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A new era for ethics: the conceptual framework How to combat the threat of cyber crime Building a connected and trusted tax department

A world in motion: finance in football


In this issue Contributors2 News and views


AIA news


British Airways and Marriott International fined for breaching GDPR rules AIA Diplomas rise in Greece



Meet the team

7 Property18

Code of ethic Achieve7 Distance learning made easy Our interactive distance learning programme designed with AIA students in mind.


Accounting for a revalued asset Steve Collings (Leavitt Walmsley Associates) explores the process of accounting for a revalued asset under FRS 102.

A new era for ethics? We explore the conceptual framework of the new International Code of Ethics for Professional Accountants.



8 Business development


Building a connected tax department Kate Barton (EY) explores how modern tax departments can be connected to more constituents than ever before.

Finance26 A world in motion: finance in football Dan Jones (Deloitte) reviews the dynamic world of football, and its efforts to continue to deliver revenue growth and profitability.

Regulatory monitoring


AIA Practising Certificate renewals Key updates to AIA Practising Certificate renewals and compliance framework take place from 1 October 2019.

Cyber security

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



How can we combat the threat? Genevra Champion (IT Governance) asks how financial services organisations can combat the threat of cyber crime.

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Technical30 Global updates

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Editor’s welcome

Contributors to this issue

Editor’s welcome


Steve Collings is the audit and technical partner at Leavitt Walmsley Associates, where he has worked for 18 years. As well as lecturing on the CPD circuit, advising professional bodies on accounting matters, and having written 24 books within the industry, Steve works closely with businesses and professional bodies on technical aspects of UK and Ireland accounting standards. KATE BARTON


he financial services industry is a natural and obvious target for cyber criminals and so it is of growing importance that everyone in the financial sector is aware of the benefits that technological advancements offer to their business, as well as mitigating the risks which they are facing. On page 14 of this issue, we look at how organisations can combat the threat posed from cyber-crime and the defences that can be put in place to ensure regulatory compliance and protect themselves from breaches. Although financial institutions were able to defend against two-thirds of unauthorised fraud attempts in 2018, the scale of attacks has increased significantly. Staying on a technology theme – with Making Tax Digital implementation imminent and the digitalisation of tax only set to increase – on page 22 we also explore the benefits of embedding technologies into your firm to build your business and better connect with clients. On page 18, we delve into the process of accounting for a revalued asset under FRS 102. Where an asset is subject to the revaluation model, all the assets within that class also have to be revalued.


Rachel Rutherford Editor, IA

Also, whilst strictly speaking it is an article aimed at AIA students, following a number of accounting scandals in the last few years, all accountants will benefit from reading the article on page 10 on the new International Code of Ethics for Professional Accountants. On page 26, Dan Jones from Deloitte provides a review of football finance which chronicles the ever fluid football finance landscape, the Championship clubs’ gambles to reach the top, and the strenuous and creative efforts of other European football leagues to narrow the gap to the Premier League. AIA members in practice should read the article on page 8, which highlights changes to AIA’s regulatory monitoring regime covering the completion and return of practising certificate renewals and fee payment that are coming in for the forthcoming subscription period (1 October 2019 onwards). Finally, I would like to congratulate the AIA Singapore and Hong Kong Branches, both of which have held branch AGMs and re-elected their governing committees. The branches work tirelessly to support AIA head office and our members locally, providing exceptional service levels and knowledge of the accountancy profession in their respective jurisdictions.

Kate Barton is global vice chair – tax at EY. She oversees all aspects of EY’s tax strategy and operations, people development, client relations, quality control, risk management, thought leadership, knowledge and learning. She also leads the EY Tax Executive Committee. Kate has extensive experience in international tax services and working with large multinational, public companies. GENEVRA CHAMPION

Genevra Champion is the financial services sector marketing manager at IT Governance, a global provider of governance, risk and compliance solutions. Working with a team of consultancy and account managers, she gains great satisfaction from helping firms to improve their business performance by outmanoeuvring cyber criminals. DAN JONES

Dan Jones leads Deloitte’s work in sport around the world and manages activities of the group across all services. He advises high profile clients including clubs, leagues, governing bodies, governments, agencies, investors and commercial partners on issues including strategic, commercial, financial, regulatory, organisational and structural matters. ISSUE 106 | AIAWORLDWIDE.COM


British Airways and Marriott International fined for breaching GDPR rules

More needs to be done to promote diversity across all levels of FTse 100

Paul Cooper/Shutterstock


elizabeth Denham CBe, information commissioner

● British Airways fined £183.39m ● Marriott International fined £99m

FollowiIng an extensive investigation, the ICO signalled its intention to fine British Airways £183.39m and Marriott International £99m for infringements of the General Data Protection Regulation (GDPR). The British Airways fine relates to a cyber incident notified to the ICO by in September 2018, which involved user traffic to the British Airways website being diverted to a fraudulent site. Through this false site, customer details were harvested by the attackers. The personal data of approximately 500,000 customers was compromised in this incident. The investigation found that a variety of information was compromised by poor security arrangements at the company, including log in, payment card and travel booking details, as well name and address information. Marriott International notified the ICO of a cyber incident in November 2018. AIAWORLDWIDE.COM | ISSUE 106

A variety of personal data contained in approximately 339 million guest records globally were exposed by the incident, of which around 30 million related to residents of 31 countries in the European Economic Area (EEA). Seven million related to UK residents.

People’s personal data is just that – personal. When an organisation fails to protect it from loss, damage or theft, it is more than an inconvenience.”

New research from Cranfield University, which is being supported by the Financial Reporting Council (FRC), has found that many FTSE 100 companies are implementing a tick box attitude to diversity. While the percentage of women on FTSE 100 boards has risen to 32% (an all-time high) and is now on track to reach 33% by 2020, more needs to be done to promote diversity across all levels. The research has found that women serve shorter tenures than men (on average, female nonexecutive directors serve 3.8 years – with men serving five years) and are less likely to get promoted into senior roles, while just 11% of women on boards are from black, asian or other minority ethnic backgrounds. Stephen Haddrill, chief executive of the FRC, said: “Diversity at board level, and at all levels of the workforce, adds real value to business culture and the bottom line. “While I welcome positive progress at some of the UK’s largest companies in appointing more women to board level roles, it is clear more needs to be done to promote diversity across all levels of FTSE companies. “Current efforts need to be reinforced.”

Information commissioner Elizabeth Denham said: “People’s personal data is just that – personal. When an organisation fails to protect it from loss, damage or theft, it is more than an inconvenience.” She continued: “That’s why the law is clear – when you are entrusted with personal data you must look after it. Those that don’t will face scrutiny from my office to check they have taken appropriate steps to protect fundamental privacy rights.”



InBrief Fresh crackdown in fight against dirty money The Economic Crime Plan draws together actions to overhaul the approach to tackling economic crime, with greater partnering between the UK government, law enforcement and the private sector. It includes: ●● Government, law enforcement and business will agree a joint plan to tackle fraud, money laundering, bribery and corruption. ●● £6.5 million will be made available from major financial institutions to reform the Suspicious Activity Reporting regime. ●● Action on cryptoassets will ensure they are not being used for money laundering and other illicit activity. ●● An Asset Recovery Action Plan will help to claw back the proceeds of crime with £1.6bn taken from criminals between 2010 and 2018. The plan sets out actions to better tackle the scourge of “dirty money” in the UK. It brings together the public and private sectors in closer cooperation than ever before, with improved levels of information sharing, resource pooling and technological innovation. Joint statement on the US-EU financial regulatory forum US and EU participants in the US-EU Joint Financial Regulatory Forum met on 25 and 26 June 2019 in Brussels to exchange views on financial regulatory developments as part of their ongoing regulatory dialogue. US and EU participants discussed financial supervisory and regulatory developments and future priorities. They exchanged views on various developments in financial markets, including potential implications of the UK’s withdrawal from the EU. In the area of banking, participants discussed implementation of the final Basel III reforms, recent developments regarding host country regulation of foreign banks, and resolution planning for global systemically important banks. For the US, topics included the recent US proposal on foreign banking organisations, and the treatment of foreign funds under the Volcker Rule. For the EU, topics included elements for the completion of the Banking Union.


Hong Kong and Qatar sign MOU on investment promotion ●● Mututal co-operation and investment ●● Framework to enhance close relationship

Invest Hong Kong (InvestHK) and the Qatar Financial Centre Authority of the Qatar Financial Centre of the State of Qatar signed a Memorandum of Understanding (MOU) on the 9 July 2019 pledging mutual co-operation on investment promotion exchange and support. The MOU provides a framework to enhance the close relationship for the mutual benefit of the Hong Kong Special Administrative Region (HKSAR) and Qatar and their co-operation with each other in promoting both inward and outward investment in the two jurisdictions. According to the MOU, both sides will share information and experiences in investment promotion, encourage interested local companies to set up or expand their business within the area of the other

jurisdictions, and support each other’s investment promotion events that foster bilateral investment between the two jurisdictions.


