Accountant Middle East - November 2012 by CFO Middle East

SETTING STANDARDS IN FINANCIAL AUDITING & ACCOUNTANCY

NOVEMBER 2012

FIGURES & FERRARIS

FORENSIC AUDITING Practical issues to consider concerning anti-fraud procedures in the UAE.

GOING WEST Demand for US CPA qualiﬁcations in the UAE on the rise.

STANDARDS OF EXCELLENCE

Chartered accountant Rajiv Saxena has a penchant for numbers, just like his love for fast cars.

GETTING NUMBERS RIGHT Dubai Chapter of ICAI outshines all its overseas counterparts.

OFFSHORE TRADING Find out the beneﬁts of having an offshore account.

Deloitte’s Partner Abbas Ali Mirza tackles key issues on IFRS and also lets you in on his ‘Triple S Theory of Success’.

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EDITOR'S AUDIT

Publisher Dominic De Sousa Group COO Nadeem Hood Managing Director Richard Judd richard@cpidubai.com +971 4 440 9126

A new feather in CPI’s cap! It’s not often that we blow our horn, but when we do… we blow it loud and proud. The launch of Accountant Middle East justi�ies the bluster, as the magazine is a groundbreaker with nothing like it on the market place.

EDITORIAL Editor Joyce Njeri joyce@cpidubai.com +971 440 9140 ADVERTISING Commercial Director Chris Stevenson chris@cpidubai.com +971 4 440 9138 PRODUCTION & CIRCULATION Production Manager James P Tharian james@cpidubai.com +971 4 440 9146 Database and Circulation Manager Rajeesh M rajeesh@cpidubai.com +971 4 440 9147 DESIGN Head of Design Fahed Sabbagh fahed@cpidubai.com +971 4 440 9148 Photographer Jay Colina jay@cpidubai.com +971 4 440 9108 DIGITAL SERVICES Digital Services Manager Tristan Troy Maagma Web Developers Abey Mascreen Erik Briones Jefferson de Joya Louie Alma online@cpidubai.com +971 4 440 9100 Published by

Office 804 Grosvenor Business Tower, TECOM PO Box 13700 Dubai, UAE Tel: +971 4 440 9100 Fax: +971 4 447 2409

With a stable of other numerous B2B titles, Corporate Publishing International (CPI) has always had a strong print component, and for that reason the launch of an accounting magazine has been organic, and well received by our audience.

The face of accounting in the Middle East has changed and its role has now grown to become the basis for corporate behaviour, decision-making and ethics, particularly in big business. And as the industry experiences this growth, at CPI we realised that despite the region being a powerhouse of media with a diverse portfolio of newspapers and periodicals, there was a lack of a professional magazine that addresses critical issues affecting the world of accountancy. This gave us an incredible opportunity to carve out a new niche… and hence the launch of this title. We aim to stay focused on two critical things: serving our core audience, and staying relevant by having an editorial voice that can connect on many different platforms. The Accountant Middle East is a leading edge concept with a unique editorial formula as our content allows for both the blithe and the conservative.

The gaudy accountant Thus, to start us off, a joke goes like this: You might be an accountant if… you have no idea that GAP is also a clothing store! Funny huh… and with a reputation like this, one would argue that accountants lead a boring deadpan kind of lifestyle that doesn’t �it well with �lashy and �lamboyance. But are chartered accountants really boring or does the society takes an unfair rap? SETTING STANDARDS IN FINANCIAL AUDITING & ACCOUNTANCY

Our cover story features Abbas Ali Mirza, who, as one of the industry’s leading �igures both locally and abroad, has written globally renowned books on International Accounting and Financial Reporting Standards (IAS/ IFRS), including a bestseller entitled “WILEY: IFRS 2009”. A senior partner at Deloitte, Abbas is also a well-known commentator on integrity and ethics, international accounting, auditing and �inance issues.

Wide range of topics Speaking of integrity, our ‘Accountancy 101’ article argues that chartered accountants are the epitome of probity and veracity, and therefore are expected to be free of the �lim-�lam of the �inancial world, but this is always not the case as they are not completely fraudfree. The consequences of being subjected to civil and criminal sanctions and the upshot of bringing shame on the profession helps to keep the professionals honest. Finally, with a host of other articles on wealth management, business insights and technology, we have been able to expand the range of topics covered because the core focus of the magazine and its mission is to serve as the voice and one-stop ultimate guide for accountants and �inance professionals in the region. Our key objective is to create a compelling and engaging editorial platform that taps into the passions of our core readers, thereby ensuring that this title remains strong. To that, I encourage an open dialogue.

Joyce Njeri Editor, Accountant Middle East

Talk to us:

NOVEMBER 2012

Printed by

E-mail: joyce@cpidubai.com

Printwell Printing Press © Copyright 2012 CPI All rights reserved While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

After meeting Rajiv Saxena, I think the rap is probably unwarranted. Rajiv is a fun loving, Ferrari fanatic chartered accountant who stands as proof that there are accountants out there who do not �it the stereotype. Read about this extraordinary professional in our Personality & Practice section.

FIGURES & FERRARIS

FORENSIC AUDITING Practical issues to consider concerning anti-fraud procedures in the UAE.

GOING WEST Demand for US CPA qualiﬁcations in the UAE on the rise.

STANDARDS OF EXCELLENCE

Chartered accountant Rajiv Saxena has a penchant for numbers, just like his love for fast cars.

GETTING NUMBERS RIGHT Dubai Chapter of ICAI outshines all its overseas counterparts.

OFFSHORE TRADING Find out the beneﬁts of having an offshore account.

Deloitte’s Partner Abbas Ali Mirza tackles key issues on IFRS and also lets you in on his ‘Triple S Theory of Success’.

Twitter: @AccountancyME Facebook: www.facebook.com/AccountancyME LinkedIn group: AccountancyME

www.accountancyme.com 3

CONTENTS NOVEMBER 2012

Main Features

COVER STORY:

IFRS SPECIAL:

PERSONALITY & PRACTICE:

IFRS expert Abbas Ali Mirza hopes that the accounting world will soon have a common set of global accounting standards, rather than country-speci�ic rules. He also reveals his Triple ‘S’ theory of success, which have largely been his guiding principles in life. Financial reporting in Mideast to change dramatically-Veronica Poole, the Global Managing Director of Deloitte IFRS says the adaptation of IFRS in the region will change the �inancial reporting landscape signi�icantly.

Ferrari Fanatic - Think accountants are deadpan humdrums? Think again. Take a ride in the fast lane with CA Rajiv Saxena in his 458 Spider customised Ferrari.

November 2012

Current Affairs 8 NEWS & VIEWS:

One voice - Accounting and audit bodies in the UAE form a joint working group to provide a common platform for tackling important matters of common interest.

Professional Watch

Time for change - ICAS President Sir David Tweedie says audit committees need to play a larger role and become more transparent in their reporting to the shareholders and investors.

FORENSIC AUDITING:

Don’t shoot the messenger - Managers who are responsible for managing fraud risk may �ind themselves in the �iring line for their failures and their jobs and personal credibility can be at serious risk. But this should not be the case.

TAX WATCH:

UAE tax-free as European economies pile on the levies - New research by UHY shows that gap between high tax Western Europe and rest of world growing larger.

BUSINESS PICTORIAL:

A visual story of this month’s dealings and proceedings in the accounting and �inance sectors.

CAREER DEVELOPMENT:

A 3D career guide in accounting and �inance - Head of Corporate Finance at Grant Thornton UAE, shares his thoughts on the three-dimensional �inancial universe.

Special Reports

INTERNATIONAL PERSPECTIVES:

FOCUS ON:

Getting their numbers right - Jaydeep Narain Shah, the President of the Institute of Chartered Accountants of India tells us why the Dubai Chapter of ICAI is the most active among the 21 overseas chapters of the giant professional body.

GFS REPORTING:

‘Emirates Gate of GFS reports’ - New government statistics reporting tool expected to aid of�icers in the analysis of the budget and state revenues, focusing on the government’s contribution to cumulative investment and savings.

CIMA SURVEY:

‘Business beyond Financials’ - Recent survey done by CIMA examines the need for businesses to focus more on the non-�inancial aspects of businesses rather than the �inancial areas.

IN THE SPOTLIGHT:

Demand for US CPA soars - Dr Abdul Kareem A. Alzarouni of the National Bank of Abu Dhabi talks exclusively to Accountant Middle East on the bene�its of acquiring the US Certi�ied Public Accountant (CPA) quali�ication.

From the Experts 58 BUSINESS INSIGHTS:

28 52

ACCOUNTANCY 101:

Should blundering auditors be punished? - Sonia Jaspal argues that sometimes they genuinely miss to detect fraud, despite their best effort to diligently perform their duties.

INDUSTRY APPOINTMENTS:

Revolving door - Find out the latest movement of professionals between roles, companies as well as new industry hires.

Offshore trading - Ross Mills explores the bene�its of having an offshore account.

TECH TALK:

New shades of Sage - Global supplier of accounting software solutions Sage embarks on a major re-branding campaign, by renaming majority of its products.

Interactions 3 EDITOR’S AUDIT 6 READERS’ FEEDBACK

INTERACTIONS FEEDBACK WE WANT TO HEAR FROM YOU! Let us know what you think of the contents in this issue. Reach us via email at accountancy@cpidubai.com

TESTIMONIALS On behalf of the Management Committee of the Institute of Chartered Accountants of Pakistan (ICAP), UAE Chapter, I congratulate the Editor and management of CPI for this brilliant initiative. The accounting fraternity in the UAE is growing fast and I’m positive that this magazine will provide a platform for the views of professional accountants not just in the country, but also beyond the borders. I am confident that the publication will be useful to the members of ICAP and to associates of other professional groups. I wish the Accountant Middle East all the success. Khalid Mehmood, President - ICAP UAE Chapter

The magazine couldn’t come at a better time.Your type of publication is very much needed in the industry, particularly here in the Middle East as accountants and auditors are keen for realistic examples of success stories. They desire some confidence and assurance that the world still has faith in them and the profession, especially post-global financial crisis. Congratulations and you have all our support.” Dr Abdulkarim Alzarouni Deputy Group Chief Financial Of�icer, National Bank of Abu Dhabi (NBAD)

It is my great pleasure to extend greetings to the readers of the first issue of the Accountant Middle East magazine. One of the epithets applied by the Institute of Chartered Accountants of India (ICAI) is “Partners in nation building” and this publication is an excellent characterisation of the contribution of accounting profession to the nations of the GCC. James Mathew, Chairman, Dubai Chapter of ICAI

I want to congratulate CPI on the launch of this new magazine and wish you the best of luck with the new venture. Accountancy, by definition, is a tool for decisionmaking. The Accountant Middle East magazine is the decision enabler for leaders in government, business, and the profession. Keep up the good work. Dr Talal Abu Ghazaleh, Chairman, Arab Society of Certi�ied Accountants (ASCA)

It’s great to have a magazine focusing on the local updates and news in relation to our profession. I believe it will be of a great interest to every accounting and financial professional. Best wishes. Karim Abd-Elhay, President, Association of Accountants and Financial Professionals in Business (IMA), UAE Chapter

November 2012

Congratulations on your new magazine the Accountant Middle East. We are pleased that you have chosen one of the most dynamic and developing areas in the region for your publication and we wish you the best of luck and success. Over several decades, KPMG in the UAE has had the opportunity to work with leading industry players in the region and has played a pivotal role in a number of success stories. At various stages of their growth, clients have looked to KPMG for timely and independent advice to help in critical decision making. Hence it is in keeping in line with these high standards that we look forward to working with you in the future. Omar Khan, Manager Markets, KPMG Lower Gulf

Finally a magazine for accountants in the UAE is a possibility! I hope it covers the myriad laws and regulations which sometimes remain a mystery as their issuance is not announced and these cannot be easily accessed. If it becomes a quality journal on the lines of similar publications in the UK and the USA, it should prove very useful. Salim Rajkotwala – Salim Rajkotwala Chartered Accountants

Congratulations on launching a new magazine for accountants. I am sure it will be a big success. I look forward to working with you and your team to ensure mutual successes in this venture. Reggie Fernandes, Director - Gulf Operations, Sage Software Middle East FZ-LLC

We thank you for informing us about the launch of the Accountant Middle East magazine. We are excited about this initiative and would like to contribute our ideas and opinions through this magazine. We look forward to the pleasure of your association with us. A.R. Ramachandran, Managing Partner – Ethics Plus Public Accountants

Congratulations on the launch and we hope to enhance our relationship with Accountant Middle East magazine. Rajiv Saxena - Managing Partner, UHY Saxena Chartered Accountants

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NEWS & VIEWS

UAE’S ACCOUNTING AND AUDIT BODIES SEEK JOINT UNIT Launch of a common action task force to help foster better working relationships

HE HEADS and regional directors of seven major audit associations and accounting professional bodies have unanimously agreed to launch a joint action task force that will help in fostering better relationships. At a �irst-of-its-kind meeting comprising of accounting and audit associations of the UAE, the bodies resolved unanimously to set up a task force – a joint working group – that would meet on a regular basis to discuss critical issues affecting their members which include UAE nationals and expats from as far a�ield as UK, India, Pakistan and nationals from around the Middle East, all of which together add up to several thousand members in total.

Abbas Ali Mirza, the Chairman of Auditors Group of the Dubai Chamber, was elected unanimously at this historic meeting of the seven major accounting and audit associations to spearhead this joint initiative and serve as the convenor of this joint action task force.

A welcome move Saif Bin Abed Al Muhairi, the Chairman of the UAE Accountants and Auditors Association (AAA), stated; “I am extremely delighted that this joint working group has been formed. There are a number of issues that were discussed and this joint task force agreed to take upon itself to tackle them expeditiously.”

“We are very hopeful that this new working group can easily take upon itself, among several important issues, key tasks such as assisting the local authorities in the UAE to set up the much-awaited Institute of Chartered Accountants of the UAE, which I am certain, will be a welcome move and will be well received by all,” he added.

“The UAE’s AAA is very supportive of the formation of this joint action task force and we are extremely glad that this timely joint initiative on part of associations and accounting bodies based in UAE is a welcome move,” Al Muhairi said.

S. Venkatesh, the immediate former Chairman of the Institute of Chartered Accountants of India, Dubai chapter, said; “We expect this to be a ‘win-win’ situation for all the associations and accounting bodies that have agreed to be part of this joint working arrangement. There are a number of areas where we hope to cooperate with each other.” “This is a move in the right direction and I am sure it will greatly facilitate the joint activities of the various accounting bodies. Our institution looks forward to working with the other associations and accounting bodies that are part of this joint initiative,” he added. Laws and standards Lauding the historic move, Abbas lamented that presently each body or association organises separate events - including

Heads of major audit associations and accounting professional bodies in the UAE at the event where they launched a new joint task force

November 2012

MEMBERSHIP: ▄ UAE Accountants and Auditors Association (AAA) - represented by Chairman Saif Bin Abed Al Muhairi ▄ Institute of Chartered Accountants of India (ICAI), Dubai Chapter - represented by Chairman James Mathew ▄ Institute of Chartered Accountants in England and Wales (ICAEW), UK – represented by Regional Director Peter Beynon ▄ Association of Chartered and Certi�ied Accountants (ACCA), UK – represented by Head of Middle East Stuart Dunlop ▄ Institute of Chartered Accountants of Pakistan (ICAP), Dubai Chapter – represented by President Khalid Mahmood ▄ UAE Institute of Internal Auditors (IIA) – represented by President Abdulqader Obaid Ali ▄ Auditors Group of the Dubai Chamber – represented by Chairman Abbas Ali Mirza technical seminars and major conferences - for its members, however, “there is a real need to coordinate and hold joint meetings for members of all bodies and associations operating in the country.” “The launch of a joint working group is expected to provide a common platform for tackling important matters of common interest that are critical for several thousand members of all audit associations and accounting bodies operating in the UAE,” he added. For the �irst time in the country, with the formation of this joint working group and task force, joint programmes for UAE nationals and expats from various countries, would take place under the auspices of the joint task force.

"These professionals undertake specialised assignments and need to keep abreast with latest changes in law and standards and thus there is an urgent need to provide them with a common platform wherein they are able to rub shoulders with other professionals," Abbas said.

NEWS & VIEWS

ICAEW 2012 AWARDS NOMINATIONS CLOSE FOR THE second year running, the Institute of Chartered Accountants in England and Wales (ICAEW) is set to host a night of awards at Jumeirah Beach Hotel on December 12, to commemorate excellence in the global accounting and �inance industry.

The awards, which were launched in 2011 and celebrate the very best of the accountancy and �inance profession in the Middle East, will feature categories for company of the year, high achieving individuals and many more.

Nominations closed on October 15, 2012, and the shortlisted candidates will be judged by a panel of 14 well respected and recognised leaders in business, accountancy and �inance in the Middle East. Members, special guests and award winners will enjoy a networking reception and a three course dinner with live entertainment to celebrate accounting and �inance leaders/organisations across the Middle East who have demonstrated superior excellence in their �ield.

Award categories Nominations have been received across 10 categories: ▄ CFO of the Year ▄ Business Leader of the Year ▄ Young Accountant of the Year ▄ Chartered Accountant of the Year ▄ Excellence in Financial Journalism ▄ Excellence in Financial Reporting ▄ Firm of the Year ▄ Corporate Finance Deal of the Year ▄ Business Finance Team of the Year ▄ Excellence in Training and Development of Finance Professionals To �ind out more about the awards, visit www.accountancyand�inanceawards.ae

FINANCE EXECUTIVES TO RECRUIT MORE STAFF Employers conﬁdent in Dubai’s economic prospects as study shows 85% of executives are concerned about losing top performers SIX IN 10 �inance executives in Dubai are planning to recruit new permanent �inance staff by the end of second half of 2012, and 8% are forecasting declines, a new study by Robert Half shows.

