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THE MAGAZINE FOR BUSINESS AND FINANCE PROFESSIONALS

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IE AB IE.AB ACCOUNTING AND BUSINESS 01/2012

CPD

PRISM VIEW

THE FINANCIAL REGULATOR’S NEW RISK ASSESSMENT SYSTEM

ALL TALKING THE SAME LANGUAGE THE MOVE TO IFRS GAINS MOMENTUM

ACCOUNTING ENFORCEMENT AN UPDATE FROM THE IAASA GOING, GONE ASSET ACQUISITION IN A LIQUIDATION CPD IMPAIRMENT OF GOODWILL AND CGUS

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ACCOUNTING AND BUSINESS IRELAND 01/2012

THE NEXT GENERATION ACCOUNTANT

CLAIRE PRENTER FCCA TALKS ABOUT ACCENTURE, AUDIT AND THE VALUE OF ACCA

AUDIT FOCUS

SCRUTINY OF THE EU’S NEW AUDIT PROPOSALS MAKING BUSINESS SENSE A COMPELLING ARGUMENT FOR DIVERSITY SAFE HAVENS SECURE INVESTMENTS IN UNCERTAIN TIMES E-INVOICING AN OPPORTUNITY KNOCKS?

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INDUSTRY & COMMERCE / FINANCIAL SERVICES International Financial Controller Technology US firm with a large international operation require a dynamic ACCA to take responsibility for the financial control of their international accounting function. Reporting to the Group CFO, you will have experience within a multinational / plc environment ideally with cross border financial experience. You will have active involvement in the development and delivery of financial strategy to optimise longterm profitability and revenue growth. Salary €90 – 120,000 + benefits Group Reporting Accountant Plc Our client, a large plc wishes to appoint a Group Reporting Accountant within their Group Finance function. With strong technical understanding and experience in a complex consolidation, you will be comfortable within a strict deadline reporting environment. You will have responsibility for the delivery of the Group’s financial statements including interpretation of accounting standards and resolution of complex accounting and financial reporting issues. Salary €65 – 75,000 + benefits Senior Management Accountant – Co. Cavan FMCG Commercially astute Senior Management Accountant required for an FMCG business. With strong financial planning and analysis skills, you will add strategic insight to the business to drive revenues and growth. Reporting directly to the Finance Director, you will be ACCA qualified with up to 4 years’ PQE in a commercial finance team. You will become a key member of the Finance team and prepare monthly management accounts to strict deadlines and produce in-depth KPI reporting for presentation to management. Salary €60 – 70,000 + benefits

Need to improve the flow of payments between your ERP and your suppliers?

Cost Accountant FMCG Leading blue chip FMCG organisation has a requirement for an ACCA with 3 years PQE. Partnering with two leading divisions within this firm, you will provide financial and commercial advice in relation to product launches and investment decisions. With strong costing experience, you will provide in-depth financial analysis and costbenefit analysis to ensure all costs are justified. You will have strong commercial awareness, previous supply chain finance experience and excellent interpersonal skills for business partnering. Salary €55 – 65,000 + benefits

We’re already there. By linking seamlessly with your ERP, AIB Credits will deliver your supplier payments worldwide in a secure, convenient and cost effective manner. Contact Paul Hogan at Ireland’s number one treasury services provider on +353 1 6417790 or email: cash.management@aib.ie Web: www.fxcentre.com

Financial Planning Analyst – Co. Louth Technology Our client, an industry leading firm has a requirement to recruit a strong ACCA with up to 3 years’ post qualification experience, ideally within a multinational environment. Reporting directly to the Financial Planning & Analysis Senior Manager, you will deliver forecasting and budgeting, business reporting and performance management. Revenue recognition and transfer pricing will feature in this position so strong analytical and interpretative skills are required. Salary €50 – 60,000 + benefits Financial Analyst Banking Our client, an asset management firm has a requirement for a commercially focused ACCA. You will work in partnership with the business in providing financial and technical analysis and commercial insight into a broad portfolio of diverse clients. You will assess and evaluate financial statements and management accounts and provide recommendation on any required action for each client within your portfolio to management. This opportunity will suit a newly qualified ACCA who trained with a small to medium sized practice firm who is eager to gain commercial experience. Strong analytical skills and advanced excel will also be required. Salary €40 – 50,000 + benefits PRACTICE Audit Director Unique opportunity to join a highly reputable Practice firm based in Dublin city centre. Due to an expanding client portfolio with typical assignments ranging from small to large indigenous size firms and international corporates, the Audit division is expanding their senior management team.You will have strong technical ability, client relationship management skills and experience in mentoring and managing junior colleagues. This position is an ideal opportunity for a Senior Audit Manager / Audit Director eager to progress their career towards Partner level within an international Practice firm. Salary €90 – 100,000 + benefits

Tax Manager A leading professional services firm currently seeks an experienced tax professional to join their Dublin office.The ideal candidate will have a number of years’ experience managing a large client allocation and will have an ACCA and / or Professional Tax qualification. With a strong progressive ethos within this Practice, this position will offer career advancement opportunities. Experience in Personal Tax, Corporate Tax and VAT will be advantageous. Salary €70 – 85,000 + benefits Internal Audit Manager Our client, a leading professional services firm currently seeks an experienced Internal Audit Manager. This is an excellent opportunity for an ambitious ACCA professional wishing to fast track their career with a department that is experiencing significant growth and winning exciting new projects.The ideal candidate will be ACCA qualified with a minimum of 2-3 years Internal Audit experience in a managerial capacity. Salary €60 – 70,000 + benefits Audit Manager Highly reputable accountancy practice seeks an experienced ACCA professional to join their Audit Team in their Dublin office. This is an exciting opportunity for an ambitious professional wishing to fast track their career with a department that is experiencing significant growth and winning exciting new projects. The role will involve managing a portfolio of clients across a variety of sectors. Salary €60 – 70,000 + benefits Audit Senior Highly reputable accountancy practice seeks newly qualified ACCA members to join their audit division to work closely with the management team. Joining an established team with responsibility for a diverse and varied portfolio of clients, the ideal ACCA will have a strong technical understanding of accounting fundamentals. You will be proactive in your approach to all engagements to ensure minimisation of risks and provide support across all business functions. Salary €35 – 45,000 + benefits

INTERNATIONAL OPPORTUNITIES Financial Controller Caribbean As an integral part of the Senior Management team you will operate at Group level and have responsibility for all aspects of the day to day management of the Finance function. You will provide monthly, quarterly and annual financial reporting to the Shareholders, actively participate in the company’s financial matters and maintain relationships with financial institutions. In-depth experience of consolidation is a key focus for this position and operational cash-flow management and balance sheet control will also be essential elements of the role. Will suit FCCA at Finance Director level eager to gain international experience. Salary € 150 – 200,000 + benefits Finance Manager China Leading Irish firm with operations globally requires a Finance Manager to join their Chinese operation. Reporting to the Finance Director, you will be heavily involved in all aspects of financial control and reporting. This is an excellent opportunity for a driven and ambitious ACCA, eager to fast-track their career and develop international experience. You will gain exposure to corporate finance, high-level financial reporting and exposure at Board level. Will suit a technically strong ACCA with 2 – 3 years’ post qualification experience in a Group reporting role. Salary €65 – 75,000 + benefits Client Services Accountant Luxembourg Qualified ACCA required for our client’s operations in Luxembourg.You will work in the client services division with responsibility for a portfolio of blue chip international clients engaged in international financing. This role with suit an ACCA with IFRS or US GAAP experience and an ability to prepare periodic management accounts and annual financial statements. Knowledge of treasury and taxation issues affecting international corporate and banking clients is desirable. Salary €50 – 60,000 + benefits

AIB Global Treasury Services

AIB Global Treasury Services is a registered business name of Allied Irish Banks, p.l.c. Allied Irish Banks, p.l.c. is regulated by the Central Bank of Ireland. Registered Office: Bankcentre, Ballsbridge, Dublin 4. Registered in Ireland: Registered No. 024173.

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Editor’s choice

In this issue of AB Ireland we take a close look at the EU’s proposals for audit reform and highlight some ACCA concerns in relation to this. Meanwhile, against continued uncertainty in the eurozone, our keynote interview with Accenture’s Claire Prenter reminds us why Ireland remains the smart choice for global business. I’ve highlighted some articles you shouldn’t miss below

TURNING ALLIES INTO ADVERSARIES When it was announced, in early December, that Ireland was to host the Olympic torch for a day this summer, it was immediately seized on as a reflection of the new rapprochement between Dublin and London. However, the progress of AngloIrish affairs is rarely simple or smooth and, only 24 hours later, the two countries found themselves on opposite sides of one of the most significant decisions in EU history, as the UK used its veto to prevent an EU treaty to tackle the eurozone crisis. Quite what this will mean for the countries now pressing ahead with a quasi-EU agreement and, indeed, Britain itself, is far from clear. The UK insists it will play a ‘technical role’ in discussions on the future governance of the eurozone, but it is hard to escape the reflection that this is more a gesture to ease the rift within its coalition government than any significant advance from December’s veto stance. For Ireland’s business interests, the uneven application of the mooted financial services transaction tax must be one of the most worrying consequences of this split. In a worst-case scenario, the IFSC would become uncompetitive and undesirable, with the City of London mopping up the benefits. However, this presupposes a tax so penal as to erase all of Ireland’s competitive advantages or that an ‘almost EU-wide’ tax would be imposed at all, if one member state was to escape its impact. Ireland, indeed, may ultimately be a beneficiary as the only Anglophone country, comfortable with the Anglo-Saxon business model, in the new ‘coalition of the willing’ set to operate side-byside with the EU. However, where there are winners there must be losers and a situation where the new cordiality between Ireland and Britain would be stymied and natural allies turned into adversaries would be a cause for regret. Donal Nugent, donal.nugent@accaglobal.com

MAIN INTERVIEW Claire Prenter FCCA talks about a career in Accenture that has run parallel to the growing attractiveness of Ireland as a global business base. Page 12

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AUDIT FOCUS ACCA’s Ian Welch offers a closeup on where the cracks lie in the European Commission’s newly published proposals on the future of audit. Page 16

PRISM VIEW The financial regulator gives an account of the PRISM, the risk assessment system for Irish financial services providers, to an ACCA audience. Page 34

GOING, GONE… Liquidations present a unique opportunity to acquire assets at a knockdown price. Tom Murray FCCA offers some advice to buyers and sellers. Page 44

NEW LEARNING As more of us get to grips with the reality of online training, e-learning is becoming evermore exciting, but bringing challenges too. Page 58

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AB IRELAND EDITION CONTENTS JANUARY 2012 VOLUME 3 ISSUE 1 Ireland editor Donal Nugent donal.nugent@accaglobal.com +353 (0)1 289 3305 Editor-in-chief Chris Quick chris.quick@accaglobal.com +44 (0) 20 7059 5966 Design manager Jackie Dollar jackie.dollar@accaglobal.com +44 (0) 20 7059 5620 Designers Jane Reid, Barry Sheehan Production manager Ciaran Brougham ciaran.brougham@accaglobal.com +353 (0) 1 289 3305 Advertising John Sheehan john.sheehan@accaglobal.com +353 (0) 1 289 3305 Bryan Beasley bryan.beasley@accaglobal.com +353 (0) 1 289 3305 London advertising James Fraser jfraser@educate-direct.com +44(0)20 7902 1224 Head of publishing Adam Williams adam.williams@accaglobal.com +44 (0) 20 7059 5601 Printing RV International Pictures Corbis ACCA President Dean Westcott FCCA Deputy president Barry Cooper FCCA Vice-president Martin Turner FCCA Chief executive Helen Brand ACCA Ireland President Ronnie Patton FCCA Deputy president Tom Murray FCCA Vice-president Diarmuid O’Donovan FCCA Head - ACCA Ireland Liz Hughes Tel +353 (0)1 498 8900 Fax +353 (0)1 496 3615 members@accaglobal.com students@accaglobal.com info@accaglobal.com Accounting and Business is published by ACCA 10 times per year. All views expressed within the title are those of the contributors. The Council of ACCA and the publishers do not guarantee the accuracy of statements by contributors or advertisers, or accept responsibility for any statement that they may express in this publication. The publication of an advertisement does not imply endorsement by ACCA of a product or service. Copyright ACCA 2011

Accounting and Business. No part of this publication may be reproduced, stored or distributed without the express written permission of ACCA. Accounting and Business Ireland is published by IFP Media, 31 Deansgrange Road, Blackrock, Co Dublin, Ireland +353 (0)1 289 3305 www.ifpmedia.com

Features 12 The accidental accountant Claire Prentice FCCA talks about Accenture, audit and the value of ACCA 16 Audit focus Scrutiny of the EU’s new audit proposals 21 Safe havens 2012 Assessing the most secure investments in uncertain times

ACCA Ireland 9 Leeson Park Dublin 6 tel: +353 (0)1 498 8900 www.accaglobal.com/ireland

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Audit period July 2009 to June 2010 138,255

24 Talking the same language The move to IFRS gains momentum

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Worldwide

There are six different versions of Accounting and Business: China, Ireland, International, Malaysia, Singapore and UK. See them all at www.accaglobal.com/ab

Regulars BRIEFING 06 News in pictures A different view of recent headlines 08 News in graphics We show a story as well as tell it using innovative graphs

TECHNICAL

YOUR CAREER

10 News round-up A digest of all the latest news and developments

38 Technically speaking Aidan Clifford rounds up the changes accountants need to be aware of

57 Diary

VIEWPOINT

40 NI notes Changes and updates of relevance to Northern Ireland practitioners

27 Perfectly e-positioned Dean Westcott on embracing new technology 28 Making business sense Liz Hughes on the most compelling argument for diversity

41 Tax diary Some important tax deadlines ahead

58 The new learning 60 Five ways to plan your CPD

Your sector

42 Budget 2012 – an update Cora O’Brien on key points for practitioners

29 PRACTICE

44 Going, gone… Tom Murray FCCA on a key opportunity liquidation presents

29 The view from Stewart Dunne FCCA

48 ESMA overview An update from the IAASA 51 E-invoicing An opportunity knocks? 53 Timed out? Pension deadline looms 54 CPD Impairment of goodwill and CGUs

30 Software review Irish accountants rate their software packages

45 PUBLIC SECTOR 33 The view from Mark Fagan FCCA 34 PRISM The financial regulator’s new risk assessment system

CPD

Accounting and Business is a rich source of CPD. If you read it to keep yourself up to date, it will contribute to your non-verifiable CPD. If you read an article, learn something new and apply that learning in some way, it will contribute to your verifiable CPD. Each month, we also publish an article or two with related questions to answer. If they are relevant to your development needs, they can also contribute to your verifiable CPD. One hour of learning equates to one unit of CPD. For more, go to www.accaglobal.com/members/cpd

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ACCA NEWS 61 Approved employer Q&A 62 ACCA Rulebook: an update 64 News

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News in pictures

01

Irish-based researchers launch the world’s first 3D surface anatomy guide for medical and physiotherapy students, surgical trainees and artists

02

Militant Italian protestors take to the streets of Rome during a protest inspired by the Occupy Wall Street demonstrations in the US

03

An umbrellastyled retractable roof is unveiled at Meeting House Square in Dublin’s Temple Bar

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04

Camera-maker Olympus go into meltdown after admitting losses going back more than 20 years. Former auditor Ernst & Young has come under fire

05

Mortgage approval rates fall to their lowest level in 40 years, with just 11,000 approved in 2011

06

Auctioneers Adams counter the winter gloom with a luxury goods auction including a vintage Bordeaux with a guide of â‚Ź1,500

07

Minister for finance Michael Noonan delivers his first Budget in December. Aside from some social welfare issues, it passes largely without protest

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IRISH SNAPSHOTS

The Statistical Yearbook of Ireland 2011 presents a comprehensive picture of a country that has experienced major change in the last number of years

POPULATION

Increase of 8.1% in five years

SALARY CUTS APRIL 2006 4,239,848

Greatest decreases in average weekly earnings

APRIL 2011 4,581,269

Hum heal an soci th and al w ork

-7.7%

SIGNS OF THE TIME Social welfa re expenditur e increases fr om 8% of G NP in 2000 to 16.7 % in 2010 Volume of pr oduction in building and construction decreases by 30.1% betw een 2009 and 20 10 Retail sales increase by 0.9% in volume bu t decreases by 2.2% in valu e in 2010

Source: CSO

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-6.7%

sional Profes ntific ie c s and l chnica and te

WORK

Employment decreases by 5%

Unemployment increases by 11%

2009 1.939M

2009 264,600

2010 1.859M

2010 293,600

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9 HEAVY-HANDED TAXATION MAKES WAY FOR THE LIGHTER TOUCH According to KPMG International’s annual Corporate and Indirect Tax Survey, corporate tax rates have been steadily falling for a decade, while goods and services tax (GST) and value added tax (VAT) systems have been introduced, rising to higher rates and applying to more items as indirect tax systems mature.

1

AFRICA

4

25.1%

LATIN AMERICA

5

23.8%

OCEANIA

22.8%

22.8%

3

ASIA

20.1% EUROPE

NORTH AMERICA

9

19.7% EUROPE

8 7 ASIA

1.84%

Corporate tax 2011

AFRICA

12.5%

LATIN AMERICA

KEY

14.2%

10

12.8%

11.7%

12

7 ASIA: UP FROM 11.6% 8 LATIN AMERICA: DOWN FROM 13.9% 9 EUROPE: SAME AS 2010 10 OCEANIA: UP FROM 12% 11 NORTH AMERICA: SAME AS 2010 12 AFRICA: UP FROM 13.9%

The percentage fall globally for the total tax rate for small and medium-sized enterprises since 2006, according to PwC’s Paying Taxes 2012.

Indirect tax 2011

11

OCEANIA

The percentage of UK gross domestic product reliant on accounts receivable finance, according to GE Capital.

Corporate tax 2010

5%

NORTH AMERICA

Indirect tax 2010

GLOBAL FRAUD

Despite a significant drop in fraud cases, global executives are reporting increased vulnerability to nearly all types of fraud, according to Kroll’s Global Fraud Report, conducted in conjunction with the Economist Intelligence Unit and surveying the sentiments of more than 1,200 senior executives worldwide.

1

2

3

4

5

6

25% 4%

47% 19%

KEY

38% 19%

8

40%

41%

42% 20%

7

10%

11%

46%

25%

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10

39%

44% 21%

XX% Incidences of fraud XX% Percentage who see themselves as highly or moderately vulnerable

1 Corruption and bribery 2 Money laundering 3 Internal financial fraud or theft 4 Vendor, supplier or procurement fraud 5 Regulatory or compliance breach

9

6 Theft of physical assets or stock 7 IP theft, piracy or counterfeiting 8 Management conflict of interest 9 Financial mismanagement 10 Information theft, loss or attack

16%

50% 23%

50%

The level of luxury purchases by Chinese consumers taking place overseas, of which half take place in duty-free shops.

Month in figures

28.3%

2

8.5%

1 ASIA: DOWN FROM 24% 2 LATIN AMERICA: DOWN FROM 25.3% 3 EUROPE: UP FROM 20% 4 OCEANIA: DOWN FROM 24.2% 5 NORTH AMERICA: DOWN FROM 23.7% 6 AFRICA: SAME AS 2010

6

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News round-up

FIRST EII FUND ANNOUNCED

Following confirmation in November that EU approval has been obtained by the government for the Employment and Investment Incentive (EII) Scheme, Davy and BDO announced details of their joint venture to provide funding under the scheme. The new scheme builds on the success of the Business Expansion scheme (BES) and significantly widens the scope of companies that can raise EII Scheme funding. In addition, companies can now raise up to €10m (previously the limit was €2m) under the scheme and the amount that can be raised in any 12-month period has been increased to €2.5m (previously €1.5m).

