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uk.ab accounting and businesS 02/2012


accounting and business UK 02/2012

unhappy birthday sarbox 10 years on

the scrutineer marGaret hodge mp technical financial statements siemens FD interview

cash quandary uk plc’S money mountain

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18/01/2012 11:43

VT_Software_accountancymag 192x260:VT_Software_accountancymag



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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, many feel the UK’s less prescriptive approach has been more effective. See pages 34 and 38

CASHING IN? Having a big stash of cash in the bank is something most of us can only dream of in these straitened times, but many UK companies have been quietly building up something of a money mountain. Worried about their ability to borrow from the banks and spooked by gloomy economic prospects, corporate treasurers have been clinging to cash like a comfort blanket. The latest figures show that British non-financial companies are sitting on some £250bn of cash and deposits in UK bank accounts – more than three times the latest round of quantitative easing. If these cash-rich corporates were to loosen their purse strings and invest their funds in something that might give them a bigger return than a bond or a bank deposit, could they not give themselves – and the economy as a whole – a much-needed boost? And could this lead to a mergers and acquisitions resurgence in 2012? Our cover feature this month (page 18) explores these possibilities, and the conflicting pressures faced by those charged with making these decisions. When not weighing up the pros and cons of such strategic issues, finance professionals remain under intense pressure to make their core businesses ever more efficient. Denise Goodey, our FD interviewee this month, gives us an insight into her approach to this at Siemens Healthcare Diagnostics Manufacturing. Smarter ways of doing things and innovation, she says, are key, as is a finance team focused on driving performance. Goodey is enthusiastically embracing the challenges this presents. But others might be wishing they could escape from the current environment to write that long-thought-about novel. One accountant who has done just this tells us her story on page 46. But even if you don’t forsake finance for a stab at a literary career, tough times mean creative thinking is key to business success. Chris Quick,

RISKY BUSINESS Accountants have a vital role to play in ensuring that risk management courses through an organisation’s veins, says a new ACCA report. Page 22

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STREET FIGHT It’s not just retailers who are struggling for survival on the high street – accountants are feeling the squeeze as the big firms move in. Page 44

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.

18/01/2012 11:59

AB UK 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. ISSN No: 1460-406X 29 Lincoln’s Inn Fields London, WC2A 3EE, UK +44 (0) 20 7059 5000

18 UK plc’s cash mountain Will we see an M&A surge in 2012? 22 Risk management A new report underlines the important role of accountants 26 Global concern What ACCA members think about economic conditions 28 Emissions omissions Questions remain over a common accounting basis for carbon markets 32 New order Global power will continue to shift to emerging markets, says IFAC board member Japheth Katto

Audit period July 2009 to June 2010 138,255

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14 A healthy outlook We talk to Denise Goodey FCCA, CFO of Siemens Healthcare Diagnostics Manufacturing

34 SOX celebrates? The Sarbanes-Oxley Act has reached its 10th birthday, but the occasion is marked by mixed feelings

18/01/2012 11:57


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


Your sector



06 News in pictures A different view of recent headlines

43 The view from Joanne Cotton of Baines Jewitt, plus news in brief

08 News in graphics We show a story as well as tell it using innovative graphs

44 Feeling the squeeze High-street accountancy firms are under pressure 46 Novel idea Former high-flying corporate finance partner Penny Avis is now embarking on a writing career

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


12 Politics The eurozone looks to strengthen member states’ fiscal positions

51 The view from Francis Laud FCCA of Marshall Motor Holdings, plus news in brief 52 Outsourcing How shared services and outsourcing are transforming the finance function

VIEWPOINT 38 Robert Bruce The UK has been more measured than the US in its response to corporate scandals

55 PUBLIC SECTOR 55 The view from Michael Tayor of the London Pension Funds Authority, plus news in brief 56 Advancing accountability Margaret Hodge MP wants to see audit and scrutiny at the heart of public services

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


41 Jane Fuller A proposed IASB revenue standard will not suit everyone


42 Peter Williams Government must understand the dynamics of the small business

62 CPD A look at the comparability of financial statements across national boundaries

59 The view from Raj Sond FCCA of First Data, plus news in brief 60 Mixed fortunes The euro’s woes could be both good and bad for the UK

66 Update The latest on financial reporting, auditing, tax and law



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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71 Do your homework Managed properly, working from home can be just as effective

ACCA NEWS 73 Welcome to the family In the first of a regular feature we congratulate the latest members to qualify as Chartered Certified Accountants 77 Diary What’s on in the coming months 79 Flexible learning ACCA offers a wide range of online CPD options 80 Rulebook update Details of changes in the 2012 edition of the ACCA Rulebook 82 News Highlights of the Council meeting on 26 November 2011

18/01/2012 11:58


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


Lloyds chief Antonio HortaOsorio declined his annual bonus after returning to work following two months off due to fatigue


Former transport secretary Lord Adonis welcomed a new £33bn high-speed rail link, saying ‘open heart surgery’ on the existing network would not solve capacity problems

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17/01/2012 18:07



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


Some £5bn was wiped from Tesco’s share price after the supermarket giant issued its first profit warning for 20 years. The retailer admitted that the UK chain had been milked dry to fund its global empire


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


Denmark took over the presidency of the European Union, saying it wanted all 27 countries to move forward together to confront the current economic problems

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17/01/2012 18:08

News in graphics



T & YOUNG 1: ERNS ICE ME OFF O H : 2 ST TION TRU YS A A D N L U O F C S AR SHIP NH IP 3: B RTNER A TNERSH R P A P G X N SE USI N HO SUS A T : I L 4 PO TRO HS E M SAC 5: N A DM L E GO UR 6: T N CE C :A EY TOPS CFOS SPOOKED GAY-FRIENDLY The biggest current concern EMPLOYER LIST for UK CFOs is the future of Ernst & Young has been named the UK’s best employer for lesbian, gay and bisexual staff in Stonewall’s Top 100 Employers 2012 index. ‘Competition for a place in the Top 100 was fiercer than ever this year,’ says Ben Summerskill, Stonewall’s chief executive. ‘The index remains a powerful tool used by Britain’s 1.7 million gay employees and 150,000 gay university students to decide where to take their talent and skills.’

14% 11% 31%


the euro area, according to a Deloitte CFO Survey. And the risk of further problems in the eurozone has led to almost as many fearing a double-dip recession.



Uncertainty (11%) Financial stress (11%) Pressure on margins and cashflow (14%) Recession (31%) Europe’s sovereign debt crisis (33%)


As the London 2012 Olympic Games and Paralympic Games edge closer to the starting line, research from BT shows that businesses must take a proactice approach to make the most of the opportunities – and prepare for the challenges.


Will supply products or services to London 2012

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Private sector companies that expect disruption


Average time organisations have spent preparing


Organisations that anticipate supplychain issues


Expect benefits will last longer than 12 months

17/01/2012 15:42


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



12/01/2012 16:24


News round-up


Professional footballers’ lifestyles are being investigated by HMRC to determine whether any players receive undeclared benefits in kind. Investigations are focused on the largest and wealthiest Premier League clubs in particular to ensure that any players who use club owners’ private jets or yachts are declaring this on their tax returns. A spokesman for HMRC said: ‘Any well-paid footballer who can’t be bothered to get their tax return right is risking a different kind of penalty.’


Deloitte has been appointed auditor of Healthcare Locums. Previous auditor BDO is being investigated by the Accountancy and Actuarial Discipline Board (AADB) regarding its audits of the company. Healthcare Locums’ shares were suspended early last year because of allegations of accounting irregularities and the share value of the company has collapsed. Healthcare Locums has also changed its financial advisers. A spokeswoman for BDO said: ‘BDO will be fully assisting the AADB with its investigation. No further comment will be made until the investigation is completed.’


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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PwC has been fined £1.4m by the Accountancy and Actuarial Discipline Board (AADB) regarding its audit of JP Morgan Securities Ltd, for failing to spot the bank’s breach of rules regarding the separation of client funds. Although PwC’s fine was a record, it was reduced from £2m because of the firm’s cooperation with the investigation. It must also pay the AADB’s expenses. PwC accepted that its audits of JP Morgan fell short of expected standards. JP Morgan was fined £33.32m by the Financial Services Authority over the failings.


The House of Commons Public Accounts Committee (PAC) has accused HMRC of being soft on major businesses. PAC chair Margaret Hodge described her committee’s report as ‘a damning indictment of HMRC and the way its senior officials handle tax disputes with large corporations’. The committee found over £25bn outstanding in unresolved tax bills. HMRC rejected the conclusion that there are systemic failures in the management of tax disputes. ‘The report is based on partial information, inaccurate opinion and some misunderstanding of facts,’ said HMRC. The National Audit Office

is now reviewing HMRC collection arrangements with large corporations.


Revenues at Begbies Traynor fell in the half year ended October to £29.4m from £29.8m in the same period in 2010. Profit before tax rose slightly from £4m to £4.1m. Net debt increased from £22.5m at the year start to £27.3m by the half year end, but remains ‘comfortably’ within the company’s banking facilities and covenants. Begbies is making progress in its disposal of its Red Flag business and it sold its tax business in November. It is now focusing on insolvency and preinsolvency operations, restructuring and corporate finance.

GRANT THORNTON WINS D1 AUDIT D1 Oils plc has appointed Grant Thornton as auditor. The company said there are no circumstances associated with the resignation of the previous auditors, Ernst & Young LLP, that need to be brought to the attention of shareholders. D1 also announced that it has appointed FCCA member Ian Wilson as its CFO.


Citizens Advice has appointed Crowe Clark Whitehill as auditors. Previous auditors Baker Tilly resigned after signing off the 2010–11 accounts. A spokesman for Citizens Advice said the charity is ‘look[ing] forward to working with’ its new auditors.


There has been a high level of take-up of the revised UK Corporate Governance Code for listed companies and the UK Stewardship Code for investors, both launched in 2010, the Financial Reporting Council (FRC) has disclosed. Some 80% of FTSE 350 boards now put all directors up for annual re-election, demonstrating how the governance code is driving change, said the FRC. Over 230 asset managers, asset owners and service providers, including most major investors in UK equities, signed up to the Stewardship Code in its first year.

17/01/2012 18:40



Whereas the US went in legislative overdrive and sought to rely on process to cure the fiscal malaise at the heart of corporate America, the UK has taken a more common-sense approach, says Robert Bruce.



ACCA has called on HMRC to adopt 12 tenets for operating an efficient and just tax system. Those principles include a presumption to tax neutrality; openness and transparency; simplification; certainty; accountability and regular reviews; efficiency; recognition that tax is a matter of national sovereignty and that tax is subject to the rule of law; respect for human rights; and avoidance of double taxation.


The Accountancy and Actuarial Discipline Board (AADB) is to investigate PwC over its audit of Barclays Capital. The bank was fined £1.2m last year by the Financial Services Authority for failing to separate client funds from those of the bank. A spokesman for PwC said: ‘We will cooperate fully with the AADB investigation and we will be defending our work vigorously.’ PwC has



KPMG Europe’s turnover rose by 13%, to €4.5bn, in the year ended September. If constant exchange rates are used, the growth was 5%. Revenues grew by 7% in the UK and the firm reported strong rises in revenues in Russia and Turkey, with Spain also performing well. Revenues were flat in Germany. Risk consulting revenues were up by 16%; management consulting revenues by 11%; and tax by 9%. Audit fell by 2% along with transaction and restructuring revenues. Richard Bennison, chief operating officer for the Europe firm, said that M&A and IPO markets were unlikely to recover quickly, but that KPMG was optimistic about its risk consulting and management consulting practices.

BDO profits in the UK rose by 1.4% on a national turnover basis, but were down 3.4% on a like-for-like basis in the year ending July. Net turnover fell from £298m to £273m. Revenues internationally grew by 4%. The firm said that it was expecting to expand work in local government auditing with the closure of the Audit Commission and that it had set up a dedicated team to win local public audit contracts.


The demand for finance professionals has increased, according to the latest editions of Badenoch & Clark’s Professional Talent Spotlight. The recent weakness of the pound has led to export manufacturers seeking highly skilled financial controllers and commercial finance experts. The recruitment advisers also report that cuts to the number of accountancy trainees in 2008 is now translating into a shortage of newly qualified accountants, leading to salary inflation. Another factor in the rising demand is the level of mergers and acquisitions activity among small and medium-sized businesses.


Ian Powell is seeking re-election as chairman and senior partner of PwC UK. Powell is nearing the end of his first four-year term of office and, under the firm’s rules, he is permitted a second term if voted in by the partners. PwC confirmed that Powell has put in a request for re-election, but says the closing date is ‘some way off’. It is not known if other candidates will put themselves forward.

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had been chief executive of Jobcentre Plus before taking over at HMRC. Dave Hartnett, HMRC permanent secretary for tax, said: ‘I am deeply saddened by the news. She was a wonderful friend and colleague who worked hard all her life serving the public. She defended HMRC, often in the face of criticism, but always set herself high standards and expected the same of others.’ Lin Homer has taken over the

distinguished this case from the issues at JP Morgan.

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


Lesley Strathie, HMRC’s chief executive until she stood down on ill health grounds in November, has died. She was suffering from cancer. Dame Lesley

role, moving from the Department of Transport, where she was permanent secretary. Hartnett, who is retiring, will stay on until the summer to assist the leadership transition.


A senior tax adviser at the former Vantis firm has been found guilty of defrauding HMRC of £70m. David Perrin, deputy managing director at Vantis Tax, devised and operated a tax avoidance scheme that he sold to 600 wealthy clients, who were advised to buy shares in companies Perrin had set up. He manipulated the companies’ share prices and tax relief was obtained on the inflated value of shares donated to charities. Perrin made over £2m in client fees. Sentencing was deferred.

17/01/2012 18:40




PETROS FASSOULAS LOOKS AT THE EUROZONE’S ATTEMPT TO REGAIN STABILITY 2012 started with a vengeance for the eurozone. After the credit rating downgrade of France on 13 January European Union (EU) leaders were due to meet on 30 January to agree an International Agreement that would enshrine in law a series of measures aimed at strengthening member states’ fiscal positions. All this is happening in the context of the British veto in early December, when prime minister David Cameron blocked eurozone member states from going ahead with a new treaty on fiscal responsibility. As a result Britain has found itself somewhat marginalised, with its ability to influence negotiations compromised. The remaining 26 member states are going ahead with negotiating an agreement.This will aim to calm the markets and restore confidence in their ability to reduce debts and deficits and run balanced budgets in the medium and long term. The agreement will complement a pack of six legislative measures adopted in autumn 2011 to reform the governance of the eurozone. Petros Fassoulas is head of policy, Europe and Americas at ACCA

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Micro-entities could produce only minimal accounts under proposals agreed by the European Parliament. The change would affect five million European small companies, with assets of less than €350,000, a net turnover below €700,000 and no more than 10 employees. It is estimated that 75% of European Union companies meet the criteria. The changes would allow individual member states to align companies’ financial reporting obligations with other reporting duties. Companies will still be required to keep proper accounts and produce annual financial statements.


The accountancy profession has been asked to produce a tough regime for the regulation of insolvency practitioners. Business minister Ed Davey said that more should be done to improve regulation of insolvencies, explaining that while his preference was for a profession-led voluntary change in regulatory arrangements, there is also support for a new regulator. Specifically, the government wants a new complaints handling process to be established. The Insolvency Practices Council will be wound up, the minister indicated.


Banks have been allowed to overstate profits through their use of International Financial Reporting Standards (IFRS), according to a report from the right-wing Adam Smith Institute (ASI). By permitting banks to book uncertain future income as current profit, IFRS has enabled them to over-reward executives through performance-related remuneration, says the think-tank. It argues that this has ‘the potential to deceive investors and lead to misallocations of capital’. Methods used include the purchase of credit default swaps, which may not pay out in the event of a default; the

use of fair value to report asset values that are unrealisable; implausible cash flow forecasts; and lack of provision for likely losses, says the ASI.


The Treasury has rejected a call by MPs to change the accounting practices for the private finance initiative (PFI), to ensure that all government PFI schemes go on balance sheet. The government will instead stick with existing accounting practices, which are a mix of compliance with International Financial Reporting Standards (IFRS) for departmental accounts and the European System of Accounts for national accounts. The two systems vary in terms of the accounting treatment for PFI schemes. The Treasury said it would consider ways of making financial reporting more transparent and avoid PFI schemes being favoured because of different accounting treatments. Andrew Tyrie MP, chair of the Treasury Select Committee, reaffirmed his committee’s belief that all PFI liabilities should be included in public sector net debt.


The creation of a eurozone Common Consolidated Tax Base (CCTB) 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’. This will involve ‘enhanced governance to foster fiscal discipline and deeper integration in the internal market’ and ‘significantly stronger coordination of economic policies’.