The net 52% increase is lower than the forecast for the �irst half of the year, but represents the second strongest estimate worldwide behind Brazil (57%). Dubai’s �igure is 29 points higher than the global net average (24%), according to the international survey of 2,179 �inance executives.

The Index, which is the �irst bi-annual recruitment survey of its size and scope to focus exclusively on �inance hiring in Dubai, shows that the biggest drivers for increased hiring levels are rising workloads (64%), and eight in 10 (81%) �inance executives �ind it challenging to �ind skilled �inancial professionals today. James Sayer, director, Robert Half UAE said: “While some of the larger multinationals are delaying adding to their headcount due to the ongoing uncertainty in the Eurozone, many local companies are hiring in response

About 81% of �inance executives in Dubai say they �ind it challenging to get skilled �inancial professionals today. Finance leaders are understandably upbeat with eight in 10 remaining con�ident in their company’s and country’s growth prospects, respectfully, compared with last year, according to the latest Robert Half Financial Hiring Index.

to strong growth and demand in the region. Regardless of their immediate plans to hire, companies are wanting to meet top candidates for fear that they may miss out, with some creating roles in order to secure the best and brightest.”

Concerns of losing top performers Challenged in �inding the requisite staff to manage potential growth opportunities, executives are increasingly worried about �inding and retaining talented staff with 85% citing concerns over losing top performers to other job opportunities in 2012.

Sayer continues: “The large majority of �inance leaders report dif�iculties when recruiting skilled �inance professionals, particularly in the areas of audit, risk, �inancial planning and analysis and IT �inance. Companies looking to attract and retain the most sought-after candidates should review their remuneration structures, with tools like the 2012 Robert Half Salary Guide providing guidance and benchmarking information against other companies in the region.” Prospects for remuneration are also on the rise with half (49%) of �inance executives expecting salaries for existing accounting and �inance employees, increasing by an average of 6.97%. Looking at bonuses, 35% expect increases, by an average of 6.35% overall. 9

NEWS & VIEWS

NEW MIDEAST CFO GROUP FORMED THERE IS no doubt that the role of CFOs has changed a great deal, compared to say, �ive years ago. The professionals are now required to understand the many areas of the business and its operations, such as its strategy and compliance, things that were not in their scope in the past. It is in this background that top CFOs in the region have come together under the umbrella of Middle East CFO Alliance (MECA), in order to push their agenda and provide a platform for professional networking.

“Within 30 days after the formation of Middle East CFO Alliance (MECA) we have accomplished our �irst major goal of having high pro�ile networking meetings in Dubai and Riyadh,” said Saleem Su�i, the coordinator of the group. Risk mitigation "More than 75 CFOs attended both events, where senior partners from Deloitte made highly informative presentations on the status of International Financial Reporting Standards (IFRS) as well as other important topics such as the evolving role of CFOs,” he added. As a �irst step, the Conference Steering Committee has been formed comprising

of the following senior level CFOs based in Dubai:

▄ ▄ ▄ ▄ ▄ ▄

Jaideep Singh, Group CFO, Fakhruddin Holdings Nauman Asif Mian, CFO, Bait.com Asad Ullah Khan, CFO, Coca-Cola MENA Region Anil Jain, CFO, Baqar Mohibi Group, CGG Dhiraj Wadhwani, CFO, 3MY General Trading Saleem Su�i, CFO, Intercos America

According to Su�i, the core philosophy of MECA is to organise high quality in-person information sharing and networking events to its members at minimal or no cost to them. “The Conference Steering Committee will work to bring top quality speakers, senior �inance executives and sponsoring partners together to create high quality event experience to MECA’s members,” the coordinator added.

Su�i said the formation of the group was long overdue, as “today’s CFO has become more sophisticated, with his responsibilities going beyond the everyday’s tasks of ensuring accuracy of numbers.”

THIRD TIME LUCKY

Business students rank KPMG second spot in Universum’s ‘World’s Most Attractive Employer’ survey KPMG HAS been given the number two spot for the third year in a row, in the annual ‘World Most Attractive Employer’ Universum survey rankings. Over 75,000 business students from the world’s top academic institutions participated in the survey. Commenting on the outcome, Vijay Malhotra, CEO and Senior Partner, KPMG Lower Gulf said; “KPMG taking the number two spot three years in a row is not something that happens by chance. We are very serious about investing in the future of our employees 10 November 2012

and providing them the best possible opportunities to achieve excellence in their chosen careers.”

“We have been in the region for over 35 years and managed to remain one of the market leaders by attracting the best people to the �irm and helping them achieve their maximum potential,” he added. Attractive employers Universum, a global talent consultant, develops its global index of the top 50 most attractive employers by asking students pursuing business

Saleem Suﬁ, Coordinator - MECA

“It is the CFOs role to see that the company’s risk mitigation is carried through diligently, and therefore we aim, through the MECA group, to address these challenges and ensure that we remain prudent and have a clear sense of the direction we want our respective organisations to take,” he added. The coordinator also revealed that the next conference has been scheduled for December 13 in Dubai, where prominent CFOs from leading business organisations in the Middle East and other global experts have con�irmed participation.

and engineering degrees to identify their “ideal” employer. Responses are gathered at leading academic institutions in the 12 largest economies: Brazil, Canada, China, France, Germany, India, Italy, Japan, Russia, Spain, the US and the UK. “Attracting top students into our �irms enables us to bring the best talent, expertise and knowledge to our clients.” said Michael Andrew, Chairman of KPMG International.

“We are proud that students globally are recognising our employment offer and have ranked us so highly for the third consecutive year. What makes the ranking especially meaningful is that it is based on the opinions of those who represent the future of KPMG and our clients,” he added.

BUSINESS PICTORIAL

MAN OF THE MOMENT: Dr Talal AbuGhazaleh, President of the Arab Society of Certiﬁed Accountants addresses participants during the Owners Forum in Abu Dhabi.

IRAQ IS OPEN FOR BUSINESS: Visiting delegation from the Iraqi region of Kurdistan in talks with ofﬁcials of Dubai Financial Market (DFM). The two groups signed an agreement to set up the Erbil Stock Exchange (ESX), with the technical support of DFM.

ALL EARS: Participants during KPMG’s second GCC Energy Conference in Abu Dhabi included Sheikh Nahayan Mubarak Al Nahayan (Centre). From left, Saif Al Ghaﬂi CEO, Abu Dhabi Gas Development, Michiel Soeting, Global Chairman of Energy & Natural Resources, KPMG UK, Vijay Malhotra, CEO KPMG Lower Gulf and Michael Armstrong, Head of Oil and Gas – Lower Gulf.

EMIRATES IN NEW YORK: Emirates NBD Securities’ congratulatory message is posted on the NASDAQ Tower in New York after the ﬁrm won NASDAQ Dubai’s “Retail Broker of the Month Award” in September 2012.

PLAY TIME: All work and no play makes some members of the Dubai Chapter of Institute of Chartered Accountants of India, dull.

YOUNG ACHIEVER: ACCA and KPMG ofﬁcials honour Anam Sami, for achieving the highest score in ACCA global exams.

NEWS & VIEWS

ICAP ENTERS UAE AS LOCAL MEMBERSHIP SOARS

ICAP Management Committee Members

Body seeks to promote and develop profession in the country ▄

THE INSTITUTE of Chartered Accountants of Pakistan (ICAP) has been launched in the UAE, “to act as a guardian of the interest of its members in the country,” according to newly elected president, Khalid Mehmood.

“Currently there are approximately 600 ICAP members working in the UAE and it was felt that a formal chapter should to be launched to cater to the needs and requirements of the members,” Mehmood said, in an interview with Accountant Middle East. ICAP has other four overseas Chapters including in the United Kingdom, Canada and Saudi Arabia. The UAE Chapter is the latest one, following elections which were held in July this year, where �ive

members took over of�ice to manage the affairs of the Chapter.

“We have started working on the strategy to formulate programmes for the ICAP members and have held various meetings to undertake key issues, such as; drafting of our constitution, planning the career professional development and interacting with other professional institutes and bodies in the country,” the chartered accountant said.

“The new committee is looking forward to working with other similar professional bodies in the UAE in order to harmonise accountancy standards in the country. Our objective here is to promote the activities of the industry, and develop the profession at international level,” he added.

▄ ▄ ▄ ▄

Khalid Mehmood President Mian Ahmad Farhan Vice President Khawaja Asif Kaleem General Secretary Muhammad Azam Razzak Head of Financial Affairs Qamar Mohyud Din Sheikh Joint Secretary

Mehmood said that the UAE Chapter also aims to “extend the work of the main ICAP body in the Pakistan, by contributing in formulating economic policies of the Pakistani Government with speci�ic focus on budgeting making and taxation.”

TAG-ORG’S NEW OFFICE TAPS LIBYA POTENTIAL AS PART of its expansion plans to serve a wider audience, the Talal Abu-Ghazaleh Organisation (TAG-Org) has opened a new of�ice in Malta.

According to Dr Talal Abu-Ghazaleh, the organisation’s chairman, the new of�ice located in San Gwann area will provide all the services rendered by the different arms of TAG-Org, while also seeking to bene�it

from the recent international agreements signed between Libya and Malta.

“We are really excited to add another of�ice to our 73 of�ices already functional around the world. Malta is a great country, and this strategic move will enable us tap into Libya’s potential, as the country embarks on rebuilding its businesses,” he said.

“The of�ice will provide most of TAGOrg’s services to clients and investors from around the world. We are looking forward to strengthening our relations with the of�icials and businessmen in Malta." TAG-Org has embarked on a mission to open more of�ices around the world as part of its expansion strategy.

MB & PARTNERS OF QATAR JOINS KRESTON INTERNATIONAL

CAIRO-BASED MARKAY CONSULTING NOW PART OF HLB

KRESTON INTERNATIONAL has added Qatar-based MB & Partners to its network. MB & Partners currently has two partners with 15 professional and support staff based in a single of�ice in Doha.

HLB INTERNATIONAL has added two member �irms in Egypt and Brazil. Sao Paulo-based Martins Oliviera Auditoria e Consultonia Empresanial has been added to HLB’s Brazil network whilst Markay Consulting, a Cairo-based �irm, has been added in Egypt.

The �irm provides the full spectrum of audit, accounting, tax and consulting services to a broad range of clients including contracting, pharmaceutical and medical, real estate and construction. 12 November 2012

The addition of these new �irms, which both provide a full range of services through teams of 80 and 30 staff respectively, follows the introduction of Chinese Baicheng Tax Consulting Services in August and Irish �irm Sheehan Quinn in July.

NEWS & VIEWS

CONTACTLESS PAYMENT TECHNOLOGY IN UAE MasterCard terminals to be deployed across more than 1000 major stores by year end

PWC RETAINS TOP SPOT WITH 8% GROWTH, MIDEAST UP 15% PWC HAS retained its position as the largest global professional services �irm for the second year in a row - despite Deloitte’s global growth - of 8.6% to 31.3 billion, in the year to 30 June 2012.

The �irm increased its assurance revenues by 3% bringing in $14.9 billion, tax by 8% to $7.9 billion and advisory services by 17% to $8.7 billion. Middle East and Africa were up 15% and Asia revenues were up 8%, with the �irm in India growing 16% and China 14%. PwC US increased its revenues by 18%.

NEW CONTACTLESS technology where users simply tap their smart phones, watches, wrist bands in front of a secure payment reader has been introduced in the UAE.

According to its developers, the groundbreaking MasterCard PayPass network is being enhanced in the country in preparation for the launch of Near Field Communications (NFC) payments technology, a system that can be accessed with modern day smart phones and mobile payment tags. Completion of the installation of MasterCard PayPass terminals across more than 1000 stores will commence in December, and will include popular areas like coffee stores, fast food restaurants, family diners, cinemas, general retailers and convenience stores.

“The introduction of more than 1000 PayPass terminals across the UAE will provide consumers with improved access to faster payments at check-out,” said Eyad Al-Kourdi, Vice President and Country Manager, UAE, MasterCard Worldwide.

No need for PIN number The MasterCard PayPass technology eliminates the need to enter a PIN or fumble for cash and exact coins. Cardholders also don’t need to hand their cards to a clerk or manually swipe through a reader.

According to Al-Kourdi, the new contactless payment technology is currently being adopted in countries across the Middle East such as the UAE, Qatar and Lebanon, “and as we continue to drive additional PayPass acceptance among banks and merchants, local consumers can expect secure and convenient solutions to their everyday transactions.” MasterCard has already introduced mobile payment wallets – payment cards placed inside smart phones – in other parts of the world and will soon be launching it in the Middle East region in collaboration with some �inancial institutions. The four main PayPass issuers in the UAE currently are Dubai First, Mashreq Bank, Emirates NBD and Abu Dhabi Commercial Bank.

The �irm had 4% growth in Western Europe, with the UK of�ice increasing its fee income by 6%. Central and Eastern Europe revenues were up 8%.

“PwC’s ability to increase revenues in all key markets in a challenging economic climate is testament to the trust that clients have in the quality of PwC work, the talent of our people and the strength of the PwC network," PwC chairman Dennis Nally said. "We are in the midst of a global economic rebalancing. Economic growth in the developing markets will continue to outpace expansion in the more established economies. That shift heightens the ongoing need to attract talented, skilled people and make sure they are located where our clients require them,” Nally said.

The �irm expanded its workforce by 7% globally increasing the total head count to over 180,000. – IAB

INTERNATIONAL PERSPECTIVES

INVESTORS CALL FOR MORE RELIABLE AUDITS & DISCLOSURE: PWC Increased transparency will be helpful in determining where ‘people push the boundaries’

T A time of market uncertainty and financial crisis investors and analysts are calling for improved auditor reporting and ask for increased transparency and disclosure, according to a global research by PwC.

future direction of reporting and stressed that there is a risk involved in ignoring those views.

PwC’s report ‘Assurance Today and Tomorrow’ shows that investment professionals are concerned about the aggressiveness of companies’ �inancial statements, that is, how management approaches judgement and accounting policies in its reporting.

“Any solution will need to balance carefully the standardisation that rules create with the �lexibility that companies need in order to express themselves,” Sexton commented.

“It would be very helpful to know where people push the boundaries. If all companies could be ranked in terms of aggressiveness or conservative accounting policies, as judged by their auditors, that would be helpful information,” an investor interviewed for PwC’s research said. Investors, however, have acknowledged the dif�iculties of introducing a benchmark to measure companies in such aggressive practices.

If all companies could be ranked in terms of aggressiveness or conservative accounting policies... that would be helpful information. Flexibility of companies PwC deputy global assurance leader Richard Sexton remarked that investors have strong views about the

Nonetheless Sexton said that the investors’ stance need to be put alongside other stakeholders’ positions to see what is possible.

The survey also found that 43% of investors surveyed did not always read the opinions on companies that they follow.

“The only time I would ever read audit opinions is if there’s something contentious in it. They are very few and far between,” one of the surveyed investors told PwC. Audit committee independence According to the PwC’s report, some investors are wary of the independence of audit committees. Over a third, 39%, of the professionals interviewed by PwC disagree or strongly disagree with the idea that audit committees are suf�iciently independent.

“Auditors should focus more on serving investors than audit clients,” one the participants told PwC. PwC said few survey participants had direct access to audit committee members.

“This creates uncertainty in their minds about the role of audit committees act as an independent check on management and are effective in overseeing the audit on behalf of shareholders,” PwC said in the report.

However, some 26% of the investors surveyed agreed or strongly agreed that audit committees were suf�iciently independent of management while 35% remained neutral. PwC’s conducted interviews with 104 investors and analysts in 11 countries allocated in four regions: Asia-Paci�ic, North America, emerging markets regions and Europe. – International Accounting Bulletin 14 November 2012

INTERNATIONAL PERSPECTIVES

ERNST & YOUNG FOLLOWS RESULTS TREND WITH 7.6% GROWTH ERNST & YOUNG (E&Y) has reported a global revenue total of $24.4 billion for the past �inancial year, up 7.6% in local currency compared with the previous year’s $22.8 billion total.

The world’s third largest accounting network saw growth across all service lines, and reached an all-time maximum staff total with approximately 167,000 employed at the end of the period. The results come in the wake of fellow Big Four �irm Deloitte’s annual report in September, which showed an 8.6% increase in revenues. Both networks posted their best results since 2008.

Like Deloitte, E&Y saw strong growth in emerging markets, where fees were up 15.5% year-on-year, and in advisory services, where the network brought in 16.2% more business.

Sovereign debt crisis Assurance revenues for E&Y were up 4.1%, tax revenues 7%, and transactions revenues 9.4%. The third largest �irm globally said growth in all areas was organic, with acquisitions accounting for less than one half of a percentage point in overall growth.

Brazil saw organic revenue growth of 17.5%, while India, Africa, China and the

TWEEDIE CALLS FOR CHANGE IN THE PROFESSION Average audit engagement of companies is ‘getting a bit cosy’, he laments THE PRESIDENT of Institute of Chartered Accountants Scotland (ICAS) Sir David Tweedie said the profession requires a “natural evolution not revolution” and improvements to audit committee reporting should be made. Tweedie said the average audit engagement of a FTSE 100 company of 48 years is “getting a bit cosy”.

“We need get audit committees to say they will look at retendering every now and again and after a while, let’s say 15-20 years, change the auditors or explain why not,” he said in the International Accounting Bulletin webinar Secrets of Success. Tweedie believes audit committees need to play a larger role and become more transparent in their reporting to the shareholders and investors. “Presently the audit committee report is really about what I’m not responsible for and what management is responsible for and that’s ok, but that could be in the appendix," he said. "At the moment it’s just about 'yes' and 'no' and what you need is to know what where

the major going concern assumptions. I would like to see what were the critical issues and estimates that matter to these accounts. And, I do think that will come.”

ICAS goals The former International Accounting Standards Board (IASB) head also emphasised the importance of regulators and auditors working closer together in order to better tell the “full story of a business and re�lect economic reality”.

Commonwealth of Independent States (CIS) region reported revenues up by 19.8%, 10.2%, 11.8% and 15.6%, respectively.

