Fund financial reporting has started to resemble a minefield for the unwary fund manager or administrator. Just as one set of changes to reporting standards is dealt with, along come more changes. Each year brings more challenges and issues to consider. Mary Keily of OBK Accountants has taken a long, hard look at some of the issues and challenges for funds reporting under IFRS.

The observations document highlights the accounting standard changes expected to have the most impact on 2013 year ends.

Taking the robust feedback the industry has received from the Irish Auditing and Accounting Supervisory Authority as a starting point, she explores recurring issues from recent years and highlights potential pitfalls for this year.

In the midst of audit season, with financial statements being scrutinised by auditors and boards of directors before being finalised, it is timely to consider the issues affecting the quality of those financial statements. IAASA (the Irish Auditing and Accounting Supervisory Authority) have had some interesting comments to make on fund financial statements over the last few years. While their remit in terms of the funds industry mostly relates to closed ended funds (as a result of the EU Transparency Directive), many of the points made in their reports and observation documents are relevant for a wider range of fund types.

In advance of the 31 December 2013 year end, IAASA published “Observations on Selected Financial Reporting Issues:   Issuers financial years ending on or after 31 December 2013”. In this document, they focus on recent and recurring financial reporting issues, and also some expectations for financial statements with 31 December 2013 year ends. A number of the issues raised relate specifically to funds.

 Quality of Fair Value and Risk Disclosures by debt issuers/special purpose vehicles

The IAASA observations document refers to previous reviews of fund and debt issuers financial statements and notes while there have been improvements, they are largely limited to issuers who have been reviewed by IAASA. The quality of these disclosures remains low in general. The problems are typically:

Suggestions made by IAASA for improvement are: