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star Performercity telecom’s alice wong

euro 2012 football and finance

myanmar change and progressclimate asia’s shipping routestechnical transfer pricing

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the magazine for business and finance professionals accounting and business china 06/2012

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NEW DAWNA wave of political and economic change is set to transform Myanmar as it emerges from decades of isolation. Page 26

TRANSFER TALKIn our technical feature, we look at the opportunities and challenges that the Hong Kong Advanced Pricing Arrangement will bring. Page 51

EXPERT INSIGHTS

Join ACCA, IBM and the IIRC for a free, one-hour webinar as we explore how integrated reporting can enhance and consolidate your existing reporting practices.www.accaglobal.com/virtual

BIG AMBITIONS?For your next move, go to www.accacareers.com/china-hong-kong

Since joining City Telecom in 2003, fi nancial controller Alice Wong has seen the telecommunications industry and the company grow in Hong Kong. Her latest challenge is to learn about multimedia and TV businesses as the company expands. Page 12

DOWN BUT NOT OUTHong Kong has one of the largest income disparity gaps in the developed world. That may not come as a surprise to anyone who has seen the rising number of beggars and homeless roaming streets lined with stores selling luxury goods, and yet it still makes for uncomfortable reading.

The plight of lower-income groups has not gone unnoticed by the Hong Kong government, which has recently introduced a HK$100m microfinance pilot scheme, administered by the Hong Kong Mortgage Corporation. The scheme allows individuals or small startups in the poorest sections of the community to access funding – a move welcomed by social policy experts and welfare groups.

In a city with a ‘can-do’ attitude, this is good news as it potentially allows small business owners to market their business, while also enabling the self-employed and those wishing to enhance their job prospects to gain training or professional qualifications.

In our feature on page 16, we look at how the scheme might work in Hong Kong. But despite ticking all the right boxes, microfinancing has its downside, not least the rising costs of administration of such schemes, which lead to higher interest rates. Microfinance delinquency rates have soared since 2008 as borrowers have struggled to repay their loans.

Also in this issue, we talk to Billy Leung, branch manager of HSBC Guangzhou, about his priorities for the year ahead. HSBC, one of the first foreign banks to do business in China, is poised to help Chinese enterprise ‘go international’ as it invests in crossborder services. You can read his interview on page 34.

And finally, this month is one of excitement and possibly a few tears among football fans as the European football tournament – Euro 2012 – kicks off in Poland and Ukraine. In our feature on page 20, we consider the financial impact on host countries of holding such a prestigious event in the sporting calendar.

Colette Steckel, [email protected]

3Editor’s choice

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Audit period July 2009 to June 2010138,255

Asia editor Colette [email protected] +44 (0)20 7059 5896

Editor-in-chief Chris [email protected] +44 (0)20 7059 5966

International editor Lesley [email protected] +44 (0)20 7059 5965

Chief sub-editor Eva Peaty

Sub-editors Dean Gurden, Vivienne Riddoch

Design manager Jackie Dollar

Designers Robert Mills, Jane C Reid

Production manager Anthony Kay

Advertising Jennifer [email protected] +852 2965 1432

Head of publishing Adam Williams

Printing Times Printers

Pictures Corbis

Editorial board Rosanna Choi, Jimmy Chung, Andy Lam, Arthur Lee, Derek Poon, Anthony Tyen, Fergus Wong, Davy Yun

ACCAPresident Dean Westcott FCCADeputy president Barry Cooper FCCAVice president Martin Turner FCCAChief executive Helen Brand OBE

ACCA [email protected] +44 (0)141 582 2000

Features12 Media starExciting times lie ahead for City Telecom’s fi nancial controller Alice Wong FCCA

16 Small is beautiful Can microfi nance help Hong Kong’s smallest businesses?

20 Golden goalsA look at what Euro 2012 hosts Poland and Ukraine stand to gain fi nancially

24 Positive outlook In his regular quarterly report, ACCA’s Manos Schizas sees a new-found optimism among professional accountants around the world

26 Myanmar’s moment How will the country develop as it emerges from isolation?

30 Keeping the romance Properly managed, business process outsourcing contracts should be happy marriages

VOLUME 15 ISSUE 6

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ACCA Shanghai+86 21 6391 [email protected] global.com

ACCA Shenzhen+86 (0)755 3395 5711/3395 5710

Accounting and Business is published 10 times per year. All views expressed within the title are those of the contributors.

The Council of ACCA and the publishers do not guarantee the accuracy of statements by contributors or advertisers, or accept responsibility for any statement that they may express in this publication.

Copyright ACCA 2012 Accounting and Business. No part of this publication may be reproduced, stored or distributed without the express written permission of ACCA.

Accounting and Business is published by Certifi ed Accountant (Publications) Ltd, a subsidiary of the Association of Chartered Certifi ed Accountants.

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AB CHINA EDITIONCONTENTSJUNE 2012

CN_Contents.indd 4 11/05/2012 15:25

BRIEFING06 News in pictures A different view of recent headlines

08 News in graphicsWe show a story as well as tell it using innovative graphs

10 News round-upA digest of all the latest news and developments

VIEWPOINT32 Cesar Bacani From number crunchers to business partners

40 Dean Westcott Integrated reporting will improve long-term performance, says the ACCA president

44 Errol Oh The vital role of audit

Regulars

CPDAccounting and Business is a rich source of CPD. If you read it to keep yourself up to date, it will contribute to your non-verifi able CPD. If you read an article, learn something new and apply that learning in some way, it will contribute to your verifi able CPD. Each month, we also publish an article or two with related questions to answer. If they are relevant to your development needs, they can also contribute to your verifi able CPD. One hour of learning equates to one unit of CPD. For more, go to www.accaglobal.com/members/cpd

WorldwideThere are six different versions of Accounting and Business: China, Ireland, International, Malaysia, Singapore and UK. See them all at www.accaglobal.com/ab

TECHNICAL46 Update The latest from the standard-setters

50 Accounting solutions PwC experts answer questions on accounting for joint ventures

51 Understanding APAHong Kong’s new Advanced Pricing Arrangement explained

54 Expats and tax Foreign companies should be aware of the implications

ACCA NEWS62 CPDGetting into good habits

64 NewsFinance tour arrives in Shenyang; job-hunting fi nal is a success in Guangzhou; vice president addresses UNCTAD; listen to investors, says report

Your sector33 CORPORATE33 The view from Tang Choon Seng of Wearnes, plus news in brief

34 Growth market HSBC’s Billy Yeung on the bank’s role in leading China’s international emergence

38 Shipping news The opening of the Northern Sea Route is set to revolutionise freight transport

41 PRACTICE41 The view from Anthony Boswell of PwC, plus news in brief

42 Stand out from the crowd Managing partners must differentiate themselves from other professionals

CAREERS56 Go the distance The popularity of the MBA by distance learning is growing

58 Get connected Networking is vital for business success

CN_Contents.indd 5 11/05/2012 15:26

01 Colourful carp streamers flutter

over the Sagami River for Children’s Day. The carp is the symbol for the Japanese national holiday as it represents strength and success

02 More than 35,000 annual

passes have already been sold for Legoland Malaysia, said its general manager, Siegfried Boerst. The park is due to open in September

03 Socialist François Hollande was

elected president of France amid fears that his anti-austerity stance may stall Europe’s recovery

News in pictures6

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04 Singapore tycoon Bill Ng withdrew

his offer for Scottish football club Rangers, citing ‘unwarranted and unexplained delays’ that made the bidding process ‘untenable’

05 Artist Edvard Munch’s

iconic artwork The Scream fetched almost US$120m at Sotheby’s in New York. The piece, one of four in a series by the Norwegian expressionist, is the most expensive artwork sold at auction

06 Singapore’s PM Lee Hsien Loong

was one of the latest statesmen to jump on the social networking bandwagon, joining both Facebook and Twitter. His Facebook page includes photos from his university graduation and wedding

07 A 50-metre high concrete

woodland will soon be one of Singapore’s newest tourist attractions. The Gardens by the Bay is due to open on 29 June

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ASIA SUPER WEALTHYThe Asian super wealthy remain optimistic that they’ll be getting richer than ever, according to the Knight Frank/Citi Private Bank Wealth Report 2012. Lorem ipsum dolor sit amet consectitur amet dolor sit amet lorem ipsum dolor sit amet consectitur amet dolor sit amet lorem ipsum dolor sit amet consectitur amet dolor sit

GLOBAL IPO ACTIVITYGlobal IPO activity fell sharply in Q1 2012, according to Ernst & Young’s IPO update. A total of 157 deals raised only US$14.3bn, down by 69% by capital raised (US$46.6bn in 296 deals) in the same period last year. Despite a tough start of the year, Hong Kong, Shenzhen and Shanghai stock exchanges were yet again among the top five global markets ranked by capital raised.

BEST FOR EXPATSSingapore is the most liveable city in the world for Asia expats, ranking well ahead of regional rival Hong Kong where the air quality is now among the worst in the world, according to HR consultancy ECA International

$53.8BNAnnual economic costs of disasters in Asia and the Pacific, according to the Asian Development Bank

100,000The number of customers bagged by Hong Kong online jeweller Vancaro in its first three months of trading

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RICH PICKINGSAsia’s super wealthy are more confident of an even richer future than those in any other region, according to the Knight Frank/Citi Private Bank Wealth Report 2012. There are now more centa-millionaires (worth US$100m or more) in South-East Asia (18,000) than in North America (17,000) or Western Europe (14,000).

TOUGH TIMES FOR IPOSGlobal initial public offering (IPO) activity fell sharply in Q1 2012, according to Ernst & Young’s IPO update. A total of 157 deals raised just US$14.3bn, down by 69% by capital raised (US$46.6bn in 296 deals) in the same period last year. Despite a tough start to the year, Hong Kong, Shenzhen and Shanghai stock exchanges were yet again among the top five global markets ranked by capital raised.

CITY LIVEABILITYSingapore is the most liveable city in the world for Asia expats, ranking well ahead of regional rival Hong Kong where the air quality is now among the worst in the world, according to HR consultancy ECA International. The survey ranks cities’ overall liveability according to factors including climate, health services, utilities, sociability, personal safety and air quality.

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ALL CHANGE New research by KPMG and the Overseas Development Institute – the 2012 Change Readiness Index – has identified which developing and emerging countries are best prepared to respond to change. The impact of recent food, fuel and financial crises on countries around the world highlights the importance of adaptability.

FOOTBALL CRAZYAs the Euro 2012 football tournament kicks off this month in Ukraine and Poland, Deloitte has identified who’s winning in the money stakes in Fan Power: Football Money League. The latest edition found that the top 20 clubs had combined revenues of over €4.4bn in 2010–11. Loyal supporters, strong broadcast audiences and corporate attractiveness have helped the top clubs to stay relatively resistant during tough economic times.

STACKING UPSingapore, Beijing, Hong Kong and Tokyo are among the top 20 cities where international retailers have the largest presence. This is according to property consultant CBRE’s latest How Global is the Business of Retail? report. Almost half (47%) of the retailers in the survey are now present in the Americas, Europe, Middle East and Africa (EMEA) and Asia Pacific. US retailers are by far the most global, with 73% being present in all three regions.

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FAKE QUALIFICATION ALERTFake accountancy certificates can be bought for 20,000 yuan, according to The Standard in Hong Kong, which received an email with the offer. The email claimed: ‘Our organisation is responsible for completion of qualification for certified Chinese accountants, 20,000 yuan all inclusive.’ Jonathan Ng, deputy executive director of the Hong Kong Institute of Certified Public Accountants, told the paper that more local accountants hoped to get a mainland professional qualification because of the increasing number of Hong Kong companies with crossborder business.

ASIA DRIVES GROWTH While the global economy should expand by a modest 3.3% this year, Asia is the main driver of growth, a Reuters poll shows. The research found that Asian economies, as well as Latin America, are expected to pick up the pace later this year, driven by monetary stimulus after a soft patch – a boost Western policymakers are increasingly unable to provide. ‘We think it is increasingly clear that the US is on a fairly self-sustaining recovery and is reasonably – but not completely – immune from what is

happening in the eurozone,’ said Andrew Kenningham, senior global economist at Capital Economics.

IPO RULES TIGHTEN Hong Kong’s secretary for financial services and the treasury, KC Chan, has pledged to tighten standards for new share listings amid growing concerns about fraud in the world’s biggest market for initial public offerings (IPOs). Chan said that tougher new securities regulations currently being debated by lawmakers would ‘strengthen Hong Kong’s position as a premier capital formation centre’. They would ‘oblige listed corporations to disclose price-sensitive information (PSI) in a timely manner and impose civil sanctions against non-disclosure’. The ‘statutory PSI regime’ will enhance transparency and ‘impose civil sanctions against non-disclosure’, he said.

GREENER PASTURES BECKON ACCA is bringing together industry players from around the region to find out whether corporates in Asia are ready for the green economy. Gordon Hewitt, ACCA sustainability adviser, said: ‘The current state of the global economy has led to an unsustainable use of resources, income inequalities,

environmental degradation and a greater level of risk. Accountants are increasingly helping businesses and policymakers to measure, understand and reduce their impact on society and the environment as a whole.’

TAX REVENUE SHRINKSChina’s tax revenues grew at the slowest pace in three years in the first quarter of 2012 as a result of the country’s cooling economy, official data showed. Tax revenues rose 10.3% year on year to 2.5858 trillion yuan (US$410.4bn) in the first quarter, according to the Ministry of Finance. The growth rate reduced 22.1 percentage points from the same period last year, the ministry said. Revenues from major tax items saw slower year-on-year gains.

DESTINATION LUXURYHong Kong remains Asia’s top destination for luxury brands, and sixth worldwide, according to CBRE’s new report, How Global is the Business of Retail? The research showed that Hong Kong leads the way for luxury and business fashion, with 86% of high-end retailers surveyed present in the city – a rise of 2% from 2011. Hong Kong hosts 40.5% of the international retailers surveyed to maintain its status as Asia’s number-one retail city, four places ahead of Singapore.

DIALOGUE WITH US SOUGHTChina is looking to the US to boost accountancy communication and cooperation. Li Yong, deputy minister of finance and president of the Chinese Institute of Certified Public Accountants, said in a meeting with delegates from the American Institute of Certified Public Accountants that enhanced dialogue not only conforms to the trend of global governance in international accountancy, but also serves the interest of the economic and trade partnerships between the two countries. Among Li’s suggestions was using the US-China Strategic and Economic Dialogue framework.

MAS GRANTS LOAN TO IMFSingapore joined the ranks of the Group of 20 (G20) countries by contributing a US$4bn (S$5bn) loan to the International Monetary Fund (IMF) to help troubled economies. This is part of the broader international effort to boost the IMF’s lending capacity, which managing director Christine Lagarde wants to increase by US$400bn. The Monetary Authority of Singapore (MAS) stressed that the contribution will be by way of contingent loans to the fund, and not directly to countries borrowing from it. ‘Hence, as with our permanent capital subscriptions to the IMF (or quota subscriptions), this bilateral loan will remain part of Singapore’s official foreign reserves,’ MAS said in a statement.

Christine Lagarde

10 News round-up

CN_B_newsroundup.indd 10 11/05/2012 15:24

P20

IPO RULES TIGHTEN The China Securities Regulatory Commission (CSRC) has issued its final guidelines on a revamp of the country’s initial public offering (IPO) system. The new rules are aimed at improving the accuracy of information disclosures and making initial pricing more reasonable. The guidelines separate responsibilities for issuers, intermediary institutions, law offices, accountancy firms and rating agencies, as well as dictate strict punishments for irregularities and illegal practices. In a statement on its website, CSRC promised to introduce independent third parties to carry out risk evaluations regarding information disclosures by companies.

VAT A MIXED BAG Shanghai’s value-added tax pilot project, launched in January, has received mixed results. Some firms and industries are benefiting from lower tax levels, while others are finding that their tax burden may actually increase. General VAT taxpayers who used to incur business tax costs embedded in or charged on the purchase of ‘in-scope’ services seem to benefit the most. Small-scale VAT taxpayers stand to gain, while companies undergoing the most significant operational changes are experiencing the most growing pains.

BETTER TIMES AHEAD Hong Kong employers are confident about hiring and offering pay rises in the financial sector following an improvement in the global economic outlook. A majority of 300 firms polled by finance and accountancy recruitment specialist Robert Half International said that they were willing to boost hiring and increase average salaries in banking, financial and accountancy services. More than two-thirds plan to increase the number of permanent hires and 55% of them intend to raise salary levels this year by 5% to 25%. Pallavi Anand, director of Robert Half Hong Kong, said the business outlook ‘has definitely improved from the last two quarters’.

BRICS INVESTMENT TO RISECrossborder investments between China and BRICS (Russia, India, China and South Africa) nations will rise this year, a Deloitte report has found. The firm concluded that closer economic ties between the BRICS will most likely result in further crossborder mergers and acquisitions (M&A) deals. Deloitte’s report, Lateral Trades – Breathing Fire into the BRICS, analyses Chinese outbound

M&A data by deal values and volumes, deal sizes by volume, and target sectors by deal volumes and deal values.

CONFIDENCE SLIPS British Chamber of Commerce members rate Hong Kong very highly as a place for doing business but are becoming less satisfied by the city’s short-term prospects, government performance, language education and the environment. The latest annual British Chamber of Commerce Business Confidence Survey has revealed that its members have a less positive outlook for the Hong Kong business environment in the coming 12 months

compared with last year. Seventy-four per cent of members expect to make an investment or further investments in China this year – 8% up on last year. However, over half agreed with reports that doing business in the mainland is becoming increasingly difficult.

SPAM A TURN OFF Nearly half of Hong Kong residents are boycotting brands that bombard

them with texts or emails. A survey by information services firm Experian reveals that 47% of 1,046 consumers polled have ceased contact with four or more brands because of incessant marketing messages. Four in 10 consumers said that they now ignore the communications they receive from companies touting their products or services. John Merakovsky, managing director of Experian Marketing Services Asia Pacific, said that sending unsolicited messages is counter-productive as consumers are increasingly annoyed by ‘over-messaging’ that is ‘a result of poorly targeted marketing efforts’.

KPMG CHINA TO EXPAND KPMG plans to double the size of its Chinese workforce to 18,000 employees within four years. During a global board meeting of the firm in Shanghai, Michael Andrew, chairman of KPMG International, pledged to continue increasing headcount and set up new offices in emerging cities this year.

Andrew said that KPMG had invested more than US$200m in China in the past decade. The company’s revenues in China increased by 12.9% in 2011, slightly above the 10.1% global average for KPMG operations. He added that in the past six months, the firm’s China business grew at 12%, compared with 8% globally.

Despite current forecasts of a slowdown, Andrew said that KPMG’s China business will continue to grow at a pace that is consistent with what it has seen in recent years.

11

Michael Andrew, speaking at the Boao Forum for Asia in April

AnalysisEVERYTHING TO PLAY FORWhen Euro 2012 kicks off this month, all eyes will be on hosts Poland and Ukraine. Apart from the kudos of hosting the world’s third biggest sporting tournament, what will be the financial impact on the two countries?

CN_B_newsroundup.indd 11 11/05/2012 15:24

NETWORK PARTNERAlice Wong FCCA has helped City Telecom become one of the largest telecoms providers in Hong Kong. Now she is working to replicate that success in a new arena

As financial controller of City Telecom – one of Hong Kong’s biggest telecommunications service providers – Alice

Wong’s role is not just about monitoring the firm’s finances.

‘I see myself as my company’s business partner,’ Wong says. ‘My mission is the same as that of our department. Our role is not passive – we build business models for our company and pursue them.’

Wong has a busy work schedule, coaching the finance department’s 50 accountancy staff and overseeing a myriad of finance matters. These include payments, budgeting, taxation, financing activities and the development of the ‘mini-CEO’ concept.

‘Finance people always say they have difficulty in pushing other teams to meet budgets as they may consider themselves only a support function.

‘Here at City Telecom, we deem ourselves a business partner. Therefore, we have the responsibility to push others to achieve targets. Each department head is empowered as the CEO of his/her own department and each of them has their own profit and loss to run. Our role is to proactively influence business decisions through ongoing communication of the financial impact, based on our accounting knowledge and judgment,’ Wong says. She also takes charge of

Major achievementsWong has achieved much during her nine years at City Telecom. She was a key member of the team that successfully raised US$125m worth of 10-year senior notes in January 2005 and US$50m through the placement of American Depositary Receipts (ADRs) on the US NASDAQ in April 2010, plus various bank facility arrangements.

In the last four years, she has been particularly active in investor engagement, hosting roadshows around the world. She also makes presentations to introduce her firm’s services – including international telecommunications, internet access, fixed telephone services and IPTV (internet protocol television services) – to potential investors.

‘In one trip to London, we had 12 client meetings in two days,’ Wong says.

Wong and her team’s efforts have been rewarded. The number of shares owned by global institutional investors, for instance, has reached more than 50% of all publicly traded stocks in December last year, up from 10% four years ago.

In addition, according to TeleGeography’s GlobalComms Database, at the end of 2011 City Telecom had a 24.2% share of the Hong Kong broadband subscriber market.

CFO interview

The tips*Don’t mind being taken advantage of by taking on extra duties – they are learning opportunities.

*Be willing to accept extra work even if it is tough, as this could be a valuable experience which could help you to advance your career and give you new knowledge.

*Add value to yourself through continuing education.

annual purchases over HK$400m, mainly for deploying the next-generation fibre network in Hong Kong.

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New focusWhile Wong has up until now been focused on the telecommunications business, she is now moving into another chapter. City Telecom sees business opportunities in the multimedia and TV businesses.

It wants to break the dominance of the local free-to-air television market by two existing broadcasters – Television Broadcasts (TVB) and Asia Television.

Wong now faces the task of getting herself and her team familiar with the multimedia and TV businesses, as well as to develop the appropriate financial reporting policies and procedures for this new business. ‘The multimedia industry is new to us. We have to adapt to a completely different industry and its accounting treatments. For example, before having this new business segment, we did not need to cater for things like characters’ costumes – whether to expense at once or amortise over a period of time,’ Wong says frankly.

‘I asked a good friend to introduce me to some of her friends who work in the television or film industry, so I could learn their practices. I read the annual reports of other television stations, as well as publications of overseas media organisations to learn about their accounting treatments. I also spent time with audit professionals to find out how, under accounting standards, to account for different cost and revenue items in the industry,’ she says.

To help transform City Telecom into a multimedia business, Wong also has to help revamp her firm’s operations. These include enhancing internal control, and other procedures. ‘Multimedia industry is very different to telecommunications. For example, their people work three shifts, and we have to develop a system to adjust to their working practices.’

Wong is no stranger to new challenges. In 2003, when she joined City Telecom as a senior manager in its finance department, she was also new to the telecoms industry and

The CV2007

Appointed financial controller of City Telecom.

2003Joins City Telecom as senior manager, finance.

1999Joins PwC Hong Kong as an associate.

1998Joins Lai & Fan, Sotherton, Hong Kong as an audit intermediate.

EDUCATION2010

Gains a counselling diploma.

2008Gains a postgraduate diploma in corporate governance.

2007Gains an MBA.

2002Gains certified public accountant (CPA) status.

1999Passes all professional exams.

1997Gains a Bachelor of Commerce degree.

It took her almost six months to gain a better understanding of how the telecoms industry works.

‘You have to be humble,’ she says. ‘I asked my colleagues in the technology division about things I did not understand, and they taught me a lot.’

Over the years, she has seen the growth of the telecoms industry. ‘Ten years ago, not many Hong Kong people could afford internet broadband services. [A connection] needed dial-up and the charge was per minute. Now it is a flat price,’ she says.

When asked what is it like to be a woman at a senior level in a Chinese firm, Wong says that she does not feel any prejudice because of her gender. ‘People here from top to bottom do not think that just because I am a woman, that my work ability is lower. As long as I prove my ability, they will listen and execute [decisions],’ she says.

Her interest in accounting began when she was a teenager. Her father, who run a small plumbing and drainage business, taught her to do his bookkeeping. ‘Each Sunday, I did his bookkeeping, and brought the books to trial balance. I found it fun,’ she recalls.

Skills developmentShe studied accounting and finance as part of her Bachelor of Commerce degree at The University of Queensland in Australia. After graduating in 1997, Wong worked as an audit intermediate at accountancy firm Lai & Fan, Sotherton, now known as RSM Nelson Wheeler, for nine months. She had to prepare books for investment and properties holding companies, as well as perform audits for different clients. In January 1999, she joined PwC Hong Kong as an associate.

Wong spent five years with the audit giant, focusing on the technology, info-communications, and entertainment sectors. She led a team of up to 10 professionals to perform audit and work on special projects, such as initial public offering listings and rights issues to raise capital for listed firms.

did not understand the jargon used in meetings. ‘I did not know what IP (internet protocol) network and average revenue per user were, or the term Metro Ethernet, which is a technology that we applied to develop the fibre network in a city environment like Hong Kong.’

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Her experiences in dealing with listed companies’ accounts at PwC and meeting differing deadlines have helped her in her current job.

‘We worked under a lot of deadlines in the professional firm, and each time we met them. I learnt that nothing is impossible, and all we need to do is plan our work properly.’

Wong also credits the ACCA Qualification for helping her in her career. ‘The ACCA Qualification is a gateway to professional jobs, and increases the possibilities for people to proceed to management-grade positions. I believe that if I hadn’t got the ACCA Qualification, my company would not have hired me in the first place,’ she says.

She adds that ACCA also provided her with training on tax practices for listed companies, financial management and management accounting, all of which she applies in her current role. To give back to the industry, Wong volunteers for ACCA Hong Kong as member of the Student Affairs Subcommittee.

Since obtaining the ACCA Qualification, she has continued with other studies, obtaining an MBA from the Hong Kong University of Science and Technology in 2007. In 2008 she received a postgraduate diploma in

corporate governance from the Hong Kong Institute of Directors and Hong Kong Productivity Council.

Then in 2010, she gained a counselling diploma from the Chinese University of Hong Kong’s School of Continuing and Professional Studies.

Top of her agenda for the coming year is to prepare the launch of the multimedia business, and enhance work procedures geared for the new business. But it’s not all work for Wong. She loves to travel and has visited between 30 and 40 countries in the past few years. As a practising Christian, she also loves reading Christian books, which guide her life and work principles.

Asked about what has allowed her to climb the ladder of success while young, Wong says: ‘I am not afraid of difficulties and am willing to dedicate myself at the critical moment.’

Her other asset is her dedicated team she has built with motivation and care. ‘We are like friends to each other, and they concern me a lot. Being fair is important, I will do my best to make sure credit goes to them for the work done. This is how we work together as a team.’

Sherry Lee, journalist

The basics CITY TELECOMEstablished in 1992, City Telecom, manned by some 3,000 staff, provides integrated telecommunications services in Hong Kong via its own self-built fibre network.

Co-founded by chairman Ricky Wong and vice chairman Paul Cheung, City Telecom was listed in Hong Kong and US in 1997 and 1999 respectively. Headquartered in Hong Kong, the group also has branch offices in Canada and Guangzhou.

Hong Kong Broadband Network (HKBN), a wholly owned subsidiary of City Telecom, established in 1999, is one of the largest fixed telecommunications and IDD operators in Hong Kong. HKBN provides broadband internet access, telephony and IPTV services, with 1,307,000 subscriptions as of 29 February 2012. It is in the process of expanding network coverage from 1.94 million to two million residential homes, which represents 85% of Hong Kong’s total households, and from 1,600 to 2,000 commercial buildings.

City Telecom has a history of breaking monopolies. In 1992, it launched its international telecom services when Hong Kong Telecom, the largest telecommunications company in the then British colony, dominated the IDD market.

The group has now applied to the government to run a free television station in Hong Kong, to compete with the two existing free TV broadcasters, TVB and Asia Television, which is still pending approval.

15

CN_F_Wong.indd 15 11/05/2012 15:26

In line with its 2012-13 budget announcement to ease the plight of lower-income groups, the Hong Kong government has announced

details of a planned HK$100m microfinance pilot scheme, aimed at boosting lending to individuals and small startup businesses in the poorest sections of the community. Social policy experts and welfare groups across Hong Kong welcomed the news in a city that suffers one of the largest income disparity gaps in the developed world.

The pilot scheme will be administered by the Hong Kong Mortgage Corporation (HKMC) – an affiliate of the Hong Kong Monetary Authority (HKMA). The HKMC plans to launch the pilot scheme by the middle of 2012, with a trial period of three years.

Speaking at the launch on 2 February, Peter Pang, HKMC executive director and deputy chief executive of the HKMA, explained that the government intends to work closely with stakeholders, such as banks and voluntary agencies, to establish a centralised microfinance platform to help people gain access to microfinance.

‘There are many in Hong Kong who aspire to set up their own businesses or

enhance their skills. While the startup funding needed may not necessarily be substantial, many often find it difficult to borrow from the traditional financing channels to realise their development potential,’ he says.

Initially, the pilot scheme will focus on three types of borrowers: those aspiring to set-up their own business; those wishing to become self-employed; and those wanting to enhance their employment prospects via training, skills upgrade or professional qualifications. The

maximum loan for each category is HK$300,000, HK$200,000 and HK$100,000 respectively, with a maximum five-year payback tenure. For loans with tenures of up to three years, debtors will have a six-month repayment holiday, and for loans of between three and five years, the first instalment is not due for 12 months.

Eugene Ha, advisory services partner at Grant Thornton Hong Kong, welcomes the scheme, saying it ought to appeal to the groups of people outlined by Pang in his speech.

‘The programme should provide an effective alternative to these people and also help small business owners to fight against the rapidly rising costs of operation, and obtain extra funds for

marketing and promotion,’ Ha says. However, Ha also says that for the

scheme to continue beyond its three-year pilot phase, the government has plenty of promotion work to do.

‘People have limited recognition and understanding of the programme and its details, such as the banks’ role and participation, assessment criteria and so on,’ he says. ‘These should be fully disclosed in order to encourage utilisation and obtain the buy-in of the people in Hong Kong.’

Growth marketHong Kong has not been alone among the advanced Asian economies in recognising growing economic disparity levels since the global financial crisis of 2008, compounded by significant increases in the cost of living at a time when median wages have failed to keep pace with inflationary pressures.

At the height of the financial crisis, many developed Asian economies, fearing the spectre of rising unemployment and growing social tensions, carried out studies focusing on ways to alleviate the plight of the poorest sections within their societies – many of these focusing on how to extend credit to those most in need but ignored by banks and other traditional lenders.

One obvious solution lay with microfinance, as pioneered by Professor Muhammad Yunus and Grameen Bank in Bangladesh – and usually referred to as ‘traditional microfinance’ – which has swept many parts of the Indian subcontinent since the 1990s.

MICRO BOOM?With Hong Kong expected to introduce a pilot microfi nance scheme, questions have been raised about the benefi t of such initiatives in more developed economies

COSTS OF ADMINISTRATION ARE SIGNIFICANTLY HIGHER THAN THOSE ASSOCIATED WITH COMMERCIAL LOANS FROM TRADITIONAL LENDERS

16

CN_F_microfinance.indd 16 09/05/2012 15:12

Singapore launched its own microfinance scheme in November 2011. The MicroCredit Business Scheme (MCBS) is aimed at facilitating small loans to those wishing to set up a business or expand an existing one.

Both the Hong Kong pilot and its Singapore counterpart share two common themes: both models are expected to be self-sustainable and recipients are expected to repay the loan in full. ‘This scheme is not a grant; it is not an entitlement,’ says Kuo How Nam, programme head of the MCBS. ‘We are not a private equity fund. We are not an angel fund, neither are we a venture capitalist. This is a commercial loan and it is expected to be repaid.’

Hong Kong’s financial secretary, John Tsang, shared similar sentiments speaking recently about the Hong Kong scheme. In his Budget speech in 2011 he said: ‘Successful examples abroad, such as MicroBank of Spain, have one feature in common, which is that loans are granted only after careful assessment of the borrower’s willingness and ability to repay, thereby preventing these loans from being used or regarded as a kind of welfare benefit.’

Given both Hong Kong’s and Singapore’s emphasis on screening, sustainability and recovery of all costs,

this raises serious concerns regarding administrative overheads, actual interest repayable and delinquency rates.

Existing microfinance schemes in both developed and emerging economies share one common trait: the costs of administration are significantly higher than those associated with commercial loans from traditional lenders, translating into higher interest rates. Typically, microfinance interest rates range between 20% to 40%, and in some instances can reach a staggering 80%.

Hypothetically, both traditional lenders and microfinance institutions have to raise capital. If the cost of capital is 10%, then each lender must charge a minimum of 10% on the loan extended, together with administrative overheads and default risk premium. In the commercial sector, by utilising economies of scale and high-tech back-office processes these overheads are usually 3% to 4%. Hence, a figure of 14% interest on the loan is not unreasonable if the default rate is low. Such a figure is unsustainable in traditional microfinance, given that the multiples of loans extended are greater than a single one-off commercial loan.

Microfinance delinquency rates prior to the 2008 financial crisis were low, with some 95% to 98% of loans repaid

and losses covered by actual interest rates payable. Since 2008, however, delinquency rates have soared, both in developed and emerging economies.

Risky businessCritics of microfinance schemes in advanced economies often raise the issue of businesses’ startup costs, such as office rental, basic communications, auditing fees and energy requirements.

While the costs associated with running a single proprietor microbusiness in Malaysia are low – the country boasts nearly 500,000 microbusinesses with a supporting microfinance infrastructure – this cannot be applied to either Singapore or Hong Kong which, between them, have among the highest commercial office space rentals globally.

In a period of increasing costs, this brings into question the actual size of the loans on offer to budding entrepreneurs, as envisaged by both the MCBS and the HKMC – maximums of US$40,000 and US$38,650 respectively, which are both significantly lower than the average per capita

Back on their feet: as Hong Kong has one of the largest income disparity gaps in the developed world, its poor could benefit the most from the proposed scheme

17


At a standstill: the high costs of starting businesses in Hong Kong could prevent a burgeoning microfinance sector

annual income of each country. Being conservative and spreading

actual startup costs over a 12-month timeframe, a figure of US$1,000 per month is a reasonable estimate for a single-proprietor operation, equating to approximately a quarter of the maximum microfinance loan available extended over the first year alone. And this before repayments on the loan are taken into consideration.

The United Nations, International Finance Corporation and a plethora of non-governmental organisations associated with relieving poverty in emerging economies are in no doubt that microfinance has helped raise millions of individuals out of poverty in Third World nations. However, serious issues exist in applying microfinance schemes in more developed nations.

Given the scant availability of figures for the MBCS, and that the HKMC pilot scheme is yet to be launched, it is impossible to cast judgment on either microfinance initiative. However, the fact remains that, in comparison to each country’s gross domestic product, the funds initially on offer are small and only an estimated 400 lucky individuals are set to benefit from either scheme initially.

John Stenhouse and Bruce Andrews, journalists

The MicroCredit Business Scheme (MCBS), launched in November 2011, is a collaborative effort between three Singapore government bodies: POSBank (POSB), Tote Board and the Social Enterprise Hub. The MCBS pilot programme was established with a S$5m lending facility provided by Tote. POSB is responsible for microloan administration, structuring, disbursement and repayment, while the MCBS programme office deals with application loan evaluation and support services to borrowers.

Unsecured loans ranging from S$3,000 to S$50,000 are available to eligible Singaporean citizens earning less than S$30,000 per annum who can provide a viable business plan. Repayment periods vary based on the value of the loan, with a maximum loan period of 10 years. Successful applicants have a six-month grace period before repayments begin at two-week intervals, and interest is charged at between 8% and 12% – comparable to interest repayment rates found in the private sector.

*SINGAPORE

Microfinance was introduced to Malaysia in 1987 as a poverty eradication strategy. The government-subsidised Amanah Ikhtiar Malaysia (AIM) was the country’s first microfinance institution to be established, followed by Yayasan Usaha Maju (YUM) and The Economic Fund for National Entrepreneurs Group (TEKUN).

Malaysia’s microfinance sector now includes credit unions, co-operative banks and specialised windows of banks, and the government also remains a prominent player in this sector. For instance, Malaysia’s prime minister Najib Razak last year announced that the government would inject US$10m to establish the non-profit Malaysian Chinese Women Entrepreneurs Foundation to provide microcredit to low-income ethnic Chinese women starting their own businesses. By 2010, some US$275m had been loaned as microfinance to 240,000 people in Malaysia through Amanah Ikhtiar Malaysia, the country’s largest microfinance organisation, according to MixMarket.org.

*MALAYSIA

18


A&B June 2012 (Offshore) ol_output.pdf 2012/4/27 10:07:39 AM

Ads-June12.indd 5 09/05/2012 13:44

Many of the world’s top football players – Cristiano Ronaldo, Zlatan Ibrahimovic and Wayne Rooney to name

a few – will be taking to the pitch in the Euro 2012 tournament this month.

But it is not just the winning countries that will ultimately be revealed, but also whether Poland and the Ukraine themselves will be viewed as winners in having co-hosted a financially successful tournament without major logistical problems.

There those within UEFA that believe that simply staging the third biggest sporting tournament in Central and Eastern Europe for the first time represents a massive achievement – only the Olympics and the World Cup are bigger sporting events. David Taylor, CEO of UEFA’s commercial arm, UEFA Events SA, is among them. He believes ‘a very important decision was made to go to Eastern Europe for the first time in our history’.

Ultimately, delivering a successful tournament is vital to the self-confidence of the region to boost its profile and to potentially become a contender to host other major sporting events in the future. However, there is no escaping that finance is key.

Estimated turnover of €1.4bn for the 2012 Euro tournament can be broken down into four main sources: media rights (62%), commercial rights – income from sponsoring and

THE BEAUTIFULAs Euro 2012 kicks off, we analyse the fi nances of previous championships and the projected revenues to be generated by this year’s co-hosts, Poland and the Ukraine

A lot of red faces have been avoided after it was confirmed that all the tournament’s new-build stadiums are ready in time – but it was a close call for a while.

The construction of the spectacular 58,000-capacity National Stadium in Warsaw – scheduled to host the opening match between Poland and Greece on 8 June – has not been a smooth process. Delays put construction behind schedule, causing tensions between those involved and the Polish government. The 50,000-seat venue was finally opened in January 2012 with a ceremony, fireworks display and free music festival.

But as recently as February, problems continued to dog the stadium. It was due to host a Poland Super Cup match, but it was scrapped when police said they were unable to guarantee security because of communication problems inside the stadium – senior officials were forced to resign.

Mayor Hanna Gronkiewicz-Waltz said afterwards that all of these problems had been addressed and the police subsequently gave their approval for the stadium to be used. It will officially be handed over to UEFA on 9 May.

Meanwhile, in the Ukraine problems have also been evident, including fears over the launch of high-speed railways between host-cities and the finalisation of construction and renovation of a number of main roads.

Even UEFA president Michel Platini raised doubts over construction deadlines for the country’s four stadia to be used in the 31-game tournament, as they slipped behind schedule. Several alternative host nations were even mooted as fall-back options in the event the Ukrainian FA was unable to deliver on its targets to UEFA. Germany, Scotland and England were among the possibilities.

What should not be overlooked is the investment involved. A new international airport terminal has been built in Ukrainian capital Kiev, while Poland has spent €21.6bn on infrastructure, with Euro 2012 as the catalyst.

*DOWN TO THE LINE

merchandising (22%), hospitality (9%) and ticketing (7%). Official UEFA figures for Euro 2008 – the previous tournament in Switzerland and Austria – showed income totalled €1.3bn – a 50% rise over the previous tournament

in Portugal in 2004. Looking even further back, the 2000 tournament in Belgium and the Netherlands generated €230m, while Euro ‘96 tournament in England produced approximately €147m.

20

AP_UK_F_eurofootball.indd 20 11/05/2012 15:17

The new National Stadium, Warsaw, Poland, sporting the country’s red and white national colours

21


Poland and the Ukraine will be hoping footballing stars such as Cristiano Ronaldo prove enough of a draw

The rapid rate of revenue increase has been truly impressive, with the single biggest contributing factor being the massive increases in media rights revenues, which generated €801m in 2008 (up from €560m in 2004) and produced an operating profit of over €700m.

HatTrick scoreThese sizeable profits have been used to fund a multitude of worthwhile development projects, such as education and training centres across the 53 UEFA member associations through UEFA’s assistance programme called HatTrick.

Once these costs are taken into account, net profit for 2008 came in around €300m, which was then ploughed back into the game and used to finance all the youth and women’s competitions from 2008–12, refereeing and coaching programmes, and various administration costs.

Forward-wind to this summer’s tournament and UEFA originally stated in early 2010 that it expected revenues to be in the region of €1.3bn, again with the lion’s share coming from the sale of media rights.

A spokesman for UEFA told Accounting and Business that despite

the general economic conditions: ‘There has not been any decrease in the overall figures since the initial projections were made a little more than two years ago’.

However, ticketing is estimated to yield €125m (down €24m on 2008), while corporate hospitality is predicted to fall a massive €55m to €100m. This represents a sizeable drop and is perhaps the biggest single financial indicator that the event will be affected by the economic downturn.

Football finance expert Simon Chadwick, professor at Coventry

University, says: ‘The European Championship is becoming a phenomenon in its own right. It really is one of the premium sporting events in the world. The way it is packaging its sponsorship deals is similar to that used by the International Olympic Commission (IOC) and proving very successful. The marketing expertise is coming in from big international brands with extensive experience and commercial logic – and it is showing.’

Sharing the spoilsFor the four years following this summer’s tournament (to 2016), estimates suggest almost €500m

will be made available to the HatTrick programme and that

each national association will receive up to €9.4m. If the forecast

targets are met, it will also mean European Championship yield will have increased by more than 30 times over the last 20 years.

But while revenue growth has been impressive, there are dark clouds on the horizon that continue to threaten the 2012 forecasts.

The ongoing economic crisis is having an impact. Sports industry advertisers have slashed budgets, while sponsors and investors have reined in.

There is also the real prospect that corporate hospitality packages for the competition may not sell out. ‘The downturn has meant that boards of directors are looking

closer at the link between corporate activity and the bottom line. Senior staff are, therefore, having to argue a much stronger case and demonstrate tangible business links before

corporate hospitality is signed off’, says Chadwick.

‘UEFA are finding it no different to anybody else,

but the fact that the Ukraine and

Poland are not considered to have the caché of a Paris or Madrid and not considered

Budget incomeMedia rightsCommercial rightsCorporate hospitalityTicketingOverall turnover

CostsEvent costsSolidarity payments toUEFA associationsOverall costs

Net profit

2012 (est)8402901001251,355

TBCTBC

TBC

TBC

2008

8012941551011,351

-600-450

-1,050

301

*EURO 2012 AND 2008 FINANCES (€M)

22


Officially licensed merchandise, such as logo-embossed footballs, is an integral income stream of any Euro competition

SIZEABLE PROFITS HAVE BEEN USED TO FUND AMULTITUDE OF WORTHWHILE DEVELOPMENTPROJECTS, SUCH AS EDUCATION AND TRAININGCENTRES ACROSS 53 UEFA MEMBER ASSOCIATIONS

has been a perceived failure by the host nations to whip up sufficient local buzz and tackle the overseas images and clichés of post-communist countries.

Taylor has already expressed his belief the 2012 tournament is not going to be the most financially successful tournament of all time – from a revenue or profit perspective. Playing down the importance of these issues, he says: ‘We could have gone elsewhere if that was our objective.’ Nonetheless, all eyes will be as focused on the performances off the pitch as much as the players on it.

Alex Miller, journalist

Germany, Spain, England, France, Republic of Ireland, Sweden, Poland, Ukraine, Portugal, the Netherlands, Greece, Russia, Czech Republic, Denmark, Italy and Croatia.

*EURO 2012 TEAMS

clients are prioritising the Olympics. ‘A lot of clients are saying they’re going to do the “big one” this year, as opposed to some of the more perennial events they normally do.’

Meanwhile, at the time of writing, general attendance tickets remain on sale, although only around 5%. Reports of extortionate hotel charges and airfares have certainly not helped. There are also very real concerns that many key roads in Poland simply won’t be finished in time.

Ukraine’s jailed opposition leader Yulia Tymoshenko’s ongoing incarceration hasn’t helped the country’s international image. And there

important growth markets hasn’t helped’, he adds.

There is also serious competition for Poland and the Ukraine from the Olympic Games in London. UEFA’s quadrennial showpiece begins just six weeks before the opening of London 2012, whereas four years ago the Olympics were hosted by Beijing, making it ‘rather more difficult to access from Europe’, Taylor adds. ‘These things inevitably have an effect.’

Big oneTony Barnard, marketing director at Prestige Ticketing, the London Games’ official on-site hospitality seller, says

23


In his regular quarterly report, ACCA’s Manos Schizas sees a new-found optimism among professional accountants around the world

When the results for the third anniversary edition of the Global Economic Conditions Survey came in, I must admit I was sceptical. The share of respondents reporting confidence gains in their own organisations had nearly doubled from 16% to 29%, and while the majority (54%) still believed that the global economy was deteriorating or stagnating, that figure was down from 73% in the previous quarter. Fearing embarrassment, I started ticking off objections.

Turns out that the rise in confidence was not due to biases in the sample. Nor was it skewed by one or two days of positive newsflow; it was based not only on perceptions but also on fundamental improvements in demand, business dynamism and access to finance. It was reflected in rising investment and employment. It was consistent across regions and industries, although the Americas and Western Europe seemed to have benefited the most, as did manufacturers and distributors, particularly in the high-tech sectors. Business dynamism has risen the most in the Americas and Asia Pacific,

A NEW-FOUND DYNAMISM CANBE SEEN IN MANY DEVELOPING AND TRANSITION ECONOMIES

*THE VIEW FROM ASIAAcross the region, 23% of respondents reported rising business confidence, up from 11% in late 2011. About a third (34%) felt the state of global economy was improving or about to, up from 19%. Nonetheless, Asia Pacific recorded lower confidence levels in Q1 2012 than any major region, and only respondents in Europe were more pessimistic about the prospects of the global economy.

Malaysia and Singapore recorded the smallest confidence gains among major markets in the region, while the survey findings revealed a difference of opinion within Greater China. There is growing confidence on the mainland, outperforming all other Asian markets, strongly rising investment and an excellent outlook for employment, but also rising inflation and concerns about government spending. In Hong Kong, on the other hand, confidence and the outlook for investment are much weaker, and respondents call for an increase in government spending.

while Africa, still ahead of the rest on the confidence scoreboard, seems to be losing ground.

Governments have helped too, even though members generally think that many major economies, including both the US and its straight man, China, are overspending.

On the other hand, policymakers hoping to deliver growth despite austerity in Western Europe and

elsewhere have been frustrated in their efforts.

Much more encouraging is the fact that a new-found dynamism can be seen in many developing and transition economies, with businesses securing new orders where previously they would not have. In the Asia Pacific region and the Americas this has led to a bounce in investment and new hires. This is a very welcome trend; investment has been subdued since the end of the ‘green shoots’ stage of the global recovery, which lasted from mid-2009 to mid-2010.

This investment is focusing on two kinds of opportunities in particular. Customer insights, namely the need to understand and benefit from spending decisions under new constraints, is one; the other is supply chain optimisation through deepening relationships and a stronger focus on quality.

The dark side of this new-found dynamism, however, is rising input prices. If even this very timid recovery is accompanied by rising inflation, then a full-blown recovery is likely to provide a challenge for central banks and other policymakers. And when interest rates are forced up again, both business and sovereigns had better be ready.

*THE VIEW FROM *THE VIEW FROM *

24 Taking the pulse of the global economy

AP_F_GEC.indd 24 09/05/2012 15:09

-13THE DANGER DOWNPOINT

THE ACCA/IMA GLOBAL ECONOMIC CONDITIONS SURVEY – HOW TO TAKE PART

-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13-13THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER THE DANGER DOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINTDOWNPOINT

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OPPORTUNITIES6 AUSTERITY7 SECTOR-SPECIFIC FACTORS8 POOR POLICIES9 ACCESS TO GROWTH CAPITAL10 BUSINESS SIZE11 UNSTABLE CUSTOMERS

The views of ACCA members are highly valued and receive widespread media coverage. The Q4 2011 survey was quoted in the press around the world

more than 500 times. So why not have your say? The next quarterly survey opens on 17 August. Everyone can participate – simply look for the link

in AB Direct or watch out for the email invitation. The survey is carried out in association with the US-based Institute of Management Accountants (IMA).

WHAT INFLUENCES CONFIDENCE?

302010

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THE ACCA CONFIDENCE INDEXBusiness confi dence remains in negative territory. The graphics show the percentage of respondents saying they have gained business confi dence, minus those who have lost it

The ACCA Confidence Index correlates strongly with economic growth globally. A reading of below -13 suggests the economies of the developed world are contracting and the global economy is slowing to a halt.

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TAKING THE GLOBAL TEMPERATUREBreaking down the ACCA Confidence Index geographically reveals some striking variations, with members in Africa still showing most confidence.

The ACCA/IMA Global Economic Conditions Survey follows 38 different indicators of trading conditions and firms’ responses to them, as well as two indices of business confidence and perceptions of the global economy. In the list of factors shown here, we’ve used statistics in order to tease out the effects of different aspects of the business environment, both positive and negative, on confidence.

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ELA

ND

-7IR

ELA

ND

IREL

AN

D -7

IREL

AN

DIR

ELA

ND

-7IR

ELA

ND

IREL

AN

D -7

IREL

AN

D

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

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EAST

ERN

EU

ROPE

EAST

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EAST

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EAST

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EAST

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EAST

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EAST

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EAST

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EAST

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EAST

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EAST

ERN

EU

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EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

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EAST

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EAST

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EAST

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EAST

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EU

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EAST

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EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

-15

-15

-15

-15

-15

-15

-15

-15

-15

-15

-15

-15

EAST

ERN

EU

ROPE

-15

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

-15

EAST

ERN

EU

ROPE

EAST

ERN

EU

ROPE

-15

EAST

ERN

EU

ROPE UK

UK

UK

UK

UK

UK

UK

UK

UK

-17

-17

-17

-17

-17

-17

-17

-17

-17

-17

-17

UK

-17

UK

UK

-17

UK

UK

-17

UK

MA

LAYS

IAM

ALA

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MA

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IAM

ALA

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MA

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ALA

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MA

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2 -2

2 -2

2 -2

2 -2

2 -2

2 -2

2 -2

2 -2

2 -2

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-22

MA

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-22

MA

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HO

NG

KO

NG

HO

NG

KO

NG

HO

NG

KO

NG

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NG

KO

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KO

NG

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NG

KO

NG

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NG

KO

NG

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NG

KO

NG

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NG

KO

NG

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NG

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NG

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NG

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NG

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NG

KO

NG

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NG

KO

NG

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NG

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NG

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NG

KO

NG

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NG

KO

NG

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NG

KO

NG

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NG

KO

NG

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NG

KO

NG

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NG

KO

NG

HO

NG

KO

NG

HO

NG

KO

NG

HO

NG

KO

NG

HO

NG

KO

NG

HO

NG

KO

NG

-28

-28

-28

-28

-28

-28

-28

-28

-28

-28

-28

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

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SIN

GA

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SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

SIN

GA

PORE

-41

-41

-41

-41

-41

-41

-41

-41

-41

-41

-41

-41

SIN

GA

PORE

-41

SIN

GA

PORE

SIN

GA

PORE

-41

SIN

GA

PORE

SIN

GA

PORE

-41

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GA

PORE

0000-10-10-20-20-30-30-30-30-30-30-40-40-40-40-50-50-60-60-60-70-70-70-70-70-70

TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE TAKING THE GLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBALGLOBAL TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATURE TEMPERATUREGLOBAL TEMPERATUREGLOBALGLOBAL TEMPERATUREGLOBALGLOBAL TEMPERATUREGLOBALGLOBAL TEMPERATUREGLOBALGLOBAL TEMPERATUREGLOBALGLOBAL TEMPERATUREGLOBALBreaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index Breaking down the ACCA Confidence Index geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with geographically reveals some striking variations, with members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.members in Africa still showing most confidence.

Total Q1 2009–Q1 2012 sample: 20,881 responses from ACCA members around the world

11111 REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING REVENUES FALLING2222222 GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS GLOBAL ECONOMY SEEN AS

MAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESSMAKING PROGRESS3 3 3 3 3 NEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLINGNEW ORDERS FALLING4 4 4 4 4 4 4 VERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIESVERY GOOD POLICIES5 5 5 5 5 VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS VALUE-ADDED BUSINESS

OPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIESOPPORTUNITIES6 6 6 6 6 6 6 6 6 AUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITYAUSTERITY7 7 7 7 7 SECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORSSECTOR-SPECIFIC FACTORS8 8 8 8 8 8 8 8 POOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIESPOOR POLICIES9 9 9 9 9 ACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITALACCESS TO GROWTH CAPITAL10 10 10 10 10 10 BUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZEBUSINESS SIZE11 11 11 11 11 11 11 11 11 11 UNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERSUNSTABLE CUSTOMERS

WHAT WHAT WHAT WHAT WHAT WHAT WHAT WHAT WHAT WHAT WHAT WHAT WHAT WHAT WHAT INFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCESINFLUENCES CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE? CONFIDENCE?

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The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey The ACCA/IMA Global Economic Conditions Survey follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different indicators of trading conditions follows 38 different 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25Taking the pulse of the global economy

AP_F_GEC.indd 25 09/05/2012 15:09

Myanmar appears to be leaving the past behind – and the resource-rich and geographically blessed

country has all the right ingredients for a prosperous future.

Industries, particularly oil and gas, mining and manufacturing, agriculture and tourism have exceptional potential and there are many opportunities for law firms and accountants who work with local and foreign companies and the government to get these industries running, growing and regulated.

‘[Myanmar is] one of the largest untapped sources of natural and human resources left. In particular, there is vast mineral wealth onshore that has not been explored,’ says James Finch, head of DFDL in Myanmar, one of the leading legal and tax firms in the country.

Labour costs are extremely low, but so too are literacy and education rates. But this will change with increased internet and mobile phone use.

‘The population exists on around a dollar a day. As this situation changes, there will be enormous markets that open up. One that is awakening now is telecommunications,’ says Finch.

Internet and mobile phone use still lags behind the rest of the world – Myanmar has the least phones per capita in the world. As Myanmar’s military government increasingly tolerates change, the cyber barriers limiting its population have been eased. The country’s firewalls have been lowered, opening access to social media sites such as Facebook and Twitter as well as international news sites. The government now

ASIA’S HIDDEN JEWELDecades of isolation have made Myanmar a mystery to the outside world. But could a new wave of political and economic change put an end to secrecy and repression?

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acknowledges the need for a local IT industry – if not for freedom of speech of its people then for the foreign investment opportunities that accompany well-established internet communities. In February, a conference run by tech lovers met not in Silicon Valley, Tokyo or even Beijing, but in the capital of Myanmar, Yangon, in an event sponsored by the country’s growing telecommunications industry.

Out of reachThat doesn’t mean people are automatically logging on, with most unable to afford inflated and exorbitant connection fees. Setting up an internet connection will leave you little change from US$850, and a mobile SIM card, costing no more than US$2 in some Asian countries, costs around US$700. However, the country plans to establish 30 million more GSM mobile phone lines in the next five years with the help of private companies, which may lower costs.

One Asian Tiger that has seen the benefits of telecommunications investment is Vietnam, which at the end of 2010 had an internet penetration of 31% and saw a 12,000% increase in usage between 2000 and 2012, according to official sources. That compares with a 205%

rise in Singapore and 1,767% in China. Vietnam has seen a more rapid growth of internet usage over the past few years than any country in the region – and not just in urban areas, with penetration at nearly 50% in smaller cities, according to market research group Cimigo Vietnam. Thirty per cent of Vietnam’s population of 92 million live in urban areas, while the other 70% reside in smaller cities and rural areas, although urbanisation and migration are changing those statistics rapidly. It’s easy to see how Vietnam’s telecommunications industry grew so rapidly and will continue to. Likewise, 30% of Myanmar’s population lives in urban areas – and the major cities will see dramatic uptake in internet and mobile usage in the next five to 10 years, followed by rural areas. It’s hard to get exact statistics, but it’s estimated there were only 110,000 internet users in the country of 50 million in 2010.

One company has already seen the potential: ‘A Fortune 500 American company (not named for legal reasons) has begun selling its big ticket technical equipment in Myanmar. We are setting up the legal structure for them to be able to do so,’ says Finch, who expects more Fortune 500 companies to follow suit.

* Population: 54.6 million

* Population growth rate: 1.07%

* Ethnic groups: Burman 68%, Shan 9%, Karen 7%, Rakhine 4%, Chinese 3%, Indian 2%, Mon 2%, other 5%

* GDP: US$50.2bn

* Imports: US$5.5bn

* Exports: US$9.5bn

* Inflation: 8.9%

* External debt: US$8.1bn

* Country land mass: 676,578 sq km

* Natural resources: petroleum, timber, tin, antimony, zinc, copper, tungsten, lead, coal, marble, limestone, precious stones, natural gas, hydropower

* Internet users: 110,000

Source: CIA World Factbook

*STATISTICS

Political reform: National League for Democracy supporters celebrate as they watch an on-screen ballot count indicating a strong return for the party in the parliamentary

by-elections. Democracy icon Aung San Suu Kyi (left) won a seat

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AP_F_Myanmar.indd 27 10/05/2012 12:05

In January 2012, eight companies were awarded 10 onshore oil and gas blocks, in the country’s biggest energy tender in years. Crude oil reserves in the country are estimated at 3.2 billion barrels and gas reserves at 11.8 trillion cubic feet – so far a largely untapped resource but one that’s caught the eye of investors from neighbouring China and India as well as Russia and Switzerland. The Ministry of Energy and Myanma Oil and Gas Enterprise are now looking at the next offering of nine offshore energy blocks to bidders – so the potential for foreign companies to make money in Myanmar is considerable.

