FINMA circular 15/1 Accounting - Banks Disclosure checklist Status: August 2015

Transcription

1 FIA circular 15/1 Accounting - Banks Disclosure checklist Status: August 2015

2 Introduction Introduction FIA circular 15/1 Accounting banks along with the accounting requirements of the Banking Act and the Banking Ordinance is the basis for the Swiss financial reporting requirements for banks, securities dealers and financial groups and conglomerates. This checklist enables users to review whether all of the disclosures are made for financial statements prepared in accordance with FIA circ. 15/1. The checklist covers all of the disclosure requirements. This checklist does not cover other requirements (e.g. valuation rules, approach description or terminology definitions). The indications in italics serve to clarify certain points. References to the relevant regulatory basis are provided for all of the provisions. The tables in annex 5 of FIA circ. 15/1 serve as examples for the layout, but these represent only the minimum requirements in terms of content. The new FIA circ. 15/1 entered into force as of 1 January 2015 and replaced the previous FIA circ. 08/2 Accounting banks. Early adoption of the new regulations was permitted. Application The checklist is based on the structure of the financial statements, taking into consideration the classification requirements of the Banking Ordinance. We recommend using the checklist side-by-side with the financial statements. Any considerations concerning the materiality of the disclosures (e.g. significant changes since the previous year ) must be documented in a verifiable manner. Where FIA circ. 15/1 explicitly specifies the materiality level, this is referenced in the checklist. Type of financial statements The first four columns (from left to right) in the disclosure checklist ( ) specify the applicability of a requirement to the corresponding type of financial statement. FIA circ. 15/1 differentiates the following types of financial statement. The abbreviations used in the disclosure checklist are illustrated below: Statutory single-entity financial statements Reliable assessment statutory single-entity financial statements True and fair view statutory single-entity financial statements True and fair view supplementary single-entity financial statements True and fair view singleentity financial statements Consolidated financial statements (true and fair view) PwC 2

3 Introduction Abbreviations The column provides the references to the corresponding items in FIA circ. 15/1 or to further sources. The reference to the respective regulation is written as follows: Not applicable - The disclosure does not apply to the financial statements in question. Not material - The disclosure is not material and has not been included. CO 123c.1 Article 123c para. 1 Code of Obligations (CO) Definitions BO 12.3 ARB /22.x 08/24.x 10/1.x GL Country Risk X.x FAQ x Article 12 para. 3 Banking Ordinance (BO) Margin number 123 of FIA circ. Accounting banks (Accounting rules for banks, securities dealers, financial groups and conglomerates; ARB) Margin number x of FIA circ. 08/22 Capital adequacy disclosure banks Margin number x of FIA circ. 08/24 Supervision and internal control banks Margin number x of FIA circ. 10/1 Minimum standards for remuneration systems of financial institutions Paragraph X.x of the SBA Guidelines for the Management of Country Risk, Nov Question no. x of FIA Frequently asked questions (FAQs): Circular 2015/1 Accounting Banks (last amended on 22 July 2015) The following indications can be entered in the Disclosure column for each of the items in the checklist: es - The disclosure complies with the legal or regulatory requirements. Disclosure Explanation Reason Breakdown Presentation Simple mention, without any additions; can be quantitative or qualitative. Comments on and interpretation of a finding. Observations and reasoning relating to the cause of a specific action or omission. The impact must be quantified. Subdivision of an amount into its individual components to show how it is composed. Two-dimensional table broken down according to a certain minimum structure. Completeness and accuracy of this checklist We have made every effort to ensure this checklist covers all of the disclosure requirements correctly and completely. Nevertheless, we cannot exclude the possibility that it contains errors. FIA circ. 15/1 or other legal requirement is the sole and exclusive authority. We recommend, therefore, that you consult the legal and regulatory requirements and seek professional advice before making any critical decisions. Depending on the circumstances of each case, additional disclosures may be necessary in order to comply with the legal, exchange-related and regulatory requirements. PwC accepts no liability for any damages arising from the use of this checklist. We would be happy to hear from you about how we can improve the future versions of this checklist. PwC 3

4 Contents Introduction 2 1 General remarks on annual financial statements annual report Annual financial statements Disclosure of capital 8 2 Management report s of the Swiss Code of Obligations in relation to the management report Disclosure according to FIA circ. 08/24 Supervision and internal control banks 10 3 Balance sheet Minimum structure Assets Liabilities Off-balance-sheet transactions 14 4 Income statement Minimum structure Positions of the income statement Appropriation of profit/coverage of losses/other distributions 16 5 Cash flow statement Minimum structure 18 6 Statement of changes in equity Minimum structure Columns of the statement of changes in equity Rows of the statement of changes in equity 19 7 Notes Business name or name of the bank, and its legal form and domicile Accounting and valuation policies Type of financial statements and type of international standards recognised by FIA Disclosure of the accounting and valuation policies for the individual balance sheet and off-balance-sheet items Calculating the previous year s figures Changes to the accounting and valuation principles Disclosures as to how transactions are recorded Disclosures concerning the treatment of past due interest Disclosures concerning the treatment of translation of foreign currencies Disclosures concerning the treatment of the refinancing of trading positions 26 PwC 4

