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PQ magazine June 2017

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CONTENTS

News 08Mental health Survey of young accountants makes grim reading 10AAT probe Tutors demand more action over MDCL 12CIMA exams First-time sitters are doing better than ever Features, etc 06Mind your Ps&Qs Why teach ethics when it’s lacking in the workplace? And why can’t we see our exam papers when we fail? 14ACCA conference CBEs are here to stay, delegates told 16Back to basics Read the papers if you want to understand ethics in the business world 18ACCA exam tips Tops tips for the forthcoming exams

22Dividend Valuation Model This is a model not an equation – just spot the clue!

24Let’s get technical We

June 2017 31CIMA’s image Transformation

is key to success, says institute 32AAT exams An update on how to pass the MDCL assessment 33Apprenticeships Why learning should be a lifelong habit 34Big data Could your future be in data science? 35Careers #1 Top tips for making yourself stand out from the crowd 36Careers #2 Life at BDO; and our social media round-up 34Fun stuff – and our giveaways The columnists Robert Bruce US standard setters fly in the face of the obvious 8 Prem Sikka Rigged economy will impact on the general election 10 Subscribe to PQ magazine It’s FREE – go to www.pqmagazine.com ABC July 2015 – June 2016

explain fixed investment appraisal

32,238

26Profile Meet Amnesty’s Nicki Deeson; plus auto enrolment and what you need to do

27ICAEW spotlight Focus on

the accounting and assurance exams at Certificate level

28ACCA resources Make the most of what’s on offer

30Leases Some top tips on

dealing with tax exam questions involving leases

Publisher’s statement: We send a digital issue of the magazine to an additional 9,647 requested readers Free to subscribers who fulfil our terms of control Annual subscription: £35 (£50 overseas)

Pass rate heaven and hell It’s exam results time. In this issue we have the ACCA, CIMA and ICAEW providing their pass rates. We also highlight the trouble AAT has been having with the MDCL assessment. That one is being totally remarked, going back to September last year! Comparisons between sittings and bodies pass rates are difficult, but some pass rates still shock me. A 28% pass rate at the final stages of a professional qualification should cause alarm bells. When two-thirds of students are paying over £100 to fail a test then there is a problem, a disconnect between what is required, what is being taught and the amount of work students think is enough to pass. Remember, the ACCA pass mark is 50% and still 72% of March sitters failed P5 this time around. But there’s no time rest on your laurels – there’s always another exam around the corner to pass! Resilience is the key here. Win one… At the recent CIPFA Innovation awards I sat next to the institute’s CFO Peter Woodman. He smiled when I said who I was and explained he was about to make me a very happy man. For years PQ magazine has been campaigning for CIPFA to put the CEO’s salary in full in the annual accounts, just like everyone else does. In the past, Rob Whiteman was paid in a salary ‘bracket’. Well, from this year we will know exactly how much members pay him, and rightly so. You can’t preach the need for openness and transparency if you don’t live by those rules. Thanks for listening, CIPFA. Lose one… I also have to apologise for misleading you last month. Yes, we got something wrong! The new CIMA logo doesn’t have a CA in front of it. Rather, that’s an ‘A’. That doesn’t mean the confusion among members has diminished. Many believe that there is still a lot of ‘brand confusion’ out there. Take a look at our piece on page 31 to see if that helps. Graham Hambly, PQ magazine editor – graham@pqaccountant.com

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PQ have your say

email graham@pqaccountant.com Ethics? What ethics? I for one am glad that ACCA seems to be talking the issue of workplace ethics very seriously with their new ethics module. OK, it costs £60 and takes 20 hours to complete, but really, we must take this issue seriously. I think it was in the May edition of PQ that you carried a story saying 20% of young accountants witness unethical behaviour in their workplace either frequently or every day (it was headlined ‘Do you behave ethically’, PQ, April 2017 page 10 – Ed.) This is an alarming statistic – if you multiple the number of young

accountants by the number of ‘incidents’ then that is a whole lot of unethical behaviour!

While it’s great that the accountancy bodies seem to be taking this seriously, the real problem is with enforcement by the likes of the Financial Reporting Council. Too often companies get away scott free, or having to pay a fine. But these multinational organisations are so swimming in cash that a fine is no punishment at all. We’ve all seen what’s happened in the audit industry in recent years, and frankly the behaviour of some firms disgraces the whole profession of accountancy. We need more accountability, and more severe punishment for those found responsible. Name and address supplied

Our star letter writer wins a fantastic PQ memory stick! Thanks for the tips

I was interested to read your short article on business basics in the May issue of PQ magazine (‘How to get your small business off the ground’, page 24). Great timing you guys – my partner is just about to start his own business so the more advice we can get the better (I’ve just started my accountancy studies). Anyway, keep the advice coming – it all helps, especially as lots of people who want to give you advice assume you already know about the ‘simple’ things, like company formation. Thanks! Jayne Evans, by email The editor says: We’re glad you found it useful Jayne – this month we are focusing on auto enrolment, so turn to page 26.

Sorted, thanks to pqjobs.co.uk

Are we that boring?

It’s always interesting to discover what the ‘great British public’ think of us accountants (‘What do Brits really think about accountants?’, PQ, May 2017, page 26). But it’s sad that we can’t seem to shake off the ‘boring tag’ – according to the Kaplan survey 44% of respondents chose accountancy as the most boring profession. The next ‘most boring’ was HR, with just 11.5% of the votes!

Are we that bad? Personally, I love my job – it’s varied, with no two days being the same (I know it’s a cliché but it’s true) and the fact I’m always meeting new people is great, too. But I do despair that we will never lose our ‘grey’ image. Name and address supplied

Read Dickens instead I enjoyed your fun page story last month about the Finance Bill having more words than two of Charles Dickens’ novels. No wonder tax dodging firms can get away with it – it’s just too compex! Paul Jacobs, by email

Let’s see our papers

Having sat the P2 and P7 exam in March, and failed, I’m disheartened and finding it difficult to get back into my books. I am very confused as to why we students are not allowed to see our exam papers when we have failed. Is it not true that at school and university you go through your papers to establish where you went wrong, so that the next time you don’t make the same mistakes? I include a letter I have sent to ACCA in the hope of a response, and I thought that maybe you would like to include it in PQ magazine to see how many other PQs feel the same. Dina Rushton, by email The editor says: Here is Dina’s letter – we’ve had to edit it for reasons of space: “I have been a registered with the ACCA since 2010, I joined very enthusiastically, looking forward to become an accountant as a mature student. I have now reached the professional levels after six years of hard work, it has been really tough, studying, working and running a household with boysterous boys. The last three months I have spent most of my time at class or at home locked away studying, I felt like I have never worked so hard in my life. I registered for the P2 and P7 exams and went into the exam feeling confident that I would pass both exams. I am now sitting here, feeling like my whole soul has been ripped from my body. I have failed both exams, and I don't know where I went wrong. I feel like giving up. Is this the sort of encouragement that the ACCA gives its students? We are not allowed to see our papers to see where we went wrong, we just start all over again. What if I make the same mistake in the next exam? It will cost me £256 to resit. I am starting to feel that this is all a big conspiracy. Exactly why am I not allowed to see my paper? And why is it necessary to pay another £50 to have somebody look at it again. What I am paying my yearly registration fee for (plus exam registration)? What value am I getting?”

PQ Magazine Unit 3a, Kingfisher Heights, 2 Bramwell Way, Royal Docks, London E16 2GQ | Phone: 020 7216 6444 | Email: graham@pqaccountant.com Website: www.pqmagazine.co.uk | Editor/publisher: Graham Hambly graham@pqaccountant.com | Advertising manager: Polly Thrasivoulou polly@pqaccountant.com Associate editor: Adam Riches | Art editor: Tim Parker | Subscriptions: dom@pqaccountant.com | 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 dom@pqaccountant.com

Published by PQ Publishing © PQ Publishing 2017


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PQ news

ROBERT BRUCE Flying in the face of the obvious

There are some things that appear so obvious that one cannot imagine why they do not happen. Take the introduction of IFRS in the US. The US is the only large economic area on the planet that does not use them. Look at a recent report about the effects of their introduction a decade ago in Australia. The significant sentence is this: “One of the key benefits of adoption across all sectors is that it has enabled users and preparers to move between sectors, and between countries, with transferable knowledge and skills.” Why would any country not wish for the same result and effect? And there are other areas where the obvious just doesn’t seem to be happening. Take the NHS. Of all the institutions in the country it probably has the strongest culture of having women in command. Generations of nurses and strong-minded matrons have effectively run the system. And now a report from the University of Exeter Business School shows that some 77% of NHS staff are women, with the percentage of female chief executives at 42.6%. However, in other key roles within the 245 NHS trusts and related arms-length bodies women are still underrepresented: just 26.3% of finance directors and 24.6% of medical directors are women. If ever there was an organisation that ought to achieve gender parity with ease it is the NHS. And that really ought to run through to the finance end of the business. Robert Bruce is an award-winning writer on accountancy for The Times

Mental health issues are on the rise

Physical and mental health issues are affecting nearly half of all ICAEW PQs, according to a new CABA survey on student wellbeing trends. The research found, worryingly, that 42% of ACA students say they don’t feel physically or mentally healthy. And it would appear that PQs are feeling more stressed this year. Some 44% of respondents to the survey said they felt less healthy than a year ago. The lack of time to do physical activity (30%), diet (23%) and stress (22%) were all cited as reasons for feeling unhealthy. The effects on students are stark,

with many PQs complaining of a lack of sleep, tiredness and a loss of energy. All were impacting on their workplace productivity. It is hardly surprising then that almost two in five ICAEW PQs (38%) are unhappy about their work-life balance. A major concern of PQs is the sheer amount of time work takes up in their personal lives, with 28% saying they are expected to work extended hours. This is evidenced by the fact that 25% of respondents worked

THE AAT WINNERS ARE…

AAT unveiled its Training Provider Award winners at the recent Birmingham conference this month. The coveted AAT Champion award was presented to Devonbased Accountancy Learning. Premier Training walked off with the Distance Learning Provider of the year for the second year in a

row, while the Best Use of Elearning went to First Intuition Distance Learning, and Large Training Provider went to BPP. Kaplan picked up the Apprentice Training Provider award for the third year in a row. Preston College and Southend Adult Community College were also among the winners on the night.

