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Graduate job applications up 140% at Ernst & Young

IFRS 3 Business Combinations

Companies move towards Integrated Reporting

GLOBAL ACCOUNTANT November/December 2011

News Technical Career November/December 2011


12 Could more be done?

03 Brief


04 Graduate job applications up 140% at Ernst & Young

14 Off Balance Sheet Activities

05 A separate type of entity

18 Auditor View

IFRS Foundation IIRC HKICPA Ernst & Young

05 Indian standards: 2013

20 IFRS 3: Business Combinations

06 Board risk reporting has room for improvement

26 Companies move towards Integrated Reporting

07 Yahoo fires CEO, promotes CFO


07 Hoogervorst: IASB will protect U.S. Sovereignty

29 Employability

09 Goldman Sachs posts loss in third quarter


Special Thanks: Steve Collings Nick Topazio

30 What do Employers want? 32 Professional Confidence November/December 2011

10 Will the UK’s reputation for accountancy training be impacted as a result of recent UKBA legislation?

© Global Accountant 2011 ISSN 2047-878X

Editors Desk 2011

has almost come to an end. Some of you will have exams on your mind and some will be thinking of making that most important career move. Global Accountant editor was invited to London South Bank University to talk about Employability. The programme is aimed at preparing students and to equip them with essential skills necessary to become employable after graduation. The programme is highly popular and has seen remarkable interest from students. In the news; IASB’s Hans Hoogervorst said the Securities and Exchange Commission [SEC] will protect US sovereignty before any IASB rule is introduced [p.05]. India plans to issue its own Accounting Standards [p.09]. These announcements make it clear that the world accounting authorities are making the effort to put their own stamp on how accounting is practiced in their own coun-

tries. Not long ago India and Japan signed an agreement of understanding to work together to improve accounting standards in their countries and strengthen their say on hot topics at the IASB. [Read more about this in the Global Accountant March / April 2011 edition] Ernst & Young sees job applications increase by 140% from graduates and a staggering 240% increase in undergraduate job applications. This is a clear indication that students are thinking ahead and trying to gain some work experience to secure a job before graduation.

Global Accountant team will like to wish the very best to all students who are sitting exams and recommend careful consideration to our readers who are thinking of a career move in the New Year. Finally, we would like to invite our readers to send us any questions they have in regards to employability. Please email:

CIMA Head of Corporate Reporting Nick Topazio writes about Integrated Reporting [p.26] and says that academics have a strong role to play in this ethical reporting movement.

Published by: Global Accountant South Bank Technopark, 90 London Rd., London, SE1 6LN, UNITED KINGDOM

Contact: +44 (0) 208 1662 662

November/December 2011,



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Brief News

IFRS 10 Consolidated Financial Statements would require consolidation if an investment entity controls an entity it is investing in. In some organisations directors receive risk reports less than once a year.

Length of annual reports drops for the first time in 15 years. Technical

Power is the current ability to direct the activities that significantly influence returns, which can be positive, negative or both.

audit opinion is not an opinion on the future solvency of the entity.

Under the gross method, goodwill includes both the acquiring entity’s interest AND the non-controlling interest.




Academics will have a strong role to play in both the development of the initial Integrated Reporting framework.

We live in competitive times. With the ever growing unemployment and increasing numbers of university graduates, the job market is undeniably in the employers favour.

Many applicants believe they have these skills and that they have examples they can give an employer when completing an application form or attend an interview.

November/December 2011




UK News

Graduate job applications up 140% at Ernst & Young and a staggering 215% increase for

• Undergraduate applications up by 215% • Attendance at campus recruitment events increased by 25% Ernst & Young, one of the UK’s largest graduate recruiters, has reported a surge in demand for its trainee schemes, with applications more than doubling compared to the same time last year. The professional services firm has seen a 140% increase in applications for its graduate programme

finishing university and start applying for vacancies. We opened our applications three months earlier than we did two years ago and our places are already starting to fill up.” However Isherwood says that for skilled candidates who are willing to be flexible, there are still plenty of opportunities on offer. “Think about where in the country you are applying for, as well as which

its undergraduate work experience programmes. Attendance at its university campus recruitment events is also up by 25% from 12 months ago.

company. A lot of applicants are focused on London, however, there are fantastic opportunities to work for global organisations, like Ernst & Young, based up and down the country.

Competition for places is fierce. The firm has already received over 3200 submissions for 800 graduate positions and 1700 applications for the 750 undergraduate places available.

“Our regional offices in Reading and Southampton for example would provide the same career development opportunities as working in the capital, plus the chance to work across a greater variety of clients.”

Stephen Isherwood, head of graduate recruitment at Ernst & Young, says that students need to get their application forms completed early, in order to be in with a chance of securing a job. “Having already received four applications for every place on our graduate trainee scheme, students need to get organised if they want to secure their dream job after

Concluding he added: “There’s no need for students to despair but they do need be pro-active and flexible, whether it’s obtaining work experience or looking for opportunities beyond London. Those that rest on their laurels will simply miss out.” Ernst & Young, November 2011, “Graduate job applications up 140% at Ernst & Young”

International News

International News

A separate type of entity IFRS, September 2011, “IASB proposes to exempt investment entities from consolidation requirements”

The International Accounting

This project is being undertaken

Standards Board (IASB) published proposals to define investment entities as a separate type of entity that would be exempt from the accounting requirements in IFRS 10 Consolidated Financial Statements.

jointly by the IASB and the US national standard-setter, the Financial Accounting Standards Board (FASB). Both boards’ proposals are broadly aligned. However, the FASB is considering proposing that the exemption would extend to cases in which the investment entity is owned by a larger group that is not itself an investment entity. The FASB will publish its exposure draft in due course.

Investment entities are commonly understood to be entities that pool investments from a wide range of investors for investment purposes only. Currently, IFRS 10 Consolidated Financial Statements would require consolidation if an investment entity controls an entity it is investing in. However, when developing IFRS 10, investors commented that this would not provide them with the information they need to assess the value of their investments. To address this issue, the exposure draft published today proposes criteria that would have to be met by an entity in order to qualify as an investment entity. These entities would be exempt from the consolidation requirements and instead would be required to account for all their investments at fair value through profit or loss. The exposure draft also includes disclosure requirements about the nature and type of these investments.

The exposure draft Investment Entities is open for public comment until 05 January 2012 and can be accessed via open+to+comment. The FASB will align its comment period with that of the IASB to ensure joint redeliberations. A podcast on these proposals and a high-level summary of the proposals (IASB Snapshot) is available on the project page. If adopted, the proposals would be integrated into IFRS 10.

