Correspondence 0001104659-23-019898 from CREDIT SUISSE GROUP AG (CIK 0001159510)
CREDIT SUISSE GROUP AG (CIK 0001159510)
Date: Feb. 13, 2023 · CIK: 0001159510 · Accession: 0001104659-23-019898
AI Filing Summary & Sentiment
File numbers found in text: 001-15244
Letter
VIA EDGAR Division of Corporation Finance Office of Finance United States Securities and Exchange Commission Re: Credit Suisse Group AG Form 20-F for the Fiscal Year Ended December 31, 2021 Response Dated November 18, 2022 File No. 001-15244
Dear Ms. Lubit and Mr. Klein:
Credit Suisse Group AG (the “Group” or “Credit Suisse”) is writing in response to the letter from the staff (the “Staff”) of the United States Securities and Exchange Commission (the “Commission”) dated January 17, 2023, containing the Staff’s comments with respect to the Group’s annual report on Form 20-F for the fiscal year ended December 31, 2021, filed with the Commission on March 10, 2022 (the “2021 Form 20-F”). As discussed between Ms. Lubit of the Staff and Sebastian Sperber of Cleary Gottlieb Steen & Hamilton LLP, our counsel, on January 23, 2023, the Group very much appreciates the Staff’s accommodation to file its response via EDGAR on or before February 14, 2023, as opposed to submitting it by the originally requested deadline.
For ease of reference, the Group has repeated the Staff’s comments in italicized text prior to its responses. Defined terms in our responses that are not defined below are defined in the 2021 Form 20-F. Please note that in the version of this letter filed via EDGAR confidential information has been omitted and delivered separately to the Staff and the redactions are denoted in the EDGAR-filed version by bracketed asterisks (“[***]”).
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 2
Form 20-F for the Fiscal Year Ended December 31, 2021
Notes to the Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Revisions of Prior Period Financial Statements, page 292
1. We note your response to prior comments 2 and 3. We continue to have questions as to the actual control(s) that were deficient. For each identified control deficiency, please address the following:
· Identify the deficient control(s), provide a description of how each control was designed to address the related risk of material misstatement, and explain whether the deficiency related to the design or operating effectiveness of the control.
· Provide management’s root cause analysis. In your response, tell us how the root cause(s), including instances where the root cause is related to the knowledge assessment and technical accounting expertise of the control owner, impact your conclusions around entity level controls.
· Describe any remediation efforts, including the nature and timing of remediation, and how the remedial actions address the related root cause(s).
Response to Comment 1
We acknowledge the Staff’s comment requesting clarification as to the actual controls that were deficient.
Presentation of non-cash equity statement movements deficiency
As noted in our response to prior comment 2 on November 18, 2022, management self-identified in 2021 a control deficiency relating to the presentation and disclosure of a limited number of non-core, unique and/or immaterial equity statement movement line items (e.g., share-based compensation, cash flow hedges) within the appropriate section / line item in the consolidated statement of cash flows. This resulted in prior period corrections, as outlined in Exhibit A in our prior response on November 18, 2022, to reclassify the non-cash portion of these items from the ‘Other, net’ line in the financing section to the operating section of the consolidated statement of cash flows. In our prior response on November 18, 2022, we referred to this control deficiency as the “Mapping rules deficiency” but we will refer to this deficiency as the “Presentation of non-cash equity statement movements deficiency” hereafter.
· What is the deficient control?
There was not a control in our inventory that was explicitly designed to designate the non-cash elements of a limited number of equity statement movements relating to certain non-core, unique and/or immaterial line items (e.g., share-based compensation, cash flow hedges) for presentation and disclosure within the operating section of the consolidated statement of cash flows.
The control that should have been in place to mitigate this specific presentation and disclosure risk was a quarterly designation of the non-cash transactions relating to these limited, non-core, and/or unique equity statement movement line items for intra-statement classification within the consolidated statement of cash flows.