INCOME FALLS

According to the Central Statistics Office, the average household income was €22,168 in 2010. This represents a 5% decline on figures in 2009 – larger than the decline between 2008 and 2009. This income decrease was notably less than the decline in GDP. Between the peak of the economic boom and 2010, GDP fell twice as much as average income. The difference is explained by social welfare payments mitigating some effects of the recession. However, when social welfare is excluded, there is an almost identical decline between GDP and income between 2007 and 2010.

70% CREDIT APPROVAL

A survey by accountancy firm Mazars found 70% of small and medium businesses that have applied for loans got credit approval. It is the first independent survey to look into demand for credit and took place between April and September 2011. It found that 36% of SMEs surveyed applied for loans during this time. Out of the businesses that did not apply, four in five said they did not need it. Minister for finance Michael Noonan said the survey would be ‘a valuable resource in informing policy decisions’.

UNEMPLOYMENT RISE

The number of people signing on the live register rose to 448,600 in November, which meant a rise of 1,700 claimants. This meant unemployment rates were at 14.5% for the month, which was 0.3% lower than the same period last year. This is the joint highest number for any month in 2011. Almost 42% of those who are claiming are now considered to be long-term claimants. This is an increase of just under 20% on the same period last year.

MANUFACTURING SLUMP

EU finance ministers try to thrash out a solution to the debt crisis in the eurozone

INFORMATION SECRECY INFLICTS SOVEREIGN DEBT PRICE

The failure of governments to release key financial information to finance institutions, credit rating agencies and the public undermines confidence in sovereign debt, says an Ernst & Young study. ‘This has potential ramifications for the global economy if those audiences making critical investment, regulatory and political decisions do not have the most relevant and reliable information,’ said Philippe Peuch-Lestrade, global government and public sector leader at Ernst & Young. ‘Governments should be motivated following the financial crisis to put in place the conditions for modern management and to reform their accounting methodologies, but more progress is still needed to address concerns about transparency, accountability and sustainability.’

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In November, activity in manufacturing declined, in both output and new orders submitted. The NCB index for this period fell to 48.5, compared to 50.1 the previous month. Any reading below 50 is considered to be a contraction in activity. One of the sub-indices of the index revealed that there has been a reduction in new orders at Irish manufacturing firms – in the six months previous to this, five of them showed a similar reduction.

DEPOSIT DECLINE

Cash deposits held in Irish banks fell by €3.6bn in October 2011, compared to the previous month, according to figures released by the Central Bank of Ireland. This is in contrast to the increase in deposits seen in August and September – the first rise in deposits held for a year. However, October’s cash deposits of €587bn were still above

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the low point of the year in July, where they were €10bn lower than that. These figures are important indicators as to how healthy the banking systems are.

NTR LOSSES

Irish investment group NTR’s losses from ‘continuing’ operations increased to €48.3m in the six months ending in September 2011. In the same period in 2010, there was a loss of €44m. This was due to its investments in waste, recycling, infrastructure and green energy. The company’s 2011 losses were partly down to a €21.7m hit on the sale of shares in the US-based ethanol producer, Green Plains Renewable Energy. However, NTR’s revenue increased by €4.5m in 2011, compared to the same period the year before.

CRISIS INQUIRY

The Dail’s Public Accounts Committee (PAC) has said it is aiming to conduct an inquiry into the collapse of the financial markets, which led to the banking crisis. According to the PAC, legal advice indicates that it has the power to carry out this investigation into this crisis, as well as into the actions of public bodies like the Financial Regulator, the Central Bank and the Department of Finance. The evidence of this inquiry will be heard in public. ‘Our next step is to draw up terms of reference and then have them legally stress-tested,’ said John McGuinness, chairman of PAC.

COMPANIES CLOSING

In Ireland, five companies collapsed per day in the first 11 months in 2011, business intelligence analyst Vision-Net revealed. Over 1,800 companies ceased business in this period, leaving behind over €1bn in debts. Since 2008, almost 47,000 companies have closed. One of the hardest industries hit has been the construction and real estate sector, with 4,000 less businesses operating now than in 2008. However, the professional services, information technology, communications, retail, wholesale and hospitality sectors have expanded.

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DUNNES PLASTIC-BAG BILL The High Court has ordered Dunnes Stores to pay a multi-million euro tax bill after it found that some plastic bags the retailer provided free to customers were not exempt from the plastic-bag levy. The supermarket chain had argued that the charge of 22c only applied to bags that were sold at the checkout. However, in December, High Court judge Mr Justice John Hedigan ruled that the levy did not solely apply to carrier bags provided at the till. In a judgment set the cost the retailer €36.4m, he said that bags used to carry loose items, provided on the shop floor, were also subject to the charge if they were above regulation size. The State had argued that the free bags provided by the retailer were large enough to carry other items and so presented litter and waste problems when available in large quantities. Dunnes argued that the definition of a plastic bag was so uncertain that it rendered the regulations invalid and also claimed Revenue had refused to explain how it calculated the money allegedly due.

ETIHAD’S HIRING IRISH

In December, United Arab Emirate’s national airline Eithad Airways held recruitment open-days in Dublin, Cork and Belfast. It aims to hire 100 people initially and then retain details of hundreds more, as it has plans to increase staff numbers by 2,500 in 2012. Etihad’s HR director Ray Gammell says the reason the company came to Ireland is because of the Irish personality, professionalism and confidence. They will be hiring people in a number of areas including: finance, sales, cabin crew and captains.

BAD DEBT CHARGES CUT

AIB plans to cut bad debt charges in 2012, in spite of rising numbers of impaired business and personal loans – including a reported 12,000 AIB customers who are having difficulties paying their mortgages. This followed

guidance offered by the Central Bank of Ireland to adopt a cautious approach to making provisions for bad debts in 2011. This should help AIB reduce its bad debts in 2012. However, the bank admitted this would be subject to the volatile domestic and international markets.

GUIDANCE ON GREEK DEBT

The European Securities and Markets Authority has issued guidance to issuers and auditors on how IFRS and legislation should be interpreted when deciding on the accounting treatment of Greek and other at-risk sovereign debt. Issuers are encouraged to provide information on exposures to sovereign debt on a country-by-country basis in their financial statements. The ESMA is seeking to achieve a consistent interpretation of IFRS on the treatment of sovereign debt.

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Interview

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THE NEXT GENERATION ACCOUNTANT Claire Prenter FCCA talks to Donal Nugent about Accenture, audit and the value of ACCA

O

ne of the curiosities of Ireland’s financial turmoil over the last few years must be the relative calm of the multi-national sector in response. Certainly, there have been job losses but few, if any, cases of companies jumping ship because of the precarious state of the country’s finances. Indeed, with over 17,000 new jobs announced in Ireland since November 2010, Ireland’s biggest vote of confidence would seem to have come from global corporate business. In reaffirming the value of the country as a place to invest and do business, many decisions are not only significant in their own right but also as influencers of others. When Accenture’s Analytics Innovation Centre opened in Dublin in 2010, creating 100 new highly-skilled positions in the process, the choice of Ireland was, Accenture Ireland managing director Mark Ryan pointed out, a deliberate one, with the country explicitly chosen ahead of stiff competition. There was, it can be noted, considerable form to build on. Accenture Business Services (ABS) Dublin serves as the finance and

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accounting hub for Accenture entities across EMEA and has a track record of high performance in a global context, being viewed, both within Accenture and among its peers, as a model of ‘next generation shared services’. Such esteem is not won easily in the world of financial and consultancy services and, in the case of ABS Dublin, can be linked to a dynamic business culture that regularly expands and reorganises the responsibilities of its finance and accounting teams. One such change has been the merging of the UK and Ireland finance and accounting teams, which would see the appointment of Claire Prenter FCCA as manager of UKI Finance and Accounting, Internal Controls and Holding Companies. For Prenter, the move has represented a major upscale in responsibility, making her leader of a team of 19 and sharing in responsibility for a team of 33. It has also provided the opportunity to diversify into the areas of budgeting, forecast modelling and cost-recovery modelling. ‘In recent years, our approach to what can be provided from a shared-services platform has changed immensely and this has created numerous new roles within

the finance area,’ she comments. ‘We have moved from a process-orientated service to becoming a strategic partner to the business. Our success has created opportunities to grow but also for people in finance to move into the consulting area of the business, growing an even more diverse skills base.’

New information A key managerial challenge for all finance departments since the recession has been an increased demand for information, analysis and leadership. Prenter says these demands have to be seen as an opportunity. ‘It is clear that more is expected, but that is a natural reaction when you are in challenging economic times. Business leaders need to know, in much more minute detail, the potential options they have, so that they can make the necessary decisions to grow and maintain the business.’ The move within finance departments from report producers to business advisers can also be seen as a major opportunity to develop leadership capacity within teams. ‘We see this on a daily basis in Accenture – people don’t want to know just the figures

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The CV 2000

Joins Garvey & Associates, rising to the role of audit manager.

2006

Becomes a member of ACCA.

2007

Joins Accenture ABS Dublin.

2008

Appointed Ireland, Central Holding Companies and Internal Controls manager, extended to UK and Ireland in 2010.

any more, they want advice on the next steps that go with them. For a manager, it also creates a demanding, high-performance environment.’ Delegation is key to delivery and, at the heart of this is having the right structure in place. Prenter says the enthusiasm and talent base around her is a huge positive in this regard. ‘You are working with people who are looking to upskill and experience new areas and develop their own career so, as much as possible, you have to give people ownership of different areas and coach them through. It doesn’t always work out as planned, of course, but you learn from that and prepare to improve the next time.’

Audit observations Prenter’s career in accounting began in the Dun Laoghaire firm of Garvey & Associates. ‘It was a great place to launch an accountancy career,’ she reflects. ‘There is a great advantage to completing your training in a practice as you get to build your knowledge step by step. There is also a natural

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progression within that environment, in that you can gradually move on to more complex cases as you gain experience.’ Rising to the role of audit manager, Prenter says the key skills of this role are a good accounting knowledge, attention to detail and excellent communication skills. ‘Like a lot of people, I probably went into the accountancy profession thinking it was all about the numbers, but one of the great learning points that has stayed with me is the value of relationships. As an accountant, you provide a service, but you also build up trust and a relationship with your clients. That is the reason they stay with your firm and recommend you to others.’

Strong focus With audit now under the spotlight as part of the overall reconstruction of the European financial system, Prenter says she believes ‘we have already learned a lot of hard lessons in recent times with regards to what stakeholders should accept from business leaders and auditors. The focus on corporate governance should remain strong and controls put in place to ensure compliance. There should be a strong focus from the auditing community on this as they need to mitigate their own risk as part of the reforms.’ On the hot topic of the EU Green Paper (see page 16), she says some very reasonable proposals for audit reform have been put forward. ‘The move for audit opinions to be based on substance over form is an important one, while the forward focus analysis to extend the auditors mandate would be particularly useful when assessing the going concern issue.’ Regarding auditors’ required communication she believes there are

also lessons to be learned from the continental approaches, noting the French commercial code requirement for auditors to publicly justify, together with their report on the annual accounts, their audit opinion. ‘This includes their appreciation of a company’s choices or use of accounting methods, of material or sensitive accounting estimates, and also, if necessary, of elements of internal controls.’ Lessons could also be learned from German legislation, which requires the external auditor to submit a long form report to a supervisory board. This report is not available to the public but details fundamental findings of the audit on the going-concern assumption and associated monitoring systems, future development and risks facing the company, material disclosures, irregularities encountered, accounting methods used or any ‘window dressing’ transactions. ‘This focus on risk exposure would be beneficial to stakeholders, she says.’

ACCA and opportunity Growing up in Bray, Co. Wicklow, Prenter describes herself as ‘an accidental accountant’. Recalling a childhood that ‘probably had a lot more independence than children today are allowed’, in terms of education and early career aspirations she is honest. ‘I would love to tell you that I excelled in every way academically, but that probably wouldn’t be the case’. Nevertheless, she was considered bright and hardworking. Her first college choices centred on biology, but cold feet at the last minute led her to study stenography instead. By the end of the course, she realised a career in court reporting was not for

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The basics: ACCENTURE her and started the search in earnest for something more rewarding. ‘I found the opportunity to do an accounting technician course and immediately knew it was what I wanted. That was the beginning and, from there, I went on to study ACCA.’ Prenter is very clear that ACCA has been at the heart of her career journey ever since. ‘It’s very simple, I would not hold the position I am in if it were not for my membership of ACCA. It was key to my progression and will continue to be in the future. The benefits of having a solid financial qualification and experience behind you is that you have a springboard into many other areas of business.’

Internal controls The move to Accenture came in 2007. ‘I really wanted to move into industry and experience a large multinational environment, which is why Accenture was so appealing. It also has a reputation for being dynamic and that was something I wanted to be part of.’ Her first role was as a Swiss holding company specialist, looking after US GAAP accounting for a group of holding companies. ‘It was an opportunity to work closely with the mergers and acquisitions accounting areas of the business. We were dealing with intellectual property and fx hedging. The holding companies are part of the global tax group, so I got the sense of the international orientation straightaway’. She then moved on to become Ireland specialist, with the promotion to manager following quickly. Four years after joining Accenture, she admits to finding internal controls ‘much more interesting than I ever would have thought. It is fascinating to see the methodologies and rigour

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applied in such a large organisation and the practicalities of executing these controls in our SEC filing.’ While the step to managerial level is a transition, Prenter believes you have to be ready to embrace it. ‘At a specialist level, you have some teamlead responsibilities, at manager level you are the sole responsible person for the delivery of quality service to your client. So it can mean having those difficult conversations and making the decisions that have to be made to move things forward.’

Green belt Her recent achievement in gaining a green belt in six sigma has added significantly to her credentials. The lean six sigma concept has traditionally been used in manufacturing but, in recent years, has been applied to service industries. In order to participate in the course, a candidate has to identify a potential area for improvement. Prenter’s project, relating to overtime working hours, resulted in approximately €130,000 worth of savings on an annual basis and a 34% reduction in worked overtime hours. ‘It is really a different way of looking at the roles, mapping them out in value stream maps and using the lean six sigma methodology to arrive at the optimal process solution. When you identify an issue, you don’t automatically impose your own solution but allow the six sigma tools to lead you there instead.’ Prenter recently challenged her work-life balance again when she went back to college to study for an IFRS diploma. ‘I wanted to keep my qualifications up-to-date and prepare for the transition to IFRS.’ Going back to college in a far more senior position

1953

General Electric asks Arthur Andersen to automate its payroll processing, leading to the first use of computers in payroll.

1989

A group of partners from the consulting division of the various Arthur Andersen firms around the world formed a new organisation.

2001

The company changes its name from Andersen Consulting to Accenture.

2011

Globally, Accenture generates net revenues of $25.5bn.

is a challenge in itself but Prenter says ACCA members can generally draw on the fact that they have been there before. ‘When you get into a mode of study and work, you often wonder what you are going to do with all the spare time afterwards. When you start studying again, you wonder how you ever found the time in the first place!’ Looking to the future, Prenter says she would like to specialise more but sees the global multicultural atmosphere around her as a driver of ambition in its own right. ‘I am constantly inspired by the people I come across every day. I admire leaders who have the conviction to tell it how it is. I admire the bravery of those who choose to be entrepreneurs in this current economic climate and I also admire those who make the sacrifices to better themselves or to make things better for their families.’

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Audit focus

BARNIER’S GRAND PLAN In the first of three articles on the European Commission’s newly published proposals on the future of audit, ACCA’s Ian Welch discovers where the cracks lie

T

he long-awaited, much-leaked and even more lobbied-against proposals from the European Commission on the future of audit were finally published on 30 November. They proved to be like the proverbial curate’s egg – in parts good, bad and indigestible. The EC’s proposals have been at the centre of heated debate ever since the initial green paper of October 2010. Given the intensity of the lobbying and the radical nature of some of the proposals, it is perhaps surprising that they have stayed largely intact. But the press statement from internal markets commissioner Michel Barnier, which accompanied the proposals, made clear his views on the importance of his mission: ‘The 2008 financial crisis highlighted considerable shortcomings in the European audit system. Audits of some large financial institutions just before, during and since the crisis resulted in “clean” audit reports despite the serious intrinsic weaknesses in the financial health of the institutions concerned.’

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He continued: ‘Investor confidence in audit has been shaken by the crisis and I believe changes in this sector are necessary: we need to restore confidence in the financial statements of companies. Today’s proposals address the current weaknesses in the EU [European Union] audit market, by eliminating conflicts of interest, ensuring independence and robust supervision and by facilitating more diversity in what is an overly concentrated market, especially at the top end.’ So Barnier’s determination to change the status quo was never in doubt. But even he had to make some concessions. His biggest perceived ‘climbdown’ was on joint audits. On several occasions Barnier praised the French practice as a good principle and was clearly keen to implement this as mandatory for the largest companies to create more opportunities for the next-tier audit firms to step up. This was a centre-piece of his measures to break the Big Four oligopoly, as he sees it. But last-minute internal lobbying seems to have won the day and joint audit is now merely ‘encouraged’.

However, companies opting for joint audits will only have to rotate their audits every nine years rather than the six introduced as a maximum tenure for firms on other large audits. This is a radical move which did remain largely untouched from all the lobbying.

Cost burden ACCA cannot support this. A legal requirement for companies to change auditors every six years could amount to a heavy cost burden ultimately borne by businesses. Given that it typically takes an audit firm two or three years to get up to full speed on complex audits, it seems unnecessary and unreasonable for them to have to leave again relatively shortly afterwards. There is no demand for this in the investment community and while it is hard to defend large companies remaining with the same auditors for 48 years – as was revealed as typical by the UK House of Lords audit inquiry in March 2011 – this seems to move from one extreme to the other. The other eye-catching change to remain, despite all the opposition, is

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Audit focus

WE ARE NOT CONVINCED THAT BANNING THE PROVISION OF NON-AUDIT SERVICES WILL IMPROVE AUDIT QUALITY OR INDEPENDENCE a major crackdown on the provision of non-audit services to audit clients. This has been effectively banned, except for some specific ‘related financial audit services’ which include audit or review of interims, assurance of corporate governance and corporate social responsbility statements, and tax compliance – and even these must only form 10% of the audit fee. Large audit firms, said the commission, ‘will be obliged to separate audit activities from non-audit activities’. While all the details were not immediately clear, it seems that firms deemed too big will have to set up separate, legal ‘pure audit’ firms. The Big Four immediately criticised this move as likely to damage rather than enhance audit quality by denying them access to their advisory arms. ACCA, too, is worried that the prospect of pure audit firms will do little to encourage talented people from joining the profession. We are not convinced that banning non-audit services will improve audit quality or independence, and do not consider that the suggested benefits outweigh the costs and disruption. Once again there is no evidence that shareholders want this; often an incumbent auditor has built a good knowledge of the entity which leaves them best-placed to provide cost-effective services. It should surely be the audit committee’s role to make this judgment. The existing ethical rules warn against providing additional services which could impede their independence. ACCA believes legal reforms should be the last resort.

