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PQ magazine September 2019 /

Exemption fees scrapped by CIMA – full story page 6

ACCA top tips inside ONE WEBSITE TO RULE THEM ALL! Check our new funky PQ magazine website

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September 2019

News 06CIMA breaks mould Institute

27CIMA update In-depth

08CIPFA exams All the results

28AAT exams How to pass the

scraps exemption fees

from the latest exam sitting 10ACCA pass rates What was good and what was bad in June 12Tech news Our digital update Features, etc 05Mind your Ps&Qs More on tackling mental health issues; doing more for CIMAs; and the best of PQ’s social media 15Non controlling interest Tom Clendon explains everything you need to know about NCI

16PQ survey The results of our exclusive mental wellbeing survey make fascinating – and sobering – reading

18Wellness initiative The ICB is introducing a new programme to keep its members happy; and why new media will revolutionise the learning process

20ACCA tips Exam advice from the experts at BPP

23Interview What makes top tutor Sunil Bhandair tick?

24CIPFA spotlight Meet new education boss Chris Glennie; and going carbon neutral

25Audit and technology Don’t fear the future

26The troubleshooter Break even analysis explained

analysis on CIMA’s decision to scrap exemption fees Professional Synoptic exam

29Careers Life at the Aster Group; Sports Direct’s woes; and our book club review

30Fun stuff – and our fantastic giveaways The columnists Robert Bruce Has office life really changed over the years? 6 Prem Sikka Shadow banking is a big threat to the economy 8 Zoe Robinson Motivation is the key to success in your career 10 Mike Day Tech offers accountants amazing new insights 12 Subscribe to PQ magazine It’s FREE – go to SEPTEMBER 2019 ISSUE Total Distribution

30,424 Publisher’s statement: We send both a paper and digital issue to a controlled database each month. The above figure is the combined total of issues sent out this month. Free to subscribers who fulfil our terms of control Annual subscription: £35 (£50 overseas)

One website to rule them all Well, we finally did it – we’ve updated our website (thanks Ed!). We still have all that great content, but think you will have a much better experience when you come to visit us online. If you haven’t been recently then go to There are also plans for a bit more interaction, too. Think podcasts here! But it won’t end there… What will always be the case, though, is that we will be first with the news that matters. This month’s PQ magazine is no exception. We have the big news from CIMA about the scrapping of exemption fees (pages 6 and 27). The pressure will now be on the other bodies to follow suit. There’s the news about where the ACCA is launching its first CBE Strategic exams come March next year. London will not be included in the list until June 2020 (see page 7). The ICAEW has also come forward to explain what happened in its Tax Compliance exams. Well done to the institute for taking a really positive open approach to this problem. Then there’s the AAT confusing students when it posted its FA19 tax reference material. Don’t worry – you won’t need them until 2020. And we have the ‘upskirting’ PwC accountant and ex-PQ convicted of attempted murder. Wellbeing survey results We also have the results from our groundbreaking wellbeing survey. It seems the accountancy bodies, employers and even some tutors need to up their game. Some 68% of respondents believe the bodies need to do more to safeguard students’ wellbeing. Let’s see how they respond. Some things never change Finally, I loved the piece by ACCA’s Antonis Diolas about how fear and lack of trust in technological progress has always been there (see page 25). As he says the challenge for us today is not to fear the change, but to embrace it, and “use it for the best advantages possible and help create the technological future we want.” Well said, Antonis. Graham Hambly, PQ magazine editor (

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HAVE YOUR SAY Help is out there I have been reading your recent articles on the mental health of accountancy students. I’m a CIMA level 2 student (and AAT member) who helps students to study through several Facebook groups, and I have a Facebook page called ‘Learning Life’, dedicated to students’ wellbeing. I am a Certified Transformative Coach. I don’t teach accountancy, but coach CIMA students with their study skills while juggling other priorities. Many students make life harder for themselves through misunderstanding how the mind works. Here’s a testimonial I received from ‘Verity’, who I coached after she failed CIMA P1

three times with ever-worsening scores: “I got much more than I expected when I asked Imogen for help with exam revision. She encouraged me to take a step back and analyse my overall

situation; not just my stress around not passing my exam. After our coaching session I felt more inspired to return to my textbooks and notes. Imogen got me back in touch with my innate ability to study and allowed me to live a happier, more balanced life. The exam is now passed, and I still have these benefits, which I continue to apply to my daily life.”. The recording of her coaching session is available on the Learning Life page. Imogen Caterer, by email The editor says: We have asked Imogen to write an article for next month’s PQ magazine.

social media ROUND-UP In an industry-first initiative, CIMA have removed all exemption fees for new students (see page 6). The news went ‘live’ on 1 August and PQ was quick to get the message out. We think we were even quicker than CIMA! On Facebook Peter Chelloe called it a “good move” and Edgar Shimalukme felt it “sounds too good to be true”. Haq Mozameel went further: “Very good decision from CIMA. Leading the accountancy profession.” Tendai Makosa stepped it up a notch: “Thank you CIMA. I am proud to be your student. No one can beat CIMA at the moment.”

Our star letter writer wins a fantastic ‘I love tax’ t-shirt! Fantastic journey I just wanted to drop you a quick note to say congratulations on your 200th issue of PQ magazine. It has been a fantastic journey and I wish PQ magazine every success in the years to come. Here’s to another 200 issues! Reza Ali, Director of Professional Education, ACCA

A CIMA’s plea I wanted to make a suggestion – as much as I enjoy receiving and reading PQ magazine I feel that all the study tips you publish are centred on ACCA and AAT. I don’t seem to recollect the last time I saw CIMA study tips. It would be useful for all the CIMA students for tips on the objective tests and the case study exams. The OT exams are tricky and some tips on the syllabus as well as on the taking of the exams would be welcomed. An example: when I sat CIMA’s P3 exam I struggled with timing and how to approach the exam. I learned after failing the OT that time was very precious and I had to have a strategy where I answered the ‘select one’ answer option and get those marks banked before trying the ‘select all’. I even found that the financial questions were

Sorted, thanks to

taking up too much time and I left these to last. I also had to practise my reading skills and be faster at reading the scenarios as they were a lot larger than in previous exams. Mike Salter by email The editor says: Thanks Mike. We will try to do more for you. I have

had a meeting with CIMA and they have promised to provide better information going forward. We have CIMA’s exams boss, Stephen Flatman, writing for us this month, and we will be homing in on the new syllabus changeover in the coming months.

Martin Waugh commented: “Rubbish, ACCA have free exemptions. What about poor service and increased fees – are PQ magazine doing something on that?” We had to point out that the ACCA says: “An exemption fee is charged for each ACCA exam you are awarded exemption from.” That fee ranges from £91–£144. He was thinking AAT. We also got great feedback on our mental wellbeing survey, where we revealed that 56% of PQs admitted accountancy exams had left them in tears. Steve Collins said: “When I sat my finals years ago I saw one or two leave the exam hall in floods of tears. In fairness we had to sit paper 3.7 (now AFM I think) as a mandatory paper and recall it being capable of reducing folk to tears.” Not everyone was so sympathetic. One reader said: “Tears?!? Why would they expect to breeze through exams? These are difficult in order to test your technical ability. Wait until real life kicks in… sorry to rant but entitlement really aggravates me.”

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

Published by PQ Publishing © PQ Publishing 2019

PQ news

ROBERT BRUCE The more things change…

Everything, it is said, reverts to the norm. Take office life. When I started work that meant an audit room. This was an office fit for about a dozen of us and there were many of them in the building. It was supposed to be empty. Partners didn’t like to see people working there. The assumption was that hours in the office were not chargeable hours. Hours out at an audit client were. A simple calculation could be made through a visual check. If we were out on the road we were making money for the partners. If we were in the office we were not. You would have thought that, over the years, this would have changed. But office life remains, broadly, the same. People might argue that now there is a greater diversity among people starting out on their careers. Yet I recall that, all those years ago, the people I most enjoyed working with and whose judgement I most valued were Hong Kong Chinese, or from Malaysia, Holland, Mauritius, Goa, and so on. Women were flooding into the audit rooms and even more so into the tax departments, where a real revolution was under way. All the communication tended to happen away from the office. This is not so very different to today when hot-desking is the norm. The scramble for a place to work in the office was not so intense back then. But back we go to the norm. People like offices. I walked into our local pub for a coffee the other morning. It was packed. And everyone had their laptops open and they were working away. They had reinvented the office of old. Robert Bruce is an award-winning writer on accountancy for The Times

CIMA scraps exemption fees CIMA has become the first accountancy body in the UK to end the practice of charging exemption fees for new students. This is something PQ magazine has been campaigning for on students’ behalf for a number of years – to no avail until now! The move, says CIMA, will help encourage both accessibility and social mobility. Effective from 1 August 2019, the change will apply to all new exemption applications made by

students registered to study both the Certificate in Business Accounting and Professional Qualification. From now on, CIMA students who apply for exam exemptions will no longer have to pay a fee for any exemptions granted for eligible prior learning. Students who have been awarded and already paid for exemptions between January and 31 July, and who will be taking an exam between August and the end

of 2019, will be credited with the difference between the previous and new 2019 exam fees. This credit can be used towards the 2020 subscription fee. Fees will remain the same for new and existing students who have entered the CIMA professional qualification through gateway and experiential programmes. CIMA’s Andrew Harding called on the other accountancy bodies to follow suit. • For more on this turn to page 27

GSM London in administration

Take pride: the ICAEW joined forces with RSM for the Pride London march recently. Both are keen to advocate that accountancy should be an open and inclusive environment in which to work

GSM London, one of the biggest private higher education providers in England, has gone into administration. Teaching will stop in September. The college said it has not been able to “recruit and retain sufficient numbers of students to generate enough revenue to be sustainable”. It teaches about 3,500 students, many on accountancy courses. Administrators BDO are working with GSM to enable all tuition, classes and exams to continue as planned for the semester. The college explained that discussions are already under way with other higher education providers “to identify options”. The college, based in Greenwich and Greenford, says some 247 jobs are now at risk.

If you want to do well in the AAA exam then you need to start with your strongest question. The examiner believes that from a technique perspective candidates who take this approach tend to score good marks early, and set themselves up for a good performance. The AAA Examiner

audit opinions and the content and form of auditor’s reports. ISA 700 is another ‘must know’ topic. • The Examiner’s Reports should be a key part of your reading programme.

The AAA examiner says… Report for June also says large numbers of students have a weak understanding of reporting, and hence fail to score many marks in the exam. Candidates are urged to understand fully the proper use of

In brief New FRC chief named Sir Jon Thompson has been unveiled as the new CEO of the Financial Reporting Council. It will be his job to lead the transformation of the council into the Audit, Reporting and Governance Authority. He will take up his new role in the Autumn. Currently the Permanent Secretary at HMRC, Sir Jon is a qualified accountant. Before joining 6

the Civil Service in 2004 he had a mixed public/private sector career working for Norfolk County Council, Eagle Star and then EY. ACCA connections mosaic ACCA wants to create a picture of its global network to celebrate ACCA connections. Members, students, employers, tutors and partners have all been asked to submit a photo. It can be in the form of a selfie, a photograph of you with a fellow ACCA student or a pic of you at an

ACCA event. ACCA will then create a digital piece of artwork made up of photographs from its global network. The final piece of art will be unveiled on ACCA Connections Day – 12 September 2019. Gaming the tax system? The maker of Grand Theft Auto hasn’t paid UK corporation tax for 10 years, despite claiming

more than £42m in tax relief. Think tank TaxWatch says that instead of paying taxes on profits made by sales of the game, the company has been able to claim tax credits from the government under the Video Game Tax Relief scheme. PQ Magazine September 2019

news PQ

Tough line from FRC The Financial Reporting Council has ‘significantly’ increased sanctions and fines as it takes a tough line on poor quality audits, says its first Annual Enforcement Review. A record £43m in fines have been handed out for misconduct and standards breaches. That compares with £15.5m levied in the previous year. Exclusions and ongoing monitoring, to help address misconduct, have accompanied many of the fines. KPMG have the dubious honour of accounting for almost half of the fines.

