC Cyprus.

as well as on encouraging business leaders and the general public to take measures for minimising the impact of fraud.

According to Police records, a total of 955 economic crime incidents were recorded in Cyprus during 2012. The highest percentage of these crimes, relate to offences of forgery followed by false representation and crimes of fraud.

7th Logistics and Supply Chain Conference

The 7th Logistics and Supply Chain Conference was organised by IMH on 21 November 2013 in Nicosia.

Our organisation was one of the sponsors of the conference which aimed at presenting new supply chain models for consumer products and partnership examples from Cyprus and Greece.

The conference was addressed to supply chain and logistics managers, human resource managers, operations directors, financial, commercial and technical managers as well as sales, marketing and production managers.

30 PwC Cyprus

Quality conference

The Cyprus Association for quality organised a conference with the subject «Quality: the road towards development» on Thursday, 14 November 2013.

The conference was sponsored by PwC and was organised as part of the association’s continuous efforts to enhance the services offered to the members of the Cyprus Association of quality and the society in general. The conference aimed at promoting new management systems and best practices

that can help companies survive and grow in times of economic crisis.George A Ioannou, Director, Performance Improvement Consulting, together with Christina Evangelides, Manager in our Performance Improvement Consulting group, delivered a presentation on public sector reform. Their presentation focused on a bench marking, re-engineering and process simplification study of three key government departments including the preparation for an ISO 9001:2008 quality management system implementation.

9th Real Estate and Construction Conference

The 9th Real Estate and Construction Conference, organised by IMH and sponsored by PwC, was held on 12 November 2013 in Nicosia with the aim to inform all stakeholders about current issues affecting the global and the local industry.

Among the keynote speakers, Kees Hage, Global Real Estate Leader at PwC analysed the emerging trends in Real Estate Europe. His presentation was based on the annual survey by PwC

in cooperation with the Urban Land Institute, whereby more than 500 of the most influential leaders in the real estate industry, give there heads-up on where to invest, what to develop, which markets and sectors offer the best prospects, and trends in capital flows.

Socrates Paschalis, Director, Capital Markets Group, delivered a presentation on transactions in the real estate industry focusing on the importance of pre-transaction planning and real estate company valuations.


Recent publications

• Global entertainment and media outlook 2013-2017

• Insurance Banana Skins 2013 • Measuring and managing total impact: A new

language for business decisions • The Global State of Information Security® Survey

2014 • APEC CEO Survey report 2013: Towards resilience

and growth

PwC Global

Leaflets • Cyprus the preferred location • Local Compliance Services • VAT – the hidden cost

3 + 1 Ideas to maximise recovery and minimise outflows in the tourist industry

• Υποβολή Κεφαλαιουχικών Καταστάσεων • The New Fiduciary Law

Are you in compliance? • Audit Committees

Stakeholders expect more • Πως οι εταιρείες της Κύπρου θα

προσαρμοστούν και θα ανταπεξέλθουν στην οικονομική κρίση

• Taking Control of FATCA • Risk Assurance Consulting

Can you manage what you can’t see? • Information Technology (IT) Internal

Audit (IA) • Sustainability Business Services (SBS) • We don’t just consult… we deliver

Delivering excellence to the Banking & Capital Markets sector

• Setting up in Cyprus Helping you find your way

• Delivering excellence to the Oil & Gas sector

Publications • Opening the vault of tourism in

Cyprus • Cyprus shipping: A sea of

opportunities • Cyprus Annual Review 2013 • A beginner’s guide to privatisations

For acquiring a copy of publications prepared by PwC Cyprus, contact the receptions of any office in Cyprus. Acrobat (PDF) files of our publications can be found on our website www.pwc.com.cy

PwC Cyprus

32 PwC Cyprus

We are striving to offer our clients the value

they are looking for, value that is based

on the knowledge that our teams draw

from 184,000 experts in 157 countries

and based on experience adapted to local

needs. PwC Cyprus focuses on two main

areas: Assurance & Advisory Services and

Tax & Legal Services. We work closely with

our clients. We ask questions. We listen.

We learn what they want to do, where

they want to go. From all our international

PwC profileknowledge we share with them the piece

that is more suitable for them and thus we

support them on how to achieve their goals.

In the operation of the world’s capital

markets we play an important role and as

business advisors we help our clients solve

complex business problems. We aim to

improve their ability to manage risk and

improve performance. At the same time

we take pride in our quality services which

help to improve transparency, trust and

consistency of business processes.

