accountant middle east - september 2013

setting standards in financial auditing & accountancy sePteMBer 2013

CRUNCHING OPPONENTS Go on the ring-side with Thabet Agha, the current ‘Al Batal’ fight title holder, who also dabbles as an accountant

BANKING ON SUCCESS CFO of Bank Sohar speaks on building one of Oman’s newest banks and the lessons learned in the top finance job

SETTING A HIGHER BARNew Deloitte survey shows how financial institutions are increasingly focusing on risk management and compliance

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RISING TO THE TOP

“Mid-tier audit firms do not feel stymied by the ‘Big 4’,” says Founder of Morison Menon Group, Raju Menon

PUBLICATION LICENSED BY IMPZ

SEPTEMBER HERALDS the beginning of the end of financial year for many companies, when accountants and money managers go into hibernation to generate their reports and statements.

These statements summarise financial reports that account for every dirham earned or spent, which are afterwards published and presented to companies’ boards and adopted by shareholders at annual general meetings.

But despite this being a manic season for the number crunchers, we managed to get first-hand behind-the-scene mechanisms of how the system works, during our visit to one of the region’s top audit firm, Morrison Menon Group.

Raju Menon, the Chairman and Founding Partner of the Group gave us a tour and also revealed how the firm continues to grow its revenues despite the aftermath of the infamous Arab Spring.

Morison Menon Group is an independent member of Morison International, a network that is ranked as the 9th largest accounting association in the world. It is aggressively expanding its operations in the region, and now has offices in the Emirates of Dubai, Abu Dhabi, Sharjah and Ras Al Khaimah while overseas operations are in Qatar, Bahrain, Kuwait, Oman and India.

From number crunching, we move on to crunching of opponents where we go on the ring-side with Thabet Agha, the current title holder of the region’s first all-Arab Mixed Martial Arts reality show, who also dabbles as an accountant.

Thabet’s story is one that redefines resilience, discipline and free spirit. The 24-year-old fighter can easily pass as a colourless suit-and-tie number cruncher but when he puts on his gloves, he becomes a ruthless badass.

His brutal mien was evident recently when he mercilessly pounded his opponent in the final episode of the reality hit show, called ‘Al Batal’ (Arabic for The Hero), where he was crowned the overall winner. Read about how he combines his taxing skills both on and off the ring in the ‘Student Accountant’ segment.

From the fight we take a flight to Oman, where we meet the Chief Financial Officer of one of the country’s youngest banks that has battled the biggies to emerge a force to be reckoned with in the region’s financial sector.

Bank Sohar has grown to OMR 1.79 billion in assets from a small OMR 159 million in the last six years, thanks to the brilliance of its money-spinner Rashad Ali Abdullah Al Musafir.

Combining his Western education with his Omani heritage complimented by unwavering work ethic, Al Musafir shares his story of starting one of Oman’s newest banks and the lessons learned in the top finance job.

Have a good read.

‘Tis the season of financial reporting

Joyce NjeriEditor, Accountant Middle East

PublisherDominic De Sousa

Group COONadeem Hood

Managing DirectorRichard [email protected] +971 4 440 9126

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SETTING STANDARDS IN FINANCIAL AUDITING & ACCOUNTANCY SEPTEMBER 2013

CRUNCHING OPPONENTS Go on the ring-side with Thabet Agha, the current ‘Al Batal’ fight title holder, who also dabbles as an accountant

BANKING ON SUCCESS? CFO of Bank Sohar speaks on building Oman’s newest bank and the lessons learned into the top finance job

SETTING A HIGHER BARNew Deloitte survey shows how financial institutions are increasing focus on risk management and compliance

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RISING TO THE TOP

“Mid-tier audit firms do not feel stymied by the ‘Big 4’,” says Founder of Morison Menon Group, Raju Menon

PUBLICATION LICENSED BY IMPZ www.accountancyme.comSubscribe now

editor's audit

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CONTENTSSEPTEMBER 2013

12 STUdENT ACCOUNTANT: Crunching opponents – We go on the ring-side

with Thabet Agha, the current title holder of ‘Al Batal’ reality show, who also dabbles as an accountant.

18 PERSONAlITy & PRACTICE: Banking on success – CFO of Oman’s Bank

Sohar - Rashad Ali Abdullah Al Musafir - shares his story of starting one of the country’s newest banks and the lessons learned in the top finance job.

32COvER STORy: Rising to the top – Chairman of Morison Menon

Chartered Accountants firm recounts his incredible journey that led to the founding of one of the region’s mid-tier leader in business consultancy.

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Current AffairsPr

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8 dIffERENT dImENSIONS:Hotlines get buzzing – Deloitte report states that

Middle East companies facing challenges as demand for legislation of whistle-blowers gain support.

58 TECHNOlOGy TAlK: On cloud 'none' – Deloitte’s new report shows

technology decision-makers are more fretful about transitioning to cloud computing.

64 BUSINESS INSIGHTS: Financial modelling – Ebrahim Yakoob

enlightens on a significant and easy approach to grow company’s profits.

74 INdUSTRy APPOINTmENTS: Revolving door – Find out the latest movement

of professionals between roles, companies as well as new industry hires.

28CORPORATE TREASURy: Foreign exchange risk and hedging – Will Spinney

explores some of the concepts and issues around currency convertions on normal trading transactions.

46 mONEy lAUNdERING: What’s it got to do with me? – Matthew Gamble explores

ways that would help accountants or auditors develop a set of systems and controls to meet AML obligations.

3 EdITOR'S AUdIT

6 NEwS & vIEwS: ACCA, IMA cancel deal – Mutual Recognition Agreement

(MRA), launched as a step towards strengthening the global partnership of the two institutes, will not proceed.

7 NEwS & vIEwS: DFM goes to New York – Dubai Financial Market will

organise its International Investor Roadshow in New York on September 24 and 25, 2013.

9 ISlAmIC fINANCE: Call to regulate Islamic Finance – Chief

Executive of Noor Investment Group says lack of standardisation holding back the industry.

10 dElOITTE SURvEy: Setting a higher bar – New Deloitte

survey shows that financial institutions are increasing focus on risk management and compliance.

24 SUSTAINABIlITy ACCOUNTING: Resetting the green button – Experts

urge more companies in the UAE to increase levels of corporate sustainability reporting, in order to address social and environmental issues.

54 IfRS SPECIAl: Cloud across Atlantic – Arif Ahmed

discusses the intricacies of loan provisioning under the new International Financial Reporting Standards.

From the Experts

Interactions

18

GLOBAL ECONOMY ON THE MEND

CHANGING THE HR GAME

BUSINESS CONFIDENCE and optimism about the global economy improved in the second quarter of 2013, according to a survey by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA).

Almost half (47%) of the 1,833 ACCA and IMA members surveyed felt the economy was improving or about to do so, an increase from 43% in the first quarter of the year.

The survey found that 26% of respondents reported increased levels of business confidence, a rise of 2% from the previous quarter.

ACCA senior economic analyst Emmanouil Schizas said: “People are reassessing their expectations of the recovery and the shape it’s going to have. They now believe that the recovery is a lot stronger than they previously thought and they also now believe that they have more access to investment opportunities and capital.”

The survey responses suggest that the second quarter of 2013 was a turning point for the global economy.

Schizas agreed that the economy has reached a turning point, where expectations about future economic performance have been managed effectively by the central banks and now it is time for the real economy to take over.

DELOITTE HAS released a new

study introducing 13 global trends

that are driving critical business

and human capital decisions.

The report provides information

on these trends across global

markets through a survey of

over 1,300 business and Human

Resources professionals from 59

countries.

Thirty two per cent (412) of survey

respondents were from the Europe,

Middle East and Africa (EMEA)

region. In terms of general business

outlook for 2013, the Deloitte

survey finds that one third of EMEA

executives forecast moderate (23%)

or strong (7%) growth this year

compared with 39% and 12% for

global respondents, respectively.

“Only 4 per cent of EMEA

respondents believe that their HR

programmes are truly exceptional”

said Ghassan Turqieh, partner,

management solutions at Deloitte

ME. “This reflects a renewed

desire to strengthen corporate

talent development," he added.

CBD EARNS VITAL CERTIFICATION

4% EMEA survEy rEspondEnts who bEliEvE thEir hr progrAMMEs ArE ‘truly ExcEptionAl’

THE TOP management of the

Commercial Bank of Dubai (CBD)

has received Level 5 certificates for

Coaching and Mentoring from the

UK-based Institute of Leadership

and Management (ILM).

ILM is an awarding body for

leadership and management

qualifications in the UK. Aligned

to the UK’s Qualifications

and Credit Framework, ILM

qualifications begin at Level 2,

such as the ILM Award in Team

Leading, and continue

up to Level 7.

CBD is the first bank

in the Middle East to

earn the ILM Level 5

Award in Coaching and

Mentoring, the highest

rate achieved by a

corporate institution

in the region. This qualification

enhances a practicing manager's

capability as a leader to influence,

guide and develop those around

them through the power of

coaching.

Thirteen CBD managers

(pictured) completed the

programme in July 14 and are set to

graduate this month (September);

while another 38 Senior

Management will complete the

training by the end of 2013.

STATS FACT:

NEwS & VIEwS

6 September 2013

DFM GOES TO NEW YORK

DUBAI FINANCIAL Market (DFM) will organise its International Investor Roadshow in New York on September 24 and 25, 2013, in collaboration with Bank of America Merrill Lynch. The event will bring together international investment managers with senior representatives from ten companies listed on DFM and NASDAQ Dubai. This event is part of DFM’s continued and proactive efforts to put its listed companies on the radar of larger and more diversified international institutions.

This year’s event has gained more significance following decision to classify the UAE as an Emerging Market, which reflects the growing popularity of the local equity market amongst international investment institutions.

The ten leading companies taking part in the roadshow are Emaar Properties, Emirates NBD, Dubai Islamic Bank, DP World, Shuaa Capital, Dubai Investment Company, Air Arabia, Arabtec, Drake and Scull and DFM Company.

Essa Kazim (pictured), Managing Director and CEO of DFM, said: “In light of the UAE’s MSCI emerging market status, international investors and emerging market funds have shown great interest in meeting DFM listed companies. DFM provides investors with diversified investment opportunities through its listed companies. They represent a variety of sectors and thrive through a high growth and sustainable economic environment.”

STANCHART LAYS GROUND FOR RMB STANDARD CHARTERED has

created a Renminbi (RMB)

Solutions team that is responsible

for delivering bespoke client

solutions to help them best capture

opportunities arising from the

internationalisation of the RMB.

The team consists of Carmen

Ling, Global Head, RMB Solutions,

Origination and Client Coverage;

Caroline Owen, Regional Head

of RMB Solutions, Americas;

Alexandra Gropp, Regional Head

of RMB Solutions, Europe; and

Lisa O’Connor, Director, RMB

Solutions.

Commenting on the

appointments, Sean Wallace,

Group Head of Origination &

Client Coverage, said, “The

liberalisation of the RMB

represents one of the most

profound changes in the world’s

financial system in generations.

We aim to be the leader in

providing insights, services and

ideas in this area. I am confident

that the RMB Solutions team will

drive our influence through advice

and bespoke solutions.”

THE ASSOCIATION OF

Chartered Accountants

(ACCA) and the US Institute

of Management Accountants

(IMA) have said their Mutual

Recognition Agreement (MRA)

will not proceed.

ACCA and IMA said they

were concerned that the

MRA could be “misused as an

inappropriate entry point by

some in the market for ACCA

students and CMA candidates”

and not as a benefit for existing

qualified members to gain a

second credential, as originally

intended.

MRA was launched at the

IMA's annual conference in

New Orleans and was seen as

a step towards strengthening

the global partnership the

two institutes entered into

more than a year ago. ACCA

and IMA said they will remain

“strongly committed to their

wider strategic partnership” and

will continue to work on joint

projects.

“While we are disappointed

the MRA is not going to

proceed, both IMA and ACCA

are continuing with our strategic

partnership. We remain

committed to quality credentials

based on rigorous testing

and a mastery of accounting

knowledge and skills," IMA

chief executive Jeff Thomson

(pictured) said.

ACCA, IMA CANCEL DEAL

7

News & Views

HOTLINES GET BUZZING

wHISTlEBlOwING, OR ‘Ethics’ hotlines, have gained importance in the middle East over the last few years, although it is difficult

to identify any legislation to protect ‘whistle-blowers’ in the region.

This topic is discussed in the summer 2013 issue of the ‘Deloitte Middle East Point of View (ME PoV)’, the quarterly thought-leadership publication and App for tablets. The latest edition tackles current hot matters from intellectual capital in Islamic Finance, to liquefied natural gas in Qatar, cyber-attacks, and many more matters of interest to business leaders in the Middle East.

One of the interesting topics for Middle East leaders and companies relates to the need for boards to ‘SACK’ management if reporting is being done ineffectively. ‘SACK’ is an acronym developed by the author of ‘Less is more’, featured in the Middle East Point of View publication and App.

‘Stipulate, Appoint, Collaborate, Keep monitoring’, or ‘SACK’, consists of a 4-point solution for efficient and effective management reporting developed by the author to assist companies working towards succeeding in their projects.

Buzz-worthy topicsIn line with the focus on people within firms, in ‘Event Management: bringing people together’, the author explores the need for effective event management following the rapid social and business development taking place in the Middle East. Driven by huge economic and population growth in Qatar, Saudi Arabia and the United Arab Emirates, demand for events in the Mena region appears to be increasing at a far greater pace than the rest of the world, thereby increasing the need for effective and efficient event management strategies and tactics.

“In every issue of the Middle East Point of View publication and App, we stress on the region’s most strategic, talked about and buzz-worthy topics. Our Deloitte subject matter and industry leaders lend their expert views on matters of importance to our

region and our clients. Of note in this issue are the pieces on whistleblowing, big data, risk and cyber-attacks, oil production, Islamic Finance, and effective management practices,” said Rana Ghandour Salhab, Communication partner at Deloitte Middle East.

Further highlights of the latest Deloitte Middle East Point of View Summer print publication and App include:

▄ In ‘Has the train left the station?’, the author assesses the possibility of Qatar’s LNG pre-eminence being challenged by shale oil from the US and LNG from Australia.

▄ In ‘Brick by brick, tile by tile’, the author assesses the building of intellectual capital in Islamic Finance through the use of Knowledge Management strategy.

▄ In ‘ICS: protecting the other network’, the author sheds light on the recent proliferation of cyber-attacks and the need for Industrial Control Systems to mitigate them. For the GCC countries with significant reliance on process industries such as Oil and Gas, complex ICS systems are considered the cornerstone of operations.

▄ In ‘New business strategies and big data’, the authors discuss how big data can lead to insight within emerging trends that are invisible in small data and thereby provides the means for businesses to be more proactive. As such, access to this data can give companies the opportunity to generate new profits.

driven by huge economic and population growth in Qatar, Saudi Arabia and the United Arab Emirates, demand for events in the mena region appears to be increasing at a far greater pace than the rest of the world.

DIffERENT DIMENSIONS

8

Deloitte report states that Middle East companies facing challenges as demand for legislation of whistle-blowers gain support…

September 2013

ISLAMICfINANCE

9

CALL TO REGULATE ISLAMIC fINANCE

STANdARdISATION Of the regulations governing Islamic finance is a must to ensure the globalisation of Islamic finance, according to Hussain

AlQemzi, the Group Chief Executive Officer of Noor Investment Group and CEO of Noor Islamic Bank (Noor).

Speaking at a recent conference on the future of Islamic finance, jointly organised by Noor and Thomson Reuters, AlQemzi said the lack of standardisation is holding back the growth of Islamic finance.

Shari’a compliantAlthough regional standardisation bodies exist,

adherence to their standards varies from country to country and region to region.

“It is a real concern that there is no authoritative global body to regulate and promote Islamic finance,” AlQemzi said.

“Disagreement and different interpretations, over what is Shari’a compliant and what is not, continue to make it difficult to establish the necessary regulations for the industry to develop globally accepted products.”

“Some people argue that standardisation is an unrealistic goal, given the fragmented nature of Islamic finance. I do not agree. There is a need for balanced, globally accepted, regulation that does not impede growth, or allow for abuse,” AlQemzi added.

A larger market shareIndustry estimates put the value of the Islamic finance sector at $1.5 trillion, little more than 1% of the overall global financial sector. And, despite impressive annual growth rates of 15% to 20%, AlQemzi said there is no real tangible evidence that Islamic finance is a world force.

Even in Muslim countries, conventional finance has a larger market share than Islamic finance.

For example in Malaysia, AlQemzi told delegates, Islamic lending accounts for just 26.6 per cent of overall lending. While in the UAE, Islamic finance accounts for only 12 per cent of the financial sector.

Al Qemzi called for practical measures to be implemented that progressively address impediments to the growth of Islamic finance.

“We need to create an enabling environment for cross border connectivity through Islamic finance,” he said.

“This will require measures to develop domestic capital markets and should go hand-in-hand with national market reforms, based on common international standards. Domestic markets should also be strengthened by widening the issuer and investor bases, with more issuances in currencies other than the domestic currency, to attract investors from across the globe.”

“And there should be greater collaboration and cooperation among, and between, national economies in which Islamic finance participates,” AlQemzi added.

Hussain AlQemzi, CEO, Noor Investment Group: “It is a real concern that there is no authoritative global body to regulate and promote Islamic finance”

12% ProPortion of islamic finance in Uae’s financial sector

“disagreement and different interpretations, over what is Shari’a compliant and what is not, continue to make it difficult to establish the necessary regulations for the industry to develop globally accepted products.”

Chief Executive of Noor Investment Group says lack of standardisation holding back the industry…

DELOITTE SURVEy

10 September 2013

SETTING A HIGHER BAR

HEIGHTENEd REGUlATORy scrutiny and greater concerns over risk governance have led financial institutions to elevate their focus and

attention on risk management, a new global survey from deloitte finds.

In response, banks and other financial services firms are increasing their risk management budgets and enhancing their governance programmes.

According to Deloitte’s eighth biennial survey on risk management practices, titled ‘Setting a Higher Bar,’ about two-thirds of financial institutions (65 per cent) reported an increase in spending on risk management and compliance, up from 55 per cent in 2010.

New regulatory requirementsA closer look at the numbers finds, though, that there is a divergence when it comes to the spending patterns of different-sized firms. The largest and the most systemically important firms have had several years of regulatory scrutiny and have continued their focus on distinct areas like risk governance, risk reporting, capital adequacy and liquidity.

In contrast, firms with assets of less than $10 billion are now concentrating on building capabilities to address a number of new regulatory requirements,

which were applied first to the largest institutions and are now cascading further down the ladder.

“The financial crisis has led to far-reaching major changes of doing business in financial institutions’ risk management practices, with stricter and ruled based regulatory requirements demanding more attention from management and increasing their overall risk management and compliance efforts,” said Joe El Fadl, Financial Services Industry Leader at Deloitte Middle East.

“That said, risk management shouldn’t be viewed as either a regulatory burden or a report destined to gather dust on a shelf. Instead, it should be embedded in an institution’s framework, philosophy and culture for managing risk exposures across the organisation. Knowing that a number of regulatory requirements remain in the queue, financial institutions have to be able to plan for future hurdles while enhancing their risk governance, enhancing management capabilities with better risk awareness using data analytics, and improving in data quality ,” added El Fadl.

The boardroom agendaThe majority of the institutions participating in the survey (58 per cent) plan to increase their risk management budgets over the next three years, with 17 per cent anticipating annual increases of 25 per cent or more. This is not a trivial matter as 39 per cent of large institutions – particularly those based in North America – reported having more than 250 full-time employees in their risk management function.

Alongside increased spending, risk management has also significantly risen up the agenda in the boardroom.

According to the survey’s results, 94 per cent of company boards now devote more time to risk management oversight than five years ago, and 80 per cent of chief risk officers report directly to either the board or the chief executive officer (CEO).

Additionally, 98 per cent of company boards or board-level risk committees regularly review risk management reports, an increase from 85 per cent in 2010.

Many companies have reported concerns especially around major operational risks in areas like large-scale cyber-attacks and management breakdowns.

65% sUrveyed financial institUtions that rePorted increase in sPending on risk management

New Deloitte survey shows that financial institutions are increasing focus on risk management and compliance…

IN THIS world, nothing can be certain except death and taxes, so goes the famous quotation. In Thabet Agha’s world, this line plays out for real.

The 22-year-old mixed martial artist who dabbles as an accountant can easily pass as a colourless suit-and-tie number cruncher but when he puts on his gloves, he becomes a ruthless badass.

His brutal mien was evident recently when he mercilessly pounded his closest friend - Georges ‘Bulldozer’ Eid - in the final episode of the region’s first all-Arab Mixed Martial Arts (MMA) reality hit show, called ‘Al Batal’, where he was crowned the overall winner.

“Normally, I don't mean to inflict pain on my opponents, but when I’m inside the chain-link cage, I become emotionless,” the good looking fighter said in an exclusive interview with Accountant Middle East.

“The final fight was even more difficult for me as I had to face Georges Eid, one of my best friends, but I had to do what I had to do!” he added.

The 1’ 81cm, 77kg Syrian lives in Jordan where he’s pursuing his accounting career. After he was crowned champion of ‘Al Batal’ [Arabic for The Hero], Thabet was kind enough to give us an exclusive insight into his fighting and professional life. Here are the excerpts from the interview;

Q. Firstly congratulations on your win at the ‘Al Batal’ show. How did you feel when you were declared the overall winner of the fight? There’s no better feeling than winning that fight, although it did not come as a complete surprise as I had done enough to merit the title shot, following my intense training and support from the coaches. When the fight master declared me the winner, the feeling was that of joy and immense sense of great achievement. The reality then dawned on me that I was the best amateur

CRUNCHING OPPONENTSJoyce Njeri goes on the ring-side with Thabet Agha, the current title holder of the region’s first all-Arab Mixed Martial Arts reality show, who also dabbles as an accountant…

STUDENT ACCOUNTANT

12 July - August 2013

13

Mixed Martial Arts (MMA) fighter in the Middle East and North Africa (MENA) region.

The competition of the gruelling fight was tough. What does winning the first series of the fighting contest mean to you? The entire competition was very tough, and required great effort and concentration, in order to advance to the next level. The guys at Abu Dhabi Fighting Championship, ‘Al Batal’ and Legacy Team did a fantastic job at producing the show – which is the first of its kind in the Arab World. On a personal level, it means so much to me to be crowned the champion of the inaugural show in the whole MENA region.

Going back in time now, share with us why you entered the contest in the first place and what you wanted you achieve. I entered the tournament because I believed in myself and my abilities, and all I needed was to put them to the test. Therefore the ‘Al Batal’ reality show presented that was once-in-a-lifetime opportunity for me to enter the world of professional MMA.

Please share with us your key fighting moments in the journey towards being crowned the overall winner of the bout. My first round in ‘Al Batal’ was against Hisham Hiba from Egypt. I thought that it would be one of the toughest fights I will have in the show but when I knocked him out I knew that the title of ‘Al Batal’ Season 1 was not far away. Eventually, I had to fight my team mate Georges Eid in the season finale. This was particularly the most difficult and most trying situation as Georges and I had formed a strong bond of friendship in the last months leading up to the fight. But hey, this is MMA and once in the cage nothing else matters but the win and I gave it my all to emerge victorious and raised my country’s f lag.

It’s hard to explain how it feels to watch my country [Syria] implode. The devastation and loss of lives happening every day is unfathomable.

STUDENT ACCOUNTANT

I love and enjoy accounting. What inspired me to pursue an accounting degree is the fact that it is a mental sport that keeps the brain engaged and alert, just like bouting.

Speaking of your country, you are originally from Syria. How do you feel about the situation back home? Has that affected you in any way, in your fighting hobby or accounting career? It’s hard to explain how it feels to watch my country implode. The devastation and loss of lives happening every day is unfathomable. Nevertheless, this was never an obstacle for me, on the contrary, I found it to be the number one motivation for me to win and dedicate my achievement to my beloved Syria.

When and how did you decide to become a professional fighter? For as long as I can remember, there has always been something that fires up in me whenever I watch any fighting, whether on television or in live situations. So I decided one day to haul myself on the ring. I started off slowly but things evolved faster than I expected, and after three years of training the next thing I knew I was the champion of the first season of ‘Al Batal’!

When you went back to Jordan, how did you share the news with your friends and family and how did you celebrate?It really was a great pride and joy for me, my family and my friends. I was surprised when I arrived in Jordan to find the airport jammed with cheering fans, friends and family! Many people had been following the show on television and hence the mammoth reception when I touched down at the airport. My family had prepared a huge celebration at my home, which also extended over into the neighbourhood!

How do you keep fit and what does your daily food diet involve?I stay fit through a combination of continuous training, hard work and a regimented healthy diet. I train in a martial arts specialised gym, under the care of professional trainers who do their best to keep me fit and healthy. Most importantly, I don’t smoke.

There's no better feeling than winning that fight, although it did not come as a complete surprise as I had done enough to merit the title shot.

14 September 2012

STUDENT ACCOUNTANT

Now that you’ve been declared the winner of the first series of ‘Al Batal’ what is your next move? Do you plan on joining the top professional ranks? My plan and dream is to have a full MMA career as a professional fighter - the Legacy Team and ‘Al Batal’ have done a great job in helping me to start and secure this.

Talk to us about accounting. Who inspired you to pursue the career? I love and enjoy accounting. What inspired me to pursue an accounting degree is the fact that it is a mental sport that keeps the brain engaged and alert. A crucial quality for a successful MMA fighter.

Why did you choose accounting as your profession, and where did you undertake your studies?

I’ve always been good with numbers and I find myself in my natural habitat when I practice accounting. I studied at the University of Jordan, Faculty of Business Administration and majored in Accounting.

What are your future plans as far as career is concerned? I will continue sharpening my skills by taking as many courses as possible and I hope to ultimately open my very own audit, tax and accounting firm!

Tell us a little about your family. I have three brothers and two sisters. I’m still unmarried.

How do you spend your free time?I spend my free time reading books and training for MMA.

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STUDENT ACCOUNTANT

CHANGING fORTUNES

INdIAN RESIdENTS residing in the UAE “have been fortunate enough to get an 11% increment in their monies without much effort, due to freefall of the Indian rupee,”

CA Padmanabha Acharya, the Chairman of the Abu dhabi Chapter of the Institute of Chartered Accountants of India, has said.

Acharya was addressing dignitaries at an Iftar dinner organised by the Chapter, during the holy month of Ramadan. The seminar was also addressed by CA Sudhir Shetty, the Chief Operating Officer – Global Operations of UAE Exchange, one of the leading exchange houses in the UAE.

History of fluctuationInaugurating the seminar, Acharya stated that

while the currency’s plunge spells good fortunes for Indians in the UAE, in India, the freefall could result in increased cost of imports, fuels and gold leading to inflation.

CA Shetty enlightened the audience about the sea-sawing of the rupee, by explaining the history of the fluctuation. He said in 1991, the currency was devalued twice by the then Finance Minister Manmohan Singh (present Prime Minister of India) to revive Indian economy.

At that time, one dollar was around 18 rupees. In 1995, it was 35, in 2000 - 45 and remained within a range bound of 42 to 46, until the end of 2011 when it sparked to 52 for a dollar. In May and June 2013, there was a sudden demand of dollar by the defence which spurred the green buck’s value to 60.

Political instabilityGiving an update on recent developments of the Indian economy, CA Shetty added that global investors are not feeling comfortable in India, with top firms such as POSCO announcing its withdrawal from Karnataka State, Arcelor Mittal from Orissa State, and Warren Buffet’s controlled Berkshire Hathaway is reconsidering earlier plans to open its insurance arm in India.

“On top of it, the lack of clarity in foreign investment policy and political instability are the major reasons for the rupee to further depreciate,” he said.

“Looking at the future, we’re anticipating that uncertainty in the central government election will remain one of the major reasons that the rupee will not strengthen any time soon. This is a long term call and corrective actions over a long term may have positive impact.”

“Whether the rupee will further depreciate is anyone’s guess. However, it appears that it will remain under pressure for some time,” he added.

The Abu Dhabi Chapter of ICAI is actively involved in enhancing and updating the professional knowledge of its members through organising seminars under the Continuing Professional Education programmes of the Institute. ICAI is the second largest accounting body in the world. Among the overseas Chapters, the Abu Dhabi Institute is one of the most active, with 29 years of history in the UAE and with more than 600 members continuously serving to the UAE.

Committee members of the Abu Dhabi Chapter of the Institute of Chartered Accountants of India pose for a photo after the Chapter hosted dignitaries to an Iftar dinner during the holy monthly of Ramadan.

“India’s lack of clarity in foreign investment policy and political instability are the major reasons for the rupee to further depreciate.”

IfRS SPECIAL

16 September 2013

fOCUS ON ICAI

Indian expatriates in UAE reap huge as rupee goes on a free fall…

BANKING ON SUCCESSCombining his Western education with his Omani

heritage and complimented by unwavering work ethic, Rashad Ali Abdullah Al Musafir has worked his way up to the rank of Chief Financial Officer at Bank Sohar. He

shares his story of starting one of Oman’s newest banks and the lessons learned in the top finance job…

18 September 2013

PERSONALITy & PRACTICE

BORN THE son of a diplomat and businessman and educated at top universities, Rashad Ali Abdullah Al musafir has always recognised his deep

interest in the world of business.

After completing his first year in Economics at Boston University, Al Musafir saw an opportunity to expand the scope of his education. Instead of going for only one undergraduate degree in economics, he pursued a unique cooperative programme called BUCOP, which is a special package where a student can attain two different degrees and certifications at the same time. Under this service, Al Musafir added Finance as his second major with a specialisation in Business Administration.

“Getting the combination of Economics and Finance was perfect for business. You need to understand what is happening to the markets, both locally and globally, and then you need to be able to understand what is happening from a financial perspective to the company. I would later add accounting to this mix, which I believe has been very helpful in regards to my career,” says Al Musafir.

A unique perspectiveImmediately after finishing these two degrees in the States, Al Musafir returned to Oman to the Central Bank to handle regulatory returns and the licensing of banks and branches.

“I was working hand in hand with the top management of the banks and oversaw their licensing of branches and their financial positions. This gave me a unique perspective to what was happening in Muscat at the time. You need to be in an environment that helps you learn, facilitates your development, and helps create the bedrock of your future. This was what happened for me at the Central Bank in those

Managing Director, Shane PhilliPS conSultantS

Shane PhilliPS

19

Rashad Ali Abdullah Al Musafir, Chief Financial Officer at Bank Sohar.


early years, where I was able to get the needed exposure and strong networking opportunities.”

He reflects that with his education in economics he had a solid understanding of what the banking sector was doing, and with his education in finance he understood the actual business of banking.

After his time at the Central Bank, he was hired at Oman International Bank in the accounting department where he took on new responsibilities that included managing a small team that handled all of the central banking reports. It was then that he realised he needed a stronger understanding of accounting to become globally competitive. Despite being recently married and having his first child, Al Musafir decided to set aside time to pursue a CPA certification.

Power of CPAWhen Al Musafir sat for the CPA exam in 2002, it was required to write all four papers over two days, beginning at 8am and finishing at 5pm. Because the CPA is a US based certification, and he had to take the exams in the United States, there were topics which required us to know a lot about US regulations and US accounting and tax laws; all of which would be foreign to Al Musafir.

He overcame these bumps in the road and passed the exams. Al Musafir gives this advice about the CPA: when considering an attempt at this certification, he suggests to do as much reading as possible before enrolling, to test the waters a bit and try things slowly. He acknowledges that many people believe it to be too complex, but he encourages those interested and says “it is not impossible, just start slowly and take your first few steps. It won’t take long before you will see value in what you are doing and you will begin to enjoy the learning process.”

“It was tough, the exams were grueling and I had a full time job and a family to raise. In between all of this I had to find time to study. That is where the real gift of the CPA is, not in getting the certificate but in the studying, in the actual learning of the accounting principles. Once you learn these concepts and then you start applying them in your job, you will get great satisfaction,” says Al Musafir.

Natural progressionUpon completing his CPA, he was called upon to

“The real gift of the CPA is not in getting the certificate but in the studying, in the actual learning of the accounting principles. Once you learn these concepts and then you start applying them in your job, you will get great satisfaction.”

20 September 201320

Al Musafir believes that accounting is the core of any business. He believes that the SME sector in Oman is struggling because of weakness in accounting.


join and help establish a new insurance company, Al Madina Gulf Insurance Company. Al Musafir became the financial controller there, but soon realised that insurance was not his cup of tea. However, he picked up valuable experience in every aspect of operation that polished him to a shine, a new coin to be picked up by Bank Sohar in 2007.

“By this point I had picked up all the necessary experience, from working at the Central Bank and understanding the regulations, to getting Green Field experience with the insurance start up, to having an academic pedigree that spanned economics, finance and accounting. So I felt it was a natural progression to do the start-up of Bank Sohar,” says Al Musafir.

In April 2007 the Central Bank of Oman raised the minimum capital for new banks to 100 million rials, and the shareholders of Bank Sohar, which comprises of a consortium of government and private investors, and the founding committee headed by a leading business man Salim Macki, made it happen. When Bank Sohar opened, there had been a dearth of new banks despite numerous mergers and acquisitions. People were hungry for fresh ideas and innovation, and the founders of Bank Sohar answered that call with new products and services.

They started with OMR 100 million authorised capital and have become the fastest growing bank in last six years in Oman. Despite losses in the first two years of operations, they quickly turned profitable in the third and their credit growth significantly increased.

In 2009, Bank Sohar invested in Al Musafir and sent him to Harvard Business School for a four month intensive programme called the General Management Programme. This course prepares executives for larger leadership challenges, by equipping them with new skills in leadership, business strategy, and best practices in management.

A devastating lossDuring his professional success, Al Musafir’s mother had fallen ill with cancer. Even though he was working long hours at the new job, he made time to take her abroad for treatments and spent most of his spare time with her. In 2009 she succumbed to her illness, but Al Musafir did not fall into depression.

“without the knowledge of accounting, it’s like driving in the dark: if you can’t see where you are, you won’t know where you are heading. you have to know your cash flow position and what your future earnings will be in order to optimise your growth.”

“The toughest thing I have ever been through was the death of my mother. She was so young to die at the age of 65. There is no way to prepare for the loss of a loved one, especially your mother. Trying to manage everything and deal with such a devastating loss was tough. The only way I got through it was with the support of my family. There was a lot of support and a lot of gatherings. That is one of the positives of life in Oman. Family is big here and my family is really close,” says Al Musafir.

He says that his mother was “always an advocate of education, faith, and positive thinking. She had been in the education field all her life and was very much loved by her family, friends and all those who had come across her, and with that in mind she always told us to always be positive, no matter what happens; it’s all written in the books. Your destiny is set so your best strategy is to be optimistic, to be positive.”

After his mother’s passing, Al Musafir realised that he would have to make the most of every moment he had.

He reflects, “My mother passed away at a relatively young age, so one of the things I learned was that you don’t get to live forever and you need to experiment and do things in life. Don’t procrastinate. Don’t be passive. Now I travel more and try new things, I am more open to taking risks than before.”

Strategy for successA similar challenge appeared in Bank Sohar – how to effectively organise the company for productivity and success and how to avoid letting projects drift over long periods. Al Musafir and his colleagues wanted to create a strategy for success without imitating anyone else’s. He says there were “no maps, no ground rules” when they

1.79bn cUrrent worth of bank sohar's assets, in omani rials

21


began so they as a team created all procedures and policies. By studying how other banks operate, they assembled a new plan in order to meet the vision for the founders.

Due to this innovative approach, Bank Sohar has succeeded and exceeded expectations. In six years, the bank has grown to 588 employees from just over 100 staff when the bank opened its offices in April 2007, and has grown to OMR 1.79 billion in assets from a small 159 million 2007.

“We are growing from strength to strength under the visionary leadership of Dr Mohammed

Kalmoor, the CEO of the bank,” says Al Musafir.

Aside from their brand-new business plan, one of the keys to their success was a focus on efficiency. Rapid growth can cripple an unprepared business, but Bank Sohar finessed this progression by leveraging three main areas: IT, Centralised Operations and Risk Management.

Growth of Islamic bankingIn addition to those manoeuvers, Al Musafir stresses the importance of having a solid recruitment team to hire qualified and effective people without any excess.

To keep things efficient, the CFO says the core team will not increase by much in the coming months, but they will be hiring as they add new branches. The focus now is to grow their Islamic banking window, Sohar Islamic. The bank now has three Islamic banking branches and expect to open more in the coming years. He says that the Islamic window is practically a bank within a bank because it has its own staffing teams, core banking system, and infrastructure and most of it is entirely independent.

If this sounds new, you’re right to think so. It was less than two years ago that the Central Bank of Oman allowed Islamic banking to set up shop, but already it has attracted many new clients at all the major banks who have opened Islamic windows.

“It’s a small market and [it’s] tough for everyone to come in at the same time,” Al Musafir says.

Right now he is most concerned with keeping the business growing in this new era.

“my mother passed away at a relatively young age, so one of the things I learned was that you don’t get to live forever and you need to experiment and do things in life. don’t procrastinate. don’t be passive.”

Weakness in accountingAl Musafir believes that accounting is the core of any business. He believes that the SME in Oman is struggling because of weakness in accounting.

He says, “Without the knowledge of accounting, it’s like driving in the dark: if you can’t see where you are, you won’t know where you are heading. You have to know your cash flow position and what your future earnings will be in order to optimise your growth. Even worse you could run into a cash flow problem. This is something a Chartered Accountant can do for you. Problem is, there are very few Omani Chartered Accountants in the landscape. The number is growing, but very slowly. Historically we have imported our accountants from the Indian Sub-Continent.”

It is predicted that the local populations of Oman and other GCC countries will see a sharp increase in the number of qualified professionals such as Chartered Accountants in the next five years and Al Musafir believes this will drive economic growth and stability in the region.

He encourages his staff to get certified in accounting despite the stereotype that it is boring or only for those in the field of accounting. He agrees that indeed it is basic, but in the way that tyres are a basic part of a vehicle.

He explains, “Without tyres, the vehicle will not move,” and without accounting you won’t be able to go very far. Accounting is the language of business and one of the stepping stones of executive management.

Investing in yourselfAl Musafir does not hesitate with his first piece of wisdom: “Sacrifice time to invest in yourself. Develop your capabilities and opportunities will come. What is the point of having an opportunity you can’t capitalise on because you are unqualified?

22 September 201322


Future of OmanBut what it boils down to, Al Musafir says, is the real work, not just the plaques that signify certifications and degrees. He states that, “The largest benefit I got out of my certification was during study time, not at the time I received the certificate. The certificate is only a piece of paper that you receive at the end saying you’ve done the work. What is important is the actual work. That’s where you gain the most knowledge and insight.”

When asked about the future of Oman and the accounting profession Al Musafir says; “to me this is the land of opportunity.”

“Oman is growing rapidly, and we have not suffered the way other countries have during the financial crisis. We are investing heavily in our infrastructure, and are developing in all sectors. I believe there is now more opportunity in the

market than ever before in history. For example, Oman witnessed the opening of its first fully fledged Islamic bank, Bank Nizwa and the second one, Bank Al Izz, is about to open. We have billion dollar tourism development projects under way and an SME sector that is ready to rise and contribute to the economy. So wherever you look you can’t help but feel confident about the future of this nation,” he proudly says.

In six years, Bank Sohar has grown to 588 employees from just over 100 staff when it opened its offices in April 2007, and has grown to OmR 1.79 billion in assets from a small OmR 159 million in 2007.

The Oman market is teeming with opportunities but the problem is finding qualified Omanis. It is true we have developed faster than most GCC states and in fact have one of the most qualified local workforces in the region. So we are moving in the right direction, but we still need more Chartered Accountants, especially Omani nationals.”

He explains that professional certifications and qualifications don’t come easy, but one must invest time and effort to push themself into more education. He warns that this becomes more difficult as one ages, and it is much easier to do these things at a much younger age. He however says that that shouldn’t stop older executives from furthering their education, saying as a married man with four children, he has achieved two advanced certifications while working.

23

Bank Sohar has three Islamic banking branches in Oman, and expects to open more in the coming years by growing its Islamic banking service, known as Sohar Islamic.


RESETTING THE GREEN BUTTONExperts urge more companies in the UAE to increase levels of corporate sustainability reporting, in order to address social and environmental issues…

TH E l E v E l o f s u s t a i n a b i l i t y reporting in the UAE is lagging b e h i n d c o m p a r e d t o o t h e r countries, delegates participating

in a focus group have been told.

The group, brought together by ACCA (the Association of Chartered Certified Accountants), sought to establish a common definition of what sustainability is and what it means in the UAE in order to help encourage more companies to invest in creating their own corporate sustainability reports on a regular basis.

Partner, uhY-Saxena

DaviD J. BurnS

This focus group was one of six held around the world, to capture the collective thinking of 49 sustainability reporting experts in a new report from ACCA called ‘Paragraph 47: international perspectives one year on.’

The global discussions in Australia, Canada, Hong Kong, South Africa, the United Arab Emirates and the UK, focussed on how the international community should take forward the commitments set out in paragraph 47 of the United Nations outcome document 'The Future We Want', which was agreed at the Rio+20 conference in 2012.

IfRS SPECIAL

24 September 2013

SUSTAINABILITy ACCOUNTING

Sustainability - an overview So, what exactly is sustainability and how does it fit into the general business environment in the region? In 1987 the Bruntland Commission, formerly the World Commission on Environment and Development (WCED) described sustainable development and Corporate Sustainability Reporting (CSR) as “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

CSR is the continuing commitment to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large. Similarly, the European Commission advised in 2008 that CSR was “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”

Today’s modern Sustainability (CSR) movement has been gaining traction and evolving since the early Greeks who are credited with the notion of virtue ethics. Socrates, Plato and Aristotle in the fourth and third centuries Before the Common Era (BCE) all pondered the meanings of human ethics and started a train of thought still relevant today. In 1854 Henry David Thoreau published Walden, the first piece of environmental intellectualism and in 1892 the Sierra Club was inaugurated. Business ethics in some ways emanated from religious groups like the Quakers and Jesuits and from large companies like the East India Company, Standard Oil and JP Morgan.

Environmental movementPost war socialism led to a more vocal society in which people questioned the influence of these large corporations which led to a decade of social

Different interpretationsThe UAE focus group brought together 11 high level delegates representing a range of organisations – including KPMG, the National Bank of Abu Dhabi, the Abu Dhabi Sustainability Group and The Pearl Initiative. Whilst the level of sustainability reporting is currently low in the UAE, it was felt that sustainability reporting should play an important role in the development of the UAE in the years to come.

UAE specific sustainability reporting guidelines would also help companies in the region undertake such initiatives, as the current international reporting frameworks require reporting systems that are currently beyond many companies in the UAE.

Rachel Jackson, ACCA’s head of sustainability, said: “We were aware that, from our conversations over the past 12 months, there were different interpretations and understanding of what paragraph 47 meant. We set out to capture those differing views from both a regional and stakeholder perspective. The findings will be valuable to governments and other key players, one year after the declaration was signed, in driving paragraph 47 forward, thus increasing the levels of corporate sustainability reporting.”

“There was common opinion that sustainability reporting will help efforts to address social and environmental issues, that government-led action was an important way to kick start the wider adoption of sustainability reporting, and that existing frameworks should be used to develop best practice, rather than being inefficient and reinventing the wheel,” she added.

Susie Isaacson, head of ACCA UAE, said: “It has been an extremely valuable exercise to capture these differing perspectives, one year on from the declaration being signed, to serve as a reminder that the implementation of paragraph 47 will need to address the myriad of stakeholder and cultural views and differences in order to succeed.”

“These discussions will hopefully make a difference in helping to change perspectives and show just how important corporate sustainability reporting is to helping the UAE’s growing economy maintain its momentum,” she added.

Sustainability reporting in the middle East has been slow to start as executives in the region are finding it difficult to relate environmental expediency to profitability and the impact on the long term business model.

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activism in the 1960's and early 1970's. In 1962 Rachael Carson wrote Silent Spring that gave birth to the modern environmental movement. The 1970 saw the first Earth Day and Greenpeace founded. The 1980's saw a rise in middle class wealth both in Europe and the US which was a factor in the numerous green groups founded in the 1960's and 1970's gaining traction.

People were becoming more aware of what was happening to people and the planet by corporations not being transparent about their activities or their profits. The Campaign for Nuclear Disarmament raised awareness about nuclear arms and their devastating effects at the same time as discussing whaling and acid rain. When the Exxon Valdez spilled millions of gallons of oil into the sea off the Alaskan coastline, worldwide condemnation followed.

More recently the labour practices at Nike and Gap became headline news as did the Shell incident at Brent Spar.

So what is modern sustainability (CSR) and where do we go from here?

In 1997 DePaul University said that “companies with a defined corporate commitment to ethical principles do better financially than companies that don't.” Companies that understand the philosophy of ‘People - Profit – Planet’ are more inclined to embrace sustainability (CSR) than those organisations that choose to ignore it.

The arguments for the incorporation of a sustainability (CSR) policy within an organisation are many and varied. They will include balancing corporate power against corporate responsibility (CR) and doing business honestly by introducing effective measures against corruption.

Access to capitalImproving public health and safety whilst improving community relations and communicating with the consumers by building

trust and support makes good business sense. Most importantly is the access to capital through sound corporate governance to fuel expansion and provide funding for environmental programmes and modern sustainability (CSR) activities.

There are also arguments against sustainability (CSR) which fall into three categories. These include;

i) the effects on the stakeholders

ii) the expectations of the society and

iii) the increased influence of corporations over society.

The shareholders view is that the only social responsibility of business is to create shareholder wealth and that corporate management cannot decide what is in the social interest. The costs of social responsibility which do not increase the value of stock will be passed onto the consumer.

The effect sustainability (CSR) has on the stakeholders being shareholders, employees and consumers in broad terms is that they will bear the cost of any sustainability (CSR) programmes introduced or followed and which will also weaken the competitive advantage and market share of the products produced.

The expectations of the society of what the corporations should do will always be more than what the corporation is willing to undertake. Lastly, there is an argument that if corporations do more for the community and society they will become more powerful and less willing to provide a higher level of corporate governance and transparency.

Sound business reputationsSustainability reporting in the Middle East had been slow to start as executives in the region are finding it difficult to relate environmental expediency to profitability and the impact on the long term business model. However, attitudes are changing, evidenced by a recent survey where 90% of the respondents believed that credible sustainability (CSR) programmes can enable companies to build and maintain sound business reputations. Many more agree that sustainability (CSR) can help attract new customers and increase market share, and it

72% resPondents in a mideast sUrvey who say they’ll invest in comPanies with a sUstainability Policy

Sustainability (CSR) is important because it influences a company’s reputation, it’s investors decision to invest and its employees to remain in its employ.

26 September 2013


27

can also foster innovation and improve staff retention.

So how would you start the process of building a sustainability (CSR) strategy within your organisation with a view to eventually submit a sustainability (CSR) report to one of the reporting bodies available? How would you determine if what you are doing already constitutes sustainability (CSR) and how much more would you need to do to make the whole process valid? Are you willing to commit resources of time, money and human capital to start the process of sustainability (CSR)?

Do you need convincing of the values and advantages of undertaking a sustainability (CSR) programme and if so, where do you go? Initially you should look towards your competitors and see what they are doing in terms of sustainability (CSR). If they are providing a sustainability (CSR) report alongside their financial reports on an annual basis then you should do the same. Decline at your peril and lose market share and respect.

Identify your risksIf your research shows that your competitors are not reporting then you should steal the opportunity and be the first in your sector. This will make you the leader and give you a competitive advantage over your competitors.

Once you have decided to start the process of sustainability (CSR) your next move would be to appoint a task force within your organisation to determine where you are now and where you want to be in the future. You will need to identify your risks across the four pillars of sustainability (CSR) these being workplace, marketplace, environmental and society.

Once these risks have been identified you can then move onto the initiatives, solutions, objectives, measurements, goals and KPI's to begin your sustainability (CSR) strategy. A few examples of these risks in each category could revolve around the following subjects.

Workplace risks could include safety, ethics, working conditions and CPD whilst marketplace risks could be economic performance, product stewardship and meeting the long term needs of the shareholders. Societal risks include community relations and programmes along with volunteerism and anti-corruption. Finally

environmental risks include energy efficiency, waste management, recycling and carbon footprint. The final document can then be reviewed and endorsed by the board of directors before being submitted to the reporting agency chosen for the purpose.

Voluntary commitmentThe case for sustainability (CSR) reporting being part of the organisation is reinforced by consumer statistics that show in the Middle East 75% of consumers prefer to buy from companies that give back to society, 72% prefer to work for companies who give back and 72% of investors will invest in companies with a sustainability (CSR) policy in practice.

Sustainability (CSR) is important because it influences a company's reputation, it's investors decision to invest and its employees to remain in its employ. It enables the strategic management of internal and external risks in social as well as environmental areas and has been seen as a factor in reducing operating costs.

Most importantly it is the voluntary commitment by individual organisations to do the right thing and be responsible for its actions and decisions in relation to the planet its people and its environment without being told.

* David Burns is a partner with UHY-Saxena and responsible for the sustainability (CSR) department

Susie Isaacson, head of ACCA, UAE – “These [sustainability] discussions will help to change perspectives and show just how important corporate sustainability reporting is, in helping the UAE’s growing economy maintain its momentum.”

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fOREIGN EXCHANGE RISK AND HEDGINGWill Spinney explores some of the concepts and issues around currency conversions on normal trading transactions…

AS AN accountant you will no doubt have many years experience recording the impact of foreign exchange on sales and costs of a

corporation and the valuation of it’s assets and liabilities.

That said, have you ever thought about how you influence what they might be to the positive benefit of your company compared to your competitors? This article explores some of the concepts and issues around foreign exchange risk on normal trading transactions - things that may happen before you crunch the numbers.

As an example, consider the two following examples:

1. An importer quotes a price in the currency of his local customer, while having costs in sterling. The quote remains open for some time, leaving time for rates to move.

2. A transport operator needs to buy assets which are quoted to him in a foreign currency. The rate at which the currency is bought changes the base value of the asset and may cost competitiveness compared to another operator in the same field.

Risk typesIf we take the time line of a typical contract with foreign exchange rates involved as in figure 1 (below), we can look at the risk as several different types.

Economic risk is the risk that we are competitive in the first place and that we can actually bid. The exchange rate may make us more expensive than a foreign competitor, for example.

When management start thinking about whether to bid, they have an exchange rate in their mind, this tends to remain a key part of the conversation over the life of the contract. So a calculation of expected profit might be based on this rate. We

aSSociate Director of eDucation – aSSociation ofcorPorate treaSurerS

Will SPinneY

CORPORATE TREASURy

28 September 2013

Economic risk is all about the business model and its cost structure, whereas pre –transactional and transaction risk is all about the tactical aspects of treasury management and hedging.

could call this pricing risk.

When a bid is actually made, or price list prepared, the company has committed to a particular price without knowing whether it will get the business or not. This is pre-transaction risk and the risk is of a contingent nature.

Finally transaction risk arises when we are fully certain of all the cash flows.

Economic risk is all about the business model and its cost structure, whereas pre –transactional and transaction risk is all about the tactical aspects of treasury management and hedging.

Risk responsesHaving identified our risks we can then think about some responses. Hedging (laying off the risk) is by no means the only alternative. It is not appropriate for economic risk, at least in the long term. In that case a response might be to re-locate production to a different area, where costs are lower or the currency cost base matches that of either or both of our customers and competitors. Auto manufacture is a classic example of that.

Another response might be to shift supplier base to a different currency to achieve a more natural hedge, so that currency cash flows in and out are better matched. This sounds simple but can lead to restriction of choice and not selecting an optimum supplier.

For pre-transaction exposure, which is a difficult risk to manage, think about a bank. They will only hold a price open for a few seconds. Contrast that to a company which has issued a price list or tender valid for several months.

Finally hedging is used for the more certain transactions, akin to fixing any other kind of business cost, such as rent or any other supply for a contract.

Difficult areasSome businesses have models which do not easily fit our contract time line seen in figure 1. Perhaps they make confectionery for export into retail markets. The retail price of the confectionery cannot be changed quickly according to the exchange rate and pricing decisions were made many years ago.

Some businesses are very complex and even finding out the certain cash flows can be difficult. A good order system in a multinational might give the short term cash inflows but purchasing decisions may not follow for several months.

Instruments and hedgingAs we have seen, hedging is the fixing of an exchange rate and hence giving certainty to the value of a foreign currency cash flow. The most common instrument to achieve this is a foreign exchange forward (‘forward’), where two sets of cash flows are exchanged with a counterparty at a rate agreed beforehand.

The rate can be agreed as far in advance as required (within reason) but most commercial hedging of this sort is done up to around a year to 18 months in advance of the settlement date when cash flows are actually exchanged. Some firms engaged in long term capital goods transaction may go much longer, however.

The usual counterparty for a forward is a bank but other counterparties increasingly compete in the area. Unless margin (cash paid over to or from the counterparty as the forward changes in value) is paid, forwards need a credit facility. There are alternatives to forwards, futures can be used to

figure 1

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CORPORATE TREASURy

achieve the same effect; these are taken out on exchanges. In addition, economic equivalence to forwards can be achieved by buying or selling a currency now (called ‘spot’) and borrowing or depositing that foreign currency as appropriate.

The cost of hedgingA common question asked of treasurers is – what is the cost of hedging? This has one answer which can be based on spreads charged by banks and other providers. It also has a different type of answer in that an opportunity cost can arise when fixing instruments are used. The following example will show this.

Imagine you buy a transport asset such as a train or bus from a European supplier and you fix the exchange rate in advance at £1 = €1.15, with a forward. You have achieved certainty. But if a competitor wanting the same asset buys the euro at a different time at £1 = €1.20, then he has paid only 96% of your cost and can charge less for use of the asset than you. The cost of hedging is thus an opportunity cost. The certainty sought might in fact cause higher risk in situations such as this.

OptionsA second type of instrument is an option. This instrument can give the best of both worlds because it avoids the opportunity cost. In the last example, if an option was bought at a ‘strike’ of £1 = €1.15 and then the rate moves to £1 = €1.20, the option can be allowed to lapse and the euro bought at £1 = €1.20. This, unsurprisingly, has a cost, called a premium, which is payable up front and is higher when the risk is higher.

What do companies do?While it is generally the larger companies that engage in hedging of any sort, mainly because of the need for ‘market sized’ transactions and

while it is generally the larger companies that engage in hedging of any sort, mainly because of the need for ‘market sized’ transactions and specialists who understand the risks and the markets, smaller companies should also assess their risks.

specialists who understand the risks and the markets, smaller companies should also assess their risks. Managing exposures through cash and borrowing can be better for these businesses.

If the cash flows are certain, as in transaction exposure, most firms hedge with forwards. Where there is any uncertainty as to the cash flows, with unknown sales forecasts for example, firms often hedge a percentage of expected sales. So certain sales invoiced might be hedged 100%, then 80% for the next period, then 50% for a further period and so on. Contingent exposures such as tenders and price lists can be managed in this way or more ideally with options.

There is no one right answer to these issues and different firms tackle their problems in different ways. However, hedging is best viewed as buying time for the hedger to change the business model. No hedge lasts forever but a hedge can be made which gives management time to react, compared to how quickly a moving exchange rate can destroy a business model.

Other issuesThis article is not designed to investigate accounting but to look at the commercial risks arising in foreign exchange. Many treasurers hedge for economic reasons and then account as required, avoiding being accountancy led.

Another type of foreign exchange risk that arises is called translation risk, where sales, cash flows, assets and liabilities are translated at period ends. Generally these types of risks are not hedged except that many treasurers will manage the currency composition of their net cash or debt position. This can reduce the risks of credit ratios, such as leverage or cash flow ratios, deteriorating.

ConclusionForeign exchange risk that arises in the normal course of trading is very much a commercial issue and the treasurer must understand his business, talk to managers and make sensible decisions to reduce risk and protect their business model.

