accounting and business_february 2012 (irish edition)
DESCRIPTION
The Irish edition of A&B magazine for professional ACCA/FCCA qualified accountants.TRANSCRIPT
TAKINGTHE PULSE
ACCA’S SURVEY OF BUSINESS SENTIMENT
NEW ORDER THE RISE OF THE ASIA PACIFIC ECONOMIES
SECURING FINANCE FOCUSED BUSINESS PLANNINGOUTSOURCING NO TURNING BACK
CPD STATEMENTS ACROSS FRONTIERS?
ALL IN IT TOGETHERTHE ROLE OF THE FINANCE PROFESSIONAL IN MANAGING RISK
TALKING TRANSFERS GERARD FEENEY FCCA ON A NEW DEVELOPMENT IN IRISH ACCOUNTING
TAX AUDIT TIPS PRACTICAL ADVICE LIMITING LIABILITY ADVICE FOR PARTNERSHIPSS202 AND AUDITOR LIENS THE NEED FOR REFORM
ABIETHE MAGAZINE FOR BUSINESS AND FINANCE PROFESSIONALS
ABIE IE.A
B A
CC
OU
NTIN
G A
ND
BU
SINE
SS 02
/20
12
ACCOUNTING AND BUSINESS IRELAND 02/2012
CPDget verifi able cpd points by reading technical articles
AB_Feb_Cover_2012.indd 1 23/01/2012 14:02
Bank of Ireland 192x260.indd 1 13/12/2011 15:09:55
The The thinking behind the search
Industry & Commerce / Financial Services
Senior Project Accountant Technology Our client, a market leading Irish multinational, requires a highly commercial ACCA to assist in the review, setting of controls and structures for business partnering as the Group expands across several markets. The role will involve working with fi nance and management in various regions, co-ordinating group objectives whilst supporting both fi nance and commercial local teams. Will suit an ACCA with an internal audit / fi nancial control background. Salary €70 – 85,000 + benefi ts
Financial Reporting Manager Plc Our client, a highly reputable plc wishes to appoint a Financial Reporting Manager within their Group Finance function. With strong technical understanding and experience in consolidation, you will be comfortable operating within a strict deadline reporting environment. You will have responsibility for the delivery of the Group’s fi nancial statements under IFRS including interpretation of accounting standards and resolution of complex accounting and fi nancial reporting issues. Salary €60 – 65,000 + benefi ts
Senior Management Accountant FMCGCommercially astute ACCA required for a growing division of a large FMCG business. As a key member of the team, you will have a leading role in the preparation of monthly management accounts and production of in-depth KPI reporting for presentation to management. Reporting to the CFO, you will have a strong focus on the annual budget, fi nancial analysis and involvement in quarterly forecasting. You will be ACCA qualifi ed with up to 3 years’ PQE in a commercial fi nance team. Salary €55 – 65,000 + benefi ts
Tax Accountant TechnologyUS fi rm with a large international operation require a Tax Accountant to join their international accounting function based in Dublin North. Reporting to the International Financial Controller, you will have a Big 4 / Top 10 training, ideally within Corporate Tax with exposure to cross border transactions. Salary €50 – 60,000 + benefi ts
Revenue Accountant TechnologyLeading international technology fi rm with operations in Dublin wishes to appoint a Revenue Accountant. Providing support, fi nancial control, reporting and assurance to project managers across the business, you will be responsible for communicating this fi nancial performance to senior management. Strong analytical skills are required along with the ability to meet strict deadlines within a fast paced environment. Will suit ACCA with 2 – 3 years’ PQE experience in revenue recognition and US GAAP. Salary €50 – 55,000 + benefi ts
Financial Accountant BankingOur client, a Financial Institution in Dublin South, is seeking to recruit an ACCA to join their Group Finance function. You will be required to deliver weekly, monthly and annual fi nancial information including year-end statutory accounts. This opportunity will suit a newly qualifi ed ACCA practice trained, technically strong and eager to gain commercial experience. Strong analytical skills and advanced excel will also be required. Salary €45 - 55,000 + benefi ts
Practice
Audit Director This is a unique opportunity for a strong Audit Director to join a highly reputable, large fi rm, based in Dublin city centre. The client base ranges from small to large sized indigenous and international corporates. Having secured a signifi cant amount of new assignments recently, the Audit Division is expanding their senior
management team. As Audit Director, you will have strong technical ability, client relationship management skills and experience in managing junior colleagues. This role is an ideal opportunity for a Senior Audit Manager or Audit Director eager to progress their career towards Partner level within a strong international practice fi rm. Salary €90 – 100,000 + benefi ts
Tax ManagerA leading professional services fi rm currently seeks an experienced tax professional to join their Dublin offi ce. The ideal candidate will have a number of years’ experience managing a large client allocation and will have an ACCA and / or Professional Tax qualifi cation. There is strong evidence within this practice of the management ethos of career development for progressive employees. The role offers strong “upward” career progress. Salary €70 – 85,000 + benefi ts
Audit Assistant ManagerHighly reputable accountancy practice seeks an experienced ACCA professional to join their Audit Team in their Dublin offi ce. This is an exciting opportunity for an ambitious professional wishing to fast track their career with a department that is experiencing signifi cant growth and winning exciting new projects. The role will involve assisting in managing a portfolio of clients across a variety of sectors. Salary €50 - 60,000 + benefi tsAudit Seniors Highly reputable accountancy practice seeks newly qualifi ed ACCA’s to join their audit division to work closely with the management team. Joining an established team with responsibility for a diverse and varied portfolio of clients, you will have a strong technical understanding of accounting fundamentals. You will be proactive in your approach to all engagements to ensure minimisation of risks and provide support across all business functions. Salary €35 – 45,000 + benefi ts
