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Cryptocurrencies: death and divorce Making tax digital reporting: a brave new world How to cope with the death of a shareholder

New UK Corporate Governance Code


In this issue Contributors2


Meet the team

News and views


Member news


HMRC suspects tech sector of £2.5 billion tax underpayment in 2018

New member benefits for AIA practising certificate holders

AIA news

Making tax digital



AIA Constitution 2018 David Potts (AIA) explains the significant changes to the structure and content of the AIA’s Constitution, which are effective from 9 October.


Shareholders13 The death of a shareholder How can private companies prepare for the death of a shareholder? Matthew Price (Company Law Solutions) makes the case for a shareholders’ agreement.


Processes23 Essential checklist for accountants in Europe Performing these essential baseline checks will help accounting teams to align their processes during what can be a particularly stressful period, writes Emine Constantin (TMF Group).


Branding8 Only the brave rebrand... A sneak peek! Carl Jepson (AIA) shares the details of the AIA’s plans to rebrand.


Corporate governance

The necessary step change? Dr Philip Shrive (Northumbria University) examines Britain’s new UK corporate governance Code. Will it provide the boost that governance needs at this time?



Students10 Achieve your potential in 2019! Find out how the AIA Achieve Programme can help you consistently get the maximum benefit from your study. Editorial Information International Accountant, the bimonthly publication of the Association of International Accountants (AIA).

Editor Rachel Rutherford E: T: +44 (0)191 493 0281

International Accountant Staithes 3, The Watermark, Metro Riverside, Newcastle Upon Tyne NE11 9SN United Kingdom

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+44 (0)191 493 0277



A brave new world From 1 April 2019, making tax digital reporting becomes mandatory for all VAT registered businesses trading above the current VAT registration threshold of £85,000. John Forth (RSM) explores the implications.

Subscribe to International Accountant

Cryptocurrencies24 Cryptocurrencies and divorce Chris Thomas (Wilson Wright) explains how the level of anonymity that bitcoin and many other cryptocurrencies offer can present huge difficulties following the death or divorce of their holder.

Dates for your diary Upcoming events


Technical29 Global updates Design and production LexisNexis, Quadrant House, The Quadrant, Sutton, Surrey SM2 5AS Printed by The Manson Group Ltd, St Albans, Herts, AL3 6PZ This product comes from sustainble forest sources.

AIA does not guarantee the accuracy of statements made by contributors or advertisers or accept responsibility for any views which they express in this publication. ISSN: 1465-5144 © Copyright Association of International Accountants


Editor’s welcome

Contributors to this issue

Editor’s welcome


Matthew Price is a director of Company Law Solutions, which provides fast, cost effective corporate legal services and specialist company formation to accountants, solicitors and private companies across the UK. He has worked in various private and public sector roles and has ten years’ experience in the provision of company law services to the professional services sector. PHILIP SHRIVES


elcome to the new look International Accountant magazine. As part of the AIA’s ongoing 90th anniversary celebrations, we decided to modernise the magazine with a view to improving the reader experience, whilst maintaining the high standards of its content. You will also see for the first time the new AIA brand, which will be formally launched in 2019. Significant research was undertaken with stakeholders, focus groups and branding experts to ensure that a strong, professional and globally accepted brand was produced. Key objectives for the rebrand were to incorporate the best of the AIA’s longstanding history with a brand that will take the Association forward, sit prominently in the marketplace and raise the AIA’s profile around the world, whilst also being conscious that the brand had to sit well across all member jurisdictions, represent the diverse nature of the AIA’s membership and be an instantly recognisable symbol of the AIA’s professional status in the sector. Recent corporate scandals have demonstrated that there was undoubtedly a need to make changes to


Rachel Rutherford Editor, IA

the UK’s Corporate Governance Code. In this issue, we look at the new Code, summarise the changes and consider whether it has gone far enough. Likewise, the transition to making tax digital (MTD) represents one of the most fundamental changes to occur to the UK tax system. Whilst the go live date of 1 April 2019 is some way off, the time and resources required to implement the changes needed for MTD should not be underestimated. In this article, we consider the key changes, reporting requirements and what accountants should be doing now to prepare for the 1 April 2019 implementation date. We also look at the sad, but necessary planning in the event of the death of a shareholder and what can be agreed in advance to limit uncertainty and conflict at a very sensitive time. The AIA’s 90th anniversary gives us the opportunity to look back on our achievements, but also to look ahead and consider how we can work together with our members, students, partners and stakeholders to shape the future. We aim to build on existing connections, and to create new ones to ensure that the AIA grows, whilst ensuring our globally recognised core values remain in place.

Philip Shrives is Professor of Accounting and Corporate Governance and Head of the Accounting and Financial Management Department at Northumbria University. He has a substantial record of research, staff development, programme and subject group leadership within Newcastle Business School and has demonstrated outstanding achievement in developing, leading and motivating other staff. JOHN FORTH

John Forth is Indirect Tax Partner at RSM UK. John trained and worked within the “Big Four” and spent several years working for HMRC, giving him invaluable insight into how its operations work. John has experience in advising clients in the not for profit and real estate and construction sector which range from large international business to SMEs. CHRIS THOMAS

Chris Thomas joined Wilson Wright in February 2013. He is a member of both the ATT and the CIOT. Chris has considerable experience in dealing with HMRC investigations, the tax issues affecting those entering or leaving the UK, the taxation of incorporated and unincorporated businesses, property and inheritance tax planning. ISSUE 101 | AIAWORLDWIDE.COM


HMRC suspects tech sector of £2.5bn tax underpayment in 2018

Financial services sentiment slumps, as growth expectations stall

HMRC is challenging businesses in the tech sector, targeting potential UK tax of £2.5bn in 2018, says accountancy firm Moore Stephens. The amount under review – known as “tax under consideration” – is the suspected maximum potential additional tax liability before a full investigation has taken place. HMRC has been under growing political and media pressure to increase its tax take from large tech companies. International tech companies have been accused of using complex tax arrangements to reduce their UK tax liability by moving profits to a different tax jurisdiction. In their search for increased revenue from tech companies, the UK government has announced a consultation over a new revenue tax for large tech and online businesses, while the EU and the OECD have also proposed their own ideas for so-called “tech taxes”. HMRC needs to balance attempts to increase the tax take from tech companies against discouraging investment into the UK by being too

© iStockphoto/mitakag


HM Revenue & Customs building in Whitehall, London

aggressive. The UK has the largest tech sector in Europe and is one of the fastest growing parts of the UK economy. The government should aim to ensure that any steps it takes does not discourage further tech investment into the UK. HMRC has already sought to increase its tax take from large international businesses, with the introduction of the diverted profit tax in April 2015. This is designed to stop businesses from moving profits away from the UK so they are not subject to UK corporation tax.


Hong Kong: updated EU tax watch list welcomed The Hong Kong Special Administrative Region Government has welcomed an amendment made by the European Union to its watch list on tax co-operation. The amendment recognises Hong Kong’s efforts in participating in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Hong Kong made commitments to the EU in 2017 on participation in the convention and implementation of the automatic exchange of financial account information in tax matters (AEOI). In December of that year, the EU put about 40 tax jurisdictions, including Hong Kong, on the watch list on the consideration that these jurisdictions AIAWORLDWIDE.COM | ISSUE 101

had demonstrated commitment to international tax co-operation. The convention came into force in Hong Kong on 1 September, allowing the city to effectively implement the AEOI and the base erosion and profit shifting package promulgated by the Organisation for Economic Co-operation & Development. The EU has updated its watch list in view of such developments, the government said. Meanwhile, Hong Kong has smoothly conducted the first exchanges with relevant jurisdictions under the AEOI, it added. Hong Kong is confident in meeting the prevailing standards on international tax co-operation and will continue to closely liaise with the EU.

Brexit uncertainty is biting hard on banks and investment managers. Optimism in the financial services sector fell sharply in the quarter to September, amid signs of a listless operating environment, according to the latest CBI/PwC Financial Services Survey. The quarterly survey of 100 firms found that optimism about the overall business situation in the financial services sector fell further, having declined in all but one quarter since the start of 2016. The deterioration of sentiment in banking and investment management was particularly widespread – only finance houses reported an improvement in optimism. Overall, business volumes increased slightly in the three months to September, although the level of business dipped slightly below normal. Conditions varied again across the sector. Whilst many sectors saw business volumes rise – notably insurers – banking volumes were stable for a second successive quarter. Investment managers said volumes contracted, confirming a striking loss of momentum during 2018. Looking ahead to the next three months, overall business volumes are expected to be unchanged, marking the weakest growth expectations since 2009. Employment growth across financial services stalled in the quarter to September, with cuts to headcount in banking outweighing increases in most other sectors. Overall, headcount is expected to remain stable in the three months to December, with the sharpest cuts expected in banking and investment management. The lack of availability of professional staff is an important factor that will hinder the increase in business levels over the next year. 42% of respondents stated that it had been difficult to retain and recruit staff during the last 12 months. All sectors face acute staff shortages in IT/technology and compliance audit.



Fight to end late payments culture The majority (85%) of small firms that operate within European supply chains report being paid late, according to research from the Federation of Small Businesses (FSB). FSB’s report, “Pay it Forward: Lessons and recommendations for Europe from the UK payment landscape”, reveals that despite positive steps, like the introduction of the Late Payment Directive, the issue of poor payment practices continues to persist across Europe. Despite the Directive’s rules on maximum payment terms of 60 days, the report shows that one in four (22%) small businesses report payments terms of over 60 days, while more than a third (37%) of FSB smaller suppliers say that their payment terms have increased over the last two years. Supply chain bullying continues to be a major issue that the Directive fails to address, and the report highlights that 12% of small businesses have been asked for a discount in return for prompt payment. FSB calls on the European Commission and EU member states to introduce a number of changes aimed at strengthening existing initiatives to help change the culture on poor payment practices in the EU. These recommendations include: ●● Strengthen small businesses’ legal protection against lengthy payments terms by more precisely defining the term “grossly unfair” as used in the Late Payment Directive. ●● Issue a recommendation that all member states introduce a duty to report on payment practices for large companies or introduce such a requirement via any reform to the Late Payment Directive. ●● Appoint sector-specific ombudsmen for those sectors that are most at risk of late payments, starting with the food supply chain but also looking at sectors with high exposure to late payments such as construction. Responding to the report, FSB national chairman, Mike Cherry, voiced the need of small firms to see further action ensure that will truly achieve the Directive’s aim of “a decisive shift to a culture of prompt payment”.