Some good news So is there anything we do like? Yes. ACCA is pleased that the EU executive is willing to facilitate the crossborder mutual recognition of audit firms and

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Ian Welch

*KEY ELEMENTS OF THE PROPOSAL

The proposals regarding the statutory audit of public-interest entities, such as banks, insurance companies and listed companies, aim to enhance auditor independence. Mandatory rotation of audit firms Audit firms will be required to rotate after a maximum engagement period of six years (with some exceptions). A cooling-off period of four years is applicable before the firm can be engaged again by the same client. The period before which rotation is obligatory can be extended to nine years if joint audits are performed; this is a way of encouraging, but not mandating, joint audits. Mandatory tendering Public-interest entities will be obliged to have an open and transparent tender procedure when selecting a new auditor. The audit committee (of the audited entity) should be closely involved in the selection procedure. Non-audit services Audit firms will be prohibited from providing non-audit services to audit clients. In addition, large audit firms will be obliged to separate audit from non-audit activities in order to avoid all risks of conflict of interest. European supervision The European Commission believes that it is important that oversight of audit networks takes place at EU level as well as internationally. It wants this coordination of the auditor supervision activities to take place within the framework of the European Securities and Markets Authority (ESMA). Enabling auditors to exercise their profession across Europe The EC proposes the creation of a single market for statutory audits by introducing a European passport for the audit profession. The proposals will allow audit firms to provide services across the EU and to require all firms to comply with international standards of auditing (ISAs) when carrying out statutory audits. Making smaller audits ‘proportionate’ The proposals also allow for a proportionate application of the standards in the case of small and mediumsized enterprises (SMEs).

statutory auditors. We also welcome the proposal to harmonise audit standards through the introduction of International Standards on Auditing (ISAs). ACCA supports the proposal to allow member states to adapt standards to the size of the audited entity through a proportionate and simplified audit for small and medium-sized enterprises (SMEs). It is important, though, that common standards are applied consistently. It will be interesting to see

how other, non-EU regulators respond. The US Public Company Accounting Oversight Board is moving in a similar direction but there is little sign of Asia doing so. How global audits can be carried out with myriad different regional rules is a key question for the profession should Barnier’s plans survive their next hurdle – the response of the EU member states. Ian Welch is head of policy at ACCA

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19 EU targets the big firms

[

Heavy-handed on corporates and skimpy on SMEs, the EU’s audit proposals face serious scrutiny, says ACCA’s John Davies

As expected, the European Commission’s draft regulation on audit concentrates on the audit of public interest entities (PIEs – mainly listed companies) and amounts to a concerted attempt to legislate for greater visible independence and competition in the audit market in this sector. These are highly interventionist measures and some appear to have been framed without conclusive evidence that they are needed to pre-empt future audit failures. In particular, it is not clear how the act of enshrining many aspects of current professional and technical standards in legislation – for example, the requirement to conduct audits in accordance with professional scepticism – will serve to improve audit quality. While the EC is entitled to stress the public interest dimension of audit at this level, we also need to ensure that the eventual legislation takes into account the needs and wishes of companies and investors. The strong focus on PIEs means that comparatively little attention is given by the EC to the audit of small and medium-sized enterprises (SMEs). That is not to say, though, that what attention is given to that area is insignificant. For the first time it is being proposed that small entities should be formally excluded from the scope of European Union law requiring accounts to be audited. This recognises the reality that the great majority of EU countries have by now taken advantage of the existing provisions in the Fourth Directive, which allow small entities to be made exempt from national laws requiring audit. The draft directive makes clear, though, that where a member state chooses to require small company accounts to be audited, those audits are to be deemed ‘statutory audits’ and will thus have to meet the various criteria set out in the directive, including in respect of eligibility to act. Similarly, if any small company chooses to have a ‘voluntary’ audit, the draft directive provides for that to be treated as a ‘statutory audit’, too. These provisions are positive in that they will help to provide certainty as to what an audit amounts to at this level. The draft directive confirms that all statutory audits, including ‘voluntary’ ones, are to be carried out in accordance with International Standards on Accounting (ISAs). However, the most significant provision as regards SME audits appears in articles 43a and b, which provide that member states are to be required to ensure that the application of audit standards to SMEs is ‘proportionate to the scale and complexity’ of the companies concerned. Thus

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the EC is envisaging some sort of modification of the existing requirements of ISAs as they are applied to SMEs. If this proposal helps to maintain the long-term relevance of audit in the SME sector, then it can only be a good thing. Scaling back the requirements of ISAs is, however, an area fraught with technical difficulty, given that the extensive procedures set out in ISAs are currently seen as integral to the achievement of the key benchmark of reasonable assurance. The other aspect, which will need to be considered carefully, concerns the delegation of authority to the individual member states to decide what proportionality means in respect of SME audit standards in their jurisdictions. Apart from the question of whether member states are the right people to decide on audit standards, the danger is that we could end up with 27 different forms of SME audit requirements. If we are trying to maintain confidence in the credibility of published accounting information, including at the SME level, the last thing we want to do is to create any new cause for confusion. So while some rationalisation of the application of ISAs at the SME level is an attractive one, at least in principle, we should at least be aiming for a harmonised solution and one which does not create any new expectations gaps. John Davies is head of technical at ACCA

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Audit focus

No joy for Big Four [

Europe’s audit proposals have been attacked from all quarters, says Robert Bruce – not least the plan for ‘pure’ audit firms.

The final version of the Barnier proposals, which aim to shake up the auditing profession across Europe, have had the most remarkable reception. Predictably, the large audit firms are against them. ‘They are completely at odds with good auditing,’ says John Griffith-Jones, chairman of KPMG Europe. But the investment community is also resistant. ‘The bottom line is that it still doesn’t do anything for the issue of choice,’ says Guy Jubb, head of governance and stewardship at Standard Life Investments, ‘and that is what investors wanted to encourage.’ Internal markets commissioner Michel Barnier wants the largest accountancy firms to be broken up into separate entities for pure audit and for all other services. He has almost completely dropped his previous proposals for compulsory joint audits, but has compensated by reducing the mandatory rotation of auditors from every nine years to every six. He also wants much change which no one would really disagree with: expanded information in the audit report, a greater and more public role for audit committees in, for example, the appointment of auditors, and so on. But it is the splitting up of the audit firms into separate business streams and the insistence on short-term rotation of auditors which have raised the most hackles.

Pure daft Making firms break themselves up into ‘pure’ audit firms and ones that provide complementary services was described by one senior partner as ‘daft’. Others agreed. ‘In order to do a high-quality audit you need to have access to specialist skills,’ says Richard Sexton, head of reputation and policy at PwC. ‘You can’t do audits to the standard

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required as an audit-only firm,’ says Griffith-Jones. ‘The work from, for example, the risk experts, the tax experts, the actuarial experts and so on is invaluable.’ There is also the question of the role of audit firms as trainers of future generations of people in the UK and Irish business world who traditionally train with the audit firms. Auditor rotation across only six years is seen as a nightmare of compromise, falling quality and rising inefficiency. In Italy, where auditor rotation has been tried, all that happened was that companies seeking continuity in their audit process simply ensured that the partners and team who dealt with their audit moved to another firm, which was then awarded the audit. Quality was retained and the legislation complied with. It was another unintended consequence.

Ultimately, the package faces a tough time both within the politics of the EC and outside from all the interested parties. He expected opposition from those he refers to as ‘the Anglo-Saxons’. But it seems he was unprepared for the furious opposition that came from many of the most recent entrants to the EU. Smaller countries with fledgling, but successful, capital markets were angry that such changes might endanger or hamper their efforts. The proposals for pure audit firms are expected to fall at some point. But it is going to be a long, long, bureaucratic and political process. It is no longer about audit, or the firms. It is about the conflicting ambitions of politicians in the European sphere. Robert Bruce is an accountancy commentator and journalist

*A VIEW FROM IRELAND

Michel Barnier has moved decisively to address the independence issue and this should be welcomed. With measures addressing audit rotation and the prohibition of non-audit work for public interest entities, the Commission has laid down its intention to tackle this issue on several levels. More will need to be done to affect change in the market structure and the moves by Europe need support within Ireland itself. Inevitably, the current levels of oversupply in the Irish accountancy sector will lead to consolidation over the coming months and years. One lesson of the past is that consolidation (in addition to the failure of one of the former Big Five) created the concentrated marketplace in the first place. Leaving the industry to ‘right size’ on its own in the coming years is unlikely to reverse this. If we are to widen the market and have five or six firms competing more equally the government and regulators in Ireland must play their part. Competition authorities may look at prohibitions on further consolidation by the Big Four and also the issue of below cost selling. Government, regulators and the public at large agree the status quo is not seen as a viable option. The European proposals will go some way to deliver change. It is now Ireland’s turn to play its part. Michael Costello, head of audit, BDO

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Safe havens in uncertain times John Mullane on the opportunities for certain investments in an uncertain world When Italian 10-year bond yields breached 7%, the threshold that saw Ireland, Portugal and Greece necessitate bailouts, fears increased that the single currency was heading for break-up. While eurozone leaders are moving closer to a lasting resolution of the crisis, investors do not yet enjoy certainty that a eurozone break-up will not occur. Investors whose overriding objective is capital preservation rather than returns are now looking at options ranging from government bonds to gold.

Investment strategies The crisis, thus far, has seen funds flowing into safe haven currencies such as sterling and the US dollar. Both currencies provide investors with protection against a eurozone breakup. However, the dollar is more volatile in nature than the pound, giving good reason for a preference for sterling. Investors looking to gain exposure to such currencies, should look at purchasing short-dated government bonds as they allow exposure to these currencies, while also earning a return from holding the asset class. By purchasing short-dated debt, investment risk from rising interest rates is limited, but it should be noted that, in holding foreign currency bonds, investors are exposed to foreign exchange risk.

Avoiding currency risk An alternative for investors looking for a safe haven is to invest in short-dated German government bonds. This avoids

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any foreign exchange risk compared to the UK and US. The German economy remains the strongest in the eurozone and is the safe haven within the monetary union. Anyone holding a German government bond has an IOU from the German government that we expect it to honour even in extreme circumstances. In the event of a break-up, it can be expected that European nations such as Ireland would devalue their currency relative to the ‘new Deutschmark’ leaving those holding the bonds well positioned on maturity.

German bonds The German government is seen as having the strongest credit rating within the eurozone area. The economy in Germany has continued to grow strongly with its large export sector continuing to benefit from rising demand from emerging economies. GDP growth for 2011 is expected to be 2.9% and 1.0% in 2012, both significantly higher than the eurozone as a whole at 1.6% and 0.7%.

Australian bonds Australia managed to avoid the worst of the recession in 2008/2009. Its banking system remains strong and well capitalised and the state has a low debt-to-GDP ratio. The Reserve Bank of Australia is expected to leave rates unchanged at 4.5% for this year with a 25 basis points cut in 2012 as lower-than-expected global growth keeps inflation in check at 3.3% for 2012. Natural disasters weighed on the

economy in the early part of the year, but continuing demand from emerging markets for the country’s raw materials continues to drive growth. While the economy faces difficulties, these are manageable and GDP growth of 3.7% is expected next year.

Norwegian bonds The Norwegian kroner is not commonly seen as a safe haven currency, but in the current environment, the economy benefits from a number of positives. The country has significant natural reserves through its North Sea oil and gas reserves. The money earned from the country’s natural resources is invested into a national sovereign wealth fund that is one of the largest in the world. The economy has managed the problems in Europe well, with its banking system facing few of the problems being experienced elsewhere in Europe. Unemployment remains low at sub 4% and the savings ratio has moved significantly since 2008. GDP growth in 2012 of 2.25% is expected despite stagnating oil and gas prices. The economy is strong and remains outside the EU. Its natural reserves mean it is well placed to weather the issues impacting other European countries.

Canadian bonds Unlike its southern neighbour, the Canadian economy has avoided a major property bubble and banking crisis. It has benefitted from the strong demand for commodities, offsetting the impact on the economy from

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weaker growth in the US. Canada has not, however, been immune from economic softness in what is by far its largest trading partner. As a result, interest rates have been maintained at 1% since September 2010 with no rate move expected until January 2012. Government stimulus is slowly being withdrawn from the economy while the private escort is continuing to strengthen. Despite this, growth is expected to fall back to 2.10% next year from 2.25% this year as households reduce spending to pay debt, but the continuing demand for commodities will support the economy in coming years.

UK gilts While the UK economy exited recession in late 2009, it is still in a weak growth environment. The UK is one of the most globalised countries in the world and vulnerable to softer global growth and renewed financial market tensions are likely to weigh on near-term growth. This is reflected in current market expectations for GDP of 0.9% for 2011 and 1.3% for 2012. In October 2011, the Bank of England decided to increase its asset purchase programme by ÂŁ75bn to further support the economy, while interest rates (0.50%) are likely to be maintained at this very low level until at least the end of 2012.

Overall, monetary policy will remain accommodative, and while growth will be weak, it will still likely be better than the euro area average going forward. From a capital-at-risk perspective, sterling offers the best risk reward for clients looking to diversify outside of the euro.

US treasuries Despite suffering a setback earlier in the year, the US is still growing. In addition recent economic data from the US strongly suggests that, while growth will be weak, at 1.8% for 2011 and 2.2% for 2012, a double dip is now unlikely. The US Federal Reserve recently announced further easing and the rhetoric from the Fed suggests further monetary stimulus will be forthcoming if required. Base interest rates in the US currently sit at 0.25% and are likely to be kept at that level until at least mid-2013. While the euro crisis will undoubtedly impact on growth, China and Canada are, in fact, the country’s largest trading partners. In addition, monetary policy will remain accommodative to support this nascent recovery.

Gold Gold is seen as a safe haven of choice in times of economic and political crisis. As a hard currency it provides protection against those who fear sovereign default. Secondly, in times of weak growth and high government deficits, central banks resort to increasing the money supply to boost growth. The consequence of monetary easing is a fall in the value of these currencies. For all its merits, gold is not cheap at current levels judged against historical norms and generates no income return for clients but it does provide protection against monetary debasement and sovereign default. John Mullane is a research analyst with Dolmen Stockbrokers. Email: john.mullane@dsl.ie

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ACCA IRELAND

HostED by RoNNIE PAttoN FCCA PREsIDENt, ACCA IRELAND February 17 Merchant Hotel, Belfast Guest speaker Dr Stephen Martin, CEO, Olympic Council of Ireland Tickets £65/€75 per person

BOOKING Contact Cathy McGann on +353 1 498 8918 or cathy.mcgann@accaglobal.com

www.accaglobal.com/ireland

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ALL TALKING THE S With an increasing number of countries adopting the same set of international accounting rules in the form of IFRS, the costbenefit tipping point has been passed

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W

ith more than 100 countries now having adopted International Financial Reporting Standards (IFRS), the benefits of the global system are becoming clearer. Consistency in how companies prepare their accounts around the world has made it easier for investors to evaluate how they allocate capital, while companies themselves have found it easier to attract investment and manage their own global groups. This view is backed up by a recent ACCA survey, Towards greater convergence: assessing CFO and investor perspectives on global reporting

standards, which reveals that nearly 40% of CFOs around the world found that the benefits of switching to the international system outweighed the costs of such a switch. Only one in five (18%) said that costs generally outweighed the benefits. It is a similar picture for investors. The same survey shows that nearly a third of investors feel that the costs of conversion are outweighed by the benefits, and less than one in 10 (7%) believe the opposite to be true. ‘One of the greatest benefits has been a single set of rules which underpin a single set of numbers by which the group is run,’ says Russell Picot, chief accounting officer for the UK business

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25 GET THE REPORT AT: www2.accaglobal.com/af/reporting

E SAME LANGUAGE of global banking group HSBC, in the ACCA study. ‘It’s done away with the Tower of Babel of different reporting and accounting languages that we had before.’ It is this consistency between countries, for CFOs and investors alike, that drives the perceived benefits of a single set of standards. IFRS might not be necessary if your organisation is based in one country and its investors are also based in that one country, but in today’s globalised business world, such isolationism is increasingly rare. As Hans Hoogervorst, chairman of the International Accounting Standards

crisis is through global regulation, and you can’t have global regulation unless you have global accounting in place.’ So as well as the economic advantages of the reduced cost of capital for individual entities, there is the macroeconomic advantage of transparency in the marketplace with one accounting language, Poole argues. It is against this backdrop that the costs of converting to IFRS should be measured. ‘We’re all very good at being able to identify costs and put a price tag on conversion,’ says Anne Simpson, head of corporate governance at CalPERS, the California

‘THE ONLY WAY YOU CAN DEAL WITH A GLOBAL CRISIS IS THROUGH GLOBAL REGULATION, AND YOU CAN’T HAVE GLOBAL REGULATION UNLESS YOU HAVE GLOBAL ACCOUNTING IN PLACE’ Board (IASB), told a conference in Australia recently: ‘Ten years ago few countries used international accounting standards. Everyone did their own thing, which made international comparability very difficult.’ But perhaps more importantly, twothirds of investors and more than half of CFOs in the survey say their view of IFRS has become more positive in the wake of the global financial crisis. ‘The move towards global accounting standards is seen as an essential element of the global financial reform agenda, providing the bedrock on which to build a better, more resilient global infrastructure,’ Hoogervorst said. Veronica Poole, global head of IFRS at Deloitte, backs this view. ‘What we have seen with this financial crisis is that the world is a very small place, everything is interconnected, and you cannot have a localised crisis. So the only way you can deal with a global

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Public Employees pension fund, in the ACCA report. ‘But should we be visited by horrors like the financial crisis and realise we’ve not invested sufficiently in quality accounting and auditing, then the cost runs to billions. Billions were wiped from the CalPERS portfolio. Those are the sort of numbers we should be looking at when people complain about costs.’ Poole says Europe is the key example of the benefits of IFRS accounting harmonisation: ‘The European regulators and the European Commission have said it is quite clear that there is no way back to different accounting for Europe. They have said that they have seen tangible evidence of the reduced costs of capital in European countries. And this is very much what we are hearing from our clients as well.’ There is of course an elephant in the room when the real benefits and

costs of IFRS and related international standards for auditing are considered. That elephant is the US, which has been following a convergence path with the IASB but retains its own generally accepted accounting principles (GAAP). The US financial regulator, the Securities and Exchange Commission (SEC); the US standard-setter, the Financial Accounting Standards Board; and the IFRS-setter, the IASB, have been working closely, moving towards a point where both IFRS and US GAAP are much better aligned, but differences still exist. And this creates an unsustainable situation, as Hoogervorst explains: ‘In the long run, a dual decision-making process is a very unstable way to work. It can lead to diverged solutions or sub-optimal outcomes at the very end.’

IFRS for the US a must Harvey Goldschmid, an IFRS Foundation trustee and former SEC general counsel, says that the adoption of IFRS by the US is a ‘national imperative’. He recently argued that it would reduce regulatory arbitrage opportunities, increase US company attractiveness to foreign investors by lowering capital costs, and reduce analytical costs and opportunities for fraud. ‘Both IFRS and US GAAP now have strengths and weaknesses… but only IFRS has the prospect of global acceptance,’ Goldschmid recently said. He conceded there would be transition costs, but said the strength of the US oversight system, combined with highquality auditing standards, had in the past reassured investors to help create a 15% premium in value for foreign issuers that had listed in the US. Poole has been encouraged by recent progress reports from the SEC, which she sees as having taken a very evenhanded approach. ‘If you were holding

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26

HANS HOOGERVORST ‘IN THE LONG RUN, A DUAL DECISION-MAKING PROCESS IS A VERY UNSTABLE WAY TO WORK. IN PRACTICE, IT CAN LEAD TO DIVERGED SOLUTIONS OR SUB-OPTIMAL OUTCOMES AT THE VERY END’ a crystal ball, I think sooner or later you would see a move closer to IFRS. Whether that is going to be IFRS in its entirety, I do not know,’ she says. As Poole observes, most jurisdictions have an endorsement mechanism and process in place, so the SEC staff paper proposal on ‘condorsement’ (a hybrid between convergence and endorsement) is not so far-fetched. ‘Condorsement just means we will move there slowly,’ she says.