Corporate Finance ProfessionalHighly reputable accountancy practice seeks a Corporate Finance professional to join their Team in their Dublin offi ce. This is an exciting opportunity for an ambitious professional wishing to progress within a department that is experiencing signifi cant growth and winning exciting new projects. Will suit ACCA’s who would have an interest in the Corporate Finance area. Salary €50-60,000 + benefi ts
Regional & International
Senior Management Accountant FMCG Co. Cavan Corporate Accountant FMCG Munster Internal Auditor Plc Regional Group Reporting Accountant Plc Co. Cavan
Financial Controller CaribbeanThis position, within a highly reputable fi rm forms an integral part of the Senior Management team where the successful Financial Controller will operate at Group level and have responsibility for all aspects of the Finance function and fi nancial reporting at Group level. You will be required to hire, train and ensure the day to day management of the Finance team, provide monthly, quarterly and annual fi nancial reporting to the Shareholders, actively participate in the company fi nancial matters and maintain relationships with fi nancial institutions. In-depth experience of consolidation is a key focus for this position and operational cash-fl ow management and balance sheet control will be essential elements of the role. Will suit FCCA at Finance Director level eager to gain international experience. Salary € 150 – 200,000 + benefi ts
Lincoln 192x260 Jan/Feb.indd 1 18/01/2012 17:19:20
AB_Feb_Cover_2012.indd 2 23/01/2012 14:02
Ireland introduced its transfer-pricing regime in 2010 and, in this issue of AB Ireland, Gerard Feeney FCCA offers an insider’s view of how the process has developed since then. Of interest to practitioners is our feature on preparing clients for a tax audit, while the ever-topical issue of outsourcing is addressed in the corporate section. I’ve highlighted some articles you shouldn’t miss below
LEVERAGING ACCA’S LINKSIrish exporters are predicting a difficult 2012 and, while expected growth of 3% would be greeted with delight if it applied to our domestic economy, there is a sense that Ireland is being hampered by over reliance on the ‘old reliables’ when it comes to export markets.
For most of our history as an independent state, that old reliable was our nearest neighbour and it has taken a generation of EU membership for the reality to sink in that continental Europe is also a legitimate target for export growth.
Many companies, once they begin the process in earnest, are surprised to find European business cultures perfectly amenable to them and the products and services they offer robustly competitive.
With the eurozone now struggling to shake off further recession, Irish exporters are rightly being pointed to the opportunities in developing economies, and particularly the BRIC countries, to sustain the momentum of growth that has been the brightest feature of our economy over the last three years (see page 11). Of course, it should have taken no crisis at all for us to recognise the centrality of these economies and, in difficult times, we do not have the luxury of a generation to adapt our mindsets to the opportunity.
CFOs and business advisers will play a pivotal role in orienting Irish exporters to new opportunities. ACCA has a significant international dimension, both in terms of membership here in Ireland and networking opportunities abroad. This is no year to hover in comfort zones. Instead, we should look to see how we can leverage the potential of this unique organisation for the benefit of our own businesses and the wider economy.
Donal Nugent, [email protected]
TALKING TRANSFERSGerard Feeney FCCA on a development that has implications for the country as a global business base.Page 12
TAX AUDITPreparing for a tax audit can be a stressful time for you and your client. Some practical advice on how to manage it well.Page 24
LIMITING LIABILITYThe absence of limited liability partnerships is leaving Irish accountants exposed to a range of issues.Page 26
AUDITOR LIENSS202 of the Companies Act 1990 is in need of reform as the wording is problematic, argues Andrew Feighery. Page 40
SECURING FINANCEThe value of a focused business plan in obtaining finance for all types of businesses is looked at.Page 48
Editor’s choice 3
TALKING TAX AUDIT
AB_Feb_2012.indd 3 23/01/2012 12:09
Audit period July 2009 to June 2010138,255
Features12 Talking transfers Gerard Feeney FCCA on a new development in Irish accounting
16 Taking the pulse A global assessment of business sentiment undertaken by ACCA
18 All in it together The role of fi nance professionals in risk management
VOLUME 3 ISSUE 2
Ireland editor Donal [email protected] +353 (0)1 289 3305
Editor-in-chief Chris [email protected] +44 (0) 20 7059 5966
Design manager Jackie [email protected] +44 (0) 20 7059 5620
Designers Robert Mills, Barry Sheehan
Production manager Ciaran [email protected] +353 (0) 1 289 3305
Advertising John [email protected] +353 (0) 1 289 3305
Bryan [email protected] +353 (0) 1 289 3305
London advertising James [email protected] +44(0)20 7902 1224
Head of publishing Adam [email protected] +44 (0) 20 7059 5601
Printing RV International
Pictures Corbis
ACCAPresident Dean Westcott FCCADeputy president Barry Cooper FCCAVice-president Martin Turner FCCAChief executive Helen Brand OBE
ACCA IrelandPresident Ronnie Patton FCCADeputy president Tom Murray FCCAVice-president Diarmuid O’Donovan FCCAHead - ACCA Ireland Liz HughesTel +353 (0)1 498 8900 Fax +353 (0)1 496 [email protected]@[email protected]
Accounting and Business is published by ACCA 10 times per year. All views expressed within the title are those of the contributors.
The Council of ACCA and the publishers do not guarantee the accuracy of statements by contributors or advertisers, or accept responsibility for any statement that they may express in this publication. The publication of an advertisement does not imply endorsement by ACCA of a product or service.
Copyright ACCA 2011
Accounting and Business. No part of this publication may be reproduced, stored or distributed without the express written permission of ACCA.
