We permit the publication of our auditors’ report, provided the report is published in full only and is accompanied by the full financial statements to which our auditors’ report relates, and is only published on an access-controlled page on your website, to enable users to verify that an auditors’ report by independent accountants has been commissioned by the directors and issued. Such permission to publish is given by us without accepting or assuming any responsibility or liability to any third party users save where we have agreed terms with them in writing.

Our consent is given on condition that before any third party accesses our auditors’ report via the webpage they first document their agreement to the following terms of access to our report via a click-through webpage with an 'I accept' button. The terms to be included on your website are as follows:

I accept and agree for and on behalf of myself and the Trust I represent (each a "recipient") that:

  1. PricewaterhouseCoopers LLP (“PwC”) accepts no liability (including liability for negligence) to each recipient in relation to PwC’s report. The report is provided to each recipient for information purposes only. If a recipient relies on PwC’s report, it does so entirely at its own risk;
  2. No recipient will bring a claim against PwC which relates to the access to the report by a recipient;
  3. Neither PwC’s report, nor information obtained from it, may be made available to anyone else without PwC’s prior written consent, except where required by law or regulation; and
  4. PwC’s report was prepared with Hermes Property Unit Trust's interests in mind. It was not prepared with any recipient's interests in mind or for its use. PwC’s report is not a substitute for any enquiries that a recipient should make. The financial statements are as at 25 March 2017, and thus PwC’s auditors’ report is based on historical information. Any projection of such information or PwC’s opinion thereon to future periods is subject to the risk that changes may occur after the reports are issued and the description of controls may no longer accurately portray the system of internal control. For these reasons, such projection of information to future periods would be inappropriate.
  5. PwC will be entitled to the benefit of and to enforce these terms.
I accept

1. Select your country

  • United Kingdom
  • Austria
  • Australia
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Iceland
  • Ireland
  • Italy
  • Luxembourg
  • Netherlands
  • Norway
  • Singapore
  • Spain
  • Sweden
  • Switzerland
  • USA
  • Other

2. Select your investor type

  • Financial Advisor
  • Discretionary Investment Manager
  • Wealth Manager
  • Family Office
  • Institutional Investor
  • Investment Consultant
  • Charity, Foundation & Endowment Investor
  • Retail Investor
  • Press
  • None of the above

3. Accept our terms and conditions

By clicking Proceed I confirm I have read the important information and agree to the terms of use.


The Hermes Investment Management website uses cookies to remember your preferences and help us improve the site.
By proceeding, you agree to cookies being placed on your computer.
Read our privacy and cookie notices.

Revised IAS7 makes “cashness” of the king clearer – but more can be done

Home / Perspectives / Revised IAS7 makes “cashness” of the king clearer – but more can be done

Mitch Reznick, CFA, Co-Head of Credit and Head of Credit Research
04 February 2016

In May 2015, we posted a commentary entitled “IASB seeks to clarify the ‘cashness’ of the king”. In it, we discussed the attributes of a likely amendment under the broad Disclosure Initiatives programme being run by the International Accounting Standards Board (IASB). We believed that this change would improve disclosure under the rule requiring companies to show historical changes in cash and cash equivalents, IAS7: Statement of cash flows.

Last Friday, the IASB issued its amendments to IAS7. Although we are very pleased with the changes, which will elucidate changes in companies’ debt positions across reporting periods, we look forward to ongoing discussions on disclosures concerning liquidity. Specifically, we’d like to see improved disclosure in the reporting of cash and cash equivalents on the balance sheet because as investors in global companies whose operations stretch across many legal jurisdictions, the improved disclosure will allow us (and others) to price liquidity risks with even more precision.

As for the announced amendments, they will require companies to provide more information about the changes in their financing liabilities. This would enable analysts to see how debt changes from one period to the next more clearly. For example, the amendments specifically address situations when the cash flow from the financing section of a cash flow statement fails to explain the change in a company’s debt position. The reason why the statement sometimes fails to explain changes in balance-sheet debt is because these are sometimes caused by non-cash events, such as debt assumed in acquisitions or the initiation of new leases. These amendments require companies to disclose some sort of reconciliation between the changes in debt on the balance sheet with the cash flows for debt on the cash flow statement. While it does not require a specific method for doing so, the IASB has added a few examples of how this could be done to IAS7. 

Ultimately, what the IASB is doing is creating a debt-equivalent of IAS1: Statement of changes in equity. This additional disclosure will allow analysts to better understand the contours of the debt on the balance sheet, what embodies financial leverage metrics from one period to the next, and the characteristics of and changes to the debt portion of a firm’s enterprise value. 

As credit investors, we applaud the IASB for requiring standards of disclosure of debt that is similar to what companies provide to shareholders. However, as per our previous post on this subject, we had hoped that the amendments would specifically require improved disclosure on the “cashness of the king”. As it stands, we are at the mercy of a company’s willingness to reveal just how much of the cash on its balance sheet could realistically be used to redeem forthcoming debt maturities. And, furthermore, not knowing how much of a company’s cash is truly available “overnight” means that any calculation of net debt could be erroneously underestimated because we risk deducting encumbered cash from gross debt. This could result in financial risks being inaccurately priced. This is particularly important for Hermes Credit, because we manage global credit mandates and are cognisant that cash is often not so easily repatriated from the jurisdiction where it is generated to that in which its debt obligations are actually serviced. 

Share this post:
Mitch Reznick, CFA Co-Head of Credit and Head of Credit Research Mitch joined Hermes in February 2010 as head of research on the Hermes Credit team. Prior to this he was co-head of credit research for the global credit and hybrids team at Fortis Investments. Other roles at Fortis included portfolio manager of European high yield funds, based in London, and senior credit analyst, based in Paris. Before this he worked as an associate analyst in the leveraged finance group at Moody’s Investors Service in New York. Mitch earned a master’s degree in International Affairs at Columbia University in New York City and a Bachelor’s degree in History at Pitzer College, one of the Claremont Colleges in California. He is a CFA charterholder; a member of the Capital Markets Advisory Committee of the IFRS Foundation, the Association for Financial Markets in Europe High Yield Investor Committee, and the Credit Advisory Committee for the PRI; and a workstream member of the UK-China Green Finance Task Force.
Read all articles by Mitch Reznick, CFA

Find posts by author

  • Alex Knox, ACA
  • Andrew Jackson
  • Andrew Parry
  • Andrey Kuznetsov, CFA
  • Audra Stundziaite
  • Claire Gavini
  • Dr Michael Viehs
  • Elena Tedesco
  • Emeric Chenebaux
  • Eoin Murray
  • Gary Greenberg
  • Geir Lode
  • Geoffrey Wan, CFA
  • Hamish Galpin
  • Harriet Steel
  • Ilana Elbim
  • Jonathan Pines, CFA
  • Joseph Buckley
  • Louise Dudley
  • Mark Sherlock, CFA
  • Martin Todd
  • Michael Russell, CFA
  • Michael Vaughan
  • Mitch Reznick, CFA
  • Neil Williams
  • Nick Spooner
  • Nina Röhrbein
  • Patrick Marshall
  • Peter Hofbauer
  • Philip Nell
  • Saker Nusseibeh
  • Silvia Dall’Angelo
  • Tatiana Bosteels
  • Tim Crockford
  • Tim Goodman
  • Tommaso Mancuso
  • Yasmin Chowdhury

Find posts by category

  • credit