ICAEW Professional results look good The first-ever ICAEW Professional level CBE results are out and they are looking good! The March Audit & Assurance paper pass rate was 87.3%, and the Tax Compliance exam had a healthy 81.3% success rate. Both CBE pass rates are well up on the paper-based December 2016 exams. The top pass rate honour this time went again to Business Strategy, with 92.5%. There was, however, a dip on the Business Planning: Taxation paper,

as its pass rate slipped to 71.3%. The ICAEW’s Mark Protherough said: “Results from the first professional level computer-based exams are directly comparable to students who have previously taken the same exam on paper. We will of course continue to closely monitor feedback from ACA students and employers.” A total of 2,720 students sat the session, with 4,136 exams attempted. Some 1,425 students sat the computer-

IASB set to ‘improve’ IFRS 8 The International Accounting Standards Board is proposing changes to the IFRS for operating segments. IFRS 8 Operating Segments was issued in 2006 and sets out the disclosure requirements for information about a company’s operating segments, products and services, as well as the geographical areas in which it operates and its major customers. The proposed amendments follow on from a Post-implementation Review (PIR) of IFRS 8. The exposure draft amendments are 8

between 43 and 60 hours a week. CABA’s CEO Kath Haines said: “This research highlights that unhealthy lifestyles are having an affect on student accountants, and employers would be wise to take note.” She felt that striking a worklife balance is hard, but working too much is a vicious circle – not getting enough sleep or exercise is detrimental to workplace performance. Haines revealed that CABA is partnering with the ICAEW to form a joint working group to help tackle the issues raised by its students.

set to: • Clarify and emphasise the criteria that must be met before two operating segments may be aggregated. • Require companies to disclose the title and role of the person or group that performs the function of the chief operating decision maker. • Require companies to provide information in the notes to the financial statements if segments in the financial statements differ from segments reported elsewhere in the annual report and in accompanying material.

based exams. PwC’s Heather Brown and Deutsche Bank’s Harriet Baker dominated the prize-winners, picking up four out of the six paper prizes up for grabs. MARCH 2017 PROFESSIONAL LEVEL RESULTS Audit & Assurance 87.3%; Financial Accounting & Reporting – UK GAAP 83.1%; Financial Accounting & Reporting – IFRS 81.6%; Tax Compliance 81.3%; Business Planning: Taxation 71.3%; Business Strategy 92.5%; Financial Management 81.3% TOP CAT: Ekaterina Christova – known at Kati – has been unveiled as the winner of the ACCA’s prestigious undergraduate of the year Future CFO competition. The economics student from the University of Cambridge wins a oneweek trip to New York to gain insight into the role of a financial professional in the US. She will also get a tour of the ACCA’s US office! The competition is run in association with TARGETjobs PQ Magazine June 2017


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PQ news

PREM SIKKA Rigged economy will rock the election As we head into another election politicians are talking about how the economy has been rigged to disadvantage consumers. Here are some examples. • Banks have admitted to rigging interest rates. Some have been fined. This means that banks have made illegal profits from loans, overdrafts, mortgages, government debt and private finance initiative (PFI) projects. How long before they face hefty compensation bills? • Privatised train companies receive £4-5bn public subsidy each year. UK trains fares are among the most expensive in the world. Subsidies are financing executive pay and dividends. • The Competition and Market Authority reported that a drug company overcharged the NHS by raising the price of hydrocortisone tablets by more than 12,000%. The price of a 10mg tablets increased from 79p in April 2008 to £88 per pack by March 2016. Profiteering is a cause of the crisis facing hospitals. • Energy companies have long excelled at providing confusing tariffs. They are quick to raise prices even when the global wholesale price of oil and gas declines. • Demand for gluten free food is rising. Sainsbury’s own-brand can of tomato and basil soup sells for 50p. Its tomato and basil soup in the ‘freefrom’ range costs £1.50 a carton and weighs 100g less. Neither has any gluten. These examples draw attention to poor business ethics and regulation. Tougher regulation is likely to be an election battleground. Prem Sikka is Emeritus Professor of Accounting at the University of Essex

AAT ‘uplifting’ MDCL marks after protests AAT needs to provide more assurances about the marking process following the problems with the Management Accounting: Decision & Control (MDCL) assessment, say leading tutors. An internal AAT investigation led to the recent surprise ‘uplifting’ of the percentage marks for each student who has completed the MDCL assessment. Many students and tutors have felt for some time the Level 4 assessment was just too difficult, with high numbers of students stuck at “not yet

Don’t take gel pens into the exam!

ACCA students take note – you must not use gel pens or Tippex in the exam hall! An F7 student confessed on one noticeboard that they had used a black gel pen and correction tape. Both are big no-no’s, and one breaches exam rules and could lead to an invigilator reporting the student. ACCA’s Sharon Machado

told PQ: “Gel pens don’t come through clearly enough in the scanning process, hence answers may not be captured correctly if written in gel pens.” Candidates are advised to use a black ballpoint pen. The ACCA has also told PQs not to use either Tippex or correction

tape. “These items are not included on the list of permitted items which can be taken to candidates’ desks,” explained Machado. All information relating to permitted stationery is contained within the exam attendance dockets, which students can access weeks in advance of the exam session.

Conference news ACCA has unveiled its timetable for the withdrawal of paper exams for the F5-F9 sessions. Delegates to the ACCA Global Learning Providers’ Conference were told that with the exception of India, countries that launched CBE sessions in September and December 2016 will have their final paper exams in December this year. That means, as of March 2018, there will be full F5-F9 CBE centre coverage across the UK, Ireland, Pakistan, China, Czech Republic,

KPMG sacks six KPMG has fired six staff members, including the head of its US audit practice, after the firm discovered they improperly received advanced warnings that the US watchdog was planning an inspection of one of their audits. The Public Company Accounting Oversight Board revealed one of its employees had ‘left’ the organisation over the leak. It has now promised that it has taken steps to “reinforce the integrity of its inspection process”. It appears a KPMG employee, who joined the firm from the regulator, had passed on information from someone who still worked there about which audits would be inspected. 10

competent”. The association says that it has now made adjustments to all assessment results that have been released from 1 September 2016 until 23 March 2017. To provide more faith in the marking process leading tutors said the AAT should allow some training providers to take part in a standardisation exercise, so all training providers can have confidence that the written tasks are being marked fairly. AQ2016 sees the AAT taking on a more manual marking, with each

synoptic assessment containing human marked tasks. Level 4 exams will also have examiner marked questions. There are also concerns over how the refunds work for students who are deemed competent at the MDCL after the remarking process, announced in early April. PQ magazine has been told that the refund will be credited to the exam centre, not the student. So students will need to liaise with their exam centre to get that money back. The AAT have said that students will also receive a £50 goodwill gesture and it will contact students directly about this. • See next month’s issue for our report from the Training Providers conference.

Hungary, Slovakia, UEA and Sri Lanka. The news comes despite the fact some countries haven’t even started to offer CBEs. For countries offering CBEs for the first time this June (such as Poland and Trinidad) their last paper-based exams will be March 2018. ACCA has promised that it will replicate the paper exam centre network, and is working with the British Council to ensure students ‘get the same experience’. • More conference news, page 14.

The leak only came to light via a whistleblower, and was referred to the oversight board and the Securities and Exchange Commission in late February. KPMG’s Lynne Doughtie said the firm has ‘zero tolerance’ for such unethical behaviour. She stressed that quality and integrity “are the cornerstones of all we do and that includes operating with the utmost respect and regard for the regulatory process”. PQ columnist Professor Prem Sikka said the leak was a consequence of the close links between regulators and the big accountancy firms. He said: “It is not just the revolving door but the revolving carousel. There are constantly people from regulators going to accountancy firms and vice versa. All kinds of lines, all kinds of boundaries, are blurred.”

Record revenues for top clubs Premier League clubs’ combined revenues for the 2015/16 rose to a record £3.6bn, up 9% in just one season, says research from Deloitte. However, after two seasons in the black clubs recorded pretax losses of £110m. Wage costs rose by 12% to £2.3bn, resulting in combined operating profits (excluding player trading, net interest charges and the amortisation of player contracts) of £0.5bn. Manchester United’s revenue grew to £515m, which meant they topped the Deloitte Football Money League for the first time since 2003/2004, as the world’s highest revenue-generating club. PQ Magazine June 2017


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PQ news

CIMA first-timers doing even better New fraud hotline from HMRC HMRC has launched a new hotline for the public to report fraud and evasion in the fight against tax fraud. The service will replace the two separate tax evasion and customs hotlines with one, streamlining HMRC’s intelligence gathering on tax fraud. You can report all kinds of tax fraud and evasion on the new hotline, including PAYE and national insurance fraud, undisclosed offshore investments, non-payment of the National Minimum Wage, tax credit fraud, failure to pay UK duty, tax evasion and VAT fraud. The HMRC Fraud Hotline can be found at 0800 788 887 and is open 8am to 8pm seven days a week, 365 days a year.

New EW texts for ACCA PQs

Emile Woolf International’s new ACCA study texts for 2017-2018 are now available to buy as e-books from its website. PQ likes the fact that it says its texts “fully cover the syllabus without going into too much detail”. You can download by the chapter, saving you from having to buy the entire text if you want to concentrate on a problem area.

CIMA has released the latest batch of pass rates and for the first-time all the first-time pass rates for its OT examinations are above 50%. The pass rate for those attempting P1 for the first-time has now risen to 50%. For P2 the pass rate is 51% and for F2 it has risen

to 53%. The E2 first-time pass rate is a healthy 86%, and for E1 it’s 77%. Steve Flatman, the exams chief, was pleased that all the pass rates continue to move in the right direction. However, there was one hiccup this time – the operational case study, where CIMA CASE STUDY FEBRUARY 2017 EXAM PASS RATE Feb 17 Nov 16 Aug 16 May 16 there was a big dip in the pass Operational 45% 67% 64% 67% rate. Recent Management 62% 71% 71% 63% sittings have seen Strategic 64% 65% 63% 45% pass rates well

CIMA OT pass rates 1/4/16 – 31/3/17 Overall First time Total E1 88% 77% 73% P1 69% 50% 45% F1 84% 72% 68% E2 94% 86% 84% P2 73% 51% 45% F2 77% 53% 49% E3 82% 67% 64% P3 79% 57% 52% F3 78% 57% 52% above 60%, but for February the pass rate dropped to just 45%. CIMA has looked into the drop and is happy that the marking was fair and consistent. Finally, Flatman revealed that the pass rates for the 2017 Cert BA exams will be released this summer, in July.

New kid on the block: Lee Hamill picks up the Newcomer of the Year Award at CIPFA’s inaugural Innovation Awards 2017. Among Lee’s many achievements are a plan that underpins the university’s ability to address and avoid the risk of financial fraud, and a programme that is strengthening the organisation’s financial procurement controls

March exam results pass rates ‘mixed’ ACCA sitters may have voted P4 as the hardest paper in March, but it was P5 that had the lowest pass rate this time around, at just 28%. The pass rate for P7 continues to hover around the 32% mark, meaning over two-third of sitters are still failing this test, too. F8 and F5 have the dubious honour of being the Fundamental papers with the lowest pass rates – 38%. Even the tax paper pass rate slumped to 41%. In all, some 90,752 ACCA students entered the second-ever March sitting, which saw a total of

113,301 exams taken. That means the paper-average-per-candidate was 1.25, which is very similar to the March 2016 figures. The ACCA revealed 3,864 students completed their final exams and now have just the ethics and experience to do before becoming ACCA members. ACCA education chief Alan Hatfield said the latest results are comparable to the March 2016 pass rates. However, if you do compare the results all the pass rates are down, apart from P2, P3 and P7.

Recruitment bugbears The lack of response from recruiters is the biggest bugbear for accountants looking to change jobs, says research by CV-Library. Nearly half (46.9%) of accountants also felt that the whole job-hunting process was just too long. Being hassled by the recruitment consultants and vague updates were also on the list of pet hates. This all combined to mean some two-thirds (64%) of accountants just don’t like looking for a new role.