Finance Bill 2019/20: government publishes draft legislation The government has published draft legislation for the next Finance Bill to which will deliver on the Budget 2018 commitment to a competitive and fair tax system, including updating tax policies for the digital age by ensuring large digital companies pay their fair share through a world-leading digital services tax. This Finance Bill, published in draft form, ensures that from April 2020: ●● large digital businesses pay a new digital services tax that reflects the value derived from their UK users; ●● off-payroll working rules will ensure that two people working side by side in a similar role for the same employer pay the same employment taxes; and

●● upon insolvency, more of the taxes paid in good faith by employees and customers will go to fund public services as intended, rather than being distributed to creditors such as financial institutions. ISSUE 106 | AIAWORLDWIDE.COM


Businesses are being urged to register for Making Tax Digital before August ●● 1.2 million businesses affected ●● Sign up to MTD before 7 August

Many of the 1.2 million businesses affected by the new rules will be required to submit their first quarterly return to HMRC using software by 7 August. Those businesses which have an annual turnover above £85,000 are being urged by HM Revenue and Customs (HMRC) to sign up to Making Tax Digital (MTD) before the 7 August VAT filing date. Many of the 1.2 million businesses affected by the MTD rules, which became law for VAT periods starting on or after 1 April, will be required to submit their first quarterly VAT return to HMRC using software by 7 August. If paying by direct debit, these businesses must register by 27 July. Theresa Middleton, the director of

Making Tax Digital at HMRC, commented on the new rules: “Now is the time for businesses with an August quarterly filing deadline to sign up and join the hundreds of thousands already

experiencing the benefits of MTD. During this first year, we won’t be issuing filing or record keeping penalties to businesses doing their best to comply.” The MTD rules became law for VAT periods starting on or after 1 April 2019 and require VAT registered businesses with taxable turnover over £85,000 to keep their VAT records digitally and to submit their VAT return direct from their MTD compatible software. A step by step guide to MTD for VAT is available at: https://bit. ly/2VutWFR.

RISE TO THE TOP Whillans’s Tax Tables 2018-19 Accurate tables of all the new and revised tax rates incorporating all the changes from the Budget and Finance Act.

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Digital skills certification for international accountants

Uptake of AIA Diplomas continues to rise in Greece

AIA has teamed up with Xero to offer members a free digital skills certification course, providing the tools and knowledge to evolve in line with market demand for greater expertise in technological advancements. The Xero Certification Equivalency Course is a great step towards gaining a solid understanding of all things cloud accounting and of Xero. It’s also great for employability: demand for these skills has never been greater at both bookkeeping and accounting practices, and with more than 463,000 subscribers across the UK.

A record number of people have graduated from the AIA Diploma programmes this year with the qualification fast becoming the first choice for aspiring accountants and business experts in Greece. AIA has a long history of providing high quality and in-demand qualifications which are relevant to a fast paced, ever changing finance profession. Designed to meet the needs of a dynamic European financial sector, the AIA Diploma equips graduates with the skills and practical knowledge to distinguish them from their peers and professional rivals, and are highly sought after by employers. Speaking at the graduation, AIA chief executive, Philip Turnbull said: “With support from the AIA Greek branch and our educational partners, AIA is able

What’s involved:


Empowering the next generation of advisors:

●● A pack of e-learning courses: At only six hours, it’s a short, sweet, wideranging introduction to the world of cloud technology – and Xero. ●● 12 modules with knowledge checks throughout. ●● Cloud fundamentals: Digestible, accessible content covers issues such as banking and projects, while lessons such as “Why Cloud, Why Now?” clearly articulate the benefits of this software. ●● Individuals will learn how to set up and run Xero on a day-to-day basis, use the Dashboard and create reports, but also achieve skills in the management of expenses, projects and fixed assets. AIA members get this course for free. Visit for more information.


Updated AML compliance guidance Updated guidance is available for AIA members supervised for antimoney laundering (AML) to ensure their compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). The compliance checklist should be read in conjunction with the MLR 2017, additional guidance issued by AIA and other regulatory authorities. AIA has also provided guidance for use by members when explaining the importance of client due diligence with clients on establishing a business relationship.



to reach a growing market of finance professionals and continue to make a valuable contribution to financial education and economic sustainability in Greece.” Further information on all AIA qualifications can be found at:

The checklist covers the following areas, which are reviewed during an AIA Monitoring Visit: ●● policies, controls and procedures; ●● training and awareness; ●● record keeping; ●● risk assessment; ●● client due diligence; ●● reporting; ●● supervision; and ●● monitoring. AIA has also provided guidance for use when explaining the importance of client due diligence with clients on establishing a business relationship. The compliance checklist and client guidance are available through the Secure Document Library, accessed through MyAIA. ISSUE 106 | AIAWORLDWIDE.COM


Distance learning made easy… Our interactive distance learning programme has been designed specifically with AIA students in mind.


Achieve will help to guide your learning and provide you support and feedback from a specialist team of e-tutors, so you get the maximum benefit from your study.”

IA, in collaboration with leading publisher of study materials for professional exams BPP Learning Media, brings you a unique and easy to follow interactive distance learning programme designed specifically with AIA students in mind. The programme, named “Achieve”, aims to alleviate unwanted study stress and provide students with a suite of resources targeted to optimising the likelihood of exam success. Studying for professional exams is always going to be a daunting task, which often comes at a time in your life when you are attempting to maintain a healthy balance between your home life and work commitments, but with Achieve we aim to make the experience as easy as possible. If you are unsure whether Achieve is for you, why not ask yourself the following questions: ● Do I feel confident of passing my upcoming accountancy exams? ● Can I remain motivated to study in the run up to my exams? ● Am I able to maintain a healthy work/life balance in the lead up to my exams? If you can confidently answer “YES” to these questions, that is fantastic, and you may not require the Achieve programme! However, if you are not quite so confident, you should certainly continue reading and strongly think about contacting AIA and enrolling onto the Achieve programme. The Achieve programme boasts many student success stories… “Achieve really helped me to pass my exam. I followed the Personal Study Planner recommended by Achieve and completed all the assignments assigned by them. The feedback from the e-tutor


*In order to be eligible for the “AIA Pass Pledge”, you must submit your practice questions on time and achieve 45 marks or more in your mock exam.

for my practice questions and mock exam helped me understand my weaknesses and subsequently improved my answering skill.” Phian Siew Foong “Achieve is the best way of studying for people whose hands are full with other commitments. Achieve enabled me to study while caring for a sick family member. I didn’t have to worry about commuting to a tuition provider or go to the library. The e-books and text materials are a onestop shop – along with the exceptionally prompt and quick support offered by everyone at the AIA and the e-tutors!!” Esther Alum 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 of these tools will undoubtedly enhance your chances of exam success, whilst your personalised study planner will allow you to maintain that healthy work/life balance you have only previously wished for 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. The 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*. Thankfully you are not too late to start your Achieve journey, as enrolment for the November 2019 exam session is open until 6 September 2019. So, enrol today and start your preparations for the upcoming 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 at ●



AIA practising certificate renewals Key updates to AIA Practising Certificate renewals and compliance framework are to take place from 1 October 2019.


What recognition and benefits do I receive with my AIA Practising Certificate?

or the subscription period 1 October 2019 to 30 September 2020, AIA is amending its current regulatory monitoring regime covering the completion and return of practising certificate renewals and fee payment.

What activity does an AIA Practising Certificate allow you undertake?

If you are an AIA member engaging in public practice in the United Kingdom, then you must hold a practising certificate. This certificate entitles you to practise as a public accountant, including the undertaking of reporting and similar work in respect of sole enterprises, partnerships and small companies exempted from the audit requirements of the Companies Act. If you hold this certificate, you are also entitled to practise as an Independent Examiner for the purposes of the Charities Act 2011. An AIA Practising Certificate is valid for 12 months in the period between 1 October to 30 September, so you must renew your certificate every year. If you do not renew your practising certificate and continue to work in public practice, then you are acting in breach of AIA’s regulations and liable to disciplinary action.


AIA is amending its current regulatory montoring regime covering the completion and return of practising certificate renewals and fee payment.”

With an AIA Practising Certificate, you automatically have access to: ● anti-money laundering guidance and supervision; ● quality assurance recognition; ● free tax advice and online seminars from Tolley Tax Intelligence; ● free AMLCC subscription to complete approved client due diligence and risk assessments; ● wide-ranging recognition from banks and building societies; ● licensed access to instruct barristers directly; ● recognition from UK Visas and Immigration to provide Tier 1 (General) Immigration evidence and inclusion in policy guidance for Entrepreneurs coming to the UK under Tier 1 (Entrepreneur) of the Points Based System; ● FCA recognition to sign a High Net Worth Exemption Statement; ● recognition by the National Approved Letting Scheme (NALS); ● eligibility for recognition as an ATOL Reporting Accountant; ● access to a library of documents, checklists, templates and specific guidance; and ● extensive member benefits and offers.