Indian standards:

2013 A Plus the official magazine of HKICPA, October 2011, “Indian standards may launch in 2013”

Corporate India may get more time to prepare for the adoption of the country’s version of International Financial Reporting Standards. The Institute of Chartered Accountants of India will suggest to the government that the standards be implemented from 1 April 2013 and not 2012 as planned, The Hindu, a Chennai based newspaper, reported. November/December 2011




International News

Board risk reporting has room for improvement A study of the risk oversight processes applied by boards of directors found inconsistency in the frequency and type of risk reports that the board is asked to review. Although evidence suggests that the boards of public companies fare best, in some organisations directors receive risk reports less than once a year.


he survey was commissioned by the Committee of Sponsoring Organisations of the Treadway Commission (COSO). It asked over 200 directors to assess the current and desired future state of risk oversight applied by the boards on which they served. The findings suggest that while many believe their boards are performing their risk oversight responsibilities diligently and achieving a high level of effectiveness, a strong majority indicate a lack of formality in executing mature and robust risk oversight processes. The survey, Board risk oversight – A progress report: Where boards of directors currently stand in executing their risk oversight responsibilities, identified nine types of risk reports that the board might receive on a periodic basis to inform its risk oversight. Respondents were asked to identify how frequently each is received in their organisation.

The top three reports that boards received at least once a year are:


High-level summary of the top risks for the enterprise as a whole and its operating units


Periodic overview of management’s methodologies used to assess, prioritise and measure risk


Summary of emerging risks that warrant board attention

US News

According to the majority of respondents, reports that the board does not receive at least annually include: scenario analyses evaluating the effect of changes in key external variables that have an impact on the organisation; a summary of exceptions to management’s established policies or limits for key risks; and a summary of significant gaps in capabilities for managing key risks and the status of initiatives to address those gaps. In general, public companies provide more regular reporting to the board on risk-related matters. However, the report finds there is scope for all companies to make their risk reporting more effective through an improved riskreporting process and increased regularity of reporting. PwC Global, November 2011, “Board risk reporting has room for improvement” US News

Yahoo fires CEO, promotes CFO

Hoogervorst: IASB will protect U.S. Sovereignty

Carol Bartz was dismissed as chief executive officer of struggling Internet company Yahoo. The company’s board of directors fired her for failing

The United States would still play a pivotal role in shaping global accounting rules if it switches to standards set by the International Accounting Standards Board, said Hans Hoogervorst, the IASB chairman. The U.S. Securities and

to increase revenues under her watch. CFO Tim Morse took over as interim CEO.

A Plus the official magazine of HKICPA, October 2011, “Hoogervorst: IASB will protect U.S. Sovereignty”

A Plus the official magazine of HKICPA, October 2011, “Yahoo fires CEO, promotes CFO”

Exchange Commission’s final say before any IASB rule is introduced would protect U.S. sovereignty, he told a conference. November/December 2011


International News

Goldman Sachs posts loss in third quarter A Plus the official magazine of HKICPA, October 2011, “Goldman Sachs posts loss in third quarter”


nvestment bank Goldman

Sachs posted a loss in the third quarter, as the company lost billions of dollars from its investment portfolio. It marked the second time that Goldman posted a quarterly loss since it went public in 1999 and the first since the collapse of Lehman Brothers in 2008.

In what is the latest indication of lower revenues affecting pay in the financial sector, Goldman set aside 59 percent less for compensation than it did the previous year. The bank posted a shareholder loss of US$428 million, or 84 cents per share, far worse than the average forecast for a loss of 16 cents per share, according to Thomson Reuters.

Goldman Sachs earned US$1.74 billion, or US$2.98 per share, during the third quarter of 2010. The European sovereign debt crisis aggravated market turmoil in the quarter and the immediate outlook for markets remains unclear, according to David Viniar, the company’s chief financial officer. “There is still a lot of uncertainty and a lot of it is based on who says what on what day,” Viniar told investors and analysts in a conference call. The bank posted the largest decline in its investment and lending departments, which lost a total of US$2.48 billion during the quarter. Global Accountant magazine covers, analyses, comments on, and defines recent news, technical knowledge, job skills that drive accountancy. Global Accountant magazine reaches readers in every continent around the world.


November/December 2011




UK News

By Christine O’Grady, BPP

The UK has long been a first choice for international students who want to study here, and accountancy is one of the most popular programmes. ACCA qualified accountants are globally recognised for their professional standards and expert knowledge. Employers across the world know and trust ACCA, and its reputation helps to re-inforce the high standard of training and ongoing development that our universities and colleges offer. With the Eurozone in crisis, it is

that demand from countries such

more important than ever that the UK maintains its image as a world class financial and commercial centre.

as China and India had already dropped off, and that the government was giving the impression to those abroad that private UK institutions were closed for business.

At the heart of the accountancy profession is its unique training capabilities, and the sector relies heavily on accredited providers to ensure that first class teaching which is relevant, practical and up to date is delivered. Students from both the UK and overseas have a choice of public and private providers, study modes and tailored programmes to suit their needs. And more importantly, many gain valuable experience by working part-time alongside their studies. Earlier this year, the UK Border Agency (UKBA) made some changes to student visa rules that were applicable to private training providers; many of whom run professional programmes like the ACCA. The change in legislation meant that overseas students at a number of private colleges would no longer be able to work whilst they studied in the UK. Leaders from these organisations claimed

Following the reviews, the Home Office reported that 470 UK colleges were stopped from accepting new foreign students from outside Europe. It estimated that these colleges could have brought in 11,000 students. In many cases, students who are legitimately in the UK have been impacted, as their particular college will have closed down. Whilst it is important that immigration

Damian Green, the Immigration Minister said that “Only first class education providers should be given licences to sponsor international students”. For those who want peace of mind, there are a number of organisations, including BPP University College, who have this licence – known as “Highly Trusted Sponsor status” and who run full time ACCA programmes. It also means that those students with a Tier 4 Visa who study the ACCA full-time at one of our 5 regional centres are eligible to work part-time whilst they are studying, in accordance with UKBA regulations.

procedures are followed correctly, it nevertheless means that the UK’s reputation will be dented, and both the professional services training and accountancy sectors will be impacted. More importantly, those who are mid way through their studies will want to ensure that they can continue towards their qualification – and will want the reassurance that their provider is licensed.