5 7.3. Explanation of risk management Explanation of the methods used for identifying default risks and determining the need for value adjustments Explanation of the valuation of collateral Bank s business policy regarding the use of derivative financial instruments and hedge accounting Explanations of the bank s business policy regarding the use of derivative financial instruments Explanations regarding the application of hedge accounting Material events occurring after the balance sheet date Reasons that led to the premature resignation of the auditor Information on the balance sheet Annex 1: Breakdown of securities financing transactions (assets and liabilities) Annex 2: Presentation of collateral for loans/receivables and off-balance-sheet transactions, as well as impaired loans/receivables Annex 3: Breakdown of trading portfolios and other financial instruments at fair value (assets and liabilities) Annex 4: Presentation of derivative financial instruments (assets and liabilities) Annex 5: Breakdown of financial investments Annex 6: Presentation of participations Annex 7: Disclosure of companies in which the bank holds a permanent direct or indirect significant participation Annex 8: Presentation of tangible fixed assets Annex 9: Presentation of intangible assets Annex 10: Breakdown of other assets and other liabilities Annex 11: Disclosure of assets pledged or assigned to secure own commitments and of assets under reservation of ownership Annex 12: Disclosure of liabilities relating to own pension schemes, and number and nature of equity instruments of the bank held by own pension schemes Annex 13: Disclosures on the economic situation of own pension schemes Annex 14: Presentation of issued structured products Annex 15: Presentation of bonds outstanding and mandatory convertible bonds Annex 16: Presentation of value adjustments and provisions, reserves for general banking risks, and changes therein during the current year Annex 17: Presentation of the bank s capital Annex 18: Number and value of equity securities or options on equity securities held by all executives and directors and by employees, and disclosures on any employee participation schemes Annex 19: Disclosure of amounts due from/to related parties Annex 20: Disclosure of holders of significant participations Annex 21: Disclosure of own shares and composition of equity capital Annex 22: Disclosures in accordance with the Ordinance against Excessive Compensation with respect to Listed Stock Corporations and art. 663c para. 3 CO for banks whose equity securities are listed Annex 23: Presentation of the maturity structure of financial instruments Annex 24: Presentation of assets and liabilities by domestic and foreign origin in accordance with the domicile principle 39 PwC 5

6 Annex 25: Breakdown of total assets by country or group of countries domicile principle) Annex 26: Breakdown of total assets by credit rating of country groups (risk domicile view) Annex 27: Presentation of assets and liabilities broken down by the most significant currencies for the bank Information on off-balance-sheet transactions Annex 28: Breakdown and explanation of contingent assets and liabilities Annex 29: Breakdown of credit commitments Annex 30: Breakdown of fiduciary transactions Annex 31: Breakdown of managed assets and presentation of their development Information on the income statement Annex 32: Breakdown of the result from trading activities and the fair value option Annex 33: Disclosure of material refinancing income in the item Interest and discount income as well as material negative interest Annex 34: Breakdown of personnel expenses Annex 35: Breakdown of general and administrative expenses Annex 36: Explanations regarding material losses, extraordinary income and expenses, as well as material releases of hidden reserves, reserves for general banking risks, and value adjustments and provisions no longer required Annex 37: Disclosure of and reasons for revaluations of participations and tangible fixed assets up to acquisition cost at maximum Annex 38: Presentation of the operating result broken down according to domestic and foreign origin, according to the principle of permanent establishment Annex 39: Presentation of current taxes, deferred taxes, and disclosure of tax rate Annex 40: Disclosures and explanations of the earnings per equity security in the case of listed banks 46 8 Interim financial statements 48 9 Remuneration report Scope Minimum requirements for the remuneration report 49 Contacts 52 Offices 53 PwC 6

7 General remarks on annual financial statements annual report 1 General remarks on annual financial statements annual report Dis-closure 1.1. Annual financial statements x BO 25.3 The annual financial statements consist of balance sheet, income statement, statement of changes in equity and the notes. x x BO 25.3 ARB 258 Note: Banks that prepare reliable assessment statutory single-entity financial statements do not have to prepare a cash-flow statement. The true and fair view statutory single-entity financial statements consist of balance sheet, income statement, statement of changes in equity, cash flow statement and the notes. x BO 33.1 The consolidated financial statements consist of balance sheet, income statement, statement of changes in equity, cash flow statement and the notes. x x x x BO 30 The annual report includes the summary report of the auditor x x x x ARB 73 CO 957a.4 CO 958d.3 x x x x ARB 73 CO 958d.3 x x x x ARB A1 CO 958d.4 Accounts are to be kept and financial reports are to be filed in Swiss francs or a currency significant for business operations. Values must additionally be quoted in Swiss francs in all components of the annual financial statements or consolidated financial statements. Financial reports are to be presented in an official Swiss language or in English. x x x x ARB 26 Formal consistency requires that the structure and form of presentation remain in principle un-changed. x x x x ARB 27 Objectively substantiated changes in presentation or valuation that are intended to effect an improvement and are maintained in subsequent years are not deemed to constitute a breach of the principle of consistency, provided they are disclosed in the notes to the financial statements. The consequences of the changes are to be disclosed and explained in the notes. If the figures of the previous year have been restated, this is also to be disclosed and explained. ( see, if applicable, section Changes to the accounting and valuation principles, page 24). x x x x ARB 74 Items and tables in the annual financial statements without balances may be omitted. Immaterial items may be summarised, provided this is done logically. x ARB 261 When preparing true and fair view statutory single-entity financial statements for the first time, the previous year s figures must be reported. PwC 7

8 General remarks on annual financial statements annual report x ARB 271 When true and fair view supplementary single-entity financial statements are prepared for the first time, reporting of the previous year s figures and the preparation of a cash flow statement are in principle mandatory. If calculating the previous year s figures and/or preparing the cash flow statement involves considerable effort, either the previous year s figures of the most recent statutory singleentity financial statements are to be reported or the statutory single-entity financial statements of the previous year are to be published in full together with the true and fair view supplementary single-entity financial statements for the current year Disclosure of capital x x x 08/22.3 When calculating capital adequacy and liquidity requirements on the level of a finance group or conglomerate, the disclosure duties are only to be applied on a consolidated basis (consolidation discount). The consolidation discount applies both to the parent company and its subsidiaries, under reservation of the special provisions of ARB x x x 08/22.4 The disclosure duties do not apply to the individual members of a central organization which, pursuant to art. 10 para. 1 CAO, FIA has exempted from meeting capital adequacy requirements on a stand-alone basis. The disclosure duties are to be met by the central organisation at a consolidated level. x x x x 08/22.5 Foreign-controlled banks are exempt from disclosure if comparable information is published abroad at group level. x x x x 08/22.51 If the bank does not publish the information in its annual report as required by this circular, it must specify in this report where such information is available. x x x x 08/22.52 Banks which benefit from the consolidation discount pursuant to margin nos. 3 and 5 must specify in a general note in their annual reports where the consolidated publication can be obtained. x x x x 08/ Systemically relevant banks must also disclose the following within two months on the basis of the parallel calculations as set out in art CAO, both at the level of financial groups and stand-alone banks: x x x x 08/ Ratios regarding common equity tier 1 capital, the conversion capital with a high trigger rate and the conversion capital with a low trigger rate in regard to the coverage of risk-weighted items. For each conversion capital composite, the bank must indicate which part is AT1 and which T2. This information is to be published on a quarterly basis. Any disclosures which happen to fall on the same date as the bank's year-end closing must be integrated into the bank's annual report. x x x x 08/ Once a year, a complete list and qualification of alleviations granted for risk-weighted assets, the eligible capital or the exposure measure at the level of stand-alone institute (stating the materiality of these impacts and their significance, including explanations of the substantiations for each alleviation, as per art. 125 para. 5 lit. b CAO. This disclosure takes into consideration appendix 3. Dis-closure PwC 8

9 General remarks on annual financial statements annual report Dis-closure x x x x 08/22.61 Disclosure in the interim and/or annual reports is not subject to the audit prescribed by the Swiss Code of Obligations. However, if certain components of the information required by this circular are published in the annual financial statements, these will become subject to the audit prescribed by the Swiss Code of Obligations. 08/22 For detailed requirements on the disclosure of capital, see FIA circ. 08/22 Capital adequacy disclosure banks PwC 9

10 Management report 2 Management report 2.1. s of the Swiss Code of Obligations in relation to the management report x x x BO 36.1 ARB 327 Where a financial group prepares and publishes consolidated financial statements and a group management report, the banks consolidated within the group are exempted from the requirement to include a management report in their single-entity financial statements. x ARB 341 Banks whose equity securities are listed (BO 36.2) are not permitted to apply the exemptions above. x x x BO 36.4 Persons according to CO 961d.2 can request complete annual financial statements and a management report. CO 961 BO 38 ARB A1 Undertakings that are required by law to have an ordinary audit must draw up a management report. The management report includes at least the following information: x x x x CO 961c.1 - Presentation of business performance and the economic position of the undertaking (and, if applicable, the group) x x x x CO 961c.2 - Number of full-time positions on annual average; x x x x CO 961c.2 - Conduct of a risk assessment; x x x x CO 961c.2 - Orders and assignments; x x x x CO 961c.2 - Research and development activities; x x x x CO 961c.2 - Extraordinary events; x x x x CO 961c.2 - Future prospects. x x x x ARB A1 CO 961c.3 The management report may not contradict the information presented in the annual financial statements 2.2. Disclosure according to FIA circ. 08/24 Supervision and internal control banks x x x x 08/24.1 The circular 08/24 sets guidelines for corporate governance, the supervision of business activities and internal controls, and the supervision thereof by the responsible function in banks, securities dealers, financial groups. x x x x 08/24.4 Securities dealers without bank status: 08/ do not apply if there is no segregation of duties between the board of directors and management. x x x x 08/24.5 Private banks: 08/ do not apply. Deviations from and simplifications to the remaining provisions are allowed upon prior agreement with the audit firm and the FIA, provided the partners are personally liable and are involved in managing the business. x x x x 08/24.6 Directly or indirectly held subsidiary banks and securities dealers as well as subsidiary companies that are primarily involved in financial activities which belong to domestic and international financial groups and financial conglomerates mainly active in banking and securities trading: 08/ do not apply but the establishment of an audit committee is recommended. PwC 10