New strategic focus for audit to serve the public interest

© iStockphoto/wutwhanfoto


●● “State of the nation” review ●● Call for informed debate

The Financial Reporting Council (FRC) has announced a strategic programme of work to ensure audit better serves the public interest. This programme encompasses work on auditor independence, audit quality, the future needs of investors and corporate viability. Developments in Audit is a “state of the nation” review for audit in the UK. It highlights key themes and issues and provides a robust evidence base to allow for an informed debate about the future of audit. These themes are set out below. Independence: Public confidence in audit depends on confidence in the independence of the auditor. The FRC will, as part of a comprehensive review of the 2016 auditing and ethical standards, test the effectiveness of the rules on independence. The review will include determining whether further actions are needed to prevent auditor independence being compromised, including whether all consulting work for bodies they audit should be banned. The FRC will work closely with the

Competition and Markets Authority (CMA) in this area. Viability: Taking lessons from recent company failures, the FRC will develop proposals to strengthen requirements on auditors when considering whether an organisation is a going concern. This includes whether the responsibilities of auditors in assessing companies’ statements on their longer term viability should be enhanced; and whether auditors should report publicly on their views of the realism of assessments made by companies. Investor needs: The FRC is undertaking a review of the work auditors do on the front half of the annual report to assess whether auditors are undertaking enough work to conclude it is not materially misstated. The FRC will shortly launch a major review of stakeholders’ needs for information in corporate reports and will consider to what extent such information needs to be assured. Audit quality: FRC has adopted an enhanced programme of audit firm monitoring. It has also strengthened its enforcement capacity so that it can conclude cases more quickly and revised its sanctions framework to levy penalties that reflect the gravity of the issue. ISSUE 101 | AIAWORLDWIDE.COM




AIA works with NEECC to promote shared values and Brexit Agenda in the North East MEMBER BENEFITS

AIA members holding a practising certificate will now have free access to Tolley’s Tax Library and Tolley Seminars Online. The bespoke Tolley’s Tax Library online bundle contains all the direct legislation and an overview of the entire tax system. It supplements this with tailored tax planning guidance for owner managed businesses and individuals. It includes: ●● Whillan’s Tax Tables; ●● Tolley’s Tax Guide; ●● Tax Computations; ●● Tolley’s Tax Planning for OMB; ●● Tolley Income Tax; ●● Tolley’s Estate Planning; and ●● Tolley’s Yellow Tax Handbook. Tolley Seminars Online gives you access to an online monthly programme of eight to ten short lectures on the latest issues and developments in personal and business tax. In addition, quarterly accounting and auditing updates further develop your knowledge and all count towards your CPD. AIAWORLDWIDE.COM | ISSUE 101

© iStockphoto/egal

New member benefits for AIA practising certificate holders

The Association of International Accountants (AIA), the global body for professional accountants, was pleased to exhibit at the North East England Chamber of Commerce (NEECC) Annual General Meeting and Showcase event. The event, which took place at Wynyard Hall in Tees Valley, focused strongly on the impending Brexit and the concerns facing the North East business community. Survey results have shown that over 50% of the region’s business community expect Brexit to have a negative impact on their business. Sharon Gorman, director of development at AIA, said: “With Brexit now only a few months away, it was no surprise that it was the main topic for debate and discussion. As a North East based organisation, AIA supports

the NEECC in proactively lobbying government to heed the warnings which are coming from businesses both locally and nationally to ensure we have the clarity we need to see continued economic success in the future.” SUBSCRIPTION RENEWALS

AIA subscriptions The AIA annual subscription is due on 1 October. If you wish to discuss your membership renewal please contact the AIA Membership Services Team, email: membership@, tel: +44 (0)191 493 0277. You can also renew your membership online via My AIA.



AIA Constitution 2018 Significant changes to the structure and content of the AIA’s Constitution are effective from 9 October.


review of AIA’s Constitution was carried out in February 2018 which identified several significant changes required to the overall structure and content of the document. The review included specific amendments resulting from the introduction of new legislative and regulatory requirements, alongside changes in best practice. The new Constitution will have the following structure:


David Potts

Director of Operations, AIA

●● Memorandum of Association; ●● Articles of Association; ●● Bye-Laws; ●● Regulations; and ●● Code of Ethics. The overall coverage of the Constitution has not been significantly altered, i.e. AIA’s membership requirements, qualification standard and obligations for members to adhere to AIA’s rules, regulations and Code of Ethics remain in place. The new Constitution will continue to meet the needs of our members and regulators.

Reducing unnecessary Articles

The legal structure of the Articles of Association remains the most rigid part of the Constitution. The review identified this rigidity as a risk when consideration must be given to introducing new regulatory requirements, and alterations have been made to remove significant delay in implementing necessary future changes. The Articles have been amended to ensure that the core structure of the company, liability of members and other requirements that must remain in place are retained within the Articles, and ISSUE 101 | AIAWORLDWIDE.COM

news Author bio

Constitution summary ●● Reducing unnecessary Articles ensures flexibility for the AIA in responding to the changing regulatory environment, whilst also meeting all legal requirements. ●● Adding flexibility to Bye-Laws to make provision for the creation of Regulations by the Council in specific areas. ●● Introducing Regulations within the Constitutional Documents covering the main areas of AIA operations. ●● Redistributing Committee responsibilities to reflect the introduction of the AIA Exam Board and to create more flexibility in processes. ●● Complaints, Disciplinary and Appeals processes have been streamlined to enable complaints to be closed more expediently. Sanctions have been amended to remove limits where appropriate with reference to new regulatory requirements, the EU Audit Directive and Anti Money Laundering Regulations 2017. ●● The provision for the category of Affiliate Members has been removed from the Constitution. ●● GDPR compliance has been incorporated into the constitution to ensure AIA meets the changing requirements of Data Protection legislation by including a catch-all provision to ensure compliance. ●● Including the Code of Ethics in the Constitution further reinforces the importance of this document to our members and highlights the regulatory requirements of the Association. the rules and regulations governing the day to day operation of the Association are covered by both the Bye-Laws and Regulations. This ensures flexibility for the Association in responding to the changing regulatory environment, whilst also ensuring that the legal requirements of the company are met.

Adding flexibility to Bye-Laws

The existing Bye-Laws have been amended to make provision for the creation of Regulations by the Council in specific areas and to reduce the level of detail unless necessary and conducive to continuing best practice.

Introducing regulations

For the first time, AIA has introduced Regulations in the Constitutional Documents. Higher levels of detail, regulatory requirements that must be amended more frequently and procedures and processes are covered in AIA’s new Regulations sections. Regulations cover the following main areas of the AIA’s operations: ●● Members; ●● Students; ●● Public Practice; ●● Complaints, Disciplinary and Appeals; ●● Continuing Professional Development; and ●● Examinations, Qualifications and Training. AIAWORLDWIDE.COM | ISSUE 101

Members’ interaction with the Constitution in future will be mainly set out in Regulations which set out the requirements for continuing membership and rules surrounding the disciplinary process. Regulations may be amended by resolution of Council, ensuring flexibility for changing regulatory requirements and enabling more efficient updating.

Redistributing committee responsibilities

The powers and responsibilities for Committees of the Council have been reviewed and amended to reflect the introduction of the AIA Exam Board and to create more flexibility in processes. The Applications Committee has been renamed as the Applications & Membership Committee and has the added responsibility for accepting applications for Practising Certificates, which has been transferred from the Qualifications Committee. The Qualifications Committee, as well as having responsibility for all qualifications offered by the Association, deals with applications for institutions applying for approved study centre status and all recommendations relating to exam sittings received from the Exam Board.

Complaints, disciplinary and appeals processes

The process for Quality Assurance recommendations has been streamlined

David Potts is AIA director of operations. He has worked at the AIA for seven years and is responsible for maintaining AIA’s international recognition and implementing regulatory strategies.

to enable these issues to be closed more expediently. The Practice Compliance Committee’s activities may now be judged a bona fide investigation and its decisions reported directly to the Disciplinary Committee. For complaints received by the Association regarding its membership, a provision is introduced to allow for mediation at a secretarial level between the complainant, respondent and Secretary. In addition, the Secretary may decide that a complaint does not fit within the strict scope of AIA’s disciplinary process in certain circumstances. Both sets of decisions must be reported to the Investigations Committee on a regular basis. Sanctions have been amended with reference to new regulatory requirements, the EU Audit Directive and Anti-Money Laundering Regulations 2017.

GDPR compliance

With the introduction of the General Data Protection Regulation (GDPR) in May 2018, the constitution has been amended to ensure it is flexible to fit changing requirements of data protection legislation. Notwithstanding, AIA has made amends to its internal processes and procedures to take into account the new GDPR, including updating its Privacy Policy.

Including the Code of Ethics

The inclusion of the Code of Ethics into the body of the Constitution further reinforces the importance of this document to our members and highlights the regulatory requirements of the Association. AIA members have always been obliged to adhere to the Code of Ethics. ●

The new AIA Constitution is effective from 9 October 2018. You can find out more about AIA’s Constitution at:



Only the brave rebrand… a sneak peek We share the details of the AIA’s plans to rebrand.


e all like a change now and again – a reinvention if you will – but with a wellestablished brand there is a great deal at stake for simply a fresh brand look. Rebranding can, without the relevant thought and consideration, be a risky manoeuvre. A rebrand done correctly can result in reaching new demographics and reinvigorating the perception of a company. Getting it wrong can be a costly exercise which can mean losing brand recognition and alienating stakeholders. For every success story, there is a conflicting failure.


Carl Jepson,

AIA Marketing Manager

Author bio

Carl Jepson has been the AIA marketing manager since March 2017. He has a detailed knowledge of branding within the professional environment.

Here at the Association of International Accountants (AIA) the decision was made, after considerable discussion with branding experts and advice by focus groups, that the time was right for a rebrand. Today we can unveil a sneak peek at some of the visuals for the impending rebrand and website redevelopment, which is due for launch in early 2019. We have taken into account our traditions, maintaining elements from our historical roots, but mixed this with a vibrant new primary colour, refreshed modern look and dynamic feel which we feel will guide the AIA through to our next milestone: our 100th anniversary in 2028! ISSUE 101 | AIAWORLDWIDE.COM


to always look its best across all channels, meaning the consistent and appropriate application of colour. It defines us as an organisation, dictates mood and helps us communicate our brand ethos. AIA is a long-established worldwide association with a network of accountants in 80 countries globally. This presents different challenges in developing a cross-culturally appropriate colour palette. Simplicity is therefore key, which is why the primary palette is limited to three colours: red, black and white. Other changes will be noticeable in the rebrand, but we will discuss these in more detail during the launch.

So why are we rebranding and what does it mean to our members, students and partners?

Necessity. We all operate in fast paced technologically advanced environments where we have an expectation to access information very quickly and with minimum fuss. Therefore, as an Association it is essential we follow this ethos; so, we are completely redeveloping our website to exceed member, student and partner expectations. With the introduction of a revamped website, it made sense to combine this with a brand redevelopment. Why have a dated brand with an all singing, all dancing website?! Our main goal is to ensure that our members, students and partners can work with us in the most convenient, responsive and straightforward manner possible. This will be achieved by making it easier for all of our stakeholders to navigate to tailored services and relevant offerings; all whilst building a strong brand platform to support our vision for growth in the coming years.

What will be remaining the same?

There are several key elements of the current branding, which make AIA instantly recognisable in the marketplace, that will remain in place. The most noticeable elements remaining will be our strapline, shield and griffin. Our strapline “Creating World Class Accountants” will continue to be used in the majority of our external communications, as an inspirational statement that expresses what we continually strive to achieve. The strapline continues to underpin our brand philosophy and supports our brand values. The shield and griffin on the AIA logo remain in place, albeit with a slight makeover to give them a fresher and more modern look. As we celebrate our 90th anniversary year, we understand the importance of our heritage, so we are proud to keep this symbol of our deeply engrained and rich history.

What will be changing?

Most noticeably the colour. The world today places ever greater value on the visual, thanks to the rise and influence of social media and the ubiquity of screens in our digital age. AIA’s aim is for the brand

Our brand is an integral part of the AIA’s development and marketing strategy, and impacts how we interact with our members, our students and other stakeholders.” AIAWORLDWIDE.COM | ISSUE 101

Our development strategy

Our brand is an integral part of the association’s development and marketing strategy and this in turn plays an important part of how the AIA interacts with our members, our students and other stakeholders. We recognise that in order to remain at the forefront of the accountancy profession we must be dynamic, creative and progressive in all that we do in order to provide our key stakeholders with the service they deserve. There are exciting times ahead and our rebrand is a significant step on our ongoing journey.

Looking forward to 2019

We hope the sneak peek has whet your appetite for our rebrand launch in early 2019. ●


© iStockphoto/SIphotography





Achieve your potential in 2019! Find out how the AIA Achieve Programme can help you consistently get the maximum benefit from your study.


IA works closely with thousands of students from around the globe on their journey towards becoming a qualified accountant. We understand the work and sacrifice that is required and appreciate the highs and the lows students often go through on the road to achieving their career aspirations. With 2019 just around the corner, the AIA Achieve Programme can help you maximise your potential, achieve your academic goals and find a work/life balance.

What our students say…

Here’s what some of our students have said about AIA Achieve:

Not 100% confident of achieving the exam results you wish for?

“I struggled with Paper 15 – Professional Practice, as I was not familiar with auditing principles. I could not fully identify the audit risk through self-study, so I decided to utilise the Achieve programme, as it offered a supported structure for my learning.”

Unable to maintain a healthy work/life balance in the lead up to exams?

“Balancing work and family life was an ongoing struggle until I signed up to the Achieve programme. The Personal Study Planner helped me to effectively plan my time and free up more time for my family.”

Struggling for motivation to study?

“Studying remotely brought the flexibility I needed to study for my accountancy qualification, but it also provided me with my greatest challenge. I found myself easily distracted at times and my motivation started to slip. Achieve helped me work through these challenges, with continued support and guidance whenever required.” At AIA, we don’t have a magic wand, but we do have the “Achieve” interactive distance learning programme. The programme has been designed AIAWORLDWIDE.COM | ISSUE 101

specifically for AIA students with affordability and flexibility in mind; alleviating unwanted study planning stresses; and providing you with a variety of resources to ultimately optimise your chances of exam success. Don’t worry if you get stuck. Achieve will help to guide your learning and provide you with access to advice, support and feedback from a specialist team of e-tutors, ensuring you consistently get the maximum benefit from your study. The programme will also offer you mock exams with written feedback, tutor marked practice questions, free to attend webinars, a course e-book and more. All these tools will undoubtedly enhance your chances of exam success, whilst your personalised study planner gives you a clear pathway to follow in the lead up to your professional exams. Achieve also offers an exclusive interactive discussion forum, which will help you to continually stay motivated by communicating with fellow students and accessing supplementary study information. AIA is so confident in the Achieve programme helping you deliver the exam results you desire that we also offer the “AIA Pass Pledge”. This pledge states that if you fail your exam, we will offer you a free exam entry to resit the paper at the next exam session*.

What’s included?

●● Personalised study planner; ●● Mock exam with written feedback; ●● Regular tutor marked practice questions; ●● Feedback, advice and support from specialist e-tutors; ●● Access to AIA webinars; ●● E-books; and ●● Interactive online discussion forum. Enrol today and start your preparations for the 2019 exams. The sooner you enrol, the sooner you will start reaping the benefits of the AIA Achieve programme. For further information, contact the AIA Study Support Team by emailing: ● *Restrictions apply

I could not fully identify the audit risk through self-study, so I decided to utilise the Achieve programme, as it offered a supported structure for my learning.” 11


The death of a shareholder How can private companies prepare for the death of a shareholder? Matthew Price makes the case for a shareholders’ agreement.

lanning in advance what should happen to the shares in a private company if one of the shareholders dies is an essential matter that company directors and owners should resolve and have properly documented at the earliest opportunity. It is not something that grieving relatives and co-directors (not to mention the company’s accountant) should have to deal with after a death. When a shareholder dies, the default position is that the right to his or her shares will pass to whoever inherits them under his or her


will or intestacy. Such a situation may well be undesirable, especially where the company is not family run, but will in the first instance be subject to any relevant provisions of the company’s articles. Many UK companies have restrictions in their articles on the transfer of shares, which tend also to apply to the transmission of shares on death. However, in many cases, such restrictions are quite basic, and in a great many others, they’re completely inadequate. For example, a huge, and still growing, proportion of UK companies have articles based on the Model Articles. These companies will, in

© iStockphoto/joshblake


Matthew Price

Director, Company Law Solutions



Author bio

Matthew Price is a specialist companies legal services manager at Company Law Solutions. He is responsible for all specialist company formations.

the absence of any separate agreement, simply be bound by a provision giving its directors the discretion to reject any transfer by a majority decision. For virtually all companies with more than one shareholder, this simply isn’t good enough and can lead to all sorts of undesirable outcomes.

The articles of association

So, how can a company get around this? The most obvious way is to modify the provisions of the articles themselves. A company’s articles of association are a reasonably flexible document and can include various types of provision with regard to what happens when a shareholder passes away – from a simple pre-emption to more complex terms including (but certainly not limited to): ●● a stipulation that the shares may pass to particular people, such as the shareholder’s spouse or children. This is sometimes alongside a requirement that the rights attaching to the shares are to be modified on such transfer (for example, so that they retain capital/dividend rights but become nonvoting); ●● arrangements to buy out the deceased shareholder’s interest, with valuation arrangements and (often) provisions giving the purchaser time to pay; and ●● provision for the shares to be bought back and cancelled by the company. In many more straightforward cases, simply modifying the articles in such a fashion will fit the bill quite nicely. However, if a company wants more complex arrangements which may be unsuitable for inclusion in the articles, or which the shareholders wish to remain confidential – articles are registered at Companies House for all to see – it may be better to enter into a shareholders’ agreement.