November/December 2011




UK News

Could more be done? Deloitte UK, October 2011, “Annual reports shrink slightly in size, but could more be done?”


he average length of annual reports for UK listed companies has decreased, bringing reports back to their 2009 levels, according to a new survey by Deloitte, the business advisory firm. Deloitte’s latest instalment in its corporate reporting series, “Gems and jetsam”, which surveyed current practice across 100 corporates

are still 123% longer than when we began our surveys in 1996”. “However, efforts are being made to make corporate reporting more straightforward, with the Department for Business, Innovation and Skills and the Financial Reporting Council looking more closely at current practice. Moreover, the International Accounting Standards Board has commissioned and received a report on reducing disclosures in financial reporting. That report found that a 30% reduction in the length of the financial statements should be possible. While these are promising developments, it is questionable whether these will merely manage the problem, as opposed to curing the illness.”

Additional key findings from Deloitte’s report included: • 76% of companies clearly adopted the 2009 FRC guidance on

• Length of annual reports drops for the first time in 15 years; • Companies making modest progress, despite complex reporting requirements.

going concern and liquidity risk.

and 30 investment trusts, showed a 3% reduction overall in annual reports. Reasons for the decline have been attributed to companies cutting back on the narrative reporting in the front half of the annual report. The length of the financial statements is unchanged. While the overall decline is a move forward in terms of ‘cutting the clutter’ out of annual reports, corporate reporting experts at Deloitte suggest more can be done.

This is a high percentage for a relatively new requirement. • 63% of investment trusts and 45% of the corporates’ parent companies continue to report under UK GAAP and so will be affected by the current deliberations of the Accounting Standards Board on the future of UK accounting. • Operational issues are the most common risk identified by companies, with 81% (2010: 69%) of corporates citing this as a princi-

Bel Sharp, senior technical audit

pal business risk. The state of the

partner at Deloitte, said: “Given the complexities of company reporting, it was good to see even a modest decline. But annual reports

economy came second at 75% and market demand and competition ranked third at 69%.

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Off Balance Sheet Activities ACCA Global, November 2011, “Off Balance Sheet Activities”


he International Accounting Standards Board (IASB) has recently issued three standards: IFRS 10, Consolidated Financial Statements, IFRS 11, Joint Arrangements and IFRS 12, Disclosure of Interests in Other Entities. The issuance of these standards completes IASB’s improvements to the accounting requirements for off balance sheet activities and joint arrangements. The standards bring into broad alignment the accounting treatment for off balance sheet activities in International Financial Reporting Standards (IFRSs) and US generally accepted accounting principles (GAAP), and are the IASB’s response to the financial crisis.

IFRS 10 replaces all of the consolidation guidance in IAS 27, Consolidated and Separate Financial Statements, and SIC 12, Consolidation – Special Purpose Entities, although the portion of IAS 27 that deals with separate financial statements remains. The old standard has been renamed IAS 27, Separate Financial Statements. IFRS 11 replaces IAS 31, Interests in Joint Ventures, and SIC 13, Jointly Controlled Entities – Non-Monetary Contributions by Venturers. And IFRS 12 replaces the disclosure requirements that used to be found in IAS 28, Investments in Associates and Joint Ventures.

IFRS 10: control and power IFRS 10 makes the concept of control the determining factor in whether an entity should be included within the consolidated financial statements of the parent company, thus building on existing principles. Guidance has been added to the standard to determine the nature of control in cases where assessment is difficult. IFRS 10 introduces a single consolidation model for all entities based on control, irrespective of the nature of the investee. Control is based on whether an investor has power over the investee; exposure, or rights, to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the returns. Thus the November/December 2011




definition focuses on the need to have both ‘power’ and ‘variable returns’ for control to be present. Control is assessed on a continuous basis as facts and circumstances change. A change in market conditions brings about a reassessment of control only if it changes one of the elements of control. The revised definition of control replaces not only the definition and guidance in IAS 27 but also the four indicators of control in SIC 12. The accounting requirements for consolidated financial statements have been transferred from IAS 27 to IFRS 10. Power is the current ability to direct the activities that significantly influence returns, which can be positive, negative or both. The determination of power is based on current facts and circumstances, is continuously assessed and is a two-step process. First, the investor considers all the facts and circumstances of the case, including the size of its holding and the dispersion of holdings. Second, the investor considers whether other shareholders are passive by nature and if the investee is controlled by rights other than voting power, which are the facts normally used to assess power. If after this latter step there is no clear conclusion, then the investor does not control the entity. An investor with more than 50% of the voting rights would meet the power criteria if there were no restrictions, but even if it held less than the majority of the voting

rights an investor could still have power in certain cases. In the latter case, such things as agreements with other vote holders, other contractual agreements, potential voting rights and de facto power would have to be considered. IFRS 10 provides guidance on participating and protective rights, and brings the notion of de facto control firmly within the guidance. To have control, an investor needs to have the ability to use its power to affect returns for the investor’s benefit. The standard also requires an investor with decision-making rights to determine if it is acting as a ‘principal’ or an ‘agent’. Such factors as whether any remuneration is at arm’s length have to be considered. If an investor acts as an agent, it would not have the requisite power, so the entity would not be consolidated. Because the new standards may change which entities are included in consolidated financial statements, deal structures may also change. Significant judgment may be required to determine whether another entity is controlled, and data may have to be gathered about other shareholders and past voting patterns. Private equity funds, asset managers and some insurance companies will have to assess whether they are principals or agents and therefore whether they have to consolidate their investments. An entity holding options to acquire additional voting interests or which owns a minority of voting rights will also need to consider the new rules.

IFRS 11: rights and obligations IFRS 11, Joint Arrangements, provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. A joint arrangement is one where two or more parties contractually agree to share control. Joint control exists only when the decisions about activities that significantly affect the returns of an arrangement require the unanimous consent of the parties sharing control. All parties to a joint arrangement should recognise their rights and obligations arising from the arrangement. The structure and form of the arrangement is only one of the factors in assessing each party’s rights and obligations; the terms and conditions agreed by the parties and other relevant facts and circumstances should also be considered. Joint arrangements are either joint operations or joint ventures. A joint operation gives the parties direct rights to the assets and the liabilities of the arrangement; those parties are called joint operators. A joint operator will recognise its interest based on its direct rights and obligations rather than on its participation interest.