U-turn over students’ status? The UK government looks set to exempt overseas students from migration targets. PM Theresa May is offering to change the way that student numbers are calculated, with the promise of concessions. Some 134,000 international students started their studies here in 2015-16, considerably down on the 175,000 from the previous year. Due to the snap election the government is likely to offer a compromise over how the number of overseas students in Britain are

ACCA MARCH EXAM RESULTS F5 F6 F7 F8 F9 P1 P2 P3 P4 P5 P6 P7

March 2017 March 2016 38% 39% 41% 44% 47% 51% 38% 41% 40% 41% 45% 50% 52% 47% 51% 48% 35% 38% 28% 33% 38% 44% 32% 30%

The March 2017 exam pass rates for the first four papers: F1 83%; F2 64%; F3 78%; F4 86%.

In brief Search on for world’s top CAs The ICAS competition to find the 35 most promising and inspiring young CAs is up and running again. The ICAS One Young CA competition celebrates innovation, leadership and entrepreneurial spirit among ICAS young members. The overall winner will represent ICAS at the global youth summit One Young World, in Bogota, Colombia. The winners will be announced on 15 September. Last year’s winner was Rimla Akhtar. 12

calculated to save the Higher Education & Research Bill. MTD delayed ACCA has welcomed the government’s decision to drop Making Tax Digital legislation from the finance bill. Head of tax Chas Roy-Chowdhury said the ACCA was pleased the government is delaying other ‘controversial’ measures – such as interest reduction, loss relief carry forward, an end to permanent ‘non-dom’ status and the dividend allowance reduction. PQ Magazine June 2017


news PQ

Can cheats prosper?

Accountancy bodies have no plans to beef up their exam invigilation following reports of a surge in hi-tech cheating at universities. A leading national newspaper discovered there has been a 42% rise since 2012 in cheating cases involving gadgets such as mobile phones and hidden earpieces. Among the worst offenders when it comes to cheating were students at Queen Mary University, London, Newcastle University and the University of Surrey. There are numerous websites that openly target students with devices that can be used for

cheating. Monorean even advertises itself as an online store to buy invisible earpieces for ‘cheating in exams’. A company spokesman claimed they are selling at least 200 units a year in the UK. The devices cost anything from ÂŁ50 to ÂŁ350 and some come with a speaker as small as a grain of rice. MPs and university leaders have called for students to be frisked for these tiny devices before an exam. PQ magazine asked all the accountancy bodies if they had plans to increase security at exam halls. CIMA has had only a tiny number of disciplinary cases and

none involved invisible earpieces. It explained its exam centre partner, Person VUE, does not allow any personal items into the testing room and candidates have to empty their pockets to show they are not carrying prohibited items with them. The centres also have CCTV. ACCA revealed that, to date, it had seen no instances of any student caught with an invisible earpiece. It said it had no plans to increase security in relation to such challenges at this point. Over at the AAT there was more concern about plagiarism of other students’ assessments and collusion between students. Again, it said it had no plans to increase or change security at assessment centres at this time. The ICAEW had also not caught anyone using an invisible earpiece. However, because many of its exams are ‘open book’ students can bring in their own materials. As a result, it believes there are fewer ways to cheat effectively in these exams, which are heavily focused on the application of knowledge and demonstration of skills.

Check out PQ-Go now!

PQ-Go is go! The first of our MCQs to help students see if they are exam ready have been launched, at www.pqgo.com. PQ magazine has teamed up with top lecturers and Rogo, the eAssessment experts, to provide a free test for PQs. We are offering mainly AAT assessments first up, so if you are struggling with your tax assessments, or perhaps the advanced bookkeeping assessment, you can test yourself with PQ-Go. Our top-class tutors include Accountancy Learning’s Neil Montgomery and First Intuition’s Gareth John and Nick Craggs. We also have the fantastic Philip Dunn’s MCQs for the ACCA F3 exam. So remember, before to go to the exam hall go to PQ-GO!

Accountancy career opportunity:

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PQ ACCA conference

CBEs are here to stay

Editor Graham Hambly reports from the global learning conference

A

CCA’s Global Learning Providers’ Conference took place recently in London’s Shaw Theatre. Executive director Alan Hatfield told the audience that he wasn’t expecting any drama over the next two days but admitted he has always wanted to be on the stage! He then turned the words of the bard on their head: “To be or not to be, or should I say CBE or not CBE, but there’s not a question about that!” The CBEs are definitely here to stay, and anyone who attended the conference could not fail to be impressed by how F5–F9 CBEs are

FAREWELL TO STEVE SKIDMORE

Walsall FC supporting Steve Skidmore was honoured at the conference after it was announced he will be retiring as examiner of the P3 Business Analysis paper when it turns into the Strategic Business Leader case study in September 2018. PQ always had a great relationship with Steve – thanks and good luck!

transforming the exam process for the better. Students really are loving them, and the complaints about hand-writing fatigue are gone forever. Markers and examiners love them, too. They can finally read what candidates are trying to say! The CBEs are the future and a better, more convenient way to take exams, as one PQ said. There is a problem, however. CBE sitters don’t appear to be using the masses of ACCA resources to get themselves familiar with the way the actual exams work. It was suggested as many as one in four CBE sitters have not looked at specimen papers before sitting the real thing. Even we have to agree that students aren’t helping themselves here. The first CBE F5-F9 sessions were launched in September 2016 in eight markets, and will be available in 18 countries in June 2017. However, as we have reported in this issue, the paper exams will start to be withdrawn on a market-bymarket basis starting next March (see page 10). Wherever you are in the world, from June 2019 a paper exam will not be available anywhere on the globe. PQ • In next month’s issue of PQ magazine we will take you through what the examiners said about their papers.

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PQ Magazine June 2017


Computer-based exams: guidance and support for ACA students

Online support The ACA Professional Level Audit and Assurance and Tax Compliance exams moved to computer in March 2017. Here’s an overview of the guidance and support available to help you prepare for these exams at the June Professional Level exam session.

• Exam guide • Series of short webinars

icaew.com/cbe

• Sample exams using the new software • Question banks within the new software From September 2017, Financial Accounting and Reporting and Financial Management will be the next two exams to move to computer. Find these resources and more information on key dates, how to book your exams and access arrangements at icaew.com/cbe


PQ back to basics

If it’s in the news, then you need to know all about it

This month AVADO’s Paul Kirkwood focuses on the ACCA F1 topic of Corporate Codes of Ethics, using real news stories to help build knowledge and understanding

I

n the words of the ACCA F1 examiner “success in the F1/FAB paper is dependent on accumulating a reasonable knowledge of a range of diverse subjects. As each of these subjects are disciplines in their own right, there is a vast array of material and no prospective candidate can possibly know every fact or understand every concept fully.” With such a huge amount of material to work through anything that helps to understand more efficiently and effectively will be of great benefit to us and it will also help us apply our knowledge in the exam room. One tip I give my AVADO ACCA F1 students is to keep up-to-date with the news and, more importantly, to align news stories to your studies. For example, take the recent forced removal of passenger David Dao from a United (Airlines) flight. This incident can be linked to many F1 syllabus areas, such as stakeholders or internal controls.

However, my thoughts were immediately drawn to Corporate Codes of Ethics. Surely United has such a code in place (a Google search can confirm this) and, if so, is it being implemented effectively across the business? This leads me to a couple of questions highlighted by the F1 examiner in recent exam reports that were not answered well by candidates. Q1. Which of the following should be included in a corporate code of ethics? A) A detailed description of all of the commercial objectives of the company. B) The consequences for employees of violating the standards of behaviour expected of them. C) A summary of the responsibilities of the individual directors of the company. D) A list of laws and regulations with which the company will comply. Thinking about the United case, a code of ethics should provide an overview of the business’s mission, values, objectives and core ethical principles that all employees would understand and be able to apply to their work lives. Applying this basic knowledge to Question 1 we can rule out option A as it would simply be too detailed for an ethical code of conduct. We can rule out option C as the code will apply to all

employees. We can also rule option D as it would simply not be practical to include all law and regulations that the company will comply with. The remaining option B must be correct and indeed codes of ethics do often include consequences for employees of code violations. There are three key learning points here – firstly, that applying the real world to our learning helps to reinforce our understanding; secondly, that ruling out incorrect answers is vital exam technique to help you choose the right answer; and, thirdly, that you should use questions to build knowledge and understanding. I’m totally convinced that we learn effectively when we get a question wrong and then work out and understand why we got it wrong. Have a look at this second question relating to corporate codes of ethics: Q2. Which of the following is the most effective way of ensuring that minimum standards of behaviour set down in a corporate code of ethics are implemented? A) Issuing a statement from the board of directors stating that the organisation will expect compliance with the code by all staff. B) Introducing appropriate control systems and communicating the serious consequences of breaches of expected standards. C) Ensuring that the code is communicated across the whole organisation, and reminding staff of its provisions in ongoing training. D) Emphasising the benefits to the organisation of compliance with the code, including a higher level of trust by stakeholders. I think that this is a tough question as all answers are plausible. However, try to focus on the question requirement – what is the most effective way to ensure implementation of the code behaviour standards. To find the answer to this question have a look at the December 2016 ACCA F1 examiner’s report and while you’re there please read through other reports as they are fantastic documents that give you an insight into the F1 exam paper, as well as giving study tips and question practice. PQ • Paul Kirkwood is AVADO’s ACCA Lead Tutor and a PQ award winner

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PQ Magazine June 2017


BO NO O W K

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

Ginny (FI tutor)

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 :)

It does! Thank you!

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PQ ACCA exam tips

The exams are coming thick and fast, so here are our tips for June’s papers First Intuition.

P1 • 50-mark scenario question to include ethics, governance and risk management, integrated reporting and directors’ remuneration. • Optional questions to include evaluation of risks and their mitigation, Tucker’s five question model on ethics and the role of NEDs in the management of risk. P2 • Q1 – Group question on disposals or step acquisitions. • Ethics. • Revenue recognition. • Provisions. • Deferred tax share-based payments. • Pensions. P3 • Three strategic lenses. • Industry lifecycle. • Pricing strategy. • Value chain. • Critical success factors. • Organigram. • Globalisation. • Porter’s generic strategies. • Change Kaleidoscope. • Harmon’s process strategy mix. • 6 I’s. • Business case. • Leadership. P4 • International investment appraisal techniques focusing on risk management tools such as value at risk. • Option valuation. • Capital structure: traditional debt finance and Islamic finance – Sukuk bonds. • Financing strategy. • Business valuation. P5 • Critique an existing performance management system and the performance hierarchy. • Quality as a critical success factor. • Benchmarking. • Effective use of information systems. • Reward systems linked to performance measures. • Performance model (balanced scorecard or performance pyramid). • Risk management techniques. • Transfer pricing. P6 • Incorporation relief/ disincorporation relief. • Remittance basis. • Pensions consortia. • Patent box. • Takeovers. • Commencement of trade (basis 18

periods/losses). • VAT – option to tax and partial exemption. • EIS, SEIS and VCTs. P7 • Business or audit risks in a scenario. • Identifying ethical and other professional issues in a scenario. • Matters to be considered and audit evidence for a couple of core accounting issues. • Forensic auditing. • Insolvency issues (UK stream). • Discussion on current issues.

LSBF.

