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ab accounting and businesS 02/2012


accounting and business international 02/2012

african journey Kholeka mzondeki on her trailblazing career

unhappy birthday sarbox 10 years on

united nations climate talks outsourcing no turning back technical financial statements

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Editor’s choice As the Sarbanes-Oxley Act heads towards its 10th birthday, it continues to divide politicians and financial experts. While corporate accounts may be more reliable, Sarbox appears no more effective than Europe’s less onerous legislation. See page 20

THROUGH THE GLASS CEILING This month’s front cover pictures Kholeka Mzondeki FCCA. A former finalist in the Nedbank/Businesswomen’s Association of South Africa Businesswoman of the Year Award, she is something of a trailblazer. A seasoned CFO and FD, it is thanks to women like Mzondeki that the corporate landscape of South Africa is changing, slowly but surely. She adheres to a philosophy of social entrepreneurship, and believes that South Africa’s lack of appreciation of its value is a significant contributor to the country’s economic woes. She acknowledges that black women accountants ‘are few and far between’ but she is a dedicated fighter for change. Read her story beginning on page 12. Still in South Africa, in this issue we report from the marathon UN climate talks held in Durban last December. A last-minute deal was achieved, but the agreement to start a fresh round of negotiations to secure a new treaty on global carbon emissions sparked a host of critical accounting and auditing questions. The new treaty will replace the Kyoto Protocol and is due to come into effect by 2020. Read the report on page 16. For companies perhaps looking for an entry-level route into sustainability reporting, there are lessons to be learnt from New Zealand in this month’s issue. The Waikato Management School has come up with a set of 10 minimal requirements. Discover what these are on page 49. Finally, we report (page 28) on the results of new ACCA research looking at the role of accountants in risk management based on a survey of more than 2,000 members from all over the world. It reveals a statistical relationship between the use of good accountancy practices, and a lower incidence of ‘dysfunctional behaviour’ – once again illustrating the vital role accountants play in businesses across the globe. Lesley Bolton,

SAFE AND SOUND Richard Byarugaba FCCA, head of Uganda’s National Social Security Fund, reveals why he took the job and dispels some common myths. Page 24

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TO THE RESCUE ACCA’s CFO summit in Poland stressed the need for innovation among accountants, so that businesses can ride the economic storm. Page 62

VIRTUAL BRIEFING CENTRE Attend live and on-demand audio and video webinars in the virtual theatre, chat with fellow delegates in the networking centre, and access the digital library.

ACCA CAREERS Check out thousands of jobs and expert careers advice at www.

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AB INTERNATIONAL EDITION CONTENTS FEBRUARY 2012 VOLUME 15 ISSUE 2 Editor-in-chief Chris Quick +44 (0)20 7059 5966 Asia editor Colette Steckel +44 (0)20 7059 5896 International editor Lesley Bolton +44 (0)20 7059 5965 Sub-editors Dean Gurden, Peter Kernan, Eva Peaty, Vivienne Riddoch Design manager Jackie Dollar +44 (0)20 7059 5620 Designers Robert Mills, Jane C Reid Production manager Anthony Kay Advertising Richard McEvoy +44 (0)20 7902 1221 Head of publishing Adam Williams +44 (0)20 7059 5601 Printing Wyndeham Group Pictures Corbis ACCA President Dean Westcott FCCA Deputy president Barry Cooper FCCA Vice president Martin Turner FCCA Chief executive Helen Brand OBE


ACCA Connect Tel +44 (0)141 582 2000 Fax +44 (0)141 582 2222 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 is published by Certified Accountant (Publications) Ltd, a subsidiary of the Association of Chartered Certified Accountants. Accounting and Business ISSN: (1460-406X) is published monthly except July/August and November/December by Certified Accountant (Publications) Ltd, and distributed in the USA by DSW, 75 Aberdeen Road, Emigsville, PA 17318. Periodicals postage paid at Emigsville, PA. POSTMASTER: send address changes to Accounting and Business, PO Box 437, Emigsville PA 17318. 29 Lincoln’s Inn Fields London, WC2A 3EE, UK +44 (0) 20 7059 5000

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Audit period July 2009 to June 2010 138,255

12 Woman at the top Kholeka Mzondeki FCCA is helping to transform South Africa’s corporate landscape 16 Emissions omissions Questions remain over a common accounting basis for carbon markets 20 SOX celebrates? The Sarbanes-Oxley Act has reached its 10th birthday, but the occasion is marked by mixed feelings 24 Funding the future A chance to head up Uganda’s National Social Security Fund proved irresistible for Richard Byarugaba FCCA 28 Risk management A new report underlines the important role of accountants 32 New order Global power will continue to shift to emerging markets, says IFA board member Japheth Katto

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



06 News in pictures A different view of recent headlines

49 Lessons from New Zealand Waikato Management School’s set of minimal requirements for sustainability reporting

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 34 Ramona Dzinkowski Detailed understanding of companies is vital, so mandatory auditor rotation is unlikely to be very popular

52 Mending holes An overview of the corporate tax regime in Ghana, where integration is increasing efficiency 54 CPD A look at the comparability of financial statements across national boundaries 57 Update The latest from the standard-setters

Your sector 37 PRACTICE 37 The view from Ansley Syanziba of Moores Rowland, plus news in brief 38 Novel idea Former high-flying corporate finance partner Penny Avis is now embarking on a writing career


36 Dean Westcott New regulation needs to be good for business and in the public interest, says the ACCA president

43 The view from Paweł Górnicki of Ceramika Nowa Gala, plus news in brief 44 Outsourcing How shared services and outsourcing are transforming the finance function 46 Interview Tony Fernandes FCCA has flourished in a wide range of ventures, including the airline business


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 59 African visit Helen Brand opens new ACCA Ghana office 60 Open minds Roundtable highlights the need for Indian businesses to have a positive outlook 62 Through the storm Summit in Poland finds that CFOs have a key role in steering businesses’ fortunes 65 Flexible learning A wide range of online CPD options is on offer 66 News Highlights of the Council meeting on 26 November 2011

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News in pictures


Struggling retailers will be pinning their hopes on a profitable Valentine’s Day following poor or discounted sales in the run-up to Christmas


A Russian protester with a ‘no vote’ sign over her mouth joins a rally in St Petersburg against alleged vote rigging in December’s parliamentary election


French president Nicolas Sarkozy shrugged off Standard & Poor’s downgrade of France’s top-tier debt rating, saying it ‘changes nothing’ for the economy

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Swiss National Bank chairman Philipp Hildebrand resigned after revelations that his wife made a profit of 75,000 Swiss francs from buying dollars, ahead of a decision by her husband to stem a rise in the Swiss currency


Nigeria’s trade unions suspended protests against doubling fuel prices after president Goodluck Jonathan announced a subsidy, slashing costs to about US$2.75 a gallon


Republican presidential candidate Mitt Romney was a step closer to taking on Barack Obama for the US presidency after winning the New Hampshire primary


Thousands of people paid their respects in Wenceslas Square to Václav Havel, the dissident playwright who led the Czechoslovakian ‘velvet revolution’. The former Czech president died on 18 December, aged 75

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News in graphics


The amount petrol prices jumped in Nigeria following the removal of a state fuel subsidy on 1 January, according to the FT.

1: India

2: Vietnam

3: Turkey

4: Argentina

=5: Chile

=5: Hong Kong


Developing economies ranked highest in taking on new staff in 2011, according to a survey of 40 countries by Grant Thornton. In India 67% of businesses were hiring, compared with –33% in Greece in last place.





The number of Fresh & Easy stores being mothballed in the US by UK retailer Tesco.




The amount automotive experts expect the Australian carbon tax to cost local manufacturers over the next four years.




A report by Washington-based financial watchdog Global Financial Integrity, Illicit Financial Flows from Developing Countries over the Decade Ending 2009, has revealed the 20 biggest victims of the illegal flight of capital over the last decade. China came first, followed by Mexico (2), Russia (3) and Saudi Arabia (4). Notably, money flows out of Malaysia (5) have more than tripled from 2000 to 2008. The report found that 157 developing economies lost more than US$900bn in illicit financial outflows in 2009 alone despite the onset of the global financial crisis. The developing world is estimated to have lost US$8.44 trillion in the decade to 2009.

Month in figures

How far property prices in Hong Kong and Shanghai are tipped to fall in 2012, according to Knight Frank.

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The strength of the yen means that Tokyo is still the most expensive place in the world to live, according to a survey by ECA International. Oslo in Norway is followed by Geneva, Nagoya and Zurich. Despite the value of the Swiss franc falling, Swiss locations remain in the top 10 most expensive locations globally.

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The most expensive catastrophes are usually weather-related, but a series of geophysical events accounted for half the insured losses in 2011.

Last year was the costliest ever in terms of damage caused by natural catastrophes throughout the world, according to research from Munich Re.

-$ $380


JAPAN US$210,000M

Global losses two-thirds higher than former record.





Japan/New Zealand quakes make up two-thirds of total.



Insurance covered less than one-third of total losses.



Of the 820 catastrophes, most were weather-related.







Deaths from disasters (excludes Africa famine).





The threat of cybercrime is growing and it ranks as one of the top four economic crimes, according to PwC’s Global Economic Crime Survey 2011. Of the 3,877 respondents polled in 78 countries, almost half (48%) of those who had experienced economic crime in the last 12 months thought the risk of cybercrime was on the rise, with only 4% believing it was falling.






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Proportion of investors deploying strategic planning tools to plan for an uncertain business environment, according to AT Kearney’s index of confidence in foreign direct investment.


The extra hit Spanish banks face in further provisions on bad property assets as part of a new round of reforms for Spain’s financial sector, according to the FT.


Number of Royal Bank of Scotland jobs that will go this year as the stateowned UK bank plans to shrink its investment bank.

Month in figures



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News round-up


Conventional banks operating under licence from the Qatar Central Bank have, under direction from the Central Bank, closed their Islamic branches. They are now prevented from accepting Islamic deposits or offering new Islamic finance services. Where conventional banks’ existing operations could not be closed, Islamic assets must now be managed in a special portfolio and some assets may be transferred to Islamic banks. The Central Bank is concerned that some banks were ‘comingling’ Islamic banking assets with conventional trading operations. Banks also had difficulty producing financial reports which were compliant with International Financial Reporting Standards (IFRS).


The Malaysian Accounting Standards Board has issued discussion papers considering the treatment under International Financial Reporting Standards (IFRS) of three forms of Islamic finance: sharia, takaful and sukuk. Malaysia converged its accounting standards with IFRS at the beginning of this year and the discussion papers consider the application of IFRS to the profit-


Financial reporting in the shipping industry is improving, but best practice is lagging, according to a KPMG study. Investors and stakeholders are driving improvements as they demand clearer, more regular and detailed financial reports. Yet in 2008, 44% of the world’s largest shipping companies did not produce publicly available accounts, said KPMG. It also found that less than half of shipping companies provide sustainability information. John Luke, KPMG’s global head of shipping, said: ‘Capital is in short supply… therefore, ship owners should be interested in presenting themselves in the best possible light if they are after some of that capital.’

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sharing arrangements of the different forms of Islamic finance. Issues that arise include revenue recognition, presentation of statements, fair value measurement, impairment and the use of smoothing techniques.


Municipalities in South Africa have been praised for improving their financial reporting performance. Jan Hattingh, chief director for local government budget analysis at the National Treasury, said nearly all municipalities now produce their financial reports on time, whereas three years ago fewer than 50 of the country’s nearly 400 municipalities did so. ‘This is a remarkable achievement,’ said Hattingh.

NEW COMMUNICATIONS STANDARD The US Public Company Accounting Oversight Board (PCAOB) has proposed a revised standard on communications between auditors and audit committees, replacing an earlier proposal from last year. The revised proposal is intended to strengthen communications and align with other PCAOB standards.

PRADA CHAIRS IFRS FOUNDATION Michael Prada has been appointed as

chairman of the trustees of the IFRS Foundation. He was chairman of the Autorité des Marchés Financiers (AMF) and its predecessor body, the French markets and securities regulator, for 12 years. He has also chaired the Executive and Technical Committees of The International Organization of Securities Commissions and was a founding member of the Financial Stability Forum, now the Financial Stability Board.


Russia has adopted International Financial Reporting Standards (IFRS) in full, with the country’s Ministry of Finance, Minfin, signing an order to implement IFRS. This has now been registered with the Ministry of Justice, published in the country’s official Gazette and is now in force. From this year, credit institutions, insurers and listed companies must issue a full set of IFRS-consolidated financial statements.


Financial education in Russia is going backwards, according to a study by the National Agency for Financial Studies. More citizens are worried by the legal activities of banks than illegal financial pyramid, or ‘ponzi’ schemes. Young adults in cities and regular internet users are most likely to identify a financial pyramid scheme. The study found that high-earning people were no more likely to spot a financial pyramid than low-income earners.


The creation of a eurozone Common Consolidated Tax Base for corporation tax calculations may have moved closer with the agreement of an action plan by the eurozone heads of nations. December’s European Council meeting agreed to a fiscal compact across the eurozone, strengthened economic policy coordination and enhanced economic stabilisation tools. In a statement, the leaders said that this represented ‘further qualitative moves towards a genuine fiscal stability union in the euro area’; adding that

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CFOs still have an urgent need to reduce the cost of running the finance function, improve the efficiency of finance processes, and make finance a more effective and able partner for the business.


this will involve ‘enhanced governance to foster fiscal discipline and deeper integration in the internal market’ and ‘significantly stronger coordination of economic policies’.


A coalition of global insurers, the HUB Group, has called on the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB), to withdraw proposals for the treatment of short-duration insurance contracts. In a letter to the chairs of the boards, the group said that current redeliberation plans may not provide sufficient discussion of accounting for issues about shortduration insurance contracts raised in comment letters, at IASB and FASB roundtables and subsequent venues. ‘With nearly one trillion of annual earned premiums on a global basis, we believe the accounting for shortduration insurance contracts warrants a more substantive discussion between the boards and constituents,’ said the HUB Group in a letter to the boards.

ICAI is giving them ‘one more hearing’ before deciding whether they should be barred from professional practice. Two other accountants, Pulavarthi Siva Prasad and Chintapatla Ravindernath, both of Lovelock & Lewes, were found to have been grossly negligent in their audits of Satyam and were barred from professional practice. Another two accountants are being investigated in relation to Satyam.

Burj Khalifa, Dubai


KPMG’s global revenues grew by over 10% in dollar valuations in the year ended September. They rose by 6.2%, measured in local currencies. Audit revenues grew by 5.8%, tax practices by 13% and advisory revenues by 14.8%, measured in dollars. Highgrowth geographic markets include India, which grew by 25%; Brazil, which grew 22%; and Asia Pacific, 16.6%. Revenues grew by 10.7% in the Americas and by 7.7% in Europe, the Middle East, Africa and India.


The Institute of Chartered Accountants of India (ICAI) has found a former PwC partner guilty of professional misconduct for his role in the audit of Satyam Computers. Talluri Srinivas was found to have not complied with professional standards. The former CFO of Satyam, Vadlamani Srinivas, has also been found guilty of professional misconduct, for not conducting proper due diligence. The

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Greater China led in initial public offering (IPO) activity globally last year, according to analysis from Ernst & Young. Exchanges in China completed 410 deals, raising US$79bn. This represented a big fall in activity from 2010, when US$137bn was raised. Figures produced by Roth Capital Partners showed that doubts about the quality of Chinese firms’ financial reporting led many to go private in the US last year: Chinese equity of US$3.5bn went private last year in the US, compared to only $2.2bn raised in US IPOs.


Ernst & Young is being sued for US$900m by the liquidators of a fund that was defrauded by Bernie Madoff. M-Invest Ltd has accused EY of negligence, professional malpractice and breach of contract over its audits for the fund between 2003 and 2007. The M-Invest fund operated solely to invest client assets with Madoff and was established by Union Bancaire


Dubai’s property sector has begun a strong recovery, according to the state’s land department. Sales of land and property rose by 20% in 2011, backed by a 12% rise in mortgage financing. ‘We can't say that the real estate sector has completely recovered, but the worst of the crisis is behind us and the market still needs a few more years to regain the solidity it used to have a few years ago,’ said Sultan Butti Bin Mejren, director general of the Dubai Land and Properties Department. The picture was confirmed by Dubai real estate agency Clutton’s, which said it expected ‘brisk’ trading in property this year across the United Arab Emirates. It added that the situation was assisted by the perception of Dubai as a business and trading ‘safe haven’ during a period of global economic difficulty.

Privee, a private Swiss bank. Union Bancaire Privee has already provided US$500m towards the liquidation to settle a previous legal action. EY declined to comment.


Ernst & Young has reduced its CO2 emissions in its Americas operations by 20% since 2008, the firm has announced. It cut emissions by 7% last year, from 187,610 to 174,200 metric tonnes. Cuts in datacentre energy consumption were achieved through server virtualisation and improved design of equipment layout and air flow.

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CFO interview

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With her boundless enthusiasm and straight talking, seasoned CFO Kholeka Mzondeki FCCA is leading the way in transforming South Africa’s corporate landscape


t was in the late 1990s that ACCA board member Kholeka Mzondeki FCCA joined a certain South African company as its first finance director – or, as some of its staff thought, the ‘invoice lady’. The company, which she declines to name, was staffed mainly by men in the executive and she giggles as she relates the consequences of her not having been formally introduced to them, amid the chaos of company restructuring in the ‘new’ South Africa. ‘One of the guys saw me in the corridor and he had an invoice that needed to be paid, and said, “Oh, are you the invoice lady?’’ she recalls. ‘Then, two days later, one of them said: “Are you the PA to the guys?’’’ Her response in her mind was: ‘They would be so lucky to have me as their PA.’ Mzondeki relates the experience with infectious humour. ‘I didn’t take offence because they weren’t used to black people, or even women for that matter. I knew where they were coming from. They come from a system where that was their picture.’ Thanks to women like Mzondeki, that picture of the South African corporate world is changing slowly but surely. The CFO of the South African leg of global infrastructure company Arup sits on the boards of a number of local and international companies and organisations. These include players in the world of big business, from Johannesburg Stock Exchange-listed mining company Bauba Platinum to diversified electronics group Reunert. They also include the World Food Programme and HIV prevention nonprofit organisation loveLife.