Accounting and Business Ireland is published by IFP Media, 31 Deansgrange Road, Blackrock, Co Dublin, Ireland +353 (0)1 289 3305
www.ifpmedia.com
ACCA Ireland
9 Leeson Park Dublin 6tel: +353 (0)1 498 8900www.accaglobal.com/ireland
AB IRELAND EDITIONCONTENTS FEBRUARY 2012
AB_Feb_2012.indd 4 23/01/2012 12:10
CPDAccounting and Business is a rich source of CPD. If you read it to keep yourself up to date, it will contribute to your non-verifi able CPD. If you read an article, learn something new and apply that learning in some way, it will contribute to your verifi able CPD. Each month, we also publish an article or two with related questions to answer. If they are relevant to your development needs, they can also contribute to your verifi able CPD. One hour of learning equates to one unit of CPD. For more, go to www.accaglobal.com/members/cpd
BRIEFING06 News in pictures A different view of recent headlines
08 News in graphicsWe show a story as well as tell it using innovative graphs
10 News round-upA digest of all the latest news and developments
VIEWPOINT21 A bad example Dean Westcott on why heavy-handed regulation can be a matter for regret
22 A fi rst for ACCA Ronnie Patton on a forward step in accounting education
23 PRACTICE23 The view from James Ffrench FCCA
24 Practical tips for a tax audit What to do when clients face a tax audit
26 Limiting liability in a partnership Advice to accountants in partnership
29 Software review The view from one accountant
31 CORPORATE31 The view from Colm D’Arcy FCCA
32 Outsourcing A fresh perspective on a topic of perennial interest
YOUR CAREER51 Health check 2012
57 Seven mistakes to avoid in interviews
60 The e-learning suite spots
61 Diary
Regulars
WorldwideThere are six different versions of Accounting and Business: China, Ireland, International, Malaysia, Singapore and UK. See them all at www.accaglobal.com/ab
Your sector
TECHNICAL34 Technically speaking Aidan Clifford rounds up the changes accountants need to be aware of
36 NI notes Changes and updates of relevance to Northern Ireland practitioners
37 Tax diary Some important tax deadlines ahead
38 Tax – an update Cora O’Brien on recent developments of interest
40 S202 and auditor liens The need of reform of a problematic section
44 Full credit given A Q&A with Bank of Ireland Finance’s Derek McDermott
48 Planning to secure fi nance The need for focused business planning
54 CPD Statements across frontiers?
ACCA NEWS58 New order The growing importance of the Asia Pacifi c economies
63 Approved employer Q&A
65 News
Accounting and Business
AB_Feb_2012.indd 5 23/01/2012 15:32
News in pictures6
01 Michael Carey, chairman, and
Aidan Cotter, CEO, Bord Bia, celebrate as Irish food and drink exports reach an all-time high of €8.85bn in 2011
02The sixth annual Tedfest,
celebrating the classic Channel 4 sitcom ‘Father Ted’, takes place in February
03Allergan, the company that
manufactures Botox announces a €274m investment in the Co Mayo facility where it is produced
AB_Feb_2012.indd 6 23/01/2012 12:10
7
04Visitors to Dublin Zoo surpass 1m
for the first time in 2011
05Sean Quinn is declared a
bankrupt in the High Court following the annulment of his UK bankruptcy
06 A survey of Irish homeowners
indicates that 15% plan not to pay the new €100 household charge
07RTÉ newsreader Anne Doyle reads
the news for the last time on Christmas Day, exactly 33 years after her first broadcast
AB_Feb_2012.indd 7 23/01/2012 12:10
News in graphics8
Source: CSO
COMPUTERS ARE USStatistics on information and communication technology (ICT) usage in Ireland, published by the CSO for the years 2009 to 2011, confirm the prevalence of IT in everyday life
Percentage of individuals who access the internet at least once a week (2007-2010)
Source: CSO
of all households in 2011 have access to a computer
of all households have access to the internet
of individuals feel they are able to protect their personal data
feel they can protect their computers from virus attacks
HO
LID
AY A
ND
TR
AVE
L A
RR
AN
GE
ME
NTS
ar
e th
e m
ost
pop
ular
e-c
omm
erce
pur
chas
es b
y in
div
idua
ls
News in graphics
technology (ICT) usage in Ireland, published by the CSO for the years 2009 to 2011, confirm the
2007 2008 2009 2010
UK
EU-15
EU-27
Never shopped on the internet
Shopped within last 12 months
Shopped more than one year ago
Ireland
Greece0
10
20
30
40
50
60
70
80
90
2007
Access elsewhere
Do not need a
computer
Too expensive
Not confident using a
computer
Other
2008 2009 2010 2011
70%
0
12%
10
8
6
4
2
0
10
20
30
40
50
60
%
Reasons why Irish households do not have a computer
Percentage of Irish people internet shopping (2007 to 2011)
AB_Feb_2012.indd 8 23/01/2012 12:10
9
CYBERCRIME HEADS TOWARDS FRAUD MAJOR LEAGUEThe threat of cybercrime is growing and it ranks as one of the top four economic crimes, according to PwC’s Global Economic Crime Survey 2011. Of the 3,877 respondents polled in 78 countries, almost half (48%) of those who had experienced economic crime in the last 12 months thought the risk of cybercrime was on the rise, with only 4% believing it was falling.
60%OF ORGANISATIONS DON’T KEEP EYE ON
SOCIAL MEDIA SITES
JAPANUS$210,000MEARTHQUAKE/TSUNAMI
NEW ZEALANDUS$16,000MEARTHQUAKE
US/CARIBBEANUS$15,000MHURRICANE IRENE
2/5OF RESPONDENTS
HAD NO CYBERSECURITY
TRAINING
34%OF RESPONDENTS
EXPERIENCED ECONOMIC CRIME IN
PAST YEAR
56%OF RESPONDENTS BELIEVE MOST SERIOUS FRAUD IS AN ‘INSIDE JOB’
40%
OF RESPONDENTS
MOST FEAR
REPUTATIONAL
DAMAGE
1/10WHO REPORTED
FRAUD LOST MORE
THAN US$5M
51%Proportion of investors deploying strategic planning tools to plan for an uncertain business environment, according to AT Kearney’s index of confidence in foreign direct investment.