Come March 2020, some ACCA PQs in the UK will still be able to sit paper-based Strategic Professional exams. This is because the option to sit the new CBE exams will be restricted initially to four cities – and the list doesn’t include London. That means unless you opt to sit exams in Birmingham, Glasgow, Leeds or Manchester you will be sitting the paper Strategic Professional exams. All locations in the Czech Republic and Ireland go CBE-only in March, however. For June 2020, ACCA says all locations in the UK will be CBE. There will be quite a long lead-

London not on the list for first Strategic CBE sitting time across the world, too. Jamaica and South Africa will make the switch in December 2020, and in Malaysia and Sri Lanka it will be June 2021. China, Pakistan and Mauritius will go CBE-only in March 2021, and for Hong Kong its September 2021. June 2021 looks like the last time anyone will be sitting a paper exam. Students should note that once

Strategic Professional CBEs are offered in a location the paperbased exams will no longer be available. This, says ACCA, will allow students to continue their digital journey from Applied Skills, making the transition ‘smoother’ through the qualification. That said, ACCA revealed some ATX and AAA adapted exams will be introduced at a later date than the other Strategic Professional exams.

ICAEW Professional level: all the June results Just two ICAEW professional level PQs out of 6,248 sitters sat four exams in June. It wasn’t a great choice – both failed all four papers! Two, however, remains the magic number if you want to pass all the papers you sit. The pass rate for those sitting two and passing both is 77.9%. This is much higher than those opting to sit one exam. In June, the pass rate for one-paper sitters was 65.8%. Some 6,000-plus candidates sat

a total of 10,923 exams, with 4,566 passing all the exams they took. In all, 1,504 students passed the Professional Level this session, with 840 of these not failing any exams. Tax compliance had the highest pass rate of all at 89.1%, followed by Business Strategy & Technology (87.1%) and Financial Management (83.6%). The paper with the lowest pass rate was Business Planning: Banking at 64.1%.

ICAEW JUNE PROFESSIONAL LEVEL PASS RATES: Audit & Assurance 79.9%; Financial Accounting & Reporting (IFRS) 80.5%; Financial Accounting & Reporting (UKGAPP) 82.8%; Tax Compliance 89.1%; Business Planning: Taxation 83.4%; Business Planning: Banking 64.1%; Business Planning: Insurance 84.8%; Business Strategy & Technology 87.1%; Financial Management 83.6%

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PQ Magazine September 2019

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PQ news

PREM SIKKA Shadow banking is a threat to the economy

Shadow banks wield assets of some $185 trillion and that should set alarm bells ringing. The term ‘shadow banks’ refers non-depository credit facilitating institutions, generally falling outside of traditional banking regulation. They include hedge funds, private equity, unlisted derivatives, unlisted financial instruments, credit default swaps and peer-to-peer lenders. Shadow banks secure resources from traditional banks, pension funds and insurance companies. Any problems in this sector affect the rest of the economy. Yet shadow banking remains lightly regulated. It is not subject to the prudential, capital adequacy, stress tests and other rules applied to traditional banking. Global GDP is around $85 trillion and that indicates the impossibility of rescuing the sector at the next crisis. The 2007-08 financial crash was not caused by mass withdrawal of cash from banks, but by the failure of Lehman Brothers, Bear Stearns and other key shadow banking players to meet their contractual obligations. They indulged in highly speculative practices that did not pay-off. Their failure exacerbated the problems of the traditional banking sector. Private equity firms operate a model based on high leverage, profit shifting and tax avoidance. This model may rescue some ailing businesses but is also implicated in the demise of Bernard Matthews, Maplin, Toys R Us and others. Governments need to regulate the vast shadow banking sector or we will all pay dearly for their failures. Prem Sikka is Emeritus Professor of Accounting at the University of Essex

CIPFA results ‘looking good’ Two paper pass rates over 90% and the Strategic final level success rate on the up all add to another successful CIPFA exam sitting this June. Corporate Governance & Law had a summer pass rate of 92%,

CIPFA JUNE RESULTS Professional Certificate Financial Accounting Management Accounting Company Financial Reporting Audit & Assurance Professional Diploma Public Service Financial Reporting Taxation Corporate Governance & Law Business & Change Management Strategic & Policy Development Financial Management Strategic Strategic Public Finance Strategic Case Study

and the Business & Change Management paper was not far behind on 91%. That is a full 10 percentage points better than the December sitting. Company Financial Reporting also recovered after three poor sets

June 19

Dec 18

June 18

66.0% 83.3% 67.8% 84.9%

69.5% 86.0% 41.0% 74.1%

63.6% 89.2% 59.2% 76.3%

53.0% 76.9% 92.0% 91.0% 76.5% 68.0%

52.1% 79.5% 83.8% 80.2% 80.0% 68.1%

64.0% 77.1% 91.6% 78.5% 75.3% 73.0%

79.4% 74.0%

69.5% 73.2%

72.4% 78.6%

of pass rates, to 67.8% Audit & Assurance was another paper that saw a positive hike in the pass rate. This June, the rate jumped by 10 percentage points (on December 2018) to 84.9%. The Public Service Financial Reporting paper had another low pass rate – 53%. This will be one paper that CIPFA needs to put in some extra resources.

Accountant pleads guilty to upskirting ‘High-flying’ PwC accountant Leon Chan has been caught with 1,700 ‘upskirt’ images after he was seen behaving strangely in Topshop’s Oxford Street flagship store. Chan, who has a first-class degree in economics from Leeds University, pleaded guilty to one count of outraging public decency – namely, filming or attempting to film up the skirts of female members of the public. The 24-year-old (pictured) told a Topshop security guard “I’m really sorry, I’m really stupid”, after Have you ever lied about your accountancy exam results? Well, according to the PQ magazine mental health wellbeing survey one in five of you has felt the need to at some point to lie about your results. Some 17% also admit they have

handing his phone over. Magistrate Victoria Readman told Chan: “We are very concerned in relation to the seriousness of the offence. It is not just the 97 specimen incidents on your memory stick, but the sheer number of images, there were 1,700 of them. We feel this does exceed our sentencing powers.”

PQ magazine

CAMPAIGN missed an exam because they felt too stressed to attend. And one in 10

Readman sent Chan to Southwark Crown Court for sentencing. He has been released on bail until a sentencing hearing date has been decided. • It was only in January this year the UK law was changed, following an 18-month campaign led by Gina Martin. Upskirting is now punishable by up to two years in prison. respondents admitted to taking ‘study drugs’ to help enhance their exam performance. That said, other admitted to copious quantities of coffee and using herbal supplements. • Check out the results in full on pages 16-17

In brief BPP up for sale BPP is being put up for sale by owners Apollo Education Group, according to reports from Times Higher Education (THE). Morgan Stanley has been appointed to handle the process. One of PQ’s sources said that “a lot of people will be sniffing around”. Any change in ownership, however, could attract the attention of the sector 8

regulator – The Office of Students. BPP was bought by Apollo in 2010 for £368m. Two get Notice To Improve Warrington & Vale Royal College and Cheadle and Marple Sixth Form College have been served with a financial health Notice to Improve (NTI). The chairs of governors at both colleges have been sent letters from the Education and Skills Funding Agency warning

them about their current financial health. In Cheadle and Marple Sixth Form’s case there is the concern over the “risk to the solvency” of the college. One body to rule them all The UK government is asking stakeholders if the time is right for insolvency practitioners to have a single regulatory body. Currently, there are five recognised professional bodies who regulate the profession – ACCA, CAI, IPA, ICAEW and ICAS. The government

is also seeking views on the current regulatory framework for insolvency practitioners following changes introduced in 2015. FA19 ‘too early for AATs’ AAT caused confusion recently when it posted its FA19 tax reference material on to its study support pages. Top tutor Nicolas Craggs was quick to help: “I am not sure why it is this early, but you do not need to use this until next year. Exams will still be based on FA18 until the end of this year.” PQ Magazine September 2019

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PQ news

ZOE ROBINSON Is motivation the key to success?

Many questions have been asked in recent weeks of the UK’s new Prime Minister, but one that would have revealed much is, why? Why would anyone want to take on this job? The downsides are many. Becoming leader will mean significant scrutiny both of policy and private life. Perhaps the salary will help? The PM is paid £150,402 a year, not insignificant but compared with other world leaders relatively small. Donald Trump earns £321,000. And when you consider the other lucrative positions that Boris is being forced to step away from, such as his newspaper column, it’s doubtful that this has influenced him. Understanding motivation is an essential component of management, and it helps people to pass exams. Learning is not a passive process – you need drive and commitment to achieve your goals. Although Maslow’s 1943 theory feels old fashioned, it’s still a powerful tool. Basic shelter, personal security and having a sense of belonging need to be satisfied before accomplishment. If asked, many PQs say accountancy offers a secure and stable income; the qualification brings both a sense of belonging to an elite group and a feeling of achievement. So, with most of the motivational boxes ticked, the bad news is you have no excuses! As for Boris, his motivation is, I think, self-actualisation – “what a man can be, he must be”. As an aside, you may have seen the update of Maslow’s hierarchy, with ‘battery’ and ‘wifi’ added to ‘basic shelter’ – an apt reflection of modern-day living! Zoe Robinson is Learning and Programmes Director at Kaplan Financial

Students just not performing in performance management ACCA may need to start doing some performance management of its performance management exams, following the June results! This summer’s PM pass rates were again the worst at the Applied level – 38%. They were even lower than AA, where sitters managed a relatively healthy 39% pass rate. You have to go back to June 2015 to find a lower PM pass rate (37%). Meanwhile, two-thirds of APM and AAA sitters around the world still fail the test each sitting. At 33% and 31% respectively, these optional paper pass rates remain stubbornly low. After sitting the June APM exam one sitter said: “There should be a place in hell for whoever created Q3b.” Many admitted they had to use a lot of “bullshit” to get through Q3. Students do seem to do better, however, at the tax papers. The TX pass rates were a healthy 52%, and

Ex-PQ convicted A failed accountancy student, Salih Khater, has been convicted of attempted murder after driving his Ford Fiesta into 14 cyclists and then speeding towards two police offices outside the Houses of Parliament. Khater studied accountancy at Coventry University between September 2017 and May 2018, but failed the first year of his course. He is believed to have had a grudge against the government after he was refused a passport, despite the fact that he had been given British citizenship. He will be sentenced for attempted murder on 7 October.