17/01/2012 17:36






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CFO interview

17/01/2012 11:10



Denise Goodey, CFO of Siemens Healthcare Diagnostics Manufacturing, is keeping the sector healthy by focusing on productivity and liberating finance staff to drive performance


olding a divisional CFO role is in some ways a doubleedged sword. While you’re supported by the strength of the parent, and in a good position to carve out a niche and make a name for yourself at head office, you also have to toe the company line at all times. For the best divisional CFOs, though, the opportunity far outweighs the challenges. Denise Goodey, CFO of Siemens Healthcare Diagnostics Manufacturing Ltd, shows what can be done. She arrived as a management accountant at the Sudbury, Suffolk, plant of Germany-

major worry if people have come in with limbs hanging off or internal injuries from road accidents is that they won’t have the right blood gases in their body; then their organs will fail before they die of anything else.’ Not much room for error there then. At Sudbury, Siemens manufactures the instruments as well as the reagents that go with them. ‘The reagents are the bits that mix with blood to pick up the blood gases,’ explains Goodey. ‘So our equipment can be used to take tiny blood samples, which is particularly useful in the neo-natal area. One of our 348 instruments has been at the top of

‘YOU’VE GOT TO KEEP MANUFACTURING ALIVE IN THE UK. AND THAT’S POSSIBLE IF YOU’VE GOT THE RIGHT PEOPLE LEADING AND DRIVING IT’ based chemicals and pharma group Bayer back in 1998. She prospered amid changes of ownership and organisation, including Bayer’s sales of its healthcare diagnostics business to German conglomerate Siemens in 2007, before being appointed CFO in the same year. She has seen the business evolve into one of the UK’s leading manufacturers of medical diagnostic equipment. Siemens’ kit mainly encompasses the design and manufacture of blood gas analysers for use on the frontline of emergency medicine. ‘You’ll often see Siemens blood gas analysers around critical care, emergency rooms, high-dependency and neo-natal departments,’ Goodey explains. ‘I’m not very technical, but in terms of emergency medicine the

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Everest measuring the blood gases of climbers at extreme altitude.’ With that level of expertise, Siemens’ position as market leader is hardly surprising. However, the company faces significant challenges. With pressure on businesses in all sectors to downsize and rationalise, the Siemens model of diversification across a number of sectors carries risk in a more competitive economy. The dangers of bloat, redundancy and duplication can make the global behemoth model look unwieldy in some lights. However, there is an upside, says Goodey: ‘Looking at Siemens as a company, the more eggs in the more baskets you’ve got, the easier you can ride the markets.’ That may be true, but there is no question that the

The tips *

Life and work is a partnership. It’s not about ‘me’ but about looking for and driving win-win alliances to achieve your goals. Those alliances can be with your own team, other stakeholders or management.


In my experience, the most important values are honesty and integrity. We should be committed to ethical and responsible actions.

healthcare sector, with its reliance on government spending, is hardly in a period of risk-free prosperity. ‘It is pretty tough at the moment,’ Goodey concedes. ‘There is price erosion and everybody is fighting for business, and it’s not just price to worry about. There is also a growing realisation from governments that the debts they’ve got have to be repaid. Added to that, the buying consortiums are all playing each other off, so it’s very competitive.’

17/01/2012 11:10


The CV 2007

Appointed CFO of Siemens Healthcare Diagnostics Manufacturing Ltd


Appointed FC of Siemens Medical Solutions Diagnostics, a business divison of Siemens, with a turnover of £58m


Begins MBA and completes it in 18 months


Joins Bayer Diagnostics Manufacturing


Assistant accountant at Braintree Office Supplies


Accounts clerk at various Essex businesses


Lloyds Bank clerk

Given that backdrop, Goodey’s focus in the past two years has been to drive out cost while protecting the quality of standards at Siemens. ‘We have to focus on getting the cost down – no two ways about it. Now that doesn’t mean anything to do with quality – quality has to remain high to continue to grow – but we have to get the cost down.’ But can any UK manufacturer really compete on cost? Goodey believes that is the wrong question: ‘Manufacturing is not dead in the UK and you’ve got to keep manufacturing alive, not just at Siemens but everywhere. And that is possible, if you’ve got the right people at the top leading and driving it.

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‘But without doubt, our biggest challenge here is to remain competitive against the lower-cost countries that can offer manufacturing capability. And we’re very open with the staff here about what we need to achieve.’ Siemens’ expectations are 5% annual cost cuts in the instruments division. ‘But taking into account pay inflation on top of that, you’re really looking at an 8–10% reduction to end up with a net 5%.’

Micro efficiencies That can be achieved in a number of ways, from large-scale companywide efficiency drives to operational improvements at the micro level. To achieve the latter in particular, Goodey is especially keen to take input from across the business. ‘Everybody’s looking at everything to get what we call productivity: doing more with less, so smarter ways of doing things. Can we design parts better? Instead of having to screw separate bits in, can you get the manufacturer to supply just one bit? That way you can cut down on your supply base and make it cheaper by not paying as many suppliers.’ To keep its processes flexible and low-cost, Siemens uses Creform tools, ‘a kind of Meccano for manufacturing’. They allow the manufacturing apparatus to be adjusted, so you can move it around and make operations smoother. It’s part of the general drive to make the company nimble enough to improve its processes. ‘Some of our projects here at Sudbury have involved us taking about 20% of labour out, and that came from a combination of how the workflow is going round the cell, how we’re assembling the parts, then standing back and looking at the processes differently.’ To achieve that level of innovation, Goodey insists on taking on board feedback and suggestions from the

shop floor. And that strategy extends into the finance function. She has encouraged a flat structure so finance people can spread their wings and drive performance. Only this way, she believes, will finance really be able to demonstrate its value to the business. ‘We have to show those who crunch numbers that there is more to accountancy and driving a business than just doing that. Because if you crunch numbers without knowing what those numbers are doing, or the impact on the finances, and how you are helping the business, then why are you in manufacturing? Why aren’t you in Someone Chartered & Co, rubberstamping somebody’s books?’ To get more value from its finance people, Siemens has for some time been asking senior managers to take an active role in developing and mentoring its intake of young professionals. It’s something that is an increasingly key part of Goodey’s role.

17/01/2012 11:10


The basics 1847

Origin of the company as German engineer Werner von Siemens patents his work on telegraphy.


Through a series of mergers and consolidations Siemens becomes one of the biggest companies in Germany.


In fiscal 2011, Siemens generates its largest ever operating profit, which rises 36% on 2010 to €9bn.

‘IF YOU CRUNCH NUMBERS WITHOUT KNOWING WHAT THOSE NUMBERS ARE DOING, OR THEIR IMPACT, THEN WHY ARE YOU IN MANUFACTURING?’ She currently mentors one staff member in the commercial department who handles contracts and costings, though they are not in a direct finance function role. Not that she sees that as a barrier: ‘There’s the element of general advice plus the need to coach and develop younger staff. I delegate a lot, and I’ve got some really good people out there and they will only learn by doing, by experience. Obviously they’re doing CPD, that’s an absolute must, and we encourage them through all of that. And Siemens has got a very good comprehensive online training as well.’ Goodey is also keen to see the company adopt a broader approach to training. ‘I want to push for ACCA as

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well throughout Siemens’ north-west cluster, because we don’t want a whole load of one-dimensional accountants. I want some more people like me across all the businesses, not just here.

A broader outlook ‘To me, ACCA is such a good grounding because you’ve got tax, the financials and a much broader outlook on all aspects of the business. And it’s a great network as well, with great online training, so why shouldn’t we give people the choice? Let them look at what I’ve achieved and done: is that something that they want to aspire to?’ Indeed, a glimpse at her CV reveals a CFO who has walked the walk, and developed an impressive portfolio


New orders rise by 16% to €85.5bn for the full 2011 fiscal year, while Siemens’ revenue rises by 7% to €73.5bn.

of skills through hard work. Having started as a bank clerk, she caught the accountancy bug and by 2000 was doing an MBA, having passed her ACCA exams several years earlier in 1997. For now, the hard work has paid off and Goodey is keen to pass on her gospel of hard work and commitment. ‘There’s no reason why you can’t develop people, because with a bit of enthusiasm you can succeed. It doesn’t matter what gender you are or what age you are, whatever – if you want it and you’ve got that skillset and are prepared to drive it, then go for it.’ Christian Doherty, journalist

17/01/2012 11:10



Hoard, distribute or invest? Corporates face a knotty problem in deciding what exactly should be done with the enormous cash mountain they have collectively stockpiled

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18/01/2012 13:13



aving a large pile of spare cash has never been so much trouble. At the end of November 2011, British non-financial companies were sitting on £247.8bn of cash and deposits in their UK bank accounts. The money has been building steadily since Britain slipped into recession. And although the rate of

UK_F_cash.indd 19

growth has levelled off in the past year – the comparable figure for November 2010 was £247.6bn – it’s still a cash mountain which could give companies business firepower in the year ahead. Put in perspective, it’s more than three times the size of the Bank of England’s current round of quantitative easing. So what will corporate Britain do with it? And why might owning all

this cash cause so much trouble? The problem arises because there are three competing strategies tugging at that cash pile. First, corporate treasurers want to cling to it like a comfort blanket in case bank lending dries up even further in the wake of more twists and turns in the sovereign debt crisis. They will be aware of a warning in a recent Bank of

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England’s Financial Stability Report that the future growth of bank lending is by no means certain in the present febrile economic climate. In fact, the reason that companies are holding so much cash is that they’ve been scared by the breakdown of normal banking following the credit crunch. As Capita Registrars noted in its 2011 Q3 UK Dividend Monitor Report: ‘Anecdotal evidence suggests corporate balance sheets are rather cash rich at present as companies hoarded cash for fear of not having access to bank lending during the crunch.’ ‘If you think the business environment is going to deteriorate so that you’ll need the money, you hang on to it,’ notes David Simpson, global

In all, Capita expected UK dividend payments to total in the region of £66bn in 2011, £9.5bn more than in 2010. There were some particularly large payers. These included the life insurance company Resolution, which was planning to return a total of £500m to shareholders over the course of a year. The mining company Antofagasta paid a special £540m dividend, on the back of soaring copper prices. Capita noted: ‘Dividends are providing the opportunity for investors to insulate themselves against the declining real value of income, as companies taken as a group should be able to increase their prices in line with inflation.’

‘A POTENT MIX OF BUY-SIDE AND SELL-SIDE DEAL DRIVERS IS EXPECTED TO BOOST MERGERS AND ACQUISITIONS IN THE NEXT 12 MONTHS’ head of mergers and acquisitions (M&A) at KPMG. But the second pressure tugging on that cash pile comes from shareholders looking for increased dividends. With other asset classes – bonds, property – either providing meagre returns or being difficult to realise in illiquid markets, investors have been ramping up pressure for improved dividend payouts. And companies seem to have been responding. Capita Registrars’ Q3 report – the most recent available at the time of writing – notes that dividend payouts from quoted companies rose in the five consecutive quarters up to the second quarter of 2011. (The figures were adjusted for one-offs and BP’s cancellation of its £5.4bn of dividend payments in 2010.) In the first half of 2011, 403 companies paid a dividend – an increase on the 372 on the same period of 2010 and as few as 333 in the first half of 2009. Even so, the number paying dividends was below the peak of 410 in the first half of 2008, before the recession following the 2007 credit crunch started to bite.

UK_F_cash.indd 20

Simpson notes: ‘If you’ve got confidence for the outlook of your own particular company or business and you’ve got excess cash, you may well be returning it to shareholders.’ But although there is undoubtedly pressure from investors to get their hands on more of that cash pile, there is also a dilemma for boards. When they’re sitting on a pile of cash, they can afford to be more generous with dividends, but in doing so they set a benchmark for the future among investors which it may not be possible to maintain – especially in another economic downturn. ‘When you’re running a quoted company, you have to think very carefully about the precedent you set when you decide on a dividend rate,’ warns Simpson. ‘There could be an expectation among investors that they can bid you up from there. The normal dividend rate should be a longterm decision.’ So, although most crystal balls are cloudy, 2012 could see a slowdown in the current growth of dividend levels. Indeed, when figures for Q4 2011 come through, there is a chance

they could show that slowdown had already begun.

To acquire or not to acquire... Which leaves boards thinking about the third pull on their cash piles – making acquisitions. The consensus view among M&A specialists is that 2012 could see a significant uptick in global activity. Doing the Deal 2012, a new survey of deal-makers responsible for 10% of global M&A, carried out by Mergermarket, found that more than half (53%) expect an upturn in 2012. ‘A potent mix of buy-side and sellside deal drivers is expected to boost M&A in the next 12 months,’ says Matthew Albert, research director for Remark, a unit of Mergermarket, and author of the report. ‘During this period, respondents see consolidating industries, cash-rich corporate buyers and strong private equity deal flow as the top three buy-side drivers. ‘These will be matched with ample opportunities on the sell side as attractive valuations, private equity exits and non-core asset sales come to the fore in 2012.’ But Simpson sounds a note of caution, citing two factors that may stop companies doing M&A deals. ‘The first is if Britain or parts of the world go back into recession,’ he says. In this climate, ‘price discovery’ in M&A deals – agreeing the price of the transaction – becomes difficult because the previous asking price may have been rendered obsolete by falling demand for the takeover target’s products. Second, if future prospects are uncertain, investors may actually urge a company to continue sitting on its cash pile rather than use it in a possibly speculative acquisition. ‘There is a strong tendency at times of great uncertainty to defer making decisions for a month or two,’ notes Simpson. ‘We’re seeing quite a lot of that.’ That word of caution is reinforced by Paul Siegenthaler, one of the world’s high priests of M&A. His book, Perfect M&As: the Art of Business Integration, is a standard text. He warns that many M&As have failed to create new value for shareholders. ‘If the business case

17/01/2012 15:18


does not appear blatantly obvious to the shareholders, how can one expect to create traction for the business integration with the other stakeholders – such as employees, works councils, trade unions, local authorities, the media and so on?’ he asks.

The losing game ‘Shareholders tend to vote in favour of a merger or acquisition assuming all will go well, when in fact a majority of M&As do not deliver their promise,’ he adds. ‘Shareholders should assume they will lose out, unless the board can convince them of what will be implemented differently in their proposed plan.’ In a warning to corporate finance teams, Siegenthaler notes that the past four years have made investors more cautious. ‘Until then, the prospect of huge gains through high leverage and a lack of understanding of the factors that can lead M&As to failure, even when based on a sound strategy, caused many mergers and acquisitions to appear overly attractive,’ he says. ‘Sensitivity analysis shows that in many instances variations in the hypotheses underlying the business case for a merger or acquisition can rapidly turn that business case into a negative value. ‘In the current climate of economic fluctuation, many M&A projects therefore still present too much risk and uncertainty. Poor growth prospects in Europe are not, in themselves, a sufficient reason to refrain from making an acquisition or merger in that area, whereas the uncertainty of a likely outcome is a strong deterrent.’ In the short term, it seems the conflicting pressures on the cash piles – hoard, distribute, invest – may lead boards and finance teams to take the safe option. Keeping a cash pile may seem the antithesis of clever financial management – the equivalent of stuffing savings under a mattress – but when nobody is quite sure what’s going to happen next, it is the safetyfirst option. No CFO ever got fired for keeping a tight watch on the money. Peter Bartram, journalist

UK_F_cash.indd 21

Shaky platform: the merger between Steve Case’s (left) AOL and Gerald Levin’s Time Warner was disastrous, with the market value of both companies plummeting


Any CFO or board sitting on a cash pile and believing that mergers and acquisitions (M&A) are a route to easy money should think again. Last June Rupert Murdoch’s News Corporation sold the social media site Myspace for US$35m, a fraction of the US$580m he paid for it in 2005. But Murdoch’s faux pas pales into insignificance alongside the merger between AOL and Time Warner. When the firms linked together in 2000, AOL had a reported market value of US$200bn and Time Warner US$160bn. When they split in 2009, AOL’s market value had slumped to US$2.5bn, scarcely more than 1% of its original worth. Time Warner’s market value had collapsed to US$36bn. ‘Regardless of the economic outlook, the two core elements of successful M&A are picking the right deal and delivering a first-class integration,’ says Pip Peel, founder and vice-president of PIPC, a worldwide consultancy which has delivered some large-scale merger integrations. ‘The first is about the strategic fit, performing adequate due diligence and paying the right price for the asset being acquired. ‘The second part is about planning what the joint business will look like and executing a strategy to realise that end state as quickly as possible, while maintaining critical business functions and people. The ultimate result of the two, if successful, will be reflected through increased shareholder value.’

17/01/2012 15:18



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

UK_AP_F_riskreport.indd 28

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

16/01/2012 13:30


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)



At Legal & General Investments, risk management culture is embedded at all levels, both within and beyond its finance department. Responsible for managing unit trust and ISA investments, the finance team is part of the core business, working collaboratively and proactively with the rest of the organisation. Finance director Stephen Thomas FCCA manages a team of 35 qualified and non-qualified accountants and operational staff, based in Cardiff. There is a collaborative, open culture among the accountants, a trait reflected in the team’s relationships with other departments. For instance, Thomas observes that there is a natural tension between the business development efforts of the sales team and the control functions of the finance department. This is, he believes, normal and creative as long as all groups acknowledge that they are working towards the same goals.