€50BNThe extra hit Spanish banks face in further provisions on bad property assets as part of a new round of reforms for Spain’s financial sector, according to the FT.
3,500Number of Royal Bank of Scotland jobs that will go this year as the state-owned UK bank plans to shrink its investment bank.
Mon
th
in fi
gur
es
COSTS OF CATASTROPHELast year was the costliest ever in terms of damage caused by natural catastrophes throughout the world, according to research from Munich Re.
THE BIG ONESThe most expensive catastrophes
are usually weather-related, but a series of geophysical events accounted for half the insured
losses in 2011.
THAILANDUS$40,000M
FLOODS/LANDSLIDES
USUS$15,000M
SEVERE STORMS/TORNADOES
Global losses two-thirds higher than former record.
Japan/New Zealand quakes make up two-thirds of total.
Insurance covered less than one-third of total losses.
Of the 820 catastrophes, most were weather-related.
Deaths from disasters (excludes Africa famine).
US$380BN
2/3
US$105BN
90%
27,000
-$-$-$-$-$-$-$-$-$$380-$$380-$$380-$$380$380-$$380-$$380-$$380
AB_Feb_2012.indd 9 23/01/2012 12:10
BILL STRUGGLEMore than half of Irish people are struggling to pay their bills, a new survey by the Irish League of Credit Unions has claimed. The survey, published in January, also found that one in four had very little money left after meeting household expenses. In all, 83% of respondents expressed fear that 2012 would be an even more difficult year financially than 2011.
INVESTMENT BOOMWith over 13,000 new jobs created in 2011 through international investment supported by the IDA, the appeal of Ireland as a strategic location for foreign investment has remained undimmed. The 2011 figures represent a 20% increase on the previous year, when 10,897 jobs were created. IDA-supported companies saw a loss of almost 7,000 jobs in 2011, leaving a net increase of 6,118. This was one of the best overall performances in the last decade and marked a significant improvement on the year-earlier figure, when only 1,400 net jobs were created.
US and European companies continue to dominate the investment profile, with only five of the 61 companies investing in 2011 from BRIC countries.
FACEBOOK PROFITS RISEAccounts for 2010, lodged at the Companies Office, show Facebook Ireland generated a pretax profit of €1.9m, a substantial rise on the €297,000 recorded in 2009. Income, meanwhile, rose from €15m to €229m, as the division assumed responsibility for advertising billing. Facebook established its European headquarters in Dublin in 2008.
PENSIONS RING-FENCE Ireland’s highest earners will be exempted from higher taxation on pension funds of more than €2.3m. The concession from Revenue applies to some 700 people whose pensions were worth more than €2.3m when the measure was announced. It had been expected that up to 6,000 high earners would be impacted by the measure.
CLOTHES CUTBACK Clothing will bear the brunt of cutbacks among Irish consumers spending in 2012 according to a survey by the EBS. The research also found 18% of people will do a very thorough review of the finances, with 36% adopting a general savings plan. However, 45% have no plans to develop a household budget in this time. After clothes, mobile phones, holidays, groceries and electricity are the most popular targets for savings.
GROWTH FORECASTIrish stockbrokers Davy has cut its predictions for growth in gross domestic product (GDP) to just 0.4% in 2012 and 1.4% in 2013. Its previous forecast for GDP growth had been 1.7% in 2012 and 1.6% in 2013. It also expects export growth to fall from 4.5% last year to 2.8% this year, in spite of increased competitiveness.
SALARY FREEZEIrish businesses are set to freeze or cut pay rates in 2012, according to a new IBEC survey. Data from 400 companies pointed to some expectations of new hiring in 2012, but found that more than two thirds (69%) of companies intend to apply pay freezes this year, while some 5% expect to reduce pay rates. EXPORTS SLOWA challenging year has been predicted for Irish exports, with growth of just 3% expected over 2012. Ongoing difficulties in the eurozone, coupled with low levels of exports to emerging economies are credited with creating difficulties for exporters. Although exports grew by 5%, or €8bn, in 2011, the rate of growth slowed in the second half of the year, leading to concerns over the outlook for this year. John Whelan, chief executive of the Irish Exporters Association, expressed concern at the limited success of Irish exports to BRIC economies and continuing dependence on Britain and the eurozone economy. In 2011, Irish exports to BRIC countries rose by 5% while the figure for the EU27 was 22.5%.
10 News round-up
DUBAI PROPERTY RECOVERS Dubai’s property sector has begun a strong recovery, according to the state’s land department. Sales of land and property rose by 20% in 2011, backed by a 12% rise in mortgage financing. ‘We can't say that the real estate sector has completely recovered, but the worst of the crisis is behind us and the market still needs a few more years to regain the solidity it used to have a few years ago,’ said Sultan Butti Bin Mejren, director general of the Dubai Land and Properties Department. The picture was confirmed by Dubai real estate agency Clutton’s, which said it expected ‘brisk’ trading in property this year across the United Arab Emirates. It added that the situation was assisted by the perception of Dubai as a business and trading ‘safe haven’ during a period of global economic difficulty.
Burj Khalifa, Dubai
AB_Feb_2012.indd 10 23/01/2012 12:10
FREEST EUROZONE ECONOMYThe Heritage Foundation has identified Ireland as the freest economy in the eurozone and ranked it as ninth in the world overall, a two-place fall on its position in 2010. Hong Kong was named the world’s freest economy by the survey, a position it has held for 18 years in a row. With an ‘economic freedom score’ of 76.9, Ireland is the second-freest economy in Europe, following Switzerland, and one place ahead of the US. The least free country in the world is North Korea, in 179th place, while China ranks 138th.
