AGEFI Luxembourg16Février 2016

Economie

By Oliver R. HOOR (left picture), Keith O’DON-NELL (right picture) and Samantha SCHMITZ-MERLE, ATOZ *

On 28 January 2016, theEuropean Commission pre-sented its Anti-Tax

Avoidance Package. One of thecore pillars of this package is aDraft EU Anti-Tax AvoidanceDirective (the “Draft Directive”)which was already widely leaked inthe press in the week before its offi-cial release. The Draft Directiveproposes anti-tax avoidancerules in six specific fieldswhich are meant to beimplemented by eachEU Member State(“MS”). This Articleprovides an overview ofthe proposed provisionsand points out their mostcontroversial aspects.

1. Introduction

The aim of the Draft Directive (also referred to as“BEPS Directive”) is to implement at EU levelthe BEPS recommendations made by OECD andG20 in October 2015. The proposal follows theconclusions reached at the 8 December 2015ECOFIN meeting, notably that EU directivesshould be, where appropriate, the preferredvehicle for implementing OECD BEPS conclu-sions at EU level. The content of the DraftDirective broadly follows a previous anti-BEPSDirective elaborated at EU Council level, whichwas made available to the public in December2015 and which included many of the BEPSrecommendations.

The Draft Directive covers all taxpayers whichare subject to corporate tax in a EU Member Stateas well as EU Permanent Establishments (“PEs”)of taxpayers which are not in the scope of thedirective. The Draft Directive lays down anti-taxavoidance rules in the following fields: - Deductibility of interest; - Exit taxation;- Switch over clause;- General anti-abuse rule (GAAR); - Controlled foreign companies (CFCs); and - Hybrid mismatches.

These measures are presented as minimum stan-dards, while certain of these are only recommen-dations or best practices in the BEPS framework,meaning that the proposals go way beyond theBEPS recommendations. Moreover, the propo-sals regarding exit taxation and the GAAR comein addition to the recommendations provided inthe final BEPS Reports released in October 2015.

Although the concerns expressed by theEuropean Commission to fight against tax avoi-dance in a coordinated manner are understan-dable, the proposals presented raise concerns inthat they further dilute national sovereignty intax matters, and by “goldplating” the BEPSrecommendations, will make the EU a less attrac-tive environment to do business.

2. Proposals in the Draft Directive

2.1. Limitation to the deductibility of interestexpenses

The first measure aims to discourage multinatio-nal groups from reducing the overall tax base ofthe group by financing group entities in high-taxjurisdictions through debt. Here, the DraftDirective proposes a fixed ratio rule as the gene-ral rule and a group-wide rule as a carve-outfrom the general rule. More precisely, it is propo-sed to set a rate of interest deductibility at thetop of the scale recommended by the OECD (i.e.10% to 30%). Subject to certain conditions andlimitations, borrowing costs shall be deductibleonly up to 30% of the tax payers’ earnings befo-re interest, tax and amortization (“EBITDA”)(fixed ratio rule) or up to an amount of EUR 1mio (safe harbour), whichever is higher.

Taxpayers who can demonstrate that the ratio oftheir equity over their total assets is equal to orhigher than the equivalent ratio of the group(under certain conditions) can also fully deducttheir excess borrowing costs (group-wide rule).Carry forward provisions are available in casethe interest deduction or EBITDA is not fullyused.

Under the current proposal, financial institutionsand insurance undertakings are not subject tothis limitation. Without further work, theseexemptions raise questions from an EU State Aid

perspective, which has a certain irony given thatit is the EU Commission making this proposal.

With regard to financing activities, the proposalwould allow interest expenses to be deductedwithout limitation, where interest income of acompany is greater than its interest expense.Hence, Luxembourg companies performingfinancing activities may also under the propo-sed rules be taxable on an arm`s length margin.

When interest expenses are not deductible,double taxation will likely arise as the lendershould be taxable on the corresponding income.Even the proposed carry-forward mechanismwould not eliminate the problem of double taxa-tion as companies may never be in a position touse the amounts carried forward. From expe-rience of existing regimes in place with similarinterest limitations, this can be a real problem forcompanies in financial difficulty as it may requi-re them to pay corporate tax on non existent pro-fits, adding to their financial difficulty.