UK_AP_F_riskreport.indd 23

Finance accepts that it should make efforts to empathise with the sales team, understanding the stresses confronting them in today’s challenging environment. This includes, for example, understanding the considerations that can underlie over-optimistic and over-pessimistic forecasting – and working together to establish mutually agreed, realistic forecast data. Such an approach embodies the team culture, which stresses the importance of constructively challenging ideas and proposals, regardless of who happens to be their author.w Thomas says that the team is particularly active in coming up with a range of viable alternatives to solve a particular issue, in areas including the evaluation of critical areas involving credit, market and operational risk loss potential. And, he adds, it is the expert practitioners who are most likely to identify the optimum solution.

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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

UK_AP_F_riskreport.indd 24

Requiring compelling business cases for new ideas

Achieving consensus

Unquestioning compliance with instructions from senior people

18/01/2012 13:19



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28/10/2011 16/01/2012 17:29 18:30 17/01/2012 12:35


Taking the pulse of the global economy In his regular quarterly report, ACCA’s Manos Schizas looks at what ACCA members around the world are saying about the global economy – and it doesn’t make for happy reading For a year and half, ACCA’s Global Economic Conditions Survey (GECS) has recorded the slowdown in the global economic recovery. However, over the last half of 2011, the global economy has taken a marked turn for the worse, led by a substantial fall in international trade. While the negative trend in global business confidence eased in late 2011 compared to the third quarter, and there are encouraging signs from resilient new orders, the damage done to global demand over the last year has been substantial. As a result, small and very open economies have been hit hard, recording levels of business confidence usually seen in the troubled economies of Western Europe. The cumulative effect of three consecutive quarters of weakening demand is beginning to take its toll on business. A detailed analysis of the GECS findings suggests that falling revenues are the strongest contributor to falling business confidence, followed by the deteriorating global economic outlook and continuing weakness in new orders. Once these, as well as the rising incidence of late payment


Traditionally, respondents in the UK are gloomier than the total sample, and this remained the case in the final quarter of 2011, although both business confidence and faith in the recovery were higher here than in Western Europe as a whole. Only 10% of respondents said they were more confident in the prospects of their organisations than they had been three months earlier, against 45% who reported a loss of confidence. Regarding the global economy, the clear majority of UK respondents (89%) expected stagnation or outright deterioration in the near future. On balance, government spending is expected to slow substantially over the next five years, and respondents felt that this will be a drag on economic growth. Intriguingly, however, respondents in the UK saw their country’s version of fiscal retrenchment as more sustainable than did their colleagues in other major ACCA markets, with the exception of Cyprus.

UK_F_gec.indd 26

and business failures, are taken into account the effect of tightening credit is only negligible. Still, with banks around the world facing an uphill climb towards capital adequacy, tightening finance must soon add to the challenge of a flagging recovery. The result is a deteriorating outlook for business cashflow around the world which may be driving a rise in business failures. Consequently inflationary pressures, which built up steadily over the past two years, are now easing.

THE CUMULATIVE EFFECT OF THREE CONSECUTIVE QUARTERS OF WEAKENING DEMAND IS BEGINNING TO TAKE ITS TOLL ON BUSINESS. FALLING REVENUES ARE THE STRONGEST CONTRIBUTOR TO FALLING BUSINESS CONFIDENCE In line with this deteriorating outlook, our findings point to weakening trends in employment and investment globally. This is particularly worrying as these two indicators have remained weak throughout the last three years and are crucial to any kind of sustainable recovery. Finally, our findings suggest that governments have to perform a tough balancing act in coming years if they are to support a flagging economic recovery. Sustainable fiscal stimulus is a luxury that not all governments can afford, especially among developed nations, while austerity is proving hard to reconcile with sustained growth, unless perhaps as a response to exogenous shocks. As a result, government approval levels are at a record low, just when they are most likely to influence business confidence. Manos Schizas, ACCA senior policy adviser

18/01/2012 11:50

27 THE ACCA GLOBAL ECONOMIC CONDITIONS SURVEY – HOW TO TAKE PART world more than 300 times. So why not have your say when the next quarterly survey opens on 17 February? Everyone can participate – simply look for the



30 Breaking down the ACCA Confidence Index 20 geographically reveals some striking variations, with members in Africa showing most confidence. 10 0 -10 -20 -30 -40 -50 -60 -70 -80 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2009 2010 2010 2010 2010 2011 2011


THE DANGER DOWNPOINT The ACCA Confidence Index correlates strongly with economic growth globally. A reading of below -13 suggests the economies of the developed world are contracting and the global economy is slowing to a halt.

link in AB Direct. If you have a story to tell, you can also join our panel of commentators by emailing emmanouil.

100 BALANCING 75 50 25 0 -25 -50 -75 -100


SAUDI ARABIA 68.8 -9.3 MAINLAND 52.8 CHINA 29.1 HONG KONG 52.4 -31.3 UAE 14.8 -39 USA 11.3 58.5 AUSTRALIA -25 -40.4 UK -38.3 -17.5 IRELAND -90.6 -27.1

The views of ACCA members are highly valued and receive widespread media coverage. The Q4 2011 survey was quoted in the press around the

Q3 2011

Q4 2011

The towers show how members think public spending will change in the medium term (increases shown in black), while the cakes show whether members see this level of public spending as excessive (above the line) or insufficient.

30 20 10 0 -10 -20 -30 -40 -50 -60 -70 -80

Sample: 2,186 ACCA members around the world

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 Q4 2010 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011


Business confidence remains in negative territory. The graphics show the percentage of respondents saying they have gained business confidence, minus those who have lost it.

UK_F_gec.indd 27

18/01/2012 11:51


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’.

UK_INT_F_COP17.indd 28

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

17/01/2012 11:11


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

UK_INT_F_COP17.indd 29

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.

17/01/2012 11:11


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

17/01/2012 11:11

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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



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

17/01/2012 16:01



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

17/01/2012 16:01

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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17/01/2012 16:02

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17/01/2012 12:35



The Enron effect [

Whereas the US went in legislative overdrive and sought to rely on process to cure the fiscal malaise at the heart of corporate America, the UK has taken a more common-sense approach, says Robert Bruce

At the time, the collapse of Enron a decade ago seemed a cataclysmic event. The Texan energy trader brought down its investors. It triggered the events which brought down Arthur Andersen. The tidal wave of collapses of fraudulently run US companies that followed seemed to strike at the very heart of US corporate culture. The UK satirical magazine Private Eye famously ran a cover with a headline ‘New Osama Threat To America’ depicting the terrorist Osama Bin Laden saying: ‘Forget terrorism, I’m going to become an accountant’. That was how the American corporate system could best be undermined. Just over 10 years later and, in the aftermath of financial shocks which have threatened nations rather than just the corporate world, it is obvious that the American system overreacted. Enron triggered a wave of regulation. And the approach was very different in the UK to that in the US. In

America the all-enveloping SarbanesOxley legislation brought fortunes to accountancy firms as they started to implement the mind-numbing details of processes that were decreed. Seminars explaining what had to be introduced to corporate America were orgies of PowerPoint and spreadsheets. To the UK it was reminiscent of the approach of one of the iconic rugby union stars of the time, Lawrence Dallaglio, who had become famous for saying that when he was up against it he simply gave 110% more. That appeared to be what the US legislation was all about – the same, but more and more of it. The reaction in the UK was very different. In part this was because

the wake-up call which scandals provide had come some years earlier with a string of fraudulent behaviour resulting in the Maxwell and Polly Peck collapses. So what we can now see as modern corporate governance had already got underway. A string of influential reports which were to revolutionise corporate governance was already in place by the time Enron hit the headlines. In the words of Lord Smith of Kelvin, who was given the task back in 2002 of producing guidance on how audit committees should work: ‘When Enron happened we had the reports from Cadbury, Greenbury and Turnbull all in place. We were quite far down the line.’ And these reports had put their finger on one of the most important changes to be made. ‘We had already split the role of chairman and CEO, which the Americans have still to do’, says Lord Smith.

Taking shape The legacy of the work, particularly the Cadbury report, was already starting to take shape. And it was very different from what was about to happen in the US with Sarbanes-Oxley. It was much more about common sense and explanation, rather than the idea of process holding it all in shape. It has created a better and more thoughtful environment. It has reduced the opportunity for the autocratic CEO to rule the roost and, without that cultural change, audit committees would not have been nearly as effective as they are now. It has resulted in better qualified and more robust directors and it has strengthened the checks and balances. It has given the auditors a place to go in times of pressure and it has strengthened the CFO in standing up to the CEO. It is a very different world to the one which bred Enron. Lord Smith looks

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17/01/2012 11:06

Banking crisis: post-Enron measures failed to prevent the credit crunch – but, unlike the Enron crisis, accounting fraud was not a major factor

back to the different pressures then: ‘If you were on the Enron audit committee you would have read the papers on the plane. You would be under time pressure. You were being asked to change the accounting treatment. You would have been told that everyone has signed it off. If you disagree you are asked: “What’s your problem?” You feel a vague disquiet, but you can’t put your finger on something specific. You respond that it seems to be inflating the profit and loss account. And the question comes again: “What’s your problem?” Without a culture of proper communication and allies within the audit committee it is very hard to be effective at times of pressure’, he says.

An old story But not everything is rosy. Gradually the perceived security of process reasserts itself. ‘It is the classic old story’, says Jonathan Hayward, partner in consultants Independent Audit. ‘The problems that gave rise to Enron have been addressed reasonably well. But you walk straight into a new crisis. We overengineer the response and, as a result, it doesn’t cope with the next crisis.’ ‘Cadbury and those reforms were very good and meant our corporate governance was better than the US,’ says Paul Moxey, head of corporate governance and risk management at ACCA. ‘But I think we have lost our way since. Despite all our efforts to improve behaviour the inexorable trend has been towards more procedure

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and reliance on structure. And that combined with much more regulation and rules means people have less need, and find it harder, to use their common sense.’ ‘Financial reporting has not been a problem this time around. Instead it has been liquidity, risk and understanding liabilities’, says Hayward. The interesting point about the UK disasters in the financial crisis, RBS and Northern Rock, was that they had dominant CEOs. ‘They were specific things in specific circumstances,’ says Hayward. ‘Corporate governance

stood up pretty well over here. Most companies which had taken corporate governance seriously came through pretty well.’ But you cannot make it absolutely safe. In Lord Smith’s words: ‘It is all about strength of character’, he says. ‘Much more important is the quality of the people.’ Or as a retired regulator put it to me: ‘Life is very complicated. The variety of things which can come up and bite you on the bum is very considerable.’ Robert Bruce is an accountancy commentator and journalist


The corporate governance landscape in the UK is very different to what it was a decade ago when the regulatory effects of the Enron collapse started to spread around the world. Lord Smith of Kelvin, who was at that point in the midst of creating his report providing guidance on the workings of audit committees, can now look back at a much-improved corporate governance culture. ‘In my experience, audit committees are now very professional,’ he says. ‘They know what the stakes are. People generally are first class and know what they are doing.’ Structures are also in place. ‘There has to be a holy trinity of the chairman of the company, the senior independent director, and the chairman of the audit committee,’ he says. ‘And perhaps these days the chairman of the remuneration committee. It is all about human behaviour. It has to be that if someone is sorely troubled they know they can go to the chairman of the audit committee and discuss their concerns and know they will get a fair hearing. That culture is now there.’ And it has brought about other changes. ‘The concept of the senior independent director has developed’, he says. ‘It is another kind of whistleblower, tension reliever or lightning conductor. People will feel they can go to them’. But it is still very different in the US where, in Smith’s view, they still haven’t got to first base. ‘It is harder in the US,’ he adds. ‘You still have a culture of very powerful combined CEO/chairmen. It is not the same.’

17/01/2012 11:07



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 13:30



The awkward wad [

The IASB’s proposed principles-based standard for revenue recognition has no truck with special sector cases, but, as Jane Fuller points out, cash receipts aren’t always the most accurate measure of sales

It feels like a breath of fresh air for the new year: an accounting standard for all sectors, not just banks, and one that deals with the income statement rather than the balance sheet. Not only that, the final Revenue from Contracts with Customers exposure draft from the International Accounting Standards Board (IASB) represents an increasingly rare success for the project to converge International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP). The proposals are principles-based – the transfer of goods/ services to the customer marks a sale – and replace industry-specific guidelines. A top-down answer never suits all, however. The construction industry and other long-term contractors have kicked up a fuss over the proposed switch away from a percentageof-completion approach. And the telecoms sector, that home of product packages, dislikes the idea of unbundling handset sales from provision of the network service. Companies always prefer producerled approaches, while users prefer economic reality and transparency. The concerns of mobile phone companies throw up some key issues. The first is that recognising revenue from selling a handset at the start of a contract does not match the pattern of receiving a monthly cash payment over the following, say, 24 months. The idea that the income statement should better reflect cashflows is a seductive one but cash receipts can be a poor measure of sales that are longer term and more complicated than the ker-ching of a checkout till. In contracting, the problem for users of accounts is the opposite of the mobile phone giveaway issue. Money is received in advance, which temporarily looks good on the balance sheet,

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but booking it as revenue before the company has performed would not be right. So why apply the cash principle when the divergence goes the other way, when a good has been supplied but payment is delayed? Telcos might also feel self-righteous because existing US-based standards that cap ‘contingent revenue’ counter an abuse thrown up in the technology bubble: recording too much revenue too soon. Indeed, they may regard

themselves as being conservative in booking a day-one loss because of giving away the handset, but accounting is supposed to be neutral. For users, unbundling different business activities is always helpful. The trend for companies to classify as much business as possible as a service has aggregated too many lines. The telcos have so far been overruled, but they might take heart from the compromises made by the standard setters to assist construction companies. These include allowing the bundling of ‘highly inter-related’ goods and services, the recognition of revenue on a straight-line basis if the effort is expended evenly, and the use of costs incurred as a measure of revenue. All this still sounds rather producer-led. Indeed, Thomas J Linsmeier, of the Financial Accounting Standards Board (FASB), in an alternative view says that ‘the proposed model has introduced exceptions that permit revenue to be recognised in a manner that is inconsistent with the core principle’. A key safeguard is the testing for onerous performance obligations – when does the company confess that the costs exceed the price? Again, the latest exposure draft modifies earlier proposals, but let’s hope that what remains is tighter than the old rules. The ‘onerous’ issue is a reminder that there is only so much that can be achieved by one standard. Companies whose transactions are anything other than short term run all sorts of cashflow and balance sheet risks. Even with non-financial companies, there is no substitute for looking well beyond the top line of the income statement. Jane Fuller is former financial editor of the Financial Times and co-director of the Centre for the Study of Financial Innovation think-tank

12/01/2012 15:49



Clueless about the creditless [

Bankers, regulators, consultants, academics, big business – they’re all in the government-led hunt to solve the small business financing conundrum. The real problem is who isn’t there, says Peter Williams

One constant theme during this longdrawn-out credit/financial/banking crisis has been the divide between those businesses that can access capital and those that can’t. The haves and the have-nots split on size. The banks, bond markets and a little bit of equity have all been there for the mega companies. But small and medium-sized businesses have faced an extended credit drought. The lack of finance infuriates politicians, who can’t understand why banks – especially the taxpayer-rescued ones – cannot or will not lend. The bankers, on the other hand, claim it’s because of lack of business demand rather than banks’ lack of supply. Fed up with the argument and the lack of progress, the government has decided that if the banks won’t lend then another way must be found to get credit flowing where it is needed. Step forward Tim Breedon, the Legal

& General chief executive charged with boosting the finance options for business. He is supported, according to the government, by a ‘panel of experts drawn from the business and finance community’. The work of this taskforce is part of the chancellor’s credit-easing package, which involves the government using the strength of its own credit rating to offer low-cost loans to business via the banks. Breedon’s taskforce is to go further to look at the challenges facing business in diversifying their finance and examining the products and finance choices – old and new – from corporate bonds to ‘crowd-funding’.

Business secretary Vince Cable is putting his trust in stoking competition and emerging alternatives to bank lending, such as businesses selling bonds directly to their customers and peer-to-peer loans that let savers invest directly in the UK’s businesses. Breedon and his colleagues will have their work cut out to roll back decades of bank lending as the default financeraising medium. Most smaller and midsized businesses rely solely on bank loans; only around 10% of them look for asset-based finance and fewer than 5% choose bond or mezzanine finance – minority choices because they are such hard work. Perhaps, though, the taskforce should look at the culture of running a small company before it turns its attention to finance. Dominated by bankers, regulators, academics, big business and big professional firms, it will surely have trouble understanding the fundraising problems that real businesses face. Like every other resource that small enterprises require, credit has to be cost-effective to secure. That means there has to be some probability of success – it’s no good spending hours trying to win finance when the odds are stacked against you. It also has to be simple to access – too much red tape and the product won’t fly. Until politicians and big business leaders really understand what it is like to own, manage and run small businesses – the personal as well as the business risk, the lack of certainty, and the absence of resource on tap – they may never find a workable small business finance solution. And that means most businesses will remain beholden to banks and overdrafts. Peter Williams, accountant and journalist

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RSM Tenon’s share price has fallen from nearly 70p to under 8p in the last year. Chief executive Andy Raynor told the company’s annual general meeting in December that it had been hit by ‘uncertain economic conditions’, but that it held ‘a strong market position as one of the leading accounting-based service providers in the UK’. He added: ‘All of our service lines have experienced challenging conditions, adversely impacting year-on-year trading performance, particularly in transaction-based activities….. All our service lines are working to improve profitability and prospects for the remainder of the year, but markets will remain erratic… Headroom will continue to be limited as we progress towards the final quarter of the year, which is the most cash generative of our annual cashflow cycle.’ A trading update will be provided on 21 February. The company declined to comment.