APC Timeline 1 September

1 October

● Subscriptions and renewal forms posted

14 October

● Renewals due

Why is the framework changing?

The UK Mutual Evaluation Report conducted by the Financial Action Task Force reported that the UK has significantly strengthened its anti money laundering/counterterrorist framework since its last evaluation, particularly in relation to operational co-ordination among law enforcement agencies, stronger investigative tools, mechanisms to facilitate public/private information sharing, and the creation of an authority to address inconsistencies in the supervision of lawyers and accountants. AIA works in the public interest to regulate its members and discharge its duties as an AML supervisor. Supervisory bodies and the supervised population must continue to work together to strengthen both the compliance environment and anti-money laundering oversight. A history of non-compliance affects your risk. Criminals target professional accountants like you, transferring money and laundering illicit cash using your respectable image as a cloak of legitimacy. If you submitted copies of the required number of DBS certificates for your practice during 2018/19 and the internal structure of your firm is the same, you do not need to apply again this year. If the internal structure of your firm has changed and your practice now has one or more new beneficial owners, officers and managers (BOOMs), you will need to apply for Disclosure and Barring Service (DBS) checks for each new BOOM and submit certified copies of the DBS certificates issued to AIA. Please apply for any additional DBS checks in good time and submit the certificates with your 2019/20 Practising Certificate renewal documents. If you have any queries, please email

What will be changing?

Revisions to timelines and compliance and disciplinary committees means that AIA members should be aware of new fixed renewal deadlines. In addition, for the first time AIA is introducing late registration penalties. This rigid reporting AIAWORLDWIDE.COM | ISSUE 106

● Final renewal submission deadline ● Members who have not submitted a renewal are removed from the online register

From 14 October ● For every week of noncompliance, a late renewal penalty of £50 will be charged

Practice Compliance Committee ● Non-renewals are passed to the next Practice Compliance Committee which will impose sanctions

Disciplinary process ● Failure to comply with the regulations will result in sanction ● Reporting to supervisory bodies and HMRC

Exemption AIA understands that some members may undertake accounting work for friends, families and charities. You are not required to hold a practising certificate for such work as long as the following stipulations are met: ● The accounts are not required to be audited in line with accounting standards. ● No fee or other material benefit is paid to you for the work. This exemption is designed to allow you to use your skills and knowledge to assist family and friends and to make a contribution to your local community and charities. It is not an entry route into public practice and you must not produce a letterhead purporting to be a practising firm in connection with this work, or advertise your services. It must also be noted that if you undertake such charitable work, you are still liable for claims for professional negligence. You must carefully consider whether you should take out professional indemnity insurance.

Eligibility To obtain a practising certificate, you must have been an AIA Associate or Fellow member for two and a half years continuously and post-qualification gained two and a half years’ work experience at a sufficiently high level with a statutory auditor or an accountant in public practice. This postqualification experience must be recorded and include professional conduct, internal review and management and business assurance, together with experience in at least three of the following main categories of work: ● Management Accounting ● Auditing ● Information and Communication ● Financial Accounting Technology. ● Taxation ● Financial Management If you have trained in a specialist area of public practice, such as forensic accounting, then you must have completed five years’ experience in the specialist field(s) in which you intend to work. Two years of this experience must be post-qualification. schedule ensures adequate protection of both our supervised population and helps us act in the public interest; but renewing early is also in your best interest and gives you access to your membership benefits and valued recognition. If you have any difficulty completing your renewal you must contact AIA’s compliance team in advance of 14 October 2019. ●


Code of ethiCs

A new era for ethics?


We explore the conceptual framework of the new International Code of Ethics for Professional Accountants and how this will impact practitioners.

s all practising accountants will be aware, the last few years have not been easy for the reputation of our profession. In the UK, the collapse of Carillion Plc was followed by months of media comment and a government Select Committee report into the corporate failure. This lack of confidence in the ethics of accounting firms has driven the review of the functioning of the audit market and may see some substantial changes to audit practices over the next few years. This focus on the conduct of auditing firms is by no means limited to isolated cases of Big Four audits of public interest entities (PIEs) causing concern – and the problems relate to audits throughout the world. It is against this evidence of concerns over the quality of accounting ethics that the new International Code of Ethics for Professional Accountants was published last year, coming into force on 15 June 2019. But does this affect you if you are working as an accountant in business preparing reports and supporting your organisation? Or if you are providing accountancy and assurance services to smaller entities not classed as public interest? And if you are studying


A lack of confidence in the ethics of accounting firms has driven the review of the audit market and may see some substantial changes to audit practices.”

to be a member of the Association of International Accountants what do you need to know? Jules and Erskine (2018) published a very useful overview of the key areas of focus for practitioners in SMEs and SMPs. This highlights that: “The fundamental principles within the Code – integrity, objectivity, professional competence and due care, confidentiality and professional behaviour – establish the standard of behaviour expected of a professional accountant (PA) and it reflects the profession’s recognition of its public interest responsibility. Those fundamental principles, as well as the categories of threats to them – self-review, self-interest, advocacy, familiarity and intimidation threats – are unchanged. Also unchanged are the overarching requirements to apply the conceptual framework to comply with the fundamental principles and, where applicable, be independent.” This may mean that a headline scan of the Code may lull one into a false sense of confidence, believing that fundamentally nothing has changed – leading to a business as usual approach to ethics in practice which is not the intent of the new provisions!


Code of ethics

AIAWORLDWIDE.COM | ISSUE 106 istockphoto/joecicak


Code of ethiCs the substantive revisions

There are a number of very important developments to the Code which, if adopted correctly, should do much to resolve some of the problems in ethics evidenced in recent scandals, and also help to re-establish the reputation of the accounting profession. The International Ethics Standards Board for Accountants (IESBA) launched the Code in April 2018 with the statement: “While the fundamental principles of ethics have not changed, major revisions have been made to the unifying conceptual framework – the approach used by all professional accountants to identify, evaluate and address threats to compliance with the fundamental principles and, where applicable, independence.” The substantive revisions to the Code consist of the following: ● an enhanced conceptual framework, which includes extensive revisions to “safeguards” throughout the Code thatare better aligned to threats; ● strengthened independence provisions regarding long association of personnel with audit clients;


The conceptual framework outlines a threestep approach involving identifying, evaluating and addressing threats to compliance with the fundamental principles.”

● strengthened provisions relating to offering and accepting inducements, including gifts and hospitality that apply to both PAs in business (PAIBs) and PAs in public practice (PAPPs); ● strengthened provisions dedicated to PAIBs, including: a. a new section relating to pressure to breach the fundamental principles; and b. revised provisions relating to the preparation and presentation of information; ● clarifications about the applicability of PAIB provisions to PAPPs; ● new material to emphasise the importance of understanding facts and circumstances when exercising professional judgment; and ● new material to explain how compliance with the fundamental principles supports the exercise of professional scepticism in an audit or other assurance engagements.

the conceptual framework

This article is the first of a short series exploring the new Code and focuses at the changes to the conceptual framework. “The conceptual framework is a set of principles-based provisions in section 120 of the conceptual framework of the Code that all PAs are required to apply to deal with ethics and independence issues. It applies to all PAs and outlines a three-step approach involving identifying, evaluating and addressing threats to compliance with the fundamental principles and, where applicable, independence.” (IESBA, 2018) This three-step process articulates the stages of ethical decision making formally within the Code, reflecting the extensive work in this area by academics such as Libby Thorne and Mary Beth Armstrong during the late 20th century. It is notable that the Code does not insert the idea of moral courage as a key stage. In the theory around ethical decision making, there is an acceptance that before behaving appropriately (addressing threats) there is another key stage required to determine the next action; namely, in the commitment and courage to do the right thing. Adopting moral courage as an additional specific stage in the Code of Ethics for Professional Accountants was debated when the Institute of Chartered Accountants of Scotland (ICAS) launched its Power of One initiative, including this as an additional fundamental principle. Other accountancy bodies and the International Federation of Accountants (IFAC) have taken the view that moral courage is part of integrity and does not need to be separately articulated – although it is useful for us as practitioners to consider that part of acting with integrity requires the courage to do what we know to be correct. ISSUE 106 | AIAWORLDWIDE.COM istockphoto/joecicak

Code of ethics

Stand back and think…

More specific safeguards

As can be seen from the ongoing tranche of audit and accounting scandals, the safeguards AIAWORLDWIDE.COM | ISSUE 106

Standard setting bodies. The key change within the conceptual framework is the requirement for accountants to stand back and consider whether their actions are appropriate to resolve the issue.