F5 • Sections A and B: Costing methods (ABC, throughput and lifecycle) and decision making (relevant costing, linear programming and uncertainty). Section C: Transfer pricing, budgeting and advanced variances. F6 • Income tax – looking at a sole trader or partnership business and calculating the tax adjusted profit. Calculating the income tax liability, with the savings income and dividend income nil rate bands being examined. • Corporation tax – looking at a company with a long period of account, requiring two corporation tax computations. Corporation tax implications of companies belonging to a 75% loss group. • Chargeable gains – calculating gains made by an individual on disposals of residential property versus disposals of non-residential assets. • Inheritance tax – calculating IHT on lifetime gifts made within seven

years, with taper relief, and looking at advantages of lifetime gifts over death gifts. • VAT – calculation of VAT payable, overseas aspects of VAT and VAT groups. • Watch out for some sort of tax planning question, for example, how profits from a company should be extracted or looking at the tax planning opportunities available to married couples. F7 • For the 60 marks of MCQs in Section A and B, the entire syllabus must be covered, including the more obscure standards (recent questions have covered R&D, government grants, borrowing costs, investment properties, etc). • Depreciation and revaluation, deferred tax, associates, effect of company payment policies, etc, on working capital ratios. Watch out also for objective test questions, that is where no alternative answers are given to guide you, usually in numerical questions. • Section C: Ratios & interpretation, including adjustments to be made before comparison to last year or a different company; published accounts with standards, including cash flow aspects; consolidations. F8 • Corporate governance recommendations. • Audit committee roles/benefits. • Audit risk and response. • External auditor’s responsibility for fraud/laws and regulations, affecting the client. • Internal controls: deficiencies in the client’s systems (purchasing/ payroll), recommendations for improvement and tests of control.

• Substantive procedures on revenue, tangible non-current assets, payroll, inventory. • Computer assisted audit techniques. • Auditor relying on the work of others. • Subsequent events. • Audit report. • Internal auditor. F9 • Section A – various questions from across the syllabus. • Section B – valuations and risk management. • Section C – investment appraisal, including an NPV and business finance. P1 • Roles of NEDs and chairman. • Board performance evaluation. • Rules v principles governance. • Public v private sector governance. • Stakeholder prioritisation (e.g. Mendelow). • External IC reporting. • Objective v subjective risk. • Correlated risks. • ERM. • Bribery and corruption. • Kohlberg. • Gray, Owen and Adams. • Corporate codes of ethics. • Integrated reporting and social/environmental footprints. P2 • Q1 – balance sheet or CFS or Sploci, in that order. • Q2 and Q3 – usual suspects of FI and NCA and impairment and revenue and leases groups, and so on. • Q4 – investors needs or provisions or groups current issues. P3 • Strategic analysis. • Evaluation of options. • Scenario planning. • Suitability of and Implementation of BPR. • Improving website effectiveness. • Decision trees. P4 • International NPV. • Foreign exchange risk. • Mergers & acquisitions. P5 • Suitabilty of metrics. • Financial approaches to decision making. • Value based approaches to decision making. • Link between new processes and new information requirements. • Improving quality. P6 • IHT with the death estate including BPR and APR and lifetime gifts, gifts with reservation and relief for a fall in value. Domicile including deemed PQ Magazine June 2017


ACCA exam tips PQ domicile and election to be treated as UK domiciled and deed of variation. • Takeovers and mergers. • Group question, sale of shares versus sale of the trade and assets. • Relief for trading losses made by a sole trader/partnership at the beginning or end of the trading cycle. • Residency rules, remittance basis and overseas aspects of income tax. • Investment in a VCT the theory versus investing in a registered pension scheme. • Overseas aspects of VAT. • Share incentive plan versus EMI share option scheme. • Ethics – conflict of interest or duties of a senior accounting officer. P7 • Audit risk. • Business risk. • Audit of public sector performance information, social and environmental info. • Accounting matters and audit evidence. • Ethics and professional issues including money laundering, advertising, quality control. • Audit report scenarios including KAM, MURGC. • For UK students, insolvency.

BPP.

F5 • Planning & operation variances. • Mix & yield variances. • Evaluation of the company (either as a whole or on a divisional basis). F6 Section A & B • Due dates for payment of income tax (payments on account). • Due dates for the payment of corporation tax (installments for large companies). • Filing dates for the income tax and corporation tax returns. • Penalties and interest for late payments and returns. • VAT rules on registration, impairment loss (bad debt) relief, and SME schemes relating to cash accounting, annual accounting and flat-rate schemes. • Inheritance tax due on lifetime transfers both in the donor’s life and on death. • Statutory residence tests for individuals. • Identification of groups of companies for corporate tax loss relief and gains. • Trading loss reliefs for both companies and sole traders. Section C Focus on income tax and corporation tax, including the following: • Employment benefits. PQ Magazine June 2017

• Property income. • Relief for pension contributions. • Adjustments to profit to arrive at trading income. • Capital allowance computations. • 10-marker on VAT, IHT or CGT. F7 Section A • Several on consolidation and interpretation of financial statements. • Non-core areas – inflation, specialized entities. Section C • One covering interpretations and the other preparation of financial statements. • One will be in the context of a single company and one in the context of a group – so you could have a single company interpretation and a groups preparation or vice versa. • Accounts preparation questions may include extracts or stand alone calculations or full statements of profit or loss and other comprehensive income and/or statement of financial position. • Accounting for items from other areas of the syllabus. • Statement of changes in equity, statement of cash flows extract, earnings per share calculation or linked written. • Consolidation question – fair values, deferred/contingent consideration, PUP on inventories/PPE, intragroup trading and balances, goods/cash in transit. • Single entity – trail balance or restatement of given financial statements with the usual adjustments for depreciation, revaluation and current/deferred tax (revaluations). Plus a mixture of adjustments such as leases, substance over form, financial instruments, share issues, government grants, inventory valuation, revenue recognition or construction costs. F8 • Audit planning. • Audit risk – identify and explain audit risk and explain the auditor’s response to each risk. • Internal audit. • Internal controls – deficiencies of internal controls and recommendations of suitable internal controls or description of tests of controls. • Audit procedures – both substantive procedures and tests of controls. F9 Section A • Ratio analysis. • The concept of shareholder wealth. • Financial intermediation.

HEALTH WARNING

These tips should only be used in conjunction with proper study. We cannot guarantee that these topics will appear in the actual exam as we have not seen the exam papers. Examiners are not predictable so it is vital that all core syllabus areas are revised fully. • Fiscal & monetary policies. • The efficient markets hypotheses. Section B • Working Capital management – operating cycle, change in credit period or accepting a factor’s offer. • Business or security valuations – methods of valuation. • Financial risk management – currency risk, interest rate risk. Section C • Working capital management. Section D • Investment appraisal – NPV with inflation and tax. Section E • Business finance – evaluation of financing options (interest coverage and gearing ratios) or cost of capital calculation. P1 • You can expect to see the use of stakeholder, ethical and other CSR theories applied to the scenario. • Use of risk. • Control and governance – board directors, remuneration and reporting. • Dysfunctional behaviour – bribery and corruption, environmental risk and poor ethical stance. P2 • Preparation of a statement of financial position and/or group statement of profit or loss and other comprehensive income or statement of cash flows, including foreign subsidiary, discounted activities, disposal and/or acquisition. • Discursive requirements on a linked accounting adjustment and social/ethical/moral aspects of corporate reporting. • Multi-part question testing – fair value measurement, deferred tax, foreign currency transactions, financial instruments, pensions, share-based payment, non-current

assets (recognition and/or impairment of tangible and intangible assets), borrowing costs, accounting treatments on earnings per share or ratios. • Industry based question – testing a range of standards such as accounting policies and the framework, leases, grants, IFRS for SMEs, reorganisations, provisions, events after the reporting period and related parties. • A discussion question looking at current developments in corporate reporting – the definition and disclosure of capital, revision of the conceptual framework, classification in profit or loss vs OCI, leasing, improvements to disclosures, regulatory issues over adoption and consistent application of IFRSs, implementation issues, application of the definition of control and significant influence (equity accounting), improvements in performance measurement, integrated reporting, revenue recognition. P4 • Q1 – project appraisal (domestic or overseas). • Business valuations. • Cost of capital calculations. • Risk management – VaR, real options, hedging, risk mapping. • Risk management (currency or interest rate). • Business re-organisation. • Real options. • Dividend policy. • Behavioural finance. P5 • Data analysis using numerical techniques – KPIs, EVA. • Transfer pricing. • Ratios. • Analysis of quality related costs. • ABC. • Performance management frameworks – building blocks, performance pyramid, balanced scorecard. • Quality management. • Information reporting – CSFs and KPIs. • Application of strategic models – PEST, Porter’s 5 forces, the value chain. • HR frameworks – reward and appraisal systems. • Risk management. • Environmental management accounting. PQ

For BPP’s top tips for the P6 and P7 exams go to our website – see

pqmagazine.com 19


The support you need for AAT New Kaplan OnDemand Courses We know it can be tough to juggle a hectic life with your AAT studies, and when you do find time to study you want to get as much done as possible, with the support of expert tutors if you get stuck. That’s why Kaplan have created OnDemand – a brand new online study method, which gives you all the support and structure of a tutor-led course, but with the flexibility to study wherever and whenever you want.

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To help design OnDemand, we asked AAT students like you what they wanted most from their course to help them succeed. Take a look at some of the responses below to show how our course was built with you in mind. “I want to know there’s someone to speak to when I need them”

“I want a subject expert to motivate me and give me feedback”

When you’re working to your own busy schedule, you don’t want to have to put your studies on hold waiting for your tutor to respond. That’s why we’re keeping our tutor support team open 7 days a week.

In order to get the most out of your course, you need full confidence in your tutor. Kaplan tutors are subject specialists, and OnDemand gives you full access to their expertise. Our tutors will be there to guide you through the whole syllabus, so you know exactly what you need to complete and when - just like in a classroom.

You can get an instant response from a qualified Kaplan tutor through live chat, arrange a phonecall at a convenient time or email them your questions - even on evenings and weekends. You are guaranteed a response by email or requesting a callback in 4 hours or less and support is available until 8pm on weekdays - perfect if you have work or family commitments.

When you take a mock exam, you’ll get feedback so you can focus in more detail on the areas you need to improve on. It can be difficult to stay motivated when studying on your own, so if you fall behind where you want to be, you can request regular contact from tutors who will contact you to see how we can help you get back on track.

“I want flexibility, but to know there’s still structure to keep me motivated.” OnDemand complements the ‘on-demand’ nature of many of the AAT exams, which can be taken any time. You can start the course 365 days a year, meaning waiting for course start dates or finding your way into a classroom becomes a thing of the past. Some students told us that they find it difficult to keep on track with no fixed dates, which is why Kaplan OnDemand also provides structure to help you maintain progress and go into the exam feeling confident.

“I want lots of question practice, in a format that’s like the real exams.” Rather than just focusing on the total volume of questions, Kaplan OnDemand assessments are designed in a way that will help you better prepare for the exams. Knowledge Checks and Progress Tests ensure you’re aware of areas you still need to work on plus you can build your own tests from a large bank of questions, so you can focus on the areas you feel you need to practice most. The final 2 mock exams even look and feel like the real exams to improve your confidence.

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“I want high quality content that makes it easier to learn” Students told us that the quality of learning resources was the most important factor for them in choosing a flexible course. We believe that just because you decide to study remotely doesn’t mean you should compromise on quality. With Kaplan OnDemand you’ll benefit from a wide range of high quality and engaging online content, all designed specifically for the OnDemand course. Created by our expert tutors, a mixture of tutor-led videos, worked examples and interactive tests will help guide you through every part of the syllabus. Plus, all the content is accessible on a range of devices - allowing you to study on the go.