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 3
· Describe how the control was designed to address the related risk of material misstatement.
Not applicable – see above.
· Is the deficiency related to the design or operating effectiveness of the control?
The deficiency related to design effectiveness as there was not a control in our inventory that was explicitly designed to mitigate the specific presentation and disclosure risks relating to the non-cash elements of these limited, non-core, and/or unique line items.
· Provide management’s root cause analysis.
The requirement for a control to mitigate this specific presentation and disclosure risk for these items was not previously identified, as these items relate to non-core activities of the Group, which are limited in number and/or unique in nature, and were immaterial, individually and in the aggregate, to the cash flow statement. As a risk of material misstatement was not identified, a distinct control was not designed and implemented.
Management concluded that this was not indicative of a pervasive issue, given the unique and limited nature of the items and the factors noted above. Certain reconciling items in the cash flow statement, specifically those impacted by this issue, did not lend themselves to the establishment of an objective expectation. However, the total investing and financing captions within the consolidated statement of cash flows may lend themselves to more predictability based upon current period lending and financing activity, as compared to certain individual line items within the consolidated statement of cash flows.
The issue does not extend to other principal financial statement elements due to controls such as the following.
o Balance sheet and off-balance sheet accounts are subject to general ledger account ownership, reconciliations, substantiation, and monthly sign-off by named employees with direct ownership and familiarity with each specific account.
o Income statement accounts are subject to a variety of controls across the first and second lines of defense, and given the nature of profit and loss, control performers can empirically establish an expectation for analytical or other detective plausibility checks items (e.g., revenues driven by volumes, etc.).
· Is the root cause related to the knowledge assessment and technical accounting expertise of the control owner, and what is the impact on our conclusions around entity level controls?
The root cause does not have to do with the knowledge or competency of a control owner, but rather a missing designation and step for review of these items within a wider process. The need for the control was not previously identified due to the nature of these items (e.g., non-core business activities, unique in nature, limited in number, and/or quantitatively immaterial).
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 4
· Describe any remediation efforts, including the nature and timing of remediation, and how the remedial actions address the related root cause(s).
Date/Period Event/Activity
Q3 2021
Management identified the control deficiency.
Management enhanced the process design to explicitly include a quarterly review of the designation and presentation of share-based compensation as a stand-alone financial statement line item within the consolidated statement of cash flows, and the designation and presentation of the non-cash elements relating to the other items (e.g., cash flow hedges). This quarterly control activity operated for the first time in support of the filing of our Q3 2021 Form 6-K. This addressed the root cause as it ensures that there is sufficient quarterly consideration of the non-cash designation and presentation of these unique and/or immaterial items.
Q4 2021 The quarterly control activity implemented as part of the remediation operated for the second time in support of the filing of our 2021 Form 20-F.
Year-end 2021 (prior to filing of the 2021 Form 20-F)
Management concluded that the quarterly control was designed and operating effectively as of December 31, 2021.
The control deficiency was remediated as of December 31, 2021.
Nonfunctional currency gains and losses deficiency
As noted in our response to prior comment 2 on November 18, 2022, management self-identified in 2021 a control deficiency relating to non-functional currency gains and losses (“Nonfunctional currency gains and losses deficiency”), which relates to the exclusion of certain instruments from the computation and reporting of the cash flow effects of gains and losses on remeasurements (transactional currency to functional currency) within the consolidated statement of cash flows.
· What is the deficient control?
There was not a control in our inventory that was explicitly designed to mitigate the specific presentation and disclosure risk relating to the relevant instruments excluded from our computation and reporting of the cash flow effects of gains and losses on remeasurements within the consolidated statement of cash flows.
The control that should have been in place was the periodic assessment of the quantified impact of the instruments that are excluded from the computation of foreign currency exposures for the relevant monetary assets and liabilities within legal entities that could significantly impact the total net cash provided by/(used in) operating activities, investing activities, and/or financing activities; with consideration of the coverage of instruments, and extension of coverage if deemed to be material.