11 Management report x x x x 08/24.7 Branch offices of foreign institutions: 08/ do not apply. All other provisions apply. x x x x 08/24.19 At least one third of the board of directors should consist of members who meet the criteria on independence set out in 08/ These members are to be named in the annual report. If fewer than a third of the members meet the independence criteria, this must justified in the annual report. x x x x 08/24.30 Should an institution not have an audit committee, the board of directors must appoint one or two independent members of the board who meet the requirements defined in 08/24.39 (however not the chairman of the board) with the duties defined in 08/ FIA may grant exceptions. If the chairman of the board is nevertheless appointed to the above-mentioned function, this must be justified in the annual report. x x x x 08/24.37 Should an institution forgo establishing an audit committee despite fulfilling one or more of the criteria listed in 08/ , this is to be justified in its annual report. Note: Institutions are to establish an audit committee if at least one of the criteria listed in 08/ applies: - balance sheet total > CHF 5 billion - custody account volume (securities and precious metals of clients, with the exception of the banks, according to regulatory reporting AU 001/AU 101) > CHF 10 billion - required capital adequacy according to the Capital Adequacy Ordinance (CAO) > CHF 200 million - listed on a stock exchange (equity interest) x x x x 08/24.38 The majority of members must meet the requirements of independence stated in margin nos ; if less than a majority meets these requirements, this must be justified in the annual report. x x x x 08/24.40 The chairman of the board of directors should not be on the audit committee. If the institution nevertheless decides that he/she should be on audit committee, this must be justified in the annual report. x x x x 08/24.66 The internal audit function must meet the quality standards promulgated by the Swiss Institute of Internal Auditing (SIIA). Exceptions must be justified in the annual report. The work of the internal audit function is governed by the Standards for the Professional Practice of the Institute of Internal Auditors (IIA). PwC 11

12 Balance sheet 3 Balance sheet 3.1. Minimum structure The minimum structure used in the balance sheet is to be in accordance with annex 1 BO, resp. ARB 262 ff., 272 ff. and 300 ff., which are summarised in chapters 3.1 to 3.4. x x x x ARB 123 Other material items in individual cases are also to be disclosed in the balance sheet or the notes. x x x x ARB 124 Figures for the previous year must be disclosed in the balance sheet. x x x x ARB 74 Items and tables in the annual financial statements without balances may be omitted. x x x x ARB 74 Immaterial items may be summarised, provided this is done logically. x x x x ARB 60 Value adjustments are deducted from the relevant asset in accordance with CO 960a.3 and may not be shown under liabilities. x x x x ARB 568 The items Own shares and Loss carried forward are to be reported as negative items Assets ARB 75 x x x x ARB 76 Liquid assets x x x x ARB 77 Amounts due from banks The following assets must be disclosed separately in the balance sheet: x x x x ARB 78 Amounts due from securities financing transactions x x x x ARB 79 Amounts due from customers x x x x ARB 80 Mortgage loans x x x x ARB 81 Trading portfolio assets x x x x ARB 82 Positive replacement values of derivative financial instruments x x x x ARB 83 Other financial instruments at fair value x x x x ARB 84 Financial investments x x x x ARB 85 Accrued income and prepaid expenses x x x ARB 86 Participations x ARB 302 Non-consolidated participations x x x x ARB 87 Tangible fixed assets x x x x ARB 88 Intangible assets x x x x ARB 89 Other assets x x x x ARB 90 Capital not paid in PwC 12

13 Balance sheet x x x x BO 69.1 ARB 626 x x x x ARB 91 Total assets x x x x ARB 92 Total subordinated claims Transitional provision: In the first two years after the entry into force of the Ordinance, banks can disclose value adjustments, in accordance with BO 27.1, as negative items in the assets, either as full totals or sub-totals. x x x x ARB 93 - of which subject to mandatory conversion and/or debt waiver 3.3. Liabilities ARB 94 x x x x ARB 95 Amounts due to banks The following liabilities must be disclosed separately in the balance sheet: x x x x ARB 96 Liabilities from securities financing transactions x x x x ARB 97 Amounts due in respect of customer deposits x x x x ARB 98 Trading portfolio liabilities x x x x ARB 99 Negative replacement values of derivative financial instruments x x x x ARB 100 Liabilities from other financial instruments at fair value x x x x ARB 101 Cash bonds x x x x ARB 102 Bond issues and central mortgage institution loans x x x x ARB 103 Accrued expenses and deferred income x x x x ARB 104 Other liabilities x x x x ARB 105 s x x x x ARB 106 Reserves for general banking risks x x x x ARB 107 Bank s capital x x ARB 108 Statutory capital reserve x x ARB 109 ARB A2-160 x x ARB 274 ARB of which tax-exempt capital contribution reserve Capital reserve x x ARB 110 Statutory retained earnings reserve x x ARB 111 ARB A2-172 x x ARB 275 ARB 304 ARB A2-173 x ARB 305 x x x x ARB 63 CO Voluntary retained earnings reserves Retained earnings reserve Note: The balance sheet items Statutory retained earnings reserve, Voluntary retained earnings reserves and Profit carried forward/loss carried forward are combined into the item Retained earnings reserve. Currency translation reserve The revaluation amount of land, buildings or equity participations in order to rectify the negative net worth is stated separately as a revaluation reserve. PwC 13