START-UP AID FROM AIBThirty-two investments, worth a total of over €5m, were made by the AIB Seed Capital Fund, a joint venture involving the bank and state support agency Enterprise Ireland in 2011. In all, the seed fund added 15 start-ups to its portfolio and, according to fund chairman Denis Marnane, the €15m invested since 2007 had attracted €47m additional investment from other sources. Medical testing firm Crescent Diagnostics and e-learning provider Footbridge Interactive were among the beneficiaries in 2011. CAR SALES RISEAlmost 87,000 new cars were sold last year, compared to 85,000 in 2010, meaning a rise in sales for two years in a row. Sales in the first half of the year were assisted by the scrappage scheme, which ended in June. In December, 597 new cars were registered, a fall of 7.7% on the same month a year earlier.According to the CSO, the most popular brands in 2011 were Toyota (11,065), Volkswagen (11,007), Ford (10,108) and Renault (8,478).
RUSSIANS LACK FISCAL ABILITYFinancial education in Russia is going backwards, according to a study by the National Agency for Financial Studies. More citizens are worried by the legal activities of banks than illegal financial pyramid, or ‘ponzi’ schemes. Young adults in cities and regular internet users are most likely to identify a financial pyramid scheme. The study
found that high-earning people were no more likely to spot a financial pyramid than low-income earners.
EY CUTS CARBON EMISSIONSErnst & Young has reduced its CO2 emissions in its Americas operations by 20% since 2008, the firm has announced. It cut emissions by 7% last year, from 187,610 to 174,200 metric tonnes. Cuts in datacentre energy consumption were achieved through server virtualisation and improved design of equipment layout and air flow.
CASHFLOW PLANNERBank of Ireland has announced details of a cashflow management tool, Cashflow Planner, designed
for owners and managers of small businesses. The planner, an interactive tool available via the Bank’s website – www.bankofireland.com/business – is designed to help businesses determine their cash requirements. It will assist them in predicting the inflows and outflows of cash and, also, will aid them when making an application for credit facilities.
LIVE REGISTER FALLThe unemployment rate fell to 14.3% in December, with a drop of 3,300 in the numbers of people signing on from November. The month-on-month decline, amounting to 0.7%, meant that, on a seasonally-adjusted basis, 443,200 people were signing on the Live Register at the end of 2011.
11
SALARY SURVEY HIGHLIGHTS OPTIMISMThe latest Ireland Salary Survey from Morgan McKiney has found that almost half of respondents (47%) working in financial services, professional services, manufacturing and IT have a more positive business outlook for 2012 compared to 2011. A further 11% feel significantly more positive about the business climate in 2012. However, the majority (58%) expect salaries to remain the same within their businesses over the next 12 months. On a more positive note, a low percentage (4%) of HR managers and business leaders are concerned about handling redundancies this year, while talent attraction is perceived to be the biggest HR challenge (chosen by 23% of respondents), followed by talent retention (19%) and skills shortages (16%). Karen O’Flaherty, chief operations officer, Morgan McKinley Ireland commented: “The findings point towards a slight lift in business confidence in Ireland, with almost half of managers claiming to have a more positive outlook for 2012 compared to 2011. Although there is still considerable uncertainty in the market and growth predictions are sombre, the major steps taken last year towards Ireland’s economic recovery have made many professionals feel that it is time to “move on” and work towards a stronger and more stable 2012.’
AB_Feb_2012.indd 11 23/01/2012 12:10
12 Interview
AB_Feb_2012.indd 12 23/01/2012 12:10
TALKING TRANSFERSGerard Feeney FCCA explains why the introduction of transfer pricing will be important for Ireland, and Irish-based companies, as they fi ght their tax battles in the future. Donal Nugent
As Revenue’s recent focus on pensioner income has demonstrated, the days when loopholes were tolerated
in taxation are at an end. As a sign of the times, it is far from a local phenomenon. Globally, pressure on tax receipts has meant that tax authorities are dedicating more resources than ever to correcting anomalies. Stabilising revenues has become the order of the day and governments, globally, are increasing cooperation and coordination among their tax authorities to achieve this.
Against this backdrop, the introduction, in Finance Act 2010, of transfer pricing into Irish tax law for the first time may have been a low-key event, but it is timely for a number of reasons. Transfer pricing is concerned with the pricing of intercompany transactions between connected companies and is an ongoing issue for multinational companies operating increasingly on a global scale. The internationally-agreed standard for setting transfer prices is the ‘arm’s length principle’, which is based on OECD principles. In essence, the idea is that intra-group transfer prices should be similar to those an independent company would charge to a third party customer in similar circumstances.
LandscapeGerard Feeney FCCA is transfer pricing director with Deloitte, an area he has specialised in since 2009. Traditionally, most developed countries have had some sort of transfer pricing legislation and the US government introduced legislation as far back as the 1960s. Although no formal legislation was included in the Irish tax code before Finance Act 2010, there were already a number of sections in the law and case law that required the application of the arm’s length principle.
The new legislation, which applies from January 2011, puts Revenue in a much better position to defend Ireland’s tax base at a time where there is increased tax authority scrutiny across the globe. Indeed, the determination with which national tax authorities are currently pursuing this area is nowhere better exemplified than by America’s IRS, which has, in the recent past, stepped up its efforts to prevent US companies transferring profits abroad. Such determination does not necessarily guarantee right is on its side – one recent case brought by the IRS involving Veritas Software Corp. and its Irish subsidiary was rejected by a US court on the grounds that it was ‘arbitrary, capricious and unreasonable’ – but it points, all the more, to the need for Revenue to be
able to engage on a robust footing in negotiations.