A joint operator needs to recognise: • its assets, including its share of any assets held jointly • its liabilities, including its share of any liabilities incurred jointly • its revenue from the sale of its share of the output of the joint operation • its share of the revenue from the sale of the output by the joint operation, and • its expenses, including its share of any expenses incurred jointly. A joint venturer, on the other hand, recognises its interest as an investment and accounts for that investment using the equity method in accordance with IAS 28, Investments in Associates and Joint Ventures, unless it is exempt from applying the equity method. A party that participates in, but does not have joint control of, a joint venture accounts for its interest in the arrangement in accordance with IFRS 9, Financial Instruments. However, if it has significant influence over the joint venture, it must account for it in accordance with IAS 28. Accordingly, a joint venture gives the parties rights to the net assets and profit or loss of the venture. A joint venturer does not have rights to individual assets or obligations for individual liabilities of the joint venture.

Entities can no longer account for an interest in a joint venture using the proportionate consolidation method but must use the equity method. Entities will need to assess their arrangements to determine whether they have invested in a joint operation or a joint venture on adoption of the new standard. Also, some entities that previously equity-accounted their investments may need to account for their share

rangement or exerts significant influence over another entity, and the type of joint arrangement when the arrangement has been structured through a separate vehicle. b) The entity’s interests in subsidiaries, in order to allow users to understand, for example, the composition of the group or to evaluate the nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities, of the group.

of assets and liabilities now that there is less focus on the structure of the arrangement. The transition provisions of IFRS 11 require entities to apply the new rules at the start of the earliest period presented on adoption. Entities in mining, extraction, oil and gas, and real estate and construction, where joint arrangements are common, might feel the biggest impact.

c) The entity’s interests in joint arrangements and associates, so users can evaluate, for example, the nature, extent and financial effects of its interests in joint arrangements and associates, and the nature of, and changes in, risks associated with its interests in joint ventures and associates. d) The entity’s interests in unconsolidated structured entities.

IFRS 12: disclosures

The objective of IFRS 12 is for an entity to disclose information that helps users of its financial statements evaluate the nature of its involvement with other entities and the effects of that involvement on its financial position. IFRS 12 is likely to increase the amount of information in financial statements about an entity’s relationships with the other parties.

IFRS 12, Disclosure of Interests in Other Entities, sets out the required disclosures for entities reporting under the two new standards, IFRS 10 and IFRS 11. It replaces the disclosure requirements currently found in IAS 28. The new standard requires entities to disclose information that helps users evaluate the nature, risks and financial effects associated with the entity’s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities. To meet this objective, disclosures are required in the following areas:

The new standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted if the entire package of standards is adopted at the same time.

a) Significant judgments and assumptions used by the entity in determining that it controls another entity, has joint control of an arNovember/December 2011




Auditor View

Insights for the investment community from assurance professionals PwC, October 2011, ‘Auditor view – Insights for the investment community from assurance professionals’

Demystifying audits Are an entity’s financial statements free from material misstatement? The audit opinion gives the auditor’s view. But what does ‘free from material misstatement’ actually mean? What work does the auditor carry out, and what lies beyond the remit of the audit? Why is it an opinion not certification? What is the difference? This ‘auditor view’ explains.

What do auditors do? Management produces financial statements for the owners of the entity. Auditors examine those financial statements and issue a report. What do the auditors do to form their opinion? The auditor’s objective is to obtain ‘sufficient appropriate audit evidence’ to give a view on whether the financial statements

invoices), checking calculations, performing analytical procedures and seeking independent thirdparty confirmations. The extent of testing depends on their assessment of risk and takes account of the audit evidence obtained from any tests of controls. Auditors then consider the application of financial reporting standards and evaluate whether the judgements and estimates used by management are reasonable.

are free from material misstatement. Auditors start by using their knowledge of the business and the environment in which it operates to identify the risks that could lead to material misstatement in the financial statements (for example, areas that are subject to a high degree of judgement). This is an assessment of gross risk; it doesn’t take account of the mitigating effect of the controls operated by management. They then assess the entity’s controls. If they think the controls are designed effectively to mitigate risks of misstatement, they test whether the controls have operated effectively during the year. Auditors also test the balances and transactions that are recorded in the accounting records, on a sample basis, and test for the possible omission of balances and transactions. They perform procedures such as inspecting assets (for example, inventory) and documentation (for example,

Finally, they determine whether they have gathered sufficient appropriate audit evidence and use that as a basis to form a conclusion, which leads to their opinion on the financial statements. Auditors are in continual discussion with management throughout this process – both at operational and senior executive levels. Using their professional judgement and scepticism, they act as a challenge to management’s assertions regarding the numbers and disclosures in the entity’s financial statements. This often results in the entity making adjustments to its financial statements during the audit process.

What does the opinion mean? Once the audit is finished, the auditors state whether, in their opinion, the financial statements are ‘true and fair’ or ‘fairly presented’. This provides ‘reasonable’ but not ‘absolute’ assurance that the financial statements are not materially misstated, and consequently it is not a certification that the

financial statements are ‘correct’. Given the constraints of cost and time and the estimates and inherent judgements involved, this is the only practical outcome. What is reasonable and what is material are inherently areas of judgement where the auditor applies professional skill and experience. For management, a modified audit opinion is highly undesirable. In our experience, management listens carefully to issues raised during the audit process and addresses those it considers material to the financial statements.

But sometimes a modified audit opinion is necessary − for example, as a result of a disagreement between the auditor and management or an inability to obtain the necessary audit evidence − but this is rare. At other times, the audit opinion might have an ‘emphasis of matter’, highlighting areas to which users should pay particular attention, such as a material uncertainty regarding going concern, perhaps because of the need to

remit. For example: Although auditors are responsible for obtaining reasonable assurance that the financial statements are not materially misstated as a result of fraud, the inherent limitations of an audit mean that there is no guarantee that material fraud will be detected.

refinance a large bank loan.

attestation under the US SarbanesOxley Act, where applicable. Even then, the work is limited to those controls over financial reporting.

What does the audit opinion cover and not cover? The auditor’s opinion covers just the primary financial statements and related notes. In many jurisdictions, the report will also highlight if there are inconsistencies between the front end of the annual report and the financial statements. The audit does not typically cover industrybased metrics, adjusted earnings and similar information outside the financial statements. It also does not cover information in analysts’ presentations or on the website, unless stated otherwise.

What do auditors not do?