KPMG quits building society audits KPMG is to stop auditing around a quarter of the UK’s building societies as it seeks to reduce its exposure to the financial services sector, says Sky News. That means relinquishing the audit work of around 12 mutuals, although sources said some of these audits were reaching the mandatory conclusion, due to the requirement to rotate auditors every 20 years. Audits ‘need to evolve’, says PwC Stakeholders feel that if audits are to have value they need to have a greater focus on the future, providing real assurances about a 10

at 43% ATX is by far the best optional pass rate. Another good news story was the Strategic Professional – Essentials pass rates. SBL saw success rates jump over 50% for the first time – to 51%. The SBR paper pass rates, at 48%, are also holding steady. In all, 125,000 students took just fewer than 160,000 exams. And some 4,923 students completed their final exams to become ACCA affiliates. ACCA’s Alan Hatfield said: “Our qualification connects students to the world of work, on whatever sector they choose. That’s because it rigorously tests the skills, abilities and competencies a modern day accountant needs.” The June 2019 exam pass rates: AB 85%; MA 66%; FA 72%; LW 84%; PM 38%; TX 52%; FR 50%; AA 39%; FM 46%: SBL 51%; SBR 48%; AFM 38%; APM 33%; ATX 43%; AAA 31%

After 14 exams and countless hours of work, as of 00.07 on 15 July Will Tarbox was officially ACCA qualified! He explained: “The hard work has absolutely been worth it.” For reference, that stack of textbooks is almost as tall as him (6’ 1”) and weighs 73kg. Next up for Will is a BSc (Hons) in Applied Accounting and the CTA

Exam freeze ICAEW has come forward to explain some June Tax Compliance sitters had their computer-based exam disrupted by frozen screens. An institute spokesman said that the upgrade of software meant there were some technical problems at the sitting. The exams were quickly restarted and no work was lost. The problem is believed to have affected a few hundred students, and anyone affected by a frozen screen was also given extra time.

company’s future prospects, according to the latest report from PwC. A call for clearer signalling of risk in the annual report, and in turn in the audit report, also came over loud and clear, says ‘The Future of Audit: Perspectives on how audit could evolve’. And there is a need for the going concern assessment to go further too, with a more frequent review by the company and the auditor. PwC’s head of audit, Hemione Hudson, said: “The findings suggest that the audit could go further to address the needs of the business community and investors. This underlines the need for audit to evolve to meet the

The problems were also taken into account at the marking stage, and it was pointed out that at 89%, the Tax Compliance June pass rate was within expectatations. ICAEW contacted students, employers and tutors explaining what was happening. The spokesman stressed that professional bodies will be measured by how they react to problems. “Transparency and openness is key here,” he said.

expectations of stakeholders and to help rebuild trust in businesses and capital markets.” The gender equality winner is… Deloitte was recently named the winner of the Gender Equality Award at the Business in the Community 2019 Annual Responsible Business Gala (now that is a mouthful!). The Big 4 firm has set targets to ensure that, by 2020, 25% of partners, leadership teams and lead client service partners will be female and that by 2030, 40% of the firm’s partners will be female. Women currently make up 21% of partners, that’s up from just 14% in 2014. This year saw a three-fold increase in female promotions from last year. PQ Magazine September 2019

PQ tech news

MIKE DAY Offering accountants new levels of insight

We are already living in a time when cloud accounting vendors have insights never seen before, by anyone. That’s because it’s based on holistic data, not subsets of data or questionnaires. How does Xero know what’s going on with UK small businesses? Well, we produce Small Business Insights. This is anonymised and aggregated data, providing a snapshot of UK firms, and we’ve been looking at this key performance data since 2008. With over 463,000 UK businesses, Xero is the largest source of live, real-time data on the financial health of small businesses. Yes, an accounting software vendor. Think about it: who else has anything more than subsets or superficial data? And that means this data is in the hands of accountants who can enable and assist relevant decision making. For example right now, for SMEs on average it takes 40 days for a 30-day invoice to be paid, which has a huge impact on small businesses cash flow. In February 2019, less than half of UK businesses were cash flow positive. It’s improving, but nowhere near quick enough. What’s even more shocking is that FTSE350 companies are the worst offenders, taking on average 46 days to pay its small business suppliers. More needs to be done. Thankfully, there are some cracking tools available to the accountant. Take the Chaser app – there are many examples of its users driving debtor days down by 15 days. Think of that, and the impact on cash flow. It’s often the difference between thriving and surviving. Mike Day, Director, UK Education Sector, Xero

CYBER ATTACK ON UNI Students’ personal data has been stolen in a sophisticated and malicious cyber attack on Lancaster University. College officials have admitted that the information has already been used to send bogus invoices to this year’s applicants. Lancaster has reported the incidents to the Information Commissioner’s Office and law enforcement agencies. A 25-yearold man from Bradford has been arrested on suspicion of committing Computer Misuse ACT and fraud offences. In a press release, the university said it is aware of two breaches: • Undergraduate student applicant data records for 2019 and 2020 entry have been accessed. This

includes information such as name, address, telephone number and email address. The university said it was aware that fraudulent invoices are being sent to some undergraduate applicants. It alerted applicants to be aware of any suspicious approached. • A breach has also occurred of the

Retail body warning of anti-fraud ‘time bomb’ Tough new anti-fraud rules could make it nigh on impossible for online retailers to process transactions and cost businesses millions of pounds worth of sales, according to the British Retail Consortium. From September 14, all purchases worth more than £30 will require two-step authentication, such as a bank card and password, or a mobile phone and a

university’s student record system and a small number of students have had their record and ID documents assessed. It advised applicants, students and staff to contact it if they receive any suspicious communications via email. The address is fingerprint. The aim is to make online transactions as secure as those in a shop, where the chipand-PIN system operates. The BRC’s Andrew Cregan said: “The government and Financial Conduct Authority must ensure a consistent and coordinated approach to implementation, clearly explaining the upcoming changes to consumers and businesses alike if we are to avert significant disruption.” Liberal Democrat MP Chuka Umunna said he was “staggered the government is not doing more about this ticking time bomb for online retail, which is on track to cause major disruption.”

Beleaguered Facebook hit with record £4bn fine Facebook has been told it must restructure its privacy policy and reduce the controlling influence of founder Mark Zuckerberg as part of a regulatory settlement that will see them hand over £4bn. The fine, handed out by the Federal Trade Commission (FTC), came just hours before Facebook released financial results that showed quarterly

revenue rising year-on-year from $13.2bn to $16.5bn. The FTC was investigating allegations that the social media platform had shared the information of 87 million users with Cambridge Analytical – the British political consulting firm (now closed down). Facebook is still facing a further FTC investigation into anti-competition practices.

Tech briefs Time to ‘merge with AI’ Billionaire Elon Musk has revealed plans to develop technology to connect the human brain to a computer interface. The system, developed by his NeuraLink company, has been tested on a monkey. NeuraLink has applied to US regulators to start trialing its devices on humans. Bulgaria’s tax agency hacked Cyber-security experts believe most adults in Bulgaria (there are seven million of them) have had 12

their data compromised by hackers. And Bulgarian authorities have now arrested a 20-year-old man on suspicion of involvement in an attack on the country’s tax agency. Stolen data included names, addresses, and details of income. It is being claimed that the attack may be in retaliation for the country’s purchase of eight US F16 fighter jets for $1.62bn. 02’s October date for 5G O2 has announced plans to turn on its 5G mobile network in

October. It will start the nextgeneration service in London, Leeds, Cardiff, Edinburgh, Belfast and Slough. By the summer of 2020, O2 wants to have expanded this to 50 towns and cities. O2 will be the last of the UK’s network providers to roll out 5G, and will be using Ericsson and Nokia to do so, not Huawei. Cyber attacks triple The number of cyberattacks on British business has tripled in the past year, according to internet

service provider Beaming. Analysis of computer data from thousands of companies discovered they are targeted by an average of 146,500 cyberattacks each in the second quarter. That’s up from just over 50,000 in the same period last year. One in seven of these attacks were from China, and there was also ‘substantial activity’ from Taiwan and Egypt. Beaming pointed out, however, that sophisticated hackers can mask and falsify their location, so the IP address is not a proof of origin! PQ Magazine September 2019

tech news PQ

Concern raised over Libra Amazon to be investigated The EU Competition Commission has opened a formal antitrust investigation into Amazon. This time it is over the use of thirdparty sellers’ data to gain an unfair advantage. The investigation will examine whether Amazon has been abusing its dual role as seller of its own products and a marketplace operator. EU Competition Commissioner, Margrethe Vestager, said: “Ecommerce has boosted retail competition and brought more choice and better prices. We need to ensure that large online platforms don’t eliminate these benefits through anti-competitive behaviour. I have therefore decided to take a very close look at Amazon’s business practices… to assess its compliance with EU competitive rules.”

The G7 finance ministers have cast doubt on Facebook’s plans for a digital currency. They have demanded that all regulatory issues are address before ‘Libra’ is allowed to launch. At a recent meeting in Chantilly, French finance minister Bruno Le Maire said: “We cannot accept having any exchange currencies with the same kind of power and the same kind of role as sovereign currencies.” German’s Olaf Scholz felt that Facebook’s plans did not appear to be fully thought through.

He was particularly worried that there weren’t sufficient data security protections in place. France is the current chair of the

G7 and it has asked the European Central Bank to set up a task force to look into the whole issue of crypto-currencies and digital coins. The IMF’s chief economist, Gita Gopinath, stressed that Libra raised many issues, including consumer protection, data privacy and potential “backdoor dollarization”. She is worried it could become a reserve currency by default and give Facebook huge power without any regulator oversight. Sound familiar? She was also concerned that Libra would be a go-to currency for the money launderers.

Security agency beats airport scammers A scam to defraud thousands of UK citizens using a fake email address spoofing a UK airport was one of a wide range of cyber attacks successfully prevented by the National Cyber Security Centre (NCSC), says a new report. The thwarting of the airport scam was one example in 2018 of how the UK’s active cyber defence (ACD) programme helped protect the public. The incident occurred last August, when criminals tried to send in excess of 200,000 emails purporting to be from a UK

airport and using a non-existent address in a bid to defraud people. The latest ACD report, measuring the impact made by the NCSC (which is part of GCHQ), found that last year it stopped 140,000 phishing attacks and took down 190,000 fraudulent sites. A combination of ACD services has also helped HMRC’s own efforts in massively reducing criminals’ use of their brand. HMRC was the 16th most ‘phished’ brand globally in 2016, but by the end of 2018 it was 146th in the world.

PQ with AAT, ACCA, ICAEW or CIMA? Why wait? Join ICB today! Fast track your career by using your existing qualifications to join the world’s largest bookkeeping organisation. As a Certified ICB Bookkeeper you’ll benefit from:

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405 4000 and quote ICBPQ

Email us at PQ Magazine September 2019

The Institute of Certified Bookkeepers




AAT to ACCA Fast Track

If you’ve completed the AAT Professional Diploma in Accounting you’ve already started your journey to ACCA. You will receive free exemptions, meaning you will get a head start and qualify sooner. Find out more and claim your free exemptions:

“I chose ACCA because it’s the largest and most global professional body, and I believe it can take my career much further than other qualifications.” Joanne McCourt, Commercial Insight Manager, New Look

back to basics PQ

How to measure NCI Concerned about the calculation of goodwill because it involves NCI? Tom Clendon explains how NCI can be measured and the consequences to the measurement of goodwill and accounting for impairment losses So what is non-controlling interest (NCI)? On the consolidation of a subsidiary, IFRS3 Business Combinations requires that where the parent has not acquired 100% of the shares in the subsidiary, then the other shares are termed the non-controlling interest (NCI). Thus, when the parent acquires a controlling interest and establishes a subsidiary by buying say 80% then the NCI will be 20%. Consequently, the post-acquisition profits and losses of the subsidiary are shared in this proportion. To calculate goodwill, the NCI at the date of acquisition is introduced as a consolidation adjustment. This key ingredient in the calculation of the goodwill will also be part of the group’s equity and be increased by the NCI share of the subsidiary’s postacquisition profits. NCI at the date of acquisition can measured at either: i. fair value (FV), meaning the value is based on the market value of those shares and is said to give rise to full goodwill; or ii. as a proportion of net assets, meaning it is measured based on the net assets at acquisition and is said to give rise to proportional goodwill. Both methods are examinable, but it is always made clear in exam questions which measurement basis has to be used. What you need to understand, and be able to apply, is that the method chosen to measure NCI at acquisition will have a direct impact both on the measurement of the goodwill arising and how any impairment loss on that goodwill is accounted for. NCI as used in the goodwill calculation The following workings actually set out how NCI is used to calculate the goodwill and the consequences of using either method of measuring NCI at acquisition. With NCI at FV With NCI as a proportion of net assets FV of the consideration paid by the X FV of the consideration paid by the X parent for its controlling interest parent for its controlling interest NCI at the date X NCI at the date acquisition X acquisition at FV (i) as a proportion of net assets (ii) Less the FV of the net assets of the (X) Less the FV of the net assets of the (X) subsidiary at the date of acquisition subsidiary at the date of acquisition Goodwill arising at acquisition X Goodwill arising at acquisition X (full goodwill) (attributable to the parent only) Less impairment loss (split between (X) Less impairment loss (wholly charged (X) group retained earnings and the NCI) to group retained earnings) Goodwill at the reporting date X Goodwill at the reporting date X Let’s look at the calculations required to initially measure the NCI at the date of acquisition using each of the methods identified above and clarify the consequences when impairment losses have to be accounted for. i) NCI measured at fair value = goodwill in full = split the impairment loss with the NCI The FV of the NCI at acquisition is measured by taking the shares in the subsidiary not owned by the parent and valuing them at their market value:

PQ Magazine September 2019

NCI% x Number of shares in the subsidiary x Market value (share price) = NCI at FV Because of measuring NCI at FV, the goodwill arising at acquisition is full goodwill; that is say goodwill is both attributable to the parent and the NCI. This means that when there is an impairment loss on full goodwill, the parent’s share is charged to group retained earnings and the NCI’s share against the NCI. ii) NCI measured as a proportion of net assets = goodwill attributable to the parent = charge all the impairment loss to group retained earnings Alternatively, NCI at acquisition can be measured at their proportion of the subsidiary’s net assets. NCI % x FV of the subsidiary’s net assets at acquisition = NCI as a proportion of net assets Because of measuring NCI as a proportion of net assets the goodwill arising at acquisition is attributable to the parent only. This means that when there is an impairment loss on the goodwill, all the impairment loss is charged to group retained earnings and none to the NCI. Conclusion So now you know the different ways to calculate NCI and the impact that it has on how impairment losses are accounted for, it is important that you go away and practise these calculations! PQ • Tom Clendon is the AVADO lecturer for ACCA SBR and FR


PQ wellness survey

PQ readers reveal what life is really feels like for the class of 2019


e know that one in four people in the UK will experience a mental health problem each year. The charity Mind says in England one in six report experiencing a common mental health problem (such as anxiety and depression) in any given week. However, while the overall number of people with mental health problems has not changed significantly in recent years, worries about things like money, jobs and exams can make it harder for people to cope. Mind explains that people’s ability to cope with mental health problems is diminishing, as the number of people who self-harm or have suicidal thoughts is increasing. This got PQ magazine thinking. We wanted know if the professional accountancy bodies and tutors were doing enough to support students who might be struggling with balancing their studies, exams, work and life in general. Should they have a duty of care for you?

Bodies need to do more The results of our ground-breaking survey showed over two-thirds of respondents (68%) believe their accountancy body should be doing more to safeguard students’ wellbeing. While some 17% were ‘unsure’ about the role the bodies should be taking, just 15% said they

How’s your

were doing enough [Editor – which is not a lot]. A big worry for the bodies should be the fact that over half of the PQs who took our survey (52%) said they would worry about contacting their professional body about their mental health issues. Another 24% were not sure how they would react if they had to contact them. And 75% wouldn’t know who or where to contact if they did have a problem – which seems a real shame, and needs to addressed immediately. One respondent said: “At times you feel the people behind these professional bodies are really not human. They simply treat us like robots.” Another PQ said: “Professional bodies need to step up to support students and safeguard their mental health.” And another said: “It does feel like these accountancy bodies don’t fully appreciate the impact of doing these exams really has on your life.” Here’s their personal story: “I work five days a week as an accountant, which is stressful enough on its own. I attend classes in the evenings so I can spend Saturday revising and Sunday doing chores and trying to catch up with family and friends. It

Does the stress of exams mean you have trouble sleeping?

Yes No Sometimes

leaves almost no time for me and often I have to go months not seeing close family. I’ve had to give up any fitness regimes because there is just no time. I have had to put off having a family for a few years because I can’t imagine how I would fit in looking after children while studying. So, my life has been on hold while I know my body clock is ticking in the background. This may seem like

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PQ Magazine September 2019

wellbeing? a small sacrifice; however, it does lead to resentment towards the qualification you are studying so hard for. As a result I’ve cried many times from sheer frustration. It begins to feel like all you do is sleep, work and study as there’s no time for anything else. I have also lost a lot of friendships. The exams are not the sole reason for the stress, it’s trying to juggle everything else in life alongside it and it really does get you down.”

Where’s the help from providers? We were also a little shocked by the number of PQs who said their college/tuition provider did not offer good mental health wellbeing support. Just over 15% of you said it was good; the rest

Yes Does healthy eating go out of the window when you are getting closer to exams?

No Sometimes

said a straight ‘no’ (47%) or were unsure (38%). Employers aren’t helping, either. Some 61% of respondents said their employer does not understand the pressure they are under while studying for accountancy exams. Colleagues also seem mainly unsympathetic (60%) about the pressures faced by PQs trying to balance study and work commitments. As one PQ said: “Non accounting staff find it difficult to understand my exam struggles, they think [they are] just ordinary exams.” Another told us: “I’m not usually stressed about the exams. However, it would be very useful if my employer understood under how much pressure I am [under] trying to juggle between job, personal life and studies.” Well, sorry to say, it appears from our survey that the accountancy bodies, tuition providers, and employers are all seemingly struggling to provide the support today’s accountancy students are looking for. You seem stressed So what about the actual process of qualifying? Today’s PQ accountant admitted it was tough getting the right work, life and exam balance. A whopping 83% said they found it hard. We also discovered well over half of you PQ Magazine September 2019

(56%) said that the exam process had left you in tears (see our August front cover). The stress of it all meant that 88% of PQs said they have real difficulty thinking clearly in the revision phase (‘yes’ or ‘sometimes’). A massive 93% said they feel anxious about the accountancy exams. In itself this isn’t necessarily a problem. But when you add in the fact 78% of PQs feel isolated and another 80% have problems relaxing during the exam phase then you can see the problem of creating a safe, wellbeing environment mounting. We also asked PQs if they had ever lied about their accountancy results, and 78% said ‘of course not’. But that left one in five who have! PQs were questioned about their use of ‘study drugs’ to help performance in exams. Just one in 10 admit to using these – still, that’s 10%. One respondent explained: “I don’t take study drugs to improve my concentration. However, I do rely on legal herbal supplements, etc, to help aid sleep and anxiety (calms and rescue remedy).” Another asked: “Are there any side effects if I am taking a lot of coffee in my preparation for exams?”

The way forward There is little doubt that the need for resilience and being able to cope with stress are now key to passing your accountancy exams. But, as one PQ put it: “It is difficult to know what is an acceptable level of stress, as I have got closer to finishing my exams, my anxiety levels are through the roof. I had to take anti-anxiety medication to attend my last two papers because I wasn’t sleeping.” Another pointed out: “The stress levels of working in accountancy practice full-time and studying on top of that is very high. Everyday I live [with] anxiety and have trouble concentrating and sleeping at night to the point where I no longer find enjoyment in life.” Both would probably agree with this student, who said: “I think mental health is a very big

Yes Have you ever felt you had no-one to talk to about your exams and stress?


wellness survey PQ

Useful links: • • • issue and the constant pressure caused by exams, accountancy bodies and employers does not help, either. I hope the bodies change their behaviour and look at supporting PQs more.” One thoughtful respondent suggested all accountancy bodies should have a student support number available 24/7, where PQs can turn to for advice and support, or just get the stress of their chest. He felt tuition providers should also offer support via a dedicated email address, or other ways, for students who are struggling with mental health issues. These tuition providers also need to communicate more frequently with tips and ideas on ways to improve mental wellbeing. It can be as easy as saying: “Have a night off”. In truth we were shocked by how stressed and unsupported many PQs felt. We believe it is now time for the professional bodies and private tutors to step up to the plate and take this challenge head on. This problem isn’t going away any day soon… PQ



Have you ever missed an accountancy exam because of stress? 17

PQ wellness initiative x

Book-keeping happy The ICB’s Ami Copeland explains why the institute is building wellness into its new CPD framework


s a membership body, the Institute of Certified Bookkeepers (ICB) is here to help bookkeepers be the best they can be and to get the recognition they deserve. We are our members’ lifetime career coach and we care about their wellbeing, not just their technical expertise. ICB is about more than just a qualification. We are a community. We support each other and we thrive on each other’s success. That is why we're building ‘wellness’ into our CPD Framework. Time and time again I see our members spending more time and energy looking after their clients than themselves. We also have a predominantly female population, and that’s unique among the main accountancy bodies. Some 72% of ICB members are women and it’s well-documented that women are more likely to put pressure on themselves to be perfect. For example, an internal survey of women working at Hewlett-Packard found women applied for a promotion only when they met 100% of the qualifications. Men applied when they met just 50%. If we are to lead the way for future generations of entrepreneurs and business leaders, it is vital that we recognise these self-limiting traits and the pressure we put on ourselves. I think it’s important that ICB looks beyond technical qualifications to embed wellness and self-belief into the model of a successful bookkeeper. That’s why we are working on providing more content and resources to help our members

build resilience and develop self-care strategies. We will be focusing on personal effectiveness, adaptability and reflection, and encouraging our members to take time out and look after themselves. We have a bold plan to run an annual ‘Wellness Weekend’ (from 2020), where members can invest in themselves and spend two days with fellow bookkeepers to de-stress, unwind and set their intentions for the year ahead. At the end of the day it’s about finding balance. We can’t predict what is going to happen, but we can control how we react. We can make a conscious decision to look after ourselves and build the physical and emotional

resilience to handle everything life throws at us. Some of our members were practically born bookkeepers but, for most, this profession has given them a second chance. This is their moment to shine and to make a difference, to spend more time with their family and be their own boss. Bookkeeping is a very noble profession and ICB bookkeepers are bringing economic prosperity to themselves, their families and to millions of small businesses across the UK. ICB bookkeepers have disrupted the accounting industry and they are the future. We will support them every step of the way. PQ • Ami Copeland is the ICB's director of communications

PQ viewpoint

Is media content the new tech? There’s a sizeable shift happening in the tech world, and it’s set to have a profound effect on the way that we learn, says Mark Mckenna


ou may have seen Apple’s ‘Behind the Mac’ advert that aired a few months ago. It featured, among many others, Oprah Winfrey, Malala Yousafzai, Serena Williams, Paul McCartney, Dave Grohl – and even Kermit the Frog. However, the most interesting thing about this advert was what it didn’t do. It didn’t promote a new iPhone or Apple Watch, or in fact any new hardware at all. As iPhone sales stagnate, this advert marks Apple’s shift to producing and streaming media content. Along with Disney, who have confirmed similar intentions, they’ll be joining the likes of Netflix and Amazon in creating their own original media content… to the tune of billions of dollars.

How does that affect PQ readers? Apart from a plethora of new shows to enjoy (when you’re not studying, of course), growing investment in media content is raising 18

expectations about the quality and ease of access to our online learning experience. The more we become accustomed to viewing high-quality movies and TV programmes on fast servers with an interesting user interface – and on any device – the more we will demand this from our educational experience, too. Colleges and training providers are recognising and reacting to this change. Many of you will have seen significant improvements in your online learning experience, and will be lucky enough to have tutors who can use

content and tech effectively when they teach. At Mindful Education, we’re leading the charge when it comes to blending media-rich online content with regular face-to-face accounting classes at our college partners – an approach we believe provides the best of both worlds for learners. With our lives lived increasingly online, it is content – rather than tech – that looks set to become king. Tellingly, Pearson, the world’s largest education company, recently announced that it will be phasing out textbooks completely as it seeks to digitalise all its content for users. If you’re at the start of your accounting education, or are planning to continue your studies for a few years, you’re set to experience a sea-change in the way you learn and, thanks to some big names, the quality of your online learning experience. PQ • Mark Mckenna is the founder and managing director of Mindful Education PQ Magazine September 2019

Accountants will save the planet! Thursday 21 November 2019 The Business School, London South Bank University Following the success of our previous accounting conferences, we are hosting a packed day conference looking at green accounting issues. Hear from renowned experts and industry leaders on current and future aspects of green accounting. Network with other professionals and join the discussion.