The key change within this conceptual framework is the idea that practising accountants now have a requirement to “stand back” and think about whether the overall conclusions made, or actions taken, are appropriate to resolve the issue. One test the conceptual framework requires us to apply here is to consider what a reasonably informed third party (RITP) might also conclude, given the same information. In the Code, this RITP test is made from the perspective of a RITP. It involves weighing all the relevant facts and circumstances that the practising accountant knows, or could reasonably be expected to know, at the time that the conclusions are made. The RITP does not need to be an accountant but should possess the relevant knowledge and experience to understand and evaluate the appropriateness of the conclusions in an impartial manner. Although it might be tempting to regard the RITP as a fellow accountant, this would be to miss a key attribute in this test – namely, that we are considering our actions from the perspective of the public interest we serve. Therefore, how our actions impact on the perceptions of the key stakeholders within that public interest is key. This standing back is a key part of employing our professional scepticism and our objectivity but often in the pressure of our professional practice it can be difficult to find the head space and time to do so. This addition into the conceptual framework embeds it as a core and vitally important step that we must build into our professional schedules.

within the previous Codes seem to be either not sufficiently specific or effective. The new conceptual framework includes more specific and robust definitions of safeguards; namely, the “actions, either individually or in combination, that a PA takes that effectively reduce threats to compliance with the fundamental principles to an acceptable level”. The key change here is an acceptance that not all threats can be addressed by safeguards – sometimes there is no action which can reduce the threat to an acceptable level – and that in certain circumstances the accountant must decline or end the professional activity or service. The enhanced conceptual framework emphasises that threats are addressed by eliminating the circumstances creating the threats; by applying safeguards where they are available or capable of reducing the identified threats to an acceptable level; or by declining or ending the specific professional activity or service. It is in the idea of acceptability that the RITP can be especially useful. Jules and Erskine (2018) note that it is especially important to ensure that we understand “the distinction between safeguards and ‘conditions, policies and procedures’, which are in contrast routine in nature and may assist the PA in identifying and evaluating threats. The conceptual framework clarifies that the conditions, policies and procedures that are established by profession, legislation, regulation, the firm or the employing organisation to enhance PAs acting ethically are not safeguards because they are not specifically designed to deal with a particular threat.” The final point within the conceptual framework to be emphasised in this article is the importance of the accountant remaining alert to changes in facts and circumstances that impact on our decision making. We need to exercise professional judgment and apply the concept of the RITP upon all stages of identifying ethical threats, evaluating their significance and impact, and then addressing their resolution. This emphasises that our consideration of ethical issues within our work is an ongoing process and not to be confined to the initial stages of an assurance engagement or work project – or delegated to a pro forma checklist and consigned to the end of the file.


●● International Ethics Standards Board for Accountants (2018) Handbook of the International Code of Ethics for Professional Accountants (IFAC) ●● Jules D, and Erskine R (2018), The International Code of Ethics for Professional Accountants: Key Areas of Focus for SMEs and SMPs (IFAC) ( ●● IFAC 2018 Global Ethics Board Releases Revamped Code of Ethics for Professional Accountants ( ●




ISSUE 106 | AIAWORLDWIDE.COM istockphoto/SiberianArt


How can we combat the threat? Genevra Champion asks how financial services organisations can combat the threat of cyber crime. Genevra Champion Author, IT Governance


he financial services industry is naturally a lucrative target for cyber criminals. Financial organisations trade and control vast amounts of money, as well as collecting and storing customers’ personal information. Clearly, a data breach could be disastrous for an industry that is built on trust with its customers. The financial services industry is second only to retail in terms of the industries most affected by cyber crime. The number of breaches reported by UK financial services firms to the FCA increased 480% in 2018, compared to the previous year. While financial services organisations are heavily regulated and cyber security is becoming more of a business priority, there is still much more to be accomplished when it comes to businesses understanding what measures must be taken – from the C-suite down – to effectively protect organisations against inevitable breaches.   So how can financial services firms proactively equip themselves to respond to increased regulatory scrutiny and mitigate the impact from the growing number of threats they will face?

will dramatically outspend their targets with increasingly sophisticated attack methods. In addition, many of the traditional banks struggle with large, cumbersome legacy systems, which pose significant reliability issues, as well as flaws in security. Last year’s IT banking disaster led to thousands of TSB customers being locked out of their accounts, leading to fraudsters exploiting the situation by posing as bank staff on calls to customers in order to steal significant sums of money from customers. The breach occurred while the company was conducting an upgrade on its IT systems to migrate customer data to a new platform. This wasn’t just bad luck for TSB, but a failure to adequately plan and assess the risks that come with such a huge project. The bank has since pledged to refund all customers that are victims of fraud, a move which will likely see other banks reviewing their approach to the rise of this particular type of cyber crime.

Mitigating the threat

Financial institutions were able to defend against two-thirds of unauthorised fraud attempts in 2018, but the scale of attacks increased significantly. Major market players including Tesco Bank, Metro Bank and HSBC all reported breaches in the last year. Clearly, the banks’ cyber security defences have not developed at a fast enough pace. Cyber criminals can and AIAWORLDWIDE.COM | ISSUE 106



With increased regulatory attention across security and privacy, firms must take steps to improve their defences, or risk severe financial or reputational damage.”



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The industry must understand that security incidents are an ever-present risk. However, organisations can be prepared – scoping a defence strategy specific to the firm, with processes for implementation, will mean an attack can be quickly identified, isolated and resolved, minimising business impact.

Appropriate defence strategy

The FCA has set out various cyber security insights that show how the cyber security practices of UK financial services firms are under the regulatory microscope, as the cyber threat continues to grow. The approach from the FCA includes practices for organisations to put into action, such as those that promote governance and put cyber risk on the board agenda. The advice also covers areas such as identifying and protecting information assets, being alert to emerging threats and being ready to respond, as well as testing and refining defences. With cyber crime tools and techniques advancing at a rapid pace, and increasing regulations, it’s no wonder that many organisations struggle to keep up to ensure their defences stay ahead of the game. In order for in-house security teams to keep up to date with current and evolving threats and data protection issues, firms must invest in regular training. Specialist skills are required to mitigate cyber risk, which for some could be cost-prohibitive. As an alternative, an insourced model allows you to leverage a dedicated and


skilled team on an “as you need” basis to deliver an appropriate strategy. With a Cyber Security as a Service (CSaaS) model in place, organisations can rapidly access a dedicated team with the knowledge and skills to deliver a relevant and risk appropriate cyber security strategy. Crucially, in addition to completing a gap analysis and a multi-layered defence strategy, the model will also apply to people and processes. Attackers will generally aim at the weakest point of an organisation – often, its staff. Human nature means that passwords are forgotten, malware isn’t noticed, or phishing emails are opened, for example. Therefore, a blended approach of technology, processes and shared behaviour is required that promotes the need for staff awareness and education of the risks, in order to effectively combat the threat.


Author bio

Genevra Champion is an author at IT Governance, a leading global provider of cyber risk and privacy management solutions, with a special focus on cyber resilience, data protection, PCI DSS, ISO 27001 and cyber security.

With increased regulatory attention across security and privacy, firms must take steps to improve their defences, or risk severe financial and reputational damage. The issue of cyber security risk must become as embedded within business thinking as operational risk. Anyone within an organisation can be a weak link, so the importance of cyber security defences must be promoted at all levels – from the board all the way through to the admin departments. It is everyone’s responsibility to keep the organisation protected against threats. While the threat of cyber attack is real, financial services firms do not have to take on the battle alone. With a CSaaS model in place, organisations can start to take back control of their cyber security strategy and embed it as a trusted, costeffective and workable core part of the business’ process. ● ISSUE 106 | AIAWORLDWIDE.COM


Accounting for a revalued asset Steve Collings explains the process of accounting for a revalued asset under FRS 102.


Steve Collings Partner, Leavitt Walmsley Associates Ltd



Where an asset is subject to the revaluation model, all the assets within that class also have to be revalued; an entity cannot cherry pick which assets to revalue.”

Author bio

Steve Collings, FMAAT FCCA is the audit and technical partner at Leavitt Walmsley Associates Ltd, chartered certified accountants and statutory auditors, where Steve trained and qualified. AIAWORLDWIDE.COM | ISSUE 106



roperty, plant and equipment are dealt with in FRS 102 at Section 17 Property, plant and equipment. Section 17 allows a reporting entity to measure property, plant and equipment (PPE) under either the cost model or the revaluation model. Where the entity applies the revaluation model, it will be applying the alternative accounting rules in the Companies Act 2006 and hence additional disclosures will be necessary. It should also be noted that deferred tax must be considered where an item of PPE is revalued.