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 5
· Describe how the control was designed to address the related risk of material misstatement.
Not applicable – see above.
· Is the deficiency related to the design or operating effectiveness of the control?
The deficiency relates to design effectiveness as there was not a control in our inventory that was explicitly designed to mitigate this specific presentation and disclosure risk relating to the relevant instruments excluded from our computation and reporting of the cash flow effects of gains and losses on remeasurements within the consolidated statement of cash flows.
· Provide management’s root cause analysis.
The computation only included the relevant instruments that are considered material in relation to the cash flow effects of gains and losses resulting from the remeasurement of foreign currency-denominated monetary assets and liabilities. There was an embedded assumption about the materiality of the instruments that were excluded within our computation of the cash flow effects of gains and losses resulting from the remeasurement of foreign currency-denominated monetary assets and liabilities. There was no Group level assessment and challenge of the assumptions regarding the materiality of the excluded instruments.
· Is the root cause related to the knowledge assessment and technical accounting expertise of the control owner, and what is the impact on our conclusions around entity level controls?
The root cause does not have to do with the knowledge or competency of a process or control owner, but rather the consideration of creating a distinct control activity to address this specific presentation and disclosure risk relating to the relevant instruments excluded from the computation of the cash flow effects of gains and losses resulting from the remeasurement of foreign currency-denominated monetary assets and liabilities.
· Describe any remediation efforts, including the nature and timing of remediation, and how the remedial actions address the related root cause(s).
Date/Period Event/Activity
Year-end 2021 (prior to filing of the 2021 Form 20-F)
· Management implemented a process and operated a control activity, which was not subject to independent operating effectiveness testing, as of December 31, 2021, related to the inclusion of additional instruments (Loans and Customer deposits) in the FX remeasurement (Nonfunctional currency gains and losses) for cash flow statement purposes.
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 6
· Management operated a control activity, which was not subject to independent operating effectiveness testing, as of December 31, 2021, related to the monitoring of the financial impact of excluded instruments from the FX remeasurement (Nonfunctional currency gains and losses) for cash flow statement purposes. Management did not elect to include additional instruments as the impact was not material.
· Management enhanced the design of existing quarterly controls, which are owned by the respective legal entity controllers, to explicitly cover Net loans and Customer deposits in addition to Long-term debt.
· Management formalized the control, which is subject to independent operating effectiveness testing, to periodically assess and monitor the materiality and quantified impact of instruments excluded in the computation of foreign currency exposures for the relevant monetary assets and liabilities within legal entities that could significantly impact the total net cash provided by/(used in) operating activities, investing activities, and/or financing activities. This control includes a consideration of the coverage of instruments and extension of coverage if deemed to be material. This addressed the root cause as it ensures that the quantified impact of the instruments excluded in the computation is explicitly and periodically considered in a formal control.
2. We note your response to prior comment 1 states that you perform an accounting Quality Assurance Review that focuses on a specific accounting topic, documenting and reviewing the way such topic is addressed across relevant entities and systems within the Group to ensure appropriate treatment. Your response further explained that the consolidated statement of cash flows was included in this review and that this management review was compensating in nature for the cash flow mapping deficiencies identified. For each control deficiency identified, please explain how you determined that management’s compensating controls compensate for the root cause(s) of the deficient controls. Specifically, for each compensating control, please explain and provide the following:
· The objective of the review control. For example, explain whether the control looks at how transactions should be treated and whether the treatment was properly implemented.
· The level of aggregation at which the control is performed.
· The frequency of the control.
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 7
· The correlation of the control’s design to each of the risks of material misstatement related to these errors.
· The level of predictability of management’s expectations in their review.