If you’re interest e green ac d in counting issues, t his is to be mis not sed!

• What are the practice implications of carbon taxes? • How do we account for corporate social responsibility? • What are the developments in green financial reporting? • How can we maximise non-renewable resources as accountants? • Rather than accounting for profit or loss, how can we best look at the effect on the environment?

Booking will open in Autumn

Winner of Innovation in Accountancy PQ Awards 2019

304-1819-MAR-BUS-PQ CONFERENCE AD_270x210_V2.indd 1

03/06/2019 16:37

PQ ACCA exam tips

Got your number What’s can you expect in this September’s exams? BPP’s top team give their tips PERFORMANCE MANAGEMENT The exam will be approximately 40% calculation and 60% discussion, meaning that it is not sufficient to be able to perform all of the calculations. Interpretation and application are crucial, especially in section C. Best advice for section A and B is study all areas. Students should also expect the unexpected. Areas you can expect to be tested in section C are budgetary systems, planning and operational variances, mix and yield variances and evaluation of the company performance (either as a whole or on a divisional basis). You are strongly advised to plan answers to section C questions before starting to write. Ensure you make reference to the scenario in your answer. TAXATION Expect some OTs to be devoted to the administration of income tax and corporation tax. That means you must be comfortable with the following: • Due dates for payment of income tax (including payments on account). • Due dates for the payment of corporation tax (including instalments for large companies). • Filing dates for income tax and corporation tax returns. • Penalties and interest for late payments and returns. Other topics likely to be tested in section A are: • VAT rules on registration, impairment loss (bad debt) relief, and the SME schemes relating to cash accounting, annual accounting and flatrate 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 corporation tax loss reliefs and gains. • Trading loss reliefs for both companies and sole traders.


Section A offers the TX team the opportunity • Relief for pension contributions. to test the whole syllabus – so practise all kinds • Adjustments to profit to arrive at trading of questions. income for both companies and sole traders – in At least 50% of your revision time has to be past sittings we have seen a number of spent answering the section questions whereby you have to C questions in practice and correct errors in computations revision kit to build up included in the scenario. confidence and speed • Capital allowance computations. in a way that will also maximise marks. FINANCIAL REPORTING Remember to learn Section A’s 15 two-mark OTs will your income tax and be on a wide range of topics, corporation tax pro including several on consolidation formas. and interpretation of financial Calculations that statements. Expect a few require no more than questions on inflation and two or three entries into specialised entities. your calculator can be In section B, questions are not These tips should only be used included on the face of dependent on each other and can in conjunction with proper your pro formas (eg time be answered in any order. Each study. We cannot guarantee apportioning a salary), that these topics will appear in scenario could be a mix of topic calculations which are the actual exam as we have not areas or focused on one topic and more complex (eg will usually consist of two or three seen the exam papers. company car benefits) calculations and two or three Examiners are not predictable need separate workings narratives. so it is vital that all core that are properly Section C has two 20-mark syllabus areas are revised fully. referenced (W1, W2, etc) questions, one covering The tips are based on our and have a heading. interpretations and the other experts experience and Attempt the narrative preparation of financial statements. understanding of the ACCA parts of the requirement – exams and will help focus your One question is likely to be in the aim for as many sentences context of a single company and last minute revision. Please as there are marks with one in the context of a group, so also read all the Examiner’s each sentence containing you could have a single company Reports – available on the something technical. Keep interpretation and a groups ACCA website your paragraphs to no preparation or vice versa. more than three sentences long. Accounts prep questions may include extracts In both numerical and narrative answers leave or standalone calculations or full statements of plenty of space on the page. So in pro formas profit or loss and other comprehensive income leave a gap between each line (you may need to and/or statement of financial position. add something in). Show workings down the Both questions will cover the accounting for pages rather than across the page as it makes items from other areas of the syllabus. them easier to mark. In narrative answers leave They may include a short separate part, eg a line or two between each paragraph just in with a statement of changes in equity, statement case you remember something later. Wellof cash flows extract, earnings per share spaced answers are also easier to mark! calculation or linked written topic. You know the two longest questions will focus A consolidated question would include one on income tax and corporation tax. These are subsidiary and often an associate, with likely to include the following: adjustments, eg fair values, deferred/contingent • Employment benefits. consideration, PUP on inventories/PPE, • Property income. intragroup trading and balances, goods/cash in


PQ Magazine September 2019

ACCA exam tips PQ

transit. A single entity question could be preparation for a trial balance or restatement of given financial statements, with the usual adjustments for depreciation, revaluation and current/ deferred tax (including deferred tax on revaluations), plus a mixture of adjustments on other syllabus areas, eg lease, substance over form issues, financial instruments (change in fair value or amortised cost), share issues, government grants, inventory valuation, revenue recognition or construction contracts. AUDIT & ASSURANCE Each mini-case question in section A will test single topic areas of the syllabus and so will either test syllabus area A, B, C, D or E. You can particularly expect questions in section A to focus on syllabus areas A and E. All three questions in section B will be broken down into sub requirements and be scenario based. The majority of marks in each question will test syllabus areas B, C and/or D. Areas expected to be tested in Q16 and Q18 include: • Audit planning. • Audit risk (identification and explanation of audit risks from a scenario and explanation of the auditor’s response to each risk). • Internal audit. • Internal controls (identification and explanation of deficiencies in internal control and the recommendation of suitable internal controls or description of tests of controls). • Audit procedures (both substantive procedures and tests of controls). FINANCIAL MANAGEMENT Section A questions will often be knowledge based (testing your knowledge of key technical terms) and will balance out the questions in section B and C. It is therefore likely that a good number of these questions will test your understanding of financial management and objectives (ratio analysis, the concept of shareholder wealth), as well as the economic environment and financial institutions topics (financial intermediation, fiscal PQ Magazine September 2019

and monetary policies). The efficient market hypothesis is likely to be tested here, too. Areas in section B expected to be commonly tested in this section are working capital management (eg the operating cycle, the impact of a change in credit period or accepting a factor’s offer), business or security valuations (eg methods of valuation), and financial risk management (most likely mainly in the form of currency risk, but it is possible that at least an aspect of interest rate risk is examined here). The two section C questions will focus mainly on syllabus sections C, D and E. Section C is working capital management, section D is investment appraisal and is likely to feature NPV with inflation and tax. Section E is business finance; either an evaluation of financing options (interest coverage and gearing ratios are likely to be important here) or a cost of capital and analysis are most likely. Whichever of these three topics does not feature in section C is likely to appear in section B. STRATEGIC BUSINESS LEADER Welcome to your first ACCA four-hour exam! SBL builds upon the knowledge that you gained at the Applied Knowledge and Applied Skills levels. However, it does also have its own distinct syllabus content. The exam will focus on one main organisation, and all of the question requirements will relate to this organisation. You may have to take on a variety of roles, which may require you to adopt an internal or external perspective when answering questions. You will also be required to respond to a variety of people within the organisation. All the questions in the exam are compulsory and will consist of 80 technical marks and 20 professional skills marks. ACCA recommend spending 40 minutes reading, planning and interpreting the requirements and the information/exhibits provided. Based on this estimation, when planning the amount of time you will spend on each requirement you should look to allocate 2.5 minutes per mark on offer. To stand the best chance of passing the SBL

exam you need to have a good understanding of the entire syllabus. However, remember that questions will not ask you to simply regurgitate your knowledge of a particular topic or theoretical model. Furthermore, requirements will not specifically ask you to use a particular model in answering the question. Whether to use a theoretical model when constructing your answer will be a matter of judgement that you will need to weigh up in light of the information presented to you in the exam. STRATEGIC BUSINESS REPORTING The first question in section A will be based on group accounting and may include complications such as a foreign subsidiary, discontinued activities, disposals and/or acquisitions. Be aware that this question may test consolidation statements of cash flows as was the case in December 2018. In answering the questions, it is vital that you explain the principles underlying any calculations you have performed, as this is where the majority of the marks can be earned. The second question will cover the reporting and ethical implications in a given scenario. Make sure you consider any threats to the fundamental principles of ACCA’s Code of Ethics and Conduct in your answer. Section B can deal with any area of the syllabus and may be based on a short scenario, a case study with several parts, or an essay. Section B will always include a question or part-question involving the analysis or appraisal of information from the perspective of a stakeholder. For example, in the December 2018 exam this involved explaining the nature of tax accounting in the financial statements to an investor. Current issues could be examined in either section A or section B. The Conceptual Framework has featured significantly in SBR exams to date – be prepared for this to be the case in September 2019 as well. ADVANCED AUDIT & ASSURANCE There should be no surprises here. Section A

Continued on page 22 21

PQ ACCA exam tips

Got your number Continued from page 21 will comprise a case study, worth 50 marks, set at the planning stage of the audit, for a single company, a group of companies or potentially several audit clients. You will be provided with detailed information that will vary between exams, but is likely to include extracts of financial information, strategic, operational and other relevant information for a client business, as well extracts from audit working papers, which could include the results of analytical procedures. Four professional marks will be available in section A, so think structure, layout and clarity here. In section B, one question will always predominantly come from syllabus section E, and consequently candidates should always be prepared to answer a question relating to completion, review and reporting. There are a number of formats this question could adopt, including but not limited to the assessment of going concern, the impact of subsequent events, evaluating identified misstatements and any corresponding effects on the auditor’s report. Candidates may also be asked to critique an auditor’s report, or a report that is to be provided to management, or those charged with governance. The other section B question can be drawn from any other syllabus section, including A, B, C, D and F. Syllabus section G on current issues is unlikely to form the basis of any question on its own, but instead will be incorporated into the case study or either of the section B questions, depending on question content and the topical issues. ADVANCED FINANCIAL MANAGEMENT From September 2018, every exam has had questions that have a focus on section B of the syllabus (advanced investment appraisal) and section E (treasury and advanced risk management techniques). Questions in section A are often based on core syllabus areas such as project appraisal (domestic or overseas), business valuations and business/financial reorganisations; these areas often include cost of capital calculations. Risk management may also feature in a number of different ways – eg value at risk, real options, hedging, risk mapping. For question 2/3 expect risk management (currency or interest rate), dividend policy and

general financing issues, or real options. Remember, this paper is not a maths exam – in all exam questions the examiner is interested in your ability to communicate well. ADVANCED PERFORMANCE MANAGEMENT Q1 will focus on a range of issues from syllabus section A (strategic planning & control), section C (performance measurement systems and design), and section D (strategic performance measurement). In recent exams Q1 has often required linking a business’s mission to its performance objectives using the concept of CSFs and KPIs. You may well also have to critique and recommend improvements to performance reports and the balanced scorecard could well be tested in this context. The assessment of performance is also likely to be tested and this could easily include benchmarking as a theme. Financial performance measurers (ROCE/ RI/EVA, etc) are also likely to be commonly examined in Q1, but don’t neglect non-financial issues from syllabus D such as quality management and reward systems. In section B, commonly tested areas include quality management, information reporting (eg big data, lean information), the application of

strategic models (such as PEST, Porter’s 5 forces, the value chain), HR frameworks (eg reward and appraisal systems), risk management and environmental management accounting. ADVANCED TAXATION One question in section A will focus on personal tax issues and the other on corporate tax issues. In question 1 there will be four professional skills marks and in section A there will be five marks on ethics. Topics/scenarios you can expect to see: • Personal income tax scenarios which could involve – investing in a pension; investing in EIS, SEIS or VCTs, share schemes; employment income possibly with termination payments; a personal service company; property income or a takeover. • Unincorporated business – particularly including loss reliefs, partnerships or basis period rules. • A question focusing on overseas issues – this could be income tax, capital gains tax, inheritance tax or a corporate scenario. • Capital gains tax versus inheritance tax including availability of reliefs. • Corporate scenarios – likely to focus in more depth on intangibles; research and development; losses; corporate groups or consortia. • Special corporate scenarios such as liquidation; purchase of own shares; close or investment companies. • A business transformation scenario question such as selling a sole-trader business, incorporation or, in a corporate context, the sale of shares versus the sale of trade and assets. • Other common types of question/calculation to expect are: – reviewing a pre-prepared computation to spot, explain and correct errors. – calculations such as ‘tax saved through an action’, ‘after-tax proceeds’, ‘the value of a posttax inheritance’, ‘Net spendable income’ or the ‘Net of tax cost of something’. Don’t forget that across the scenarios we will typically expect to see VAT marks available – partial exemption, land & buildings, transfer of going concern, capital goods scheme, overseas VAT and registration/group registration tend to be frequently examined. There will also likely be a couple of marks for stamp duty points if you remember to think about it in your planning. Finally, don’t forget basic administration points are likely to be examined – when do we need to pay tax, when do we file a return and what if either of those are late? PQ