Moreover, how a business finances its operationsis an important business decision that dependson a range of factors. While the deductibility ofinterest expenses is one factor to be considered,the decision as to whether a company should befinanced by equity or debt is generally not-taxdriven and there are a number of good commer-cial reasons why intra-group loans can be prefe-rable to a contribution of equity (legal require-ments, regulatory constraints, foreign currencyimplications, business considerations, etc.).

The proposed rules could lead to significantdisallowance of interest expense in case ofAlternative Investments (for example real estate,private equity and infrastructure). These invest-ments usually have relatively high levels of thirdparty debt. Nonetheless, interest paid to thirdparties does not give rise to base erosion.

So far Luxembourg tax law does not provide forany thin capitalisation or earning stripping rulesother than the 85:15 debt-to-equity ratio appli-cable to holding activities (which is based onadministrative practice). The implementation ofthe proposed limitation to the deductibility ofinterest by Luxembourg might be harmful to thecountry`s position as a location of choice for thestructuring of cross-border investments in andthrough Europe.

2.2. Exit taxation

The second measure aims to discourage tax-payers to move their tax residence and/or assetsto low-tax jurisdictions. Under the proposal, ataxpayer shall be subject to tax at an amountequal to the market value of the transferred assetsat the time of the exit, less their value for tax pur-poses in case of: - A transfer of assets from the head office to a PEin another MS or to a third country; - A transfer of assets from a PE to the head officeor another PE in another MS or a third country; - A transfer of tax residence to another MS or athird country (except for those which remainconnected with a PE in the first country).

In case of transfers within the EEA, a taxpayermay defer the payment of exit tax by paying ininstalments over at least 5 years. This is in linewith the requirements determined in the juris-prudence of the European Court of Justice(“ECJ”).

Under Luxembourg tax law, the aforementionedtransfers are already taxable events (with thenecessary possibility to postpone the payment

of the exit tax when transfers occurwithin the EEA and, since 2016,

extended to transfers involvingtax treaty countries). Hence, nochanges to Luxembourg taxlaw would be required in thisrespect.

2.3. Switch-over clause

The aim of the switch-overclause is to discourage com-

panies from shifting profits outof high-tax jurisdictionstowards low-tax jurisdictions,

unless there is sufficient busi-ness justification for the

transfer.To achieve this,

the proposedrule states that aMS shall notexempt a tax-payer from tax

on: - Third country

income received inthe form of a profit

distribution; - Capital gain on

the sale of shares in athird country entity; or - Income from a third country PE

if this third country taxes profits at a rate whichis lower than 40% of the statutory tax rate thatwould have been levied in the MS. In these cir-cumstances, the MS should apply the creditmethod (i.e. switch over from exemption to cre-dit method) and grant a tax credit for the amountof tax paid in the foreign country on such income.

This rule would have a limited scope whenimplemented under Luxembourg tax law. This isbecause dividends and capital gains realised inrelation to subsidiaries resident in third countriesmay only benefit from the Luxembourg partici-pation exemption regime if they pass a compa-rable tax test. In this regard, a subsidiary has to besubject to an effective taxation of 10.5% on a com-parable taxable basis. This translates into a taxcorresponding to 50% the Luxembourg corpora-te income tax rate (i.e. above the 40% thresholdproposed in the switch over clause).

Thus, with regard to dividend income and capi-tal gains, this rule may only apply in the fewcases in which Luxembourg has adopted theexemption method to avoid double taxation ondividend income in an tax treaty concluded witha third state. There may be a real issue here inrelation to the directive imposing a unilateraltreaty change (unless Luxembourg can renego-tiate all the tax treaties concerned by the date forimplementing the directive.

With regard to income derived through a PE in atax treaty country, the host state of the PE has anunlimited primary taxing right and Luxembourgfrequently adopts the exemption method for theavoidance of double taxation. The application ofthe exemption method is not conditional to therecognition of the PE by the other contractingstate or the level of effective taxation. Hence, theproposed rule may apply where the income of aPE located in a third state is not taxed in its hoststate (or taxed at a low level).

However, even in the above mentioned casesthe switch-over rule should not be applicable asit would represent an illegitimate treaty overridewhich transgresses international law. Instead,individual tax treaties would need to be renego-tiated in order to include the switch-over clausein the respective tax treaties. As this problemwill be a recurrent one in European States, wewould suggest that the EU Commission studycarefully the number of DTT negotiations thatwould be required and at a minimum put inplace grandfathering provisions pending rene-gotiations of DTTS.