· The criteria for investigating deviations or differences from expectations and how those criteria correlate to management’s materiality evaluation. As p
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filename1.htm
February 13, 2023
VIA EDGAR
Cara Lubit
Robert Klein
Division of Corporation Finance
Office of Finance
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Credit Suisse Group AG
Form 20-F for the Fiscal Year Ended December 31, 2021
Response Dated November 18, 2022
File No. 001-15244
Dear Ms. Lubit and Mr. Klein:
Credit Suisse Group AG (the “Group”
or “Credit Suisse”) is writing in response to the letter from the staff (the “Staff”) of the United
States Securities and Exchange Commission (the “Commission”) dated January 17, 2023, containing the Staff’s
comments with respect to the Group’s annual report on Form 20-F for the fiscal year ended December 31, 2021, filed with
the Commission on March 10, 2022 (the “2021 Form 20-F”). As discussed between Ms. Lubit of the Staff
and Sebastian Sperber of Cleary Gottlieb Steen & Hamilton LLP, our counsel, on January 23, 2023, the Group very much appreciates
the Staff’s accommodation to file its response via EDGAR on or before February 14, 2023, as opposed to submitting it by the
originally requested deadline.
For ease of reference, the Group has repeated the
Staff’s comments in italicized text prior to its responses. Defined terms in our responses that are not defined below are defined
in the 2021 Form 20-F. Please note that in the version of this letter filed via EDGAR confidential information has been omitted and
delivered separately to the Staff and the redactions are denoted in the EDGAR-filed version by bracketed asterisks (“[***]”).
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 2
Form 20-F for the Fiscal Year Ended December 31, 2021
Notes to the Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Revisions of Prior Period Financial Statements, page 292
1. We note your response to prior comments 2 and 3. We continue to have questions as to the actual control(s) that were deficient.
For each identified control deficiency, please address the following:
· Identify the deficient control(s), provide a description of how each control was designed to address the related risk of material
misstatement, and explain whether the deficiency related to the design or operating effectiveness of the control.
· Provide management’s root cause analysis. In your response, tell us how the root cause(s), including instances where the
root cause is related to the knowledge assessment and technical accounting expertise of the control owner, impact your conclusions around
entity level controls.
· Describe any remediation efforts, including the nature and timing of remediation, and how the remedial actions address the related
root cause(s).
Response to Comment 1
We acknowledge the Staff’s comment requesting
clarification as to the actual controls that were deficient.
Presentation of non-cash equity statement
movements deficiency
As
noted in our response to prior comment 2 on November 18, 2022, management self-identified in 2021 a control deficiency relating to
the presentation and disclosure of a limited number of non-core, unique and/or immaterial equity statement movement line items (e.g.,
share-based compensation, cash flow hedges) within the appropriate section / line item in the consolidated statement of cash flows. This
resulted in prior period corrections, as outlined in Exhibit A in our prior response on November 18, 2022, to reclassify
the non-cash portion of these items from the ‘Other, net’ line in the financing section to the operating section of the consolidated
statement of cash flows. In our prior response on November 18, 2022, we referred to this control deficiency as the “Mapping
rules deficiency” but we will refer to this deficiency as the “Presentation of non-cash equity statement movements deficiency”
hereafter.
· What is the deficient control?
There was not a control in our inventory that was explicitly
designed to designate the non-cash elements of a limited number of equity statement movements relating to certain non-core, unique and/or
immaterial line items (e.g., share-based compensation, cash flow hedges) for presentation and disclosure within the operating section
of the consolidated statement of cash flows.
The control that should have been in place to mitigate this
specific presentation and disclosure risk was a quarterly designation of the non-cash transactions relating to these limited, non-core,
and/or unique equity statement movement line items for intra-statement classification within the consolidated statement of cash flows.
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 3
· Describe how the control was designed to address the related risk of material misstatement.
Not applicable – see above.
· Is the deficiency related to the design or operating effectiveness of the control?