“There is a really big network of support there if you need it. Even in the evening or on a Saturday morning, if you’ve got a problem you can talk to a tutor. It’s nice to know that they’re just there!” Julie Dove, Kaplan student, AAT Distance Learner of the Year nominee 2017


PQ Dividend Valuation Model

More than a simple sum The Dividend Valuation Model (DVM) is exactly what it says it is – a model not just an equation! Sunil Bhandari explains all

T

he Dividend Valuation Model (DVM) is a key part of both the CIMA F3 and ACCA F9 exams. It has also recently reappeared again in the ACCA P4 paper after going missing for a short while. The DVM is one of the methods that can be used to value equity shares, which is how it was predominantly tested in the exam papers mentioned above. However, it is the unique technique to find the price of preference share capital and bonds as far as these exam papers are concerned. The DVM is founded upon this simple statement: “The current value of a share or bond is equal to the sum of the present value of future cash flows received by the investor after being discounted at their minimum required rate of return.” It’s a mouthful for sure, but not really that complicated. It is simply saying that investors’ price their investments based on the cash returns they expect to receive after accruing for the time value of money (discounting the cash flows). However, many exam candidates appear not to appreciate this point. The reason is that the exam papers provide a formula that can be used to find the value of equity shares: Po = Do(1+g) (Ke – g)

Where: Po = Equity share price g = Expected constant annual growth rate in dividends Ke = Minimum required rate of return of the shareholders (Ke maybe replaced with the letters ‘re’) The equation ONLY applies to compute the value of an equity share providing the future annual dividends will grow at a constant rate. It is true that the officially approved

22

exam kits particularly, for CIMA F3 and ACCA F9, contain practice material that simply allows the answer to be obtained using the formula. Unfortunately, this leads to some students rote learning how to use this method and not to understand the foundation of the model. Why is this an issue, you may well ask? If the examiners provide the formula and the exam preparation material allows a candidate to see how this works there is no problem. Or is there? This equilibrium gets unbalanced when the exam questions vary from the theme of providing the last dividend paid, specifying the future annual growth rate in this value and stating the Ke. Take the following three situations: 1) Instead of providing the current dividend per share, the forecast dividend in one year’s time is given. Some students incorrectly adjust this by multiplying by (1+g), leading to an overstated share price. In the CIMA F3 and ACCA F9 papers, which contain multiple choice/objective test questions, it is likely that this wrong answer will be one of the options. It will be a distracter answer. 2) The more interesting situation occurs

when there is either no dividend payable for a short period of time or there is an erratic growth pattern for the next few years. In both cases, this is likely to be followed by a constant growth rate in the dividend. The equation provided on the paper will not work in this situation. However, understanding the foundation of the model, along with being able to compute a discount factor for a delayed perpetuity with growth, will allow students to conquer this test. 3) Finally, when applying the DVM to ascertain the value of a redeemable bond the equation has no relevance at all. The lender will receive interest each year until maturity, followed by a repayment of the capital in the final year. To find the bond value, discount the interest each year using an annuity discount factor and add to this the present value of the capital repayment. The discount rate is the yield of the bond, not the Ke. Students who appreciate and understand basis of the DVM rather than wrongly believing that its just an equation that you plug figures into, will have a far better chance of passing their respective exam. PQ • Sunil Bhandari is a freelance ACCA and CIMA tutor and writer

PQ Magazine June 2017


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PQ AAT exams

LET’S GET TECHNICAL

I

nvestment appraisal is a key topic in the management accounting papers at levels 3 and 4. It is important that AAT student have a good grasp of the basics. Let’s imagine that we are considering buying a machine for £130,000 (what we could call the initial outlay). The machine will be used to make products that will be sold to generate positive cash flows of £50,000 per annum for a total of four years. There are two investment appraisal techniques that we will consider.

Payback period The payback period technique is the simplest technique. It looks at how long the investment takes to ‘pay back’ the initial outlay; in this case the £130,000 cost of the machine. If we take the four years that we will own the machine for one at a time, we can consider the ‘cumulative cash flow’ at the end of each year. This means adding up the various cash outflows and inflows as we go along to keep a running total. Just remember to treat the initial outlay as a negative cash flow. At the end of the first year we need to combine the initial outlay with the first positive cash flow of £50,000, meaning that the cumulative cash flow is -£130,000 + £50,000 = -£80,000, so we are still £80,000 down. Clearly the initial outlay has not yet been paid back after just one year. At the end of the second year we will have generated another £50,000 of positive cash flow meaning that the cumulative cash flow is now -£80,000 + £50,000 = -£30,000, so still £30,000 down. At the end of the third year the cumulative cash flow will be -£30,000 + £50,000 = £20,000, so in total after three years we are £20,000 up. The initial outlay has now been paid back. In fact, it has been more than paid back. In an assessment you will be expected to ‘pro rata’ your calculation to work out how much of the third year would be taken to exactly pay back the initial outlay. You can imagine that if the £50,000 positive cash flow is made up of sales that are spread over the year then to pay back the remaining -£30,000 cumulative cash flow from the end of the second year will take more than half of the third year. In fact, it will take £30,000/£50,000 x 12 = 7.2 months of the third year. You might be told to round your answer up to a whole number of months which would give a payback period of two years and eight months. In order to make a decision about whether to buy the machine, the business will compare this result to whatever target that they have set as being acceptable. If the company demands a payback period of three years then they would be happy to buy the machine as it pays back the initial outlay in less than this target. Net present value One of the problems with the payback period technique is that although it is a fairly easy approach to apply it ignores what is known as the ‘time value of money’. In our calculations above the £50,000 positive cash flow in the second year of the project is taken to have the same value as the £50,000 positive cash flow in the first year of the project. In reality this is not true. The ‘time value of money’ means that the longer that we have to wait to receive a cash flow the less it is actually worth. In calculations we take account of this by discounting, or reducing, the value of each cash flow

24

Gareth John explains fixed investment appraisal

depending upon how long we have to wait for it. The longer we have to wait, the less a cash flow is actually worth. To discount a cash flow we multiply it by a decimal which is known as a discount factor. This gives us what are known as ‘present values’. A present value gives a better reflection of what a cash flow is really worth. The discount factors for our example might be: Year Discount factor 1 0.9091 2 0.8264 3 0.7513 4 0.6830 These discount factors allow us to calculate the present value of each of the positive cash flows that our machine will generate over the next four years. Year Cash flow Present value 1 £50,000 £50,000 x 0.9091 = £45,455 2 £50,000 £50,000 x 0.8264 = £41,320 3 £50,000 £50,000 x 0.7513 = £37,565 4 £50,000 £50,000 x 0.6830 = £34,150 What you should be able to see is that the present value of each £50,000 falls the longer we have to wait for it. This shows the ‘time value of money’ in action. To work out the net present value of an investment we combine the present value of each of the positive cash flows with the negative cash flow of the initial outlay to see whether overall we are better off or worse off. The net present value of buying our machine is (£130,000) + £45,455 + £41,320 + £37,565 + £34,150 = +£28,490. The fact the overall the net present value is positive shows that the positive value of the benefits of the project outweigh the costs. A positive net present value means that the business would be happy to buy the machine. PQ • Gareth John is a tutor/director with First Intuition and helps to manage their AAT distance learning programme. He was PQ Magazine Accountancy Lecturer of the Year in 2011

PQ Magazine June 2017


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PQ profile

The reluctant

accountant Amnesty International’s Nicki Deeson was the star turn at the recent ICAEW prize-giving ceremony. She explains how auditing nearly put her off accountancy for life!

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an you pinpoint the moment when you first thought about being an accountant? The International Financial Director at Amnesty International, Nicki Deeson, certainly can! She told the packed ICAEW prize-giving ceremony that it was a neighbour who made the suggestion when they found out she was good at maths. They told her mum: “She should be an accountant, then she can keep you in your old age.” She claims that, being a dutiful daughter, the suggestion lodged itself in her mind. She went to Nottingham University, where she won her only accounting prize – coming top in the first-year bookkeeping exam. This opened doors, and she was offered a summer job at KPMG. Deeson (pictured right) admits she never worried about the accountancy exams. Her problem was she just didn’t find auditing exciting enough. Her first task at KPMG was to use a calculator to add up a massive computer print out. After 90 minutes she had three different

answers. Luckily someone else in the audit team had better calculator skills. Following the summer job she had real doubts about an accounting career, but despite considering other options she kept coming back to it. So on graduation she took a job at PwC and came down to the bright lights of London. To her relief, although she still had to use her calculator, organisational skills, relationship-building and problem-solving were even more essential. She actually started to enjoy accountancy! But audit was still there and she admits she never wanted to work on the same audit twice. That meant as soon as she qualified in 1992 she got a role in Bangladesh as a volunteer accountant for an Irish charity. This was the start of a hugely successful career in the charity sector that has spanned 25 years. Her biggest project while working in Bangladesh was to develop and implement a new accounting system, and she was then asked to spend six months rolling it out in Ethiopia, Mozambique and Burundi. Deeson admits flying into Burundi in 1994 was scary as the country was in the middle of a civil war. Although she was not directly saving lives she felt her role was essential. Her finance system meant money spent on the emergency services wasn’t wasted

and could be tracked to where it was needed. But how could she possibly expect people to prioritise forms and spreadsheets when they had lived through such terror? Yet, despite it all, she found everyone warm, friendly and positive. Returning to the UK was a strange experience. Her old colleagues thought she had been on holiday for two years and Deeson admitted it was all a bit of a culture shock. Her next role was as a project manager, a largely non-accounting role, with a large international charity called Plan. The aim of her project was to measure and maximise its impact on communities where Plan worked. Unfortunately, it ended with her firing the project team, writing some simple questionnaires herself and fiddling with the new IT system so she could start producing reports. The second challenge came when Plan saw the initial reports from West Africa. Although the charity had run programmes there for 20 years data showed that literacy and health indicators had actually got worse in the villages where it had been working. This wasn’t what the organisation wanted to see and senior management started talking about exiting Burkina Faso due to its negative impact on the country. However, Deeson decided to delve deeper, and she found that successful graduates of its vaccination and schools programmes had left the community for jobs in the city, reducing the indicators but increasing the wealth of the village through the money they sent home. So beware the dangers of the statistic. Deeson is now at Amnesty and content to be back in an accounting role. She stressed it is vital young accountants hold on to their dreams. She said: “Follow what you love, and you can change the world… one spreadsheet at a time.” PQ

PQ company formation

How to get your small business off the ground In this article we deal with the issue of pensions auto enrolment

I’m a small business owner, and am worried about my auto enrolment obligations. What do I need to do? Auto enrolment requirements are coming into force for around 800,000 small businesses during 2017. If you employ just one person aged between 22 and the state pension age, who is earning more than £10,000 a year, then you are likely to have duties under pension law to put them into a workplace pension scheme, and to make regular contributions. The Pensions Regulator is responsible for enforcing the law on workplace pensions, and so your first requirement will be to check its online 26

duties checker to find out if auto enrolment applies to your business, and from when. You will need your PAYE reference number for this, and if you find auto enrolment doesn’t apply you will need to fill out an online form to this effect. If it does apply to you and your current/future employees you will be given a staging date, by which point you must have a workplace pension in place. You will also need at this point to communicate with your employees about how auto enrolment affects them. When choosing a workplace pension scheme consider: • What is the cost to my business? • Is the scheme compatible with our current payroll software? • Is it suitable for our current and future staff? • Will it carry out the administrative functions I require?