Our position is strengthened with our more

than 900 professionals and our offices

throughout Cyprus.


Assurance & Advisory Services

Our Financial Assurance services comprise of statutory and regulatory audit services, which include evaluation of information systems, advisory services for capital market transactions, accounting and regulatory issues for all types of businesses through specialist industry divisions:

Financial Services (FS), Consumer and Industrial Products and Services (CIPS) and Technology, Information, Communications, Entertainment and Media (TICE).

Our Risk Assurance Consulting (RAC) offers expertise on internal audit services, internal controls optimisation, corporate governance and reporting, as well as assurance and advisory services related to security and controls of information technology systems including Enterprise Resource Planning (ERP) systems (e.g. SAP, Oracle, Navision), Project Implementation Assurance (PIA), Computer Assisted Audit Techniques (CAATs), Spreadsheet Integrity and IT Risk Diagnostic and Benchmarking. A particular focus of the team is in supporting the financial services industry on matters related to regulatory compliance, licensing and risk management.

Our Performance Improvement Consulting (PIC) is offering specialist advisory services on strategy and operational effectiveness, process improvement, cost reduction, people and change and sustainability issues.

Our Deals & Corporate Finance (DCF) provides consulting on M&A’s, valuations, feasibility studies, transactions support and crisis Management.

Tax and Legal Services

Our PwC network’s tax and legal services include Global Compliance Services, Direct and Indirect Tax Services, Local Compliance Services and Legal Services.

Global Compliance Services

Comprising the whole spectrum of company administration and corporate statutory compliance services, bookkeeping, accounting and payroll services as well as specialised services such as private client services, advice on establishment and administration of local and international business companies, collective investment schemes, UCITS, investment firms and trusts.

Direct tax services

Corporate: Advisory Services for tax planning, international tax structuring, mergers and buyouts and other business issues, tax returns administration, agreement with Tax Authorities and obtaining tax rulings.

Personal: Tax planning, completion submission and agreement of tax returns, tax services to expatriates, pensioners and other non-Cypriot individuals.

Indirect Tax Services

VAT: Advisory services for VAT, VAT recovery and VAT minimisation and tax compliance (administration of VAT returns, communication with VAT authorities, agreement of disputed assessments, etc).

Local Compliance Services (LCS)

Our Local Compliance Services are addressed to all type of businesses that carry out local operations. These enterprises cover a wide range of activities and include private and public companies, government and semi-government organisations, foundations, as well as personal and family enterprises. Our services cover the whole spectrum of accounting, tax and VAT compliance, financial structuring and corporate compliance services.

Legal Services

The legal firm, full member of the PwC international network, offers legal services that cover the whole spectrum of corporate and business law, including advising and representing clients in M&A transactions, re-organizations, European Union law and Competition law, setting up and regulating private companies, setting up joint ventures and other forms of businesses and carrying out legal due diligence.

34 PwC Cyprus

Nicosia

Mailing address: P O Box 21612, CY-1591 Nicosia, Cyprus

Street address: Julia House, 3 Themistocles Dervis Street, CY-1066 Nicosia, Cyprus

Tel. +357 - 22555000 , Fax +357 - 22555001

Limassol

Mailing address: P O Box 53034, CY-3300 Limassol, Cyprus

Street address: City House, 6 Karaiskakis Street, CY-3032 Limassol, Cyprus

Tel. +357 - 25555000, Fax +357 - 25555001

Larnaca

Mailing address: P O Box 40450, CY-6304 Larnaca, Cyprus

Street address: Artemidos Tower, 7th Floor, 3 Artemidos Avenue, CY-6020 Larnaca Cyprus

Tel. +357 - 24555000, Fax +357 - 24555001

Paphos

Mailing address: P O Box 60479, CY-8103 Paphos, Cyprus

Street address: City House, 58 Grivas Dighenis Avenue , CY-8047 Paphos, Cyprus

Tel.+357 - 26555000, Fax +357 - 26555001

PwC offices in Cyprus

© 2013 PricewaterhouseCoopers Ltd. All rights reserved. PwC refers to the Cyprus member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Designed by: PwC Cyprus (Marketing & Communications Department)

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors

ISSN 2301-2064 (print)ISSN 2301-2072 (online)

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