www cipfa org uk Beginners Guide to Fair

www. cipfa. org. uk Beginner’s Guide to Fair Value (IFRS 13) Gareth Davies CIPFA © CIPFA Networks

Programme IFRS Framework IFRS 13: Why? IFRS 13 Approach IFRS 13 – Possible Actions Resources www. cipfa. org. uk

cipfa. org. uk Opening Thought “It is unfortunate we can't buy [some people] for what they are worth and sell them for what they think they are worth” Malcolm Forbes Entrepreneur Forbes Magazine • 3

What? Why? How? When? cipfa. org. uk Objectives of IFRS “…financial reporting standards based on clearly articulated principles. These standards should require high quality, transparent and comparable information. . ” • 4

cipfa. org. uk Essential elements of IFRS GREATER TRANSPARENCY e. g. Financial Instruments COMPARABILITY e. g. Geographic BALANCE SHEET FOCUS INCREASED DISCLOSURE THE CURRENT PICTURE FAIR VALUE ACCOUNTING GREATER INCOME STATEMENT VOLATILITY Now a general focus on reducing ‘clutter’ • 5

cipfa. org. uk Fundamental Qualitative Characteristics Relevance • Can make a difference to decision making • Predictive &/or confirmatory value • Material if omission or misstatement would influence users decisions Faithful representation • Complete – all necessary information for understanding • Neutral – not biased or manipulated • Free from error – may require explanation of the limitations of measurement • 6

www. cipfa. org. uk IFRS 13 Fair Value Measurement 7 © CIPFA Networks

cipfa. org. uk IFRS 13 Objectives Single approach to Fair Value Measurement Address inconsistencies in FV Increase transparency Clarify definition of Fair Value Increase convergence of IFRS and US GAAP 8

cipfa. org. uk IFRS 13 Implementation IFRS 13 issued May 2011 EU Adoption Dec 2012 Private Sector Periods beginning on/after 1 Jan 2013 Public Sector: FRe. M / Local Authority Code 2015/16 (Adaptations apply) 9

What? Why? How? When? cipfa. org. uk Definition of Fair Value “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ” • 10

cipfa. org. uk Example Areas to Consider Property, Plant & Equipment Financial Assets Investment Property Impairment of Assets Intangible Assets Non-Current Assets Held for Sale 11 Financial Liabilities

IFRS 13 Fair Value Measurement Specific Characteristics Market conditions, Best Market, Highest & Best Use Disclosures FVM No adjustment for transaction costs Transition – Prospective FV Hierarchy www. cipfa. org. uk

www. cipfa. org. uk Framework Elements unit of account characteristics of asset market participant assumptions non-financial assets: valuation premise non-financial assets: highest & best use the market transport & transaction costs (market determination) orderly transaction valuation techniques

IFRS 13 – Fair Value 1. Inputs – Quoted Prices 2. Observable inputs (eg publicly available info) Valuation Technique (usually based on: market or cost or income) 3. Unobservable inputs www. cipfa. org. uk

IFRS 13 – Disclosures www. cipfa. org. uk Help Reader to Assess Valuation techniques & inputs Impact on SDPS / OCIE of unobservable inputs (for recurring level 3) Judgements Detail Emphasis Aggregation Additional Information

Disclosures – Some Considerations Highest & best use? Reconcile to balance sheet? Transfers between levels? Level 2 & 3 – details? Material? 16 cipfa. org. uk

Possible Actions verify valuers and treasury advisors complying with IFRS 13 requirements accounting policies asset register changes (eg to record and report on valn level) minimise use of level 2 & 3 valuations minimise transfers between levels refer to guidance / resources consider materiality of disclosures 17 www. cipfa. org. uk © CIPFA Networks

Resources www. cipfa. org. uk [Click for the hyperlink] IFRS 13 Fair Value Measurement registration (free) required IFRS 13 Project Summary and Feedback Statement IFRS 13 – IFRS Educational Materials Local Authority Accounting Code of Practice Financial Reporting Manual (FRe. M) RICS Valuation – Professional Standards (‘Red Book’) 18 © CIPFA Networks

cipfa. org. uk Closing Thought “An approximate answer to the right question is worth a great deal more than a precise answer to the wrong question” John Tukey, Statistician • 19

Any Questions? gareth. davies@cipfa. org 0131 221 8644 © CIPFA Networks

cipfa. org. uk Becoming and Exceptional Communicator Andrew Toogood Proclaim Consulting

Lunch followed by Workshops 13. 00 to 14. 00

CIPFA Northern Ireland Annual Conference Excellent People and Excellent Service Jane Jones

What I will cover: ✓ 1 Why Employee Engagement is vital ✓ 2 The Evidence ✓ 3 The Four Enablers of Engagement ✓ 4 The Practicalities: Leadership, Trade Unions etc. ✓ 5 Final thoughts: Ideas to consider

Our most important asset – why engagement is so important ü Productivity and performance ü Income growth ü Customer/client satisfaction ü Absence and wellbeing ü Greater staff retention ü Innovation

How engaged is the UK workforce? • Around 1/3 of UK workers say they are engaged • UK ranked ninth for engagement levels amongst the World’s twelfth largest economies as ranked by GDP - and a widening productivity gap • 94% of world’s most admired companies believe their engagement efforts have created a competitive advantage • Increasing employee engagement a priority for major business leaders • 2014 Civil Service Benchmark Employee Engagement Index is 59% • Head of Civil Service identified increasing engagement among public sector employees as priority

The Four Enablers of Employee Engagement • Visible, empowering leadership • Engaging managers • Employee voice • Organisational integrity

Visible, Empowering Leadership • Strategic Narrative – providing a clear line of sight between an employee’s role and the visions and aims of the organisation • Visible Leadership • Inform, Inspire, Engage • Revealing leadership presence

Engaging Managers • Providing Clarity • Honesty and consistency • Treating people as Individuals • Equipping and supporting people to do their job • Meeting often and evaluating mindsets • Listening and paying close attention • Creating and sharing key learning opportunities

Employee Voice: putting yourself in others’ shoes • Loyalty and commitment • A thirst for information and data • Sense of having less influence over their futures than senior staff • Working alongside Unions: – What approach to take – A need to understand – Support the protagonists – Smoothing the road

Organisational Integrity • Strong, transparent and explicit organisational culture • Consistency • Living the Values • Trust and Integrity

Where to start? • Start with business objectives • Open the dialogue: one-to-ones, focus groups, staff surveys etc. • Use the four enablers as routes to engagement : – A strong strategic narrative – Engaging managers – Employee voice – Organisational integrity