Audit and accounting topics – What the ECB is expecting

ECB expectations for audit and accounting

The ECB began to shed light on what its priorities would be for 2016 and the 2015 year-end audit.

Partner, ECB Office, Audit and Accounting topics

KPMG in Germany

Contact

Related content

Man holding the laptop

As 2015 wound down, the ECB began to shed light on what its priorities would be for 2016. In a number of speeches and presentations the ECB stressed that it would focus on transition to IFRS 9, business model and profitability, capital adequacy, governance, cyber risk, data quality and compliance with BCBS 239, credit risk and non-performing loans, and liquidity risk management; with a focus on increased harmonisation across the member states. Some of these are primarily audit and accounting issues (e.g., IFRS 9) while others will have an indirect impact to the audit and accounting functions at banks.

ECB audit and accounting focus

The ECB also reiterated the audit and accounting topics that they were concerned about during 2015. Among the key topics that will impact audit and accounting functions at banks this year (to list a few): 

  • Structures clearly designed to deconsolidate: Do they really meet IFRS 10 requirements?
  • Deferred tax assets: Diversity in recognition is observed – scrutiny and professional skepticism is expected from auditors. 
  • Liquidity: From a "going concern review" standpoint.
  • Transition to IFRS 9 (inclunding IT issues): Status of project / qualitative elements expected to be disclosed at a minimum.
  • In addition to these areas of focus, KPMG has gathered questions regarding year-end audits from our meetings – formal and informal – with ECB/SSM staff and various speeches made by Supervisory Board members or Heads of the DGs. These questions reflect what we believe is currently on the minds of the SSM with regard to accounting topics and how they are dealt with by banks and their independent auditors. This is of importance to you when you need to explain yourself to your supervisor.

Key questions raised

While there were a number of lessons learned under the first year of the SSM, there is still a great deal to manage. Below is a list of key questions raised by the ECB for the 2015 audits: 

  • Structures clearly designed to deconsolidate: Do they really meet IFRS 10 requirements?
  • Assets in “originate to distribute” models: Do they meet IAS 39 de-recognition requirements?
  • Level 3 assets: Completeness of identification and valuation: Do they comply with IFRS 13 requirements?
  • Deferred tax assets: Diversity in recognition is observed – scrutiny and professional scepticism is expected from auditors.
  • Accounting for pensions: Low interest rates context and funding issues to be looked at.
  • Forbearance: Completeness of identification and appropriate levels of allowance for credit losses for this “fragile” population.
  • Liquidity: From a going concern stand point.
  • Transition to IFRS 9 (including IT issues): Status of project / qualitative elements expected to be disclosed at a minimum.

KPMG’s European Central Bank Office

KPMG’s ECB Office offers you information and solutions for dealing with the ECB supervisory approach.

 
Read more

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform