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PQ magazine /

August 2017


WAVE GOODBYE to your calculator, the accountant’s new best friend could be their pet drone! PwC has a drone HQ in Poland and now EY has announced plans to scaleup the use of drones in its audit process. So the days of PQs climbing up ladders for the annual stocktake could be well and truly over. Last year, PwC created a global centre of excellence in Poland, called Drone Powered Solutions. It wants to harness the opportunities drones can offer its clients. PwC’s Michal Mazur said: “Drones are making the transition from novelty item to indispensable business tool.” He estimated that the dronepowered solutions market had an estimated value of $127bn. Meanwhile, EY has just announced a Global Proof of Concept (POC) to expand the use of drones in ‘inventory observations’, as part of its digital audit programme. The Big 4 firm said that in order to enhance audit quality this extensive pilot project will use pioneering industry technology to

improve the accuracy and frequency of its inventory count data collection. The cloud-based asset tracking platform, powered by an Internet of Things (IoT) sensor network, will analyse inventory qualities in real-time by reading Quick Response (QR), barcode and rack labels, feeding this information directly into EY’s audit digital platform, which connects to its 80,000 auditors. The POC will initially be used in both the manufacturing and retail

sectors. Audits for automotive manufacturers, for example, will use the drones to conduct an automated count of vehicles at manufacturing

plants. In retail sector audits to count warehouse stock the drones will work autonomously while using variable image and object recognition tools such as

optical character recognition and barcodes to collect inventory information, especially during off-hours, to minimise audit stakeholder risk and improve efficiency. EY’s digital leader, Hermann Sidhu, said: “We have been testing the use of drones in the audit process for several months and the findings have been compelling. “It’s now time to scale our testing globally across multiple sectors, as we know that many audits can benefit from the use of this innovative technology.” He also felt that the use of drones will allow audit teams to focus on identifying areas of risk, rather than manually capturing stock counts.

Computer says no?

Vodafone is extending its AI recruitment system to include senior managers and executives. Currently, only candidates for call centre and shop-floor roles are being asked to submit to video interviews, answering a standard questionnaire. A computer then looks for suitability based on subtle facial cues and voice intonation. Only those who pass the computer test are put forward for interview by a real human being! About 50,000 applicants have already gone down this route, and Vodafone is so pleased with the results it wants to expand the system.

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News 08CIPFA support Upgrade to institute’s training offering 10Social mobility Grant Thornton ranks top in the UK for social mobility 12CIMA tops Institute is the favoured qualification for recruiting Big 4 firms 13Time to test yourself Check to see if you are exam-ready – go to right now! Features, etc 06Mind your Ps&Qs AAT’s year goes from bad to worse; why we should welcome the robots; and hurray for the humble pizza 14F8/P7 exams Rote learning is simply not an option here 16CIMA case Top tutors talk you through the August Operational case study 17AAT Level 4 exams Tips on choosing your Level 4 options 19IFRS four-page pull-out Our guide to the standards is sure to prove an invaluable resource 23LSBU conference Sign up for a joint LSBU/PQ conference on the future of accountancy 24P3/F3 exams Top advice from CIMA’s Jackie Durham on how to pass these tough papers 26ACCA examiners’ say Part two of our comprehensive round-up of what the examiners think about your efforts

August 2017 28Your career The importance of

building your personal ‘brand’ 30ICAEW spotlight Access arrangements for the exams 32AAT focus AQ2016 one year on; and the exam results 34Careers #1 How to deal with failing at the interview stage 36Careers #2 Life at Triumph; and our social media round-up 38Fun stuff – and our giveaways The columnists Robert Bruce Professor David Flint, an example to us all 8 Prem Sikka Election outcome will put the heat on accountants 10 Zoe Robinson Discover how you are motivated to learn 12 Subscribe to PQ magazine It’s FREE – see page 32 or go to ABC July 2015 – June 2016


Publisher’s statement: We send a digital issue of the magazine to an additional 9,788 requested readers Free to subscribers who fulfil our terms of control Annual subscription: £35 (£50 overseas)

The future belongs to you Our front page headline this month is ‘Drones are coming to an audit near you’. Turn to our top news story on page 8 and you will see CIPFA is launching a new virtual learning environment for its PQs. Accountancy is changing faster than many imagined, and how the bodies cope with these emerging issues in their syllabuses and support is going to be how they are ultimately judged (CIPFA and EY are definitely ahead of the game). It was while we were discussing our ever-changing world with London South Bank University’s top team that we hit upon the idea of an allencompassing conference. It helps that they have a business school dean who is really switched on. So a date has been set for The Future of Accountancy: Success in a changing world, and a full programme is being put together (see page 23). LSBU wanted it to be free and we have places for 250, so please take a look and sign up. There really will be something for everyone, whether you are a student, employer or teacher. This will be the ultimate networking event of the year. And don’t forget to take a look at We are adding new MCQs all the time (mainly AAT for now). They are a great way to see if you are exam ready, and again is a free resource. We are good to you… Something special We have something special for you this month in the middle of the magazine, in the form of our IFRS pull-out guide. A big thanks go to AVADO and the IFRS Foundation. Yes, we are giving you your very own IFRS 1 to 17 revision guide. Our pull-out summarises the main principles of each standard “at a high level and in non-technical language”. We also have the IAS 1 to 41 on file – do you want those to appear in the magazine, too? Let me know what you think. Graham Hambly, PQ magazine editor –

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PQ have your say

email Oh dear, AAT! There is little doubt that the AAT has not had a happy year so far – to say the least. The problems highlighted in your last issue (PQ, July 2017) concentrated on the Level 3 Advanced Diploma Synoptic and the fact that AAT ‘got it wrong’ with MDCL. But I have also heard of problems with Advanced Bookkeeping and the Level 4 synoptic. On top of that came the news that the AAT had ‘to regret to inform me’ that its quality assurance processes had identified an error within the

assessment for the Management Accounting: Budgeting unit at level 4, too. I was informed that the error has now been corrected, but some students who have taken the

assessment since 30 March 2017 may be affected. The results were delayed ‘to ensure all students were treated fairly’, we were told, and that the AAT will review all results released since the end of March. Students who had been deemed not yet competent were then told not to resit, as any increase in marks could change their result. Wow, what has happened at AAT? The introduction of AQ2016 has been a real dog’s dinner, and

we the students seem to be sitting an exam assessment that doesn’t seem fit for purpose. I haven’t read anything about the problems in any official journal (sorry if I’ve missed it). I think it’s time that the AAT came clean and told us where the problems lie. Who is responsible for these errors? Has AAT invested enough in the system to make it work, and how can they instil confidence in what appears to be a failing exam process? Name and address supplied The editor says: It’s certainly not been a vintage year for the AAT, that’s for sure. Of course in the interest of fairness we would welcome a response from AAT.

Our star letter writer wins a fantastic PQ memory stick! Robots are welcome

I was interested to read your article ‘The robots are coming’ in last month’s PQ magazine (July 2017). You quote the report ‘The Future of Accountancy’, saying that 96% of accountants asked said they thought that ‘the robots would be among us by 2022’. I was surprised by that figure – I would have thought it would be 100%!

which seems to be everything – well anything that tastes good, that is. So thanks for the advice. I can’t stop because I’m off to Domino’s for a large Neapolitan! Name and email address supplied.

I need Back of the net

And I’ve got news for the 4% of doubters – the robots are already here. Vast amounts of what a modern-day acountant does is automated (and has been for a good few years now). Personally I welcome this – we’ve been freed up from a lot of the mind-numbing ‘drudge’ work. This leaves us free to do what we do best; namely, offer creative solutions to the real problems

facing businesses, using our skills and acquired expertise (hopefully). We are becoming – many of us – trusted and valued advisers, rather than mere number-crunchers. Here’s the the future! CIMA recently qualified accountant, by email

Hurray for pizza!

I enjoyed your fun page story last time (PQ, July 2017) about how us exam revisers should be tucking into takeaway food to help increase our mental capacity. At last some good news. We’re always being lectured on what’s bad for us –

I loved your football front cover last month, and it got me thinking. Which accountancy body could put together the best football team? Has this ever happened? Jack Langwirth, by email The editor says: There are accountants playing football as we speak. The Manchester Accountants’ Football League has two divisions – Davyhulme Park sit top of the Premier League (KPMG are in First Division). There is a London league, too. ACCA used to run regular six-a-side tournaments, which were very popular – I am not sure why that stopped. And I was once involved in a national tournament, which I seem to recall was won by a team from MCASS.

PQ Magazine Unit 3a, Kingfisher Heights, 2 Bramwell Way, Royal Docks, London E16 2GQ | Phone: 020 7216 6444 | Email: Website: | Editor/publisher: Graham Hambly | Advertising manager: Polly Thrasivoulou Associate editor: Adam Riches | Art editor: Tim Parker | Subscriptions: | Contributors: Robert Bruce, Prem Sikka, Carl Lygo, Tony Kelly, Phil Gammon | Origination and print services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email

Published by PQ Publishing © PQ Publishing 2017

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PQ news

ROBERT BRUCE Here’s to a full life well led

There is something wonderful about long lives. They enable us to see an extraordinary unfurling of change and achievement. And they allow us to set that change in the context of the principles that remain unchanged. One such was Professor David Flint, who died recently at the age of 98. It is hard to take in, but he had only just started his days as a young trainee accountant when, less than a fortnight in, he went off to the war in 1939. Appropriately, he served in the Royal Signals. Even then, as he went through the rest of his long life, he was communicating in the clearest and most efficient way. His life as a revered Scottish accountant covered everything from partner in a leading firm to Professor of Accounting at Glasgow University, and from educator and teacher to President of ICAS. This is why he was so important. In those days, Scots accountants were taught by senior people in the profession. So an entire culture grew up. People learned about the technical side but they were imbued with the ethics and clarity of thought that would not let errant folk get away with anything. And he tied together the two sides of being an accountant, sorting out the numbers and seeking out the truth and sticking to it. Or as he himself put it: “I believe in academic education for accountants, and I believe in the function of accounting as a vital force in society and I believe in auditing – two different subjects but both of them vital to our kind of democracy.” Robert Bruce is an award-winning writer on accountancy for The Times

New virtual learning environment is here

CIPFA’s Education and Training Centre, CETC, is taking its study support to another level with the launch of CIPFA Learning this month. CETC’s new virtual learning Campbell: environment ‘time is will become right for available from more 28 July, with integrated course approach’ enrolments open on 17 July. PQs (and their employers) will in the future be able to choose from three study modes: face-to-

face; web class; and self-study. CIPFA is promising that whatever route you chose you will experience the same familiar, high-quality CETC tuition. The online ‘onestop-shop’ approach looks set to be a winner as CIPFA delivers all learning, from training and learning plans, workbooks, live and on demand web classes, presentations, video clips, discussion forum and web links, to revision and assessment materials.

There is also a clearer, more streamlined pricing structure, offering everyone greater transparency when planning and costing their accountancy training. The self-study package, for example, comes in at just £3,100 for the whole 12 papers. This is going to be hard for any of other accountancy body or tuition provider to match. CETC’s Nicola Campbell said the time is right for a more integrated approach. The new web classes, and live interactive learning fit neatly with CIPFA’s online exam system. Campbell explained that following the launch of online exams in 2016, CETC has been working closely with the CIPFA Student Network, employer and students to ensure it provides the sort of study options to fit current student expectations. She said PQs also needed to know that “learning is easy and simple with CIPFA”.

KPMG settles US hiring discrimination case KPMG in the US has agreed to pay out $420,000 in back pay, interest and benefits to failed Asian applicants for audit jobs, to resolve allegations of hiring discrimination. The agreement follows an investigation by the US Labor Department, which found that from October 2011 to March 2013 the audit firm discriminated against 60

Asian applications for positions at KPMG’s Short Hills office. The agency claims KPMG violated an executive order, which prohibits federal contractors from discriminating in employment based on race, colour or national origin. In addition to back pay, the firm has promised to provide six

positions to the affected applicants as they become available. KPMG must also take steps to ensure its personnel practices, including its record-keeping and internal auditing procedures, meet legal requirements. • Despite making the concessions KPMG does not acknowledge any liability in this case.

MORE PROBLEMS FOR AAT Graphs please! The problems with the Level 3 synoptic and MDCL assessment are now well documented, but it appears there have been more hiccups for AAT with its exams. The association has told students and tutors that its quality assurance processes have found an error with the assessment for the Management Accounting: Budgeting unit at level 4. The AAT has, it says, now sorted the problem, but some students who have taken the assessment since 30 March 2017 may be affected (see our letter’s page). AAT said that due consideration will be given for any student who was impacted by this error and under no circumstances will assessment marks decrease. • See page 32 for all the current AAT pass rates and the wealth of study support currently on offer from AAT.

Graphs are still important, according to the Performance Management examiner in her March Examiner’s Report. Although you won’t be asked to draw graphs, you can and will be asked to interpret them. So do you know your CVP graphs, linear programme graphs and decision trees? The report said that F5 PQs seem to be struggling with the numeric side, and good technique was ‘less evident’ in March papers.

In brief The future of accountancy PQ magazine has joined forces with London South Bank University to provide readers with a chance to look into the future with a joint national accounting one-day conference: The Future of Accountancy: Success in a changing world. Anyone working in accountancy or connected with the sector is invited to join us at LSBU’s Keyworth Centre on 23 November. You can sign up for this free event using Eventbrite by going to 8

How much for a prize? The percentage marks of the ACCA March prizewinners makes interesting reading. The top student in the F5 paper, Rafael Sierra, managed to gain 98% in the Spring test – the top mark for any winner. He is closely followed by F7 sitter Rita Lopatko, who was awarded 97% for her paper. The P7 joint winners took the prize with 79%. UK students dominate the list, but there are also winners from Spain, Italy, Sri Lanka, China, Pakistan, Ireland and Latvia.

Appy days Small traders will soon be able to take card payments from customers using an app on their mobile phone, rather than via a card terminal. Worldpay has launched a pilot scheme to help mircobusinesses with their payment processes. It means that instead of having to purchase cumbersome hardware business owners will just need to download a free app. The downside is that those using the app will only be able to accept payments of up to

£30, the current ceiling for contactless card transactions. Crackdown on crime The government is hoping criminals and terrorists will find it harder to move money through the UK financial system, thanks to new rules which came into force on 26 June. Businesses such as accountants, banks and estate agents now have to carry out stringent and targeted checks to make sure that money changing hands is from a legitimate source. PQ Magazine August 2017


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PQ news

PREM SIKKA Election outcome will increase pressure on accountants The outcome of the 2017 election marks a break from recent economic policies. With the uncertainty of Brexit, many corporations are postponing their investment plans, which in turn will slow economic growth and any recovery in wage levels. So government will have to step up and invest. The Conservative Party has already downgraded the goal of eliminating the public borrowing deficit. Labour’s election manifesto promised expenditure of £48.6bn to stimulate economic growth. New economic policies are likely to sharpen focus on accountants because no government can stimulate the economy without sustained tax revenues. These have been under attack from accountants, especially the big firms. The accountancy bodies have done little to check the tax avoidance trade promoted by their members. Despite critical court judgments, no accountancy firm has been disciplined for selling tax avoidance schemes even when the courts considered them to be unlawful. Governments will be under pressure to get tough on tax avoidance. The current Conservative government is likely to impose statutory fines and prosecutions for accountants involved in tax avoidance. Labour published a 10-page election manifesto on tax avoidance, which in addition to fines and prosecutions will also force large companies to publicly file their tax returns. If in office, it is likely to end the regulatory powers enjoyed by accountancy bodies and transfer them to new independent bodies. Prem Sikka is Emer itus Professor of Accounting at the University of Essex

Grant Thornton top CIMA down for social mobility on numbers

The number-one employer in the UK for social mobility is… Grant Thornton. Well, that’s where Grant Thornton finished in the firstever Social Mobility Index, beating KPMG into second place. Grant Thornton’s CEO, Sacha Romanovitch (pictured) said the firm had started its social mobility journey three years ago. It has removed academic barriers to entry and stopped the emphasis on relevant work experience and extracurricular achievements. This meant nearly one in five of those

who successfully got a place on the firm’s school leaver or graduate programmes in 2016 would have been excluded under the previous academic criteria. Romanvitch stressed: “Investing in social mobility is a win-win and a great example of business doing well by doing good.” The top 10 firms named on the list were Grant Thornton, KPMG, Skanska, Standard Life, Deloitte, JP Morgan, PwC, Berwin Leighton Paisner, Morrison Supermarkets and Enterprise Rent-A-Car.

The CIMA student population shrunk for the second year in a row, according to its latest annual report. Despite this, the institute added 33,604 new students in 2016, the second-highest student recruitment year on record, and 12% higher than 2015. CIMA student numbers were up ‘significantly’ in four markets. In India, 2,504 students signed up, an increase of 245%. In Indonesia 667 joined, an increase of 224% on 2015. Meanwhile, in Sri Lanka 979 new students were ‘acquired’ (up 33%) and in China 304 students opted for CIMA (that’s up 16%). • Read our full review of all the annual reports next month.

What papers should you sit?

A Triumph: Meet the ACCA March P1 Global prizewinner, Katrina Dasantos, who studied with HTFT Partnership. She is pictured here between Jonathan Maddams, (left) from the ACCA and her boss Adam Samples, the CFO of Triumph Motorcycles Ltd. Read all about Katrina in our ‘Life at’ section on page 36.

ACCA students need to be planning their route to qualification now if they want to manage the changeover to the new Strategic Professional exams in September 2018. Tutors were reminded at the Global Learning Providers’ Conference that their PQs need to have passed both P1 and P3 to be exempt from the new Strategic Business Leader exam. There are now just four sittings left to achieve this. ACCA also revealed that it plans to make the SBL case a CBE exam by September 2019. It is working with partner Pearson Vue to ensure this will happen. Students can go online to see the specimen paper and ACCA is providing examples of what good, marginal and weak scripts look like. There is also guidance on how the paper will be marked.

Choice not an option ACCA has said that from September 2018 there will be no choice in the final level optional papers questions. With pass rate percentages already in the low 30s many tutors are worried that the exams could become even harder to pass. ACCA said it believes performances will get better and the move will mean students learn the whole syllabus rather than trying to question spot. One examiner was worried that tutors might currently be pushing

Too bored to work Boredom can affect even the most studious of workers, and worrying statistics from recruitment firm CV-Library reveal that boredom afflicts almost half (49%) of accounting professionals. It means that some 55% are looking for something ‘more interesting’ workwise. Some one in five accountants admitted to feeling bored every day, with another 30% saying they had that feeling on a weekly basis. Just 2% said they never felt bored by their job.

In brief New CGMA store CIMA has launched its new CGMA Store (, giving students and members access to a range of continuing professional development resources through the Association of International Certified Professional Accountants. PQs can choose from a variety of formats, including online courses, video sessions, audio sessions and ebooks to help them develop exactly where they need to, and keep ahead of emerging trends. 10

students to answer certain questions in Section B. Was tax software to blame? The recent global cyber-attack that affected companies around the world may have started via corrupt updates on a piece of accountancy software, according to reports from the BBC. Reporter Jane Wakefield wrote: “Fingers are increasingly pointing to a piece of Ukrainian tax-filing software, MERoc, as the source of the infection.” The software company denies this.

PQ Magazine July 2017

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PQ news

ZOE ROBINSON What motivates us?

After the horrendous news coverage regarding the recent Grenfell Tower fire, one story in particular stood out for me: the story of Ines Alves, who at 16 turned up for a GCSE exam in her pyjamas, hours after she escaped from the blazing building clutching her revision notes. It’s an inspiring story of someone who was able to pick herself up and carry on moving forward. But how did she do it? What motivated her to get up, tired and emotionally drained, to sit an exam? In 2010, Daniel Pink wrote ‘Drive’, a book on human motivation. In it he describes three types of motivation. The first, motivation 1.0, is what you experience when your existence is threatened. The so-called ‘fight or flight’, this was all too evident on the night of 14 June. Motivation 2.0 suggests that people are moved to action by reward and punishment, the ‘carrot and stick’. But it's the last one that is most revealing. Motivation 3.0 states that people act when they are intrinsically motivated to do so. Intrinsic motivation is an internal experience in which one or more of three elements need to present. Firstly, you have to feel in control (autonomy); secondly, believe you can improve your skills (mastery); and, lastly, whatever you’re doing it must have meaning and purpose (purpose) for you. We can never know what motivated Ines Alva that day, but the theory behind motivation is something we all can harness to help move forward. Zoe Robinson is Learning and Programmes Director at Kaplan Financial

Big 4 firms are fond of a CIMA The Big 4 employ more CIMA trainees than ACCA, according to the latest stats compiled by Accountancy magazine. A total of 774 CIMA trainees work across PwC, EY, KPMG and Deloitte, compared with just 361 ACCA trainees. The ICAEW has the largest number of trainees with the Big 4 with 7,734 students, with ICAS coming in second with 2,164

CA students in contracts. Outside the Big 4, CIMA trainees are rare in the top 75 accountancy firms, although BDO was training seven in 2016. Grant Thornton also stands out on the Accountancy list with 81 CIPFA trainees. Moores Stephens with two are the only other firm on the list who are training CIPFA PQs. Another surprise might be the

large number of tax trainees among the top 75 firms. Some 6.9% (1,143) of all trainees are studying the CIOT tax qualification, rather than an a traditional accountancy one. Overall, the study found the ICAEW qualification still dominating the top 75, and it has 65.7% (10,885) of all the trainee posts. ICAS trainees make up 15%, mainly due to EY’s 1,096 trainees. The ACCA comes in third with a total of 1,168 PQs. Lovewell Blake (at number 38) has more ACCA trainees (22) than ICAEW (15). The same is true with Forrester Boyd (number 43), which also has more ACCA than ICAEW trainees.

Cheap wins

3) Take a look at the ‘Five Minutes with the Examining Team’ videos – student who looked at these are 22% more likely to pass. 4) Use approved content – students who used these are 24% more likely to pass. The source of these stats is the September 2016 post-exam student feedback survey, crossreferenced against the exam results.

IASB’s IAS 12 clarification

ACCA has unveiled four ways you can get ‘cheap wins’ when it comes to passing the exams. Here they are: 1) Read the Examiner’s Reports – students who use these are 28% more likely to pass. 2) Read the Specimen exams – students who use these are 27% more likely to pass.

The CEO pay league

ICAEW’s Michael Izza (pictured) is still sitting pretty as the toppaid CEO among the accountancy bodies. He took home a cool £570,000 after a pay rise of £16,000 in 2016. Next up comes ICAS CEO Anton Colella, with a tidy sum of £416,000. This figure includes a bonus of £105,000! CIPFA has, after years of PQ magazine campaigning, finally released Rob Whiteman’s salary. He was paid £259,166 for 2016 and £235,093 in 2015.

FRC Italian probe The FRC has started a formal investigation into PwC’s audit of the financial statements of BT Group plc. The investigation covers the Big 4 firm’s audit of the group from 2015 to 2017 and relates to the scandal in the telecom’s Italian division. Earlier this year, BT was forced to write down the value of its Italian operation by £530m because of 10-years of ‘inappropriate behaviour’. Big 4 rival KPMG replaced PwC as BT’s auditor in June. ‘Unrealistic’ Brexit timetable The UK’s big businesses need at least a year to prepare for new customer arrangements to 12

What is happening at CIMA is less straightforward. We know Charles Tilley was replaced by Andrew Harding during the year. If you take five months of salary and add it up it all comes to £242,000. However, the annual report doesn’t put a name next to the job title. Finally, the AAT’s Mark Farrar was paid £179,000 following a £5,000 pay rise. • See our review of the annual reports in next month’s issue. ACCA releases its annual report later in the year.

prevent EU trade grinding to a halt after Brexit, KPMG has warned. While Brexit secretary David Davies believes there is little need for transitional arrangements, KPMG has stressed that the current timescales look “frankly unrealistic”. KMPG’s Bob Jones said once there is some clarity on the customs arrangements businesses will need a year to design, build and test their systems. Tesco investigation ‘closed’ The FRC has announced the closure of its investigation into the conduct of PwC’s audit of Tesco plc. The executive counsel to the FRC has concluded that there is not a realistic prospect that a Tribunal would make an adverse finding against PwC within the current

The International Accounting Standards Board has issued IFRIC 23 Uncertainty over Income Tax Treatments, to specify how to reflect uncertainty in accounting for incomes taxes. The board explained that it may be unclear how tax law applies to a particular transaction or circumstance, or whether a taxation authority will accept a company’s tax treatment. IAS 12 Income Taxes specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. IFRIC 23 provides requirements that add to the requirements in IAS 12 by specifying how to reflect the effects of uncertainty in accounting for income taxes. The interpretation is effective from 1 January 2019.

scope of the investigation.The investigation into other members of the accountancy bodies is ongoing. Meanwhile, the three former Tesco directors charged with fraud are seeking to have their cases dismissed, arguing that no false accounting took place. UK ‘attractive’ to foreign workers The UK remains an attractive place to live and work, but could face challenges in retaining large number of non-British workers, says Deloitte. Its study found 89% of non-British workers say they find the UK ‘quite attractive’ or ‘highly attractive’ as a work destination. For respondents based outside the UK, the UK ranked as the most desirable place to work, with 57% placing it their top three PQ Magazine August 2017

news PQ

More clarity please! The CIOT has called for greater clarity before HMRC moves ahead with its latest measure to crack down on VAT non-compliance by overseas companies that trade via online marketplaces. HMRC is considering introducing split payment measures, which would means VAT is extracted from the price paid by consumers in real time using card payment technology and then deposited with the revenue. It is hoped this will reduce VAT losses from these overseas

businesses, estimated at between £1bn and £1.5bn. However, CIOT wants to know if the split payment model will be limited to sales of goods situated in the UK by overseas suppliers or whether it will apply to a greater range of online sales. CIOT believes that the split payment rules should apply to overseas sellers first or only, so it is targeted at those with the greatest risk of noncompliance. This will ensure the largely compliant UK businesses will be unaffected.

What not to do in ACCA P7 Why are candidates re-writing the question in their answer paper, asks the ACCA P7 examiner. Another no-no for exam candidates is using vague phrases like “performance analytical procedures”, “check the relevant documentation” and “in accordance with the relevant standard.” These cannot earn you marks in an exam at this level – you must develop the point. She is also concerned with the lack of knowledge shown by some candidates. “An error cannot simultaneously overstate assets and understate profits,” she said. It appears that candidates are continuing to take a linear approach and are not linking auditing to other topics. She again urges candidates to re-learn the basics of auditing.

PQ-Go is about to get bigger – we are adding AAT Level 3 Accounts Preparation and Professional Ethics, along with Level 4 Cash & Treasury Management. PQ-Go offers students a great opportunity to test themselves against our MCQs, to see just how ready they are for their next exam. Our tests are powered by Rogo and written by some of the world’s leading

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tutors, including the legendary Neil Montgomery from Accountancy Learning. One of the new

authors is Sam Hannigan, from award-winning distance learning provider Premier. We also plan to

launch ACCA paper 4 Corporate and Business Law soon, so watch this space. It really is easy to take a look and totally free. Just go to and see what’s on offer. Lots of AAT’s have already taken our MDCL, AVBK, PTAX, and BTAX tests.

ACCA resources to help you ACCA is reminding PQs that its Exam Club Hub will help make revision and exam prep easier. The revamped resource centre provides downloadable self-study pass guides, plus retake and syllabus guides. All the information you need to plan and book your exams is also on hand. The ACCA is also planning live network

sessions for those sitting the September exams. On top of monthly live webinars with ACCA staff, students, members and tuition providers, you can also access the ACCA library of exam support videos and on-demand webinars. The hub will be regularly updated with new content. Another new service is downloadable course brochures from tuition providers.

ACCA tuition led by PQ Magazine’s Public Sector Lecturer of the Year • • • • •

Courses starting September for December 2017 exams All ACCA modules Revision classes in November – included in tuition or available independently F4-F9 & P1-P7 Learn on-campus from experienced professionals

Find more information online or speak to programme leader Nagin Lad directly: PQ Magazine August 2017


PQ audit procedures spotlight

Why rote learning will lead to failure

Paula McGrath outlines the importance of you detailing the appropriate audit procedures in your F8 and P7 answers


common requirement in both the F8 and P7 exams is to suggest appropriate audit procedures to be performed. In both papers the scenario will describe one or more specific issues and audit procedures should focus on these issues. The examiners of both papers often comment that students tend to give a list of rote-learned procedures that do not focus on the issues in the scenario and therefore do not score marks. A comment from the F8 Examiner’s Report (September 2016) said: “...candidates must strive to understand substantive procedures. Learning a generic list of tests will not translate to exam success – procedures must be tailored to the specific requirements of the question.” This comment was repeated again in the December 2016 Examiner’s Report. To score well students must be able to suggest audit procedures that are relevant to the issue or balance being tested. In addition, the procedure must properly describe how the audit evidence is to be obtained and for what purpose. The September 2016 F8 exam paper contained the following scenario: Trade payables The finance director of Spider Spirals Co has informed you that at the year-end the purchase ledger was kept open for one week longer than normal as a large bank 14

transfer and cheque payment run was made on 3 November 20X6. Some purchase invoices were received in this week and were recorded in the 20X6 purchase ledger as well as the payment run made on 3 November. The client’s financial year ended on 31 October 20X6. The requirement asked students to describe substantive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to the matter. In this scenario the issue relates to cut-off of trade payables. Audit procedures should therefore focus on testing the assertion of cut-off. Relevant answers include: • Select a sample of purchase invoices received between the period of 1 and 7 November, ascertain through reviewing goods received notes (GRNs) if the goods were received pre or post year end, if post year end, then confirm that they have been excluded from the ledger or follow through to the correcting journal entry. • Review after date payments; if they relate to the current year then follow through to the purchase ledger or accrual listing to ensure they are recorded in the correct period. • Obtain supplier statements and reconcile these to the purchase ledger balances, and investigate any reconciling items. Procedures in relation to payables in general, or which test other assertions,

are not relevant as they do not focus on the specific issue. Similarly, procedures that focus on testing purchases are not relevant. The scenario is clearly headed ‘Trade payables’ so the examiner requires payables procedures not procedures that test the purchase transaction. Purchases are transactions which occur throughout the year. Payables are balances outstanding at the year-end. Therefore to test the year-end payables balance students must focus on the transactions that have occurred near the year-end for which payment has not yet been made. A similar question was included on the March/June 2016 F8 paper. The first part of the scenario described an extensive refurbishment that a client had carried out to its restaurants. The refurbishment was financed via a share issue at a premium of $1.6 million. The requirement asked for substantive procedures in respect of: (i) Property, plant and equipment (ii) Equity In (i), relevant procedures would focus on testing the additions of new assets and disposal of the old assets. Any procedures that test existing assets are not relevant as these do not form part of the refurbishment. In (ii), relevant procedures would focus on the share issue such as confirming the receipt of cash to the bank statements and recalculating the split between ordinary share capital and share premium to be included in the financial statements. Any procedures which once gain focus on the refurbishment itself are not relevant as these were required in part (i). Summary Audit procedures are a significant part of the audit process as they are used to obtain sufficient appropriate audit evidence required to form a conclusion on the financial statements. They will feature in every audit exam. Audit exams at both levels require application of knowledge to a scenario. It is essential that students are able to suggest procedures which are relevant to the specific circumstances of the scenario rather than giving rote-learned procedures from the text book. PQ • Paula McGrath, F8 and P7 Content Specialist, Kaplan Publishing

PQ Magazine August 2017


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PQ CIMA case study

Make sure you are on

the right track Tutors from Viva Financial Tuition take you on a ride through the August CIMA Operational case study


he August 2017 Operational Case Study introduces us to Premium Trains, a train operating company in the fictional country of Tawland. In this article, we will walk you through the main financial statements given in the pre-seen materials by CIMA. We’ll look at some of the most telling movements over the past year as well as analysing some key financial ratios. Starting with the Statement of Profit or Loss and Other Comprehensive Income for 2017 and we note that while revenues have risen 3% since 2016, operating costs have advanced more rapidly. The fact that operating costs increased by just over 6% in 2017 means that net profit shows a 27% decline in the current year. The different elements that make up operating costs are detailed underneath the income statement and we can see that almost 74% of the total T$13,046,000 increase in operating costs comes from one element, the ambiguously titled “other external charges”. External charges We ascertain from the budget information for 2018 presented later on in the preseen, that other external charges are made up of such items as train leasing costs, train maintenance costs, insurance, marketing expenses and administrative expenses, as well as the cost of goods sold relating to the onboard cafe. 16

It’s a little frustrating that we are not presented with more detail on the individual increases for each of those individual costs but it would not be surprising to see that train maintenance costs are becoming problematic given the fact that the company’s stock of own trains is over 25 years old. One would also imagine that insurance costs for an older stock of trains more prone to breaking down and presenting faults etc would be quite high. We know that management of the on-board cafe’s inventory lacks rigour, with staff simply casting an eye over existing inventory and applying their own subjective judgement in re-ordering inventory when they deem it to be too low. So it’s likely that COGs for this area has been rising recently. Not surprisingly, profitability ratios have declined between 2016 and 2017. It’s difficult to calculate the gross profit margin ([gross profit/revenues] x 100%) as we cannot isolate an overall cost of goods sold figure. We can see that the operating profit margin ([operating profit/revenues] x 100%) has fallen from 10% in 2016 to 7% in 2017. Furthermore, return on capital employed ([profit before interest & tax/capital employed] x 100%) has declined from 56% in 2016 to 40% in 2017. This decline is due to the fact that obviously operating profit has declined but is also because Premium Trains has taken little effort to expand its noncurrent asset base in the past year. This leads us nicely to analysis of the

Statement of Financial Position. It’s obvious from the first line of the Statement of Financial Position that Premium Trains has a fast-depreciating stock of trains. The overall value of property, plant and equipment has declined by just over T$5 million in 2017. We know that Premium Trains owns 15 of the 25 train units it operates and that their own trains have been in use since 1991. We also know from various articles at the end of the pre-seen that customers value modern trains and those companies that have invested in modern train units (e.g. East Trains and Northstar) have reaped the benefits of enhanced custom and market share. Current assets on the other hand, have seen an overall increase of 31% in 2017 with trade receivables and cash accounting for most of this upward movement. Given that payables have fallen by T$580,000 and we have a change in the current ratio (current assets/current liabilities) from 1.8 in 2016 to 2.5 in 2017 signalling a liquid, if financially conservative company. Premium Trains needs to take a little care with its receivables figure. We know that Tawland Rail, the government-run agency that manages Tawland's tracks and stations, often ends up settling amounts due to Premium Trains 60 days after payments have been processed, whereas Premium Trains typically settles amounts due to its own suppliers 30 days after the invoices are issued. The fact that the cash position has more than doubled in the last year again points to a company that is holding back on investments. Limited control In summary, Premium Trains is likely to struggle in generating additional revenues in the short to mid-term due to the fact that it cannot expand beyond the two routes it has the franchise rights to run. Moreover, it has limited control over its pricing, with Tawland Rail approving or rejecting proposed prices. All of this means that in order to improve profits Premium Trains needs to control its costs more effectively. It would also be wise for Premium Trains to either invest in the purchase of newer trains or simply lease more of its trains (we are told in the preseen that its leased trains are much more modern). The company is in danger of falling into a vicious cycle where a lack of investment leads to lower revenues and profits, which in turn means there is less to invest in much-needed non-current assets. PQ • An accredited CIMA Global Learning Partner, VIVA Financial Tuition is a leading provider of CIMA study solutions, specialising in creating highquality, affordable materials for the Case Study exam. For more go to PQ Magazine August 2017

AAT Level 4 PQ

TAX OR NOT? Experienced tutor Aidan Elliss offers some tips on choosing your AAT Level 4 tax options


ongratulations! You’ve made it through to Level 4, and now it’s time to pick your options. Should you do the tax units? Should you do both or just one? Tax isn’t easy, there are a lot of complex rules to understand and learn, but the actual assessments are fairly straightforward. There’s a lot to be said for doing both units, as the same capital gains tax rules are tested in both. In Personal Tax you will study the income tax computation. Here we list the different sources of income, total them, deduct allowances then calculate tax. The calculation of each source of income has its own set of rules. In Personal Tax you will study employment income, property income, savings and dividend income. However, you don’t get to see how income from self-employment for a sole trader or partner is calculated. If you do Business Tax that completes the jigsaw –

calculation of income for a self-employed person is a key part of the syllabus. However, the rest of the income tax computation is not on the Business Tax syllabus, so if you just do this unit you

are only seeing part of the calculation. If you are doing both units it makes sense to do Personal Tax first, as the understanding of the big picture you get here will help you put things in Business Tax into context. So what if you only want to do one? Well, in addition to income tax Personal Tax covers national insurance for an employed person and inheritance tax, and also looks at ethical considerations in lots of detail. Business Tax covers NI for the selfemployed and Corporation Tax, but looks at ethical considerations in less detail. It also covers a lot of administration, for example tax returns, deadlines (when these should be filed) and tax paid (and the penalties that would arise if these deadlines are missed). It also looks into the capital gains tax reliefs that are available for businesses. Under the old syllabus we could confidently say Personal Tax was an easier option than Business Tax – it was a lot shorter! However, under the new syllabus Personal Tax now includes inheritance tax and there’s lots to cover here. On balance, though, Personal Tax is probably still a smaller syllabus. So the choice is yours, depending on your personal interest and what you think will be useful in your career. PQ • Aidan Ellis is an AAT tutor at BPP Professional Education

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IFRS pull-out PQ

Here is your handy ‘pocket guide’ to all the IFRS, brought to you by AVADO and the IFRS Foundation, no less IFRS 1 First-time Adoption of International Financial Reporting Standards IFRS 1 requires an entity that is adopting IFRS Standards for the first time to prepare a complete set of financial statements covering its first IFRS reporting period and the preceding year. The entity uses the same accounting policies throughout all periods presented in its first IFRS financial statements. Those accounting policies must comply with each Standard effective at the end of its first IFRS reporting period. IFRS 1 provides limited exemptions from the requirement to restate prior periods in specified areas in which the cost of complying with them would be likely to exceed the benefits to users of financial statements. IFRS 1 also prohibits retrospective application of IFRS Standards in some areas, particularly when retrospective application would require judgements by management about past conditions after the outcome of a particular transaction is already known. IFRS 1 requires disclosures that explain how the transition from previous GAAP to IFRS Standards affected the entity’s reported financial position, financial performance and cash flows. IFRS 2 Share-based Payment IFRS 2 specifies the financial reporting by an entity when it undertakes a share-based payment transaction, including the issue of share options. It requires an entity to recognise share-based payment transactions in its financial statements, including transactions with employees or other parties to be settled in cash, other assets or equity instruments of the entity. It requires an entity to reflect in its reported profit or loss and financial position the effects of share-based

Your guide to the IFRS payment transactions, including expenses associated with transactions in which share options are granted to employees. IFRS 3 Business Combination IFRS 3 establishes principles and requirements for how an acquirer in a business combination: • recognises and measures in its financial statements the assets and liabilities acquired, and any interest in the acquiree held by other parties; • recognises and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and • determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The core principles in IFRS 3 are that an acquirer measures the cost of the acquisition at the fair value of the consideration paid, allocates that cost to the acquired identifiable assets and liabilities on the basis of their fair values, allocates the rest of the cost to goodwill and recognises any excess of acquired assets and liabilities over the consideration paid (a

‘bargain purchase’) in profit or loss immediately. The acquirer discloses information that enables users to evaluate the nature and financial effects of the acquisition. FRS 4 Insurance Contracts IFRS 4 Insurance Contracts will be superseded by IFRS 17 Insurance Contracts. IFRS 4 specifies some aspects of the financial reporting for insurance contracts by any entity that issues such contracts and has not yet applied IFRS 17. An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. IFRS 4 applies to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds, except for specified contracts covered by other Standards. It does not apply to other assets and liabilities of an insurer, such as financial assets and financial liabilities within the

scope of IFRS 9. Furthermore, it does not address accounting by policyholders. IFRS 4 exempts an insurer temporarily (ie until it adopts IFRS 17) from some requirements of other Standards, including the requirement to consider the Conceptual Framework in selecting accounting policies for insurance contracts. However, IFRS 4: • Prohibits provisions for possible claims under contracts that are not in existence at the end of the reporting period (such as catastrophe and equalisation provisions); • Requires a test for the adequacy of recognised insurance liabilities and an impairment test for reinsurance assets; and • Requires an insurer to keep insurance liabilities in its statement of financial position until they are discharged or cancelled, or they expire, and to present insurance liabilities without offsetting them against related reinsurance assets. A 2016 amendment to IFRS 4 addresses some consequences of applying IFRS 9 before an entity adopts IFRS 17. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 5 requires: • a non-current asset or disposal group to be classified as held for sale if its carrying amount will be recovered principally through a sale transaction instead of through continuing use. • assets held for sale to be measured at the lower of the carrying amount and fair value less costs to sell. • depreciation of an asset to cease when it is held for sale. • separate presentation in the statement of financial position of an asset classified as held for sale and of the assets and liabilities included within a disposal group classified as held for sale. • separate presentation in the statement of comprehensive income of the results of discontinued operations. Continued on page 20

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PQ Magazine August 2017


PQ IFRS pull-out

Your guide to the IFRS

payable) and those that have many financial instruments (for example, a financial institution most of whose assets and liabilities are financial instruments).

financial asset, the entity classifies it on the basis of the entity’s business model for managing the asset and the asset’s contractual cash flow characteristics, as follows: • Amortised cost – a financial asset is measured IFRS 8 Operating Segments at amortised cost if both of the following IFRS 8 requires an entity whose debt or equity conditions are met: Continued from page 19 securities are publicly traded to disclose – the asset is held within a business model IFRS 6 Exploration for and Evaluation of information to enable users of its financial whose objective is to hold assets in order to Mineral Resources statements to evaluate the nature and financial collect contractual cash flows; and IFRS 6 specifies some aspects of the financial effects of the different business activities in – the contractual terms of the financial asset reporting for costs incurred for exploration for which it engages and the different economic give rise on specified dates to cash flows that and evaluation of mineral resources (for environments in which it operates. are solely payments of principal and interest on example, minerals, oil, natural gas and similar It specifies how an entity should report the principal amount outstanding. non-regenerative resources), as well as the costs information about its operating segments in • Fair value through other comprehensive of determination of the income – financial assets are technical feasibility and classified and measured at fair commercial viability of value through other extracting the mineral comprehensive income if they resources. IFRS 6: are held in a business model • permits an entity to develop whose objective is achieved by an accounting policy for both collecting contractual cash exploration and evaluation flows and selling financial assets without specifically assets. considering the requirements of • Fair value through profit or Available to you online, by phone and email paragraphs 11–12 of IAS 8 loss – any financial assets that Accounting Policies, Changes are not held in one of the two in Accounting Estimates and business models mentioned are Errors. Thus, an entity adopting measured at fair value through IFRS 6 may continue to use the profit or loss. accounting policies applied When, and only when, an immediately before adopting entity changes its business IFRS 6. model for managing financial • requires entities recognising assets it must reclassify all exploration and evaluation affected financial assets. assets to perform an Financial liabilities: All financial Paul Kirkwood Cat Hill Caron Betts impairment test on those assets liabilities are measured at when facts and circumstances amortised cost, except for suggest that the carrying financial liabilities at fair value amount of the assets may through profit or loss. Such I never expected such great exceed their recoverable liabilities include derivatives amount. (other than derivatives that are support from an online tutor. • varies the recognition of financial guarantee contracts or Grace Herron, ACCA Student impairment from that in IAS 36 are designated and effective Impairment of Assets but hedging instruments), other measures the impairment in accordance with annual financial statements and in interim liabilities held for trading and liabilities that an that Standard once the impairment is identified. financial reports. It also sets out requirements entity designates to be measured at fair value for related disclosures about products and through profit or loss (see ‘fair value option’ IFRS 7 Financial Instruments: Disclosures services, geographical areas and major below). IFRS 7 requires entities to provide disclosures in customers. After initial recognition, an entity cannot their financial statements that enable users to reclassify any financial liability. evaluate: IFRS 9 Financial Instruments Fair value option: An entity may, at initial • the significance of financial instruments for the IFRS 9 is effective for annual periods beginning recognition, irrevocably designate a financial entity’s financial position and performance. on or after 1 January 2018, with early asset or liability that would otherwise have to be • the nature and extent of risks arising from application permitted. measured at amortised cost or fair value through financial instruments to which the entity is IFRS 9 specifies how an entity should classify other comprehensive income to be measured at exposed during the period and at the end of the and measure financial assets, financial liabilities, fair value through profit or loss if doing so would reporting period, and how the entity manages and some contracts to buy or sell non-financial eliminate or significantly reduce a measurement those risks. The qualitative disclosures describe items. or recognition inconsistency (sometimes referred management’s objectives, policies and IFRS 9 requires an entity to recognise a to as an ‘accounting mismatch’) or otherwise processes for managing those risks. The financial asset or a financial liability in its result in more relevant information. quantitative disclosures provide information statement of financial position when it becomes Impairment: Impairment of financial assets is about the extent to which the entity is exposed party to the contractual provisions of the recognised in stages: to risk, based on information provided internally instrument. At initial recognition, an entity • Stage 1 – as soon as a financial instrument is to the entity’s key management personnel. measures a financial asset or a financial liability originated or purchased, 12-month expected Together, these disclosures provide an overview at its fair value plus or minus, in the case of a credit losses are recognised in profit or loss and of the entity’s use of financial instruments and financial asset or a financial liability not at fair a loss allowance is established. This serves as a the exposures to risks they create. value through profit or loss, transaction costs proxy for the initial expectations of credit losses. IFRS 7 applies to all entities, including entities that are directly attributable to the acquisition or For financial assets, interest revenue is that have few financial instruments (for example, issue of the financial asset or the financial calculated on the gross carrying amount (ie a manufacturer whose only financial instruments liability. without deduction for expected credit losses). are cash, accounts receivable and accounts Financial assets: When it first recognises a • Stage 2 – if the credit risk increases

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PQ Magazine August 2017

IFRS pull-out PQ significantly and is not considered low, full lifetime expected credit losses are recognised in profit or loss. The calculation of interest revenue is the same as for Stage 1. • Stage 3 – if the credit risk of a financial asset increases to the point that it is considered credit-impaired, interest revenue is calculated based on the amortised cost (ie the gross carrying amount less the loss allowance). Financial assets in this stage will generally be assessed individually. Lifetime expected credit losses are recognised on these financial assets. Hedge accounting: The objective of hedge accounting is to represent, in the financial statements, the effect of an entity’s risk management activities that use financial instruments to manage exposures arising from particular risks that could affect profit or loss or other comprehensive income. Hedge accounting is optional. An entity applying hedge accounting designates a hedging relationship between a hedging instrument and a hedged item. For hedging relationships that meet the qualifying criteria in IFRS 9, an entity accounts for the gain or loss on the hedging instrument and the hedged item in accordance with the special hedge accounting provisions of IFRS 9. IFRS 9 identifies three types of hedging relationships and prescribes special accounting provisions for each: • fair value hedge: a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, or a component of any such item, that is attributable to a particular risk and could affect profit or loss. • cash flow hedge: a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a component of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable forecast transaction, and could affect profit or loss. • hedge of a net investment in a foreign operation as defined in IAS 21. When an entity first applies IFRS 9, it may choose to continue to apply the hedge accounting requirements of IAS 39, instead of the requirements in IFRS 9, to all of its hedging relationships. IFRS 10 Consolidated Financial Statements IFRS 10 establishes principles for presenting and preparing consolidated financial statements when an entity controls one or more other entities. IFRS 10: • requires an entity (the parent) that controls one or more other entities (subsidiaries) to present consolidated financial statements; • defines the principle of control, and

establishes control as the basis for consolidation; • sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee; • sets out the accounting requirements for the preparation of consolidated financial statements; and • defines an investment entity and sets out an exception to consolidating particular subsidiaries of an investment entity. Consolidated financial statements are financial statements that present the assets, liabilities, equity, income, expenses and cash flows of a parent and its subsidiaries as those of a single economic entity. IFRS 11 Joint Arrangements IFRS 11 establishes principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (joint arrangements). A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities (ie activities that significantly affect the returns of the arrangement) require the unanimous consent of the parties sharing control. IFRS 11 classifies joint arrangements into two types – joint operations and joint ventures: • in a joint operation, the parties that have joint control of the arrangement (joint operators) have rights to particular assets, and obligations for particular liabilities, relating to the arrangement; and • in a joint venture, the parties that have joint control of the arrangement (joint venturers) have rights to the net assets of the arrangement. IFRS 11 requires a joint operator to recognise and measure its share of the assets and liabilities (and recognise the related revenues and expenses) in accordance with IFRS Standards applicable to the particular assets, liabilities, revenues and expenses. A joint venturer accounts for its interest in the joint venture using the equity method (see IAS 28). IFRS 12 Disclosure of Interests in Other Entities IFRS 12 requires an entity to disclose information that enables users of its financial statements to evaluate: • the nature of, and risks associated with, its interests in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity; and • the effects of those interests on its financial position, financial performance and cash flows.

IFRS 13 Fair Value Measurement IFRS 13 defines fair value, sets out a framework for measuring fair value, and requires disclosures about fair value measurements. It applies when another Standard requires or permits fair value measurements or disclosures about fair value measurements (and measurements based on fair value, such as fair value less costs to sell), except in specified circumstances in which other Standards govern. For example, IFRS 13 does not specify the measurement and disclosure requirements for share-based payment transactions, leases or impairment of assets. Nor does it establish disclosure requirements for fair values related to employee benefits and retirement plans. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). When measuring fair value, an entity uses the assumptions that market participants would use when pricing the asset or the liability under current market conditions, including assumptions about risk. As a result, an entity’s intention to hold an asset or to settle or otherwise fulfil a liability is not relevant when measuring fair value. IFRS 14 Regulatory Deferral Accounts IFRS 14 prescribes special accounting for the effects of rate regulation. Rate regulation is a legal framework for establishing the prices that a public utility or similar entity can charge to customers for regulated goods or services. Rate regulation can create a regulatory deferral account balance. A regulatory deferral account balance is an amount of expense or income that would not be recognised as an asset or liability in accordance with other Standards, but that qualifies to be deferred in accordance with IFRS 14, because the amount is included, or is expected to be included, by a rate regulator in establishing the price(s) that an entity can charge to customers for rate-regulated goods or services. IFRS 14 permits a first-time adopter within its scope to continue to account for regulatory deferral account balances in its IFRS financial statements in accordance with its previous GAAP when it adopts IFRS Standards. However, IFRS 14 introduces limited changes to some previous GAAP accounting practices for regulatory deferral account balances, which are primarily related to the presentation of those balances. IFRS 15 Revenue from Contracts with Customers IFRS 15 is effective for annual reporting periods Continued on page 22

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PQ IFRS pull-out

Your guide to the IFRS Continued from page 21

beginning on or after 1 January 2018, with earlier application permitted. IFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. Applying IFRS 15, an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To recognise revenue under IFRS 15, an entity applies the following five steps: • identify the contract(s) with a customer. • identify the performance obligations in the contract. Performance obligations are promises in a contract to transfer to a customer goods or services that are distinct. • determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. If the consideration promised in a contract includes a variable amount, an entity must estimate the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods or services to a customer. • allocate the transaction price to each performance obligation on the basis of the relative stand-alone selling prices of each distinct good or service promised in the contract. • recognise revenue when a performance obligation is satisfied by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). For a performance obligation satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. IFRS 16 Leases IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019, with earlier application permitted as long as IFRS 15 is also applied. The objective of IFRS 16 is to report information that (a) faithfully represents lease transactions and (b) provides a basis for users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. To meet that objective, a lessee should recognise assets and liabilities arising from a lease. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is 22

A Better Way to ACCA Call our expert advisors now for a free consultation: 020 7173 5685 of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. A lessee measures right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of the right-of-use asset and interest on the lease liability. The depreciation would usually be on a straight-line basis. In the statement of cash flows, a lessee separates the total amount of cash paid into principal (presented within financing activities) and interest (presented within either operating or financing activities) in accordance with IAS 7. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. The initial lease asset equals the lease liability in most cases. The lease asset is the right to use the underlying asset and is presented in the statement of financial position either as part of property, plant and equipment or as its own line item. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17 Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. IFRS 16 replaces IAS 17 effective 1 January 2019, with earlier application permitted. IFRS 16 has the following transition provisions: • existing finance leases: continue to be treated as finance leases. • existing operating leases: option for full or limited retrospective restatement to reflect the requirements of IFRS 16. IFRS 17 Insurance Contracts The following summary is based on a near-final draft of IFRS 17. IFRS 17 was issued in May 2017.

IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2021, with earlier application permitted as long as IFRS 9 and IFRS 15 are also applied. Insurance contracts combine features of both a financial instrument and a service contract. In addition, many insurance contracts generate cash flows with substantial variability over a long period. To provide useful information about these features, IFRS 17: • combines current measurement of the future cash flows with the recognition of profit over the period that services are provided under the contract; • presents insurance service results (including presentation of insurance revenue) separately from insurance finance income or expenses; and • requires an entity to make an accounting policy choice of whether to recognise all insurance finance income or expenses in profit or loss or to recognise some of that income or expenses in other comprehensive income. The key principles in IFRS 17 are that an entity: • identifies as insurance contracts those contracts under which the entity accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder; • separates specified embedded derivatives, distinct investment components and distinct performance obligations from the insurance contracts; • divides the contracts into groups that it will recognise and measure; • recognises and measures groups of insurance contracts at: (i) a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset). (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). • recognises the profit from a group of insurance contracts over the period for which the entity provides insurance cover, and as the entity is released from risk. If a group of contracts is or becomes loss-making, an entity recognises the loss immediately; • presents separately insurance revenue (that excludes the receipt of any investment component), insurance service expenses (that excludes the repayment of any investment components) and insurance finance income or expenses; and • discloses information to enable users of financial statements to assess the effect that contracts within the scope of IFRS 17 have on the financial position, financial performance and cash flows of an entity. IFRS 17 includes an optional simplified measurement approach, or premium allocation approach, for simpler insurance contracts. PQ • PQ magazine would like to thank the IFRS Foundation for the use of its material PQ Magazine August 2017

LSBU Conference PQ

The future of accountancy London South Bank University and PQ join forces to host a one-day conference looking at the future of the profession


hat skills will you need in the future to be a successful accountant? The landscape is ever-changing, so PQ magazine decided to get together with London South Bank University to try to provide some of the answers! Our free one-day conference will have four streams running though the day, where you will be able to mix and match the subjects that interest you. They are Going Digital; Own Your Career: Let’s Get Technical; and Employer Advice. Our going digital room will look at developments in the cloud, big data and Making Tax Digital. Over at the career room we will discuss creating your own brand, how to get headhunted and setting up your own business. The employer room will home in on apprenticeships, the changing skills set, and staff wellbing. We haven’t forgotten the technical stuff, either. In our technical room we are running seminars on topics including crowd funding, intellectual property,

money laundering and leases. So how do you sign up? Well, through Eventbrite of course. Just go to and drill down to the 23 November – the date of the conference. All PQ and NQ readers, and anyone connected with the accountancy sector, are welcome to sign up. The PQ team will of course all be there, too. Keep an eye on future editions of PQ magazine as we unveil some of the experts who will give you their take on what the future will hold. The event will take place at London South Bank University. PQ

For accounting professionals of any seniority working in all sectors. Expect expert speakers from leading accounting bodies and organisations, touching upon topics such as careers, technology in the accounting space, and the impact that digital is having on the industry. Speaker topics and areas: • Digital accounting: sage and big data • Career enhancing: how to get headhunted, skills for today, your personal brand • Employer focus: apprenticeships, skill sets for today, wellbeing of staff

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PQ Magazine August 2017


PQ CIMA exams

How to pass P3 & F3


lease don’t get too excited by the title of this short article! Sadly, I don’t have a magic wand, or a password that will guarantee success. However, I can offer a little advice and guidance, including some tips from successful students. P3 and F3 are challenging exams, but they are do-able as the pass rates show – the P3 pass rate to March 2017 was 79%, with 57% first-time passes; for F3 the figures are 78% overall and 57% first-time passes. Better still, these figures are slightly up on previous months. As with all objective test exams, knowing the syllabus inside out and really understanding and being able to apply models and concepts is essential. However, to give yourself the best chance of success you need good time management, too. I picked up some excellent advice from Monika, a successful F3 student (it’s also relevant for P3, too). Read it before you sit (or re-take P3). Here it is: “Know the book inside out – I only use Kaplan books, the study text and revision kit – nothing else, by self-study. And by inside out I mean inside out. I ended up going through the whole book five times. Chapter by chapter, section by section. By the fifth time I started discovering the little hidden hints such as – ‘note that CAPM will sometimes give you the market premium which is the difference between the expected market return and risk free cost of debt and other times it gives you the expected market return’. “That was a eureka moment, as I couldn’t work out why the calculation sometimes subtracted the cost of debt from the ‘supposed expected market return’ and other times they didn’t… simply by going through the book again and again, without putting pressure on yourself, the theory will automatically start making sense and you will start making links [for example] how raising finance by issuing new debt rather than new equity will increase your EPS as the cost of debt is cheaper than cost of equity.” Another essential tip is to avoid too much question practice early on in your

CIMA’s Jackie Durham has puts together some top advice on how to get through these tricky exams

studies before you have consolidated your learning, as this can give you a false sense of confidence and lead to disappointment in the exam. I’ve covered the ‘perils of practice questions’ in a CIMAconnect blog and a previous article in PQ magazine. Another student, Jana, offers the following very sound advice about thorough preparation and perseverance being the secrets of success, particularly at the higher levels of the CIMA qualification. Here's what Jana says: “I have passed the nightmare paper F3 on my 4th attempt, it took me 10 months to pass this exam!! Soul destroying (86, 98, 89 and 106). This time I did the study differently, working – with just Kaplan and First Intuition. I think the most important factor is developing the deeper knowledge rather than number of questions you do. So just take 1 or 2 providers and stick with their materials. In addition, I ordered aptitude 2 – I have to say it’s very good, the questions are extended and much harder than aptitude 1.” As I said earlier, time management is very important and a number of students have offered suggestions on

Are you ready to go? Are you exam-ready?

CIMAconnect, which I have condensed into the following approach: • Don’t get stuck on long/complex questions and/or those that you can immediately see. Cover topics you are less confident about (I know there shouldn’t be any of those if you’ve covered the syllabus in full but we will always have weaker areas!). • Skip any of the above as there is a ‘review incomplete’ option at the end of the test, which means you don’t waste time but can come back to questions you’ve skipped very easily. • Learn (by practise) how to scan questions to see if they are going to be challenging for you. Read the first part of the question so that you know the topic, then skip to the actual requirement and see what is being asked and note any figures provided. Sometimes you don’t need all the information in the question to answer it if it’s a topic/model you are very familiar with. Alternatively, it may be one you save for later. • Learn (from experience) your strengths and weaknesses, so you need to know where to practise. This may be from practice exams or previous attempts at the actual exam. Have you found that some of the questions you got wrong were ones where you actually knew how to do them but got them wrong under the time pressure? This shows areas where you know the content well enough but where you need to improve your exam technique. • Don’t panic and be constantly looking at the clock, it won’t help. You need to work quickly and methodically, but panicking because you’ve got 10 long questions left and only 10 minutes isn’t going to help your focus. • My personal tip for the ‘select all that apply’ questions is be confident and only select answers that you feel totally confident are right when you first read the question. Any you hesitate over or try to justify are probably wrong. This only works if you do know the subject very well, of course... PQ • Jackie Durham, education and training consultant, CIMA


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PQ ACCA exams

We have real insight from the actual F5, F8, P5 and P7 examiners from day one of the ACCA Global Learning Providers’ Conference. Our editor reports directly from the conference F5 Performance Management Exam structure Section A – 15 objective test questions (OT) worth two marks each. There was a debate over different marks of three and one, but it was finally agreed on two marks per OT. Section B – Three OT case questions of 10 marks comprising of five x two mark OT questions. Section C – Two questions worth 20 marks each (expert marked). Section A The examiner stressed that students can’t hide from any of this ‘large’ syllabus. She explained that the paper exam will all be MCQs. The CBE will use MCQs, but also a mix of other question types: for example, point and click, multiple correct option, fill in the blank, matching and pull-down lists. Section B Each OT case will cover a topic from one main area of the syllabus, although it may bring in small parts from another area of the syllabus too. That said, the examiner emphasised that individual questions within the OT case will be independent. Section C This is the only expertly marked part of the exam. The questions will come from syllabus areas B, C or D. There will be no more than one from each syllabus area. Answering section C questions in the CBE will require using basic spreadsheet skills. Candidates will have to copy, paste and be able to perform simple formatting. There will also be simple formulae with multiply and divide needed. The examiner stressed here that although markers can see the formulae behind the cells answers still need to be clear. She felt the CBEs encourage neater layout to answers, and said candidates can expect that some narrative might be required – namely, a conclusion at the end of the calculations. When it comes to using word processing in the CBE for this section students were told they can use headings from their plan, and some of


THE EXAMIN their bullet points, as the structure of their answer. So far marking has shown that students’ answers for CBE questions on the word processing tool are better than on paper. The examiner believes this is because students tend to be more succinct. There also seems to be less of a problem with students not answering the question set. The examiner reminded PQs that answers to performance management questions need to be more than just ‘this target has been met’ – I need to know why, she said. “Ask yourself why you have calculated that ratio!” Students continue to perform poorly at the variance analysis questions. The examiner understands there were several different approaches and said her markers gave credit to the two main ways it can be done. F5 in the future The examiner revealed that students will be expected to analyse information using spreadsheets. Candidates will need to show their understanding and give constructive advice. Finally, she stressed the exam was reflective of the real world in which systems calculate a lot of the numbers and the accountant acts in more an advisory capacity. Going forward, students will not be asked to draw graphs. They might, however, be asked to solve one, or read from a graph. During the Q&A session with tutors the examiner said students should not underestimate the rigours of the CBE. P5 Advanced Performance Management The examiner stressed that knowledge of his syllabus will usually only score about 30% of marks. “Brain dumps don’t work either,” he said. When it comes to application, students are expected to answer in the context of the scenario. And, the examiner said that ‘evaluate’ at P5 means more than ‘calculate’. He wants PQs to use a logical approach. You can’t expect to pass on defining technical terms though. You are also expected to be critical – just becuase it has appeared in the answer to another question it doesn’t mean it’s right! The examiner felt that students generally do well with EVA, quality systems (especially JIT), and models from section E of the syllabus – like

the balanced scorecard. However, too many PQs confuse terms; they learn the jargon but don’t know what it means. So they know the words when it comes to the balanced scorecard, but he wants them to apply it and that’s when the issues come. “The number of P5 students who don’t know the definition for the return on capital employed is jaw dropping,” he suggested. The examiner warned sitters it will come up again! Other areas where students need to do more work are ABC and overhead cost allocation systems, responsibility centres and transfer pricing. The examiner said students must not question spot, either: “I deliberately try not to have patterns in paper, but there are core areas.” Changes for 2018 New exam structure – section A one x 50-mark case study. Section B two x 25-mark questions. New exam guidance – section A, syllabus areas A, C, D. Section B, one question from E, one question from any area of the syllabus. B will

PQ Magazine August 2017

ACCA exams PQ

NERS’ WORKSHOPS however, depending on the subject area. The real worry is the lack of syllabus knowledge seen in many scripts. As a general rule there will be two knowledge and three application OTs. The examiner admitted that some of the OTs are challenging, so PQs must spend time practising these types of questions. Students perform better on ethics and corporate governance. But audit evidence and reporting results questions are ‘more disappointing’. The problem is students seem to learn the list but don’t know how to apply them. The examiner stressed that PQs should not rush their answers. She also wants you to be up-to-date with the IASs.

pop from time to time, too! The examiner is hoping the introduction of the SBL exam will help push up P5 pass rates. He felt that students would be better served to sit SBL before they attempt P5. F8 Exam structure Section A – three objective test (OT) case scenarios, each 5 x 2 mark OTs. Section B – one x 30 marks and two x 20-mark questions. This section will mainly feature syllabus areas B, C and D. Sections A & E will appear though, said the examiner. Pass rates March 2017 – 38%; December 2016 – 40%; September 2016 – 44%. These are for both the CBE and PBE exams. Some 70% of the exam is expert marked. Section A The examiner explained that most students are attempting all the OTs. Performance is variable,

PQ Magazine August 2017

Section B Ethics is a popular area with students. Although many can pick out the facts from the scenario, the examiner feels candidates don’t seem to be able to flag up the threats. Audit risk & responses is a core area and PQs need to be practising this one extensively. A key here is to remember the examiner wants the auditor’s response, not the management’s response. Internal controls can also be an area where students struggle, particularly when it comes to coming up with objectives. It seems students can name deficiencies but aren’t good with the strengths. Applied substantive procedures has been around in F8 since 2012. The examiner revealed that there have been complaints from markers about the amount of spelling mistakes in CBE scripts, but at least they can read them. She also admitted that the March paper results did seem poorer at 38%, but was hoping this was just a glitch. Her worry is that with four sittings a year students are rushing to sit the next sitting without doing enough work or understanding where they went wrong the previous time. P7 ADVANCED AUDIT & ASSURANCE Pass rates March 2017 – 32%; December 2016 – 31%; September 2016 – 32%; June 2016 – 32%; March 2016 – 30%. What is interesting here is that the December 2015 pass rate was a ‘relatively healthy’ 39%. However, this was proceeded with a September 2015 pass rate of 29%.

Underlying factors for poor performance The examiner felt students sitting P7 had a lack of technical knowledge – in both audit and financial reporting. She said some candidates don’t seem to know the IASs even existed. There is also little application to the question scenario and very little evidence that past questions have been attempted. The examiner stressed that the syllabus has clear examinable documents, yet candidates come into the exam hall without knowing the basic requirements of audit reporting. Their financial reporting is also not as good as it used to be. She said P7 was ‘predictable’ – you can expect questions on audit planning, audit reporting, ethics and quality control. But still students don’t seem to understand these areas. When it comes to the optional questions, the examiner is worried that tutors are pushing students to certain questions. If students practise a range of questions they will have a much wider choice in the exams. There is good news, too. Students are performing better in questions about ethical threats, client/engagement acceptance, audit quality and business risk. Example requirement and typical response From September/December 2016 the published sample exam was: Recommend the principal audit procedures to be performed on the classification of the 50% equity shareholding in WTC as a joint venture. Typical weak answers: • Are too vague, eg discuss with management/obtain written representation. • Are not relevant audit procedures, eg recalculate. • Are not answering the requirement, eg talk about accounting treatment, not the audit procedures. September 2018 changes Section A – 50-mark case study set in planning stage. The examiner said that this question will not be too dissimilar from the current Q1 – just bigger and for more marks! Section B – two x 25-mark questions. Use the specimen paper to help understand the style in the new exam format. So, the big change is no optional questions. PQ


PQ your career

Step up for career success P

otential job candidates often assume that upon qualifying as an accountant they will automatically secure a job when applying for a role. What they don’t realise is employers are looking for a lot more than someone who is ‘good with the numbers’. Navigating a successful career in finance and accountancy involves implementing certain steps and accepting some realities of the new world of work. ACCA’s report Professional accountants – the future: Generation Next presents us with many of these new realities – from the rise of technology in the workplace, to globalisation, to the fact there is no more ‘employment for life’. Almost 19,000 ACCA students and members under the age of 36 and from 150 countries participated in this study, making it one of the largest surveys ever across the global profession. Managing your own career ACCA’s research shows that owning your career, which means thinking about your career plans, will be crucial to whether you succeed in the future. Successful professionals manage their careers with a blueprint, carefully plotting out the experiences they need. As the employer/employee relationship continues to evolve, and with job tenure decreasing, the future will mean taking responsibility of your career and seeking out professional challenges which will allow you to develop. So thinking about the skills you need for the future is an important part of developing a career plan. Future proofing your skills will be crucial in an age of collaboration in the profession, between smart people and smart tools.


The future means that on-going relevancy will be required as careers become more fluid. It will be up to you to ensure the skills you hold are not only of the highest standards, but are current and relevant to your employer’s needs.

Building your personal brand One thing to do now is to start creating and maintaining your personal brand. Social media is a powerful tool to showcase your personal brand through a strong online profile that includes endorsements from colleagues and clients where possible. Being able to demonstrate a positive professional footprint through platforms such as Twitter and LinkedIn goes a long way to making you stand apart from other candidates. Considering lateral moves It’s important to be realistic about what future employers will be able to offer you in terms of career progression. We know that it takes time to build up the requisite skills for those in finance and accountancy careers. It can be beneficial to work ‘within the system’ and see the employer’s perspective in charting out your career journey – this is of course if you want to stick with your current employer. Be open to exploring a move into roles without a salary increase or promotion. These lateral moves can help you build additional technical competencies and knowledge, as well as developing softer talents and behaviours such as leadership, communication, influencing skills, change management and collaboration skills. As organisations often provide opportunities for professionals to

Anita Brook offers some sage advice on how you can make progress in your career

undertake innovative or creative activities, becoming ‘intrapreneurial’ – which means benefiting from the resources, capabilities and security offered by your employer – is a key learning opportunity. Being an intrapreneur will allow you to learn from possible failures without the personal risks of entrepreneurship. Where possible, gaining global experience will give you a more diverse view as an employee and will look attractive on your CV. A great way to obtain a more diverse outlook is to work in global teams and to seek international experience.

