Apple Park Steals the tMega Show; Tax Reform Reality Check and Dealing with a Cyber Attack
Tags: Apple, cybersecurity, Hedge Accounting, pension liability de-risking, tax reform, tMega 2017 H2 Meeting
NeuGroup thanks everyone who participated at the tMega 2017 H2 on September 26-27 in Cupertino, especially Apple for hosting the meeting at Apple Park, the company’s immense and impressive new headquarters. Here’s what you missed.
Inside Apple Park. Members got one of the first looks by outsiders at the inside of Apple’s still-unfinished, future workplace: a 175-acre plot that’s home to a huge, four-storied, glass and steel circular building powered entirely by renewable energy set in a natural landscape with thousands of trees. Our tour included an airy cafeteria and the 1,000-seat, underground Steve Jobs Theater, where Apple unveiled the newest iPhones and other products about two weeks before tMega’s arrival. Members marveled at the tremendous engineering and construction achievement of making Jobs’s vision for Apple Park a reality.
Keeping Pace with the Tax Reform Beat. The moving target of tax reform remains a core topic for treasurers tasked with planning for something that remains far from certain. One member said his company’s plans through March 2018 assume no tax reform but “if there is, that’s a bonus. We all are very hopeful they’re going to get something done but we can’t plan they are going to get something done.” Indeed, on the day the White House released a “unified framework” that calls for a 20% corporate rate, one tax and policy expert told the group Senate Majority Leader Mitch McConnnell has lost his magic and that the odds of broad tax reform passing by next summer are less than 50:50.
Hedge Accounting Changes. Members discussed the implications of FASB’s long-awaited update to hedge accounting standards, unveiled in late August with a mandatory effective date beginning in January 2019. Whether to adopt the standards early is among the questions now facing treasury. A bank presented the group with the most significant changes, a list of positive and negative “game changers” and some recommendations. The analysis included the observation that companies still must attest to a hedge being “highly effective” to qualify for hedge accounting; but for cash flow and net investment hedges, FASB has eliminated the requirement to measure and report hedge ineffectiveness.
Pension Liability De-Risking. Members enjoyed a lively session on improving pension asset-liability balances and minimizing the risk exposures companies face from their defined benefit plans (de-risking). One presenter detailed his company’s commitment to move away from equity and extend fixed income as its service cost as percentage of Projected Benefit Obligation (PBO) declines; he asked the group for thoughts on the ideal glide path. The goal: to move fixed income allocation from 20% to 40%. Another discussed waiting for interest rates to rise before further de-risking the company’s plan as it tries to determine how quickly to “move up glidepath,” as his slide put it. Other topics discussed included annuitization, terminating and freezing plans (“a hot topic,” one member said) and the resulting amount of resistance and “noise” companies encounter from shutting down or limiting pension plans.
Cyber Attack: Real-Life Lessons Learned. The group also heard a member describe the cyber attack that shut down his firm’s worldwide IT systems in June and infected half the company’s laptops and desktops, leaving treasury without the ability to access its TMS (which was not compromised) as the quarter closed. The department had a business continuity plan but did not envision losing access to laptops. The company was forced to buy new laptops, use personal computers and to use smartphones.
If you would like more information about NeuGroup’s tMega, visit this link. The group’s next meeting will be in New York City March 13-14, 2018.
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