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Outside the box When asked to join Arup, Mzondeki had been enjoying an 18-month sabbatical. ‘I said, “If you are okay with my boards, then I am on board.” I am lucky that they are open-minded enough to allow me to do all these different things,’ she explains. ‘I am a person who has to do a lot of things to be productive. If you just give me one little thing, you’ll drive me cuckoo. I don’t like being put in a box.’ More importantly, Arup’s values had to resonate with her own. ‘There are certain positions that I have turned down – inasmuch as some would have been good for my CV and my ego but my sense was: no, I’m not going to fit in with their values.’ Mzondeki was raised in Botswana by South African parents. Her father was denied permission by the apartheid government to study law at the white University of the Witwatersrand in Johannesburg. Instead, he read history and philosophy at the then blacks-only University of Fort Hare and became a teacher. But following the introduction of Bantu education – an inferior system that facilitated the subjugation of blacks – he decided to move the family to Botswana. It was there that Mzondeki accessed best schools, gained a commerce degree at the University of Botswana, and then furthered her education in the UK, ultimately becoming an ACCA Council member. Accountancy, however, was not an initial passion for her. It was, she says, a career decision arrived at more by chance than planning and was suggested by her sister.

The tips Kholeka Mzondeki advises young accountants not to be too pedantic about career planning. ‘Life is a journey. If you plan it too much, then all the spontaneity will go out of it. ‘Try as far as possible to follow your passion. Creativity is not only for something like fashion design; you can be creative in your strategic thinking. Use your accountancy training to be lateral. I credit ACCA training for my ability to make myself relevant in any challenge. ‘A tip I’d have loved is to do a longer stint in an accounting and corporate finance firm; it strengthens your core as an accountant. I’d also like to have been advised of the fields I could have followed. I’d have loved to have followed the investment route of corporate finance. ‘Follow your passion early, because once you follow a certain path, it is very difficult to shift out of it.’

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The CV

Kholeka Mzondeki has been in corporate governance and financial management for more than 20 years. She holds a Bachelor of Commerce degree from the University of Botswana, has a diploma in investment management, and qualified as a chartered accountant in the UK through ACCA. A seasoned chief financial officer and financial director, Mzondeki has also acted as risk manager for South African electricity company Eskom, director and general manager of finance for sub-Saharan Africa at technology company 3M, and CFO and general manager of corporate services at South African minerals processing research and development organisation Mintek. Other companies she has worked with include South Africa’s Rand Merchant Bank, as well as auditing firm Coopers & Lybrand, now PwC. She was later headhunted for the position of financial director at MPS, where she was instrumental in setting up systems and from which she later resigned to undertake a sabbatical. Returning to the world of big business after 18 months, Mzondeki took up her current role as chief financial officer at Arup South Africa, part of an international company of designers, engineers, planners and business consultants. She sits on the boards of ACCA, the World Food Programme and South African HIV-prevention organisation loveLife, as well as listed companies Sentula Mining, Bauba Platinum and Reunert. In 2008, Mzondeki was a finalist in the Nedbank/Businesswomen’s Association of South Africa Businesswoman of the Year Award.

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‘BEING AN ACCOUNTANT, YOU CAN FIT IN ANYWHERE IF YOU UNDERSTAND THAT IT IS ALL ABOUT DRIVING VALUE, NOT NUMBER CRUNCHING’ ‘It was not like I had this great desire to be an accountant,’ she says. ‘But with being an accountant, one becomes lateral. I think you can fit in anywhere if you understand that it is all about driving value and not just about crunching the numbers. ‘For me it’s more a strategic role than anything else. That’s where my strengths lie. If you make me do management accounting you are just going to drive me crazy. ‘It’s all about interpreting the figures – to say, “This is the vision.” I am very much a high-level, strategic, analytical thinker.’

Value driver ‘I consider myself more of a value driver than a bean counter,’ she says. ‘I take offence when people think I am just a bean counter. First of all it’s about creating value, of course, for the shareholder, but these days it’s

also for the stakeholder – not just the people who put the money in. We are all integrated and interrelated.’ Mzondeki is committed to helping solve South African problems and, in the process, add value for its people. She sits on the board and chairs the audit committee of loveLife, the country’s largest HIV prevention organisation for young people. The country has the dubious distinction of having the highest number of citizens infected with HIV – the figure for South Africa now stands at well over five million – and loveLife is credited with stabilising the youth infection rate. With her philosophy of social entrepreneurship, it is unsurprising that Mzondeki became involved. ‘It is incredibly exciting,’ she says. ‘loveLife is a very dynamic organisation, has good networking opportunities and good growth opportunities. I love it; it’s

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The plan

a place that’s growing me. ‘It’s about influencing policy and direction, and looking at what Aids is really about. It’s not only about sexual behaviour. It’s other social factors that result in this behaviour, where people come from broken families, a patriarchal society, a materialistic culture, our apartheid history; it’s a whole lot of things.’ Mzondeki also regards a lack of appreciation of the value of social entrepreneurship as a significant contributor to South Africa’s economic woes. The biggest problem facing the country is unemployment, which stood at 25% in October 2011.

The inferiority issue A pervasive inferiority complex is doing nothing to help entrepreneurship and job creation, Mzondeki believes. ‘We are quite far ahead in certain things in South Africa, but because of this label we have of being on the “dark continent”, we just don’t fight against it; we think everything from Europe is better,’ she says. ‘We don’t believe in our own continent. Our minerals are going to China, to the US, to the UK.

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Look at Maslow’s hierarchy of needs: we’re thinking about food and not about jewellery.’ At the same time, skills are in critically short supply in South Africa, and the shortfall extends to chartered accountants. Mzondeki believes the shortage is unnecessary and dismisses as ‘nonsense’ the high university entrance barriers, low numbers of placements, difficulties in securing articles and daunting board exams associated with the profession in the country. ‘This is exacerbated by economic power being in the hands of a minority,’ she says. ‘Inasmuch as the government is trying to address the imbalance, transformation statistics show a disturbing picture. There are a lot of black professionals emerging. ‘I don’t believe there is any rocket science to accounting, quite frankly... Like somebody said, paying a bill in China is the same as paying a bill in South Africa – you debit expense and credit cash. Really, people should just get over themselves. The value of a good CFO is their lateral ideas, influencing strategy, sensing the future.’ Artificial or not, the shortage means that Mzondeki is an unwilling member of an exclusive club. The most recent available figures from the South African Institute of Chartered Accounts show that of its 28,483 members, about 26% are women and 14% are African, Asian or of mixed race. Mzondeki acknowledges that black women accountants – highly sought after in the local business landscape to fill racial and gender equity targets – ‘are few and far between’. However, she cautions that this could lead to arrogance and a temptation to ‘believe in your own hype’. Despite the shortage, Mzondeki has also had to contend with the notorious

Kholeka Mzondeki’s ambition is eventually to form her own ‘little thing’ that will enable her to ‘determine my own time and take on assignments as and when I want’. She likes to do things that connect the dots to create a big picture. ‘My plan is very much in its infancy, but my vision is that I can help small to medium companies, especially those which are transforming, which need a CFO but cannot quite afford it,’ she says. Mzondeki enjoys mentoring and helping young people of talent become educated and gain experience in their chosen fields. ‘I love to see young people educate themselves and get the appropriate experience,’ Mzondeki says. ‘My vision is, hopefully through my influence and through my training, to come up with a model or vehicle to help the country with its skills shortage.’

glass ceiling. ‘I hate patriarchy with a passion. I have been in situations where clearly men in similar positions or lower are paid more than me. That is devastating. Imagine somebody supposedy empowered like me feeling like that. What about those women who are not empowered?’ she asks. ‘For me, it’s worse in South Africa where I am a black woman and you have the race and sexism issues. You can’t quite win. But we continue fighting, or else who is going to fight for our children? For our daughters? For my nieces? They must not be in the same situation.’ Nicki Gules is news editor of City Press, South Africa

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ACCOUNTING FOR EMISSION OMISSIONS The marathon UN climate talks in South Africa last December achieved a last-minute deal, but big questions remain over a common accounting basis for carbon markets


he marathon United Nations climate talks in Durban, South Africa, resulted in agreement to start a fresh round of negotiations to secure a new treaty on global carbon emissions and will spark a host of critical accounting and auditing questions. Delegates said the new treaty would replace the Kyoto Protocol and come into effect by 2020 at the latest. However, despite the renewed political will, serious question marks remain over how emissions can be properly monitored and accounted for and how that will affect the health of carbon markets. Under the existing UN clean development mechanism (CDM), emission reduction projects in developing countries can earn certified emission reduction (CER) credits. These saleable credits can be bought by industrialised countries to help meet their emission reduction targets under the Kyoto Protocol, which will now be extended until at least 2017 under the Durban pact. But the accounting basis of the CDM and CER framework remains unclear or at best ambiguous in parts. The UN’s climate governing body in Durban agreed only to review the basis of CDM and CER at its next meeting in Qatar in November 2012. Still outstanding is the finalisation of the design of the extended Kyoto emissions commitments to ensure effective operation of emissions trading, ‘taking into account relevant rules, modalities, guidelines and procedures for measuring, reporting, verification and compliance of the CDM process’.

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The CDM’s executive board has also asked market participants to suggest draft data quality guidelines to use in standardised baselines for emission calculation models. The current lack of a common accounting system

pledges and decrease the transparency of government actions. Pledges [of emissions cuts] are based on different assumptions, conditions and implied rules. This complexity is increasing since some parties are using Kyoto

Riding the revolution: cyclists power lights on an installation depicting a baobab tree on Durban’s beachfront

to monitor emissions under the UN climate convention could further complicate efforts to achieve accurate monitoring – which is a necessary underpinning for carbon markets. Niklas Höhne, director of energy and climate policy at Germanybased energy consultancy Ecofys, says: ‘The fragmentation of emission accounting rules will make it very difficult for scientific comparison of

Protocol rules for counting their pledge and others aren’t. This, in turn, will increase the level of uncertainty in evaluating the global emissions we really have now and where they are headed.’ The complexities inherent in the system have been highlighted by Australia’s emissions policy. Australia pledged to cut emissions by 5% from the levels it produced in 2000 but the industrial sector levels incorporated

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Feel the heat: supporters of southern African grouping the Rural Women’s Assembly raise awareness at Durban of the impact of climate change on ordinary people

into the Kyoto Protocol would in theory allow Australia to increase its emissions by as much as 26% over 1990 levels. These apparent contradictions emerge because Australia calculated its emission reduction target for 2020 on the basis of the sectors listed in the Annex A of the Kyoto Protocol – namely, energy, industrial and agricultural emissions – plus the emissions from afforestation, reforestation and deforestation, based on another Kyoto clause. As emissions from afforestation, reforestation and deforestation are projected to be much lower in 2020 than in 1990, emissions of all other sectors can be higher, according to environmental consultancy Climate Analytics. ‘A set of common rules would ensure a higher level of transparency, ensure comparability and build confidence,’ Höhne says. The European Union, long Kyoto’s most significant supporter, reaffirmed in November 2011 that timely and accurate figures on emissions are vital and has proposed legislation to boost monitoring and reporting of emissions, especially for the period 2013 to 2020. The legislation also aims to cover reported emissions from land use, land use change and forestry, aviation

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and maritime transport among other sectors. Its main objectives include measures to improve the quality of data reported and to ensure that EU states comply with current and future international monitoring and reporting obligations and commitments. The UN climate body is also trying to iron out problems but negotiations will take at least a year. A decision over establishing a CDM appeals process was deferred to the Qatar meeting after delegates in Durban failed to agree on how appeals would operate.

Materiality threshold A separate provision for a ‘materiality threshold’ under the CDM was agreed in Durban, and emissions reporting errors too small to have any significant impact will in future be disregarded. Information relating to a CDM project will be considered material if its omission, misstatement or noncompliance with a requirement results in an overestimation – above a certain allowable level – of total emission reductions achieved. Large projects are allowed a smaller margin of error than small ones. In the case of projects that offset more than 500,000 tonnes of carbon dioxide equivalent (CO2e) a year, total emission reductions may not be overestimated by more than 0.5%.

Meanwhile, the deal reached in Durban should be a boost for the EU’s own emissions trading scheme (ETS) carbon market. Without Kyoto and its commitments from mainly EU countries to cap their greenhouse gas emissions, the ETS would have been under threat. The EU pledged in Durban to cut its emissions by 30% by 2020 compared with 1990 levels. The EU ETS covers some 11,000 power stations and industrial plants in 30 countries and will extend to the civil aviation sector from January 2012. But the ETS has not had an easy ride since its inception in 2005. Carbon prices have slumped to around €7 a tonne CO2e, far below record highs of around €30/t CO2e and well below the minimum of €20/t CO2e seen as needed to attract investment in new clean technologies. The euro crisis, the grim global economic outlook and an oversupply of allowances issued by polluters that expect their power stations and other facilities to pump less in the downturn have pulled down allowance prices on the ETS. Banking group UBS has been highly critical of ETS, arguing it has cost EU consumers almost US$290bn for ‘almost zero impact’ in cutting emissions. UBS has also warned that ETS prices will crash in 2012.

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The ETS is trying to recover its reputation after a series of high-profile theft and fraud scandals which has knocked confidence in the scheme. ‘Clearly, the market is in a dark place, being awash with supply and facing big European macroeconomic risks,’ a spokesman for British banking group Barclays said. US investment bank Goldman Sachs has even warned that EU politicians may be tempted to intervene in the ETS to prevent allowance prices falling even more. ‘We see a potential catalyst for carbon prices from political intervention, either through a tightening of the scheme or from a carbon floor price,’ said a Goldman Sachs spokesperson. ‘We believe the significant influence of green party agendas across Europe, combined with the potential revenue for cash-strapped governments, is the basis for risks of intervention in the carbon markets.’

EU ready to act Denmark, which took over the EU presidency for six months starting in January 2012, is seen as sympathetic to EU action in the market. In a further sign of EU intervention in the carbon market, there are plans to ensure EU spot carbon permits are regulated by the European Commission under the Markets in Financial Instruments Directive (MiFID). MiFID may ensure that future carbon registry account holders in the ETS will be restricted to prevent fraud. At the start of 2011, a total of 4m tonnes CO2e of EU ETS allowances (EUAs) was stolen by hackers who accessed online registry systems of the ETS. ‘While it is impossible to fully legislate against theft, the question remains as to why we continue to facilitate access to our market to the criminal element by allowing almost anyone to open up a registry account,’ said a carbon market analyst at Deutsche Bank. With Europe in a funk, the biggest potential boost to carbon markets may come with its development in China and Australia. China, the world’s biggest emitter of greenhouse gases

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Delegates at the UN Climate Change Conference in Durban

A new report from ACCA, COP 17 and Accountants: Where Next?, makes it clear that business and climate change experts believe accountants have the technical skills and expertise to make a real difference to climate change mitigation activities. However, the experts also believe that the profession needs to develop its knowledge and mechanisms to meet new demands, and to reshape its training and skills courses to provide the necessary confidence and trust in accountants’ capabilities and integrity. Rachel Jackson, ACCA’s head of sustainability, says: ‘The profession has work to do to get to where it needs to be on sustainability accounting, but it has been flexible in the past and should rise to this new challenge. The fight against climate change is going to be a collaborative effort. Accountants, countries, and private enterprise and finance will all have a role to play.’ View the report at

used the UN climate talks in Durban to confirm it was aiming to launch a working carbon market which would act as a market-based mechanism to incentivise its main polluters to reduce emissions. ‘We will actively develop the market mechanism of carbon trading pilot projects to explore the establishment of carbon trading markets,’ China’s top climate negotiator Xie Zhenhua said in Durban. China’s Industrial Bank and the Shanghai Environment Energy Exchange in November signed an agreement to test an emissions trading scheme in Shanghai. China’s economic planners want similar exchanges in Beijing, Guangdong, Tianjin, Hubei and Chongqing by 2015. Like China, Australia has plans to bring in a carbon market in 2015. The

proposed Australian carbon market would be linked to the EU’s ETS system. Talks between senior Australian and EU officials will focus on how Australia and the EU can work together to promote deep, liquid and integrated carbon markets. The talks ‘will also examine the mechanics of linking Australia’s carbon pricing mechanism with the EU’s ETS’, according to the EU and Australia. The negotiations could be a sign of the times: the Asia Pacific region will increasingly take the lead in developing carbon pricing and market mechanisms as part of global climate change mitigation efforts, according to the International Emissions Trading Association (IETA). George Stone, journalist

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It’s hard to credit now, but 10 years ago the Sarbanes-Oxley Act introduced a financial reporting regime that met with near-universal approval in the US


f America’s businesses had to vote on their least favourite lawmakers of recent years two names would spring immediately to mind: Paul Sarbanes and Michael Oxley. A decade ago this July these politicians gave their name to the Sarbanes-Oxley Act. The 2002 law was intended to restore public faith in the trustworthiness of US firms’ financial reporting, which had been shaken by high-profile accounting scandals at Enron, Tyco International and WorldCom. But many executives have lambasted Sarbox, as it has become known, as an overreaction that has saddled US businesses with unnecessary costs. Several leading Republican presidential candidates have vowed to roll back some of the provisions of the act, at least for smaller businesses. Meanwhile, the Securities and Exchange Commission (SEC), which polices the US securities market, has seemed reluctant to use the law to punish chief executives whose accounts don’t come up to scratch. More damaging still, the accounting failures that contributed to the 2008 financial meltdown are seen by many as a sign that Sarbox has failed even to fulfil its main aims. So 10 years on, Americans are still hotly debating one key question: did the introduction of the controversial act protect investors without harming

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businesses? Many argue that reforms to accounting rules in Europe, which was also shaken by the Enron collapse, provided investors with the same level of security but inflicted less damage on companies than Sarbox did. Given how controversial Sarbox has become, it is easy to forget how popular it was in 2002. Lawmakers approved the measure with virtual unanimity. Only three members of the US Congress voted against the bill, with 423 in favour, while just one of the 99 senators refused to support it. President George W Bush, who prided himself on being a defender of entrepreneurs, declared: ‘The era of low standards and false profits is over; no boardroom in America is above or beyond the law.’

The buck stops at the top The law was framed to achieve its objectives in several ways. For example, top executives had to attest personally to the reliability of financial reports. As well as being legally liable for failures, chief executives could have years of pay clawed back if profits turned out to have been illusory. Since accounting firm Arthur Andersen had turned a blind eye to accounting irregularities at Enron, lawmakers moved to break up the cosy relationship between management and auditors. A new public body was set up to keep an eye on auditors – the Public Company Accounting Oversight Board

– and firms would have to rotate the accounting firms they used. Most controversially of all, both companies and their accountants were forced to test internal controls to ensure their rigour – the notorious section 404. Around the same time Europe was experimenting with a lighter version of similar policies. Enron had caused concern among regulators worldwide but it was only after the €13bn bankruptcy of Italian food and dairy firm Parmalat in 2003 that European regulators acted decisively. The Statutory Audit Directive of March 2004 was Europe’s answer to Sarbanes-Oxley; it upgraded audit committees and made it harder for executives to sway accountants. Company chiefs were also subjected to a (less onerous) legal standard in terms of certifying the accuracy of the corporate accounts, and Europe’s new rules on testing internal controls were likewise less burdensome. Peter Montagnon, senior investment adviser to the UK’s Financial Reporting Council, says: ‘There was a sense that Sarbox was too rigid and expensive and that the cost-benefit equation did not work. Europe opted for a more flexible code-based approach.’ With a decade of hindsight, this cost-benefit calculation is easier to make. Defenders of Sarbox point to several benefits from its tighter rules. For example, Carl Rosen, executive

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Enron’s massaging of its financial figures to deceive investors triggered a wave of public outrage that fed anti-capitalism sentiment, such as this protest against the World Economic Forum

director of the International Corporate Governance Network, says: ‘There is little doubt that accounts are more reliable than before. Firms have beefed up their financial expertise, especially on audit committees, so problems are more likely to come to the attention of shareholders earlier.’ The rules have even had a spin-off benefit for companies, according to Paul Hodgson, senior researcher at the Corporate Library, which studies governance issues. Upgrading internal controls has given executives a better understanding of what is going on in their business, which should improve decision-making. Even more importantly, an MIT study suggested that complying with the rules appeared to have lowered the cost of capital for businesses by as much as 150 basis points, mainly by giving bond investors greater confidence. Of course, the rules have been far from watertight. Although the 2008 financial meltdown in the US was not primarily caused by weak accounting,

Despite such failures, US watchdog the SEC has a poor record of clawing back undeserved pay from executives. Over the past decade it has filed cases against just 31 senior managers at 20 companies, recouping only trivial sums.

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such abuses did contribute to the collapse. A few cases of egregious bookkeeping stand out, says Mark Calabria, a fellow at the Cato Institute in Washington. Insurance company AIG, which had to be rescued by the US government after making huge derivative losses, turned out to have extremely weak internal controls, Calabria says. The woes of mega-banks like Citigroup were also exacerbated by accounting flaws. Sarbox was intended to put an end to the kind of off-balance sheet accounting that allowed Enron to hide losses or debts, but in 2004 financial regulators exempted banks from that rule. This allowed Citigroup to set up special investment vehicles into which it loaded mortgage assets. ‘If the banks hadn’t been allowed to do this they would probably have had an extra US$60bn to US$100bn in capital during the financial crisis,’ Calabria says. The demise of stockbroker MF Global has provided a more recent example of failed internal controls.

The burden of compliance Then there is the cost to businesses. Scott McNealy, founder of IT giant Sun Microsystems, once described Sarbox as ‘buckets of sand in the gears of the market economy’. A host of studies have made clear the substantial costs of compliance. A 2009 SEC study estimated the average company’s cost of compliance at US$2.3m a year. More recent studies have produced a lower figure. In 2011 risk and business consultancy Protiviti calculated that after four years of compliance few companies were spending more than $1m a year on Sarbox compliance. But even this is far from small change. Assume a price-earnings ratio of 20 times, says Bob Litan, a fellow at the

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Dennis Kozlowski collected US$81m in unauthorised bonuses from Tyco

A massive accounting fraud by Bernie Ebbers brought WorldCom down

Kaufman Foundation for enterprise in Washington, and Sarbox lops US$20m off a company’s market capitalisation. Critics say such costs help explain why fewer start-ups are raising money on the stock exchange. During much of the 1990s around 80% of businesses listing in the US had market values of less than US$50m. Now such small businesses account for 20% or less of public offerings in most years. For this reason many US politicians – including most Republican presidential hopefuls – want to modify or repeal Sarbox. Outright repeal still seems extremely unlikely but a watering down of the act’s provisions is possible.

SURVEYS OF BUSINESS EXECUTIVES SUGGEST A GRUDGING ACCCEPTANCE THAT TODAY’S CORPORATE ACCOUNTS ARE MORE RELIABLE At present any public company with a market value above US$75m has to comply. Republican senators Jim DeMint and John Barrosso want to allow companies smaller than $1bn to opt out provided they clearly disclose this to investors. ‘It would be good to give firms more flexibility,’ says Alex Pollock, a fellow at the American Enterprise Institute. Many opponents of Sarbox believe

Jeff Skilling kept Enron’s failing financial health secret from shareholders


that European regulations – with which Britain complies – provide a similar level of investor protection at lower cost. Montagnon also believes that the US could relax Sarbox if it enhanced the rights of shareholders, which are much weaker than in Europe. As Sarbanes-Oxley heads towards its 10th birthday it continues to divide politicians and financial experts. The act does not appear to have been notably more effective than the less onerous rules that apply in Europe. There is also reasonable evidence that it has discouraged young businesses from seeking money through a stock market listing. Even the act’s most ardent defenders do not claim it has put an end to accounting trickery or abuse. The 2008 financial crisis uncovered gaps that Sarbox failed to fully close, along with patchy compliance. Yet the act has not been a total failure. Surveys of business executives suggest a grudging acceptance that today’s corporate accounts are more reliable, although most believe this could have been achieved at lower cost. Perhaps the greatest compliment for the act, says Rosen, is that it has made life harder for corporate crooks. ‘There will always be people who can manipulate the system,’ he points out, ‘but it is much tougher now.’

The US telecoms giant admitted a US$11bn accounting fraud in July 2002. Bernie Ebbers, former CEO, was convicted of fraud and conspiracy and given a 25-year prison sentence. The company filed the largest ever bankruptcy.

Christopher Alkan, journalist based in New York


The high-profile corporate scandals that set Sarbox in motion:

Enron A string of court cases led to the conviction of the energy company’s former CEO Jeff Skilling, who is currently serving a 24-year jail sentence for fraud and insider dealing; he still asserts his innocence. Ken Lay, former Enron CEO and chairman, was convicted of fraud and conspiracy but, following his death from a heart attack in 2006, had his guilty verdict wiped out as he hadn’t been able to challenge the conviction. Former Enron CFO Andrew Fastow was released after serving a six-year jail sentence for his part in the scandal. The scandal, which was revealed in 2001, also resulted in the demise of Enron’s auditor, Arthur Andersen, one of the Big Five accountancy firms.

Tyco International Two former executives of Tyco International, former CEO Dennis Kozlowski and his second in command, Mark Swartz, were both sentenced in 2005 to between eight and 25 years in prison for stealing hundreds of millions of dollars from the manufacturing company. The scandal came to light in 2002.

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Richard Byarugaba FCCA has spent much of his working life in corporates, but an opportunity to head up Uganda’s National Social Security Fund proved irresistible

the focus had been on the investment side – rather than how the money got in or what happened to the members. So we have changed the focus of our organisation to our members. Members want their money to come in without hassle. They want their money to be posted to their statement and, when they retire, they want their money to be there and paid to them promptly. That is what we have set out to do. We have changed our business model from one of compliance to one of relationship management. That means that every single employer – we have 6,000 active ones – has a relationship manager.


One year into the job, what is your impression of the National Social Security Fund (NSSF)? Let’s start off dispelling some myths: that government interferes; that you can come here and steal money; that there is no corporate governance; and that Temangalo and Nsimbe [property projects] are the fund’s biggest problems. The reality is that the biggest problem for the business was the collection side. We simply collect money from employers and invest it to give our members a good return. But

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How difficult has it been to persuade a critical public that you mean business? We have run a whistleblower campaign and an amnesty campaign. Now, 65% of employers are compliant, up from 47%. We have also tried to improve the process by which they get their benefits. When I arrived, we had more than 3,000 benefits waiting to be processed and the average wait to get paid was 106 days. Now, the process takes under 14 days and there are fewer than 600 members.


What do you consider your accomplishments so far? When I came in we were collecting about Shs28bn a

month, but that’s gone up to about Shs40bn a month. Benefits payments were at Shs6bn a month, now they’re about Shs10bn a month because of our efficiencies. We used to earn about Shs9bn a month in investments, and that’s gone up to Shs16bn a month. We used to spend about Shs4.5bn a month but cut down on our vehicle fleet and reduced our headcount. The value of the fund has gone up to Shs2.1 trillion from about Shs1.6 trillion. We have recently switched to a new IT system, which will help improve our work. We are outsourcing all our collections to the banks; this will improve our turnaround time on members’ transactions from three weeks to 48 hours. For our customers, we have created – in addition to our 24 branches – 61 outreach centres. We have set up website, email and SMS channels, as well as a call centre for members. In July, before we created these channels, we had 32,000 people walking into our branches, but by August, after their

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The CV launch, we had about 27,000, showing that customers are using these channels to contact us.


The fund has had a difficult history with its investments. Is that still a concern? The investment side has proved more challenging than I anticipated, because when I came in the investment portfolio was heavily skewed towards fixed income. The problem with fixed income is that although it is more secure – because you put money in treasury bills and government bonds – the return is very low. However, we have begun to take advantage of the rise in interest rates on the fixed income side by repricing our assets. For example, if you invested at 7% and the rate has since gone up to 15% you get to a higher level that helps our portfolio. The problem is that our real estate is not performing, so we are not earning as much money. The equities market is very small for us and therefore

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if we move in or out it just upsets the market. So, that is where our challenge has been. We have a lot of procurement requirements and it takes a very long time to do anything in real estate because of our procedures.


There has also been a storm brewing over pension sector reform. What is happening? Pension sector reform has been on the cards for a long time and the first law – the Uganda Retirements Benefits Authority Act – was passed in June 2011. This act will enable the pensions sector to have a regulator. The second aspect of the reform is the introduction of a law that liberalises the sector. That is where there is a storm because NSSF will lose its monopoly to collect contributions, and NSSF will need to form itself into a pension scheme. At the moment we are a provident fund, which means that contributors get their money at the end of the period in a lump sum, together with

Richard Byarugaba FCCA, 50, began his career at Standard Chartered Bank as a clerk. After his initial grounding in banking he pursued a variety of roles in corporate finance, corporate governance, restructuring and operations. He is nostalgic about his teller job because it gave him the opportunity to learn the basics of banking in a practical environment. Byarugaba has also worked outside Uganda. He worked in London as Standard Chartered’s regional finance manager and has travelled widely across Africa and the rest of the world. Back in Uganda, he headed the consumer section of the bank in Uganda and was involved in the acquisition that built its current retail base. Later he moved on to head Nile Bank where he created one of the most successful brands in the local banking sector. When Barclays Bank acquired Nile Bank in 2007, Byarugaba became the chief operating officer responsible for integrating Nile into Barclays, expanding the retail network for Barclays and introducing a new IT system. He later moved on to head Global Trust Bank before taking up his current post at NSSF in 2010.

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the interest accrued. In a pension scheme you don’t get all your money in a lump sum. That discussion needs to go on because it is not yet law. The overwhelming feedback seems to be that people want their lump sum, but that decision needs to be made by parliament.


What is your own view? Existing NSSF members should be given a choice of a lump sum or a pension. But ultimately I think the consumer should be given an opportunity to make that decision. I know that as a pension fund it becomes more expensive for NSSF; there is no doubt about that because the average statistics show that people are living longer. I would be happier with a provident fund because I know what my liability is, I know when I am going to pay it out, I know what assets I have and they are all matched to my liabilities.


To what one thing do you attribute your rise up the corporate ladder? Focus. Everybody’s career is made up of four steps: the executive job, the managerial job, the supervisory job and the clerk job. There are two ways of getting to the top: experience and education. You need a professional qualification such as ACCA and then an MBA, and then you need your strategic skills to get to the top. You also need managerial and soft skills for dealing with people. Then you need specific hard skills, such as counting money, balancing and reconciling the books, to get the job done as a clerk.

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‘IN UGANDA PEOPLE TEND TO GET MORE EDUCATION BEFORE THEY GET THE EXPERIENCE. TO ME THAT IS THE WRONG MODEL’ As a professional, you need to go through all these stages to get experience. However, beneath all these there is a pendulum that swings, so you might end up getting too much experience or too much education. In Uganda people tend to get more education before they get the experience. To me that is the wrong model. My career therefore has been based on climbing up the ladder and getting experience, then supplementing that with education.


Were you ever worried at any point when you took on this job? When parliament asked me about firing staff I was a little scared, but I knew I was doing the right thing. If you are taking people through change – as we are – you need to tell them what you are doing. They need to know what we want to achieve and how. If anything goes wrong I should be the first to admit it.


What are the reasons for Uganda’s poor corporate governance? In many cases, boards tend to be badly constituted. In the UK, for example, boards consist of people who have retired or are about to retire. These are business people who have been in the corporate governance structure and are experts in their own areas. In Uganda, people get a board seat either because it is a family business or they are rich. Why can’t we have a board that has, for example, an accountant and lawyer among others? Or why don’t we legislate on how a board should be constituted? Not having structured boards with qualified people on them is a problem. The second problem is that we have very weak laws on fraud. We need to look at our bail conditions, for example. Until very recently, there was no ‘electronic’ law, so if I stole money electronically the law would not convict me.

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he day-to-day activities of financial controllers and other accountants on the business shop floor have a vital role to play in successful risk management and the finance professionals in the business stand ready to do more. This is one of the main findings of new ACCA research looking at the role of accountants in risk management. Based on a survey of more than 2,000 members from all over the world, the research reveals a statistical relationship between the use of good practices by accountants – such as properly executed forecasting and budgeting – and a lower incidence of ‘dysfunctional behaviour’. Poor accounting practices include a general lack of risk awareness when making decisions, playing down risk to get approval for proposals, overstating benefits and underestimating costs. Accountants in the survey reported a high level of dysfunctional behaviour around risk management. Almost every respondent reported the ‘gaming’ of forecasts. Others mentioned treating forecasts as targets, providing optimistic forecasts to avoid criticism and pessimistic ones to reduce expectations. The survey also found that such behaviour was commonplace – fewer than 1% said none of them happened at their organisation. Paul Moxey, ACCA’s head of risk management and corporate governance, says the findings highlight the important and positive role for organisations of integrated risk

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management – the idea that risks should be identified and managed as part of a core management process rather than left to a compartmentalised team or individual. ‘Risk happens at all levels of business and for all types of business functions,’ he points out. ‘It doesn’t sit in neat silos. Risk management needs to be something everyone in an organisation does. ‘Our survey showed that accountants, particularly at the shopfloor levels of a business, have an

to risk management is huge and necessary in any organisation.’ The survey comes at a critical time for risk management. The financial crisis highlighted the disastrous consequences of senior management ignoring risk management, and led to the climb of the practice up the corporate agenda, although its new apparent importance has not always been matched by increases in budgets or actual actions. Moxey fears that once the current crisis has passed, the risk function may

‘ACCOUNTANTS HAVE AN EXCELLENT GRASP OF THE RISKS FACED BY THEIR ORGANISATION AND THE STEPS NEEDED TO NEGATE THEM’ excellent grasp of the risks faced by their organisation and the steps needed to negate those risks. Businesses need to make sure they use the abundant risk awareness and risk management skills of their qualified accountants, and not miss an opportunity to effectively integrate risk management.’ As accountants provide decision support, such an approach puts them in an important position – after all, most ‘risky’ business decisions contain a financial element. And in most organisations the accountants outnumber the formally designated risk managers. As one respondent to the survey put it: ‘Although not always appreciated, the contribution of the finance section

again decline in status, with potentially dangerous consequences. Another finding of the research is that those in mid-level roles such as financial controllers and management accountants are much more aware of both risks and dysfunctional behaviour than are their board-level colleagues – including non-executives. Most non-executive board members said overly optimistic forecasts to avoid criticism were never made in their own organisation, but only 20% of financial controllers or accountants agreed. Non-executives also seem less aware than everybody else of problems with persistent quality issues. There are several possible explanations. Those at more senior

18/01/2012 12:28


Effective risk management starts on the finance ‘shop floor’ and should embrace the whole organisation, according to the findings of a new ACCA study levels are less involved in the day-to-day running of an organisation, and so are less aware of detail, taking a broader overview of a business. It could be that the information they are presented with by their teams is sanitised in some way. Additionally, as the financial crisis showed, there are often plenty of incentives for not asking challenging questions or rocking the boat. One respondent, a financial controller in Ireland, said: ‘Decision analysis is sometimes hijacked by higher-level political motivations, leading to poor decision-making and adverse impacts.’ The study shows clear support among accountants for ‘challenging senior people’ as part of an ideal business culture. A questioning approach can help avoid the kind of cultural bias or ‘groupthink’ that leads

to risks being missed. As another financial controller said: ‘There will always be uncertainty around decisions to enter new markets or to try new ideas, but the accountant should be able to highlight the potential risks and rewards of various actions, and to seek ways to mitigate the impact of any risks.’ A CFO respondent said: ‘Accountants need to be business partners. They need to be involved in decision-making and help other functions see the possible implications of decisions they are about to make or have made.’ The study found that input from accountants in the decision-making process had a number of beneficial effects. Some 95% of respondents said that input always made people more aware of the uncertainties involved.

The fall-out from the crisis: Occupy Wall Street protesters in New York (far left) Shock and awe: photocall for Margin Call, a film starring Kevin Spacey (centre), that portrays the events that destroyed a Lehman-like bank, and shook the US financial system (middle) Disasters can be natural as well as human-inspired: restaurant in Bangkok, Thailand, as a river in spate dumped vast quantities of floodwater in the city (right)



Private equity investor ABCI Investment Management takes risk very seriously. The Hong Kong-based company has put risk management at the centre of its commercial operations, both before and after acquisitions are made. A subsidiary of Agricultural Bank of China, ABCI has a portfolio fund valued at HK$5bn. Its management team consists of some 20 professionals, including specialists in risk management, finance, compliance and law. This team works together to identify and evaluate suitable acquisition targets, and to monitor each investment until it is realised. Its private equity managing director Bernard Wu, who is also chairman of ACCA Hong Kong, says: ‘Risk exists in every corner of a business, and it’s our job to identify and evaluate every risk in a target company’s history, operations and forecasts.’

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Accountants work in compliance as well as finance as part of an integrated risk management team. The most important elements in evaluating a prospective investment are checking management integrity and evaluating performance trends against ABCI’s exit target. ABCI researches the sources of the company’s financing. For start-up operations, it assesses the attractiveness of the projected business performance and margins versus the records of the owners and management. The Companies Registry and the Tax Bureau are also valuable information sources – tax history is a very important indicator. If the finance team is happy with the initial evaluation results, ABCI then performs a detailed risk assessment on the target company, analysing its current and projected growth rates compared with its peer group, to determine whether the forecasted performance is reasonable.

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A similar number said it helped people think more widely about the possible consequences of a decision, and only marginally fewer said it encouraged decisions that reflected the interests of all relevant stakeholders. In times of global economic uncertainty, such input can make the difference between success and failure. ‘Instability is the new stability,’ said the FD of a leading investment and insurance business. ‘The banking crisis has morphed into the sovereign debt crisis, and now we are confronted by the real risk of a double-dip recession.’ According to this FD, an integrated approach is key to a finance team’s successful risk management. However, there is some way to go before risk management – and the role of accountants in its implementation – is fully integrated. According to KPMG’s global Risk Management Survey 2011, 42% of C-level executives were dissatisfied with the quality of risk management integration into strategic planning, project assessment, capital allocation and budgeting – all areas where accountants should be making a valuable input. But the key message from the survey, devised and analysed by Matthew Leitch of Internal Controls Design, and detailed in the resulting report, Rules for Risk Management: Culture, Behaviour and the Role of Accountants, is that accountants are aware of the issues and keen to get involved. Businesses should not waste this opportunity.

US snowstorms can be so violent as to force the declaration of a state of emergency; good risk management means being aware of – and ready for – the worst


ACCA’s study asked how accountants could influence the decision-making process 0%











Questioning proposals even when they are by senior people

Recognising uncertainties and being willing to seek and use relevant data

Divorcing decision-makers’ personal interests from decision-making

Choosing actions that are ethical

Choosing actions that are legal

Thinking carefully about decisions, and using calculations/models if possible

Chris Quick, editor-in-chief and Philip Smith, journalist


ACCA has developed an online tool allowing businesses to compare themselves to practices and experiences from businesses in the survey, and identify areas for improvement. You can find it at: researchandinsights

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Requiring compelling business cases for new ideas

Achieving consensus

Unquestioning compliance with instructions from senior people

18/01/2012 12:45

When forming a new company, how do you choose the best start? … Ask an member. ACRA, the Association of Company Registration Agents, was established to encourage high standards and to help you find an agent which will form your company to the best legal standard.

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17/01/2012 12:35



International Federation of Accountants board member Japheth Katto takes an accountant’s-eye look at the future of the Asia Pacific economies


s an African accountant, I view the rise of Asia Pacific as hugely significant. Africa’s links with the region are deepening and expanding. For instance, Australia’s trade with Africa is growing at an average of 6.1% a year and China ended 2010 as Africa’s biggest trading partner. As I pointed out at the Confederation of Asian and Pacific Accountants (CAPA) Conference in Brisbane, Australia, last year, where I was a speaker, Africa’s great potential in energy, minerals and commodities will make the continent the next frontier for the Asia Pacific economies. From Australia to Vietnam, Asia Pacific’s population is growing as strongly as its economy and many of its markets have emerged as robust global players over recent years. Of course, beyond the glowing gross domestic product (GDP) figures, markets in the region face some big risks. For example, while China and India now have economies that compete with the US and Japan, their lowcost production bases are forcing middle-income countries in Asia Pacific to find new ways of remaining competitive. Then there is the fear of recessionary contagion from the West, not to mention the risk of

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failures in corporate governance and risk management that have been so painfully felt in the West. Financial markets and economies are experiencing increasing and rapid change. The biggest of all is the tilt from Western economies to the BRICS (Brazil, Russia, India, China and South Africa). And it’s not just the BRICS. Following close behind are the emerging economies known as the Next 11 or N-11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam), many of which also lie in Asia Pacific. Yet the current state of markets and economies is a cause for real concern. ACCA’s latest quarterly surveys of the world’s accountants – people who have their fingers on the pulse of the economies in which they work because they deal with the real and tangible needs of businesses – make for grim reading. In the second quarter of 2011, confidence in the economy among global respondents plummeted because of the Western world’s continuing economic malaise. Even in Asia Pacific, until then so immune, accountants reported the first-ever net loss of confidence since the survey began, a trend confirmed in the third and fourth quarter reports.

Sovereign debt also remains a clear and present risk. According to the most recent edition of The Economist’s World Debt Guide, which shows overall debt as a percentage of GDP, Europe is far more highly leveraged than the BRICS. The figure for Britain is 495%, Spain 370% and Italy 316%, compared with 195%, 129% and 71% for China, India and Russia respectively. Not all of Asia Pacific looks so healthy, though: the figure is 492% for Japan and 306% for South Korea. But the skills and competencies of the accountancy profession all over the world also represent an opportunity for development. In its report, Competent and Versatile: How Professional Accountants in Business Drive Organizational Sustainable Success, the International Federation of Accountants (IFAC) identified eight interlinked drivers of that success: a customer and stakeholder focus; effective leadership and strategy; integrated governance, risk and control; innovative and adaptive capability; financial management; people and talent management; operational excellence; and effective and transparent communications. As creators, enablers, preservers and reporters of sustainable value,

17/01/2012 15:24


GLOBAL POWER WILL SHIFT FURTHER TO EMERGING MARKETS. THE DRIVING FORCE OF GLOBALISATION WILL NO LONGER BE WESTERN MULTINATIONALS BUT INTERNATIONAL COMPANIES BASED IN EMERGING MARKETS The shape of the future: the Tri-Bowl exhibition centre is part of the US$40bn Songdo new city being built from scratch near Seoul, South Korea, to service the three booming north-east Asian markets of economic giants China, Japan and South Korea

accountants are central players in many of these themes. In preparing reports they must enhance transparency and communication so that the reports resonate with stakeholders, who may not be based in the region. Brevity, relevance and flexibility are the gold standard here. The drive towards global accounting standards is both a challenge and an opportunity for accountants. In Asia Pacific, the timing and degree of convergence on International Financial Reporting Standards (IFRS) in various jurisdictions both vary. Australia, Malaysia and Singapore, for example, have almost fully aligned with IFRS; some countries such as Taiwan have set a timeline for convergence, while others have not yet committed to specific plans. There is, however, an increasingly clear recognition that convergence with IFRS is inevitable. The influx of money into Asia Pacific economies means that a great many questions are being asked about how companies can effectively manage the legal and reputational risks. Ethical issues are as pertinent in Asia Pacific as in the rest of the world, and businesses must operate with a clear sense of values. Ethical leadership from the top is a necessity.

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Governments in Asia Pacific have been proactive in tackling bribery and corruption. As early as 1999, the region’s leaders recognised the challenge and along with the Asian Development Bank and the OECD established the Anti-Corruption Initiative for Asia-Pacific. The World Economic Forum’s Partnering Against Corruption Initiative (PACI) has also been doing good work to tackle the issue. It is challenging the belief held by some that bribery and corruption oil the wheels of business – its research shows that corruption actually increases the cost of doing business globally by up to 10% on average. We accountants have a huge role in fighting corruption, and must abide by standards of conduct set by the International Ethics Standards Board for Accountants. The economic, political and environmental climate has exposed shortcomings in financial regulation, financial reporting, corporate transparency, climate change and assurance provision. It is in addressing these shortcomings that the accountancy profession can help markets in the Asia Pacific region – and indeed around the world – cope with the challenges of the future. In ACCA’s report Where Next for the Global Economy: A View of the World

in 2030, an expert panel (of which I was privileged to be a member) hypothesised, among other things, that global power will shift further to emerging markets. The driving force of globalisation will no longer be Western multinationals but international companies based in emerging markets. This levelling of the global playing field will stimulate competition among countries for access to finance. More volatile global markets will become the norm. Regulation will be applied at a global level, reflecting the ability of business, capital and people to cross borders. A multipolar world of superspecialised regions will develop, spurred by information technology. Education will be increasingly seen as a growth enabler and those countries that value education and invest in it should reap the rewards. It’s a vision of a brave new future: a world economy with parity between markets and a much wider range of key players, sharing power and influence in a new order that will bring greater global prosperity. This article is based on a presentation given to the CAPA Conference 2010


Japheth Katto FCCA, CPA (U) is CEO of the Capital Markets Authority in Uganda and an IFAC board member

17/01/2012 15:25



Rotation just doesn’t cut it [

In a world where detailed understanding of companies has never been more important, mandatory auditor rotation will be a fashion that nobody wants to wear, says Ramona Dzinkowski

For those of you lucky enough to have been in the accountancy profession in the US through the implementation of Sarbanes-Oxley (SOX), you’ll remember the backlash against the proposed certification and testing of internal controls over financial reporting, and the ultimate costs imposed on companies who fell under that particular Public Company Accounting Oversight Board (PCAOB) audit standard (AS2, AS5). As we recall, the Sarbanes-Oxley Act of 2002 was a US federal law setting new standards for all US public company boards, management and public accountancy firms. It was crafted in response to the major corporate failures of the time, including Enron, Tyco and WorldCom. Ten years later we have to ask: did SOX do its job? Did it prevent investors from losing billions of dollars when share prices collapsed and rocked public confidence in US securities markets, yet again? My answer would be to ask a shareholder of Lehman Brothers, Freddie or Fannie, Goldman or IAG back in 2008 how Sarbanes-Oxley, and related SOX 404 (AS2, AS5), worked for them (see feature, this issue, page 20). Perhaps, then, that’s why we see the decidedly negative response to the proposed new standard for ‘increasing auditor independence, objectivity and professional scepticism’ through mandatory rotation of audit firms. I guess the question on most minds would be: Is this really going to increase public security or is it merely another grand gesture on the part of the standard setters with a questionable outcome?

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Many suggest that it will not. The main arguments against come from corporate America. More specifically, they suggest that in today’s complex business and regulatory environment, a deep level of knowledge around

a company and its industry, its operations and financial history are mandatory in conducting an effective audit. Mandatory auditor rotation will therefore result in less effective audits, not the other way around. Second, it will limit the pool of qualified providers for non-audit services, with implications and resulting costs. Also, at a time when the US economy is still struggling to regain its economic footing, costs are the biggest concern, with rotation potentially significantly increasing audit fees and related expenses. Finally, other observers suggest that Sarbanes-Oxley has actually covered off auditor independence quite nicely, commenting that ‘the expanded role of the audit committee under SOX is adequate to monitor and evaluate auditor independence’. And what do the auditors have to say if in fact there is an opportunity to increase audit fees? This time, compared with the SOX 404 and AS2, AS5 days, they seem to be decidedly in agreement with corporate America. Deloitte & Touche (the only Big Four firm to have responded in writing to the proposal) makes clear that it really doesn’t think auditor rotation will cut it when it comes to increasing independence, objectivity and professional scepticism. So with both sides of the fence coming together on the proposed new ruling, what’s ahead for 2012? It’s likely going to be a long and frustrating winter for the PCAOB if it insists that both corporate America, and its auditors, wear the latest fashion. Ramona Dzinkowski is a Canadian economist and award-winning journalist

13/01/2012 12:22

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17/01/2012 14:38



A bad example


As a decade of Sarbanes-Oxley has shown, heavy-handed regulation can be a matter for regret, says ACCA president Dean Westcott

Whenever there is a major financial scandal, the call inevitably goes out for tighter regulation to prevent such a thing from ever happening again. That call is not always heeded but this year marks the 10th anniversary of an occasion when it most certainly was. The Sarbanes-Oxley Act will be 10 years old in July. Designed to thoroughly plug the gaps that enabled executives at Enron and WorldCom to get away with what they did, the law placed onerous responsibilities and duties on executives, and forced companies and their accountants to set up elaborate and expensive internal controls. It has been argued that Sarbox has been good for corporate governance as well as the credibility of accounts. But question marks remain about its effectiveness and serious criticisms have been made of the huge costs it has imposed on businesses. Critics also point out that it failed to prevent the collapse of Lehman Brothers – the outrider of the financial crisis. Some have warned of the danger of repeating the mistakes of Sarbox in the current process of reforming audit practice. It is undoubtedly healthy to have a root and branch examination into whether audit could have done more to alert companies and regulators about impending financial problems and whether audit practice should evolve so as to maintain its value and relevance. But some of the proposals currently being put forward appear to be based on the same optimistic assumption that underlay Sarbox – namely, that the way to prevent corporate malpractice is to impose rigid and bureaucratic rules from the top. ACCA is studying the proposals issued by the EU at the end of last year on both audit and financial reporting. The key issue for us is that the needs of the users of annual accounts are protected. But we should not ignore the question of cost and the risk of imposing regulatory costs that are disproportionate to the benefit sought. We urge regulators around the world to bear in mind the experience of Sarbanes-Oxley and to focus as much on meeting the challenges of today and tomorrow as on fixing the problems of the past. I know ACCA will continue to call for balance in ensuring any new regulation is good for business and in the public interest. Dean Westcott FCCA is finance director of Hinchingbrooke Hospital in Cambridgeshire, England

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16/01/2012 13:38



PwC is advising companies in China to examine their financing arrangements and debt-to-equity ratios. Companies should prepare documentation where approved debt-to-equity ratios are breached, to avoid a tax authority levy and to mitigate transfer pricing adjustment risks, says the firm’s China practice. The advice follows the news that the country’s first thin capitalisation audit case has been concluded by the Shaanxi Provincial State Tax Bureau. The case also involved a probe into tangible goods transactions and equity transfer. China established debt-to-equity regulations in 2008, which were designed to avoid companies financing themselves through tax deductible debt, rather than additional equity. The ratio is based on the average monthly debt balance with related parties during the year, divided by the average monthly equity during the year.

The view from: Zambia: Ansley Syanziba ACCA, senior manager, Moores Rowland Q What are your top priorities when you start work each day? A Clearing my in-tray and ensuring all new jobs are assigned to the right people in my team, so that we can deliver the service clients and regulators expect. Q What strategies should professional services firms devise to attract and retain top talent when the jobs market takes off? A Because we operate in an increasingly competitive world, firms must offer incentives that match those available in industry, to hold onto their brightest people and avoid continual recruitment. Q What advice would you give newly qualified accountants considering their options? A As the job market becomes flooded and employers demand more evidence of top-quality performance, they might consider an MBA or further professional certifications. Q What helps you achieve a work-life balance? A I have a young family; they need my regular involvement and presence. To refresh my mind I normally go to the gym or play soccer; to relax, I play guitar.

Shaanxi Province, China

GRANT THORNTON WINS AUDIT D1 Oils has appointed Grant Thornton as auditor. The non-food biofuel feedstock supply company said that there are no circumstances associated with the resignation of the previous auditors, Ernst & Young, that need to be brought to the attention of shareholders. D1 also announced that it has appointed FCCA member Ian Wilson as its CFO. The company changed its year end from 31 December to 30 June to fit with its production and harvesting schedules in India and assist more accurate financial reporting.

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Q What gives you the greatest optimism for 2012? A It’s hoped that the new government will reintroduce regulations around compulsory auditing of companies; if that happens, it’s likely to boost earnings for firms here, creating more employment opportunities for young accountants.

37 Practice The view from Ansley Syanziba of Moores Rowland; how Penny Avis’s latest move is a real page-turner 43 Corporate The view from Paweł Górnicki of Ceramika Nowa Gala; shared services and outsourcing are here to stay; Tony Fernandes FCCA is living the dream


Moores Rowland: Zambia’s sixth-largest firm; part of Praxity, a global alliance of independent accountancy firms Offices: Lusaka, Livingstone and Ndola Services: Assurance, business advisory, taxation, corporate finance, company secretarial, payroll management

17/01/2012 18:26


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13/01/2012 12:27


A novel idea Meet Penny Avis – the high-flying ex-corporate finance partner who, having smashed glass ceilings and weathered corporate storms, is now embarking on a writing career


x-Deloitte corporate-finance partner-turned-author Penny Avis is already making plans for her 50th birthday, even though she is only 43. ‘I’ll either be making a speech saying: “I gave up the best job in the world that I worked so hard for to write a book that nobody read,” or it’ll all pay off and be a bestseller. Who knows? Either way it’s been fun.’ But what makes someone at the height of their professional career, who has seemingly smashed through any glass ceilings quicker than neutrinos in the Large Hadron Collider, give it all up to write a novel? The clues are in Avis’s determination in the world of corporate finance and how she has successfully managed her career with being a mother of two. Avis’s career is even more surprising given that she didn’t have an early vocation for accountancy, instead reading law at Sheffield University. ‘I couldn’t decide what I wanted to be and when I spoke to careers people they said to do a good degree. I thought I wanted to be a management consultant but I didn’t know what that was.’ Luckily, an innate numerical streak meant that at the university milk rounds Avis’s head was turned by Price Waterhouse and she applied to train with the then Big Six firm, moving to its Manchester office. ‘I got my ACA qualification and became an audit manager. What you get from audit is the ability to look at new businesses all the time and learn what’s good and what’s bad about them; the ability to walk into a business and say, look, I can understand why this business is doing well, or not so well, and where it sits in its competitive

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environment by looking at the bigger picture.’ Having graduated in 1989, by 1994 Avis had decided to move to London, a decision driven by friends and the desire to have a change of scene. The only secondment available at the time was in the technical department answering a hotline on accounting queries. ‘I wasn’t renowned for my deep technical expertise, but it was available immediately.’ The job involved giving ‘the ultimate view’ on any queries from teams and partners in the UK who were after technical sign off.

