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Editor’s choice

In this issue Aidan Cotter, chief executive of Bord Bia, explains why sustainability is key to the development of the Irish food and drink industry. I’ve highlighted some articles you shouldn’t miss below

WHERE GROWTH NEEDS LEADERSHIP ‘European politicians always act a day late and promise one euro too little.’ As the euro crisis rolls on, this withering observation from the president of the World Bank, Robert Zoellick, is one the continent’s leaders will have to accept as a fair reflection of events. As a critique of policy, it has a not unfamiliar ring to Irish ears. For decades, the country was routinely criticised for coming up short in terms of addressing its infrastructural deficits. Ireland’s agri-food industry has been one of the few shining stars of the economy over the last few years and, in this issue, we take a close look at how the dairy sector, considered one of the strongest pillars for export growth within it, is shaping up for a period of expansion ahead. For all of Ireland’s obvious advantages and the clear opportunity that exists, we have yet to see real evidence of an export strategy that involves much more than simply being buoyed along by strong commodity prices. While European competitors consolidate across borders and New Zealand has secured preferential access to the Chinese market, the industry in Ireland has still to set out a clear framework for how it will fund and deliver the capacity growth that is needed for it to become a serious world player. In any other sector, there would be little doubt that consolidation will be central to this. The history of the industry in Ireland suggests that this will be a slow argument to win. Food and drink is Ireland’s largest indigenous industry and the coming years present it with a golden opportunity to show it is also among the most dynamic, sustainable and conducive to job creation. Let’s hope that, by the end of the decade, a variant of Zoellick’s critique is not left ringing in the industry’s ears. Donal Nugent,

TABLE TALK The CEO of Bord Bia talks about the growing export opportunity for Ireland’s food, drink and horticulture industry Page 12

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NO ILLUSIONS Governments around the world need to be more upfront about their fiscal responsibilities, according to Gillian Fawcett Page 24

NEW PROTOCOL ASSET TRACING A new protocol Tracing hidden designed assets on behalf to enhance of clients has information new ACCOUNTING FORbecome THE aFUTURE sharing between work stream theJoin Central forlive many ACCABank for a one-week and on-demand and auditors of accountants ininclude event from 8 to 12 October. Topics will firms downturn sustainability, investors, the corporate reporting Page and26 risk management. Page 44

POWERS THAT BE Eamon Coates assesses the range of new powers that have been BIG given to Revenue AMBITIONS? by government through For your recent next Finance move, Acts check out Page www.accacareers. 46 com/ireland

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AB IRELAND EDITION CONTENTS JULY/AUGUST 2012 VOLUME 3 ISSUE 7 Ireland editor Donal Nugent +353 (0)1 289 3305 Editor-in-chief Chris Quick +44 (0) 20 7059 5966 Design manager Jackie Dollar +44 (0) 20 7059 5620 Designers Robert Mills, Barry Sheehan Production manager Ciaran Brougham +353 (0) 1 289 3305 Advertising John Sheehan +353 (0) 1 289 3305 Bryan Beasley +353 (0) 1 289 3305 London advertising James Fraser +44(0)20 7902 1224 Head of publishing Adam Williams +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 OBE ACCA Ireland President Tom Murray FCCA Deputy president Diarmuid O’Donovan FCCA Vice-president Anne Keogh FCCA Head - ACCA Ireland Liz Hughes Tel +353 (0)1 447 5678 Fax +353 (0)1 496 3615 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 2012

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

Features 12 Growth on the table Chief CEO of Bord Bia, Aidan Cotter, on the opportunity for Ireland’s food and drink industry 16 Milking it? What it takes for Ireland’s dairy industry to realise its global potential

ACCA Ireland 9 Leeson Park Dublin 6 tel: +353 (0)1 447 5678

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Audit period July 2009 to June 2010 138,255

20 Capital - a competitive threat? Can Irish food and drink companies address the funding issue?

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

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

VIEWPOINT 23 Roar power Dean Westcott on the emergence of the African lion 24 Accounting tricks Why governments need to be upfront about their fiscal responsibilities



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

61 Motivate, guide, support

40 Irish tax changes – a round-up 42 NI notes Changes and updates of relevance to Northern Ireland practitioners 43 Tax diary Some important tax deadlines ahead 44 On the look out Tracking down hidden assets 46 The powers that be The extent of Revenue’s new powers explored 50 Funding the export recovery The opportunity for Irish companies as they grow exports 52 Banking on it The opportunity for food industry funding 53 Accounting solutions Questions answered by PwC experts

62 Diary 63 Accounting overseas

Your sector 25 PRACTICE 25 The view from Roy Finucane FCCA 26 Auditor protocol An update on information sharing

29 CORPORATE 29 The view from Siobhan Farragher FCCA

54 CPD Preparing for change

30 The tax director of tomorrow International perspectives at a recent ACCA event

57 CPD Making strategic options

34 Sourcing success 36 Reporting matters Insight from PwC


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

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ACCA NEWS 65 New members event 66 News

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News in pictures


The Croke Park Agreement saves â‚Ź650m in pay over 12 months, according to a report by its implementation body


The government pardons over 4,500 former soldiers who deserted the Defence Forces during World War II to fight with the Allied Forces


President Michael D. Higgins pays a visit to Bloom, Ireland’s annual gardening festival, at the Phoenix Park in June

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The Royal Ulster Agricultural Society announces it will stage its annual Balmoral show at the site of the former Maze prison from next year


Newspaper websites in Ireland are now more popular than their print equivalents as a source of news and current affairs, according to research


Bloomsday’s celebrations on Broadway, New York, see actor Fionnula Flanagan reprise her celebrated reading of Molly Bloom’s soliloquy


Burmese democracy leader Aung San Suu Kyi departs for a trip to Europe where she receives the freedom of the city in Dublin

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News in graphics



A Q1 2012 survey of Irish technology, media and telecoms (TMT) companies by BDO shows that the broader macro-economic issues playing out over the last 12 months have impacted on confidence in one of the most internationally-oriented of Ireland’s business sectors


Does your company plan to develop new products? 53 respondents confirmed that they were, of which:






Most companies favour modification of proven existing products and services. We asked, does your company plan to develop new products? 53 respondents confirmed that they were, of which: 65% WOULD ENHANCE/MODIFY EXISTING PRODUCTS/SERVICES 35% WOULD DEVELOP NEW PRODUCT/SERVICE LINE BASED ON SIMILAR PRODUCTS IN THE MARKET



What are the Whatfor are the strategies strategies growth for forfor growth technology technology companies? companies?



What are the top strategies for growth for technology companies? (Base: 90 multi-response (MR))

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How confident are you about the prospect for strong growth in your sector in the coming year? (Base:100)

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2 US (1) 3 SWITZERLAND (5) 4 SINGAPORE (3) 5 SWEDEN (4) 6 CANADA (7) 7 TAIWAN (6) 8 NORWAY (13) 9 GERMANY (10) 10 QATAR (8) 11 NETHERLANDS (14) 12 LUXEMBOURG (11) 13 DENMARK (12) 14 MALAYSIA (16) 15 AUSTRALIA (9) 16 UAE (28) 17 FINLAND (15) 18 UK (20)


Hong Kong

United States


IMD’s world competitiveness rankings for 2012 show the continuing power of the US, and success for the fiscally disciplined European economies of Switzerland, Sweden and Germany. Also clear is the inability of emerging economies to escape the turmoil elsewhere: mainland China, India and Brazil all fell back (to 23rd, 35th and 46th respectively), while Ireland moved up four places to 20th.

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Almost half of financial institutions surveyed by consulting firm Protiviti say that extraterritorial compliance (such as FATCA, Dodd-Frank, SarbanesOxley and Solvency II) now accounts for between 10% and 25% of their compliance budget.

Month in figures

As the graphic shows, a substantial proportion of employers around the globe identify a lack of available skilled talent as a continuing drag on business performance. The global average is 34%. According to ManpowerGroup’s 2012 talent shortage survey, shortages are most acute in Asia Pacific, particularly in Japan, where an ageing workforce exacerbates the problem. Surprisingly, despite the ongoing acute level of talent shortages, employers express notably less concern than they did last year about the impact that shortages have on key stakeholders such as customers and investors – perhaps representing a new normal. Accounting and finance staff ranked sixth in the top 10 jobs that employers are finding difficulty in filling.

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News round-up


Nearly half (44%) of Irish CEOs are positive about the prospects for their own businesses while only a fifth (22%) are favourable about the outlook for Ireland’s economy over 2012/13. That’s according to PwC’s 2012 CEO Pulse Survey. The survey also found 40% plan to grow employment levels over 2012/13, while a further 40% will hold employment levels. However, costs are still a major area for change for a majority (72%) in the coming year. The vast majority of multinational CEOs indicated that their investment in Ireland is considered to be a success. The top two factors critical for Ireland’s attractiveness as a location of choice for foreign direct investment are the

retention of our 12.5% corporate tax rate (82%) and maintaining our track record as a good place to do business (61%).


Some 43 of Ireland’s largest indigenous companies contributed over €16.7m to the community in 2011. That’s according to a recent survey by KPMG Ireland. The survey found that these socially-minded Irish companies have formed more than 3,600 community partnerships with over €11m given in cash donations, €2.3m through in-kind donations and €3.3m through employee fundraising. Employees also volunteered over 130,000 hours to local groups and projects during the year.


Research carried out by Accenture paints a picture of Irish consumers with dwindling loyalty to service providers such as airlines, utilities and mobile phones, who are relying on information from people they know and online reviews to make purchasing decisions. Companies that don’t deliver on customer service are likely to be punished as 91% of Irish consumers are likely to tell others about their experience and almost 3 out of 10 (29%) are also likely to post bad experiences online. In all, 74% of Irish consumers research companies online frequently, while 41% feel no loyalty to service providers, with majority making purchasing decisions based on online reviews and information from people they know.


In the years 2006 to 2011, some 10% of Irish men in their 20s and 5% of women of the same age emigrated, leading to a net outward migration of 40,000 people in this age group. The ESRI analysis, based on data from the 2011 census, confirms a picture of Irish men in sectors such as construction searching for work abroad in the period since the property crash.


(Left to right) Jeremy Fitch, Invest NI; Padraig O’Ceidigh, chairman of E&Y judging panel; Frank O’Keeffe, partner-in-charge; Margaret Hearty, Intertrade Ireland; and, Tom Hayes, Enterprise Ireland


Ernst & Young announced the 24 Irish finalists for its Entrepreneur of the Year awards in May. In October 2012, three individual category winners in addition to the overall recipient of the 2012 Entrepreneur Of The Year accolade will be announced. The overall winner will then go forward to represent Ireland at the World Entrepreneur Of The Year finals in 2013. ‘Ireland must remain optimistic but realistic in terms of its economic future,’ said Frank O’Keeffe, partnerin-charge of the Ernst & Young Entrepreneur Of The Year Programme, at the announcement of the finalists.

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More than half a million Irish families with mortgages will be up to €1,000 better off this year thanks to falling lending rates, according to IBEC. The improvement will come in spite of higher taxes, increases in fuel and energy costs and health insurance. ‘Mortgage costs coming down are set to have a massive impact on spending power,’ according to IBEC economist Fergal O’Brien. New figures from the Central Statistics Office show there was a seasonally adjusted decrease in both exports and imports in April compared to March.


Ireland’s trade surplus rose to €3.4bn in April from €3.1bn in March, according to figures published by the CSO. However, it also notes that seasonally adjusted exports fell by 9% (€719m) in April, while imports fell by 23% or just over

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€1bn. The export figure is the lowest such figure since March 2010, while the import figure is the lowest since November 2010. The EU accounted for 59% of total exports in April, with Belgium and the UK collectively accounting for 30% of the total exports. The UK was the main source of imports in April, accounting for 33% in all.


The Irish Infrastructure Fund (IIF) has acquired a majority stake in a portfolio of wind farms from the Viridian Group. The fund, established in 2011 with the goal of attracting up to €1bn from Irish and international investors to invest in Irish infrastructure, including assets being disposed of by the State, made its first major acquisition in the Viridian deal. While the value of the deal has not been revealed, the fund takes a stake of at least 75 per cent across the portfolio of wind farms. Overall, the IIF has secured investment of €300m to date.


According to the Central Bank, one in 10 mortgages are in arrears of more than 90 days and the number of householders getting into difficulty continues to rise. In all, 59,437 mortgage accounts are more than 180 days in arrears, accounting for 7.8% of the total of 764,138 private residential mortgage accounts for principal dwellings in Ireland. The Central Bank categorised 79,712 mortgages as being restructured at the end of March 2012, an increase of 7.2% on the figure at the end of December 2011. The Central Bank also recorded that 170 homes have been repossessed in the first quarter of 2012.


Ireland’s popularity as an international conference destination is growing, according to the International Congress and Convention Association. The country is at number 33 in world ranking, a rise of four places on last year’s position, while Dublin jumped nine places to 23 in the city destination rankings. Fáilte Ireland has welcomed news of the improved placings and said it would invest €3.7m in business tourism promotion this year. Research from the tourism organisation has found that nine in 10 overseas conference delegates registered a ‘very satisfied’ rating for their experience of Ireland as a conference destination.


International corporate and finance law firm Maples and Calder has announced that it will create 75 jobs in Dublin over the next three years. The company, which already employs 175 people in the city, says the expansion is as a result of growing demand for its

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international legal services and its fund administration services. Clients of the US firm include some of the world’s leading companies, banks and financial institutions. The jobs expansion is supported by IDA Ireland.


Data published in June by the EU statistics agency, Eurostat, shows Ireland’s gross domestic product (GDP) per head was the fourth highest among the 27 EU states in 2011. Ireland was 27% above the EU average, with Luxembourg on top, followed by the Netherlands and Austria. At the peak of the economic boom, in 2007, Irish GDP per head was 48% above the EU average, and its decline since then has been the largest of any EU Member State. Actual individual consumption is a measure used by Eurostat to more closely reflect household incomes and spending. By this measure, Ireland ranked 12th out of the EU 27 in 2011.


Ireland needs to deliver growth of 3% a year if it is to tackle its economic problems, Danny McCoy, director general of IBEC told delegates at a conference in June. McCoy told the Small Firms Association annual conference that the predicted growth rate of 1% this year would not allow the country to deal with economic problems such as the lack of employment opportunities and the country’s debt

burden. ‘We need to be a little bit more ambitious than 1%,’ he said, adding that a number of factors made this more ambitious growth rate achievable, including capacity, infrastructure, workforce and availability of capital through foreign direct investment.


City house prices in Ireland are set to rise quickly because of pent-up demand among under-35s seeking to buy a family home, but only once the economy picks up, according to a new ESRI report. Once mindsets change, the ESRI has calculated that prices will rise in key areas of Dublin, Cork and Galway. The view tallies with estate agents who are already indicating a micro-market for family homes exists in cities and large towns.


The Irish Music Rights Organisation (IMRO) said that the royalties it collects for songwriters and music publishers fell by 4% to €36.5m in 2011. IMRO said the fall-off was not unexpected and reflected the challenges of the overall economic climate. In all, 37% of IMRO revenue derives from public performance sources, ranging from shops and offices to live concerts; 33% is paid by radio and TV organisations; with the remainder coming from cable providers and overseas sources. Just 1% of its total revenue comes from online sources.

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The food and drink industry is poised for growth, but key challenges will need to be addressed, as Aidan Cotter, CEO of Bord Bia, explains


ord Bia, the Irish Food Board, is the state agency that provides strategic marketing services to the Irish food, drink and horticulture industry. Established in 1994, it has offices in 10 locations overseas, stretching from New York to Shanghai, and is well known to consumers in Ireland for a host of activities that range from meat quality assurance programmes to the running of Bloom, the annual gardening festival in Dublin’s Phoenix Park. Bord Bia came into being to address a fragmented approach to the industry and its foundation brought together the former CBF (the Irish Meat and Livestock Board) and the food promotion activities of the Irish Trade Board (subsequently Enterprise Ireland). Aidan Cotter, CEO of Bord Bia, was part of CBF when An Bord Bia was formed (the ‘an’ was dropped a few years later). He recalls the rationale, at the time,

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was a fairly simple one: ‘The goal was to ensure there was a single, focused marketing perspective in the international marketplace for the Irish food industry.’ Events would soon confirm the value of the move. With its assured handling of high-profile issues such as the BSE crisis in 1996 and the Foot-and-Mouth outbreak in 2001, Bord Bia gained credibility among the general public, the food industry and the notoriously hard to impress farmer organisations. Today, Bord Bia finds itself at the vanguard of another challenge: addressing longstanding structural deficits in the industry that is about to significantly extend its footprint on the global stage.

Centre stage Agriculture is so intertwined with the landscape and culture of Ireland that the two, for much of its history, have seemed inseparable. Yet, for all that, the food industry has long been hamstrung by the twin issues of

fragmentation and underinvestment, to the point where it had come to be regarded by some as a twilight industry only a few years back. Today, no close observer of the country can fail to note the reappraisal that has taken place, with a newfound respect and enthusiasm underwriting conversation on the agri-food industry. For once, too, the narrative of optimism is grounded on hard facts. The export growth enjoyed by the sector over the last two years would make impressive reading at any time, but in the context of national and international recession, its simply pops off the page: In the years 2010 and 2011, the value of Irish food and drink exports increased by €1.8bn or 25% and, while they represented just 10% of merchandise exports, they accounted for 25% of the rise in total export revenues over those two years. In contrast to other high-performing export sectors, such as pharma and IT, agri-food also sources the vast majority

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The CV 1984

Appointed manager of CBF’s Dusseldorf office.


Becomes European director of CBF.


Named operations director, Bord Bia.


Appointed chief executive, Bord Bia.

of its inputs in Ireland, meaning that, all in all, it supports more than 230,000 jobs, directly and indirectly, in the economy.

Future proof In 2010, the industry gained a clear roadmap for its future development with the publication of Food Harvest 2020 by the Department of Agriculture, Food and the Marine. Positing an export scale-up of some 40% by the end of the decade, its vision of growth is centred on a smart, green and sustainable industry. Implementation groups that have been set up ensure the specific actions it recommends are delivered on and a June 2012 survey by Ulster Bank confirmed buy-in at producer level. Farmers are currently planning increases of 52% in milk output and 40% in beef output by 2020, as well as 60% growth in sheep numbers (substantially higher than the Food Harvest 2020’s target of 20%) suggesting, if all goes to plan, the industry may comfortably overshoot its targets in a range of areas. However, in spite of such favourable headwinds,

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and two years of export growth, few in the industry are ready to celebrate just yet. While the sector was not in the frontline of the boom, recession saw it get the brunt of the bust, and companies have found themselves, over the last few years, focused on a battle to restore competitiveness or face decimation. ‘I think the industry fared very well and much better than a lot of commentators at the time would have predicted,’ Cotter says of the pivotal 2008-2009 period. ‘One of the big drivers towards that new competitiveness was the very rapid and deep depreciation of sterling around 2009. Over 40% of our exports go to the UK market and companies were very quickly forced to find savings and reconfigure their businesses and products where possible. They have come out the other end of that process much leaner and more competitive.’ Cotter says that this restored competitiveness has been particularly evident in the home market: ‘Food prices, in Ireland are, today, between 3% and 4% higher than they were seven years ago. In comparison, in the euro area, overall, they are 16% higher and, in the UK, they are 36% higher.’ While the most intense pressure on the industry has subsided, the hangover has been an ever-present demand for discounting, as consumers come to regard money-off deals as integral to their shopping basket. Longer-term trends are likely to see this phenomenon ease off, Cotter says. ‘Ultimately, we are going to have to accept that the end of cheap food is at hand. The world is struggling to keep pace with growth in global demand for food, which is why we have seen commodity prices rise significantly over the last decade. That trend is going to remain upwards.’

Pathways In 2010, Bord Bia commissioned Harvard Business School to undertake

an analysis of the industry and assess where its future opportunities lie. The report Pathways for Growth found Ireland had ‘an enviable agricultural situation that almost every other country would kill for’ but identified a track record of underperformance linked to fragmentation, lack of consumer orientation and a lack of confidence in the industry itself. ‘The report resonated with people from the day it was launched,’ Cotter recalls. ‘There was an immediate recognition that things had to change within the industry and a willingness to support that.’ Within Bord Bia, Pathways for Growth would provide the basis for the development of streams of activity that might have been unthinkable just a few years before. Among them is Bord Bia’s active support for ‘co-opetition’, where competitor companies are encouraged to strategically cooperate to reduce their overheads or take on bigger markets more effectively, and FoodWorks, a new approach to attracting and nurturing entrepreneurs within the industry. The developments have also seen increased cooperation between Bord Bia and other state agencies connected to the food industry such as Teagasc and Enterprise Ireland. ‘I think that it is critical that all agencies work closely together,’ Cotter says. ‘Our functions are all very complementary in terms of the food industry and we need to leverage that on behalf of Irish companies.’

Sustainability One collaborative project that has earned the title ‘world first’ is the work done on sustainability, involving Bord Bia, Teagasc, the UK’s Carbon Trust and the 32,000 farms that are members of Bord Bia’s Beef Quality Assurance Scheme. ‘It is the first time in the world a national quality assurance programme has assessed

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The basics: BORD BIA


Bord Bia is established through a merger of CBF and elements of the Irish Trade Board.

the carbon footprint of each of its members and shown the commitment for carbon footprint reduction among them,’ Cotter explains. Frameworks to capture farm performance in areas like water and biodiversity are also being developed and Bord Bia and Teagasc are currently working with the country’s largest dairy processor, Glanbia, on a similar project in dairy. Underwriting all of this is a belief that Ireland’s commitment to sustainability will be one of its key marketing advantages in the decade ahead. ‘A lot of the work is first being done in the primary sector, because this is the foundation of the industry, but it will also be moving up the value chain,’ he explains. If Bord Bia’s plans come to fruition, the industry will see a sustainability programme implemented on a scale that no other country has so far contemplated, he says. ‘It will enable us to say that we are working our way towards being a world leader in sustainability and being able to prove objectively how we are doing it. We are doing this not just because it confers a competitive advantage to our industry, but because it is the right thing to do.’

Background Growing up on a farm in Co. Cork, Cotter says he was ‘always interested in food and agriculture. Everybody belonging to me had a farming

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background, so working in the agrifood industry was something that naturally appealed to me. I have always believed that, if you are interested in something, you have an opportunity to be good at it.’ His primary degree was in agricultural economics in UCD, followed by an MA in the same field and a further MA in economic science. His first job was with the National Board for Science and Technology and, from there, he moved to CBF. ‘I ran the Dusseldorf office from 1984 to 1988 and then returned to Ireland, from where I was appointed European director in 1991. The position was based in London and, in 1994, when Bord Bia was established, I initially continued to work out of London’. In his spare time, he undertook an MBA in Cranfield University, graduating in 1995. Returning to Dublin as operations director in 1998, he was appointed chief executive in 2004.

Expectations While the export growth of the last few years has been impressive, the signs this year are that a period of consolidation lies ahead as the heat has, for the time being, at least, gone out of international commodity prices. ‘It was inevitable, after two years of strong growth, that we were going see this kind of scenario,’ Cotter says. ‘We have seen volatility in the market in the past few years and it’s set to continue


Bord Bia assumes responsibility for horticulture with the integration of Bord Glas.


Bord Bia is given responsibility for seafood promotion.


Irish food and drink exports reach an all time high of €8.85bn, up 12% on the 2010 figures.

into the future. The OECD has pointed to weather as the single biggest factor behind volatility, which means it is going to be inherently hard to predict.’ A cooling off in growth may also help the industry address the rather tricky problem of managing expectations. ‘Agriculture and food have a lot to offer the economy, not only because of their opportunity for growth, but because the multiplier effect in the economy is much more significant than in non-indigenous industries. However, every economy needs to have balanced growth and a good balance across the sectors that underpin it. Bord Bia’s role is to be the eyes, ears and voice of the Irish industry in the marketplace and that is something we will be continually reinforcing and enhancing over the coming years.’ Donal Nugent, editor, and Miriam Atkins, journalist

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The Irish dairy industry is planning its biggest expansion in over 30 years. Matt O’Keeffe asks how it will be financed


ith the strict production limits (the quota system) that were placed on the European dairy industry back in 1984 set to be abolished in 2015, the Irish dairy industry is soon to be presented with an opportunity to grow volume ouput for the first time in more than a generation. The Government-sponsored Food Harvest 2020, which sets out the strategy for the agri-food sector for this decade, proposes that a 50% growth in Irish milk output in the five years after 2015 is an achievable target. All of the dairy industry players – producers, processors, marketeers and farm organisations – have bought into the proposal, buoyed by a feel-good factor created by two years of strong commodity prices and international dairy consumption growing at more than 2% per annum.

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Key questions However, a number of key questions are yet to be resolved in the lead up to 2015 – namely, how the industry should finance this expansion, who should pay for it and where the new processing plants should be located. The new post-quota scenario also offers an opportunity to effect useful improvements in scale and efficiency by rationalisation, mergers and joint ventures among the existing independent players in the dairy processing sector, and the question remains as to whether this opportunity will be seized. A range of reports, over the past two decades, have suggested that a major rationalisation of the industry would be necessary if it is to compete with other dairy processors across the globe. The emergence of Fonterra, the giant New Zealand milk processor, has given further impetus to

this perceived need for greater scale in Irish dairy processing. The structure of the European dairy industry has also changed beyond recognition in the past 10 years. The recent cross-borders merger of the Danish-based Arla with Germany’s Milch-Union and Britain’s Milk Link has, for example, created a new single-processing entity with a scale over twice as large as Ireland’s entire milk processing sector. The ‘new Arla’ will process 12bn litres of milk while, in contrast, 13 Irish processors, of varying sizes, catering for a total milk output of 5.6bn litres.

Co-ordination Given that much of the expanded milk volume, after the abolition of milk quotas in 2015, is likely to be processed into bulk products, such as milk powders, there would seem to be a strong case for building the

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necessary processing infrastructure – in this case, a high output dryer – in a centralised location that could cater for the expected increased milk volumes across a large area of the country. In all, 75% of Irish milk is produced south of a line from Dublin to Galway and the biggest processors in this area, and in the country, are Dairygold, Glanbia and Kerry. A much improved road network as well as access to port facilities add to the financial, economic and logistical arguments for at least two of the ‘big three’ – Dairygold and Glanbia – to agree on such a joint venture. However, despite intensive negotiations, the expectation at the moment is that this may not happen and that they will both do their own thing in terms of catering for the expected expansion in milk supplies from their producers post 2015.

Capital requirements The financial challenges facing the Irish dairy industry, in relation to the anticipated expansion in production, are two fold. The first, and most obvious one, relates to the initial capital expenditure on new infrastructure required to process the milk from the farms. However, there is an even bigger financial challenge, as ICOS, the representative organisation for Irish co-operatives points out. TJ Flanagan, head of strategy at ICOS, emphasises the need to provide for increased working capital requirements: ‘At the moment, peak working capital in this sector is around €1bn. Even looking at it on the most simplistic basis, the Food Harvest

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2020 strategy’s 50% output increase would require a jump in peak working capital to €1.5bn. Depending on the product mix, the actual figure could be up or down from there. It should also be remembered that this is an ongoing capital requirement that needs refinancing every year.’ Because of the seasonal nature of Irish grass-based milk production, linked as it is to a grazing season that runs from February to November, with a sharp spike in production in the May/ June period, the peak working capital requirement is far higher, on a per kilo of milk solids basis, in Ireland than it is for most other competitors, with the possible exception of New Zealand’s Fonterra. This working capital is required by the processors to pay producers for milk, process the milk, store the product for varying periods and, ultimately, market the product. The capital requirements of the Irish Dairy Board (IDB), the exporting arm of the Irish dairy industry, are also included in these figures as there is a lengthy payback time between the IDB buying product from processors and being paid by the end customers around the world. The major financial institutions have all been positive in terms of backing the dairy expansion strategy. Both Bank of Ireland and AIB, for instance, have dedicated funding available to the agri sector, with dairy farming a central investment target. Likewise, there is a solid committment to have funding available for investment in extra processing capacity and the increased working capital necessary to oil the milk purchasing, processing

and marketing chain in an expanding industry.

Shareholding shortfall Irish milk producers, as members of cooperatives, are significantly out of line with their international counterparts in that they carry far lower average levels of shareholdings in their co-ops. At between 1-1.5 cents/litre (c/l) of milk output, they are out of kilter with the EU average. The Dutch shareholder would carry 6-7 c/l, the Finnish 15-16 c/l, and New Zealand’s Fonterra members hold shares to the value of 16 c/l of milk produced. While share capital is not necessarily the tool to fund expansion, because of possible imbalances between producers in terms of who carries the greater burden, it is, nevertheless, an issue that must be eventually faced if the industry is to be adequately capitalised for the future. Other tools and strategies to fund expansion are currently being debated and may well be announced in the early summer. Dairygold has devised a revolving share fund to finance its expansion plans, in addition to the use of bank debt and increased cashflow. This is likely to result in between 7 and 10 c/l being eventually tied up in shareholdings. There has been resistance among some milk producers, especially those who do not plan to expand production. As ICOS sees it: ‘adequate share capital is an absolute necessity and would be a better financing mechanism that borrowings, in that it allows producers to retain a greater degree of ownership

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of their processing sector.’ To date, Glanbia, the biggest milk processor in the country, has not announced its plans. Given its plc/ co-op structure, the likelihood is that a unique funding mechanism will be found to satisfy all interests as far as possible. Glanbia Co-op has the luxury of almost €1bn in capital tied up in its 54% shareholding in Glanbia plc. Releasing some of this capital, however, could prove problematic with a 75% shareholder vote required to bring the co-op shareholding below 50% ownership of the plc.

Sitting on a jackpot? One question that has arisen among the investment community, especially the stockbroking sector, relates to the rigid manner in which co-operative shareholdings in Glanbia are held. They see an opportunity for the shareholders involved to realise the underlying value of those co-op shares. With each Glanbia Co-op share now having an underlying value of almost €20, the development of a facility to allow shareholders to convert co-op shares into plc shares, or at least trade in a ‘grey market’ with real values, as distinct from ‘face value’ plus a small top-up, would seem to stockbrokers to be a wasted opportunity to exploit a wealth source to fund expansion, should shareholders wish to do so. The contrasting strategy of Kerry plc/co-op over many years is quoted in support of the argument that Glanbia Co-op shareholders are depriving themselves of a significant financial opportunity.

The scale game While ICOS’s TJ Flanagan insists that Irish processors are efficient and competitive, as outlined by an ICOSsponsored KPMG analysis, the fact that international competitors are scaling up at a staggering rate cannot be ignored. The KPMG report did show that capital expenditure is relatively low in the Irish processing sector. Profitability is similarily low, as is investment in R&D, relative to international peers. The structure of the industry needs to be made more profitable, as TJ

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Flanagan explains: ‘Consolidation would help in this regard. A well-funded single entity R&D programme would improve efficiencies in that area. In addition, marketing consolidation, with more support for the IDB, would be seen as an optimal strategy to improve overall profitability in the sector.’ Ultimately, the idea of a joint approach to building new infrastructure is identified by ICOS as the most viable solution to funding and operating the processing facilities required to handle the 50% extra production expected to come on line by 2020. ‘The ultimate aim must be to build a more sustainable industry that can compete on international markets’, as TJ Flanagan sums it up. Rabobank’s dairy analyst Kevin Bellamy has singled out the Irish dairy industry as the most competitive in the northern hemisphere. He suggests that it is in a very good position to act as a counterpoint to New Zealand in terms of producing dairy commodities, such as butter and powder, very efficiently on a seasonal basis, with production and marketing peaking at the time of year when New Zealand’s dairy output is at it’s lowest phase.

New milk – new markets Producing the extra milk will be a big challenge for the Irish dairy farmer. Processing the resultant increased volumes of milk will be one of the challenges for the processors. Another challenge, shared with the Irish Dairy Board, will be to market the end product. In all, 80% of Irish dairy produce is exported, with the IDB currently responsible for selling almost two-thirds of those exports. Many of the dairy processors use the IDB exclusively to market their produce. Others use the board for a proportion of their output. The IDB is a highly successful company with the Kerrygold brand as its central and longest-standing product brand, selling into 75 international markets. Turnover at the company increased to €2bn last year, while pre-tax profit increased to just over €21m, as the sector continued to benefit from strong dairy markets. Close to 40% of the Irish Dairy Board’s

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revenues comes from its consumer foods division, which includes the Kerrygold brand. About 28% comes from its dairy trading and ingredients business, while the remainder is derived from its US food distribution business. Already, efforts are being made by the IDB and individual dairy processors to identify and explore new market opportunities for Irish dairy produce. The IDB made significant inroads into new markets – particularly in Africa and Asia – during 2011, as part of its stated strategy to ‘broaden our footprint in international markets’, according to Cathal Fitzgerald, the IDB’s financial director. Last year, Kerrygold experienced 30% volume growth in the Middle East, as well as a 13% increase in the tonnage of milk powder sold in sub-Saharan Africa, an area seen as a key growth area for dairy products. Chinese consumers are also increasing their dairy intake, though the logistical challenges of exporting bulk dairy product to China are formidable. Recent visits by Chinese delegations show a growing interest in Irish dairy products to complement the preferential dairy import agreement that country has with New Zealand. These are precisely the areas of growth in dairy consumption that will be needed to absorb the expected increase in Irish milk output. The IDB is confident that it can play a key role in marketing the expected 50% increase in output by 2020. Already, the finance houses have shown their willingness to back the international dairy marketeer by refinancing the IDB’s loans, an exercise that allowed it to secure a new €350m, three-year bank debt facility – a move that Cathal Fitzgerald expects will allow the IDB to position itself well for future growth.

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Tax-efficient expansion

increasing and further investments are being planned in expanding housing, milking, milk storage and effluent capacity on farms. Land availability for grazing is a critical factor. Eliminating drystock, as well as developing innovative partnership arrangements with likeminded farmers, have been identified as options for expanding milk output. This is seen as a once-in-a-generation opportunity by many producers. There are, however, risks attached to expansion. Capital tied up in extra livestock can kill cashflow, as any accountant will certify, and expansion only makes sense if it delivers more profit, not just revenue. Close monitoring of the expansionary phase by producers, their accountants, advisers and bankers will be critical to successful dairy farm expansion. Meanwhile, the debate around financing expansion at processing level continues. The Irish Farmers’ Association’s (IFA) influential dairy committee is seeking a means to allow producers to voluntarily invest in new processing facilities in a tax-efficient manner. It has commissioned Deloitte to devise a funding mechanism that will let producers buy into the ownership of an expanded industry, building equity in the businesses in a manner that will not overburden their farm accounts balance sheets. Government, and possibly even EU, approval may be needed to allow this to happen. As Kevin Kiersey, the IFA’s dairy committee chairman, puts it: ‘Dairy expansion can deliver for the Irish economy in terms of extra jobs on farm and in construction, processing and marketing. It can provide extra income on farms and in support industries such as services and supply companies. Ultimately, dairy expansion can deliver higher export and tax revenues.’

Dairy producers are already gearing up for expansion. Dairy stock numbers are

Matt O’Keeffe, journalist

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CAPITAL– A COMPETITIVE THREAT? Ciara Jackson on how Irish food and drink companies can address the issue of funding to secure growth


he world’s population is growing rapidly, life expectancy and retirement ages are increasing, middle classes are burgeoning in emerging markets and Asian diets are shifting from rice to wheat and more protein-based meals. The government-supported Food Harvest 2020, with its threepronged strategy of ‘act smart, think green, achieve growth’, challenges the agri-food sector to respond to this and grow significantly between now and 2020. These ambitious targets come in the face of one of the most tumultuous periods experienced by the Irish economy – prolonged recession, the banking crisis, a dramatic drop in consumer confidence, rising energy costs, high unemployment, commodity price spikes and sterling depreciation. All agri-food companies have been stress-tested during this period, certainly proving the Darwinian business concept of evolve or disappear! Agri-food businesses, today, have adapted their business models, understanding that, as the business environment becomes more demanding and customers’ needs become more complex, good decisionmaking is increasingly central to the success of every business.

Capitalising on opportunity Ireland is a small nation on the fringes of Europe, competing on a global playing field. Scale, efficiency and good business information metrics are fundamental requirements to succeed

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in the game. Ultimately, profit and growth is about selling at as high a price as possible, and operating from a lean, efficient cost base. Where smart productivity initiatives are implemented, there is potential to grow margins, and free up working capital for the business. Ireland is in the enviable position of having a grass-based production system and a temperate climate. With the ending of milk quotas in 2015, there is a widely-held view that milk output will increase by 50%. Speculation is rife that the US and Chinese markets will open for Irish beef. Brand Ireland is very strong internationally, as Ireland boasts: A healthy, well-educated nation and a positive reputation globally; A well-established culture of entrepreneurship; Proximity to key markets, particularly the UK and EU; An extremely successful indigenous food & beverage sector, known for: Food safety and provenance; High quality local suppliers; and Clean seas and grass-fed livestock; Capacity, capability and business environment for R&D and product development; Advantageous (and much envied) low tax regime; A state that is fully engaged in supporting the sector; and, Export experience and capability.

* * * *

* * *

for all businesses and can be seen as a sort of competitive threat: there is a limited amount available and all businesses are fighting for a share of that small pot. Recent Grant Thornton research identifies two significant challenges identified by Irish businesses – a reduction in demand, and the cost and availability of finance. We believe that average breeds average. Average financial performance offers limited access to capital. Where financial performance is strong, a business is much better placed to attract funding, and from a wider variety of sources, including banks, private equity and venture capital, generally at a more competitive price. The financial performance of a business has a significant impact on its ability to raise finance. Financial performance drives availability of funding. Demonstrating financial stability and generating as much free cashflow as possible is crucial, for two reasons: Having your own cash means you are less reliant on external sources; and, Stable and strong cashflow improves potential to obtain bank funding by making the business more attractive.




* * *

Ways to improve funding

Research Access to capital is a real challenge

(1) Ensure a dynamic and evolving business plan is in place. Where an agri-food business has a smart, strategic, dynamic financial plan in place, it improves their

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potential to secure funding. Anecdotal evidence suggests that only 10% of small farmers prepare business plans. Given that this basic fundamental is not being observed, it would suggest that strategic planning is not high on their priorities and they aren’t as prepared as larger, more industryfocused operators. Access to credit, or lack of, may be a restriction on achieving the potential of Food Harvest 2020. (2) Tight working capital management and cost control. There is always opportunity to generate efficiencies through constantly challenging existing practices and striving to improve them, eliminating ‘fat’ from the process, and freeing up cashflow. (3) Review existing funding structures and ensure that the funding structure is appropriate to the business needs. For example, fixed-asset financing is generally long term, and often at a fixed rate, whereas working capital,

Business reviews

business review, where weak financials and weak leadership are often quickly exposed. It is important, therefore, that these issues are addressed in advance of an external IBR – the old adage that you never get a second chance to make a first impression applies. Don’t ignore the situation! Some businessed are avoiding making strategic decisions, motivated by the recession and by fear. Doing nothing is a decision, whether conscious or otherwise. Successful businesses take decisions which will lead them to prosper and gain a competitive advantage. Being on the right side of the funding gap will enhance your competitive edge in a tough market and increase the sustainability of your business.

Increasingly, financial institutions are requesting independent business reviews (IBR) to inform their decision making on extending credit to business. An IBR is a comprehensive

Ciara Jackson is director and head of Food & Beverage, Grant Thornton. Email

by its very nature, demands revolving, flexible finance. (c) Other sources of finance. Consider alternative sources of capital, such as invoice discounting, stocking finance, supply chain finance, angel investor, private equity funding, mezzanine finance, subsidies, grants, group funding/’crowd funding’, venture capital and joint ventue finance. (4) Consider non-financial measures that will drive productivity, and ultimately improve financial performance. For example, where an organisation has a culture of managing poor performers, this behaviour has a motivational effect on other staff, who feel their ‘good behaviour’ is appreciated.


Cost of finance


Shortage of working capital


Shortage of long term finance


Regulations / red tape


Availability of skilled workforce


Shortage of orders / reduced demand


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25/06/2012 10:27 17/05/2012 15:08:51



Roar power


The emergence of Africa’s ‘lion markets’ sets another big cat loose in the global economy, says ACCA president Dean Westcott

For many years there was a favourite business saying that the African economy was a sleeping lion and the world would know when it finally woke up. It may now be time for the rest of the world to wake up. The phenomenal growth in the continent over the past decade has outstripped that of East Asia, with the World Bank reporting that sub-Saharan African economies have been growing at rates that match or surpass the rest of the world. As a result many countries in Africa have earned the nickname of ‘lion markets’, putting them alongside the ‘Asian tigers’ and ‘Latin pumas’ as fast-growth economies. The growth has led to many international agencies investing more in emerging African economies, which have defied the global economic recession and are providing some of the highest rates of return on investment in the developing world. Through its long association with Africa – many of our African country offices were set up more than 50 years ago – ACCA has had a front row seat when it comes to the development of economies and the accounting profession on the continent. ACCA has 10,500 members and nearly 83,000 students in sub-Saharan Africa. This is why we felt it was important this year to hold ACCA’s annual Council meeting in Nairobi, Kenya, due to take place as Accounting and Business goes to press. It will give Council members a better understanding of developments in Africa and how these impact accountants, and let them see what ACCA can do to support them. Council will not only meet with ACCA members in Kenya, but see – through visits to Tanzania, Uganda and Ethiopia – how members in East Africa are contributing to the economy and profession in their respective countries. It will help Council to connect with ACCA’s partners, the profession and policymakers in the region, and to show how ACCA’s work is bringing value to employment markets. Many stakeholders have told us that for Africa’s economic potential to be fully realised, strong national professions are essential. ACCA aims to continue to contribute to the development of national professions, working through its members to ensure that the lion markets continue to roar. Dean Westcott, ACCA president and interim CFO, West Essex Clinical Commissioning Group, UK


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Accounting tricks leave us with no illusions


Governments around the world, including Ireland, need to be more upfront about their fiscal responsibilities, writes Gillian Fawcett

A recent International Monetary Fund (IMF) discussion paper Accounting Devices and Fiscal Illusions suggests that a government seeking to reduce its deficit by spending cuts or tax increases can do so with the aid of accounting devices. It highlights hidden borrowing, disinvestment, deferred spending and foregone investment as the main culprits that governments use to reduce or hide a deficit. Using these devices, governments can defer the reporting of spending or accelerate the reporting of revenue. ACCA agrees that the current ‘mish mash’ of accounting practices employed by governments is not helpful and allows wide scope for accounting devices to be used to fudge fiscal indicators. Deferring vast amounts of spending is perhaps the most dangerous path to follow and is a threat to sustainable public services, as well as adding to the tax burden for future generations. In Ireland, and across many countries, public private partnerships (PPPs) have been used to build new hospitals,

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schools, roads, etc. Yet it is only recently that these schemes have been included on the balance sheets of a handful of governments and, even today, are still not counted against public sector net debt in the national accounts compiled by governments. As well as lacking accounting transparency, we now know that these obligations have grown over time. For example, in the UK PFI/PP liabilities of £29bn appeared, for the first time, in the Whole of Government Accounts (2009-10), which raise questions about affordability. The same issues emerge in accounting for pensions, where large volumes of spending continue to be excluded from some governments’ balance sheets. The IMF discussion paper states that ‘stratagems cannot be eliminated, but several things can be done to reduce their use or at least bring them quickly to light’. ACCA supports the paper’s conclusions and believes strongly that governments should be encouraged to comply with accruals-based international accounting standards and accounting regimes should be

supported by effective audit. This would allow for the harmonisation and comparability of government accounting, make it less easy to fudge deficits and improve the quality and transparency of financial statements. There is little doubt that government financial statements based on accruals will complement existing financial information and will narrow the scope for accounting devices to be used to distort the bottom line. As well as shining a light on future liabilities, they will also provide a useful indicator for identifying how well assets are being utilised. They won’t be a substitute for other financial information produced by other bodies, but over time alignment with government national accounts will help to provide greater consistency between a government’s financial statements and the public sector element of the national accounts. Gillian Fawcett is head of public sector, ACCA. Email

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The view from: Limerick: Roy Finucane FCCA, TaxAssist Accountants Q What lessons have you learned from business? A The attitude we have adopted from the outset is that we are operating in a service industry and we are always trying to add value where possible to our clients. We don’t see ourselves as merely a once-a-year compliance service; the personal service and fixed-fee model is consistent with that approach: we are in regular contact with our clients, and we provide them with a monthly small-business newsletter with topical issues of relevance to their business. Q What’s your biggest work challenge right now? A Before returning home to Limerick to set up TaxAssist Accountants, I spent the previous 15 years working in the IFSC in Dublin, so it was a significant challenge to set up a new business in my home city without a traditional network. As a consequence, the next challenge was to promote the TaxAssist brand locally and to let the small-business community know that we offered a different approach to the support of their sector. Q How do you plan to overcome it? A Initially, my plan was to have as visible a presence as possible, so I purposefully chose to locate my shopfront on Roches Street, a busy retail street in Limerick. My business is located on the ground floor with my range of services and contact details listed on the window. To date, this has paid dividends with over half my clients walking in off the street.

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26 Auditor protocol 29 The view from Siobhan Farragher and outsourcing success

I am also quite active on social media and regularly post tax and small business tips on my Twitter and Facebook pages. Q Tell us about TaxAssist Accountants Limerick? A TaxAssist Accountants is an accounting and tax service specifically aimed at small business and tax payers, and the service delivery is tailored to their needs. The business is a walk-in accounting service, where the small business owner can avail of a free consultation. In addition, we operate a fixed-fee model, where fees are agreed up front with the client, so no nasty surprises are in store.



Favourite getaway Dingle


Currently reading The E Myth by Michael Gerber


Business hero Michael O’Leary

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Auditor Protocol Andrew Guiney FCCA on a new protocol designed to enhance information sharing between the Central Bank and auditors of firms In December 2011, following a public consultation, the Central Bank of Ireland published the Auditor Protocol between it and auditors of regulated financial service providers. The protocol, which, in the first instance, applies to those firms that are rated ‘high impact’ under the Central Bank’s new regulatory risk model, PRISM, became effective on 1 January, 2012. The aim of the protocol is to enhance information sharing between the Central Bank and auditors of firms, thereby improving the regulatory and statutory audit processes. To do this, the protocol provides a framework to facilitate information sharing principally through a structure for pre- and post-audit meetings. It is envisaged that the auditor will be represented by the lead partner and the Central Bank by the senior examiner in order to ensure that the meetings are mutually beneficial.

The pre-audit meeting The Central Bank, through its corporate governance requirements, places a significant onus on the audit committee to monitor the effectiveness and adequacy of the firm’s internal controls and internal audit functions. The Central Bank, thus, believes that it is appropriate for the pre-audit meeting to be a trilateral meeting (i.e., a meeting between the Central Bank, auditors and the audit committee or independent non-executive directors) unless both the Central Bank and the auditor believe that it would be more beneficial to only have a bilateral meeting. It is expected that the agenda for this meeting would cover, inter alia, the following issues: (i) the risk profile of the firm – e.g. changes in business lines, drivers of income, strategy, etc.;

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(ii) weaknesses identified in previous audits; (iii) overview of weaknesses identified through the supervisory process; (iv) the audit approach and the application of the materiality concept; (v) changes in the corporate governance and internal governance structures of the firm; and (vi) observations on the control functions of the firm (e.g. risk management function, internal audit, compliance, etc.).

The post-audit meeting The post-audit meeting will be a bilateral meeting (i.e., a meeting between the Central Bank and auditors), which will generally be held after the audit report is signed off. This meeting may, however, occur before sign off if it is deemed more beneficial. It is expected that the agenda for this meeting would cover, inter alia, the following issues: (i) the going-concern concept; (ii) an update on the items outlined in the pre-audit meeting; (iii) discussion on whether the auditors were able to follow their intended audit plan and/or whether they had to make any amendments based on their findings during the audit; (iv) discussion on the audit findings as originally presented to the firm and the adequacy of the firm’s response to these findings; (v) discussion on areas where management of the firm applied significant judgment and its impact on the auditor’s view of the financial statements and on the risk profile of the firm. This discussion would include how the level of professional scepticism was applied by the auditor; (vi) any issues that affected communications between the auditor and/or the Central Bank and/or the firm during the year that could be improved; and (vii) the future strategy

of the firm and the impact that it may have on audit and regulatory issues.

Open and frank communication The Central Bank recognises that, in order for the protocol to be successful, the communication between the relevant parties needs to be open and frank. For this reason, a number of measures to achieve this goal have been outlined in the general framework section of the protocol. Firstly, it obliges the firm to advise: (i) the Central Bank of the contact details of the audit partner responsible for the audit within five days of their appointment; and (ii) its auditor of the contact details of its senior examiner in the Central Bank within five days of the auditor’s appointment. Secondly, it outlines a number of principles governing the meetings between the Central Bank and auditors: (a) the Central Bank shall endeavour to share all information, which it believes would lead to higher quality audits with the auditor; (b) the auditing firm shall endeavour to share with the Central Bank any information that it believes may assist the Central Bank in the exercise of its supervision functions; and (c) all communication between the Central Bank and auditors shall be deemed confidential under Section 33AK of the Central Bank Act, 1942 (as amended). It should be noted that the protocol also facilitates material information (i.e., information that is deemed would be of immediate interest to the other party) to be shared between both parties at the earliest instance, even if a meeting between both parties is not planned. Thirdly, it requires the terms of the audit engagement to include a clause that specifically acknowledges

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that the Central Bank and the firm’s auditors can discuss any issue that is of relevance to their oversight of the firm and that this communication will not be determined by the firm as a breach of duty by either party.

Annual review process In order to ensure the protocol remains relevant and up to date, it includes an annual review clause. The annual review

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will include updating the protocol to reflect changes in legislation, auditing practices and other relevant developments including, where possible, removing any barriers to the sharing of information identified during the year (if any), thereby maximising the effectiveness of communication between both parties. For more information, check the Central Bank website The views expressed in the article are those of the author and are not necessarily the views of the Central Bank of Ireland. Andrew Guiney FCCA is a senior accountant in the Governance, Accounting and Auditing Policy Division of the Central Bank of Ireland. Email Andrew.Guiney@

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25/06/201210:10:13 10:27 22/06/2012


The view from:

Dublin: Siobhan Farragher FCCA, finance director, Capita Asset Services Ireland Q What business lessons have you learned? A Over the past four years, the deteriorating economic environment and constant market turmoil have provided many useful lessons to all players in our sector. As an organisation, we have succeeded in weathering the storm due, in no small part, to the flexibility and adaptability of our business model and, indeed, our staff. The ongoing investment in training and development of our staff throughout the cycle is paying dividends for us now. Q What tips would you pass on to others? A The ability to leverage off a capable resource base within the company has been a big positive when faced with immediate and challenging deliverables which have become commonplace in the current environment. As such, I would recommend involvement and inclusion of staff from as early a stage as possible in the process. The old saying ‘the whole is greater than the sum of its parts’ absolutely applies in our case. Ultimately, dedication, hard work and attention to detail are hard to beat. Q What are your key business challenges in the year ahead? A Liquidity constraints remain in the financial markets and, as a result, lending is still highly constrained and there is no immediate sense of how and when this situation will improve. Our service offering is now facing a completely new client base


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30 The tax director of tomorrow and outsourcing success 25 The view from Roy Finucane and Auditor Protocol

as different players enter the debt market and we need to establish and develop new relationships as a result. Q Tell us about Capita? A Capita is the UK’s leading provider of BPO and integrated professional support service solutions. With more than 46,000 employees at more than 350 sites, including 68 business centres across the UK, Ireland, the Channel Islands, Europe and India, the group uses its expertise, infrastructure and scale benefits to transform our clients’ services, driving down costs and adding value.



Commute time 40 minutes


Holidays this year Nothing too exciting...Portugal for some sun and relaxation


Favourite restaurant Pearl Brassiere, Dublin

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The tax director of tomorrow A daunting cocktail of complexity, challenge and risk is putting corporate tax departments under more pressure than ever, according to experts at a recent roundtable hosted by Accounting and Business and Thomson Reuters Tax is top of the political agenda. Revenue-starved governments around the world are struggling to grab their ‘fair share’ of the total tax pot in an increasingly globalised and connected world, in which technology plays an ever greater role. Politicians, tax authorities and the media are all focusing on this hugely complex subject, driving change that is fast and sometimes unpredictable. The lines between planning, avoidance and evasion are consequently becoming more blurred. Caught in the crossfire is the tax director, who has to balance the competing demands of managing a company’s effective tax rate while ensuring compliance and managing tax risk – and with an eye fixed ever more firmly on PR. Accounting and Business (AB), in association with Thomson Reuters, brought together a group of tax experts to pull together these developments and predict how these will affect the tax director of the future.


It feels as if governments have declared war on companies over their tax affairs. With attitudes of governments around the world to tax avoidance hardening, what impact will this have on tax directors?


People and businesses are trying to navigate their way through very difficult systems. But at the same time governments are saying: ‘Well, actually you should pay more.’ However, the reality is that the public and business are paying quite a lot more than governments think they do.


I think that’s a good point. I’m not sure government attitudes to tax avoidance have shifted, in that most governments have always said people should pay their fair share.

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‘THE REALITY IS THAT THE PUBLIC AND BUSINESS ARE PAYING QUITE A LOT MORE THAN GOVERNMENTS THINK THEY DO’ I think that what has changed is the line. Things that historically might have been considered as tax planning are now considered as avoidance.


Governments increasingly view tax planning as tax avoidance. More importantly, the public is increasingly taking the same view. Even though companies may have a perfectly legal and defensible position under their right to minimise tax as much as possible, they are taking a public relations hit over it.


Companies are seeking to minimise their tax position because they are competing in a global economy against other companies. But public outcry following the financial crisis gives permission to governments to increase regulation, including retrospective legislation. We have seen this recently with the banks and there was hardly any outcry.


The most interesting point about navigating this path is whether the CFO’s view of the tax department will change. Most CFOs measure the tax department’s effectiveness through the lens of the effective tax rate (ETR) and in many respects by reducing it. This may well change to one of maintaining an acceptable ETR or to shift the focus to other measures altogether and perhaps looking at the management of taxes more widely.


I also think that the job spec of the tax director will change. You assume that the tax director is competent in assessing tax risk, but this has now moved on to reputational risk.


Tax directors are used to looking at technical risk. In addition to reputational risk I think there is an operational risk. In order to manage reputational and operational risk, tax

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Chris Quick, chairman

directors need to be more commercial. There is competition among governments to get their fair share of revenue and this is why transfer pricing (TP), for example, is increasing in prominence. This is a very challenging thing to tackle operationally. TP is embedded throughout the business units, so how do tax directors control that? They have to talk to the business units. They have to be ahead of transactions, which is not something the tax director has traditionally needed to look at.


Tax positions used to be operated in a silo, but you are now having to share data through transfer pricing, and you are now having to reconcile tax positions of multiple different regions in your operations. You have got to be able to have some visibility to be able to say you have the legitimate tax positions. I think that technology has to play a massive part in that. You need to dig down deeper into the data levels so that you have the visibility to make further reconciliations.


What will be the impact on tax directors as tax authorities begin to reach beyond their borders, such as with FATCA (Foreign Account Tax Compliance Act) from the US, as governments struggle at a national level to deal with a globalised world?


We have already seen global audits and one of the things

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Member of ACCA’s Global Forum for Taxation and a consultant at management consultancy Affecton. He spent 28 years with Shell, including a spell as head of UK tax from 1999 to 2005.


Director at specialist tax recruitment consultancy Talentpool Selection. He trained with Arthur Andersen, and specialised in tax before moving into recruitment in 1996.


Head of indirect tax at KPMG, he set up the firm’s process and technology team five years ago. He had been with HMRC and Ernst & Young before he joined KPMG in 1999.


Leader of Ernst & Young’s EMEIA Tax Performance Advisory business. He has over 20 years of international tax experience spanning industry and the profession.


ACCA’s head of taxation. He worked in public practice before joining ACCA’s technical department.


Head of operations for AIMS Accountants for Business. He has worked with the AIMS franchise network since it was launched in 1992.


Managing director and senior vice president of Tax & Accounting EMEA, Thomson Reuters, where he leads a team of 200 tax and accounting specialists throughout EMEA.


UK tax counsel at GlaxoSmithKline. He qualified as a solicitor at Slaughter and May before joining GSK as the global tax team’s in-house lawyer.


Editor-in-chief of Accounting and Business. He trained as an accountant at Arthur Andersen before entering journalism in the late 1990s.

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Chas Roy-Chowdhury, ACCA


The technology ramification is that it needs to be on similar data elements, on similar taxonomies, similar technology. This means tax directors need to change their reporting systems and processes because they are going to be sharing data with other countries.

Albert Lee, Ernst & Young



At GSK we found a lot of people in the business were ‘doing tax’, so we now have a global tax team that brings individuals into the tax reporting line rather than a local reporting line. We now have much more visibility locally and this allows us to standardise our approach much more.

h transfer pricing, which we have always known, is that you never say one thing in one jurisdiction and something else in another. The two things must tie up. Sooner or later, one part of the world will catch up with another. You will need to be careful about how you provide information to any one tax authority because this could be shared globally. This will be much more the case going forward.

We’ve seen information exchange around the EU for a while – for example, European Commission sales lists – but what about other jurisdictions?



Multinational groups are interconnected and global. Tax authorities are increasingly dealing at that level as well, and not just those in the historically more developed countries. I think that developing countries are getting more sophisticated in understanding a lot of the more global issues.


I think there’s a desire but no mechanism at the moment, although it’s not that far away. But it’s

a one-sided equation at the moment – tax authorities are going after avoidance and treating avoidance as evasion, but there is not much simplification for business. I feel quite sorry for tax directors at the moment. They are under siege and have to fight their corner while the organisations that could help more are not helping.


Does this mean tax functions are becoming more expensive?

That’s a good question. One of the skills some tax directors have to learn is how to do more with less and build business cases. They know they need a more systematic and standardised approach, but feel helpless in trying to get a budget for this.


Tax departments may be getting bigger, but I’m not sure they’re getting more expensive – they could be outsourcing. There might be an expansion in the function but that does not necessarily go hand in hand with more cost. But sooner or later that increase in cost will come through as developing countries catch up and start becoming expensive.


A lot of debate focuses on large multinationals, but what about SMEs? What pressures are they feeling in terms of aggression from tax authorities and the changing challenges of managing their tax?


A global company that operates on a global and local basis keys into these authorities and their emerging views. Multinationals may have tax departments around the world, but they may not put a lot of effort into lobbying locally. Once they are part of a global tax department, if the centre says this is important they should allocate resources towards it.

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Tom Duffy, Affecton

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Tim Woodthorpe, GlaxoSmithKline

consider implementing better tax compliance systems, especially in big multinationals, systems for data collection, and streamlining the whole tax compliance process. Tom Walsh, Thomson Reuters


Essentially, these are people who are just trying to make a living. If they know the rules, they will pay their tax. But certainty has disappeared. My clients will sit there and see all the things that the multinationals are doing and ask why they are being hounded for a £5,000 VAT bill while an international company has paid hardly any tax in the UK.


Yes, but what surprises me is that you have global businesses with global tax directors who are accountable for the tax worldwide yet have little or no visibility in the centre of what is happening on the ground across the taxes. I’ve seen some organisations go for the technology with all the bells and whistles yet as a starting point just basic visibility is the key to them really reaching out to the organisation to manage taxes effectively.





Companies big and small face some of the same issues, it’s just a matter of scale. It’s about understanding the rules. There’s a real challenge around keeping current with the rules and rates, not just in the UK but around the world.

This is also a technology issue. For instance, in the UK there is real-time information (RTI) coming in, which will also happen in other countries, and I just wonder if SMEs are willing or prepared or have started investing in RTI systems.


Which brings us neatly to the next subject. How will the tax director of the future be impacted by technology, including XBRL, and does this add to the potential offered by outsourcing and shared services?


If you’d suggested a career move into tax software 10 years ago to a tax person, they would have asked: ‘Why would I do that?’ It seemed a very narrow niche area, but that has quickly changed. Tax directors now realise they have to seriously

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Another slant on this is that a lot of organisations have focused on ‘good enough’ tactics for technology for a long time. I just don’t think that cuts it any more, there’s too much change. It’s about getting the right technology.

I think there are dangers in tax being hived off to shared service centres. It is a cost saving, but perhaps businesses need to recognise it is a dis-saving because you could end up with additional internal issues which may not be addressed. You might not have people within your business who can tell you exactly where you stand from a compliance point of view, articulating why you have got certain tax numbers, working out businessspecific issues that affect your tax position. The finance director of the future needs to be careful and retain a significant part of the tax function within the business.


As well as being technology experts, do tax directors have to be PR experts too? What happens when you have protests outside your offices or your shops?

Gary Harley, KPMG


In some ways I think it would be good where you’ve got an organisation such as UK Uncut protesting about an issue for the tax director to stand up and defuse the situation. But I’m not sure that there are many tax directors willing to do that. However, I think that is going to be forced on them in the future because they need to be able to get the information out to wider audiences. It could make the job more interesting.


There are some sectors such as oil and mining that I think are caption style very good at articulating their total tax contribution in their annual reports. I think that the tax director has got to be on the front foot with the board in terms of getting their message out to the public.


We’ve also seen a trend of public relations being done collectively, such as through the CBI. The challenge in making the proactive case is that a lot of tax issues are difficult to understand and convey. When the press is seeking to deliver a particular message, it is difficult to get across the detail. It is a challenge for the tax director to articulate and make the point while it’s a lot easier to attack something. Philip Smith, journalist

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Sourcing success CFOs have high and rising expectations of shared services and outsourcing, but new research shows many are not making the most of remote delivery, says ACCA’s Jamie Lyon Today’s CFO operates in a challenging and complex environment. With continuing uncertainty on the horizon of the global economy, more than ever the CFO is in the spotlight to transform the finance function so it can support the business more effectively. But how successful are current transformation activities, and are shared services and outsourcing really living up to the promise? A recent study from ACCA, Finance leaders on sourcing success, suggests that many opportunities remain untapped. Uniquely, the survey focused on how CFOs themselves viewed the success or otherwise of shared service and outsourcing (SSO) strategies, outlining the drivers behind SSO adoption and gauging how the business outcomes that were initially sought have shifted. Almost 500 CFOs and other finance leaders across the world participated in the study, which was complemented by in-depth interviews with leading brands such as Microsoft, GE and AOL. The outcomes make compelling reading First it is important to note that not everyone has adopted SSO, even for transactional finance activities. Twenty-eight per cent of respondents

to the survey said they had not yet taken the plunge with remote delivery of some finance operations. For those CFOs that have, the survey suggests that shared services and hybrid models are the significant preference.

Partial penetration In many senses SSO has been an overwhelming success, particularly around transactional finance activities. Leading brands around the world have tapped into a compelling labour arbitrage and used SSO to drive process standardisation. But the survey also sounds a note of caution and suggests there is much more to do. Many CFOs are still not using remote delivery for transactional finance activities, and the promise of shifting the ‘higher value’ finance activity out remains just that, a promise, even with the largest businesses. Around 60% of respondents still keep higher value activities in-house. The good news is that these findings don’t appear to detract from the attraction of SSO for CFOs. In fact, quite the opposite. The survey suggests most finance leaders have very high aspirations for the business outcomes that SSO can deliver, and – guess what? – these aspirations are getting higher.

CFOs cite the usual trifecta of business outcomes – cost reduction, efficiency and finance capability – as reasons for undertaking the journey in the first place but as they progress through the journey new priorities come onstream. Quality, scalability, transformation and talent quickly rise up the agenda as sought-after outcomes too. No pressure then? As aspirations rise, the key question is whether CFOs believe SSO can deliver the outcomes desired. Here is the stumbling block – this survey suggests not quite. So this is a story of growing expectations not quite being matched. It’s a challenging picture with a consensus that effectiveness needs to improve. Not surprisingly, however, this survey suggests that it is those businesses with more longevity in their SSO relationships that typically see greater effectiveness.

The shape of success Of course, one of the critical questions in the adoption of SSO is what success actually looks like. There is much talk about going beyond cost reduction as the barometer of success, yet this survey suggests that measures of success remain in their infancy. Overwhelmingly businesses remain focused on measuring success through

**WHAT DOES THE FUTURE HOLD? More CFOs aspire to implement SSO models

* Outsourcing of higher value finance activities is still untapped * Efficiency, cost and capability are the initial drivers for adoption * Model maturity drives effectiveness * Cost won’t always be the highest priority for CFOs * Focus of SSO is on quality, scalability, transformation and talent

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two methods – cost reduction and the achievement of service level agreement. Fewer than one in six businesses adopt broader measures of success such as return on investment targets, profit contribution targets and net promoter scores. Just 5% of businesses attempt to link their SSO investment to shareholder value. Perhaps this is part of the problem.

Poorly monitored Unsurprisingly, these findings also correlate with the use of monitoring tools, which remain in their infancy. According to the survey, only 31% of businesses use finance dashboards to monitor the programmes, and even fewer use internal/external benchmarking or tools such as six sigma and lean processes. These findings are consistent with ACCA’s previous study on SSO at the start of the year, which was reported in the February and March issues of Accounting and Business. That study concluded much more could be done to embrace remote delivery and capitalise on the benefits promised; change management and service experience in particular were cited as key challenges. So where next? Well, it’s not all bad news. CFO aspirations remain positive

and this is reflected in the desire for future investment in SSO, according to the survey. Put simply, those CFOs who have already invested in SSO expect to continue to add significantly to their investment. In contrast, those who haven’t adopted remote delivery as part of the finance solution are seen to be less bullish about investing in their current finance delivery model. These findings should be seen as a wake-up call to those people involved in SSO delivery on a daily basis. The reality is that SSO won’t always be at

the forefont of the CFO’s mind, and won’t always be given the focus and priority it perhaps deserves. There is no doubt that SSO has delivered significant cost reduction, improved finance processes and helped drive control transparency. Leaders in the SSO space need to continually restate and remind businesses and finance chiefs, and not just themselves, of the significant benefits already achieved. This is particularly true when making the business case for transitioning higher value finance activities and unlocking the value that SSO can deliver. Our survey suggests that some CFOs may need a little bit more convincing. Jamie Lyon, head of corporate sector, ACCA If you are a CFO or FD interested in this area and want to contribute to ACCA’s programme, please email



Have not yet implemented SSO


Have had their current finance delivery model in place for more than five years


CFOs use shared services or a hybrid of SSO models


Still keep their transactional finance activities in-house

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36 Corporate * FIRST OF A NEW SERIES Reporting matters How can companies improve their corporate reporting to better communicate with the capital markets? PwC’s Alison Thomas discusses the investors’ perspective There are many stakeholders with an active interest in corporate reporting. Companies, governments, banks, credit-rating agencies, academics and the media, to name a few, all rely in part upon an effective reporting model for their decision making. However, from all these stakeholders, the investment community stands out. These are the individuals who most closely scrutinise corporate reports. They are the hungriest for information and, in many respects, the most demanding. Over this series, I will reflect on some of the key issues in corporate reporting today, focusing on the investors’ perspective.

Why is the investors’ perspective important? Fundamentally, if an investor or analyst can’t get the financial information they need, they can’t make effective decisions. These decisions drive the capital markets and have a real impact on companies and economies. In today’s difficult economic times, it is more important than ever for companies to communicate effectively with investors, to take the guesswork out of their analysis and to give themselves the best chance to access ever-scarcer capital. Yet time and again, investors tell us they are frustrated with elements of current corporate reporting practice. Throughout my career as an investment professional, academic and latterly corporate reporting specialist at PwC talking to the investment community, I have pulled together a picture of the simple things companies could do to improve their communications with the capital markets – both in how they communicate financial performance and how that performance is set in the

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context of the business and its operating environment.

It’s not always more, more, more Companies frequently complain that the investment community always wants more: more disclosure, more detail and more insight. But this isn’t necessarily so. Investors are often in favour of cutting clutter and showing only pertinent information. Volume, they tell us, is no substitute for quality. I will touch on some of the areas most frequently identified by investors as prime candidates for streamlining in later articles.

guarantee that good disclosure would get you a higher share price, but I can guarantee that bad disclosure will get you a lower one.’ The message from investors is loud and clear: good financial reporting and high-quality contextual data is critical to market confidence and lowers the cost of capital for companies that provide it. Alison Thomas is a corporate reporting specialist at PwC. For more information on the financial reporting areas of most interest to investors and how to improve those disclosures, visit

We need to speak the same language We all know that there is some jargon inherent in financial reporting, but we should remember that investors are rarely technical accountants. If management can get ‘back to basics’ and explain the underlying economic substance of the accounting in the financial statements, it would significantly help investors in trying to analyse the entity’s performance. We’ve been consulting with investors for some time to understand where improvements could be made. Some of these ‘quick wins’ are summarised in our ‘Investor view’ series (see link below) and provide some great insight into the concerns and focus of the investment community. An investor recently told us: ‘I can’t

25/06/2012 10:28

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09/05/2012 17:24 25/06/2012 10:28 22/06/2012 14:34:56



Technically speaking [

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

IN THIS ARTICLE: * 01 ODCE addresses issue of errant auditors. * 02 The Property Services Regulatory Authority is now up and running. * 03 Clear as MUD. * 04 New regulations for security firms. * 05 Temporary agency work to get equal pay and conditions. * 06 IAASA finds some more disclosure omissions in public company accounts. * 07 ODCE sets out procedure for dealing with auditor reporting of indictable offences. * 08 Professional conduct update.


In recent years, the Office of the Director of Corporate Enforcement (ODCE) has successfully prosecuted several cases where auditor’s reports filed with the Companies Registration Office were signed by firms/persons who were not entitled to do so or where the names of bona fide audit firms were used without the knowledge of those firms. These offences arise under Section 187 of the Companies Act 1990 (qualification for appointment as auditor) and Section 242 of the 1990 Act (furnishing false information to the Registrar of Companies). Several further prosecutions have been, or are very likely to be, initiated during the remainder of 2012. In one case, conviction under Section 242 resulted in a sentence of imprisonment being imposed on the defendant. A good behaviour bond for two years after release was also imposed on the individual concerned and leave to appeal was refused. In

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another recent case, the defendant was charged with 12 offences under Sections 187 and 242. A custodial sentence of five months was imposed (suspended for three years) in respect of four charges under Section 242, with a fine imposed in respect of certain other charges.


The Minister for Justice and Equality established the Property Services Regulatory Authority (PSRA) on a statutory basis on 3 April 2012. The authority will establish a system of licencing and supervision of property services providers (i.e., auctioneers/ estate agents, letting agents and management agents). It will take over the licensing of auctioneers/estate agents and letting agents from the courts and Revenue, and also licence, for the first time, management agents. The PSRA is confident it will take over licensing from Revenue with effect from the commencement of the 2012/2013 licensing year. At this point, all existing requirements will become redundant and a new licensing regime for management agents will be put in place. A Guide to Becoming a Licensed Property Services Provider, under the new legislation, has been published. See for further details. A code of conduct is already in place for property services providers and copies are on the PSRA website. Auditors using the old auctioneers factsheet issued by ACCA should cease to use it now. Until the factsheet is updated, members are advised to download SI 199 of 2012, copy the pages relevant to the accounting requirements and design audit tests based on these requirements. The audit tests set out in the old auctioneers factsheet will cover most of the new requirements, but not all.

Aidan Clifford FCCA, advisory services manager,

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The Multi-Unit Development (MUD) Act imposes a requirement to disclose a number of matters in an ‘annual report’. These include details of insurance and fire safety, as well as an income and expenditure account and other matters. The Companies Act requires the preparation of ‘Companies Act accounts’ and, although the words ‘annual report’, in general usage, is taken to mean ‘Companies Act accounts’ the MUD Act does not use this terminology. Some auditors have, therefore, concluded that the annual report in a MUD is nothing to do with them, although the ‘Companies Act accounts’ to which they have attached their audit report may be included in an overall annual report, a report that they contend should be prepared by the property agent. Others have concluded that the additional disclosure requirements (see the full disclosure checklist at www.accaglobal. com/mud) should be in an appendix to the Companies Act accounts, i.e., outside the scope of the audit report. Either way, the important issues here are that auditors are not fire safety or insurance specialists and they should decline to provide a ‘true and fair’ opinion on such details. Where the extra information is in an appendix, the auditor will still be bound by ISA 270. In the circumstances where the Companies Act accounts are prepared and audited, and become themselves part of a larger annual report, prepared by the property agent, the auditor would not be caught by ISA 270, although, confusingly, ISA 270 refers to ‘annual reports’, although this is the general usage of this term rather than the usage in the MUD.

04 SECURITY COMPANY CHANGES The government has set 1 October 2012 as the commencement date for

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S37 to come into force (as amended by Section 13 of the Civil Law (Miscellaneous Provisions) Act 2011). This section brings in licensing of security firms and individuals in the security industry. The section applies to private security employers or independent contractors who install, maintain, repair or service access control security equipment; install, maintain, repair or service CCTV security equipment; or who install, maintain, repair or service intruder alarms. See for more details.


The Protection of Employees (Temporary Agency Work) Bill was signed by the President on 16 May 2012. This gives effect to EU Directive 2008/104/EC on temporary agency work. The Act provides that equal treatment in terms of basic working and employment conditions must be applied to temporary agency workers in the same way as if they were directly recruited by the hirer to the same or similar job. Estimates suggest that there are about 35,000 temporary agency workers in Ireland. The majority of agency workers are engaged in the private sector across a diverse range of sectors including security, manufacturing, services, ICT etc. In the public sector, agency working features predominantly in the health sector, which employs significant levels of workers in posts including orderlies, nurses, other professional services and doctors.


Regulation 21(2) of the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 requires that the director’s report of a company that has securities admitted to trading on a regulated market, shall

contain certain specified information. IAASA has identified a number of instances in which the required disclosures have not been provided and has issued an information note, drawing, the requirements applying in this area, to the attention of directors. In summary, the requirements are related to detail of the company’s capital structure and any restriction or special rights attaching to shares; details of significant direct or indirect holdings of securities in the company; any rules that the company has in force concerning appointment and replacement of directors or amendment of the articles of association; significant agreements that take effect, alter or terminate upon a change of control of the company following a bid, and the effects of any such agreements; and any agreements between the company and its directors or employees providing for compensation for loss of office or employment that occurs because of a bid.


ODCE, in association with CCABI, has issued new guidance to explain its structure for responding to reports from auditors in relation to indictable offences. The guidance, Auditor Reporting, What Happens Next, is available at


If you are facing the prospect of dealing with the ACCA Professional Conduct Department, Authorisation and Licencing or Disciplinary Committees, ACCA Ireland has arranged a brief tour of the topic from Reddy Charlton in our new professional conduct resource on the Irish Technical Library (ITL) at http://ireland. technical_library/

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Tax 2012 – a round up In this article: 01 Department of Finance consults on film relief. 02 Revenue issues information on VAT, Form 11 filing and repayments. 03 Budget 2013 targets confirmed.

01 Consultation on film relief The Department of Finance has published a consultation paper inviting submissions as part of an economic impact assessment of Section 481 Film Relief. This relief applies to individuals and companies who make qualifying investments in certain film production companies. The department aims to review the operation of the scheme, with a view to making decisions regarding its future after 31 December 2015, the date on which the scheme is currently scheduled to terminate. The intention is to minimise the exposure of the exchequer to the costs associated with the scheme, while maximising the effectiveness of the resulting expenditure in the sector. The department is asking the following questions: Is the support of the film and TV sector through section 481 relief an efficient use of scarce resources and why?; Does the scheme maximise the potential economic benefits to Ireland in terms of stimulating activity in the sector?; What are the economic arguments for restricting or terminating the scheme?; What changes to the existing scheme should be considered, and why?; Is there merit in extending the scheme beyond 2015?; and, How does the scheme interact with other enterprise tax incentives? The full consultation document can be downloaded from the Department of Finance website and the closing date for submissions is 31 July 2012.

* * * * * *

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02 Finance announcements In early May, the Department of Finance published a revision to its statement of strategy for the period 2011 to 2014. The statement provides for a revised organisational structure of the department, which will be based on four key policy divisions: international, fiscal, financial and economic. A corporate office and a finance office will also be established. With regard to tax policy, the department identifies one of its aims as ‘broadening the tax base and distributing the tax burden in a manner that is supportive of growth, with a taxation policy that supports the promotion of fairness, enterprise and competitiveness’. Guidance on VAT Revenue have issued an information leaflet providing details of the practical application of the ‘place of supply’ rules for services connected with property. The place of supply of services can vary depending on whether the service supplied is directly related to a specific property or whether the service has only an indirect connection with the property. The leaflet, which is available on the Revenue website, contains a list of services that are considered taxable, where the property is located and a list of services whose place of supply is determined under the general place of supply rules. It also provides guidance for Irish suppliers providing services directly related to property elsewhere in the EU, and foreign suppliers providing services directly related to Irish property. Enhancement to ROS Form 11 Readers who are involved with filing income tax returns, either on behalf of clients or on their own behalf, may be interested to know that the prepopulation facility on the ROS Form 11 now includes information on payments received from the Department of Social Protection (DSP) for 2011. eBrief No.

24/12 notes that the nature of the payment and the amount received will appear, in a table, above the entry fields for DSP payments in the Form 11. It should be noted that, where a taxpayer is in receipt of a DSP payment that does not appear on the table, or is not in receipt of a payment despite it appearing, the correct amount must be entered on the return. Revenue also notes that it does not have access to the source of the DSP figures and are not in a position to clarify amounts. Any queries regarding amounts prepopulated should therefore be clarified directly with the taxpayer. Repayments and offsets Readers may recall that Finance Act 2012 introduced a provision stating that where a repayment of tax cannot be made to a person because a claim is lodged outside of the relevant time limit, an offset against any of the person’s other tax liabilities is not permitted. A limited exception to this general rule applies where tax is due and payable for a period by virtue of action taken by Revenue, to assess or recover tax, at a time that is four years or more after the end of the period involved. In such a case, an amount of tax that cannot be repaid because of the application of a time limit, but which relates to the same period as the tax liability Revenue is pursuing, is available for offset. against that liability. Revenue have now updated their tax and duty manuals to reflect this position. VAT treatment of vouchers EU VAT rules will be updated to ensure uniform VAT treatment of vouchers, under plans announced in May by the European Commission. The VAT directive does not currently contain rules on the treatment of transactions involving vouchers, and this has obliged Member States to develop their own solutions. The Commission plans to update the VAT Directive to define the different

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categories of vouchers, and to identify the point at which VAT is payable for each category. Meanwhile, HMRC in the UK has announced a change in the UK VAT treatment of face-value vouchers. The change arises from a decision of the European Court of Justice and it is effective from 10 May 2012. VAT on such vouchers will now become due, if applicable, when they are issued rather than when they are used to purchase goods or services. VAT will also be due on each subsequent sale of the voucher.

tax base; A value-based property tax; A restructuring of motor taxation; A reduction in general tax expenditures; and, An increase in excise duty and other indirect taxes. Meanwhile, Budget 2013 will also see the introduction of expenditure measures to the value of €2.25bn,

* * * *

including social expenditure reductions, reductions in the total pay and pensions bill and reductions in capital and other expenditure. The OECD is currently conducting an independent review of long-term pensions policy in Ireland. Cora O’Brien is director of technical services, Irish Taxation Institute. Email

03 Budget 2013 targets The latest update to the EU/IMF Programme of Financial Support for Ireland was published by the Department of Finance in early June. The document confirms the tax and expenditure targets that the government has agreed to attain with measures to be introduced in Budget 2013. The government has committed to implementing tax measures that will yield at least €1.25bn. The measures to be introduced with a view to reaching that target include the following: A broadening of the personal income


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Northern Ireland tax notes Real time information The changes relating to Real Time Information are fast approaching, so check with your software provider if you need to make any changes to your processes. From October 2013, all employers and pension providers will need to be registered and reporting to HM Revenue & Customs (HMRC). This will result in most employers and pension providers making changes by April 2013. HMRC’s guidance (www. uk/rti) focuses on the following areas; correct payroll data, updated payroll software, correct Bacs references and where to find further support.

Engagement letters Technical Factsheet 173, Engagement Letters for Tax Practitioners, is the updated joint guidance issued by the main tax and accountancy bodies. Amendments have been made to the foreword, guidance notes to the appendices and Appendix C – standard terms and conditions of business only. An additional Appendix D has also been inserted covering disengagement letters. All other appendices remain unchanged. New subjects covered in this edition are: * The Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2008. * Consumer Protection (Distance Selling) Regulations 2000. * Services directive. * iXBRL tagging. * Disengagement letters. The topics for which the guidance or recommended text has been changed include: * Acting as a guarantor – wording expanded.

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* Limitation of liability – wording expanded and some text moved from the standard terms and conditions to the covering letter. * Limitation of third party rights – wording expanded. Practitioners are encouraged to review their existing engagement letters annually and update as appropriate. Where practitioners use the engagement letter and schedules developed by the joint bodies, they should tailor them to suit their practice. The factsheet can be found at members/ publications/ technical_factsheets

Dispute service HMRC’s Alternative Dispute Resolution (ADR) service seems to be one of its best-kept secrets. While there were doubts among members about the independence of the service when it was first set up, the few practitioners who have used the service have reported that it works well. If you have dismissed it, it may be worthwhile having another look. You can see HMRC’s examples of suitable cases for the ADR pilot at www. appendix-a.pdf Please let us know if you have used the service and how you found the process. Email advisory@

Internal audit The Auditing Practices Board (APB) has issued a consultation paper on proposed revisions to International Standards on Auditing (ISAs) (UK and Ireland), addressing the use of internal audit to adopt changes to the corresponding ISAs issued by the IAASB.

The proposed changes are designed to enhance auditors’ risk-assessment procedures for entities with an internal audit function, and provide a more robust framework for evaluating and using the work of an internal audit function including in appropriate, limited, circumstances obtaining direct assistance from internal audit staff under the supervision and control of the external auditor.

Greenhouse gases The International Auditing and Assurance Standards Board (IAASB) has released the new International Standard on Assurance Engagements (ISAE) 3410, Assurance Engagements on Greenhouse Gas (GHG) Statements. The new standard addresses global assurance services in support of reliable emissions reporting, whether for regulatory compliance purposes or undertaken on a voluntary basis to inform investors, consumers, and others. It addresses practitioners’ responsibilities in identifying, assessing, and responding to risks of material misstatement when engaged to report on GHG statements. It sets out requirements and guidance on the work effort and reporting responsibilities of practitioners for both reasonable and limited assurance engagements. The ISAE is applicable to a broad range of situations, from emissions from electricity used at a single office, to emissions from complex physical or chemical processes at several facilities across a supply chain. Glenn Collins, head of technical advisory, ACCA UK

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Tax diary JULY 2012 General 6 Mandatory reporting Where applicable, quarterly return of client lists for period to 30 June 2012. 14 PAYE P30 monthly return and payment for June 2012. (ROS extension to 23 July 2012). 14 PAYE P30 return and payment for calendar quarter ended 30 June 2012. (ROS extension to 23 July 2012). 14 PSWT F30 monthly return and payment for June 2012. (ROS extension to 23 July 2012). 19 VAT Bi-monthly VAT3 return and payment for the period May/ June 2012 (ROS extension to 23 July 2012). 19 VAT Half-yearly VAT3 return and payment for the period January-June 2012 (ROS extension to 23 July 2012).

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Companies 14 Dividend Withholding Tax Return and payment of DWT for distributions in June 2012. 21 Corporation Tax Return and final payment for accounting periods ended 31 October 2011. (ROS extension to 23 July). 21 Corporation Tax Preliminary tax for accounting periods ending 31 August 2012. (ROS extension to 23 July). 21 Corporation Tax First instalment of preliminary tax for ‘large’ companies for accounting periods ending 31 January 2013. (ROS extension to 23 July). 31 Form 46G – Return of Third Party Information Form 46G for accounting periods ended 31 October 2011.

AUGUST 2012 General 14 PAYE P30 monthly return and payment for July 2012. (ROS extension to 23 August 2012). 14 PSWT F30 monthly return and payment for July 2012. (ROS extension to 23 August 2012).

21 Corporation Tax First instalment of preliminary tax for ‘large’ companies for accounting periods ending 28 February 2013. (ROS extension to 23 August). 30 Form 46G – Return of Third Party Information Form 46G for accounting periods ended 30 November 2011.

Companies 14 Dividend Withholding Tax Return and payment of DWT for distributions in July 2012. 21 Corporation Tax Return and final payment for accounting periods ended 30 November 2011. (ROS extension to 23 August). 21 Corporation Tax Preliminary tax for accounting periods ending 30 September 2012. (ROS extension to 23 August).

Information supplied by the Irish Tax Institute 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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On the look out Tracing hidden assets has become a significant new work stream for many accountants in the downturn, as Jim Stafford reports Tracing, tracking and locating hidden and fraudulently acquired assets is not a new phenomenon. Up until recent years, most instructions would typically arise from divorce cases and fraud cases. However, it is now a growing area for many accountants and an area where banks and other financial institutions are engaging accountants more and more often. The engagement is generally as a result of some sort of break down in communication between the bank and the individual (‘the target’) in relation to distressed loan agreements. However, this is not always the case and, on some occasions, the bank may be merely verifying the reliability of information received from the target.

Knowledge The financial institution will often have some detailed knowledge of the assets held by the target, based, possibly, on previously received statements of affairs or loan applications. The information may be limited to jurisdictions where they believe the target holds assets or they may have specific regions and, in some cases, they will have specific addresses of properties held. In general terms, the more information you can obtain, prior to taking on the assignment, the easier the task will be and, ultimately, the higher the likelihood of it being a successful asset tracing exercise. Some jurisdictions, for example

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Ireland and the US, have publicly available databases where you can establish property ownership and directorships on someone with just their name. Other jurisdictions, e.g. the UK, require the written consent of the target to carry out property searches. There are some powerful databases in the US that only allow access to licensed private investigators. We would normally request the following information in order to carry out our work: * Name of the target. * Date of birth of target. * Most recent address of target. * All known addresses of the previous 10 years. * Details of all assets that the bank is aware the target holds. * All known phone numbers. * All known email addresses. * Brief background on the target, career to-date, companies they are involved with, etc. * Spouses name and date of birth, if known. * Children’s names and dates of birth, if known.

Legislation In terms of legal framework, there is a vast amount of legislation that an accountant should be familiar with in terms of advising financial institutions on what steps they may take to enforce judgments. The following briefly sets out the legislation that covers one

aspect of asset tracing, being the reversal of previous asset transfers: * Conveyancing Act Ireland 1634; * Bankruptcy Acts 1988 to 2011; * National Asset Management Act 2009; * Land and Conveyancing Law Reform Act 2009; and, * Companies Acts 1963 – 2009. Some people believe that, if an asset transfer to, say, a spouse, took place more than two years ago, it cannot be reversed. However, this is not the case. Under the 1988 Bankruptcy Act, an asset transfer within the previous two years of being adjudicated a bankrupt is automatically reversed. If an asset transfer took place between three and five years prior to bankruptcy, and it can be proved that the party that transferred the asset was insolvent at the time, then that asset transfer can also be reversed. Another key piece of legislation affecting asset tracing are the Data Protection Acts. In summary, the Data Protection Acts state that: * Any processing of information by private investigators must be undertaken in full compliance with the Data Protection Acts. * The private investigator shall be expected to comply at all times with the Data Protection Acts. * Any unauthorised processing, use or disclosure of personal data by the private investigator is strictly prohibited.

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Surveillance Accountancy firms do engage private investigators in some cases, and they can prove useful. However, there are many instances where they may add little, if any, value to a case. A good ‘lifestyle report’ on a target from a private investigator may take up to four weeks, which can delay finalising the asset tracing report to the client. Cost/ benefit must also be taken into account prior to engaging a private investigator. They are quick to recommend surveillance on a target. However, this will prove costly and is not often adjudged to produce useful results.

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Such surveillance was probably more useful in a pre-IT age, when a target might have suggested the existence of a bank account by walking into a certain bank branch. However, given the pervasiveness of internet banking, such leads are less common today.

Results Asset tracing is useful in some cases, and we can get good results for a client. However, it is sometimes more beneficial and cost effective for the financial institution to have the debtor examined in the District Court or the

High Court, as it forces the debtor to be truthful and forthcoming with information in relation to possible hidden assets, and obliges him to release bank statements, etc. Having direct access to bank statements and tax returns is much more productive. The area of asset tracing is a growing one and one that is sure to continue to grow as financial institutions seek to make recoveries on distressed loans. Jim Stafford is a partner in Friel Stafford Corporate Recovery. Email

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The powers that be Eamon Coates assesses the new powers given to Revenue by government in recent years As part of the continual campaign to detect and deter tax evasion, and to maximise compliance in relation to both the filing of returns and payment of tax, the Oireachtas, in each recent Finance Act, has provided Revenue with additional powers. This article considers some of the more recent powers provided to Revenue in Finance Acts 2010, 2011 and 2012.

Suppression Devices An automated sales suppression device (or ‘zapper’, as it is commonly known) is a software programme that falsifies the electronic records of point-of-sale systems for the purpose of facilitating tax evasion. The use of a zapper enables businesses to alter point-of-sale records so as to delete a number of sales transactions. The use of a zapper can be difficult to trace and is unlikely to be detected by either an auditor or an accountant preparing accounts. However, Revenue has detected the use of such devices using their software programmes. While the understatement of sales or profits is, of course, an offence under many tax statutes, Finance Act 2011 introduced a specific Revenue offence, under Section 1078 TCA 1997, in relation to zappers. Effective from 6 February 2011, apart from any other offence which a person may have committed, a Revenue offence is committed where a person knowingly or willfully possesses or uses, for the purpose of evading tax, a computer

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programme or electronic component which modifies, corrects, deletes, cancels, conceals or otherwise alters any record stored or preserved by means of any electronic device without preserving the original data and its subsequent modification, correction, cancellation, concealment or alteration. In addition, it is also an offence to provide or make available to another person such a programme for the purpose of evading tax. A person guilty of a Revenue offence may be liable to a fine of up to €126,970 or imprisonment for a term of up to five years, or both.

Power of attachment Under the provisions of Section 1002 TCA 1997, Revenue can compel certain persons who owe money to or hold financial assets of a taxpayer who has defaulted in paying tax, interest or penalties due to Revenue to make payment to it in discharge or part discharge of the taxpayer’s liabilities. Typical of persons who Revenue would require to make such a payment would be a trade debtor of the taxpayer or a financial institution holding funds belonging to the taxpayer. Under the legislation, as originally enacted, a specific exclusion was made for wages or salaries owed by an employer to an employee. Previously, an employer could not be compelled to pay to Revenue tax liabilities of the employee out of wages or salaries due to the employee. Such a situation might have arisen where an employee

had unpaid liabilities to Revenue on investment or rental income or capital gains. However, under the provisions of Section 74 Finance Act 2011, the situation has changed. Effective from 6 February 2011, Revenue may compel an employer to discharge tax liabilities of an employee out of salaries or wages due to the employee. The Notice of Attachment served on the employer will specify the period of time over which these payments are to be made by the employer to Revenue. Such payments, of course, will be deducted from the employee’s gross salary in addition to the usual statutory deductions for PAYE, PRSI, etc.

The collector general The Finance Act 2012 grants new powers to the collector general when dealing with persons with unpaid tax liabilities. Section 125 Finance Act 2012 empowers the collector general to require any person who has failed to discharge tax due to deliver a comprehensive statement of assets and liabilities. Where a person is jointly assessed to income tax, his or her spouse or civil partner will also be required to deliver a statement of affairs. The statement or statements of affairs must include all assets, wherever situated, to which the person or persons are beneficially entitled and all liabilities for which the person or persons are liable on the specified date. Certain assets of a minor child of a person, his/her spouse or civil

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partner must also be included. Persons acting in a representative capacity for another person or as trustees of a trust may also be required to file a statement of affairs with the collector general. The section sets out the assets/liabilities that must be included in a statement of affairs of such persons. For example, in the case of a trustee, the statement must include all assets and liabilities comprised in the trust on a specified date. Any statement of affairs filed under this section must be signed by the person by whom it is delivered and must include a declaration by that person that it is correct and complete to the best of that person’s knowledge, information and belief. There is also a provision whereby the declaration may be required to be made on oath. Section 126 of the Finance Act 2012

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empowers the collector general to require a person carrying on a business to give security to the collector general for the payment of certain fiduciary taxes that are or may become due from that person. The taxes are PAYE/PRSI, Relevant Contracts Tax, VAT and Universal Social Charge. Security may be required only where: (a) In relation to businesses that have ceased, tax which arose while the business was trading; or (b) In relation to a current business, where tax due has not been paid within 30 days of the due date. The section states that the security shall be of such an amount and in such form as the collector general considers appropriate. The legislation contains no further detail on this point. Where a person is required under this section to provide security to the

collector general, it shall be an offence for that person to engage in business until the relevant security has been provided to the collector general. Any person served with a notice under this section requiring that person to provide security to the collector general may appeal the notice within 30 days to the Appeal Commissioners. The person can continue in business pending the Appeal Commissioners’ determination. The implications for persons served with notices requiring that they provide security to the collector general are very serious. Particularly serious is the prohibition on carrying on business until such time as the required security is provided to the collector general. In addition, the definition of ‘management of the business’ has the potential to bring a wide group of persons within the section.

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Given the serious implications for persons within the ambit of the section and the lack of detail contained in the section, it will be interesting to see how Revenue propose to implement the legislation. Before implementing the section, Revenue should provide detailed guidance as to the circumstances in which the legislation will apply, the type of security that will be sought, and the range of persons who may be served with notices.

Credit cards In the course of its audits and other interventions, Revenue has come across situations where payments made by way of credit card by customers for goods and services were not included in the merchant’s accounts or tax returns. For example, in a situation where

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a merchant or trader may have a number of terminals for use by customers to make payment by credit card, payments made using a particular terminal or terminals may not be properly recorded. Under Section 122 of the Finance Act 2012, an obligation will be imposed on payment settlers, i.e., persons who make payment to merchants or traders who have supplied the goods or services to the customer, to make a return to Revenue of amounts paid to traders or merchants. Access to this information will assist Revenue in verifying the accuracy of the trader’s tax returns. The legislation does not specify when payment settlers will first be required to make returns to Revenue or the year or years for which they will be required to make returns other

than to state that returns shall not be required for a year earlier than 2010.

Conclusion Practically every Finance Act of recent years has provided Revenue with new powers. Generally, these provisions do not attract high profile media attention, which tends to focus on changes to tax rates, introduction of new reliefs, or the abolition of existing reliefs. It is, therefore, very important for practitioners to familiarise themselves with the details of new Revenue powers by reading the Finance Acts and publications by professional bodies so as to be aware of potential sanctions facing their clients. Eamonn Coates is director, Taxation Services, Deloitte. Email

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Funding the export recovery Graham Byrne on the funding opportunity for Irish companies as they explore export opportunities When Bibby Financial Services surveyed businesses they found Irish exporters are over reliant on temporary finance solutions to fund overseas activity. The survey findings revealed that 25% of business owners surveyed were found to be relying on bank overdrafts to fund export activity, followed by 14% on credit cards and 11% on personal savings. The results highlighted the fact that many Irish business owners are struggling to access flexible funding solutions. It is a somewhat obvious conclusion to draw that the Irish business community are working with temporary funding solutions and are missing out on real opportunities as a result.

Communications Admittedly, with the conflicting credit availability reports from small business associations and traditional lenders pouring in, confusion and uncertainty is ever present in the economy. It is clear a more concerted effort amongst lenders, government agencies, business groups and financial advisers is required to provide increased support to Irish SMEs, particularly around raising awareness of funding

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options available to them and support systems that exist. While we have been beating the same drum repeatedly, more needs to be down to help SMEs, who are the key to economic recovery. It is vital that businesses are equipped with all relevant information to enter overseas markets. Now, given the continued lack of access to flexible finance, more and more businesses are moving away from traditional lenders, with many SMEs and start-up businesses looking beyond traditional ways of doing business and considering trading overseas as a viable option. Some businesses are hesitant about taking their business to the next level and are uncertain about what exporting entails, yet there are many opportunities for growth in overseas markets.

Options When embarking on export activity many Irish businesses come across initial obstacles such as length of time involved securing new business, travel and associated upfront costs, putting a strain on working capital. However, more and more businesses involved in exporting are finding effective support in export invoice finance,

which is providing them with adequate and flexible funding to maximise opportunities. Export invoice finance not only helps businesses control their spending, it also enables businesses to progress with confidence to take on new business and make significant on-going investment, safe in the knowledge that their cashflow needs are being met. Moreover, global invoice finance players are well placed in establishing the correct and appropriate levels of funding. For exporters, it is imperative that they understand international business risk and, through export invoice finance, businesses can have international credit searches carried out on their behalf and establish a global rating on both new and existing customers. While businesses can, of course, maintain their credit control and all elements of their customer relationships themselves, opting to use a comprehensive management service can help overcome problems associated with any language barriers that may exist in

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certain markets with the assistance of a highly-skilled, multi-lingual credit management team.

Reduce uncertainty With global invoice finance providers, businesses can also reduce risks associated with the uncertainty of fluctuating exchange rates – their wide networks of international bank accounts allow for fast and efficient payment in different currencies. In fact, leading invoice finance providers who have a global footprint can utilise worldwide knowledge, experience and presence to assist clients with various exporting challenges and provide on-the-ground assistance through

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expansive networks of offices in leading markets. For those businesses considering trading overseas, it is important to seek out all the support mechanisms available. Businesses across all sectors, whether they are in the initial planning stages of export or wanting to build on already existing export activity, don’t have to work on their own. This is not to say there isn’t a lot of work involved, but in the end, the benefits will far outweigh the initial stumbling blocks. Graham Byrne is managing director, Bibby Financial Services Ireland. Phone 01 297 4911.

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Banking on it The opportunities for funding agri-business growth are growing, but clear business plans are essential

‘Agri is the single largest sector in Bank of Ireland business banking and represents one third of our overall customer base,’ Derek McDermott head of asset and commercial finance, Bank of Ireland, explains. With Ireland’s largest indigenous industry now scaling up for a period of growth in the decade ahead, McDermott says the bank has seen a general increase in the amount of credit approved for those operating in agriculture over the last year. A number of factors are driving this, he adds, from an increase in land transactions to agri-food business owners looking to expand. Helping these enterprises avail of the growth opportunities emerging is a priority for all the banks at the moment and, McDermott says, in the case of Bank of Ireland, ‘approval levels for agri-food applications are at over 80%. We are encouraging agri-food producers to come to us and discuss their plans with us.’ There are no mysteries as to what makes for successful applications: ‘a clear and up-to-date business plan is the most important ingredient for a

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successful meeting with your bank. It should outline factors such as what your market is; what your unique selling point is; what assumptions are used in producing projections; and what your funding requirements and projected cashflows are.’

Services One example of a product Bank of Ireland offers to support companies that are expanding into new markets is invoice discounting, whereby a business can use their existing debtor book to raise the funding required to expand. In 2011, €3.3bn of sales discounted by Bank of Ireland Commercial Finance were related to exports and 41% of its loan book is in the agri-food sector. Liam Woulfe, managing director of Grassland Fertilizers, says his company has been an active user of invoice discounting since it was first established a decade ago. The service has grown in strategic importance over the years and Woulfe sees it as having a particular value in the current climate, where it is ‘a more perfect

model than an overdraft to the bank.’ The company’s strong supplier and customer base is key to its ability to make use of the service, he adds. ‘There are, for the most part, limited companies with a full see-through for the bank in terms of their scale and their strengths.’ The seasonal nature of agri-business also makes it particularly attractive – for Grassland Fertilizer, the majority of transactions are in three months at the beginning of the year. ‘In February, March and April we could do anything up to 70% of our annual business. Invoice discounting is a very useful way of having creditors paid off early and for us to be able to manage our working capital so that we can wait for payments from our customers’. After ten years of using the service, Woulfe describes it as ‘the prefect model for our industry. We could use alternative sources of funding but I see this as fantastic tool for allowing businesses like ours to managing their working capital.’ Donal Nugent, editor

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Accounting solutions In this month’s column, PwC authors answer technical questions on changes in tax rates in interim disclosures, and on segment reporting in current economic conditions


ABC plc in the UK is preparing interim financial statements under IAS 34, Interim Financial Reporting, for the six-month period ended 31 March 20x1. The government has announced that it plans to change the main rate of corporation tax applicable to ABC plc from 30% to 25%. This change is expected to be substantively enacted and come into effect in the second half of ABC plc’s current financial year. Should ABC plc take into account this change when preparing its six-month results? A company’s tax charge cannot be properly determined until the end of the financial or tax year, when all allowances and taxable items are known. IAS 34 therefore requires, in interim periods, an effective tax rate to be calculated based on an estimate of the tax charge for the full year and applied to the results of the interim period. Consistent with IAS 12, Income Taxes, this estimate should use the tax rates (and tax laws) that have been substantively enacted by the end of the interim reporting period. It should not take into account changes in tax rates that have not been substantively enacted. So ABC plc should use the tax rate of 30% in its estimate of the tax charge (making the required adjustments for tax allowances, nondeductible items, etc) at the end of the interim period. If the impact of the announced change in tax rates is material to ABC plc, it should be disclosed in the notes to the interim financial statements.



Most multinational companies have recently changed their internal reporting to highlight increased country risks in Europe. What is the impact of the change on the financial reporting? ABC is a global manufacturing group with operations in three main territories, the US, China and Europe. The group’s executive committee is the chief operating decision-maker (CODM) as defined by IFRS 8, Operating Segments. The CODM monitors revenue and operating profit measures on a territory-by-territory basis and so has three operating segments. In recent years, the group’s operation in China has accounted for around half of the total revenues and operating profits consistently, followed by the US with some 20% share of each measure. The


This is a guide to the new standards and interpretations that come into effect in 2012, outlining key requirements and implications for management. To order copies, visit

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remaining 30% is shared by the group’s European operations mainly in the eurozone. The group therefore reported these three territories as reporting segments in their financial statements. Given the ongoing turmoil in the eurozone, the CODM requested changes to the internal management reporting to show each European country’s performance separately. The determination of operating segments under IFRS 8 is based on how the CODM reviews performance and allocates resources. As a result of the alteration to the internal management reporting, the group’s operating segments have now changed. Management assessed which countries meet the definition of reporting segments. It concluded that China and the US would exceed the quantitative thresholds as described in IFRS 8, para 13 and therefore required separate disclosure. In respect of the European operating segments, although the requirement for segments to have similar economic characteristics might be difficult to overcome when combining individual countries, management was comfortable with the aggregation of operations in Germany and the Netherlands on the basis that these countries have similar economic conditions, exchange control regulations and underlying currency. On the other hand, they concluded that it would not be appropriate to aggregate the operations of Greece, Spain and Hungary because of their differing economic situations. Management has also restated the comparative information. This month’s solutions were compiled by Imre Guba, Richard Tattershall and Iain Selfridge of PwC’s Accounting Consulting Services

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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

Preparing for change Don’t let recent International Financial Reporting Standards amendments both current and future slip beneath your corporate radar, warns Graham Holt The International Accounting Standards Board (IASB) is developing a group of projects that are likely to affect financial statements ending in 2015. However, in the meantime, there have been some amendments to International Financial Reporting Standards (IFRS) which affect year ends in 2012 and others that come into effect from 1 January 2013. Although these amendments have been in existence for a while, entities should ensure that the amendments do not slip under their corporate reporting radar. There are amendments which relate to December 2012 year ends. For example, an amendment to IFRS 1, First-time Adoption of International Financial Reporting Standards, eliminates the need for companies adopting IFRS for the first time to restate derecognition transactions that occurred before the date of transition to IFRS and provides guidance on how an entity should resume presenting financial statements in accordance with IFRS after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. An amendment to IFRS 7, Financial Instruments: Disclosures, introduces some additional disclosures that apply on the transfer of financial assets. The amendments allow users of financial statements to improve their understanding of transfer transactions of financial assets, for example, securitisations, including understanding the possible effects of any risks that may remain with the

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entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. IAS 12, Income Taxes, requires an entity to measure the deferred tax

translation) and those elements that will not (for example, fair value through OCI items under IFRS 9, Financial Instruments). The revisions made to IAS 19, Employee Benefits, are significant, and will impact most entities. They come into effect from 1 January 2013. The

ENTITIES SHOULD ENSURE THAT THE AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS DO NOT SLIP UNDER THEIR RADAR relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be subjective when assessing whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, Investment Property. The amendment provides a solution to the problem by introducing a presumption that recovery of the carrying amount will normally be through sale. In addition, there is an amendment to IAS 1, Presentation of Financial Statements, which applies from 1 July 2012. The amendments to IAS 1 retain the ‘one or two statement’ approach at the option of the entity and only revise the way other comprehensive income (OCI) is presented, requiring separate subtotals for those elements which may be ‘recycled’ (for example, cashflow hedging and foreign currency

revisions change the recognition and measurement of defined benefit pensions expense and termination benefits and the disclosures required. In particular, actuarial gains and losses can no longer be deferred using the corridor approach. New and revised standards on group accounting were published in 2011. IFRS 10, Consolidated Financial Statements, replaces IAS 27, Consolidated and Separate Financial Statements and SIC-12, Consolidation — Special Purpose Entities and sets out a single consolidation model that identifies control as the basis for consolidation for all types of entities. IFRS 11, Joint Arrangements, establishes principles for the financial reporting by parties to a joint arrangement, and replaces IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities, Non-monetary Contributions by Venturers. IFRS 11 reduces the types of

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TO GET THE QUESTIONS GO TO cpd/financialreporting

Helen Brand Chief executive ACCA

joint arrangement to joint operations and joint ventures, and prohibits the use of proportional consolidation. IFRS 12, Disclosure of Interests in Other Entities, combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. In addition, IAS 27, Separate Financial Statements, now has the objective of setting standards to be applied in accounting for investments in subsidiaries, joint ventures, and associates when an entity elects, or is required by local regulation, to present separate (non-consolidated) financial statements. Financial statements in which the equity method is applied are not separate financial statements. IAS 28, Investments in Associates and Joint Ventures, covers equity accounting for joint ventures as well as associates. IAS 28’s objective is to prescribe the accounting for investments in associates and set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. All of the new group accounting standards have to be implemented together and apply from 1 January 2013. They can be adopted with immediate effect (subject to EU endorsement for European entities), but only if they are all applied at the same time. The European Financial Reporting Advisory Group (EFRAG) supports the adoption of the standards and

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recommends their endorsement. However, it does not support the mandatory effective date of 1 January 2013; the field-tests it has conducted provided evidence that some financial institutions would need more time to implement IFRS 10, IFRS 11 and IFRS 12 in a manner that brings reliable financial reporting to capital markets. EFRAG recommends the mandatory effective date of the standards to be 1 January 2014. A number of current IFRSs require entities to measure or disclose the fair value of assets, liabilities or their own equity instruments. The fair value measurement requirements and the disclosures about fair value in those standards do not always give a clear measurement or disclosure objective. IFRS 13, Fair Value Measurement, published in May 2011, deals with this issue. The new requirements apply from 1 January 2013, but can be adopted with immediate effect, again subject to EU endorsement for European entities. In addition to the changes which will have an immediate impact, there is potential for significant change in practice because of current exposure drafts. The comment period for the updated exposure draft, Revenue From Contracts With Customers, closed recently. Most respondents agreed with many of the proposals, but some expressed concerns over the lack of clarity on how to identify separate performance obligations, the performing of the onerous assessment

Dean Westcott President ACCA

Submit your question and get an answer from the top! ACCA Engage September 2012

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CPD units on the web

B B F F at the performance obligation level, and the volume of disclosures. The IASB and US Financial Accounting Standards Board (FASB) are beginning revisions and have indicated the effective date will be no earlier than 2015. The FASB and IASB are proposing to fundamentally change the accounting for leases and are attempting to issue a second exposure draft by the end of 2012. The boards are proposing a ‘right-of-use model’ for lessees in which all leases are recognised on the statement of financial position at the commencement of the lease. A lessee would recognise an asset for the right to use the underlying asset and a liability to make lease payments. The two key factors in initially measuring the right-of-use asset and lease liability are the lease term and lease payments. The lease term is to be the non-cancellable lease period, plus any renewal periods for which there is a significant economic incentive for the lessee to exercise the renewal option. Similarly, a lessor accounting model is proposed. Under this method, a lessor would derecognise the underlying asset leased and recognise a lease receivable measured as the present value of the future lease payments and residual asset measured on an allocated-cost basis. A lessor’s lease of investment property would utilise existing operating lease accounting but this is still in discussion by the Boards. IFRS 9, Financial Instruments, is being

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developed in three phases: classification and measurement, impairment and hedging. The IASB agreed in late 2011 to look at limited modifications to IFRS 9 for classification and measurement. This arose because of application issues with IFRS 9 – the need to consider the interaction between IFRS 9 and the decisions being made on the insurance project, and consistency with the FASB’s model on the classification and measurement of financial instruments. In December 2011 the IASB issued Mandatory Effective Date of IFRS 9 and Transition Disclosures, which amends IFRS 9 to require application for annual periods beginning on or after 1 January 2015, rather than 1 January 2013. Early application of IFRS 9 is still permitted. IFRS 9 is also amended so that it does not require the restatement of comparative period financial statements for the initial application of the classification and measurement requirements of IFRS 9, but instead requires modified disclosures on transition to IFRS 9.

Amortised cost To date, the Boards have decided that an entity should assess the cashflow characteristics of financial assets and its business model to determine which financial assets should be classified and measured at amortised cost. If the business model’s objective is to hold the assets in order to collect contractual cashflows, then amortised cost is used. All financial instruments are initially

measured at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs. A measurement category other than fair value through profit or loss can be used if the contractual terms of the financial asset result in cashflows that are solely payments of principal and interest on the principal amounts outstanding. The existing requirement under IFRS 9 that prevents the splitting of embedded derivatives from financial assets is to be retained. The IASB intends to expand IFRS 9 to add new requirements for impairment of financial assets measured at amortised cost, and hedge accounting. The Boards are continuing their discussions on development of the three-bucket expected credit loss impairment model. The IASB expects to publish an exposure draft in the second half of 2012. It can be seen that when reviewing and preparing financial statements, difficulties arise in ensuring compliance with all of the various amendments being issued, deciding whether to adopt a standard early and determining whether the jurisdiction has actually approved the standard for use. Graham Holt is an examiner for ACCA, and associate dean and head of the accounting, finance and economics department at Manchester Metropolitan University Business School

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B B C C l l

Business Leaders’ Business Leaders’ Forum Breakfast Forum Breakfast 27 September • 7.30am • Westbury Hotel, Dublin 27 September • 7.30am • Westbury Hotel, Dublin Guest speaker Guest speaker Brendan Burgess, Brendan Burgess, Tickets €35 members and €45 non-members Tickets €35 members and €45 non-members Kindly supported by Kindly supported by Booking Booking Lynn McCarthy on +353 1 4988905 or Contact Contact Lynn McCarthy on +353 1 4988905 or

ACCA – the global body for professional accountants ACCA – the global body for professional accountants AB_July_2012.indd 57

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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

Making strategic options fly In the last article of this series, Dr Tony Grundy examines how the finance function – and the accountant within it – can play a much more strategic and influential role

So far this series has highlighted that the competitive environment has a very profound impact on financial returns. For an example of the effect, let’s take a brief look at the case of Marks & Spencer. In the very late 1990s M&S was Britain’s most profitable retailer. It was making profits of more than £1bn on sales of just £8bn. In economic terms, given the general competitive state of the retail industry, the company was making abnormally high returns. This was partly a reflection of its previous competitive advantage – brand, reputation, products and so on – but also in part because it was milking its position, underinvesting (lower depreciation), and skimping on customer service. Newer, nimbler and more aggressive competitors from niche retailers right up to Tesco and Asda were poised to attack its clothing business. And Waitrose, Tesco Finest and Sainsbury were attacking its premium foods business. Using various strategy matrices at that time and through the early 2000s I monitored M&S’s strategic position as shown in the table on this page. M&S’s clothing business was undermined by complacency, and by the early 2000s was really suffering against the competition. During this period, margins and profits at the company collapsed as a result of this weakening competitive position and the rise in rivalry. Its food business didn’t show much innovation throughout the very late 1990s and into the early 2000s. Although that improved greatly post-2005 under Stuart Rose, competition sharpened as its rivals improved their offerings.

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Marks & Spencer: strategic position Late 1990s

Very early 2000s

After 2005

After 2010

Market attractiveness





Competitive strength


Very low



Market attractiveness





Competitive strength







Value tree for new supermarket trolleys New trolleys

Customer value (by segment)

Company value

Operating cost saved Ease of use

Contributed to capturing new customers?

Irritation avoided

Contribution to brand image

Investment cost saved

Switching to competitor avoided?

In short, M&S’s profits collapse and its faltering recovery record very much mirrors, with some lags, the changing strategic position of its individual business streams. The company’s

profits look unlikely to return to the levels of the last century for the foreseeable future because those elevated returns have returned to a ‘normal’ level. What was cunning and

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unique in those halcyon days of bumper profits is no longer so. So profits and financial returns are closely correlated with external changes, with shifts in relative competitive position and with the extent to which the organisation is cunning or complacent. So when accountants look

much more effective in * be influencing key players in the organisation spend less time on more pure number crunching and backwardlooking work. Returning to the issue of shareholder value, there are said to be seven key


IF ALL THIS IS A FOREIGN LANGUAGE TO YOU, THEN AS AN ACCOUNTANT THERE IS SOMETHING THAT YOU AREN’T DOING BUT WHICH YOU SHOULD BE to the profit and loss (P&L) account as the key performance indicator of the business they are often looking at symptoms rather than causes; the P&L figures don’t uncover the real drivers of corporate performance. By becoming strategically astute, accountants and the finance department as a whole can begin to fulfil their true role as the guardians of shareholder value, rather than being primarily the score-keepers who look after accounting profit. To turn this role into a reality, financial professionals need to: become much more involved in the planning process, by co-ordinating and project-managing it apply the strategic option grid (as described in the third article of this series) to help operational managers carry through the ‘challenge-andbuild’ process of refining and testing their options champion the role of shareholder value in the business (as described below), not just in business cases but more generally

* *


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value drivers that propel the net present value of future cash streams of the business: sales growth rate, operating profit margin, three drivers concerned with fixed and working capital, the tax rate, and the cost of capital. These seven drivers all have an impact on the share price. This impact can be modelled on a relatively simple spreadsheet which discounts forecast cashflows and the ‘terminal value’ at the end of the planning period to a present value. If all this is a foreign language to you, then as an accountant there is something that you aren’t doing but which you should be: keeping a close track on the value of your business, seeing whether this value is going up year on year (the ‘economic profit’), and understanding what is really behind that. This is a quite different way of looking at finance. It is forward-looking and not confined to just a year at a time. It is also based on a more honest metric: cashflow. It all helps you, in your role as an accountant, to assess

the value to the business of new strategic options and decisions. The first two of the seven value drivers are called ‘business value drivers’; they are generally the most important in determining the share price and business value. If we look first at the more generic business value drivers, we can trace the links as shown below between competitive strategy (boldfaced) and the value drivers a strategically astute accountant should be looking for.

Sales growth rate

(political, economic, social * PEST and technical) factors: lower

* *

economic growth reduces the sales growth rate Life-cycle effects: maturity dampens price increases, may cause price deflation and lower sales volumes Relative competitive advantage: impacts on relative market share and supports premium prices.

Operating profit margin

five forces: squeezes prices, * Porter’s pushes up costs and reduces margins competitive advantage: * Relative protects against discounting, and


lowers costs of acquiring new customers and reducing the cost of replacement Variables: economies of scale and lower costs.

These are merely high level, but it is precisely this kind of analysis that accountants with a strategic role should be undertaking. The two business value drivers of sales growth rate and operating profit margin are a very good

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CPD units on the web


start but very generic. An accountant can make them far more specific. So first, a business value driver is defined as anything that generates – directly or indirectly – the cash inflows of a business, now or in the future. A cost driver can be defined in a very similar way as anything which generates – directly or indirectly – the cash outflows of a business, now or in the future. In the earlier article on the option grid, at ‘strategic attractiveness’ we were implicitly asking about cashflows, so we should look too at value and cost drivers, but now specifically. To operationalise these, it is best to try to sketch out a tree of value (and cost) drivers which underpin a particular strategic option. An example is in the value tree graphic shown on the first page of this article. This examines the value drivers for a new form of supermarket trolley which goes in a guaranteed straight line. The graphic shows an example of value segmentation – that is, economic value which accrues either to different people or in different ways/activities. This process allows indirect and less tangible sources of value to be captured – and ultimately for some ‘what if?’ approximate valuation to be done. This allows the accountant to capture softer value in business cases. In strategic planning softer value is very common. Such value trees not only help to cast the net of quantification wider but also, as we drill down to the bottom of that page, in more detail and depth. This methodology has helped me to put an economic value on culture change at BP and on learning and development at a police force, demonstrating the high ratios of value over cost resulting.

AB_July_2012.indd 60

The cost driver tree I created had the investment and running costs broken down into losses and damage (big) and trolley retrieval costs (enormous). Drilling down here has begun the process of convincing UK supermarkets to reconsider coin locks. Using these kinds of pictures can enable accountants to perform a combined strategic and financial analysis of strategic options, project cost breakthroughs and generate far better business cases generally. Let’s now look at how a finance department might develop a strategy for itself.

Current position What businesses are we in? Transactional Technical Reporting Budgeting and financial planning Strategic, advisory, influencing Process development Special projects (for example, cost management) What is the current value added and what are the costs? Internal customer analysis/costs.

* * * * * * * * *

Value outsourcing Options/breakthroughs: Shift resources from traditional activities to strategic. Adapt structure and adopt more fluid roles. Mindset more commercial, forwardlooking, advisory.

* * *


be regarded as more of a * To business unit than a functional overhead, a voice championing shareholder value.

Not rocket science Creating a strategy for a finance department isn’t rocket science. It is a very similar process to developing one for any other business or function. In the future it would be wise to capitalise on your learning. Sadly the provision of short courses on strategy has dried up. In terms of further reading, Wikipedia is excellent and cuts through the terminology, although it is still rather conceptual. MBA courses can help broaden you conceptually and give you far more confidence. They put a lot of emphasis on strategic thinking – contact me via my website if you have serious interest. Strategic projects are another excellent way to develop further – for example, major change programmes, secondments, acquisition work and so on. Do trial techniques such as the option grid on these projects. Let me finish with a story. A group of turkeys were having a day out in Hyde Park. While they were having their lunch (chicken sandwiches), a man came up to them and said, ‘Would you like to fly? I can show you how.’ They agreed and he took them on a flight around the park, over Buckingham Palace and Big Ben. When they landed, they thanked him and said what a great time they had had, then walked home happily. What is the one big thing that the turkeys forgot to do? Dr Tony Grundy is an independent consultant and trainer and lectures at Henley Business School in the UK

In the next issue we begin a new series of articles by Dr Grundy, this time on economic value.

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Motivate, guide, support Is it time for you to give something back to the profession by supporting an ACCA trainee as a workplace mentor? It’s easier than ever and can contribute to your own CPD Do you remember the days when you were an ACCA student or affiliate, looking for support to help you gain the practical experience requirement (PER) of the ACCA Qualification and sign off your achievements? Now ACCA trainees are asked to find a workplace mentor – an individual who can verify their experience but also act as a guide to help them plan how they will achieve competences and to generally motivate and offer support. At ACCA, we believe that members are our greatest asset and that mentoring is the best mechanism to ensure that the quality of our membership base in the future remains as high as it is today. We therefore put a lot of resource into making sure that members who act as workplace mentors are supported by ACCA.

What’s involved?

Why become a mentor?

If you’re already a mentor, signing off your trainees’ experience is now easier and simpler than before: the look and feel of the tool will be slightly different for you, but the process you follow in signing off PER will remain exactly the same access to My Experience is through myACCA just like before; and any information you and your trainee may have already entered has been transferred to the enhanced tool. We will remind trainees regularly to update My Experience. Please help us reinforce this message by explaining to your ACCA trainee(s) that they should use My Experience to log regular updates. For

Becoming a workplace mentor can have many benefits for you: coaching and mentoring can count towards your annual CPD requirement if you are learning relevant new skills that you can apply in the workplace you will reap the benefits of working with junior colleagues, who will become more able, enthusiastic and develop a better rapport with you you’ll develop the characteristics and behaviours required of today’s rounded business professionals and develop a wide range of transferable skills to use in your career from preparing for coaching or mentoring, through the session itself to your post-session review, you’ll improve both self-awareness and the ability to identify your own areas for development the achievements of your trainees will reflect well on your own leadership ability and potential.

* * * *


AB_July_2012.indd 61

The workplace mentor supports the trainee’s development in the workplace and reviews their progress and achievements at work. As the workplace mentor, you should: help trainees identify which performance objectives to target advise trainees about performance targets to achieve and the date by which they should achieve them evaluate trainee progress on a regular basis review the answers given to challenge questions sign off experience and the performance objective if you agree that the standard required has been met.

* *

example, they can use the tool to log some months of relevant experience with an employer, even if they have not yet achieved any Performance Objectives. For more information please visit

* * *

Already a workplace mentor?

* *


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Activity Based Costing – From Manufacturing to Services 27 September 18.00 – 20.00 Ulster Members’ Network John Doris, Meridian Business Advisors Radisson Blu Two CPD units

FRSME 13 September 09.30 – 16.30 Corporate Sector Chris Nobes, University of London Radisson Blu Royal, Golden Lane Seven CPD units

CORK US GAAP Update 14 September 09.30 – 16.30 Corporate Sector Chris Nobes, University of London Clarion, Lapps Quay Seven CPD units Enterprise Schemes and Grants 25 September 18.00 – 20.00 Munster/Connaught Members’ Network Carol Grogan, Camplex Ltd Clarion, Lapps Quay Two CPD units

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Taxation Compliance and Topical Updates for the Corporate Sector 20 September 09.30 – 16.30 Corporate Sector Paul Murphy, MJ Kelly & Co Gibson Hotel, Dublin 1 Seven CPD units Business Breakfast 27 September 07.30 – 09.00 Business Leaders’ Forum Brendan Burgess, Westbury Hotel Two CPD Units Managing the Over-Geared Business 11 September 18.15 – 20.15 Leinster Members’ Network Mick McAteer, Grant Thornton Radisson Blu Royal, Golden Lane Two CPD units

Funds Services Event 19 September 16.00 – 20.00 Financial Services Network Various Speakers Gibson Hotel Four CPD Units The Future of Pensions – How to Plan and Invest for Retirement 26 September 18.15 – 20.15 Leinster Members’ Network Conail Flynn, Grant Thornton & Shane Gill, Key Capital Private Gibson Hotel Two CPD Units

DUNDALK People, Problems, and Productivity – Top HR Issues 20 September 18.00 – 20.00 Leinster Members’ Network Terry Harmer, NCL Training Crowne Plaza Two CPD Units

GALWAY Enterprise Schemes and Grants 6 September 18.00 – 20.00 Munster/Connaught Members’ Network Carol Grogan Menlo Park Hotel Two CPD Units

LIMERICK Conference 3 29 September 09.30 – 16.00 Practitioners Members Network Various speakers Castletroy Park Hotel Seven CPD Units

SLIGO Bankruptcy 4 September 18.00 – 20.00 Munster/Connaught Members’ Network Tom Murray, Friel Stafford Corporate Recovery The Glasshouse Hotel Two CPD units

WATERFORD Employment Law 5 September 18.00 – 20.00 Munster/Connaught Members’ Network Deirdre McHugh, 353 Management & Legal Training Services The Tower Hotel Two CPD units

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Accounting overseas Gerard Quinlivan on why your CV will benefit from international experience

For career accountants in Ireland, an international move may not be on the agenda due to ample opportunity at home. Nevertheless, there are many upsides to relocating overseas, not least the obvious benefits to your CV. Here are our top ten advantages for ACCA accountants in choosing to work overseas: 1. New experiences – This is your opportunity to gain exposure to new systems and an alternate work culture. This has many benefits, not least of which is the incremental skills and knowledge you will bring back with you. 2. Financial gain – There are many countries where your salary is not subject to the same degree of taxes imposed in Ireland and that have substantially lower living costs. 3. Lifestyle – This is an opportunity to experience a change of pace, move in new circles, learn a new language, and break away from the humdrum of daily life. 4. Ease of transferability – Your ACCA qualification is recognised and respected globally and acts like a

AB_July_2012.indd 63





passport to other markets, without necessarily requiring additional study. Family – Many accountants see the benefits of moving with their families to a new country and many companies provide some form of relocation and education assistance to ease the transition. ‘Swim upstream’ – This is your chance to stand out from the crowd and act fearlessly with your next career step. Many Irish employers regard candidates with international experience on their CV’s very favourably. Globalisation – The increase in the number of Irish plcs setting up operations overseas has led to a parallel increase in demand for Irish accountants. One of the key reasons is the obvious cultural synergy they offer and their ability to hit the ground running in fast paced, changing environments. Career progression – The competition for promotions within the Irish marketplace means that many accountants find it difficult to leap onto the next rung of the

ladder. An international move may facilitate this progression much more quickly in markets where their skill sets are in short supply and their expertise is more readily appreciated. 9. A sense of adventure – An international career move can offer the chance to break down barriers and markedly improve skills and knowledge in more dynamic and exciting environments. Diversifying your industry experience will also add significantly to your marketability and fast-track your career progression. 10. Global reporting qtandards – With increasing use of universal audit and reporting standards across geographic regions, there is significant demand for Irish accounting professionals at all levels possessing the skills and knowledge to implement these locally. Gerard Quinlivan is an international recruitment consultant with Careers Register. Email Gerard.Quinlivan@

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ACCA Approved Employer

The view from: Ryan Spiteri, department manager, Statutory Reporting, HSBC Securities Services


Q Tell us about your role in HSBC? A As department manager for the statutory reporting area, I am responsible for overseeing the overall client service delivery of periodic financial statements and the leadership and development of our team members. We currently produce nearly 300 sets of financial statements per annum under IFRS, US GAAP or Irish GAAP, for a wide range of investment fund structures domiciled in key fund jurisdictions including Ireland, Cayman Islands, Bermuda, BVI, Guernsey and Delaware. Q What are your key business challenges in the year ahead? A The investment funds industry is currently experiencing a number of challenges arising from the introduction of key regulations in both the EU and the US such as UCITS


Favourite get away in Ireland Connemara


Currently reading The Way I See It by Alan Sugar


Must-watch TV None!

WE WANT YOUR VIEW If you’d like to feature on this page get in touch at

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IV, AIFMD, Dodd Frank, FATCA and, also, continuous developments in accounting standards and corporate governance codes. These will require us to undertake changes in our systems and in our accounting and reporting processes, while continuing to meet client demands and maintaining operational efficiency and cost effectiveness. Q How do you plan to overcome them? A At HSBC, we have been closely monitoring the development of these new requirements and are working with various industry participants and our clients to develop solutions that meet these requirements and are tailored to the different needs of each of our clients. We are also fortunate enough to be supported by our global product team that provides us with in-depth knowledge and industry experience and leverages HSBC’s global network of local regulatory expertise. Q Tell us about your experience as a mentor on the ACCA Approved Employer Programme? A My role as workplace mentor for ACCA trainees allows me to provide objective feedback on the selection and completion of relevant performance objectives. I am also able to identify work assignments that allow trainees to gain the necessary work experience. By acting as mentors, we provide a clear message of HSBC’s commitment to provide learning and development opportunities to our staff. This helps us in recruiting and retaining the best talent.

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ACCA WELCOMES NEW FCCAS Dublin’s Shelbourne Hotel was the venue for ACCA Ireland’s FCCA reception on Wednesday 13 June when new fellows were invited to celebrate their becoming FCCA. Welcoming guests, Liz Hughes, head of ACCA Ireland, spoke about the life-long learning opportunities that are available to ACCA members through the CPD programme, as well as the networking opportunities and support available to members throughout Ireland. Following this, an interactive Q&A session with ACCA Ireland president Tom Murray FCCA saw him explain why he chose to study ACCA, how ACCA has helped his career and his reasons for getting involved with the ACCA networks and panels. Louise Fallon, a senior recruitment professional from Robert Walters then spoke about developing career and presentation skills. The event followed by a wine reception which gave attendees the opportunity to network with their fellow ACCA members.

Ann Marie Smith, O’Dwyer Delaney & Co.; Jennifer Bolton, AIB; and Liz Hughes, head of ACCA Ireland

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Fiona Croke and Kate McGuinness, Robert Walters

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ACCA reviews performance More students, more members and more online customer satisfaction

Inside ACCA 64 Approved employer Q&A 65 New members event

ACCA has announced a significant rise in both its new student numbers and online service customer satisfaction at the end of the 2011–12 operating year. Total increase in membership in 2011–12 has been 7,000 (up 4.8%) and over 70,000 new students have started studying for the ACCA Qualification. ACCA now has 154,000 members and 432,000 students in 170 countries. Sustained investment in customer service over the past 12 months has seen customer service targets hit and an improvement in the online customer experience. In addition, ACCA has seen a significant rise in satisfaction with the public value created through its global policy positions and activities. Helen Brand, ACCA’s chief executive, says: ‘ACCA’s results show that we continue to deliver towards our goal to be the leading global professional accountancy body in reputation, influence and size. We’ve seen strong demand for the ACCA Qualification, with significant growth in established markets – such as China, Singapore, Malaysia, the Caribbean and the UK – and in new markets too. ‘Members and students are now starting to see the benefits of investments made in recent years to improve our processes, IT infrastructure and customer service levels. This has included our customer contact centre, ACCA Connect, now open 24/7, 365 days a year.’ Key indicators include: 75% of students and 70% of members now say ACCA is easy to do business with online 85% of exam entries are now made through the ACCA website 90% of online student registrations are now completed within seven days.

* * *

Brand adds: ‘This is a good outcome. We know we need to go further to improve satisfaction ratings even more and have plans to increase our performance around service delivery, including the website. ‘I am particularly pleased to see that we are enhancing our global reputation through our policy and technical work. Council is clear that we must demonstrate public value in all that we do. We have outperformed our target in relation to employers believing that our global policy output brings public value.’

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Helen Brand


Speaking at the Sustainable Stock Exchanges 2012 event in Rio, just before the Earth Summit, Martin Turner, ACCA’s vice president, has called for the Rio+20 ‘zero draft’ to integrate material sustainability information into the corporate reports of listed and large private companies. ‘The distinct and credible reporting of environmental, social and governance [ESG] disclosures have an important part to play in encouraging a positive approach to sustainable development by business and the adoption of long-term and socially responsible investment strategies by investors,’ said Turner. He added that sustainability reporting needed global buy-in: ‘We must aim to achieve a reporting framework which provides meaningful information to users everywhere and is also flexible enough to accommodate substantial differences in cultural and legal practices that may exist in different countries. A framework needs to be put into place to make this happen, which will help businesses to flourish wherever they are based.’ An ACCA paper that considers possible changes to the zero draft is at www.


Economic growth and opportunities and challenges in Africa and globally will be the main theme of ACCA’s Council meeting, to be held in Nairobi as we go to press. There will also be visits to Ethiopia, Tanzania and Uganda. See African lion, page 23.

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AB IE–July/August 2012 (Irish edition)  

Accounting & Business–July/August 2012 (Irish edition)

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