There are statutory minimum contributions that you, and the employee, will need to make. Currently, as an employer you will need to contribute at least 1% of the employee’s salary into a pension, with a combination of employer and employee needing to contribute at least 2%. Be mindful that these contributions are set to be raised to 2% and 5% respectively from 1 October 2017. Employee’s workplace pension contributions are deducted from their gross pay, prior to income tax deductions. They must be supplied with a paper or electronic copy of their record of pay for each pay period, demonstrating how any pension contributions have affected their net pay. PQ • Darren Nicholls is Product Manager for Informi, powered by AAT. Visit informi.co.uk/ to find more practical advice PQ Magazine June 2017


ICAEW spotlight PQ

Master the Certificate level Next in our series on the ICAEW Certificate Level we focus on the Accounting and Assurance exams. Here Philippa Hood and Charlotte Lewis explain all you need to know to help you best prepare for success in the exam hall

ACCOUNTING For most students, accounting is likely to be one of the first exams you sit, and what a good place to start. By the end of the qualification you will have learned a whole lot more about the world of business than just accounting, but the skills you learn in this module will stay with you throughout the qualification, and most likely your whole career. This exam has 25 questions: 24 objective test questions, which are multiple choice, multi-part multiplechoice or multiple-response questions, and one scenario-based question. For the scenario-based question you will be given either extracts from financial statements and asked to prepare a statement of profit or loss and statement of financial position, or a statement of cash flows. In the exam, the scenario-based question will be presented first, but you can answer in any order. You might like to consider answering all the objective test questions before making a start on the scenario-based question. It is very easy to overrun if you attempt the scenario-based question first, not leaving enough time to attempt the objective test questions. The examiner wants to see that you have a good understanding across the whole syllabus, so try not to PQ Magazine June 2017

get too bogged down on one particular question/topic you are finding difficult. This module introduces you to three types of business: sole traders, partnerships and companies. The majority of accounting is the same for each of these, although you will look at a few differences, too. One of the underlying concepts that will be fundamental in your career as an accountant is debits and credits – how we actually get from a transaction occurring in our business to it being recorded in our financial statements. These can seem difficult to get your head around, but stick with it and soon enough they will be like a second language. The key to your success in this exam is question practice – work through the question bank twice. Top tip: The bookkeeping and accounts preparation program is a fantastic tool to help you gain experience of recording and preparing financial information. What’s more, it is designed to complement the Accounting module. Access it at icaew.com/bookkeeping ASSURANCE Assurance may not be as time-pressured as other Certificate Level exams, but it’s not to be underestimated. Answers are

not always black and white and therefore a pause and a second thought is often required due to its subjective nature. Compiled of 50 multiple-choice, multipart multiple-choice or multiple-response questions, worth two marks each, there is a strong focus on ‘gathering evidence on an assurance engagement’, representing 35% of the parts. Regarding style of exam question, sometimes a multi-part multiple-choice question will be split into parts, all sections need to be answered correctly to pick up the full marks per question. Passing the the exam will require two things: initial understanding of key concepts, and the ability to retain detailed knowledge of those concepts. A particular key concept students find tough is ‘internal controls’, representing 25% of the syllabus. This includes identifying a business risk, a control activity, then subsequently how that control is monitored by management and tested by the auditor. To make this conceptually easier for students to digest practical scenarios in business can be used to illustrate how this operates. For example, consider the business risk of a local restaurant, dealing in a large amount of cash transactions: • Business risk – surplus cash on premises. • Control activity – frequent banking, cash secured via physical locks with limited access to staff. • Monitor control – log daily bank drops, review access codes to secure area. • Audit risk – ‘cash at bank’ figure in the financial statement is materially incorrect. Retaining detailed knowledge can be broken down and become more manageable using memorable acronyms. For example, threats to the auditors independence can be remembered via the acronym MASSIF – management, advocacy, self-interest, self-review, intimidation, and familiarity. Overall, success will largely be down to adequate question practice from the question bank. A thorough review of question bank answers from all chapters will give students a good grasp of the type and class of standard they should expect. In addition, the knowledge that students do gain in Assurance, they will need to retain and build on in Audit and Assurance at the Professional Level. Before a Certificate Level exam go to icaew.com/examresources to download the syllabus and access the exam resources. PQ • Philippa Hood and Charlotte Lewis are ACA tutors with Kaplan Financial Reproduced with the permission of ICAEW, this article was first published in Vital (October 2016). Vital is the quarterly magazine for ACA students. © ICAEW 2017. icaew.com/vital 27


PQ ACCA resources

Think ahead

with ACCA

Maggie McGhee outlines what the Professional Insights are and explains why ACCA students would be wise to maximise the resources available to them

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hen it comes to the big questions about being an accountant, ACCA’s Professional Insights team is there to find out all the answers. Capturing views from all around the globe, we share our findings with you, in research reports, at events, in videos and at presentations. Our aim is to create a full picture of what is happening and the impact this will have on the future of the profession. The intelligence gathered from ACCA’s extensive network of offices and centres enables us to ‘Think Ahead’. Our research has played an important role in moulding global ACCA thought leadership, which in turn has helped shape and lead the profession. Our findings are shared with standard setters, policy makers and regulators, and also politicians, influencing discussions that impact on all our futures. We ask the big questions to ensure our profession remains at the forefront of innovation and continues to be trusted to deliver what businesses, markets and governments have come to expect of accountants. Critical questions It’s by asking critical questions and digesting the answers that we can really understand where our profession is today – and where it is going. The accountancy profession has always helped to shape and support business, other organisations, and economies of all types and sizes. As future professional accountants, you will need to embrace leadership and become trusted expert counsels as well as key strategic advisers to growing organisations across the public and private sectors. ACCA is well aware that in order to add value to employers and clients, professional accountants of the future will need an optimal and changing combination of professional competencies: a collection of technical knowledge, skills and abilities, combined with interpersonal behaviour and qualities. 28

We know we are working in a fastchanging world – the evidence is all around us. The evolving business landscape is constantly bringing new challenges and opportunities to the finance profession. Innovations in technology, increasing globalisation and evolving governance models are moulding the expectations that employers, clients, regulators and other stakeholders have of professional accountants.

As the global business landscape evolves, so will the practice of accounting and what will be expected and required of you as professional accountants. Sharpen your professional skills We’ve revealed previously in PQ magazine that intellect, creativity, emotional intelligence, vision, experience, mastery of the digital world and technical skills make up the ‘magnificent seven’ sought after skills and qualities. So how do you measure up? ACCA’s interactive online test allows you to see how you perform against the seven qualities, identifies areas where you can sharpen your skills and directs you to a range of resources that can help you. To find out about your professional quotient visit thefuture.accaglobal.com Maximising the resources available We take our responsibility of supporting our students and members very seriously. Our comprehensive learning support offering includes exam-specific resources available to you through the Exam Resource Finder on ACCA’s website. And our research also helps you to understand in more detail the issues that matter. We’re continuing to publish sample exams twice a year after the December and June sessions. These exams are compiled from questions that have appeared in the last two sessions. For example, after the June session, we will publish a sample exam containing questions from the March and June sessions. The content of the sample exams are selected carefully by the examining team so that they contain the questions that will be most helpful to students, including subject areas new to the syllabus, new styles of requirements and topics students tend to struggle with. ACCA’s Professional Insights, another resource in our rich suite of content, provides knowledge on the topics and subjects impacting our profession. It could be an in-depth report that reveals something new, a fact or a quote that inspires you. It will help you think ahead, armed with knowledge that helps strengthen our profession today, and forms the foundations of tomorrow. We will reveal our future findings here in PQ magazine but for those who enjoy receiving live updates, I would recommend you download our app. Our Professional Insights app gives you access to research, reports and our latest thinking on issues crucial for business, economies, society and the accountancy profession – now and in the future. It is available for iOS, Android and Kindle as well as a web version. PQ • Maggie McGhee, Director of Professional Insights, ACCA PQ Magazine June 2017


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PQ leases

Don’t go to pieces over leases Claire Oglesby explains all you need to know about leases in the form of some top tips

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great many students seem to struggle with the different aspects of leases when they arise in tax exam questions, so here are some key tips. Leases can be long or short, assigned (sold) or granted. Transaction in leases can also be chargeable to capital gains tax (CGT) or a mixture of CGT and income tax. You need to remember that a short lease is a lease expected to last 50 years or less. If a short lease is granted, the premium will be split and part will be chargeable to income tax and part to CGT. So how can you remember the different treatment of sales and grants of long and short leases? When there is a sale of a lease there is a normal capital gains tax disposal – you are disposing of all of your interest in the property. When there is the grant of a sub-lease you generally have a part disposal to calculate (with exception of

the grant of a short sub-lease out of short head-lease) – you are only disposing of a few years of your interest in the property and the property will revert to you again at the end of the sub-lease you have granted. Hence you will be given the value of the reversionary interest to use in your part disposal formula. Where you are either selling (assigning) a short lease or granting a short sub-lease out of a short head-lease (no mention of long lease), you need to use your tax tables. From the tax tables you will take the relevant lease depreciation percentages and apportion the cost by an appropriate fraction. When you are selling a short lease you will take the lease percentage for the years remaining on the lease at Sale and divide this by the years on the lease at Acquisition, remember this by taking the first two letters of SALE. When you are granting a short sublease out of a short head-lease you will apportion the lease percentage for the head-lease years remaining at Grant of

the sublease, deduct the percentage for the head-lease years remaining when the sublease Runs out, then divide by the years remaining when the head-lease was Acquired. I remember these as the first three letters of GRANT. If some of the premium has already been subject to income tax (where a short lease has been granted) we need to strip out the income element to leave the capital part. The proceeds for your calculation where there is a grant of a short sublease out of a long head-lease or freehold will therefore be just the capital element, even though the full premium joins the reversionary interest on the bottom of the part disposal calculation. However, the proceeds for the grant of short sub-lease out of a short head-lease calculation will use the full proceeds but include a deduction for the already charged income element after the apportioned cost has been deducted. This cannot create a loss. PQ • Claire Oglesby is a senior tutor at Tolley Exam Training, part of Lexisnexis, and can be contacted at examtraining@lexisnexis.co.uk. The views expressed are her own

The highest level tax qualification in the UK

Find out more at www.tax.org.uk/ctaqualification 30

PQ Magazine June 2017


CIMA branding PQ

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wenty years ago, Apple asked us to ‘think different’. In today’s world – shaped by political shifts, rapid technological change and the unrelenting march of complexity – it’s more than a marketing slogan. It’s a necessity. “The question organisations need to ask themselves is this,” a recent Conference Board report concluded. “Are we driving change and disruption, or are they driving us?” It’s a question CIMA has long asked – and one we have answered time and again by choosing the path of innovation. There are numerous examples in our history: from our founding nearly a century ago by professionals who pioneered a new approach to accountancy, to the launch of the Chartered Global Management Accountant (CGMA) designation, creation of the first Global Management Accounting Principles, and the computerisation of our exams. Members again picked the path of transformation last summer. By voting to deepen our relationship with the American Institute of CPAs (AICPA) in June, they created a platform that will allow us to further extend the vibrancy of our profession. Through the new Association of International Certified Professional Accountants, we have combined the strengths of CIMA and the