The move took her career in a new direction and led to her going through the transaction services director panel while pregnant with her first daughter, Charlie, in 2000.

Simple decision It’s at this point that many women in the City face a sometimes difficult decision: when, and how, to pick up, continue or advance their career post children. For Avis, it was surprisingly simple: ‘I never thought I might give up,’ she says. ‘I took three-and-a-half months off and went back full time.’ Avis appreciates that she was in a

‘WORKING ON A TECHNICAL HOTLINE GAVE ME UTTER CONFIDENCE IN THE FIELD. IT TAUGHT ME THE ROUTE TO FINDING THE ANSWER’ ‘I had to be interviewed and crammed about standards that were coming out. Amazingly enough I got the job.’ It was, she says, ‘the best thing I ever did, for two reasons. Firstly, it gave me utter confidence in the field. I knew that they could throw anything at me and I knew how to get the answer. It taught me the route to finding the answer.’ The second benefit was that it was the perfect springboard for what turned out to be the rest of Avis’s career in professional services. ‘Another job came up, in transaction services, and the candidate had to be available immediately. I’d just done a stint for four weeks to help with a crisis in transaction services. Although they were only taking 10 people, they liked my technical background plus the work I’d done on the project, so I got one of the 10 jobs in the fledgling transaction services in 1993, when I was 25.’

financial position to afford the help that made this possible. ‘I had a maternity nurse when Charlie was first born, then recruited a full-time nanny a month before I went back to work so there was a proper handover.’ She did suffer first-day guilt, though not perhaps for the expected reason. ‘I got in, briefcase down and someone said: “You’re back, can you come to this meeting?” So I was straight back in there with no time to think, and when I got home I thought: “Oh God, I’m the worst mother, I didn’t even ring!”’ From then on, she arranged that the nanny would send regular texts – ‘my fix’ – so that she knew what was happening at home. While Avis’s advice for women in the workplace isn’t that they should pretend to be men, she admits that super-sensitive HR departments might erroneously read that message into it. ‘My philosophy is that you should be a swan at work, however hard anything

13/01/2012 12:27



else is. Sometimes people think I’m saying women shouldn’t be who they are but I’m not, I simply believe they should think carefully about how much of their home life they should bring into the office. ‘I think it’s a matter of giving the impression that sometimes you’re a little bit more in control than you are. Don’t go in sobbing when you’re in the middle of a crisis.’ Avis’s own role model is her mother who has always worked. And with a childhood that at one stage involved five sisters in one household, she hasn’t been short of watching women work and interact. She currently mentors partner-track women at Deloitte on a pilot scheme, with two-hour sessions helping them prepare personally and professionally. Avis credits her friendship network and ‘a husband who completely supports me’ as being crucial to her own success. She was also a founding member of the City Women’s Club, a network of senior women working in financial services. ‘I do think networks – formal or informal – are incredibly important,’ she says.

And while her hard work gave her the financial stability to fund comprehensive childcare, Avis is quick to point out that ‘if you’re going to work at your career you have to invest in it and it will get easier. We didn’t have loads of money; I was a director and so with that first nanny, [finances were] almost neutral, but I knew I had to do it to get partnership.’ With her sights set on being a partner, Avis faced another crossroads when Price Waterhouse and Coopers merged. ‘I was going through partner promotion but I felt I was going to be partner 26 of 26 and have a tiny role.’ She ended up undergoing the partner process at competitor Arthur Andersen at the same time and, when the firm offered her a meaty role plus partner, she jumped at the chance. She was, she says, ‘very proud of myself’. It was March 2001. Little did Avis know that just a year later she would be forced to vote for her survival after the Enron scandal, which brought down Andersen and rocked the accountancy world.


Never Mind the Botox is a series about four professional women all working on the sale of a high profile cosmetic surgery business. Each book reveals how the women cope with one of the most glamorous but challenging deals of their careers, and the dramatic impact it has on their personal lives. Alex Fisher is a high-flying lawyer close to making partner and busy planning her perfect wedding to Elliott. In the latest book, just published, Rachel Altman is a corporate financier with a prestigious accounting firm who’s desperately trying to keep on the straight and narrow. Hopelessly led astray by her bar-diving boyfriend, she gets the chance to turn things round when her boss gives her the break she’s been waiting for. ‘Rachel is closest to my career,’ admits Avis, ‘though the stories in it are made up. Our risk management brains worked out that it would not be great to have clients ringing up having recognised themselves!’ Cosmetic surgeon Stella Webb and senior banker Meredith Romaine are the main characters in the final two books, both to be published later this year. Visit for more information.

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‘Baptism of fire’ ‘My abiding memory of the Enron crisis is calamity, shock, how the place falls apart, when the US freeze money and you can’t pay payroll and bizarre messages from South American partners. I had some of the hardest meetings of my career; it was a baptism of fire for a new partner.’ She was offered a job at Ernst & Young. ‘I didn’t feel I had any loyalties anywhere but we were encouraged to stay with the marching army.’ So she held on to wait and see what deal was being made behind the scenes. In the end, the deal was announced in the less-than-glamorous location of a hotel near Heathrow airport, although the cloak-and-dagger nature of it, plus the doubtless bordering on hysterical Andersen partners, made for an exciting afternoon. ‘We had messages from our partners who were flying down with Deloitte partners, so we knew it was Deloitte [taking over]. Once the deal was presented to the 350-odd Andersen partners, we had to go to the back of the room and vote in favour or not of the rescue transaction. ‘There were 350 partners and 240 places in the deal. What we voted on was the process to agree who those 240 partners should be, not the names, so at the time you didn’t know whether you were a turkey voting for Christmas or not.’ As practically last in, Avis assumed she’d be offered a directorship, but her interview notes with Andersen – ‘the only paperwork they had on me!’ – were so good that she walked in, as partner, to an enlarged transaction services department. The culture difference between Andersen and Deloitte was, says Avis, immediately obvious. ‘Andersen partners were more outspoken and entrepreneurial – perhaps Deloitte would say more dangerous – while Deloitte was incredibly well run and very risk-focused.’ Avis went on to have a second child, Cole, in 2003, again taking short maternity leave and going back full time, and her star continued

13/01/2012 12:27


‘THE WORK JUST STOPPED. I’D BEEN BUSY FOR FIVE YEARS AND IT WAS A HORRID ENVIRONMENT. I STARTED THINKING I WOULD TAKE A SABBATICAL’ in its ascendancy – with highlights including becoming lead client service partner for Unilever and joining the Deloitte board. But things changed after the Lehman Brothers collapse in 2008. ‘The work just stopped,’ she recalls. ‘I’d been busy for five years and it was a horrid environment, ringing around for work. I started thinking I would take a sabbatical. I thought, if I don’t take a break now, when the market is rubbish, I’ll be doing this when I’m 50.’ So in 2009 Avis resigned from Deloitte. The idea for a book came while she was driving and musing about what enterprise she could set up easily. A chat with Joanna Berry – friend, mother, lawyer and ex-Eversheds partner – clarified things. ‘We started texting ideas and we realised very quickly we could

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do a four-women series. They are popular – things like Desperate Housewives, Mistresses, Sex and the City – all based around four women with different personalities.’ And so the idea for Never Mind the Botox was born: a series about four professional women – a corporate financier, a lawyer, a banker and a doctor – all working on the sale of a high-profile cosmetic surgery business. With two manuscripts complete, Avis and Berry started looking at the traditional publishing process but in parallel began to explore self-publishing, which is where they decided to invest. ‘If I was advising someone with my business hat on I’d tell them not to do it, but if you self-publish you own the copyright,’ says Avis.

‘We decided to do everything to retail standard plus a little bit more. We hired our own PR, got independent cover designers to pitch, used a freelance editor and set up a professional website.’ Perhaps going back to her audit training, Avis was already looking at the bigger picture. ‘We knew the real success was film or TV and we could see what other books had made the move, like Bridget Jones or The Devil wears Prada.’ Having written a proposal, Avis and Berry toured the trade shows and caught the attention of Future Films, signing a deal in 2011. It may be that Avis is on her way to become the new Helen Fielding or Candice Bushnell, but it seems that although you can take the girl out of accountancy... ‘I’ll always see myself as a corporate finance partner at Deloitte,’ she laughs, ‘I resigned, I have no legal right to even say it, but I can’t not say it!’ Beth Holmes, journalist

13/01/2012 12:27

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Six senior former Fannie Mae and Freddie Mac executives have been charged with securities fraud by the US Securities and Exchange Commission (SEC). The SEC alleges that they knew and approved of misleading statements, falsely claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans. ‘Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,’ said Robert Khuzami, director of the SEC’s Enforcement Division. ‘All individuals will be held accountable for perpetuating half-truths about matters materially important to the interest of our country’s investors.’ The SEC is seeking financial penalties, disgorgement of ill-gotten gains with interest, permanent injunctive relief and officer and director bars against the former executives.

The view from: Poland: Paweł Górnicki FCCA, vice president to the board, Ceramika Nowa Gala Q What are your top priorities when you start work each day? A The first thing I do is read emails and check the news. Then I try to keep my schedule divided into single-issue slots and avoid multitasking. Q Why should accountants act as business partners? A The biggest contribution we can make is to ensure business decisions are based on objective facts – but that doesn’t mean they need to be unimaginative. We must understand our companies beyond the numbers, procedures and budgets. I’m personally involved in day-to-day general management, allowing me to explain the rationale behind decisions to non-finance people. Q How has the global recession changed the way finance teams operate? A Efficiency is now about driving efficiencies across the whole value chain, and influencing areas beyond direct control. Following an era when financing was available to anybody, many industries still face structural problems resulting from unwise historical spending, spooking investors and bankers. Yet successful businesses must invest to stay competitive.


The US Public Company Accounting Oversight Board (PCAOB) has proposed a revised standard on communications between auditors and audit committees, intended to further strengthen the quality of communications and to be more closely aligned with other PCAOB standards. ‘The reproposed standard would benefit both the auditor and the audit committee, by providing the auditor with additional information relevant to the audit and assisting the audit committee in fulfilling its oversight responsibilities,’ said chief auditor and director of professional standards, Martin F Baumann.

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43 Corporate The view from Paweł Górnicki of Ceramika Nowa Gala; shared services and outsourcing are here to stay; Tony Fernandes FCCA is living the dream 37 Practice The view from Ansley Syanziba of Moores Rowland; how Penny Avis’s latest move is a real page-turner

Q What do you do to achieve a work-life balance? A Not enough! I firmly believe that intense physical effort clears the mind, so I train in various sports. I climb regularly and take my holidays in the mountains. Of course, I have to call work from time to time – but I schedule those calls, so that I can resolve any pressing issues in one chunk.


Education: Studied robotics and automatics at Warsaw University, before switching to accounting and finance. Graduate of joint MBA programme between Warsaw University and University of Illinois. Career: Started in finance at Polska Telefonia Cyfrowa (part of T-Mobile), progressing into consultancy at Deloitte and subsequent CFO roles in telecommunications.

17/01/2012 18:25



No turning back It is clear that shared services and outsourcing are here to stay and will increasingly help finance functions to drive business performance, reports ACCA’s Jamie Lyon A big priority for CFOs in today’s global economy is how they shape the finance function to drive business performance. There are three big priorities: reducing the cost of running the finance function in the first place, improving the efficiency of finance processes, and making finance a more effective and able partner for the business. The key tools in the toolbox that finance leaders have turned to to drive these initiatives have been shared services and outsourcing. ACCA has just published its first report on how leading organisations are transforming the finance function. Finance Transformation: Expert Insights on Shared Services and Outsourcing presents insights from experts at 20 of the world’s leading companies on the success of transformation through shared services and outsourcing. In the report the likes of Coca-Cola, Shell, Unilever, AstraZeneca, PwC, Ernst & Young, KPMG and Deloitte share their perspectives on the current issues, challenges and opportunities in the shared services and outsourcing space. Shared services started in the 1980s in the US and by the 1990s had migrated to Europe. Today shared services are a global phenomenon, with leading companies and finance leaders seeking to explore the benefits they can bring to finance operations. It’s not hard to see why. Shared services and outsourcing operations have been an overwhelming success for the businesses that have adopted them.

Cost no-brainer The obvious draw is reduced cost, as consolidation of finance activities into specific locations has driven significant scale benefits, and most importantly tapped into significant labour arbitrage between different geographies. Put

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LABOUR ARBITRAGE MAY NOT IN FUTURE BE AS COMPELLING AS IT ONCE WAS, BUT OTHER REMOTE DELIVERY BENEFITS CONTINUE TO SHINE THROUGH simply, it replaces relatively expensive management accountants in mature economies with their equivalents in cheaper locations. But to sell the benefits of shared services and outsourcing on cost alone would significantly underplay the other benefits of ‘remote delivery’. Labour arbitrage may not in the future be as compelling as it once was, but the other benefits from remote delivery continue to shine through. So what are these benefits? First, there is standardisation. Remote

delivery takes finance processes that seek the same outcomes across different geographies and turns them into one, ensuring consistency and understanding of how these processes work, rather than variations on a theme, and leveraging technology to deliver them. Second, remote delivery brings transparency. The transfer of finance activities into remote delivery centres gives the business and the finance function greater visibility on how finance operations work and how they can best

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support business aims, which helps drive accountability and ownership. Third, remote delivery offers control. The use of shared services and outsourcing for finance helps drive better financial control across the organisation and makes the auditing process more effective and efficient, with controls typically located in one or a few locations rather than dispersed across the business. Fourth comes quality. Better finance processes drive qualitative outcomes that are better first time round. They also start to drive greater insight into the business metrics and outcomes that matter, and the understanding of how processes may affect these. These four benefits are often cited as the key advantages of shared services and outsourcing, but there are others. Businesses often say that shared services and outsourcing help reduce finance operating risk (linked to transparency). In particular, businesses that choose to keep remote delivery units in-house through captive shared service centres say this lets them drive and retain specialised capabilities that may be important to the organisation – for example, regulatory skills.

Freeing up finance This, in turn, raises the broader issue of talent development. By consolidating and centralising finance operations, the business gains visibility over the skills it needs and the talent at its disposal. This is not just about visibility in the remote delivery centre: similar benefits should accrue to the retained function as staff are freed up to develop skills in necessary areas. Caroline Curtis FCCA, senior director of controllership accounting and reporting, EMEA, Yahoo, says: ‘Our shared service centres bring many benefits – speed of execution, reduced operational risk, specialised capability when it may be needed (for example, with regulatory issues), operational flexibility and an ability to control talent development effectively.’

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Anoop Sagoo

Given these benefits, it should come as no surprise that ACCA’s report shows that there will be no turning back from shared services and outsourcing. Businesses have already stripped out significant costs in their finance operations, and other benefits have started to accrue. It seems that shared services and outsourcing for finance are here to stay. While ACCA’s report concludes that shared services and outsourcing have been a success, there is much more that can still be done. In particular, the priority of many businesses is not finance transformation per se; an efficient and cost-effective finance function is beneficial, but increasingly business leaders want to understand how the finance model can improve business outcomes and profitability, and the role of shared services and outsourcing in this. They seek to drive the finance model that best meets the needs of the business and which is fully integrated with the business. Anoop Sagoo, senior executive for business process outsourcing at Accenture, says in the report: ‘The CFOs that I work with see finance


Caroline Curtis

transformation as a vehicle and tool to drive change. What they are most interested in now is performance.’ Jamie Lyon, ACCA head of employer services month, we will be looking at the *Next challenges involved in outsourcing you are a CFO or FD interested in *Iffinance transformation, shared services or outsourcing and want to contribute to ACCA’s programme, please contact, +44 (0)20 7059 5513

*VIEW FROM DELOITTE: PETER MOLLER, PARTNER Shared services and outsourcing have been an overwhelming success and are now recognised as key components of a best practice finance function. Remote delivery is an idea whose time has come and any organisation with multiple back-office finance functions is likely to benefit from a shared service structure – whether run as a captive or outsourced. The labour arbitrage that has driven nearshoring and offshoring over the past 10 years will decrease. But even if there is little cost arbitrage to be gained from a low-cost location, there are many other benefits, such as the adoption of a single best practice and more productive process, better spans of control, and standardised and enhanced data and reporting. Such benefits will ensure that consolidated transaction processing and even higher value activities will continue to make good business sense. There is no turning back.

13/01/2012 12:40



The man who is living the dream Having turned a loss-making airline into a runaway success and flourished in a wide range of ventures, Tony Fernandes FCCA is as big a celebrity businessman as they come


ony Fernandes is a force of nature. He is the man behind Malaysian entertainment and leisure conglomerate Tune Group, which is the parent business of AirAsia, the owner of English Premiership football team Queens Park Rangers (QPR) and principal of the Caterham (formerly Lotus) Formula 1 racing team, for starters. His success hasn’t gone unnoticed. In South-East Asia he commands virtual rock star status, but despite being held in such lofty regard he

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remains approachable and unaffected, sitting at a simple desk in an open-plan office alongside his staff at AirAsia. But life would have been very different if Fernandes had followed his father’s wishes and opted for a career in medicine as he himself had done, rather than train with ACCA. ‘My father wanted me to follow in his footsteps and become a doctor. But I decided to do accountancy instead,’ he says. Fernandes is perhaps best known for buying AirAsia in 2001 for a token

sum – the day after the 9/11 disaster. Back then it was a loss-making airline company complete with debts of £8m, but Fernandes has turned it into one of the world’s most successful budget airlines. In doing so, he has revolutionised the aviation industry in South-East Asia by making flying affordable for everyone. He remains group CEO of AirAsia. The idea behind the acquisition was hatched at an early age, through his own experiences of travelling back and forth to his native Malaysia.