Varying interpretations However, the current endorsement processes do mean that local variations in the application and interpretation of IFRS remain, a point highlighted by the recent SEC reports. And for CFOs, keeping up with the local variances, or carve-outs, within different jurisdictions that implement IFRS is the sort of operational hurdle that acts as a disincentive to conversion by adding costs and complexity. As James Singh, CFO at Nestlé, the Switzerland-based food group, said in the ACCA study: ‘In terms of subsidiaries, some of ours are quite large and material to the group. So as a multinational company, we can’t afford to have different accounting standards in different locations.’ One of the major concerns, particularly in the US as it considers adoption of IFRS, has been and will be the transition costs involved in moving from set of standards to another, and it has been argued that the current point in the economic cycle may not be the best time for such a transition. As Goldschmid noted, changes caused by the financial crisis, such as the Dodd-Frank Act in the US, and the current economic downturn have made some organisations feel that 2011 and 2012 are the wrong years to create new burdens. But he believes that a date of 2016 or 2017 would

AB_Jan_2012.indd 26

give US corporations ample time to put new processes in place alongside the necessary planning, education and training. More to the point, he says: ‘The IASB and the FASB have already done much to reduce transition difficulties and costs by narrowing differences between the two systems in their convergence projects.’ Of course, it is not just the US that is considering adoption of IFRS – there are other significant economies that are debating the merits of joining the

single set of standards club. Notably, IFRS is on the agenda for Japan, China and India. Were these economic blocs to come on board then it could be said that a common global financial language had been established. ‘Chinese standards are very close, it’s happening,’ says Poole, adding that in Japan, many multinationals are already implementing IFRS. ‘Once you have that, then the rest will follow,’ she says. Philip Smith, journalist

*THE 2012 AGENDA

This year, the IASB aims to put in place a single set of high-quality accounting standards. Its revised work plan, as published in October 2011, runs as follows. Financial instruments Effective date of IFRS 9 – finalisation was expected by end of 2011. Impairment – confirmation of re-exposure, now due in first half of 2012 (deferred from possible issue in Q4 2011). Hedge accounting – an exposure draft on macro hedge accounting now due in first half of 2012 (deferred from possible issue in Q4 2011); finalisation of general hedge accounting project remains first half of 2012. Offsetting – finalised amendments to IFRS 7 and IAS 32 were expected by end of 2011.

* * * *

Other core projects (no changes to expected timing) Leases – re-exposure in first half of 2012, finalised IFRS in second half of 2012. Revenue recognition – re-exposure in 2011, finalised IFRS in second half of 2012. Insurance contracts – review draft or re-exposure in the first half of 2012, no target date set for a finalised IFRS.

* * *

Post-implementation reviews (indicative timings) IFRS 8, Operating Segments – review initiated in 2011, target completion in 2012. IFRS 3, Business Combinations – review to be initiated in 2012.

* *

Agenda consultation Decisions on the agenda expected to be made in 2012.

*

Other projects

updates in relation to annual improvements (although the 2009 annual * No improvements are expected to be finalised in the first half of 2012), IFRS 1 amendments for government loans, or the exemption from consolidation for investment entities.

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Comment

27

Perfectly e-positioned

[

By embracing the best that technology has to offer, we are ensuring the profession controls its destiny, says ACCA president Dean Westcott

Writing at the start of 2012, I would like to wish you all a happy and healthy year ahead. As this is a time to look forward, it also seems fitting to give you a sense of the work ACCA is engaged in. This looks ahead not just to the coming year, but to the generations to come. At the end of last year, ACCA’s Council and its International Assembly discussed the advent of the e-professional, looking at how technology developments over the next three to four years might affect the working lives of accountants and the skills that they will need. The challenges are highlighted by the changing role of the CFO. Finance leaders increasingly need to interpret data provided by outsourced or shared service centres. Similarly, with audit manuals and working papers now online, there is a greater focus on the synthesis and analysis of information within public practice. Technological advances will not change the core skills and capabilities which accountants will need. In fact, the skills of interpretation, critical thinking and judgment for which accountants are so particularly valued will become even more important. However, accountants are now expected to understand the whole business and not just the numbers. This means that, if we do not embrace digital advances, we may get left behind and displaced by other professionals. Within three years mobile technologies will enable finance professionals to work anywhere at any time. Yet the core skills and capabilities we need to demonstrate will not fundamentally change. Accountants will always need to be skilled communicators, whether online or face to face, and this will present different challenges for different generations. ACCA has moved to meet such challenges with an innovative new e-assessment programme. The move to online delivery of ACCA examinations, announced last year, will bring greater choice and access for employers and students around the world, and will let us test students’ knowledge and skills in a way that better reflects real-life workplace scenarios and activities. In this way we can ensure that those with the ACCA Qualification will continue to be in demand among businesses for many years to come. Dean Westcott FCCA is finance director of Hinchingbrooke Hospital in Cambridgeshire, England

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Comment

Why diversity makes good business sense Liz Hughes argues that diversity in business can only improve corporate decision-making Labour TD Joanne Tuffy caused some controversy last November when she decided not to attend a meeting for women TDs and senators. The objective of the meeting was to encourage greater gender equality in Irish politics. However, Deputy Tuffy declined the invitation on the grounds that men were not invited. While I would very much welcome greater participation by women in politics, I am inclined to agree with Deputy Tuffy. If we do not recognise that diversity is about inclusion and an equal share of voice, then we are likely to do little more than pay lip service to it. Interestingly, the groups at the forefront of pushing diversity at the moment are largely political and corporate organisations. They recognise that differing voices and viewpoints are powerful factors in driving innovation and the form of diversity that is most frequently at the top of their agendas is gender. From ACCA’s perspective, we have a very strong story to tell in this regard. Over half of ACCA’s students are women, a situation reflected generally among business and finance graduates in Ireland, the UK and the US. However, it has long been established that gender balance at the entry level of a profession is much easier to achieve than at the upper tiers. A recent UN report showed that, while women have been afforded far

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greater opportunities in the political and corporate worlds in recent years, most of this progress can be traced to the use of mandatory quotas. A number of European market regulators are now considering applying this to publicly quoted companies as a requirement in corporate governance codes. An argument, sometimes raised in opposition to this, is that there are simply not enough women with the relevant industry experience. I would dispute this, as there are ample opportunities to look outside traditional networks and backgrounds for board members and to consider nominees whose wide-ranging experiences can only enhance the profile of a board and, indeed, the business. There is strong evidence to suggest that a robust gender balance (as opposed to tokenism) on a board can change its cultural dynamics. Some commentators argue that women tend to question more and are more risk averse. Whatever the debate, I would hope that the argument that carries the day is the huge potential benefits that come to a business when it harnesses a more diverse range of perspectives in its decision-making. With our current economic difficulties a daily reminder of the dangers of allowing the ‘group think’ to take hold, this can only be a good thing.

Liz Hughes is head of ACCA Ireland. Email liz.hughes@accaglobal.com

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Practice

29

The view from:

Dublin: Stewart Dunne FCCA, partner, BDO Q What business lessons have you learned? A I’ve learnt the importance of continuing to focus on client service, regardless of the downturn. As an adviser, the more time I spend client facing, the more I learn about their businesses and the better I can help them find solutions. Through building close relationships with clients you build up knowledge of their organisation, their trust and, eventually, become an important part of their business. This is the best way to deliver quality advisory service. The early ‘80s are not dissimilar to the times we find ourselves in today. Many companies (including our own) grew out of these difficult times and seized opportunities as they presented themselves. My role is to understand what business owners need to, firstly, survive and, ultimately, grow their business. Q What tips would you pass on to others? A You have to actively participate in a partnership – it is about give and take. It is about being a team player and being the best professional that you can be. Being mindful that, at certain times in the business cycle, when your area may be performing well, other areas will need your support. It’s important to build a team to ensure that you can continue to deliver the level

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of service expected by your clients. As a professional, working with professionals, you must understand and support people in their career progression and provide a platform to help them reach their potential. Q What has been the hardest part in terms of growing the business? A We have had to go ‘back to basics’ and focus on our core business of audit, tax and advisory. In a very competitive market, the challenge facing us is to ensure that we always put the needs of our clients first. We realise that there are opportunities for us and for our clients in the downturn, we just need to think outside of the box sometimes to see them.

30 Software survey Irish accountants assess the software packages they use 33 The view from Mark Fagan and PRISM, the financial regulator’s new risk-based supervision system

Q Tell us about BDO? A I’d like to think that we are not just another large global accounting firm. Our partners and staff are focused on building strong relationships with our clients and working together to bring solutions to their various needs. We look to find solutions to the issues they face in both the short and longer term and really get to know their business. When we talk to our clients about how they see BDO, they consistently tell us that we deliver solutions and are focused on adding value to their business.

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Practice

Software review Irish accountants assess the software packages they use John Comber FCCA, John W Comber & Associates, Athlone Q Why did you choose the accounting software package you use? A I use SAGE Professional and I chose this software mainly because I had experience of it from my previous employment role. In fact, I not only installed it for my previous employer, I also trained the staff on it. At the time I chose it, it was the most popular package on the market and the support resources were good. I was able to get any information I needed to fix problems quickly and effectively. Q What are its strong points? A The strong point for me with SAGE is the fact that the package will let you change formats with relative ease. I know the package so well at this stage that I find it easy to reformat and design new accounts formats (i.e., two separate sole trades for example). I also use SAGE for bookkeeping and, again, find that it is simple to design

a system that fits the client. I also find the ability to copy one page/note from one client to the other especially useful. Q Any areas you’d like to see improved? A There are no areas where I feel that major improvements are required. I did find that the updates tended to overwrite accounts to the most recent format, which I did not necessarily require all of the time, but there is an option now not to update. I do not update the package unless there is a major change, as I tend to update one file and copy over the relevant pages. Q Tell us about any other office manager or customer relations management software you use? A The only other software package I use is Collsoft for payroll. I use the ROS off-line facility for all tax work.

Dimitris Karagiorgis FCCA, Group Treasury Accountant, CRH, Dublin Q Why did you choose the accounting software package you use? A I use SAGE Professional and I chose this software mainly because I had experience of it from my previous employment role. In fact, I not only installed it for my previous employer, I also trained the staff on it. At the time I chose it, it was the most popular package on the market and the support resources were good. I was able to get any information I needed to fix problems quickly and effectively.

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Q What are its strong points? A The strong point for me with SAGE is the fact that the package will let you change formats with relative ease. I know the package so well at this stage that I find it easy to reformat and design new accounts formats (i.e., two separate sole trades for example). I also use SAGE for bookkeeping and, again, find that it is simple to design a system that fits the client. I also find the ability to copy one page/note from one client to the other especially useful.

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Q Any areas you’d like to see improved? A There are no areas where I feel that major improvements are required. I did find that the updates tended to overwrite accounts to the most recent format, which I did not necessarily require all of the time, but there is an option now not to update. I do not update the package unless there is a

major change, as I tend to update one file and copy over the relevant pages. Q Tell us about any other office manager or customer relations management software you use? A The only other software package I use is Collsoft for payroll. I use the ROS off-line facility for all tax work.

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Practice

John Hassett ACCA, David O’Donnell & Associates, Limerick Q Why did you choose the accounting software package you use? A Initially, we were using manual books and this proved to be very time consuming. We contacted Big Red Book and one of their representatives called to us and gave us a demonstration. We were very impressed and immediately installed the software. Q What are its strong points? A The first thing is ease of use. We would have a number of clients who like to keep their own records to

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manage costs. Even if their accounting knowledge is limited, it is easy to guide them through. I find the ease with which mistakes can be corrected on the package a massive plus. It seems to be to be one of the best packages for non accountants, while also meeting the needs of the professional. Secondly, the reporting function is by far the best I have come across. The book-enquiry facility allows fantastic management of data.

than it adds. If I had to suggest something, it might be to expand the nominal categories in the profit and loss report beyond the current groups. Q Tell us about any other office manager or customer relations management software you use? A We don’t use any other software in this category.

Q Any areas you’d like to see improved? A Honestly, the best improvement I could recommend is not to change much at all. Sometimes it is best to know that a package meets its objectives and change can take more

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Public sector

33

The view from:

Dublin: Mark Fagan FCCA, assistant national director finance, HSE Dublin North East Q Tell us about your role? A I am currently assistant national director of finance in the Health Service Executive (HSE), in charge of the finance function within the Dublin North East region, with an annual budget of almost €2bn. I am responsible for all management and financial accounting functions within the region, which includes a mixture of acute hospitals and community services. Q How has the recession changed your priorities? A Where to start with this question! The last three years have seen a complete turn around, from focusing on service expansion to attempting to maintain services while experiencing budget reductions that, in the words of our CEO, are ‘probably unprecedented in the developed world’. This has led to a concentration of effort in the finance function around monitoring and assisting in cost-containment measures and, given the lack of a single national financial system, this is a very challenging environment. Q What tips would you pass on to others? A The HSE has been a ‘vote’ holder since its inception in 2005 and this means it

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reports to government on a cash basis rather than an accruals basis. There is a constant tension trying to manage services on a cash accounting basis rather than an accruals accounting basis without a single national financial system. My advice/ request/tip would be to invest in proper systems that free up qualified accounting staff at senior levels to allow them focus on business analytics rather than having to do data processing, particularly around consolidating data from multiple systems. It would also help to extend planning horizons to three-to-five years from the current annual process.

34 PRISM The financial regulator’s new risk-based supervision system 29 The view from Stewart Dunne and Irish accountants assess the software packages they use

Q What is the most satisfying aspect of the job? A I deal with a great variety of issues that allow me to experience a broad width of the health system in Ireland and so the job is, while very challenging, never boring. Without wanting to seem trite it is also a job whereby my work can assist in improving the health of the people in my region and nationally, so it links my profession with my personal values in a very direct way. I also work with incredibly committed and hardworking staff, although this reality is not often acknowledged in the media.

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Public sector

PRISM – risk-based supervision in Ireland Details of PRISM, the financial regulator’s new riskbased supervision system, were announced at the ACCA Ireland Industry Briefing in December Deputy governor of the Central Bank of Ireland, Matthew Elderfield, announced details of Probability Risk and Impact System (PRISM), the new system of regulation for financial firms, at the ACCA Ireland Industry Briefing at the Westin Hotel in Dublin on December 1. PRISM will cover the 10,000 firms monitored by the Central Bank, ranging from banks to brokers, and divides firms into four categories, depending on the level of risk they pose. Firms whose potential failure is deemed to pose a high-risk to the economy will face the most rigorous regime of regulation and the Central Bank says the new system will mean authorities are better equipped to spot problems before they become crises. In the following excepts from his speech, the financial regulator explains the rational behind PRISM.

Why risk based supervision? ‘Fundamentally, we need risk-based supervision because we have to make sure we deal adequately with the main risks to financial stability and consumers posed by our regulated financial firms. If we were to simply divide our front-line supervisors evenly between the 10,000-plus firms we regulate, we would not be able to do

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very much proactive work at all and we would certainly not have enough resources to understand our major firms well.’

How is risk assessed and what is the risk appetite? ‘Impact is one of the core building blocks of a risk-based system of supervision. Our risk tolerance is highest for low-impact firms while, for obvious reasons, we have a very low tolerance to failure in the highestimpact firms. We require all low-impact firms to comply with the appropriate prudential and consumer regulations just as much as we require our higher-impact firms to comply with such regulations – but we accept that, in any market economy, firms will be created and they will fail for a whole variety of reasons. When they fail, we will work to ensure that the rights of customers are appropriately protected according to the law, supported by the extensive retail consumer protection framework in Ireland. We will also work to ensure appropriate cancellation of permissions and winding up in accordance with insolvency regulation. As you would expect, our risk appetite for such failure in our highest impact firms is markedly less. We do

not expect these firms to fail regularly and, when it appears that it is possible they are at risk or may fail, you will find us working proactively to mitigate the risks.’

Implementing risk appetite ‘The first stage in implementing our risk appetite is through investigating and challenging the firms we regulate. Firms can expect their engagements with our supervisors to be demanding. I am asking our supervisors to ask firms difficult questions, to be skeptical, to challenge established truths and to not necessarily take the first answer they are given. I wish them to be assertive. Assertive does not mean rude or aggressive – it is perfectly possible, indeed it is highly desirable, to be both polite and challenging. That said, I will support our supervisors in being robust where they need to be robust in the face of obfuscation where this arises. But I would hope many firms will find their conversations with our supervisors stimulating, helpful and thought provoking. We are all familiar with poor consultants: he or she may tell you what you want to hear as they believe that will be how they are engaged for further work. Our supervisors should

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not be consultants. They can and should differ with both the firm’s management and consultants hired by the firm. This challenge by supervisors will occur during the PRISM engagement tasks.’

Judging ‘First and foremost, we have sought to achieve greater consistency in the approach of supervisors through the use of risk governance panels. For example, under the PRISM framework, when a medium-high or medium-low impact firm has been subject to a full risk assessment – a comprehensive inspection visit if you prefer that language – the supervisory team will return to the Central Bank and use PRISM to write up the findings of their visit and to make structured judgments about the risk profile of the firm. They will then present their evaluation and proposed next steps to a risk governance panel. These panels consist of senior staff drawn from across the Central Bank. They offer their expertise to the front-line supervisors, debating, discussing and challenging their findings and bringing wider expertise and perspectives to the table.’

Mitigating risk ‘As well as being a tool to help

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supervisors form judgments, the PRISM application also assists the supervisor in formulating and tracking risk mitigation programme actions designed to reduce risks at firms to an acceptable level. The system requires the supervisor to set out clearly what is the issue which gives rise to the concern. It then requires him or her to set down the outcome they wish to see before inviting the supervisor to formulate an action or series of actions which are likely to lead to the issue being mitigated in a way which achieves the desired outcome. Risk mitigation programme actions are not new, but the way in which PRISM helps a supervisor to formulate them is designed to ensure that we put the outcomes – the financial stability and consumer protection – we seek on behalf of the public, at the forefront of our risk mitigation thinking.’

Spotting trends and tracking risks ‘One advantage of supervisors using an integrated system to challenge firms, judge risk and mitigate unacceptable risk is that, over the course of time, the Central Bank will assemble a powerful quantitative and qualitative database about the riskiness and behaviour of

firms. The senior leadership of the Central Bank will be able to review management information on evolving risks across sectors and sub-sectors, enabling us to consider whether a policy or enforcement response might be appropriate, alongside the firm centric work of individual supervisors. We will also be able to track which firms are habitually non-compliant in terms of working with us in a timely manner to mitigate key risks and take appropriate action. As a Central Bank, we have management information already, but PRISM will offer us a new dimension by cutting newly aggregated data in fresh ways, enabling us to monitor emerging risks in different sectors much more easily.’

Clarity and consistency ‘Moving to risk-based supervision offers real benefits for firms, particularly for firms with sound business models. Firstly, PRISM creates a common framework for Central Bank supervision of financial firms. In doing so, it should help us achieve consistent supervisory interaction with equivalent firms. Concerns around inconsistency between firms have been raised with me in the past: I hope firms and trade bodies will find PRISM helps address

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those concerns. Secondly, PRISM will allow us to see patterns across the different sectors within financial services much more easily, allowing senior management to obtain a real-time overview of where supervisors perceive most risks to be. PRISM will allow us to see the sectors in which new risks are emerging and to take actions focused on the characteristics of that sector or sub-sector. This will materially reduce the likelihood – and I know some in industry perceive this to be a potential risk – that funds are treated like insurers and insurers like domestic banks. Thirdly, PRISM will be proportionate. It is a firm-centric approach which will mean that the actions are tailored to the firm in question, with the sharing of risk ratings and the risk mitigation programme giving each firm clarity around our individually tailored supervisory agenda and depending on the firm’s impact rating to us.’

Low-impact firms ‘We are all too aware that low impact entities such as, for example, retail intermediaries, can also cause consumer detriment through overcharging, misselling and poor systems and controls. There will be a different approach to low-impact firms but they will not fly beneath our radar and will not have an easier time. We plan to monitor the financial aspects of these firms through semi-automatic reviews of their on-line

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returns as our technology infrastructure evolves. Our on-line returns programme, when combined with PRISM key risk indicators drawn from those returns and PRISM reporting functionality, is helping us advance rapidly down the automation route. Themed inspections will continue to be an important supervisory tool, and going forward, we will publish our intended thematic work plan. A themed inspection focuses on a specific topic rather than on a range of topics and is usually carried out on a number of relevant regulated firms or on firms that represent a significant proportion of market share – in line with our riskbased approach. Themes and firms for inspection are selected based on our market intelligence from a range of sources, including issues noted during on-going supervision, complaints received and referrals from the Financial Services Ombudsman.’

Enforcement ‘During 2011, we opened 32 enforcement case files with the vast majority of these in the reactive category. In 2011, our supervisory divisions identified six priority areas: governance and risk management; systems and controls; controls around charging issues; compliance with the Mortgage Arrears Code; compliance with client money requirements; and timeliness and accuracy of information received by the Central Bank from regulated entities.

Six of the seven settlement agreements we have entered into so far this year have related to these predefined priorities. Over the same period we have taken reactive enforcement action in a single case, which related to a breach of the MiFID suitability requirements by a spread trading firm. The Administrative Sanction Procedure cases concluded this year have resulted in monetary penalties totalling €1.59m, six reprimands and the disqualification of two persons concerned in the management of a regulated entity for a period of three-and-a-half-years each.’

Conclusion ‘In summary, the PRISM framework will help us challenge ourselves and our firms in a constructive fashion. It will help us form consistent judgments about the risks firms pose to our objectives of financial stability and consumer protection and, having established what those risks are, it will help us formulate appropriate mitigation steps and monitor the success of that mitigation. We will work to ensure that we supervise all types of financial firm in an appropriate fashion but we will never be infallible – we cannot guard society against all risks. Our objective with the PRISM framework is to give ourselves the best chance to guard against the most severe threats to financial stability and consumers in the future.’

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16/12/2011 11:26


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Technically speaking

[

ACCA’s Aidan Clifford rounds up some of the changes Irish accountants should be aware of

IN THIS ARTICLE: • • • • • •

01 New insolvency guidance for practitioners. 02 ESMA report on enforcement of accounting standards. 03 Accounting guidance issued on government loans. 04 Suggested advice for a client facing insolvency. 05 Relaxation of voluntary strike-off procedure criteria. 06 Employee numbers when determining the size of a company for filing purposes.

01 INSOLVENCY REGULATION

CCABI, which includes ACCA, has in the past called for regulation of the insolvency sector in Ireland. Currently, this is nominally regulated by the Office of the Director of Corporate Enforcement (ODCE). It is one of the ODCE functions, under their founding legislation, but, while they appear to discharge their function effectively with regard to liquidator reports, I would suggest greater resources should be invested in monitoring the work of liquidators in respect of matters such as: fees charged, inspection and investigation work undertaken and other matters. As there is no licensing of liquidators in Ireland, quite literally anybody can accept a liquidation appointment; the only bar in company law being an officer or servant of the company or a disqualified director. In an on-going case, even the definition of ‘servant’ has been stretched to allow what most accountants would consider a servant to be appointed the liquidator. This is an area I would encourage the ODCE to address in 2012. Quite recently, a liquidator was replaced due to excessive fees, and another recently transferred 70 liquidation appointments to another liquidator. Irish statements of insolvency practice

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(SIPs) are issued by CCABI and are available on the ACCA website. Members accepting insolvency appointments would be expected to comply with the SIPs. Insolvency would be very robustly monitored by ACCA in Ireland where a complaint was received and compliance with the SIPs would be expected. See ACCA’s Irish technical library at www. accaglobal.com/itl for more details. Note this site is a work in progress and is designed to be a free technical resource for members in Ireland.

02 ENFORCEMENT OF IFRS

The European Securities and Markets Authority (ESMA) report on enforcement of accounting standards gives a review of the 2010 activities of accounting enforcers within the European Economic Area (EEA), showing that, overall, the level of enforcement activity in 2010 was similar to 2009. About 1,700 financial reports were reviewed, of which 1,000 (compared to 1,200 in 2009) were subject to a full review and 700 (900 in 2009) to a partial review. These reviews resulted in around 700 (2009: 730) enforcement actions by national enforcers, of which one out of five were subject to European co-ordination.

03 LOANS AND IFRS

The International Accounting Standards Board has published for public comment a proposed amendment to IFRS 1 Firsttime Adoption of International Financial Reporting Standards. The proposed amendment sets out how a first-time adopter would account for a government loan with a below-market rate of interest when they transition to IFRSs; which, for most Irish companies, will be in 2015. The existing requirement in IAS 20 requires entities to measure government loans with a below-market rate of interest at fair value on initial recognition. A first-time adopter applying IAS 20 retrospectively to existing government loans at the date of transition to IFRSs

Aidan Clifford FCCA, advisory services manager, aidan.clifford@accaglobal.com

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would be required to identify a fair value at an initial recognition. The proposed amendment would require that firsttime adopters apply this requirement in IAS 20 prospectively to loans entered into on or after the date of transition to IFRSs or to apply IAS 20 retrospectively to that loan.

04 CLIENTS AND LIQUIDATION

Case law from the UK suggests that auditors and accountants for SMEs have an enhanced duty of care to their client and, where they face liquidation, the accountants should write to them setting out the implications of a CVL. These are: the liquidator will report to ODCE on whether the directors acted honestly and responsibly. In a period where a company is not trading well, the directors would be advised to hold and document frequent directors’ meetings to discuss the issues. This will provide evidence of the directors considering such matters as reckless trading or of only taking credit where there is a ‘reasonable prospect’ of repaying it. The directors would also be advised to have management accounts up to date; this is to demonstrate that they made decisions based on solid information. Directors also need to be informed that the liquidator will undertake an investigation of the last two years’ transactions to ensure that there were no instances of fraudulent preference in the payment of creditors. Such incidences will result in the transaction being reversed and will reflect badly on a director when the liquidator is forming an opinion as to behaving ‘honestly and responsibly’ for their ODCE report. For a similar reason, a director would be advised to ensure that proper books and records are maintained in the final period of trading; failure to keep proper books can lead to personal liability for all of the debts of the company. Having accurate PAYE and VAT returns in the final period of trading is also a key issue that liquidators report on and

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failures in this area is likely to lead to a restriction and possible prosecution. Finally; a director would be advised to ensure that directors’ PAYE and PRSI is up to date as Revenue will disallow any deduction for PAYE or PRSI paid by the director out of their wages but not ultimately paid over to the Revenue. As mitigation, it should be noted that any funding introduced by the directors or others at the very end to cover wages and similar expenses may rank as ‘super-preferential creditors’ and may be repaid to the director ahead of other creditors.

05 VOLUNTARY STRIKE-OFF

CRO announced changes to the limits for using the voluntary strike-off procedure. The limits used to be: • The amount of assets in the company at the time of application must not exceed €150. • The amount of liabilities must not exceed €150. • The company does not have, and did not have in the previous three years, an issued share capital in excess of €150. Since 26 October 2011, the share capital criteria has been withdrawn, with only the asset and liability limits remaining. The new H15 form is now available reflecting this change.

06 ADDING UP

Employee numbers can be critical when determining the cut off between

small and medium companies, and audit exempt and not audit exempt. The calculation is not exactly intuitive. The Act states that it is calculated as follows: ‘…the average number of persons employed by a company shall be determined by dividing the relevant annual number by the number of weeks in the financial year of the company …the relevant annual number shall be determined by ascertaining for each week in the financial year of the company concerned … the number of persons employed under contracts of service by the company in that week (whether throughout the week or not), and… adding together all the weekly numbers.’ It would appear that ‘whether throughout the week or not’ means one employee working for one hour in a week is counted as 1/52 of an annual whole person. One employee working a 40-hour week is also counted as 1/52 of a whole person. To calculate the number of employees per the Act, you get the total number of employees in every week, multiply this by 1/52, add up all of the weeks and that is the annual total. Where, for example, a hotel takes in waiting staff for four hours for a wedding, they will be counted as full-time employees for that week, even though they only worked for four hours. Many companies might be tempted to form another company to supply labour to the original company, ensuring both companies are under the limits; but this option comes at an additional cost.

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Northern Ireland notes Professional fees A deduction for fees and subscriptions paid to professional bodies or learned societies under Section 344 ITEPA 2003 (formerly Section 201 ICTA 1988) is allowable where: * A statutory fee or contribution shown in the list (see below) is allowable where employees pay this out of their earnings from an employment, and are required to pay this as a statutory condition of following their employment. * An annual subscription to a body shown in the list as approved by HMRC is allowable where employees pay this out of their earnings from an employment and the activities of the body are directly relevant to the employment. * The activities of a body are directly relevant to an employment where the performance of the duties of that employment is directly affected by the knowledge concerned or involves the exercise of the profession concerned. The list, (www.hmrc.gov.uk/list3/ list3.pdf), shows professional bodies and learned societies, approved by HM Revenue & Customs (HMRC) for the purposes of Section 344 ITEPA 2003 (formerly S201 ICTA 1988).

Shares of negligible value HMRC provides a list of shares or securities formerly quoted on the London Stock Exchange, which have been officially declared of negligible value for the purposes of a claim under S24(2) Taxation of Chargeable Gains

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Act (TCGA) 1992 by the Shares and Assets Valuation Office. The negligible value list gives a tax year or a specific date at which the office has accepted that the share or security is of negligible value. You can find the list at www.hmrc.gov.uk/cgt/negvalist.htm

Current tax treaties You can find links to tax treaties currently in force at www.hmrc.gov.uk/ taxtreaties/in-force/index.htm

IT and class 4 nic It is often overlooked that, when trading losses are relieved against sources of income other than trading income, or indeed capital gains, this will cause a mismatch between the amount of losses carried forward for income tax and class 4 national insurance contribution (NIC) purposes. Where losses are claimed under the Income Tax Act 2007, section 64 or 74 and/or extended by a claim under the TCGA 1992, section 261B, separate memoranda should be kept of the unutilised losses for income tax and class 4 NIC purposes as the amount of losses available for income tax relief under ITA 2007, section 83 and for Class 4 NIC under SSBCA 1992, schedule 2, para 3(3)(4) will differ. Worked examples can be found at www2.accaglobal.com/trading_losses

Employment manual Technical guidance on the Finance Act 2011 rules on employment income provided through third parties has

been updated in EIM45025 – Employment income provided through third parties: the Section554A gateway.

Disguised remuneration Amounts chargeable to income tax under the Disguised Remuneration legislation now carry an income charge. The regulations came into force on 6 December 2011 and HMRC has stated that employers will need to account for class 1 primary (employee) and secondary (employer) NIC on amounts which count as employment income under chapter 2 of part 7A on or after that date, except where the part 7A charge arises on 6 April 2012 in relation to an ‘early step’ which took place between 9 December 2010 and 5 April 2011.

Finance bill 2012 The draft bill was published on 6 December and will be open for comment until February 2012.

Toolkits HMRC has produced a presentation designed to show how to use the toolkits to help reduce errors. The video can be found at www.hmrc.gov. uk/agents/lt-training.htm The toolkit on VAT input tax has been updated. The full suite of toolkits can be found at www.hmrc.gov.uk/agents/prereturnsupport-agents.htm Glenn Collins, head of technical advisory, ACCA UK

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Tax diary JANUARY 2012 General 7 Mandatory reporting Where applicable, quarterly return of client lists for period to 31 December 2011 14 PAYE P30 monthly return and payment for December 2011. (ROS extension to 23 January 2012). 14 PAYE P30 quarterly return and payment for the calendar quarter ended 31 December 2011. (ROS extension to 23 January 2012). 14 RCT RCT30 monthly return and payment for December 2011. (ROS extension to 23 January 2012). 14 PSWT F30 monthly return and payment for December 2011. (ROS extension to 23 January 2012). 19 VAT Bi-monthly VAT3 return and payment for the period November/December 2011 (ROS extension to 23 January 2012). 19 VAT Four-monthly VAT3 return and payment for the period September/December 2011 (ROS extension to 23 January 2012).

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19 VAT Half-yearly VAT3 return and payment for the period July/ December 2011 (subject to any ROS extension to 23 January 2012). Companies 14 Dividend withholding tax Return and payment of DWT for distributions in December 2011 21 Corporation tax Return and final payment for accounting periods ended 30 April 2011. (ROS extension to 23 January). 21 Corporation tax Preliminary tax for accounting periods ending 29 February 2012. (ROS extension to 23 January). 21 Corporation tax First instalment of preliminary tax for ‘large’ companies for accounting periods ending 31 July 2012. (ROS extension to 23 January). 31 Form 46G – return of third party information Form 46G for accounting periods ended 30 April 2011 Individuals 31 Capital gains tax Payment of capital gains tax in respect of gains arising on disposals in the period 1 December 2011 to 31 December 2011

FEBRUARY 2012 General 14 PAYE P30 monthly return and payment for January 2012. (ROS extension to 23 February 2012). 14 PSWT F30 monthly return and payment for January 2012. (ROS extension to 23 February 2012). 15 PAYE Form P35 for 2011. (ROS extension to 23 February 2012). P60s for 2011 must also be issued to employees by 15 February. 15 PSWT Form F35 for 2011. (ROS extension to 23 February 2012). 15 RCT Principal contractors to file form RCT35. (ROS extension to 23 February 2012). Companies 14 Dividend withholding tax Return and payment of DWT for distributions in January 2012 21 Corporation tax Return and final payment for accounting periods ended 31 May 2011. (ROS extension to 23 February).

21 Corporation tax Preliminary tax for accounting periods ending 31 March 2012. (ROS extension to 23 February). 21 Corporation tax First installment of preliminary tax for ‘large’ companies for accounting periods ending 31 August 2012. (ROS extension to 23 February). 29 Form 46G – return of third party information Form 46G for accounting periods ended 31 May 2011

Information supplied by the Irish Tax Institute. Please note that the deadlines above are those which apply at the time of writing. There is always the possibility that the deadlines may be affected by Budget 2012. Disclaimer: This is a calendar of the main tax compliance deadlines but is not intended to be an exhaustive list. While every effort has been made to ensure the accuracy of this information, the Irish Tax Institute does not accept any responsibility for loss or damage occasioned by any person acting, or refraining from acting, as a result of this material.

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Budget 2012 – a business round-up Cora O’Brien outlines key areas of interest to business advisers Budget 2012 was delivered over two days in early December. Details of the proposed public expenditure cuts were announced by the minister for public expenditure and reform, Brendan Howlin, on Monday 5 December, while the taxation measures were presented by the minister for finance, Michael Noonan, the following day. This article outlines the main provisions of Budget 2012 affecting businesses.

Corporation tax

(a) 12.5% corporation tax rate to remain Minister Noonan reaffirmed the government’s commitment to maintaining the 12.5% corporation tax rate. He said: ‘we made a commitment in the Programme for Government to maintain the 12.5% rate and we will do so’. (b) Start-up relief extended The scheme of corporation tax relief for start-up companies has been extended to include start-up companies that commence a trade in 2012, 2013 or 2014.

Business expansion and export measures A number of targeted measures have been introduced with a view to attracting further inward investment and stimulating indigenous growth. (a) New SARP regime A new Special Assignee Relief Programme (SARP) will be introduced to attract skilled mobile individuals to work in Ireland. (b) Deduction for overseas assignees A foreign earnings deduction (FED) is to be introduced in order to assist businesses expanding into overseas markets. The relief will be available for individuals who spend at least 60 days a year developing markets for Ireland in Brazil, Russia, India,

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China or South Africa. Readers may recall that a FED was in place in Ireland a number of years ago, but was withdrawn in 2003. (c) International Financial Services Sector A package of measures will be set out in the Finance Bill focused on developing the international funds industry, the corporate treasury sector, the international insurance industry and the aircraft leasing industry. Further details on all of these measures will be provided in the Finance Bill.

Encouraging R&D Businesses engaged in R&D activity will be pleased to see a number of measures introduced in order to enhance the attractiveness of the existing R&D tax credit scheme. (a) Volume basis The volume basis will apply to the first €100,000 of qualifying R&D expenditure. The tax credit will continue to apply to incremental R&D expenditure in excess of €100,000, as compared with expenditure in the 2003 base year. (b) Outsourcing limit Currently, outsourced R&D costs are eligible for relief where they do not exceed 10% of total costs or 5% where work is outsourced to third level institutions. These limits will be increased to allow the greater of the existing percentage arrangement or €100,000. This measure will be of particular benefit to SMEs. (c) Use of credit to reward employees Companies availing of the R&D tax credit will have the option of using a portion of the credit to reward key employees who have been involved in the R&D process. We await further detail in the Finance Bill on how this will operate in practice.

Business succession Business owners planning to pass on their business to the next generation should note that the rates of capital gains tax (CGT) and capital acquisitions tax (CAT) will increase from 25% to 30%, applicable for transactions after 6 December 2011. The current Group A CAT threshold (mainly applicable for transfers from parent to child) will fall from €332,084 to €250,000. In order to encourage the early transfer of business and farming assets, an upper limit of €3m on CGT retirement relief for an intra-family transfer will apply where the transferor is aged over 66 years. The upper limit for transfers outside the family will fall from €750,000 to €500,000 where the transferor is aged over 66 years. A CGT relief will be available on the

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and Insolvency Scheme will be reduced from 60% to 15%.

Pensions Despite the proposals in the Programme for Government, income tax relief on pension contributions will continue to be available at the employee’s marginal rate. There are consultations ongoing with the pensions industry at the moment in relation to pension-related taxation issues. However, in an effort to broaden the PRSI base, the remaining relief of 50% for employer PRSI on employee pension contributions is being removed from 1 January 2012. Last year’s Budget had reduced the relief from 100% to 50%.

DIRT The DIRT rate is being increased to 30% for deposit interest payments made annually or more frequently, and to 33% for payments made less frequently than annually. These new rates will apply from 1 January 2012.

Stamp duty The rate of stamp duty on nonresidential property is being reduced to 2% in respect of instruments executed after 6 December 2011. disposal of properties purchased between 6 December 2011 and the end of 2013. Where the property is held for more than seven years, the gains accruing in the first seven years of ownership will not attract CGT.

Indirect taxes

(a) VAT As had been signalled in advance of the Budget, the standard rate of VAT will increase from 21% to 23% from 1 January 2012. (b) Carbon tax The carbon tax increased from €15 per tonne to €20 per tonne, with effect from midnight on 6 December, on petrol and diesel. The increase will be effective from 1 May 2012 on kerosene, marked gas oil, liquid petroleum gas, fuel oil and natural gas. No carbon tax will be

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applied to solid fuels, such as peat and coal.

Payroll taxes As had been promised in the Programme for Government, there were no changes made to income tax rates, bands or credits. Labourintensive businesses employing seasonal and part-time workers should note that the exemption threshold for liability to the Universal Social Charge (USC) was increased from €4,004 to €10,036 for 2012. Payroll administrators should note that the USC will be moving to a cumulative basis in 2012, as announced recently by Revenue. As part of the expenditure measures presented by minister Howlin, it was announced that the rate of the employer rebate under the Redundancy

Legacy property reliefs For individuals holding section 23 type investments who have gross incomes over €100,000, a surcharge of 5% (essentially a higher rate of USC) is to apply on the amount of income which the Section 23 relief shelters. Investors in accelerated capital allowances schemes, who have annual gross income in excess of €100,000, will also be subject to the surcharge of 5%. In addition, where the tax life of the scheme extends beyond 1 January 2015, or the tax life ends before 1 January 2015 and all of the allowances have not yet been used, the remaining allowances will no longer be available for use. Cora O’Brien is director of technical services, Irish Taxation Institute. Email cobrien@taxireland.ie

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Going, gone… Tom Murray FCCA offers some advice on buying and selling assets in insolvency proceedings In the current economic environment, thousands of Irish companies are going into liquidation/receivership. Such situations can represent a unique opportunity for a purchaser to expand his business, or acquire a complementary business, at a knockdown price. Sometimes, depending on the particular market the company is operating in, the situation may give a competitor the opportunity to increase market share by paying a premium for the assets and, thus, preventing the previous management from buying the assets and setting up in competition. It has been known for competitors to mothball such assets in order to protect their market share. Leaving aside the strategic issues facing potential purchasers, the purpose of this article is to lay out some of the issues facing an insolvency practitioner in disposing of assets and, also, to suggest an action plan for acquiring businesses from receivers.

carry out an appraisal of the assets with a view to determining their true value. In many circumstances, the former directors’ estimations of the assets can be dramatically over or under valued.