Transformation is the key to success – as CIMA is proving CIMA CEO Andrew Harding explains the thinking behind the institute’s new branding that has set the tongues wagging

CIMA’s new logo, right, replaced the one above

• Andrew Harding is Chief Executive – Management Accounting, Association of International Certified Professional Accountants

AICPA to form the most influential body of professional accountants in the world. We are able to advance management and public accounting worldwide, further enhance the global relevancy of our qualifications, and maximise the employability of our members and students wherever they live. Dynamic vision We launched a new brand in March to reflect this dynamic vision. The modern look signals our forward focus and commitment to building opportunities for the next generation. The logo, defined by a sweeping ‘A’, carries across CIMA, the AICPA and the new Association to signify the reach and influence of our network of 650,000 professionals and students on the frontlines of economies. This change is only the most visible indication of progress we’re making on behalf of members and students. In recent weeks, we’ve also significantly

expanded continuing professional development opportunities for CGMAs, created new resources for accountants to lead in a vital area – cyber security – and developed new practical tools to help CGMAs drive business forward. At the heart of this work is the recognition that success tomorrow requires new ways of thinking and ever faster response to rapidly changing market needs. It demands agility and an embrace of uncertainty and experimentation. In that way, the association is an accelerant for innovation – one that will serve as a catalyst for the success of our students and members far into the future. PQ

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The Institute of Certified Bookkeepers 31


PQ AAT exams

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uring your revision phase try to practise as many questions as you can from all the different study support resources available. Cover all topics – not just those you like the best or find the easiest to understand! The more variety of questions you attempt, the more confident you will feel when faced with the tasks in the real assessment. Don’t suffer in silence… If there are areas of the MDCL syllabus that you don’t fully understand ask your tutor or distance learning mentor for additional support as soon as you need it. Don’t wait until a few days before the real assessment before asking for help. The sooner you get to grips with the concepts being taught, the more time you will have to focus on these weaker areas Don’t panic! Believe it or not, nervousness is a good sign before sitting an assessment. No nerves usually means complacency, which is never a good quality. However, try not to let nerves get the better of you during the assessment itself. If you feel yourself panicking, pause for a moment and take a deep breath. Read the question again carefully and think about the topic being tested. Don’t get overwhelmed by the information presented in the question, break it down

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Practice is the only way

Sally Ball offers five top tips to help you pass the hell that is MDCL assessment and attempt each task step by step. Lots of practice (see left!) will help reduce panic mode setting in. Watch the time! Good time management is crucial at this level of the qualification. Mark allocations are displayed against each task so use these to plan your time when answering the questions set. Allow just over a minute per mark as a rough guide. This will allow time for all the tasks to be attempted. Many students are unsuccessful when they spend too long working calculations at the expense of the written tasks. Maybe even consider answering the written tasks first? Adopt a positive attitude Approach the assessment with a ‘can do’ attitude. If you have followed the guidance above and have prepared well there is no reason why you should not be able to answer the tasks presented to you. Often, topics may be tested from a different angle to those seen previously but the concepts being tested will always remain the same. PQ • Sally Ball, Kaplan Financial

PQ Magazine June 2017


apprenticeships PQ

Mark Farrar explains why the economy will benefit from continuing to upskill UK workers – whatever their ages

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he new Apprenticeship Levy is now in force, which should act as a helpful prompt for many businesses to invest in apprenticeships for the foreseeable future. Around the same time as the Levy, a report was published by the Skills Commission, part of Policy Connect, into issues faced by older workers throughout the country, referred to in the report as the “largest pool of untapped potential”. AAT is one of the report’s principle supporters – we recognise the need for training and upskilling throughout people’s careers. This is to the benefit of both individual and employer, and more widely, the economy as a whole. Learning through either a formal apprenticeship scheme or some other high-quality traineeship can benefit social mobility and adapts workers to the everchanging needs of the British economy. The report refers to ‘Skill-based technological advancements’, which simultaneously helps produce new jobs while contributing to the decline of others, as seen for example in the rise in IT roles, or a fall in the number of dressmakers in recent years. There is no upper age limit on learning new skills, and at AAT we frequently see new students who prove the old adage that ‘you can’t teach an old dog new tricks’ to be totally wrong – more than two-thirds of our apprentices are aged over 25. The

Why training and upskilling should be a lifelong habit

Still going strong: accountant Monica Evans, 89, has worked for Warwick-based firm Kigass Aero Components for 70 years. Above, Monica with work colleagues average age of those taking our short qualifications is 35, and thousands of AAT students are aged over 50. With our nation’s ageing population and the need to improve productivity when faced with increasing global competition, it is imperative that older workers remain competitive in the labour market, and have the appropriate skills for evolving jobs, or indeed the ability to

branch out into a new career entirely. AAT has consistently suggested that, in time, the Apprenticeship Levy’s scope should be increased to support other forms of high quality training, and that it should be renamed as the Skills Levy to reflect this. In a recent AAT survey conducted with MPs across all parties, 65% supported this suggestion. There’s no doubting the benefits that apprenticeships and similar schemes can bring to people of all ages. Our own research with CEBR in 2013 found that those who complete an apprenticeship at level 4 and above could earn approximately £150,000 more over the course of their lifetime. The Skills Commission report also highlights the advantages of additional training from a health and wellbeing point of view, not to mention the financial improvements in later life and the benefits to the taxpayer in terms of reduced state reliance. Retraining and upskilling could help reduce the UK’s skills shortages; give older workers new skills and be of financial benefit to all. Employers large and small need to proactively consider the role these workers have to play when considering their own training programmes and hiring practices. PQ • Mark Farrar is Chief Executive of the Association of Accounting Technicians

THE TROUBLESHOOTER IS GUNNING FOR...

Divisional performance

PQ troubleshooter Philip Dunn explains how ACCA F5 sitters should tackle questions on this tricky subject

Question: I am an ACCA student preparing for the F5 Performance Management exam, where there is reference to divisional performance and the use of ROI (return on investment) and RI (residual income). How are these PIs used in practice? Answer: Many large corporations have divisionalised structures. For example, prior to its takeover by Vildiz Holding, United Biscuits had four operating divisions with clear graphic and product remits with their own management, financial targets and strategic plans. The management within that type of structure is expected to produce a satisfactory return on capital while producing consistent long-term growth in the sector. Performance measurement in such environments is based upon responsibility accounting with expense/profit and investment centres being the responsibility of management who need to utilise the assets most efficiently. PIs as ROI and RI together with EVA (economic value added), a similar concept to RI, are often used in divisional performance. ROI is usually measured as pre-tax controllable profit as a percentage of capital employed. PQ Magazine June 2017

RI is a concept that was developed by Alfred Sloan at General Motors Corporation in the 1920s. This is the excess of pre-tax controllable profit over the notional cost of capital (the target return). Example: Davenports plc has a Divisional Structure and its Artists’ Materials and Paints Division showed the following performance for 2016. Notional cost of capital or target return Pre-tax controllable profit Divisional investment (capital employed) ROI = £110m/£440m x 100/1 = 25% RI notional cost of capital £440 x 15% Pre-tax controllable profit Residual Income

15% £110m £440m £66m £110m ———— £44m ————

This is clearly in excess of the target return. The divisional RI would be compared with that of other divisions in the group and used when preparing project appraisals and strategic plans. One final note: please look carefully in the study text at the advantages and disadvantages of these PIs when revising for the exam. PQ • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books 33


PQ big data

Is your future in data science? Why now? A year ago only a handful of our clients were talking to us about big data, R programming and linear-regression-inpython. This is changing. In most client meetings now we have discussions about future skills needs, big data, analysis tools and how we can help them change the finance department from a service function to a businesscritical service, central to strategic decision making. A number of our clients recognise that data science is the intersection of technology, statistics and business (domain) knowledge – take the Venn diagram for example (above). They also recognise that their finance departments are ideally positioned to take advantage of this transition from traditional data analysis to something that

James Taylor looks at how big data is changing the world for accountants – and creating opportunities, too

I

n March 2016, ACCA published an article entitled ‘The Big Data Effect’. The article focused on the notion that as businesses are being transformed by the impact of big data and data analytics the role of accountancy and finance professionals will change, too. I remember reading the article and thinking, does this mean that accountants need to start developing and adopting data scientist skills-sets? What and who are data scientists? Data scientists are big data wranglers. They take an enormous mass of messy data points (unstructured and structured) and use their formidable skills in maths, statistics and programming to clean, massage and organise them. Then they apply all their analytic powers – industry knowledge, contextual understanding and scepticism of existing assumptions – to uncover hidden solutions to business challenges.

is more data interrogation, analysis of data from different sources and more intelligent data samples.

What does the future hold? From what I see, the accountants of the future are going to need to be able to tackle more in-depth data analytics: • Descriptive analytics: historical and current data. • Diagnostic analytics: patterns and irregularities. • Predictive/prescriptive analytics: forecasting. There is clearly an opportunity for new ‘hybrid accountancy/big data’ teams to be established. These teams/individuals will not only process a large amount of unstructured, semi-structured, and structured data that flows into business every day, they will undertake more indepth analysis to give businesses a more comprehensive understanding of their functions and opportunities. While we are helping clients develop training programmes to take advantage of the obvious opportunity and I would recommend looking at some of the free SQL, R or python resources out there to see if it’s an area that interests you. PQ • James Taylor is a partner at HTFT

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careers PQ

Greg Thorpe offers the job hunters among you some top tips for standing out on paper and in person

M

aking a great first impression when applying for a job is no longer confined to the CV and covering letter. Your first point of contact with a potential employer may now be on social media, for example through LinkedIn. Even when you apply for a role in the traditional way, the employer may check out your Facebook profile or Google you, before they decide whether to shortlist your application. Consequently, there is more to standing out on paper than having a professionally written CV. Here we share our tips for making a great first impression when applying for jobs and when attending an interview. Your digital presence Many jobs go unadvertised because they are filled using social recruiting. Employers and recruiters search for passive and active candidates on social media platforms such as LinkedIn, Twitter and Facebook. Passive candidates are hot property – these are people who are not actively looking for a new job but if the right opportunity comes along might be interested. Platforms like LinkedIn have made recruiting passive candidates much easier; recruiters can search online using a variety of filters to identify potential candidates. This means that active candidates have more competition and really must ensure that their social profiles stand out. This can be challenging if you don’t want your current employer to find out. A top tip is to change your privacy settings so that your LinkedIn network is not notified of any profile changes – a sure give away that you’re looking for a new job! Although LinkedIn is the ‘professional network’ and therefore your LinkedIn profile needs to be in great shape, don’t discount other social media platforms like Facebook and Twitter. Depending on the role you’re looking for and your industry, employers may be using these to recruit as well. They may also be using them to vet candidates. So even if your Facebook profile is used entirely for social interactions, a potential employer may be looking at it. Therefore, it is essential to make sure there is no content on there that might leave a less than desirable impression: if in doubt lock down your profile by changing your privacy settings. Your CV At some point in the recruitment process you will be asked for a CV. The purpose PQ Magazine June 2017