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He explains: ‘I was sent away to study in London [Epsom College and the London School of Economics] at a very young age and it was very expensive to travel home then. I thought to myself, why should air travel be so expensive? Everyone should be able to fly home to their loved ones any time they want.

DRB-Hicom) for the token sum of one Malaysian ringgit.’ Despite the tough climate and fears surrounding aviation travel after the Twin Towers attack in 2001, the AirAsia debt was paid back inside two years. ‘People did not believe it was something that was achievable,’ says Fernandes. ‘But it feels good that since we took over we have successfully turned the airline from a two-aircraft outfit plying six routes in Malaysia to a business covering 80 destinations in 24 countries, with more than 10,000 staff and a market capitalisation of over £1.4bn [as of December 2011].’ The turnaround and expansion of the company aside, there are plenty of big challenges to keep him on his toes. ‘The main challenge is always to keep costs low, as nothing is certain in terms of fuel prices, rising costs and the global economic uncertainty. But AirAsia will continue to stay focused on our strategy of containing or driving down costs, raising yields and further expanding network reach.’ For now the outlook remains good for AirAsia, especially with the launch of AirAsia Philippines, AirAsia Japan and its recent firm order for 200 Airbus A320neos. The Airbus deal is seen by a number of analysts as key to securing the company’s future by vastly improving its ability to meet the potential growth in the market. ‘The decision to be one of the first launch customers for the A320neo will ensure we remain ahead of the pack,

‘IT’S A THRILL TO BE AT THE APPRENTICE ASIA HELM AND SEE PROMISING BUSINESS TALENTS BATTLE IT OUT FROM THE STREET TO THE BOARDROOM’ ‘Then along came an opportunity to live my dream of democratising air travel. Together with my partners Dato’ Pahamin Ab. Rajab, Dato’ Kamarudin Meranun and Dato’ Aziz Bakar [none of whom had any real aviation industry experience], we bought out AirAsia from Hicom Holdings (now

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with one of the world’s youngest and most modern fleet. The A320neo is expected to deliver approximately a 15% reduction in fuel consumption per aircraft, which will help us to focus on maintaining or even lowering our already leading cost per available seat kilometre [CASK].’

Results to date for 2011 show a 20% year-on-year increase in revenue for Q1 and 15% for Q2. Affiliates in Indonesia and Thailand performed well in both quarters, with AirAsia Thailand posting a growth of 44% year on year and AirAsia Indonesia a 37% rise in year-onyear revenue. Meanwhile, AirAsia Indonesia will be operating a 100% Airbus fleet for 2012. This will help improve operating costs and contribute to further growth. ‘We are trying to maintain tight control of costs even as we grow revenues,’ he says. ‘Fuel prices are volatile and beyond our control, so our response is to continue to innovate in the way we operate. Based on the results of both quarters, we are well on track to achieve our goal – building on our already strong foundation to enhance growth.’ At the nub of that strategy is a ‘load active, yield passive’ outlook, which is paying off through lower average fares. That attracts more passengers, who in turn contribute to a higher take-up rate of ancillary services such as baggage supersize, pick-a-seat, cargo and courier, in-flight merchandise and meals and refreshments. ‘Instead of raising fares for higher yields – and running the risk of dampening air travel – we’d rather keep fares at reasonable levels to attract higher passenger loads and boost revenue through ancillary services.’ Despite his clear love of AirAsia, it was never going to be enough for a man who is constantly on the lookout for new opportunities. Fernandes has also turned his hand to another business venture in the form of Tune Hotels, a no-frills low-cost hotel chain. Tune offers ‘five-star bedding at one-star prices’, with room rates from 20p. It currently operates eight hotels and is working to develop dozens more across AirAsia destinations. And there’s more, including an opportunity with Caterham in Formula 1. Having already brought AirAsia into F1 with AT&T Williams as a team partner, Fernandes was approached about sponsoring a new team. A motorsport fan since childhood, he saw

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The CV

The tips

Group CEO, Tune/AirAsia

Believe the unbelievable, dream the impossible and never take no for an answer.


* *


Vice president, ASEAN, Warner Music South-East Asia

Go with your gut and give it your best shot – you may fail, but don’t give up.


Regional MD, ASEAN, Warner Music South-East Asia


MD, Warner Music Malaysia


Senior financial analyst, Warner Music International, London


Financial controller, Virgin Records, London

the chance to bring the much-loved Lotus name back into F1, and with a consortium of Malaysian business interests he led the creation and launch of the team in 2009 and its entry into the 2010 FIA Formula 1 World Championship. During 2011, Fernandes also pulled off two more eye-catching sports-related deals in the UK. First he purchased British sports car company Caterham. The acquisition is an opportunity for Fernandes to enter the automotive industry but was a move made more difficult at the time by an

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ongoing row with the Lotus-branded Renault F1 team over the use of the rights to the Lotus brand name. Team Lotus won the case, so Fernandes and his team are the rightful owners of the Team Lotus name. If he had lost, he would probably have lost the use of the Team Lotus name. Caterham was born out of Lotus, initially as a dealer of the iconic Lotus Seven and subsequently as the purchaser of the rights to continue manufacturing the Seven when Lotus ceased production in 1973. Caterham’s only car at present is the Caterham 7, an evolution of the Lotus. Later in 2011, he snapped up newly promoted Premier League side QPR, following talks with the club’s previous owners, F1 moguls Bernie Ecclestone and Flavio Briatore. ‘Negotiations were not that long,’ he says. ‘The opportunity to get involved in QPR came up via the previous owners and I jumped at it. Now that I am part of it, I hope to make this raw diamond shine as much as it can. I want the fans to be proud of what we are doing as they are stakeholders.’

There is speculation that Fernandes would like to relocate the club to a bigger stadium with the possibility of increasing revenues. ‘Let’s focus on staying up and building a good structure and a solid foundation to grow for the future at the moment,’ he responds. ‘Let’s see how the season goes and we will plan from there.’ And as if he hasn’t enough on his plate, he has also found the time to front the Asian edition of TV series The Apprentice. ‘It’s a thrill to be at the helm of The Apprentice Asia and to see some of the most promising business talents in the region battle it out from the street to the boardroom,’ he says. ‘It’s great to be able to throw some really interesting challenges their way, so they can show the world what the new generation of Asian business executives are made of.’ If they turn out anything like Fernandes, there will be plenty to admire. In the meantime, 2012 looks like being another formidable year for one of ACCA’s highest-profile members. Alex Miller, journalist

13/01/2012 12:26



Lessons from New Zealand Looking for an entry-level route into sustainability reporting? Waikato Management School has come up with a set of minimal requirements, as Martin Kelly FCCA explains

The number of sustainable business reports has grown over recent years and the quality of reporting has also developed. This article suggests what minimal essential information should appear in a basic sustainability report. This minimum is much less than the comprehensive listings generated by such bodies as the Global Reporting Initiative (GRI) and Accounting for Sustainability (A4S).

The 20th century business model resulted in severe damage to the earth’s ecosystems, as was made clear in the UN’s Millennium Ecosystem Assessment Synthesis Report 2005. It is essential that a shift in the 21st century business decision-making model is made if we are to avoid continuing damage to ecosystems and to societies. Sustainability reporting can help drive that shift.

THERE ARE MANY ORGANISATIONS THAT WISH TO START PROVIDING SUSTAINABILITY REPORTS BUT FIND THE BROAD REQUIREMENTS TOO ONEROUS Sustainable business practices encourage organisations to measure and report what effects their activities are having on the environment, their stakeholders in society, cultural development, ethical behaviour and the economy. Organisations that do so, it is suggested, will behave better in making decisions that benefit society. A key element in sustainability practices is to ensure that businesses remain financially viable over the long term. Sustainable business practices are not offered as an alternative to profitable business practices, but they demand more of managers than an ability to maximise the organisation’s short-term profitability.

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What’s in a good sustainable business report? What constitutes a good sustainability report is a matter of opinion, but GRI, A4S and other bodies have attempted to provide sets of detailed guidelines on what is required. GRI-3 has become the widest used reporting system. Probably the next most used system has been that provided by A4S, which enjoys the support of the Prince of Wales. On 12 September 2011 the recently formed International Integrated Reporting Committee (IIRC) issued a press release calling for improved reporting, because the world has changed and reporting must too. GRI,

A4S and many other influential bodies are supporting IIRC. In 2012 IIRC will be issuing an exposure draft of an international integrated reporting framework. In the short term – until the framework is up and running – IIRC is encouraging organisations to combine sustainability and management reports as a progressive step towards integrated reporting. IIRC hopes integrated reporting will evolve to encourage a future-based perspective, discourage bribery and corruption, and allow easier comparisons of ethical and conflict resolution practices. In New Zealand, Waikato Management School (WMS) provides leadership in sustainable business practices. WMS has provided advice on minimal requirements for a sustainability report. The team at WMS has become aware of many organisations that wish to start providing sustainability reports but find the broad requirements too onerous. WMS has tried to make it easier for such organisations to get started by limiting the number of issues that sustainability reports ‘must’ address to 10. Either immediately or over time, it is hoped that the organisations involved will extend their reports to include other issues that are particularly relevant to their operating environments.

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The 10 issues

1) The purpose of the organisation in society Organisations are human creations. All the powers they have, and support they are given, are in place because the societies they operate in permit this. It follows that organisations should recognise the rights afforded to them and behave as good corporate citizens. A sustainability report gives an organisation an opportunity to explain what it brings to society by way of profitability, employment, societal development, environmental care, cultural support, etc. 2) How the organisation defines sustainability Unless a single and universally

accepted definition of sustainability appears, it is incumbent on those using the word to explain what meaning they are attaching to it. Definitions of sustainability may vary greatly between different types of organisations in different countries. There may be huge differences put on the weights of various practices that fit generally under the sustainability banner. Readers must be informed exactly what an organisation’s sustainability objectives are. 3) The reporting system that has been adopted/considered (such as GRI-3) Some organisations produce sustainability reports without making reference to any existing guidelines on what those reports should contain. It


1) The purpose of the organisation in society 2) The organisation’s definition of sustainability 3) The reporting system adopted by the organisation (for example, GRI-3) 4) The individual in the organisation who is primarily responsible for sustainability, and their full contact details 5) The stakeholder groups recognised by the organisation 6) How the organisation balances stakeholder interests and complies with legal and voluntary codes 7) The identification of adequate KPIs with evidence of forward planning 8) The evidence of external benchmarking 9) The integration of sustainability aspirations into the corporate culture 10) Verification of the published information

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is poor practice for any organisation to choose to ignore this valuable advice. 4) The individual in the organisation who is primarily responsible for sustainability, with contact details Readers of sustainability reports often wish to know more about some of the contents, but it is often difficult to make contact with anyone within an organisation who is prepared to respond to questions. As a courtesy, and a public relations measure, details of an accessible contact person should be provided. 5) The stakeholder groups that are recognised Generally those organisations involved in sustainable business practices will have opted to be socially responsible organisations. Being socially responsible requires an organisation to identify the stakeholder groups it owes responsibilities to. It is helpful if readers are also made aware of the key stakeholder groups that have been recognised, and briefly what responsibilities are recognised. 6) The balancing of stakeholder interests and compliance with legal and voluntary codes If responsibilities to several stakeholder groups are recognised, it becomes impossible to optimise

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returns to each stakeholder group simultaneously. Organisations should make it clear that they recognise this problem and inform their report readers of the machinery they have in place to address situations where conflicts are expected to arise among stakeholder groups, and with any legal/ voluntary rules which the organisations feel they should adhere to. 7) How adequate KPIs are identified Many organisations do not set adequate key performance indicators (KPIs) to ensure that their financial health is best protected. However, the absence of clear KPIs is much more prevalent when organisations are planning for healthy workers, contented customers, environmental respect, ethical practices, cultural recognition and other such ‘vague’ aspirations. Some organisations indicate that they have set clear KPIs for the past year but do no more than report against them. They fail to inform readers why (sometimes large) variances have occurred, and what actions have been taken to decrease the chances of such variances occurring in future years. Where future KPIs are shown, it is rare for them to extend beyond the next year. In some areas companies should be signalling what progress they wish to have made several years from now.

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8) Comparisons with external benchmarks Most organisations obtain information from trade associations, government bodies and elsewhere about how well similar bodies are performing in all areas where they have decided to set targets for themselves. This benchmarking should extend throughout all areas of sustainable business practices and comparisons reported in the sustainability reports. Where relative performances are poor they should be reported, along with details of the consequential changes in operating procedures. 9) How sustainability aspirations have been embedded in the culture It is hard to describe what is required under this heading. Many organisations try to report on various sustainability issues, but often such reports seem like after-thoughts, something to be addressed after the separate and more important financial accounting element of sustainability has been completed. Few sustainability reports successfully integrate the reporting of their many other sustainable business practices with their financial reports. Financial reporting should complement other sustainable business practices rather than suggest rivalry between profit maximisation and other sustainable business practices.

10) How the published information has been adequately verified by an external source In New Zealand most sustainability reports are published with no external verification attaching to them. If large organisations were to publish financial reports that had not been audited, many readers would not tolerate such a reporting omission. All the sustainability reports of large organisation should have some external verification attaching to them to improve their credibility.

A springboard Some experts will undoubtedly argue there are other more important issues that should be included in any top 10 list such as this one. This list is a subjective one and all 10 issues listed here should be considered by any organisation trying to produce good sustainability reports. Martin Kelly FCCA is an ACCA ambassador in New Zealand This article is drawn from an academic research paper being created by the WMS team. That paper contains further discussion and a comprehensive literature review. Anyone wishing to obtain a copy of that report should contact the author of this article:

13/01/2012 16:05



Mending holes in the tax net Kelvin Abdallah ACCA provides an overview of the corporate tax regime in Ghana, where integration and computerisation are making the process less cumbersome

The relative peace, stability and democratic successes recorded by Ghana in the last two decades have enabled the West African country to emerge as an important economic player within the sub-region. Gross domestic product (GDP) growth rates in the last three years have averaged 6%, with tax revenue contributing an average of 20% of GDP. This notwithstanding, it is generally believed that the majority of Ghanaians, especially in the informal sector, operate outside the tax net. Governments, both past and present, have been accused of focusing largely on the few corporate entities and employees in the formal sector for tax revenue. It is often argued that such businesses eventually become overtaxed – carrying the burden of the larger majority who do not pay taxes at all or who pay nominal taxes based on unreasonably low estimated assessments allocated to them by the Ghana Revenue Authority (GRA). Until recently, the major problem that plagued the GRA was the lack of information and communication technology (ICT). Tax information was kept on paper files and payments were recorded manually. This created an avenue for corruption and caused huge tax losses and, in 2006, the government embarked on a computerisation drive. While yet to be fully implemented, the benefits have already been felt, resulting in Ghana’s upward placement in the annual Paying Taxes study from PwC,

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the World Bank and the International Finance Corporation. To further eliminate bottlenecks, the hitherto-complex tax administration services – made up of the Internal Revenue Service (which administered corporate taxes), the Value Added Tax Service and the Customs, Excise and Preventive Service – have been replaced by the GRA, which is expected to offer taxpayers a one-stop location for the administration of all taxes. Under the GRA, taxpayers no longer deal with three distinct and unconnected tax bodies – a development expected to make compliance easier and more efficient. In addition, on the back of the recent oil find, the government has set up a special petroleum tax unit for companies operating in the oil and gas industry. A special desk has also been established to administer the taxation of professionals, a group largely believed to be under-taxed in Ghana. Under the Ghanaian tax system, corporate taxpayers are put in two categories: large and general. Large taxpayers pay tax based on a system of self-assessment. Such entities are required to submit a self-assessment tax return to the GRA prior to the start of every tax year (January to December). Corporate taxes are then paid quarterly in arrears, based on the projected profits included in the self-assessment return. General taxpayers, on the other hand, are provided with a tax assessment by the

GRA within a few weeks of the start of the tax year and are required to pay the assessed amount quarterly in arrears.

General outline At 25%, Ghana’s corporate tax rate is one of the lowest in the sub-region. The rates saw consistent reductions from as high as 35% in 2000 to the current 25% in 2006. Resident persons are taxed on all income accruing in, derived from, brought into, or received in Ghana, while non-residents are taxed on income accruing in or derived from Ghana. Companies operating with a Ghana Free Zones Board licence (with the requirement to export a minimum of 70% of their produce) enjoy a 10year tax holiday and a corporate tax rate not exceeding 8% thereafter.

Corporate tax rates Ghana’s corporate tax rate of 25% applies to both limited liability companies and local branches of foreign (external) companies. The rate is computed on the tax-adjusted profit, after adding back notional expenses such as depreciation and adjusting for capital allowances. For the purposes of capital allowances, assets other than buildings are pooled into classes and granted capital allowances at the rates of 20% (data handling equipment), 30% (automobiles and construction equipment) and 40% (plant, machinery, furniture and general equipment). Buildings are granted a 10% capital allowance on cost over 10 years.

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Net improvement: Ghana’s revenue collection process should benefit from changes that are reducing the holes that potential taxpayers fall through

Generally, expenses must have been wholly, exclusively and necessarily incurred for business purposes to be tax-deductible. In the case of a branch, payments made to its head office or affiliated offices are not deductible for tax purposes unless they constitute

improvements to the asset and incidental costs of disposal. Unlike other jurisdictions, Ghanaian tax laws do not allow for indexation of the cost base (adjustment for inflation). A person making a capital gain is required to file a return no later than

GOVERNMENTS HAVE BEEN ACCUSED OF FOCUSING ON CORPORATE ENTITIES AND EMPLOYEES IN THE FORMAL SECTOR FOR REVENUE reimbursement of actual expenditure incurred by the head office on behalf of the branch. Additionally, branches pay a 10% branch-profits tax (the equivalent of dividend withholding tax for companies) on actual and deemed repatriation of profits. As stated earlier, corporate taxes are paid quarterly in advance. Companies are thus required to make payments on the last day of the third, sixth, ninth and 12th month following the start of the tax year or the company’s accounting period. Tax returns must be filed no later than four months after the end of a company’s accounting period, although a two-month extension can be obtained.