Free Notes, Lectures, Tests & Tutor support for

ACCA & CIMA Exams Visit to benefit 22

PQ Magazine September 2019

interview PQ

A rebel with a cause Sunil Bhandari is a well-known (and often provocative!) accountancy tutor and our resident expert for ACCA FM, ACCA AFM and CIMA F3. Clearly, he doesn’t know when to quit, as he’s been a tutor since 1986! PQ: Why did you choose to become a tutor? Sunil: I was taught by some really good, inspirational tutors, people who treated each student as an individual. Tony Unett and Bob Phelps (Financial Training – FTC, now Kaplan, in Birmingham) in particular were brilliant. They were larger than life personalities with a clear mission to teach – a cause, if you like. I remember saying: “This is amazing, I’ll try it for a year.”

PQ: How have you kept your motivation? You are teaching the same subjects over and over again? Sunil: That’s easy! First, I’m a perfectionist, and there is always something to do better. I learn something new every season, especially in the online space with new tools and approaches coming out all the time. Second, no two students are the same, so I get to meet new people each season. Third, I just love teaching.

PQ: Did you find it challenging? Sunil: Of course! In those days there were no standard notes – you had to write your own. I was training ICAEW students on block release courses, and while the students were great, they could ask tough questions for a ‘green about the ears’ tutor. It was a steep learning curve. PQ: There was no CIMA or ACCA classroom courses? Sunil: Not at first. CIMA and ACCA trainees used to go to the local state colleges, with the private sector entering the market later. I got into ACCA/CIMA classes when I joined BPP and set up their Birmingham business. The class sizes were huge – 50-100 per room. Local colleges and private sector trainers still compete head to head, as you can see in PQ magazine. That’s great for the students, because if you look you can find good tutors for particular subjects in either market. PQ: Do you think the exams are easier or harder now? Sunil: That’s easy: they’re far harder. Syllabuses have grown and the questions are tougher. Plus, the pressure to pass first time is greater, and many students have less time off to study. That’s why we have seen the huge growth in evening, weekend courses and now online courses. PQ: How has that changed your role as a tutor? Sunil: I am glad you used that word ‘tutor’ and not ‘lecturer’. A tutor provides the support a student needs to pass, not just the knowledge. Of course, students get my email address, but they also get my mobile number, a WhatsApp support group and regular unsolicited contact from me asking them for their homework. PQ Magazine September 2019

now I use carefully crafted videos, which I regularly re-record, and support these with WhatsApp, email and phone. I also make one-to-one phone videos for individual students, for example on debriefing questions, etc. It’s all about having the core syllabus covered via general, up-to-date videos, but then treating students as individuals to address their personal issues.

PQ: It sounds like a great career choice for some recently qualified accountants. Sunil: This will surprise you, but when my own daughter proposed becoming a tutor I strongly advised against it.

My students deserve to get help ASAP (outside Manchester United game time). I always say ‘give the students the best chance to pass’. PQ: How do you use WhatsApp? Sunil: I answer any question asked that’s relevant to that group. Other students may chip in with supplementary questions, and benefit from the questions of others, but I’m not a great fan of students answering other student’s questions – I call it the blind leading the blind. Students rarely have the time to work things out from scratch: they need a tutor to present clear solutions quickly. A board of directors gets expert support from knowledgeable staff, and a student needs a decent tutor on their team. PQ: What about lectures and webinars? Sunil: I used to offer webinars, but most students only viewed the recordings. So

PQ: Why was that? Sunil: In 1986, new tutors could double their salary as compared with the profession. You were only working on weekdays. There was plenty of holidays. Today it’s different. Practice and industry pay more, antisocial evening and weekend teaching is the norm, and with four exam seasons a year there’s no ‘slack season’. But, most importantly, there’s less room to innovate: most organisations tell you when, how and what to teach. I prefer to have a free hand and to be judged on my pass rate, but new tutors don’t have that luxury. PQ: How would you summarise your teaching career? Sunil: I always consider myself as a rebel. I shoot first, ask questions second, sometimes to my detriment. I seek challenges. My cause has been to innovate: to do things differently that benefit my students and help them pass. So, I’m ‘a rebel with a cause’. PQ: Last question. If you had not been a tutor what career would you have followed? Sunil: I’d have been a chef. And before you ask, of food, not books! I’ve always enjoyed cooking and I write my own recipes. Come to think of it, exam question video debriefs bring out the Jamie Oliver in me. PQ 23

PQ CIPFA spotlight

Speaking your language PQ magazine recently caught up with Chris Glennie, CIPFA’s new education chief


what the future holds. Glennie stressed: “We can’t let prejudices get in the way.” He also believes CIPFA needs to widen the net when trawling for ideas. Of course local government will be a big contributor, but he also wants the health services, and police and fire services to come forward.

Developing a new syllabus He joins CIPFA at an exciting time. It is just beginning to shape and renew its core accountancy qualification; we are

Not an elitist club Glennie is well aware that today’s CIPFA students are more demanding about the exams process, and will be quick to point out any mistakes. The relationship between professional bodies and their students is changing, and he believes CIPFA is at the forefront of ensuring the ‘student experience’ is the best it can be. The student society network is a real bonus here, and he knows not every accountancy body has such an active and thoughtful resource. He also stressed that while professionals need to do their thing, that doesn’t mean they should go about creating a club of elite people in the process. Today’s modern chartered bodies should not be viewed in the same way as their 1950s/1960s counterparts. Today, with the use of apprenticeships and a dynamic qualification, he believes CIPFA helps create people who can thrive in the public sector environment and be economically useful. Glennie explained: “We do need to impress on the market that CIPFA is and always will be the most appropriate accountancy qualification for the public sector. We should not be distracted from that simple message.” PQ

IPFA’s has a new director of education and lifelong learning. Chris Glennie joins the institute after a stint at the Institute of Risk Management, where he was Chief Operating Officer. As well as working for ICSA he was also interim head of product development and e-learning at AAT in 2012. The University of Oxford modern languages graduate has also published a book. His ‘Looking for America’ recounts his drive across the US and his love of history. It even got a five-star rating when we reviewed it in July! His career in professional associations follows some 20 years in academic and educational publishing, where he worked for such companies as Prentice Hall, Macmillan and Granada Learning. If you have ever had to use a Letts Revision Guides, then you can blame Glennie, he was the publishing director of that series. What it does also mean is he has that product development is very much in his blood. “Developing products for an educational market is just something I keep coming back to.” That’s a handy skill to have when a new syllabus needs developing!

talking CIPFA 2020 here. Glennie and the team are now deep into phase one – where they need to ask some very direct, and some indirect, questions. It also means listening between the lines, and finding out exactly what the market needs from today’s and tomorrow’s public finance professional. “We need to re-engage with the market and reflect the needs of learners and employers,” he said. There will be some obvious changes needed, but he wants to fight against preconceived ideas of

Glennie: ‘We need to re-engage with the market’

Have you declared a climate emergency?


ow carbon literate are you? Well, CIPFA students at their national conference in Birmingham were recently introduced to the first carbon literate local authority treasurer in the form of Stockport Council’s Michael Cullen. He is one of the first treasurers to take part in the Carbon Literacy Project, which aims to create carbon literate citizens. The ultimate goal of the project is to ensure effective action is taken to reduce greenhouse gas emissions. Cullen admitted, in front of a record student turnout, that after his training he had become so evangelical about reducing the effects of climate change that he now doesn’t eat meat at least once a week and has bought an electric car. He is taking his new-found carbon literacy into his personal and professional life, into the organisation he works for. Matching his fiduciary duty with the need to create a green world is not easy. He needed, for


example, to buy 30 new refuse collection vehicles – although there are no electric bin vehicles on sale at the moment. Then one of his schools needed a new boiler. He looked at ground-floor heating pumps, where holes are bored into the playground to extract the heat. Unfortunately, the playground had been recently resurfaced at the cost of

£250,000, so that wouldn’t be a cost-effective move. The Carbon Literacy Project’s Phil Korbel stressed that some 109 local councils have now declared a climate emergency. With the weather on steroids, local authorities will need to understand how they are going to achieve what are very bold carbon reduction figures. The Greater Manchester authority, for instance, has said it plans to be carbon neutral by 2038. Yet it hasn’t been able to achieve its 15% reduction this year, and Korbel admitted it was a huge challenge. And he felt that accountants needed to be on board and committed to the cause, because they can make a massive difference. It will be interesting to see if carbon accounting is in the institute’s new 2020 syllabus. The greening of the balance sheet assets and liabilities means that carbon literate accountants will be must. PQ PQ Magazine September 2019

audit and technology PQ

Time to conquer the new frontiers The accountancy sector must welcome new, revolutionary technologies not fear them, says ACCA’s Antonis Diolas


t ACCA’s HQ in London we keep an archive of ACCA presscuttings going back to the early 1900s. As a historical record they are a fascinating insight into the profession. Of course, they reveal that times have changed a great deal, but that also how some things remain constant – tax policies made regular headlines then as much as they do today. I recently noticed two clippings from 1935, signalling a new concern – how machinery and technology were having an impact on the economy and on people’s jobs. One comes from The Bulletin, a cartoon of how machines are taking over jobs – “the machine is displacing the man!” it exclaims. At around the same time, The Glasgow Herald of 13 February 1935 reported on a lecture given by Mr John Buyers, a lecturer in economic history at Glasgow University. His subject was about trade redistribution and causes of unemployment. At the time, reasons for high unemployment were blamed on “technological progress”, a “gloomy view” discounted by the Ministry of Labour that stated industrial production in the UK was rising, including that of professional services alongside “electrical cables and lamps”. Mastering a field of study Back to the 21st century, and human interaction with technology is moving apace, and still making headlines. At the time of writing, the media was reporting on Microsoft’s funding of the Elon Muskfounded OpenAI project, which aims to build Artificial General Intelligence (AGI). Announcing the deal, Greg Brockman, the CTO at OpenAI, said “an AGI will be a system capable of mastering a field of study to the world-expert level, and mastering more fields than any one human — like a tool which combines the skills of Curie, Turing, and Bach”. There is a lot of hype about technology, AI and machine learning – and the audit and accountancy professions are not immune from this. So it’s important for ACCA that we understand this hype, and understand the working environment better. PQ Magazine September 2019