Disposal of assets

The liquidator has a duty to obtain the maximum value for each individual asset. There are any number of disposal methods and the liquidator should choose the method which best suits the class of asset and the opportunity for maximum realisation. Among these options, the liquidator may: • Advertise the asset in a national newspaper or a trade journal;

When a company is placed into insolvency proceedings, the officer holder, be they liquidator or receiver, has a duty to, first, protect and, second, achieve maximum realisations for the assets of the company. * Independent valuation At the outset, the liquidator should appoint an independent appraiser to

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* Subject to finance charge It may be the situation that some of the assets are subject to a lease or financial charge. In these circumstances, the liquidator should obtain a settlement figure from the leasing company and determine whether there is any equity when comparing the independent valuation and the settlement figures. If there is no equity in the asset, the liquidator will need to immediately hand the asset back to the charge holder. If there is equity, the liquidator will then set about disposing of the asset and then discharge the outstanding lease with the equity forming part of the realisations of the liquidation.

Disposal method

Sell them through an auctioneer (ideally one who specialises in the type of asset); and/or, Sell them to connected parties.

*Maximising return It is important that the liquidator can stand over whatever method of disposal and can demonstrate that maximum realisations were achieved. The duty of the liquidator is to ensure the maximum value of the assets is obtained, but this does not require the liquidator to obtain the maximum value for each individual asset if disposal of a parcel of assets or the assets as a whole will, in aggregate, maximise total realisations. *Selling to connected parties The obligations on the liquidator in relation to the maximising of realisations of assets do not, in any way, preclude the disposal to connected parties. However, a liquidator is prohibited from disposing of assets by private contract to any person who was an officer of the company in the three-year period prior to its insolvency, unless the liquidator gives 14 days notice to all known creditors. This requirement is outlined in Section 231(1A) for court liquidations, Section 231(1A) and Section 276 for voluntary liquidations and Section 316A for receiverships. It is the liquidator’s duty to ensure that all

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transactions are conducted on an arm’s length basis and, as regards the value of any assets, subject to transaction, these must be valued on the basis of a professional appraisal of the assets. If the appraisal of the value of the assets is not conducted by an independent appraiser, the liquidator should ensure that he or she has conducted all due enquiries as to the value the assets and retains appropriate support documentation in this regard. If the assets are being sold with a professional valuation, the officeholder should consider seeking the views of the committee of inspection, should one be appointed.

Buying assets Leaving aside the strategic issues facing potential purchasers, the following sets out a suggested action plan for acquiring businesses from

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receivers. Similar considerations would apply to buying a business from a liquidator. *Initial review The purchasers should determine why the company went into receivership. If the company failed because of poor product quality leading to poor sales, then it is likely that there is no inherent viable business. However, if the company failed because of, say, inadequate financing but has a strong brand name in the marketplace then it may be viable. *Acquisition team A party interested in buying the business should assemble an acquisition team, who should be advised by competent solicitors and an appraiser. It is also a very good idea to have an insolvency specialist on the team as he or she can advise on the

negotiating strategy to be adopted with the receiver. *Investigation Generally speaking, the receiver will sell an asset ‘as is’ and will give no warranties or guarantees. Thus, receivership sales are a case of caveat emptor. The investigation into the business should concentrate on its future prospects. In contracting-type businesses, the receiver may wish to sell the benefit of uncompleted contacts. These require particular due diligence to ensure that they can be completed profitably. *Negotiating Having completed the investigation and decided to sit at the negotiating table, the potential purchaser will find the form of the final discussions will depend on many factors, including the degree of face-to-face negotiations and

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Technical

the skills of the respective negotiating teams. The experienced receiver will rarely tell you how much he or she is looking for, being well aware that ‘every offer is subject to a counter offer’, and so will ask all interested parties to submit written offers and attempt to improve on these. The receiver may also attempt to generate a bidding war among the potential purchasers, leading to a so-called ‘Dutch auction’ scenario. While the receiver will try and sell the business for the maximum

amount possible, he will generally end up selling the business for an amount between its forced-sale value and its going-concern value. The receiver will have received valuations from his appraisers for the assets on these two bases. To illustrate the difference in values, take the recent case of a small Irish engineering company whose book value of plant and machinery was €410,000, going-concern value €228,000 and forced-sale value €104,000. The business was finally

sold, after three months’ trading, for an effective price of €182,000. There are many factors receivers will take into account in selling assets. For example, there may be a rent quarter day coming up and the receiver may wish to have the premises vacated by then. In another recent case, in the space of an afternoon, the contents of a 20,000 sq. ft. carpet warehouse, and the office furniture and equipment in an adjoining building, were sold for only €32,000, as a rather aggressive landlord was organising bailiffs to come round the following day. Most receivership sales are not done under such duress and, in these circumstances, it is worthwhile maintaining close relationships with the company’s management and the receiver’s staff to determine the level of interest of other purchasers. This information can be used for setting the parameters of the opening bid. The golden rule to remember is that everything is negotiable: the price, payment terms, rents, access to premises post-completion, retention of title claims, commission for the collection of book debts, etc. The longer the receiver continues to trade, the more likely he or she is to sell the business closer to its forced sale value. This is because the business starts to lose customers due to uncertainty over future supplies and key staff take up positions elsewhere. If there is only one purchaser interested in the business then the opportunity for knocking the price down is greater. However, an experienced receiver should still manage to achieve a good result. In conclusion, receivership/liquidations offer a unique opportunity to buy a business for less than its going concern value. Tom Murray is a partner with Friel Stafford. Email tom.murray@ frielstafford.ie

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COMMERCIAL ANNOUNCEMENT

MAXIMISING VALUE ON MOVEABLE ASSETS Over the past few years the requirement to maximise value on moveable assets from insolvency projects has become more critical than ever. With property so hard to sell, assets such as IT equipment, warehouse equipment, plant etc, have taken centre stage in many insolvency projects. The current high price of metals has added an extra dimension on plants that have heavy duty machinery, where the copper cabling within these machines can be more valuable than the machine itself. There are countless scenarios where an insolvent company is put under duress from a landlord and our aim is to provide insolvency practitioners with accurate advice, so they can get a financial return on these assets from the landlord or have them sold and removed from site. The financial industry is also taking a more pragmatic view on lending and lenders are actively engaging with asset auctioneers such as E-Auctions to conduct item-by-item valuations on ‘movable assets’ prior to approving finance.

These valuations are typically based over one-to-three or three-to-five periods, on what the lender may expect to return if the assets need to be sold during this period. Our advice to clients is always, ‘discretion is the better part of valour’. If you are unsure about selling or moving an asset that has potential repercussions, get it doublechecked. We aim to give the right the advice, so all parties are happy. E-Auctions industry experience includes: aerospace, audio visual, automotive, biotech/medical/pharma, chemical, computers, electronic test/measurement, food/ beverage, material handling, metalworking/machine tools, office equipment, packaging, plastics/injection moulding, PCB, printing, semiconductor, sports memorabilia, textiles etc. Kieron Gammell is managing director of E-Auctions.ie Email: kgammell@e-auctions.ie

AUCTION XCHANGE: ASSET DISPOSAL/RECYCLING Auction Xchange has positioned itself to capitalise on a growing niche market driven by the current high levels of insolvencies, combined with an upsurge in company start-ups. In effect, by driving corporate recycling, our aim is to facilitate the transition of assets from insolvent companies to new business start-ups and expansions. On average, 45% of the furniture, fixtures and fittings and 85% of the technology sold at its auctions are sourced from previously cash-rich companies, who have gone into receivership or liquidation. High-quality clearance stock from distributors, agents and retailers form 35% of entries, providing these businesses with a strong return on disposal and aged goods. The balance of entries are provided from companies on the move, providing physical and financial assistance to re-locations, downsizing and upsizing. With set-up funding being tighter than ever in this credit starved environment, entrepreneurs are looking for ways to make their money go further. Auctions are the ideal place to facilitate expansion or assist new companies getting off the

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ground by providing the opportunity to equip and furnish businesses at a minimal capital outlay. All entries for auction can be inspected, Monday to Saturday, at a 10,000 sq. ft. showroom in Sandyford, Co Dublin. In addition, entries can be viewed and bids accepted online at www.auctionxchange.ie Live monthly disposal auctions are conducted at the premises, in a dedicated auction room aided by a projected display of each item. This facilitates real-time purchase and immediate check out functionality. These disposal auctions combine the assets of many sources that would otherwise be of too small a quantity to justify a dedicated disposal auction. The bespoke cloud computing solution also provides the option to carry out off-site dedicated disposal auctions, therefore reducing time and transportation overheads. Andrew Hamilton is managing director of AuctionXchange. ie Email ahamilton@auctionxchange.ie

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ESMA overview Michael Kavanagh reviews the ESMA’s recent activities from an Irish perspective The European Securities and Markets Authority (ESMA), recently published its second annual activity report on the enforcement of International Financial Reporting Standards (IFRS) in Europe. By virtue of the Transparency Directive (EU Directive 2004/109/EC), all EU Member States are required to establish an accounting enforcer to examine whether the annual and half-yearly financial reports of affected listed entities have been ‘...drawn up in accordance with the relevant reporting framework’ (i.e., applicable accounting standards and law). In Ireland, this function is carried out by the Irish Auditing and Accounting Supervisory Authority (IAASA), which is the designated competent authority under the Transparency Directive, as transposed into Irish law. IAASA is a member of the EECS (European Enforcement Co-ordination Sessions), which operates under the oversight of the Corporate Reporting Standing Committee of ESMA. The main objective of EECS is to coordinate the enforcement activities of Member States in order to increase convergence amongst European enforcer’s activities across EEA, which should contribute to fostering and maintaining investor confidence. To that end, membership of the EECS includes both organisations that are securities regulators and, where EU Member States’ financial reporting enforcement responsibilities do not reside with the national securities regulator (as is the case in Ireland), non-ESMA members. EECS currently has 38 members from 29 countries.

IFRS enforcement While the EECS has been very active since 2006, this is only the second occasion that ESMA has decided to issue an activity report, the purpose of

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which is to provide stakeholders with an overview of the monitoring and enforcement of IFRS across the EU. The report covers the year to 31 December 2010. In summary the report provides: * An overview of enforcement activities in the EEA and the coordination of enforcement through EECS; * The outcome and some tentative conclusions relating to the enforcement of IFRS; and, * An outline of EECS/ESMA cooperation with third country (i.e., non-EU) accounting enforcers. Some items of note from the report include: * EECS met eight times during 2010, with a significant portion of meetings being dedicated to the discussion of decisions submitted by members; * In all, 120 EU accounting enforcement decisions were submitted to the EECS’ confidential database during 2010, of which the most difficult were analysed in meetings held during the year. As of 31 December 2010, around 420 decisions in total had been entered to the database; * The EECS accounting enforcement database contains around 140 emerging issues, of which 34 were submitted and discussed in 2010; * Two packages, containing summaries of 32 enforcement decisions (including a number of IAASA decisions), were published during the year; * During 2010, the EECS organised two meetings with IFRS IC (formerly IFRIC) to discuss complex issues identified by EECS members for which there is no specific IFRS guidance or where widely diverging interpretations exist. Thirteen issues were addressed during these

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meetings; and, * The EECS (via CESR) published a follow-up statement on an earlier report on the ‘Application of Disclosure Requirements related to Financial Instruments in the 2008 Financial Statements of Financial Institutions’ published in November 2010.

IAASA involvement IAASA is an active member of the EECS and during the period covered by the report: * IAASA staff attended all eight EECS plenary meetings and actively participated in the consideration of issues brought to the EECS by other members; * IAASA staff presented 12 enforcement decisions and two emerging cases to the plenary for discussion by members; * IAASA staff actively participated in two meetings held with the IFRS Interpretations Committee (formerly known as IFRIC) (where five out of the 13 issues discussed related to enforcement decisions of IAASA). The subject matter of the issues discussed included: • Impairment of assets and interaction with operating segments; • Discontinued operations – ‘major’ line of business or geographical area of operations; • Current/non-current classification of financial liabilities; and • Various aspects relating to IFRS 8; * IAASA staff presented on the IAASA’s ‘Observations on Selected Financial Reporting Issues’ to the plenary and on its publication ‘Observations on Materiality in Financial Reporting’; and, * IAASA conducted research and analysis, from an Irish perspective, on the compliance of European financial institutions with financial reporting disclosure requirements relating to financial instruments for collation at EU level by CESR. IAASA also has a direct input to, and involvement in:

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* The review of emerging cases and decisions as tabled by EU national enforcers with a view to assessing those which should be afforded priority for consideration and discussion at the plenary; and, * The review of enforcement decisions taken by EU national enforcers with a view to determining whether they meet the criteria for publication. During the year, I was also appointed to the following EECS working groups: * Sub-group on materiality (as chair), whose objective is to analyse and identify the principles of a common approach to be considered by European accounting enforcers. The output of the discussions will be the preparation of a paper, which may be published by ESMA; * Enforcement methodology group, which is charged by the plenary with the development of common review methodologies; and, * Enforcement actions group, which is charged by the plenary with the examination of enforcement actions taken by EU national enforcers.

Conclusion A proper and rigorous accounting enforcement regime is key to underpinning investors’ confidence in financial markets. Within the EU, enforcement of accounting standards is at a national level and, therefore, EECS plays a vital role in facilitating the co-ordination and consistency of financial reporting enforcement practices across the EU. Through its direct dialogue with the IASB and the IFRS IC, EECS has also contributed to the clarification of the application of IFRS. Indeed, a number of the items in the annual improvements project of the IASB are as a result of items highlighted by EECS members including IAASA. The Activity Report can be accessed on the www.esma.europa.eu website. Michael Kavanagh is head of financial reporting supervision with IAASA. Any opinions expressed in this article are his own. Email michael_kavanagh@iaasa.ie

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E-invoicing – an opportunity knocks? Ted Laverty on a business solution that can deliver cost savings

Getting paid by customers and reducing debtor days is a challenge for all businesses in today’s economic environment. While enforcing payment terms on customers can be difficult, the efficiency of an internal accounts receivable process is something that every organisation can and should control. An extensive survey of European organisations has shown that the adoption of electronic invoicing (e-invoicing) is now firmly on the agenda of chief executives and financial directors across Europe and with good reason: e-invoicing can deliver savings of 1-2% of an organisation’s turnover to its bottom line.

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E-invoicing enables organisations to deliver some of these efficiencies by replacing a paper-based invoicing process with a streamlined electronic workflow. By automating the invoicing process in this way, e-invoicing not only cuts an organisation’s mailroom and postal costs, but improves their entire accounts receivable process.

customer invoices per annum, just making the switch to e-invoicing can deliver savings of up to €9,700 a year. While this calculation alone should be reason enough for most organisations to adopt an e-invoicing solution, there are also other tangible benefits to consider.

Costs savings

Electronic invoicing provides an organisation with full visibility and control throughout its accounts receivable process. By providing customers with electronic invoice delivery and an online customer service portal, invoice queries are resolved faster and customer loyalty is

It is estimated that an organisation can expect to cut up to 80% of its invoicing costs by moving from a manual paper-based process to an electronic invoicing solution. Putting this figure into perspective, for an organisation that sends 10,000 paper-based

Visibility and control

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improved. This provides a powerful platform from which an organisation can reduce its debtor days and improve its cash management.

Compliance Recent changes to invoicing legislation in Europe (2010/45/EU) have opened the door for the widespread adoption of e-invoicing. However, such legislation provides clearly defined processes that an organisation must adhere to in order to achieve compliance. An effective e-invoicing solution will deliver such compliance by ensuring the authenticity and integrity of an organisation’s end-to-end invoicing

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processes - providing full audit trails and a compliant storage archive for all invoice-related documents. The EU estimated that 3bn electronic invoices will be exchanged in 2011 across all sectors, with volumes increasing towards 4.2bn in 2012. Such growth projections ensure that e-invoicing is fast gaining acceptance as best practice within organisations looking to deliver operational efficiencies and puts it firmly on the agenda of finance directors across all sectors for the coming years. Ted Laverty is director of SoftCo Ltd. Email ted.laverty@softco.com

*E-INVOICING AND THE EU The European Commission has described e-invoicing as ‘an essential part of an efficient financial supply chain’ with savings estimated at around €64.5bn per year for European business. It points to substantial benefits over paper invoicing, allowing for shorter payment delays, fewer errors, reduced printing and postage costs and, most importantly, fully integrated processing. As one of the distinctive features of e-invoices is its potential for automation, most of the economic benefits do not arise from savings in printing and postage costs but rather from the full process automation and integration from order to payment between trading parties. In a commentary on e-invoicing in 2010, the Commission called for removal of the regulatory and technical barriers that prevent mass adoption of e-invoicing. It argues that, to the detriment of consumers and enterprises alike, the existing rules that govern e-invoicing in Europe are still fragmented along national lines and most of the potential of e-invoicing is still untapped. While 42 % of large enterprises say they receive or send e-invoices, adoption rate among SMEs is currently 22%. As a result, the average market penetration of e-invoicing remains low in Europe and is currently estimated at around 5% of all invoices annually exchanged for business-to-business relations. The mass adoption of e-invoicing within the EU would, it says, lead to significant economic benefits and generate savings of around €240bn over a six-year period. Furthermore, due to the close link between invoicing and payment processes, the creation of the Single Euro Payments Area (SEPA) offers a launch pad for interoperable European e-invoicing schemes. The Commission wants to see e-invoicing become the predominant method of invoicing by 2020 in Europe.

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Timed out? Up to a third of pension trustees could face a €2,000 on-the-spot fine for failing to comply with regulatory training requirements, writes Fionán O’Sullivan Following the enactment of Section 28 of the Social Welfare and Pensions Act 2008, new legislation regarding formal trustee training has applied to all pension scheme trustees since 1 February 2010. By the 31 January 2012, pension trustees will be required to have undergone trustee training, and newly appointed trustees must receive training within six months of their appointment in order to comply with new regulatory requirements.

And of those that were aware, 14% say they found the requirements unfair in the time frame allowed.

Duty Trustees have a statutory duty to know and understand the law relating to pensions and trusts, the funding of schemes, and the principles of investing scheme assets, so it is of utmost importance that they have comprehensive knowledge of their responsibilities and understand the

scheme’s finances. The bottom line is that pension trustees who have not yet completed their training should take part in trustee training sessions, which are conducted on a regular basis around the country. Training can be completed in half a day.

Fionán O’Sullivan is director of corporate pensions at IFG Corporate Pensions. Email fionan.osullivan@ifg.ie

Pressure A recent trustee survey conducted by IFG Corporate Pensions found that a worrying 20% of respondents were unaware of the legislative changes in relation to trustee training. The survey highlights the increasing pressure trustees are coming under, which means that many have found it difficult to balance their general work role with the additional responsibilities of being a pension trustee. Reflecting this, almost 60% of respondents say that they feel that legislative changes over the last 12-24 months have made the role of the trustee more time-consuming.

Incentive In addition, the fact that one in 10 respondents didn’t think that all trustees would be able to meet the regulatory training standard in the time allowed was a worrying statistic. If you are a trustee of your employer’s pension scheme, then it’s important to recognise that this change in legislation applies to you, whether you are a HR director, a financial controller or a director of a one-man company. A key incentive for pension trustees to comply with the legislation is that, if they are found to be non-compliant with the new regulations as of January 2012, they could face up to a €2,000 on-the-spot fine or their employer could face prosecution. It is worrying that 33% of respondents of the survey were unaware of the implications of non-compliance.