“FY12 remained a dynamic and volatile period in the world economy. The ongoing sovereign debt crisis in Europe, the impending ‘�iscal cliff’ in the US, and signs that the emerging-market economies are slowing, all point toward a challenging business climate in the months ahead,” said E&Y global chairman and chief executive Jim Turley. “We will also continue to face regulatory uncertainty in many jurisdictions around the globe. That said, we are pleased that our business showed good results, the best since 2008, in the midst of what has been several years of uncertainty,” the CEO added. – International Accounting Bulletin

students and telling them war stories and what they are going to need to look out for as they start to practice,” he said. Tweedie said he wants to bring the profession closer to young people from a deprived background. “There are a lot of bright kids who don’t go to university or get bewildered by it and it’s about how we get them into the profession, how we mentor them and keep them going,” he explained. “We want to make sure bright kids, who just can’t get on to the educational ladder, get on it.” – The Accountant, UK

“Lessons in all quarters are being learnt from the global �inancial crisis. There is work to be done in restoring con�idence and trust in business and in the profession – including preparers of �inancial statements and auditors. Increased transparency and clearer communication will be pivotal to this,”Tweedie said.

Tweedie, who played a pivotal role in in�luencing global accounting standards, started his new role on April 20. Tweedie said one of his major goals as ICAS president is to emphasise the importance of professional ethics.

ICAS President Sir Davis Tweedie

“We want to get the practitioner back to the 15

FORENSIC AUDITING

DON’T SHOOT THE MESSENGER The vital role of ‘whistle blowing’ in modern business cannot be gainsaid, however, managers responsible for preventing fraud risk may ﬁnd themselves in the ﬁring line

PROTECT HIM

ORPORATE FRAUD and other business misconduct regularly dominate the headlines worldwide, and the Middle East is not immune to such problems.

Danny McLaughlin Head of Fraud and Forensic Grant Thornton UAE

When a fraud incident occurs, it is invariably bad news for the business concerned. The effects can be widespread and damaging – the theft of cash, misappropriation of assets or the violation of sanctions are damaging for businesses. The reputation of a business that has been carefully nurtured for years, or even decades, may be undermined.

Fraud or misconduct can affect the business but also regrettably customers, employees and suppliers. Trust is lost, the brand becomes associated with the fraud and bad news stories may spiral out of control. Managers who were responsible for managing fraud risk may �ind themselves in the �iring line for their failures and their jobs and personal credibility can be at serious risk. Lack of effective control Many if not most cases of fraud can be attributed to a lack of effective control. In the worst cases, subsequent investigations may in fact reveal there was little if any control in the �irst place.

Fraudsters will perhaps focus their fraud on non-core activities, those that are less well understood or of less interest to the owners. Complacency and misplaced trust are gifts to potential fraudsters. The opportunity to commit fraud because of poor controls, ineffective segregation of duties and limited oversight 16 November 2012

combined with pressures on a fraudster, perhaps because of �inancial problems, peer pressure or inherent dishonesty are two facets of the so-called fraud triangle which helps us understand why frauds occur. The third facet, the rationalisation helps us to understand why someone takes that next step and actually commits fraud – “no one will notice”, “they owe me”, “everyone else is doing it”, and it’s only a small amount”. But at the heart of these cold calculations by a fraudster is the fundamental belief that they can get away with it and no one will detect their activities.

Potential ‘Red ﬂags’ So how do we change such mind-sets? I believe that fraudsters are themselves often very good risk managers. They coldly calculate the risks of detection as they get to know what gets checked and what doesn’t. They often have a backup story to explain their activities, if someone does raise suspicions.

Fraudsters will perhaps focus their fraud on noncore activities, those that are less well understood or of less interest to the owners. They may commit small frauds to start with so as to see what is possible. They often become greedier as they test the system whilst remaining undetected. They create an aura of honesty and portray themselves as someone beyond suspicion. Ironically, these behaviours are often what we might describe in the fraud prevention world as “red �lags” or indicators of potential fraud. When someone has worked in a business for a long time, they understand the weaknesses and the opportunities to commit abuse. When someone who is a good manager recognises such gaps in control, they will use this knowledge to put in place more effective controls, but without adding often useless bureaucracy. Does seven signatures

FORENSIC AUDITING

on a Purchase Order mean there is greater or less control? They will work with the Audit Committee and both internal and external auditors to manage risk. If they are dishonest, then unfortunately there is potential for a much less pleasant story to unfold. The fear factor Many business owners are shocked and feel particularly betrayed when after a fraud occurs it is revealed that many people in the business actually did have suspicions but failed to report such concerns. Why would they not speak up?

The answer is fear. Writing in Ancient Greece more than 2600 years ago, Sophocles the Greek Tragedian said in his work called Antigone that "No one loves the messenger who brings bad news". In 1598, Shakespeare referred to a similar concept in his plays Henry IV part 2 and Anthony and Cleopatra essentially saying that you “don’t shoot the messenger”. Regrettably, people do fear being “shot” or in modern terms being terminated, retaliated against or otherwise victimised. It may be so much easier to keep your head down and say or do nothing.

It takes great courage for someone to report fraud and they need to be sure that they will be treated sensitively and that their confidentiality will be protected. Blowing the Whistle The term ‘whistle blowing’ seems to me to be less familiar and less well understood in this region than it would be for example in the UK or US. The term itself was �irst used by consumer champion Ralph Nader in the seventies. He wanted something that was less emotional than the words snitching or informing.

These terms are frequently used in a pejorative way. Whistle blowing on the other hand should be seen as something done for good reason. In many countries, laws have been introduced to provide legal protection for those who decide to reveal their concerns. We believe that whistle blowing is a key part of your fraud risk management strategy. It provides your employees (and customers or suppliers) with a con�idential way for them to report concerns. The very best whistle blowing systems are also independent and run by a third party on your behalf.

The whistle blowing service contractor should provide you with a call centre operation that runs 24/7, can take calls in multiple languages and provide real time or near real time translation facilities as well as a range of alternative communication channels such as via the Internet (Website or email) and good old fashioned letters. It takes great courage for someone to make that call and they need to be sure that they will be treated sensitively and that their con�identiality will be protected. STOPPING FRAUDSTERS Grant Thornton recognises that there is an increasing demand for such services in the Middle East. Recently, the Dubai Real Estate Regulatory Agency (RERA) suggested in a draft law that real estate developers should implement whistle blowing. We regularly receive requests for advice on how to implement whistle blowing. Grant Thornton are now in partnership with Whistle Blowing Security Inc, a Canadian �irm, to focus on providing a whistle blowing service to the Middle East and North Africa. The service is in fact available globally for our clients with operations outside the region. Toll free numbers for callers can be set up (where available) or collect / reverse charge facilities. Whistle Blower Security Inc has worked with Grant Thornton UAE to ensure that clients have access to an Arabic language reporting website. Real time translation is available in more than 150 languages.

The service is keenly priced with an all-inclusive subscription charge based on staff numbers. There are no separate charges for producing a report on calls received and you have the added assurance of knowing that calls will be handled by an established call centre designed for this purpose.

Identity protection Callers are provided with a unique ID and password to allow on-going communications whilst protecting their identity if they wish. Whistle Blower Security does not disclose details of calls to anyone but your designated representatives. We in Grant Thornton can provide you with investigation and fraud prevention services should you need these as a result of concerns raised on the hotline. Fraud seriously damages businesses. Fraudsters thrive because they believe that they are safe from detection, and that colleagues, or others who have suspicions are too frightened to raise their concerns. By using this new service you can ensure that someone thinking of committing fraud in your business is likely to have second thoughts because the odds of detection will have changed substantially in your favour.

FOCUS ON: ICAI DUBAI

ONE CHAPTER,

1,750 SUCCESS STORIES The Dubai Chapter of the Institute of Chartered Accountants of India (ICAI) has grown to become the most active among the 21 overseas chapters of the giant professional body.

G Jaydeep Narain Shah ICAI President

LOBALLY, ICAI has expanded and now stands as the second largest accounting organisation in the world, with over 170,000 members.

In an exclusive interview with Accountant Middle East, the President of the global ICAI based in India - Jaydeep Narain Shah (pictured left) - says Dubai, being the business hub of Middle East, occupies pivotal role in the ICAI initiatives in providing a global benchmark to its membership. Here are the excerpts from the interview; What, in your opinion, has propelled the growth of the Dubai Chapter to become the most dynamic among the 21 overseas chapters of ICAI? With more than 1,750 members, the Dubai bureau is actively involved in enhancing and updating the professional knowledge of its associates and

18 November 2012

towards this end, conducts several professional lectures and seminars, in collaboration with other institutions. These afďż˝iliations have largely enabled the Chapter to expand and grow our operations in the region.

For instance, ICAI entered into an agreement with the Higher Colleges of Technology in Dubai, and is presently working to draw a framework for organising joint programmes.

ICAI also signed a MoU with the College of Banking and Financial Studies (CBFS) in Oman, to provide assistance and support to CBFS in the area of capacity building of Omani nationals in accounting, auditing and other allied areas. Similarly, the body is providing all required technical assistance to help establish an Omani Institute of Chartered Accountants.

FOCUS ON: ICAI DUBAI

In Bahrain, ICAI has signed a joint declaration with the Bahrain Institute of Banking and Finance, to establish closer working ties that would enable the two to draw synergies from the professional expertise available with each other in areas of accounting, �inancial engineering and corporate governance. Equally, the Institute has proposed to enter into partnership with the Saudi Organisation for Certi�ied Public Accountants (SOCPA), which is still under consideration.

students and it is expected that this number will grow phenomenally in the coming years reaching to over 400 students by the year 2015.

Therefore, the opening of the new campus was essential to cater to the growing need of students and members.

Why is it important for students to gain a CA quali�ication from ICAI? Today, India is the biggest source of young manpower to the world which is technically competent and highly skilled. In the context of Chartered Accountancy professionals, the ICAI, being a true partner in the nation building is a front runner in developing the capabilities and skills of upcoming CAs.

You recently inaugurated a new teaching facility at the Knowledge Village. Why did you feel it was important for ICAI to open a campus in Dubai? The Dubai of�ice of ICAI was primarily established for the bene�it of its members and students residing in the Middle East. Since its establishment in 2004 it has been operating from the Knowledge Village (KV). The number of members and students has almost doubled during the past four years and the Chapter is expecting a similar increase in future. The activities at ICAI Dubai branch have expanded multi-fold. At times, �ive classes are being conducted simultaneously, including the IFRS classes for members, the GMCS Programme, CPT, IPCC, Final coaching classes and IT training for CA students. In addition, the growth in the number of students in CPT, IPCC and Final and GMCS is considerable and there was a need to run classes continuously. The current batch of CPT has over 50

For over six decades, ICAI has made an enviable niche for itself in the realm of education, training, examination, disciplinary mechanism, peer review, continuing professional development and standard setting and we aim to continue on that trajectory.

Today, India is the biggest source of providing young manpower to the world which is technically competent and highly skilled

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During the �inancial year 2011-12, the membership of the Chapter increased to 1, 550, representing an increase of 70% over the last four years. 413 new members joined during the �iscal year. This increase underscores its position as the largest overseas Chapter of ICAI.

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POWER TO READ: Jaydeep Narain Shah, President of ICAI, cuts the ribbon to ofﬁcially open the new campus at the Knowledge Village in Dubai, to cater for the growing number chartered accountant hopefuls.

The fresh entrants to the CA course not only focus on developing their academic capabilities but are expected to hone their skills in various other �ields like Information Technology (IT) and personality development. To sum up, our chartered accountancy course provides an excellent opportunity for students and gears them up towards rendering quality services to the society.

FOCUS ON: ICAI DUBAI

BRAND AMBITIONS Newly elected chairman of Dubai Chapter reveals his tenure plans “THE DUBAI Chapter of ICAI has come a long way to earn the recognition of the business community, mainly because of the hard work exhibited by its more than 1,750 strong members. Since its inception, the Institute’s af�iliates have worked relentlessly to overcome challenges in the pursuit of establishing ICAI as a global brand. It has been an unforgettable journey for me and we are all delighted that our chapter is expanding from strength to strength and it’s now ranked as the largest overseas chapter of the main ICAI body.

Besides representing the interests of its members to government, industry, academia and the general public, the Chapter is actively involved in enhancing and updating the professional knowledge of its members through organising seminars under the Continuing Professional Education (CPE) programme. The body also carries out various activities for the community and facilitates the training of students who are undergoing training for the Chartered Accountancy (CA) course. During the recent election where new members of the board took of�ice, there were renewed calls to further enhance the standing of the Chapter as the largest overseas Chapter of the ICAI and to convene regular training programmes, workshops and seminars that would be of signi�icant importance to members and students in the country.

Key initiatives and action plans My heart �ills with pride when acknowledging the efforts, passion, enthusiasm and the perseverance of those who have always been

committed to the progress of the Chapter. We will continue with this determination to make this chapter a success and a mark of professional triumph.

In the very �irst week of assuming of�ice as the 15th chairman of the Chapter, I had the opportunity to interact with the newly elected members of the managing committee and we agreed on key initiatives and action plans, which we believe will help steer the Institute to new heights. These include; 1. Upgrading facilities at our new campus at the Knowledge Village

to undertake more courses with visiting faculty from India and other countries. One of the areas we would like to focus on is technology, and in particular social media and how we could utilise this medium to enhance our members’ professional development. 2. Our CSR initiatives are also growing year-on-year and the momentum will continue this �inancial year as well. 3. We are in the process of initiating a joint task force comprising representations from ACCA, ICAEW, UAE Auditors and Accountants Association, ICAI, ICAP. The idea here is to represent our members strongly in the presence of the various authorities. 4. With regards to our brand building exercise, we have initiated the ICAI Middle East Awards. We would like to recognise CAs not just from the Dubai Chapter but also from all over this region.

Finally, with the Chapter largely focusing on leading the profession by promoting the Chartered Accountant brand, we aim to be at the forefront in setting the benchmark for the highest ethical and educational standards.

ICAI DUBAI – MANAGING COMMITTEE 2012-13

Chairman James Mathew

Member Krishnan Ramachandran

20 November 2012

Vice Chairman Nandakumar A

Member Karuna Luthar

Secretary Nimish Makvana

Member Rishi Aggarwal

Treasurer Pankaj Mundra

Member Nimesh Lokhandwala

Member Prabhdeep Singh Baweja

FOCUS ON: ICAI DUBAI

AIMING FOR THE STARS At a tender age of 21 Rashi Jain is already a force to be reckoned with in the accounting ﬁeld, having been honoured as the youngest chartered accountant in the Dubai Chapter of the Institute of Chartered Accountants of India (ICAI). She talks to Accountant Middle East about her journey to becoming a chartered accountant. What path did you take to become a chartered accountant? I undertook my high school studies at Our Own English School in Sharjah, up to Grade 12. Afterwards I moved to India for further studies, and that is where my journey into accountancy began. As an integral part of the course and curriculum designed by ICAI, every student enrolled is required to undertake a three-year programme commonly known as ‘article apprentice’- with a reputable chartered accounting �irm. I did my apprenticeship with the P. Bohra & Company accounting �irm. While pursuing chartered accountancy, I simultaneously enrolled for the Bachelor of Commerce course, through ICAI's Memorandum of Understanding with an Indian University. My �irst assignment involved undertaking a three-month management accounting task with the Emirates Airline, for the group’s engineering services. Being the youngest employee in the entire team, my con�idence got a major boost as the team members always supported my efforts and contributions.

The facets of accounting profession are broad, including auditing, tax, legislation, management, banking, etcetera. Is there one speci�ic area which is of most interest to you? With three years of exposure in the �ields of auditing, taxation, consultancy and legislation, I could say that auditing is one particular �ield that I tend to gravitate towards more, since it was my early plunge into the profession. As I mentioned, my �irst assignment involved undertaking a management

accounting task with the Emirates Airline, for the group’s engineering services. Auditing gives one speckled exposure to the various mechanisms of industries and their services.

What should students and youngsters look for when choosing an accounting degree? The best way to excel in the accounting �ield is to have an interest in the profession. Dealing with numbers and �igures can be daunting and therefore interest has to be inculcated in the early years of schooling. What’s the best advice you can give to youngsters wanting a career in accounting? Having �irsthand working experience enables one to realise the need to learn and grow in the industry. However, every individual has a responsibility to set personal goals for themselves and always strive to ensure that they attain them during their professional development.

Picture highlights of 2011 - 2012

Lawmaker Shri Piyush Goyal, a member of parliament in India addressed one of the many career professional development summits.

Globally celebrated author of bestselling book “The Monk Who Sold His Ferrari” – Robin Sharma – conducted a joint leadership event of Dubai and Abu Dhabi Chapters.

Malli Mastan Babu was the first Indian to reach the Seven Summits within the shortest span of time.

India’s Supreme Court Advocate Harish Salve who served as the country’s Solicitor General graced one of the events.

IFRS SPECIAL

IFRS EXPERT: Abbas is the author of a number of IFRSrelated publications and also chairs the Dubai Chamber of Commerce’s Auditors Group.

ONE WORLD, ONE SET OF CONVERGED STANDARDS

Deloitte Partner, Abbas Ali Mirza, hopes that the accounting world will soon have a common set of global accounting standards, rather than country-speciﬁc accounting rules. 22 November 2012

IFRS SPECIAL

N A BID to ensure that all countries converge into a common set of global accounting standards, proponents of the International Financial Reporting Standards (IFRS) wary of the slow pace the journey towards this process has been taking. Following the global �inancial meltdown, world leaders (including the G20) and accounting professionals the world over called for a uniform set of global accounting standards that the International Accounting Standards Board (IASB) has been entrusted with to develop and promulgate.

Conforming to IFRS According to the IASB, to this day, although approximately 90 countries have fully conformed to IFRS, about 120 nations have adopted reporting jurisdictions that require IFRS for their domestic listed companies.