For Ireland Inc., the new transfer pricing legislation may also be valuable when contentious issues come into the spotlight, an example being when high profile groups move their head office locations from other jurisdictions to Ireland. More broadly, as a ‘new world order’ emerges in financial markets one of the benefits of the new law is that ‘companies may perceive Revenue to be more readily available to assist them in defending their pricing policies when in discussion with overseas tax authorities,’ Feeney comments.
DocumentationWhile the transfer pricing legislation is based on OECD guidelines, as it is in most tax jurisdictions, significant points of departure in Ireland include the fact that, in contrast to most countries, it only applies to trading (rather than passive) transactions and the fact that counterparty documentation (documentation prepared where the related company resides) may be used to meet the Irish documentation requirement.
‘One of the key issues for companies is documentation and how they are going to satisfy that requirement,’ Feeney explains. ‘By pronouncing that counterparty documentation is acceptable, Revenue has made a
13
AB_Feb_2012.indd 13 23/01/2012 14:03
positive move in ensuring companies aren’t faced with an unnecessary additional cost in preparing specific Irish documentation. However, the onus will be on them to ensure that the documentation is available on request by Revenue’.
Once the groundwork has been done, Feeney’s assessment is that companies should find compliance with the new regime smooth. ‘Irish plcs and multinational companies based in Ireland already deal with transfer pricing issues on a day-to-day basis with foreign taxation authorities, so the new law should not be a significant additional burden to them. Of course, where the Irish company is transacting with companies in jurisdictions where there is no formal documentation requirement, it will be up to the Irish company to ensure that it has sufficient supporting documentation to meet the requirement under law.’
Later this year, as companies file their corporation tax returns for 2011, we will get the first clear indications on Revenue’s audit approach and areas
of focus. ‘Revenue has indicated that it will undertake a number of transfer pricing audits annually. Once this happens, we will have an idea of its areas of focus and how aggressive it may be in pursuing issues that arise.’
Deloitte Ireland has a team of five dedicated transfer pricing specialists and, globally, over 1,500 people involved in the area full-time. ‘By its nature, transfer pricing is a global issue and so we regularly interact with our colleagues in other jurisdictions to service our clients.’
Feeney says that, rather than seeing it as a burden, he advises companies to look at transfer pricing as a useful strategic tool. ‘Transfer pricing has a role in helping companies to look at how they are structured across the globe and to look at ways of more efficiently organising themselves. For example, if you are an Irish company looking to expand abroad, a decision has to be made on how you structure operations in the other jurisdiction – options, for sales activities abroad, could include setting up a full-risk
or stripped limited-risk distributor in that other jurisdiction. From a transfer pricing perspective, the level of functions and risks assumed by a company is linked to the level of profit that entity is entitled to.’
BackgroundOriginally from Co. Roscommon, Feeney went to college in St Mel’s, Longford, and graduated from NUI Galway with a B. Comm. in 1995. An interest in accounting led him into practice with FGS Lyons Keenan Kilemade, a medium-sized practice in Longford, now part of RSM Farrell Grant Sparks, and it was here that he became a member of the ACCA. ‘The reason was the flexibility offered by ACCA in pursuing exams and attaining experience. You can study and do your exams before you are into a training contract and I found that quite useful, as it allowed me more time to broaden my skills base in practice.’ While with the Longford-based firm, Feeney trained as an audit senior, with a specialisation in accounts preparation,
14
The CV1995
Graduates NUI Galway with B. Comm.
1997Joins FGS Lyons Keenan Kilemade in Longford.
2000Becomes a member of ACCA, becoming FCCA in 2005.
2001Joins Deloitte, specialising in transfer pricing in 2009.
AB_Feb_2012.indd 14 23/01/2012 12:10
audit, tax and general business advice. However, he found himself increasingly interested in tax issues and, ultimately, felt it was the area he wanted to specialise in.
Future tax takeAssessing government thinking on tax on the basis of Budget 2012, he says it’s clear that ‘the focus was on indirect taxation in the recent Budget, but we have a number of austerity Budgets to come over the next few years and the likelihood is we will need to raise revenues from other tax heads and new taxes. Therefore, apart from the new household charge and property tax, it is likely that income tax and capital taxes will need to be looked at again’. In terms of Ireland’s overall drive to broaden its tax base, Feeney cautions that the government will need to be very careful on how it balances tax increases with spending cuts to ensure the economy has the opportunity to grow. ‘The 2011 IMD World Competitiveness Yearbook ranks Ireland as number one, globally, as regards the
The basics: DELOITTE
1845William Welch Deloitte opens an office in London, becoming the first person to be appointed an independent auditor of a public company.
1898George Touche opens an office in London and, two years later, in New York.
1989Deloitte Haskins & Sells and Touche Ross merge to form Deloitte & Touche.
2009Business Week rates Deloitte the number one place to launch your career.
availability of skilled labour. We need to strive to ensure our tax policy is employer friendly to be in a position to convert what is currently a liability for the country – our high unemployment level into an asset – job creation – in the near future.’
ExpansionWhile an increased tax burden may give little cause for cheer, Feeney notes that Deloitte’s performance in Ireland in the last few years, in common with many other professional services organisations, is a cause for optimism. Deloitte has over 1,200 employees in the Republic of Ireland and is continually expanding and recruiting. Feeney observes that ‘Deloitte is recruiting over 200 graduates in 2012 in the areas of tax, audit, consulting, corporate finance and enterprise risk services. With the extinction of the Celtic Tiger, the domestic market has contracted but, from an international perspective, we have seen increased activity of late. The reaffirmation to our 12.5% corporation tax rate should
bring confidence for international groups seeking to locate and expand operations in Ireland. Together with the reduction in the cost of doing business in Ireland, we see the future outlook as positive.’ Feeney points to the eurozone debt crisis as one of the key influencers of business confidence at present. ‘If the current crisis can be satisfactorily resolved during 2012, there would be many good reasons to believe that the business environment will start to improve. Many multinational groups have put plans for expansion in Ireland on hold until the crisis is resolved and so we can only hope that deliberations at European level will reach a satisfactory outcome. At that point we will see investment into Ireland starting to pick up again.’