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Technical GET VERIFIABLE CPD UNITS

Answer questions about this article online Studying this article and answering the questions can count towards your verifiable CPD if you are following the unit route and the content is relevant to your development needs. One hour of learning equates to one unit of CPD

Impairment of goodwill and CGUs An amendment to IAS 36 has clarified that a cash-generating unit cannot be larger than an operating segment before aggregation. Graham Holt explains The basic principle of impairment is that an asset may not be carried on the statement of financial position above its recoverable amount, which is the higher of the asset’s fair value less costs to sell and its value in use. An asset’s carrying value is compared with its recoverable amount and the asset is impaired when the former exceeds the latter. Any impairment is then allocated to the asset, with the impairment loss recognised in profit or loss. All assets subject to the impairment review are tested for impairment where there is an indication that the asset may be impaired, although certain

independent of the cash inflows from other assets or groups of assets. Goodwill acquired in a business combination is allocated to the acquirer’s CGUs that are expected to benefit from the business combination. However, the largest group of CGUs permitted for goodwill impairment testing is the lowest level of operating segment. Under IAS 36, Impairment of Assets, impairment testing of goodwill must be performed at a level no larger than an operating segment as defined in IFRS 8, Operating Segments. However, complexity is created because IFRS 8 allows operating segments to be aggregated into a

AN ENTITY THAT ACQUIRES A PARTIAL INTEREST IN A SUBSIDIARY CAN CHOOSE HOW TO MEASURE THE NON-CONTROLLING INTEREST assets such as goodwill and indefinitelived intangible assets are tested for impairment annually even if there is no impairment indicator. The recoverable amount is calculated at the individual asset level. However, an asset seldom generates cashflows independently of other assets, and most assets are tested for impairment in groups of assets described as cash-generating units (CGUs). A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely

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higher-level reportable operating segment if certain criteria are met. IAS 36 was not clear as to whether the highest level of aggregation of CGUs for goodwill allocation and impairment testing purposes was to be no larger than an operating segment before or after this aggregation. To deal with this lack of clarity, the International Accounting Standards Board (IASB) has issued an amendment to IAS 36 to clarify that a CGU cannot be larger than an operating segment before aggregation.

Entities should ensure their CGUs are aligned with their operating segments. The recoverable amount of a CGU is the same as for an individual asset. The carrying amount of a CGU consists of assets directly and exclusively attributable to the CGU and an allocation of assets that are indirectly attributable on a reasonable and consistent basis to the CGU, including corporate assets and goodwill. Where goodwill has been allocated to a CGU and the entity disposes of an operation within that CGU, the goodwill attributable to the operation disposed of is included in the carrying amount of the operation when calculating the profit or loss on disposal. Similarly, an entity might reorganise its business and change the composition of one or more CGUs to which goodwill has been allocated. In such situations, the goodwill attributable to operations that are moved between CGUs is calculated on the basis of the relative fair values of those operations and the remainder of the CGUs from which the operations are transferred. Liabilities that relate to the financing of the CGU are not allocated to determine the carrying amount of the CGU as the related cashflows will be excluded from the impairment calculations. An impairment charge calculated for a CGU should be allocated to the CGU’s individual assets – first of all to goodwill allocated to the CGU, and then

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TO GET THE QUESTIONS GO TO www.accaglobal.com/ab_tech

to the other assets of the CGU on a pro rata basis according to the carrying amount of each asset in the CGU. In allocating the impairment loss to a CGU the carrying amount of each asset within the CGU should not be reduced below the highest of: a) fair value less costs to sell; b) value in use; c) zero. Any unallocated impairment should be reallocated to the CGU’s other assets, subject to the same limits. This could result in a process that continues until the impairment loss is fully allocated or until each of the CGU’s assets have been reduced to the highest of each asset’s fair value less costs to sell, value in use and zero. The recognition of impairment loss should not, however, result in recognition of a liability, unless it meets the definition of a liability under another IFRS. IFRS 3, Business Combinations, brings in new requirements for the allocation of impairment losses when dealing with goodwill. An entity that acquires a partial interest in a subsidiary can choose on an acquisition-by-acquisition basis how to measure the non-controlling interest (NCI). It can be measured at the NCI’s proportionate share of the fair value of the subsidiary’s identifiable net assets at the date of acquisition or at the fair value of the NCI at the acquisition date. An entity’s choice of method will affect the amount of goodwill that will

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be recognised in the consolidated financial statements. Under the partial goodwill method, only the holding company’s share of the goodwill is recognised; under the full goodwill method, goodwill includes both the holding company’s and the NCI’s share of the goodwill in the subsidiary. Management should consider the measurement method’s impact on their impairment test when choosing how to measure an NCI under IFRS 3. Entities will need to keep records of each component of their goodwill balances. Any CGU containing goodwill is tested for impairment annually. However, the way that entities choose to measure their goodwill and NCI affects the nature of the test and the amount of impairment loss recognised. Under the partial method, a notional gross-up of the entity’s goodwill balance is required to ensure the carrying value of the CGU includes any goodwill attributable to the NCI. The grossed up amount is compared to the recoverable amount of the CGU and an impairment loss calculated. Only the holding company’s share of the impairment loss is recognised in profit or loss. This requirement is not new and entities will already be grossing up goodwill from partial business combinations in impairment tests. Under the full goodwill method, there is no grossing up required because the goodwill figure already captures the goodwill that is attributable to the NCI.

Example An entity acquires 60% of a subsidiary, which is a CGU. At the year-end, the carrying amount of the subsidiary’s identifiable net assets is $30m; the recoverable amount of the CGU is $43m. Goodwill is $12m using the partial method or $18m under the full goodwill method. The first table below (this page) shows the impairment test under the partial goodwill method; the second table (on the following page) shows the impairment test under the full goodwill method. Under the partial goodwill method only the holding company’s share of the impairment loss is recognised in profit or loss because only the holding company’s goodwill share is recognised. This is 60% of $7m, or $4.2m. Using the full goodwill method, the impairment loss charged to profit or loss is higher for an entity that elects to adopt the fair value method. There

Partial goodwill method Identifiable net assets Goodwill grossed up ($12m x 100/60) Total carrying amount of CGU Less: recoverable amount Impairment

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will almost always be a difference in the impairment figure calculated under the two methods. Under the full goodwill method, the impairment loss is recognised in full. There are requirements for allocating goodwill impairment losses between the holding company and the NCI. Where the subsidiary with the NCI represents a CGU for goodwill impairment-testing purposes, the allocation of the loss is done on the same basis as the allocation of profit. Under the full goodwill method, the full impairment loss of $5m is charged against the goodwill/the net assets and in profit or loss, 40% is allocated to the NCI ($2m) and 60% ($3m) to the holding company. The allocation of impairment losses between the holding company and the NCI can become more complex if the subsidiary is not a CGU itself but part of a larger CGU for impairment testing purposes. The full goodwill method introduces some complexities in

Full goodwill method Identifiable net assets

$30m

Goodwill

$18m

Total carrying amount of CGU

$48m

Less: recoverable amount

$43m

Impairment

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$5m

impairment testing in this scenario and management should consider the impact on impairment tests when choosing goodwill method. Difficulties may well occur where entities have a CGU that has goodwill from several sources. Examples will be subsidiaries acquired before IFRS 3 was revised that apply the partial goodwill method, subsidiaries acquired after IFRS 3 was revised that apply the full goodwill method, and entities that have goodwill from 100%-owned subsidiaries.

Example In the above example let’s assume that the subsidiary (A) that has been acquired is part of a larger CGU that includes another subsidiary (B) that is 100%-owned by the holding company. Assume that goodwill of $27m arose on the acquisition of the wholly owned subsidiary. The carrying amount of the identifiable net assets of the combined CGU (A plus B) is $50m and the recoverable amount of the combined CGU is $80m. If the full goodwill method is used, the results are as shown in the Impairment Problems table on this page. Under IAS 36, impairment losses are allocated first to goodwill and then to the identifiable assets on a pro rata basis. All the impairment loss in the example relates to goodwill and is allocated to the two subsidiaries that form the CGU. The loss will be allocated based on their relative carrying amounts of goodwill. The loss will be allocated

40/60, based on the goodwill values of $18m and $27m respectively. Thus the goodwill of wholly owned subsidiary B will be charged with a $9m impairment loss and that of partially owned subsidiary A with a $6m impairment loss. B’s impairment loss will be charged entirely to the profit or loss of the holding company whereas A’s will be split on the profit-sharing basis (60/40) between the holding company and the NCI – $3.6m and $2.4m respectively. This example does not reflect all of the complexities that might well occur in practice. Under IFRS 3, impairment losses have to be allocated between each component of the goodwill in the CGU, which will mean detailed tracking of each component of goodwill. Graham Holt is an examiner for ACCA and associate dean of the accounting and finance division at Manchester Metropolitan University Business School

Impairment problems Identifiable net assets

$50m

Goodwill ($18m+$27m)

$45m

Total value of CGU

$95m

Less recoverable amount

$80m

Impairment loss

$15m

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ACCA diary

BELFAST

President’s Debate 6 February 18.00 – 20.00 Ulster Members’ Network Various Speakers Radisson Blu Two CPD units President’s Dinner 17 February ACCA Ireland Dr Stephen Martin, CEO, Olympic Council of Ireland Merchant Hotel

CORK

Taxation Update 2 February 18.00 – 20.00 Munster/Connaught Members’ Network Michael Mullins, Moore Stephens Nathans Clarion, Lapps Quay Two CPD units

DUBLIN

Converting from US GAAP to IFRS 26 January 09.30 – 16.30 Corporate Sector Chris Nobes, University of London Radisson Blu Royal, Golden Lane Seven CPD units IFRS in a Hurry 1 February 18.00 – 20.00 Financial Services Network Aidan Clifford, ACCA Ireland Clarion, IFSC Two CPD units

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Taxation Update 15 February 18.15 – 20.15 Leinster Members’ Network Derek Andrews, Andrews Tax Consulting Radisson Blu Royal, Golden Lane Two CPD units FRS for MEs 16 February 09.30 – 16.30 Corporate Sector Robert Kirk, University of Ulster Radisson Blu Royal, Golden Lane Seven CPD units People, Problems, Productivity – Top HR Issues 21 February 18.00 – 20.00 Leinster Members’ Network Terry Harmer, NLC Training Clarion, Liffey Valley Two CPD units Business Breakfast 22 February Business Leaders’ Forum Eamon Gilmore TD, Tánaiste Westbury Hotel Two CPD units Introduction to Treasury Products 22 February 09.15 – 16.15 Financial Services Network Derek Taylor, Taylor Associates Clarion IFSC Seven CPD units

DUNDALK

Planning and Managing Board Meetings 23 February 18.00 – 20.00 Leinster Members’ Network Paula Phelan, Mason Hayes + Curran Paula Mullin, Executive and Communications Coach Fairways Hotel Two CPD units

GALWAY

Taxation Update 1 February 18.00 – 20.00 Munster/Connaught Members’ Network Derek Andrews, Andrews Tax Consulting Menlo Park Hotel Two CPD units Fraud & Special Assignments 29 February 09.15 – 16.15 Practitioners’ Network Patrick D’Arcy, Grant Thornton Seven CPD units

LIMERICK

Taxation Update 22 February 18.00 – 20.00 Munster/Connaught Members’ Network Alan Lawlor, Wallace O’Donoghue Clarion, Steamboat Quay Two CPD units

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MULLINGAR

Taxation Update 29 February 18.00 – 20.00 Leinster Members’ Network Darragh Kilbride, Kilbride Consulting Mullingar Park Hotel Two CPD units

NAAS

Taxation Update 8 February 18.15 – 20.15 Leinster Members’ Network Julie Herlihy, Baker Tilly Ryan Glennon Osprey Hotel Two CPD units

SLIGO

Revenue Update 9 February 18.00 – 20.00 Munster/Connaught Members’ Network Derek Andrews, Andrews Tax Consulting The Glasshouse Two CPD units

TRALEE

Taxation Update 28 February 18.00 – 20.00 Munster/Connaught Members’ Network Pat Sheehan, Horwath Bastow Charleton IT Tralee Two CPD units

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Careers

THE NEW LEARNING As more of us get to grips with online training, e-learning looks set to become the norm. But while the tool is becoming ever more exciting, it brings challenges too

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hile e-learning is no longer a novelty, the unrelenting pace of IT progress means that modern online training is expected to become ever more exciting, challenging and rewarding. Technology is now an integral part of our work and personal lives. Only 20 years ago, schoolchildren would be hunched over library books researching the secrets of the pyramids or how the atom came to be split. Now, the stock answer to any request for information from an overworked parent is surely: ‘Let’s Google it when we get home.’ And it’s not just children who can benefit from the educational properties of the digital world. Professionals – both ‘digital natives’ and those old enough to remember life before email – have also come to take it for granted. ACCA recently commissioned a report exploring the world of the e-professional and how online learning affects development, the impact of technology on finance professionals and their clients, and what the future of online learning may look like. Digital advances are something that everyone with an interest in educating the finance professionals of the future are embracing, including ACCA. Clare Minchington, ACCA executive director – learning and products, says: ‘In June 2011, we announced that ACCA would be working towards delivering all its examinations online through an innovative and forwardfacing programme of e-assessment. This will lead to a new generation of professional examinations that maintain the rigour and quality

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*FAST FACTS 2 BILLION

Number of internet users worldwide

5 BILLION

Number of mobile phone users worldwide Source: The e-professional (see below)

35% Proportion of US smartphone users who use an app before they get out of bed Source: Ericsson ConsumerLab

associated with the ACCA brand and appeal to the coming generation of e-professionals, employing technologies they will increasingly be using in their social lives.’

Attitude shift There are two key reasons for a change in attitude towards e-learning. The first is the growing sophistication of the options, with everything from Skype to iPhone apps to webinars; the second is the flexibility that e-learning offers both to learners and trainers. Learning programmes now often fit around work, rather than work being accommodated around study leave. Any suspicions that professional standards are being compromised by insufficiently robust online learning and assessment programmes are quickly challenged by those on the front line. Martin Taylor, CEO of BPP

Business School, argues that online learning is actually more demanding than traditional forms. ‘E-learning can be incredibly demanding, because learners are doing a lot of the learning and the research themselves, which is incredibly beneficial to deep understanding,’ he points out. These issues are increasingly important in the aftermath of the global economic crisis, when employers are forced to prioritise efficiency, with customers typically wanting more for less. Laura Overton, managing director at Towards Maturity, an organisation that works with employers to implement and benchmark e-learning capability, says: ‘This raises questions not only about how employees learn on the job in a formal programme, but what informal learning opportunities employees have access to.’

Blended is best Greg Owens, director of technical training and student qualification at BDO, says: ‘There has to be a way professionals can get that initial knowledge and then apply it to a real client experience. It’s how you make it all real that’s the hardest bit.’ This is where blended learning – the combination of e-learning with on-thejob and classroom training – comes into play. The blended approach reflects the 70/20/10 theory of learning: 70% of learning happens informally and is available on demand, 20% comes from ‘social learning’ such as networking and coaching, and 10% from courses and reading. The 70/20/10 approach recognises

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‘GAMING IS ALLOWING LEARNING DESIGNERS TO INTRODUCE SCENARIOS AND THROW IN SURPRISES TO REPLICATE THE REAL WORLD MORE CLOSELY’ and exploits the less regimented learning structure that is characteristic of modern digital students. As Damian Day, head of education and quality assurance at the General Pharmaceutical Council, says: ‘They don’t start at A and end up at Z; they learn in a much less structured way.’ Globalisation is another driver, says Richard Pollard, global development leader of PwC: ‘We currently have 170,000 people in our organisation and can see that growing to a quarter of a million and more over the next five years. Given general levels of attrition, keeping up this volume of professionals is a huge, huge effort.’ The importance of global consistency means organisations need to be sensitive to regional preferences. May Chan, learning designer at Standard Chartered Bank, says: ‘People in Asia will not ask so many questions, and they may prefer to type in questions rather than ask them in a live webinar or masterclass.’ This links back to one of the biggest

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benefits of digital learning: flexibility. Kristin Watson, director of the UK national exam training team at Ernst & Young, says: ‘Where students are doing some form of blended or distance learning, they are not tied to a particular course or date. This allows businesses to give their students study leave on a convenient date.’

Advance on three fronts Given what may be possible with technology over the next five years, there are three main growth areas in e-learning: mobile devices, social networking and gamification. Mobile devices may be able to access more information in easier-toread formats, and share information with other devices while on the move. Social media is increasingly appearing in e-learning. Jim Robertson, vice president for tax, Eastern hemisphere and global tax practices at Shell, says: ‘If you are in well engineering at Shell, there will be a global expert in how to drill in a

Fast forward: visitors to the Time Tunnel exhibit at the fifth Electronics and Information Fair in Hangzhou, China, in 2011 particular geology such as sand, and that person will receive lots of requests for help by email, instant messaging and blog facilities. It is a form of e-learning, but it is very task-specific. I expect we will see a lot more of that in the future.’ And gamification aims to reproduce the simulation capabilities of gaming environments in e-learning. Taylor says: ‘Gaming is gaining real traction in the learning environment. Threedimensional, even four-dimensional, capabilities allow learning designers to introduce different scenarios and throw in surprises to replicate the real world more closely.’ Beth Holmes, journalist

*CLICK TO VIEW

To read The e-professional: embracing learning technologies, and to see the video interviews, visit: www.accaglobal.com/eprofessional

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ACCA careers

Five ways to plan your CPD The easiest – and the most satisfying – way to fulfil your CPD requirements is to make sure you’re on top of the process by following the five golden rules listed here 1 Reflect on last year’s CPD

Before considering the year ahead, it’s worth looking back at the development you undertook last year. What activities or approaches to your learning and development went particularly well? Is there anything you would do differently in the future? Are there any specific areas you need to revisit in 2012?

2 Be practical with your planning

By planning your CPD at the start of the year, you can ensure you think not only about your learning needs but also about when, where and how you will do your development. When planning your CPD, particular areas you will need to consider are relevance and verifiability. Relevance should be at the centre of your CPD planning. CPD is not solely about updating your technical accounting knowledge. If you’re no longer in an accounting or finance role, then you should identify your CPD needs in relation to the latest developments both in your profession and in the business world in general. Verifiability of learning is also key. If you are following the unit route, you need to complete 40 units of CPD, 21 of which must be verifiable. Non-verifiable CPD can be general relevant learning activity such as keeping abreast of business developments through reading or informal networking. For CPD to be verifiable, however, you need to be able to answer ‘yes’ to the following three questions: Can you explain how a learning activity is relevant to your career? Can you explain how you have applied what you have learned or how you will apply it? Can you provide evidence that you undertook the learning activity?

have been designed specifically for ACCA members. The first, ACCA Compass, enables you to assess your level of experience and skill and compare it to a recommended market average for a total of 20 different finance and accounting job titles. The second, the Professional Development Matrix, is designed to help you identify your preferred learning style and the knowledge, skills and expertise you may need in either your current role, or in roles which you are interested in for the future – whatever your chosen career.

4 Try something new for 2011

Our innovative approach to development means we have a comprehensive range of services and tools to support you in planning, sourcing and achieving CPD – and the list is growing. From networking on the ACCA LinkedIn members’ group to mentoring or coaching a colleague, there is something for everyone. If you’re looking for a source of low-cost online CPD, ACCA has a new, improved virtual learning centre. We are working with a number of top e-learning providers to bring you flexible, interactive and affordable CPD opportunities. Go to our

e-learning gateway and get started. Direct link: http://virtuallearn. accaglobal.com/pages/ To read more about CPD learning opportunities, please visit www. accaglobal.com/members/cpd/ cpd_learning

5 Put some dates in the diary

It’s good to plan your CPD now, but to ensure you keep the momentum up, try introducing regular checkpoints during the year to ensure you are on track to meet the requirement. How about setting a reminder for June/July in your online diary to see how you are placed and how much CPD you still have to do? Visit www.accaglobal.com/members/ cpd for more.

