Asset Management Update: FASB Modifies Fair Value Disclosure Requirements
EisnerAmper LLP Opens London Office
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EisnerAmper Global welcomes Singapore member
EisnerAmper Cayman is delighted to welcome EisnerAmper Singapore to the EisnerAmper Global network. EisnerAmper Global is a specialist network of independent member firms operating in key financial services and international trading hubs. EisnerAmper Global member firms provide clients with access to the expertise of 200 partners and 2,000 professionals globally, with office locations including New York, Miami, San Francisco, Cayman, Dublin and Singapore.
EisnerAmper Singapore, formerly Saw Meng Tee & Partners PAC, provides specialist accounting, advisory, outsourcing,and risk & regulatory services to international and domestic clients operating in Singapore and across Asia. At EisnerAmper Singapore’s launch, Managing Partner Saw Meng Tee noted that EisnerAmper Singapore’s vision is to be “recognised as one of Singapore’s leading professional services firms in the specialist areas of financial services, corporate solutions and advisory”. EisnerAmper Ireland and Saw Meng Tee & Partners PAC have been working closely together over the past 18 months to further develop existing ties between Ireland and Singapore.
For enquiries, please contact Saw Meng Tee, Managing Partner, EisnerAmper Singapore or visit the EisnerAmper Singapore website.
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Business in Brief: EisnerAmper Celebrates 10 Years in Cayman
Accounting, auditing and advisory firm EisnerAmper Cayman celebrated its 10th anniversary in the Cayman Islands at The Westin Grand Cayman last week.
EisnerAmper flew in Adam Cheyer, a co-founder of Siri, the digital assistant in Apple’s iPhone, as a key note speaker.
Mr. Cheyer, who also co-founded Viv, the digital assistant which Samsung branded as Bixby for the Galaxy S8, gave two presentations to local high school students and the business community, last Thursday.
Ben Leung, EisnerAmper’s managing partner, said: “We wanted the pupils at all the local schools to have the opportunity to listen to and meet someone who is a high achiever in the technology field. Moreover the area of mobile technology in particular is relevant now and will become more so in the future.”
The evening session was devoted to the future of artificial intelligence. Given that automation has famously reduced the number of blue collar jobs and is anticipated to reduce the number of white collar jobs as well, the presentation addressed how artificial intelligence is likely to affect businesses going forward.
Mr. Cheyer outlined the future of digital assistants which, although ubiquitous on all computer and smartphone operating systems, are not that widely used.
Mr. Cheyer said it will need four things to elevate assistants from a utility “that is nice to have to a paradigm” that every business will need to use.
This would require one assistant that can be accessed from any device for any type of service in a way that can be personalized, he said.
EisnerAmper Cayman started in 2007 as one of the smallest firms in Cayman and has quickly grown its staff and offices, now located at Cricket Square. “The world financial crisis commenced shortly after we launched so arguably it was not the best timing,” Mr. Leung said. “However, there is always a demand for quality, and we positioned ourselves in the market as a firm where senior management were heavily involved in engagements.”
The firm has undertaken many pro-bono audits such as the CI Red Cross, NCVO, CI Chamber of Commerce and Cayman Finance.
James Lewis, partner, said: “We also try and take every opportunity to participate in events supporting charities. Every year we are out at the supermarkets for Veterans Day. We have dress-down days for local charities like Rock Your Socks (Downs Syndrome) and participate in the events such as the 5Ks for the CI Red Cross and Cayman Crisis Centre, also a sponsor for both.”
A copy of the article published on the Cayman Compass can be downloaded from the following link: Business in brief – EisnerAmper celebrates 10 years in Cayman – Cayman Compass
Other articles written during Adam Cheyer’s visit are on the following link:
Accounting Standards Update (ASU) 2015-09, Disclosures about Short Duration Contracts
ASU No. 2015-09 focuses on improving existing disclosure requirements to all insurance entities that issue short-duration contracts. The main improvements provide increased transparency of significant estimates in measuring the liabilities for unpaid claims and claims expenses and provides additional information to analyse the amount, timing and uncertainty of cash flows from insurance contracts and development of claims estimates. An in-depth discussion of these improvements can be found at our website: ASU 2015-09
Required disclosures (RD) to be included in the notes to the financial statements:
- Incurred and paid claims development tables by accident year for the most recent reporting period.
- A reconciliation of incurred and paid claims development information to the aggregate carrying amount of the liability with separate disclosure of reinsurance recoverable.
- For each accident year presented, total of incurred but not reported (IBNR) liabilities plus expected development on reported claims accompanied by description of reserving methodologies (and any changes thereto).
- For each accident year presented, quantitative information about claim frequency accompanied by a qualitative description of methodologies used for determining claim frequency information (and any changes thereto).
Required supplementary information (RSI) disclosure to be included either in the notes to the financial statements or as a separate schedule:
- Incurred and paid claims development tables by accident year for all years except for the most recent reporting period.