You may have come across some of this in your current role. Would you like to influence the outcome? The Association of Corporate Treasurers (‘ACT’) offers a Certificate in International Treasury Management which could help you do just that. For further information, see www.treasurers.org/phoenix

CORPORATE TREASURy

30 September 2013

Accountancy Qualifications at Phoenix Financial TrainingProfessional

Phoenix Financial Training, founded in 2006 by David Thomasson has achieved great success in the UAE and India as a UK orientated accountancy training provider. We offer a wide range of courses including ACCA, ICAEW & CIMA.

These courses are delivered in the D.I.F.C. and World Trade Centre by carefully selected and approved tutors who are the envy of our competitors. With flexible payment options and course hours to suit a multitude of personal schedules, at Phoenix we always put the student first.

ACCA - Association for Chartered Certified Accountants• Phoenix are the only Platinum approved provider of ACCA in the UAE• Globally recognized professional qualification• Open entry with optional Oxford Brookes degree within the ACCA qualification• Easy instalment plan and a wide choice of course timings

CIMA - Chartered Institute of Management Accountants• Open entry with certificate, diploma and advanced diploma qualifications• Accelerated route available for MBA, Masters and professional accountancy qualification holders• Globally recognised qualification and highly demanded in business roles such as Chief Financial Officer and Chief Executive Officer

ICAEW - Institute of Chartered Accountants in England and Wales• A leading chartered accountant qualification valued around the world• Entry Requirements; 2 A-levels/Degree• ICAEW Chartered Accountant on completion of 15 papers and a three year training contract with an ICAEW approved employer• Exemptions available if you have an accounting/business related degree or a professional qualification

CONTACT OUR OFFICE ON 04 401 9313 TO BEGIN YOUR CAREER

RISING TO THE TOPCEO and current Chairman of Morison Menon Chartered Accountants firm recounts to Joyce Njeri his incredible journey that led to the founding of one of the region’s mid-tier leader in business consultancy…

Raju Menon, Founder and Chairman - Morison Menon Group

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GROwING UP in a sleepy village deep in the townships of Calicut, Kerala, Raju menon embraced the early-rising, hardworking

life of a diligent boy brought up by strict parents.

Although his parents were much less educated, they instilled excellence in their son, a quality that helped him form the positive habits that would later on be the foundation for his overriding success in school and in life.

“My parents were very loving people. My mother had completed her basic studies and managed to get employment in the government, but my father did menial jobs as he did not have a good education stead,” he says in an exclusive interview with Accountant Middle East.

Early childhood educationRecounting his boyhood and early school days, the Founder and current Chairman of Morison Menon Chartered Accountants firm said his foray into accounting was purely by fluke, as “back then, the sort of career mentor-mentee scheme didn’t exist.”

“I did my schooling at a government school in Calicut, Kerala till tenth grade and then pursued my Bachelors degree in Commerce before completing my Masters from a government college.”

Having hailed from the village in Kerala, Menon decided to undertake his Chartered Accountancy course after he was through with his M.Com, saying that “at the time, I did not have any enough courage to pursue a CA qualification. I was however happy that I was through with my M.Com because it greatly helped to boost my knowledge and confidence when I finally decided to undertake my CA papers,” he narrates.

Afterwards Menon joined a firm in Calicut city in 1985 and cleared his CA in November 1989. However, his passion for academic pursuits did not end there. During this time, while he was doing his CA, he decided to pursue Bachelor of Laws also.

“Of course the LLB has an obvious appeal to anyone wishing to develop a career in the legal profession, but back then, a law degree was seen as an equally attractive option for individuals and employers in spheres of commerce, accounting, finance and other industries in general. So, I was pursuing my LLB alongside the CA course,” he quips.

Acting on good instinctOne of the enormous privileges of a mentoring scheme is the opportunity for someone who has been down a particular path to share some of those experiences with someone who is about to embark on that journey. Unfortunately, Menon did not have this privilege.

“I completed my post-graduation back in 1984 and with no one to mentor me professionally or offer sound career advice, all this coupled with growing up in the village, my foray into Chartered Accountancy was purely through good instincts,” he recalls.

More than 30 years later, Menon’s accounting firm has become a regionally known resource in the Auditing and Business Consulting industry.

Morison Menon Group is an Independent member of Morison International. The network is ranked by the International Accounting Bulletin as the 9th largest accounting association in the world, with over 168 member firms worldwide in 68 countries boasting 1,008 partners, 8,500 staff and 291 offices.

Headquartered in Dubai, the UAE entity started operations in 1994 and provides services in accounting, auditing, business, and financial and management consulting. The Group has other offices in Jebel Ali, Dubai Airport Free Zone, Abu Dhabi, Sharjah and Ras Al Khaimah while overseas operations are in India, Qatar, Bahrain and Oman.

A committed workforceAs Chairman and Managing Partner of the Group, Menon’s daily role at the firm is more of a supervisory and directorial one.

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“We have about 18 partners in our GCC-based offices and my job mainly is to see that business is moving fine. On a macro-level I’m tasked with the management and supervision of the entire organisation, but we also have some of our long-time clients who require my hands-on service and my presence at meetings,” he adds.

Menon displays cheerfulness when he speaks about the caliber of staff that currently works at his firm.

“We have the best team any organisation could wish for,” he says with a glee of contentment.

“Qualities of a good employee goes beyond the traditional eight-hour day routine. Every employer dreams to have a workforce which is committed, self-motivated and dares to think in and out of the box and bring such plans into action. These are the qualities our team members demonstrate,” he says.

“Sometimes what separates an exceptional employee from a bunch of good employees is the

extra mile he is willing to see the organisational goals are met and thus serving his employer better,” observes Menon.

Importance of CPEAsked what skills he looks for besides the traditional accounting qualifications, the Chairman was quick to praise the CA qualification administered by the Institute of Chartered Accountants in India (ICAI), saying the certification is one of the best in the market at the moment.

“Let me start by saying that the chartered accountancy of India is one of the most in-depth, well rounded qualification we have in the market at the moment. It is regularly revised and updated to ensure that the learning and knowledge acquired is current and relevant to the prevailing actual market conditions.” he says.

“Similarly, compared to other courses like Chartered Financial Analyst or even an MBA with a specialisation in Finance, which are fairly practical in their approach and assessment, chartered accountancy of India provides for a fair and comprehensive grounding of accounting, finance, tax and consulting.”

“When you want execution of a job with top quality, you need a good chartered accountant to do that; otherwise you’ll have to bear the challenge of supervising your staff all the time. Considering the current challenges faced, even merely possessing a top qualification like CA is not enough. This is where the need for continuing professional education (CPE) programmes assumes great importance.

“It’s fair to say the first part of your mission is well and truly accomplished when you’re through with your academic qualifications. But you can’t afford to bask in academic laurels for too long for you might be left well lagging behind your colleagues who have already progressed to the next level. The same is true for professionals with many years’ experience in the workplace,” he advices.

Changing business landscapeMenon extols the benefits of CPE, saying that “in today’s changing business landscape, the pace of change is probably faster than it’s ever been – and this is a feature of the new norm that we live and work in. Therefore, continuing professional

One of the enormous privileges of a mentoring scheme is the opportunity for someone who has been down a particular path to share some of those experiences with someone who is about to embark on that journey.

INTEGRITY:

“There is a need for the accounting industry to ensure that it continuously maintains a strong reputation and the highest standard of professionalism.”

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GOOD CAUSE:

Outside of his usual accountancy work, Raju Menon likes to engage in philanthropy work. He says, “People will soon realise that it is not so much what the government does for the country, but it is a question of what they themselves do to develop the country.”

education is important because it ensures you remain competent in your profession. It is an ongoing process which continues throughout a professional’s career.”

As part of developing the accounting profession in the country, Morison Menon Group has also been actively involved in activities at various local universities and colleges in order to ensure that local students are prepared to face the world upon graduation.

“We offer Emirati accounting graduates internship opportunities at our firm to help them raise their competency to be on the same level and playing field with the other foreign accountants,” Menon says.

Speaking about the adoption of new International Financial Reporting Standards (IFRS) in the region, the straight-talking CEO says that while the implementation of IFRS, would help companies to be ‘understood in a global marketplace’, there should be a localisation of standards as ‘one size does not fit all’.

“There is a growing need for convergence in international accounting standards as it

comes with the prospect of improved quality of financial reporting, greater mobility of capital at a decreased cost and more efficient allocation of resources. However, while it is commendable to have standardised rules across borders, there are great hurdles to overcome as the IFRS is still being seen largely as an imposition of accounting standards and regulations more suited to the Western world,” he says.

“The UAE is one of the countries to have adopted the IFRS. We cannot have a ‘one size fits all’ standard as the dynamics of business vary from country to country. Even though there are opportunities arising from the adoption of international standards, we need to ensure continuous development of regulatory systems for more specific fields like the SMEs, banks and listed companies,” he urged.

“when you want execution of a job with top quality, you need a good chartered accountant to do that; otherwise you’ll have to bear the challenge of supervising your staff all the time.”

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Global financial crisisThe 2008-2010 global financial crises brought the accountancy profession under intense scrutiny and spotlight, following accusations that inaccurate accounting practices were to blame for the disasters. Menon however, vehemently rejects the notion that accountants were to blame for the crisis, but admits “there have been other corporate accounting scandals that have gravely stained the profession.”

“From Enron, WorldCom and Satyam, just to name a few, a growing number of frauds have undermined the integrity of financial reports, contributed to substantial economic losses, and eroded investors’ confidence regarding the usefulness of auditors’ reports and reliability of financial statements,” he bemoans.

“As managers, we have an obligation to continuously protect and uphold the integrity of the profession by condemning these activities and tying all the loose ends to ensure and avoid deliberate falsification of accounting records.”

“There is a need for the accounting industry to ensure that it continuously maintains a strong reputation and the highest standard of professionalism.”

While elucidating how unscrupulous auditors try to ‘massage the numbers’ through deliberate omission of transactions, the Chairman said misapplication of financial reporting standards is mostly carried out with the intention of presenting the financial statements with a particular bias, “in order to improve any analysis of liquidity.”

“There have been a number of cases that have gone unreported where major public companies have experienced financial reporting fraud,

resulting in turmoil in the capital markets, a loss of shareholder value, and, in some cases, the bankruptcy of the company itself.”

“World-over, governments have been forced to impose stiff penalties, exemplary punishments, enforcement of new laws and policies. While this has all been done with the right spirit, as managers we have the obligation to ensure a continuity of sustained internal control, the analysis of the financial situations’ safety, the efficiency and efficacy of operations, of the conformity with the legislation and regulations in use.”

“We need to tie all the loose ends in order for companies to win back stakeholder’s trust, as well as bring back public confidence in the capital markets,” he adds.

Proper regulatory bodyHere in the Middle East, most top listed companies are audited by the ‘Big 4’ accountancy firms. Menon however says that this does not pose a threat to existing mid-tier firms and other new independent financial consultancies entering the market.

“It is true that most listed companies in the region are audited by the larger accounting firms. This pales in comparison with the other markets in the world where mid-tier firms are rated equally as good. Mid-tier firms do not feel stymied by the much larger and better resourced rivals, as they are presented with the same opportunities as their giant counterparts and have to compete for clients on equal terms.”

According to Menon, the reason why most top listed companies are audited by the ‘Big 4’is because there is no proper accounting regulatory body in the UAE to control the profession, and therefore clients and users of financial statements tend to place more trust on the large firms.

“In India you have ICAI (Institute of Chartered Accountants of India), in the UK there is ICAEW (Institute of Chartered Accountants in England and Wales), in South Africa there’s SAICA (South Africa Institute of Chartered Accountants) and in the US there are various regulatory bodies. I’m aware there have been efforts to form a local body to regulate the profession, but until that is done, the mid-tier firms unfortunately will continue to be viewed as second best,” he says.

The credit crunch of 2008-2010 and debt crises have introduced the world to a new order of magnitude in financials. Businesses have been forced to establish new models to cope and stay liquid and competitive.

9Position of morison international in the ranking of global accoUntancy firms

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“But one thing I must add however, is that because of the rapid growth in the region in areas like oil and gas, telecoms and financial services, we have noticed a big shift happening in favour of mid-tier firms, as the ‘Big 4s’ have been swamped with work and in that case, we have benefitted a lot as most work is passed down,” he adds.

Staying competitiveThe credit crunch of 2008-2010 and debt crises have introduced the world to a new order of magnitude in financials. Businesses have been forced to establish new models to cope and stay liquid and competitive. According to Menon’s assessment, the most common challenge financial consulting businesses are facing in today’s competitive marketplace is that of relentless change in financial markets, regulation, and implementation of these laws as required by authorities. He says emerging economies, if they wish to gain credence in global capital markets, ‘need to adopt new accounting technologies.’

“Following the financial crisis, there has been increased need to diffuse audit practices. Other factors that are fueling this convergence include formation of common currency and economic blocks, like the EU (European Union), ASEAN (Association of South East Asian Nations), SADEC (Southern African Development Community), and the OECD (Organisation for Economic Co-operation and Development) among others.

Western-centric standardsMultinational corporations have also contributed to this phenomenon, as western

governments rely on particular accounting blueprint for the regulation of enterprises. These cross-border companies view the adoption of IFRS will save them the expense of preparing more than one set of accounts for different national jurisdictions. Adopting these acceptable Western-centric standards like the IFRS provides corporations, common economic blocks and developing nations with more legitimacy.”

Many multinational business entities have a major presence in the UAE, as the country continues to develop economic sectors as diverse as aviation, tourism, logistics, trade, health, education, technology, and media among others. Due to this, the Morison Menon Group recently published its fifth edition of paperback titled ‘Doing Business in Dubai’ and ‘Doing Business in Abu Dhabi’, which gives potential investors guidelines on setting up enterprises in the Emirates.

While launching the book, His Highness Sheikh Ahmed Bin Saeed Al Maktoum, President of Dubai Civil Aviation Authority, Chairman and CEO of the Emirates Airline and Group and Chairman of Dubai Supreme Fiscal Committee, said; “The popularity of Dubai as the region’s best and the world’s emerging global business hub has empowered the Emirate to create unique economic opportunities and value propositions that attract the best of global entrepreneurial and business leadership. Dubai government’s strong commitment to free market economy, fair competition and economic diversification are unparalleled in the region and compare with the best globally.”

‘Doing Business in Abu Dhabi’ 2013 edition was launched by His Excellency Nasser Ahmed Alsowaidi, Chairman of Abu Dhabi Department of Economic Development at the Abu Dhabi Department of Economic Development Office in February this year.

Menon, who was particularly instrumental in the publication of the paperback, said that the fifth edition of the ‘Doing Business in Dubai’ book serves as an ideal tool for global investors for setting up businesses in Dubai and to attract Foreign Direct Investment to Dubai. The book also gives a comprehensive list and features and opportunities in all the Free Zones in Dubai.

BOOK LAUNCH:

His Highness Sheikh Ahmed Bin Saeed Al Maktoum launching the ‘Doing Business in Dubai’ book with Raju Menon (left), Chairman and Managing Partner, Morison Menon Group and Sudhir Kumar (right), Partner & Head-Corporate Communications, Morison Menon Group.

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TEAM UAE IMPRESSES AT KPMG GLOBAL EVENTTop students compete for international title by developing innovative solutions to complex real-world business issues...

THE TEAm of students from the Australian National University h a s w o n t h e 2 0 1 3 K P m G International Case Competition

(KICC) held recently in madrid, Spain.

The students will receive an all expenses paid, one week entrepreneurship training at Babson College in Boston, Massachusetts, USA. This award is presented in partnership with Banco Santander, a global multinational bank who collaborated with KPMG on this year’s event.

Now in its tenth year, KICC is one of the world’s largest case competitions and represents KPMG’s flagship student recruitment initiative. This year, KICC drew some 15,000 students from more than 400 universities in 23 countries to compete against each other in developing solutions to realistic business scenarios.

Window into real worldKICC offers an opportunity for students to experience the fast-paced world of casework, meet new people, improve their networking skills and develop a global mindset. Students

WINNERS TAKE ALL:

The Australian National University was selected as the winner of 2013 KPMG International Case Competition (KICC) held recently in Madrid, Spain.

15,000 nUmber of stUdents who ParticiPated in 2013 kPmg international case comPetition

IfRS SPECIAL

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goal of increasing and sustaining the bottom-line of the organisation, that is, Consultancy!”

Gayathri. T - “Our team was a perfect combination of analytical and communication skills. We balanced each other’s shortcoming with our competencies which made us a winning combination. We have number crunchers and strategists; this helped us tackle business cases in a well-organised manner. My future goals are to leverage my learning from the case competition and to progress towards a career that challenges me analytically on a day to day basis. Being a management student with some amount of experience in NGO work in biodiversity, I found the sustainability dinner most intriguing and personally raised my interest in a career of this nature.”

Q. What was it like participating in the KPMG Ace the Case Competition in the UAE and winning?

Siddharth. K - “It was a surreal experience to participate in a national level competition

also receive valuable feedback from KPMG leadership and get a window into the real world of business to understand the complexity KPMG professionals tackle every day.

This year, the final competing teams were asked to provide strategic advice to a global food organisation on the acquisition of a major snack brand. The challenge was to prepare a compelling set of recommendations and an engaging presentation for a panel of leaders from across KPMG’s global network.

After careful deliberation, the Australian National University was selected as the winner due to their innovative approach, insight into the subject matter, and the passion exhibited in their presentation. The team included, Olivia Kelly, Xinyu Ru, Vithiyasagar Sritharan and Aizaz Syed.

Team UAE at KICC 2013Gayathri Thampi, Prakarsh Jain, Sagar Arya and Siddharth Kannan from S P Jain School of Global Management represented the UAE at the KPMG International Case Competition in Madrid.

We caught up with them to find out more about their experience.

Q. Tell us a little bit about the team and your future career goals…

Siddharth. K - “Our team is a mix of freshness and experience, a blend of core analysis and lateral thinking competencies; this enabled us to effectively hammer the nitty-gritty’s of the cases we solved. In terms of my road ahead, I would ideally like to work in a risk advisory role to observe and aid business decisions from close quarters. Consultancy has always fascinated me, and that’s where I see myself over the years.”

Prakarsh. J - “To define our team in one phrase I would say, we are the best combination that we could have made; A Mass Media Graduate, Financial Analyst, Sports Analyst and Chartered Accountant. This combination of analytical personnel and a brilliant communicator helped us crack the cases in tight time frames. My future goals are somewhat connected to the way KICC is set up, solving business problems with an end

KICC offers an opportunity for students to experience the fast-paced world of casework, meet new people, improve their networking skills and develop a global mindset.

TEAM UAE:

Gayathri Thampi, Praskarsh Jain, Sagar Arya and Siddharth Kannan from S P Jain School of Global Management represented the UAE at the KICC in Madrid.

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and going up against the best case-crackers of UAE. The case and judges questions were very thought-provoking. Overall, it was a unique experience to win a national round in case analysis.”

Sagar. A - “Honestly, it all happened so quickly and there was barely time to let it settle. Although, we were confident about winning Ace the Case, we knew we hit the nail on the head with our analysis and it all worked out to be the best experience of my life.”

Prakarsh. J - “Ace the Case, was an unforgettable opportunity. From the very start in assessment day, which gave us the feel of how things are dealt with in the real world and then moving on to the competition to solve a particular situation – this overall provided a different perspective outside what’s taught in business institutions. Therefore winning the nationals and then representing the UAE was both unimaginable and still seems to be a dream.”

Gayathri. T - “In addition to the fun we had during Ace the Case, the learning from the regional finals to the training we received from KPMG professionals this has been priceless! Along with the opportunity of meeting so many people from different universities, the feedback received from the judges was extremely informative and helped us fine tune our professional skill sets, these are all benefits we’ll reap throughout our professional careers.”

Q. What did it feel like representing the UAE in an International competition?

Siddarth. K - “It was a proud moment for us as a team to be representing UAE at the global stage and indeed an honor to wear the badge of the nation and battle it out with the other countries on behalf of the UAE.”

Sagar. K - “It felt really good to represent a country such as the UAE. The world knows the quality business schools and institutions this region is home to, and to be the cream of the crowd from amongst these is something that makes me feel proud of our achievement.”

Prakarsh. J - “As an Indian, representing UAE, in Madrid, no more can attain this pride. Just winning nationals, changed the environment

for me and the intrinsic satisfaction and motivation gained was a meaningful achievement. It was a matter of pride! Getting a chance to outdo so many aspiring teams and to get to Madrid was a much appreciated one.”

Q. What was the greatest benefit you derived from KICC?

Siddharth. K - “The sheer cultural immersion in terms of thought processes and ways of living provided a once in a lifetime experience of absorbing so many national specificities at once. It was a wonderful platform for exchange of ideas and ideals with such a diverse group of people.”

Prakarsh. J - “Definitely the learning imparted by leaders in feedback sessions, and the networking opportunity, Ace the Case to KICC has revolutionised my professional and personal network.”

Gayathri. T - “My professional network - Where else does one get a chance to meet students and

“we see the KPmG International Case Competition, as a natural extension of our commitment to learning and development.”

Reyana Menzel, Head of Human Resources and Learning & Development – KPMG in the UAE: “The caliber of students KICC attracts year after year is definitive of the future leaders and entrepreneurs molded by top universities to excel in the corporate world.”

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41

professionals across 23 countries in one single room? Interacting with so many interesting people, different nationalities and diverse backgrounds was the best part.”

Q. What was the highlight of KICC for you?

Siddharth. K - “The highlight of KICC for me was the Sustainability dinner, where the conversation at the table covered almost every nation and notion of humankind! It was very humbling to see what the Cycle for Water project had achieved, and there was a general buzz of becoming better global citizens.”

Sagar. A - “Conquest of Madrid was by far the highlight. It was a 4-hour contest with trivia questions about Madrid’s cultural history. We were given a list of tourist locations to visit in a stipulated time period. That was the best way to go around the city and cross places off typical tourist must-sees!”

Gayathri. T - “The highlight for me was preparing presentations to the judging panel of KPMG partners. The professional setting gave us a taste of what the future holds. The challenging Q&A round prepares us for tackling such inevitable high-pressure business situations in the future, and the rigorous nature of the competition really put us to test.”

Q. What would be your message to others who want to participate in this competition in the future?

Siddarth. K - “Solve as many cases as possible, develop a well-rounded style of analysis and counter-argument, and don’t miss the forest for the trees!”

Sagar. A - “Firstly, go ahead and participate! The experience is something you can never get in a classroom. Take advantage of the chance to learn from KPMG professionals and diverse individuals, this is immensely beneficial. I conduct myself differently now thanks to the communications training received from KPMG throughout the preparation. It’s a life-changer.”

Prakarsh. J - “Give your hundred percent and there is nothing that can stop you. From forming teams to the presentation in the end, all of it will teach you something or the other. Take this opportunity and just give it your best. Results are not what is

held by us, but determination is what can be done. Make the right combination, practice, gain insights provided by the experts and enjoy!”

Gayathri. T - “This is an opportunity you don't want to miss. An experience like this will benefit you professionally and personally. The people you meet will teach you a lot about schools, careers, diversity, and everything under the sun. KICC will set you apart from the others and in the true sense will teach you how KPMG or any other professional services company works.”

Commenting about the competition, Reyana Menzel, Head of Human Resources and Learning & Development – KPMG in the UAE said; “It was a great honor for KPMG UAE to participate in its second International Case Competition. The caliber of students KICC attracts year after year is definitive of the future leaders and entrepreneurs molded by top universities to excel in the corporate world. KPMG across the globe is in complete support of these academic strategies and welcomes the new generation.”

Michael Andrew, Global Chairman, KPMG International added; “We see the KPMG International Case Competition, as a natural extension of our commitment to learning and development. KICC places students at the heart of real business issues and simulates the difference KPMG professionals make to business and communities on a daily basis.”

Michael Andrew, Global Chairman, KPMG International: “KICC places students at the heart of real business issues and simulates the difference KPMG professionals make to business and communities on a daily basis.”

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fAIR VALUE ACCOUNTING

THE ACCOUNTING standard boards and the professional bodies of accounting all over the world are grappling to define and redefine

various concepts of accountancy.

Post Luca Pacioli’s introduction of the double entry system not much has changed – debits remain debits and credits remain credits. Recording of past transactions, to reflect them faithfully, has been the motto of accounting ever since.

This could have remained a very routine and repetitive process, straightforward and problem free. Yet, over the years, accounting standards have been diverse across countries, dealing with numerous complex issues and many a times being economically and politically sensitive and even becoming controversial. What should have been straightforward ended being a meandering road to debate and doubt.

Perspective of the marketAccountants have always had options to select from multitudes of measurement techniques ranging from historic cost, through value-in-use, to fair value and many shades in between. The International Accounting Standards Board (IASB) issued International Financial Reporting

Standards (IFRS) 13 on May 12, 2011 unifying the fair value measurement requirements across various IFRSs. It came into effect on January 1, 2013 and must be implemented in financial periods beginning on or after January 1, 2013.

IFRS 13 defines fair value as “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” (IFRS 13.9). The fair value measurement is from the perspective of the market participant rather than the entity itself, it is the exit price of the asset or liability. When an entity is fair valuing any asset or liability the following factors would need to be considered:

The asset or liability: Characteristics of an asset or liability that a market participant takes into account for pricing would need to be considered by the entity, for instance condition, location and restrictions, if any, on sale or use. A single asset or liability or a group of assets or liabilities may be fair valued.

Director - South aSian ManageMent technologieSfounDation

veena hingarh

STANDARDS & PRACTICES

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The standards board issued IFRS 13 in 2011 to unify measurement requirements across various principles. With many organisations facing hurdles towards this transition, Veena Hingarh provides practical solutions to help overcome these obstacles…

September 2013

The market: Fair value would be based on a hypothetical transaction that would take place in the principal market or, in its absence, the most advantageous market.

The market participants: Fair value measurement requires considering the same assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.

The price: Fair value would be based on the exit price and not the transaction price or the entry price.

The standard also provides certain specific requirements for non-financial assets, liabilities, equity and financial instruments.

IFRS 13 requires the fair value of a non-financial asset to be measured based on its highest and best use from a market participant’s perspective.

A fair value measurement assumes that a financial or non-financial liability or an entity’s own equity instrument is transferred to a market participant at the measurement date. It assumes that the liability/entity’s own equity instrument would remain outstanding and the market participant transferee would be required to fulfill the obligation/ take on the rights and responsibilities associated with the instrument.

Valuation techniquesWhen a quoted price for the transfer of a liability or the entity’s own equity instruments is not available but the instrument is held by another investor as an asset, management should measure fair value from the perspective of the investor.

If a market is not available for the liability, a valuation technique is required to measure the fair value from the perspective of the liability issuer. The valuation techniques should be appropriate

in the circumstances and have sufficient data available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Based on the quality of the inputs the standard established a fair value hierarchy- Level 1 for quoted price of identical assets, Level 2 for directly or indirectly observable inputs other than quoted prices and Level 3 using unobservable inputs for valuation.

The fair value of a liability reflects the effect of non-performance risk. Non-performance risk includes, but may not be limited to, an entity’s own credit risk.

IFRS 13 implementation challengesIn this section I have discussed some of the challenges faced while implementing fair value measurement. Being the first year of implementation data gathering, selection of the valuation technique, changing the mind set to an exit price orientation, and measuring the risk premium have been some of the common areas of deliberation. Paucity of detailed knowledge is another major challenge. I have provided a summary of select practical problems faced by industries across different verticals and would like to remind the readers that no single entity might have faced all of them.

The identification of the appropriate market, that is, the principal market and the advantageous market may not be as straight forward. Further, management may need to make assumptions about the type of market participants that may be interested in a particular asset or liability. They would need to consider multiple factors such as the specific location, condition and other characteristics of the asset or liability, growth rates, risk free rate and the risk premium, impact of inflation and so on.

Non-performance riskManagement may require considering alternative uses of those assets to determine whether the current use of the assets commands the highest price and is the best use.

The price being based on an exit price brings in a hypothetical sale and requires adoption of an estimation methodology. The extent to which market data is available varies with different assets and liabilities. A rigorous process would be required to study various market assumptions, key

Every organisation needs to sensitise their personnel on the impact that fair valuation would bring on the look and interpretation of their financial statement.

Over the years, accounting standards have been diverse across countries, dealing with numerous complex issues and many a times being economically and politically sensitive and even becoming controversial.


43

features of each transaction and their influencing factors to be able to determine a reliable fair value for an arms-length transaction. Uncertainty and estimation is inherent in the entire process.

The fair value of a liability should reflect non-performance risk and should take into account the effect of an entity's own credit risk and the counterparty’s credit risk. Therefore there were two implications (1) that fair value measurements must take counterparty risk into account and therefore a credit valuation adjustment should apply to the ‘risk free’ yield curve, and (2) a debit valuation adjustment would need to be made for the entity’s own credit status.

A process in the entity would need to be established for periodically tracking and applying the movements in the credit value adjustment and the debit value adjustment.

Market transparencyApart from credit risk a comprehensive risk assessment may be required by the entity while determining the non-performance risk. The entity must have a documented risk management strategy and risk quantification methodology established.

The standard permits fair value measurement of a group of assets or liabilities. The portfolio impact in such cases needs to be determined.

Use of the fair value hierarchy may become a data intensive and complex exercise. Availability of local data and statistical deficiencies has been an impediment resulting in usage of proxy values and resulting in many assets and liabilities being measured using unobservable inputs. That is, at Level 3.

Development and selection of the correct valuation technique is critical. The statistical –financial models developed for the valuation should be such that it can be consistently used in the future.

Disclosures requirement are intensive including the details of judgments, methodologies and related issues.

Accountancy is not a subject of mathematical precision. Estimates and judgments are an integral part of the subject. The accounting standards no doubt provide transparency to the market and users of financial statements. However, our accounting standards can now cause the same

asset or liability to have multiple values. It would depend upon the estimate of numerous factors and the choice of the valuation technique according to which they are being recognised.

Effective monetary capitalValuation is as much of an art as a science and we are fully aware of that. Beauty is in the eye of the beholder, and so is valuation. When the market is booming assets valued at the exit price would be an overestimation and underestimated in case of market failures. The value of the asset would oscillate with the market oscillations.

Fair value measurements would give rise to unrealised gains once recorded through profit and loss account. Distribution of the unrealised gains may endanger the enterprise capital and pose a challenge to the maintenance of effective monetary capital.

Another challenge to fair value accounting is intangible assets. Internally generated intangibles are no doubt valuable. It may be Coke’s content formula or Facebook’s business concept, but these find no representation or fair value in accountancy.

Comparability is another feature of the financial statements. It is a riddle how diverse accounting techniques, measurement methodologies, and varied accounting policies on fair valuation can result in truly comparative statements.

Every organisation needs to sensitise their personnel on the impact that fair valuation would bring on the look and interpretation of their financial statement. Even though the first challenge seems to be to have the computational framework ready, but the real challenge will emerge once the first set of accounts is ready and its impact starts percolating down the profit and loss account of subsequent years. Alarming though, but fair valuation may not be fair to all entities.

Accountancy is not a subject of mathematical precision. Estimates and judgments are an integral part of the subject. The accounting standards no doubt provide transparency to the market and users of financial statements.

44 September 2013


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wHAT’S IT GOT TO DO wITH ME?

IN THE first two parts of this series there was a refresher on money laundering, terrorism financing and sanctions, together with a discussion

on suspicious activities and what to do with them, as well as the important role that the money laundering reporting officer plays.

In this third part, I want to explore how an accountant or auditor would go about developing a set of systems and controls to meet its obligations in respect of anti-money laundering (AML), terrorist financing and sanctions.

Perhaps the first and most important part to developing a set of systems and controls is to take stock of what are the risks facing your business from an AML, terrorist financing and sanction perspective.

What is needed for this stock take is to carry out a risk assessment.

Burden on firmsOne of the major complaints about the Financial Action Task Force [on Money Laundering] (FATF)

Director, SuPerviSion anD heaD of anti-MoneY launDering, DfSa

MattheW gaMBle

recommendations has been the unnecessary burden it has placed on firms. Firms have complained that asking for customer information on identity, beneficial owner, business rationale, source of funds and wealth have only made doing business that much harder. In effect, firms have become the unpaid policemen for governments in combating money laundering and terrorist financing.

I accept that if you require the same level of customer due diligence for all customers then you are placing an unnecessary burden. FATF has recognised this and has provided guidance on how to use the risk-based approach (RBA) to overcome this issue. However, from my

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46

In this third part of our continuing series on Money Laundering, Terrorist Financing and Sanctions, Matthew Gamble explores ways that would help accountants or auditors develop a set of systems and controls to meet AML obligations…

September 2013

experience, firms have failed to understand what is required to be done under this RBA. All too often a firm will move to the check-the-box approach and design a checklist of what documentary evidence it needs to gather on every new client regardless of the risk that new client poses from an AML, terrorist financing and sanction perspective.

What needs to be done before turning your mind as to what evidence should be gathered is to understand what are the AML, terrorist financing and sanction risks faced by the firm. From my own experience only the best firms carry out a risk assessment while the lazy firms gravitate to developing a checklist and then complain why they cannot get the evidence they themselves decided to collect!

What is the RBA?The Dubai Financial Services Authority (DFSA) has embraced and reinforced the FATF’s approach to the RBA. In its recently released AML Rulebook, DFSA regulated Firms are required to apply the RBA to their AML, Counter-Terrorist Financing (CTF) compliance (collectively referred to as AML) which is proportionate to the risks to which a Firm is exposed to taking into account the nature of its business, customers, products, services and any other matter which may be relevant.

The general principle is that where there are higher risks of money laundering taking place, enhanced measures to manage and mitigate those risks should be implemented. Correspondingly, when the risks are lower simplified measures are permitted.

Adopting the RBA discourages a ‘tick box’ attitude to AML compliance and instead emphasises that there should be a clear and reasonable rationale for the measures taken by firms to manage and mitigate the AML risks which it faces. The process of applying the RBA will vary from firm to firm and it is important for a firm to tailor its processes to its individual risks.

The new DFSA AML Rulebook purposely does not prescribe, beyond what is contained in the AML module, on how a Firm should implement its RBA. The reason why it has done this is that no two firms are the same. Each Firm has its own

business model and that business model will govern the types of products and or services it offers to its customers.

A cornerstone of the AML Rulebook is Chapter 4 which sets out the standard for risk- based assessments and applies to all decisions made by a firm in which a risk-based assessment is required.

The four elements of any risk based assessment are that they should be:

objective and proportionate to the risks;

based on reasonable grounds;

properly documented; and

reviewed and updated at appropriate intervals.

The DFSA has represented this concept as being the four main pillars supporting the ‘house of AML’. To me the concept reinforces the importance of completing and maintaining a risk assessment.

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The DFSA believes that the risk assessment should be carried out in two parts. First look at the AML risks that arise from your business and then use that information to assess the AML risks that your clients bring.

Assessing Business RiskA firm should identify and assess the money laundering risk its business is exposed to by taking into consideration the nature, size and complexity of its activities.

Factors to be considered when undertaking the assessment of business risk include, but should not be limited to:

type of customers and their activities;

countries or geographic areas in which a Relevant Person does business;

products, services and activity profiles;

distribution channels and business partners;

the complexity and volume of transactions;

the development of new products and new business practices, including new delivery mechanisms, channels and partners; and

the use of new or developing technologies for both new and pre-existing products.

The process of identifying components of business risk involves a level of introspection and deliberation drawing on the collective experience within the firm, from senior management to operational staff.

Assessing Customer RiskHaving determined its business AML risk, a firm then needs to assess the AML risk posed by its customers.

The factors to be considered when undertaking an assessment of customer risk include, but should not be limited to:

identifying the customer and any beneficial owner;

The general principle is that where there are higher risks of money laundering taking place, enhanced measures to manage and mitigate those risks should be implemented.

48 September 2013

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49

obtain information on the purpose and intended nature of the business relationship;

the nature of the customer, its ownership and control structure, and its beneficial ownership (if any);

the nature of the customer business relationship with the Relevant Person;

the customers country of origin, residence, nationality, place or incorporation or place of business;

the relevant product service or transaction; and

business risk assessment under Chapter 5 of the AML Module.

The process of identifying components of business risk involves a level of introspection, drawing on the collective experience within the firm, from senior management to support staff.

The Three Golden RulesFinally, for those of you who have had the experience of my team carry out audit inspections of your Firm you would have heard the statement, “If it is not documented, then it is not done”. That same philosophy has been carried through to the new DFSA AML Rulebook. The obligation to document has been hardwired into the rulebook and no-one will be given the benefit of the doubt.

The three golden rules?

Document, document and document!

ConclusionIn this third part, the intention was to discuss the new approach. No longer will the completion of a checklist cut it, the DFSA will want to see the actual thought processes of firms and the documentation of those thoughts. The next part will discuss what you do once you have carried out your risk assessment.

Disclaimer:Any opinions, statements or other information or content expressed or made in this article are those of the author and not the Dubai Financial Services Authority (DFSA), and the author's opinions, statements or other information or content expressed in this article should not be viewed as any indication of the opinion, view or policy of the DFSA.

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GOVERNANCE IN PRACTICE

CORPORATE GOvERNANCE is seen largely as the province of Board of directors and legal compliance officers, and that narrow view can

restrict improvements to the entire control process in organisations.

Good governance is a journey that begins with a broad, organisational perspective. Making steady progress requires committed senior leadership, integrated planning, coordinated execution and constant monitoring.

The best Corporate Governance addresses the needs of all of an organisation’s stakeholders, shareholders, employees, customers, lenders, vendors, market authorities and the community, because all of these groups share a common interest in perpetuating the business. ‘Well-governed’ organisations recognise that balancing the interest of them all is critical for a sustainable and thriving organisation.

Internal audit’s responsibilities are growing due to increased regulatory scrutiny as well as

BDO Senior Manager Francisco Basdekis examines the value of Internal Audit in strengthening control processes in organisations…

Senior Manager – aDviSorY ServiceS, BDo Qatar

franciSco BaSDekiS

directives from executives to strengthen controls and improve risk management. Increasingly, business leaders expect internal audit to play a more strategic – rather than merely tactical – role in the governance process.

In fact, that role is consistent with the definition of ‘internal audit’ sanctioned by The Institute of Internal Auditors (IIA). However, the internal audit function continues to play only a minor role in many organisations.

Corporate Governance ComponentsAt a high level, Corporate Governance can be thought to have seven interrelated components. These, are contributing towards an effective and efficient government, creating Organisations’ Value and promoting Growth:

Board of directors and committees, Legal and regulatory, Disclosure and transparency, Business practices and ethics, Enterprise risk management, Monitoring, and communication.

IfRS SPECIAL

50 September 2013

CORPORATE GOVERNANCE

Internal audit’s responsibilities are growing due to increased regulatory scrutiny as well as directives from executives to strengthen controls and improve risk management.

These seven (7) components give a comprehensive view of the complexity, interrelationships, and variables of an Organisation must manage in order to strengthen their governance.

How are they interrelated?When all components operate effectively and are efficiently coordinated, Corporate Governance provides the ‘platform’ to help improve business performance and enhance stakeholder value.

The following is an analysis of the seven essential and interrelated components of the Corporate Governance Framework along with Internal Audit contribution.

1. Board of Directors (BOD) and Committees: establishes the direction and values of an organisation, oversees performance, and protects shareholder interests.

(Internal Audit: assists with their self –assessments and best practices, assesses effectiveness and compliance, bringing best-practice ideas for internal controls and risk management).

2. Legal and Regulatory: legal boundaries of organisations’ operations along with the requirements set forth by current law – complex issues for large corporations.

(IA: verifies – with legal – organisation has identified the requirements, assigned responsibilities and addressed all key legal and regulatory requirements, look for opportunities to leverage compliance activities and capabilities).

3. Business Practices and Ethics: Business practices are the operational tactics and measures a company uses to achieve its purpose and strategy. Ethics are the moral boundaries an organisation believes it should observe when pursuing competitive objectives. Ethics and a well-defined code of conduct are cornerstones for building a strong foundation for good corporate governance.

(IA: Reviews the code of conduct and ethics policies; Performs a behavioral sciences ethics review to assess the understanding and perception of compliance at all levels of the organisation; Helps management and the audit

committee hold people at all levels accountable, listening to their words but also looking at their actions oversight role; Participates in whistleblower and other ethics complaints investigation processes; Conducts annual audits of hotline and follow-up processes, reporting results.)

4. Disclosure and Transparency: This component refers to the nature and timing of information the Organisation provides to its stakeholders. Sarbanes Oxley Act (SOX1) require executives of publicly traded companies to certify financial statements. Financial reports must meet legal expectations for clarity, relevance, reliability, and comparability. The legislative intent is to provide shareholders with information that is complete, objective, and timely. In many cases, however, organisations need to think more broadly than they do about what is appropriate disclosure and transparency to all stakeholders, not just shareholders.

(IA: Conducts testing of financial disclosures and confers with the Chief Financial Officer (CFO); Understands concern for disclosure and transparency, aligning risk assessment with stakeholder expectations; In the annual audit plan, addresses disclosure and transparency objectives; Understands the breadth and depth – that is, the spectrum – of disclosure and transparency possibilities and where the organisation strives to be or should be on the spectrum; Actively participates in the disclosure committee, including evaluating its effectiveness; and Reviews the sub-certification process.)

5. Enterprise Risk Management (ERM): Enterprise risk management encourages organisations to take a broader view than narrowly focused on compliance. The ERM framework of the ‘Committee of Sponsoring Organisations of the Treadway Commission’ (COSO2) is an integrated approach to managing

IFRS SpecIal

51


51

risk and reinforces the need for a comprehensive approach to mitigating risk and improving corporate governance. SOX is having the effect of pushing ownership of controls to process owners throughout the business. Process owners are in the best position to monitor operational risks and benefit greatly from a better understanding of internal controls over financial reporting. The process and risk-assessment-related evaluation skills that internal audit must have to understand the best mix of controls provide the foundation for assessing governance processes.

(Thus, IA can provide recommendations that manage risk, enhance performance, and improve governance).

6. Monitoring: Monitoring has a common objective; to evaluate whether components of the governance framework are operating as intended and provide reporting to various levels of the organisation. At the most fundamental level, monitoring systems look at ‘what is’ versus ‘what should be.’ To identify gaps, organisations employ a variety of monitoring functions, including internal auditors, regulatory or legal compliance officers, ethics officers, internal management reporting, and self-assessments. Timely risk and performance monitoring has a positive impact on an organsation and the sustainability of corporate governance. With better integration among monitoring functions, methodologies, and systems, company leaders receive more relevant reports, thereby enabling them to take corrective action promptly.

(IA: Understands what monitoring activity is taking place in the organisation for each of the other components of the governance framework; Facilitates the implementation of a common risk

monitoring methodology across all corporate governance functions, thus feeding an integrated reporting system; Performs a strategic-level corporate governance audit or sees that one is conducted; Incorporates tactical-level corporate governance aspects into audit plans; and, Develops an assurance scorecard and reports on it quarterly).

7. Communication: The increasing complexity of legal requirements, compliance activities, and governance best practices requires good communication. Communication holds together the various components of the governance framework and keeps the process improving over time. Because corporate governance permeates virtually every area of an organisation, it is important to have a shared set of terms people can understand and use productively in discussions. A common governance ‘language’ facilitates productive dialogue so that everyone can work together to strengthen governance and company performance.

(IA: Participates in ongoing dialogues with the general counsel, chief financial officer, and other senior management officers; Maintains steady communication with audit committee members and oversight executives; Includes information about corporate governance in audit reports; and, Assists in establishing a corporate governance communications calendar and solicits input about needs across the Organisation).

Concept of ‘Governance’“Corporate Governance is the ‘systems’ and ‘processes’ an Organisation has in place to protect and enhance the interests of its diverse stakeholder groups’, according to a report published in 1992 by Cadbury.

Recent regulations, including an emphasis on the anti-fraud and whistle-blower provisions and the potential impact on stock prices, have compelled Auditors to take a more active role in Governance. (In 2003, US Securities and Exchange Commission (SEC) approved final versions of revised NYSE & Nasdaq requirements). The NYSE requires that listed companies have an internal audit function.

Investors and other stakeholders are interested on corporate governance and they value companies that anticipate problems and show

Companies today have to accept that market volatility, complexity, political and regulatory changes are here to stay affecting them as the business environment too and internal audit functions have more opportunities to contribute in a meaningful way.

52 September 2013


evidence of strong internal oversight; How? By relying to effective and efficient Corporate Governance.

A focus on Corporate Governance offers Internal Audit the opportunity to become a more active and strategic ‘team player’. Recent surveys have shown that Management and Boards of Directors are looking for greater contributions from the Chief Audit Executive (CAE) and Internal Auditors.

It is essential that Internal Audit should be a ‘champion’ in assessing opportunities where Corporate Governance can be strengthened and suggesting corrective action as needed.

Internal Audit challenges todayThe biggest challenge facing companies and

their Internal Auditors is the lack of a one-size- fits-all ‘method’ to improve Corporate Governance. Each organisation must tailor an individual solution that considers its industry, maturity, business strategy, capabilities, corporate culture, and competitive position.

Internal Audit challenge: remaining independent and objective while being part of the Organisation as a Trusted Advisor and Consultant (Internal Auditing requires: business knowledge, insight, good judgment, effective communication)

Stakeholder expectations are increasing and there are opportunities for Internal

Auditors to play a Key Role to, including;

Educate and train audit committees and management on risk and risk management concepts.

Provide assurance on the core internal audit roles described in an IIA Position Paper titled ‘The Role of Internal Auditing’

Align Audit Strategy to Business Strategy,

Focus on Key Business Risks,

Seek opportunities to perform Risk Management consulting services

Companies today have to accept that market volatility, complexity, political and regulatory changes are here to stay affecting them as the business environment too and internal audit functions have more opportunities to contribute in a meaningful way.

A focus on corporate governance offers internal audit the opportunity to become a more active and strategic team player. Recent surveys have shown that management and boards of directors are looking for greater contributions from the Chief Audit Executives (CAE) and internal auditors.

Internal auditors can meet these heightened expectations by taking a more holistic view of corporate governance and aligning internal audit skills and activities to assess, improve, and monitor their Organisations’ Corporate Governance capabilities. The CAE must understand all of the components of corporate governance and how internal audit can support them.

Today, business leaders increasingly expect internal auditors to play a more strategic – rather than merely tactical – role in the corporate governance process.

5353


CLOUD ACROSS ATLANTIC

OfTEN THE clouds across Atlantic clash with each other and cause torrential downpour across civilisations that lie on

its shore.

Often it stays cloudy for days and then suddenly the sun comes out brightly forcing the clouds to retreat, but a prudent man would always reach for the umbrella since one never knows.

In the wonderland of accountants we see such a cloud growing in strength arising out of the loss provisioning norms suggested under exposure draft of International Financial Reporting Standards (IFRS) 9 and consequent industry reactions coupled with the differential view taken by the Financial Accounting Standards Board (FASB). This article takes a look into the provisions and impact that can be felt at the desk of the accountants.

Salient aspectsThe IASB exposure draft on financial instruments expected credit losses was issued March 7, 2013 bringing in amendments as to recognition, measurement, presentation, and disclosure of expected credit losses. Salient aspects of the suggestions put forward in the draft included the following:

Arif Ahmed discusses the intricacies of loan provisioning under the new International Financial Reporting Standards…

ProfeSSor anD Director South aSian ManageMenttechnologieS founDation

arif ahMeD

Scope: The standard requires providing for a credit loss provision for all financial instrument that are subject to erosion in value arising out of credit risk. The proposed approach will apply to all financial assets carrying credit loss risk on them. Some loan commitments and financial guarantee contracts will also be covered by the approach.

Following financial instruments are covered by the proposal:

Originated, purchased, reclassified or modified debt instruments that are measured at amortised cost in accordance with IFRS 9 Financial Instruments

IfRSSPECIAL

54 September 2013

The IASB exposure draft on financial instruments expected credit losses was issued march 7, 2013 bringing in amendments as to recognition, measurement, presentation, and disclosure of expected credit losses.

Financial assets measured at fair value through other comprehensive income

Loan commitments unless measured at fair value through profit or loss

Financial guarantee contracts unless measured at fair value through profit or loss

Lease receivables within the scope of IAS 17 Leases.

Methodology: The expected credit loss estimate should ref lect two aspects:

i) Probability Adjustment: An unbiased and probability weighted amount which would encompass a range of possible outcomes. This can be described by a matrix comprising of extent of loss in lifetime cash f low on default and probability of such loss arising. We will describe this matrix in greater details later in the article.

ii) Time Value Adjustment: Adjustment for time value of money arising out of payment delayed beyond contracted schedule. This is essentially the present value of the lifetime cash f low due and the amount the entity now expects to receive. The relevant discounting rate should be between the risk free rate and effective interest rate of the financial asset, though the range may be violated on period after initial recognition due to changes in risk free rate. In case of undrawn loan commitments and financial guarantee contracts, the discount rate should ref lect the current market assessment of the time value of money and risks specific to the cash f lows. In cases of purchased or originated credit impaired financial assets, credit adjusted effective interest rate should be used to discount cash f lows.

Recognition: Recognition of the expected credit loss is broken up in a three-stage. In the first stage an entity will apply portfolio approach to provide for such losses unless any individual asset demonstrates signs of specific impairment. In such cases the individual asset will be marked separately and move on to the second or third stage, as the case may be. An overview of the three-stage approach is stated below:

First stage: We will identify all financial instruments with low credit risk or whose credit quality has not deteriorated significantly since initial recognition. A 12 month expected credit loss will be recognised for these assets which is essentially a product of probability of default over a 12 month period following the reporting date and the total expected credit loss arising out of the default. Interest revenue, wherever required, would be computed on the gross value and not after adjusting the provision.

Trade receivables which do not constitute a financing transaction will follow a simplified approach and provide for credit loss using a provision matrix depending on days overdue. Since most of such receivables will have a lifetime of less than 12 months, the 12-month credit provision and lifetime credit provision will be the same. Long term trade receivables and lease rent receivable can follow either the three-bucket approach or the simplified approach.

Second stage: At this stage we will identify financial instruments excluding those rated as ‘investment grade’ as on the reporting date, that has suffered significant loss in credit quality since initial recognition. A lifetime expected credit loss would be recognised. This will be computed by using the probability of default occurring anytime over the lifetime of the instrument. Interest revenue, wherever required, would continue be computed on the gross value.

Third stage: Financial instruments as this stage would manifest demonstrate objective evidence of impairment on the reporting date. A lifetime expected credit loss is to

In the wonderland of accountants we see a cloud growing in strength arising out of the loss provisioning norms suggested under exposure draft of IFRS 9 and consequent industry reactions coupled with the differential view taken by FASB.

IfRSSPECIAL

55

be recognised for all such instruments and interest revenue, wherever applicable, will be computed on the net carrying amount that is gross carrying amount reduced by the lifetime allowance for credit loss. All purchased credit impaired asset will have the same treatment.

Disclosure: The proposed disclosure seeks to identify and state the impact of expected credit losses amounts on the financial statements and the effect of deterioration and improvement in the credit risk of relevant financial instruments.

The three-stage impairment approach would be extended to off-balance sheet items like loan commitments, financial guarantees, and others. While estimating the 12 month loss provision, the reporting entity will consider the portion of the loan commitment expected to be drawn down within the next 12 months.

Similarly while estimating lifetime expected credit losses the portion of loan commitment expected to be drawn over the remaining life the commitment when is to be considered. This provision has a far reaching impact as we are ref lecting a probable loss against an unrelated revenue stream and would be presented as a separate liability line item.

Premium for credit riskIt must be accepted that all interest earnings includes a premium for credit risk of the borrower and charging of a loss allowance effectively nullifies the effect. However inclusion of the accrued amount without any adjustment for the credit risk is unlikely to provide an accurate measure of the realisable value. At the same time, interest accrual is made on gross amount - thus effectively offsetting any adverse impact on performance measure.

Major difference between IASB and FASB lies in

that FASB considers all contractual cash f lows that are unlikely to be collected instead of the 12 month and lifetime credit loss approach preferred by IASB and consequently the exposure draft of FASB do not have a transition criteria.

In addition as against no recognition exception proposed by IASB, FASB provides for recognition exception to financial assets measured at fair value through profit and loss if the fair value exceeds amortised cost and expected credit loss is insignificant.

Having discussed the proposed standard let us look into the three major steps necessary for operationalising the model.

1. Definition of significant deterioration in credit quality: This appears to be subjective in some sense. One can use proxies like number of days overdue to signify significant deterioration. IASB has considered a rebuttable presumption that any delay beyond 30 days signifies a significant deterioration in credit quality and entities may consider any other time frame that can be so established.

2. Identification of point in time when credit quality deteriorated: This is necessary essentially because we need to recognise the event in our financial reports and also to define the time period over which present value adjustment will be carried on. We will need to define triggers that will allow us to identify such time. For example we need to define whether the deterioration takes place on expiry of 30 days overdue or 30 days overdue manifests that credit deterioration has taken place on the due date of payment.

3. The future expected cash flow from impaired asset: Present value of difference between this amount and contractual cash f low will define the extent of expected loss.

Let us now have a look at the credit risk estimation models that may be useful in determining the loss allowance. An effective model will be one which includes a set of variables which contributes towards the performance of a credit exposure. These variables are to be identified primarily based on domain expertise and then validated using statistical processes.

The proposed IASB disclosure seeks to identify and state the impact of expected credit losses amounts on the financial statements and the effect of deterioration and improvement in the credit risk of relevant financial instruments.

56 September 2013

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IfRSSPECIAL

In my personal experience supported by collective experience of risk modelling experts, one of the critical data in designing the model is the transactional behaviour of the counterparty. Other variables may include financial parameters like sales, profit ratio, market share, incremental revenue, leverage ratio, loan to value, and others along with economic indicators.

If the lender entity is not privy to regular operational update from the borrower entity, the model will depend mostly on publicly available information which would generally include quarterly statements, press reports, and third party credit rating. These variables are then examined to identify whether they evidence any causal relation with the default event. The model will then assign various weights to various variables signifying the extent by which they inf luence the default event. Once the casual relation is established, the model can be extrapolated over new credit events.

Probability of defaultThough various models can have different designs but looking at the time and expertise that a non-banking institution is likely to have for such complex computation and interpretation process, my personal favourite are the models that provides a probability of default using the multiple variable driven model described earlier. Thus we will have a single value ranging from 0% to 100% denoting the probability of default.

The data analysis necessary to arrive at this probability of default value will allow us to find the expected loss, as a percentage of the exposure value, that the entity may suffer given a default. All we now need is to identify the discounting rate.

This is how these data will be used:

Consider a company have customers from two regions - Middle East and Europe with total customers numbering 200 and 250 respectively. Past evidence suggests that expected default rate to be 10% and 8% respectively. Following table shows the computation procedure required to find out the loss rate.

It is evident from the table above, that computation framework for arriving at expected loss is dependent on assessment of the probability of default and discounting rate.

We have earlier described the conceptual framework of arriving at these. Financial institutions have significant investment in risk management department and are likely to have the computational infrastructure for computing these values. Non-financial entities will need to choose between making an investment on building up the infrastructure or deploy a simple spreadsheet based solution by investing in designing a model and then merely update the same for future period.

Increasingly such solutions are being available on the cloud or being provided by external experts. The decision will be entirely driven by the complexity and volume of the business. Corporate houses in the Middle East Asia will have an additional challenge in terms of recognising the unique trade conditions that may make a ready-made model inappropriate.

No matter how the company addresses the issue, the January 1, 2015 deadline is closer than it may seem on the calendar considering the complexity of model design. It may be sensible to start rolling out the enablers. Even without regulatory requirement, it is a good practice to adopt. In face of a dark cloud, an umbrella is always handy.

Region

Middle East

Europe

No. of Client

A

200

250

Total Exposure

B

168436

238982

Average Exposure

C=B/A

842

956

Probability of Default

D

10%

8%

Exposure at Default

D

16840

19120

PV of Loss

E

13135

15296

Expected Loss

F = E/B

8%

6%

5757

IfRSSPECIAL

ON CLOUD 'NONE'

mOST CHIEf financial Officers (CfO) and Chief Information Officers (CIO) are concerned about cloud data security,

according to a new report authored by deloitte.