A shareholders’ agreement

Many UK companies have restrictions in their articles on the transfer of shares, which tend also to apply to the transmission of shares on death.” 14

A shareholders’ agreement should be considered in any situation where there are two or more shareholders. Such agreements must be drafted to meet the circumstances of the case at hand, but typically will be designed for several purposes. One of the most important of these, of course, is to set out provisions relating to the death of a shareholder. However, one of the major benefits of using a shareholders’ agreement is that its potential remit is very wide. A company which decides to enter into a shareholders’ agreement principally as a means of providing certainty in one particular area can also take the opportunity to set out numerous other provisions relating to the running and ownership of the company. For example, such agreements routinely set out what is to happen to the share capital of the company upon certain “trigger events” other than the death of a shareholder. The most obvious of

these is where a shareholder wishes to transfer some or all of their shares during their lifetime. The terms of the agreement may determine who (if anyone) that party must offer the shares to first; how their shareholding is valued; and even, potentially, whether they are classed as a “good leaver” or “bad leaver” (which can lead to radical adjustments in the capital return payable to them). Aside from that, shareholders may, under the terms of such an agreement, be subject to a forced sale of their shares; for example, as the result of a “drag along” provision designed to facilitate the sale of the whole of the company to a third-party buyer. A shareholders’ agreement designed for a company owned “fifty-fifty” by two shareholders, on the other hand, may contain provisions designed to cater for the possibility of a major falling out between them (and the deadlock situation which would invariably follow). Popular options include the “Russian Roulette” and “Texas Shoot-Out” clauses and their variants (the nomenclature supposedly arising from the comparatively drastic nature of the provisions themselves, rather than an enthusiasm for firearms on the part of the lawyer who came up with them).

A constraint of powers

A shareholders’ agreement doesn’t, however, just cover matters relating to the company’s share capital. A key function of such an agreement is to protect each shareholder from any unfair actions by the others. Unless constrained by a shareholders’ agreement, shareholders with a simple majority of votes (e.g. two out of three equal shareholders) have very wide powers under company law. Without requiring any consent from the other shareholders, they can: appoint new directors (perhaps their friends or family members); remove any director (such as one of the other shareholders); vote to pay themselves salaries or fees which other shareholders or directors do not receive; or issue more shares (so diluting existing shareholders’ ownership of the company). These are only a few examples. A shareholders’ agreement would usually constrain these powers so that such things can only be done with the consent of all the parties or, sometimes, a specified majority of them. Crucially, a well drafted shareholders’ agreement would also require that any future shareholders in the company agree to become a party to it, and adhere to its terms, as a prerequisite of share ownership.

Managing expectations

A shareholders’ agreement is also useful in setting out the parties’ expectations as to the running of the company. Most agreements will set out a list of management decisions that require the assent of all the parties, or specified parties. Circumstances vary, but typical provisions of such an agreement relate to ISSUE 101 | AIAWORLDWIDE.COM

COMPANY LAW matters that are outside the usual course of the company’s business, such as: ●● changing the nature of the business; ●● entering into unusual contracts (or contracts in which a director is personally interested); ●● extending the company’s overdraft (which often all directors will have personally guaranteed); ●● borrowing above agreed limits; ●● employing or dismissing staff in unusual circumstances; or ●● bringing or defending legal proceedings.

© iStockphoto/mangojuicy

The cross-option agreement


Another legal device to consider here is the cross-option agreement (sometimes referred to as the “double option agreement”). Such an agreement is a contract between the shareholders of a company relating specifically to the sale and purchase of a deceased shareholder’s shares, and sometimes those of his or her family members. Under such an agreement, each shareholder grants to each of the other shareholders “put” and “call” options, exercisable on death, over his or her holding. What this means in practice is that the surviving parties can exercise an option to purchase the shares of the deceased, but equally the estate of the deceased can enforce its option to sell the shares to the remaining shareholders. The defining characteristic of a cross-option agreement is that it is backed by a set of term assurance policies which provide the finance for the purchase – something which may otherwise be hard to come by (especially where the market value of the company is high). A cross-option agreement is ideal where it would be inappropriate or undesirable for the family members of the deceased to continue holding shares in the company. In such circumstances, it’s also likely that they would indeed wish to “cash out” rather than maintain any further involvement. Such an agreement can sit in force as a constituent part of a shareholders’ agreement or, alternatively, as a separate document (in which circumstances care must of course be taken to ensure that the provisions of the two do not conflict with one another). Planning for the future is an essential part of company management, both for those directly involved and their advisors. Agreeing such terms in advance, rather than attempting to sort these matters out in the aftermath of a bereavement, will avoid uncertainty and conflict at a very sensitive time. Whatever is decided can be given legal effect in the most appropriate way, but what is paramount is to ensure that all relevant documentation – the will, the company’s articles, any shareholders’ agreement and/or cross option agreement – must be compatible. The last thing the company, the shareholder’s family, and the bereaved shareholders need at such a time is a legal dispute. ●



The necessary step change? Dr Philip Shrives examines Britain’s new UK corporate governance Code. Will it provide the boost that governance needs at this time? Dr Philip J. Shrives


Professor of accounting and corporate governance, Newcastle Business School, Northumbria University.

ritain is arguably proud of its reputation in corporate governance. The Cadbury committee produced its report in 1992 and since then Britain has been held up as an expert in corporate governance regulation. The Cadbury Committee’s Code of best practice has been imitated and copied all over the world. Yet every so often we are reminded that some of the key aspects of corporate governance have not been fully addressed and recent scandals in the UK are the manifestation of that. We should also recall that the Bank of England requested the original report into corporate governance because governance practices were thought to be better in countries like Germany and Japan. So, there’s no room for complacency.

Step change?

In around 2014, we were led to believe that there would be no changes to corporate governance arrangements for a few years. In fact, a new Code was introduced in 2016 and now again another has been introduced this year. The Code has been changed on a fairly regular basis since 2003 (the previous version was produced in 1998) and since then has been amended practically every two years (in 2006, 2008, 2010, 2012, 2014 and 2016).



© iStockphoto/IBushuev




CORPORATE GOVERNANCE The 2018 Code is supposed to be a “step change” rather than an incremental change. That is to be welcomed because incremental change is unlikely to provide the boost that governance needs at this time. However, there is a danger that companies and their directors will see this as yet another amendment to the Code, despite the important changes encompassed within it. This article examines some of those key changes. The table to the right summarises the changes to the Code. The Code is much simpler to look at and has just five sections and 41 provisions in total. It is frequently referred to as “shorter” and “sharper”, but to what extent does it address current concerns about corporate behaviour? There are two key aspects in the new Code that will affect boards and other jurisdictions that base their Code on the UK’s. The first is shareholder primacy and the need to moderate that. While this is nothing new to those schooled in responsible business practice, traditionally governance has been very shareholder orientated. A company’s culture needs to encourage openness and a high level of integrity, while at the same time recognising diversity and a wide range of stakeholders – and not merely shareholders. The second key aspect is the cultural dimension. The old corporate governance adage that “the fish rots from the head” is very much true today. Company boards need to address the company culture, providing an example of transparency and honest behaviour. There is a lot of talk about corporate culture in the UK today, particularly following the BHS and Carillion collapses and the ethical issues raised at Rolls-Royce for example. It is quite easy to recognise a toxic culture; for example, this can lead to differing values, inadequate communication, leadership issues and questioning, rumour, and lack of trust and respect. However, it is difficult to overcome these issues once they become deep seated in a company or organisation. One way is to follow the German example and to ensure that employees with their own views and values are represented on the board. In the UK, the link to the workforce can now be established in three different ways (2018 Code, section 1, para 5), by means of: ●● a director appointed from the workforce; ●● a workforce advisory panel with a designated non-executive director; or ●● some other mechanism that captures the spirit of workforce involvement in corporate affairs. A combination of these measures is another possibility within the Code. Arrangements for workers providing feedback anonymously, should they decide to do so, should also be in place.

The remuneration committee

Another concern is, of course, directors’ pay. In August 2016, the Chartered Institute of Personnel and Development (CIPD) issued a statement comparing the average remuneration


© iStockphoto/IBushuev

The simpler sharper Code?

Summary of changes to the UK’s corporate governance code Area Comment Overall The new Code is sharper and shorter, encouraging greater transparency, trust and integrity. This represents a key step change to the Code rather than an incremental change. It reinforces the need to avoid a “tick box” approach to compliance, reinforcing the “comply or explain” system. Can it ensure the UK stays ahead in corporate governance? The new Code applies to accounting periods from the start of 2019. Culture Aligning company values with strategy, promoting integrity and valuing diversity. Succession and Succession planning is a key area for boards and planning diversity and establishing a diverse board with the appropriate skill level is critical. External board evaluation is an issue here too (this was originally raised in the 2012 Code). Remuneration This has been a public issue since the “fat cats” of the 1990s. The fear is that remuneration committees may have made things worse. Workforce Ever since the Bullock Report (1975), there have been issues and wider about whether workers can be represented on boards. This stakeholder is nothing new to continental European companies with their group two tier (management and supervisory) boards. The question is: how will it work in practice and will employees benefit? However, companies should feel the benefit of considering a wider stakeholder group. Code Board leadership and company purpose: structuring: Principles: A-E five sections Provisions: 1-8 Division of responsibilities: Principles: F-I Provisions: 9-16 Composition, succession and evaluation: Principles: J-L Provisions: 17-23 Audit, risk and internal control: Principles: M-O Provisions: 24-31 Remuneration: Principles: P-R Provisions: 32-41 ISSUE 101 | AIAWORLDWIDE.COM

CORPORATE GOVERNANCE of CEOs with other workings. CEO remuneration has increased by 23% (a median of 11%) during a time when other workers’ pay has increased by only 2%. Even if some outliers are removed from this analysis, the relevant CEO pay increase would be 6% and the full-time worker would take 137 years to reach the adjusted mean FTSE 100 Chief Executive reward package (CIPD report on Executive Pay, August 2018). The committee should now review workforce remuneration, related policies and the alignment of rewards and incentives with corporate culture. Importantly, these should be taken into account when setting the policy for executive director remuneration. Thus, the remuneration committee is now making comparisons between workers and executives and looking to ensure pay is in line with company culture. Incentives should be consistent with the sort of culture the company wants to promote. Poor performance should not be rewarded, particularly bearing in mind the need for controlling pay when directors are leaving an organisation.

stakeholders and to ensure that the UK remains the leader in corporate governance reform?

A different regulator?