The revaluation model

The revaluation model in Section 17 works in much the same way as the revaluation model in the previous FRS 15 Tangible fixed assets. The asset is revalued to fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent impairment losses. It is important to emphasise that where an asset is subject to the revaluation model, all the assets within that class also have to be revalued; an entity cannot “cherry pick” which assets within a class to revalue. Paragraph 17.15B of FRS 102 says that revaluations should be made with suffi●cient● regularity●to ensure that the carrying amount of the revalued fixed asset does not differ materially from that which would be determined using fair value at the balance sheet date. The frequency of the revaluation exercise under FRS 102 will all depend upon fluctuations in the fair value of the asset. Some assets may experience significant and volatile movements in fair value and therefore it may be the case that annual revaluations are necessary; however, other types of assets may experience insignificant and less volatile movements in fair values, which would mean the revaluation exercise is carried out less frequently. FRS 102 paragraph 17.32A(a) requires disclosure of the effective date of the revaluation. This also applies to small companies which choose to apply the presentation and disclosure requirements of Section 1A Small entities as per paragraph 1AC.15(a). When an item of PPE is revalued, the revaluation gain or loss is taken directly to a revaluation reserve within the equity section of the balance sheet and is reported in other comprehensive income. Gains should only be recognised in profit and loss to the extent that they reverse a revaluation decrease of the same asset that was previously recognised in profit or loss. Conversely, losses on revaluation should only be recognised in the revaluation reserve to the extent of a credit balance on the revaluation reserve. Any remaining loss is taken to the profit and loss account. Should the asset appreciate in value at the next revaluation, the gain is recognised in profit or loss to the extent of the previous revaluation loss recognised, with any



further gain being recognised in the revaluation reserve. The important point to emphasise in this respect is that gains and losses of different assets cannot be offset against each other.

Example: Revaluation and treatment of depreciation A building has a carrying value of £188,000 made up of cost of £200,000 and accumulated depreciation of £12,000. The building is revalued to fair value of £225,600. Method 1

Method 2




Prior to revaluation



Revaluation adjustment



After revaluation



Prior to revaluation



Revaluation adjustment



After revaluation



Revalued amount



Revaluations and depreciation

FRS 102 is silent on how accumulated depreciation on an asset that has been revalued should be treated. To develop an accounting policy in this respect, an entity could choose to look to IFRS, although they do not have to do this. If the directors choose to look to IFRS, then paragraph 35 of IAS 16 Property, plant and equipment allows a choice of one of two treatments: ●● Method 1: Adjust the gross carrying amount in a manner which is consistent with the revaluation of the carrying amount of the asset. The accumulated depreciation at the date of the revaluation is adjusted so that it is equal to the difference between the gross carrying mount and the carrying amount of the asset after taking into account accumulated impairment losses. ●● Method 2: The accumulated depreciation is eliminated against the gross carrying amount of the asset.

Accumulated depreciation

*Building fair value increased by 20% [(£225,600 – £188,000)/(£188,000 x 100)], hence an uplift of 20% on cost and 20% on depreciation.

Deferred tax

Deferred tax is brought into account where a non-monetary asset is subject to the revaluation model. In the example above, if the tax rate applicable to the reversal of the timing differences is 17% (i.e. the corporation tax rate which will apply on 1 April 2020), then the deferred tax liability would be: £6,392 [(£225,600 – £188,000) x 17%]. This is recognised in other comprehensive income (i.e. the revaluation reserve) as its underlying transaction has also gone into the revaluation reserve, hence the entries are: Dr: Revaluation reserve £6,392 Cr: Provisions for deferred tax £6,392




Professional judgment is required under FRS 102 where the revaluation model is concerned – particularly the frequency of the revaluation. Also keep in mind that revaluation gains are not treated in the same way as investment property fair value gains. This is because the revaluation model in Section 17 uses the alternative accounting rules (hence a revaluation reserve is presented in the balance sheet); whereas Section 16 Investment property applies the fair value accounting rules so gains and losses on investment property are taken to profit or loss.● ISSUE 106 | AIAWORLDWIDE.COM


Building a connected and trusted tax department

Kate Barton explores how modern tax departments can be connected to more constituents than ever before.


s EY Global Vice Chair – Tax, Kate oversees all aspects of EY’s Tax strategy and operations, people development, client relations, quality control, risk management, thought leadership, knowledge and learning. She also leads the EY Tax Executive Committee. Businesses have made great strides in digitising tax but must still strive to embed innovative technologies and build stakeholder trust. The ideal of the connected tax department that can serve as a trusted business adviser remains a work in progress. This point is driven home often in meetings with clients, where it’s clear that they are experiencing a disconnect


Kate Barton Global Vice Chair – Tax, EY

between increased reporting expectations and insight into the data. In a recent EY poll, nearly three-quarters of the professionals surveyed said their tax authorities had increased digital requirements in the last three years. But over fourfifths of respondents said they had little to no idea what kind of analysis is being run on the tax data collected. This single disconnect is but one of many. Modern tax departments need to be connected to more constituents than ever before – with deeper, more immediate links. The internal groups run the gamut from the board, C-suite and IT department to the front lines of the business, all of which increasingly rely on the tax function to make strategic decisions with confidence. External ISSUE 106 | AIAWORLDWIDE.COM


Modern tax departments need to be connected to more constituents than they ever have before – with deeper and more immediate links. ”

stakeholders include investors, tax authorities and, lately, the public in a social media environment where a contested tax profile can tarnish a company’s brand. Building trust – sooner rather than later – has become critically important. Certainly, progress has been made from the days when the tax department was a back-office silo working mainly with historical data. We’re getting there but the status quo is anything but static.

Diplomats and visionaries

Over the years, tax executives have assumed new roles and responsibilities. They are stepping up as tax ambassadors who educate the C-suite and other stakeholders about the impact of AIAWORLDWIDE.COM | ISSUE 106

Author bio

As EY Global Vice Chair – Tax, Kate Barton oversees all aspects of EY’s Tax strategy and operations, people development, client relations, quality control, risk management, thought leadership, knowledge and learning. She also leads the EY Tax Executive Committee.

changing tax laws. They increasingly act as tax diplomats, fostering relationships throughout their organisation. As tax technologists, they are embracing the power of IT to do their jobs more efficiently and redefine their roles. As tax visionaries, they are providing trusted business advice to their organisation that equips leaders to make educated decisions and find value. While growing into all these roles, however, the tax department has yet to settle into a “new normal”. Unprecedented new tax policies and game-changing technologies present continual disruptions, repeatedly challenging the way tax people work and the models they use. Consider how US tax law changes, once thought highly unlikely, have now become


BUSINESS DEVELOPMENT something akin to a megatrend in terms of immediate impact on US tax departments. EY teams estimate that the level of effort required simply to handle compliance with the new law, in addition to requirements from the EU mandatory disclosure regime, will at least double in the next year. And there will likely be business implications for US companies across the board in terms of how they operate, invest, compete and deliver products and services – in the US and abroad. Another legislative swerve could be just ahead, under the European Commission’s March 2018 proposal for the taxation of digital business activities. Imagine the global implications if it turns out, as recommended, that profits are to be registered and taxed where businesses interact with customers through digital channels.

On the front lines

At the same time, continual innovation in technology is driving companies to digitalise operations, automate supply chains and offer new digital services. Tax planning needs to be considered at every step of the way. Flash points can include enterprise transformation projects, the integration of acquisitions and globalisation initiatives. At such moments, businesses face tremendous compliance risk if they don’t get it right, and tax efficiencies if they do. Tax authorities are also rapidly digitalising. Governments that are further along in the process are directly collecting e-invoices and other transaction data, calculating the tax due themselves and presenting the bill to companies to either confirm or contest – within short turnaround times. EY research shows that a traditional tax compliance cycle time of three years could be compressed by the digital compliance model to a period of 90 days. This approach is increasingly used for indirect taxes today, but it is expanding to cover corporate income and other types of taxes. In all cases, a business needs to make sure assessments are correct. But the question is how. Should the tax department do a mock audit of its own? Do most companies even have the technology to do so? Uncertainty surrounding questions like these is making today’s environment very difficult for tax

EY-Thomson Reuters Global Tax Alliance EY and Thomson Reuters bring together ONESOURCE process automation with EY Tax Technology and Transformation services. The alliance will help businesses address the challenges of multijurisdictional tax operations, by providing leading edge, digitally enabled tax services. With extensive knowledge of ONESOURCE, EY teams will guide clients through the implementation of the technology as clients embark on digital and business transformation to simplify tax processes, drive down operating costs and maintain transparent global tax compliance. Thomson Reuters ONESOURCE – with an industry-leading portfolio of global tax and accounting technology for corporations – enables streamlining of data and process automation across tax, accounting and finance functions.


departments to navigate. To quell uncertainty, the tax function should commit to being as close as possible to the front lines of business.