The new issue of ‘CFO Insights’ examines the use of cloud computing and addresses the benefits and concerns related to the decision of transitioning to this form of technology.

The Deloitte report recommends that technology decision-makers, notably CFOs and CIOs, to carefully decide what to move to cloud, when to move it, and how to transition from an on-premises computing technology environment to a cloud computing technology environment. It further examines how to test out cloud computing in an organisation and assesses its ‘cloud comfort level’.

Working relationshipThe concept of cloud computing can help a business outsource day-to-day management of a resource and only buy what it needs, the quantity it needs, and when it needs that resource (similar to utilities such as power and water). Also, and in contrast

to on-premises technology, the cloud computing resource is delivered over the Internet.

The Deloitte report stresses that the decision on cloud computing requires a productive working relationship between the CIO and the CFO. The CFO’s role in the transition is to embrace the cloud, to catalyse behaviours across the organisation and to execute strategic and financial objectives, while creating a risk intelligent culture. In his turn, the CIO, with the backing of the technology department, can increase their visibility as valued service providers to the broader organisation.

“Aligning the various stakeholders is an important task for the CFO in partnering with the CIO to adopt a cloud computing environment in an organisation” said James Babb, Partner, CFO Programme Leader, Deloitte Middle East.

“In addition, a cloud computing environment will often allow a CFO to know better the true cost of the IT function where the running costs of applications are often hard to determine with precision.”

Right type of cloudThe Deloitte report finds that as with any initiative

TECHNOLOGy TALK

58

Deloitte’s new report shows technology decision-makers are more fretful about transitioning to cloud computing…

September 2013

that involves uncertainty, most organisations will pilot the use of cloud computing with either low-risk projects, or projects in which the on-premises computing resources would not normally be available. To determine which cloud type is right for an organisation, Deloitte experts suggest that relative costs and benefits should be examined.

Benefits of cloud computing seem evident to both CFOs and CIOs. The Deloitte report cites those that appear most often in interviews with CIOs and CFOs to include:

agility that the cloud provides, whereby businesses are not burdened with technology infrastructure and can react more quickly to change technology;

cost savings in that cloud computing is considered an operating expense, paid for as it is consumed, and as such, does not require a significant capital investment in computing resources;

potential for the reduction in IT support staff needed as the vendors of the cloud maintain the hardware and software environments; and,

ability to quickly respond to opportunities or competitive threats through the use of cloud computing.

“Cloud computing has real benefits to the finance function in particular where efficiency and productivity gains are available,” explains Babb.

Conversely, in terms of concerns, the Deloitte report finds that interviewed CFOs and CIOs raise numerous security concerns including whether data will be safe, and whether the data will be audited and backed up. Similarly vendor dependency and potential ‘end game’ scenarios seem high on the concerns list.

Technology with less riskThe issue of how easy it would be to move from one cloud technology provider to another is put forth, in addition to concerns related to how cloud computing would fit into the entire computing portfolio of the organisation.

Deloitte experts’ basic message for companies is to become comfortable with cloud computing.

CIOs and CFOs alignment through the cloud decision can help them decide where cloud is appropriate for their organisation. This will involve assessing technology in the context of business purpose and risks.

One recommendation the report offers is to start small and sample technologies with less risk and related influences on the business. After obtaining greater comfort in the cloud, the Deloitte report recommends to continue to shift the computing environment to cloud by using an appropriate assessment-based road map.

With CFOs and CIOs evaluation of governance and how the availability of cloud technology can impact their organisation, they can help ensure a smooth transition to cloud computing.

“Cloud computing has real benefits to the finance function in particular where efficiency and productivity gains are available.”

TECHNOLOGy TALK

59

IN GOOD MEASURE

IN PRINCIPlE, as per the Institute of Internal Audit (IIA), internal auditing is an independent, objective assurance and consulting activity designed to add value

and improve an organisation’s operations.

It aids an organisation in accomplishing its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

In my view, internal audit needs to adopt a true risk-based approach in order to meet the Audit committee and the stakeholder’s expectations. This is needed more than ever nowadays due to the increased importance of an internal audit department in an organisation.

Not only does it improve the organisation’s operations, “internal audit also enhances the opportunity for companies to reduce risk and identify potential efficiencies and cost benefits across the organisation,” according to IIA board.

Risk-based audit approach A risk-based audit approach (RBA) is the latest ‘best practice’ in the evolution of internal auditing, aimed at maximising the impact of audit by focusing on the major strategic, regulatory, financial and operational risks that confront an organisation.

Partner, inSurance anD accounting aDviSorYServiceS, kPMg in Qatar

YacouB hoBeika

This approach targets high and significant risk areas and helps the auditors achieve maximum value for the organisation from their efforts.

Core challenges of IA functionIn order for a function to work properly, it has to identify its challenges, assess them find a way to overcome or reduce them.

Of the many challenges associated with such a function, below are the key ones along with the method of addressing them;

Need for an integrated assurance model: Internal audit functions should build an integrated assurance model by covering the organisation’s governance, risks and controls. Internal audit must focus on expanding the services provided in order to be viewed as a business partner and source of quality challenge across the enterprise.

Need for continuous auditing and technology: Internal audit functions should significantly enhance their use of technology and analytical auditing techniques. Continuous auditing allows internal auditors to identify emerging risks and issues much earlier and adds value.

IfRS SPECIAL

60 September 2013

INTERNAL AUDIT

KPMG’s Partner Yacoub Hobeika discusses the challenges and requirements needed to establish an effective internal audit function…

Need for the presence of a proactive internal audit role: Internal audit functions should be proactive in their approach. They should not only maintain their focus on compliance aspects but also focus on helping management in building stronger processes and operational effectiveness.

Need for balancing stakeholder expectations: Internal audit functions should balance the expectations of stakeholders and the impact of the different work requirements on internal audit’s resource model. Internal auditors should update the organisational risk profile to reflect the changing environment.

Need for fraud detection and fraud prevention: Internal audit functions should adopt a fraud risk detection and prevention approach as part of their risk based strategy.

Need for the right people: Internal audit functions should achieve the appropriate mix of people and skills. Their staff should be enthusiastic and should have high energy levels. Internal audit should attract, develop and retain the best talent.

Effective practiceInternal audit functions need to effectively demonstrate their values. Some of those key requirements needed are as follows:

1. An internal audit mission and structure that promotes objectivity, consistency and business understanding by performing the below initiatives:

Define mission and role within a wider governance framework

Maintain a reporting line to the Audit Committee or Board of Directors

Receive mandate from the Audit Committee or Board of Directors

Foster Enterprise Risk Management to improve coordination with other risk management groups within the company

Attend Audit Committee meetings regularly and have discussions with the Chairman of Audit Committee, independent of the executive management

Reflect mission, role and required competencies in internal audit staffing strategy

2. An internal audit strategy and plan that is prepared based on a thorough risk assessment process and the execution based on an effective internal audit methodology or framework by completing the below initiatives:

Develop an internal audit strategy for a 3 year period and approve it duly by the Audit Committee

Develop the internal audit strategy using a risk based approach, through business risks assessments, covering the entire value chain, in conjunction with the executive management

Integrate risk assessment into business practices which in turn make the business more adaptable to change and deliver more than one-time value

Follow the internal audit structure methodology: strategic analysis, enterprise risk assessment, internal audit strategy, engagement planning, internal audit execution, exit conference, reporting and issue resolution tracking

Internal audit enhances the opportunity for companies to reduce risk and identify potential efficiencies and cost benefits across its structures.

IFRS SpecIal

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INTERNAL AUDIT

61

3. An internal audit that complies with IIA standards to ensure good quality of its deliverables by making sure of the following:

IIA standards are complied with to ensure high quality services are delivered in a professional manner

Quality assurance programme is in place

Internal audit approach is sufficiently flexible to respond to changes

4. An internal audit that develops and manages appropriate relationships with its key stakeholders and which follows all due communication and administrative protocols by ensuring that agreed and documented processes are in place to help internal audit manage its relationships.

5. An internal audit that adds value to the business by achieving the below initiatives:

Define success criteria, such as cost saving and performance development, for internal audit in conjunction with both the Audit Committee and executive management

Identify key changes occurring both internally and externally, which is basically an ongoing process

Make internal audit a more strategic part of the business by moving away from a compliance role to helping the organisation proactively build strategies

Integrate fraud detection and prevention into internal audit strategies

Use data and analytics to structure audits that can add real value. Those data and analytics can give a focus to audits on what is really important to the company

Be fully capable of evaluating the business, technology, risk management, control and governance challenges in organisations

6. An internal audit report that is risk based and focuses on the root causes of risk and provides practical recommendation by analysing and assessing the below:

Risk centric approach

Root cause and consequence analysis

Root cause categorised into design, operational or system deficiency

Recommendations are root-cause focused

7. An internal audit that proactively follows up on past recommendations by undergoing the following:

Thorough follow up of the development and implementation of the audit plan and procedures

Specific schedule established for timing frequency of follow up audit

Management progress in implementation of recommendations

Effective business practiceIn every practice there are some challenges which would be resolved by identifying the issue, assessing and analysing the situation and working on reducing or even eliminating those challenges to ensure the best practice.

In internal audit, it is about more than policing compliance. It is an opportunity for organisations to tighten their controls and challenge the status quo to reduce risk and identify potential efficiencies and cost benefits across the organisation.

In conclusion, internal auditors should rethink their role in the organisation and think more independently and proactively about the situations. As a recommendation, they should consider the IIA’s professional standard and devote their time and major efforts towards risk management, process improvements and governance.

In addition to that, it is important for internal auditors to strengthen those relationships with the Audit Committee and management and facilitate the Audit Committee’s growing and evolving needs. This will in turn provide value addition to management by being reasonable and practical.

Internal audit needs to adopt a true risk-based approach in order to meet the Audit committee and the stakeholder’s expectations.

62 September 2013

INTERNAL AUDIT

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eBrahiM YakooB

fINANCIAL MODELLING

SOmE PEOPlE dream of great accomplishments, while others stay awake and do them. Accomplishment comes with proper planning.

Thinking out of the box is great but the ideas need to be tabulated to work out a game plan.

Translating a set of hypotheses into financial terms is essential before embarking on a venture. This entails preparation of a financial model.

Financial models are tools for approximate thinking, a way to help transform one's intuition about the future and make numerical predictions.

Reducing uncertaintyFinancial modeling is the task of building an abstract representation of a financial decision-making situation. This is done using a mathematical model designed to represent the performance of a financial asset or portfolio of a business, project, or any other investment. Models can be manipulated and analysed more easily than the real system and hence permit the analyst, in effect, to carry out experiments. They reduce uncertainty about the future of the business by introducing statistical data about relationships and trends.

DePutY general Manager, haBiB Bank liMiteD

Financial models can be constructed in many ways, either by the use of computer software/spreadsheets, or with a pen and paper. What's most important, however, is not the kind of user interface used, but the underlying logic that encompasses the model. A model, for example, can summarise future company returns (profitability) or it may help estimate market direction.

Businesses use financial models to understand the potential impact of a variety of initiatives, ranging from the launch of new products or services to equipment investments or mergers and acquisitions. Financial models are used in business plans, pro forma financial reporting, and even applications for bank loans by businesses.

Financial models are valuable tools that can help managers with decision-making, but these tools can also pose challenges, particularly when forecasting new products and services.

ChallengesPoorly defined product strategy, little or no historical data on sales or cost trends, and a mistrust of model assumptions are just some of the challenges that can make it difficult to forecast finances effectively.

IfRS SPECIAL

64 September 2013

BUSINESS INSIGHTS

Ebrahim Yakoob enlightens on a significant and easy approach to grow company’s profits…

Tips for effective financial modelingBefore building your model, make sure that you understand the key decisions your model will support, as well as who will be using it, and what criteria will be used to measure its success.

Following are some of the tips for effective financial modeling:

1. Begin with the end in mindFirst, make sure that you understand the key decisions that the model will be used to support, who will be using the financial model, and what criteria will be used to measure the model's success.

2. Identify the goals Clearly identify the purpose of the financial model. Often, management will want to use a model to find out the impact of a new product on company profitability. Management may alternatively want to evaluate a product's unique role within an overall product portfolio.

3. Identify and meet with stakeholders Involve managers from product development, marketing, sales, production, customer service, and other relevant departments. Conduct introductory one-on-one meetings or hold a group kickoff meeting with these stakeholders

to explain the modeling project goals and to ask for input about key sales, cost drivers, and risks.

4. Understand the company's lexicon Every company has a unique set of terms used to communicate and evaluate financial performance. This includes evaluation metrics such as return on investment (ROI), internal rate of return (IRR), net present value (NPV), and market share. Even the definitions of simple terms (such as operating income and gross margin) can be perceived differently, depending on the department or organisation. Make sure that key stakeholders are on board with the metric terms and methods that are used in the model.

Core structure of financial modelFinancial models for a new product or service are often custom-developed in spreadsheets and take into consideration the unique characteristics of that product's market, competitive situation, and cost structure. Avoid wasting precious time during this time-consuming process by following these guidelines:

Outline the model structure Diagram the steps that the model will take to generate its output, including the interdependencies of model components, mathematical equations used for key components, and where user interaction occurs. Your model outline can be as simple as a sketch on a piece of paper.

Weigh costs and benefits of building a complicated model Don't be tempted to build a model that considers every possible detail and scenario. Keep in mind that forecasting future performance is not an exact science, no matter how detailed the model. And the potential benefits of a financial model may become compromised if it is too onerous to use.

Understand product demand Make sure that you understand customer appetite for your product, given different feature combinations and price points. Incorporate price elasticity of demand into your model to measure how price variations affect customer purchases. Understanding customer demand can be a challenging part of financial modeling, and you may need to work with marketing research or outside consultants to fully address this area.

Financial models can be constructed in many ways, to help summarise future company returns (profitability) or to aid in estimating market direction.

IFRS SpecIal

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BUSINESS INSIGHTS

65

A Chartered Accountant, Ebrahim Yakoob conducts public courses in the areas of finance, MS Office, valuation modeling, management/cost accounting and audit.

Categorise costs Break down costs associated with your product into different categories to aid data analysis and forecasting. Examples of cost categories include:

• Variable costs, including direct materials and direct labor per unit of production.

• Fixed costs, such as advertising and product manager salaries.

• Mixed costs, such as communications.

• Step costs, such as compensation for customer service representatives, each of whom can handle only a certain number of customer inquiries.

• You also need to understand how overhead costs from the parent company will be allocated to the product.

Perform scenario analysisFinancial models involve many assumptions as they attempt to forecast future performance. Models should allow for testing a number of business situations and their potential impact on — for example, profitability and market share.

Identify key variablesChoose key variables that the user can change in the model to drive different operating scenarios. Examples of these key variables are unit prices, unit costs, price elasticity of demand, and market share. For example, perhaps your team feels strongly that unit costs and fixed costs will remain relatively stable, so you'll want to focus on the impact that different unit prices have on the product's demand and profitability.

Sensitivity / Understand the risks Gain an understanding of the risks involved in

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66 September 2013

BUSINESS INSIGHTS

a potential product launch. For example, if a key distributor relationship is not established, what impact can that have on sales? If it is a significant impact, that risk should be turned into a model variable and evaluated in different scenarios.

Modeling with Spread sheetsUsers can alter inputs to run different scenarios, but they often need to hard-code changes in the model input section and save those scenarios as separate files. Spreadsheet features, such as the Scenario Manager and Spinner features in Microsoft Office Excel, help develop and evaluate multiple scenarios on the fly.

Making intuitive models Ideally, a financial model will be distributed to stakeholders so that they can use it to test different scenarios and to help in their planning activities. Make sure that your model is easy to use so that those who weren't involved in building it will still be able to derive value from it.

1. Color-code for easy interpretation Key variables, such as unit prices, unit costs, or required head count can be highlighted by using cell shading or font color. For example, red shading or font colors might be used for cells that need user input. Areas on the worksheet that contain formulas can also be color-coded — perhaps using gray for cells that contain formulas and therefore should not be altered.

2. Protect your model Use the protection feature of the spreadsheet program to prevent user tampering that might have a ripple effect on the rest of the financial model.

3. Use multiple worksheets Split key sections of the model into separate worksheets (all within the same spreadsheet file). For example, your model might have

different worksheets for user input, output, a summary of data elements (for instance, outline of revenues, costs, income, expected returns, and market share), and supporting graphs. Be sure to use logical names for each worksheet tab.

4. Use comments and name cells Use the comments function to add an explanation to a particular cell where you may have a formula that merits description. For instance, in Excel, you can insert a comment by clicking the Insert menu, clicking Comment, and then entering your text. Be sure to use clear, helpful names for column and row headers and titles for charts, tables, and graphs.

5. Provide helpful graphics As the output of the model will likely be used in management presentations, consider including graphs in the model. For instance, a breakeven point graph that illustrates fixed costs, variable costs, total costs, and total revenues over time can help management find out when the product might break even, and the graph can also outline short-term funding requirements.

Conclude the financial modelWhen the stakeholders have been engaged, the financial model created, and the scenarios developed, wrap up the project by making your recommendations and handing off the model to the people who will use it.

1. Document Key assumptions Develop a brief report that summarises how the model was constructed and that includes worksheet descriptions, key formulas, limitations, and a list of stakeholders who participated in developing requirements. This documentation should enable a person who was not involved in the model development to use the model effectively.

2. Test the model As part of the quality control/testing process for your model, try to break the model by creating scenarios that stretch its capabilities. Sometimes it is best to get another person who wasn't involved in the model development to test the model.

3. Conduct a final presentation and hand off the model Finally, present the model assumptions, findings, and your recommendations to the stakeholders.

Businesses use financial models to understand the potential impact of a variety of initiatives, ranging from the launch of new products or services to equipment investments or mergers and acquisitions.

IFRS SpecIal

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BUSINESS INSIGHTS

Try to resist pressure to make the new product forecast more positive than the most likely scenario indicates. If the numbers don't add up for developing and launching the proposed product, make recommendations, such as lowering unit costs or increasing advertising, that might improve the product's outlook. Finally, hand off the model to the stakeholders who will need to use it.

Financial modeling is critical to determine whether to build and launch a new product or service. To create an effective financial model, make sure that you outline the model structure, identify key drivers, allow for scenario analysis, and make the model intuitive and easy to use.

As you develop your financial model, communicate with stakeholders so that the final model meets all users' needs and expectations. With these basic building blocks in place, you'll ensure that your model will become a valuable tool for business decision-makers.

What makes a good financial model using Spreadsheet?