Similarly, dramatic changes to promulgated standards have been made by global standardsetters such as the IASB in order to keep improving values and also enhance transparency in �inancial reporting. In an interview with Accountant Middle East about the US convergence with IFRS and the recent report by the US Securities and Exchange Commission

Dramatic changes to promulgated standards have been made by global standard-setters such as the International Accounting Standards Board in order to keep improving values and also enhance transparency in financial reporting. (SEC) on this subject, Abbas Ali Mirza opined; “The issuance of the much-awaited �inal report by the US SEC on July 13, 2012 captioned ‘Work plan for the consideration of incorporating IFRS into the �inancial reporting system for US issuers’, came as a ‘bolt from the blue’ for the protagonists of the international accounting movement." Abbas, who is also a member of the Deloitte’s regional IFRS leadership team for the Middle East region and an author of several books on IFRS globally, added that much against popular expectations, "the US SEC report did not provide the expected impetus to the high riding wave of internationalisation of accounting."

Addressing key issues The reasons outlined in the report for not being supportive of incorporating IFRS into the US �inancial reporting systems at the present are that: IFRSs are underdeveloped in certain areas, the IASB should do more to address the interpretative process, as well as consider greater reliance on national standard setters.

Other reasons include that IFRSs need to be applied and enforced in jurisdictions around the globe in a more consistent manner; there is a need to put in place a mechanism speci�ically to consider and to protect the US capital markets; the funding mechanism for the IFRS Foundation, more speci�ically the continuous reliance on large public accounting �irms to provide funds to the IASB; and lastly, the need to improve investor engagement and education related to the development and use of accounting standards.

“Let me hasten to add, this SEC 'staff report' might have been perceived by some to be the �inal blow to IASB’s untiring efforts to gain acceptance of its standards by the US, but, luckily, it was categorically conveyed to the world of accounting in the report that the views expressed in the SEC report were those of the 'SEC staff' and not necessarily those of the 'US SEC' (in other words, this was not the of�icial stand of US government on this very important and highly contentious issue of IFRS acceptance by the US),” Abbas said. Standard setters set pace Explaining how accounting standards have been impacted in the long term as a result of the urge to keep churning out new and revised standards, Abbas said; “From time to time standard setters issue IFRS after �irst exposing them to their constituents (at which stage of development the Standards are regarded 'Exposure Drafts'). In addition, IASB is working under a Memorandum of Understanding (MOU) with the Financial Accounting Standards Board (FASB), the US standard setter, to work towards achieving ‘convergence’.”

“Therefore we note that the international accounting and �inancial reporting standards are constantly being revised and in fact, in some cases the original standard could be revised twice or even three times within a few years." "The ‘International Accounting Standard (IAS) 8’ and ‘International Accounting Standard (IAS) 39’ are good examples of how the Standards are subject to change and how their titles change as well.” One size does not ﬁt all And is there any move on the part of the international standard setters to address the needs of small and medium sized entities? 23

IFRS SPECIAL

CONSUMMATE PROFESSIONAL: “When I embarked upon this career the most important personal attribute I kept in mind was to pursue it with perseverance, determination and hard work,” he says.

now it is up to the regulators in each jurisdiction that have adopted IFRS to allow those standards to be used in their respective jurisdiction.

Career in public accounting Abbas’ career has long focused on public accounting. The consummate professional says that the most important aspect of being in ‘public accounting’ is “to keep acquiring new knowledge and also updating it on a regular basis.” “It is a challenge to stay abreast of the changes and to keep oneself up-to-date in the current times, as there are ongoing amendments to the standards,” he said, adding that “by staying well-informed and up to speed with the latest technical advancements, accountants and auditors can then use the most upto-date thinking on any contentious issues.” “When I embarked upon this professional career the most important personal attribute I kept in mind was to pursue it with perseverance, determination and hard work,” he adds.

The IASB has been progressively reducing the size or the scope of the entities to which its accounting standards apply – from ‘IFRS for all’ to ‘IFRS for SMEs’. "The IASB has been progressively reducing the size or the scope of the entities to which its accounting standards apply – from ‘IFRS for all’ to ‘IFRS for SMEs’. Now, the IASB is getting ready to develop guidance for ‘micro-entities’," Abbas explains. “Initially, the IFRS issued by the ‘IASB’ were applicable to all entities irrespective of their size. In addition, with the determined efforts of the IASB, these standards gained tremendous popularity across national borders and were adopted by over 120 countries of the world including several countries in the Middle East.” Cognisant of the much-talked about philosophy of ‘one size does not �it all’, the IASB set its sight on developing a standard that would address the needs of ‘small and medium-sized’ entities (SMEs). And after years of intense debates, they �inally issued the 'IFRS for SMEs' standard in July 2009. This came as a big relief to ‘SMEs’ since this standard is a much shortened version of the ‘full IFRS’ (almost one-tenth in terms of the number of pages compared to ‘full IFRS’). What is to be noted is that, in effect, the IASB has done its job by issuing the standard on ‘IFRS for SMEs’ and 24 November 2012

Abbas is the author of a number of IFRS-related books published globally, and has also served as the chairman of the 21st session of UNCTAD’s Intergovernmental Working Group of Experts on International Standards on Accounting & Reporting (ISAR), a group based at the United Nations in Geneva. He also chairs the Dubai Chamber of Commerce’s Auditors Group.

TRIPLE ‘S’ THEORY OF SUCCESS

According to Abbas, "success does not come easy, but requires commitment, hard work and discipline." He reveals his TRIPLE 'S' theory of success, which he says has largely been the driving force in his personal life. These principles are explained brie�ly below:

1. Give to others and share with others – engage in 2. 3. 4. 5. 6. 7.

charity and be prepared to share your knowledge and experiences. Always have a smile on your face and adopt a positive attitude. Positivity brings positivity. There are no short cuts to success – it requires hard work and a lot of effort. Aim to achieve quality at all times – the pursuit of excellence is sometimes challenging but it should always be the goal. Try to add value in all what you do – think outside of the box if necessary, to do things differently. Perfect your communication skills in order to successfully get your ideas across – but also, just as importantly, be a good listener. It does no harm to dream – you might not achieve everything but it will keep you motivated especially when things are not necessarily going your way.

Views expressed in this interview are those of the interviewee and may not necessarily be shared by the �irm or organisations that he is part of.

IFRS SPECIAL

MIDEAST FINANCIAL REPORTING SET FOR DRAMATIC CHANGE As countries move to implement IFRS, Deloitte experts conduct classes to keep region up to speed with latest advances

he ongoing modifications to the existing set of International Financial Reporting Standards (IFRS) are expected to change the financial reporting landscape significantly, Veronica Poole, the Global Managing Director of Deloitte IFRS has said.

At a recent event in Dubai dubbed; ‘Global IFRS Forum and Master Class’, Poole, together with other Deloitte global IFRS experts, focused on complex areas in �inancial reporting and topics which have been subject to signi�icant changes in the recent years.

Globally, businesses are realising the importance of adhering to international standards, in order to compete in the marketplace

These include the latest IFRS Standards on Consolidated Financial Statements, Fair Value Measurements, Joint Arrangements, Disclosure of Interest in Other Entities, Financial Instruments and the Exposure Drafts on ‘leases’ and ‘revenue recognition’. “The changes being made to IFRS will impact international trade and all types of businesses 26 November 2012

across the Middle East, and worldwide,” Poole said, adding that the standards have now been adapted and are used in over 120 nations across the world, including most countries in the Middle East.

The master class also featured international speakers including Andrew Spooner, Partner at Deloitte IFRS Centre of Excellence and Leader of Deloitte's Expert Advisory Panel on ‘Financial Instruments’ and Abbas Ali Mirza, audit partner, Deloitte Middle East, and member of the Deloitte IFRS leadership team in the region. Also present was Paddy Acharya, who is an audit partner at Deloitte Middle East, and member of the Deloitte leadership team on telecom audits.

“These amendments are important not only to be able to prepare �inancial statements in accordance with IFRS standards, but also to offer clear guide and advise to the management and directors on the related company’s �inancial position and operating results,” quipped Abbas Ali Mirza.

Focus on controversial subjects The forum was part of Deloitte’s series of Middle East conferences, tailored to keep the region up to speed with the latest advances in this �ield. The IFRS (promulgated by the International Accounting Standards Board, IASB) have been in international �inancial news lately, due to divergent views on controversial subjects such as ‘�inancial instruments’ expressed by the IASB and the US standard setter, the FASB.

IFRS SPECIAL

Furthermore, the US Securities and Exchange Commission’s (SEC) �inal ‘SEC Staff Report’ released earlier this year, which did not report the much-awaited US stand on whether US public companies should be allowed or required to adopt IFRS for their �inancial reporting, provided a detailed discussion of critical issues and focus areas such as, the progress of the development of IFRS and maintenance of IFRS by the IFRS Interpretations Committee (IC) of the IASB.

Observations in this report, such as, “The standards that are issued by the IASB are generally perceived to be high quality by the global �inancial reporting community, however, there continue to be areas that are underdeveloped…” and “the (SEC) Staff’s outreach both domestically and internationally indicates that the IFRS IC should do more to address issues on a timely basis”, have evoked considerable debate in the world of international

accounting wherein more than 120 countries are already applying IFRS.

In addition, the IASB has been working on completing its un�inished agenda under the “MOU” with the US Financial Accounting Standards Board (FASB). It has also issued several new Standards (IFRSs) and is working on several new/proposed Standards (“Exposure Drafts”) on some highly contentious accounting issues. “Globally, businesses are realising the importance of adhering to international standards, in order to compete in the global marketplace. Globalisation has now become central to a �irm’s growth strategy,” said Paddy Acharya.

A series of Deloitte IFRS seminars will be hosted by the �irm in other countries across the Middle East in the coming months, to address these ongoing changes.

‘BIG FOUR’ WELCOME FINAL DRAFT OF IFRS 9 New proposals will allow companies to reflect better on their risk management activities in the financial statements, accounting firms say

HE INTERNATIONAL Accounting Standards Board (IASB) has issued a draft of general hedge accounting requirements to be added to IFRS 9 Financial Instruments.

The modi�ied proposals allow closer alignment between companies’ risk management activities and their hedge accounting procedures and according to Ernst and Young (E&Y) will “allow many entities better to re�lect their risk management activities in the �inancial statements.”

KPMG said that while some industries, such as banking and insurance, may see the proposals as of lesser importance than the Board’s forthcoming macro-hedging paper, sectors with substantial commodity related risk such as airlines and manufacturers will welcome the opportunities provided. KPMG UK’s technical accounting partner Andrew Vials said these companies would “be able to re�lect in its �inancial statements an outcome that is more consistent with how management assesses and mitigates risks”.

E&Y’s global IFRS Financial Instruments leader Tony Clifford said this would create a simpli�ied, more principlebased hedge accounting model linked to an entities risk management model. Such a system would best bene�it

“non-�inancial services entities” who could hedge for clearly de�ined individual risk items.

Reduction of operational burden He added that this is an improvement on the current model which “includes complex rules, some arbitrary limits, and onerous hedge effectiveness testing that often result in an entity not being able to apply hedge accounting to its economic hedging relationships.”

Vials warned that while the proposals will allow for more �lexible hedge accounting, the guidance remains complex in some areas and to properly comply some companies “may need to apply a greater degree of judgement”. He added that the more principles based approach will need additional disclosures of how a company is managing risk. Clifford concludes that until the completion of the macro hedging product in 2014, banks will need to be careful about reconciling their hedge accounting policies with the new IFRS. However, they will bene�it as the standard “should reduce the operational burden of hedge accounting and provides more �lexibility.” The IASB is not seeking any comment on the draft, which re�lects decisions resulting from its technical deliberations, and has been made available online until early December. – The Accountant, UK

TAX WATCH

UAE TAX-FREE AS EUROPEAN ECONOMIES PILE ON THE LEVIES

New research by UHY shows gap between high tax Western Europe and rest of the world growing larger

HE UAE has one of the world’s highest per-capita incomes at $48,200, and remains a tax-free country while Eastern Europe, BRICs and AsiaPacific are offering the lowest taxes, according to the latest survey undertaken by the international auditing and accounts firm UHY. The yawning gap between personal taxes in high and low-tax economies, meanwhile, has grown even wider over the last year, with major European economies imposing an average $1,784 tax rise on those earning $200,000 over the last year compared to an average $266 tax cut in the BRIC (Brazil, Russia, India, China) emerging economies, statistics in the report by reveal.

UHY says that the broadening tax gap has been driven by struggling European economies raising taxes to plug gaps in their budget deficits. Low earners on $25,000 in the studied major European economies saw their taxes remain the same between 2011 and 2012, compared to an average tax cut of $198 in the BRICs. 28 November 2012

UHY tax professionals studied data in 26 countries across its international network, including all members of the G8 and the emerging BRIC economies. It calculated the basic ‘take home pay’** of a single, unmarried employee after income taxes and employee social security contributions are deducted for salaries of $25,000, $50,000, $200,000, $250,000, and $1,500,000.

Personal tax gap widens UHY says that the broadening gap has been driven by struggling European economies raising taxes to plug gaps in their budget de�icits. The accounting network warns that this is making European economies even more uncompetitive compared to rival low tax economies.

Ladislav Hornan, chairman of UHY, says: “The personal tax gap between Western Europe and the rest of the world continues to grow larger. The distinction is sharp. Western European countries make up the �ive highest taxing economies in almost every tax bracket we looked at. Countries like China, Estonia, and Brazil consistently had the lowest tax burden.” “Countries like France or Italy have had relatively high taxes for some time, but this year has seen other debt-laden European economies join them. For example, Spain has seen big tax rises for high earners as governments have tried to fund budget shortfalls.”

TAX WATCH

Ladislav Hornan adds: “The big European economies need to be very careful. They are putting a lot of pressure on individuals. There is a ‘brain drain’ risk for some countries with high personal taxes, particularly amongst internationally mobile high earners. For example, South-East Asia in particular has been increasingly attracting professionals from Europe. Losing talented workers and the taxes they pay will make it even harder for countries to close de�icits.”

“Traditionally, the EU has been able to offset the effect of high taxes by offering a wide range of public services. However, tax rises in some EU countries have come hand-in-hand with swingeing cuts to public services.” Emerging economies hold up The BRIC countries – Brazil, Russia, India, China – all have some of the lowest levels of personal tax and social security contributions. The average taxpayer in a BRIC country will keep 85% of their income at $25,000 and 75% at $200,000. This compares to just 80% and 62% for the same average taxpayers in G7 countries.

Low earners on $25,000 in the studied major European economies saw their taxes remain the same between 2011 and 2012, compared to an average tax cut of $198 in the BRICs.

The G7 could only manage an average tax cut of $31 for those earning $25,000 from 2011 to 2012, compared to the average $198 tax cut in the BRIC emerging economies.

Two of the countries imposing the �ive highest tax rises between 2011 and 2012 for those earning $200,000 were G7 countries: the US and France. Ladislav Hornan adds: “The low tax economies, not all of which are developing economies, have been able to maintain or cut their tax rates over the past year.” There were six countries to take over 50% of incomes, all in Western Europe, and all for incomes over $1,500,000. Those countries were: France (54% income taken); Italy (52%); Ireland (52%); the Netherlands (51%); Spain (50%); and the UK (50%). France recently announced plans to introduce a dramatic marginal 75% tax rate on $1.3m+ (EUR 1m+) incomes from 2013.

Russia was the most consistently low-tax economy, appearing most often in the �ive lowest taxing economies across the pay brackets. Italy and France appeared most often in the �ive highest taxing economies.

Higher end of income scale Nikolay Litvinov, partner of UHY Yans-Audit LLC in Russia, a member of UHY, comments: “Russia’s 13% �lat rate of income tax makes it very competitive compared to rival economies, especially at the higher end of the income scale. Russia is consistently one of the cheapest places to live in terms of income tax. These low tax rates may help convince young and entrepreneurial Russians to stay in the country, and they may even tempt expats to return.” “A taxpayer earning $250,000 will take home over $80,000 more than they would if they lived in Italy.”

Bernard Fay of UHY Fay & Co in Spain, a member of UHY, comments: “Last year, Spain performed well compared to other European economies in terms of income taxes. However, there have been big tax increases at the higher end of the income scale, as well as cuts to public services.”

Ladislav Hornan, chairman of UHY: “There is a ‘brain drain’ risk for some countries with high personal taxes.”

“With high unemployment, drastically cut public services, and high taxes for those in work, there’s a very real risk of a ‘brain drain’ in Spain: younger and experienced workers will look enviously at other EU countries. It says a lot that other parts of Western Europe are attractive to Spanish workers, when Western Europe as a whole is performing poorly compared to other regions.” 29

TAX WATCH

The ﬁscal strength James Tng, Tax Partner, UHY Haines Norton in Australia, a member of UHY, says: “Australia seems to have found the balance between a progressive and competitive tax system. Unlike other major industrial economies, Australia doesn’t have a huge debt burden to complicate things. Low taxes are offered for the lowest earners, but the taxes on high earners are still a lot lower than elsewhere.”

Figure 1 – Income kept by those earning $25,000 and $200,000 after personal taxes and social security contributions in 2012 UAE Japan Australia China Ireland Nigeria Russia Netherlands Malaysia UK Brazil Austria Canada*** USA*** Spain Mexico Estonia India France Slovakia Czech Republic Italy Uruguay Germany Romania

UAE Russia Nigeria Japan Czech Republic Slovakia Romania Estonia Brazil Mexico India China Malaysia Australia Canada USA Uruguay UK Spain Austria Germany France Ireland Netherlands Italy

“There has been a general easing of the tax rates of low and middle income earners over the past decade, beginning with the introduction of a Goods and Services Tax in 2000.”

James Tng adds: “The low tax burden re�lects the �iscal strength of the Australian economy, particularly in the decade prior to the global �inancial crisis. Australia entered the crisis with little debt and very little in the way of the social security structures that other major economies have to fund, particularly in Europe. Consequently, Australia hasn’t been forced to raise personal taxes.”