15
AB_Feb_2012.indd 15 23/01/2012 12:10
In his regular quarterly report, ACCA’s Manos Schizas looks at what ACCA members around the world are saying about the global economy – and it doesn’t make for happy reading
For a year and half, ACCA’s Global Economic Conditions Survey (GECS)has recorded the slowdown in the global economic recovery. However, over the last half of 2011, the global economy has taken a marked turn for the worse, led by a substantial fall in international trade.
While the negative trend in global business confidence eased in late 2011 compared to the third quarter, and there are encouraging signs from resilient new orders, the damage done to global demand over the last year has been substantial. As a result, small and very open economies have been hit hard, recording levels of business confidence usually seen in the troubled economies of Western Europe.
The cumulative effect of three consecutive quarters of weakening demand is beginning to take its toll on business. A detailed analysis of the GECS findings suggests that falling revenues are the strongest contributor to falling business confidence, followed by the deteriorating global economic outlook and continuing weakness in new orders. Once these, as well as the rising incidence of late payment
THE CUMULATIVE EFFECT OF THREE CONSECUTIVE QUARTERS OF WEAKENING DEMAND IS BEGINNING TO TAKE ITS TOLL ON BUSINESS. FALLING REVENUES ARE THE STRONGEST CONTRIBUTOR TO FALLING BUSINESS CONFIDENCE
*THE VIEW FROM IRELAND
Irish respondents have been some of the most pessimistic throughout the last three years of GEC surveys. Still, the renewed slowdown in the global economy has meant that Ireland is far from the most pessimistic of the major ACCA/IMA markets.
Respondents in Ireland continue to expect a sharp fall in government spending over the next five years, which on balance they see as unsustainable, and this is contributing to a loss of business confidence. On balance, respondents’ assessment of the government’s policies is strongly negative. More than half of the Irish sample (51%) reported a loss of confidence over the last three months, against just 12% who reported confidence gains. Ireland was also the only major market in which no respondents said they were ‘much more confident’ than three months earlier. Finally, the clear majority (87%) of Irish respondents felt that the global economy was stagnating or deteriorating.
and business failures, are taken into account the effect of tightening credit is only negligible. Still, with banks around the world facing an uphill climb towards capital adequacy, tightening finance must soon add to the challenge of a flagging recovery. The result is a deteriorating outlook for business cashflow around the world which may be driving a rise in business failures. Consequently inflationary pressures, which built up steadily over the past two years, are now easing.
In line with this deteriorating outlook, our findings point to weakening trends in employment and investment globally. This is particularly worrying as these two indicators have remained weak throughout the last three years and are crucial to any kind of sustainable recovery.
Finally, our findings suggest that governments have to perform a tough balancing act in coming years if they are to support a flagging economic recovery. Sustainable fiscal stimulus is a luxury that not all governments can afford, especially among developed nations, while austerity is proving hard to reconcile with sustained growth, unless perhaps as a response to exogenous shocks. As a result, government approval levels are at a record low, just when they are most likely to influence business confidence.
Manos Schizas, ACCA senior policy adviser
*THE VIEW FROM *THE VIEW FROM *
Taking the pulse of the global economy
16
AB_Feb_2012.indd 16 23/01/2012 12:11
-13THE DANGER DOWNPOINT
THE ACCA GLOBAL ECONOMIC CONDITIONS SURVEY – HOW TO TAKE PART
-13THE DANGER DOWNPOINT
GLO
BAL
-30
AFR
ICA
-13
MID
DLE
EA
ST -1
7 PA
KIS
TAN
-25
MA
INLA
ND
CH
INA
-34
UK
-40
IREL
AN
D -4
0 M
ALA
YSIA
-42
EAST
ERN
EU
ROPE
-47
SIN
GA
PORE
-58
HO
NG
KO
NG
-59
The views of ACCA members are highly valued and receive widespread media coverage. The Q4 2011 survey was quoted in the press around the
world more than 300 times. So why not have your say when the next quarterly survey opens on 17 February? Everyone can participate – simply look for the
link in AB Direct. If you have a story to tell, you can also join our panel of commentators by emailing [email protected]
SAU
DI A
RABI
A 6
8.8
-9.3
MA
INLA
ND
52.
8CH
INA
29.
1H
ON
G K
ON
G 5
2.4
-31.
3 UA
E 14
.8 -39
USA
11.
358
.5AU
STRA
LIA
-25
-40.
4
UK
-38.
3-1
7.5
IREL
AN
D -9
0.6
-27.
1
BALANCING PUBLIC FINANCES
302010
0-10-20-30-40-50-60-70-80
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011
3020100
-10-20-30-40-50-60-70-80
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011
1007550250
-25-50-75
-100
THE ACCA CONFIDENCE INDEXBusiness confi dence remains in negative territory. The graphics show the percentage of respondents saying they have gained business confi dence, minus those who have lost it.
The ACCA Confidence Index correlates strongly with economic growth globally. A reading of below -13 suggests the economies of the developed world are contracting and the global economy is slowing to a halt.
TAKING THE GLOBAL TEMPERATUREBreaking down the ACCA Confidence Index geographically reveals some striking variations, with members in Africa showing most confidence.
Sample: 2,186 ACCA members around the world
The towers show how members think public spending will change in the medium term (increases shown in black), while the cakes show whether members see this level of public spending as excessive (above the line) or insufficient.
17
AB_Feb_2012.indd 17 23/01/2012 12:11
The day-to-day activities of financial controllers and other accountants on the business shop floor have a vital role to
play in successful risk management and the finance professionals in the business stand ready to do more.