Company boards need to address the company culture, providing an example of transparency and honest behaviour.”

Comply or explain

The approach to governance remains the same: adopting the “comply or explain” approach which focuses on the spirit of corporate governance, rather than adopting a purely legalistic approach. This softly, softly approach is quite different to the more compliance driven “comply or else” philosophy, which is adopted for example in the United States (the Sarbanes-Oxley Act) and other areas of legislation within the UK. My own research work published in The British Accounting Review and Critical Perspectives on Accounting (see references below) raises the issues about the quality of company explanations and the use of rhetoric in the reasons given for non-compliance. This Code, like others before it, reminds company directors that they should not pay lip service to the Code, stating: “Explanations are a positive opportunity to communicate, not an onerous obligation.” It would be useful if the Financial Reporting Council (FRC) and investors were more questioning of poorly crafted or inadequate explanations. The trick here is not to frighten companies into compliance – companies should be confident in justifying different approaches to governance that still accord with the overall principles of governance (see table).

Other areas

Many areas of the Code are the same as previously, including guidance on risk, the percentage of non-executive directors and the audit committee. For example, the requirement to have at least one member of the audit committee who has recent and relevant financial experience is unchanged. Could more items have been revisited or is it acceptable to leave some areas as they were? Do we need more radical changes to the Code to protect shareholders, employees and other AIAWORLDWIDE.COM | ISSUE 101

Recently the Institute of Directors has suggested that a distinction needs to be drawn between a compliance-based system (which tends to operate in audit) and the approach just described in relation to corporate governance. In its view, the two different approaches to regulation warrant a different regulator. Is it time for a new regulator other than the FRC, which is busy with auditors and the quality of audits? Sir John Kingman is currently carrying out an independent review of the FRC and is likely to publish recommendations towards the end of the year.


For what is publicised as a new version of the Code, no doubt some will be critical as to whether the changes go far enough. The new stakeholder approach is very much welcomed, providing that companies embrace it and allow workers to be properly represented on the board. It would be easy to adopt lip service to this change, rather than truly embracing the spirit of it. In a recent document, the Institute of Directors argues that recent corporate failures suggest the FRC needs to concentrate on auditing and accounting issues and let the more flexible corporate governance issues be dealt with by another body. While one can see the logic of this, we might question whether it is necessary to have two regulators looking after closely related issues. Either way, I feel the FRC or its replacement needs time to focus quite carefully on corporate governance as actually practised by companies. In particular, companies should be encouraged to think about the spirit of governance in the same way as this new Code is encouraging them to think more carefully about culture. Culture is not a tick box matter, and neither is corporate governance. The FRC and reviews of corporate governance often focus on compliance. Nevertheless, compliance is not the important thing and can encourage a mechanistic approach. Companies should think about their compliance and, if they do not comply with the Code, develop authentic explanations. Can the FRC start to question either false compliance or inadequate explanations? Simply forcing companies into compliance is not going to fix the problem. If the FRC cannot or is just not willing to do that, then possibly the Institute of Directors is right – it could be time for a change.


Author bio

Philip Shrives is professor of accounting and corporate governance and head of the accounting and financial management department at Northumbria University.

Shrives, Philip J. and Brennan, N.M. (2015). “A typology for exploring the quality of explanations for non-compliance with UK Corporate Governance regulations”, The British Accounting Review, Vol. 47, Issue 1, pp. 85-99. Shrives, Philip J. and Brennan, N. M. (2017). “Explanations for corporate governance noncompliance: A rhetorical analysis, Critical Perspectives on Accounting”, Vol. 49, pp. 31-56.●



A brave new world From 1 April 2019, making tax digital reporting becomes mandatory for all VAT registered businesses trading above the current VAT registration threshold of £85,000. John Forth explores the implications. John Forth Partner, RSM


© iStockphoto/Thoth_Adan/4khz




he transition to making tax digital (MTD) represents one of the most fundamental changes to occur to the UK tax system for decades. HMRC is concerned that basic VAT accounting errors are resulting in significant VAT loss to the Treasury and believes that MTD will play a major role in reducing this. Whilst it is expected that MTD will eventually apply to taxes such as income tax and corporation tax, VAT will be at the vanguard of these changes with effect from 1 April 2019, when MTD reporting becomes mandatory for all VAT registered businesses trading above the current VAT registration threshold of £85,000. With just less than 12 months to go until then, affected businesses will need to ensure that they fully understand the changes they will need to make to ensure that they are MTD compliant. For many organisations this will require significant changes to their accounting software and is likely to require support from both their internal IT function and external third party software providers. Businesses will also need to factor in sufficient time to test the updated systems to ensure that the required changes are effective. Accordingly, whilst the go live date of 1 April 2019 is some way off, the time and resource required to implement the changes needed for MTD should not be underestimated.

There are essentially two key areas of change: how VAT information is compiled and submitted to HMRC; and what information has to be retained digitally by the business.” purposes, it will be necessary to have digital links between the packages and/or spreadsheets to ensure that information flows automatically to HMRC via the API links.

Information requirements

Whilst all affected businesses will be mandatorily required to submit the information that currently makes up the nine boxes on the VAT return digitally, they will also be required to retain supplementary information digitally. This includes recording all sales and purchases at a transactional level, together with a summary of all VAT adjustments and a breakdown of supplies made at different VAT liabilities; and identifying, on an invoice by invoice basis, VAT that is only partially recoverable. Whilst businesses are not obliged to submit this supplementary data, HMRC has stated that where organisations submit this data voluntarily, it will take this into account in determining whether or not to undertake a compliance visit. The inference is that those businesses that choose to only submit the mandatory data may be regarded as being in some way less compliant. 

The key changes for VAT under MTD

There are essentially two key areas of change: firstly, in relation to how VAT return information is compiled and submitted to HMRC; and, secondly, in relation to what information has to be retained digitally by the business.

Reporting requirements

At present, most VAT returns are completed by manually filling in the required fields and submitting this information via HMRC’s online portal. This will change from 1 April 2019, as VAT return data will need to be automatically submitted to HMRC via MTD compatible software using application programme interfaces (APIs), which will act as a digital bridge between HMRC’s systems and the business’s accounting software. The intention is that the VAT return information will flow from the source data directly to HMRC with limited scope for the figures to be amended, thereby reducing the risk of errors arising. Software providers are in the process of developing API software solutions and a number of the larger software houses are now working to make these available to their licence holders. In circumstances where the VAT return is compiled from more than one accounting package or where spreadsheets are used to calculate adjustments, e.g. for partial exemption AIAWORLDWIDE.COM | ISSUE 101

Preparing for MTD

Author bio

John Forth is a key member of RSM’s financial services team. He also has experience advising clients in not for profit and real estate and contruction.

HMRC has recognised that businesses may want to embrace MTD before 1 April 2019 to ensure that they are compliant from this date. To assist with this, HMRC is running an MTD pilot programme from 1 April 2018. Initially, this pilot is restricted to a limited number of businesses with a straightforward VAT profile, with those businesses with more complex VAT accounting being able to participate in the pilot later in the year. HMRC has confirmed that it will adopt a light touch to compliance failures for the first 12 months and will not seek to levy penalties arising from digital submission errors. The changes under MTD will provide HMRC with more information and a better understanding of the risk profile of businesses. Accordingly, in preparing for MTD, businesses should take the opportunity to review their VAT accounting processes and procedures with a view to minimising the risk of errors arising in the future. ●



Essential checklist for accountants in Europe Performing these essential baseline checks will help accounting teams align their processes and take some of the complexity away from what can be a particularly stressful period. Emine Constantin, TMF Group, EMEA Head of Accounting and Tax

1. Review filing deadlines This is the first, very basic check that should performed by companies. Most of the time, deadlines for group reporting are very tight and much tighter than the deadlines for the preparation of local financial statements. For example, in Germany, ranked 42nd in the world for financial compliance complexity in TMF Group’s Financial Complexity Index, local financial statements need to be prepared and filed by 31 December of the following year. In Belgium, the deadline for the 2018 financial statements will be sooner - the end of June 2019. Individual countries typically give accountants more time to prepare and close the accounts, while at group reporting level the deadlines are usually much tighter. This difference between deadlines has an impact on the year-end financial closing calendar; the post-balance sheet events and how they are reflected in the financial statement. So take the time to check all relevant filing deadlines before starting any closing procedures.

Note changes in format and filing requirements There are key differences in the application of IFRS and local GAAP across Europe. In the Netherlands, Italy and Portugal, cash flow statements are not required. This is compared to Germany and France where they are required for consolidated accounts, or for enterprises listed in capital markets with financial statements that follow the IFRS format. Some countries require statements of comprehensive income and income statements that are broadly consistent with IFRS for SMEs; and some countries do not require a comprehensive income statement. In France, Germany, Norway, Portugal and Poland, the statement of other comprehensive income does not exist. Also keep in mind that countries frequently review and make amendments to legislation. What changes in accounting forms, format and filing steps have occurred since the company’s last year-end close? How do these changes impact group reporting?

2. Check statutory audit and consolidation requirements There are key differences when looking at the statutory audit from a group versus local reporting perspective. In most EU countries, a statutory audit is required if a certain threshold related to turnover, assets or the number of employees is exceeded. Alongside the statutory audit, companies should be mindful of the consolidation requirements, as there are some more thresholds here based on turnover, assets and number of employees. Again, these thresholds differ from country to country. Companies need to make sure they comply with threshold levels in each country in which they operate.