If Myanmar is to continue attracting foreign investment it needs to continue legal and fiscal reform. Sean Turnell, associate professor at Macquarie University in Sydney says ensuring property rights for its citizens is the number one priority: ‘Burma [Myanmar] really needs to continue the reforms, above all, legal reforms and reforms that guarantee property rights. That’s a big problem: it’s the thing that has separated it from Vietnam and China.’

The other issue is political reform. ‘Right at the heart of Myanmar is the military spending as it dominates the fiscal issues. It’s military spending that is at the core of the budget deficit,’ says Turnell, an expert on Myanmar and South-East Asia. The nation’s annual estimated military spending is US$1.9bn, which is about 15% of the total budget and easily the biggest spending item in the budget, he adds. ‘Out of all South-East Asian countries it’s the only country that spends more on military versus all social spending [on education]. In the end it’s a political issue – the military apparatus is there for a reason, to quell dissent.’

Political reform‘The biggest change, to date, has been in the political arena and the world’s perception of this,’ says DFDL’s

Finch. With the National League for Democracy and its leader Aung San Suu Kyi victorious in the April by-elections, there is much excitement over the potential for change in the political arena and the move towards democracy. However, that excitement has been tempered by the fact that parliament is still dominated by military (they are guaranteed a quarter of seats in the lower house) and the pro-military politicians.

Jim Della-Giacoma is South-East Asia project director for the International Crisis Group, which offers independent advice to governments and international bodies on prevention and solution to deadly conflicts. He says: ‘As the president said in his inaugural address on 30 March last year, it is time to catch up with a changing world. To reform economically, there has to be political change to bring along all groups in society, including the ethnic minorities. Political change needs to be conducted hand in hand with economic change

and reforms to the economy that do not deliver results or have unintended negative consequences could affect political support for the government’s efforts. The two are intertwined and cannot be separated.’

DFDL’s Finch adds: ‘Much is still on the way in a business and commercial context. Because of the recent spate of interest, I am often asked by foreign companies if they’re too late to get in. I tell them the process of modernisation in Myanmar will take years and that those already in the market are only the earliest pioneers.’ Most of his clients are foreign companies and it’s likely to remain that way for some time.

History of wealthIt’s hard to imagine that Myanmar was once a prosperous nation – under British rule between 1824 and 1948 it supplied oil through the Burmah Oil Company. At one point it produced around 75% of the world’s teak and was the largest exporter of rice in the world – neighbouring Thailand now

Answer to prayer: the future is brighter for Myanmar now that EU and US sanctions are being eased

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claims that title. Until 1937 Myanmar was an administered province of India, when it then became a self-governing colony and attained independence in 1948. The well-documented 1962 coup d’état by General Ne Win and a number of other senior military officers led to the nationalisation of all industries and set the country on a path of stern military control and ‘socialism’. Still today, the country lags well behind those in South-East Asia – being the most isolated and arguably the poorest.

Myanmar borders five countries – Bangladesh, China, India, Laos and Thailand – and huge trade potentials exist within those countries alone. The Andaman Sea and Bay of Bengal are at its doorstep, which could potentially position Myanmar as the hub of Asia connecting South-East Asia and the pacific to China, India, and the Middle East. The country is about the size

of Britain and France combined – the second largest in South-East Asia – with a vast land area for agriculture. The Ministry of Agriculture and Irrigation estimates there are around 23 million acres of land left for crop cultivation out of a total 44.65 million acres – and it’s offering tax exemptions to entice companies to cultivate the land.

Currently Myanmar imports around US$5.5bn worth of goods, and exports US$9.5bn (see box, previous page) – a number that’s likely to shift. Total foreign direct investment (FDI) in Myanmar amounted to about US$40bn from about 1988 to late 2011, with most expenditures resource-based projects such as mining, power and oil and gas, Myanmar Investment

Commission (MIC) statistics show. The leading investors are currently China and Thailand. MIC deputy director general U Aung Naing Oo claims that at least US$4bn in FDI is due to enter Myanmar in the year 2012-13, which began on 1 April.

Tax breaksOn 28 January, the government announced a policy to give all foreign investors an eight-year tax break – a clear message to the international community that it welcomes foreign investment. Amendments to the Myanmar Foreign Investment Law 1988 have been drafted by parliament with the help of international consultants. Two proposals are on the table: one to extend the current tax holiday to eight years from the current three and another to extend it to five years.

To complement these tax breaks, the president, Thein Sein, has introduced a series of political and economic reforms related to anti-corruption and taxation. Foreign companies are being lured in by these incentives as well as improving infrastructure. ‘The infrastructure is slowly changing and has a long way to go… including the information highway, which now operates reliably, but slowly,’ says Finch.

Other changes are in the pipeline. ‘The MIC has streamlined its procedures for approval of benefits granted under the Myanmar Foreign Investment Law 1988. These will, when fully implemented, be a big step in cutting out the red tape. Practically every ministry has taken some steps to liberalise its procedures. Much

more needs to be done, particularly with respect to internal ministerial rules and regulations on projects that will promote the Myanmar economy,’ says Finch.

He recommends the government follow the IMF’s suggestion to unify currency exchange rates, ending a 35-year official peg and ‘pass the proposed amendments to the Myanmar Foreign Investment Law of 1988 currently before parliament, particularly the extension of the tax holiday to at least five years’. If that happens, and that is a big if, it will be the biggest economic shift by Thein Sein and the government of Myanmar after taking office last year.

‘The political and economic landscapes in Myanmar are changing very rapidly so serious investors will need to devote a substantial amount of time to trying to understand what’s going on. This will be difficult in part because the country is swamped with visitors trying to get a piece of the action, overwhelming government officials and private sector leaders who speak English [or other languages] well,’ says Lex Rieffel, a senior fellow and expert on South-East Asia at the Brookings Institution in the US.

However, the future is bright politically and economically – due to the lifting of sanctions. The European Union (EU), US and other Western nations this year started easing sanctions in recognition of recent moves toward political reform. In February, the EU suspended admission restrictions against Myanmar, allowing the 87 top officials from the country visas into Europe, but maintained a freeze on their assets. On 23 April, it agreed to suspend most of its sanctions (not including arms) against Myanmar for a year, despite a dispute over a parliamentary oath between the army-backed ruling party and Suu Kyi.

Asha Phillips, journalist

‘I TELL FOREIGN COMPANIES THAT THE PROCESS OFMODERNISATION IN MYANMAR WILL TAKE YEARSAND THAT THOSE ALREADY IN THE MARKET AREONLY THE EARLIEST PIONEERS’

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AP_F_Myanmar.indd 29 10/05/2012 12:05

VIEW AN ACCA/KPMG OUTSOURCING WEBINAR www.accaglobal.com/virtual

The relationship between an outsourced service provider and a client is like a marriage, whether the service provider

is a third party or a captive entity. At the start, both parties are flushed with happiness and hopeful their expectations will not just be met, but exceeded.

Unfortunately, as the relationship matures, satisfaction levels can drop. In outsourcing relationships, with both parties having typically committed to it lasting between five and seven years, this happens when there is misalignment between services agreed in the contract, services expected by the client, and the services actually delivered. This misalignment is sometimes exacerbated by the role of the ‘marriage arranger’ – represented in outsourcing by the specialist teams from both service provider and client who negotiate contract terms. The negotiators are not necessarily those who will be providing and receiving the outsourced service, thus increasing the risk of misalignment between client expectations and the service agreed in the contract.

For example, some services covered by the contract may be neither expected nor delivered, and are thus irrelevant. Other services may be agreed and expected, but not delivered. Service providers can also waste resources delivering services that are neither expected by the client nor agreed in the contract.

There is a sweet spot where the services expected by the client are both agreed in the contract and delivered by the service provider. The bigger the

sweet spot, the better. However, over a long-term relationship, careful management is required to avoid any creeping waste in service provision or growing misalignment between client expectations and service delivery.

Based on KPMG firms’ experience, value leakage in outsourced service relationships is most likely to stem from three core areas: operational, performance and portfolio management challenges.

Avoid duplicationOperational challenges arise, for example, due to the duplication of services provided by both service provider and client. To avoid this, attention needs to be given to redesigning and re-skilling the retained finance function, so that individuals are equipped for their new roles managing the service contract. Performance challenges can arise when problems are not managed or the service provider’s performance is not at expected levels. This could, for example, result from the high degree of personnel churn currently experienced by many service providers.

Turning to performance management challenges, value leakage can occur when service providers identify opportunities for improvements, but the client is unresponsive or fails to make adjustments. Improvement opportunities are likely to be identified once the service handover is completed and process standardisation achieved. Having analysed the client’s data, the service provider may gain new information that could be applied to

improve the service – but client action will often be required.

Existing contracts can be reviewed to identify where client organisations could be driving increased value from their outsourcing relationships. Reviews conducted by KPMG over the last 12 months, using our value assurance framework, reveal some typical areas of conflict between client and service provider. There are, for example, often issues around performance, with the credibility of performance metrics often challenged. This may be exacerbated by insufficient pre-contract baselining. Clients moving from a decentralised service delivery model to an outsourced model are unlikely to have the right baseline information available. This makes it difficult to set realistic baseline service levels for the provider, or to hold the provider accountable.

Lack of trustProblems arise with processes too, with efficiencies sometimes lost through clients’ failure to focus on end-to-end process optimisation. This can result from a lack of trust in the provider and an unwillingness to hand over certain processes.

KPMG’s reviews have also found problems in realising the full potential of outsourcing contracts. Some firms complain they are not receiving the levels of innovation outlined in their contracts; but service providers are dependent on client cooperation to help implement innovative ideas.

Other challenges arise in terms of a client’s ability to implement change globally. First-level savings can be achieved through labour arbitrage, but

KEEPING THE LOVEEntering a business process outsourcing contract is like agreeing to a marriage, says KPMG’s Claudio Altini. So it needs ongoing love, care and attention as it matures

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AP_INT_F_outsource.indd 30 10/05/2012 16:31

VIEW AN ACCA/KPMG OUTSOURCING WEBINAR www.accaglobal.com/virtual

achieving additional benefits requires more significant change. Unless these changes are made, service providers contracted to deliver cost savings will take the hit and suffer falling profit margins, with declining service levels certain to follow. Both parties must, therefore, agree in advance how they will work together to deliver additional savings beyond any easy, early wins.

Finally, problems with perception often occur. Many CFOs often comment that, from what they have heard, their organisation has a poor relationship with its service provider. On investigation, however, KPMG firms often find few significant issues; the CFO is simply picking up ‘noise’ within the system. Day-to-day minor issues do arise, just as they did before the outsourced service contract was put in place. The noise they create is amplified, however, because now an external party can be blamed.

Experience suggests that the higher up the organisation you go, the more

‘noise in the system’ occurs. Such negative perceptions are dangerous and need to be managed. If key stakeholders have poor opinions of the outsourcing relationship, it will

ultimately fail and achieving the expected value will prove impossible.

Claudio Altini, head of the business process sourcing practice at KPMG, UK

* It is never too late to establish a leading practice outsourcing governance team: a lack of governance can erode deal value by as much as 15%–20%.

* Realise that effective operations managers usually don’t make effective governance executives.

* Shadow organisations often exist in client organisations, increasing cost: root these out.

* Outsourcing governance teams should ebb and flow as needs change through transition and steady-state phases: make sure your teams flex accordingly.

* Learn how to track the value of your outsourcing relationship. Focus on the ‘what’ and not the ‘how’.

* Make sure your enterprise business intelligence and knowledge management initiatives include all data and information related to outsourced processes, and that it’s tracked throughout the lifecycle of the relationship.

* Track internal client satisfaction. Maintaining open dialogue and obtaining regular feedback from internal clients is key to maintaining expectations.

* Ensure you and your provider have aligned goals, or risk failure to deliver on the ‘intent’ of the deal.

* Determine your organisation’s level of trust toward its provider. Do whatever is necessary to maintain or regain trust to avoid diminishing value.

*SUCCESSFUL RELATIONSHIP GOVERNANCE

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Comment

I recently interviewed Robyn Denholm, executive vice president and CFO of US$4.5-bn-a-year Juniper Networks, and was struck once again by the transformative changes that the finance function is undergoing.

‘If you go back maybe 10 years, there was a very heavy focus on compliance and regulatory things,’ says Denholm, a fellow of the Institute of Chartered Accountants in Australia who was in professional practice before moving on to Toyota, Sun Microsystems and now Juniper, where she has been finance chief since 2007.

But she is also comfortable with the non-traditional roles that accountants are increasingly expected to play. At Juniper, she oversees not only finance but planning, real estate, information technology, business process re-engineering, field operations, investor relations and internal audit. What finance has done, she explains, is build up a very strong base of financial, compliance, regulatory and statutory talent and is now constructing a ‘very good business capability’ on top of that.

Some may not want to become business partners. That’s fine. ‘I know many good accountants who like doing accounting and don’t necessarily want to do planning,’ says Denholm. ‘We have different tracks, and they can move from one track to another.’

For those who embrace the evolving role, there is a lot to do. Finance at the global and regional levels is a key player in planning, says Denholm. ‘We do a three-year plan

Tracking fi nance’s transformation[The evolution of fi nance professionals from number crunchers to business partners continues, but it is

vital that key aspects – such as accounting integrity – should stay the same, says Cesar Bacani

at Juniper so we make sure that the resource alignment is there end to end [and] that we maximise the return from the products that we invent.’

Finance also analyses business conditions and prospects in conjunction with the sales leadership. Denholm adds: ‘My finance leaders tend to be quite operational, whether it’s

looking at the logistics of moving things into the region or working with manufacturing to make sure that all aspects of the operation are covered.’ All this is possible because of a 2,000-strong global shared services centre in India, which takes care of a number of compliance and transactional processes.

Talking to Denholm and other global CFOs, such as Ingo Bank of Philips Healthcare and Ray Leclercq, formerly of BT Global Services, I am convinced that the CFO’s leadership by example

and commitment are important pieces as well.

‘I’m not a traditional CFO,’ says Denholm.

‘I like spending time with our employees across

the world, I like working on strategy,

I like meeting with customers and stockholders.’ She is also

curious by nature and likes to learn new things. ‘I know personally that’s been a

huge part of my career. Starting in accounting, I continued to educate myself on accounting rules, at the same time understanding [the company’s] process, products and operations. I think all finance people are capable of doing that.’

Importantly, though, Denholm makes sure the integrity instilled in herself and her team is not set aside as finance’s role in the business expands. ‘It doesn’t matter if I’m doing strategy and planning; I have my fiduciary roots,’ she says.

In transforming finance, the more things change, the more they should also stay the same.

Cesar Bacani is editor-in-chief of CFO Innovation Asia

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AP_COM_Cesar.indd 32 09/05/2012 15:08

The Marina Bay Sands resort

Q What do you consider to be your key achievement at the company? A I have led the streamlining of its diverse businesses (more than 100 entities) into four core businesses. The group is today stronger and more focused, achieving record profits in the 2010 and 2011 financial years.

Q How has Wearnes changed over the years? A Wearnes was founded in 1906 by two brothers, as the automotive dealer CFF Wearne & Company. WBL Corporation (Wearnes) was listed in 1912 as Wearne Brothers Limited. Over the decades, Wearnes extended its activities and its ventures included investments in high-tech industries, engineering and construction, industrial equipment and supply, telecommunications, agrotechnology and property. Today, Wearnes’ core businesses are technology, automotive, property and engineering and distribution.

Q What are your priorities for the company? A To continue to grow its core businesses organically and geographically.

Q What challenges does the company face? A The group faces economic uncertainty, rising labour costs, increased competition and a talent crunch. However, our business strategies have enabled us to grow our businesses, while mitigating costs and optimising operational efficiencies with stringent management processes.

Q Where do you see growth for the group? A Buoyed by increasing affluence and sustained demand for luxury items such as automobiles and homes, and technological advances that drive demand for more consumer electronics such as smartphones and handheld tablets, we remain geared up to tap growth in these markets.

FAST FACTSRevenue for last financial year: S$2.2bn Number of staff: About 4,000 in 11 countriesFavourite book: The Bible; it is a source of great wisdom, encouragement and solace

GAMBLING PAYS OFF Singapore is poised to become the world’s second-largest gaming destination behind Macau, with gross gaming revenue expected to reach S$8.04bn (US$6.5bn) this year. This will overtake the predicted US$6.1bn total takings by casinos on the Las Vegas strip. Last year, analysts made a similar prediction about the earnings from Singapore’s two integrated resorts but the outcome fell short of their expectations. However, they are confident the target will be achieved this year if the strong earnings recently reported by Marina Bay Sands (MBS) resort can be taken as a guide. MBS raked in gross gaming revenue of over US$2bn last year, and posted net revenue of US$848.7m for the first quarter of this year. Its casino earnings have increased by 51% to US$701.3m.

TAX PLANS PUT OFF INVESTORSIndia’s plans to tax indirect investments and combat tax evasion could cause foreign investors to think again. The first provision gives India the power to retroactively tax the indirect transfer of assets. The second targets tax evaders through the General Anti-Avoidance Rule, which places the burden on investors registered in countries with special tax exemptions with India to prove they do not intend to explicitly avoid tax. Mark Mobius, executive chairman of Templeton Emerging Markets Group, says the reforms will harm investors’ confidence in India, and caused Macquarie Bank’s Asia hedge fund to exit its short positions in Indian single futures in March.

The view from: Singapore: Tan Choon Seng, group CEO, Wearnes

33 Corporate The view from Tan Choon Seng of Wearnes; an interview with Billy Leung, branch manager of HSBC Guangzhou; how global warming is set to help trade between Europe and Asia Pacifi c

41 Practice The view from Anthony Boswell of PwC; what managing partners need to do to make a difference

33Corporate

AP_YCORP_intro.indd 33 11/05/2012 15:18

34 Corporate

AP_YCORP_Leung.indd 34 09/05/2012 15:11

LOCAL BANKS OUTSHINEUS IN NUMBER, BUTOUR GLOBAL NETWORKAND RESOURCES GIVEUS A POWERFUL EDGE

Billy Leung has had an illustrious career at HSBC, which was one of the first foreign banks to do business in China. Here he tells Accounting and Business about the opportunities and challenges the bank has in the region and internationally.

Q What are your priorities for this year?A As HSBC has a long-term corporate business priority of helping Chinese enterprises ‘go international’ – 60% of the top 100 mainland enterprises that have invested overseas have cooperated with HSBC – we will keep investing in crossborder service capabilities. For example, we have set up a China desk with designated teams and personnel to provide specialised services to Chinese enterprises in more than a dozen major markets around the world, with more to come in other markets. This will help provide better services for local Chinese enterprises to expand into overseas markets.

At the same time, we also hope to obtain more overseas mergers and acquisitions and other financing business from mainland enterprises. In Hong Kong, we will continue to help mainland enterprises to issue renminbi bonds, US dollar bonds and conduct other capital market financing.

Q What challenges do you face in achieving those aims?A The biggest challenge for HSBC, in order to develop the network and business in Guangdong province, is to recruit and retain the right talent – finance professionals with international vision and experience.