The view from: Accountancy: Joanne Cotton FCCA, manager, Baines Jewitt Q After 10 years at the practice, what has been your career highlight so far? A Passing my ACCA finals was my career highlight and also a relief. At the time, I hadn’t appreciated to what extent the learning had only just begun. I remember the first time that I was assigned a new client to work with. I felt a real sense of pride when the job was all signed off. Q What are your main areas of work? A I work with small and medium-sized enterprises in a broad range of industries. I am also heavily involved in the audit of some UK subsidiaries of German group companies; this requires knowledge of international standards as well as UK generally accepted accounting principles. I spend a lot of my time working at clients’ premises which gives me a greater insight into the ethos of a business. Q Where would you like to be in five years’ time? A I hope that there will be opportunities for me to become more involved with the specialisms within the firm. I would also hope to be working on larger group companies, perhaps with overseas aspects.


HMRC says that it will work with employers to improve data quality related to PAYE. Its Targeted Employer Support programme is to be rolled out to at least 1,000 employers. HMRC will make ‘tailored’ face-to-face visits to identify employers’ data quality problems. Its existing analysis of employer data has indicated that the main problems relate to missing or incorrect national insurance numbers; incorrect or missing dates of birth; and errors in employee names. HMRC said that it wants to improve employers’ data quality before the pilot of realtime information in April.

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Q What would be your top tips for newly qualified ACCA members? A Passing exams is excellent but there is still so much to be learned. It is very important to try and establish a healthy work/life balance early on. And remember that it is OK to ask questions. Q As a keen runner and rock climber, how do you find spare time for sports? A I don’t find time, I make time! I always try and book my sports and social appointments in my diary a few weeks in advance. I am a healthier and happier person for having these interests.


Location: Stockton-on-Tees Area of expertise: Working with owner-managed businesses in a variety of industries including car dealerships, manufacturing and civil engineering companies

43 Practice The view from Joanne Cotton of Baines Jewitt; hope for highstreet accountancy firms; how Penny Avis’s latest move is a real page-turner 51 Corporate The view from Francis Laud of Marshall Motor Holdings; shared services and outsourcing are here to stay 55 Public sector The view from Michael Taylor of the London Pension Funds Authority; Public Accounts Committee chair Margaret Hodge MP highlights audit and scrutiny 59 Financial services The view from Raj Sond of First Data; implications of the eurozone crisis for City and UK accountants

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These mean streets The recession has hit high-street accountancy firms hard, exerting a dismaying degree of pressure on both fees and costs, but all is not lost for the smaller practice The figures make for sober reading. It is not just the retailers that have suffered on the high streets of Britain during the recession. Accountancy firms too have been hit by a downturn in business as their clients tighten their belts or go under completely. Research from information provider Bloomsbury Professional shows that the firms being squeezed are those with a turnover under £100,000 a year, often sole practitioners. At their peak in 2009, there were 20,800 such firms; now there are 19,790 – a fall of almost 5% in two years. Yet in the same period the number of firms with an annual turnover of more than £100,000 has risen from 12,470 to 13,115, or just over 5%, suggesting a twin-track economy in the accountancy profession. So what dynamics are at play here? With the small high-street firms representing 60% of all practices in the UK, it is important to grasp the issues facing them. According to Bloomsbury, many small owner-managed businesses – the lifeblood of the high-street accountant – have cut back their spending on professional fees, with more now managing their own tax affairs rather than turning to their accountant for advice. At the same time, the larger firms are moving into the high street to grow their own revenue, squeezing the smaller firms by cutting their fees and competing aggressively.

Expectations dashed The irony here is that accountancy firms were expected to have a good recession, as small businesses turned to them for advice in the tough economic climate. But it is all too easy to forget that accountancy firms are businesses themselves, and so not immune to the recession. ‘There was a widespread belief that the accountancy profession would be relatively insulated from the recession, but that clearly hasn’t been the case for many of the smallest firms,’ says Bloomsbury managing director Martin Casimir.

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‘Small practices are facing pressures from a number of directions. Their owner-managed client base has become much more fee-resistant during the recession and, on top of that, larger firms are muscling in on their turf.’

Costs up, fees down While struggling with fees that are stagnant at best, the high-street firms are also facing rising costs that are difficult to pass on to their clients. Phil Shohet, a director of professional advisory firm Kato Consulting, agrees that times are incredibly tough on the high street: ‘When you are very small, you are consuming most of your income because you will probably be paying an assistant and your rent while you are being squeezed by your clients; they can always go around the corner and get a better deal. A client being charged £250 for a tax return could probably get £100 sliced off that. He might come back to you to see if you can match it, but you would need to suck very hard because this is your profit.’ Tax work appears to be the major battleground on the high street. Very few firms are doing audit, although there is still a demand for basic bookkeeping and payroll advice. But even here there is risk, with changing legislation and greater technology and automation. Shohet points out the difficulty the smallest firms at this level face in adding value to their services: ‘This is processing work and, to be quite honest, your major competition is coming from the unqualified operations. You might have four letters after your name, but you’ll be thinking about why you’re doing very rudimentary work.’ A secondary but equally important aspect that can affect whether a firm survives to fight another year is its tax bill. Finance companies such as Syscap have been reporting over the last two years a significant rise in the number of professional firms looking for finance to meet their tax liabilities. The government’s ‘Time To Pay’ scheme would

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have helped these firms in the past, but the door to this particular option is slowly closing as the number of scheme rejections from HMRC increases. In other words, if the squeeze from competitors and cash-poor clients does not get you, then the taxman might. So what can the smallest firms and sole practitioners do to stay afloat? If a large part of the business is based on tax returns, Shohet urges firms to get their clients to give them the necessary paperwork earlier, easing the pressure on limited resources and allowing clients to be billed earlier too. However, Shohet acknowledges clients might be unwilling to hand over that paperwork until the last possible moment. ‘A small firm can go for months with no income as it just waits for information,’ he says. Shohet says it can be very lonely on the high street, especially as a sole practitioner. ‘You haven’t got anyone to talk to,’ he says, and suggests attending seminars put on by accountancy bodies such as ACCA. Shohet believes the worries will encourage mergers and acquisitions, making it easier for firms to raise finance and decide on future directions. ‘Being able to talk in a commercial sense to a partner will help develop ideas,’ he explains, adding that such a move could also increase average client fees: ‘A good sole practitioner who is young and has a portfolio of around £100,000 is in an ideal position to go and look for someone doing £300,000. And the younger person could provide the answer to another practice’s succession question.’ Clearly, while there may be losers on the high street, there are opportunities in store as well. Philip Smith, journalist

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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

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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

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‘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

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ACCA Business Dinner

MONEY Europe. Recession. Banks. Budget. Speaker: Lord Norman Lamont Radisson Manchester 7pm Monday 26 March 2012

For more information and to book visit

UK-Page 50 (left).indd 50

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Reproduced by kind permission of Prudential Group Archives

Former KPMG global vice chairman Alistair Johnston has been appointed a non-executive director (NED) of Prudential and a member of the company’s audit committee. He was a KPMG partner from 1986 to 2010 and global vice chairman from 2007 to 2010. Johnston also held the roles of UK vice chairman, international managing partner – global markets, vice chairman of UK financial services and head of UK insurance practice and has been chair of the Foreign & Commonwealth Office’s audit committee. He replaces Kathleen O’Donovan, a former Ernst & Young partner, on the board and audit committee of Prudential. In other changes to Prudential’s board, Harvey McGrath will retire as chairman and as a director once a successor has been selected. Kaikhushru Shiavax Nargolwala has been appointed as a NED and becomes a member of the risk and remuneration committee. He is the non-executive chairman of Credit Suisse Asia Pacific.


Jock Lennox, a former senior Ernst & Young partner, has joined Dixons Retail as a non-executive director. Lennox was with EY for more than 30 years, 20 of which as a partner. He has also been appointed chair of Dixons’ audit committee, taking over from Andrew Lynch, a former finance director of the Compass Group. Lennox has chaired several company audit committees and is currently a director and audit committee chairman of A&J Mucklow Group, EnQuest, Hill & Smith Holdings and Oxford Instruments.

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The view from: Car sales: Francis Laud FCCA, finance director, Marshall Motor Holdings Q How did you start your career in accountancy? A Instead of heading to university, I joined Marshall’s at 18 and qualified through ACCA while progressing my career with the organisation. Q Last October saw new fleet car sales increase despite private car sales falling. What do you predict will happen during 2012? A 2012 is going to be very tough for the industry as demand for new products is expected to fall in both the retail and fleet sectors. The new car market was 2.4 million units in 2007. For 2012, recent forecasts published by Deloitte anticipate that the market volume will be 1.8 million units. This represents a fall of 25%, which is a difficult pill for any industry to swallow. Q The duty on fuel remains a concern. As Budget 2012 approaches, what action would you like the chancellor to take? A Consumer confidence is the key driver of sales in our business, so I would like to see the chancellor hold his nerve and stick to the plan. Confidence will come from stability and predictability, so short-term actions could actually have a destabilising effect. A tweak to stamp duty could help get the housing market moving, from which we all benefit and a new scrappage incentive scheme would offer significant respite. Q If you could give one piece of advice to finance directors, what would it be? A It’s all about relationships! Get away from the numbers and talk to people. Q What do you enjoy most about your role? A The industry sector is fast-moving, exciting and full of interesting characters. Every day brings something new.


51 Corporate The view from Francis Laud of Marshall Motor Holdings; shared services and outsourcing are here to stay 43 Practice The view from Joanne Cotton of Baines Jewitt; hope for highstreet accountancy firms; how Penny Avis’s latest move is a real page-turner 55 Public sector The view from Michael Taylor of the London Pension Funds Authority; Public Accounts Committee chair Margaret Hodge MP highlights audit and scrutiny 59 Financial services The view from Raj Sond of First Data; implications of the eurozone crisis for City and UK accountants

Total assets: £93m Turnover: £685m Number of dealerships: Sixty franchised outlets Number of staff: 1,850

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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.

12/01/2012 16:50

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head of IT, Royal Shakespeare Company

Public sector


The National Audit Office (NAO) has refused to sign off the accounts of HM Courts Service, because of its poor accounting records regarding the collection of fines and other money due. A total of £1.9bn was owed to the Courts Service at March 2011, up from £1.5bn the year before, yet only £457m was recognised in its accounts as receivable, with £1.4bn estimated to be debt at risk of non-collection. NAO head Amyas Morse said: ‘I welcome the further steps planned by the Courts Service and Ministry of Justice to improve the evidence on its financial position relating to fines, confiscation orders and penalties. However, I recognise that they face significant challenges in improving the extent of available data and on reducing the level of debt.’

The view from: Local government pensions: Michael Taylor, chief executive of the London Pension Funds Authority Q What is your major investment challenge? A Pension funds look for inflation plus 4% or 5% returns, so 7% or 8% per annum. The biggest challenge is whether traditional methods of investing – an equity and bond split – will deliver those returns. In recent years they haven’t. Q Have you reduced holdings of equities and bonds? A We are now a global investor. Global returns will broadly follow global GDP growth. To achieve those you invest in global companies. Q Do you regard the fund as sustainable? A Yes – providing government takes the necessary action to mitigate the effects of longevity. There has been an increase in life expectancy of two years every decade since the war. Q Do the government’s proposed reforms improve sustainability? A Providing we get the detail right. The biggest threat was to increase employee contributions, which could have driven people out of schemes. But government has listened to the arguments that the Local Government Pension Scheme is different from public sector unfunded schemes.


The vast majority of local authorities had their accounts signed off by their due date, the Audit Commission has reported. Opinions were given on the accounts of 328 out of 356 councils by 30 September 2011, along with 36 of 38 police authorities, 30 of 31 fire and rescue authorities and 28 of 32 other local government bodies. Only one qualified opinion was issued. However, it said that the challenge of introducing International Financial Reporting Standards last year caused a rise – from seven to 18 – in the number of bodies where the opinion was outstanding at 31 October. There was a significant increase in the number of bodies needing to make material adjustments to their accounts following audits.

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Q What makes your life easier? A There is much more debate in the press about pensions. I can talk to people now about pensions – a few years ago they would have fallen asleep. Q How do you relax? A I watch Chelsea and take things out on the dart board.


Net assets: £4.127bn at March 2011 Contributions received: £191m in 2010–11 Investment income: £45.8m in 2010–11

55 Public sector The view from Michael Taylor of the London Pension Funds Authority; PAC chair Margaret Hodge MP highlights audit 43 Practice The view from Joanne Cotton of Baines Jewitt; hope for highstreet firms; Penny Avis turns the page 51 Corporate The view from Francis Laud of Marshall Motor Holdings; shared services and outsourcing 59 Financial services The view from Raj Sond of First Data; implications of the eurozone crisis

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Public sector

Advancing accountability At a recent ACCA conference, Public Accounts Committee chair Margaret Hodge MP highlighted the drive to ensure that audit and scrutiny are at the heart of public services The knock-on effect of the global slowdown on public finances has been an intensification of the pressure on audit and scrutiny to ensure that taxpayers’ money is being spent wisely. If auditors are to demonstrate that they are adding public value, this means not merely reporting on whether institutions are following the rules and regulations, but actively monitoring their performance too. Discussions at ACCA’s recent International Public Sector Conference showed that this is where auditors face the greatest challenge, not least the technical and logistical difficulties involved in bringing together a mass of often inconsistent data. In the UK, for example, the publication of the Whole of Government Accounts (WGA) for 2009–10 has been a major step forward in improving the transparency of financial management in the public sector. But it is still very much a work in progress. As Karen Sanderson, deputy director of the financial management and reporting group at the Treasury, points out, the consolidated set of accounts covers hundreds of bodies operating in different statutory and accounting frameworks. An immediate qualification to the WGA was therefore the different accounting standards used by central and local government. But even more fundamental issues remain, such as the boundaries of the public sector itself.


Nevertheless Sanderson believes that the publication of the accounts will itself act as a catalyst for change: ‘The emphasis has been on trying to get data out there quickly and improve quality. Having the data out there starts the conversation: people’s behaviour is changing – they know their actions will be scrutinised.’ The aim is to create accounts which have more of the look and feel of private sector accounts as a way to improve the day-to-day financial management of the public sector. ‘Our overall objective is to put finance at the heart of decisionmaking, so that finance is not an afterthought or something that happens in the financial community, but something that is a reality in the everyday world,’ says Sanderson. ‘We are trying to move from finance as a process to finance being embedded in the way things are done.’ The WGA will also be important to the work of independent bodies such as the Public Accounts Committee and the newly created Office for Budgetary Responsibility (OBR). ‘We see the WGA as a tool for change,’ says Sanderson. ‘There are a number of ways we can practically use it. The OBR uses the unaudited data to inform its long-term fiscal sustainability reports. It includes some data not available elsewhere, so it’s really important in informing OBR thinking.’ While both the OBR and the WGA are newcomers to the world of public

To see the video of ACCA’s third International Public Sector Conference, which took place on 15 December 2011, go to: Footage includes interviews with Jill Goldsmith of the NAO and Lazaros Lazarou of the European Court of Auditors, as well as the conference addesses from John Doyle, Margaret Hodge, Ian Mulheirn and Karen Sanderson.

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finance, the Public Accounts Committee (PAC) of the House of Commons is the oldest and most powerful of select committees. Its remit is to review the whole of government expenditure. The committee is always chaired by a member of the opposition and its composition reflects the political make-up of parliament. Recently its power has been bolstered by having for the first time an elected chair. Current chair Margaret Hodge MP explains: ‘The fact that I’m elected gives us much greater authority and credibility both in parliament and beyond.’