14 Balance sheet x x x x ARB 257 A revaluation of real estate and participations in excess of their acquisition costs in the case of banks in the form of a company limited by shares is to be dealt with in accordance with the provisions of CO 670 CO and reported to FIA before the financial statements are published. x x x x ARB 112 ARB 584 x ARB 294 ARB 306 Own shares (negative item) Minority interests in equity x x ARB 113 Profit carried forward/loss carried forward x x x ARB 114 Profit/loss (result of the period) x ARB 307 x ARB 307 x x x x ARB 115 Total liabilities Consolidated profit/consolidated loss. x x x x ARB 116 Total subordinated liabilities - of which, minority interests in consolidated profit/ consolidated loss x x x x ARB of which subject to mandatory conversion and/or debt waiver 3.4. Off-balance-sheet transactions x x x x ARB 119 Contingent liabilities x x x x ARB 120 Irrevocable commitments x x x x ARB 121 x x x x ARB 122 Credit commitments The following off-balance-sheet transactions must be disclosed separately: Obligations to pay up shares and make further contributions PwC 14

15 Income statement 4 Income statement 4.1. Minimum structure The minimum structure used in the income statement is to be in accordance with annex 1 BO, resp. ARB 262 ff., 272 ff. and 300 ff., which are summarised in chapters 4.1 to 4.3. x x x x ARB 160 Other material items in individual cases are also to be disclosed in the income statement or the notes. x x x x ARB 161 Figures for the previous year for the period concerned must be disclosed in the income statement. x x x x ARB 74 Items and tables in the annual financial statements without balances may be omitted. x x x x ARB 74 Immaterial items may be summarised, provided this is done logically Positions of the income statement x x x x ARB 125 The following items must be disclosed separately in the income statement in report form: x x x x ARB 126 Result from interest operations x x x x ARB Interest and discount income x x x x ARB Interest and dividend income from trading portfolios ARB A3-12 Note: This item is to be disclosed only if the bank does not offset the interest and dividend income from trading portfolios against the refinancing expense for trading positions in the item Result from trading activities and the fair value option. Note the changes in the duty of disclosure regarding the accounting and valuation principles. x x x x ARB Interest and dividend income from financial investments x x x x ARB Interest expense x x x x ARB 131 Gross result from interest operations x x x x ARB Changes in value adjustments for default risks and losses from interest operations x x x x ARB 133 Subtotal net result from interest operations x x x x ARB 134 Result from commission business and services x x x x ARB Commission income from securities trading and investment activities x x x x ARB Commission income from lending activities x x x x ARB Commission income from other services x x x x ARB Commission expense x x x x ARB 139 Subtotal result from commission business and services PwC 15

16 Income statement x x x x ARB 140 Result from trading activities and the fair value option x x x x ARB 141 Other result from ordinary activities x x x x ARB 142 Result from the disposal of financial investments x x x x ARB 143 Income from participations x x ARB 277 ARB 309 x x ARB 278 ARB 310 x x x x ARB 144 Result from real estate x x x x ARB 145 Other ordinary income x x x x ARB 146 Other ordinary expenses - of which, participations recognised using the equity method - of which, from other non-consolidated participations x x x x ARB 147 Subtotal other result from ordinary activities x x x x ARB 148 Operating expenses x x x x ARB 149 Personnel expenses x x x x ARB 150 General and administrative expenses x x x x ARB 151 Subtotal operating expenses x x x x ARB 152 Value adjustments on participations and depreciation and amortisation of tangible fixed assets and intangible assets x x x x ARB 153 Changes to provisions and other value adjustments, and losses x x x x ARB 154 Operating result x x x x ARB 155 Extraordinary income x x x x ARB 156 Extraordinary expenses x x x x ARB 157 Changes in reserves for general banking risks x x x x ARB 158 Taxes x x x ARB 159 Profit/loss (result of the period) x ARB 307 x ARB 294 ARB 307 Consolidated profit/consolidated loss - of which, minority interests in consolidated profit/consolidated loss 4.3. Appropriation of profit/coverage of losses/other distributions ARB 162 x x ARB 163 Profit/loss x x ARB 164 Profit/loss carried forward The following information is to be provided on the appropriation of profit or coverage of losses, as applicable. x x ARB 165 Distributable profit/accumulated loss PwC 16