Auditors do not give an opinion on the effectiveness of the entity’s internal controls other than as an

In those jurisdictions where auditors are required to read the front end of the report, this is to check its consistency with the financial statements. They do not audit the whole document. Management assesses whether it is appropriate to prepare the financial statements on a ‘going concern’ basis – that is, the accounting treatments assume that the entity is viewed as continuing in business for the foreseeable future (in contrast with preparing financial statements on a ‘wind-up’ basis). Auditors review the reasonableness of the assumptions that management uses and consider whether there are any material uncertainties that may cast significant doubt about the entity’s ability to continue as a going concern and whether they concur with management’s assessment. However, the audit opinion is not an opinion on the future solvency of the entity.

There are many misconceptions about areas that lie outside the auditor’s November/December 2011




IFRS 3 Business

Combinations Steve Collings Steve Collings is the audit and technical partner at Leavitt Walmsley Associates Ltd and is the author of The Interpretation and Application of International Standards on Auditing.

Students attempting financial reporting examinations in November and December may be asked to produce a consolidated statement of financial position or a consolidated statement of comprehensive income (or even a consolidated statement of cash flows). These types of financial statements are usually asked for in many financial reporting examinations because they require students to demonstrate a higher level of skill whether it be dealing with post-acquisition profits or impairment of goodwill to very high level aspects such as ‘D’ shaped groups. This article will look at IFRS 3 and the steps an acquirer in a

business combination has to take as well as a detailed look at the options for recognising goodwill. The next three articles are going to focus on the detailed mechanics of consolidated financial statements. It is important that once consolidated financial statements are on your syllabus that you are comfortable with the provisions contained in IFRS 3 Business Combinations. IFRS 3 itself has been subjected to some revisions back in 2008. The revisions to IFRS 3 were as a result of a joint project with the US standard setters (the Financial Accounting Standards Board (FASB)) because FASB issued a revised FAS 141 Business Combinations and FAS 160 Non-Controlling Interests

in Consolidated Financial Statements back in November 2007. The revised IFRS 3 introduced some substantial changes to the way in which business combinations are accounted for, including: • All forms of consideration are recognised at fair value at the date of acquisition, whether payment is probable or not. • Non-controlling interests (NCI) can be measured at fair value or at the NCIs share of recognised assets, on a combinationby-combination basis. What happens here is that goodwill is either recognised at an amount which includes both the NCIs share of goodwill and the parent’s share of goodwill OR the parent’s share of goodwill only. • Previously held interests in the acquiree (for example when the acquiree was an associate) are remeasured on the business combination to fair value, with a gain or loss recognised within the statement of comprehensive income. • More guidance was issued on separating other transactions from the business combination, including share-based payments and pre-existing relationships. • Transaction costs are immediately expensed and are not included in the business combination accounting. These costs relate to costs such as due diligence fees levied by the accountancy firm or legal fees in connection with the acquisition.

Business combination The first thing a student needs to be comfortable with is the actual definition of a business combination. IFRS 3 defines a business combination as: ‘a transaction or other event in which an acquirer obtains control of one or more businesses.’ The important ‘keywords’ to bear in mind are ‘obtains control’. Only when control is obtained does a parent-subsidiary relationship arise. So what is ‘control’? If you look to the provisions in IAS 27 Consolidated and Separate Financial Statements (which has been renamed ‘Separate Financial Statements’ and which will apply to accounting periods commencing on or after 1 January 2013 but will become relevant for some students examined under a six-month from issue rule in 2012) that standard defines ‘control’ as: ‘the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities’.

IFRS 10 goes on to define power as: ‘existing rights that give the current ability to direct the relevant activities.’ You can see, therefore, that control is exercised when the parent can direct the financial and operating policies of the subsidiary. Many students tend to apply a blanket percentage approach and work on the basis that if the parent owns more than 50% then they consolidate – if the parent owns less than 50% no consolidation is required. This is not always the case! Students must appreciate that a parent-subsidiary relationship can (and in the real world often does) arise when the parent owns less than 50%. The deciding factor is whether the parent can govern the financial and operating policies of an entity so as to obtain benefit from its activities.

Figure 1 Gabriella Enterprises Inc purchases a 40% share in Lucas Industries Inc. Gabriella has the power to appoint five of the board of directors and the remaining investors have the power to appoint two each. The five directors appointed by Gabriella have effective power over Lucas Industries to such an extent that they are able to direct the financial and operating policies of the company. In this example, Gabriella Enterprises controls Lucas Industries by way of its effective control over the board of directors and the fact that it has the ability to direct how Lucas Industries is run. As a consequence, Gabriella Enterprises should consolidate the results of Lucas Industries under the provisions in IAS 27.

The new IFRS 10 Consolidated Financial Statements which will come into effect for accounting periods commencing on or after 1 January 2013 (which will be examinable in 2012 for students who are examined under a six-month from issue rule) goes into a bit more detail in its definition of ‘control’. IFRS 10 says control occurs when: ‘the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.’

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During this last revision phase, students must not lose sight of the concept of ‘control’ and merely look out for percentage figures above 50%. Students must read the question very carefully and be on alert for any indicators that control has been obtained by the parent despite the fact that the parent might own less than 51%. Some other typical indicators where a parent might have obtained control of another entity are as follows:

• The assets acquired. • The liabilities assumed. • Non-controlling interests. • Consideration transferred. • Goodwill on acquisition or the gain on a bargain purchase. Recognising all assets and liabilities acquired at fair value gives more relevant and reliable information about market expectations concerning future cash flows related to the assets and liabilities and to

allows goodwill to be amortised over its expected useful life. Keep in mind that when you are dealing with IFRS 3 style questions, goodwill is never amortised! Figure 2 On 1 January 2011, Alexander Enterprises Inc purchases an 80% stake in the net assets of Alicia Enterprises Inc for $25,000. On the date of acquisition the net assets of Alicia Enterprises are as follows:

their future performance. • Power over more than half of the other entity’s voting rights by virtue of an agreement with other investors. • Power to cast the majority of votes at meetings of the board of directors or equivalent governing body of the other entity. • Power to govern the financial and operating policies of the other entity under a statute or an agreement.