The deficiency related to design effectiveness as there
was not a control in our inventory that was explicitly designed to mitigate the specific presentation and disclosure risks relating to
the non-cash elements of these limited, non-core, and/or unique line items.
· Provide management’s root cause analysis.
The requirement for a control to mitigate this specific
presentation and disclosure risk for these items was not previously identified, as these items relate to non-core activities of the Group,
which are limited in number and/or unique in nature, and were immaterial, individually and in the aggregate, to the cash flow statement.
As a risk of material misstatement was not identified, a distinct control was not designed and implemented.
Management concluded that this was not indicative of a pervasive
issue, given the unique and limited nature of the items and the factors noted above. Certain reconciling items in the cash flow statement,
specifically those impacted by this issue, did not lend themselves to the establishment of an objective expectation. However, the total
investing and financing captions within the consolidated statement of cash flows may lend themselves to more predictability based upon
current period lending and financing activity, as compared to certain individual line items within the consolidated statement of cash
flows.
The issue does not extend to other principal financial statement
elements due to controls such as the following.
o Balance sheet and off-balance sheet accounts are subject to general ledger account ownership, reconciliations, substantiation, and
monthly sign-off by named employees with direct ownership and familiarity with each specific account.
o Income statement accounts are subject to a variety of controls across the first and second lines of defense, and given the nature
of profit and loss, control performers can empirically establish an expectation for analytical or other detective plausibility checks
items (e.g., revenues driven by volumes, etc.).
· Is the root cause related to the knowledge assessment and technical accounting expertise of the control owner, and what is the
impact on our conclusions around entity level controls?
The root cause does not have to do with the knowledge or
competency of a control owner, but rather a missing designation and step for review of these items within a wider process. The need for
the control was not previously identified due to the nature of these items (e.g., non-core business activities, unique in nature, limited
in number, and/or quantitatively immaterial).
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 4
· Describe any remediation efforts, including the nature and timing of remediation, and how the remedial actions address the related
root cause(s).
Date/Period
Event/Activity
Q3 2021
Management identified the control deficiency.
Management enhanced the process design to explicitly include a quarterly
review of the designation and presentation of share-based compensation as a stand-alone financial statement line item within the consolidated
statement of cash flows, and the designation and presentation of the non-cash elements relating to the other items (e.g., cash flow hedges).
This quarterly control activity operated for the first time in support of the filing of our Q3 2021 Form 6-K. This addressed the
root cause as it ensures that there is sufficient quarterly consideration of the non-cash designation and presentation of these unique
and/or immaterial items.
Q4 2021
The quarterly control activity implemented as part of the remediation operated for the second time in support of the filing of our 2021 Form 20-F.
Year-end 2021 (prior to filing of the 2021 Form 20-F)
Management concluded that the quarterly control was designed and operating
effectively as of December 31, 2021.
The control deficiency was remediated as of December 31, 2021.
Nonfunctional currency gains and losses
deficiency
As noted in our response to prior comment
2 on November 18, 2022, management self-identified in 2021 a control deficiency relating to non-functional currency gains and losses
(“Nonfunctional currency gains and losses deficiency”), which relates to the exclusion of certain instruments from
the computation and reporting of the cash flow effects of gains and losses on remeasurements (transactional currency to functional currency)
within the consolidated statement of cash flows.
· What is the deficient control?
There was not a control in our inventory that was explicitly
designed to mitigate the specific presentation and disclosure risk relating to the relevant instruments excluded from our computation
and reporting of the cash flow effects of gains and losses on remeasurements within the consolidated statement of cash flows.
The control that should have been in place was the periodic
assessment of the quantified impact of the instruments that are excluded from the computation of foreign currency exposures for the relevant
monetary assets and liabilities within legal entities that could significantly impact the total net cash provided by/(used in) operating
activities, investing activities, and/or financing activities; with consideration of the coverage of instruments, and extension of coverage
if deemed to be material.
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 5
· Describe how the control was designed to address the related risk of material misstatement.
