Cayman’s timing problem; Quantum accounting

New disclosure regime didn’t come soon enough for the EU. It is also familiar territory for US managers; On adding back potential profits from a parallel timeline.

Cayman law: Connor Hussey takes a look at what the new disclosure regime for private funds in the Cayman Islands means for managers with fund structures domiciled there. The regulation was passed in response to threats by the EU’s finance ministers to blacklist the country should it not implement certain measures around disclosures of collective investment vehicles by the end of 2019.

The problem, it seems, was the timing of the regulation, which was passed in February, about 10 days before EU finance ministers added the country to its blacklist. The good news for Cayman is that it is still considered “not harmful” to the global economy by the OECD, and the EU still doesn’t consider it a tax haven. The good news for managers is that it doesn’t changed how Cayman funds are marketed in the EU under AIFMD, according to Dechert.

EBIT-What?: If Armando Iannucci (the satirist behind The Thick of It, Veep, The Death of Stalin, etc) wrote financial/accountancy satire, we could have safely assumed he was also behind the concept of earnings before interest, taxes, depreciation, amortization and coronavirus. If I were an accountant employing EBITDAC, I could have safely assumed that I’d get called out for it by a lot of people.

EBITDAC, apparently, includes an ‘addback’ of profits a company might be making in an alternate universe where there is no covid-19 pandemic. EBITDA on its own is already a controversial number, being an easily manipulable metric, and thus not a reliable indicator of a company’s general well-being.

If you agree with that assessment of EBITDA, then including addbacks from potential profits possibly earned in a parallel dimension is actually a logical next step in the metric’s evolution. Why not add an “if we were Amazon” addback for the fiscal year?

Email prepared by Graham Bippart