- For all claims except health insurance claims, the average annual percentage payout of incurred claims by age.
RD’s plus RSI’s and their audit considerations:
In forming an opinion, amongst other considerations the auditing standards require the auditor to consider the compliance of the financial statements with accounting principles generally accepted in the United States (US GAAP). If financial statements do not fully comply with US GAAP (including, but not limited to, omissions or errors) the auditor will need to assess the significance of the matter in forming an opinion. Depending on the significance of the matter the auditor may consider modifying the opinion. The auditor will need to assess each scenario individually based on facts and circumstances.
Required supplementary information
The RSI is not part of the basic financial statements, however, the information is considered to be an essential part of financial reporting by the relevant standard setters. In general, standard setters do not expect the auditor’s opinion on the fair presentation of such financial statements in accordance with the applicable financial reporting framework to be affected by the presentation by the entity of the RSI or the failure to present some or all of such RSI.
The audit standards require that the auditor perform some limited procedures on RSI which includes but is not limited to:
- Inquire of management;
- Compare the information for consistency with (i) management’s responses to the foregoing inquiries, (ii) the basic financial statements, and (iii) other knowledge obtained during the audit of the basic financial statements; and,
- Obtain certain written representations from management.
Audit report considerations:
- If all or some of the RSI is presented, the audit report will include additional communications in an “Other Matter” paragraph that is not considered a modification to the audit opinion as follows:
- A statement that the RSI is required under US GAAP to supplement the basic financial statements.
- A statement that the RSI, although not part of the basic financial statements, is required by the Financial Accounting Standards Board (FASB), who considers it an essential part of financial reporting.
- If we are able to complete the procedures required by auditing standards:
- A statement that we have applied certain limited procedures to the RSI, including a summary of the basic procedures;
- A statement that we do not express an opinion or provide any assurance on the RSI.
- If we are unable to complete the procedures required by auditing standards:
- A statement that we are unable to apply certain limited procedures to the RSI and the reason;
- A statement that we do not express an opinion or provide any assurance on the RSI.
- If some of the RSI is omitted, we will include in the “Other Matter” paragraph the following:
- A statement that management has omitted the missing RSI required by US GAAP;
- A statement that such missing RSI, although not part of the basic financial statements, is required by FASB, who considers it an essential part of financial reporting;
- A statement that our opinion on the basic financial statements is not affected by the missing RSI.
- If the measurement or presentation of the RSI departs materially from US GAAP, a statement that although the auditor’s opinion on the basic financial statements is not affected, material departures from prescribed guidelines exist, including a description of the departure.
- If the auditor has unresolved doubts about whether the RSI is measured or presented in accordance with prescribed guidelines, a statement that although our opinion on the basic financial statements is not affected, the results of the limited procedures have raised doubts about whether material modifications should be made to the RSI for it to be presented in accordance with guidelines.
- If all of the RSI is omitted, the “Other Matter” paragraph should include (e) above.
The auditing standards generally accepted in the United States of America, AU-C Section 730: Required Supplementary Information, contains illustrative examples of Other Matters paragraphs addressing the scenarios discussed above.
AU-C Section 730 par. A3: Illustration 1- The Required Supplementary Information Is Included, the Auditor Has Applied the Specified Procedures, and No Material Departures Have Been Identified
US GAAP requires that the required supplementary information on page XX be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by FASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
AU-C Section 730 par. A3: Illustration 2 – All Required Supplementary Information Omitted
Management has omitted the required supplementary information that US GAAP requires to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by FASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.
AU-C Section 730 par. A3: Illustration 3 – Some Required Supplementary Information Is Omitted and Some Is Presented in Accordance With the Prescribed Guidelines
US GAAP requires that the included supplementary information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by FASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with evidence sufficient to express an opinion or provide any assurance. Management has omitted [the missing required supplementary information] that US GAAP requires to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by FASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.
EisnerAmper LLP is awarded Best Global Accounting Firm
EisnerAmper LLP was named Best Global Accounting Firm in the 2017 Global Service Provider Awards Survey conducted for Hedgeweek Global. The Global Service Provider Awards are amongst the hedge fund industry’s most prestigious and competitive awards and are based on a rigorous peer review survey of Hedgeweek’s readers, which includes a global audience of investors, fund managers and industry service providers.
Charles Weinstein, EisnerAmper LLP’s Chief Executive Officer, said that EisnerAmper LLP was honoured to be receiving the award and to being recognised as the preeminent accounting and advisory firm in the alternative investment marketplace.
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EisnerAmper LLP & EisnerAmper Cayman attend GAIM Ops Cayman conference
Nicholas Tsafos and Peter Cogan, Audit Partners in EisnerAmper LLP and Directors of EisnerAmper Global, attended the Global Alternative Investment Management (“GAIM”) Ops Cayman conference on March 6-9 alongside Ben Leung, Managing Partner of EisnerAmper Cayman and Director of EisnerAmper Global.