30 days after the gain is made, accompanied with the tax payment. Where they re-invest the proceeds in a replacement asset of a similar nature within one year, the gains from that sale are exempt from tax. Further, capital gains derived by a company arising out of a merger, amalgamation, or re-organisation are exempt from tax where there is continuity of underlying ownership of at least 25% in the asset. For resident persons, capital gains is payable on the disposal of all chargeable assets in Ghana. Where the assets are not located in the country, the gains are taxable in Ghana only if the proceeds are brought into, or received in, Ghana.

Capital gains taxes

Position of losses

Capital gains are taxed at 15%. The gains are calculated as the difference between the disposal proceeds of a chargeable asset and the cost base of the asset, plus any cost of making

Tax losses incurred by businesses in farming, agro-processing, mining, tourism, ICT and manufacturing (for export) can be carried forward for five years. Where several losses have been

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incurred, they must be deducted in the order they occurred. A company’s right to deduct losses carried forward is restricted to the business from which the loss was actually incurred. Accordingly, a company with several businesses cannot deduct the losses of one business brought forward against the profits of another. Any unrelieved losses carried forward are lost where there is a change of 50% or more in the company’s underlying ownership.

Group treatment Group taxation is not applicable and every company within a group is taxed separately on its operations. Companies are thus unable to transfer losses to other members of a group. The above notwithstanding, dividends paid to a resident company by another resident company are exempt from tax where the company receiving the dividend controls, directly or indirectly, 25% or more of the voting power in the company paying the dividend.

Future outlook Despite the challenges, we have seen tremendous improvements in the last few years, and the investing community is optimistic that when computerisation is complete, the payment of taxes will be less cumbersome. Kelvin Abdallah is associate director in charge of the tax services subsidiary of Oxford & Beaumont Solicitors

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Statements across frontiers? Just how comparable are financial statements across national boundaries, given the clear and concise language in IAS 1? Graham Holt explores the evidence

IAS 1, Presentation of Financial Statements, requires that an entity whose financial statements comply with International Financial Reporting Standards (IFRS) has to make an explicit and unreserved statement of such compliance in the notes. Financial statements cannot be described as complying with IFRS unless they comply with all the requirements of IFRS, including International Financial Reporting Interpretations Committee interpretations (IFRICs). Inappropriate accounting policies cannot be rectified either by disclosure of the accounting policies used or by notes or explanatory material. On the basis of the above statements, it could be assumed that the comparability of financial statements could be assured, as the language used in IAS 1 is clear and concise. Recently staff at the US Securities and Exchange Commission (SEC) analysed the annual consolidated financial statements of 183 companies, including both SEC registrants and companies that are not SEC registrants, which prepare financial statements in accordance with IFRS. The 183 companies were domiciled in 22 countries and approximately 80% were domiciled in the European Union (EU), with companies from Germany, France and the UK representing just over half. The companies in the analysis represented 36 industries and were selected from the Fortune Global 500, a listing of the world’s largest companies by revenue.

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The standards reviewed were those in effect at 31 December 2009. It was found that company financial statements generally appeared to comply with IFRS requirements. However, it was felt that the transparency and clarity of the financial statements in the sample could be enhanced. Many companies did not appear to provide sufficient detail or clarity in their accounting policy disclosures to support an investor’s understanding of the financial statements, and some also used terms that were inconsistent with the terminology in the applicable IFRS. Further, some companies referred to local guidance, the specific requirements of which were not clear. Differences in the application of IFRS affect the comparability of financial statements across countries and industries. In the sample, any lack of comparability seemed to be caused through application of IFRS, or due to options permitted by IFRS or the absence of IFRS guidance in certain areas. In other cases, differences resulted from what appeared to be non-compliance with IFRS. Differences arising from the standards themselves were affected by guidance from local standard setters or regulatory bodies that narrowed the range of acceptable alternatives permitted by IFRS or provided additional guidance or interpretation. There was also a tendency by some companies to carry over their previous national practices in their IFRS financial statements.

In the absence of a specific applicable IFRS, an entity is required first to consider guidance in an IFRS standard that relates to similar issues, and then to consider the IFRS Framework. The entity may also consider recent pronouncements of other standard-setting bodies that use a similar conceptual framework, other accounting literature and industry practices, if they do not conflict with IFRS. Approximately 20% of companies in the analysis referred to local guidance for a specific transaction as part of their accounting policy disclosures. An interesting case arose where a company elected to rely on the pronouncements of another standard setter as regards their revenue recognition accounting policy. Subsequently the standard setter changed its guidance but the company did not incorporate the changes that the standard setter had made. IFRS is silent on this matter. IFRS requires compliance with IFRICs. However, like new IFRSs, IFRICs are not mandatory immediately. For example, in the EU, IFRICs are not implemented until after the European Commission adopts them. As a result, some companies in the EU adopted IFRICs at dates later than companies outside the EU. This practice can cause differences in accounting practices that the IFRICs are issued to address, due to a timing difference. IFRS permits a departure from specific requirements of IFRS if an entity determines that the application of that requirement would result in the

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financial statements being so misleading that they no longer meet the objectives of the Framework. This is often referred to as a ‘true and fair override’. There were no examples of the true and fair override in the sample. There were significant differences in the presentation of the statement of cash flows. IAS 7, Statement of Cash Flows, permits the use of the direct or indirect method of

claims. IFRS defines cash equivalents as ‘short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value’. Differences were seen in the items classified as cash equivalents; these ranged from balances at central banks to investments with a maturity exceeding three months.

COMPANY FINANCIAL STATEMENTS GENERALLY APPEARED TO COMPLY WITH IFRS STATEMENTS, BUT TRANSPARENCY COULD BE ENHANCED presentation. The vast majority of companies used the indirect method, with companies in two countries primarily using the direct method. This was due to the use of the indirect method being prohibited at the time of initial adoption of IFRS. Further, there were many variations relating to the profit or loss measure used as the starting point to determine operating cash flows. Additionally, there were differences in the classification of items within the operating, investing and financing categories. For example, most companies in the insurance industry classified their investment activities within cash flows from investing activities but some presented investing activities within cash flows from operating activities, either on a gross basis or net of payments of related benefits and

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IAS 38, Intangible Assets, defines an intangible asset as ‘an identifiable, non-monetary asset without physical substance’ and requires each entity to ‘assess whether the useful life of an intangible asset is finite or indefinite’. Some companies determined that certain types of intangible assets – for example, brand names – had a finite life, while others determined that the same type of intangible assets had an indefinite life. The brand names included some of the world’s most recognised brands. Additionally some companies disclosed useful lives that appeared to be capped at a maximum length rather than using an assessment of the useful life of the asset. Companies can select either the cost model or the revaluation model as their accounting policy and must apply that policy to an entire class of intangible assets. All of the companies elected to


use the cost model to account for intangible assets. IAS 36, Impairment of Assets, requires assets to be evaluated for impairment individually, or, if the recoverable amount of an individual asset cannot be determined, by cash-generating unit. A cash-generating unit is ‘the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets’. It was seen that there were several levels defined as cash-generating units, including: the operating segment; below the operating segment but not defined; one level below the operating segment; two levels below the operating segment; and the individual store or outlet. This is obviously a cause for concern in terms of the nature and accuracy of the impairment charge. One-third of companies disclosed that they entered into transactions within the scope of IAS 40, Investment Property. IAS 40 permits companies to elect to use either the fair value model or the cost model. Most companies applied the cost method, with those that used the fair value model mainly in the banking sector. There were problems with those companies who used the fair value model; several did not disclose the methods and significant assumptions used to determine the fair value of the investment properties, as required by IFRS. Also, there were variations by country in the determination of fair value for investment properties. The

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determination of fair value of investment property was regulated in one country, while in another it was measured for fair value in accordance with guidance published by a national organisation. Fair value should reflect market conditions at the end of the reporting period. In IAS 37, Provisions, Contingent Liabilities and Contingent Assets, IFRS requires a provision to be recognised

determine whether a provision should be recorded. There were several instances in which local laws or accounting regulations required the use of a separate account within shareholders’ equity to provide for specifically mandated reserves. IFRS gives no guidance regarding the presentation of these separate accounts. A group of companies in a particular country disclosed that 10%

THERE WERE INSTANCES IN WHICH LOCAL REGULATIONS REQUIRED A SEPARATE ACCOUNT WITHIN SHAREHOLDERS’ EQUITY when an entity has a present obligation whether legal or constructive as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle that obligation, and a reliable estimate can be made of the amount of obligation. Most companies stated these recognition criteria in their accounting policy, but did not provide any additional explanation as to how the criteria were applied. Some disclosed that one of the criteria applied to recognise a provision would be that no inflow of resources of an equivalent amount was expected. IFRS does not allow offsetting in the statement of financial position of amounts recoverable from third parties. In addition, some entities did not discuss the recognition criteria in IAS 37 but indicated that they looked to legal experts to

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of profit was transferred to a nondistributable statutory surplus reserve in shareholders’ equity in accordance with national accounting standards. Similarly, an entity disclosed that national law required it to maintain a general reserve within shareholders’ equity for the risk of impairments equal to 1% of risk assets, which are defined by law. IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations, requires: a) assets that meet the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets to cease; and b) assets that meet the criteria to be classified as held for sale to be presented separately in the statement of financial position and

CPD units on the web

the results of discontinued operations to be presented separately in the statement of comprehensive income. Companies tended to address some, but not all, of the criteria required for classification as discontinued or held for sale. Several companies described accounting practices that did not appear to comply with IFRS. For example, one of the criteria used to classify an asset as held for sale was that a sale would be completed within one year from the statement of financial position date, rather than one year from the date of classification. Another company classified assets as held for sale that were not available for sale in their present condition. This is inconsistent with IFRS, which requires that the asset ‘must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets’. There were other differences reported by the SEC in relation to deferred tax, operating segments and revenue recognition. As stated above many of the differences seemed to stem from national policies carried over at the time of transition to IFRS and national laws and regulations. It does appear that the aim of producing comparable financial statements across boundaries has some way to go. 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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Technical update


A round-up of the latest developments in financial reporting and audit FINANCIAL REPORTING IFRS CHANGES At the end of 2011, the International Accounting Standards Board (IASB) announced that the mandatory effective date of IFRS 9, Financial Instruments, would be deferred from 1 January 2013 to 1 January 2015. The IASB has also amended IFRS 9 to provide relief from the requirement to restate comparative information, but transitional disclosures will be required. In December 2011 the IASB issued an amendment to IFRS 7, Financial Instruments: Disclosures, aimed at improving the information presented in financial statements about the effect or potential effect of offsetting arrangements. The balance sheet offsetting of financial instruments was the subject of a joint project between the IASB and the US Financial Accounting Standards Board and, while a joint exposure draft was issued in January 2011, the respective boards have decided to retain their existing models but jointly issue new disclosure requirements. These will apply for periods beginning on or after 1 January 2013. An amendment to IAS 32, Financial Instruments: Presentation, was also issued clarifying the requirements for offsetting financial instruments. The amendment, Offsetting Financial Assets and Financial Liabilities, will apply for periods beginning on or

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after 1 January 2014 and is retrospective. The revised standard clarifies: The meaning of ‘currently has a legally enforceable right of set-off’. That some gross settlement systems may be considered equivalent to net settlement. IFRS 10, Consolidated Financial Statements, was issued in May 2011 and some concerns have been raised about the transitional provisions addressing when the standard needs to be applied retrospectively. As a consequence, the IASB has issued an exposure draft suggesting amendments to clarify the requirements. The proposed changes are: An explanation that the ‘date of initial application’ means

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the beginning of the accounting period in which IFRS 10 is applied for the first time. Clarification that relief from retrospective application would apply where an interest in an investee was disposed of in the comparative period such that consolidation would not occur at the date of initial application. Clarification as to how the comparative period(s) should be adjusted when required by the standard. The SME Implementation Group (SMEIG) of the IFRS Foundation has added a further module to its training material in relation to the IFRS for SMEs addressing related party



disclosures. The material is available at at no charge. The SMEIG has also published two questions and answers addressing: Entities that typically have public accountability. Interpretation of ‘traded in a public market’.

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Yvonne Lang, director, Smith & Williamson

AUDIT ISO UPDATES GLOBAL AUDITING STANDARD The International Organization for Standardization has published an updated version of its key ISO 19011 auditing standard to provide a uniform approach

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Technical update

to multiple management system audits. The aim is to create common guidance for auditing the wide range of management systems now operated by businesses, such as quality, environmental, IT services and information security. ISO wants to give companies the ability to produce comparable assessments of the such systems’ effectiveness, perhaps in a single unified audit. Alister Dalrymple, convenor of the team updating the standard, said the new guidance would offer auditors ‘an opportunity to re-assess their own practices and identify improvement opportunities’. The new standard also adds the concept of risk to assessments and clarifies the suggested roles of audit teams and sole auditors. ‘Also, the use of technology in remote auditing is acknowledged, for example, conducting remote interviews and reviewing records remotely,’ added Dalrymple. The previous standard was released in 2002. More information at ISO_19011_2011

EUROPEAN UNION ACCOUNTING RULES EASED FOR SMALL COMPANIES The European Parliament has given its second and final approval to proposed changes to EU accounting law that will ease accounting requirements for Europe’s

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smallest companies. MEPs have backed changes to the fourth accounting directive (78/660/EEC) for ‘certain types of companies as regards micro-entities’. Under the new legislation, these businesses will be able to file a very simplified balance sheet and profit and loss accounts, as defined in the directive. The parliament set the maximum size of these companies as having a balance sheet total of €350,000, a net turnover of €700,000 and an average of 10 employees. The EU Council of Ministers still has to give its final approval, but this is expected to be secured smoothly. More information at www2.accaglobal. com/2009_0035

REGULATORS GAIN POWERS OVER CONGLOMERATES National financial regulators across the EU gained new powers on 9 December 2011. They now have the right to demand accounts information from major financial conglomerates which may trade in many member states. The change comes in amendments to EU financial conglomerate directive 2002/87/EC through the amending directive 2011/89/EU. It frees regulators to assess banking and insurance information – where before they had to choose between the two – and to demand supplementary information to make sure that a conglomerate is in rude financial health.

The change follows concerns about management failures in such groups during and before the 2008 financial crisis. More information at supervision IFRS DEADLINE EXTENDED The European Commission has extended to December 2014 from January 2012 the deadline for non-EU issuers of securities to base their financial data on International Financial Reporting Standards (IFRS). To do so, these issuers’ home jurisdictions must have made a practical commitment to introduce IFRS by that date. More information at www2. Keith Nuthall, journalist

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ACCA news



ACCA chief executive Helen Brand visited and ACCA Ghana last December. In Ghana she officially opened the new office, had breakfast meetings with employers and the Public Accounts Committee of Ghana’s parliament, and attended a new members’ ceremony. Brand told guests gathered for the office opening, who included Thomas Abobi, chairman of the ACCA Ghana Network Panel, and S O Annan, past president of ACCA Ghana and former International Assembly representative for Ghana: ‘This new office forms a key part of our strategy to 2015, which is to ensure that we become the leading global professional accountancy body in reputation, influence and size. ‘Part of that strategy is to ensure our network of offices enables us to anticipate and respond to the needs of its employers, members, students and tuition providers.’


From left: Norman Williams; Jamil Ampomah, ACCA director, sub-Saharan Africa; Helen Brand; Kwame Antwi Boasiako, past president, ACCA Ghana Network Panel and FD of Central University College; and Enoch Dodoo, first president of the ACCA Ghana Network Panel and board member of the Ghana Audit Service


Saint Paul Dagaaba Youth Bawa group usher guests


ACCA Ghana’s new office

She also took the opportunity to welcome newly appointed head of ACCA Ghana, Norman Williams, who has joined ACCA from Delta Airlines where he was general manager for Ghana. Brand pointed out that Ghana provides a huge opportunity for young people who wish to pursue a career in finance. The country was listed as the world’s fastest growing economy in 2011 in economic research led by Economy Watch, with economic growth predicted to be about 9% this year. Separately, at an ACCA roundtable for employers on the theme of creating sustainable business, Brand told chief executives, policymakers and regulators that the sustainability challenge is the greatest one faced by the world: ‘Making even the current global economic crisis pale in comparison. This is an issue which we must continue to keep at the front of everyone’s mind.’ She concluded: ‘The finance profession does have a great deal to offer in the sustainability challenge – and stands ready to support initiatives to protect our most valuable asset – our planet.’

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Open minds and hearts Indian businesses are grappling with the issues around diversity as much as the developed world, and a recent ACCA roundtable highlighted the need for a positive outlook Though globalisation is new to India, Indian companies have displayed entrepreneurial grit with a spate of acquisitions over the last decade. With these acquisitions and global partnerships came the issue of managing and retaining talent and harbouring innovation and entrepreneurship on foreign shores. Therefore, diversity is a big issue for companies and it was the focus of a roundtable held by ACCA and the Economic and Social Research Council (ESRC), in New Delhi in November 2011. For some participants, like Ravi Chaudhry, chairman of CeNext Consulting & Investment (a business strategy consulting firm), diversity relates to sustainable growth. For others, like Vandana Saxena Poria, chief executive of Get Through Guides (a global provider of professional education in finance, management and accounting), diversity is all about innovation and acceleration. Meanwhile, Mohini Daljeet Singh, head of the Max India Foundation (the CSR initiative of Max India), thinks diversity is about looking beyond one’s own nose. ‘It is a cultural issue,’ she said. And Ashish Makhija, an advocate at AMC Law Firm, feels that diversity is the reality of life. ‘One must accept it for growth,’ he added. The discussion began on the premise that diversity, or the lack of it, affects the five pillars of sustainable business growth: new talent; new markets; innovation; effective organisational structures; and leadership capability.