Not applicable – see above.
· Is the deficiency related to the design or operating effectiveness of the control?
The deficiency relates to design effectiveness as there
was not a control in our inventory that was explicitly designed to mitigate this specific presentation and disclosure risk relating to
the relevant instruments excluded from our computation and reporting of the cash flow effects of gains and losses on remeasurements within
the consolidated statement of cash flows.
· Provide management’s root cause analysis.
The computation only included the relevant instruments that
are considered material in relation to the cash flow effects of gains and losses resulting from the remeasurement of foreign currency-denominated
monetary assets and liabilities. There was an embedded assumption about the materiality of the instruments that were excluded within our
computation of the cash flow effects of gains and losses resulting from the remeasurement of foreign currency-denominated monetary assets
and liabilities. There was no Group level assessment and challenge of the assumptions regarding the materiality of the excluded instruments.
· Is the root cause related to the knowledge assessment and technical accounting expertise of the control owner, and what is the
impact on our conclusions around entity level controls?
The root cause does not have to do with the knowledge or
competency of a process or control owner, but rather the consideration of creating a distinct control activity to address this specific
presentation and disclosure risk relating to the relevant instruments excluded from the computation of the cash flow effects of gains
and losses resulting from the remeasurement of foreign currency-denominated monetary assets and liabilities.
· Describe any remediation efforts, including the nature and timing of remediation, and how the remedial actions address the related
root cause(s).
Date/Period
Event/Activity
Year-end 2021 (prior to filing of the 2021 Form 20-F)
· Management
implemented a process and operated a control activity, which was not subject to independent operating effectiveness testing, as of December 31,
2021, related to the inclusion of additional instruments (Loans and Customer deposits) in the FX remeasurement (Nonfunctional currency
gains and losses) for cash flow statement purposes.
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 6
· Management
operated a control activity, which was not subject to independent operating effectiveness testing, as of December 31, 2021, related
to the monitoring of the financial impact of excluded instruments from the FX remeasurement (Nonfunctional currency gains and losses)
for cash flow statement purposes. Management did not elect to include additional instruments as the impact was not material.
2022
· Management
enhanced the design of existing quarterly controls, which are owned by the respective legal entity controllers, to explicitly cover Net
loans and Customer deposits in addition to Long-term debt.
· Management
formalized the control, which is subject to independent operating effectiveness testing, to periodically assess and monitor the materiality
and quantified impact of instruments excluded in the computation of foreign currency exposures for the relevant monetary assets and liabilities
within legal entities that could significantly impact the total net cash provided by/(used in) operating activities, investing activities,
and/or financing activities. This control includes a consideration of the coverage of instruments and extension of coverage if deemed
to be material. This addressed the root cause as it ensures that the quantified impact of the instruments excluded in the computation
is explicitly and periodically considered in a formal control.
2. We note your response to prior comment 1 states that you perform an accounting Quality Assurance Review that focuses on a specific
accounting topic, documenting and reviewing the way such topic is addressed across relevant entities and systems within the Group to ensure
appropriate treatment. Your response further explained that the consolidated statement of cash flows was included in this review and that
this management review was compensating in nature for the cash flow mapping deficiencies identified. For each control deficiency identified,
please explain how you determined that management’s compensating controls compensate for the root cause(s) of the deficient
controls. Specifically, for each compensating control, please explain and provide the following:
· The objective of the review control. For example, explain whether the control looks at how transactions should be treated and whether
the treatment was properly implemented.
· The level of aggregation at which the control is performed.
· The frequency of the control.
Ms. Cara Lubit and Mr. Robert Klein
Securities and Exchange Commission
February 13, 2023
Page 7
· The correlation of the control’s design to each of the risks of material misstatement related to these errors.
· The level of predictability of management’s expectations in their review.
· The criteria for investigating deviations or differences from expectations and how those criteria correlate to management’s
materiality evaluation. As p