Mentors and networks Other key considerations involve looking for mentors and sponsors from both within and outside the organisation. Having a strong network can significantly help with your own personal brand building. It’s widely regarded that the strength of an individual’s personal network can have a significant bearing on career success particularly in a world where next career moves may be less obvious and following less linear paths. Being able to talk to clients, always remaining personable and your ability to demonstrate how you will add value from the word ‘Go’ as a new employee will determine whether you get and maintain your dream job in the future. My advice is to be proactive in managing your own future career trajectory. Plan ahead, think ahead and be aspirational. Build you network, and your personal brand. Future proof your skills so that you will be among the career elites and remain in demand as an accountancy professional. PQ • Anita Brook is an ACCA qualified accountant and entrepreneur PQ Magazine August 2017


Pass first time with "Tutors are always available. Even at 10pm on a Sunday night!" Sonam, CIMA student

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Hi Ginny, quick question - what is the difference between CSR Strategy and Strategic CSR? 21:09

The strategy is how the organisation is going to implement CSR, strategic CSR is the big picture rationale for carrying out CSR. Hope that 21:11 helps :)

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Discover everything you need to know about access arrangements and special consideration for the exams


o you feel your exam performance may be hindered due to a health condition, disability or specific learning difficulty (SpLD)? ICAEW may be able to put access arrangements in place to support you during an exam. You can also apply for access arrangements if you are suffering from a shortterm condition not covered by the Equality Act. Once ICAEW has received your application, it will be reviewed and you will be notified of ICAEW’s decision in 10 working days. ICAEW will do everything reasonable to support you. This may involve adjustments, such as awarding you extra time, rest breaks, a reader, scribe or changes to the exam format. Just so long as you can provide suitable evidence. How to apply for access arrangements Please make sure your completed application is submitted by email to no later than the exam booking deadline, including any supporting evidence that will help ICAEW consider your application. Please ensure that you read the guidance notes in full, available at prior to sending your application. What happens if access arrangements cannot be awarded? If appropriate access arrangements cannot be awarded in time for the exam you should consider carefully whether to defer your exam to the following exam session. ICAEW recommends that you read through the guidance documents online to ensure you understand the requirements and you can be rest assured your application will be looked at without delay.

possible after the exam; all applications must be received within two weeks from the date of the exam. If you are unsure about an application please refer to the special consideration guidance available at

You can find these documents at Alternatively, you can email with any questions you may have regarding your circumstances or the application. Special consideration Students who feel that their performance in the exam has been adversely affected by illness or other circumstances may apply to have these factors taken into consideration during the results determination process. It is solely your responsibility to fully read and understand the special consideration process before you sit an exam. You can find out more about this process by visiting How to apply for special consideration Any applications for special consideration should be submitted to as soon as

Access arrangements and computer-based exams We have been working with our computer-based exams software and exam centre providers to ensure that our access arrangements evolve, as more of the ACA Professional Level exams move to computer. If you have already applied and have been awarded access arrangements for a Professional Level exam we will contact you to confirm your access arrangements for these exams before they move to computer. If you have access arrangements already in place that are not due to expire you do not need to reapply when you book an exam. If you feel you may need access arrangements for an exam moving to computer, or you haven’t taken an exam in two years, please get in touch, email ICAEW at Exam booking deadlines ICAEW recommends that you make a note of all key dates and deadlines when applying for your ACA Professional or Advanced Level exams. Any late exam applications are unlikely to be accepted. Any requests received within the week after the closing date, that can be accommodated, will incur additional fees. Please remember to apply for and book your exams early. Download all the key dates you need at PQ

THE TROUBLESHOOTER IS GUNNING FOR... STRATEGY PQ magazine’s troubleshooter Philip Dunn explains the best way to tackle question on business strategy THE TROUBLESHOOTER has recently reviewed the Learning Outcomes embedded in the Assistant Accountant Apprenticeship at Level 3. Under the section headed Knowledge and Business Awareness Learning Outcome (2) it says: “Describe and understand the business strategy that meets the needs of stakeholders.” Question: Apprentices at this level will soon be asking: “What is strategy and who are the stakeholders?” Answer: In this short response I will focus on strategy, its link with strategic planning; and will deal with stakeholders in a later Troubleshooter. Firstly, we need to consider the following definitions: Strategy is defined as ‘a course of action including the specification of resources required to achieve a specific objective’ (CIMA Terminology). For example, the NHS in its overall strategy has an objective of reducing waiting times in A&E and specifies the resources required to achieve this specific objective. Strategic Planning is the ‘formulation, evaluation and selection of strategies for the purpose of preparing a long-term plan of action to attain objectives’ (CIMA Terminology). 30

Thus strategic planning focuses on the longer-term, covering a period of more than one year – it enables time scales of three years, five years or more to be considered. Peter F Drucker once identified the decisions an organisation must make when it is formulating strategies that form the basis of a longer-term plan: • Identify its opportunities and decide which risks it is willing to accept. • Choose the right balance between specialisation and diversification. • Achieve growth organically (from within the existing business) or by acquisition – financial strategy. • Decide on an appropriate organisational structure to achieve the objectives. Thus strategy and strategic planning generates plans that can be used as benchmarks against which performance can be measured (incorporating on an on-going basis budgets and budgetary control). Strategy identifies areas of responsibility and authority for each management activity and forms the core of Responsibility Accounting (the establishment of Expense, Profit and Investment Centres). It also generates ideas and creates a culture of creative thinking which in turn may create further business opportunities. PQ • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books PQ Magazine August 2017

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90.9% 78.4% 90.5% 61.0% 76.5% 65.0% 80.3% 74.1% 68.0% 51.8% 67.3%


For general information, of the total number of assessments sat in the period (September – December 2016), only 12% were for AQ2016 qualifications and, for the most part, these were sat by students at less than 50% of all approved training providers. The data available in September 2017 will provide a broader picture of the success rates.

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ack in September 2016, we replaced seven of our accounting and bookkeeping qualifications with a new qualifications suite, AQ2016. This introduced grading to our qualifications – of pass, merit and distinction – along with assessment percentage pass marks and synoptic tests. The changes that we have made for AQ2016 were in direct response to recommendations made by our students, who told us that they were interested in gaining greater feedback about their exam results and the areas in which they may need to improve. One of the fundamental changes affecting the delivery of AQ2016, compared with AQ21013, is the requirement to apply knowledge across units through synoptic assessments, which use scenarios to draw on and assess learned concepts and practices. These assessments reflect the importance for accountants to be able to write effectively and coherently, as well as deal with technical elements.

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PQ Magazine August 2017

AAT results PQ

AAT RESULTS Level 2 Introduction to Payroll Systems is still the toughest AQ2013 paper to pass, although there has been a jump in the success rate to 48.1%. It was 45.2% last time around, and 43.4% the time before that, so the pass rate is moving in the right direction. The latest figures cover the whole Suzie Webb: ‘new lucky dip Green light option introduced’

succeed, we provide students and tutors with supplementary resources and content to support them through the teaching and learning process. Study support includes e-learning, key calculations, real-life scenarios, and Green Light tests. These resources are designed to enhance students' understanding of key subjects through interactive tutorials, examples, questions, and scenarios. Our popular Green Light tests help students judge how well they understand subjects and identify where they may need to put in some more work. Green light tests also include a summary dashboard so students can review their results from across a number of tests. We have also introduced a new ‘lucky dip’ Green light option, providing a set of questions from across the qualification being studied. It’s important to remember that these are tools designed to provide additional support to learners, and that can be used by tutors in the classroom. They are not designed to determine if a student is ready to sit an assessment – only the tutor can do that! We are introducing additional e-learning to support an increased emphasis on writing skills. This includes guidance on writing a good analysis, explanation, or justification and communicating effectively with different stakeholders. During May, our AQ2016 e-learning support materials were visited in excess of 60,000 times. Support for our new Access qualifications is also in production, to be available in time for launch in 2018. Our popular AAT Comment blogsite also generates a huge amount of content for students, including writing tips and study techniques, while our various social media channels provide useful pieces of information often created by our own students. Various discussion forums, including on our Facebook group, see students and tutors helping to problem solve issues that others may be facing. Students can access study support via their MyAAT portal, with our weekly Summing Up emails covering all the latest updates about individual assessments. Time is running out to finish AQ2013 A brief footnote – if you haven’t switched to AQ2016 to continue your current level, then time is running out for you to either transfer or complete. For our students still studying the AQ2013 syllabus, you have until 31 December 2017 to finish the level you are currently on. PQ • Suzie Webb, Director of Education and Development, AAT PQ Magazine August 2017

of 2016 and show international students helped push up the Level 4 Personal Tax pass rates to 54.1%. In the UK, the actual pass rate dropped to 53.6%, but international success rates for the assessment rose to an impressive 80.7%. Perhaps UK tutors should find out what is behind the increase in overseas pass rates!

AQ2013 & SHORT QUALIFICATIONS CBA SUCCESS RATES – YEAR ENDING 31 DECEMBER 2016 Level/Assessment name L1 Access L1 Bookkeeping and Accounts L1 Computerised accounts L1 Computerised Payroll Administration L1 Spreadsheets software L2 Applied Business Communications & Personal Skills L2 Accounting skills to run your business L2 Basic costing L2 Control accounts, journals and the banking system L2 Computerised accounting L2 Computerised Payroll Skills L2 Developing Study Skills L2 Introduction to Payroll Systems L2 Processing bookkeeping trans L2 Spreadsheet Software L2 Work effectively in accounting and finance L3 Accounts preparation L3 Computerised accounting L3 Costs and revenues L3 Prepare final accounts for sole traders and partnerships L3 Indirect tax L3 Professional ethics L3 Spreadsheet software L4 Budgeting L4 Business tax L4 Credit control L4 Cash management L4 External auditing L4 Financial performance L4 Financial statements L4 Internal controls and accounting systems L4 Personal tax


UK 93.7% 85.0% 94.1%

Int'l 94.0% 100%* n/a

World 93.7% 85.0% 94.1%


70.3% 95.3%

100% n/a

70.3% 95.3%






57.3% 94.7%

n/a 88.1%

57.3% 94.3%


86.9% 94.5% 78.9% 88.2% 48.1% 90.3% 83.3%

76.7% 76.9% n/a n/a n/a 78.2% n/a

86.5% 93.6% 78.9% 88.2% 48.1% 89.7% 83.3%


93.4% 59.5% 93.8% 82.5%

74.1% 44.1% 100% 59.7%

92.2% 57.8% 93.9% 80.2%


82.9% 77.1% 71.9% 90.2% 71.7% 54.1% 78.8% 58.5% 87.2% 61.7% 68.7%

64.9% 55.9% 55.9% 69.2% 47.5% 62.3% 51.3% 19.8% 53.3% 41.0% 44.7%

81.3% 69.9% 69.9% 88.2% 68.7% 54.8% 76.1% 55.1% 71.0% 59.6% 66.2%


90.9% 53.6%

84.9% 80.7%

90.0% 54.1%

* Less than 100 assessments (ASYB = 57, COAG = 42, PTAX (Int'l) = 24**) CBA success rate

Level 1 92.2%

Level 2 90.3%

Level 3 74.2%

Level 4 65.0%

The success rates include assessments from AQ2016. However, the timescales and number of assessments taken affects the reliability of the AQ2016 data available. As these are drawn from only 16 weeks of performance, AAT has published success rates only for assessments with more than 500 results. This first set of results for AQ2016 should be viewed with caution, given the limited data available. 33

PQ careers

Dealing with interview failure F

or every job a company recruits for, inevitably someone with a great CV, fantastic ideas, desirable skills and amazing personal qualities will be rejected. Does that make you feel any better? Probably not. Along with the excitement of looking for a new job, progressing your career and finding a company that you want to work for, is the possibility that you’ll get rejected at the interview for a job you really want. Picking yourself up again, dusting yourself off and getting back out there after interview rejection is tough. However, it’s got to be done if you want to find a new job and achieve all those associated goals. So here is my advice for dealing with interview rejection. I’ll try to avoid the clichés like ‘it probably wasn’t meant to be’, although there is often wisdom in these rather trite sayings. Instead, here’s an action plan of what to do after an interview rejection so you can take control of your job search again.