A business call For many years, organisations have paid lip service to diversity. But today, companies can’t ignore societal, cultural and environmental concerns. Customers also value responsible

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companies over those which pursue profit alone. ‘Diversity is a business call,’ said Lalit Jain, senior vice president and company secretary of Jubilant Life Sciences, an integrated pharmaceutical and life sciences company. And integration of businesses is never easy. According to Jain, Indian companies need to exercise considerable control following an acquisition. ‘We send our financial

Global concerns Today, talent transcends geographical boundaries. More often than not, growth is dependent on how companies are able to tap the best talent from across the world. In addition, diversity has to be in line with both entrepreneurship and innovation. ‘Diversity breeds creativity and innovation. People from across the globe offer different dimensions. And all these dimensions need to be

‘THE CEO MUST HAVE A MINDSET THAT ACCEPTS NEW BUSINESS REALITIES. YOU ALSO NEED A HEARTSET TO COMPREHEND AND MANAGE DIVERSITY’ chief from India to control the companies that we acquire,’ he said. But do businesses actively try and promote diversities? ‘Yes,’ said Singh. ‘Independent directors from across the globe are being hired; they want to learn from the success stories.’ Then again, having a diverse board or paying ample attention to the issues around diversity per se does not guarantee success. ‘Companies with equivalent diversity have been failures,’ Chaudhry said. ‘The key precondition for pursuing diversity is that the CEO must have a mindset that accepts new business realities. You also need a heart-set to comprehend and manage diversity,’ Chaudhry added. According to Chaudhry, CEOs in the West and East who do not have these strengths find the going tough. Companies need to value, embrace and percolate diversity into the lower echelons of their organisation. ‘There is a need for sensitivity and mutual regard. There is also a need to understand cultures,’ Singh added.

explored,’ Makhija said. However, Poria raised a pertinent point – while several large Indian companies – like Infosys and WNS – are diverse, is diversity relevant for all businesses? ‘What about the chaiwallah who sells tea outside offices? Is diversity relevant to this tea vendor?’ she questioned. Poria was more of the view that diversity applies mainly to larger companies and not to businesses that are small and local. But Charlie Walker, counsellor (cultural affairs), British Council Division, British High Commission, differed. ‘The chaiwallah may lose his contracts if he does not become hygiene conscious to cater to a wider audience. So diversity is as important to small businesses as it is to the large ones,’ he said. Singh concurred. ‘When the market is changing, the chaiwallah will have to change,’ he added. ‘Diversity is inevitable. It is about harbouring a value system, about humanism. And these are universal

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Clockwise from top left: Lalit Jain, senior vice president and company secretary, Jubilant Life Sciences; Vandana Saxena Poria, chief executive, Get Through Guides; Mohini Daljeet Singh, head, Max India Foundation; and Ashish Makhija, advocate, AMC Law Firm traits,’ Singh said. Companies need to display their commitment and sincerity to the cause. ‘Diversity is about ethos, about values of the CEOs. And values are the same across the universe,’ she added. Chaudhry said: ‘If a CEO has a vision but no values, irrespective of diversity, he or she will not benefit.’

In sync with change While values and ethos are one end of the spectrum, diversity is also about methods. ‘It’s about how you work across cultures,’ Walker said. Agility, innovation and growth emerge from strategies that embrace difference. These strategies harness difference not only in people – and their culture, race, gender, age or skillset – but in the way they conduct their business – be it governance, partnerships, organisational structures or operations. Delivering these strategies requires leaders to adopt a broad and open attitude that encourages and accommodates a range of perspectives,

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fresh thinking and autonomy. ‘Cultural diversity is not the basic point. Diversity is to change, have an open mind and common goals,’ Singh said. It is also about understanding the consumer, their tastes and preferences and the culture of the market you are doing business in. Citing the example of McDonald’s, Singh said that the fast-food giant studied the Indian market and launched products – such as the McAloo Tikki Burger – that suited the Indian palette. Similarly, there are small entrepreneurs who are taking Chinese food to Indian villages. The other critical point is to understand change. For instance, technology and the affordability levels, tastes and preferences of the Indian middle class. ‘Similarly, there are changes in the working patterns,’ Walker said. ‘When it comes to technology, no one can anticipate the change,’ Jain said. Nonetheless, companies have to adapt to the changes, become more conversant with concepts like social

media and use the latest communication tools to connect with consumers and employees. ‘All these trends are giving rise to the need for knowledge workers,’ Poria pointed out. ‘With an ageing population and rising unemployment, the West will look forward to low-cost technologies that were being developed for economies like India and China,’ Chaudhry said. Eventually, the ‘bottom of the pyramid approach’ will work across the globe. But does diversity guarantee innovation? ‘No,’ said Jain. For innovation, you need to harness the right thoughts and that will only happen through a positive mindset. And this is where the role of the leadership becomes critical. ‘Leaders can also learn from the team,’ Walker said. Therefore, diversity is also about a diverse team, about empowerment and having a flatter organisational model. ‘With a diverse mix of people, you get fantastic ideas,’ Makhija said. Swati Prasad, journalist

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CFOs at the helm The role of ratings agencies, the usefulness of business intelligence tools, and innovation among accountants came under discussion at ACCA’s European CFO summit in Warsaw ‘Those who blame globalisation as the root cause of the current crisis are wrong, but it is true that a crisis of this sort would not have been possible without globalisation,’ said Grzegorz Kolodko, former Polish finance minister and current head of economic thinktank Tiger in his keynote speech at the CFO summit held in Warsaw on 1 December 2011. Kolodko blamed the current turbulence on ‘failed neo-liberal policies’ and warned it would continue. ‘We’ll be talking about the crisis for many years to come,’ he predicted. However, he addressed the current concern about the euro with more optimism: ‘I am still confident that the euro will survive and in 2017 or 2018 Poland will join the eurozone as will Sweden and Denmark but not the UK. The position of the common currency will grow and the world will continue to integrate further.’ He also pointed out that the global economy was not actually currently in recession, despite what might be inferred from media reports, but ‘going through a period of sluggish growth’. Kolodko said that the global economy was currently facing two dangers: ‘a return to failed neo-liberal policies or a lurch in the opposite direction, towards state capitalism’. He concluded by advising governments and economists worldwide to rethink the aim of economic policy and come up with solutions that would meet the expectations of the 21st century.

occurred in the past 25 years. They didn’t predict the Asian crisis, the internet bubble, the sub-prime crisis. Even now, despite the much publicised downgrading of some countries, the credit ratings of Germany, France or Italy are much more optimistic than the markets’ view. If the agencies are wrong again, we can expect a wave of credit downgrades the consequences of which could be comparable to a war. ‘For example the credit rating of France by Moody’s is Aaa/stable. That is nine points better than the price of financial derivatives insuring against bankruptcy suggests – that rating is

Baa3. The difference for Germany is five points, for Holland six points and for Belgium 10 points. Rybin ´ ski predicted that there would be downgrades of major European countries early in 2012. He expected Greece and Italy to default on their loans and that France would ‘definitely’ be downgraded. ‘Unfortunately, history shows that ratings agencies follow the market’s indicators rather than predict them correctly. That’s why my forecast is very pessimistic,’ he said. Piotr Kowalski, head of Fitch Poland, did his best to defend the ratings industry. ‘Our task is to show the

Always getting it wrong? Meanwhile, Krzysztof Rybin ´ ski, rector of Vistula University, Warsaw, and former vice president of the National Bank of Poland, blasted the track record of the credit ratings agencies: ‘All the ratings agencies were completely wrong each time a crash

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From left: David McQuaid, Bloomberg News; Adam S´ wirski, Deutsche Bank; Mariusz Kolwas, Europejski Fundusz; Krzysztof Rybin ´ ski; and Piotr Kowalski probability of a particular entity going bankrupt. There is always risk,’ he pointed out. He also argued that the scenarios predicted by ratings agencies tended to occur in the long run, and that the media only ever noticed sovereign downgrades and ignored upgrades. ‘This year, we raised the rating of four European countries but nobody talks about that because positive information and correct judgments are not attractive for the media,’ he said. Despite fierce criticism from economists and the media, companies still make use of the services of ratings agencies. Mariusz Kolwas ACCA, of Europejski Fundusz Leasingowy (EFL), said: ‘For me in my job, the agencies still play a useful role in risk assessment. But one should remember that ratings agencies shouldn’t be the only basis for taking decisions.’ ´ wirski of Deutsche Bank Adam S Poland said he still paid attention to ratings agencies but drew a line: ‘Do we look at ratings? Yes. Do we make decisions based on them? No. Each time we try to judge for ourselves the risk. In banking, commonsense and individual relations with clients have always counted and it doesn’t look like that will change.’

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Software smarts

Inga Jezewska

Rafal Wicin´ ski

The financial crisis is only one of the challenges facing FDs today. Participants at the summit agreed that the CFO’s role was being re-evaluated. This revolution is a challenge for financial professionals, creating constant pressure from the competition but also offering an opportunity for a CFO to have more influence on the strategic decisions of their business. As the panellists at the summit emphasised, when the work of departments was not automated, finance teams had to go through monotonous and time-consuming procedures. But modern business intelligence tools give CFOs more time and an opportunity to participate in strategic business decisions. Irina Gridneva, CFO of Nokia Siemens Networks, said: ‘Ten years ago, I used to spend roughly 80% of my time collecting and checking data. Right now I spend 30% of my time at work gathering and checking data and 70% analysing it. ‘Having these tools at my disposal, I can now, together with our marketing director and CEO, react much faster to what is going on in the market.’ Edward Woods, finance director at Phillip Morris Poland, said that thanks

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From left: Robert Kazda, Saint-Gobain; Marcin Sojda, Procter & Gamble; and Rafal Wicin´ ski, Coca-Cola to business intelligence tools he now had fewer decisions to make: ‘Most of the requests I would probably have turned down anyway can now be taken care of at other levels. So the majority of requests brought to me now are the ones I would probably agree to anyway and I have to say no much less often.’ However, when it comes to competitive intelligence (data gathered on rivals) Przemyslaw Hewelt of Grant Thornton stressed the need for care as businesses sometimes deliberately place misleading information on their website to suggest that they are heading in a particular direction when in reality they have a completely different strategy. ‘The main challenge is for the company’s top management to know exactly what competitive intelligence they need to have before making a strategic decision,’ said Hewelt. He added that a company’s intelligence needs could generally be assigned into three functional categories: development of the company’s strategies early warning indicators such as competitor initiatives, technological innovations and governmental actions – for example, those involving regulation descriptions of the key players in the marketplace, information about competitors, customers, suppliers, regulators and potential partners.

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Creativity and the CFO The summit’s panellists also discussed innovation, a practice not traditionally associated with financial professionals, but which is slowly becoming a part of their working vocabulary. In the current situation of rapid change and global competition, innovation in financial departments has become a necessity. ‘CFOs have to be innovative, creative and future-oriented, especially in times of incredible challenges,’ said Ilona Weiss, president of ACCA Poland. So, how can FDs meet the demands of a rapidly changing environment where innovation and active participation in strategic management are now required of them? FDs usually have a full picture of the structure of the organisation. The proper transfer of information and the use of analytical tools can significantly increase the competitiveness of their businesses but the panellists agreed that their successful use required financial professionals to change their view of their responsibilities. ‘With business intelligence tools at our disposal, we can now concentrate on analysis and value-adding activities,’ said Inga Jezewska ACCA, financial director at Baxter Poland. She added: ‘CFOs today need to think beyond the numbers and to understand the business to the extent of being able to imagine and prepare for different scenarios.’

´ ski ACCA, CFO of Rafal Wicin Coca-Cola, agreed. ‘As finance people, we have a view of the whole business, all the departments, and behind the numbers are many interesting questions and conclusions,’ he pointed out. ‘We need to help find the fuel for the business to run fast. We need to combine a simplification of operations with standardisation. ‘We also need to work closer than ever with our clients in order to understand their needs.’ The summit attendees concluded that if, as some economists were predicting, the credit ratings of France and Germany were to be reduced at the beginning of 2012, then European companies would be in for a very big challenge in the coming 12 months. This in turn will expand even further the role of financial professionals in their organisations. ‘The role of accountants and CFOs is growing,’ said Gustaw Duda, a member of ACCA’s Council. ‘We are increasingly finding ourselves at the head of our businesses. Maybe this is the time when we can take over the steering wheel and help our businesses get through the storm.’ Remi Adekoya, journalist ACCA’s CFO European summit was sponsored by Alma Consulting, Euler Hermes and Randstad

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The e-learning suite spots [

We take a look at just some of the ways in which ACCA members can gain access to CPD learning opportunities by engaging with a range of online platforms and initiatives

One of the biggest attractions of ACCA’s CPD suite is the flexibility that allows it to be applied to all types of learning. Members can use this to their advantage when planning and sourcing CPD where it is not possible for them to attend courses or face-toface events. Here we look at just some of the ways members can source CPD learning through engaging with the online platforms available.

Social networking and learning on the move Communication platforms are evolving rapidly, offering professionals new and innovative ways to communicate. The increase in the use of mobile communications allows you to network and learn whenever it suits you. ACCA has a number of official networking

groups that have the potential to offer you new learning, both in terms of verifiable and non-verifiable CPD. There are ACCA sites on LinkedIn, Facebook and Twitter. Alternatively, you might prefer to use ACCA’s own e-learning gateway at:

Podcasting With podcasts you can automatically receive the latest file covering your chosen topic as soon as it becomes available. You will find ACCA podcasts on current and relevant topics of interest to members. Members are able to access a series of podcasts (to which they can subscribe free of charge) on the ACCA website through the following link: Many more relevant podcasts are also available elsewhere on the internet. A good place to start is the iTunes Store.

Distance learning Distance learning is an excellent option that allows you to follow a particular

course by taking it online rather than in a classroom. It offers an opportunity that not only allows you to learn and apply the course syllabus to your role, but also opens up the opportunity of networking with fellow delegates online. Online networking in this way can facilitate lots of questions and debate on topics that are of interest to you for your role or career. Distance learning is also informative, inspiring and – most importantly of all – relevant to your CPD.

Voluntary work through professional forums Professional forums are another networking opportunity that can help you to source learning in your area of interest that could be relevant to your role. Often these can be sourced online but they still give you the opportunity to meet face to face periodically. Networking with people who have similar professional interests and objectives may open up opportunities to keep up to date with recent developments both locally and globally.


You can only count CPD learning as verifiable if you’re able to answer ‘yes’ to the following three questions: 1) Was the learning relevant to your role/career? 2) Were you able to apply the learning to your role/career? 3) Did you retain evidence of your learning? If you have undertaken general learning that is not related to a specific outcome, it is likely to be non-verifiable CPD. Such learning includes general reading and research.


17/01/2012 15:38


ACCA news

Council highlights Highlights of the meeting on 26 November Council’s final meeting of 2011 took place at 29 Lincoln’s Inn Fields on 26 November. This was held immediately following the annual meeting of ACCA’s International Assembly. Assembly members Shalini Popat (Kenya) and Nisreen Rehmanjee (Sri Lanka) were invited to give oral reports to Council on the outcomes of the Assembly meeting, including the debates Assembly members held around the topics of the advent of the e-professional and the future of ACCA’s global policy development. Council was also pleased to welcome Olivier BoutellisTaft, chief executive of the Federation of European Accountants, who gave a topical presentation on the European Commission’s green paper on audit. A number of other issues were debated at the meeting. Council met in break-out groups to discuss issues around the advent of the e-professional, a topic which had also been considered by the International Assembly. The discussions focused on how technological advances are changing the role and skills of the finance professional, the key drivers for the increasing use of technology and a profile of the next generation of worker. The outcomes of the discussions will help to inform the development of ACCA’s strategy in this area. Council also considered the regular report of the chief executive, covering a number of strategic developments both within and outside ACCA and developments in key markets. Council was particularly pleased to note that ACCA had been awarded a contract to advise on the development of a new post-university professional accountancy programme in Singapore. Following an earlier decision that Council’s next international meeting should be held in Nairobi in June 2012, Council received a report on arrangements for the meeting, together with proposals for a programme of events involving members, students and other important stakeholders. The meeting in Nairobi will take place on 23 June, after which smaller groups of Council members and senior staff will undertake visits to Ethiopia, Tanzania and Uganda in order to maximise the opportunity for stakeholders in the region to meet with representatives of ACCA’s governing body. Council agreed recommendations from Nominating Committee regarding skills criteria for non-Council members on a number of its standing committees. In other business, Council agreed a timetable for choosing its preferred nominee for vice president in 2012–13. It also received presentations from the chairmen of the governance design and market oversight committees on the work plans for their committees for the coming year. Council will next meet in London on 10 March 2012.


Inside ACCA 65 Flexible learning ACCA offers a wide range of online CPD options 62 CFOs at the helm Ratings agencies come under scrutiny at ACCA’s CFO Summit in Warsaw 60 Diverse interests An ACCA roundtable in New Delhi focuses on diversity 59 Brand visits Ghana Highlights from ACCA chief executive Helen Brand’s recent trip to Ghana

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ACCA chief executive Helen Brand is pictured at Buckingham Palace in London in December, shortly after receiving her OBE from the Queen. She was made an Officer of the Order of the British Empire in the Queen’s official Birthday Honours list in June last year, for services to accountancy. Brand said: ‘I truly believe that this honour is in recognition of ACCA’s success of which I am extremely proud to have played a part, alongside its members, students and staff around the world. ‘I was delighted to be able to share the special investiture day with my family, whose immense support has allowed me the privilege of serving as chief executive.’


A rare honour has been bestowed on Vietnam’s finance minister, Vuong Dinh Hue, for his contribution to the development of the accountancy profession in Vietnam. ACCA has made him an honorary member – this award has only been given six times since 1999. The presentation was made by ACCA president Dean Westcott.

17/01/2012 18:27

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17/01/2012 17:41

Accounting and Business_February 2012 (International edition)  

The International edition of A&B magazine for professional ACCA/FCCA qualified accountants.