With colleagues at CA ANZ, our strategic partners, we recently published a report, called ‘Audit and Technology’, which asserts that technology offers the ability to both improve the quality of audit and to add value to it. Audit is moving from being a reactive, backward-looking exercise to a proactive, predictive, forward-looking one, working in real time; it provides an opportunity to help businesses by providing timely insights. From interviews and panel discussion events, we gathered a number of insights for this report, and perhaps one of the most relevant is that the human relationship between client and auditor remains important: not everything can be replaced by technology. This report is not just for those looking to become auditors or who are already working in this field. It offers insights into a theme that plays right across the whole profession – about how as professionals we need to nurture our connections, about how we can design and use technology that helps us do our work faster and more accurately. As many PQ readers know, the ACCA qualification prepares people to be the dynamic professional accountants who are strategic forward-thinkers, and who thrive in this world of constant technological change. Syllabus review Every year, ACCA conducts a syllabus review to ensure the qualifications we offer evolve to meet the increasing demands of the profession and to reflect the changing landscape presented by continuing digitalisation and advances in technology. Our aim is to ensure that as a professional accountancy body, we also develop our students’ and members’ digital and technology knowledge, building the skills to analyse and evaluate financial and non-financial data, with a clear understanding of the professional and ethical obligations that must be met in the use of data and data technology. The ethical dimensions of how technology is being developed and utilised in the profession – and indeed in wider society – is being hotly debated. And this brings me back to the press cuttings from 1935 and the lack of trust – even fear – inherent in the changes they were experiencing back then. Perhaps this is one of the biggest challenges we can alter now in the 21st century – not to fear technological change, but to embrace it, use it for the best advantages possible and help create the technological future we want in the profession, from audit to financial management to tax planning. PQ • Antonis Diolas, Manager – Audit and Business Law, ACCA 25

PQ ICAEW spotlight

How to enhance your prospects A

s a part-qualified professional you’ll naturally considering your next steps. You might be thinking of continuing your journey to becoming fully qualified. Or you might be working towards a new job or a promotion. No matter what your goal is, adding further value to your qualification by gaining a designation along the way can enhance your career prospects and boost your confidence. The ICAEW Business and Finance Professional (BFP) designation is a professional status provided by one of the largest professional membership organisations globally, and will help you demonstrate your skills and knowledge in finance, accounting and business. Read on to find out how adding letters to your name can benefit your career and how you can become a BFP. Why gain a designation? A mark of excellence, a designation is not only proof of the hard work you’ve put in towards your qualification so far – it also demonstrates that you are committed to your continuous development and to adhering to professional standards. With a professional status you show commitment to keeping your knowledge

and skills up-to-date – something employers and clients value more than anything. Even if you’re on your way to becoming fully-qualified, a designation is a great recognition for all the hard work you’ve put in and adds to your credibility as a professional. Why the BFP designation? As an ICAEW Business and Finance Professional (BFP) you will build a strong relationship with ICAEW, an institute that places great value on ethics and on professionalism. Being recognised by ICAEW means that you will meet these high standards. As a BFP, you will gain invaluable support from ICAEW in the form of technical and ethical resources, along

The BFP designation will boost your confidence and your career outlook

with bespoke advice and access to ICAEW’s helplines – a service greatly valued by both professionals and members. If you decide to become a fullyqualified ICAEW chartered accountant, BFP is a great addition to your ACA, and to gaining membership, as you will already have experience of adhering to professional standards and keeping up with your professional development. How do you become a BFP? The first requirement towards the designation is the ICAEW Certificate in Finance, Accounting and Business (ICAEW CFAB). A stand-alone qualification, it also makes up the first six modules of the ACA. As a PQ you may have already completed ICAEW CFAB or an equivalent qualification. If the latter, then you will need to sit one or more exams to complete this requirement. In addition to your qualification, you will need to demonstrate 12 months’ work experience in business and/or finance and complete the ICAEW online Ethics Learning Programme. How can you use the designation? The designation is a stamp of recognition that you can proudly display next to your name. By adding the BFP letters to your CV, your Linkedin profile and your business cards you immediately show potential employers, colleagues and clients your professional status, standing out from the crowd. To find out more about the designation and to become a BFP visit PQ • Thanks to ICAEW for this article

PQ the troubleshooter

Working out how to break even PQ’s troubleshooter Phil Dunn explains everything you ever wanted to know about break-even analysis Problem: I am a Level 4 student and do not fully understand the calculation of the break-even point and the margin of safety. This should be of interest to AAT and ICB students. Solution: Break-even analysis is a management accounting technique that relies heavily on the concept of marginal costing that classifies cost as either fixed or variable in a range of decision making aids to management. The terminology embedded in break-even analysis includes: • Variable costs. • Fixed costs. • Contribution (sales revenue less variable costs). • Break-even point. • Margin of safety. The following example shows the Operating Statement of Dunn Strike Cricket Ball Manufacturer for quarter ended 31 March X19 (In Marginal Costing format) 26


3,000 units £ per unit £ Revenue/sales 180,000 60 Variable costs 60,000 20 Contribution 120,000 40 Fixed costs 40,000 Operating profit 80,000 Note: The variable costs comprise direct labour, direct material and variable overhead. Contribution comprises: Sales revenue less variable costs. Break-even point: That point at which there is neither a profit nor loss and where total contribution is equal to fixed costs. Break-Even Point in Units: Fixed costs/contribution per unit £40,000/£40 = 1,000 Units (33.33% of Output) Break-even point in £ sales revenue: Fixed costs/ (contribution/sales revenue) £40,000 / (£120,000/£180,000) = £60,000 (33.3% of sales revenue).

Margin of safety: As the break-even point is 33.33% of output and also sales revenue the margin of safety is 66.67%. This simply represents the percentage by which the output and sales revenue exceeds break-even. The margin of safety in units is 2,000 and in terms of revenue is £120,000. Using the marginal costing format management can forecast with accuracy the profit/loss at varying levels of output. You will have noted from your reading that the break-even point can also be represented in the form of a break-even chart or profit volume graph. PQ • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books PQ Magazine September 2019

CIMA spotlight PQ

CIMA BREAKS MOULD CIMA has dropped exemption fees and ushers in 2019 syllabus exams, writes Stephen Flatman

in a Digital World’ section has been updated, it now covers technology, data and information in a digital world and the changing shape and structure of the finance function. The P1 ‘Management Accounting’ and F1 ‘Financial Reporting’ is now more digitally-focused in areas like cost accounting, budgeting, and short-term commercial decision-making for P1 and areas such as managing cash and working capital section for F1. There is now new content on business models and value creation in E2 ‘Managing Performance’, reflecting the impact of digitisation in these areas. Under P2 ‘Advanced Management Accounting’, managing the costs of creating value has been updated, along with capital investment decision-making and managing performance of organisational units. We also added integrated reporting as a new area in F2 ‘Advanced Financial Reporting’.


ith the aim of broadening the pipeline of finance professionals, from 1 August 2019 students embarking on their journey with CIMA will no longer have to pay exemption fees. This launch coincides with the start of the 2019 syllabus exam registration in November, and we hope removing the fees will reduce barriers and give budding finance professionals around the world greater access to the CIMA qualification, which is equivalent to a Master’s degree. At the moment, you can find our members and students working across all levels of business in all kinds of capacities, but over the past few years we have seen some roles and responsibilities change. New and emerging technologies This has been brought about by new technologies and as they continue to evolve we know there will be further impact. To understand what the future of finance will look like, we carried out research, speaking with more than 2,000 organisations from more than 150 countries, our findings told us that new and emerging technologies will continue to take over traditional tasks but, at the same time these changes which demand new digital competencies, will create opportunities that many finance professionals have yet to recognise. Additional research also told us that the transformational efforts of many organisations is dependent on having a highly digitally skilled team of finance professions. But 90% of finance leaders said they felt their teams didn’t have the skills they needed. In an effort to make sure we plug any skills gaps we updated the CIMA syllabus – it was launched on 31 January.

TIMETABLE The timeline for the changes to exemptions will follow: • From 1 August 2019, CIMA students who apply for exam exemption(s) will no longer have to pay a fee for any exemptions granted for eligible prior learning. • For students who have been awarded and already paid for exemptions between 1 January and 31 July 2019, and who will be taking an exam between 1 August and 31 December 2019. CIMA will credit these students’ accounts with the difference between the previous and new 2019 exam fees on a monthly basis over the remainder of 2019. This credit can be used towards the 2020 subscription fee. • For new and existing students who have entered the CIMA qualification through gateway and experiential programmes fees will remain the same. PQ Magazine September 2019

The syllabus is still based on our CGMA Competency Framework, which was developed in partnership with employers, and covers key skills such as leadership and people management. But it’s now filled with content that not only prepares members with all relevant technical skills, business acumen and competencies, but also gives them the digital skills needed to thrive in an automated world. Students will be examined on the new syllabus from November 2019 and new topics such as data analytics, blockchain, digital costing and digital strategy and artificial intelligence. The CIMA syllabus is split across three levels – Operational, Management and Strategic and into three areas – enterprise (E), performance (P) and financial (F). The syllabus includes nine subjects, each covers a specific area of knowledge and content. All subjects interlink to give our students the highest level of competencies. The impact on our exams will be seen in new key areas such as integrated reporting, business models, cyber-security and technology to our core accounting, finance and business topics. After reaching the end of each level, our students’ skills and competencies are assessed in a Case Study exam. This involves a real world business scenario that management accountants might experience. All the technical, business, people and leadership skills and competencies that CIMA students have learnt throughout their studies will need to be clearly demonstrated. Testing competencies like this unites the learning from each of the subjects in a holistic way that is critical to professional development and shows employers what they can do. At the operational level, E1 ‘Managing Finance

Digital strategy At the strategic level, digital strategy is now part of E3 ‘Strategic Management’, this will help students feel confident in developing a digital strategy and supporting the digital transformation of their business. In P3 ‘Risk Management’, there is now a new area covering cyber risks so students can better understand, identify, evaluate and manage new digital risks on behalf of their organisation. We have moved some of the content from P3 ‘Risk Management’ to F3 ‘Financial Strategy’; F3 now also includes business valuation and covers everything you need to know about intangible and tangible assets. We know these changes are significant. They had to be, to meet the demands of an automated world head on. But, to make sure we don’t leave any students behind we developed exam blueprints. The blueprints are a tool and a first for the management accounting sector. They’re designed for tuition providers and students, to understand the new expectations – they tell you what you’ll be assessed on and they also show employers you are gaining all the skills they have told us they need in modern business. The aim is to give you everything you need to be successful in your exams, so within each blueprint you will see a series of ‘I Can’ statements, which reflect the competencies you will come to own and tasks you will be able to perform as you pass each level. We also developed a transition tool to give current CIMA members and students personalised step-by-step support while the changes take place. Detailed transition guides for each subject are now available for each. You can access the tool at CIMA Study Planner where you can also find study guides, tips and resources. PQ • Stephen Flatman, Vice President, Examinations, Management Accounting, The Association of International Certified Professional Accountants 27

PQ AAT exams

Dissect this paper one task at a time Jennifer Nyland offers you a step-by-step guide to passing the notorious Professional Synoptic exam


he Professional Synoptic is another notorious AAT Level 4 exam with a dismal pass rate, currently sitting at only 56.7%. This is a huge improvement from its first release when it was a mere 41.2%. Although 56.7% is low, it is still superior to the dreaded MDCL exam, which is currently 52.5% (see my previous article February 2019 issue). There is still a concerning number of students on their fourth and fifth attempts for both these exams. Is this because the exams are too difficult, or is it that students are just simply not prepared or ready? Many students pass this exam first time, so the problem must reside in the preparation and readiness of those who don’t. Many students have not successfully completed the core units before taking this exam, or rush to fit in with ‘synoptic windows’, which can have a serious impact on results. Preparation is key with all exams but, as with MDCL, this exam is tough because there is so much content to remember and it is also mostly written. However, in this article I will show you a tactical approach to this exam, which could quite possibly secure you a pass. So make sure you attempt the tasks in the following order: Task 1 is worth 20 marks • Easy multiple-choice questions based on your knowledge from Level 2 and 3, eg. control accounts reconciliations, ethics and learning outcomes 1 and 2 from the ASYC unit. • Spend a maximum of 10-15 minutes on this task. Task 5 is worth 20 marks • Relatively easy ratio calculations

