PwC conference 2023: 660 minutes of meaningful presentations

December 2023

Two days, 660 net minutes of meaningful presentations, 380 conference guests, 25 speakers, feedback on the organisation with a score of 9.4 on a ten-point scale are the main numbers with which to summarize the event that took place at the Alexela Concert Hall in Tallinn on 22.-23. November.

The First Day, November 22

In the morning sessions on the first day, PwC partners Janno Hermanson and Ago Vilu and lead auditor Oksana Popova gave an overview of the upcoming changes in financial accounting (both IFRS and RTJ) standards.

After many years, there have been changes in the International Financial Reporting Standards (IFRS) that make the reports shorter. With the amendment to IAS 1, in the 2023 annual accounts, companies must disclose only those accounting principles that are related to important events/areas and convey important and/or company-specific information. The inventory of the accounting principles of the annual report allows us to delete a considerable number of unimportant and standard accounting principles, explained Janno.

We learned from Oksana that IFRS 17 may be applicable to all companies that prepare their financial statements in accordance with IFRS, regardless of the sector they operate in or whether they have an insurance license.

Ago noted: "Finally, there are clear rules for reporting mergers and divisions of companies. Those who could not attend the conference can read the draft amendments to RTJ 11 on the website of the Ministry of Finance".

In the second half of the first conference day, Lauri Past (PwC), Kristi Ziugov (PwC) and Allar Karu (PwC) talked about everything that is essential in financial reporting, what the current macroeconomic situation reflects and which is the most important thing to pay attention to when preparing this year's financial year report. Among other things, the focus was on asset valuation.

Tarmo Meresmaa (PwC) shared the results of a study conducted by PwC Estonia in supporting the automation of ERP solutions and the company's management decisions - pointing out that the need to update and integrate existing software favors the introduction of ERP. Also, the company itself must be able to formulate the needs clearly and assess whether the ERP service support can implement it in the company easily and comprehensively enough. Modern ERP solutions offer users the necessary functions and options. 

On the topic of ERP, but in a different vein, Tarvi Tara from Rocksoft discussed the impact of artificial intelligence in the automation, optimisation and data analysis of business processes, while also bringing various "challenges". Tarvi called missing the "big picture vision" one of the challenges that generative AI currently lacks as well as the veracity of the generated information in a real context. However, thanks to artificial intelligence, there are already several good areas of use in retail trade, finance, supply chains and also, for example, medical technology. By 2030, according to a McKinsey study, nearly 50% of the work done by humans will be automated.

The business environment of the last few years has been anything but stable, which is why we invited Erle Kildjer from Infovara to talk about modern budgeting, which is especially suitable during times of rapid changes or crises, and how to do this enterprise-wide integrated planning in such a way that it covers effectively all basic processes. Although, according to research, the vast majority of companies continue to use Excel for budgeting, the biggest trend of the last year is the introduction of integrated and predictive planning, which is based on artificial intelligence technology.

The first day of the conference was concluded by Lenno Uusküla (Luminor) and Kaspar Oja (Bank of Estonia) giving the participants an in-depth insight into our economy. The picture as a European is not optimistic today, the competitiveness of the economy has decreased, while consumer confidence has clearly increased. Unfortunately, as an Estonian in Europe, the colors are not significantly brighter - due to the aging population, the labor force is decreasing every year, inflation has reduced the purchasing power of the average Estonian to a level lower than that of a European with a similar income, and the tightening tax policy in the form of new taxes increases the burden on the private sector even more. From a positive point of view, difficult times create the need for smart solutions (including taking into account the green transition), and taking into account Estonia's adaptability and flexibility based on previous practice, sooner or later we will see growth again.

The Second Day, November 23

The first half of the second day of the PwC Conference tackled important ESG topics. Merili Vares (PwC) spoke about the necessity of the sustainability report from the CSRD point of view. The sustainability report also requires the description of the value chain to which most companies belong, so the reporting obligation does not concern only large companies. Merili also spoke about the principles of calculating footprint and corporate impact. She also explained the principle of double materiality and that we need to start analysing more the future effects of ESG in the company. Until now, calculating the financial impact has been the biggest nut for companies.