Figure 2 – Change in income kept by those earning $25,000 and $200,000 from 2011 to 2012 (positive number indicates a tax cut) France Uruguay Netherlands Spain Austria Canada Romania Japan Russia Mexico Ireland Italy Malaysia Slovakia China USA Czech Republic Germany Brazil UK Nigeria Australia India

-192 -104 -89 -75 -68 -1 0 0 0 0 0 0 0 14 49 51 59 86 114 272 382 540 628

18,567 18,759 18.203 18,306 21,249 21,338 20,145 20,220 20,893 20,962 20,696 20,697 17,535 17,535 24,240 24,240 21,750 21,750 20,118 20,118 22,629 22,629 18,305 18,305 21,183 21,183 18,499 18,484 22,914 22,865 20,366 20,315 18,453 18,393 17,643 17,558 20,906 20,792 20,983 20,711 22,146 21,764 23,873 23,333 18,973 18,345

Spain France USA Uruguay Austria Slovakia UK Australia Italy Japan Russia Ireland Mexico Malaysia Romania Germany Canada Brazil Netherlands China India Czech Republic Nigeria

* Includes data from Germany, UK, Italy, Ireland, Netherlands, France, and Spain ** Including basic allowances ***Country data is city-speci�ic, for instance, US data are from New York City, Canadian from Toronto

30 November 2012

-6,704 -5,876 -3,837 -586 -167 -139 -77 -48 0 0 0 0 0 0 3 57 67 98 112 340 628 2,888 3,582

117,117

123,821 UAE 111,574 117,450 Russia 123,595 127,432 Nigeria 122,320 122,906 Japan 112,205 Czech 112,372 Republic 157,634 Slovakia 157,773 121,609 Romania 121,686 132,097 Estonia 132,146 106,610 Brazil 106,610 Mexico 164,109 164,109 India 174,000 174,000 China 110,106 110,106 Malaysia 142,180 142,180 Australia 138,910 138,910 Canada 154,719 154,716 USA 111,846 111,788 Uruguay 123,943 UK 123,876 147,946 Spain 147,848 109,812 Austria 109,700 140,000 Germany 139,660 139,898 France 139,270 Ireland 159,883 156,995 Netherlands 166,784 163,202 Italy

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GFS REPORTING

GOVERNMENT LAUNCHES NEW FX REPORTING SYSTEM 'Emirates Gate of GFS' scheme expected to aid in measuring monetary activities accurately, Ministry of Finance says

HE MINISTRY of Finance has published the UAE version of Government Finance Statistics (GFS) system, a reporting system which compiles data that measures the financial activities of the government.

Dubbed the “Emirates Gate of GFS reports”, the new system is expected to aid of�icers in the analysis of the budget and �inancial activities, focusing on the government’s contribution to cumulative investment and savings, while also providing for comparison across the seven emirates.

“The Ministry of �inance endeavours to use the best means to measure the government �inancial performance, as we aim to improve transparency processeses and work towards a greater conservation of public money,” said Saeed Rashid Al Yateem, Executive Director of Revenue and Budget at the ministry. The GFS manual was issued by the International Monetary Fund (IMF) in 1986, and was largely cashbased. However, the new GFS manual (GFSM, 2001) has moved to accrual-based reporting. Presenting ﬁscal statistics The GFSM2001 provides guidance on how to present �iscal statistics so that they are comparable across Summary of revenue, expenditure and surplus/ deﬁcit at the government level for the year 2011 (AED million):

the various divisions of government, and that the impact of the state’s activities should be presented in the framework of a balance sheet, similar to that of business accounting.

“To allow for comparability of government �inance statistics within a country, for instance when comparing the �iscal activities of central, state, and local governments, the relevant institutional units should be consolidated and presented as standardised subsectors with the institutional coverage speci�ied,” the IMF says in its latest manual.

Based on the GFS framework, the major �iscal summative presented in the Emirates Gate of GFS reports’ system include the government’s net debt, which shows the measure of the strength of the Government’s �inancial position and comprises Surplus/deficit 36,160 selected �inancial assets and liabilities, and net �inancial worth, which shows the strength of the Government’s �inancial position but avoids valuation issues with non �inancial assets in measuring net worth. Others include �iscal balance and underlying Expenditure cash balance. 343,706 Revenue by GFS manual classiﬁcations groups at the UAE level for the year 2011: (AED million)

400000

379,865

350000

300000

Surplus/deficit 36,160

Revenue 379,865

282,159

250000

200000

150000

Expenditure 343,706

Revenue 379,865

100000

73,133

50000 4,325

20,248

0 Revenue

32 November 2012

350000

Taxes

343706

Social contributions

Grants

Other Revenue

GFS REPORTING Surplus/deficit 36,160

“The Ministry of Finance aims to achieve its strategic goals through the coordination of �iscal policies while raising the ef�iciency of legislation Expenditure Revenue and �inancial systems of accountability,” added 343,706 379,865 Al Yateem.

400000

“The startup launch of the two systems re�lect the Ministry’s continuous improvement in the electronic services that support sustainable and �lexible payment scheme for the UAE residents,” Al Yateem said.

379,865

350000

300000

282,159

250000

200000

150000

100000

Ofﬁcials from the UAE Ministry of Finance and the National Bank of Abu Dhabi address the press at an event where they unveiled a new government statistics reporting system.

73,133

50000 20,248

4,325 0 Taxes

Revenue

Social

Grants

Other

contributions by GFS manualRevenue Government expenditures classiﬁcation groups at the UAE level for the year 2011: (AED million)

350000

343706

300000

200000 162517 150000

100000

45637

44760

3943

2366

7309

Interest

Subsidies

31771

Consumption of fixed capital

35286

10117

Infrastructure projects

Other expenditures

Social benefits

Grants

Use of goods and services

Compensation of employees

0 Expenditures

Demonstrating how the GCC Takamul System works, Khalid Ali Al Bustani, the Assistant Undersecretary of International Financial Relations Sector at the Ministry of �inance emphasised that, when fully integrated, the facility will enable the ministry to conduct specialised statistical operations that are offered by the UAE and GCC, as well as screening the areas that need improvement in the quality of transactions provided both inside and outside the country. The executive showed how the system harmonises �iscal control and monetary policy between the ministry of �inance and the Federal UAE Government, by helping to build a consolidated �inancial database for all ministries, federal entities and local authorities in each of the seven emirates. “The system integrates the �inancial statements for different sectors, allowing the presentation of accurate information that will enable decision makers to prepare plans and take appropriate and necessary decisions to manage public expenditure in the UAE,” he explained.

250000

50000

Second generation e-Dirham During the same event, of�icials drawn from the ministry and from the National Bank of Abu Dhabi highlighted also the bene�its of GCC Takamul system and the new services of the second generation e-Dirham - a more �lexible system for making government payments.

Government of�icials also made a presentation relating to major strides achieved through the implementation of the Federal Financial System, lauding the network's ability to harmonise budget reports, �inancial accounts, statistics and special management reports across the seven Emirates.

GCC Takamul system According to the of�icial, the system also addresses various issues that include transportation and residence, professional practice, economic activities, real estate ownership, ownership and circulation of the purchase of shares, establishing companies, topics on the Customs Union and the obstacles of trade within the GCC region. “The launch of GCC Takamul system is part of the ministry's plan to streamline and ensure proper �iscal functioning in the Gulf Common Market and the Custom Union. The system is meant to ensure the best application of the market’s resolutions, by allowing the opportunity for GCC citizens to share their suggestions, complaints and observations. This initiative contributes to strengthening the market’s position as one of the most prominent economic blocs in the region and globally,” Al Bustani added. 33

TECHNOLOGY TALK

NEW SHADES OF SAGE Commonly used accounting software Sage Peachtree becomes Sage 50 as software-supply firm revamps products

N AN EFFORT to strengthen its brand, the global supplier of accounting software solutions Sage has embarked on a major re-branding campaign, by renaming majority of its products. According to Reggie Fernandes, the company’s director of Gulf operations based in Dubai, the rebranding drive began in May this year and the full switch to new product names is scheduled for November 2012.

Commonly used accounting software Sage Peachtree and Sage Simply Accounting is set to become Sage 50. The other new mappings include Sage ERP Accpac which has now become Sage 300 ERP, while Sage ERPX3 remains the same. “During an earlier period, all of our products used to be known by their individual product names. However, we have now decided to align all of our products under the strong ‘Sage’ branding,” Fernandes explains.

History has also shown that all entrepreneurs who innovate during economic downtime always emerge as market leaders during recovery time.

Products’ sophistication In an interview with the Middle East Accountant, the executive said the products have also been upgraded, and the numbering of the branded portfolio, which comes in sequence of Sage 50, Sage 100, Sage 300, Sage 500 re�lects the products’ increasing sophistication and superiority. “To date, we now have over 1,000 customers utilising the Sage 300 ERP software. Aside from 34 November 2012

this, Sage also offers a fully integrated product that allows customers a complete 360 degree view of the business. Our products highlight the signi�icance of the integration between ERP and CRM, which adds tremendous value to the customers. These clients include small companies as well as large corporations like banks and hospitals. We also have manufacturing companies that use this product. The upgraded versions have been rebranded and new features added to help make accounting much easier,” added Fernandes.

"We were known by our products to a larger extent, but now we want to be identi�ied by the Sage brand name. This is a process that has been taking place for the last year, and we are working towards becoming the strongest and leading market contenders."

“Sage’s accounting solutions are designed for SME’s, as well as large corporations and they go far beyond accounting, providing an array of business management tools that offer instant access to key information, helping in HR and controlling pro�itability easier than ever.”

Staying competitive The new Sage 50 (Formerly Sage Peachtree) which is mostly used by small entrepreneurs promises to provide businesses and accountants with customisable access to critical information including billing, payments and other important transactions, thereby helping small businesses to stay competitive in an ever-evolving business landscape.

“When the global �inancial crisis hit, we obviously knew most of our clients would be adversely affected since most of the entrepreneurs had not experienced recession in their lifetime,” Fernandes explains, adding “Therefore we decided to launch a campaign in 2009 that would at least help to cushion and minimise the effects of the crisis on our clients’ businesses.”

TECHNOLOGY TALK

NEW NAME, SAME PRODUCT: ▄ ▄ ▄ ▄ ▄ ▄ ▄

Reggie Fernandes, Director - Gulf Operations, Sage Software Middle East

Sage Peachtree rebranded as Sage 50 Sage MAS 90 rebranded as Sage 100 Standard ERP Sage MAS 200 rebranded as Sage 100 Advanced ERP Sage Accpac 100 rebranded as Sage 300 Standard ERP Sage Accpac 200 rebranded as Sage 300 Advanced ERP Sage Accpac 300 rebranded as Sage 300 Premium ERP Sage ERP MAS 500 rebranded as Sage 500 ERP

“We visited our channel partners and retailers based in 10 countries in the Gulf region, where we carried out a study that focused on the challenges they faced in their operations. The �ive major hurdles they were encountering included dif�iculties in collecting funds from customers, sustaining their businesses during the tough times and retention of their key customers during the downtime.” After Sage spoke to many of their customers, the company found out about how these businesses were largely encountering dif�iculties during the crisis period, particularly across debt collection. The company then developed and provided a unique collection management system that saw debt collection improve by 20 to 30 per cent.

“It was the same case we found about customer reporting, which made them �ind it dif�icult to retain their clients. Here, we developed a CRM tool to educate them more about what they needed to do in order to have a sustained effect in their clients’ mind,” he says, adding, “If you are not in the mind of your customer you’ll lose out.”

People want more for less Fernandes particularly identi�ied Bahrain, where “the report-back from our clients has been the most positive, and although there have been intermittent political trouble there, Sage’s business has grown almost doubled since we started running these campaigns.” “Sage is a �irm believer that when markets are down, innovation is the key. History has also shown that all entrepreneurs who have revamped or have been innovative during the downtime emerged as market leaders during recovery time,” he added.

In today’s corporate world, people want more for less. Businesses have become cautious in their spending, even if it’s towards a key investment, the management feels it’s an unnecessary expense. So we have to create more value at a less cost. Accountants have the responsibility to create that value. Eventually, the £2.24 billion company’s strategy is to move from a house of product names co-branded with Sage to a strong branded house, emphasising Sage.

TAG-ORG LAUNCHES CLOUD COMPUTING SERVICE Latest move aims at keeping up with the rapid developments in IT, ﬁrm says Talal Abu-Ghazaleh Organization (TAG-Org) has launched the new TAG Cloud Computing consulting service to tap into the region’s growing IT sector and make the new technique accessible to business and services �ields for the public and private sectors. The �irm said the purpose of this service was to assist companies and corporations gain from the bene�its of cloud computing.

“A team of experts at TAG-Org has been working to �inalise the implementation of all the project’s phases, including signing agreements with global companies already implementing cloud computing,” the company said in a statement. Recently, TAG-Org’s chairman Dr Talal Abu-Ghazaleh met with representatives of VMWare, a �irm that specialises on cloud infrastructure, to follow up on the progress of the project.

“This project represents a strategic transformation that helps the IT sector respond more ef�iciently to business requirements in a �lexible and suf�icient manner while minimising operational risks,” he said.

“ TAG-Org realises a new unique achievement represented by helping those working in the IT sector to innovate while maintaining credibility, achieving information security

and controlling all applications and services through this project,” he added.

Dr Abu-Ghazaleh also stressed his keenness to mark a transitional step in education, by implementing this technology at the Talal AbuGhazaleh University and other colleges af�iliated to TAGOrg, to enable them acquire the means to transfer their applications, systems and software. 35

PERSONALITY & PRACTICE

LIFE IN THE FAST LANE

You can’t talk about accountancy in the UAE without mentioning Rajiv Saxena. As one of the industry’s leading ﬁgure both locally and abroad, the shrewd businessman has an astute acumen and a formidable IQ which he both engages to steer him through a life of remarkable achievements. He talks to Joyce Njeri about his passion for numbers, Ferraris, the importance of family, charity and leaving a legacy …

RIDE IN his 458 Spider customised Ferrari comes to a stop outside one of Dubai’s upmarket addresses, where a large barrier glides upwards and ushers us in into the imposing Emirates Crown apartment building in the Marina area. As we drive a few metres inside the basement parking area, a couple of other top-of-the range cars parked next to each other are evidence of what it means to live a life of luxury and comfort. No, Rajiv Saxena is not a Bollywood hunk, but a chartered accountant who, as he puts it, “has rightfully earned his wealth through sheer hardwork, discipline and dedication.” And just like his stylish apartment, his new UHY-Saxena offices at Mazaya Business Avenue ooze class and contemporary sophistication. 36 November 2012

Located in a high rise building just behind Jumeirah Lake Towers (JLT), the entire office interiors look as if they’ve been designed for the connoisseur. These suite-like rooms also have a separate dining and meditation area.

Contemporary sophistication The executive of�ices are encased by a deep rich mahogany �inish, blending with modern art design elements. The walls and work surfaces feature veneers which have glassy-metallic �inish, not mentioning the cozy brown leather couches which have been colour-coordinated to bring out an inviting environment with executive style, characteristics and function. This is where I settle down for a long chat with Rajiv, the Managing Partner at accounting firm UHY – Saxena.

PERSONALITY & PRACTICE

Rajiv is not your regular smart-suited-black-tie accountant. The down-to-earth father of two has a penchant for numbers and �igures, just like his love for Ferraris. He took me for a spin around the Marina area in his bright yellow-coloured powerful machine. "Why yellow?" You may ask.

“Ferraris have long been associated with the red colour but what many people don’t know is that the brand’s original colour was actually yellow, and not red,” he quips.

Spider specs The 458 Spider Ferrari is the latest addition in his impressive collection. The cabin features a seamless combination of comfort and elegance, and unlike the other brands of cars, the Spider doesn’t have the clustering of controls on the steering wheel.

“This ensures that the driver can easily reach all of the commands without loosening his grip on the steering wheel,” Rajiv brings me up to speed, literary, with the inside-functionalities of his pretty little thing.

FERARRI BUFF: Rajiv Saxena poses next to his 458 Spider customised Ferrari.

“The 458 Spider is more oriented towards weekend driving trips with a friend or your partner, rather than using it for your daily means of transport to work,” he adds.

And his love for Ferraris does not end there. He is also a member and honorary treasurer of the Ferrari Club of Dubai and enjoys a pretty hectic social life with his family and friends.

A vital question remains for investors - have banks and other financial institutions learnt their lessons post global economic crisis?

In the thick of the 2008-2010 global recession, most certi�ied accountants were scratching their heads and chained to their desks while trying to balance their books and grind out returns. This is a period Rajiv would want to forget fast. Swirling comfortably in his chair, Rajiv was forthcoming and direct about the global �inancial crisis.

“We are in 2012, and yet we are still hearing stories about banks’ write offs, undiscovered bad mortgages, the Libor scandal, so four years later have we learnt a lesson? He asks rhetorically.

“It’s not a secret that bad accounting practices and habits always have a way of re�lecting in the overall performance of a company,” he says, without mincing words, adding, “The lesson learnt is that we as professionals need to go back to our conservative bases.” “The accounting and banking industries have been adopting tougher regulatory measures to restore public con�idence and prevent the recurrence of another global �inancial crisis,” he continues, “However we still witness mistakes and scandals in these lending institutions.” “The banking industry in particular has been battered, from the myriad of never ending scandals. These banks will have to work hard to regain investors’ con�idence,” he says.

Lessons from ﬁnancial crisis Late last year, Swiss bank UBS revealed it had lost around $2 billion due to rogue dealing by one of its traders. In May, US bank JPMorgan Chase announced it lost $2 billion on a bad trade. The announcement led to its share price plunging by more than 11 per cent, shaving about $17.5 billion from its market value, according to Bloomberg �igures. In June, Barclays bank was �ined £290 million by US and UK regulators for attempting to manipulate inter-bank lending (Libor) rates. “A vital question remains for investors - have banks and other �inancial institutions learnt their lessons post global economic crisis?” he asks rhetorically.