2.4. General anti-abuse rule (GAAR)

The Draft Directive further proposes the intro-duction of a GAAR which would allow the taxauthorities of a MS to deny taxpayers the benefitof arrangements considered as abusive. Theexplanatory memorandum to the proposal statesexpressly that the proposed GAAR is designed toreflect the artificiality test of the ECJ.

Under the proposal, non-genuine arrangementscarried out for the essential purpose of obtaininga tax advantage shall be disregarded. The DraftDirective defines that arrangements are deemedto be non-genuine when they are not put intoplace for valid economic reasons which reflecteconomic reality. In case arrangements are disre-garded in application of this rule, the tax liabilityshall be calculated by reference to economic sub-stance in line with domestic tax law.

Accordingly, we now have a EU concept of "non-genuine arrangements" already seen in theGAAR included in the latest version of the EUparent subsidiary directive, but in a slightly dif-ferent version, and overlaid with a new conceptof "the essential purpose", while the EU parentsubsidiary directive refers to “main purpose orone of the main purposes”.

Given that these subjective concepts create alrea-dy some legal uncertainty as they may give riseto a lot of different interpretations, it would bedesirable that the EU Commission remainsconsistent with the concepts already defined inECJ case law instead of proposing new conceptsof vague character.

The proposed GAAR is fairly similar to the abuseof law provision provided under Luxembourgtax law(1) that enables the Luxembourg tax autho-rities to challenge transactions whose sole pur-pose is to evade taxes through abusive construc-tions. It follows that no tax law changes shouldbe required in this respect. Nevertheless, thescope of the abuse of law provision (and theGAAR) should be limited to clearly abusivesituations or wholly artificial arrangements (inaccordance with relevant jurisprudence of theLuxembourg courts and the ECJ).

2.5. Controlled foreign company (CFC) rules

The Draft Directive also provides for CFC rulesthat would re-attribute the income of a low-taxedcontrolled company to its parent company eventhough it has not been distributed.

The CFC rules apply if the following conditionsare fulfilled: - The controlling taxpayer holds or holds toge-ther with its associated enterprises a direct orindirect shareholding of more than 50% in thecontrolled entity; and - The controlled entity is subject on its profits toan effective tax rate which is lower than 40% ofthe effective tax rate that would have been char-ged in the MS of the controlling taxpayer; and- More than 50% of the income accruing to thecontrolled entity is passive income (as defined inthe proposal, i.e. interest, royalties, dividends,etc.); and- The principal class of shares of the controlledentity are not regularly traded on a recognizedstock exchange.

The CFC rules also apply to financial underta-kings but only to the extent that more than 50%of their passive income, as defined in the propo-sal, comes from transactions with the controllingtaxpayer or its associated enterprises. The CFCrules shall not apply if the controlled entity islocated in an EU/EEA country, unless the esta-blishment of the entity is wholly artificial or to theextent that the entity engages in the course of itsactivities in non-genuine arrangements put inplace for the essential purpose of obtaining a taxadvantage.

Here, we have a concept of "non-genuine arran-gement", overlaid with a concept of "essentialpurpose" and combined with a "transactionalapproach", meaning that the definition of “non-genuine arrangement” even differs from the oneincluded in the GAAR. The draft Directive seemsto be nervously skating around the "CadburySchweppes" standard of limiting any restrictionson intra-EU establishment to "wholly artificial"structures. Evidently, these subjective notionswould result in significant legal uncertainty.

This concern has already been voiced in com-ments to the December draft directive which sta-ted that: "limiting this (CFC) provision to thirdcountries, as foreseen in the Italian presidency’scompromise text, seems to be the most suitableoutcome in the framework of this directive ...." asotherwise "...the legal drafting of the CFC ruleswould become very complicated". Indeed, CFCrules that apply in an EU context are hardlyconsistent with EU Law unless they consider thestrict interpretation of the ECJ.

As of today, Luxembourg tax law does not pro-vide for any CFC rules and the question might beasked why Luxembourg should implement suchrules. Income from subsidiaries that come withinthe scope of the CFC rules would be taxableupon repatriation to the Luxembourg parentcompany so these CFC rules will impose anapproach to timing of taxation of profits.

In our view, MS should be free to choose whetherthey want to implement CFC rules or not. CFCrules are not free from doubt in a DTT contextwith different views of whether they are contra-ry to the bilateral obligations assumed in a stan-dard DTT. Here again, the proposal seems tododge the point and fails to provide a mecha-nism to deal with the uncertainty in an interna-tional context

Suite en page de droite

The EU Commission Releases Draft Directive on BEPS – A Critical Analysis

Février 201617AGEFI LuxembourgEconomie

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2.6. Framework to tackle hybrid mismatches

The aim of the last measure is to eliminate thedouble non-taxation created by the use of certainhybrid instruments or entities.