• Flexibility: Design the model so that it can be modified easily. Tip: any assumption that was made to create the model, such as revenue growth, or discount rate, should be easy to change

• Visibility: Create the model under the premise that anyone should be able to review/audit and understand it quickly. Tip: refrain from embedding hard coded data in formulas or hiding/grouping

• Organisation and Design: Organise workbook so that worksheets flow together logically. Tip: group all assumptions on separate tab; name all other tabs according to the information or

function each contains (for instance income statement, balance sheet, depreciation schedule, output)

• Depth: Construct model to reflect the reality of the business while making as few simplifying assumptions as possible. Tip: build separate schedules for capital expenditures, depreciation, debt

• Formatting: Use formatting for a purpose. Tip: use one color for hard coded data (for instance, constants or historical data), another for links and a third for formulas)

• Realistic Depiction of Business Operations: Choose assumptions that are reasonable and defensible. Tip: most assumptions will be determined by a senior banker or researcher, but research or industry reports can provide guidance

What makes a good model, then? The best ones use only a few variables and are explicit about their assumptions. Like the Black-Scholes model for options valuation - now often maligned - is a model for models. It is clear and robust.

Clear because it is based on true engineering: It gives you a method for manufacturing an option out of stocks and bonds, and it tells you what, under ideal circumstances, the option should be worth. The world of markets doesn't exactly fulfill the ideal conditions Black-Scholes requires. But the model allows an intelligent trader to see what real-world dirt has been swept under the rug - and to adjust his or her risk estimates accordingly.

Concluding remarks Financial Modeling is a very effective tool for setting the direction. A model, however beautiful, is an artifice. It gives the direction which may help but may not be 100% accurate.

To confuse the model with the world is to embrace a future disaster in the belief that humans obey mathematical principles. Though models should be boldly used to estimate value, reality should never be sacrificed for elegance without understanding the assumptions of the model and understanding the practicality of its application. Financial modelers need to clearly mention assumptions and oversights.

Ideally, a financial model will be distributed to stakeholders so that they can use it to test different scenarios and to help in their planning activities. make sure that your model is easy to use.

68 September 2013

BUSINESS INSIGHTS

SUBSCRIBE NOW TO THE REGION'S FIRST MIDDLE EASTERN FOCUSED ACCOUNTANCY MAGAZINE.Complimentary subscription for any accountants currently working or studying in the UAE.

Every month we will bring you the latest news, expert opinion, interviews with regional influencers and policy makers, as well as CPD advice, job opportunities and moves.

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SALES EDITORIALChristopher Stevenson Joyce NjeriTel 04 440 9138 Tel 04 440 9140Email [email protected] Email [email protected]

yOUR CHANCE TO SHINEThis year’s Association of Corporate Treasury Middle East 'Deals of the Year Awards' have been officially launched…

HA S yO U R t e a m p u s h e d t h e boundaries of treasury over the past year? Perhaps it has pulled off an eye-watering funding deal

or put in place an innovative supply chain finance solution?

If so, this is the time for you to share your successes with the Association of Corporate Treasury Middle East (ACTME) network and your treasury peers.

We are delighted to announce that the ACTME Deals of the Year Awards will be returning for 2013. This will be the fifth year that the awards have taken place and they exist to recognise excellence across a wide range of treasury activities happening in the Middle East. They also aim to develop the knowledge and expertise of treasury, finance and risk professionals in the region.

Last year’s winners included Dubai-based shopping centre developer Majid Al Futtaim Group, which issued $400 million in Sukuk; Etihad Airways, which created a ground-breaking secured shareholders’ loan for Air Berlin; and Dolphin Energy, which raised $1.3 billion in senior secured project bonds to refinance existing commercial loans. The treasury teams of marine terminal operator DP World and Kuwaiti conglomerate Alghanim landed the treasury team of the

year awards in the large and small categories respectively.

CategoriesThe awards cover the period of 1 October 2012 until 1 September 2013 and there is no limit on the number of deals that can be nominated in any or all categories. All sizes of deal and company will be taken into consideration, but the awards are only open to corporate organisations (that is, not banks, financial institutions or government departments). The categories are as follows:

Corporate Finance Deal of the YearCovers all types of activity related to funding, raising capital, risk management and Mergers & Acquisitions.

Treasury Management Deal of the YearRecognises excellence in cash management,

CORPORATE TREASURy

70 September 2013

This will be the fifth year that the ACTmE awards have taken place and they exist to recognise excellence across a wide range of treasury activities happening in the middle East.

supply chain finance, trade finance and other core treasury activities.

Large Corporate Treasury Team of the YearAcknowledges outstanding teamwork – for example, new system implementation, treasury reorganisation and corporate governance – in larger organisations.

Small/Medium Corporate Treasury Team of the YearAcknowledges outstanding teamwork – for example, new system implementation, treasury reorganisation and corporate governance – in smaller organisations.

How the awards are judgedA panel of corporate treasury practitioners will judge the awards according to the criteria of ‘excellence in corporate treasury’ – that is, sound treasury management, efficient pricing,

optimal or innovative structure and relative success in prevailing market conditions.

The team awards will be judged on sound treasury management, strong technical knowledge and ability, innovation in technology and systems, and the ability to build strong relationships with advisers and bankers.

What next?Anyone can nominate, so to submit your own deal or treasury team – or a client’s deal or treasury team – for an ACTME award, please visit www.treasurers.org/actmiddleeast/awards/2013 to download a nomination form. Entries close on Thursday 5 September 2013.

The winners will be announced at a glittering cocktail and awards ceremony in Dubai on 26 November 2013 at the ACT Middle East Annual Conference and their feats will be written up in detail in the winter 2013 issue of the Middle East Treasurer.

Good luck.

The ACT is delighted to announce the dates of the next Middle East annual conference. Currently in its fourth year, this flagship event for the region builds upon the series of events we run across the GCC, providing the perfect platform for the region’s treasury and finance community to share and promote treasury best practice. Look out for the preview programme in May. For a glimpse of what to expect from this year’s annual conference take a look at the 2012 conference overview here: www.actmiddleeast.org/annualconference.Special rates are available for all Accountant Middle East readers. To submit your interest in sponsoring, exhibiting, attending or speaking at this year’s ACT Middle East Annual, simply visit the website: www.actmiddleast.org/annualconference2013 or email [email protected].

ACT Middle East Annual Conference 201326-27 November 2013 |The Ritz-Carlton, DIFC, Dubai

A panel of corporate treasury practitioners will judge the awards according to the criteria of sound treasury management, efficient pricing, optimal or innovative structure and relative success in prevailing market conditions.

71

CORPORATE TREASURy

2% Uae’s comPUlsory ProPerty registration charge on a ProPerty worth $3.5 million

GOVERNMENTS EyE PROPERTy

TAXES

THE UAE levies some of the lowest property purchase taxes and charges on prime properties of any major country, while other governments are

targeting wealthy property buyers with higher property purchase taxes in an attempt to help plug their fiscal deficits, shows research by tax and audit firm UHy.

UHY’s research shows that the UAE’s 2% compulsory property registration charge on a property worth $3.5 million is far lower than the international average cost of taxes and charges for a property of the same value, which is now 3.4% (see table).

Prime properties are seen as attracting a large proportion of overseas buyers.

David Burns, Partner at UHY Saxena, UHY’s member firm in the UAE explains: “The UAE offers some of the most competitive and attractive property purchase charges in the world, which is bound to have a positive effect on its housing market and in attracting in highly skilled and wealthy migrants.”

“They are taking a very different approach to many other national and regional governments who have

been desperate to plug their deficits. These other countries have opted for the populist way to do this by levying new top rates of stamp duty on the purchase of the most expensive properties, which often attract foreign buyers.”

“While some markets might be sufficiently robust to absorb this, they risk killing off their property market altogether along with the added benefits that wealthy buyers and an active property market bring to the economy, from spending on refurbishments, to legal fees and employing domestic staff. Once High Net Worth individuals leave, it is hard to attract them back.”

UHY also point out that many European economies that do not target prime properties in particular still have relatively high overall average property purchase taxes, averaging nearly 4.5% for France, Italy, Austria, the Czech Republic and Germany.

Less expensive propertiesUHY points out that the UAE’s flat 2% property registration charge is also lower than the rate levied in many other countries for less expensive properties. For example, the international average tax rate for more modest properties with a purchase price of $150,000 is 2.6%.

The UAE has one of the lowest purchase taxes for prime properties of any major country, according to a new report authored by audit firm UHY.

TAX wATCH

72

Levies on purchases of prime assets to help

plug fiscal deficits, research by tax and audit

firm UHY states…

September 2013

UHY says that by minimising the costs of buying a new home, these lower property purchase taxes encourage labour market mobility. It cites the example of North America, which is renowned for its flexible and mobile labour market, where property purchase taxes are typically below 1% in the USA* and no higher than 1.9% for the most expensive homes in Canada.

David Burns adds: “By keeping the additional costs on the purchase of a property very low, people considering moving for a new job are encouraged to take the plunge, especially those with families who might reasonably expect to own their own property.”

“So employers don’t have to offer such significant pay rises to lure talented staff to a new location, and workers feel they can take up the opportunity to move into a new role which fully utilises their skills and experience.”

“High levels of stamp duty are an easy fiscal option, but in a prolonged recession, they may be a short-sighted one.”

UHY tax professionals studied tax and compulsory property registration charges in 25 countries across its

“UAE’s competitive property purchase charges is bound to have a positive effect on the country’s housing market and in attracting in highly skilled and wealthy migrants” - David Burns, Partner - UHY Saxena

For a property of USD3,500,000

For a property of USD150,000

Amount of tax and charges paid

% of property price Amount of tax and charges paid

% of property price

India $ 280,830.00 8.0% India $ 12,830.00 8.6%

Spain $ 245,000.00 7.0% Spain $ 10,500.00 7.0%

UK $ 245,000.00 7.0% Argentina $ 7,650.00 5.1%

Australia $ 185,830.00 5.3% France $ 7,640.00 5.1%

Argentina $ 178,500.00 5.1% Germany $ 7,500.00 5.0%

France $ 178,150.00 5.0% Austria $ 6,900.00 4.6%

Germany $ 175,000.00 5.0% Czech Republic $ 6,050.00 4.0%

China $ 165,030.00 5.0% Mexico $ 5,410.00 3.6%

Austria $ 161,000.00 4.6% China $ 4,580.00 3.0%

Israel $ 153,340.00 4.4% Italy $ 4,940.00 3.0%

Czech Republic $ 140,050.00 4.0% Romania $ 3,820.00 2.5%

Japan $ 113,930.00 3.3% Australia $ 3,660.00 2.4%

Italy $ 105,440.00 3.0% Malaysia $ 3,000.00 2.0%

Malaysia $ 105,000.00 3.0% Netherlands $ 3,000.00 2.0%

Mexico $ 83,220.00 2.4% UAE $ 3,000.00 2.0%

Netherlands $ 70,000.00 2.0% Uruguay $ 3,000.00 2.0%

UAE $ 70,000.00 2.0% Japan $ 1,810.00 1.2%

Uruguay $ 70,000.00 2.0% Ireland $ 1,500.00 1.0%

Canada $ 66,160.00 1.9% Canada $ 1,230.00 1.0%

Ireland $57,020.00 1.6% USA $ 1,110.00 0.7%

Romania $ 55,680.00 1.6% Estonia $ 170.00 0.1%

USA $ 28,000.00 0.8% UK $ - 0.0%

Estonia $ 3,320.00 1.0% Israel $ - 0.0%

Russia $ - 0.0% Russia $ - 0.0%

Slovakia** $ - 0.0% Slovakia** $ - 0.0%

international network, including all members of the G7, as well as key emerging economies. UHY calculated the total taxes and compulsory fees payable to local, state and municipal government on property purchases of up to $3.5million.

NotesThe calculations assume that both buyers and sellers are private individuals from the country concerned. Special exemptions, for instance, for new properties, are not taken into account.

*Figures for Australia, Canada, Germany, India, Mexico, Spain and USA are national averages. State and municipal taxes and charges vary.

Russia charges a nominal fee for the registration of new property purchases. The UAE charges a compulsory 2% of the property price to register a property transaction at the local land department. The total taxes and fees for Austria include a 1.1% land register fee.

**Slovakia abolished real estate transfer taxes in 2005.

TAX wATCH

73

Christopher Taylor has been appointed Chief Executive Officer of Abu Dhabi Finance. He will be responsible for the overall strategy

execution, leadership and management at Abu Dhabi Finance. Chris is an experienced Chartered Accountant with local and international financial services experience, having spent six years in the UAE, and with nearly two decades diverse industry experience across the retail, commercial, and corporate banking and insurance sectors abroad. Prior to joining Abu Dhabi Finance, Chris was Head of Internal Audit at the National Bank of Fujairah in 2007, and he was Director of Compliance and Operational Risk Management for Retail Banking Operations in Europe for Bank of America, where he exhibited his leadership skills as he directed a team of 60 people across three countries. He holds a BA Hons in Geography from Liverpool University, UK, and is an ICAEW-qualified Chartered Accountant. Chris was honoured as the ‘ICAEW Middle East Chartered Accountant of the Year’ in 2012.

Qatar National Bank, the largest Middle East lender by assets, has appointed Ali Al Kuwari as acting Chief Executive Officer after a recent government reshuffle

that saw its previous head named the Gulf state’s finance minister. Al Kuwari was the chief business officer at the acquisitive lender, leading the bank’s main divisions including corporate, retail and international banking businesses. Ali Al Emadi, QNB’s previous chief executive, who became the Gulf state’s new finance minister following a cabinet reshuffle in June, was named chairman of the bank’s board of directors.

Jay Raney joins Grant Thornton UAE as an Audit Partner. Prior to this, Jay worked for KPMG in Canada as an Audit Partner and has

spent over 14 years with a Big Four firm of which four were spent within the UAE. During his time at KPMG, he serviced a diverse portfolio of clients which includes mid-to-large sized public listed companies under IFRS reporting, while also working on SEC listed clients with US GAAP and SOx 404 reporting requirements. Jay also headed an internal audit department where he serviced the internal audit requirements of non-audit based clients. He brings an extensive level of expertise gained from the oil & gas, information communication and construction sectors. He has invaluable sector expertise and professional services experience which he gained within the Middle East and Canada.

Dubai Islamic Bank (DIB), the largest sharia-compliant lender in the Emirate, has appointed Adnan Chilwan Chief Executive Officer.

Chilwan, who was previously deputy CEO at the bank, replaces Abdullah Al Hamli who was named managing director. The management reshuffle at DIB comes when the bank is preparing for renewed growth, after it set aside about AED 5 billion against bad loans following the 2009-2010 crash of Dubai’s real estate market. DIB, which is in the process of acquiring Islamic mortgage lender Tamweel, became the second Gulf bank to issue a hybrid perpetual sukuk when it priced in March a $1 billion Islamic bond to boost its Tier 1 capital ratio.

Nasdaq Dubai, the Middle East’s international exchange, has announced that it has appointed Hamed Ahmad Ali as Chief

Executive Officer, in order to strengthen its strategy of growth and innovation. The appointment follows Ali’s success in developing the exchange in the role of Acting Chief Executive Officer since August 2012. Activities at Nasdaq Dubai in 2013 include listing a number of Sukuk and conventional bonds and preparing innovative plans for further expansion in addition to listing of equities. “As the exchange expands, we look forward to welcoming a variety of new listings including Initial Public Offerings, Sukuks and conventional bonds,” Ali said after the announcement of his new role.

The Board of Directors of Commercial Bank of Qatar has announced the appointment of Abdulla Saleh Al Raisi to the role

of Chief Executive Officer. Al Raisi joined the bank in 1998 and worked in both the Retail and Corporate banking divisions before being appointed as Deputy CEO in March 2007. Andrew Stevens, will continue as the Group Chief Executive Officer with Al Raisi’s appointment allowing Stevens to focus on driving the Bank’s international strategy as well as the management of the investments the Group has made in National Bank of Oman, United Arab Bank, and most recently, Alternatifbank in Turkey, which received regulatory approvals from the Banking Regulation and Supervision Agency and the Capital Markets Board of Turkey last month.

APPOINTmENTSif you have made a new appointment, promotion or have any relevant hiring

news, please email the details and a photo to [email protected]

74 September 2013

Fujitsu STYLISTIC Q702Attach or touch – the hybrid business talentThe Fujitsu STYLISTIC Q702 is the perfect choice for mobile professionals looking for high-performance without compromising on versatility. With its attachable keyboard option, this lightweight hybrid tablet PC enables easy content creation and consump-tion. Either use it as a tablet when traveling or attach the keyboard and convert the STYLISTIC Q702 into a traditional notebook for additional usability in the offi ce. The 29.5 cm (11.6-inch) display with pen and fi nger input support offers you excellent fl exibility while optional 4G/LTE completes the picture of a professional tablet.

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INDUSTRy APPOINTMENTS

Fujitsu STYLISTIC Q702Attach or touch – the hybrid business talentThe Fujitsu STYLISTIC Q702 is the perfect choice for mobile professionals looking for high-performance without compromising on versatility. With its attachable keyboard option, this lightweight hybrid tablet PC enables easy content creation and consump-tion. Either use it as a tablet when traveling or attach the keyboard and convert the STYLISTIC Q702 into a traditional notebook for additional usability in the offi ce. The 29.5 cm (11.6-inch) display with pen and fi nger input support offers you excellent fl exibility while optional 4G/LTE completes the picture of a professional tablet.

■ Up to Intel® Core™ i5 vPro™ processor■ Windows 8 Pro 64-bit■ Notebook and versatile tablet PC in one -

starting from only 850 g, dual digitizer for pen and fi nger input, and optional attachable keyboard to convert the tablet into a traditional notebook

■ Ultimate security with Advanced Theft Protection, fi ngerprint sensor and optional Trusted Platform Module (TPM)

■ Maximum connectivity with optional embedded 3G/UMTS or 4G/LTE (incl. GPS), WLAN and Bluetooth

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Fujitsu recommends Windows 8.

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A world leAder of the AccountAncy And finAnce profession

once again, the very best talent in the world of accountancy and finance will be celebrated by icAew at a stellar awards ceremony.

icAew is a professional membership organisation supporting over 140,000 chartered accountants around the world. And, on wednesday 11 december 2013, at the ritz carlton in Abu dhabi, we’ll be recognising excellence in twelve categories featuring: cfo of the year, corporate finance deal of the year and the internal Audit excellence Award

with an impressive line up of speakers, special guests and entertainment, it all adds up to a truly memorable evening.

to submit a nomination or for more information, visit icaew.ae/awards

nominations close on 1 november 2013

THE MIDDLE EAST ACCOUNTANCY AND FINANCE EXCELLENCE AWARDS WEDNESDAY 11 DECEMBER 2013 AT THE RITZ CARLTON, ABU DHABI

ACCOUNTING FOR EXCELLENCE

Platinum sponsor Gold sponsor

400595_ICAEW_MiddleEast_Ad_NBAD_DEVERE_207x270_AW.indd 1 21/08/2013 11:01

accountant middle east - september 2013

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