17 Income statement x x ARB 167 Appropriation of profit: - minus allocation to statutory retained earnings reserve - minus allocation to voluntary retained earnings reserves - minus distributions from distributable profit - minus other appropriation of profit = New amount carried forward x x ARB 168 Coverage of losses: - minus transfers from statutory retained earnings reserve - minus transfers from voluntary retained earnings reserves = New amount carried forward x x ARB 169 Any distributions not made from distributable profit must be disclosed here. x x x x ARB A3-114 The profit-related interest on cantonal banks endowment capital and cooperative capital, on limited partners capital contributions and capital accounts, as well as the profit-related compensation for the cantonal guarantee and any guarantee capital are not to be treated as other operating expenses, and are in-stead to be treated as appropriation of profit. PwC 17

18 Cash flow statement 5 Cash flow statement x ARB 170 Preparing a cash flow statement is voluntary in the case of reliable assessment statutory single-entity financial statements (BO 25.3). x x x BO 36.1 ARB 327 Note: If a cash flow statement is prepared voluntarily, it has to meet the minimum requirements of ARB. Where a financial group prepares and publishes consolidated financial statements and a group management report, the banks consolidated within the group are exempted from the requirement to include a cash flow statement in their single-entity financial statements. x ARB 341 Banks whose equity securities are listed (BO 36.2) are not permitted to apply the exemptions above. x x x BO 36.4 Persons according to CO 961d.2 can request complete annual financial statements and a management report. x x x ARB 170 Preparing a cash flow statement is mandatory for true and fair view statutory single-entity financial statements, true and fair view supplementary single-entity financial statements and consolidated financial statements Minimum structure x x x ARB 269 ARB 288 ARB 315 The cash flow statement is to be presented as set out in annex 6 to the circular. x x x ARB A6-9 The minimum structure may be amended in line with the bank s specific requirements. x x x ARB A6-8 The previous year s figures are to be provided in each instance. x x x FAQ 13 To avoid any disproportionate efforts in preparing the cash flow statements, it is not necessary, however, to include previous-year figures for the financial year x x x The incoming and outgoing cash flows must, in principle, be presented as gross amounts. x x x ARB A6-7 The cash inflows and outflows from banking operations may be presented net. ARB A6-2 The cash flow statement must comprise at least the following items: x x x ARB A6-3 - Cash flow from operating activities x x x ARB A6-4 - Cash flow from shareholder s equity transactions x x x ARB A6-5 - Cash flow from transactions in respect of participations, tangible fixed assets and intangible assets x x x ARB A6-6 - Cash flow from banking operations PwC 18

19 Statement of changes in equity 6 Statement of changes in equity 6.1. Minimum structure The minimum structure used in the statement of changes in equity is to be in accordance with annex 1 BO, resp. ARB 262 ff., 272 ff. and 300 ff., which are summarised in chapters 6.1 to 6.3. x x x x ARB 171 The statement of changes in equity presents in a table the opening and the closing balances for the current period of each material equity category as well as a reconciliation between them. x x x x ARB 74 Items and tables in the annual financial statements without balances may be omitted. x x x x ARB 74 Immaterial items may be summarised, provided this is done logically Columns of the statement of changes in equity ARB 171 ARB 172 x x x x ARB A4 - Bank s capital x x x x ARB A4 - Capital reserve x x x x ARB A4 - Retained earnings reserve The figures of each material category of equity are presented in accordance with the minimum structure as per the table in ARB A4. x x x x ARB A4 - Reserves for general banking risks x ARB A4 - Currency translation reserves x x x x ARB A4 - Voluntary retained earnings reserves and profit/loss carried forward x x x x ARB A4 - Own shares x ARB A4 - Minority interests x x x x ARB A4 - Result of the period x x x x ARB A4 - Total 6.3. Rows of the statement of changes in equity x x x x ARB 171 Opening balance The statement of changes in equity discloses for each material component of equity the following information: x x x x ARB 171 Reconciliation between opening and closing balances x x ARB A4 - Effect of any restatement x x ARB A4 ARB 614 x x x x ARB A4 - Capital increase/decrease x x x x ARB A4 ARB Employee participation schemes/recognition in reserves - Other contributions/other capital paid in PwC 19

20 Statement of changes in equity x x x x ARB A4 - Acquisition of own shares x x ARB A4 - Effect of subsequent valuation of own shares x x x x ARB A4 - Profit (loss) on disposal of own shares x x ARB 585 x x ARB 588 x ARB A4 - Currency translation differences x x x x ARB A4 - Dividends and other distributions x x ARB 586 x x ARB 588 x x x x ARB A4 - Other allocations to (transfers from) the reserves for general banking risks x x x x ARB A4 - Other allocations to (transfers from) the other reserves x x x x ARB A4 - Profit/loss (result of the period) x x x x ARB 171 Closing balance x x x x ARB 171 Each movement that is material for the assessment of the economic position is to be presented separately. x x x x ARB 591 Visible and hidden benefits provided to and received from holders of participations are of particular importance. Such benefits are recognised as equity transactions according to the substance over form principle. x x ARB 602 Equity transaction costs, insofar as they result in a procurement (capital increase, sale of own shares) or a repayment (capital reduction, purchase of own shares) of equity, are in principle to be recognised as a reduction in the item Capital reserve, net of any related income taxes. x x ARB 603 Equity transaction costs are to be debited to the item Capital reserve even if the result is a negative balance. The tax effect of the deductible costs of a capital increase is credited to the item Capital reserve by debiting the current tax expense or deducted from the costs debited to the item Capital reserve, as appropriate. PwC 20