As far as hybrid entities are concerned, the propo-sal provides that if two MS give a different legalqualification to the same taxpayer (including itsPE) so that it leads to either a deduction of pay-ments, expenses or losses at the level of the twoMS or it leads to a deduction in one MS with noinclusion in the other MS, the legal qualificationgiven by the country of source (country in whichthe payment has its source, or in which theexpenses have been incurred or the losses havebeen suffered) has to be followed and is bindingon the other MS.

As far as hybrid instruments are concerned, theproposal states that the legal qualification of theinstrument in the jurisdiction of source of the pay-ment made will be determinant and binding onthe country of the other MS involved in the mis-match. It means that if the jurisdiction of sourceconsiders that the instrument is a debt instrument,

the payment made under this instrument willqualify as interest both at source level and at resi-dence state level. Hybrid mismatches in regard tofinancing instruments have already been largelydealt with through changes to the EU parent-sub-sidiary directive and the resulting changes to theLuxembourg participation exemption regime. It isinteresting to note that these anti-hybrid rulesshould only apply in regard to hybrid mismatchesbetween MS (not in regard to transactions withthird states).

3. Conclusions and outlook

At this stage of the procedure, even though thereis a clear political will to implement BEPS mea-sures in a coherent and coordinated manner inorder to, as the Commission says, avoid “nationalpolicy clashes, distortions and tax obstacles in theEU”, one should keep in mind that EU countrieswill have to agree unanimously on all aspects ofthe proposal before it can become a final directive.

The Draft Directive could be seen by many MS asinvasive in terms of national sovereignty, as it goesfar beyond previous tax directives. Moreover,whereas previous directives sought to eliminatediscriminations and tax barriers to cross borderbusiness within the EU, the Draft Directive seeks

to impose a common tax system on all EU MS inthe fields mentioned above, justifying this on thegrounds that it is necessary for the functioning ofthe internal market.

This justification looks thin, frankly. If one appliedthe “essential purpose” test proposed in the DraftDirective, would a reasonable man conclude thatthe essential purpose of the package was a) taxharmonisation and revenue raising in the EU or b)improving the functioning of the internal market?

The proposals in the Draft Directive are clearlyinspired by existing provisions generally seen inhigh-tax jurisdictions such as Germany, Franceand Italy. The risk of blunt “one size fits all” rulessuch as these is a drift in Europe towards a high-spending, high-taxing economy throughout redu-cing the tax competition within the EU that theCommission itself recognises as important. Inaddition, when taken with the aggressive stance ofthe EU Commission towards multinational busi-nesses, the EU risks losing its competitive edge onthe global stage.

The proposals would be especially detrimental forsmaller countries with open economies such asLuxembourg. Therefore, it is imperative for theLuxembourg government to carefully analyse any

BEPS recommendations before implementationinto Luxembourg tax law and to defend the coun-try`s and the EU`s interests where necessary. Onceagreed by all MS, the Directive will have to beimplemented into the national tax laws of all MS.

The proposal currently does not include any infor-mation on the timeline for such implementationalthough the Commission has indicated in itscovering communication that it believes that it canachieve early agreement. Since the EuropeanCommission proposes principle-based rules inorder to leave it to the MS to define their imple-mentation details, it is questionable whether theobjective of having a coherent implementation ofBEPS measures at EU level will be met. It is evi-dent that there is still a long way to run until theserules will become the new European standards.

* Oliver R. HOOR is a Tax Partner (Expert Comptable, Steuerberater), Keith O`DONNELL is the Managing Partner and SamanthaSCHMITZ-MERLE is a Director with ATOZ Tax Advisers (TaxandLuxembourg). www.atoz.lu

The authors may be contacted at: oliver.hoor@atoz.lukeith.odonnell@atoz.lusamantha.merle@atoz.lu

1) Section 6 of the Steueranpassungsgesetz

Most probably in response tothe excessive nature ofthe European Union’s

regulatory answer to the ban-king and tax crisis, the EUCommission launched a callfor evidence on the EU regula-tory framework for financialservices in September 2015.