“After the anguish of the past four years, it is dif�icult to imagine what else could go wrong for the banking industry,” he laments, looking serious in a smart navy blue suit, azure-coloured shirt accessorised with a matching tie.

Since the crisis hit, there has been doubt concerning the use and implementation of the International Accounting Standards (IAS). A wave of changes has been urged on the part of the global standard-setters like the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) for the need for improvement and more transparency in the industry. Rajiv opines that accounting standards should be harmonised in order to bring lucidity and fairness in all countries. “We have a great divide on accounting standards across the Atlantic.” 37

PERSONALITY & PRACTICE

“The European accounting standards are quite different from the American accounting standards, so what is needed is to bridge that gap. These standards need to be uni�ied,” he says �irmly.

“Flawed �inancial reporting served as the root cause of global economic crisis through some accounting rules such as mark-to-market valuation commonly known as ‘fair value,’ and the delay in recognition of bad debts, until losses was incurred. This led to massive distortion of information and investment decisions, which eventually contributed to market failures.” He urged for better balance of respective countries’ common law and statutory approaches to �inancial reporting in order to minimise and alleviate such mistakes.

“Our role as auditors is to provide accurate �inancial reporting for the markets so investors can independently value the securities and make decisions accordingly,” he said. UHY-Saxena global operations Not only is Rajiv Saxena a skillful professional but he is also the embodiment of what one can achieve through dedication and hard work.

His accounting �irm UHY-Saxena is a member of Urbach Hacker Young International Limited - a UK company. In 1999 Rajiv was selected to become an independent member of an International �irm of auditors and accountants UHY and joined them the same year. UHY is a global network of accounting and consultancy �irms with over 6,800 professionals operating in more than 250 business centre’s in 81 countries across all continents.

UHY in Dubai has now over 70 professionals working in the newly �inished Jumeriah Lake Tower of�ice combining much of the workforce from the other four of�ices situated in the UAE.

Our role as auditors is to provide accurate financial reporting for the markets so that investors can independently value the securities and make decisions accordingly. “I discovered the industry in the Middle East 21 years ago, that is when I came to set up my �irm, at that time, audit was not even a requirement in businesses. We had very few enterprises which required an auditor because they were only a few �irms that had �inancial 38 November 2012

FAMILY MAN: Apples don’t fall far from the tree and just like their father, Rajiv’s children Tanisha (L) and Tanmay (R) are pursuing equally demanding careers, pictured here with their mother Shivani

exposures to banks, so we had very few �irms that bothered with the audit. But over the years… it has changed.”

“We’ve had new regulations coming in. Actually there are regulations in place that require all the limited companies to have their accounts audited. But these regulations are not strictly implemented, and if there is any form of implementation, it varies between the emirates. For instance Dubai may not implement the same regulations as Abu Dhabi, while the emirate of Sharjah has a different set of regulations to that of Dubai, required for audit on limited liabilities companies.” “So �irst of all we need a standard, and we need a strict implementation of these regulations because limited liability companies form the largest group of corporate in the UAE, and till today I haven’t seen any strict regulation that companies are required to �ile their audited �inancial statements in order to have their business licenses renewed. In the free zones you have stricter implementation so you have much higher percentage of companies on audit. So I think the basic need of the day is �irst of all the implementation of audit rules, they need to be made compulsory, whether by the Central Bank or by the Ministry of Economy is a different matter but for the purposes of �inancial health of companies, regulation compliance has to be enforced.”

“If businesses do not comply with audit regulations, there should be a penalty imposed by the government,” he says. UHY-Saxena embarked on a growth and development strategy in early 2000 and is now managed by a professional Board of Directors and has diversi�ied its activities to include business intelligence and private client services.

PERSONALITY & PRACTICE

Remarkable journey into accountancy In 2001 Rajiv set up the Matrix Group Limited as an independent business unit. The company now has interests in hospitality, mining, power, metals and real estate with interests in India, U K Europe and Africa. Rajiv serves as an independent director in a number of companies. Being a hands-on CEO, the high-�lying chartered accountant always travels in style... by air, land and water to these of�ices where he personally supervises work and engages employees.

And what's his leadership style? “Open door policy,” he answers. Rajiv was born into a middle class family, in 1958 in Bombay, India. His father was an economist for the United Nations (UN) and travelled the world undertaking economic development work on their behalf. His mother, he says, “was the driving force in the family unit and supported my father in his Indian business ventures.”

The accountant was schooled in Bombay at the Jesuit Campion School in Colaba before entering the Sydenham College of Commerce and Economics part of Bombay University to begin a Bachelor of Commerce degree course at the age of 18 years.

After graduating with honors he went on to a threeyear post professional graduate course in chartered accountancy with the Institute of Chartered Accounts of India (ICAI). On completion of his post professional graduate course he was enrolled as a member of the Institute where he now holds a fellowship of the ICAI. “This is where the impetus for private accountancy practice began to take shape in my mind,” he says.

TALKING POINT: The lesson learnt (from the global ﬁnancial meltdown) is that we as professionals need to go back to our conservative bases, Rajiv says.

“I needed to be able to be creative and control my own destiny, and I didn’t know that about myself until I got into private practice,” he adds.

So, in 1982 Rajiv started his �irst business venture in Bombay where he formed MehraSaxena and Associates. In 1985, he married his wife Shivani and continued to operate out of Bombay with 13 staff until 1992, when, together with other two company associates, he moved the �irm and his family to Dubai.

A consummate professional During these early days Rajiv established himself as a true professional and gained the respect of a number of in�luential Emiratis in Dubai. Over the years he has been called upon to provide advice to many different organisations and has acted as an advisor to leading private banks for their Middle East strategy. A consummate professional Rajiv says his advisory work takes a huge toll on his time as his “travel schedule is extremely busy and complicated.”

“However, I’m always available for my clients who often require my services at odd times during the night and at weekends with requests for all types of assistance,” he says, while narrating a case where a client on one occasion, asked him to organise his son’s wedding in Dubai. Having had an extraordinary career and seeing his two children grow into adulthood, it is most evident that the accountant still has much energy left. So what does the future hold for him? Passion for charity With a supportive wife by his side, Rajiv’s other passion is charity where he provides support to benevolent organisations for children with special needs, orphans in India and many other ad hoc projects.

Rajiv is also a member of the Dubai Chapter of the ICAI as well as several memberships to business groups in Dubai and India.

The couple has two children Tanmay and Tanisha both currently studying in the United Kingdom. Tanmay, born in 1989 attended the Dubai College before going on to UCL in London to study economics and philosophy. He is now a chartered accountant working as an intern with KPMG to complete his articles. Daughter Tanisha was born in 1992 and also studied at the Dubai College before joining the prestigious London School of Economics to study economics and philosophy. UHY recently conducted a global survey on personal taxes. Turn to page 28-30 for more insights into the research.

CAREER DEVELOPMENT

CONSIDERING A CAREER IN ACCOUNTING AND FINANCE? Simi Nehra, Head of Corporate Finance at Grant Thornton UAE, shares his thoughts on the three-dimensional ﬁnancial universe

HE JOURNEY to become a financial professional can be exceptionally rewarding, however it takes hard work and years of experience in practice and industry, and even then, you continually need to sharpen the axe.

Simi Nehra, ACA, CF Director, Head of Corporate Finance - Grant Thornton UAE

Whether you have just graduated, are an accountant looking for a new challenge or even looking for a career change, it is established that professional accounting and �inancial quali�ications not only help bolster your technical knowledge which positively improves your on-the-job experience, but it also enhances your career prospects and salary.

In this ever competitive market place for young talent, employers today look for candidates who are self-starters, and what better way to demonstrate this by enrolling in a professional programme or becoming part quali�ied using your own initiative.

The professional qualiﬁcation route Professional institutes over the past decade have improved their accessibility and allow you to enroll and sit exams in your city. Accredited tuition programmes are also widely available from local �inancial training partners such as the Genesis Institute. 40 November 2012

Professional quali�ications in this era have already bene�ited from decades of experience evolving due to reporting, �inancial and legislative changes driven by accounting scandals, �inancial and economic bubbles as well as periods of recession.

The best practice accounting and �inancial quali�ications originate from institutes based in the UK and USA, broadly other countries have their own derivatives based on similar syllabuses. Three-dimensional ﬁnancial universe Generally, unless you are from the same gene pool as “Good Will Hunting”, without a formal professional quali�ication, over time there remains large gaps in your technical knowledge which simply do not get bridged from on-the-job experience.

This may leave the individual struggling to get ahead as a horse with blinkers or as a �inance professional seeing the world in only one dimension. A professional quali�ication dramatically improves your ability to see through the �inancial and commercial effects of a transaction, also the quali�ication enables the individual to quickly grasp complex concepts which otherwise would be dif�icult to understand.

CAREER DEVELOPMENT

This is usually when technical and on-the-job experience converges and the individual begins to view in 3D. At this point, the individual will experience rapid progression and begin to add tremendous value to clients and internal management. Professional quali�ications also give you a broad understanding of the international money markets, economics and the value chain in business.

One quali�ication could achieve this euphoric capability, however if you go on to specialise in a certain area of �inance then one should consider the available options for a second quali�ication. One size does not �it all, there are many options and you need to seek advice to be sure which one suits your personal circumstances and your careers aspirations.

One-dimensional view Accounting is fundamental to any business, large or small; whilst management forge ahead in sales and operations they need access to up-to-date �inancial information to ensure their decisions are backed up by �inancial fact. If the quality of �inancial information is poor, not comparable or timely,

Professional qualifications in this era have already benefited from decades of experience evolving due to reporting, financial and legislative changes driven by accounting scandals, financial and economic bubbles. clearly management runs the risk of neglecting important �inancial indicators such as;

1. Which products contribute the greatest gross pro�it margins 2. Which costs are escalating out of control 3. How much cash is on hand and what are the likely short and long term cash �lows effects on a potential deal. For example, a big contract is great news for a business; however the cash �low impacts in the early months of the contract may require an overdraft or simply more equity funding from the shareholders to allow the business to meet its commitments and stay solvent in the short term.

The Association of Certi�ied Chartered Accountants (ACCA) and Chartered Institute of Management Accountants (CIMA) are both 10-14 paper UK quali�ications which in my opinion guarantee to provide you with a concrete platform to ensure, at the minimum, the 1D view is gained. ACCA has the bene�it of including audit and assurance modules which allows you to work as an external auditor. CIMA’s main focus is for candidates who look to work internal management accounting and �inancial control. Other quali�ications include the US 4 paper quali�ication known as Certi�ied Management Accountant (CMA). Entry requirements for all quali�ications usually start with a graduate degree however, should you not have a graduate degree you can apply based on your experience or indeed opt for a starter or conversion professional quali�ication such as the AAT. This route will provide you with basic accounting and �inancial knowledge which then will allow you to progress to the more rigorous quali�ications outlined above. All the quali�ications at this level do not require a training contract hence they can be undertaken as self-study programmes.

Two-dimensional route Financial reporting and �inancial control is key to the success of any business with the responsibility resting on the organisations �inancial department headed by a Chief Financial Of�icer (CFO). Audit broadly is the review of historical �inancial information and is split between external audit and internal audit. External auditors seek to provide an opinion on whether an entity’s �inancial statements provide a true and fair view of a period’s trading activities. Internal auditors seek to control and monitor a business and its operations.

Auditors should be independent and should report directly to a company’s audit committee. The respected quali�ication for external auditors is the Chartered Accountancy route (ACA). When training to be an ACA you have to join an audit �irm and gain three years practical experience before you can be admitted to the institute. Founded in the USA, the highly regarded Certi�ied Public Accountant (CPA), is a four-paper examination which also requires on-the-job experience.

An audit quali�ication allows you to bene�it from a broad understanding of International Financial Reporting Standards (IFRS), and the key areas of 41

CAREER DEVELOPMENT

professional scepticism, ethics and good corporate governance which in recent times have been an issue with some members of our profession.

The path for internal auditors usually means you would be working in the internal audit department for an organisation to monitor, improve and enhance operating and �inancial control across the business. For internal auditors respected US quali�ications include Certi�ied Internal Auditor (CIA) and Certi�ication in Control Self-Assessment (CCSA) which enables you to take a view of internal �inancial and operating risk and control. Also, the UK’s Chartered Internal Auditors (IIA) is also a fantastic option.

Currently, quali�ied internal auditors are in high demand across the region, therefore you would be smart to consider specialising in this growth area.

Being a financial professional does not have to be a final career, in fact it opens several other doors, noting that 51% of CEOs in FTSE 100 are Chartered Accountants.

Three-dimensional course Corporate �inance broadly includes transactional due diligence and valuation, mergers and acquisition advisory and fundraising. Typically these services are required by investors or companies considering investing or divesting. In simple terms, transactional advisors have to protect investors interests on the deal and advise on whether they are paying a fair price. In such transactions, whilst historical data is important as can form the basis for future projections, however, advisors have to build sophisticated �inancial models and perform various �inancial scenario analyses to advise on the varying outcomes on the feasibility and viability of the proposed deal or venture. 42 November 2012

The key here is the forward view on earnings rather than that of the �irst or second dimension which is looking back at historical data. Advisors are required to fully comprehend the impact of non�inancial matters such as, commercial, operating, legal and compliance considerations.

The US quali�ication known as the Chartered Financial Analyst (CFA) best approaches the detail required for the third dimension, although the ICAEW’s Corporate Finance Quali�ication (CF) has powerful practical application as it covers vast deal concepts. Both quali�ications have the potential to launch your career into investment banking or private equity. Binod Shanker and Mohit Malhotra, Directors at the Genesis Institute, maintain that the CFA programme is widely recognised as the gold standard in �inancial and investment education with more than 90,000 charter holders worldwide. Funding your qualiﬁcation Funding your programme is not easy when starting out, it can be expensive, ranging from USD7,000, however your �inancial returns will reappear later in the way of improved salary and notoriety within your organisation or �irm. Most �irms in the UAE will sponsor your examination and tuition fees by 50% or more and also most banks provide education loans which can also help.

The accountant stereotype Being a �inancial professional does not have to be a �inal career, in fact it opens several other doors, noting that 51% of CEOs in FTSE 100 are Chartered Accountants (February 2011). Also, several entrepreneurs including the richest man in history, John D. Rockefeller had started life as a humble bookkeeper!

IN THE SPOTLIGHT: US CPA

GOING WEST Growth of American ﬁrms in the UAE fuelling demand for US CPA qualiﬁcation

HE GROWTH and expansion of American businesses in the UAE is fuelling the demand of US Certified Public Accountant (CPA) qualification in the corporate world, according to Dr Abdul Kareem A. Alzarouni, the Deputy Group Chief Financial Officer, Finance Control Department, National Bank of Abu Dhabi (NBAD).

Dr Abdul Kareem A. Al Zarouni Deputy Group Chief Financial Of�icer, Finance Control Department, National Bank of Abu Dhabi

Speaking to Accountant Middle East in his office at NBAD’s headquarters in Abu Dhabi, Dr Alzarouni, who is also a US CPA, exalted the importance of the qualification, saying possessing the license opens immense opportunities to accountants, which can significantly help in their careers.

“Don’t get me wrong, there’s no superior quali�ication as all these professional certi�ications such as CPA, ACCA, ACA among 44 November 2012

others… help accountants gain the credibility that the license carries,” he said.

The UAE is one of the fastest growing US economic partnerships in the Gulf region with an estimated 800 American �irms having a presence in the country, including major corporations like General Motors, General Electric, Boeing, Microsoft, Fedex, Starbucks, Bechtel, ExxonMobil among others. Therefore becoming a US CPA not only boosts one’s chances of securing placement in these top ranking companies, but also opens new doors of opportunities, Dr Alzarouni opines.

“The US CPA qualification creates a remarkable difference… as an accountant would need to provide employers with verifiable evidence to demonstrate that he/she is acquainted with American technical skills and accounting standards in order to work for these top ranking firms.

IN THE SPOTLIGHT: US CPA

The UAE is home to over 800 American firms

US visa hurdles surmounted Here in the UAE, major certi�ications include CPFA from the Chartered Institute of Public Finance and Accountancy, which is the only professional accountancy quali�ication speci�ically geared to the public services, the quali�ication offered by the Association of Chartered Certi�ied Accountants, and the certi�ication offered by Chartered Institute of Management Accountants, which mainly specialises in accounting for business. There’s also the Associate Chartered Accountant (ACA) quali�ication from the Institute of Chartered Accountants in England and Wales (ICAEW), the ICAI quali�ication from the Institute of Chartered Accountants in India, among others. Last year, for the �irst time, the American Institute of CPAs and the National Association of State Boards of Accountancy (NASBA) started administering the US CPA exam outside of the United States. Dr Alzarouni, who pursued his US CPA in America, lauded the move, saying previously, candidates were required to travel to the US to sit for the exam, “but now the hassles and hurdles of obtaining US visa have been removed with the administration of the exams here at home.”

“As an Emirati I would particularly urge local students to take up this opportunity, since the US companies operating in the UAE and other countries

We cannot afford to be complacent. This is the period we need to hire highly qualified professionals who are up to the task. in the region are now able to hire local residents that understand US accounting standards, without having to rely on foreign expatriates,” he added.

In the Middle East region, the exam is now available to candidates in Bahrain, Kuwait, Lebanon and the UAE. According to NASBA, in the �irst year, more than 2,000 candidates sat for the exam in the Middle East as a whole, with the UAE contributing the largest number of candidates, with more than 1,100 sitting for the exam at locations in Abu Dhabi and Dubai.

As NBAD’s Deputy CFO, Dr Alzarouni foresees sustained demand for quali�ied accountants in the Middle East region in the years to come as businesses move towards implementing zero-tolerance policy in �inancial reporting.