Another challenge is how to continuously improve our service, by introducing products that not only meet local customer needs, but also highlight the advantages of HSBC’s international financial services.

No boundariesBilly Leung, branch manager of HSBC Guangzhou, reveals how the bank intends to capitalise on China’s expected emergence as the leading trading nation

We must adapt to the demand from businesses and households for innovative, diversified financial services, due to China’s rapid economic growth.

Q China has two domestic banking giants – Industrial and Commercial Bank of China, and China Construction Bank – that garner the lion’s share of banking business in China. How does HSBC differentiate itself from the competition? A Local banks outshine us in the number of outlets and geographical coverage, but our global network and resources give us a powerful edge in expanding business and capturing new market opportunities.

In mainland China we currently have a total of more than 110 service outlets in 32 cities, leading all other foreign banks; across the globe, HSBC has about 7,200 outlets in over 80 countries and regions, making it one of the largest financial institutions globally. Its network covers most of the world trade volume and capital flow, thus helping customers benefiting from markets with faster economic growth.

Thanks to the Closer Economic Partnership Arrangement (CEPA) and the Economic Cooperation Framework Agreement (ECFA), economic integration between mainland China, Hong Kong, Macau and Taiwan is getting stronger, with frequent trading and huge volumes of cross-strait trade. We are the largest international bank in Greater China, with more than 270 service outlets. Due to this network, HSBC enjoys a large market share in financial services for the cross-strait economic and trade exchanges.

HSBC is leading the promotion of the internationalisation of the renminbi, with renminbi products offered in over 50 countries and regions in the

The tipsWhat advice would you give ACCA students who are hoping to develop their career in the banking industry?

*First, you should acquire the basic knowledge. Banking includes a wide range of specific businesses, with varying requirements for different departments and positions. You should determine your interest and career path early.

*Second, you should develop the ability for careful thinking and accurate communication.

*Finally, you should keep an open mind towards learning and be conscientious and responsible.

35


AS CHINA’S ECONOMY BECOMES INCREASINGLYGLOBALISED, INTERNATIONAL BANKS WILL ENJOYA LOT OF DEVELOPMENT OPPORTUNITIES

The CV2009

Appointed branch manager of HSBC Guangzhou.

2006Appointed head of commercial banking at HSBC Guangzhou.

1998Joins HSBC Hong Kong as a trainee. Successively serves as account manager of personal financial services, regional manager of trade and supply chain department and manager of business development.

Billy Leung received his Master’s degree in financial management from the University of London and his Bachelor’s degree in economics from the University of Texas at Austin. From 2000 to 2004, he served as an instructor in The Open University of Hong Kong’s Department of Economics.

He is also a member of the 13th Chinese People’s Political Consultative Conference (CPPCC) for the Yuexiu District, Guangzhou, and the deputy director of the Foreign Bank Working Committee of Guangdong Banking Association.

trading nation in 2016, accounting for 12.3% of total global trade in 2026 (9.82% in 2011). Therefore, there is a lot for banks to do in term of offering

world, and renminbi services for retail and wealth management clients in 11 Asian markets.

With the growth of wealth, Chinese domestic households increasingly need overseas financial services. For example, HSBC expects the number of mainland Chinese students studying overseas to exceed one million in 2020, a 138% increase on 2008. In addition, more than 70 million Chinese mainland tourists travelled overseas in 2011, according to official statistics. Our premier wealth management services include services related to overseas study, immigration and investment.

Q Where do you see opportunities in banking for foreign banks such as HSBC in the future? And how do you see the development of HSBC in Guangzhou and Guangdong province? A According to forecasts from the HSBC Global Research team, the Chinese economy will maintain rapid growth in the coming years. In addition, as China’s economy becomes increasingly globalised, international banks will enjoy a lot of development opportunities in the Chinese market in both retail and wholesale banking.

On the retail side, China’s expanding wealthy population and the resulting demand for international financial services will bring great opportunities for the development of international banks.

HSBC research shows that the average sum of liquid assets of wealthy individuals exceeded one million yuan for the first time in 2011, which will further enhance the size of the wealth management market.

On the wholesale side, international banks also have many opportunities. In a new phase of economic globalisation, China’s development will depend on trade, investment and financing ability. According to HSBC’s projections,

China’s import and export volume will exceed US$6 trillion by 2015, a compound annual growth rate of 18%. At the same time, more of China’s trade surplus will be invested in overseas markets, with more than 80% going to other parts of Asia, Latin America, Africa and other emerging markets. Therefore, ample opportunities exist for banks to offer enterprises crossborder financing and financial advisory services.

Opportunities will also be brought by the internationalisation of the renminbi. HSBC expects the yuan to become one of the three trade settlement currencies. The offshore renminbi deposit and bond issuance business is also developing fast in Hong Kong. This gives international banks room to expand their trade financing and other services.

The Pearl River Delta region is one of the most developed regions for an export-oriented economy, with a high concentration of multinational companies, foreign invested enterprises and export-oriented local enterprises. HSBC can utilise its global network and international financial services expertise to financially support them in their bid to expand trade and make overseas investment overseas. Apart from serving corporations, our extensive global network and financial services expertise can meet the need that the rich have in the region for international banking services.

Q HSBC Holdings issued a global trade report in February 2012 that claimed that China would overtake the US as the largest trading nation by 2016. What implications will that have for the banking industry in China? And how might HSBC benefit? A HSBC expects China to overtake the US to become the world’s largest

36 Corporate


enterprises crossborder financing and financial advisory services.

Our trade-related services, number of outlets and network coverage put us in a better position to seize on the market opportunities brought by China’s trade growth. In 2011, HSBC’s trade-related service revenue in Asia Pacific region grew 28% over the previous year.

The basics HSBCHSBC, founded in 1865, was one of the first foreign banks to do business in China. It was also one of the first foreign banks to enter southern China, with offices set up in Shenzhen and Guangzhou in as early as the early 1980s.

After China’s accession to the World Trade Organisation, the development of HSBC in the mainland picked up speed.

It bought a stake in the Bank of Shanghai in 2001 and was allowed to offer foreign currency banking services to mainland residents and businesses in Beijing and Shanghai in 2002.

In 2004, HSBC began to provide renminbi services to local enterprises and became one of the first locally incorporated foreign banks in 2007.

Following local incorporation, HSBC China grew fast. In April 2007, it had 35 outlets and about 3,000 employees. Now it boasts 117 outlets in 32 cities and 5,500 people.

While more and more international companies are entering China, the pace of Chinese enterprises investing overseas is also accelerating. China is increasingly becoming a major trading and investment partner for many countries and regions in Asia and the world.

It should be noted that the trade and economic ties of the Greater China

region are getting closer. This will not only redefine the business strategy of HSBC in the Hong Kong market, but also become one of the main drivers of HSBC’s revenue growth in Asia and the global market.

Billy Leung was interviewed by Colette Steckel, Asia editor, Accounting and Business

37


Despite the still contested debate about the extent to which greenhouse gas emissions from humans contribute to climate change, global warming is a reality. Nowhere is this more obvious than the Arctic Basin, where the melting of the ice sheets is viewed with increasing concern.

In 2011 the retreating ice reached its second lowest ever recorded level, some 310,000 sq km off the 2007 record low. The decadal reduction went from 10.2% in 2007 to a new high of 12% in 2011, according to the National Snow & Ice Data Center in Colorado. In addition, the Northern Sea Route (along the top of Russia) was open throughout last August and well into September. The ‘Amundsen route’ of the Northwest Passage (along the top of Canada) was also open for the fifth year running.

The opening up of the Arctic routes brings with it real opportunities for ships trading between Europe and China, with significant reductions in transit time and concomitant savings in both costs and emissions and the avoidance of piracy-prone areas off Somalia and the Straits of Malacca. The debate over the speed at which the ice will disappear from the Northern Sea Route is a strongly contested topic among the climate change community, with more conservative opinion putting the commercial reality out to the 2030–40 timeframe. However, recent classified studies within the UK’s

Ministry of Defence leaked to the Daily Telegraph last August place greater emphasis on an earlier opening up of the route, with a 2015–20 timeframe seen as a more likely scenario.

On a more basic level, there is little research currently in hand looking at the extent to which the Arctic Basin will be used by shipping, with the Arctic Council’s Arctic Marine Shipping Assessment (AMSA) issued in 2009 standing out as the most recent globally accepted detailed assessment. However, the report was based on a 2004 survey of shipping through the Northern Sea Route and the Arctic Climate Impact Assessment’s 2008 median ice extent.

Of course, the Antarctic Ocean also lies at a pole but conditions there are significantly different from the Arctic. The way in which the Polar Code is being developed treats the environment at both poles in a similar way despite the very real differences in the way in which it behaves. For example,

Antarctica is an ice-covered land mass with ice shelves extending outwards whereas the North Pole is covered by an iced-over central sea with land around the edges only. This makes for very different climate impacts yet little is done to differentiate the way in which the Polar Code is applied in each area.

The International Maritime Organization (IMO), in conjunction with the Institute of Marine Engineering, Science & Technology (IMarEST), classification society DNV and a number of other stakeholders, is developing the Polar Code regulatory framework. At present, it is focusing mainly on the requirements of ships that operate in or near ice conditions and the requirements of an ice navigator. Even though sea ice is retreating further and faster than ever, other considerations such as sea-air temperature differences, extreme wind speeds and visibility, despite their importance, are not receiving the same amount of attention. The Polar Code also fails to address

via Suez Canal via Northern Sea Route Miles Days Miles Days Savings (days)Japan 11,000 34 7,400 26 8South Korea 10,700 33 7,500 27 6China 10,500 32 7,900 28 4

Distances and times from Asia Pacific to Rotterdam in the Netherlands, based on 2011 transit times with some ice present. The likely increase in speed to 14 knots in the next five years would cut a further five days or so from transit times.

*OVER THE TOP

Northern liteThe opening up of the Arctic to shipping will bring big savings on the freight and carbon costs of transporting goods between Europe and Asia Pacifi c. Colin Manson reports

38 Corporate

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Barren beauty: multiple exposure of the midnight sun in Alaska, 175 miles north of the Arctic Circle

View of Arctic Basin showing Northern Sea Route in blue and Suez route in red

the training requirements inherent in the current STWC mariner certification as well as the additional maritime pollution and safety of life at sea issues associated with such remote and difficult to police regions.

How will the changes to the Arctic affect the rest of the industrial world? With its opening up to sea freight, transit times between Europe and the expanding markets of Asia Pacific (notably China) will reduce significantly, albeit only during the summer months. At a recent conference on polar shipping held at IMarEST, there was much debate about the reduction in emissions, operating costs and transit times.

The transit times between the port of Rotterdam in Europe and Japan, China and South Korea have been calculated (see panel opposite) based on an average speed of just six knots along the north of Russia – a speed consistent with some ice being present throughout the voyage. Over the next five years or so, the extent of ice is expected to reduce, enabling the average transit speed to increase to perhaps 14 knots, which reduces the overall time considerably. The savings gained will include more than just the cost in operating costs, though – they will also include the carbon cost per tonne of cargo. At an average of, say, £50k per day, the northern sea route confers a freight saving of around £400k from Japan, which could rise to

perhaps £750k in the near future. The Arctic sea routes also remove

the need for vessels to pass through the Malacca Straits and the northwest Indian Ocean – both areas of endemic piracy. Without this risk, insurance premiums can be reduced significantly although this is partly balanced by the increased premiums associated with the risk of ice damage. Suez Canal transit charges are also likely to go on rising, although the Arctic routes may incur the cost of an ice breaker escort.

A widening windowAt the same time, stocks of components or finished goods can be reduced during the summer months although here again the weather in an individual year may affect that holding. However, as the ice melts ever faster in the near future, the open water season will increase from the current eight to 10 weeks up to perhaps four months. This would reduce operating costs significantly but require more detailed overview of the stock control process.

The IMO’s initiative in producing the Polar Code is a welcome step towards providing a regulatory framework for safe use of the Arctic Basin. However, to determine the true extent of the requirements and provide a robust yet flexible code, more research is desperately needed to generate better forecasts of the speed at which the ice will retreat, and hence the increasing availability of the Arctic routes as well

as the volume of shipping expected to take advantage of that availability.

Overall, the opening up of the Arctic Ocean and the Northern Sea Route represents potential savings in cargo costs, insurance premiums and stock holdings as well as a reduction in the carbon cost of goods both imported from and exported to markets in Asia Pacific. However, it needs the customer to be aware of these potential savings in order to ensure that freighting companies take proper note of the reduction in costs – they will be reluctant to do so as it will eat into their own operating model.

Only by a straightforward application of market forces will savvy customers ensure that their operating costs are reduced by insisting that carriers use the northern sea route. This will also improve their green credentials and raise their sustainability rating.

Colin Manson is the director of Manson Oceanographic Consultancy

39

AP_YCORP_climate.indd 39 11/05/2012 16:27

Integral benefi ts

[Focusing on integrated reporting at the Rio+20 summit will benefi t both companies and investors, says ACCA president Dean Westcott

Twenty years after the United Nations (UN) Conference on Environment and Development, Rio de Janeiro is again hosting a major conference – this time on sustainable development.

This gathering at the end of June – better known as Rio+20 – has two key themes: a green economy, sustainable development and poverty eradication; and the institutional framework for sustainable development.

ACCA is focusing on one area of the policy which is to be debated at Rio+20 – one which is of particular interest to the accountancy profession – this is the integration of organisational sustainability reporting requirements into corporate reports.

The aim of integrated reporting is to help corporate reports provide a bigger picture of an organisation, providing value to investors, businesses and the public. There is already a great deal of support for reform in the accountancy sector and wider business world, with organisations such as the International Integrated Reporting Council bringing investors and report preparers together, but support from the highest level at Rio+20 would be invaluable in moving integrated reporting forward and ensuring its worldwide spread.

We want Rio+20 to lead to a commitment by UN member states to develop frameworks for sustainability reporting at a national level. While a global framework may be more ideal, an international commitment to nation-by-nation reporting might be more realistic. It would allow countries to propose frameworks suitable to their own needs and it would establish, at the very least, an international acceptable level of reporting.

Making sustainability an integral part of the information presented to investors and the public would provide companies with an incentive to improve their own performance.

By integrating their reporting, we believe companies will also have the opportunity to see themselves in a whole new light: one that allows them to identify areas of efficiency or inefficiency like never before.

Integrated reporting can, ACCA believes, also help companies to develop more integrated strategies which can only help improve business performance in the long term.

Dean Westcott, ACCA president and interim CFO, West Essex Clinical Commissioning Group, UK

Comment40

AP_INT_COM_pres.indd 40 10/05/2012 15:11

Q What projects are currently in your inbox? A I am currently working on a number of different projects, including the unwinding of several derivative portfolios in which key counterparties are in some form of bankruptcy or administration, and a court-appointed receivership in which we have been tasked with protecting and preserving a large asset pool.

Q What do you enjoy about your work? A The challenge of solving complicated business challenges for clients, particularly when their investment is at risk.

Q What valuable lessons have you learnt? A At the end of every working day, I ask myself three things. One, what value did I add for my clients? Two, what did I do to enhance, grow or build a new relationship in the market? Three, what did I do to coach or build the quality of our team? If I can’t give myself three good answers, tomorrow I need to make sure I catch up.

Q What do you do to manage and motivate your staff? A First, I try to ensure we communicate with our team regularly and openly. Second, we try to reward those people who demonstrate all facets of the PwC Experience – based around valuable client and people behaviours.

FIRM FACTSTypical clients: Those in financial servicesFavourite books: Too Big To Fail: Inside the Battle to Save Wall Street by Andrew Ross Sorkin and Scar Tissue by Anthony Kiedis

RIVAL MAY HAIL FROM CHINAThe next large accountancy firm to emerge that could challenge the dominance of the Big Four will come from China, says Sir David Tweedie, former chairman of the International Accounting Standards Board. Sir David says the growth of accounting services in Asia, and China in particular, could fuel the rise of a fifth global firm in the region that would in turn help to break the Big Four’s oligopoly. Sir David, who was appointed as the new president of the Institute of Chartered Accountants of Scotland in April, told the Financial Times that attempts to intervene in the audit market, such as enforcing lead audit partner rotation, were less likely to succeed in breaking the Big Four’s stranglehold of the top end of the global audit market.

PWC MALAYSIA APPOINTS DUOPwC Malaysia has announced it is appointing Mohammad Faiz Azmi as the new executive chairman and Sridharan Nair as managing partner. Faiz and Sridharan will be taking over from Datuk Seri Johan Raslan and Chin Kawi Fatt – who had been at the helm for eight and 12 years respectively – when they assume their new roles on 1 July. Faiz has been with PwC Malaysia since 1993 and is currently the firm’s joint assurance leader in Malaysia and also PwC’s global Islamic finance leader. Sridharan joined PwC in 1994 and is a partner in the firm’s Malaysian assurance practice.

The view from: Hong Kong: Anthony Boswell, Business Recovery Services partner, PwC

41 Practice The view from Anthony Boswell of PwC; what managing partners need to do to make a difference

33 Corporate The view from Tan Choon Seng of Wearnes; an interview

with Billy Leung, branch manager of HSBC Guangzhou; how global warming is set to help trade between Europe and Asia Pacifi c

41Practice

AP_YPRAC_intro.indd 41 11/05/2012 15:29

IN TOO MANY FIRMS MANAGING PARTNERS FOCUS ON THE PEOPLE WHO DON’T WANT TO GO WITH THEM, RATHER THAN THOSE WHO DO

The answer to this question has been at the top of the agenda of every managing partner (MP) we have worked with in our 20-year association with professional service firms. To answer the question and add to our anecdotal experience, we interviewed 150 practising and managing partners from accounting, law and consulting firms across Europe and the US.

Our model of what successful managing partners do describes the behaviours under four broad headings: setting direction, gaining commitment, execution and personal example. Each of the broad headings has a number of specific behaviours under it and, in this short article, we’ll highlight the behaviours from the model we believe are key. The fifth element, context, we’ll return to at the end of the article.

Create a compelling vision and get the partners on boardWith so many firms trying to do broadly the same thing and with differentiation in professional services only achieved through delivery, how the vision is delivered is the critical element. And, as the partners are the people who ultimately deliver the vision, they must be brought onside, which means involving them in the debate and decision-making process.

No MP should attempt to do everything and this is especially true when it comes to making sure the partners are onside. In every example we heard about, the MPs who succeeded in generating the commitment and participation of their partners started by getting the firm’s influential partners onside first and using them to influence the other partners. This is especially important in multi-office/multi-country situations, when it is impossible for the MP to attend all of the partner meetings and

engage in every debate about the right course of action. And, these debates must take place. In the truly successful firms, the partners were always involved in the discussions about the firm’s future. Sometimes the discussions were easy, often they weren’t, but, critically, at the end of the discussions, the partners ‘walked

together’ and focused as a group on delivering the vision (even though individual partners disagreed with some elements of the plans).

One of the key behaviours in the engagement process is to keep repeating the message about why and how. As all of the highly regarded managing partners said to us, ‘by the time you’re absolutely fed up of hearing yourself saying the same thing, the partners will just about have got it’. In nearly every firm we know, the partners prefer to focus their attention on serving their clients and not get involved in any firm-based activities, but when the managing partner is trying to ensure the firm is and remains ‘best in class’ they must keep the partners focused on the bigger picture.

Focus on the people who want to go with youIn too many firms managing partners focus on the people who don’t want to go with them, rather than those who do. In doing this, they inevitably reduce enthusiasm and momentum. The natural temptation in a partnership is to focus on the whole, but all of the research on creating and sustaining

change argues strongly for the opposite. In lots of initiatives we know, the managing partners have started with only about half of the partners clearly with them – but, crucially, they had clear plans about how to raise that figure quickly through their own efforts and those of the influential partners who were supporting the initiative.

Help the partners to be effective leadersAs stated earlier, the partners are the people who make the vision a reality and, in our experience, a lot of partners struggle in their role as owners and leaders. So one of the key tasks of any MP (and it’s what the successful MPs spent lots of time on) is helping their partners be better leaders. That means dedicating a lot of personal time to talking to the partners about their role, how they are doing and how the firm can help them. It is a time-consuming task, but all of the partners we spoke to said that the truly successful MPs knew the importance of the task, gave their time freely, and ensured the partners received the help they needed.

Never accept second bestNot every firm can be the market leader, but every firm can have a reputation for being outstanding at everything it does. The successful MPs understood this and never settled for second best, always exhorting the partners to find new and better ways of doing things. All of the MPs were trying to create a situation where

Standing out from your peersWhat do managing partners need to do to differentiate themselves in the world of professional services, ask Rob Lees, Derek Klyhn and August Aquila

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in our experience most people can’t. So the challenge for MPs is to develop a number of potential successors capable of addressing the different issues the firm is likely to face in the future – then choose the right one.

Rob Lees is a founding partner of Møller PSF Group and consultant to professional service firm leaders. He is also co-author of When Professionals Have To Lead. August Aquila is a speaker and consultant to professional services firms. He is also the co-author of Compensation as a Strategic Asset and Client at the Core, and CEO of Aquila Global Advisors. Derek Klyhn is a founding partner of Møller PSF Group. For a full copy of the study Leadership At Its Strongest: What Successful Managing Partners Do, on which this article is based, please contact Derek Klyhn at [email protected]

challenge was a natural part of their firm’s culture – but that never meant sacrificing things that were crucial to the firm and what it stood for.

Take tough people decisionsThe need for the managing partner to deal with underperformance came up in every discussion. Underperformance needs to be dealt with in line with the firm’s values and the individuals given help and support to turn things around. However, if they don’t, the successful MPs recognised the negative impact across the firm of not dealing with the issue.

Appoint the right person for the circumstancesOne of the things that great MPs do is plan their succession, which brings us back to context. While there are undoubtedly some people who can do everything regardless of the challenge,

Successful management model

Source: When Professionals Have To Lead by Thomas Delong, John Gabarro and Robert Lees

PersonalExample

Con

text

Context Context

Direction

ExecutionCommitment

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AP_INT_YPRAC_manage.indd 43 10/05/2012 15:07

Comment

Oscar Wilde once observed that a cynic knew the price of everything and the value of nothing. What would he have said about how people in Malaysia view audit fees? It must be a maddening situation for auditors because many stakeholders do not seem to appreciate the relationship between the value and price of audits.

For that matter, there is considerable ambivalence about the importance of the audit function. It is often grudgingly accepted, particularly among small and medium-sized enterprises, because it is a statutory requirement for all Malaysian companies to be audited.

Most people agree that audited financial statements provide assurance to shareholders, tax authorities, lenders and suppliers, and the process itself helps improve record-keeping and internal controls. However, these factors are less persuasive when it comes to private companies whose shareholders and management are one and the same, or whose size and level of activity do not really need auditing.

In such cases, an audit opinion serves as little more than an expensive and superfluous endorsement of the accounts. This is why there has long been an intention to amend the law so that certain types of companies can be exempt from having to undergo statutory audits.

Things are less clear-cut with so-called public interest entities (PIEs), such as listed

Understand the value of audit[Audit plays a vital role in providing assurance, improving record-keeping and maintaining controls.

But as long as clients quibble over costs, the profession will continue to be undermined, says Errol Oh

companies, banking and financial institutions, insurers, broking firms and fund managers. Stakeholders demand that the financial statements of the PIEs are credible and useful. There is no doubt that auditors have a big role in this sphere. The question is, how do you evaluate this role? How much should a company pay for the services of its auditors? After all, an audit does not directly add value to a business, and it is difficult – if not impossible – to quantify the benefits.

Based on the principle that tax deductions are allowed only for expenses wholly and

exclusively incurred in the production of gross income, audit fees should not be tax deductible in Malaysia. Fortunately, fees can be deducted in tax computations. Nevertheless, this supports the perception that an audit does little to boost a company’s bottom line. It is no surprise then that a common complaint among accountancy firms is that they are grappling with audit fee pressure.

Clients tend to resist fee hikes and yet it is increasingly costly to conduct audits. With auditing and financial reporting standards more complex than ever, more work has to be done. Amid the war for talent, firms have to

pay more to recruit and retain good people. In addition, competition among firms is stiff.

Released in February, the World Bank’s report on the observance of standards and codes in the accountancy and auditing environment in Malaysia notes that audit fees are at ‘low levels’ and questions

whether quality audits can be performed.The report recommends

that hiring auditors primarily on cost grounds be discouraged, and that a review of practice in other jurisdictions be undertaken.And if all else fails, companies

should understand well an argument based on price and value – when an

audit failure occurs, more often than not, share prices plunge and value gets destroyed.

Errol Oh is executive editor of The Star

44

AP_COM_Errol.indd 44 09/05/2012 15:14

Ads-June12.indd 1 09/05/2012 13:43

INTERNATIONAL

FINANCIAL REPORTINGThe International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) have issued a joint update note setting out the progress made on convergence between International Financial Accounting Standards (IFRS) and US GAAP. The note primarily provides an update on the projects contained in the memorandum of understanding (MoU) between the two parties.

The note identifies that most of the short-term projects identified in the MoU have either been completed or are close to completion. One project, income tax, has been determined as being of lower priority than originally assessed and no immediate action is planned.

Of the longer-term projects, several are now complete but there are three where technical decisions have yet to be finalised – leases, revenue recognition and financial instruments. The note anticipates standards for these three projects will be issued by mid-2013.

For preparers and users of financial statements that apply the IFRS for SMEs, the IFRS Foundation has provided some new and updated guidance.

A revised version of A Guide to the IFRS for SMEs has been produced. The

guide is written in non-technical language and is intended to be used by lenders, creditors, owner-managers and other users of IFRS for SME financial statements.

Four final questions and answers have also been issued by the SME Implementation Group addressing the following:

* Application of ‘undue cost and effort’.

* Circumstances where a jurisdiction requires fall back to full IFRS.

* Fall back to IFRS 9, Financial Instruments.

* Recycling of cumulative exchange differences on disposal of a subsidiary.

AUDITINGThe International Auditing and Assurance Board (IAASB) has issued its annual report for 2011 entitled Foundations for the Future.

The report highlights the new and enhanced international standards issued by the IAASB, as well as implementation support and guidance material. The report also includes details of over 100 outreach activities undertaken in the year with investor groups.

Yvonne Lang, director, Smith & Williamson

MALAYSIA

SSM PROSECUTESThe Companies Commission of Malaysia (SSM) has prosecuted 9,806

companies and businesses where the officers of the companies and businesses have contravened the Companies Act (CA) 1965 and Business Act (BA) 1956 during 2011.

The three main common offences made by companies and directors under CA 1965 are:i Failing to conduct the

AGM as required under section 143(1). About 2,542 cases involved this.

ii Failing to lodge the annual return with the SSM as required under section 165 (4).

iii Failing to table the audited financial statements at the AGM as required under section 169(1).

The other three main common offences identified under BA 1956 are:i Conducting business

after the expiry of the business registration under section 12(1).

ii Conducting business without registering it under section 12(1)(c).

iii Failing to display the certificate registration of business under section 12(2).

The SSM has stressed that it will take action against companies, directors and officers of companies which fail to comply with the law.

For more information, go to www.ssm.com.my

GST BILL READING POSTPONEDThe second reading of the Goods and Services Tax Bill 2009, which had been

scheduled for 19 April 2012, has been deferred.

ACCOUNTANTS ACT 1967The Malaysian Institute of Accountants (MIA) has submitted to the government a draft of proposed amendments to the Accountants Act 1967, to tie in with the country’s Economic Transformation Programme. The act was last amended in 2001.

MIA president Datuk Mohamed Nasir Ahmad says that the legislative framework of the accountancy profession should be consistent with the changing capital market landscape.

The MIA intends to get the amended bill tabled in parliament before year-end after the accountant-general, Finance Ministry and Attorney-General’s Chambers give the green light. The changes centre on the following:

* Creation of an Investigation Committee, Disciplinary Committee and Disciplinary Appeal Board.

* Requirement for a competency assessment before admittance as an MIA member.

* Authority for the MIA council to make/amend certain rules without having to wait for a general meeting to approve them.

AMENDMENTS TO MFRS 1On 26 April 2012, the Malaysian Accounting

A monthly round-up of the latest from the standard-setters

46 Technical update

AP_T_update.indd 46 10/05/2012 12:06

Standards Board (MASB) issued amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (MFRS), providing relief to first-time adopters that receive a below-market rate of interest on loans from the government. Government loans with a below-market rate of interest, under MFRS 120, Accounting for Government Grants and Disclosure of Government Assistance, are measured at fair value on initial recognition.

The amendments add an exception to the retrospective application of MFRS. First-time adopters are required to apply MFRS 120 prospectively to government loans at a below-market rate of interest existing at the date of transition to MFRS. As a result, the corresponding benefit of such loan is not recognised as a government grant and first-time adopters shall use its previous carrying amount of the loan at the date of transition to MFRS as the carrying amount of the loan in the opening MFRS statement of financial position.

However, first-time adopters may choose to apply MFRS 120 retrospectively if the necessary information was obtained at the time of initially accounting for that loan. The option is available on a loan-by-loan basis.

Similar amendments are also made to FRS

1, First-time Adoption of Financial Reporting Standards, government loans (amendments to FRS 1).

The amendments are effective for annual periods beginning on or after 1 January 2013 and early application is permitted.

For more, go to www.masb.org.my, or email [email protected]

PRACTICE NOTE APPROVEDThe MIA has approved International Auditing Practice Note (IAPN) 1000, Special Considerations in Auditing Financial Instruments as Malaysian Approved Auditing Practice Notes.

IAPN 1000 provides important practical assistance to auditors when addressing valuation and other considerations pertaining to financial instruments.

IAPNs are non-authoritative materials that do not impose additional requirements on auditors beyond those included in the International Standards on Auditing (ISAs), nor do they change the auditor’s responsibility to comply with all ISAs relevant to the audit.

The practice note can be downloaded from www.mia.org.my

AMENDED PREFACEThe MIA has approved the amended Preface to the International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements.

The preface establishes IAPNs, a new category of pronouncements for issuing non-authoritative material. The preface has also been amended to remove International Auditing Practice Statements (IAPS).

For more information, go to www.mia.org.my

WITHDRAWAL OF IAPSThe MIA has approved the withdrawal of the following with immediate effect:

* IAPS 1000, Inter-Bank Confirmation Procedures.

* IAPS 1004, The Relationship Between Banking Supervisors and Bank’s External Auditors.

* IAPS 1006, Audits of the Financial Statements of Banks.

* IAPS 1010, The Consideration of Environment Matters in the Audit of Financial Statements.

* IAPS 1012, Auditing Derivate Financial Instruments.

* IAPS 1013, Electronic Commerce – Effect on the Audit of Financial Statements.

These are largely now out of date and inconsistent with the clarified ISAs.

Vilashini Ganespathy, head – technical and professional development, ACCA Malaysia

SINGAPORE

ECI FILING WAIVEDThe Inland Revenue Authority of Singapore (IRAS) has simplified the reporting

requirements for estimated chargeable income (ECI) and the filing of income tax return, Form C, for small companies to reduce their compliance burden. Currently, all companies have to report their ECI within three months of the end of their financial year end. Companies without any taxable profit and no ECI are also required to do so.

To reduce compliance requirements for small companies with turnover not exceeding S$1m and no ECI will no longer need to file their ECI. The waiver will take effect from year of assessment 2013 for companies with accounting years ending October 2012 or after. With this change, 67,000 companies, or about 42% of all companies would not need to file their ECI, saving them one step in the overall corporate tax filing requirements.

INTRODUCTION OF FORM C-S From this year, year of assessment 2012, small companies with an annual turnover not exceeding S$1m will find tax filing much faster and easier with Form C-S, a new simplified income tax return for small companies. About 110,000 small companies, which constitute 70% of all companies, will benefit from Form C-S, as only essential tax and financial information will be required. It is estimated that they will spend only 10 minutes completing Form

47

AP_T_update.indd 47 10/05/2012 12:06

C-S, or half the average time taken to complete Form C. Companies that electronically file Form C-S will also be able to file later, by 15 December, instead of 30 November for paper filing.

For more information, go to www.iras.gov.sg

REVISED GOVERNANCE CODEThe Monetary Authority of Singapore (MAS) has accepted the recommendations made by the Corporate Governance Council on the Code of Corporate Governance, and has issued the revised Code of Corporate Governance.

The key changes focus on director independence, board composition, director training, multiple directorships, alternate directors, remuneration practices and disclosures, risk management, as well as shareholder rights and roles. However, the MAS will make two modifications to the recommendation relating to independence from substantial shareholders.

The revised code will take effect in respect of annual reports relating to financial years commencing from 1 November 2012. The MAS recognises that sufficient time should be given for companies to make board composition changes. Accordingly, the changes (with the exception of changes required as a result of the chairman of the board falling within the four

circumstances specified in Guideline 2.2 of the code), should be made at the annual general meetings (AGMs) following the end of the relevant financial year. A longer transition period will be provided for board composition changes needed to comply with the requirement for independent directors to make up at least half of the boards in specified circumstances (Guideline 2.2). These changes should be made at AGMs following the end of financial years commencing on or after 1 May 2016.

The council has informed the MAS that it will shortly be issuing guidance for boards on risk governance. This is intended to provide practical guidance on risk governance for board members. The MAS welcomes this initiative, as enhancing risk governance among listed companies wil help to strengthen overall corporate governance.

For more information, go to www.mas.gov.sg

Joseph Alfred, policy and technical adviser, ACCA Singapore

HONG KONG

DTA WITH MALAYSIAHong Kong has signed its 24th comprehensive agreement for the avoidance of double taxation, this time with Malaysia.

In the absence of the agreement, the profits of

Hong Kong companies doing business through a permanent establishment in Malaysia may be taxed in both places if the income is Hong Kong sourced. Under the agreement, any Malaysian tax paid by the companies will be allowed as a credit against the tax payable in Hong Kong in respect of the income. On the other hand, Hong Kong residents receiving interest from Malaysia are subject to Malaysian withholding tax, which will be capped at 10% under the agreement. The withholding tax is currently 15%. The Malaysian withholding tax on royalties, currently 10%, will be capped at 8% while the withholding tax on fees for technical services will be capped at 5%, which is currently 10%.

Under the agreement, Hong Kong airlines operating flights to Malaysia will be taxed at Hong Kong’s corporation tax rate, which is lower than that of Malaysia. Profits from international shipping transport earned by Hong Kong residents that arise in Malaysia will not be taxed in Malaysia.

The latest OECD standard on exchange of information is incorporated in the agreement. It will come into force after the completion of ratification procedures on both sides.

Sonia Khao, head of technical services, ACCA Hong Kong

CHINA

NATIONWIDE ROLL OUT OF VATLeaders from the Ministry of Finance’s Department of Taxation and the State Administration of Taxation’s Department of Goods and Service Tax are evaluating the pilot scheme on switching business tax to VAT in some regions and sectors.

The pilot in Shanghai has proved to be of national significance and Beijing and other regions have submitted their applications to participate in the trial. The related departments will keep track of the pilot work in Shanghai, summarise the experience obtained, and gradually expand the trial’s scope to achieve nationwide reform during the 12th Five-Year Plan.

To ensure the continuity of existing business tax policy, the current business tax exemption policy will partly remain valid, and will partly be replaced by the policy of refunding once VAT is collected. The transitional policy can be adopted to support some sectors with noticeable tax increases.

More than 170 countries and regions which have adopted VAT have single tax rates and multiple tax rates. The pilot scheme will adjust the present two-grade tax rate to a four-grade tax rate. The grades will be simplified in the future.

Sophia Zhao, technical manager, ACCA Beijing

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Ads-June12.indd 2 10/05/2012 15:22

Q Entity A, a mid-size luxury goods manufacturing company, needs funding to market one of its key brands globally

that it has been selling on the local market for many years. Entity A enters into a joint venture agreement with a multinational distribution company, Entity B. At the inception of the joint venture entity (Entity JV), Entity A contributes its key brand in exchange for 60% of Entity JV’s share capital, and Entity B contributes cash for 40%. An independent valuation arrived at a fair market value of C1,500 for Entity A’s brand. Entity B therefore contributed C1,000 to the joint venture. The shareholdings are unequal, but both Entity A and B need to agree strategic financial and operating decisions unanimously. Entity JV therefore qualifies as a joint venture – to be precise, a jointly controlled entity – under IAS 31, Interests in Joint Ventures. How should Entity A and Entity B account for the transaction, assuming that both entities apply the equity method of accounting for jointly controlled entities?

A The initial cost of investment in Entity B’s books is a straightforward C1,000. But the accounting in Entity A’s books

is more complex. As the brand was developed internally, it is likely to have little or no carrying value on Entity A’s balance sheet. But when ownership of the brand passes from Entity A to Entity JV, it would meet the definition of an intangible asset under IAS 38, Intangible Assets, so it should be initially recorded

share of net assets as being C1,500. But, as the brand Entity A contributed had no value on its balance sheet, would this simply result in a ‘gain’ of C1,500 by forming a joint venture?

A The answer is ‘not quite’. The interpretative guidance in SIC 13, Jointly Controlled Entities – Non-monetary Contributions

by Venturers, only permits recognition of such gains up to the level of the equity interest held by other venturers – in other words, Entity A cannot recognise the unrealised gain on the 60% of the brand, which it effectively still owns through its stake in the joint venture. Under the equity method of accounting, the unrealised part of the gain is removed from the income statement and is instead eliminated against the investment in Entity JV. So at the inception of the joint venture, Entity A will recognise the investment at C600 – that is, C1,500 less the unrealised gain of C900 (C1,500 x 60%).

IFRS 11, Joint Arrangements, applies to financial years beginning on or after 1 January 2013. Both entities A and B should re-assess under the new guidance whether their involvement in the joint arrangement would give them the right to Entity JV’s net assets or rights to individual assets and obligations to liabilities. Assuming they conclude that the joint arrangement gives them right to net assets, the accounting would be the same as described above. This is because both entities would continue to apply the equity method of accounting, and the recognition of the unrealised gain would still be prohibited.

This month’s solutions were compiled by Imre Guba and Iain Selfridge of PwC’s Accounting Consulting Services

in the joint venture’s books at cost. In this case, ‘cost’ would be equivalent to the fair value of the shares issued by Entity JV – that is, C1,500.

Q At inception, Entity JV therefore has net assets of C2,500. Applying the equity accounting method in its consolidated

accounts, Entity A will recognise its

Accounting solutionsThis month PwC authors answer two questions on accounting for joint ventures under IAS 31, IAS 38, SIC 13 interpretative guidance, and IFRS 11

50 Technical

PwC’s practical guide to applying IAS 34, Interim Financial Reporting, is out this month, updated to reflect standards effective for 2012 year ends. It provides comprehensive guidance on IAS 34, an illustrative set of condensed interim financial information for a fictional existing IFRS preparer and a disclosure checklist. Copies of Manual of accounting – interim financial reporting 2012 are available to order from www.ifrspublicationsonline.co.uk

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CPDunits on the web

APA uncoveredWhile the launch of the Hong Kong Advanced Pricing Arrangement creates opportunities for taxpayers, it also brings challenges, as Philip Wong and Petrina Chang explain

The release of the Departmental Interpretation and Practice Notes No. 48 (DIPN 48) by the Hong Kong Inland Revenue Department (IRD) on 29 March 2012 marked the launch of the Advance Pricing Arrangement (APA) programme in Hong Kong. This was officially rolled out on 2 April 2012. This article examines the prominent features of DIPN 48, and highlights the potential opportunities and challenges for taxpayers seeking to explore the APA programme.

Scope of programmeThe APA programme offers an opportunity for Hong Kong taxpayers to seek and conclude a binding agreement with the IRD, and one or more tax authorities of different jurisdictions, on the transfer pricing methodology to be adopted for a specified set of related-party transactions over a fixed period of time, usually on a prospective basis. The authority and administrative power of the IRD to conclude an APA with the tax authority of another jurisdiction is provided under the Mutual Agreement Procedure (MAP) article in the double tax agreements/arrangement (DTA) concluded between Hong Kong and the DTA countries. Hence, while the APA programme is available for Hong Kong taxpayers – which includes a Hong Kong resident corporation and a non-resident corporation with permanent establishment (eg a branch) in Hong Kong chargeable to profits tax – the related party with whom the Hong Kong taxpayer transacts must be

located in a country that has concluded a DTA with Hong Kong incorporating a MAP article.

The APA programme primarily covers bilateral APAs (with one other foreign tax authority) and multilateral APAs (with two or more foreign tax authorities). While it is a voluntary exercise and applications are made at the initiative of the Hong Kong taxpayer, DIPN 48 has established

application thresholds, based on the nature of the related-party transaction to be covered by the APA, as follows:

* HK$80m per year for purchase and sale of goods.

* HK$40m per year for provision of services.

* HK$20m per year for the use of intangible assets (eg royalty).

An APA in Hong Kong will normally cover a period of three to five years, and the taxpayer may seek for a renewal to cover another three to five years, but at least six months before the expiration of the original APA. While DIPN 48 envisages the estimated timeframe for concluding an APA to be 18 months, from our experience, the process could take longer (eg two years or more), especially if there are prolonged mutual negotiations between the relevant tax authorities.

DIPN 48 sets out seven distinct

steps of the Hong Kong APA process, which are shown in the table overleaf.

The pre-filing meetings can be held on an anonymous basis, and the IRD will not charge a fee for processing the APA application.

Collateral issues and resolutionDuring the initial stage of the APA process, the IRD may identify collateral issues pertaining to an APA application

that are required to be resolved in order to conclude an APA. Collateral issues are defined broadly in DIPN 48, and include any material issues pertaining to legal and tax matters that appear alongside the related-party transactions in question. For collateral issues such as tax anti-avoidance under sections 61 and 61A of the Inland Revenue Ordinance (IRO), and non-arm’s-length transactions with closely connected non-residents under section 20 of the IRO, taxpayers will need to submit an advance ruling request to the IRD to resolve these issues first.

The apparent intention of the IRD is to prevent taxpayers from using the APA programme to set up tax avoidance schemes. Hence if the IRD is unable to give a positive ruling on the collateral issues in question, it may withdraw from the APA process.

THE APPARENT INTENTION OF THE IRD IS TO PREVENT TAXPAYERS FROM USING THE PROGRAMME TO SET UP TAX AVOIDANCE SCHEMES

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GET VERIFIABLE CPD UNITSAnswer questions about this article onlineStudying this article and answering the questions can count towards your verifi able CPD if you are following the unit route and the content is relevant to your development needs. One hour of learning equates to one unit of CPD

52 Technical

Opportunities and challengesWhile the APA programme offers opportunities for taxpayers to obtain certainty on their transfer pricing position, there are also associated challenges that they should be aware of before engaging in an application.

Opportunities

* Certainty for tax risk management In view of the increasing number of DTAs concluded by the IRD, the Hong Kong APA programme can offer certainty to multinational corporations (MNCs) on their transfer pricing position during the defined APA period, thereby achieving effective management and certainty on the material tax position of the MNCs.

* Minimises risk of tax audit and double taxation Traditionally, Hong Kong has been the preferred jurisdiction for MNCs to conduct inter-company transactions with China affiliates, or to set up an Asian hub (eg principal operating company) for operational and tax efficiencies. The lack of DTAs and APA process in the past had exposed MNCs to extensive tax audits on transfer pricing issues in the overseas countries, without any resort for initiating MAP in Hong Kong to counter/mitigate double taxation issues. With the launch of the APA programme in Hong Kong, MNCs are now provided with the opportunity to negotiate and conclude a binding agreement with the IRD and the foreign tax authority(ies) on related-party

APAproposal

Pre-filingmeeting

APAapplication

Analysis/evaluation

Negotiation/agreement

Drafting/execution

Monitoring and renewal

Activity

Submit APA proposal.

Meet with IRD to discuss APA proposal. If IRD agrees to move forward, IRD will invite taxpayer to submit APA application.

Submit formal APA application and advance ruling request to deal with collateral issues, if necessary.

IRD to evaluate APA application, request additional information, obtain expert opinions, resolve collateral issues.

IRD to negotiate terms with DTA partner and consult with taxpayer; adapt to unilateral APA if MAP fails.

On conclusion of MAP, IRD to prepare for execution by taxpayer.

Taxpayer to submit annual compliance reports showing compliance with APA terms, and comp adjustment, if any.

Documents required

APA proposal.

APA case plan and collateral issues.

APA application to IRD (and parallel application to DTA partner).

Additional information at request of IRD.

Application for MAP procedure.

Execute and return APA letter to IRD.

Annual compliance report, apply for renewal six months before expiration.

Timing

At least one month before pre-filling meeting.

At least six months before start of APA.

18 to 24 months; longer for complex cases.



As above.

Three to five years.


53 TO GET THE QUESTIONS GO TO www.accaglobal.com/cpd/lawandtaxation

TO GET THE QUESTIONS GO TO

transactions, based on the arm’s-length principle, to allocate profits between the group companies, on a prospective basis.

* Prospective and retrospective resolution of transfer pricing issues DIPN 48 indicates that a taxpayer currently under transfer pricing audit may also apply for an APA in respect of future years. If the IRD considers that the APA application is relevant to the transfer pricing issues under audit (ie the APA conclusion may contribute to the resolution of the underlying transfer pricing disputes), the tax audit may be held in abeyance pending conclusion of the APA. On conclusion of the APA, the taxpayer may seek to apply the agreed transfer pricing methodology under the APA to settle the outstanding transfer pricing audit.

Challenges

* Unilateral APA applications are not accepted Currently the APA programme is open only to bilateral and multilateral APA applications. Historically, taxpayers having related-party transactions with affiliates in non-DTA countries could seek a unilateral APA from the IRD by way of an advance ruling. However, it is our observation that advance rulings on transfer pricing cases have so far covered relatively straightforward related-party transactions (eg inter-company service fees at a cost plus mark-up basis). Hence, taxpayers with

complicated related-party transactions with an affiliate located in a non-DTA country would not be in a position to utilise the new APA programme immediately.

* Collateral issues could be detrimental to the APA If the IRD places excessive focus on collateral issues such as section 61/61A of the IRO and withdraws from the APA, it will negate the good intention of the

programme in promoting APA negotiation/conclusion. Furthermore, inclusion of section 20 as a collateral issue would seem counter intuitive. The purpose of an APA is to provide taxpayers with the opportunity to ascertain and agree the arm’s-length transfer price for related-party transactions, which would normally come within the ambit of section 20 of the IRO. If a taxpayer has to first obtain a successful advance ruling on section 20 before being able to proceed, it means that the taxpayer would have to secure a unilateral APA on the related-party transactions before concluding an APA. With the need for a taxpayer to reach agreement with the IRD on both the transfer pricing matters and the collateral issues, the APA process will become overly complicated and lengthy.

* No guarantee that prior years’ tax position will not be subject to audits DIPN 48 clearly states that the IRD, in concluding an APA with a taxpayer, will not refrain from auditing the same transfer pricing issues of the taxpayer in prior years. Hence, if transfer pricing risks in the past are identified during the course of the APA process, it is possible that the IRD may roll back

the principles reached in the APA and impose transfer pricing adjustments to the taxpayer’s prior years tax returns.

Closing commentsThe Hong Kong APA provides a good channel for taxpayers to manage their transfer pricing position and maximise the benefits available under the various DTAs to support inbound and outbound investments. To avail the potential benefits, taxpayers are advised to review their significant related-party transactions and transfer pricing positions, and if necessary seek professional input on the consideration of an APA application.

Philip Wong is transfer pricing partner and Petrina Chang is transfer pricing director of Deloitte Hong Kong

THE PROGRAMME CAN OFFER CERTAINTY TO MULTINATIONAL CORPORATIONS ON THEIRTRANSFER PRICING POSITION DURING THE PERIOD


跨境工作：管理海外员工派遣中的中国常设机构风险By Charles Gong

中国持续繁荣发展的市场不断吸引着外国

投资者来到中国探索其新的业务增长动

力。近年来，外国公司按照跨境安排派遣

员工到其中国子公司行使管理、监督、咨

询等职能的做法已日益普遍。对于所属国

已与中国签署了避免双重征税协定的外国

公司来说，海外员工派遣安排是否被认定

为构成中国常设机构，对于判断该外国公

司在中国的纳税义务情况至关重要。鉴于

中国税务机关已在逐步完善跨国员工派遣

方面的法律法规并不断加强针对此类派遣

安排的监管力度，外国投资者及其中国子

公司已越来越关注与此相关的中国常设机

构风险。

海外派遣安排的常见方式

在目前的商业实践中，外国公司对其中国

子公司开展跨境员工派遣主要采用以下三

种方式：

1. 中方单一雇佣安排

在这种安排下，被派遣员工必须终止现

有的与外国公司签订的雇佣合同，并根

据中国法律规定与其中国子公司签署一

份新的雇佣合同。

2. 双重/分离雇佣安排

若采用这种派遣安排，则被派遣员工可

以根据其现有的海外雇佣合同保留其与

外国公司的雇佣关系，同时根据中国法

律的规定与其中国子公司另行签署一份

新的雇佣合同。

3. 借调安排

根据借调安排，被派遣员工将根据现有

的与外国公司签订的雇佣合同在其中国子

公司工作。

判断海外员工派遣是否在中国构成常设机

构的关键因素

判断上述三种海外员工派遣安排是否会导

致外国公司在中国构成常设机构，关键因

素在于对被派遣员工“实际雇主”的判

定。在这一点的判定上，中国采用了与2010

年经济合作与发展组织（“经合组织”）

税收协定范本所一致的“实质重于形式”

原则。

如果外国母公司派遣员工至其中国子公

司工作并且满足下列条件之一，该母公司

将很可能被认定为被派遣员工的“实际雇

主”：

1.该外国母公司对被派遣员工在中国的工

作有指挥权并承担与此项派遣相关的风

险和责任；

2.该外国母公司决定被派遣员工的人数和

级别；

3.被派遣员工的工资由该外国母公司承担；

4.该外国母公司因此项派遣从其中国子公

司处获得收益。

因此，根据“实质重于形式”原则，即

使在上述若干派遣安排下雇佣合同是由被

派遣员工同中国子公司签署的，或被派遣

员工的报酬是由中国子公司承担的，一旦

该外国母公司对被派遣员工在中国的工作

拥有控制权并承担与此项派遣相关的风险

和责任，则该外国母公司仍然会被视为被

派遣员工的“实际雇主”。如果同时还满

足其他一些条件（这些条件将在后文中提

及），该外国母公司将很可能因此项海外

员工派遣在中国构成常设机构。

反之，如果外国母公司派遣员工为其中

国子公司工作并且其中国子公司有权控制

被派遣员工的工作并承担与其工作相关的

风险和责任，则该中国子公司将会被视为

被派遣员工的“实际雇主”。向被派遣员

工支付的报酬会被视为向该中国子公司员

工支付的薪酬，无论该薪酬是由该子公司

直接支付还是通过外国母公司的账户间接

支付。因此，外国母公司在这种情况下不

会构成与此项海外员工派遣有关的中国常

设机构。

此外，值得注意的是，尽管中国现行的

相关法律法规仅涉及外国母公司和其中国子

公司之间的跨境员工派遣方面的常设机构认

54 Technical

CN_T_Expats.indd 54 11/05/2012 15:27

认可，税务机关有权按照核定利润方式向该

常设机构征收企业所得税，即按照下列公式

在该常设机构成本费用的基础上计算应归属

于该常设机构的利润额：

应纳税所得额=成本费用总额/(1-经税务

机关核定的利润率) × 经税务机关核定的

利润率

常设机构的上述成本费用包括应归属于

该常设机构的被派遣员工的报酬和该员工

所发生的诸如差旅住宿费、办公室租金等

其他费用。根据中国有关法律法规规定，

核定利润率应按下列标准确定：

- 从事承包工程作业、设计和咨询服务的，

核定利润率为15%至30%；

- 从事管理服务的，核定利润率为30%至50%

；

- 从事其他服务或服务以外经营活动的，

核定利润率不低于15%；

- 如果主管税务机关有证据认为常设机构

的实际利润率明显高于上述标准，则可

按照比上述标准更高的利润率核定其应

纳税所得额。

Charles Gong is tax CEO, RSM China Certified Public Accountants, and managing partner, Zhongrui Yuehua Tax Advisory Company Ltd

定，我们认为，该原则应同样适用于任何外

国公司和中国公司之间的类似派遣安排。

判断海外员工派遣是否在中国构成常设机

构的其他因素

如果一家外国公司被视为其派遣至中国子

公司的员工的实际雇主，且满足下列两个

条件之一，则该外国公司将因此项海外员

工派遣被视为在中国构成了常设机构：

1.被派遣员工全部或部分通过在中国的固

定营业场所提供服务

中国常设机构的判定中，“固定营业场

所”的定义包含以下三个特征：

1) 实质存在。指一家企业可支配的一定空

间，无论是该企业自有的还是租用的；

2) 相对固定。指在时间上具有一定的持久

性。例如：代表处、分支机构以及由服

务接收方提供的供该被派遣员工在中国

提供服务而使用的办公室等；

3) 企业全部或部分的营业活动是通过该营

业场所进行的。

2. 被派遣的员工在任意12个月内为提供服

务在中国停留的时间连续或累计超过183

天/6个月

中国常设机构的判定中,对“183天（或

在有些避免双重征税协定下的‘6个月）”

规定有严格的计算方法。被派遣员工在中

国境内为提供服务停留的时间自到达中国

之日起计算，直至其完成在中国境内的服

务之日为止，其间该被派遣员工离开中国

境内的天数会被扣除在外，但节日、周

末、假期或其他在中国境内的非工作日很

可能会被包含在内。

跨境派遣下中国常设机构的判定与经合组

织注解的一致性

外国公司对其中国子公司进行跨境员工派

遣而构成中国常设机构的风险较之以往有

大幅度增加。目前，有关中国常设机构认

定的解释通常会基于经合组织对税收协定

范本的注解，这意味着当现有法律法规尚

没有明确规定的情况下，纳税人可援用经

合组织对税收协定范本的注解来解释与中

国常设机构判定有关的事项。

与常设机构有关的中国纳税义务

若外国公司因海外员工派遣被认定为在中国

构成常设机构，则该外国公司从其中国子公

司收取的与此项派遣有关的收入将被视为所

构成的中国常设机构的收入，包括但不限于

管理服务费和被派遣员工的报酬等。中国税

务机关将就归属于常设机构的利润征收税率

为25%的企业所得税。如果该常设机构的收

入明显偏低或其归属利润不能得到税务机关

55

CN_T_Expats.indd 55 11/05/2012 15:27

Long-distance relationship[Distance-learning MBAs, increasing in popularity, may provide a fl exible solution for time-pressed

professionals. But what is the reality – and do they really measure up against traditional programmes?

Deciding to study for an MBA is a big decision and it can be difficult to juggle work, family and study. For these reasons distance-learning business education is gaining in popularity and turning into something of a success story. For instance, according to the FT’s Online MBA 2012 Listing, SBS Swiss Business School offers a global distance MBA and currently has 387 students enrolled, 82 of whom are international, while 72 of the 117 students enrolled at Spain’s IE Business School on its global executive MBA are from overseas.

These days anyone from anywhere can do an MBA without having to physically turn up to a classroom and learn. Yet students who take their MBAs at a distance can find themselves facing a certain amount of snobbery from some employers – and full-time counterparts. So what are the advantages and disadvantages of distance or online learning, and do the rewards make up for any perception of inferiority?

The first thing to understand is the intrinsic and perpetual value of an MBA. Stacy Blackman, CEO of Stacy Blackman Consulting and MBA blogger, says: ‘An MBA is a clear stamp on a resumé that says an individual was screened by the very best, and made it through. It’s validation and a helpful tool for recruiters screening numerous resumés. Top employers still run heavy recruiting programmes on campus at business schools. It’s a big priority for them and for some it’s really the only way in to the company. Finally, most top companies are already filled with MBAs who are more than happy to network with and hire fellow alums.’

Paul Allen, associate director at Coutts & Co, is distance studying for an MBA at Durham Business School. ‘I have always had a deep-rooted desire to challenge myself, perform and prove that the environment in your formative years needn’t be an inhibitor to your future success. The MBA was another personal challenge and one that I hope will afford me a degree of occupational flexibility. I’m a firm believer in giving

yourself options, and I feel that an MBA can be an excellent way to demonstrate a broader understanding of business which can ultimately open the door to switches in occupation and industrial sector.’

While Allen admits that he underestimated the commitment to sustaining his studies while working full time, he has chosen to complete the course in the quickest time possible – two years – in the knowledge that he could extend his studies by an additional three years should he wish.

Flexible approach‘This flexibility is essential and, coupled with the support and availability of the tutors and access to the online learning resources, provided

me with the confidence to pursue this method of study,’ he says.

The degree is broken down into core and elective modules followed by a dissertation. Each semester starts with the home delivery of the module notes and learning materials. The business school provides hard copies, CD media and online access to all course notes, which affords maximum flexibility.

‘My preference has always been for the hard copy materials as I can make notes easily and then draft practice papers from these,’ says Allen. ‘Given the nature of my job I spend a lot of time travelling and so planes and trains have been my primary place of study, with weekends reserved for exercise and assignment work.’

Modules are made interactive via a portal which facilitates learning. Here, group work can be undertaken where students can work together on a variety of tasks. ‘This is a key

feature of the distance-learning medium, as part of the value in undertaking a traditional MBA is in the people that you meet,’ Allen says. ‘Developing networks and learning from other cultures and professionals from different industries needn’t be the preserve of full-time MBAs.’

Missing the energy?But Blackman has reservations. ‘I do not think that online MBAs are as effective,’ she says. ‘That’s not to say that there is not value there, but being in class, in person, meeting the teacher, the guest speakers and, perhaps most importantly, fellow classmates, is a huge benefit. The energy created by having so many people together in a room is enormous and exciting.’

56 Careers

CN_CAR_MBA_ad.indd 56 10/05/2012 16:54

This lingering question mark over whether online courses are ‘as good’ as classroom-based ones has meant that the more prestigious schools may have been slower in jumping on the bandwagon. But with the irrefutable advantages in terms of flexibility with both schedule and location, more business schools are signing up to it – with some offering blended schemes, a mixture of distance and classroom learning.

‘If you are going to invest time and money in an online MBA, you should evaluate it with the same criteria as you would an offline MBA,’ Blackman advises. ‘You would want to look at the programme reputation and career offerings following graduation, the strength of the alumni network. You should evaluate curriculum, teaching style, strength of faculty. Of course you may decide that the convenience outweighs a lower ranking in some

Prague-based ACCA member Jan Švorc is a manager in a Big Four management consulting department. He embarked on Durham Business School’s global MBA (finance) programme as a distance learner.

There are, he says, four key advantages to the programme: ‘good quality and reputation of the school, reasonable fee, flexibility and specialisation in corporate finance’.

Before enrolling, Švorc had studied for the ACCA Qualification, where preparations for exams were held mostly in distance-learning mode, although some classes were also available for the modules. ‘I was pretty comfortable with this way of learning as it brought the results and was suitable for me because of the flexibility,’ he says.

Švorc hopes that the MBA will bring two main benefits. ‘Firstly, I think it helps to consolidate and cement my knowledge in various managerial topics,’ he says. ‘My professional career brought a great deal of pieces of experience and managerial knowledge, but they were unstructured. Secondly, I have learned how to approach business research and build up my reports.’

To complete a typical module, Švorc expects to spend several days – ‘actually, nights’ – working on the formative assignment and about two weeks for the final one. ‘If there was an exam in addition, the preparation takes about 10 evenings and a weekend at minimum. It depends on the topic.’

Švorc admits that working full time and studying during the evenings and weekends has taken its toll on his social life. But his hope is that achieving an MBA will propel him to a senior position in financial management at a mid-sized, internationally operating company.

*CASE STUDY

categories, but you absolutely want to take all of these criteria seriously to ensure a smart choice.’

‘I spent a lot of time researching business schools and MBAs, here in the UK, North America and Asia,’ says Allen. ‘International recognition of the school, degree content and quality were of primary importance to me. The various league tables – notably the Wall Street Journal rankings – confirmed the international pedigree of Durham Business School above and beyond anything. It also helped having access to international recruiters who spoke very highly of Durham MBA graduates.’

Allen has a final piece of incentive-led advice. ‘I took the decision to finance my own studies; I’m convinced that having skin in the game helps focus the mind!’

Beth Holmes, journalist

LOOKING FOR A NEW JOB? Visit www.accacareers.com/ china-hong-kong

CN_CAR_MBA_ad.indd 57 10/05/2012 16:54

‘HANDING OUT BUSINESS CARDS WITHOUT TAKING THE TIME TO TALK TO PEOPLE IS A WASTE OF TIME.EXPLAIN WHO YOU ARE AND WHAT YOU DO’

When Jim Thompson first came to Asia, he was a young man of broad vision but limited means. The 23-year-old American didn’t have concrete plans, but knew he wanted to make it big. With only US$1,000 to his name, he started a small company in Tokyo before heading to Hong Kong. Today, as head of Crown Worldwide Group – the world’s largest privately held group of international relocation companies – Thompson is one of Hong Kong’s most successful self-made businessmen, and credits what we now know as networking as being one of the cornerstones of his empire.

Hong Kong is a hotbed of entrepreneurial ambition. The city is home to over 290,000 small and medium-sized enterprises (SMEs), and remains a magnet for local and foreign entrepreneurs staking their hopes on Asia. By natural extension, the Chinese mainland is now in their sights, too.

But not everyone makes it. Indeed, however high their hopes may be at startup, Barry Tong, partner in advisory services at Grant Thornton Jingdu Tianhua in Hong Kong, says history shows that the ‘vast majority’ of SMEs operating in Hong Kong and China ultimately fail – not due to external challenges but through deficiencies in their own internal strategies, management and operations.

There are many factors at play here but the success stories insist that networking is an entrepreneurial imperative. Thompson says it’s all about putting your business out there. ‘Networking is definitely one of the keys to success for almost any business and it certainly was with mine,’ he says. ‘When I started Crown in Japan I had to make my company known in the community and I made a great effort to meet everyone I could to tell the story of my new business.’

Joining the local branch of the American Chambers of Commerce led to the opportunity to join two committees where Thompson met people ‘who would become my future customers’. He networked informally, too, attending functions where potential clients might be. ‘I found that meeting them and leaving an impression on them are two different things,’ Thompson explains. ‘I often see people handing out business cards without taking the time to talk to the

people they are meeting. This is a waste of time. You must explain who you are and what you do.’

Break through the firewalls Thompson found this approach opened doors to ‘firewalls’ around the city’s decision-makers, with whom it is often difficult to get an appointment. As he says, ‘people are less likely to refuse in a face-to-face approach’.

Shanghai-based David Caselli, a New Zealander who founded boutique corporate finance firm I Grow, has had a similar experience. ‘How do you get a billionaire to come to a function of a company they’ve never heard of? The recommendation has got to come from a trusted adviser.’

Apart from regular channels such as chambers of commerce and industry-specific associations, Hong Kong (and increasingly the mainland) has a number of networking vehicles. Briton Gerry Ball founded The Entrepreneurs Club in 2002, its purpose to help people starting out learn from experienced entrepreneurs.

Ball is now based in Singapore, where he is CEO of his own online language solutions business, Mind Your Language. ‘All business is based around word-of-mouth, none more so than at the start of a business’s life,’ he says. ‘Networking helps to facilitate that – especially for a startup who is not going to have a bottomless pit of money to spend on advertising.’

Ball adds that the best networkers have a knack for picking the right events. ‘You need to network at events

where the people there are going to be able to do business with you. So CEOs of large companies network in Davos, whereas the insurance salesman networks at the local rugby club.’

Alexandra Yung, president of The Entrepreneurs Club, says she has gained ‘immense value’ from it. ‘You meet like-minded people who have also left the safety net of a job and salary to live their dreams. You learn a lot from their stories,’ says Yung, who runs branding and creative marketing company Creasians. Through the club, she met a contact that resulted in a ‘major milestone’ – the opportunity to co-brand Harbin, the famous ‘ice city’ in northeastern China.

Business Networking International (BNI), also established in Hong Kong, adopts a more formalised approach, with weekly meetings where members are expected to present new contacts or connections. Only one person from each profession is allowed to join a chapter (Hong Kong has 14 chapters). ‘Everybody educates each other,’ explains regional director, Stella Yung.

Get connectedFor the startup or entrepreneur, telling your unique story and developing an effective network of contacts – for both business and peer support – is vital

58 Careers

CN_C_networks.indd 58 09/05/2012 15:21

It works for Ho Tak Sang FCCA. Ho founded his accountancy firm, Ho Tak Sang & Co, in 1979 but about five years ago business plateaued. He was introduced to BNI, and the firm is ‘on the move again’. ‘I would say that half of my new business comes through BNI,’ Ho says.

Confidence boostBut networking delivers soft benefits, too. When chartered accountant Suzanne Liu Duddek joined the (now defunct) Hong Kong Women Business Owners Club, it was a turning point in getting her firm, S Liu & Co, off the ground. ‘I was definitely in a minority – the vast number of Chinese women were, and still are, employees,’ she says. While she initially joined for the emotional and moral support of like-minded women, her public speaking and communication skills also developed. She continues to network though the Women in Publishing Society, Hong Kong, and the Australian Chamber of Commerce and Industry.

Of course, Hong Kong’s small size makes networking easier. The mainland is vast, so for newcomers the various chambers of commerce are a good start. Nonetheless, it’s worth the effort in a nation where guanxi is viewed as ‘the mother of all relationships’.

After nearly half a century in business, Thompson says that networking is more relevant than ever. ‘There are many places to network that cost very little – if anything,’ he says. ‘My advice to entrepreneurs or new startups is simple: do it.’

Pete Tomlinson, journalist

* The Entrepreneurs Club has 200 members, with around 80 turning up to monthly events. www.entrepreneurs.com.hk

* BNI Hong Kong has 500 members, meeting weekly in chapters around the city. Members see themselves as ‘referral partners’. www.bni.hk

* NetworkClub holds regular events in Beijing. On arrival, each attendee hands over two business cards. www.networkclub.com

* Chambers of commerce in Hong Kong and all key mainland cities are a good starting point for entrepreneurs to meet new people. Industry-specific organisations offer networking opportunities too.

* ACCA organises different kinds of events and activities that provide members with professional networking opportunities vital to their personal development and business success. ACCA offices are located in the Chinese cities of Beijing, Shanghai, Guangzhou, Shenzhen and Chengdu, as well as Hong Kong and Macau.

*A GUIDE TO NETWORKING GROUPS

59

CN_C_networks.indd 59 09/05/2012 15:21

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OVER 24,000 ACCA MEMBERS AND STuDENTS HAVE REgISTERED THEIR CVS ON ACCA CAREERSEveryday on ACCA Careers on average we have....150 new candidates register11,352 page views44 new jobs posted253 job applications

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ABCNCAREERSjune.indd 3 09/05/2012 18:39

In addition to improving the focus of your career development, setting time aside for planning your CPD can save you money and time.

Plan to succeedIt is no secret that members who take time to identify their development needs in advance of selecting learning activities are more likely to put together a more effective development plan and obtain their CPD easily.

Planning your CPD early enables you to think strategically about which learning mediums will be the best fit for different areas of development. Face-to-face may be best for some types of learning, whereas e-learning, research or learning on the job may be more effective for others.

It is important to undertake CPD activities that are relevant to your role. Practising members should aim to ensure that an appropriate amount of their development is undertaken in their area of technical specialism. If your career has moved away from accounting and finance, you should undertake learning which is relevant to your new role. Remember that your CPD is about technical and non-technical areas.

You don’t need to leave all your CPD to the end of the year. Every year we

see a surge of CPD activity during the last quarter from ACCA members. This suggests that CPD may be viewed by some as something they ‘have to do’, rather than an ongoing process of professional development. CPD is really just a practical expression of professionalism, and something you are likely to be doing on an ongoing basis as part of your working life. Don’t forget you can include activities you undertake in the workplace; for example, briefing sessions, learning from experts, and coaching and mentoring.

Resources to help youACCA has developed several tools and resource web pages to help you succeed in planning your CPD.

* ACCA Compass is an interactive tool that allows you to assess your level of experience and skill and compare this to a recommended market average for 20 different job titles. ACCA Compass allows individual members to undertake a competence self-assessment process to encourage a more focused professional development, making it a perfect resource for the beginning of the CPD year.

*Acting as an electronic coach, the Professional Development Matrix (PDM) is designed to help you

identify your preferred learning style and the knowledge, skills and expertise you may need in either your current role or in roles which you are interested in for the future. It will also help you to produce a personal development plan.

There is also ACCA’s CPD i-guide, which you can use to coach and support you through CPD.

What happens next?We’ve talked about how to plan your CPD, but we would also recommend a learning cycle of Plan, Do and Review as best practice.

Doing your CPD is about carrying out the right learning opportunities. Once you know what you need to learn or develop, you can browse and select learning opportunities from ACCA’s new CPD online section. It’s a one-stop shop giving you access to articles, podcasts, online seminars, research and qualifications from our partners all in one place.

Reviewing your CPD activity involves thinking about what you have learned, how you will apply the learning, and providing evidence for it.

For information on CPD and the learning cycle, please visit our new and improved CPD section.

CPD: getting into good habitsACCA has developed several tools and resources to help members plan their CPD effectively, such as ACCA Compass and the Professional Development Matrix

62 ACCA

CN_INT_A_CPD.indd 62 09/05/2012 16:43

01 Bernard Wu, chairman of ACCA

Hong Kong, welcomes guests to the ACCA Mentorship Programme appreciation reception

02 Staff from Standard

Chartered Bank listen attentively to Rhys Johnson during the in-house training session

03 KPMG audit partner George Wong (far left), and Sophie

Yuan, head of ACCA Guangzhou, present Zhimin Wu with his prize

HONG KONGMENTORSHIP PROGRAMME THRIVESThe ACCA Mentorship Programme proudly marches into the sixth year since its launch in 2007. This year, ACCA Hong Kong recruited 69 pairs of mentors and mentees, and an appreciation reception and launching ceremony took place on 24 April.

ACCA Hong Kong chairman Bernard Wu officiated at the evening and gave a warm welcoming address.

The mentorship programme provides good networking and bridging opportunities for members and students. Fellow members of ACCA are encouraged to nurture budding accountants by coaching them using their personal experience, knowledge, advice and confidence. This assists ACCA students, affiliates and young members to grow and join the profession.

BANK STAFF BENEFIT FROM TRAININGIn-house training workshops, run by ACCA Hong Kong for Standard Chartered Bank, were held on 23 April.

The workshops received an overwhelming response, attracting 100 middle- to senior-level staff from finance, tax and risk departments.

Rhys Johnson, vice president of teaching and learning at Kaplan Singapore, was the speaker. Staff attending the workshops gained a thorough understanding of capital investment appraisal and risk management.

GUANGZHOUJOB-HUNTING FINAL A SUCCESS The Guangzhou final of the ACCA Job Hunting Competition (JHC) 2012 took place on 26 April. All 20 finalists were ACCA students from universities in South China.

The winner was Zhimin Wu, a third-year student from Shenzhen University who is majoring in computer science and technology. He studies part-time and beat the 19 other contenders with his outstanding leadership. ‘The JHC is a great experience for me and now I have more confidence to continue my ACCA studies,’ Wu said.

ACCA news64

CN_A_news.indd 64 09/05/2012 15:20

05 Jordan Yu presents certificates at ACCA Beijing’s

spring prize-giving and celebration ceremony

06 Annie Sun presents ACCA emblems to new members

04 Participants gather for the Shenyang leg of ACCA Beijing’s T2 Finance Tour. The event focused on raising venture capital and private equity

BEIJINGTOUR ARRIVES IN SHENYANGIn partnership with Shenyang Government Finance Office and CEBEX Group, ACCA Beijing’s T2 cities Finance Tour – Raising Venture Capital and Private Equity, was held on 27 April in Shenyang, one of the top five markets in northern China.

The forum, which explored the process of attracting venture capital and private equity investment, was attended by more than 80 company representatives.

ACCA Beijing head Jordan Yu kicked off the forum by sharing ACCA’s recent report in collaboration with Forbes Insights and CGA-Canada, which says that most small and medium-sized enterprises (SMEs) believe that the worst of the recession has passed, but a significant number do not think that they have sufficient cash reserves to survive another financial crisis. To help SMEs in the credit market, the report recommends that providers of capital are clear about their lending and investment criteria, and consider the need for security or personal guarantees on a case-by-case basis.

Kevin Ao FCCA, founding partner of Golden Rock Capital, led the panel discussion together with Kajun Chen, senior investment director at FUHO Capital, Dennis Deng, senior partner at Dacheng Law Offices and Hao Gu, partner at Sinowisdom. Panellists shared their views on using capital to grow business networks. They stressed that even once small businesses convince investors that their ideas have merit, and funds are secured, the journey is just the beginning. The question then becomes how to allocate this capital properly with so many choices available: recruitment, product research and development, marketing campaigns, logistics and a continuous list of possible outlets.

The panel advised small businesses on the best outlets for capital to grow a business from the ground up.

The report, SMEs: Rebuilding a Foundation for Post-Recovery Growth, can be found at www.accaglobal.com/en/research-insights/access-finance/sme.html

MEMBERS’ ACHIEVEMENTS CELEBRATEDTo express appreciation for students’ endeavours and to congratulate new members, ACCA Beijing organised a spring prize-giving and celebration ceremony at China World Hotel on 25 April. This exciting and successful event was attended by more than 80 ACCA top winners, fellow members, new members, affiliates, approved learning partners and media representatives.

Jordan Yu, head of ACCA Beijing, gave a welcome speech and this was followed with one by Annie Sun FCCA, China CFO at EMC Computer Systems (China). Sun shared her career experience and encouraged all students and affiliates to become members.

Fourteen students from mainland China, who acheived top scores in the December 2011 exams, were awarded certificates, with Sun presenting ACCA emblems to new members. Mu Mengxi, the top winner from Sichuan University, made a video to illustrate students’ gratitude to ACCA, and the ceremony ended with networking opportunities.

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64 NewsFinance tour arrives in Shenyang; members’ achievements are celebrated; and job-hunting fi nal is a success in Guangzhou

62 CPDGetting into good habits

Inside ACCA

Martin Turner, ACCA’s vice president, told the 13th session of the United Nations Conference on Trade and Development (UNCTAD) in April that high-quality accountancy, financial reporting and auditing can play a crucial role in improving economic performance around the world.

As part of the conference, held in Doha, Qatar, UNCTAD’s Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) held an event on 22 April focusing on the role of the accountancy profession.

At the ISAR event, Turner emphasised the importance of capacity building in the accountancy profession to ensure that there are the necessary number of qualified accountants to guide economic development in emerging markets at all stages of their economic growth.

He also focused on the crucial role of accountants in promoting sustainability,

drawing on material from a policy paper – The Role of the Accountancy Profession in Economic Development – that ACCA prepared to coincide with the event.

‘ACCA was pleased to be part of this high-level ministerial event and to have an opportunity to emphasise the crucial role we believe the accountancy profession plays in supporting sustainable economic development,’ Turner said. ‘UNCTAD-ISAR has been tireless in its efforts to enhance the capacity and ability of the global accountancy profession to help bring nations into the world economy. A key part of its mission is to promote globally sustainable economies, a goal which ACCA wholly endorses.’

During the event, UNCTAD launched its new Accounting Development Toolkit, comprised of an accounting development framework and a set of accounting development indicators. This is designed to provide guidance to policymakers on the current level of development of a country’s accountancy infrastructure in order to identify gaps, define priorities and help focus national efforts to improve.

The Role of the Accountancy Profession in Economic Development is available at www.accaglobal.com/accountancyrole

Crucial role for professionVice president Martin Turner addresses UNCTAD

INVESTORS’ VIEWS ‘LOCKED OUT’ Investors should be placed at the heart of global financial and accounting standards, say ACCA and Grant Thornton in a new report. However, it warns that investors’ views on shaping future standards are not being heard.

Putting Investors at the Heart of the Financial System (www.accaglobal.com/investors) is based on a series of roundtables for investors and investor representatives held around the world. It says that the piecemeal, fragmented way in which solutions to global economic uncertainty are proposed and the lack of focus on investors in the reform

process prolong global economic fragility, and proposes seven steps to improve matters.

‘Investors should be the primary focus for global financial and accounting standards, yet their voices are not being clearly heard,’ said Sue Almond, director of technical at ACCA, adding that ‘the investor community opinion isn’t necessarily homogenous, but this doesn’t mean all voices should be ignored’.

Doha, Qatar

Martin Turner

Sue Almond

GOT ROLES TO FILL? Visit www.accacareers.com/china-hong-kong

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