You will find below the preliminaryand general observations which Ifound useful to submit to the EUCommission in addition to the answers toits (perhaps too detailed) questionnaire:

“At a time when nine out of tenof the largest banks in theWorld are American orChinese and where theEuropean Union is lag-ging behind as regardsinvestment following thefinancial crisis, as a professorin EU banking and financiallaw and as a partner in a leadingLuxembourg law firm, I commend theEuropean Commission for launching theabove-mentioned consultation.

I have answered the questionnaire as far as pos-sible but would like to point out that I am disap-pointed by its format, which only touches upon thefundamental questions involved. Accordingly, Iwould like to raise in this cover letter some of thefundamental issues faced by the EU regulation ofthe financial services sector.

In my opinion, the approach of the EU as regardsbanking and financial regulation has several majordefaults, which are presented below.

1) At the emotional level: sanction-based and guilt-inducing treatment

of the financial sector, which iscounterproductive for the

European economy

Instead of encouraging coope-ration between the authoritiesand the private sector in orderto prevent another crisis (whichit is worth reminding did notstart in Europe) and to reinvigo-rate the European economy, theEU institutions have fallen into

the trap of searching for a scapegoatand wanting to “punish” the finan-

cial sector for its perceived mistakes.

The perception of thefinancial sector asbeing at fault has ofcourse been exacer-bated by the media.The EU institutions

have nonethelesscontributed to the

creation of a climate oftension and hostility,

which has resulted in financialplayers and investments relocating

outside Europe and in the general decline of theEuropean financial sector.

2) At a methodological level : lack of rigour in thediagnosis of the problem and choice of remedy, lackof a coherent and considered vision and lack of aclear strategy; leading to merely following otherpowers at the international stage and a prolifera-tion of legislative acts

The EU institutions have made a mistake in theirapproach. Rather than : (i) identifying and tho-roughly attacking the actual causes of the European

crisis provoked by the problems in the USA (exces-sive porosity of the European financial system) ; (ii)defining the financing needs of the European eco-nomy and the best ways of satisfying those needsby looking at the specific characteristics of theEuropean financial system (major dominance ofthe banking sector) and international competition(reality-based approach) ; and (iii) outlining a clearand coordinated strategy; the EU can be criticisedfor simply following the G20 and being naïve inwanting to be a model pupil. In particular, the EUhas not realised that its interests are not necessarilyaligned with those of other powers and it has notpaid enough attention to identifying what are itsinterests.

In deciding what policies to pursue, the EU has notshown the intellectual curiosity necessary to exa-mine the reasons explaining why other countriesescaped the consequences of the US crisis. It is note-worthy, for instance, that it has not looked at theexample of Canada. Similarly, the EU has not revie-wed critically its own policies in the banking andfinancial regulation since the launch of the 1999financial sector action plan and therefore has notlearnt any lessons from the past.

It is this lack of review and coherent and consideredvision which has led to a proliferation of legisla-tion. This legislation has been hastily drafted, oftenas a knee-jerk reaction to political, economic andfinancial developments and international pressure.

3) At the institutional and legislative level: toomany regulatory acts and too many regulators

These strategy problems have been exacerbated bythe implementation of legislation in a nervous poli-tical climate and by anxiety-provoking and riskadverse legislation. The legislation has been draftedby a number of EU organisations invested with dif-ferent legislative and supervisory powers. Theresult has been a constant output of legislation of

varying legislative value (Level I, II and III) comingfrom different authorities and often contradictingitself. It has become impossible for financial under-takings, and even EU banking and financial lawspecialists, to follow all of this legislation.

In addition, the transfer of supervisory powers tothe EU level has been accompanied by significantdelays in handling files by the authorities and a lossof understanding by the private sector of their poli-cies. All this has occurred at an important time forthe re-bolstering of the European economy. Giventhat finance involves, by definition, gambling on thefuture, it can only prosper in a reassuring, predic-table and ultimate stable environment.

4) Systemic risk

Lastly, although the EU institutions have appearedto be concerned with systemic risk and moralhazard, the regulatory burden seems to work in theopposite direction. With so many obligations to res-pect and legislative acts with which to comply, onlythe bigger credit institutions are well-equipped tocope. The result will be a concentration of the finan-cial sector and the increase in big players ratherthan a range of diverse operators in the market.Consequently, the European economy will be facedwith credit institutions which are “too big to fail”,which was exactly one of the problems in the finan-cial crisis.