More with less

All these drivers, in turn, require the digitalisation of the tax function itself. Most departments right now are being asked to do more with less, even though changing tax law and administration are making their work more complex and labour intensive. The skills shortage in the industry is only aggravating this resource crunch. Part of the solution is for the tax function to work side by side with the IT department because it needs the latest technologies to be efficient. This requires access to tools, platforms and applications for more robust data archives and audit processes, and real-time visibility across the enterprise’s financial systems. It also requires the tax function’s monitoring techniques to be aligned with what governments are looking for, as well as sufficient investment in predictive analytics, and forays into the robotic process automation and machine learning technologies that can do much of the baseline work. It should, of course, go without saying today that manual systems are not equipped to keep up with these requirements. A connected tax department aligns itself with all stakeholders in managing the risks of business transformation, creating value and cutting costs – all while adapting to dramatically changing tax laws and administration.

The connected tax department of tomorrow

In order to build a connected tax department, you need to ensure that tax planning is considered at every step as you digitalise operations, automate supply chains and offer new digital services. Flash points include enterprise transformation projects, the integration of acquisitions and globalisation initiatives. Get it right and you’ll enjoy tax efficiencies. Get it wrong and there’s tremendous compliance risk. The next step is to create deeper, more immediate links with key stakeholders. Internally, this ranges from the board and IT department to the front lines of the business. External stakeholders include investors, tax authorities and the general public. And finally, make sure your monitoring techniques are aligned with what governments are looking for and that there has been sufficient investment in predictive analytics and robotic processes. Manual systems cannot do this for you. “Connected” means using technology in ways that organisations may have never dreamed of and establishing a wider network of relationships than they’ve ever imagined. In almost every way, the connected, trusted tax department of tomorrow will look very different from today. We need to keep on connecting those dots. ● ISSUE 106 | AIAWORLDWIDE.COM

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A world in motion: f Dan Jones

Partner, Deloitte


he football finance landscape is ever fluid. Whilst the Premier League retains its leadership in financial terms, the Premier League clubs face challenges to continue to deliver revenue growth and profitability. Meanwhile, Championship clubs are increasingly gambling to reach the top, and strenuous and creative efforts are being made by other European football leagues to enhance their own global appeal and close the gap to the Premier League.

The revenue generating league

In a Premier League season which saw Manchester City achieve the widest winning points margin in history between first and second place, Premier League clubs were unable to extend their own significant revenue lead in global football, as the German Bundesliga narrowed the revenue gap slightly. Nonetheless, the Premier League comfortably managed to hold its position as the largest revenue generating league in the world. The Bundesliga benefited from the commencement of a new broadcasting deal, which saw a step-change in the league’s broadcast revenue. Whilst the Premier League’s closest rivals are seeking to play catch up with recent growth in their respective broadcast deals, the 2019/20 to 2021/22 Premier League broadcast rights cycle has seen more marginal net


Dan Jones reviews the dynamic world of football, and its efforts to continue to deliver revenue growth and profitability. increases as international growth compensated for a domestic reduction. For context, it should be remembered that this follows two previous cycles of substantial broadcast revenue growth. Therefore, it is imperative for Premier League clubs to remain dynamic in the creation of their own revenue, with a focus on matchday and commercial revenues, in order to maintain the league’s substantial revenue advantage.

Dynamic approaches

Tottenham Hotspur’s new stadium, which opened its doors in April 2019, is the highest profile example of such dynamism. The stadium has been designed and built with a view to operating not just as a football stadium for 90 minutes, but rather an entertainment destination, including a “Sky Walk” and its own microbrewery, as well as a ten-year partnership ISSUE 106 | AIAWORLDWIDE.COM


n: finance in football with the NFL to be the dedicated home of the NFL in the UK. With regards to commercial revenue, many Premier League and European clubs are looking to continue to utilise and grow their global footprint and popularity created in part through broadcast exposure in order to drive interest, and more importantly value, from their commercial partners. The key to success is connecting with and delivering value to their worldwide fanbase. Four Premier League teams are competing in the Premier League Asian Trophy in Shanghai in July 2019, and pre-season friendlies announced to date cover eight different countries, with China and USA being the most popular destinations, owing to the perceived commercial growth potential in relatively underdeveloped football markets in the world’s two largest economies. A record five teams competing in the UEFA Champions League helped drive the Premier League clubs’ record revenue in 2017/18. The lucrative value of this competition to the ‘big six’, as well as the intensely competitive nature of the division itself, has resulted in clubs spending more of their revenue on wages to obtain and retain the best playing talent. This was clearly evident with two record transfer windows in the 2017/18 season, as well as an increase in the wages to revenue ratio in the Premier League. Given the onus is now on clubs to generate revenue growth from sources other than AIAWORLDWIDE.COM | ISSUE 106

broadcast revenue, coupled with the higher levels of wage spend, it may put downward pressure on pre-tax profits from the record breaking levels of recent years.

The wider football pyramid

Commendably, in addition to parachute payments to relegated clubs, each season the Premier League provides contributions to support the wider football pyramid and various charitable causes. This was about £200m in 2017/18, equivalent to almost 7% of the league’s total central revenues for the year. Meanwhile, £211m exited the game in payments by Premier League clubs to agents. As the Premier League and its clubs have enjoyed record revenues, profitability and investment in recent years, there is increased opportunity and growing pressure to further boost the future level of support to the wider football pyramid, charitable donations and good causes. Additional investment in a range of initiatives could undoubtedly benefit communities and enhance football’s role and position in society. For example, more investment to provide pitches and facilities for grassroots football; to help develop the women’s game; to promote anti-discrimination activities; to promote mental health and lifestyle issues; and to support the education and betterment of the next generation.

Author bio

Dan leads Deloitte’s work in sport around the world. He advises high profile clients including clubs, leagues, governing bodies, governments and commercial partners on issues including strategic, commercial, financial, regulatory, organisational and structural matters.



❯ Jason Brown/ProSports/Shutterstock

Tottenham Stadium Get dressed up for the time in NFL colours during the NFL Media Day held at Tottenham Hotspur Stadium, London

A year of records

Beyond the riches of the Premier League, it was a year of records in the Championship, most unenviable, as despite record revenues, record wage levels (in excess of revenue) resulted in record operating losses. Clubs clearly are still willing to invest heavily in playing talent and wages, in excess of their revenues, chasing the dream of the financial promised land of the Premier League. Parachute payments received by clubs which were unable to maintain their position at the top of English football have been a key driver of revenue growth in the Championship in recent years and this was the case again in the 2017/18 season. Whilst clubs in receipt of parachute payments may have an apparent advantage over their direct competitors when it comes to being able to attract, and afford, the best on-pitch talent, the league table consistently shows many clubs are unable to capitalise on this, perhaps due to legacy issues brought down with them into the division. We expect that Championship clubs’ revenue in the 2018/19 season will remain at similar levels to that of the 2017/18 season. However, with new broadcast rights arrangements due to commence in the 2019/20 season, which provides a reported 35% increase on the value of the current deal, we will then see another boost to the revenue of Championship clubs. Unfortunately, without accompanying improvement in cost control discipline, this will make no meaningful impact on the clubs recurring heavy losses.

The financial picture

To complete the financial picture of the top four divisions of English football, average revenues were static for League 1 and League 2 clubs, whilst wage costs in 2017/18 compared to the previous season were 11% and 9% higher respectively. Across the 72 Football League clubs, combined annual wage costs exceeded £1bn for the first time in 2017/18. Revenues have yet to break that mark. Average operating and pre-tax losses of League 1 clubs worsened, skewed by significant losses of clubs relegated from the Championship, while average losses of League 2 clubs were quite stable. The majority of clubs in League 1 and League 2 continue to be supported by owner contributions.


The continued revenue growth of the Premier League and Football League has contributed to another year of growth in the overall size of the European football market. The 2017/18 season total got a boost from the 2018 FIFA World Cup being held in Russia, as well as revenue growth in all “big five” leagues. Whilst the Premier League continues to lead the way, Spain and Germany are engaged in ongoing competition to be second in line. Germany leapfrogged Spain following the commencement of its new four-year broadcast deal. We expect Germany to retain its status as the second highest revenue generating league in the next edition, with La Liga potentially overtaking again in 2019/20.

International footprints

Given both La Liga and Bundesliga have their domestic broadcast rights locked in until 2021/22 and 2020/21 respectively, commercial growth is key for both leagues. Both are continuing to develop their international footprint in order to lay the foundations for commercial revenue expansion. The Bundesliga opened an office in New York in 2018, and La Liga have now opened nine international offices in eight countries – including two in China. Despite winning the World Cup, France’s domestic league was not able to match that success off the pitch, with limited revenue growth coupled with increased wages. Ligue 1’s new domestic broadcast deal commencing in 2020/21 will provide a much needed boost in revenue for the league. By contrast to France, the Italian domestic league fared somewhat better than its national team, seeing revenue growth outpacing wages. This said, it is pressing for both Italian and French clubs to develop their revenue streams. It is unlikely either league will break the €3bn revenue barrier in the next few years, and there is a risk that the gap between them and the top three leagues will continue to grow.