“We cannot afford to be complacent,” he says, adding “This is the period we need to hire highly quali�ied professionals who are up to the task. Banks are now hiring talented accountants who demonstrate advanced knowledge and skills like corporate �inance, tax, audit and legislation expertise, as these help accelerate their careers and enhance the value they bring to �inancial institutions.” Revisiting the 2008 global crisis According to the banker, accounting is no longer a technicality.

“Professionals need to have the skill to prepare and interpret �inancial reports that are released by businesses. It’s about being up to the level of knowledge, skills and trust. Stakeholders and shareholders are looking for professionals who can be trusted as advisors and understand the dynamics of today’s businesses,” he emphasised. Revisiting the events of the 2008 global crisis, Dr Alzarouni recalled experiencing �irsthand the �inancial meltdown. The global crisis began in early 2008 in the United States and then in Europe, which eventually spread to the rest of the world. Banks and lending institutions that had invested in risky real estate mortgages were the �irst to be hit as property prices tanked.

“We witnessed banks that were traditionally known as ‘too big to fail’ on the brink of insolvency. Decline of individual household wealth in real estate and equity markets in turn led to a drop in consumer con�idence. This plunge in spending was what pushed the world’s economies into the recession.” “Of course here in the Middle East region, countries have strong economic linkages with the global economy that go beyond oil. They have invested a large portfolio of �inancial and equity investments in these Western economies, which means that they had massive exposure to global economic downturns.” “As the economies of the Middle East countries were also impacted by the global crisis, the �inancial 45

IN THE SPOTLIGHT: US CPA

institutions had to work with their respective governments in order to mitigate the negative consequences.”

accounting profession in the UAE by serving its members, the profession, and society.”

According to the International Monetary Fund (IMF), banks and other �inancial lenders were among the �irst institutions to show weakness, and governments supported their commercial banks by providing credit support and liquidity.

“I think one of the main reasons is lack of awareness of the importance of the profession. We live in an interconnected world now economically and �inancially and therefore we need to keep pace with the rest of the world otherwise we stand the risk of being the weakest link in that network,” he urges.

This entailed reining in on risky lending which followed stricter �inancial regulations, while at the same time, governments injected �iscal stimulus.

“Among oil-exporting countries, Kuwait, Saudi Arabia, the UAE, and Libya strengthened their banking systems by offering their commercial banks deposit guarantees,” IMF said in a study in 2009. The report shows that the largest �iscal expansion was implemented by Saudi Arabia, which increased its government spending by 9.3%, from $138.9 billion in 2008 to $151.8 billion in 2009, while other countries with substantial �iscal expansion policies in 2009 were Algeria (6.6%), UAE (4.9%) and Qatar (4.8%).

Saudi Arabia best in GCC As the former Chairman of the UAE Accountants and Auditors Association (AAA), Dr Alzarouni takes pride of the fact that he was instrumental in

AAA has been actively pursuing its mandate, which is mainly to develop the accounting profession in the UAE. helping “to develop the accounting profession in the UAE to the best international standards.”

“AAA also works closely with other stakeholders like the Ministries of Economy, Finance and Social Affairs to encourage more UAE locals to pursue accounting careers. I was part of the committee in charge of developing the new accounting and auditing law in the UAE, and the association has been active pursuing its mandate, which is mainly to provide a suitable forum to develop the 46 November 2012

“Granted, in terms of development, growth and integration of accounting profession, the UAE and the Middle East rank a little bit behind,” he continues.

Among the GCC countries, Dr Alzarouni says that Saudi Arabia has the best accounting and auditing practices.

The Kingdom has an active and dedicated accounting organisation called ‘SOCPA’, (Saudi Organisation for Certi�ied Public Accountants), which develops and promotes the accounting and auditing profession.

“This association receives exceptional support from the Saudi government, which helps it to actively develop all the essential pillars of accounting profession, such as legal framework, accounting standards, audit standards, continuous professional development, quality assurance and ethics, in order to have the best industry practices,” he adds. He also lauded the efforts of the GCC Accounting and Auditing Organisation (GCCAAO), saying the body which was established in 1998, has been at the forefront, helping to develop the profession to the best practice, working together with other professional organisations such as the World Bank. “GCCAAO was heavily involved and participated in the discussion of the uniform accounting and auditing law for the GCC countries,” the banker said.

Recently the organisation signed an agreement with ICAEW to develop a quality assurance programme, which will be implemented across the GCC countries.

SUBSCRIBE NOW TO THE REGIONS FIRST MIDDLE EASTERN FOCUSED ACCOUNTANCY MAGAZINE. Complimentary subscription for any accountants currently working or studying in the UAE. Every month we will bring you the latest news, expert opinion, interviews with regional influencers and policy makers, as well as CPD advice, job opportunities and moves. Accountancy ME will also feature regular articles and reports on auditing, legislation, management advisory services, ethics, professional development and practice management.

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accountancyme.com/subscribe Contact us today for more information about this brand new title. SALES Christopher Stevenson Tel 04 440 9138 Email chris@cpidubai.com

EDITORIAL Joyce Njeri Tel 04 440 9140 Email joyce@cpidubai.com

IN THE SPOTLIGHT: US CPA

BREAKING NEW GROUND The American Institute of CPAs (AICPA) and the National Association of State Boards of Accountancy (NASBA) are testing the waters in the Middle East, with the launch of the US Certiﬁed Public Accountants examination at trial sites in some countries including UAE, Bahrain, Kuwait and Lebanon. In an exclusive joint interview with the Accountant Middle East, Craig Mills, AICPA Vice President – Examinations and Continuing Professional Education and Colleen Conrad, NASBA Executive Vice President and Chief Operations Ofﬁcer, share about their historic foray into the region.

Craig Mills AICPA Vice President – Examinations and Continuing Professional Education

48 November 2012

Having launched in the UAE, what are your expansion plans, particularly in the Middle East? We have been very pleased with the demand in the UAE over the course of the �irst year and we believe the momentum will continue moving forward. We are proud to work with NASBA and Prometric to administer the US CPA exam in the Middle East to meet the demand for US CPA licensure. We are working to raise awareness of the exam in the Middle East and making sure that we are providing candidates with the information they need to understand the process of registering and taking the exam, as well as the content which is tested. At this point we are focused on the countries we are presently administering the exam, which include the UAE, Bahrain, Kuwait and Lebanon.

Why is it important for accounting students to gain a US CPA quali�ication? What does the exam offer to stand out from the crowd of other certi�ications? The US CPA license is the premier accounting credential in the United States and is highly respected throughout the world. According to a recent research by AICPA, the quali�ication is the most highly regarded and trusted by both �inancial professionals and investors. Equally, business decision makers ranked the CPA �irst among �inancial and business professionals. To become a licensed CPA, candidates need to meet rigorous educational and experience requirements, pass an intensive Four-section examination which involves 14 hours of testing and continue to keep

IN THE SPOTLIGHT: US CPA

their skills up to date with Continuing Professional Education. Additionally, research has shown that the job market for CPAs is stronger than it is for nonlicensed accountants and that traditionally they earn up to 10% more than non-CPAs. As one of the largest accounting bodies in the world and most recognised, what do you think about US accounting education? The system of accounting education in the United States is extremely strong and the Uniform CPA examination protects the public interest by helping to ensure that only quali�ied individuals become licensed as US Certi�ied Public Accountants (CPAs). Everyone who wishes to become a CPA is required to pass the CPA Examination and it is the only licensed quali�ication in accounting in the United States.

Once someone becomes a US CPA, Continuing Professional Education (CPE) is required for them to maintain their professional competence and provide quality professional services. CPAs are responsible for complying with all applicable CPE requirements, rules and regulations of the board of accountancy in the state in which they are licensed as well as those of membership associations and other professional organisations.

Through the launch of the international CPA exam, the AICPA has expanded its focus beyond the US borders as the world's financial markets increasingly become globally interconnected.

AICPA works with the academic community to strengthen the education students receive – from their introduction to accounting, through college and PhD programmes. In fact, AICPA, along with the American Accounting Association recently released the Pathways Report - a study on the future of higher education in the accounting profession and how it can be strengthened even further. One of the ways AICPA supports the academic community is through Non-CPA Faculty Associate Membership, which is open to accounting faculty

who are not CPAs. This membership provides educators with tools, techniques, and resources for teaching accounting and keeping students up-todate on what's happening in the profession.

In addition, AICPA supports students at the high school level with a dedicated website known as Start Here, Go Places - http://www.startheregoplaces. com/. This site provides them with insights into what the accounting career would mean for them and offers them the ability to join as student members. Similarly, AICPA has a website for college students and those who are currently in the process of studying for the Uniform CPA, called This Way to CPA - https://www.thiswaytocpa.com/. The website, which features a section for international students, offers great career tools for aspiring CPAs and a community for them to network amongst each other. What are the priorities for AICPA at the moment? Our main priority is and will continue to be developing the accounting profession by attracting, educating and nurturing CPAs throughout their professional careers and into retirement. We offer our members the resources and support they need to make sense of an increasingly changing world and provide �irst-class work for their clients and their companies. We are �irmly committed to ensuring that the US CPA is one of the premier accounting credential in the world. As you are aware, through the launch of the international CPA exam, the AICPA has expanded its focus beyond the US borders as the world’s �inancial markets increasingly become globally interconnected. One way we are doing this - both domestically and abroad, is working with the Chartered Institute of Management Accountants (CIMA) through a joint venture to advance the science of management accounting through a new designation – Chartered Global Management Accountant (CGMA). Our priority for the CGMA is to elevate management accounting and further emphasise its importance for businesses worldwide and promote it as the premier management accounting designation in the world. The AICPA is also committed to advocating for high quality, relevant regulation and standards at the international level and establishing a differential set of accounting standards for private companies in the United States. 49

IN THE SPOTLIGHT: US CPA

You have embarked on a major expansion plan, with the launch of the US CPA Examination at test sites in Japan and the Middle East. What is special about these locations that you selected them as your �irst launch sites? The international locations have been and will be evaluated based on a set of criteria, including: ▄

Colleen Conrad NASBA Executive Vice President and Chief Operations Of�icer

▄ ▄

▄

Volume demand as demonstrated by candidates from those countries taking the exam in the United States, Ability to deliver the exam without legal obstacles, Security threat to the exam (both physical security at test centre and intellectual property security of exam content) assessed at levels equivalent to those presented domestically, and Existence of established Prometric test centres.

At this time, countries that have not met those criteria to the combined satisfaction of NASBA, the AICPA and Prometric are not under consideration as testing locations. While we appreciate the desire for the Exam to be available in many locations, we can best serve the US State Boards of Accountancy and the accounting profession by ensuring a safe, reliable and valid exam.

In order to qualify to take the CPA exam outside the US, candidates will have to first establish their eligibility through application to a state board participating in the International CPA Examination Administration Programme. What has been the response so far? Kindly give us the exact number of students who have done the US CPA exams in these regions. We have 4,055 unique candidates who have applied to take the exam since May 1, 2011. Similarly, 12,404 examination sections have

50 November 2012

been administered from August 1, 2011 to August 31, 2012. Tell us more about the exams. What are the prerequisites required for anyone interested in pursuing the US CPA quali�ication. What is the certi�ication or license procedure afterwards? In order to qualify to take the CPA exam outside the US, candidates will have to �irst establish their eligibility through application to a state board participating in the International CPA Examination Administration Programme.

For speci�ic instructions on how to apply to take the CPA Examination, candidates visit the CPA exam section of the NASBA website. Applications from citizens of other countries must apply to state boards using the same criteria and procedures applied to US CPA candidates. There are three basic requirements that must be met in any state or jurisdiction to qualify for a CPA license – education, examination, and experience. The education and experience requirements vary for each state or jurisdiction. Many jurisdictions require an additional examination in ethics. The successful completion of the Uniform CPA Examination is a requirement in all 55 jurisdictions. Candidates who obtained their education outside the United States will need to be evaluated by a foreign credential evaluation service to determine how it compares to US education. Each jurisdiction lists the foreign credential evaluation services they accept, so candidates should check if it’s approved by the jurisdiction before selecting a foreign evaluation service.

Requirements for obtaining a CPA license vary across 55 jurisdictions. NASBA has a website available to the public called ALL, Accountancy Licensing Library: http://all.nasbatools.com/ jurisdiction/list_jurisdiction, and it's written in easy-to-understand language.

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ACCOUNTANCY 101 POINT BLANK

WHY AUDITORS FAIL TO DETECT FRAUD

They are the money people in organisations … and not investigators, right? But failure to deﬁne clearly the roles and responsibilities of auditors can prove risky when a scam goes undetected

HEN THE media reports a new fraud, the initial reactions from the public are – “What were the auditors doing? How did they miss it? Were they involved?” The auditors get labelled as morons, conspirators or criminals.

Sonia Jaspal Sonia has over 15 years of experience in risk management and corporate governance. She currently provides consulting through her own organisation – RiskBoard. Email: Soniajaspal@riskboard.in

52 November 2012

Generally most people jump to the conclusion that auditors had mala �ide intentions and became accomplices to get more business. While this may be true in some cases, auditors need the bene�it of doubt. They sometimes genuinely miss the cases despite their best effort to diligently perform their duties. This article is an attempt to explain why auditors miss the frauds.

I want to share a joke with you before I explain. Two drunkards were walking on a railway track. The �irst said to other – “I am really tired, I hope the steps will end soon.” The second replied – “Yeah. I wish they had put the handrails at a better height, my back is killing me.”

Auditors responsibility to detect frauds We can laugh at this, but if I say most of us don’t see clearly, there will be a lot of angry reactions. But hold on a minute, psychology experiments have time and again proved human beings' lack of attention to detail. Let me ask you a question – if you see a moonwalking bear on the road, will you notice it? You most probably answered yes. However, in an awareness test, eight basketball players were passing the ball among themselves, and the viewers' job was to count the number of passes made. In between, a moonwalking bear entered the game for a few minutes. Most of the viewers were so busy counting the passes, that they didn’t notice the bear. Auditors have the same problem. They have to give a true and fair opinion on the �inancial statements. They are not required to focus on detecting frauds, as auditors don’t design the audit programmes to conduct tests for detecting fraud symptoms and probability. Therefore, with no speci�ic coverage,

ACCOUNTANCY 101 POINT BLANK

auditors fail at detecting frauds as their attention is diverted to other tasks. For instance, an extract from India’s New Companies Bill, Section 143 reads as follows. Normally, other countries have similar provisions for auditors. “The auditor shall make a report to the members of the company on the accounts examined by him and on every �inancial statements which are required by or under this Act to be laid before the company in a general meeting. The report shall, after taking into account the provisions of this Act and the accounting and auditing standards, give a true and fair view of the state of the company’s affairs as at the end of its �inancial year and pro�it or loss and cash �low for the year... and such other matters as may be prescribed.”

Auditors punishment on failure The second question frequently debated is – “Should auditors be punished if they fail to detect frauds?” Section 147, clause 4 of India’s New Companies Bill states the auditor’s liabilities in respect to fraud in the following words:

Should auditors be punished if they fail to detect frauds?

“Where, in case of audit of a company being conducted by an audit �irm, it is proved that the partner or partners of the audit �irm has or have acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to or by, the company or its directors or of�icers, the liability, whether civil or criminal as provided in this Act or in any other law for the time being in force, for such act shall be of the partner or partners of the audit �irm and of the �irm jointly and severally and such partner or partners of the audit �irm shall also be punishable in the manner as provided in Section 447.” This clause in some form is generally applicable to auditors of most countries and puts them on

shaky ground. It is dif�icult to prove innocence once fraud is detected. How can an auditor state – “I did my work properly, saw these documents, looked at the same audit evidence but didn’t �ind anything wrong with it”? Most will jump to the conclusion that the auditor knowingly ignored all the evidence. Let us build a scenario for the auditor. An auditor is checking 100 vouchers with supports. One voucher among the 100 is fraudulent. What is the probability of the auditor noticing it? What if I say it is less than 25%? You might have dif�iculty believing this, but a normal person doesn’t even notice when the person he/she is talking to is swapped in between the conversation. British author Derren Brown conducted a perception and change blindness experiment to prove so. A person was asking directions from a stranger on the road. Two people carrying a huge painting interrupted the conversation. Meanwhile, the person asking for directions was swapped quickly and the new person continued the conversation. In 75% of the cases, people didn’t notice that the six foot man they were talking to was different!

Is it possible then for auditors to have such heightened sensitivity that they will notice minuscule alterations and fudging on fraudulent documents? After understanding these experiments, it shouldn’t be surprising that auditors fail to detect frauds. Though auditors are trained, they are human. The same psychology works with them too. The success rate of detecting frauds will be higher when the auditors – external and internal – have speci�ic responsibility to detect frauds. Without the speci�ic responsibility, regulators can continue to complain and investors will share their anguish, however all will be futile. The laws need to be devised to hold someone responsibly for detecting frauds. What is your opinion? • To comment on this article or to suggest an idea for another article, contact the Editor at accountancy@cpidubai.com

CIMA SURVEY

DRIVING PERFORMANCE IN A SMARTER WAY CIMA’s global relations director discusses the critical need for management accountants in organisations

NEW BUSINESS paradigm is gradually taking shape in the Middle East as multiple pressure elements never experienced before, come into play. These include unprecedented demands brought about by the globalisation of economies, increasing regulation and global business competition. In this regard, the Chartered Institute of Management Accountants (CIMA) partnered with the American Institute of Certi�ied Public Accountants (AICPA) and conducted a study to �ind out how business leaders around the world were tackling the new challenges. A new designation known as Chartered Global Management Accountant (CGMA) was also launched.

CIMA’s Global Corporate Relations Director Emma Cunis was recently in Dubai to discuss the results of this research with the association’s members and students. Together with CIMA’s 54 November 2012

Middle East Regional Manager Geetu Ahuja, she presented the report titled “Business beyond Financials”, which outlines the reasons and urgency for management accountants in SMEs, government and corporate organisations. The study also examines the need for businesses to focus more on the non-�inancial aspects of businesses rather than the �inancial areas only.

“CIMA is investing heavily, given its fast growth in this region, in both understanding the needs of governments, corporate, private and public companies to see how we can support the economies,” said Geetu.