I sincerely hope that my comments in this letterand answers to the questionnaire will receive thesame attention which the regulation of theEuropean financial sector deserves”.

Philippe-Emmanuel PARTSCHEU Financial & Competition Law Partner

Arendt&MedernachProfessor of EU Banking and Financial Law at the University of Liège

philippe-emmanuel.partsch@arendt.com

Call for evidence of the EU Commission: EU regulatory framework for financial services

By Laurent GATEAU, Associate Partner and FlorentBAUDIN, Manager, KPMG Luxembourg

In the current economic world, the pres-sure on timing is always increasing.This statement is all the more true for

CFOs and finance departments whichneed to be more and more reactive.

Financial information needs to be available quick-ly in order to ease decision making. Therefore thepressure on accounts closure routines is increasing.With the burden on cash flow and sudden changesin the economy, a company’s management needsregular information in a timely manner to be able toact or react in the best interests of the company. Thetime when closing was mainly a statutory eventand timing was not the highest priority is now overand the period for closure has started to be reducedto meet the information needs of stakeholders.

Finance departments are more and more requiredto become a business partner and a switch is requi-red between running operations to enhancing thefinancial performance of companies. In a recentKPMG survey conducted worldwide*, a Financedepartment used to spend 50% of its time perfor-ming basic finance tasks, 30% focusing on reportingactivities and 20% relating to finance performance.This recent evolution shows a shift from standard

finance tasks towards business performance, wherethe percentages have now swapped. Thereforereduction of time used for low value added tasks tofree up time for scarce finance resource is vital for acompany.

Best in class firms are now able to close in three busi-ness days, but with those deadlines the possibility tocorrect any issue that might have occured during theclose is very tight. At the same time, quality requi-rements are not a nice to have but a must which willbe the cornerstone of reporting. Indeed, the infor-mation will not be used if incorrect and could leadto wrong decision making based on false facts.

Providing incorrect information might break thetrust that the business and operations have in theFinance department, and lead them to producetheir own dashboards instead of focusing on busi-ness which in the long run might be costly for thecompany. Therefore Finance departments need toperform a certain number of adjustments in theirorganization in order to make this change frommainly book-keepers to finance partner possibleand to reduce the time spent on lower value addedtasks. One of the first key elements is to anticipateany “what could go wrong” events in order to miti-gate risks before close.

In an environment where the closing process is per-formed in less than a few days, a clear process needs

to be in place to avoid that part of the informationis missed during the close. Tasks need to be speci-fied with owners including timing for their expec-ted completion and can be monitored through theuse of checklists. Doing this will allow one to knowduring the close where the process stands and tocheck if it is on track or if some actions are requiredto ensure that everything is in the books before thedeadline.

Also one of the best practices is not to wait until afterthe period end to book everything. A large amountof information is available prior to close and can bebooked through the month reducing the amount ofwork required during the closing period, thus allo-wing more time to review and analyse month endfigures before releasing them, which will also bringmore value and insight for management. Withingroups, the standardisation of classification of thedifferent cost and revenue elements under therequired reporting captions is critical. In order toachieve this, communications to all parties and sub-sidiaries on how to classify them is essential to ensu-re comparability at group level and to help reducethe closing period.

With standardised templates and monitoring ofaccounts used, the information will be easier to ana-lyse throughout a subsidiary and the identificationof potential issues or risk in one of them will befacilitated. If communication is not efficient with a

group’s subsidiaries, and there are no guidelinesregarding the allocation of costs, the comparabilityof data will be lost. Depending on the understan-ding of each counterpart, similar costs might beclassified in different accounts leading to an incon-sistency at group level and which may mislead thefinance and operations departments when analy-sing figures.

To reduce closing time, the optimization of the ITsystem is an important feature. Excel is still largelyused for compiling data (almost every companyuses it at one stage of the closing and reporting pro-cess), and the risk of error in formulae needs to bemonitored. The implementation of sanity checksas a safeguard is a must have and source data needsto be monitored. Also the automation of tasks willreduce the potential for manual mistakes andstrengthen the reliability of final figures. On aworldwide level, 35% of respondents are expectingto invest significantly in their accounting system inthe next two years*.

Closing is a critical activity for Finance departmentsand they can only be recognized as true businesspartners when they have mastered this activity in asustainable fashion and thus create available time toprovide value added information to internal stake-holders and also potential investors or analysts.

* KPMG International’s global survey of CFOs

Closing of Accounts – The challenge to match timing and quality