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Tuesday, 23rd April 2024
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The big five on the euro Back  
Looking for some New Year reading on the euro? Una McCaffrey reviewed the major publications on offer from the ‘Big Five’ accounting firms.
Arthur Andersen

Arthur Andersen has produced a 112-page report entitled ‘The euro and your business’, in which the firm, in association with Treasury Management International takes a whistle-stop look at euro-preparedness for businesses in all eleven EMU-participating states, as well as in Sweden, Switzerland, the UK and the United States. In the Ireland section, Fintan Glynn and Derek Moriarty cover the key points of the National Changeover Plan, as well as accounting and tax issues that will arise for individual firms. Such issues include changeover costs, useful lives of tangible and intangible fixed assets and foreign exchange.

As well as covering individual countries in detail, the report includes three essays on the background to the euro and nine pieces on strategy and compliance questions such as IT and legal issues. One of these pieces, ‘Implementing shared services in Europe’, looks at SSCs and identifies their usefulness in a euro-denominated environment. According to Peter Moller and Philip Startin, the London-based authors of this piece, ‘although the most likely starting point is financial shared services, additional processes, such as procurement, order entry, customer service, human resources and legal services, are increasingly being moved wholly or partly into SSCs’. Such a move would lead to the achievement of ‘further economies of scale’, according to the authors.
Web: www.arthurandersen.com

KPMG

KPMG Consulting’s third annual EMU report, ‘Europe’s preparedness for EMU’, has the tone of a trouble-shooter, and assumes that businesses are at the point where they have begun preparations for EMU and are identifying possible problems along the way. The report pulls no punches in warning firms that ‘in the short term, EMU is likely to have a negative impact on profitability’, and that thus, companies ‘face a turbulent transition period for which many are ill-prepared’. In particular, KPMG identifies issues where businesses may not yet be up to speed, and draws upon its research with 307 companies across Europe to come up with final preparation tips.

According to the report, the main difficulties faced by companies in the remaining euro preparation period are caused by an overly introspective or operational approach to the whole project, and a certain neglect of the market opportunities that might be arising. The report is unyielding in its proclamation that ‘purchasing, pricing and accounting differences will lead to chaos’ in supply-chain situations. This will be the result, says the report, of a lack of co-ordination between companies making payments to suppliers, receiving payments from customers and accounting in euros. This is a situation which could leave smaller companies is a particularly vulnerable position, according to the report.

The study also concludes that many companies’ IT preparations ‘remain flawed’, even at this late stage. Putting a new perspective on the much-publicised Y2K dilemma, the report reminds readers that the lifetime of EMU will mean that IT measures ‘will greatly exceed Year 2000 spend’.
Web: www.kpmg.ie

PricewaterhouseCooopers’s

work on the euro resulted in a study on ‘The Euroland economy’ that examines ‘the past performance of the Euroland economy’ and assesses ‘its future prospects in both the short and medium term’. This study takes an educated and quite theoretical look at the main economic issues that the euro will drag in its wake and comes to the conclusion that the euro could eventually gain international currency status on a par with the US dollar. The report says that consensus forecasts point to continued relatively strong Euroland economic growth of around 2.5-3 per cent in 1999, but admits that this outlook is uncertain. To cater for this uncertainty, PwC has outlined two possible economic scenarios that could become reality next year: ‘euro dream’ and ‘euro crash’.

Under the dream scenario, Euroland growth would slow steadily in the medium term to around 2.25-2.5 per cent. Inflation would remain relatively low, helped by a stable and relatively
strong euro. The ECB would guarantee price stability and thus help to facilitate the integration of European capital markets.

In contrast, the crash scenario would involve a less favourable global economic environment, in combination with a ‘multi-speed’ Euroland economy where some smaller economies are overheating and the larger economies still have excess capacity and high unemployment rates. Under this situation, according to the report, the ECB might react by raising interest
rates. This could, in turn, slow domestic demand growth and attract large capital inflows that could lead to excessive appreciation of the euro, so eroding the competitive edge of the
entire zone.

The report concludes that the balance of risk between the two scenarios is ‘roughly even’.
Web: www.pwcglobal.com

Ernst & Young

Ernst & Young also takes an academic look at the euro with its book, ‘Strategic conversations on the euro at the vanguard of global integration’. This 300-page publication is divided into four parts, each of which is further divided into sub-sections. Each sub-section is based on a ‘strategic conversation’ with an eminent player in euro-economics, such as Jean-Francois Theodore, chairman and CEO, SBF-Bourse de Paris, or Rene Karsenti, director general of finance, European Investment Bank. Part I, ‘One currency, many stock exchanges, one market’ covers ‘the new geography of global capital markets’, while Part II, ‘European hubs for global finance’ asks ‘The euro: the catalyst for entrepreneurial change in Europe?’ Part III, ‘European banking and the euro challenge’ looks at EMU from the network banking, asset management and EIM perspectives. Finally, Part IV of the book is entitled ‘The global integration frontier and the euro’ and looks at the issue of convergence from a statistical and information viewpoint. This section includes a conversation with Yves Franchet, director general of Eurostat.

The book’s prologue features no less than Jacques Santer, President of the European Commission, who gives his views on ‘The euro, Europe and the world’. Santer says that he ‘looks with satisfaction on the enormous progress that has been made in the filed of further integration’, but warns that ‘there are still enormous challenges facing us’.
Web: www.ie.eyi.com

Deloitte & Touche

Deloitte & Touche has circulated, among other guides, a ‘Eurocheck’ pamphlet that attempts to wade through all the available information on EMU to provide businesses with a ‘brass tacks’ approach’ to what they really need to know about the event we have all been waiting for. The first section of the booklet covers ‘the key questions you should be asking now’, and offers a checklist of nine issues that should have formed part of businesses’ preparations
before the end of 1998. These potentially problematic areas include invoicing in euro, tax issues arising from EMU and price sensitivity in EMU. To help businesses deal with possible difficulties, Deloitte & Touche has drawn up a simple three-stage plan involving the steps: collect, identify and report. The firm recommends that information on all areas of a business be collected, before the implications of EMU are identified and reported upon.

The pamphlet concludes with some ‘important facts at a glance’. According to this, some 64 per cent of German companies, for example, have made preparations to switch to the euro as soon as it becomes a trading currency, while just 10 per cent of Irish companies have looked at the consequences of EMU. From January 1999, says the booklet, the Revenue Commissioners
will accept tax and customs and excise payments in euros, and euros may be deposited and withdrawn in Irish banks.
Web: www.deloitte.co.uk

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