GAIM was founded in 1994 and soon became the world’s largest international alternative investment event, known for its high intellectual content as well as the range, quality and quantity of the global investors and allocators it attracts. It has been held in Geneva, Monaco, Cannes, and Cayman.
GAIM is the annual global focal point for global investors to learn about the wider industry and the strategic debate within which alternatives operate, and secondly as an objective platform for the most interesting investment themes and best performing funds globally.
Peter, Nick and Ben were joined by other members of the EisnerAmper Cayman team to participate in interactive workshops and discussions.
GAIM Ops Cayman 2016 Poll Results
The results can be viewed below or a PDF version of the report can be downloaded here: GAIM 2016 Survey Results
- Hedge Fund Investor: What’s New and What’s Changed
- Calling All Regulators: Active and Recently Retired Regulators Prepare You for What’s Next
- The Evolving Business Model for Hedge Funds: Looking at the Future Model of Sustaining, Growing and Innovating
- Institutional Investor Perspective: The Future Partnership with Managers
In March 2016, EisnerAmper had the opportunity to participate in the annual GAIM Ops Cayman conference, one of the hedge fund industry’s leading operations and compliance events.
This year’s gathering brought together close to 500 operations, due diligence and compliance experts from the alternative investment industry. C-level personnel and fund managers made up the largest percentage of the attendees.
Over the course of the conference, the audience was polled on a variety of topics. The following report details those results.
As you review the responses, we want to offer our own insight to provide a more complete and in-depth look at the findings:
The Evolving Business Model for Hedge Funds
Fifty-five percent of respondents indicated the commingled hedge fund is not an endangered species.
While the commingled fund may not become extinct any time soon, the 2×20 pricing structure is long gone for equity based strategies. The 1.5×20 fee structure has grown in popularity due to pressure from the institutional investment community resulting from underperformance in recent years.
We anticipate that you will find hurdle rates incorporated into the incentive fee structure, wherein a manager must outperform a stated rate of return (e.g., 10-year bond) before the incentive can be taken.
Institutional Investor Perspective
More than 75% of respondents would consider increasing or beginning pursuing opportunities through liquid alternative products.
Liquid alternative mutual funds took off like wildfire from 2012-2014 as the number of new funds grew and AUM ballooned. However, for investors looking to gain access to certain strategies, the daily liquidity requirements for a liquid alternative mutual fund often prohibit certain securities and asset classes being included in the fund. These strategies are only accessible in a traditional commingled hedge fund structure.
More than half of the respondents felt it was important to meet personnel beyond the senior management team during operational due diligence (“ODD”) visits.
Post-Madoff, the role of ODD has grown dramatically. Whether investors are assigning the responsibility internally or outsource it to an ODD firm, managers must make sure their firms are of institutional quality from the front-middle-back office, legal/compliance, and infrastructure perspectives to win allocations.
(Click images to enlarge)
HEDGE FUND INVESTORS
What’s New and What’s Changed
Will the hedge fund industry continue to grow in assets or will there be consolidation among managers?
What is the biggest challenge facing managers today?
Where are fees heading over the next couple of years?
CALLING ALL REGULATORS
Active and Recently Retired Regulators Prepare You for What’s Next
Insider Dealing: Post-Newman, do you believe congressional action to codify “insider trading” would be beneficial?
Cybersecurity and cyber-related crime: Which elements of a cybersecurity program do you find the most difficult to implement?
Other policy and regulatory developments: Which of the following developments do you identify as the potential biggest threat to the hedge fund industry (Related to politics and regulations)?
THE EVOLVING BUSINESS MODEL FOR HEDGE FUNDS
Looking at the Future Model of Sustaining, Growing and Innovating
Is the commingled hedge fund an endangered species (and the 2 and 20 fee structure along with it)?
Which investor group(s) represents the most advantageous path for your goals in raising capital?
INSTITUTIONAL INVESTOR PERSPECTIVE
The Future Partnership with Managers
Who do you expect to win the U.S. Presidential election?
Demands for portfolio and operational transparency have increased dramatically over the last few years. How has your organization reacted to those demands?
Who are the most important people to meet during an operational due diligence visit?
Have you had Basel III-related conversations with your prime brokers?
Is your CCO function outsourced to a third-party compliance consultant?
Are You a Going Concern?
The rules of US Generally Accepted Accounting Principles (GAAP) are no longer silent on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and what management should disclose in their financial statements.
In August 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, titled Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance about management’s responsibilities in this regard.
Guidance has been issued to reduce diversity in timing and content of footnote disclosures. Management need to consider this guidance to produce US GAAP-compliant financial statements.
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Article on FASB’s Accounting Standards Update (ASU) No. 2015-09
Preparers of financial statements need to be aware of the additional disclosure requirements introduced by ASU No. 2015-09, as well as consider the time impact and increased level of detail on reserving and claims data to be compiled in order to enable preparation of financial statements that comply with accounting principles generally accepted in the United States of America (U.S. GAAP).
The article published in Captive Insight can be downloaded through the link below.
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