Land your dream job

information they require, and highlight the most important information first. A short, punchy personal statement is a great starting point giving employers a clear idea of your experience and the value you can add to their company. This should then be followed by your work history in chronological order focusing on your most relevant responsibilities, achievements and skills that make you a great fit for their role. Always proofread for spelling and grammatical mistakes – these will make you stand out for the wrong reasons – and get a second opinion from a trusted colleague or your recruitment consultant.

of a CV is to get an interview, not to share your life history, so keep it succinct and relevant to the job opportunity. Potential employers may have hundreds of CVs to look through and so you only have a few seconds to stand out. Therefore, keep to a traditional format so employers can find the

Standing out at an interview One of the best ways you can stand out in an interview is by being confident and engaging. Confidence comes from doing your homework, and knowing that you’re a great fit for the job. We recommend that you do plenty of research on the company before you attend so you can speak with confidence about the role, your experience, and how you can help them fulfil their objectives. Many interviewers are using competency-based interview (CBI) techniques to discover more about candidates’ skills, qualities and motivations. They may ask questions like “give an example of a time when you had to make a difficult decision.” If you’re unprepared for this type of questioning it can be very unsettling and you may struggle to think of something to say that reflects positively on your abilities. Therefore, it is really important to prepare for CBI type questions. Search online for competency-based interview questions to familiarise yourself with what you might get asked. Then give some thought about your experience, personal qualities and achievements, and how you can use these to answer questions providing the detail and insights the interviewer is looking for. Preparation is the key to a successful interview and you’ll find it much easier to be engaging and make a great impression if you prepare thoroughly beforehand. It will also help you manage those interview nerves! PQ • Greg Thorpe, Director, Howett Thorpe 35


PQ careers

social media ROUND-UP When should the ACCA release its exam results? The March set were accessible from 17 April at 5.00 GMT. Or students could have opted to receive their results by email and text. The ACCA starts issuing these from 12.00. In the UK, results day was also on a Bank Holiday Monday this time around. Student Marta Cecylia went on Facebook to ask whether “anyone else was staying up til midnight and waiting for a text?” No one, it seems, appeared to be having a results’ night party! So we took to twitter to ask if it wasn’t time for the ACCA to look at releasing results at sensible set times, rather than by Greenwich Mean Time. How about at 9am for each time zone? Nick B agreed: “Has to be better than sat up at midnight constantly hitting the refresh button.” However, Nadia loved the fact that the results fell on a Bank Holiday: “Personally, I love it. None of the Monday morning ‘so how did you do? in work!’” We hate to break it to her but she will get the same conversation on Tuesday! PQ magazine was, as always, out and about this month. We met up with our PQ of the Year at the CIPFA Public Finance Innovation Awards. Our Tim was up for the ‘Newcomer of the Year’ award, but lost out to University of Edinburgh’s Lee Hamill. Still, he wasn’t too concerned – he has a shiny PQ award at home! PQ also visited Osborne Training, who were shortlisted for this year’s PQ awards in the Online College of the Year category. They are a real success story, starting out with just four AAT students. Osborne Training now has over 500. It also offers ACCA training too out of its Stratford, London offices.

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Life at BDO Catherine Devine is a trainee accountant based in Belfast. She has worked there for two-and-a-half years. Catherine, who is studing with Chartered Accountants Ireland, was recently named Apprentice of the Year at the PQ Awards 2017 What time does your alarm clock go off on a working day? 6:30am. What’s the first thing you do when you get to your desk? Turn on my laptop and make a cup of tea. What’s on your desk? Calculator, pencil case, laptop. What’s the best thing about where you work? You learn something new every day and it’s close to Marks & Spencer. Where’s your favourite place to go for lunch? Ocho Sandwich bar. What (or who) can you see when you sit at your desk? Glass office, 30 trainees, Marks & Spencer (through the window). Which websites are your

favourites and why? Miss Guided – I’m obsessed with their clothes. Which websites do you use for work? Companies House and HMRC are the main two. How many hours a week do you spend in meetings? Bar a few planning meets for upcoming engagements, not often. What time do you leave the office? It varies, but usually around 6pm. How do you relax? I’m crazy about the gym, I feel like it really de-stresses me after a day’s work. How often do you take work home with you? During busy season, frequently. What is your favourite TV

show? Changes on a regular basis – Suits at the minute. Summer or winter? Summer. Pub or club? Pub. Who is your hero? My daddy. He literally works around the clock and is one of the most inspirational people I’ve ever met. If you had a time machine, where would you go? Back to the 1920s – I’m obsessed with The Great Gatsby and I would love to dress up as a flapper. If you hadn’t chosen accountancy, where might you be right now? I’d probably be in my final year of university, studying either law or English literature.

it’s morning then use that time to revise. That alarm went off at 6am, so use the first hour of your day to study. And Scudamore says that during that hour you are not allowed to check your phone/email, etc. You are in

charge – not those faceless online people! 4) Eat properly – fuel your body. Get yourself a sharp knife and peeler. Lots of fruit and veg is the key here. 5) Commuting is a killer – make it work for you. You need to get the balance right, What do you do on your commute? You need to maximise the dead time. 6) Sleep is key. A good night’s sleep is a must. Bad days just make it harder. So try to end the day on a positive note.

In brief The morning ritual Brian Scudamore, CEO of O2E Brands, recently set out six morning rituals that he believes will make you productive all day. Here they are: 1) Set you alarm (with precision) and don’t compromise here – 6am is 6am! 2) Have one ‘daily intention’. Do you have a written down ‘to do’ list? If you don’t you should have one thing you need to achieve each day. Oh, and it can be as simple as eating a carrot. 3) Have a ‘power hour’. Are you a morning or an evening person? If

The PQ Book Club: books you should read TED Talks: The Official TED Guide to Public Speaking by Chris Anderson (Headline, £18.99) Presentations are a part of the modern working world, and let’s face it, most of us are terrified by the prospect. Whether it’s to the board at work, or 600 delegates at a conference, the idea of public speaking brings the jitters to the best of us. That’s where this book – and the author, Chris Anderson – comes in. He is, after all, Head of TED. In this informative yet lively read Anderson shares his five key techniques to a successful presentation – namely connection, narration,

explanation, persuasion and revelation. Each concept has its own chapter and is explored in detail. These are illustrated with the use of anecdotes, making this an engaging and lively read. Anderson doesn’t go it alone here, eliciting the help of many of his associates who give their spin on the art of public speaking. And very useful for the novice speaker are the FAQs – these cover a wide variety of public speaking-related issues, from what to wear to how to prepare beforehand. The author never loses sight of the single most important factor – content. As he writes: “The central thesis of this book is that anyone who has an idea

worth sharing is capable of giving a powerful talk. The only thing that truly matters in public speaking is not confidence, stage presence or smooth talking. It’s having something worth saying.” This book explains just how powerful public speaking is achieved, and equips you to give it your best shot. There is no magic wand and no two talks should be the same. The goal is for you to give the talk that only you can give. PQ rating 4/5 Time invested in this book will be time well spent. PQ Magazine June 2017


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PQ got a story, funny or serious, you want to share? Email graham@pqaccountant.com

A ‘SHERLOCK’ MEMORY IS POSSIBLE

Sherlock Homes used it and so should you! The ‘method of Ioci’ memory technique really can double or even treble the number of facts you can retain. Scientists say the skill can be taught to just about anyone. The method itself is pretty straightforward. As you learn key words, numbers or figures, you place them somewhere on an imaginary route or a certain location in a ‘mind palace’. After just six weeks you can increase your memory to elite levels. It will not, however, help you remember where you left the remote control.

MOVE TO HOVE

Hove, East Sussex, is the most popular location for young professionals, according to a new poll. This is the third year running that the seaside town has ticked all the right boxes for young workers (do they know about Southern Rail?). The average house price in Hove is £380,000, compared with the £763,000 for second place Wandsworth, London. London boroughs dominated the top 20 desirable places for young professionals; just Brighton, Reading and Didsbury managed to join Hove on the list.

GANGSTA’S PARADISE

So what aspect of the tax system would American rapper Coolio want to change? He might be best known for his hit single Gangsta’s Paradise, but he recently told a leading newspaper that he would get rid of tax completely. Then again, he also said he would get rid of money, too! He wants a return to the barter system. “In my opinion, and according to the constitution of my country, tax is illegal,” he said.

MY LAPTOP HAS DIED FROM ACCOUNTANCY TO POLICING

New Metropolitan Police chief Cressida Dick has a secret. In a recent interview she revealed that she was turned down by Thames Valley Police after leaving Oxford University. So, before she joined the Met she went to work for a ‘large’ accountancy firm. Obvious, accountancy just wasn’t exciting enough for Scotland Yard’s first female commissioner.

So it isn’t you – most laptops really don’t have the battery life promised on the box! In fact, several tested by Which? were found to have only half the claimed capacity. The consumer group tested 67 models and six of the seven brands did not ‘perform’ as promised. It said

HOW NOT TO SEND

A FAKE INVOICE

PQ magazine recently received an email purporting to be from a ‘junior accountant’. We were duly informed that we were being issued with a subpoena and our invoice was only a click away. They almost had us and then we read the ‘here you go, you fucking thief” line and knew it couldn’t be us. How very rude!

’ E W V E Five go…

that HP and Dell were the worst performers. HP’s batteries lasted on average five hours and two minutes – it claims that they were nearer 10 hours! Dell’s just made it over five hours. The claim is they will run over nine. However, Apple says its laptops have a battery life of 10 hours and tests showed they could in fact last longer – 10 hours and 15 minutes.

WOOD FOR THE TREES

It appears Apple has caused an acute shortage of trees on the West Coast of America. The reason is its rush to finish its ‘spaceship’ campus in Cupertino, California. So far 3,000 mature trees have been gobbled up by the project.

HOW YOUR PAST CAN CATCH UP WITH YOU

PQ editor Graham Hambly visited Russia with a group of accountants many moons ago – when he had some hair! It was that long ago. He thought on a visit to Moscow it was a great idea to wear a red nose in Red Square. Well, it was the time of glasnost and Mikhail Gorbachev. What he didn’t know was that Ashley Smith, who is now on the ACCA UK Corporate Network Panel, won Highly Commended in a UK photo competition with the picture and the editor was on display in a gallery in Covent Garden!

GOT THE L OT

Join Julian, George, Dick, Anne and Timmy the dog doing things they never did when Enid Blyton was alive! We thought we would cheer you up with these best selling books for grown-ups. There’s ‘Five Give Up the Booze’, ‘Five Go on a Strategy Away Day’, ‘Five Go Gluten Free’ and ‘Five Go Parenting’. Instead of one big prize we are going to send one of these books to four lucky readers – but it will all be random! To enter this giveaway with a difference send your name and address to graham@pqaccountant.com. Head up your email ‘Five Go’.

Sudoku heaven

Time to unwind and immerse yourself in hundreds of Times Sudoku puzzles. Our four-book pack would cost £28 in the high street, but it is yours for nothing in this month’s prize draw! And we have three sets to give away. The books have a selection of easy, mild, difficult and fiendish puzzles so there’s something for everyone. If you want the chance to win one of the three sets of books up for grabs then send an email to graham@pqaccountant.com along with your name and address. Put ‘Sudoku’ in your email header.

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 9 June. The main draw will take place on Monday 12 June 2017.

TO ENTER THESE GIVEAWAYS EMAIL GRAHAM@PQACCOUNTANT.COM 38

PQ Magazine June 2017


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PQ magazine, June 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...

PQ magazine, June 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...