Expanding role With the UK facing huge cuts in public spending, together with the transformation of many areas of the public sector, the PAC faces a challenging period, not least in the expansion of its own role, as it takes over some functions of the Audit Commission, which used to monitor local government value for money. ‘We are used to dealing with very big contracts in big departments,’ says Hodge. ‘We are not used to small contracts and very dispersed bodies.’ There is also a trend towards a much greater fragmentation of the public sector – for example, in education – and more delivery of public services by the private sector. ‘The PAC needs to look for value for money in a very disparate group of organisations,’ says Hodge. ‘Delivery through private contracts also creates challenges for accountability, and the extent to which we can follow the accounts in organisations which have commercial confidentiality.’ In this work the PAC is aided not only by the WGA but the independent National Audit Office (NAO). ‘We get a wealth of very high-quality data from

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Margaret Hodge MP the NAO,’ says Hodge. ‘Auditors are absolutely essential to effective governance, and that’s a non-partisan issue – everyone is interested in value for money.’ The PAC produces around 50 reports a year, which have so far always been unanimously agreed. Although its remit is to look back at whether value for money has been achieved, rather than forwards at policy and proposals, Hodge hopes that during her five-year tenure she can tackle some of the systemic issues of waste and failure to achieve value in the public sector. ‘Too often in government people don’t think before they start a project,’ she says. ‘There’s not enough preparation or analysis of issues such as the financial implications or the complexity or cost of the project.’ This is partly a skills issue, with a current emphasis in government on development rather than implementation of policy. ‘The skills needed to translate policy into practical reality aren’t there,’ Hodge says. ‘We’ve got a lot of very talented individuals who, with the appropriate training, could do these jobs very well.’ A key issue for Hodge is lack of responsibility and accountability for the individuals in charge of projects: ‘Career civil servants are only on a project for a couple of years, so the person in charge is never accountable.’ In the light of this the PAC has taken to calling in – often under duress – previous officials, and instituting recall sessions where officials are grilled as to whether they have in fact followed PAC recommendations. ‘We’ve been learning the lessons,’ says Hodge. ‘We’ve begun to monitor whether they implement the recommendations, and

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‘CAREER CIVIL SERVANTS ARE ONLY ON A PROJECT FOR A COUPLE OF YEARS, SO THE PERSON IN CHARGE IS NEVER ACCOUNTABLE’ the threat of being called back is itself encouraging departments to implement.’ However, she says that in general less than half of parliamentary committee recommendations are acted on. Even with the publication of the WGA it is hard to get committees to look in detail at financial matters. ‘More select committees should be looking at budgets and expenses more closely,’ she says. ‘But I don’t know how we get there – it’s not sexy.’ With a duty to ‘follow the pound’ on behalf of the taxpayer, Hodge says she is determined to get the proper accounting and structures in place, whether in the police or local authorities or the health service. ‘At the moment it’s not there,’ she says. ‘We re being very tough. We are not going to sign off a new system unless we are absolutely clear it gives us the insight we require. If we can get better value out of every pound of taxpayers’ money and protect frontline services, that’s a job well done.’ A key factor in all this is getting the figures to convey a meaning beyond financial totals. ‘Read the story; don’t keep the score,’ is the advice of John Doyle FCCA, who as auditor general

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Public sector

‘TOO OFTEN IN GOVERNMENT PEOPLE DON’T THINK BEFORE THEY START A PROJECT. THERE’S NOT ENOUGH PREPARATION OR ANALYSIS OF ISSUES SUCH AS THE FINANCIAL IMPLICATIONS OR THE COMPLEXITY OR COST OF THE PROJECT’ of British Columbia has the role of conducting both performance and financial audits of the Canadian province’s public sector bodies. As an independent auditor (‘I am not a public servant’) Doyle has wide-ranging powers both to audit expenditure and to make recommendations. British Columbia is unusual in that the legislature has ordered balanced budgets in the public sector, which, according to Doyle, has led to some perverse bookkeeping. ‘The balanced budget is a big club,’ he says. ‘It doesn’t matter what the rest of the financial statement says as long as the figure at the bottom is balanced. What that has to do with good financial management I have no idea.’ Accounts that Doyle has criticised include a public utility which used an industry-specific accounting procedure to reclassify a US$4.4bn loss as an asset, and an education department which built up a cash surplus of US$1.3bn – all in the name of balanced budgets. Doyle says: ‘I don’t think users of these accounts know what they mean. When it comes to public accounts someone has to predigest it. Even accountants struggle with this stuff.’ Gillian Fawcett, ACCA’s head of public sector, says: ‘The value of audit and scrutiny is in the spotlight like never before. Auditors in the public sector are operating in financially constrained environments which bring new pressures and risks, as well as having to take account of the environment and climate change. ‘At the same time, the demand for efficient and effective public finances and financial reporting is growing around the world.’ Mick James, journalist

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With a growth projection for the UK that suggests that by 2017 the UK economy will be 18% smaller than previously expected, the challenge of funding public services sustainably will be on the agenda for years to come. Ian Mulheirn, director of the Social Market Foundation (SMF), says public services are facing an ‘unprecedented squeeze’ that will extend the fiscal tightening originally envisaged by the incoming coalition government in May 2010 by another two years. With limited scope for further service cuts and tax hikes combined with low growth expectations, Mulheirn says the focus must be on public sector efficiency. In the present context this means a continuation of the 20-year trend towards the marketisation of public sector service delivery. However, Mulheirn believes that this is not so much an ideological decision as one based on ‘the need to unite control of the public sector at a level where the information is needed’. He adds: ‘When Whitehall holds the reins, it has never found a good way to retain financial control if it allows the front line to do what it wants. Marketbased delivery allows you to do that in a couple of ways.’ One way is through increasing the element of choice, allowing users in effect to hold service providers to account. Another is through payment by results – for example, paying not for a back-to-work service but on the basis of whether the clients of such a service actually get jobs. Mulheirn warns that marketisation should not be confused with privatisation. In fact, he believes that ownership structures are less relevant than the introduction of competition. ‘When the Welsh Assembly abolished league tables it reduced both the level of information and competition between schools,’ he points out. ‘The result was a two-grade drop, concentrated among the most deprived children.’ By contrast, Mulheirn says that there is a definite case for public investment in areas where there is a high capital cost, little innovation and less need for information and feedback at ground level. ‘The government needs to pull the investment lever itself,’ he says. ‘But what can government do if it is constrained by the public spending deficit and fears that bondholders will turn against it?’ On the other hand, he points out that investors will also ‘punish’ a low-growth economy. ‘We do face blockages to this and it comes down to accounting models that have boxed government in,’ he says. This has led to strategies such as PFI and ‘credit enhancement’ to get investment off the balance sheet. However, Mulheirn says: ‘If government thinks investment is good, why are fiscal measures being taken off the balance sheet? It is inconceivable that bondholders won’t notice.’ Mulheirn argues that a complete rethink of government accounting is needed: ‘We need a clearer debate on what we should and should not be doing. Why do we treat current expenditure the same as investment in things we desperately need?’

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Financial services


Non-executive directors (NEDs) have been told to take a stronger role in the corporate governance of financial services firms to ensure customers are treated fairly. The Financial Services Authority (FSA) says that NEDs must take a strategic view on the treatment of their customers; ensure they are confident that the firm is identifying, monitoring and mitigating risk to its customers; ensure that there is the right mix of skills on the board and they are given the information needed to constructively challenge the executive; and that they support a culture within the firm that takes into account fair treatment of customers. Clive Adamson, director of supervision in the FSA’s conduct business unit, said: ‘NEDs have a duty to challenge the management of their firms where they believe the firm could do more to ensure that customers get fair treatment.’


The Financial Services Authority has banned a former client adviser at UBS, Jaspreet Singh Ahuja, for failing to act with integrity and for not being a fit and proper person. He is prohibited from performing any function in relation to any regulated activity in the financial services industry. He was also fined £150,000. Ahuja was a client adviser within UBS’s international wealth management business in London, where he helped an Indian client to invest over US$250m in a fund invested in Indian securities. This broke Indian law: Indian investors can only invest in Indian securities using specified means.

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The view from: Merchant processing: Raj Sond FCCA, group finance director, merchant acquiring EMEA, First Data Q What does being an FCCA mean to you? A When I qualified, I felt a great sense of achievement. At that time, I think the average pass rate for all students was something like 27%. Being an FCCA makes career progression a visible reality for our ACCA student accountants at First Data. Q What lessons have you learnt in your career? A When seeking development and progression it’s important to balance ambition against achievement. It’s also important to have the correct balance of people in any team, ensuring one’s weaknesses are balanced off by another’s strengths. Q In your opinion, what would you attribute First Data’s positive financial results to? A Critical to our success is our workforce. We focus on retaining and developing people throughout the organisation. This is demonstrated in our finance teams by the ACCA and CIMA accreditations and student training. Payments is a dynamic industry. In order to succeed at this pace its important to for us to know when to pre-empt and lead the industry, and when to wait and see the effects of new developments. Q How important is innovation at First Data? A Innovation is of paramount importance and our recent alliance with Google, Citi, MasterCard and Sprint to create Google Wallet is testament to this. Google Wallet is an app, currently available in the US, which turns mobile phones into virtual wallets. We encourage all of our workforce to have ideas. We are all consumers and all make payments – therefore we all have the opportunity to identify the next big trend!


59 Financial services The view from Raj Sond of First Data; implications of the eurozone crisis for City and UK accountants 43 Practice The view from Joanne Cotton of Baines Jewitt; hope for highstreet accountancy firms; how Penny Avis’s latest move is a real page-turner 51 Corporate The view from Francis Laud of Marshall Motor Holdings; shared services and outsourcing are here to stay 55 Public sector The view from Michael Taylor of the London Pension Funds Authority; Public Accounts Committee chair Margaret Hodge MP highlights audit and scrutiny

Staff: 24,500 Headquarters: Atlanta, Georgia Structure: First Data has business operations in 35 countries and serves customers in 80 countries

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Financial services

Mixed fortunes The eurozone crisis currently makes sterling look good, but should the currency union shrink or break up the consequences for the City and UK accountants could be both awful and opportune As British politicians look across the Channel at the political crisis unfolding in the eurozone, many are betraying a sense of schadenfreude – to borrow a word imported from Germany, the 17-country bloc’s biggest member state. But expert observers of the UK’s financial services sector believe that there is only limited cause to smile at the current disparity between mainland Europe’s troubles and the UK’s relative stability. Simon Hills, head of prudential capital at the British Bankers’ Association, says that if the eurozone’s problems worsen, ‘I guess we would have a less tough time than the eurozone but given the importance of mainland Europe as a trading partner things could be relatively tough for the UK too.’ The eurozone crisis has reached a critical juncture. In the final months of 2011, European leaders publicly acknowledged for the first time that member states might leave the currency union. The realisation that the bloc might break up exacerbated the eurozone’s economic crisis – prompting Schroders and other City institutions to predict a 2012 return to recession in euroland. Although analysts’ talk that the eurozone might disappear altogether has subsided, a partial breakup – with weaker economies such as Greece or Italy finding themselves forced to leave – is now seen as a strong possibility. This has heightened the sense of insecurity in many countries, creating a negative feedback loop that has seen the bond yields of countries such as Italy rise sharply on investors’ fears that they may not be repaid in euros – or indeed in any currency at all. If continuing fear of breakup pushes the eurozone back into recession, the UK is likely to follow suit with its own

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slump, since half its trade is with eurozone member states. And should the UK and eurozone economies both shrink, so too would Britain’s financial services sector, which has thrived in recent years because of its position as Europe’s financial hub.

City fears Experts in UK financial services are most concerned about the City, which will bear the brunt of the damage to the sector caused by a deepening eurozone crisis. Rob Harbron of the Centre for Economics and Business Research, which produces the most widely followed forecast of City job numbers, estimates that a severe eurozone recession precipitated by a partial eurozone breakup could lead to another 10,000 jobs disappearing from the City’s headcount. The City is defined broadly by the CEBR as the international and highly

skilled jobs in financial and related professional services in the Square Mile itself, Canary Wharf and other parts of London. Harbron says that investment banking could be hit hard, as companies respond to the financial market turbulence by cutting issuance of bonds and shares. But he also suggests that ‘professional services, including legal services, accountancy and consultancy’, could suffer similar sharp reversals. The loss of 10,000 jobs would take the City’s headcount down to 278,000, according to the CEBR, amounting to a fall of over 75,000 since the 2007 peak of 354,000. Despite his pessimistic overall assessment, Harbron thinks UK financial services could benefit in certain fields from the eurozone crisis. Sterling-denominated corporate bond issuance soared in

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The face of crisis: eurozone states that have bit the austerity bullet have experienced massive social convulsion, with riot police deployed in Athens last year after violent demonstrations left hundreds injured (left) and protesters gathering outside the Italian bourse after a general strike was called (far left) 2011 as euro issuance fell. Issuers have responded to investors wary of buying bonds in a currency whose empire could shrink if Italy and Greece left the zone, or disappear altogether if the eurozone breaks up. Even eurozone blue-chips such as Électricité de France (EDF) have issued sterling bonds. Hills says: ‘There has been a flight to the relative quality and stability that sterling represents at the moment.’ Harbron sees potential for growth too in foreign exchange trading volumes – an important source of City jobs – if businesses respond to fears over the currency’s future by deciding in large numbers to swap their euros for other currencies. Should the eurozone crisis plunge the bloc back into recession, Hills says

sufficiently realistic in marking down the value of bad eurozone debts. Helen Hill, director of policy and public affairs at the London Chamber of Commerce, says that of all the problems facing Britain because of the euro crisis, ‘one of the biggest risks is to the balance sheet of UK banks’. However, she concludes: ‘We bounced back from the financial meltdown a few years ago, so I think we should be pretty confident.’ Looking further ahead, a silver lining to the eurozone cloud is that analysts think the currency’s crisis will further buttress London’s status as Europe’s financial capital. ‘If the euro area does hold together, it will be in a slightly weaker form,’ says David Marsh, author of The Euro: The Battle for the New Global Currency. ‘The City will profit from this. The

‘IF THE EURO HAD REALLY MADE IT AS A BIG INTERNATIONAL CURRENCY TO RIVAL THE DOLLAR, IT WOULD HAVE BEEN QUITE A THREAT TO LONDON’ employment in British banking would be hit, although he adds that ‘perhaps UK banking might do less badly than the UK economy in general’. The share prices of some British banks have pitched and heaved in response to the eurozone drama, reflecting fears that any worsening in its plight could force a writedown of their eurozone loans. However, Hills says that the exposure of British banks to the weaker eurozone economies is lower than for many other European banks, such as those in France. Some analysts say that British banks are storing up trouble for themselves since they have not been

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world will want to come to London rather than Paris or Frankfurt.’ Marsh, who is co-chairman of the Official Monetary and Financial Institutions Forum in London, explains: ‘If the euro had really made it as a big international currency which could rival the dollar as a transaction currency and in bond issuance, it would have been quite a big threat to London, since London isn’t in the single currency. The tarnishing of the euro and the fact that a lot of the capital underlying the bonds is no longer risk-free make it harder for the euro to fulfil its potential.’ Harbron thinks that Paris and Frankfurt ‘don’t have the history that

could make them rival London’. However, he worries that London, which has been Europe’s leading financial hub for decades, could lose business to Far Eastern cities such as Hong Kong and Shanghai because of what he sees as the continuing threat of an EU-wide tax on financial transactions.

Speculators David Cameron, Britain’s prime minister, has opposed the tax unless it is implemented globally. However, support of EU leaders for a European tax has grown as they blame ‘financial speculators’ for the euro’s plight. London remains the world’s most competitive financial centre according to the latest report from consultancy Z/Yen Group, with New York second. But after a recent rise in Z/Yen’s ratings, Hong Kong and Singapore were not far behind in the September 2011 report, in third and fourth place respectively. Shanghai has also jumped 30 places to fifth since March 2011. Meanwhile the eurozone cities have fallen: Frankfurt is down two places to 16th and Paris has dropped out of the top 20 altogether. Few observers dispute the idea that Britain will remain Europe’s premier financial location, but the big question is how much financial business will be left anywhere in the region if the backlash against the sector – fuelled by the euro’s trouble – continues. Some banking analysts fear that banking is making a partial return to the semi-pariah status it held in medieval Europe, when the Church taught that it was an inherently immoral practice. David Turner, journalist

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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. The standards reviewed were those in

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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 financial statements being so misleading that they no longer meet the objectives of the Framework. This is

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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 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 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.