* * *

3 Use ACCA’s planning tools

ACCA has two planning resources that

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ACCA Approved Employer

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The view from:

Dermot Igoe, finance director, Microsoft EMEA operations centre Q Tell us about your role in your organisation? A I’ve been with Microsoft for 17 years and held several jobs within operations and finance, ranging from chief of staff to my current role as finance director supporting Microsoft’s Europe, Middle East and Africa (EMEA) Operations. My team is responsible for financial planning, analysis, decision support and accounting for the EMEA Operations lines of business. The exciting part of the job is partnering with the business to prioritise and optimise resources and to drive insightful discussions and decision making. Q What’s your biggest work challenge right now? A One of the biggest and most exciting challenges for Microsoft is to continue the growth of our cloud services business. Microsoft recently invested over $500m in building a state-of-the-art data centre in Dublin, which is the backbone for providing online services such as Hotmail, Xbox live and Bing to consumers, and Office 365, Windows Azure and Microsoft Dynamics CRM Online to commercial customers across EMEA. While cloud is considered by some as a technology evolution, the reality is that it is much more than that. The fundamental shift that it represents means that business, public sector and government now have the

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opportunity to change how they run their organisations; how services are delivered; and how they scale an operation, while increasing efficiencies and reducing costs. Q How do you plan to meet this? A Within Microsoft Operations, we build the necessary processes and tools to enable our consumers and commercial customers to use cloud services and manage the entire ordering, customer support and billing processes. Finance plays a crucial role in supporting and managing the operational investment decisions we make, driving compliance and ensuring we optimise our resources. Q How does the ACCA Approved Employer programme help you achieve your goals? A Attracting and retaining talent requires a clear commitment to continuous professional development. Microsoft is committed to career development: you drive your career development plan while your manager assists and coaches you, and Microsoft provides a framework with the tools and resources you need to succeed. This framework is aligned with ACCA’s professional development framework. Being an ACCA Approved Employer differentiates Microsoft as an employer that is committed to continuous professional development.

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ACCA

Fine-tuning the rules [

ACCA’s Ian Waters runs through the changes that have been made in the 2012 edition of the ACCA Rulebook to reflect the development of the association and its processes

This article sets out the main changes to ACCA’s bye-laws, regulations and its Code of Ethics and Conduct, as published in the ACCA Rulebook. The Rulebook is usually updated once a year. However, during 2011, interim changes were made, which took effect on 1 June 2011, and were reflected in the online version of the Rulebook at that time. These interim changes have been included in the details set out in this article.

Bye-laws The following changes to the bye-laws were approved at the 2011 AGM and subsequently by the Privy Council: When a member (or his or her firm) has been subject to a disciplinary process other than that of another professional body, it is more appropriate to discipline the member under a provision of bye-law 8(a) other than 8(a)(v) or (vi). Prompt notification to ACCA is required by a member when he or she or another member may have become liable to disciplinary action (save where this would be contrary to a legal obligation).

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Membership Regulations The principal amendments to the Membership Regulations are as follows: The meaning of ‘book-keeping’ and the permitted activities of ACCA students have been clarified, including the entitlement of ACCA students who are licensed insolvency practitioners to undertake insolvency work. The Practical Experience Requirement (PER), set out in appendix 2 to the regulations, has been clarified to say that it must involve 36 months’ work experience in one or more accounting and finance-related roles.

of ‘workplace mentor’ * Ahasdefinition been provided. At the start of 2011, ACCA launched a new suite of entry-level qualifications known as Foundations in Accountancy (FIA), and the Mature Student Entry Route is no longer available. Interim amendments to the Membership Regulations were necessary to reflect the fact that, since January 2011, students are being registered to the new FIA suite of qualifications, which includes the Certified Accounting Technician (CAT) qualification, but also other entry-level and ACCA feeder qualifications. Other interim changes included: amendments to recognise the new practical experience requirement for CAT, called Foundations in Practical Experience Requirement; a change to the name of paper P1, from ‘Professional Accountant’ to ‘Governance, Risk and Ethics’, to reflect the increased content in the syllabus in respect of risk in response to feedback from employers.

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Global Practising Regulations The substantive change to the Global Practising Regulations allows nonaccountants to act as continuity nominees in respect of some activities, such as insolvency work.

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Global Practising Regulations – Annexes 1 to 4

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Substantive changes to Annexes 1 to 4 to the Global Practising Regulations: clarify that a licensed insolvency practitioner in the UK is in public practice, and so a member who holds an insolvency licence from another professional body must hold an ACCA practising certificate; require a member applying for an audit qualification in the UK, Ireland or Cyprus on the basis of audit experience or a certificate obtained

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some time ago to demonstrate relevant recent audit experience and CPD, or to undergo appropriate audit training; align the European annexes with the requirements of the European Statutory Audit Directive in that only two of the three years of practical training for the audit qualification need to be under the supervision of a statutory auditor; reflect the minimum professional indemnity insurance requirements in the UK and Ireland for firms wishing to conduct insurance mediation activities.

Global Practising Regulations – Australian Annex This is a new Annex, brought about as a result of ACCA achieving recognition by the Australian Tax Practitioners Board (TPB). TPB registrants may undertake tax and business activity statement agent services, and Annex 5 sets out the requirements of ACCA members who wish to undertake such services, incorporating the TPB’s requirements of ‘good fame, integrity and character’.

Irish Investment Business Regulations The only substantive amendment here reflects the new name of the investment business lead regulator in Ireland (now the Central Bank of Ireland). There are corresponding amendments to the Regulatory Board and Committee Regulations, the Authorisation Regulations, the Irish Annex to the Global Practising Regulations, and section 270 Custody of client assets of the Code of Ethics and Conduct.

Regulatory Board and Committee Regulations The substantive changes here better reflect the way in which the Regulatory

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THE RULEBOOK IS AVAILABLE AT: www2.accaglobal.com/rulebook2012 Board is appointed by Council, and how Committees are established. An interim change was also made, because the terms of office of all the lay members of ACCA’s Regulatory Board expired in September 2011. In order to aid succession planning, future appointments will be made so that one-third of the Regulatory Board’s lay members will retire, in rotation, each year. Amendments to the Regulations were required to facilitate the issue of contracts to members of the Board for terms shorter than three years.

Authorisation Regulations These now clarify that the Admissions and Licensing Committee may only order a hearing to proceed at short notice if it deems it to be in the public interest. It may also exclude from any hearing anyone (including the applicant) who is likely to disrupt the orderly conduct of proceedings.

Complaints and Disciplinary Regulations The substantive changes to the Complaints and Disciplinary Regulations: provide a definition of ‘finding’ and amend the definition of ‘order’ accordingly (a change reproduced in the appeal regulations); separate interim orders from conditions imposed on an adjournment, and clarify that conditions imposed on an adjournment cannot be appealed; set out the effective dates of interim orders and conditions imposed on an adjournment; clarify the regulations relating to publicity in light of the new definition of ‘finding’ and in respect of conditions imposed on adjournment; enable the chairman, under certain conditions, to correct errors without a further hearing;

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the Disciplinary Committee * enable to exclude disruptive individuals

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from hearings (including members from their own hearings); require the Disciplinary Committee to indicate the facts on which its findings are based before a member is invited to make submissions on mitigation and sanction; allow for suspension of membership or registered student status at a health hearing.

Appeal Regulations Substantive amendments to the Appeal Regulations: make separate regulations for Disciplinary Committee and Admissions and Licensing Committee appeals, because a ‘finding’ is applicable only to a Disciplinary Committee hearing; specify what needs to be included in the appellant’s grounds for requesting the Appeal Committee to reconsider an application notice; provide a procedure for ensuring timely notification to ACCA if the appellant wishes the Appeal Committee, at a full appeal hearing, to reconsider some grounds of appeal where permission was refused by the chairman; allow the Appeal Committee to rescind findings as well as orders; clarify the regulations relating to publicity.

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Code of Ethics and Conduct Descriptions of professional accountants and firms and the names of practising firms – Section B4 The change to this section clarifies that ethical requirements in respect of ‘stationery’ apply to websites and other electronic communications. Professional liability of accountants and auditors – Section B9 The proposed change incorporates the model rule, encouraged by the Ministry of Justice, in respect of paid trustees and trust draftsmen, whereby if the trust document is to include a ‘trustee exemption clause’, the member has a duty to take reasonable steps to ensure the person creating the trust is aware of the meaning and effect of the clause. Ian Waters, regulation and standards manager, ACCA

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ACCA news International Assembly An imposing turnout of senior members for the International Assembly discussed ACCA’s strategy, changes in corporate reporting, the rise of the e-professional and much more

(From top) Members of the ACCA Midland Network; Jack Gogarty FCCA (fourth from left), RFC director with his team from Coca Cola Global Business Services and Laura Coughlan, ACCA Ireland (third from right); and, Michelle Hourican, president of ACCA Leinster Members’ Network with Barry Jones who spoke on behalf of the charity Cystic Fibrosis Ireland

ACCA Christmas Lunch Michelle Hourican, president of the Leinster Members Network, welcomed over 350 members and guests to the Four Seasons in Ballsbridge on Friday 2 December 2011 for the ACCA Leinster Christmas Lunch. Guest speaker was the well-known broadcaster and rugby commentator George Hook. The president’s nominated charity was Cystic Fibrosis Ireland and almost €12,000 was raised on the day.

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Fifty-six senior members from 40 different countries gathered in London in November for ACCA’s annual International Assembly. They debated ACCA’s strategy, future trends in ACCA’s policy development, and discussed how it should deal with issues such as the advent of the e-professional. ACCA president Dean Westcott, deputy president Barry Cooper and vice president Martin Turner took part in the Q&A session on how the profession should move forward. The event culminated in a discussion on the future of reporting, introduced with a scene-setter from the president. ‘Is reporting still valuable, or has it become marginalised?’ he asked. ‘When we look at issues such as complexity and relevance, it is clear that reporting has a case to answer in terms of its value as a business tool.’ And what, he asked, was the role of reporting in the ‘financial ecosystem’? Westcott touched on non-financial reporting issues, such as the concept of integrated reporting. He also highlighted ACCA’s backing of a call by Aviva Investors for the UN Conference on Sustainable Development, to be held in Rio this June, to pass a resolution that disclosure on sustainability should be made mandatory on a comply or explain basis. Sustainability reporting was tackled in depth by guest speaker Steve Waygood, Aviva Investors’ head of sustainability research and engagement. He outlined how fund managers were increasingly working sustainability issues into their valuations of companies and investment decisions. Describing this as a ‘silent revolution’, Waygood said: ‘The point is that a lot of sustainability issues have an impact of financial performance.’ Clockwise from top left: Anthony Tyen (far left), Saad Siddiqui (left), Michael Scicluna (right) and Kathy Grimshaw, ACCA director – markets, take part in a discussion; chief executive Helen Brand gives an update on ACCA’s strategic aims; vice president Martin Turner listens to the debate; Nisreen Rehmanjee makes a point as Michael Michaelides looks on; ACCA deputy president Barry Cooper (left) and president Dean Westcott share a joke; Kaka Singh and Edmund Mndolwa (back) ponder the issues; Chama Kamukwamba (centre) accompanies ACCA executive director Clare Minchington (right) and other delegates in to dinner; and, this was Solomon Kebede’s sixth and last assembly appearance

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ACCA news

Head of ACCA Ireland Liz Hughes and deputy governor of the Central Bank, Matthew Elderfield, discuss the launch of PRISM at a recent ACCA Ireland Information Briefing. See page 34

Inside ACCA 61 Approved Employer 64 ACCA Ireland Christmas Lunch

Declan Taite FCCA, head of RSM Farrell Grant Sparks, Restructuring & Insolvency Department; Anthony O’Toole, executive; John Coulston FCCA, director; David Farrell, senior manager; and Paul Kennedy, director

New appointments RSM Farrell Grant Sparks has announced the expansion of its restructuring and insolvency team, headed by Declan Taite FCCA. Included in the expansion are the internal promotion of John Coulston FCCA to director and the recruitment of David Farrell and Anthony O’Toole. The 60-strong team now comprises three partners and five directors. RSM Farrell Grant Sparks is the seventh largest accounting firm in Ireland with offices in Dublin, Longford and Belfast.

Students go online To increase choice, processing speed and reliability, ACCA is launching a fully online service for examination registration, entry, dockets and results. From early 2012, these services will be available exclusively online and will no longer be issued as paper documents in Hong Kong, Singapore, Malaysia, Australia, New Zealand, the UK, Ireland and Ukraine. The online service will be made available to other countries in the coming months. Most students are currently interacting with ACCA online and this initiative reflects student demand for, and positive feedback on, online services. ACCA is also introducing improvements to its exam results service, including reducing the length of time between the end of an exam session and the release of the results. The December 2011 exam results will be made available for students to view online and sent by email or SMS in the week beginning 13 February 2012. ACCA has also introduced a service that lets students print out their results via myACCA. Students in the countries listed above can print an official notification of their results via myACCA. Paper copies of exam results will not be issued to students in these locations.

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INDUSTRY & COMMERCE / FINANCIAL SERVICES International Financial Controller Technology US firm with a large international operation require a dynamic ACCA to take responsibility for the financial control of their international accounting function. Reporting to the Group CFO, you will have experience within a multinational / plc environment ideally with cross border financial experience. You will have active involvement in the development and delivery of financial strategy to optimise longterm profitability and revenue growth. Salary €90 – 120,000 + benefits Group Reporting Accountant Plc Our client, a large plc wishes to appoint a Group Reporting Accountant within their Group Finance function. With strong technical understanding and experience in a complex consolidation, you will be comfortable within a strict deadline reporting environment. You will have responsibility for the delivery of the Group’s financial statements including interpretation of accounting standards and resolution of complex accounting and financial reporting issues. Salary €65 – 75,000 + benefits Senior Management Accountant – Co. Cavan FMCG Commercially astute Senior Management Accountant required for an FMCG business. With strong financial planning and analysis skills, you will add strategic insight to the business to drive revenues and growth. Reporting directly to the Finance Director, you will be ACCA qualified with up to 4 years’ PQE in a commercial finance team. You will become a key member of the Finance team and prepare monthly management accounts to strict deadlines and produce in-depth KPI reporting for presentation to management. Salary €60 – 70,000 + benefits

Need to improve the flow of payments between your ERP and your suppliers?

Cost Accountant FMCG Leading blue chip FMCG organisation has a requirement for an ACCA with 3 years PQE. Partnering with two leading divisions within this firm, you will provide financial and commercial advice in relation to product launches and investment decisions. With strong costing experience, you will provide in-depth financial analysis and costbenefit analysis to ensure all costs are justified. You will have strong commercial awareness, previous supply chain finance experience and excellent interpersonal skills for business partnering. Salary €55 – 65,000 + benefits

We’re already there. By linking seamlessly with your ERP, AIB Credits will deliver your supplier payments worldwide in a secure, convenient and cost effective manner. Contact Paul Hogan at Ireland’s number one treasury services provider on +353 1 6417790 or email: cash.management@aib.ie Web: www.fxcentre.com

Financial Planning Analyst – Co. Louth Technology Our client, an industry leading firm has a requirement to recruit a strong ACCA with up to 3 years’ post qualification experience, ideally within a multinational environment. Reporting directly to the Financial Planning & Analysis Senior Manager, you will deliver forecasting and budgeting, business reporting and performance management. Revenue recognition and transfer pricing will feature in this position so strong analytical and interpretative skills are required. Salary €50 – 60,000 + benefits Financial Analyst Banking Our client, an asset management firm has a requirement for a commercially focused ACCA. You will work in partnership with the business in providing financial and technical analysis and commercial insight into a broad portfolio of diverse clients. You will assess and evaluate financial statements and management accounts and provide recommendation on any required action for each client within your portfolio to management. This opportunity will suit a newly qualified ACCA who trained with a small to medium sized practice firm who is eager to gain commercial experience. Strong analytical skills and advanced excel will also be required. Salary €40 – 50,000 + benefits PRACTICE Audit Director Unique opportunity to join a highly reputable Practice firm based in Dublin city centre. Due to an expanding client portfolio with typical assignments ranging from small to large indigenous size firms and international corporates, the Audit division is expanding their senior management team.You will have strong technical ability, client relationship management skills and experience in mentoring and managing junior colleagues. This position is an ideal opportunity for a Senior Audit Manager / Audit Director eager to progress their career towards Partner level within an international Practice firm. Salary €90 – 100,000 + benefits

Tax Manager A leading professional services firm currently seeks an experienced tax professional to join their Dublin office.The ideal candidate will have a number of years’ experience managing a large client allocation and will have an ACCA and / or Professional Tax qualification. With a strong progressive ethos within this Practice, this position will offer career advancement opportunities. Experience in Personal Tax, Corporate Tax and VAT will be advantageous. Salary €70 – 85,000 + benefits Internal Audit Manager Our client, a leading professional services firm currently seeks an experienced Internal Audit Manager. This is an excellent opportunity for an ambitious ACCA professional wishing to fast track their career with a department that is experiencing significant growth and winning exciting new projects.The ideal candidate will be ACCA qualified with a minimum of 2-3 years Internal Audit experience in a managerial capacity. Salary €60 – 70,000 + benefits Audit Manager Highly reputable accountancy practice seeks an experienced ACCA professional to join their Audit Team in their Dublin office. This is an exciting opportunity for an ambitious professional wishing to fast track their career with a department that is experiencing significant growth and winning exciting new projects. The role will involve managing a portfolio of clients across a variety of sectors. Salary €60 – 70,000 + benefits Audit Senior Highly reputable accountancy practice seeks newly qualified ACCA members to join their audit division to work closely with the management team. Joining an established team with responsibility for a diverse and varied portfolio of clients, the ideal ACCA will have a strong technical understanding of accounting fundamentals. You will be proactive in your approach to all engagements to ensure minimisation of risks and provide support across all business functions. Salary €35 – 45,000 + benefits

INTERNATIONAL OPPORTUNITIES Financial Controller Caribbean As an integral part of the Senior Management team you will operate at Group level and have responsibility for all aspects of the day to day management of the Finance function. You will provide monthly, quarterly and annual financial reporting to the Shareholders, actively participate in the company’s financial matters and maintain relationships with financial institutions. In-depth experience of consolidation is a key focus for this position and operational cash-flow management and balance sheet control will also be essential elements of the role. Will suit FCCA at Finance Director level eager to gain international experience. Salary € 150 – 200,000 + benefits Finance Manager China Leading Irish firm with operations globally requires a Finance Manager to join their Chinese operation. Reporting to the Finance Director, you will be heavily involved in all aspects of financial control and reporting. This is an excellent opportunity for a driven and ambitious ACCA, eager to fast-track their career and develop international experience. You will gain exposure to corporate finance, high-level financial reporting and exposure at Board level. Will suit a technically strong ACCA with 2 – 3 years’ post qualification experience in a Group reporting role. Salary €65 – 75,000 + benefits Client Services Accountant Luxembourg Qualified ACCA required for our client’s operations in Luxembourg.You will work in the client services division with responsibility for a portfolio of blue chip international clients engaged in international financing. This role with suit an ACCA with IFRS or US GAAP experience and an ability to prepare periodic management accounts and annual financial statements. Knowledge of treasury and taxation issues affecting international corporate and banking clients is desirable. Salary €50 – 60,000 + benefits

AIB Global Treasury Services

AIB Global Treasury Services is a registered business name of Allied Irish Banks, p.l.c. Allied Irish Banks, p.l.c. is regulated by the Central Bank of Ireland. Registered Office: Bankcentre, Ballsbridge, Dublin 4. Registered in Ireland: Registered No. 024173.

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THE MAGAZINE FOR BUSINESS AND FINANCE PROFESSIONALS

get verifiable cpd points by reading technical articles

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CPD

PRISM VIEW

THE FINANCIAL REGULATOR’S NEW RISK ASSESSMENT SYSTEM

ALL TALKING THE SAME LANGUAGE THE MOVE TO IFRS GAINS MOMENTUM

ACCOUNTING ENFORCEMENT AN UPDATE FROM THE IAASA GOING, GONE ASSET ACQUISITION IN A LIQUIDATION CPD IMPAIRMENT OF GOODWILL AND CGUS

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ACCOUNTING AND BUSINESS IRELAND 01/2012

THE NEXT GENERATION ACCOUNTANT

CLAIRE PRENTER FCCA TALKS ABOUT ACCENTURE, AUDIT AND THE VALUE OF ACCA

AUDIT FOCUS

SCRUTINY OF THE EU’S NEW AUDIT PROPOSALS MAKING BUSINESS SENSE A COMPELLING ARGUMENT FOR DIVERSITY SAFE HAVENS SECURE INVESTMENTS IN UNCERTAIN TIMES E-INVOICING AN OPPORTUNITY KNOCKS?

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Accounting & Business (Irish edition)_January 2012