Express yourself

It was a year of records in the Championship, as desite record revenues, record wage levels (in excess of revenue) resulted in record operating losses.”

With UEFA stating its ambitions to preserve and improve competitive balance in football, some future changes to the regulatory environment and competitions for European clubs can be expected. Both UEFA and FIFA have recently floated ideas with stakeholders about the future of international club competitions. For the future of football, there is an intriguing mix of factors to be first assessed and addressed by the football bodies, including the balance between domestic and international club competitions; changes to national team competitions; how to utilise the most favourable slots in the sporting calendar; responding to growing polarisation issues; creating incremental value for the game; providing solidarity mechanisms; and promoting popular competitions with exciting and meaningful matches. The coming months promise important debates and decisions with potentially profound impacts on the game, on and off the pitch. For the full report, see ● ISSUE 106 | AIAWORLDWIDE.COM


UK 10 September 2019 SME Conference The University of London, The Garden Halls, 1 Cartwright Gardens, London 09.00 to 15.30 12 September 2019 SME Conference AC Hotel by Marriott,


Salford Quays, Manchester 09.00 to 15.30


5 November 2019 AML Update The University of London, The Garden Halls, 1 Cartwright Gardens, London 18.00 to 20.30

3 September 2019 Audit & Accounting Standards Conference Camden Court Hotel, Dublin 10.00 to 14.30

7 November 2019 AML Update AC Hotel by Marriott, Salford Quays, Man

3 December 2019 Budget and Tax Update Conference Camden Court Hotel, Dublin 10.00 to 14.30


21 August 2019 HMRC and HSE Working Together for You – Growing Your Business 14.00 to 15.00

SME Conference 10 September 2019 The University of London, The Garden Halls, 1 Cartwright Gardens, London 09.00 to 16.00 Jakes Iles – Six Forward  Capital Allowances Something old, something new: the enduring value of capital allowances Capital allowances should form an integral part of every commercial transaction as they are probably the most legitimate of tax reliefs and yet remain misunderstood for acquisitions and disposals. Jake will discuss recent legislative changes and explain where some of the true value lies. John Thompson – F3C Advantage Limited Demystifying advisory services John will explain why it is time to start thinking seriously about advisory services and advisory led practices, as he provides greater clarity about the topic area, and the different pathways that firms can take to develop their advisory services. In addition, John will provide delegates with the framework for planning how to deliver advisory services. AIAWORLDWIDE.COM | ISSUE 106

Diane O’Neal – Xero Embracing being digital within your practice Technology permeates all of our lives, facilitating it in so many ways. Artificial intelligence (AI) is very much a part of the equation. Diane will discuss the efficiencies that you gain from AI including: more timely submissions with less errors and less admin time; smarter workflows and greater control; and richer insight that enables better advisory services. Paul Mason – Markel Tax IR35 Paul has been providing tax and insurance advice in the freelancer market since 2001. Paul regularly speaks on IR35 and works closely with the Markel Tax contract review team and investigations specialists to ensure that all the players in the recruitment team get best advice, protection and defence in respect of IR35. Anthony Carty – Clifton Asset Management Plc SME access to finance – the easy way One of the key challenges facing the alternative finance sector is the awareness of the different types of finance available. There are over 140 alternative finance products out there and SMEs expect their accountants to know the differences between them.

Anthony will help delegates understand the alternative finance types available, how to prepare effectively for funding and how to navigate the alternative marketplace. On 12 September 2019, we then move to Manchester. This event will follow the same themes as London, but with a slightly different speaker line-up. For further details go to: Additional benefits In addition to a highly informative and interactive presentations, delegates will also benefit from:​the opportunity to ask speakers direct questions and receive expert advice; networking opportunities with peers; 6 CPD units and a certificate of attendance; and lunch and refreshments provided. Book now Book your place at this event by visiting events, or call us on +44 (191) 493 0282, quoting the reference below! £95.00 | AIA members (CPD782) | London £125.00 | Non-members (CPD783) | London £95.00 | AIA members (CPD784) | Manchester £105.00 | Non-members (CPD785) | Manchester



Global ethics board launches eCode, tacking the usability and accessibility of the Code of Ethics to the next level The International Ethics Standards Board for Accountants (IESBA) has launched the eCode – a web-based tool that delivers the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) on a digital platform. In addition to “app-like” features and functionalities, this new platform better demonstrates the Code’s “building blocks” architecture and scalability. The eCode represents the outcome of a strategic initiative to leverage modern technologies, including mobile access, to make the content of the Code as widely accessible and visible, and as user-friendly as possible. In addition to enhanced search and navigation, the eCode includes links to non-authoritative resources that provide contextual information or explain the rationale for particular provisions in the Code. “The eCode is an innovative response to stakeholder calls for more support for implementation,”

said Dr Stavros Thomadakis, IESBA chairman. “Technology opens many opportunities for enhancement to the user experience, and with the eCode we have sought creative and appealing ways to do so. We firmly believe the eCode will greatly facilitate adoption, consistent application and enforcement of the Code in the public interest.” “The launch of the eCode is timely, as the Restructured and Revised Code came into effect earlier this month,” said Ken Siong, IESBA senior technical director. “Technology is rapidly transforming the ways of work and how information is accessed and used. It is therefore apt to see the Code now accessible on a digital platform which users will find familiar and intuitive.” The development of the eCode has benefited from the operational support of the International Federation of Accountants (IFAC), as well as staff support from the New Zealand External Reporting

Board. The IESBA will continue its collaboration with these partners as it embarks on a second phase of this initiative to explore additional features, as well as avenues to transfer the platform to adopters of the Code. The eCode is available free of charge at The IESBA welcomes feedback from all stakeholders. In particular, views are sought about usability features, national adoption of the eCode platform, and areas for further improvement from firms, national standard setters, regulators and audit oversight bodies, professional accountancy organisations, investors and academia. Please email suggestions to: Learn more about the Code, including the five fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour, on the IESBA’s website.


Collaborating for a coherent international tax system is a core recommendation. IFAC stands with G20 leaders to call for global tax policies that address the complexity of the digital economy. Ongoing tax and trade tensions demonstrate the desire for nations to act unilaterally on impactful issues. IFAC urges G20 countries to ensure a coherent, transparent global regulatory environment that limits fragmented regulatory regimes. The immense cost to the global economy – more than $780bn annually in the financial sector – is unsustainable. Another G20 concern is addressing the needs of an ageing society, which requires robust and resilient public sector practices. Accrual-based public sector accounting helps governments to develop a more accurate picture of national income, costs, assets and obligations. The result is increased transparency and accountability, and more informed decision making to plan for the long term. G20 countries play a crucial role in fostering institutions and governance

models that can anticipate, respond to and optimise rapid technological change.

As tax, trade and transparency dominate the G20 agenda, IFAC issues a call to action IFAC (the International Federation of Accountants) has urged G20 countries to pursue smart regulation, heightened transparency, and inclusive growth to embrace Japan’s vision for an innovative and intelligent “Society 5.0”. At a time of economic and political uncertainty, IFAC’s recommendations focus on actions that will strengthen the economy, ensure progress toward the Sustainable Development Goals, and create a fair and empowered digital economy. “While growth has returned to most economies, substantial uncertainty and downside risk remain, along with the temptation for unilateral policy actions,” said IFAC CEO Kevin Dancey. “We urge leaders to collaborate on solutions to evolving global challenges, and to ensure more citizens are able to enjoy the benefits of the digital age.”


IAASB and IESBA increase collaboration with national standards setters The IAASB and IESMA have written to stakeholders to share a brief update on their latest initiative to support global standard setting and to better leverage the coordination opportunities between our two boards. With global regulatory fragmentation risk on the rise, and greater international collaboration on the forthcoming G20 agenda, they were pleased to advise that last month they convened a meeting in Paris with national audit and ethics standard setting organisations representing 17 jurisdictions. They spontaneously dubbed this four-way dialogue (IAASB, IESBA, national audit and assurance, and ethics standards setters) a “quadrilogue”. The name has stuck – along with the goodwill the event created! The discussions marked the beginning of an exploratory ISSUE 106 | AIAWORLDWIDE.COM

Technical and evolutionary process for the IAASB and IESBA to work with national standard setters, and for national standard setters to work with each other, to consider new ideas in pursuit of mutually shared objectives. The meeting advanced already significant IAASB and IESBA coordination efforts, which acknowledge the importance of audit and ethics standards to audit quality. The meeting facilitated further collaboration between a number of national audit and assurance standard setters and the IAASB, as well as identifying ways national standard setters can work more effectively together in the interests of international standard setting. Some important themes emerged from the “quadrilogue”: ●● the value of continued IAASB and IESBA coordination, the significant advances made to date, and how this serves as a catalyst for national coordination; ●● the importance of early coordination between the two boards, and increased stakeholder communications about it; ●● recognition that it is important to identify the areas where four-way engagement makes most sense; and ●● quality management within accountancy firms, implications of technology developments, stakeholder engagement, and enhanced implementations activities are possible topics for further exploration.