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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 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 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

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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 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% of profit was transferred to a non-distributable 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

UK_T_HoltCPD.indd 64



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 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.

units on the web

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


17/01/2012 11:52

DATA PAGE Bank Base Rates

Date 7.8.97 6.11.97 4.6.98 8.10.98 5.11.98 10.12.98 7.1.99 4.2.99 8.4.99 10.6.99 8.9.99 4.11.99 13.1.00 10.2.00 8.2.01 5.4.01 10.5.01 2.8.01 18.9.01 4.10.01 8.11.01 6.2.03

Rate 7.00% 7.25% 7.50% 7.25% 6.75% 6.25% 6.00% 5.50% 5.25% 5.00% 5.25% 5.50% 5.75% 6.00% 5.75% 5.50% 5.25% 5.00% 4.75% 4.50% 4.00% 3.75%

Rate 7.00% 6.75% 6.50% 6.25% 5.75% 5.65% 5.50% 5.75% 6.00% 6.25% 6.50% 6.75% 6.50% 6.75%

Figures compiled on 13 January 2012

Retail Prices Index

Date 10.7.03 6.11.03 5.2.04 6.5.04 10.6.04 5.8.04 4.8.05 3.8.06 9.11.06 11.1.07 10.5.07 5.7.07 6.12.07 7.2.08 10.4.08 8.10.08 6.11.08 4.12.08 8.1.09 5.2.09 5.3.09

Rate 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 5.50% 5.25% 5.00% 4.50% 3.00% 2.00% 1.50% 1.00% 0.50%

Source: Barclays

Mortgage Rates Date 1.6.01 1.9.01 1.10.01 1.11.01 1.12.01 1.3.03 1.8.03 1.12.03 1.3.04 1.6.04 1.7.04 1.9.04 1.9.05 1.9.06

February 2012

Date 1.12.06 1.2.07 1.6.07 1.8.07 1.1.08 1.3.08 1.5.08 1.11.08 1.12.08 1.1.09 1.2.09 1.3.09 1.4.09 4.1.11

Rate 7.00% 7.25% 7.50% 7.75% 7.50% 7.25% 7.00% 6.50% 5.00% 4.75% 4.50% 4.00% 3.50% 3.99%

Existing Borrowers - Source: Halifax

January February March April May June July August September October November December

1996 150.2 150.9 151.5 152.6 152.9 153.0 152.4 153.1 153.8 153.8 153.9 154.4

1997 154.4 155.0 155.4 156.3 156.9 157.5 157.5 158.5 159.3 159.5 159.6 160.0

13th January 1987 = 100

1998 159.5 160.3 160.8 162.6 163.5 163.4 163.0 163.7 164.4 164.5 164.4 164.4

1999 163.4 163.7 164.1 165.2 165.6 165.6 165.1 165.5 166.2 166.5 166.7 167.3

2000 166.6 167.5 168.4 170.1 170.7 171.1 170.5 170.5 171.7 171.6 172.1 172.2

2001 171.1 172.0 172.2 173.1 174.2 174.4 173.3 174.0 174.6 174.3 173.6 173.4

2002 173.3 173.8 174.5 175.7 176.2 176.2 175.9 176.4 177.6 177.9 178.2 178.5

2003 178.4 179.3 179.9 181.2 181.5 181.3 181.3 181.6 182.5 182.6 182.7 183.5

2006 2.4% 2.4% 2.4% 2.6% 3.0% 3.3% 3.3% 3.4% 3.6% 3.7% 3.9% 4.4%

2007 4.2% 4.6% 4.8% 4.5% 4.3% 4.4% 3.8% 4.1% 3.9% 4.2% 4.3% 4.0%

2008 4.1% 4.1% 3.8% 4.2% 4.3% 4.6% 5.0% 4.8% 5.0% 4.2% 3.0% 0.9%

2009 0.1% 0.0% -0.4% -1.2% -1.1% -1.6% -1.4% -1.3% -1.4% -0.8% 0.3% 2.4%

2010 3.7% 3.7% 4.4% 5.3% 5.1% 5.0% 4.8% 4.7% 4.6% 4.5% 4.7% 4.8%

2011 5.1% 5.5% 5.3% 5.2% 5.2% 5.0% 5.0% 5.2% 5.6% 5.4% 5.2% Source: ONS

HM Revenue & Customs Rates “OFFICIAL RATE”*

Effective Date 6.3.99 6.1.02 6.4.07 1.3.09 6.4.10

Rate 6.25% 5.00% 6.25% 4.75% 4.00%

*Benefits in Kind: Loans to employees earning £8,500+ - official rate of interest. Official rate for loans in foreign currencies: Yen: 3.9% w.e.f. 6.6.94; Swiss F: 5.5% w.e.f. 6.7.94 (previously 5.7% w.e.f. 6.6.94).


Effective Date 27.1.09 24.3.09 29.9.09

Rate 1.00%/1.00% 0.00%/0.00% 3.00%/0.50%


Effective Date 6.12.08 6.1.09 27.1.09 24.3.09 29.9.09

Rate 5.50% 4.50% 3.50% 2.50% 3.00%


Effective Date 6.11.08 6.12.08 6.1.09 27.1.09 29.9.09

Rate 2.25% 1.50% 0.75% 0.00% 0.50%

w.e.f. 6.3.09 0.00% (0.00%) 0.00% (0.00%) 0.75% (0.00%) 0.75% (0.00%) 0.75% (0.00%) 0.75% (0.00%)

w.e.f. 6.2.09 0.00% (0.00%) 0.00% (0.00%) 1.00% (0.50%) 1.00% (0.50%) 1.00% (0.50%) 0.75% (0.25%)

w.e.f. 9.1.09 0.00% (0.00%) 0.00% (0.00%) 1.50% (0.75%) 1.25% (0.50%) 1.25% (0.50%) 1.25% (0.50%)

Encashment rates shown in brackets. Above rates are paid gross but are liable to tax.

Late Payment of Commercial Debts From 1.7.10 1.1.11

To 31.12.10 30.6.11

Rate 8.50% 8.50%

From 1.7.11 1.1.12

To 31.12.11 30.6.12

Rate 8.50% 8.50%

The Late Payment of Commercial Debts (Interest) Act 1998 For contracts from 1.11.98 to 6.8.02 the rate applying is the Bank of England Base Rate that was in place on the day the debt came overdue plus 8%. The Late Payment of Commercial Debts (Interest) Regulations 2002 For contracts from 7.8.02 the rate is set for a six month period by taking the Bank of England Base Rate on 30 June and 31 December and adding 8%.

LIBOR January February March April May June July August September October November December

2008 5.58% 5.74% 6.01% 5.84% 5.87% 5.95% 5.78% 5.75% 6.30% 5.84% 3.91% 2.77%

2009 2.17% 2.05% 1.65% 1.45% 1.28% 1.19% 0.89% 0.69% 0.54% 0.59% 0.61% 0.61%

2010 0.62% 0.64% 0.65% 0.68% 0.71% 0.73% 0.75% 0.73% 0.74% 0.74% 0.74% 0.76%

2011 0.77% 0.80% 0.82% 0.82% 0.83% 0.83% 0.83% 0.89% 0.95% 0.99% 1.04% 1.08%

3 MONTH INTERBANK - closing rate on last day of month

2006 193.4 194.2 195.0 196.5 197.7 198.5 198.5 199.2 200.1 200.4 201.1 202.7

2007 201.6 203.1 204.4 205.4 206.2 207.3 206.1 207.3 208.0 208.9 209.7 210.9


2007 6.3% 7.7% 4.6% 4.2% 4.6% 4.2% 4.5% 5.0% 5.5% 4.2% 5.1% 3.4%

January February March April May June July August September October November December

2008 209.8 211.4 212.1 214.0 215.1 216.8 216.5 217.2 218.4 217.7 216.0 212.9

Whole GB economy unadjusted *Provisional

2008 3.6% 4.6% 4.8% 4.8% 4.2% 3.4% 3.2% 3.2% 2.8% 3.6% 2.3% 2.5%

2009 210.1 211.4 211.3 211.5 212.8 213.4 213.4 214.4 215.3 216.0 216.6 218.0

2010 217.9 219.2 220.7 222.8 223.6 224.1 223.6 224.5 225.3 225.8 226.8 228.4

2011 229.0 231.3 232.5 234.4 235.2 235.2 234.7 236.1 237.9 238.0 238.5

Source: ONS

2009 -1.7% -5.7% -1.1% 1.7% 0.9% 1.1% 0.3% 0.3% 0.9% 0.7% 0.8% 0.7%

2010 0.6% 5.2% 6.6% 0.4% 1.1% 1.1% 1.8% 2.1% 2.3% 2.1% 2.1% 1.3%

2011 3.5% 1.0% 2.1% 2.5% 2.4% 3.3% 2.8% 3.0% 2.1% 1.8% 2.1%*

2009 517.2 515.3 508.3 508.6 520.7 514.0 520.1 524.1 533.5 535.4 536.0 541.3

2010 535.7 537.2 543.1 552.7 547.6 538.5 544.8 546.6 529.6 534.9 528.4 522.7

2011 522.6 523.3 524.8 525.3 525.4 529.6 533.1 524.6 525.5 531.8 520.4 510.7

Figures include bonuses and arrears Source: ONS

House Price Index 2007 595.7 612.3 625.2 641.5 644.9 645.5 649.2 650.8 647.8 640.2 628.7 632.2

January February March April May June July August September October November December

2008 619.1 626.1 616.9 618.0 603.5 588.3 577.5 567.7 561.0 544.2 527.1 512.8

All Houses (January 1983 = 100)

Exchange Rates

Certificates of Tax Deposit up to £100K £100K+ 0-1 mth £100K+ 1-3 mth £100K+ 3-6 mth £100K+ 6-9 mth £100K+ 9-12 mth

2005 188.9 189.6 190.5 191.6 192.0 192.2 192.2 192.6 193.1 193.3 193.6 194.1

% Change Average Weekly Earnings

% Annual Inflation January February March April May June July August September October November December

2004 183.1 183.8 184.6 185.7 186.5 186.8 186.8 187.4 188.1 188.6 189.0 189.9

2005 2006 2007 2008 2009 2010 2011

YEN 202 205 233 198 142 142 133

MARCH US$ SFr 1.89 2.25 1.74 2.27 1.97 2.39 1.99 1.97 1.43 1.63 1.52 1.60 1.60 1.47

Source: Halifax on last working day

€ 1.45 1.43 1.47 1.25 1.08 1.12 1.13

2005 2006 2007 2008 2009 2010 2011

DECEMBER YEN US$ SFr 203 1.72 2.27 233 1.96 2.39 222 1.99 2.25 130 1.44 1.53 150 1.61 1.67 127 1.57 1.46 120 1.55 1.45

€ 1.46 1.48 1.36 1.04 1.13 1.17 1.20

Income Support Mortgage Rate Effective Date Rate

Effective Date Rate

Effective Date Rate

17.12.06 18.2.07 17.6.07

12.8.07 13.1.08 16.3.08

18.5.08 16.11.08 1.10.10

6.58% 6.83% 7.08%

7.33% 7.08% 6.83%

6.58% 6.08% 3.63%

From 1.10.10 the standard interest rate will be the BoE published monthly avge mortgage interest rate. Can claim mortgage interest on, up to £200,000 of the motgage. Waiting period 13 weeks.


Judgment Debts: High Court (& w.e.f. 1.7.91 County Courts) 8% w.e.f. Decrees: Court of Session & Sheriff Courts 8% w.e.f. 1.4.93 (previously 15% w.e.f. 16.8.85). 1.4.93 (previously 15% w.e.f. 16.4.85). Funds in Court: Special Rate (persons under disability) 0.5% w.e.f. NORTHERN IRISH COURTS 1.7.09 (previously 1.5% w.e.f. 1.6.09). Basic Rate (payment into court) Judgment Debts: High Court: 8% w.e.f. 19.4.93 (previously 15% w.e.f. 0.3% w.e.f. 1.7.09 (previously 1% w.e.f. 1.6.09). 2.9.85). County Court 8% w.e.f. 19.4.93 (previously 15% w.e.f. 19.5.85). Interest in Personal Injury cases: Future Earnings - none. Pain & Interest on amounts awarded in Magistrate Courts 7% w.e.f. 3.9.84. Suffering - 2%. Special Damages: same as “Special Rate” - see Funds in Court above (½ Special Rate payable from date of accident to date ADMINISTRATION OF ESTATES of judgment). England & Wales: Interest on General Legacies: 0.3% w.e.f. 1.7.09 Interest Rate on Confiscation Orders in Crown & Magistrates Courts: (previously 1% 1.6.09). Interest on Statutory Legacies: 6% w.e.f. 1.10.83 (previously 7% w.e.f. 15.9.77). same rate as applies to High Court Judgment Debts.

All rates and terms are subject to change without notice and should be checked before finalising any arrangement. No liability can be accepted for any direct or consequential loss arising from the use of, or reliance upon, this information. Readers who are not financial professionals should seek expert advice.

Data specially compiled for


the adviser’s portal

The UK’s largest provider of savings and mortgage data

Tel: 01603 476 476

Datapage.indd 1

12/01/2012 14:51


Technical update

A monthly round-up of the latest developments in financial reporting, audit, tax and law 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 after 1 January 2014 and

UK_T_update.indd 66

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 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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THE FUTURE OF UK GAAP In the light of the proposed changes to UK generally accepted accounting principles (GAAP, the UK Accounting Standards Board (ASB) has been further considering the future role of the Financial Reporting Standard for Smaller Entities (FRSSE). The ASB has decided tentatively that the FRSSE will be retained, in revised form, following the amendments to the accounting directives currently proposed by the European Commission. Furthermore, the ASB also tentatively agreed that further consultation on the FRSSE would be carried out in 2012. INCOME TAX The ASB and the European Financial Reporting Advisory Group (EFRAG) have published a paper in order to solicit views on how the financial reporting of income tax can be improved. The paper discusses ways in which the usefulness of information prepared in accordance with IAS 12, Income Taxes, can be enhanced. In particular, the paper discusses possible changes to the reconciliation of the tax expense to a

standard rate; revisions to the requirements in respect of uncertain tax positions; and whether deferred tax should be discounted. The paper also discusses alternative approaches that could form the basis for a new accounting standard that would replace IAS 12. The paper is open for comment until 29 June 2012.

AUDITING REVISED ETHICAL STANDARDS The Auditing Practices Board (APB) has made the following two amendments to the Ethical Standards for Auditors: Extending until 31 December 2014 the transitional arrangement for tax services provided on a contingent fee basis where contracts were entered into prior to 31 December 2010. Amending Appendix 1 to ES 1 to provide a simplified illustrative template for communicating information on audit and non-audit services.



Yvonne Lang, director, and Kern Roberts, associate director, Smith & Williamson, www.

TAX ASSOCIATED COMPANIES The rules relating to associated companies were rewritten and apply to accounting periods ending after 31 March 2011.

18/01/2012 11:51


Associated companies are defined in S25(4) of the Corporate Tax Act 2010. ‘A company is an associated company of another at any time when one of the two has control of the other or both are under the control of the same person or persons.’ The new test is therefore a two-part test: 1) Would the companies be associated under the old associated company rules? If no, the companies are not associated under the new rules; If yes, the companies may be associated under the new rules (subject to 2 below). 2) Is there ‘substantial commercial interdependence’ between the companies? If no, the companies are not associated; If yes, the companies are associated. Examples of commercial interdependence include: Loans between companies and/or crossguarantees. Similar trading activities. Shared workforce. Doing essential work for each other. Sharing contracts/clients. Forming joint ventures. Using each other’s plant/ equipment. Inter-company purchases. It’s important to note the disregards that apply. For example, a holding company will be disregarded as an associated company where it doesn’t trade, has one or more 51% subsidiaries and is a passive company.

* * * * * * * *

UK_T_update.indd 67

A passive company: Has no assets other than shares in 51% subsidiaries. Has no income other than dividends. Distributes dividends in full. Has no chargeable gains. Has no management expenses of any consequence. Makes no qualifying charitable donations which are deducted from profits. For more, go to www2. associated_companies

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INTRASTAT REVISED DUE DATE As highlighted last month, the due date for submission of intrastat declarations is now planned to apply from 1 April. HMRC states: ‘This measure will take effect on 1 April 2012. Intrastat declarations for the period 1 to 31 March will be due on 21 April; all subsequent declarations will be due on the 21st of the month.’ It will impact on businesses that are required to submit declarations of their trade with other EU member states using an intrastat declaration ie, those with intra-EU trade in excess of £600,000 per annum for arrivals (EU imports) and/or £250,000 per annum for dispatches (EU exports). HMRC has now updated Notice 60 Intrastat General Guidance to reflect the change. The notice is effective now and as well as being easier to read, it

withdraws the option to submit paper forms, brings forward the due date of submission of forms to the 21st day of the month, clarifies that Nature of Transaction Codes 40 and 50 can only be used where no change in ownership takes place, and announces that the threshold for using the low value consignment simplification procedure has been increased from £130 to £180. The notice also contains web-based and telephone contact details regarding the two ways to submit data electronically: Via the internet (Intrastat Online Services). Using Electronic Data Interchange (EDI). For more, go to www2. _intrastat

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SMALL PENSION POTS Draft guidance has been made available explaining how a change in legislation allows individuals aged 60 or over with small personal pension pots of £2,000 or less to have two such pots paid as a lump sum in a lifetime. The 2012 regulation change inserts a new regulation 11A into the Registered Pension Schemes (Authorised Payments) Regulations 2009. The conditions that need to be met, for a small lump sum to be commuted under regulation 11A are that: The payment is made on or after 6 April 2012. The payment is made to a member who has reached the age of 60. The ‘small lump sum’ does not exceed £2,000.