21 7 Notes The minimum structure used in the notes is to be in accordance with annex 1 BO, resp. ARB 262 ff., 272 ff. and 300 ff., which are summarised in chapters 7.1 to x x x x ARB 174 Unless expressly provided for otherwise by the remarks or detailed information set out Annex 5 to the present circular, all quantitative entries are to be accompanied in the notes by figures from the previous year. x x x x ARB 627 Transitional provision: When preparing annual financial statements in accordance with the provisions of this Circular for the first time, banks and financial groups may omit the presentation of the previous year s figures in the notes (tables as per ARB A5) if this constitutes new information in the notes compared with FIA circ. 08/2 Accounting banks, valid until 31 December x x x x ARB 181 The notes must contain the following subsections: (see titles of the following subsections chapters) Note: This margin number represents a structuring requirement Business name or name of the bank, and its legal form and domicile x x x x Title Business name or name of the bank, and its legal form and domicile exists. x x x x ARB 182 Business name or name of the bank x x x x ARB 182 Legal form of the bank x x x x ARB 182 Domicile of the bank 7.2. Accounting and valuation policies x x x x ARB 183 Title Accounting and valuation policies exists Type of financial statements and type of international standards recognised by FIA x x x x ARB 184 Type of financial statements (ARB 9): - Reliable assessment statutory single-entity financial statements - True and fair view statutory single-entity financial statements - True and fair view supplementary single-entity financial statements - Consolidated financial statements (true and fair view) x x x x ARB 184 Type of international standards recognised by FIA Disclosure of the accounting and valuation policies for the individual balance sheet and off-balancesheet items x x x x ARB 184 Disclosure of the accounting and valuation policies for the individual balance sheet and off-balance-sheet items. Note: The following lists only the special regulations that must be complied with or disclosed, according to the ARB, in the corresponding circumstances. PwC 21

22 x x x x FAQ 3 The use of methods for calculating liquidation values (ARB 424), hedge accounting (ARB 443), and recognition in the balance sheet and disclosure of the economic impact of pension schemes using a dynamic method (ARB 503) are generally subject to stricter and more exhaustive rules in the international standards recognised by FIA than in the Swiss Accounting Rules for Banks (ARB) set out in FIA Circ. 15/1. This means that the options referred to can be used by all banks applying the ARB that fall within the scope of consolidation of a financial group using an international standard recognised by FIA. The relevant provisions of the international standard recognised by FIA must be applied in full, i.e. including the relevant disclosure requirements in the notes. The accounting and valuation principles of the banks concerned must contain a corresponding statement regarding the application of rules set out in the international standards recognised by FIA Other financial instruments at fair value Liabilities from other financial instruments at fair value (fair value option) x x x x ARB 376 The procedure for valuing financial instruments at fair value must be set out in an internal directive. x x x x ARB 400 ARB 401 ARB Financial investments The accounting and valuation principles must include disclosures regarding the treatment of structured products. x x x x ARB 383 It is also possible to accrue the premium/discount over the term and therefore value on the basis of the amortised cost (as long as the fair value is not lower), even if the amortised cost is higher than the historical cost. Use of this option must be disclosed in the accounting and valuation principles Positive/negative replacement values of derivative financial instruments x x x x ARB 400 ARB 401 ARB 402 The accounting and valuation principles must include disclosures regarding the treatment of structured products. x x x x ARB A2-44 Bank acting as commission agent: Banks are to disclose in the accounting and valuation principles which principles have been followed in the recognition of the replacement values for commission agent transactions Value adjustments for default risks x x x x ARB 411 The various criteria and methods for creating value adjustments are to be documented in detail internally. x x x x ARB 425 Past due interest (including accrued interest) and related commissions are not to be included in interest income. Interest and commissions are past due where they are more than ninety days overdue (past due receivables). Any treatment of past due interest that deviates from these rules with regard to the period is to be disclosed in the notes to the accounting and valuation principles. PwC 22