(computer marked) and interpretation (computer or human marked) from FSLC. • Look at the numbers. What has increased or decreased? What may have caused this? • Spend 15-20 minutes on this task. We can now start to see why this order is important. This exam is three hours and worth 100 marks. So far, we could easily achieve 36-40% in the first 30 minutes of the exam – in only two tasks! Task 3 is worth 15 marks • Slightly more difficult than the previous one but still relatively straightforward. This task will require you to identify weaknesses. • Read the question first, then read the information provided to save time. • Answer the question asked. No marks are awarded for identifying weaknesses on the sales process when the question requires weaknesses in the payroll systems or risk of fraud. • Use the marks available as a guide on

how many points to make. • Spend 25-30 minutes on this task. We could easily achieve 12-15 marks on this task, meaning we could potentially gain 48-55% in just over the first hour of this exam. Task 6 is worth 15 marks • This question suitably follows on from Task 3. • This question requires you to analyse the scenario and may require you to identify weaknesses and make recommendations, Cost Benefit or SWOT analysis. Do not be confused by a blank grid in an answer box, this is for your workings of a Cost Benefit Analysis. • Spend approximately 30-40 minutes on this task. By this stage we could have possibly achieved a further 12-15 marks, giving a total of 60-70 marks in less than two hours, with the remaining two tasks being those that students find the most difficult. When you come to Task 2 and 4, complete the one you are more confident with first to gain maximum marks in the time remaining. You should spend 35-40 minutes each on these last two tasks. Task 4 is worth 15 marks • This task covers decision making techniques covered in MDCL (e.g. relevant costing, limiting factors, contribution, make or buy, standard costing, product discontinuance, shut down or target costing). Task 2 is worth 15 marks • This task covers budgeting and budgetary reports from MABU, costing techniques and standard costing from MDCL and maybe elements of ASYC. • Remember to answer the question being asked. You can see that by using this method, we have used the time efficiently from the start of the exam to gain as many marks as possible in the shortest amount of time because the performance and concentration of many students will start to deteriorate after two hours. My final piece of advice would be to always refer to the information in scenario, use names, assume the examiner knows nothing and remember to include enough detail to gain the full marks available. PQ • Jennifer Nyland is an AAT Level 4 tutor at Training Link. See

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PQ Magazine September 2019

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It’s Sports Indirect! The results were delayed several times in ‘bizarre’ even ‘farcial’ fashion, no one seems to know if auditors Grant Thornton still want the job and the FD is going. Another typical results season for Sports Direct – perhaps not? The market certainly didn’t like what it was seeing and shares in the company adjusted themselves accordingly. But, finally, after several false starts the accounts are out… Everyone was expecting the House of Fraser purchase to threaten group profitability, but no one was expecting the £614m tax and penalty demand from the Belgium authorities. Then there was the news that the current finance director, John Kempster, was leaving the company. And then there’s Grant Thornton, who are not saying anything! Was it happy to continue being the company’s auditors? The Financial Times has reported that Grant Thornton has told regulators it intends to quit after the AGM in September. Sport Direct says it wants them to stay. The general consensus is also none of the Big 4 auditors are keen to work with this company. Don’t forget Sports Direct’s Mike Ashley’s call for all CEOs and CFOs to have regular drugs tests, either! What

Life at Aster Group Jenny Armes, 25, is a management accountant based in Bournemouth. She has been with the firm for 22 months. An ACCA studier, Jenny is one of the poster girls for the company, with her photo on huge-life size banners throughout our offices. What time does your alarm go off on a work day? 5:15am (it gets ‘snoozed’ a lot!). On a good day I’ll hit the gym before work. What’s the first thing you do when you get to your desk? Check my calendar, I like to manage my tasks for the day. What’s on your desk? We all hot-desk, so nothing to begin with. What’s the best thing about where you work? The flexible working and our office environment, we have a games table and a big TV with cosy sofas. Where’s your favourite place for lunch? The office is close to Poole quay, so a lunchtime ice

cream is a must in summer! What (or who) can you see when you sit at your desk? Hot-desking means I can sit opposite anyone I like, we have nice murals on the walls, too. Which websites are your favourites and why? Pinterest – it’s full of useful information. Which websites do you use for work? HMRC, Open Tuition and ACCA when I need to refresh my memory on a study topic. How many hours a week do you spend in meetings? Three or four on average. What time do you leave the office? Between 4–5:30pm, sometimes earlier to continue from home for a few hours.

How do you relax? Volunteering on international conservation projects. And near home there’s a pizza restaurant on the beach where I like to watch the world go. What’s your favourite tipple? Palma violet gin and lemonade. How often do you take work home? A few times a week. What is your favourite TV show? The Good Place – it really made ethics more interesting! Summer or winter? Summer. Pub or club? Pub. If you had a time machine, where would you go? Back 153 million years, I’d love to see dinosaurs alive and up close. If you hadn’t chosen accountancy, where might

Calls for rethink on apprenticeships CIMA has called on the new Prime Minster Boris Johnson to reform the UK apprenticeship programme to increase social mobility and productivity. It believes the apprenticeship levy should be transformed into the apprentice and skills levy. This would allow employers to invest unspent levy funds after two years on employee training the professional development. It also wants to see delivery expansion of apprenticeship tuition and exams, so one organisation can do both. The

institute believes this will help to create a simpler and flexible system for both apprentice and employers.

Finally, it wants the government to keep funding higher-level apprenticeships and work to expand their number. This will help more apprentices gain the skills, knowledge and experience needed to get into their chosen career, while keeping their education debts to a minimum. CIMA said together these measures could contribute to increasing the number of and quality of apprenticeships, make the programme more accessible outside of big city centres and support lifelong learning.

The PQ Book Club: books you should read brought that on? Is it a cry for help, or does he know something we don’t? Ashley said: “Having such undisclosed personal issues could lead to blackmail and force [individuals] to make decisions based on savings their own skin and potentially reducing shareholder value.” Shareholder advisory firm Pirc described the company as “an embarrassment to UK corporate governance”. It points to the years of ineffective chairing, and believes the company is veering from one mistake to the next. But what about the actual results? Group revenue actually increased by 10.2%. The reported profit before tax was £179.2m, up 193.3% from £61.1m (restated from £77.5m), largely due to an £85.4m impairment of its Debenhams strategic investment in the previous year. PQ Magazine September 2019

The Numbers Business by Della Hudson (SRA Books, £14.99) Della Hudson is a lady I have a lot of time for. She grew her practice from scratch in Bristol in 2009, selling up in 2018, using cloud-based applications at the heart of the practice. She continues to work in accountancy as a speaker, blogger and consultant. This is a great book that I thoroughly enjoyed, most likely because at its core it’s an honest and true reflection of a real small practice with real small business clients that all small practices can relate to. The term ‘manual’ is used often in the publicity for this book, which I think does not do it justice. For me a manual is something that should be

followed to the letter, and while any accountant in practice could do that if they wanted I think more will benefit by firstly having a thorough read of the book from start to finish and then thinking about how each chapter relates to their own practice, and what if any ideas they can implement. I especially liked the chapter on becoming a trusted adviser, because it is something that the world is shouting at us to become. As the author says: “Not all accountants enjoy this type of work, nor do we have the necessary skills.” However, she does point out that recognising this does not mean that we pass up the opportunity, and she explains how this can happen. The sub-title of the book is

‘How to grow a successful cloud-based practice’, and it covers everything that you will need to think about if you are to make a success of your practice. Yes, the focus is on cloud, but in her chapter ‘Choosing your software’ there is a good list of what is available – it’s not all cloud and it’s not all Xero, either. PQ rating 5/5 If you are in practice, or if you are thinking of starting out in practice, this book will help you get the very best of what you do. • Review by Tony Margaritelli, CEO, ICPA. For information go to 29

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GET ON YOUR PHONE Forget mindfulness for stress, what you need to do is play a video game on your smartphone! Yes, a new study from UCL and the University of Bath says that if you want to relieve stress then you need to play shapefitting games. The researchers found that students who played a computer game at home after work said they felt more relaxed by the end of the week than those who used a mindfulness app. UCL’s Anna Cox said that people should not feel guilty about using games to relax.

WOMEN GET SHIRTY The success of the England Women’s football team at this year’s World Cup is expected to grow the number of female players of the game by around 7% (to around 200,000 players) in 2019, says Deloitte’s Sports Business Group. However, just three-fifths (60%) of top flights women’s football clubs globally have front-of-shirt sponsors different to the men’s equivalent. Deloitte expects that the proportion of women’s teams with distinct main sponsor will rise to 100% in time for the 2023 World Cup.


RECEIPTS DITCHED Wetherspoons has become the first large business to stop issuing receipts after customers complained that it was a waste of paper and just created more mess. You can still request a receipt; they just won’t be handed over automatically. Someone has worked out that UK retailers issue 11.2bn receipts (7,300 tonnes) every year, costing them £32m. There has also been a move for ereceipts in the past few years by clothes stores such as Gap and Clarks. But they have to have your email address for that…

AML QUIZ BEWARE OF THE BITCOIN How’s your anti-money laundering (AML) knowledge? Well, maybe it’s time to check out the ALMCC quiz! It will help you with a whole new set of acronyms, such as AMLGAS, OPBAS, OFSI and FATF, to name but a few. This is a clever and educational tool that shows exactly what the AML rules mean in practice. There are some great news and feature articles on the website, too. See for yourself at


Investors should be cautious about putting their money in unregulated crypocurrencies such as bitcoin, as they have no ‘intrinsic value’, warns the Financial Conduct Authority. The City watchdog also pointed to the fact that they have few protections too – and they aren’t protected by FCA schemes.

A crackdown on bullying and ‘fake news’ has paid off for Twitter as it attracted more users in its second quarter. Twitter revealed it had 139 million ‘monetisable’ daily users this quarter, up from 122 million for the same quarter last year. It’s second quarter profits were $1.1bn, boosted by a $1bn one-off tax benefit. Operating profit, however declined from $80m to $76m, as the company hired more staff. • The company is currently valuated at $32bn.


There’s a new Bank of England exhibition in town. From Roman relics to a nuclear fall-out calculator from the Cold War, the free exhibition features, we are told, “fascinating artefacts to celebrate the Bank’s 325th anniversary”. The objects explore how money and the way we pay for things has transformed since the Bank of England was created in 1694.

TOWN HALL PROPERTY BOOM One small borough council that took out more than £1bn in cheap government loans to buy office blocks is now making more money from property than from council tax, says the Sunday Times. Spelthorne Council in Surrey is forecasting net income of just under £10m for 2019/20 in business rents from its property empire. This compares with £8m in council tax.


De-stress with Wildlife Wonders

Time for a detox

We have three colouring books to give away this month, in the form of a collection of favourite animals from the number-one bestselling illustrator Millie Marotta. There are 110 illustrations ready to ease your stress, so get your pens and pencils ready! To be in with a chance of winning one of these great prizes just send your details (that’s your name and address) to Head up your email ‘Wildlife Wonders’

We want to help you achieve balance in a digital world and have three copies of ‘The Essential Digital Detox Plan’ up for grabs. Ask yourself – can you go for a walk outside without your smartphone or spend a day without logging on to Facebook? This book is here to help you with your addiction! Send your name and postal address to be entered for our prize draw. There will be three winners for this giveaway. Head up your email ‘Detox’ and send to

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 13 September. The main draw will take place on Monday 16 September 2019.


PQ Magazine September 2019

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Profile for PQ magazine

PQ magazine, September 2019  

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

PQ magazine, September 2019  

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