Acquisition method of accounting When a business combination occurs, IFRS 3 requires the use of the ‘acquisition’ method of accounting. Students might have heard this method called the ‘purchase’ method. What this method does is to look at a business combination from the perspective of the acquirer (the party making the purchase). It involves identifying the acquirer and determining the date on which the combination should be accounted for (the date of acquisition). This method then goes on to deal with recognising and measuring the components of a business combination which are:



Share capital

In the individual financial statements of a parent will be the cost of the investment in the subsidiary. In the consolidated financial statements, this cost is removed from non-current assets and is included in the goodwill calculation (goodwill, instead, will appear in the non-current assets section of the consolidated statement of financial position). Goodwill is the excess of the purchase consideration over the net assets purchased in the subsidiary. An important point to emphasise is that goodwill (under the provisions in IFRS 3) is never amortised; it is always tested annually for impairment thus there may be some interaction with IAS 36 Impairment of Assets (students must bear in mind that many standards often inter-relate with one another). This is an important point to emphasise here because many students who work in jurisdictions that operate national standards (such as in the UK) may have do-

Retained earnings

mestic accounting standards which permit the amortisation of goodwill – for example in the UK, FRS 10 Goodwill and Intangible Assets

1,000 25,000

You are required to calculate the goodwill to be included in the consolidated statement of financial position as at 31 December 2011 using the proportionate method of recognition. The goodwill figure is simply the excess of what has been paid over what has been acquired: $

$ 25,000

Cost of investment

Less net assets acquired: Share capital Retained earnings

Goodwill on acquisition

1,000 25,000 26,000 X 80%




Some questions may require students to deal with subsequent impairment of this goodwill. When this is required, the first thing to do is not to panic! Over the years I have come across students that panic when they see that they have to firstly calculate the goodwill and

then deal with an impairment charge because they are only preparing the consolidated statement of financial position. The advice I give here is to think carefully about what the impact of the impairment has on a set of financial statements. Impairment is simply an additional charge to the statement of comprehensive income (additional depreciation if you like). The effect of it is to reduce noncurrent assets to recoverable amount following an impairment test and to

would be reduced (CR goodwill) and profit would also be reduced (DR impairment loss). The resulting profit (or loss) is transferred to retained earnings and the process starts all over again on day one of the new financial year. By reducing consolidated retained earnings you are merely reducing the profit for the year.

reduce profits (or increase losses). If you are practising questions on the consolidated statement of financial position, any subsequent impairment of goodwill is simply taken to the consolidated retained earnings figure. Take a moment to think about the impact of an impairment charge on the financial statements. If you were preparing both the consolidated statement of financial position and the consolidated statement of comprehensive income what would happen is that non-current assets

the directors have undertaken an impairment test and they have concluded that the goodwill in Alicia Enterprises has suffered a 10% impairment and you are preparing the consolidated statement of financial position. This means that goodwill needs to be reduced from $4,200 to ($4,200 less $420) $3,780. All you will do is to:

In the example above, assume the question requirement says that

Debit consolidated retained earnings Credit goodwill

Old versus new Earlier on in the article I mentioned that the revised IFRS 3 permits two methods of goodwill recognition. These two methods are generally referred to as: • The gross (full) method; or • The proportionate method. Under the gross method, goodwill includes both the acquiring entity’s interest AND the non-controlling interest. Non-controlling interests are measured at fair value and this was the new part which was introduced into the revised IFRS 3 back in 2008. Under the proportionate method (the ‘traditional’ method), goodwill will only include amounts relating to the acquiring entity’s interest in the business acquired.

$420 ($420)

Figure 3 Aidan Enterprises Inc acquires a 60% stake in Charlotte Inc for $150m. The fair value of the noncontrolling interest is determined to be $100m. The net assets in Charlotte at the date of acquisition are $50m. You are required to calculate goodwill using the full method and then to recalculate the goodwill using the proportionate method. Full Method

The full method of goodwill is calculated by matching the fair value of the whole business with the whole fair value of the net assets of the subsidiary.

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The journal entries will be: Debit $m Identifiable net assets Goodwill W1

Credit $m

50 200





W1 – Goodwill Working Cost of investment Fair value of NCI Less 100% of the fair value of the net assets acquired

150 100 250 (50) 200

Non-controlling interest can be ‘proved’ by saying: Identifiable net assets attributable to NCI (40% x $50) Goodwill attributable to NCI (40% x $200)

20 80 100

What will happen is that the NCI at the year-end is calculated by updating the fair value of the NCI at the date of acquisition by giving them their share of the post-acquisition profits. The post-acquisition profits are simply the rise in the net assets of the subsidiary since the date of acquisition. Assume that at the next year-end the rise in the net assets were $20m, the NCI share of this profit would be (40% x $20m) = $8m. Proportionate Method

Under this method Aidan Enterprises will only recognise its share of goodwill and will measure NCI at their proportionate share in Charlotte Enterprises identifiable net assets. The journal entries will be:

Debit $m Identifiable net assets Goodwill W2 Cash Non-controlling interest

Credit $m

50 120

W2 – Goodwill Working Cost of investment


Less net assets acquired (60% x $50m)




150 20

cus on consolidated financial statements in more detail because once consolidated financial statements are on your syllabus, the chances are they will be examined at every sitting due to the fact that there are lots of opportunities for students to demonstrate the higher levels of skill that consolidations require. Students preparing for examinations in November and December should now have finished the study phase and be well underway with their revision phase. It is particularly important that if you are attempting a financial reporting examination in November or December that you thoroughly practise examination standard questions to time. You must pay particular attention to question requirements because it is very easy to get lost in the detail – particularly for financial reporting examinations that are ‘higher level’. Pay particular attention to the requirements for goodwill given that IFRS 3 now allows two possible methods of recognition. Finally if you are struggling with certain areas you must devote additional time to these areas – do not simply stick to the areas which you feel comfortable in. The non-controlling interest can be ‘proved’ by saying (100% less 60%) = 40% x $50m = $20m. I cannot over-emphasise the importance of thoroughly reading through the question requirements – particularly in more advanced financial reporting examinations. If the question specifically requires students to measure NCI at fair value, this is

what you must do – do not attempt to start measuring NCI at their proportionate share of the acquiree’s identifiable net assets because you will lose valuable marks!


Steve Collings is the audit and technical partner at Leavitt Walmsley Associates Ltd and the author of ‘The Interpretation and Application of International Standards on Auditing’ (Wiley March 2011). He is also the author of ‘IFRS For Dum-

This article has focused primarily on business combinations with emphasis placed on goodwill. The next three articles are going to fo-

mies’ to be published by Wileys in April 2012 and lectures professional accountants on financial reporting and auditing issues. November/December 2011




Companies move towards

Integrated Reporting


few years ago, if you asked someone in business to discuss their organisation’s response to the sustainability agenda, they might have replied by describing how they have installed paper recycling bins in their offices or how many new tree plantings they had sponsored in their local community. However, the response to the same question today is likely to be very different. Yes organisations still realise that they have a social responsibility position to maintain but nowadays sustainability is increasingly seen to relate to the long-term survivability and success of the business itself. Some will ask whether it is possible for companies to act sustainably yet still fully embrace the profit motive? The answer lies in the time horizon over which the business strategy is formulated. Short-termism does not tend to allow these two objectives to exist side-by-side. What is needed is a more long-term view, one in which both commercial organisations and society realise they have a symbiotic relationship - they both need each other to thrive. Businesses around the world must wake up to the fact that acting in a sustainable manner makes good business sense as this usually results in more successful operations that generate reliable cash flows. Society also needs responsible commercial organisations to generate the tax revenue required to run public bodies, provide employment for its citizens and to produce the goods and services needed to fuel the economy.

