Press release: Are you ready for fair value?DOWNLOAD
Luxembourg, 22 January 2010 — The impact of the CNC (Commission des Normes Comptables) 2-1 position paper on the consolidation exemption for companies in the private equity and 60 participants, Benjamin Lam, partner of Deloitte and leader for private equity and real estate, together with Georges Kioes, audit partner and member of the CNC explained the factors that led to the issuance of this position paper and the background. Kioes mentioned that the CNC started to work on a position on article 317.3 (c) of the Commercial Companies Law of 1915 (as amended) more than 18 months ago, after having received several requests from private equity houses that wanted to benefit from the consolidation exemption as is the case for SICARs and SIFs.
Nick Tabone, audit partner specialising in private equity, then focused on the practical implications of the six conditions defined in the position paper that need to be fulfilled for private equity and real estate groups which would like to benefit from the consolidation exemption for the periods beginning on or after 1January 2009, and instead disclose the fair value of their investments.
Raymond Krawczykowski, tax partner, went on to discuss the potential tax impact on the fair value option. He reminded participants that there is no assessment carried out on the consolidated accounts as the tax authorities only review the tax position on a standalone basis and, therefore, the booking of the fair value of the underlying investments may have an impact that will need to be analysed and discussed with the tax authorities and tax advisors.
A Q&A session followed. One of the key aspects of the discussion was how to fair value the investments and what needs to be disclosed in the annual accounts.
Benjamin Lam wound up the meeting by stating that “in the current environment where transparency and good corporate governance are essential to restore confidence in the markets, the decision as to whether to consolidate or provide fair value must be carefully analysed and assessed on a case-by-case basis. It is of paramount importance that this issue is discussed with professional advisors.”