3. Understand the differences in accounting policies and treatments This area warrants a checklist of its own. All of the following items need to be carefully considered by companies, and it’s crucial to ensure the right level of information is collected in order to identify the correct accounting treatment in accordance with local rules. ●● Check the approach to estimates (group vs local): Different approaches commonly exist at local and group levels; for example, with pension cost estimates, bonus estimates, holiday accruals and so on. ●● Review provisions and contingencies: The Netherlands


allows a provision to be made, even if an obligation may not exist. Meantime, Germany and Italy refer to provisions for all risks, which would seem to go much further than other countries and IFRS. ●● Adjust events: In Germany, strict knowledge at the balance sheet date is required for events to lead to an adjustment, and the strict adoption of knowledge at the balance sheet date is mandatory. Nonetheless, foreseeable risks and losses occurring up to the balance sheet date lead to adjustments if they become known between the balance sheet date and the date of preparation of the financial statements. While in the Netherlands, profit distributions may always lead to adjustments, and dividends proposed and declared after the year-end are included in current liabilities. ●● Check revaluation: Options for this exist in some countries (the Netherlands, Romania, Portugal and Poland) and for any companies that have taken up the revaluation option, there would be a clear change. 5. Collaborate with legal This is an area that is commonly overlooked and neglecting this aspect could lead to not only delays in the filing of financial statements, but in extreme cases, also penalties. Capture year-end corporate secretarial requirements in your financial close calendar and ensure these requirements are considered alongside other inter-dependencies. Year-end closing in Europe is always a stressful time, but with some foresight and good planning, it can be performed with no unexpected surprises. ●


© iStockphoto/Jolygon





Cryptocurrencies and divorce The level of anonymity that bitcoin and many other cryptocurrencies offer can present huge difficulties following the death or divorce of their holder.


Chris Thomas

Senior tax adviser, Wilson Wright

ryptocurrencies were, so it was said, a boon for the criminally minded. Criminals everywhere were apparently financing their syndicates with cryptocurrencies, secure in the knowledge that their illicit gains and their payments to henchmen cannot be traced. But cryptocurrencies are now mainstream. Firms have clients that are holding cryptocurrencies as investments, clients that are dealing in cryptocurrencies, and businesses launching whose products and services can only be purchased with cryptocurrencies. This rise in popularity of cryptocurrencies means that death and divorce present stumbling blocks to ensuring that all assets are identified, and everyone gets their fair share.

irrecoverable. It cannot be reset, and the digital wallet managers are unable to re-issue it. Digital wallets can be online or offline. An online digital wallet allows an individual to access their cryptocurrency from any device, wherever they may be. There have been instances of online digital wallets being hacked and investors losing funds. Consequently, some people do not trust these online digital wallets with their wealth. An offline digital wallet is stored on a particular data storage device. This could be a phone, a computer, or removeable storage such as a portable hard drive or USB stick. If the device or the data on the device is lost, the digital wallet can never be accessed and the cryptocurrency is lost forever. Cryptocurrencies therefore offer a great deal of security and privacy.


The blockchain

Typically, cryptocurrencies are stored in an individual’s digital wallet. To access this digital wallet, an individual will need their password, and this will usually allow cryptocurrency balances to be viewed. To carry out transactions, including converting cryptocurrency to cash (a fiat currency), a private key is required. If this private key is lost, the cryptocurrency to which they relate will be forever stuck in its current state. This private key is completely AIAWORLDWIDE.COM | ISSUE 101

Author bio

Chris Thomas is a senior tax adviser at Wilson Wright. He boasts a wide range of experience from advising farmers to international high net worth individuals.

The blockchain is at the core of this confidentiality and security. A blockchain is a database. The blockchain of a cryptocurrency will store details of all transactions that have ever been undertaken in that cryptocurrency. It is a complete record of every cryptocurrency transaction. The bitcoin blockchain is freely available to search, and there are many online tools that enable anyone to explore all transactions. It was


CRYPTOCURRENCIES possible for the writer to very quickly find the first bitcoin transaction, in which 50 bitcoins were mined on 3 January 2009. Who carried out this transaction? In the case of bitcoin, and many other cryptocurrencies, this information is simply not available. These first 50 bitcoins were sent to the bitcoin address 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa, but who owned this address? Despite all of the publicity surrounding the founder of bitcoin, this information is still not known. This is the level of anonymity that bitcoin and many other cryptocurrencies offer.


Executors of an estate can often have a very difficult job. Sometimes there will be a financial adviser who has a full list of assets and investment products. Sometimes the deceased has kept an “on my death” folder, usefully detailing everything an executor and the family need to know. But being an executor is not always so easy, and details of assets and liabilities are not always readily available. Where information is not readily available, a process of checking bank statements, direct debits and old documents gives a picture of the assets and liabilities of the deceased. Financial institutions are generally co-operative, paying out policies, providing valuations and identifying unknown assets. If the deceased is disorganised and owns some cryptocurrency, that cryptocurrency may be lost forever. There is no bank with which the executors can communicate which can bypass online security. Without the password and private key, there is little hope. If you have clients with cryptocurrency, you should consider drawing these problems to their attention so that provisions can be made.


Divorce can be an emotionally painful and financially challenging time and cryptocurrencies can add to this strain. On divorce, a financial settlement is generally agreed, with one spouse paying the other so that they are both able to take their share of assets and carry on with their respective lives. The individual paying a financial settlement will generally be seeking to agree that the matrimonial assets have a lower value, while the spouse receiving the settlement will be contending that the assets have a higher value. In many cases, these matters can be resolved with relative ease. Banks provide lists of accounts and liabilities, financial advisers can provide values of pensions and other investments, and surveyors are instructed to value property. Accountants are employed to value private companies, and tax advisers calculate the latent gains on all of these assets. In extreme cases, a forensic accountant may be employed to trawl through bank statements to check that everything is in order and all assets are identified.


Death and divorce present stumbling blocks to ensuring that all assets are identified, and everyone gets their fair share.”

As with an individual’s death, cryptocurrencies complicate the traditional routes of valuing an individual’s assets. There is no central bank or authority that is able to provide information on an individual’s cryptocurrency holdings. It is not that these are secretive companies that refuse to breach an individual’s confidence, but that the information is simply not available. The blockchain holds the information, and it cannot be examined in any detail. While the transfer of funds to a cryptocurrency may be easily traced from a bank or credit card statement, what has happened to the funds from then on? Have they been spent? Have they enjoyed a ten-fold increase in value? Or has their value been decimated? Once funds are in the realm of a confidential blockchain, there is no way for a third-party to access those transactions. A court has no bank or other financial institution to turn to that will have records of the transactions. This gives an unscrupulous divorcee the possibility of hiding wealth. Conversely, an honest divorcee may not be able to prove that they do not own any cryptocurrency. Following a forensic review, it may be proved that that some cryptocurrency was purchased some years ago, but what has happened to that investment in the meantime? The investment may have been into a fledgling currency with a value which quickly collapsed. Any small, remaining funds may have been transferred back into sterling, or converted to bitcoin and spent on goods or services, but since the digital wallets have been closed and no paper records were kept, this cannot be proved. This could prove very frustrating for both parties and will likely increase the legal costs of the divorce. Good records are required for many purposes, not least to ensure that an individual’s tax affairs are in order. If clients are investing or trading in cryptocurrencies, they should be encouraged to keep proper records in a format that can be examined at any point in the future.

The future

The above problems stem from the use of a confidential blockchain. Currently, the use of the blockchain is confined to cryptocurrencies, but there are many ideas to extend the use of the technology. The execution of contracts and the ownership of assets can all, in theory, be controlled using the blockchain technology. It is possible that some of these blockchains will be available for inspection, enabling anyone to interrogate the data. It is also possible that the technology will be expanded to increase the privacy of asset ownership and the confidentiality surrounding transactions. As the security services struggle with the use of end-to-end encryption, the legal and financial industries may find that the use of confidential blockchain presents problems that are not easily solved. ● ISSUE 101 | AIAWORLDWIDE.COM



Illustrative IFRS Consolidated Financial Statements for 2018 Year Ends This latest edition includes: >

Illustrative disclosures to reflect the adoption of IFRS 9 and IFRS 15.


New illustrative disclosures required under amendments made to IFRS 2 in relation to share-based payment plans with withholding tax obligations.


Appendices including new leasing disclosures.


A summary of new standards and amendments effective for the first time for years ending 31 December 2018, and of forthcoming requirements.

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UK 6 November 2018 VAT Update Seminar The Wesley Euston Hotel, London, 18.30 to 20.30 8 November 2018 VAT Update Seminar The AC Hotel by Marriot, Salford Quays, Manchester 18.30 to 20.30 5 February 2019 Cyber Security Seminar The University of London, 1 Cartwright Gardens, London 18.30 to 20.30 7 February 2019 Cyber Security Seminar The AC Hotel Hotel by Marriot, Salford Quays, Manchester 18.30 to 20.30


2 April 2019 Ethical Accounting Conference The AC Hotel by Marriot, Salford Quays, Manchester 9.00 to 4.00 4 April 2019 Ethical Accounting Conference The University of London, 1 Cartwright Gardens, London 9.00 to 4.00

Ireland 4 December 2018 Budget and Year Review Camden Court Hotel, Dublin 10.00 to 14.30 5 March 2019 Wealth and Pension Conference Camden Court Hotel, Dublin 10.00 to 14.30