UK AND IRELAND Revision of Practice Note 19: The audit of banks and building societies in the UK The Financial Reporting Council (FRC) has issued a revision of Practice Note 19: The audit of banks and building societies in the United Kingdom. Practice Notes are intended to assist practitioners to comply with the requirements of UK auditing standards, by providing additional contextual material on the application of those standards in particular circumstances or in specialised sectors. The revisions to Practice Note 19 reflect: ●● revisions to UK auditing standards (ISAs (UK)), in particular ISA (UK) 540 (revised December 2018), Auditing Accounting Estimates and Related AIAWORLDWIDE.COM | ISSUE 106

Disclosures, which is effective for audits of financial statements for periods beginning on or after 15 December 2019 (early adoption is permitted); ●● guidance relevant to the audit of estimates for expected credit losses (ECL). Auditors may find this guidance helpful for the audits of periods ending before 15 December 2019 even if they have not early adopted ISA (UK) 540 (revised December 2018); ●● changes in relevant legislation and regulation (at the time of publication, there are EU regulations, including binding technical standards, that apply directly to UK banks and building societies. References to these are made in this revised PN. When the UK ceases to be a member of the EU, these references will be updated accordingly); and ●● the establishment of the of the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) in place of the Financial Services Authority (FSA). The Practice Note has been developed with input from an expert working group, including representation from audit firms with bank audit expertise, the banking industry and the banking regulators. The revisions that the FRC has made will support the delivery of high quality audit, and responds to findings from the FRC’s audit inspection work covering bank audits, which were covered extensively in public reports in June 2018. The final revised Practice Note reflects the actions that the FRC determined should be taken, having considered the responses received.

Regulators welcome government’s Green Finance Strategy In a joint statement, the FRC, the PRA, the FCA and the TPR have welcomed the government’s Green Finance Strategy. Climate change is one of the defining issues of our time. The bodies recognise it presents far reaching financial risks relevant to their mandates from both physical factors, such as extreme weather events, and transition risks that can arise from the process of adjustment to a carbon neutral economy. Companies should consider the likely consequence of climate change on their business decisions, in addition to meeting their responsibility to consider the company’s impact on the environment.

Financial risks will be minimised by achieving an orderly transition and via a collective response. The bodies welcome the action being taken as part of the UK’s Green Finance Strategy to ensure a coordinated approach and look forward to further collaboration to advance progress in the near term on climaterelated issues. Sir Win Bischoff, chair of the Financial Reporting Council said: “The effect of climate change on society and business is one of the defining issues of our time. As well as reporting on their impact on the environment, public companies and their boards should address the impact of climate change on their business. The FRC is pleased to play its part in supporting the UK’s Green Finance Strategy in co-operation with other regulators. We are outlining our actions to encourage and monitor companies’ responses.” Sam Woods, deputy governor for Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority, said: “Climate change has the potential to create significant financial risks for the firms the PRA regulates. The challenge we face in mitigating these risks is unprecedented, and we need to begin to act now if we are to ensure an orderly transition to a carbon-neutral economy. We will play our part and work with government, fellow regulators and industry through the UK Government’s Green Finance Strategy, the Climate Financial Risk Forum, and the Network for Greening the Financial System.” Andrew Bailey, CEO of the Financial Conduct Authority, said: “Climate change and the transition to a carbon-neutral economy will transform financial services markets and shape consumer priorities and needs. This brings unprecedented challenges for us in mitigating risks and enabling positive changes. Working with other regulators and government is an essential part in our approach to successfully tackling these challenges. We welcome the shared understanding of the nature, importance and urgency of financial risks of climate change amongst the regulators and government.” Charles Counsell, chief executive of The Pensions Regulator, said: “Climate change is no longer simply a social responsibility issue. It is a core financial risk impacting broadly across business, the economy and markets. Climate change is a risk to longterm sustainability pension trustees need to consider when setting and implementing investment strategy, while


Technical many schemes are also supported by employers whose financial positions and prospects for growth are dependent on current and future policies and developments in relation to climate change. Tackling poor standards of governance and risk management in pensions are priorities for TPR and we welcome working together with other regulators to address these challenges for pension schemes.”

Consultation paper on the proposal to issue a Guidance Note on the duty of auditors to report to the director of corporate enforcement IAASA has issued a consultation paper seeking stakeholders’ views regarding IAASA’s proposal to issue a Guidance Note on the duty of auditors to report to the director of corporate enforcement. The consultation paper is available on the IAASA website, along with the accompanying draft Guidance Note. The Guidance Note is based on the Bulletin 2007/2 – The Duty of Auditors in the Republic of Ireland to Report to the Director of Corporate Enforcement (issued March 2007), published by the Financial Reporting Council and which was subsequently withdrawn. The principal changes are: ●● the enactment of the Companies Act 2014, which consolidated Irish companies legislation into a single act. The duty of auditors to report suspected category 1 and 2 offences to the director of corporate enforcement is set out in Companies Act 2014 s 393(1);  ●● the duty of auditors to report certain suspected indictable offences to the director of corporate enforcement under of the Irish Collective Assetmanagement Vehicles Act 2015 s 122(1);  ●● since June 2016, IAASA is responsible for the adoption of the Irish auditing framework; and ●● changes to the International Standards on Auditing applicable in Ireland since 2007. 

UNITED STATES FASB proposes narrow-scope improvements to credit losses standard The Financial Accounting Standards Board (FASB) has issued a proposed


Accounting Standards Update (ASU) that would address issues raised by stakeholders during the implementation of Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Stakeholders are encouraged to review and provide input on the proposed ASU by 29 July 2019. A negative allowance describes a situation in which an organisation recognises a full or partial write-off of the amortised cost basis of a financial asset – but then later determines that the amount written off, or a portion of that amount, will in fact be recovered. While applying the credit losses standard, stakeholders questioned whether negative allowances were permitted on assets that had already shown credit deterioration at the time of purchase (also known as PCD assets). In response to this question, the proposed ASU would permit organisations to record negative allowances on PCD assets. In addition to other narrow technical improvements, the proposed ASU would also reinforce existing guidance that prohibits organisations from recording negative allowances for available-for-sale debt securities. The proposed ASU is available at

FASB seeks public company input on segment reporting The Financial Accounting Standards Board (FASB) has announced that it is seeking public companies to participate in a study that focuses on potential improvements to the segment disclosure requirements. This is the FASB’s second study on segment reporting and focuses on the information that is disclosed by each reportable segment. The first study, undertaken in 2018, focused on improving the aggregation criteria and the process for determining the reportable segments. For this study, the FASB seeks public companies that apply the disclosure requirements in FASB Accounting Standards Codification Topic 280, Segment Reporting. Participants in the study will be asked to provide information on the operability of various potential improvements to the segment disclosure requirements and to identify any potential unintended consequences. Feedback obtained from the study will

help inform the Board about the costs and benefits of the different ideas. A summary of the findings will be presented to the Board at a future public board meeting. Individual feedback will be kept confidential. The study period is expected to last for three or four months. Organisations interested in participating can register at

FASB moves towards approving accounting relief for contract modifications arising from reference rate reform The Financial Accounting Standards Board (FASB) took a major step towards approving accounting relief for companies and organisations required to modify contracts as a result of new global reference rates. The Board tentatively decided that for a contract that meets certain criteria, a change in that contract’s reference interest rate would be accounted for as a continuation of that contract rather than the creation of a new contract. This decision applies to loans, debt, leases and other arrangements. “Reference rate reform is a top priority for the Board, and we’re committed to ensuring standards help stakeholders successfully adapt to the changes ahead,” stated FASB chairman Russell G. Golden. “Today’s decisions will ease, from an accounting standpoint, the transition to a new reference rate for all organisations, thereby reducing accounting cost and complexity.” Currently, trillions of dollars in loans, derivatives and other financial contracts reference the London Interbank Offered Rate (LIBOR), the benchmark interest rate banks use to make short-terms loans to each other. Consequently, their related cash flows are tied to that rate. With global capital markets expected to move away from LIBOR towards more transaction-based reference rates, the FASB launched a broad project to address potential accounting concerns expected to arise from the transition. Additionally, in late 2018, the FASB added the secured overnight financing rate (SOFR) as a permissible benchmark rate for hedge accounting purposes. The FASB will discuss other hedging specific reference rate issues at a public meeting in July. More information about the FASB’s reference rate reform project and upcoming meetings is available at ISSUE 106 | AIAWORLDWIDE.COM


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Profile for Association of International Accountants

International Accountant 106  

International Accountant 106 July/August 2019

International Accountant 106  

International Accountant 106 July/August 2019