* * *

18/01/2012 11:51


Technical update

payment extinguishes * The the member’s entitlement to benefits under the arrangement. The member has not previously received more than one payment under Regulation 11A. Further guidance can be found at pensionschemes/small-potsguidance.pdf


PENSION TRANSFERS Draft guidance has been made available that is intended to apply from 6 April, regarding the transfers of pension savings to qualifying recognised overseas pension schemes. The guidance summarises that the changes are to firm up the tests to be an overseas pension scheme, to make the rules work as originally intended, and to introduce new information and reporting requirements. For more, go to www.hmrc. draft-guidance-qrops.pdf PAYE/NIC SECURITY DEPOSITS From 5 April, HMRC will be able to ask employers to pay a security deposit where there is serious risk that they won’t pay over their PAYE or Class 1 national insurance contributions. HMRC has said that it will use this power ‘to target those employers who have a record of using bankruptcy and phoenixism as a way of stepping away from their creditors, leaving debts unpaid with HMRC and legitimate suppliers’. It is similar to the regime that exists for VAT,

UK_T_update.indd 68

insurance premium tax and environmental taxes. In the same statement, HMRC said that it ‘will not use these powers where a business is having genuine financial difficulties’.

will need to provide full disclosure, with payment, by 31 March 2012. You can find details of this and earlier campaigns at tax_hmrc_guidance

CAMPAIGNS Two new campaigns will run through the spring, while another reaches the end of its notification period. The February campaign focuses on electricians. It is the second trades campaign and unsurprisingly is called the Electrician’s Tax Safe Plan (ETSP). Its main target group is electricians and electrical fitters and, as with all campaigns, its aim is to improve tax compliance and provide an opportunity for an individual to voluntailry disclose any taxes that are due. As with the Plumber’s Tax Safe Plan, HMRC is likely to use information pulled together from different sources, to target and investigate those who have chosen not to come forward. You can find details at tax_hmrc_guidance The second campaign focuses on those who are using e-marketplaces to buy and sell goods as a trade or business and fail to pay the tax owed. When considering if an individual is operating a business, you may wish to consider the badges of trade information available at tax_badgesoftrade Finally, the closing campaign is aimed at tutors and coaches. They

EXPORTER: TARIFF PREFERENCE REGISTRATION HMRC has updated Notice 830 Tariff Preference: New GSP Rules of Origin to reflect changes to the rules including the new Registered Exporter System which will apply from 1 January 2017. HMRC also highlights that the procedure to become a registered exporter will not commence until 2016. For more, go to www2. registered_exporter CARE ACCOMMODATION HMRC Brief 47/11, regarding VAT liability on the construction and first sale or lease of a dwelling linked to a separate provision of care, seeks to clearly state HMRC’s view that ‘regardless of the use class, that extra care accommodation is “designed as a dwelling”, and therefore its construction and first sale or long lease will be zero rated, if it meets all of the standard conditions, which are as follows: The dwelling consists of self-contained living accommodation. There is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling. The separate use of the dwelling is not prohibited

* * *



by the terms of any covenant, statutory planning consent or similar provision. The separate disposal of the dwelling is not prohibited by the terms of any covenant, statutory planning consent or similar provision. Statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent’.

VAT RATES The VAT rate in Ireland increased to 23% from 1 January. You can find details of VAT rates across the European Union at NOTICE 700/50 DEFAULT SURCHARGE If you managed to look at Notice 700/50 issued in November 2011, you may wish to review the replacement Notice 700/50 issued in mid-December. The notice explains how to avoid a surcharge, how default surcharge works, when default surcharge is applied, and what to do if you think you have a reasonable excuse for submitting your VAT return or payment late. NOTICE 701/10 ZERO-RATING OF BOOKS Notice 701/10 is effective now and replaces the earlier notice from October 2010. It seeks to provide guidance on how HMRC interprets the

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Value Added Tax Act 1994, section 30 and schedule 8, group 3, which sets out where zero-rating may apply by explaining the nature and the circumstances when you can zero-rate books and other forms of printed matter. Schedule 8, group 3 lists the type of books and printed material where zerorating may apply: Group 3 – Books, etc. Item No. 1) Books, booklets, brochures, pamphlets and leaflets. 2) Newspapers, journals and periodicals. 3) Children’s picture books and painting books. 4) Music (printed, duplicated or manuscript). 5) Maps, charts and topographical plans. 6) Covers, cases and other articles supplied with items 1 to 5 and not separately accounted for. The guidance explains each of the areas, considers supplies to charities and looks at mixed supplies and multiple supplies, including where the supply includes services. It also lists liability of items which are commonly the subject of queries received by HMRC about the zero-rating for books and other printed material. For example, maps and memoranda of association (completed in booklet form) are zero-rated, while medical records, membership cards and memo pads are standard-rated. Links to the recent notices are available at www2.

UK_T_update.indd 69 indirect_tax VAT ONLINE From 1 April 2012, all remaining VAT-registered businesses – those registered for VAT before 1 April 2010 with a VATexclusive turnover of less than £100,000 – will also have to submit VAT returns online and pay any VAT due electronically. HMRC has announced that it will be writing to businesses in the run-up to the change, informing them that they will need to file returns online. CONSULTATIONS It you would like to consider how the administration of the personal tax system could be improved to achieve better understanding and make it easier for customers to deal with, you have until 24 February to read the consultation document, Modernising the administration of the personal tax system: Tax Transparency for Individuals, and reply to the following questions that it poses: Do you want to know more about the tax you


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pay, and what do you want to know? Where do you currently look for information on how much tax you have paid? If you had better access to tax information do you think that you would have more confidence in: a) HMRC b) the accuracy of your own tax? Do you know what to do now if you are unsure your tax is right? Do you know what your responsibilities are regarding tax? Do you want to know why tax is paid and more information on how it is spent? If you could access online accounts as described in the Irish example, how do you think this would improve your awareness and understanding of tax? How often do you envisage you would use an online account? If you complete a selfassessment return, do you think you would benefit from information being pre-filled?

do you consider the * What benefits and risks of pre-

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filling to be? What do you think the most important areas are to pre-fill that would reduce the potential for mistakes and save time? Would you like to have an annual tax statement that sets out your income and tax liability for the year? Would you want to view your annual tax statement if it included your overall personal tax contribution, your average tax rate and other general tax information? What else could an annual tax statement show that would be of use and/or of interest to you? What educational material would you like to see to help taxpayers understand and comply with their tax responsibilities? What areas of the personal tax system cause you most confusion or difficulty? Do you have any other ideas for how the government can achieve

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Technical update

greater engagement of UK citizens in tax? How do you think HMRC can engage individual taxpayers to say how the personal tax system should be modernised? You can find the consultation at www2. transparency


LAW INTELLECTUAL PROPERTY The government’s recent Innovation and Research Strategy for Growth paper highlights the continued importance of research and development (R&D) to the UK economy. It stresses the commitment to R&D support announced in the autumn statement and states: ‘We will improve incentives for companies to innovate – especially small and medium-sized busineses (SMEs). Beyond our successful changes to the SME R&D Tax Credit, we will invest an additional £75m to support small business innovation, including additional funding for SMART, grants that support SME research and development. ‘We will implement a new innovation voucher programme, enabling SMEs to engage with universities and wider external knowledge base providers, and will invest more in the Small Business Research Initiative, helping more SMEs to win government contracts for their innovative products and services.

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‘Additionally, we will increase our funding to support design driven innovation. We will also encourage large company research and development by making the R&D Tax Credit “above the line” from April 2013.’ Details of the SMART grants process can be found at The next grant assessment date is 1 March with applicants being informed one month after the batch assessment date with respect to the funding decision. This announcement follows on from earlier R&D tax credit announcements and changes lowering the cost of protection against small claims. The Patents County Court (Financial Limits) Order (No.2) 2011, which came into force in October, says that trademark and copyright claims under £500,000 must be heard in the Patents County Court. Read the full report at law_intellectual_property EMPLOYMENT Employment tribunal increased limits become effective from 1 February. The weekly pay limit increases from £400 to £430 and the maximum compensatory award for unfair dismissal increases to £72,300. Employment law factsheets can be found at publications_resources Glenn Collins, head of technical advisory, ACCA UK


All employers will have to consider the seven steps issued by The Pensions Regulator in order to prepare for automatic enrolment. Know your staging date – when to act. Assess your workforce. Review your pension arrangements. Communicate the changes to all your workers. Automatically enrol your ‘eligible jobholders’. Register with The Pensions Regulator and keep records. Contribute to your workers’ pensions. When to act? Employers will need to have considered how they can comply with the registration process, including how changes to existing pension scheme rules apply by the following staging dates: Businesses with more than 3,000 staff: on or before 1 July 2013. Businesses with between 50 and 2,999 staff: between August 2013 and March 2015. Forty-nine or fewer staff: from May 2015. By the above dates, employers will have had to amend existing pension scheme rules or established a new company scheme and will have registered their scheme online with The Pensions Regulator. Employers will need to ensure that their pension scheme offering complies with a number of conditions, including that a new starter is eligible to join an employer pension scheme from their first day of employment. Employers will also need to contribute to the scheme with the minimum contribution being 3% of earnings and the employee contributing the remainder with the minimum total combined contribution being 8%. However, this is phased in over the staging dates starting at 1% from the employer and a total combined minimum contribution of 2% to 30 September 2016, rising to 2% employer and a 5% total combined minimum contribution between 1 October 2016 to 30 September 2017 and then reaching the final minimum total combined contribution of 8% from 1 October 2017. The Pensions Regulator has provided two useful flowcharts that highlight the steps that are required to determine if schemes are eligible and if they can be used to fulfil employers’ automatic enrolment obligations. Appendix B highlights the steps to take to determine if your defined benefit pension scheme is a qualifying scheme, while Appendix C similarly looks at defined contribution pension schemes. You can find articles provided by The Pensions Regulator, an ACCA guide for you to take and use and links to further guidance at If you are currently preparing business and project plans you may wish to make sure your plans and cashflows reflect the changes.

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18/01/2012 11:52



How to make home-working work [

There is still time for this winter to take a turn for the worse, making it impossible for some staff to get into work. But if the right strategies are in place, employees can work just as efficiently from home as the office

Over the past few winters, adverse weather conditions – particularly heavy snowfalls – have forced many people to stay off work, for days if not weeks, and the financial cost to businesses has been as unwelcome as it has been unexpected. Yet some staff who were unable to commute to work were able to work from home. Indeed, working from home and mobile-working schemes supposedly make working arrangements more flexible than ever before. So can it be done in your business? First of all, working from home is not yet a mainstream way of working: it’s undoubtedly on the rise, but it isn’t yet something businesses and their staff are used to. You may have heard colleagues say they couldn’t work from home or wonder how exactly you would get things done outside the office. For those used to the familiarity and routine of commuting to work, being forced to work from home because of terrible weather could be trying. Employers, too, may worry about how much their employees are actually able to get done away from the workplace. Fortunately, there are ways employees and employers can make working from home work for them.

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Be prepared Working from home needs careful forethought: both employer and employee need to prepare for it, so that if staff can’t get to the workplace, the systems are already in place that allow them still to work. Clearly, the technical systems are crucial here. Elizabeth Elsworth, a senior manager in the financial sector tax department at KPMG, has been working from home one day a week for the past seven years and she says technology is key. ‘People can do so many things electronically – having meetings by conference call or email, for example – that it really doesn’t matter where you are,’ she says. ‘I have a BlackBerry, I set up my laptop at home so I can link into the network from home, and the office phone diverts to my mobile. It’s just as if I’m in the office. Call diversion is good for those clients who are very traditional; regardless of the reality or that you might be getting a lot more done at home, you have to present yourself professionally and it is helpful for them to perceive that you’re in the office when they phone you.’

Judy Heminsley, author of Working From Home and ambassador for the Jelly co-working space for mobile and home workers, agrees the technical aspect is important: ‘Employers need to set up the technology required for employees to work from home, make sure they have the correct furniture, and understand what working from home is all about and support their employees in doing so.’ But she argues that psychological preparation is needed as well. ‘If you’re used to getting up and going into work (and coming back home) at a certain time, it’ll be a shock to the system when you don’t have to do that any more,’ she says. ‘Discipline is key: office environments are often easier as you have to be physically present, but with working from home, you need to understand and work with your own personality to make it work. Understanding yourself and your own needs can make home-working enjoyable: you build a system that works around you instead of having a structure imposed on you.’ ‘The key is to be organised,’ Elsworth advises. ‘Think about what you’re going to do in that day you are working from home, and prepare for it. If you can, make sure it’s not the day before

17/01/2012 15:46



something very urgent, or you’re working from home on something that needs lots of files from the office.’ She adds that it’s important to think about where you’re going to work: ‘For example, in my home I can work from either my study or my dining room; I work in the study if I’m working on something where I must not be distracted and I don’t have to spread my work out over a large area. If I’ve left something in the office, someone on my team in the office is there to scan and email it to me. ‘You need to be focused. You might be at home but it is a working day and must be treated as such.’

The trust thing Despite the odd study quoted in the press concluding homeworkers are more productive than office workers, the trust issue is still a huge factor in whether an employer is happy for employees to work from home. While Heminsley believes working from home on a

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continual basis ‘isn’t something everyone’s suited to’, she says preparation on both managers’ and employees’ part will help if a heavy snowfall (or other emergency) occurs and employees suddenly have to work from home for a period. ‘You need to work out with your colleagues how it will work, and managers need to be confident that whoever is working from home is actually working,’ she adds. Elsworth initially had to put forward a convincing business case to her seniors to explain how she would manage any problems. She also observes that negative perceptions of home-workers remain, with many suspecting that if an employee is not visibly present in the office, then they are not actually working. She says that the best way to counter such perceptions is to demonstrate it’s not true. ‘Reply more promptly than usual, and make sure colleagues can still get hold of you, by email or phone,’ she says. ‘Timesheets are often a good motivator here – only so much time can be put down to admin and business development. If anyone says you can’t do something because you’re working from home,

show them that you can do it.’ Isolation can be another problem, and (weather permitting) getting out and being with people, whether at a business meeting or a co-working space, may be of great value. Changing a working location can help: WorkSnug is a mobile phone app that helps find alternative working spaces with free WiFi – such as coffee shops or libraries – near a particular location. If home-workers are not able to switch off easily, there may be some resentment that work has invaded their home. A routine can help here, says Heminsley: ‘Have a signal to yourself that your working day is over, like a glass of wine, or walking the dog, or talking to the children. ‘But ultimately there are no rights and wrongs. You can read various rules for working from home – for example, having one special room or desk to work from – but often they’re just tips that work for that person. The best thing you can do is try them, find out which works for you, and don’t take it personally or feel like a failure when a particular tip doesn’t work for you.’ Santhie Goundar, journalist

17/01/2012 15:47


CONGRATULATIONS TO NEW MEMBERS In the first of a new, regular feature we welcome the arrival of the latest intake of new members into the ACCA family chieving full membership of ACCA is a landmark in members’ careers and, in a new quarterly feature, we salute those members who qualified as Chartered Certified Accountants between 1 October and 31 December 2011, listed on the following pages.


jobs portal – ACCA Careers * –a todedicated help you advance your career services such as face-to-face * local professional networking, CPD courses

Benefits of membership

New member events

The designatory letters ACCA can be the passport to a successful career in accountancy around the world. ACCA’s extensive resources help new and existing members in their careers via services, including: portability between business sectors access to a global network of employers and opportunities

We appreciate that many of our new members like to celebrate their newfound status and 2011 saw ‘new member ceremonies’ held in London, Edinburgh and Cardiff. These events bring together new members, their immediate families, senior ACCA members and staff. Some quotes from celebrating members are shown on the list of names that follows.

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and online e-learning monthly members’ magazine – Accounting and Business – and sector-focused ezines.


Our online portal – ACCA Careers – provides new members with their passport to furthering their career. It allows employers from around the world who are looking to recruit topquality talent to advertise vacancies, while members and students can browse, search and apply for jobs.

*A MEMORABLE NIGHT! The London new members’ ceremony proved to be a lifechanging event for two members, when David Osinowo proposed to Abiola Taiwo after the dinner. We are delighted to report that Abiola said ‘yes’ and offer our congratulations to both on their engagement!