23 x x x x FAQ 1 If the following option is used, this must be stated in the accounting and valuation principles: For credit facilities (with corresponding credit facility limits) whose use is typically subject to frequent and large fluctuations (e.g. current account credit facilities) and for which provisioning is required, the following alternative method of recording is available: initial and subsequent creation of a provision is carried out in its entirety (i.e. value adjustments for the actual use and provisions for the undrawn part of the credit facility) via item Changes in value adjustments for default risks and losses from interest operations. If the level of use of the facility changes, a reclassification without income effect is carried out between value adjustments and provisions. When they are no longer required, reversals of value adjustments and releases of provisions must also be made via item Changes in value adjustments for default risks and losses from interest operations Participations x x x x BO 69.2 Transitional provisions: The individual valuation of participations according to BO 27.2 has to be implemented as of 1 January 2020, at the latest. The non-recognised, unrealised losses must be disclosed in the notes to the financial statements Tangible fixed assets x x x x ARB 474 ARB A5-40 x x x x ARB 474 ARB A5-40 x x x x ARB 474 ARB A5-40 x x x x ARB 474 ARB A5-40 x x x x ARB 474 ARB A5-40 Disclosure of the depreciation method applied. If a depreciation method that has been applied is replaced with another method, this is to be disclosed in the notes. If it is material, the impact of the change in the depreciation method on the result of the period is to be disclosed in quantitative terms for each category of investment. Disclosure of the ranges used for the expected useful life for each category of tangible fixed assets. Where the ranges are relatively broad, an explanation is to be provided for each category in the notes. x x x x BO 69.2 Transitional provisions: The individual valuation of tangible fixed assets according to BO 27.2 has to be implemented as of 1 January 2020, at the latest. The non-recognised, unrealised losses must be disclosed in the notes to the financial statements Intangible assets x x x x ARB 475 The estimated useful life of intangible assets is to be disclosed in the notes. x x x x ARB 476 Subsequent changes to the useful life once determined are to be disclosed in the notes. x x x x ARB 476 The impact of subsequent changes to the useful life once determined on the balance sheet and income statement are to be quantified. x x x x ARB 475 The method of amortisation of intangible assets is to be disclosed in the notes. PwC 23

24 x x x x BO 69.2 Transitional provisions: The individual valuation of intangible assets according to BO 27.2 has to be implemented as of 1 January 2020, at the latest. The non-recognised, unrealised losses must be disclosed in the notes to the financial statements Goodwill x ARB 297 x ARB 297 x ARB Reserves for general banking risks Amortisation is to be carried out using the straight-line method unless another method of amortisation is more appropriate in a particular case. The reasons for the use of such a method must be disclosed in the accounting and valuation principles section of the notes. As a rule, the amortisation period is five years from the time of acquisition. It may be extended to a maxi-mum of ten years in justified cases. Such an extension is not permitted in the case of good-will relating to individuals. Margin no. 215 of FIA circ. 08/2 Accounting banks, which was in force until 31 December 2014, allowed for goodwill to be amortised over a period of up to 20 years. After this present Circular enters into force, banks and financial groups that have taken ad-vantage of this option may continue to amortise already existing goodwill over the period so provided for, subject to compliance with the rules on impairments. x x x x ARB 577 The accounting and valuation principles section of the notes must also disclose whether or not the reserves for general banking risks are taxed Transactions with holders of participations and treatment of own shares x x x x ARB 585 When own shares are disposed of, the booking method chosen is to be disclosed in the accounting and valuation principles Result from trading activities and the fair value option x x x x ARB A3-33 Banks that disclose the result from primary market trading activities in this item are to set this out accordingly in the accounting and valuation principles in the notes to the annual financial statements; Calculating the previous year s figures x ARB 185 Disclosure in the case of true and fair view supplementary single-entity financial statements being prepared for the first time. x ARB 185 Disclosure as to how the previous year s figures were determined or reference to the statutory single-entity financial statements of the previous year Changes to the accounting and valuation principles x x x x CO 958a.3 ARB 14 Deviations from the going-concern assumption are to be disclosed in the notes to the financial statements and the impact on the economic position must be explained. x x x x ARB 28 Changes in estimates impact the current (and possibly future) business year(s) and are to be disclosed in the notes. Their consequences must be disclosed and explained. PwC 24

25 x x x x ARB 29 If errors relating to previous periods are identified during a current period, these are to be corrected and recognised through ordinary items in the income statement in the current period. [ ] If the amount of the correction is material, the reason for the error is to be explained in the notes to the financial statements and a quantitative indication of the impact is to be given. x x ARB 30 In the case of changes to the accounting and valuation principles, a restatement of the previous year s figures is in principle not permitted. However, simple reclassifications not relating to the equity capital and result of the period items are permitted. ARB 32 In the case of changes to the accounting and valuation principles, x x ARB 32 - a restatement of the previous year s figures and x x ARB 32 - an explanation in the notes are in principle required. x x ARB 32 If restatement is not possible with a reasonable amount of effort, it may be waived. However, the reasons must be disclosed. x x x x ARB 186 Reasons for changes in the accounting and valuation policies in the current year. x ARB 31 ARB 186 Disclosure and explanations of their effects, i.e. their impact on the hidden re-serves. x x x ARB 186 Disclosure and explanations of their effects Disclosures as to how transactions are recorded x x x x ARB 187 Disclosures as to how transactions are recorded. x x x x ARB 17 The method selected (trade date accounting principle or the settlement date accounting principle per product category) must be applied consistently and disclosed in the notes to the financial statements under the accounting and valuation principles Disclosures concerning the treatment of past due interest x x x x ARB 188 ARB 425 Disclosures concerning the treatment of past due interest where the treatment employed deviates from the practice set out in ARB 425. Note: Any treatment of past due interest that deviates from the 90-day rule must be disclosed in the notes to the financial statements in the accounting and valuation principles Disclosures concerning the treatment of translation of foreign currencies x x x x ARB 189 Disclosures concerning the treatment of translation differences of foreign currencies. x x x x ARB 189 ARB 73 Disclosures of the method used for foreign currency translation. x x x x ARB 189 Disclosures of the exchange rates of the most important foreign currencies; PwC 25