High demand from Arab nationals Earlier during the event, participants heard how there have been a huge demand for CIMA certi�ication from Arab nationals, following the launch of Arabic Diploma Programme, which is a two module programme in Performance Operations and Performance Management.

CIMA SURVEY

Geetu said the course is currently being offered only in selective countries in the Middle East, including UAE and Oman, adding that the response has been overwhelming and “we have now expanded the module to include advanced diploma in Islamic Finance.” “This trillion dollar market is asking for more and my role is to lead the strategy with global �irms in local markets to help companies recruit, develop and retain quality talent that will help to drive business performance,” Geetu added.

Investing in the right talent is seen as critical to driving performance growth, according to most of the global CEOs surveyed in the study. Emma Cunis, CIMA Global Corporate Relations Director

Over 80% of CEOs in the research indicated that a candidate with the new Chartered Global Management Accountant (CGMA) designation would be more appealing to their organisations than those without it. Similarly, 75% of the business leaders said that they would want their existing �inance employees to obtain it. Global Corporate Relations Director Emma Cunis said that when the study was launched, the objective was to understand what the key metrics were, in driving performance outside the �inancials.

People are not afraid of hard work; however what they want to do is smart work. They want to drive performance in a smarter way.

"Almost 300 business leaders across 20 countries answered the survey and we also did in depth interviews with 17 CEOs around the world and uncovered some very interesting results," Cunis said. “Most of the executives were unanimous that the complexity of business today is not only the pace of change but also some of the ambiguity there is in the market place. They reported that people are not afraid of hard work, what they want to do smart work. They want to drive performance in a smarter way,” the executive revealed.

Risks and opportunities "The new challenges that today’s businesses face only reinforce the need to engage management accountants in all �irms, as the professionals have a broader skill-set in connecting the dots and helping their colleagues to understand incoming costs, risks and opportunities of all kinds, and not just �inancials," Cunis said, adding, “In an environment where change is the only constant, CGMAs have the agility and adaptability to guide and support critical business decisions that drive performance.” The most critical theme to come out of the research was that senior business leaders view the value of the human dimension to be the most critical to an organisation’s success. Initially, according to the study, business leaders saw �inancials as king, with 11 per cent of the respondents saying that reducing costs was the main priority.

“Of course you would expect that in this type of environment,” quipped Cunis, adding “But what did change and surprised us somewhat was this increasing focus on the human dimension, which has been rated at 17%.” Statistics in the study show that greater emphasis is laid more on relationships, customers, supplier-relationships, talent development and intellectual capital. These are also the corefocus for businesses and they rated it equally as important, at 68%. “From the research we can deduce that business leaders now regard people’s ideas, skills, knowledge and relationships as more important than the traditional �inancial sources of value.”

“So when we measure and value the human dimension, we would argue they’ve never been important and we need the right people with the right skills to do that. The increasing importance of this non-�inancial value explains why it is so important for businesses to capture and measure it,” said Cunis. More focus on non-ﬁnancials About 75% of the business leaders interviewed stressed on the need to put more emphasis on measuring and demonstrating the non-�inancial value of the organisations, arguing that the current reporting system promotes an excessive focus on the �inancials.

Drawing a parallel to this scenario, Cunis gave an example of an earlier research, which 55

CIMA SURVEY

The executive narrated the major scandal involving drug maker Johnson & Johnson’s, when the company’s best-selling product Tylenol led to the death of seven people died in the US in 1982, after taking cyanide-laced capsules, in an alleged sabotage drama. “Many business people thought that J&J would never recover from the sabotage, however, the company was very open with the media because their brand reputation was on the line.”

Geetu Ahuja, CIMA Regional Manager, Middle East

showed that in 1975, a total of 83% of the market capitalisation of companies in the Standard Report 500 Index was accounted for by tangible assets like “factories, plants and of�ices. However by 2009 this �igure had dropped to 19%, meaning that focus had signi�icantly shifted to intangible resources.” And what are these intangible assets? “One example could be your brand reputation,” Cunis says.

56 November 2012

“This is a very good example of how the non�inancials are very critical to the value of organisations,” she added.

On the current challenges faced by global business leaders, about 69 per cent of business leaders who participated in the study felt that the �inancial markets put immense pressure on businesses, sometimes holding them to ransom “as they’re mostly focussed on short term goals.” “The outcome was quite interesting and we expected this sentiment to be particularly stronger in the UK and US, but actually it was much pronounced from our survey results from the Asian markets, especially in South East Asia,” said Cunis.

On the same breathe, 67% of the respondents said the current reporting tools are skewed in favour of �inancial reporting and that “there are de�iciencies in the current information available on non �inancials.”

CIMA SURVEY

strategy, with the social, environmental and economic context within which they operate. “By reinforcing these connections to integrated reporting, businesses can be able to make better decisions that enable investors and other stakeholders understand how the organisation is performing,” Cunis said. “So new abilities and business dynamics in terms of innovation, technological innovation, risk intelligence, business models and effective corporate culture are areas that need to be better managed and reported, for businesses to perform to their full potential,” she added.

Transparency was another important element covered by the joint research study, and according to the CIMA executive, the subject was imperative as “we live in an unprecedented era of transparency where anything that a business does, writes or says, could be made public.” Challenges in existing regulations Still on hurdles, about 28 per cent of the respondents saw that there were challenges from existing and new regulations, and to remedy this, Cunis revealed that CIMA and AICPA have been working closely with the International Integrated Reporting Council (IIRC), to come with solutions that demonstrate how organisations could use integrated reporting in sync with their governance and �inancial performance

“The research indicates there’s a virtuous cycle of transparency and companies that embrace social networks as their core value �ind that it becomes their key driver of success and a source of major competitive advantage.” “Social networks of course are exacerbating the problem but in the current business environment we cannot afford to do business without them. It’s crucial to harness the power of social networks,” it stated.

BUSINESS INSIGHTS WEALTH MANAGEMENT

You too… can contribute to the growth of the offshore economy

F Ross Mills Senior Associate and Investment Specialist at Holborn Assets. Email: ross@holbornassets.com

IGURE THIS; An extraordinary amount of £13 trillion is sitting in offshore accounts, according to a newly released report commissioned by the campaign group Tax Justice Network. The detailed analysis in the report compiled using data from a range of sources, including the Bank of International Settlements and the International Monetary Fund, shows that individuals particularly in the oil-rich states of the GCC are generous drivers of this offshore economy. Ross Mills explores the benefits of investing offshore... Virtual tax-free growth Often referred to as the gross roll up effect, investment in an offshore bond grows virtually free of year-on-year Income Tax and Capital Gains Tax charges, unlike comparable onshore bonds which suffer tax on any growth. Small amounts of irrevocable with-holding tax may be payable on certain investment funds.

No Capital Gains Tax Fund switches made within offshore bonds do not trigger a Capital Gains Tax liability. Such switches within a portfolio of onshore direct equity or unit trust investments would incur a Capital Gains Tax charge in that tax year during which the switches were made. Offshore bonds therefore provide a more tax ef�icient structure for active investment management. 58 November 2012

Access to your money Offshore bonds enable you to have access to some or all of your investment monies should you need to. As offshore bonds are long term investments there may be some penalties which apply if you withdraw your money in the early years.

You can take regular withdrawals from most offshore bonds, accessing your capital in a tax efficient way by withdrawing up to 5% of total premiums paid every year as income. This 5% amount can be taken every year for 20 years, or accumulated over a number of years and withdrawn less frequently without triggering a chargeable event for tax purposes (a chargeable event occurs when you withdraw in excess of 5% per policy year or you cash in your bond in full, in triggering a potential Income Tax charge).

Tax control Tax deferment is a key feature of offshore bonds. This enables you to choose when a tax charge may occur, as this will be when you cash in some or all of your bond. The tax payable at the point of a chargeable event will depend on your highest marginal rate at that time. This allows you to defer such an event until you are either no longer a tax payer or have moved from being a higher rate tax payer to a lower or basic rate tax payer or have moved to a country with low taxes.

BUSINESS INSIGHTS WEALTH MANAGEMENT

Inheritance Tax Planning Structuring your assets through an offshore bond held in trust can mitigate, or avoid altogether, taxes due when transferring wealth.

Self-Assessment friendly As offshore bonds are non-income producing assets there is nothing for you to report to Her Majesty’s Revenue & Customs until a chargeable event occurs, for instance when you cash in more 5% of total premiums paid. You do not have to include any information on your tax return before this point, compared with the potentially complicated requirements for reporting a portfolio of unit trusts. At that point you need to include information on your tax return under self-assessment, it is generally much simpler to report income from an offshore bond. Seven bene�its of an offshore bond for UK expatriates

You can take regular withdrawals from most offshore bonds, accessing your capital in a tax efficient way by withdrawing to 5% of total premiums paid every year as income Time apportionment relief Any UK tax will be reduced proportionately for time spent non-resident. Additional investments are deemed to be made at the commencement of the original contract.

Gift Assignment No income or capital gains tax charge on assignor. All future tax charged at the rate of the new owner.

Trusts Possibility of reducing or eliminating UK inheritance tax liabilities; Generation planning and asset protection advantages (avoid probate issues). Deemed tax credits 15% deemed gain is calculated at the end of each policy year, but is not taxable unless the policyholder is UK resident. The 15% deemed gain which accrues during the period of non-UK residence is deducted from the �inal surrender value, potentially reducing the gain.

▄ ▄

5% tax-deferred withdrawals yearly 5% of the initial investment yearly withdrawals are allowed without immediate UK tax charge. 5% is cumulative if not used.

Top Slicing Gain is divided by the number of years the policyholder was UK resident. This reduced number is added to taxable income in the year of surrender, which may avoid higher rate (40%) and additional rate (50%) of UK income tax on very large taxable gains.

No ﬁve year rule Subsequent expatriation for short periods may avoid UK tax. No need to expatriate for �ive years as with assets subject to capital gains tax... simply spend a complete tax year outside of the UK to avoid the tax.

TAX HAVENS: RICH NATIONS DOMINATE When one thinks of a tax haven, images of sandy Caribbean beaches and offshore banks come to mind, but the largest secretive jurisdictions in the world are far removed from the tropics, according to the Financial Secrecy Index.

The index was created by the Tax Justice Network to assess secretive jurisdictions that have slipped the attentions of the OECD and International Monetary Fund. The OECD notes there are 40 tax havens, but the FSI list features 60 jurisdictions and claims it is the only objective assessment of tax havens.

The major global players in the supply of �inancial secrecy are rich nations operating their own specialised jurisdictions of secrecy, rather than island states. These jurisdictions have links to smaller satellite jurisdictions, which act as conduits for �inancial �lows into the mainstream capital markets, the Tax Justice Network claims.

The leading secrecy jurisdiction on the list is the US (Delaware), with Luxembourg in the second place, followed by Switzerland, Cayman Islands and the UK. – International Accounting Bulletin 59

BUSINESS INSIGHTS ASK JT

STOCK OPTIONS

I have just landed a job in the UAE and I find stock prices quite cheap here. Since all my investments are in international currency investments in mutual funds and real estate, do you think an exposure to regional securities is a good idea?

James T. Regional Director, Acuma Email: jthomas@acuma.ae

60 November 2012

FIRSTLY CONGRATULATIONS on your new job! While I am not a stock broker, and so not able to comment on individual companies that are quoted on the regional markets, I am happy to give my views as to whether it is a good idea to consider investing in them or not. Based on a number of factors that I will discuss, I would say that an exposure to regional securities could be a good idea, and I am sure that there are some great opportunities to benefit from. There are a number of markets in the region, with all of the GCC countries having their own stock markets, and the UAE actually having three markets within 150km of each other. They are all governed by different rules, and obviously are denominated in different currencies. Certain companies also have rules regarding the amount of stock non-nationals are able to own.

The regional markets have experienced a roller coaster ride over the past few years. Most of the bourses are quite new, and have relatively low level of trades on the markets. For example the Dubai Financial Market (DFM) opened to trading in March 2000, and it now has over 65 companies listed on the market. But when compared to some international markets the total amount of trades that occur in a day here, would only take a few minutes elsewhere. This small level of trading on certain markets can lead to a high amount of volatility as it can prove difďż˝icult to sell particular shares as and when you would like to, and to actually sell the holding, the price may have to be reduced signiďż˝icantly. Indeed some shares on certain markets can experience little or no trades for days or even weeks. This obviously needs to be considered before buying any holding to make sure you can actually secure one and then be able to sell it again.

BUSINESS INSIGHTS ASK JT

Regional markets in the upturn The regional markets have experienced volatility lately, even more so than other more established markets around the world. As with the upturn the world’s markets have experienced over the past couple of months, the regional markets have also picked up, but it is a brave call to say where markets are going next.

It is worth discussing the area of risk. The last year or so has brought risk sharply back into focus, as most assets have retreated from record highs. From my perspective as a �inancial consultant, direct shares would be at the very top of the risk spectrum, which means that although they can produce high returns, the potential for loss is also greater. However, if you were to talk to a

Most bourses in the region are new and have relatively low levels of trade.

stockbroker, I am sure they would use a different risk scale, and blue chip companies that are quoted on the FTSE100 or Dow Jones 30 would be classed as lower risk than a company quoted on a regional market here. Investing into direct securities Another factor to consider is how you are planning to buy your shares. Are you looking to invest a lump sum or do you wish to invest regularly? Are you looking to day-trade or to hold the stocks for a length of time? This may well have a bearing on the stocks that you wish to hold, and how you wish to invest into them.

How much of your total portfolio are you considering investing into these equities? I would normally recommend to clients that if they wish to invest into direct securities, that it should be around 10% of their total portfolio,

The amount of shares you wish to purchase may have a bearing on the best way to invest

unless they are completely comfortable with the risks involved.

The amount that you are looking to invest, and how many different shares you wish to purchase may have a bearing on the best way to invest, as there are mutual funds available that invest into all of the regional markets, and can offer a level of diversi�ication that would be virtually impossible as an individual investor.

In summary, if you do your research, are fully aware of what you are investing into, can spend the time following the markets, and are happy to ride the peaks and troughs, then the regional markets can offer some great opportunities. As with all aspects of your �inancial affairs, you should regularly review your �inancial situation to make sure it continues to re�lect your wishes and requirements. 61

INDUSTRY APPOINTMENTS

APPOINTMENTS If you have made a new appointment, promotion or have any relevant hiring news, please email the details and a photo to accountancy@cpidubai.com

Mandip Dulay joins the Grant Thornton UAE of�ice as a Marketing Communications Manager. She is a strategic and tactical marketing communications professional who has over eight years of experience in accounting �irms at a local, national and international level. Having spent four years in PwC at a local level (West Midlands region, UK), Mandip went on to join BDO in London, where she spent her time developing marketing strategies and delivering high pro�ile projects. In recent years she has expanded her professional experience beyond the UK through work spells in Brussels and Mumbai. Mandip is now managing the business development and marketing function for the GT �irm in the UAE. Ahmad Al Moghrabi joins the Association of Management Accountants (IMA) Middle East regional of�ice as Chapter Relations Manager. Previously he served in business development and marketing roles in Emirates Airline and prior to that he was with the Emirates Hotel and Resorts. He gained customer service experience working with different organisations in the travel, aviation and hospitality sectors. Ahmad is now managing and supporting the daily chapter operations in the Middle East to help in advancing their success. Ben Blair joins the Grant Thornton UAE of�ice as a Senior Audit Manager. Ben has over nine years of experience in auditing across a number of industries in the UK and the Caribbean. Ben is ACA quali�ied from the Institute of Chartered Accountants in England and Wales and holds a joint honours degree in Economics and Politics from Southampton University, UK. Prior to 62 November 2012

joining Grant Thornton UAE, Ben worked with KPMG in the Cayman Islands as a senior manager. Ben has been managing audit teams across multiple jurisdictions across the Caribbean on various projects, as well as developing and delivering audit strategies. Peter Beynon is now the Regional Director of the Institute of Chartered Accountants in England and Wales (ICAEW). Beynon’s new role will see him support institute members in the region, as well as developing the accountancy profession in the UAE. The accountant joins the Institute’s Dubai of�ice from HBG holdings, where he was an operating director for MENA (Middle East and North Africa) and South Asia, and before that he was managing director at Al Fahim Group; the �irst non-family member to hold the position. He originally quali�ied with PwC. Sumair Hadeed joins the Grant Thornton UAE of�ice as an Audit Executive. Sumair quali�ied with Bachelors in Commerce at the University of Karachi. He brings over �ive years of experience in auditing and reviewing �inancial statements for a diverse portfolio of clients. He has worked with both multinational and local companies within a wide range of industries which include banks, NGOs, media, insurance, trading and manufacturing. NASDAQ Dubai announced that it has appointed Hamed Ali as acting Chief Executive, to lead the next phase of

expansion at the region’s international exchange. Ali joined NASDAQ Dubai earlier in August as Chief Operating Of�icer (COO) and has stepped down from that position to take up the acting CEO role. Earlier he served as Executive Of�icer of the exchange from 2006-2008, before leaving to serve as COO of the Dubai International Financial Centre (DIFC) Authority and later Executive Director at Dubai’s Knowledge and Human Development Authority. Asim Masood joins the Grant Thornton UAE of�ice as a Business Risk Services consultant. Asim is an ACCA member, who brings over four years of experience ranging from internal audit to risk based system studies. Asim has worked for a wide range of industries which include leisure & hospitality, NGO’s and the private sector. Rakesh Pardasani has been promoted as a Partner in RSM Dahman �irm. An Indian national, he is a fellow member of the Institute of Chartered Accountants of India and has a rich experience in the �ields of accounting, auditing and management consultancy as well as in Indian Tax laws and Corporate Laws. At RSM Dahman, he is currently incharge of the external and internal audits of major companies in UAE and also provides business and advisory services to international clients, with regards to services such as setting up business in the UAE, providing outsourced �inancial processing services and other consultancy services.