2 November 2018 Budget Webinar 11.30 to 12.30

1 March 2019 Finance Act 2019 11.00 to 1.00

20 February 2019 Work, Health & Wellbeing 11.30 to 12.30

26 March 2019 Insolvency Webinar 11.30 to 12.30

VAT Update Seminar 6 November 2018 | London 8 November 2018 | Manchester 18:30 to 20:30 Join us on either 6 November in London or 8 November in Manchester for the VAT Update Seminar where we will welcome Melanie Lord as our keynote speaker for the final seminar of our 90th anniversary year! This evening seminar will see Melanie Lord delivering a VAT update on the dual 2019 VAT challenges of Brexit and HMRC’s imposition of Making Tax Digital for VAT accounting. With Brexit happening in April 2019, VAT accounting on EU sales and purchases will have to be changed. However, with less than eight months to go, significant uncertainty still surrounds what the new rules are going to involve. This seminar will provide a timely update on the new rules as they stand with less than six months left before system changes need to go live. Making Tax Digital (MTD) is the second April 2019 challenge facing all VAT registrations. By removing the current online VAT return submission system, everyone needs to use digital


accounting software to submit VAT returns. While simplifications have been agreed in principle, none of the necessary software solutions have yet been designed. This seminar will address these issues and update members on the current state of play with MTD VAT proposals. Melanie Lord will guide delegates through both challenges utilising her vast wealth of experience, having worked in VAT for over 35 years, helping people avoid and solve problems with the most difficult areas of the tax. Originally trained as a VAT inspector, Melanie moved on to head up the North East VAT team for a Big Four firm before founding AVS VAT in 1994. She and her team provide support on all VAT related matters, as well as specialist advice on property, the travel sector, TOMS VAT and financial services. Additional benefits In addition to a highly informative presentation from Melanie Lord, delegates will also benefit from:​ ●● the opportunity to ask speakers direct questions and receive expert advice;

●● networking opportunities with peers; ●● 2 CPD units and a certificate of attendance; and ●● refreshments provided. Book now Book your place at this event by visiting events, or call us on +44 (191) 493 0265, quoting the reference below! £25.00 | AIA members (CPD734) | London £30.00 | Non-members (CPD735) | London £25.00 | AIA members (CPD736) | Manchester £30.00 | Non-members (CPD737) | Manchester ISSUE 101 | AIAWORLDWIDE.COM


IPSAS 41 to improve financial instruments reporting The International Public Sector Accounting Standards Board (IPSASB) has released IPSAS 41, Financial Instruments. IPSAS 41 substantially improves the relevance of information for financial assets and financial liabilities. It will replace IPSAS 29, Financial Instruments: Recognition and Measurement, and improves its requirements by introducing: ●● simplified classification and measurement requirements for financial assets; ●● a forward looking impairment model; and

●● a flexible hedge accounting model.


●● establishes a requirement to understand and comply with laws and regulations that prohibit the offering or accepting of inducements in certain circumstances, such as in relation to bribery and corruption; ●● guides professional accountants in applying the enhanced conceptual framework underpinning the International Code of Ethics for Professional Accountants (including International Independence Standards) where there is no improper intent; and ●● provides enhanced guidance on the offering and accepting of inducements by professional accountants’ immediate or close family members.

Global ethics board resets expectations of professional accountants regarding inducements The International Ethics Standards Board for Accountants (IESBA) has released new enhancements to its global ethics code which address more fully the responsibilities of professional accountants around the offering and accepting of inducements. The revised standard sets out a comprehensive framework that more clearly delineates the boundaries of acceptable inducements, and guides the behaviour and actions of professional accountants in business and in public practice in situations involving inducements. “Incentives motivate behaviour, and some inducements can be a powerful incentive to unethical behaviour,” said IESBA chairman Dr Stavros Thomadakis. “This revised standard complements our standard on NOCLAR to offer a full system of ethical defences that relate both to malfeasance committed by others and to accountants’ own involvement in potentially unethical behaviours.” Central to this framework is a new intent test that prohibits the offering or accepting of inducements where there is actual or perceived intent to improperly influence the behaviour of the recipient or of another individual. The framework also: ●● clarifies the meaning of an inducement; AIAWORLDWIDE.COM | ISSUE 101

“The significance of government debt to global capital markets can often be ignored,” said IPSASB chair Ian Carruthers. “IPSAS 41 is a major step forward in accounting for financial instruments, and responds to the problems with IPSAS 29 that were exposed by the global financial crisis. It provides principles that appropriately reflect the economics of transactions involving financial instruments, replacing the more rules-based approach of its predecessor.”

The revised provisions become effective June 2019, including consequential amendments to the independence provisions of the Code addressing gifts and hospitality. The changes constitute the last piece of the recently revised and restructured Code.

International accountancy and law professions further anti-corruption mandate ahead of global economic leaders’ meeting The International Federation of Accountants (IFAC) and the International Bar Association (IBA) have announced their shared commitment to continue their work combating corruption in all its forms. Published ahead of the gathering of global economic leaders (G20), taking place in Buenos Aires, Argentina, the

IPSAS 41 is based on International Financial Reporting Standard (IFRS) 9, Financial Instruments, developed by the International Accounting Standards Board (IASB). IPSAS 41 will also include public sector specific guidance and illustrative examples on: ●● financial guarantees issued through non-exchange transactions; ●● concessionary loans; ●● equity instruments arising from non-exchange transactions; and ●● fair value measurement.

signed IBA and IFAC Anti-Corruption Mandate highlights the role of business and government in safeguarding a fair and transparent future for all. “Grounded in a strong ethical code, professional accountants across the globe play a critical role in the fight against corruption, bringing essential transparency, relevance and integrity to the systems that underpin vibrant economies,” says IFAC CEO Fayezul Choudhury. “We are proud to partner with the IBA to highlight and advance the role of our global professions in serving the public interest now and in the future.” According to the International Monetary Fund, bribery, which is just one aspect of corruption, costs the global economy nearly $2 trillion – approximately 2% of global GDP – each year. However, where governance architecture is strong, the role played by professional accountants in tackling corruption is amplified, such as in G20 countries and in countries that have adopted anti-money laundering laws in line with international recommendations. The presence of professional accountancy organisations is another important factor, as they advance the adoption of ethical, educational investigation and discipline requirements that are central to the profession. According to research from IFAC, there is a strong link between the percentage of professional accountants in the workforce and more favourable scores on the main global measure of corruption. Mark Ellis, IBA executive director, commented: “Corruption is a significant impediment to economic stability and development, tarnishing public trust in


Technical institutions and inhibiting citizens’ access to opportunities and prosperity. With empirical research that demonstrates the world’s poor pays the highest percentage of their income in bribes, the imminent meeting of the G20 finance ministers and Central Bank governors presents an important opportunity to remind leaders that every stolen dollar, euro, lira, peso, pound, rand, real, rouble, rupee, yen or yuan robs someone of an equal opportunity in life, and that everyone has a responsibility to combat corruption. “The IBA-IFAC cross-sector collaboration aims to reinforce the role and responsibility of international professions to tackle corruption, and we are delighted to be partnering with IFAC.” In all its variations, corruption has far reaching negative consequences, including when money is misappropriated through illicit financial flows that can lead to the funding of organised high level crimes such as drug trafficking, human trafficking and terrorism. The international accountancy and legal professions continue to promote core ethical values, facilitate national and international cooperation in the fight against corruption, and advance monitoring and enforcement systems in the public interest.

Updated practical support and guidance for small business audits Small and medium sized practices (SMPs) may require practical support when implementing the International Standards on Auditing (ISAs) in audits of small and medium sized entities (SMEs). The International Federation of Accountants (IFAC) has updated the Guide to Using ISAs in the Audits of SMEs, Fourth Edition (the Guide) to help firms efficiently and proportionally apply ISAs on SME audits. This fourth edition is updated to reflect recent changes to the ISAs, including International Auditing and Assurance Standards Board (IAASB) projects on: ●● auditor reporting; ●● disclosures; ●● the auditor’s responsibilities relating to other information; and ●● using the work of internal auditors. The Guide is designed for use by all practitioners. Volume 1 covers the fundamental concepts of a risk-based audit in conformance with the ISAs. Volume 2 contains practical guidance on performing SME audits, including two


illustrative case studies – one of an SME audit and one of a micro-entity audit. Many firms use the Guide for training purposes and as the basis for firm manuals. IFAC has also updated the Companion Manual which provides practical “best use” suggestions for the Guide. IFAC has a long history of developing implementation support for international standards. In addition to the Guide, the extensive suite of material includes: ●● Guide to Quality Control for Small and Medium Sized Practices, Third Edition; ●● Guide to Review Engagements; ●● Guide to Compilation Engagements; ●● Agreed-Upon Procedures (AUP) Engagements A Growth and Value Opportunity; and ●● Choosing the Right Service: Comparing Audit, Review, Compilation and Agreed-Upon Procedure Services.

UK AND IRELAND Revised guidance on the strategic report The FRC has published revised Guidance on the Strategic Report, which encourages companies to consider wider stakeholders and broader matters that impact performance over the longer term. The 2018 Guidance has been enhanced to recognise the increasing importance of non-financial reporting, while maintaining the key principles of existing guidance. The FRC believes that the integration of non-financial information into the strategic report is a key part of telling a company’s story. The revised guidance places a greater focus on the directors’ duty to promote the success of the company under the Companies Act 2006 s 172. This is complemented by new legislation that introduces a specific reporting requirement on how directors have had regard to broader matters when performing their duty, including considering the interests of employees, suppliers, customers and other stakeholders, as well as impacts on the community and environment. The new legislation is applicable to large companies for financial years beginning on or after 1 January 2019. Paul George, FRC’s executive director corporate governance and reporting, said: “The revised guidance underpinned by legislation will improve

the effectiveness of section 172 and stimulate Board discussions on how companies are considering various factors to ensure their business is sustainable over the long term, including the impacts on the company’s key stakeholders. The revisions to the Guidance on the Strategic Report complement the recent changes to the FRC’s Corporate Governance Code and as a package will contribute to enhancing trust and transparency in business.”