Companies such as Poland’s Grupa Lotos, a vertically integrated oil company, recognise the benefits of pursuing a sustainable business strategy. Across all areas of their business the Company seeks to minimise its environmental impact, values the intellectual capital and experience of its employees and is committed to furthering the welfare of society. And this strategy has produced commercial success with the Lotos Group’s share in the total fuel market increasing from 28.3% to 31.3%. Sales revenue for 2010 amounted to PLN 19.7bn, which represented a 37% growth relative to the previous year. So acting sustainably does not necessarily mean that the drive for profit is abandoned. The world is increasingly competitive and only those companies with robust business models generating durable longterm profitability and cash flow will thrive. The critical areas of the busi-

By Nick Topazio Head of Corporate Reporting, CIMA

ness model that organisations and their boards must focus on are cost leadership, durability of the supply chain, motivating staff, attracting and retaining customers and innovation. And in each of these areas directors of successful companies have widened their focus beyond the traditional business drivers. While there are many examples of where the drive for long-term profitability currently coincides with the wider sustainability agenda, there are instances where current business behaviour needs to be adjusted to recognise environmental concerns. This is where governments and regulators around the world need to step in. They must accelerate the recognition of some environmental costs within business models. While an organisation consuming natural resources at an unsustainable rate, such as fish stocks, rain forest or fresh water, may not otherwise feel the impact of their current actions for several decades; it is the role of government to develop pricing mechanisms that cause the organisation to bring forward recognition in their current business planning. It is essential that the corporate reporting system not only allows but actively promotes this new corporate philosophy which is required to drive business forward as it battles

to meet 21st century challenges. There is currently much mistrust in the actions of commercial organisations and in many circles the term ‘corporate behaviour’ has become synonymous with greed, self-interest and detachment from the real world. Nevertheless, there are many companies that have successfully adopted business strategies that recognise the public interest yet are still focussed on long-term sustainable profitability. The corporate

extended timescale the business needs to act sustainably. Only when integrated decision-making exists within an organisation will it be in a position to produce integrated as opposed to combined reporting.

reporting system must be allowed to develop to allow effective communication of their stories.

change is necessary and why integrated reporting is the solution together with the concepts, principles and key elements around which an Integrated Reporting Framework should be constructed.

Integrated Reporting is being hailed as the ‘next big thing’ in reporting and it certainly has the potential to be the vehicle that allows companies to effectively communicate how their business model and strategy are designed to focus on the long-term durability of their organisation. To date the concept of integrated reporting has perhaps only been recognised by most companies as the combination of financial and non-financial reporting in a single document rather than separate Annual Reports and Corporate Responsibility reports.

The International Integrated Reporting Committee has published a discussion paper ‘Towards Integrated Reporting – Communicating Value in the 21st Century’ which sets out why

The discussion paper contains a number of key messages for the different stakeholder groups affected: Reporting Organisations • Integrated Reporting is critical to a meaningful assessment of the long term viability of an organisation’s business model and strategy. It is therefore better aligned to the information that management requires for decision-making. • Integrated Reporting enhances risk management within an organisation and better identification of opportunities.

But true integrated reporting is much more than this. To be able to meaningfully comment on the economic, social and environmental influences and impacts of the entity’s operations requires integrated thinking and planning within the organisation. The business strategy must recognise not just the importance of short-term profits but also the need for the organisation to succeed over the medium and long-term. And to succeed over an

Nick Topazio Head of Corporate Reporting, CIMA

November/December 2011




Investors • Integrated Reporting clarifies the linkages between strategy, governance and financial performance and the social, environmental and economic context within which the company operates. It also aligns externally reported information with information that management uses for decisionmaking allowing disclosure of the key risks and opportunities as management views them.

addressing these risks is greater transparency of market participants, which Integrated Reporting can facilitate. This may well contribute to lower volatility in markets. Moreover, it permits policy-makers and regulators to identify such risks as they emerge so that they can be dealt with in a timely way, thus adding to greater economic and market stability. • The more meaningful communi-

• Integrated Reporting puts greater emphasis on information about the future. This will assist investors in assessing the organisation’s ability to generate future cash flows.

cation brought about via Integrated Reporting will support more effective capital allocation across the economy generally which should encourage the investment necessary to respond to issues such as energy security, food scarcity and climate change.

Policy-makers, regulators and standard-setters • The recent global financial crisis has made it clear that risks can develop, be harboured and be transmitted through market participants and practices that fall outside the traditionally prudentially regulated institutions. One important tool in

Civil society • Organisations that adopt Integrated Reporting will display their stewardship not only of financial capital, but also of human, natural, social and other capitals and demonstrate how this stewardship is of central importance to business operations and decision making. • Integrated Reporting’s emphasis on stakeholder engagement is likely to result in greater consultation with civil society interest groups. Employees • Current and prospective employees will be able to gain an integrated perspective on the future prospects of their employer. They will also be better able to discern whether their employer’s values are consistent with their own.

Assurance providers • The independent audit of financial statements currently plays a critical role in the world’s capital markets, and independent assurance of sustainability reports is recognised as best practice. It is therefore reasonable to expect that when an Integrated Report is an organisation’s primary report, investors and other stakeholders will want that report to be subject to independent assurance. • Some information in an Integrated Report may be more difficult to assure than information disclosed under traditional reporting frameworks. This will require the development of new techniques, standards and reporting mechanisms to support assurance on Integrated Reports. Academics • Academics will have a strong role to play in both the development of the initial Integrated Reporting framework and in education and capacity building across the reporting system, which will be essential to Integrated Reporting’s long term success.