Mihkel Jugaste (Graanul Invest AS) and Anneli Turkin (Tallinn Airport) discussed who has a larger footprint and how to reduce it. Determining it is a little more complicated than one might think, as there is quite a lot to calculate while taking into account the various increasingly strict standards - REDII methodology, CSRD, GHG Protocol, ACERT, ACA and UN SDG and others. Mihkel pointed out that the reporting obligation also encourages innovation, i.e. the automation of data collection and the development and creation of new technologies. Small footprint without evidence = large footprin

Anneli talked about mitigating climate risks and the mission to create a carbon-neutral airport focusing on reducing the CO2 emissions of electricity and machinery, as well as investing in the circular economy. Anneli also pointed out the connectedness of the supply chain, so procurement is done with CO2 neutrality in mind. 

The ESG conference session ended with a panel discussion in which Tatjana Vakulenko (SEB), Jaanus Uiga (Bolt), Janno Hermanson (PwC) and Merili Vares (PwC) participated, discussing the topics of sustainability reporting, circular economy and community impact. Tatjana emphasized that the initial data and numbers must be reliable and available in order to fix the starting point, then you can start setting goals. From the auditor's point of view, the sustainability report is aimed at the future, which is still unfamiliar with current practice (retrospective), added Janno. He added that double-materiality assessment is an important new role for the auditor. The panel also discussed the financial impact of climate risks, collateral assets and physical risks. Tatjana added that the state could also be more helpful in assessing climate risks. Jaanus noted that when adding information to the report, it should also be compared with the averages of other market participants, so that the reader understands the entire context. Jaanus added that it is difficult to implement the circular economy in the entire company at the same time, it is best to start with smaller units or products and grow from there.

The second half of the day was opened by the moderator of the panel discussion, Hannes Lentsius, head of PwC's tax line of services. In the panel discussion, Evelyn Liivamägi from the Ministry of Finance and entrepreneurs Joakim Helenius and Indrek Neivelt and Hannes Lentsius (PwC) discussed whether and which tax increases in a country with a budget deficit (such as Estonia) are necessary and reasonable. Are tax increases inevitable in a country with an aging life expectancy, or can we find ways to cover the deficit in other areas?

Then, Hannes Lentsius (PwC) shared intriguing summaries of tax legislation and an overview of the most important twists and turns in European and Estonian legislation both in the field of VAT and income tax. For example, when is a board member liable for the company's tax debt? Specifically, the tax authority must prove intent or gross negligence in paying taxes. As another case example, he cited the deduction of input sales tax - namely, it does not depend on whether the other party to the transaction paid VAT or not, because the appearance of the transaction alone is sufficient to prevent the deduction. He also gave examples of real estate taxation.

What has become of the minimum tax, what do faster, unshell and befit stand for? How does the digital age affect VAT? Helen Pahapill (Ministry of Finance) gave us an overview of OECD and European Commission initiatives. Minimum tax is mandatory in the EU, but voluntary for the rest of the world. In Estonia, there are five group parent companies with a total revenue of EUR 750 million and about 350 subsidiaries of foreign groups, in which the minimum income tax would apply. Helen talked about UNSHELL, or preventing the use of shadow entities, but discussions are still ongoing and its implementation is open in the EU. In addition, he talked about the reduction of excessive withholding tax to faster and safer procedures so that the capital market functions more efficiently (FASTER). BEFIT is Business In Europe: Framework for Income Taxation, which aims to create a common corporate tax base in the EU.

Eneli Tomingas (Tax and Customs Board) talked about transfer prices, pricing of intra-group transactions and the main problems in practice. For example, transfer pricing is not considered or the documentation is incomplete. Eneli's recommendation is to think about these issues ahead of the transactions; the comparative data must also meet the requirements. In the case of loans, he gave examples of the requalification of transactions and the setting up of a commercial pledge. Eneli also talked about pricing management services and sales of services.

Lasse Lehis (Estonian Taxpayers Association) provided a complete overview of the tax changes that have come into effect and are pending. The most important changes are the increase in tax rates - a general increase in the tax rate, as well as for journalism and accommodation services. Lasse gave examples of when the turnover in the company actually arises from the definition of the VAT liable law. He also talked about what, must be kept in mind regarding the service period considering the new VAT rate, i.e. what kind of documentation must be submitted and at what point in time.

End notes

With this, the conference was wrapped up for the time being. Conference guests who have already given feedback most often mentioned the first day's in-depth look at the economy and the second day's tax panel discussion as their favourite sessions. 

See you at the PwC conference 2024!


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