IAASA highlights key areas for companies to consider in preparing 2018 accounts IAASA, Ireland’s accounting enforcer, has published its annual Observations document highlighting those key topics that management, directors and audit committees should consider when preparing and approving 2018 financial statements. The document highlights some key areas that warrant close scrutiny by those preparing, approving and auditing 2018 financial statements in the upcoming reporting season, including: ●● the impact of new financial reporting standards; ●● significant judgments and sources of estimation uncertainty; ●● accounting treatment applied in respect of complex customer and supplier arrangements; and ●● the presentation of alternative performance measures (APMs). While this document is addressed primarily to the preparers, approvers and auditors of financial statements, IAASA believes that it should also be helpful to users of financial statements and assist them in understanding the significant judgments made by companies in preparing financial statements. This 2018 Observations document seeks to highlight matters users may wish to be aware of and focus on when reviewing 2018 financial statements.  While IAASA’s remit extends only to companies with securities admitted to trading on a regulated market (principally the Main Market of Euronext Dublin – the Irish Stock Exchange), the topics identified in the 2018 Observations document could usefully be taken into consideration by a much wider range of companies with the aim of improving the quality of financial reporting generally and to increase the transparency and usefulness of financial statements for users. ISSUE 101 | AIAWORLDWIDE.COM

Technical Statement on scope and authority of audit and assurance pronouncements IAASA has published its Statement on Scope and Authority of Audit and Assurance Pronouncements. The document provides more details on the Auditing Framework for Ireland, as adopted by IAASA. The document can be accessed at

IAASA survey of companies’ annual reports identifies corporate taxes as a principal risk and source of uncertainty Corporate income tax is an important topic in the annual accounts of companies that are subject to income tax in multiple jurisdictions. Significant judgement and a high degree of estimation may be required to determine the world-wide provision for taxes. Macroeconomic factors and other events such as Brexit, US tax reform and OECD initiatives related to base erosion and profit shifting (BEPS) can hugely impact companies’ tax exposure. IAASA, Ireland’s accounting enforcer, has conducted a desk-top review of the tax accounting practices of a range of listed companies. The review reveals that for almost two in every three companies selected, corporate income taxes were a principal risk and uncertainty and a source of estimation uncertainty. The survey, the results of which are available at, provides IAASA’s observations on the disclosure of the effective tax rate, the tax reconciliation disclosed in the notes to the annual accounts, and the disclosure of uncertain tax positions (UTPs). IAASA expects that publication of the results of this desk-top survey will assist companies in providing more transparency in their corporate income tax disclosures in their annual accounts.

ASIA PACIFIC Changes on statutory requirements for AGM and filing of AR in Singapore As part of ongoing efforts to keep Singapore business friendly and competitive, legislative changes relating to annual general meetings (AGMs) and annual returns (ARs) timelines that AIAWORLDWIDE.COM | ISSUE 101


For Companies with FYE ending before 31 Aug 2018

For Companies with FYE ending on or after 31 Aug 2018

Holding of AGMs (a) Timeline 1: Hold first AGM within 18 For listed companies: months of incorporation, and subse- Hold AGM within four months after quent AGMs yearly at intervals of not FYE. more than 15 months.  For any other company: (b) Timeline 2: Financial statements Hold AGM within six months after FYE.  tabled at AGM must be made up to a date within four months (for listed company) or six months (for any other company) before the AGM date. Filing of annual returns   For companies having a share capital and keeping a branch register outside Singapore: ●● File annual returns within 60 days after AGM. For other companies: ●● File annual returns within 30 days after AGM. 

For companies having a share capital and keeping a branch register outside Singapore: ●● File annual returns within six months (if listed) or eight months (if not listed) after FYE.   For other companies: ●● File annual returns within five months (if listed) or seven months (if not listed) after FYE. Annual return can be filed only: ●● after an AGM has been held; ●● after financial statements are sent if company need not hold AGM; or ●● after FYE for private dormant relevant company that is exempted from preparing financial statements.

will reduce the regulatory burden of companies took effect on 31 August 2018. In addition, the process for solvent EPCs and dormant private relevant companies to file annual returns has also been simplified. The following legislative amendments to the Companies Act took effect for companies with FYE ending on or after 31 August 2018. Alignment of timelines for holding AGMs and filing ARs to the Financial Year End (FYE) To provide greater clarity for companies and reduce the compliance burden, the timelines for holding annual general meetings (AGMs) and the filing of annual returns will be aligned with the company’s FYE.   To prevent companies from arbitrarily changing their FYE, the following safeguards are put in place:  a. companies must notify the Registrar of their FYE upon incorporation and of any subsequent change; 

b. companies must apply to the Registrar for approval to change their FYE: ●● if the change in FYE will result in a financial year longer than 18 months; or  ●● if the FYE was changed within the last five years; c. unless otherwise approved by the Registrar, the duration of a company’s financial year must not be more than 18 months in the year of incorporation; and d. only FYE of the current and immediate previous financial year may be changed (provided that statutory deadlines for the holding of AGM, filing of annual return and sending of financial statements have not passed). A company’s financial periods starting on or after 31 Aug 2018 by default will be taken to be a period 12 months for each financial period. 


Technical Important information for companies with unusual financial year period Companies with an unusual financial year period (e.g. 52 weeks) should notify ACRA via the notification of change of FYE if they want to avoid applying for approval to change FYE every year. Important information for newly incorporated companies that have yet to file annual returns Companies incorporated before 31 August 2018 have their FYE deemed by law to be the anniversary of the date previously notified to the Registrar as their FYE date. In the absence of such notification before 31 August 2018, the anniversary of the date of incorporation is deemed by law to be their FYE. Companies can change their FYE by notifying ACRA before or after 31 August 2018. 

UNITED STATES FASB improves the accounting for costs of implementing a cloud computing service arrangement The Financial Accounting Standards Board (FASB) has issued an Accounting Standards Update (ASU) that reduces complexity for the accounting for costs of implementing a cloud computing service arrangement. The ASU is based on a consensus of the FASB’s Emerging Issues Task Force (EITF) (Issue No. 17-A). “Stakeholders observed that existing U.S. Generally Accepted Accounting Principles (GAAP) resulted in unnecessary complexity and needed to be updated to reflect emerging transactions in cloud computing arrangements that are service contracts,” said Russell G. Golden, FASB chairman. “To address this diversity in practice, this standard aligns the accounting for implementation costs of hosting arrangements – regardless of whether they convey a licence to the hosted software.” The ASU aligns the following requirements for capitalising implementation costs: ●● those incurred in a hosting arrangement that is a service contract; and ●● those incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software licence). 


For calendar-year public companies, the changes will be effective for annual periods, including interim periods within those annual periods, in 2020. For all other calendar year companies and organisations, the changes will be effective for annual periods in 2021, and interim periods in 2022. More information about the ASU can be found at

FASB improves the effectiveness of disclosures in notes to financial statements The Financial Accounting Standards Board (FASB) has issued two changes to the FASB’s conceptual framework and two Accounting Standards Updates (ASUs) that improve the effectiveness of disclosures in notes to financial statements. “The two changes to our Conceptual Framework will help the Board identify and evaluate disclosure requirements in accounting standards and clarify the concept of materiality,” said FASB chairman Russell G. Golden. “Meanwhile, the new standards improve fair value and defined benefit disclosure requirements by removing disclosures that are not cost beneficial, clarifying disclosures’ specific requirements, and adding relevant disclosure requirements.” A new chapter in the Conceptual Framework on disclosures The chapter explains what information the Board should consider including in notes to financial statements by describing the purpose of notes, the nature of appropriate content, and general limitations. It also addresses the Board’s considerations specific to interim reporting disclosure requirements. An update to an existing chapter of the Conceptual Framework for its definition of materiality. The amendment aligns the FASB’s definition of materiality with other definitions in the financial reporting system. The materiality concepts will now be consistent with the definition of materiality used by the US Securities and Exchange Commission, the auditing standards of the Public Company Accounting Oversight Board and the American Institute of Certified Public Accountants, and the United States judicial system.

An ASU on Fair Value Measurement disclosure requirements The standard improves the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The amendments are effective for all organisations for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2019. Early adoption is permitted. An ASU on defined benefit plan disclosure requirements The standard improves disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments are effective for fiscal years ending after December 15, 2020, for public companies, and for fiscal years ending after 15 December 2021, for all other organisations. Early adoption is permitted. More information about the Conceptual Framework changes and the ASUs can be found at

FASB proposes narrow scope improvements to credit losses standard Accounting Standards Update (ASU) that would amend the transition requirements and scope of the credit losses standard issued in 2016. Stakeholders are encouraged to review and provide comment on the proposal by 19 September 2018. “The proposed ASU addresses areas of uncertainty brought to our attention by our stakeholders,” noted FASB chairman Russell G. Golden. “It is intended to reduce transition complexity and represents our ongoing commitment to support a successful transition to our standards.” First, the proposed ASU would mitigate transition complexity by requiring entities other than public business entities to implement it for fiscal years beginning after 15 December 2021, including interim periods within those fiscal years. This would align the implementation date for their annual financial statements with the implementation date for their interim financial statements. Second, the proposed ASU would clarify that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. More information about the proposed ASU can be found at ISSUE 101 | AIAWORLDWIDE.COM


We’re here to support with a special AIA 90th Anniversary offer on Professional Indemnity and Office Insurance Towergate Insurance Brokers in conjunction with Allianz Insurance are delighted to be approved by the AIA to take care of members insurance needs. For members of the Association of International Accountants, we appreciate that insurance is about numbers too and receiving the best technical advice. You can be sure that our experts will get together with your people to really understand your business and tailor Professional Indemnity and Office Insurance policies that reflects your specific requirements. With Towergate Insurance Brokers you will enjoy preferential rates, interest-free payment facilities and enhanced cover (subject to approval)

Access to the highest quality cover at our best possible price We believe everyone deserves the right Risk Management and Insurance for them and their business. Which is why we aim to offer the right advice, at the right time, to manage your risk and recover faster, should the unexpected happen.

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In the first instance, contact Neil Fraser at or call him on 01325 347 279 to confirm your renewal dates.

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International Accountant 101