17/01/2012 17:23

74 Abad Ur Rehman Joanne Abbott Nicholas Abbott Joe Abraham Michaela Adamcova Helen Adamson Adesola Abidemi Ademuyiwa Kemi Adeoye Kathryn Jane Adkins Regina A Adomako Kyren Aftab Ahmed F S Almuzaini Karan Ahuja Rizwan Ali Akhtar Rachel Victoria Alcock Zeshaan Ali Asad Ali Ene Patience Ameh Nicola Anderson Konstantinos Antonopoulos Asim Khan Jadoon Daniel Askew Anthony Attree Darren Avey Irene Obarichuremi Awala Nilar Aye Andrew Bacchus Naomi Davinia J Bacon Bai Xue Rachel Yvonne Bailey Vijay Bains Hamza Saeed Bajwa Suzanne Marie Baker John Balai Carly Ball Brian Banda Olusegun Bankole Amy Bannister Kevin David Bannister Dianne Elizabeth Barbieri Sarah Anne Barker Guy Barnett Nathan Paul Barrow Caroline Rachel Barthorpe Robert Bateman Neil David Beardsmore Louise Clare Beckingham Khaleda Begum Mark Richard Bell Petra Bendova Samantha Berridge Salim Bhaiji Gunpreet Bhatla

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Bilal Younis Chudher Ewa Biolik Michaela Birkett Paul Stewart Blackboro Christopher Blake Julie Amandine Cecile Blanco Roman Bogdanovskiy Kathryn Gail Bolor Lewis Booth Stacey Bosher Mark Bostock Katy Louise Bothick Lucy Bovill

Vishal Chouhan Pui-Ying Chow Lilian Suet Ling Chung Lucy Clarke Sye-Ling Clarke Arlene Clarke Jason Coker Georgina Cole Elizabeth Collins Lawrence Collins Kate Mary Cooke Matthew Cooper Michael J V Copas Helen Marie Copeland

‘ACCA IS MY PASSPORT TO MY FUTURE CAREER’ Amelia Brewer Edward Brookes Emily Broomhall Andrew John Brown Kevin Charles Browne Jessica Bryant Victoria Bryen George Gordon Buchanan Adeyemi Temitayo Buko Sundeep Burdish Alan Burgham-Wilson Rebecca Burgoyne Charles John Butcher Edward Button Alan Cai Shuyao Rachel J S Callender Theresa Campbell Alan Keyes Campbell Arben Canolli Pete David Carnell Samantha Carr Thomas George Carroll Benjamin John Case Natalie Casemore Pamela Cave Teodor Cernobai Deepwant Chahal James Chamberlain Irene Shunyee Chan Dean Charles Vijay Chavda Yi Chen Tsitsi Chengeta Chetna Chikhlia Chul Hyun Cho Randeep Chohan Ju Eun Choi Dimpy Chotai

Tulin Cottle Natalie Cottle Ian Coupe Elizabeth Greer Craig Heather Croft Nicholas John Cross Angela Belinda Cruickshank Luke Cuddy Sinead Patricia Cullen Robert Dack Oluwakemi Olabisi Dada Chunxia Dai Rachena Datta Nicola Davies Steven Trevor Davies James Davies Emerald Davies Gerald John Davies Cheryl Davis Andreas Demetriou Fiona Mary Denney James Derham Lorraine Marylin Deville Amandeep Dhadwal Davide Di Lorenzo Bianca Diedericks Ejimofor Maduka O Dike D M Ashoka D S B Dissanayake Benjamin Thomas Dixon Dipesh Dodia Katie Louise Douglas Francina Dowman Rachel Vanessa Dring Matthew Dry Lindi Du Toit Lucky Dube Kevin Duddy

Harsha Sita Dulabh Lynsey Dyer Louis Ebanks Thomas Edwards Stephen Edwards Andrew Edwards Thomas Eede David Elms Oluwaseun Faloye Oluwatosin Farinre Bhavesh Fatania Julie Elizabeth Fenton Vincent Anthony Flynn Sally Folkard Simon Fong Chin Lung Joana Fonseca Michelle Elizabeth Foreman Seonaid Sophie Forsyth Georgina Anne Fox Jessica Franklin Joanne Frances Frew Chris Froggatt Trevor John Fry Viktoriya Galisheva Ross Michael Gallagher Yao Ge Robert George Ricky Gharu Inderjeet Ghataora Helen Jayne Gilbert Catherine Maree Gilbride George Gilfillan Laura Jane Gillett Lucy Goodwin Graham Gordon Victoria Gould Rebecca Green David Paul Green Jason Paul Green Dee Green Thomas James Griffiths Michelle Grundy Guan Xiong Svetlana Gubareva Agampodi J Gunasekara Helena Marie Gunn David Hackett Rachel Hagues Belaynesh Hailemariam James Hall Saira Hamid Lisa Olivia Hamilton Philip Hammond Edwina Hanslo Adwoa Pomaah Hanson Nadeem Haque Nicola Hardie

17/01/2012 17:24



Kevin Chidwick FCCA of Admiral Group and addresses new members in Cardiff; celebrations in Edinburgh Nicola Jane Harley Abigail Rebecca Harnwell Colette Ann Harris Gareth Harris Nicholas Harrison Sarah Harwood-Smith Claire Hawkin Aaron Hay Damien Hayes Zoe Haynes Gemma Healy Roy Henry Michael Herd Natasha Higgs Jocelyn Rupert Hill Sian Hinde Rebecca Hing Kimberley Hinks Erin Hirata Stephen Hitchen Minyuen Ho Anh Diep Hoang Joanne Hobday Daniel Hobden Simon Hodge Ian Hodgkinson Hayley Hogben Doris Marla Hollick Nicola Holmes Andrew John Holt Caroline Ann Hunt Taiba Hussain Tamoor Hussain Nadia Azhar Hussain Barbara Hyland Nneka Ebelechukwu Ijere Syed Saqib Iqbal Voke Irabor Nicola Ann Irons Svetlana Jackson

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Jonathan William Jackson Nicholas Jackson Joanne Jackson Raakhee Rani Jagwani Salina Jamal Douglas Andrew James Huw Christopher Jenkins Louise Jenkins Sarah Elaine Jenkins Terrie Lousie Jennings Yuting Jiang Luke Adam Jobling Ian Robert Johnson Huw Jonathan Natalie Jones

Yousuf Khan Dipti Khatri Seyonne Kidnapillai Semiu Olatoye Kilaso Emily Kilshaw Darryl Kiy Tracy Koomson Todor Dimitrov Kostov Jason Koumides Prashant Krishnankutty Ezhuthachan Anar Kubekpayeva Manoj Kumar Langnyo Kwon Alfonse Kyeyune Ireoluwa A Laguda

‘BECOMING A MEMBER FEELS LIKE A LIFETIME ACHIEVEMENT’ Peter Jones Evilina Jones Martyn Jones Christopher Jordan Jillian Louise Jurgens Harjinder Kalair Raymond Daniel Kamanga Talis Karklins Iain Peter Kawenja Katimbo-Mugwanya Sukhjinder Kaur Ian Anthony Kelly Richard Mark Kelly Armand Tsafack Donso Kenfack Andrew Kettleton Rukhsana Khan Hadia Shabnam Khan

Virginie Lalande Alexis Karen Lamont Lucy Langdon Tyler Lappage Elizabeth Lavery Stephen Lee Rebecca Lewins Rebecca Lewis Yu Fai Li Jie Mei Li Li Dongmei Lian Wei Lau Daniel Lin Yu-Feng Janice Marie Lindo Hu Ling Veronica Linnane Roger Wayne Linton Danielle Linton Patrick Littlewood

Christopher Liu Yau Hang Darren Lloyd Irina Lopatina Simon Lovick Robert Loweth Jonathan Robert Lucas Yemisi Luwoye Emma Frances MacArthur Carly Macdonald Robert Macdonald Svetlana Maddison Joss Lisa Kathleen Magee Arshad Mahmood Mohammed Asim Mahmood Usman Mahmood Sumera Mairaj Ahmed Arun Makani Gautam Malavia Yakoot Malik Ahmer Mohamed Malik Ciaran Mallon Aman Mann Christine Marchant Aleksandra Marienko Sarah Louise Markham Chantelle F. Marshall Andrew Martin Janet Martin Ana Martin Lopez Sam Mason Alison Massingale Colin Christopher Masterman James May Paula Mcadam Jonathan Mccluskey David McConnell

17/01/2012 17:24

76 Susan Mccornick Melanie McCroarey Jennifer McGee Mark Mckechnie Ruth McLaren Stuart McMahon Nichola McMillan Emma Meades Mutlu Mehmet Viren Mehta Xuan Meng Eugene Michael W Merrett Karolina Mikolajczyk Christopher Miles Miras Eskander Linda J Mitchell Jack Selbie Mitchell Mohammad Shoaib Hahtem Mohammed Mohammed Israr Amjad Mohammed Morad Errhioui Puteri Norlizawati Mohd Ismail Karen Moodie Simon Russell Moody Steven Moorcroft Laurence Moore Christopher Dale Morgan Inga Morkunaite Laura Morrish Timothy Mottahed Natalie Moyes Jade Batsirayi Muchando Muhammad Ahmed Malik Muntazir Zulfikar Bhimji Anna Murkin Stephanie Murray Lukasz Musialowicz Lorraine Sabina Musiyiwa Abebayehu Mussie Peter Andrew Musson Abdul Muttakin Mustafa Helene Na Nabeel Shamshad Qureshi Zohaib Nadeem Nadir Ahmed John Nanson Chris Nanson Anna Navarro Lloyd Nelson Marie Therese Ngo Tetga Kona Amy Nicholson

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Ekua Nkyekyer Angela Nolan Ben Norris Liam Patrick O’Brien Luke O’Connell Elizabeth Ann O’Shea Adewunmi Omoniyi Odesola Oge Ofuasia Yetunde Ogunfemi Omowonuola Ogunlela Chidi Okpara Omoruyi Ebimiowei Okuonghae Solace Okyne Olayiwola Oladire Ayomide O Olowe Johnson Olukayode Oludairo Opeyemi Opeodu Ian Orgill Oluwakemi Bosede Otun Rachid Ouaddane Louise Outram Gareth John Owen Damian Owen Gavin Page Sohel Yunus Panchbhaya Shruti Pande Chirag Pandya Martin Robin Parker Syed Taufiq Pasha Reena Patel Khanjana Patel Tejal Patel Keneal Patel Smita Patel Yogesh Patel Sandeep Patel Sahera Banu Patel Rimal Patel Kerri Pattinson Mark Snowdon Payn Kelly Peng Jun Amanda Jane Penny Matthew Colin Penny Scott Perkins Stephen Perry Adrian Perry Sarah Jamie Perryman Claire Louise Pettitt Hannah Pettitt Indre Phillips Agathe Piederriere Andrew David Pierce Samantha Pittman Lucy Pitts Phillip Justin Polden

Gary John Pollard Elanko Ponniah Darren Postlethwaite Amy Louise Potter Sangeetha Prabhu Masimba Prew Gareth David Price David Price Emma-Jayne Priddy Abdul Quddus Liam Quinlan Ronan Kevin A Quinn

Steven Scholtz Douglas Schoonraad Wesley Scorey Susan Elizabeth Scott David Sedgwick Iain Seedhouse David Segal Pamela Sell Gary Selway Samera Kausar Shah Amit Shah Deval Shah

‘BEING AN ACCA HAS ENABLED ME TO FIND THE JOB I DESIRE’ Rakiba Rahman Md.Mizanur Rahman Dejan Rangjelovikj Antonio M Rasco Fernandez Saiema Rashid Paul Rayner Nichola Rayner Christopher Paul Reed Linda Valerie Reed Samuel Peter Reed Amie Reilly Yevgeniya Remyga Alexander Revitt Mark Dean Rich Amy Richardson Allan David Riggall Nazir Ahmad Rizwan Ahmad Catherine Robinson Pat Robinson Cameron James Elliot Robson Christopher Michael Rodgers Scott Rogers Andrew Rowe Lynn Sabine Ishmail Abubakarr Saccoh Michael Steven Sampson Dwarkesh H Sanghadia S Satheeskumar Sivashakthie Sathiyaseelan Fayaz Sattar Christopher Saxton James Christopher Sayle Tanja Schneeberger Trudie Alison Scholes

Shahram Shahir Lauren Shan-Chi Pang Timothy Shanthakumar Scott Shaw Mark Daniel Shaw Claire Louise Shayshutt Steven Shead Jasmine Sheeley Sergiy Shepetko Ryan Sheppard Rajsi Sheth Adeyemi David Shiyanbade Laura Shoreson Sophie Short Anne Marie Diane Sim Leander Simpson Navchetan Singh Yiu Chung Siu Mark Sleight Melissa Smillie Martin Scott Smith Christopher Smith Tracey Clare Smith Jonathan Michael Smith Nicola Smith Sukdip Singh Sohal Rosica Sasheva Solunova Temitope Sonubi Desmond Jeremy Sparkes Marina Spindola Alice Spurling Julie Squires-Smith Ruth St John Nora Staka Thomas Stephens Lucy Sarah Stevens Alistair Stewart Kirsty Stone

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77 Jodie Street Michael Richard Stubbings Richard Sullivan Mohamed Suna Miah Sundarabalan Balasundaram Gurushankar Suriyakumar Ponniah Michael John Swain Syed Adnan Ali Anna Szkudlarek Julius Luxurious N Tafura Salin Deip Talavdekar Tang Xiaolu Louise Clare Tattershall Sarah Taylor Neil Alan Taylor Lyndsey Taylor Judith Taylor Philip Taylor Darren Taylor Clare Lorraine Taylor-Green

Sara Thompson Steven Thompson Philip Leo Premraj Thurairajah Mark Anthony Tillcock Tsehay Tola Zarina Torobekova Son Minh Tran Jayne Tressler Yee Mann Tsang Athina Tsiameti Leah Tsikriti Kazumi Tsutsui Tu Jun Stephanie Tucker Richard Tumber Mark Richard Turtle Aoibhin Tweedie Krystyna Tyler Siddharth Vakharia Kusha Vatish Christopher Vines Jaymini Rajendraprasad Vyas

Jason Walby Andrea Charlotte Walker Katherine Walker Katie Waller Rhiannon Jayne Walters Katie Louise Walton June Wang Waseem Tariq Heidi Watkins Emma Watkins Susan Jane Watson Geoffrey Watson Wayne Andrew Wearing Amy Webb Tracy Welsh Keith Richard Westran Samantha White Thomas Whitwell Jennifer Wilcocks Andrew Wilkinson Adam David Williams David Thomas Williams Eva Willingham Jennifer Wilson

Edward Winkworth Steven Wise Sarah Wong Wong Hoi En Samantha Wood James Francis Worthington Daniel Wray Christopher Neal Wright Alexander Lee Wright Dorota Wrobel Wei Wu Yuanchun Xin Yan Tao Jin Yang Deming Ye Matthew Yiu Sabiha Zabwala Daria Zakiewicz Moustapha Zara Na Zhang Zhang Yu Dongdong Zheng Jia Zheng

ACCA diary [

ACCA UK runs an exciting programme of events across the country. You can find more information on any event by visiting

EMPLOYMENT-BASED MEMBERS’ NETWORKS INTERNAL AUDIT 21 February, Tuesday Cloud Computing, London Speaker: Pragasen Morgan, director, PwC 28 March, Wednesday Anti-Money Laundering, London. Speaker: David Blackmore, independent consultant To book, please register at

REGIONAL MEMBERS’ NETWORKS AND DISTRICT SOCIETIES Please note the majority of events take place in the evening but please check the

UK_A_names/diary.indd 77


29 March, Thursday Budget Update, Sheffield

17 March, Saturday Saturday CPD Conference, London

15 February, Wednesday Fraud and the Law, Middlesbrough

To book, visit http:// members/networks/regional

24 February, Friday Business Lunch, Leeds


22-24 March Spring Update for Accountants, Oxfordshire

8 March, Thursday Business Question Time: Joint event with IoD, Hull

18 February, Saturday Saturday CPD Conference, Glasgow

22 March, Thursday Budget Update, Preston

25 February, Saturday Saturday CPD Conference, Sheffield

websites listed for details.

22 March, Thursday North East Business Lecture, Chester le Street 26 March, Monday Business Dinner with Norman Lamont, Manchester

3 March, Saturday Saturday CPD Conference, Bristol 10 March, Saturday Saturday CPD Conference, Manchester

22 March, Thursday Budget Breakfast 2012, London 24 March, Saturday Saturday CPD Conference, Birmingham 26 March, Monday Money Laundering Workshop, London For more information or to book your place, visit http:// or email professionalcourses@

17/01/2012 17:25


Christopher Cope

- Solicitor -

Call: 01769 581581

l Complaints l Regulation l Disciplinary Worried about any of these? Phone today for free initial advice.

Over 500 accountants represented, nationwide. Your PI or office insurance could cover legal fees. Why not join Accountants’ Defence & Advisory Services Ltd today to cover legal/professional fees on any future problem. email: London - Devon Member, Academy of Experts chriscopes.indd 1

UK-Page 78 (left).indd 78

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17/01/2012 17:03



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.


12/01/2012 15:09



Fine-tuning the rules [

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

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

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



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

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

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


Global Practising Regulations – Annexes 1 to 4


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

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

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

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

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

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

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

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

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the Disciplinary Committee * enable to exclude disruptive individuals

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

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


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

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ACCA news

Council highlights Highlights of the meeting on 26 November

Inside ACCA 80 Rulebook update Details of changes in the 2012 edition of the ACCA Rulebook 79 Flexible learning ACCA offers a wide range of online CPD options 77 Diary What’s on in the coming months 73 Welcome to the family In the first of a regular feature we congratulate the latest members to qualify as Chartered Certified Accountants

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.




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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.’


Michael Muskett FCCA, senior partner with PKF in East Anglia, has been awarded an MBE in the New Year Honours List for services to social enterprise aid and to the local community. Muskett, who celebrated 50 years with the firm last year, has helped to raise tens of thousands of pounds for local and regional charities, including Macmillan Cancer Support and the Royal British Legion.

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uk.ab accounting and businesS 02/2012


Accounting and Business_February 2012 (UK edition)  

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

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