Greg Thorpe explains how you can put a dissappointing job interview behind you

Revisit the job There are many reasons you may have been rejected, not necessarily because of anything you said or did during the interview. It may actually be because the job or company wasn’t a good fit for you, and this became apparent while the interviewer was questioning you. Have another look at the job description, company info and also your CV. Could you be more selective in the roles you apply for to get a better fit? Is your CV misleading in any way, resulting in invitations to interviews for roles you’re not really right for? Address the issues If the employer flags up something specific in their feedback, or if you have a good idea of what ‘went wrong’, you’ve got something to work with. You may benefit from some interview practise with your recruiter or a coach, or perhaps you need to address a lack of qualifications or knowledge by getting some training.

Give yourself a break First off, take a little bit of time out after a job rejection before you react to it. I don’t mean take a holiday or don’t go to the interview you’ve got lined up later that week. But just sleep on it, try not to dwell on it, and give yourself some breathing space before you do anything. This should take the edge off the disappointment or hurt and allow you to access the situation with a little less emotion. Ask for feedback If you’re working with a recruitment agency speak to your consultant and ask them if they’ve had any feedback or can request feedback from the employer. If you’re in direct contact with the employer ask them whether they can take the time to talk to you. The best way to do this is with a follow-up email, thanking them for the interview opportunity and stating that you would welcome feedback – both positive and negative. Stress that you want to learn, not that you want to interrogate them, and that you want feedback for self-development.

managed to get some feedback, how does this reflect on the interview? Did the employer highlight anything that you can improve on?

Review the interview Think back over the interview and how you thought you performed. Were there any instances where it didn’t feel like it was going your way that you could work on for future interviews? If you’ve

Move on Having gleaned what you can from your experience, it’s time to move on. Often the reason for interview rejection is because of a gut feeling, personal preference (they liked the other candidate more) or an unconscious bias (the other candidate went to the same university, or also likes sailing, etc.). There’s not much you can do in these circumstances unless you can prove discrimination and that’s not a great way to get a new job. Seize the positives, learn from your mistakes (sorry cliché alert!) and get back out there looking for the next opportunity. If you would like to discuss your job search with a specialist recruiter, get in touch with our team. Call 01252 718777 or email PQ • Greg Thorpe is MD at Howett-Thorpe Recruitment

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PQ Magazine August 2017


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PQ careers

social media ROUND-UP The ACCA June exam results were due out on Monday 17 July, so didn’t make this issue. They will, of course, go online at just as soon as we get them. One of our favourite tweets this month came from John Peden, just after his exams had finished. He said: “Two pints after another set of ACCA exams isn’t really enough. What the fuck made me choose to pursue accountancy as a career?” We also picked up on the HTFT Partnership newsletter, which reminded ACCA PQs that the new ethics module comes into effect on 31 October. We wondered if it was “time to get it done and save yourself £60”. Alex Norian told us on Facebook: “Just completed mine – and the answer is most definitely yes.” Facebook now has two billion people using its apps and services every month. Founder Mark Zuckerberg explained the company has doubled its user base in just under five years, having passed the billion monthly users in October 2012. Talking of Facebook, there is a new group on the block – the CIMA UK Student Group. Some PQs were a little puzzled about the claim that “this is the official group is for CIMA students in the UK” (sic). The administrators are Louiza and Ayan, and the logos they use are CIMA’s. There was an initial suspicion from some PQs about that sentence, as the extra ‘is’ meant it didn’t make sense (that’s been changed now). Another trainee felt the admin were hiding behind false names (those could be their real names!). You asked us to get on the case: “Perhaps our resident investigative journalist could… investigate? Potential scoop here Graham Hambly”. And we have. You were, of course right, this is not an official CIMA group, according to the CIMA social media team. The group is, however, growing quickly and had nearly 440 members when we last looked. CIMA’s social media team will be in touch… A tweet that also got you going was: “Apple Retail UK paid less tax last year – just £8m. Revenues for the year rose by 2% to £1.024bn, but operating profits fell to £19.2m…” As Matt replied: “Apple Retail UK converted over £1bn into only £19m profit… 0.02% profit margin. Sounds perfectly reasonable…” 36

Life at Triumph Motorcycles Katrina Dasantos, 25, is a Group Treasury Accountant based in Leicestershire. She has worked there for two years. An ACCA studier, she has a degree in Accounting and Finance from DeMontfort University What time does your alarm clock go off on a working day? Between 6:15 and 7am. What’s the first thing you do when you get to your desk? Text my husband so he knows I’ve arrived safe. What’s on your desk? Lots of folders and paperwork. And usually a cup of coffee to keep me going. What’s the best thing about where you work? Half-day Friday! And the people I work with. Where’s your favourite place to go for lunch? Frankie and Benny’s. What (or who) can you see when you sit at your desk? My lovely colleagues and more importantly the food table. Which websites are your

favourites and why? ACCA Global for the articles, exam information and module guides/study material. HTFT Partnership’s website while I’m studying for all the material, and their Online Learning Community, where I can get support from their tutors and others studiers. And Martin’s Money Tips – we are currently saving for a house so all the tips are very useful. Which websites do you use for work? FT, banking and currency websites. How many hours a week do you spend in meetings? About two, depending on the week. What time do you leave the office? Around 5pm. How do you relax? At home,

with a good film, a nice dinner and my husband. What’s your favourite tipple? Archers. How often do you take work home with you? Rarely. What is your favourite TV show? Once Upon A Time. Summer or winter? Definitely summer! Pub or club? Pub. Who is your hero? My husband, for putting up with me during my degree and my exam stress. If you had a time machine, where would you go? Nowhere, I’m happy right now. If you hadn’t chosen accountancy, where might you be right now? Maybe studying psychology, or working with animals.

In brief Emails? What emails? What is the secret of Sir James Dyson’s success? He says it is down to the fact that he gets only six emails a day! It started 30 years ago, when he banned staff from writing memos. Instead, he encouraged them to talk to each other! New Dyson staff are still given old-fashioned exercise books and staff are urged to use them in meetings instead of laptops. He also believes the rise of the AI will mean we will eventually be able to leave it to the bots to answer our emails for us. Dyson is the 14th richest man in the UK, with accumulated wealth of £7.8bn,

according to The Times’ latest Rich List.

never leave the building because of the free food on offer.

Going out to lunch Bloomberg, the financial media giant, has bucked the trend and told staff it won’t be offering cafeteria facilities in its new £1bn HQ. Founder Michael Bloomberg (pictured) said he wants staff to get away from their desk, go outside for lunch and enjoy the local economy. He says he wants to avoid the ‘Google syndrome’, where staff seem to

Time to speak the truth Highly qualified staff are up to three times more likely to get the job if they are honest about their shortcomings, say researchers. It appears those who serve up a fantasy of perfection are just kidding themselves and not the interviewer. Employers like a little frankness about occasional lateness and the inability to use certain software as it makes the candidate more authentic and real.

The PQ Book Club: books you should read The Daily Telegraph Tax Guide 2017 by David Genders (£14.99) Author David Genders has been writing this tome annually since 1982 and it contains everything you need to know – from completing a self-assessment tax return for 2016/17 to how to be more tax efficient. Although written for the taxpayer rather than the accountant it is a perfect place for PQs to start if they want an invaluable guide to how tax actually works in the UK. We really loved the practical advice, along with the examples that

make the complex and challenging world of tax returns easier to understand. Also included is the 2016 Autumn Statement and what happened in the March 2017 Budget. Genders starts his book with a nice outline of what HMRC does and then moves onto tax rates and allowances (our favourite bit). Tax credits has its own chapter, as does interest payments and other outgoings. Residence and domicile also pops up, and the author does a great job of setting out the differences between automatic residence and the sufficient ties

test. And who doesn’t like to know what the penalties are for doing something wrong? Throughout the guide Genders puts in lots of useful ‘tax saver’ tips – what a good accountant should be doing for their clients. PQ rating 4/5: This book isn’t a substitute for a good accountant, but if I was in practice I would give it to every client. PQ Magazine August 2017







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The accountancy bodies spend a lot of time getting their annual reports to look and feel right. We know because they get offended when we criticize them! CIMA’s report was nice and clean. Ok, it didn’t get our top marks but it was strong. PQ was a little bemused by the cover – there is a very strong lookalike here with Roger Hargreaves’ Mr Messy. But we have been told that it represents the ‘extraordinary times’ we are all living in. So perhaps it does fit! • See next month’s issue for our full review of all the annual reports

Dr Seuss’ books have helped the Bank of England to make their reports more readable. A former deputy governor, Dame Nemat Shafik, recently said: “Dr Seuss was a genius at getting young people to read by using very simple language and very short words.” The BoE did some research on the linguistic complexity of its own publication and found that its reports on things such as inflation were only accessible to one in five of the UK population. Watch out for ‘Carney in a Hat’ and ‘Green Bucks and Spam’.


Implementing the Making Tax Digital initiative is becoming like the Wild West, according to ICPA chairman Tony Margaritelli (left). In his presentation to 100-plus delegates at the ICPA’s Practice Evolution seminar in London, he outlined what he consided the Revenue’s hostility to the UK’s accountants in practice. He singled out ‘ugly’ Jim Harra, Tax Assurance Commissioner and Director General Customer Strategy and Tax Design at HMRC as particularly hostile – and his slide illustrating the point brought the house down.


The Conservatives have 16, while Labour and the SNP have only two each. What are we talking about? The answer is MPs with an accounting background, of course. There are also two accountants in the Cabinet, even after the early reshuffle – Justine Greening (pictured) and Karen Bradley. Together the 20 MPs make up 3% of the total. There is a question mark hanging over one ICAEW-qualified MP – Thanet South’s Craig Mackinlay. It is being alleged he overspent during the 2015 election campaign. Despite the claims he still got re-elected in June.

OUT OF SIGHT OUT OF MIND LATEST CHEAT IS… If you need to concentrate then you need to put your phone in another room! It appears even having your smartphone face down on your desk or in your bag means you become less able to concentrate – that’s how bad the addiction is! Scientists found that our brains suffer constant low-level distraction from the opportunities the phone offers for messaging and browsing. In fact, these phones are changing the way we think, with their mere presence meaning we are less able to perform even simple cognitive tasks. In a series of tests it was those who placed their phone in a separate room who did best, and those with it screen down on the desk that did worse. The results are stark – those with the phone on their desk scored 10% lower on the memory test and 5% lower on the maths one.


Move over Harry Potter, here comes the latest exam scam – invisible ink. A law student was recently caught red-handed with 24 pages of notes written in invisible UV ink, according to a report from the Office of Independent Adjudicator. The student in question even smuggled a UV light into the exam hall so she could read her special notes! She had put the notes in her law statute book, which she was allowed to bring into the open book exam. It didn’t stop her appealing to the adjudicator to reserve her cheating punishment!

I WANT TO BE LEFT ALONE Scientists have created a desktop light linked to your computer that switches from green to red when it deems you are ‘in the zone’ and should not be disturbed. The ‘traffic light’ system is meant to stop interruptions and uses an algorithm to decide when the light needs to change. The worry is that your computer will eventually be able to monitor brainwaves and vital signs too, showing bosses if you are really concentrating on the job!


Smart powerbank

PQ magazine has joined forces with the award-winning ACCA-X to offer five readers the chance of winning a smart powerbank. The powerbank provides a quick and convenient charge to your mobile phone, iPOD, camera, game console and most other digital devices. Simply email your name and address to – head up your email ‘ACCA-X’ and we will do the rest.

Your home reference set The examiners and markers have started to complain about exam candidates’ spelling now that increasing numbers are sitting CBEs! Well, we are here to help, with the Collins Home Reference collection. With a dictionary, thesaurus and guides to spelling, grammar and punctuation, this set is worth just under £50. The collection also includes a guide to scrabble, a book of quotations and a crossword solver’s dictionary. To win this great giveaway just head up your email ‘Collins’ and send your name and address to It is as simply as that.

Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries must be received by Friday 11 August. The main draw will take place on Monday 14 August 2017.


PQ Magazine August 2017

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PQ magazine, August 2017  

PQ is a free monthly magazine for student accountants, focusing mainly on the ACCA, CIMA, CIPFA, ICAEW and AAT qualifications. It's packed f...

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