To find out more on Integrated Reporting, contribute to the debate and access the discussion paper, please go to: nick-topazios-blog/towards-integrated-future

take. Do a little research, talk to people before jumping-in and make sure you make the correct choice” “10 years ago a university degree would have been enough to secure a good job. The same cannot be said now. Going forward, a university degree alone certainly is not enough to command a healthy career, salary or progression within an organisation. You will need to look at the options of specialising

Employability We live in competitive times. With the ever growing unemployment and increasing numbers of university graduates, the job market is undeniably in the employers favour. “How can we get experience?” “What do I need to do to be able to compete in the job market?” “How are we able to obtain experience, if no one is willing to offer any work?” These are only a few questions the Global Accountant team are asked by students and graduates. The Global Accountant editor Siret Aktuglu recently addressed a class full of university students on a topic of Employability, a programme run by the London South Bank University to equip its future graduates with necessary skills to be able to find work when they do

graduate. The programme is a success and has proven highly popular amongst accounting and finance students. “Think of a cake. To be able to bake it with a successful outcome it needs to be combined with several ingredients that work well together. You may not be successful at first. Then you will try again, and again. Finally you will have success. And that success is called employability” said Siret. Siret referred to those ingredients as “motivation, interpersonal skills, interview skills, communication skills and all those skills necessary to become employable” Siret then continued his speech on professional qualifications in accounting. “There is a lot of choice out there. You will be overwhelmed and will have to come to a conclusion of what you will do. Stop and think. Now is the time for you to decide what path you shall

and moving towards being a qualified accountant. The market speaks for itself” “When I was at university I founded the SSAF [Student Society of Accounting and Finance]. This gave me that little extracurricular activity to prove to any employer that I was motivated and could handle my studies as well as other duties. I had to prove that I could be different. First, I had that great idea, I couldn’t stop there and realised from the beginning that I couldn’t go alone so I had to convince people to support me, then I had to motivate them to follow me and then when all that was accomplished I delegated duties. It is a success and the society still lives on today!” Siret concluded; “Every graduate went to university, done coursework, passed exams; but the question is, what did you do at university that makes you different?”

Global Accountant magazine is ready to mentor students and recent graduates from all around the world for free. We offer a limited amount of students and graduates to apply for mentorship in this area. If you are interested please email: November/December 2011




Many employers think that skills and personal qualities are as important, if not more important than paper qualifications. However, qualifications are proof of commitment and determination to fulfill requirements by meeting deadlines whilst under-pressure. They are symbols of accomplishment. Skills, personal qualities and qualifications undoubtedly complement each other.

What do Employers want?

Many applicants believe they have these skills and that they have examples they can give an employer when completing an application form or attend

Look at the list of skills below and decide on your

an interview. Being able to prove that you actually

current strengths, where you have some examples

posses these skills and communicate them in a

to offer and where you need to make that skill or

way that will impress the employer not only will

quality a priority in your next plan.

give you an edge over other candidates but may be the deciding factor of your employability.

Don’t worry if you don’t have many ticks in columns 2 and 3 – the good news is that skills can

Nevertheless, the importance of being able to

be learned and examples of using your personal

command skills which are necessary through

qualities can be gathered.

day to day activities of an accountant is fundamental to all. Professional attitude and due care

You will be able to track your progress towards

are crucial ingredients of being a professional

being work-ready – moving more of your ticks into

accountant. However, this article is based not on

columns 2 and 3 at your next review will show

professional accountants but employability quali-

your progress. You’ll be more confident when

ties, skills and somewhat an action plan to achieve

you are aware of your strengths and that you’re

these strengths.

developing the right skills.

Tick one box on each line 1 = No evidence of this skill or quality 2 = Some evidence of this skill or quality 3 = Good evidence of this skill or quality








Communication Talking & listening skills Develop good working relationships Able to understand & follow instructions Telephone skills IT skills i.e MS Office Communicates confidently Personal qualities Able to accept praise Enthusiastic and motivated Always on time or early Works hard and willing to learn Flexible Expresses own ideas Respects equal opportunities Is responsible / reliable Shows initiative with own workload Able to plan and organise tasks Dresses appropriately Numeracy & Literacy skills Using numbers Writing messages and letters Problem solving Able to overcome problems - find a solution Use own initiative - thinking for yourself Able to ask for help Able to manage own learning

November/December 2011




Professional Confidence Professional Confidence: what is it? Professional Confidence is about having the confidence, belief and ability to do your job effectively. In our personal lives, having confidence is a belief in yourself to be able to do things such as interact with people without any problems, and with professional confidence we can apply this to the work place. However, even if you are a socially-confident person, it doesn’t necessarily mean that you have professional confidence. Professional Confidence is about being able to make decisions independently, being open to new approaches and not staying with what you are familiar with. Can you make good decisions by yourself or do you always have to rely on others? Why is having professional confidence important? Having professional confidence is especially important if you have a job where you are required to make decisions or give advice to people. In a business situation, it is important to present a good image of your organisation and by demonstrating that you have professional confidence you can project a very positive image. Having professional confidence is not just a question of being aware of your own value as

an employee-being aware of and praising the good work of colleagues is also an indicator that you are professionally confident. How can you show you have this competency? If you go for an interview and you need to demonstrate this skill, there are a few dos and don’ts. Do: • Explain how you bring your personal knowledge and skill to your work • Talk about situations at work which have been challenging or unpredictable and your response to them, if the outcome was successful. • Be prepared to state how much credit for positive results is due to your work. Don’t: • Speak badly about colleagues • Attempt to take all the credit for the success of a team, you will appear to be arrogant. If you constantly seek the advice of others and are unable to work independently you may need to work on your professional confidence. Let’s now take a look at what you can do about this. How to improve this skill? When presented with an unfamiliar

task which needs to be done, be prepared to take it on. Don’t be afraid to take risks and if you don’t know something, don’t be afraid to admit it. If you get a question that you cannot answer, simply tell the other person that you cannot give an immediate answer without doing more research. This will gain you more respect. If you try to be over-confident and answer the question without getting your facts right, it may not only make you look incompetent if you are found to be wrong, but you could also end up creating the impression that you are arrogant and untrustworthy. Start relying on your own judgement when making decisions. For example, you decide not to assign someone to a particular task as you feel they are unsuitable for it. If this person is a popular member of the team, you may be faced with some resentment. However, if you are able to treat that person with respect and can explain your reasons, your decision will be respected. Finally, look at fellow colleagues and the work they do. If they are doing a good job, ask yourself if you can learn from them and be prepared to compliment them on their successes. This shows that you can recognise and appreciate when work is completed in a professional manner.

REFERENCE This article first appeared at and is reprinted with the permission of the British Council

November/December 2011



Global Accountant November / December 2011  

Relevant, Reliable and Useful Information

Global Accountant November / December 2011  

Relevant, Reliable and Useful Information