This is one of the main findings of new ACCA research looking at the role of accountants in risk management.
Based on a survey of more than 2,000 members from all over the world, the research reveals a statistical relationship between the use of good practices by accountants – such as properly executed forecasting and budgeting – and a lower incidence of ‘dysfunctional behaviour’.
Poor accounting practices include a general lack of risk awareness when making decisions, playing down risk to get approval for proposals, overstating benefits and underestimating costs.
Accountants in the survey reported a high level of dysfunctional behaviour around risk management. Almost every respondent reported the ‘gaming’ of forecasts. Others mentioned treating forecasts as targets, providing optimistic forecasts to avoid criticism and pessimistic ones to reduce expectations. The survey also found that such behaviour was commonplace – fewer than 1% said none of them happened at their organisation.
Paul Moxey, ACCA’s head of risk management and corporate governance, says the findings highlight the important and positive role for organisations of integrated risk
management – the idea that risks should be identified and managed as part of a core management process rather than left to a compartmentalised team or individual.
‘Risk happens at all levels of business and for all types of business functions,’ he points out. ‘It doesn’t sit in neat silos. Risk management needs to be something everyone in an organisation does.
‘Our survey showed that accountants, particularly at the shop-floor levels of a business, have an
excellent grasp of the risks faced by their organisation and the steps needed to negate those risks. Businesses need to make sure they use the abundant risk awareness and risk management skills of their qualified accountants, and not miss an opportunity to effectively integrate risk management.’
As accountants provide decision support, such an approach puts them in an important position – after all, most ‘risky’ business decisions contain a financial element. And in most organisations the accountants outnumber the formally designated risk managers.
As one respondent to the survey put it: ‘Although not always appreciated, the contribution of the finance section
to risk management is huge and necessary in any organisation.’
The survey comes at a critical time for risk management. The financial crisis highlighted the disastrous consequences of senior management ignoring risk management, and led to the climb of the practice up the corporate agenda, although its new apparent importance has not always been matched by increases in budgets or actual actions.
Moxey fears that once the current crisis has passed, the risk function may
again decline in status, with potentially dangerous consequences.
Another finding of the research is that those in mid-level roles such as financial controllers and management accountants are much more aware of both risks and dysfunctional behaviour than are their board-level colleagues – including non-executives.
Most non-executive board members said overly optimistic forecasts to avoid criticism were never made in their own organisation, but only 20% of financial controllers or accountants agreed. Non-executives also seem less aware than everybody else of problems with persistent quality issues.
There are several possible explanations. Those at more senior
ALL IN IT TOGETHER
‘ACCOUNTANTS HAVE AN EXCELLENT GRASP OF THE RISKS FACED BY THEIR ORGANISATION AND THE STEPS NEEDED TO NEGATE THEM’
18
AB_Feb_2012.indd 18 23/01/2012 12:11
levels are less involved in the day-to-day running of an organisation, and so are less aware of detail, taking a broader overview of a business. It could be that the information they are presented with by their teams is sanitised in some way. Additionally, as the financial crisis showed, there are often plenty of incentives for not asking challenging questions or rocking the boat.
One respondent, a financial controller in Ireland, said: ‘Decision analysis is sometimes hijacked by higher-level political motivations, leading to poor decision-making and adverse impacts.’
The study shows clear support among accountants for ‘challenging senior people’ as part of an ideal business culture. A questioning approach can help avoid the kind of cultural bias or ‘groupthink’ that leads
to risks being missed.As another financial controller said:
‘There will always be uncertainty around decisions to enter new markets or to try new ideas, but the accountant should be able to highlight the potential risks and rewards of various actions, and to seek ways to mitigate the impact of any risks.’
A CFO respondent said: ‘Accountants need to be business partners. They need to be involved in decision-making and help other functions see the possible implications of decisions they are about to make or have made.’
The study found that input from accountants in the decision-making process had a number of beneficial effects. Some 95% of respondents said that input always made people more aware of the uncertainties involved.
Effective risk management starts on the fi nance ‘shop fl oor’ and should embrace the whole organisation, according to the fi ndings of a new ACCA study
Private equity investor ABCI Investment Management takes risk very seriously. The Hong Kong-based company has put risk management at the centre of its commercial operations, both before and after acquisitions are made.
A subsidiary of Agricultural Bank of China, ABCI has a portfolio fund valued at HK$5bn. Its management team consists of some 20 professionals, including specialists in risk management, finance, compliance and law.
This team works together to identify and evaluate suitable acquisition targets, and to monitor each investment until it is realised.
Its private equity managing director Bernard Wu, who is also chairman of ACCA Hong Kong, says: ‘Risk exists in every corner of a business, and it’s our job to identify and evaluate every risk in a target company’s history, operations and forecasts.’
Accountants work in compliance as well as finance as part of an integrated risk management team. The most important elements in evaluating a prospective investment are checking management integrity and evaluating performance trends against ABCI’s exit target.
ABCI researches the sources of the company’s financing. For start-up operations, it assesses the attractiveness of the projected business performance and margins versus the records of the owners and management. The Companies Registry and the Tax Bureau are also valuable information sources – tax history is a very important indicator.
If the finance team is happy with the initial evaluation results, ABCI then performs a detailed risk assessment on the target company, analysing its current and projected growth rates compared with its peer group, to determine whether the forecasted performance is reasonable.
*CASE STUDY: ABCI INVESTMENT MANAGEMENT
The fall-out from the crisis: Protesters outside the Dáil in December react to the austerity measures contained in Budget 2012 (far left)
Shock and awe: photocall for Margin Call, a film starring Kevin Spacey (centre), that portrays the events that destroyed a Lehman-like bank, and shook the US financial system (middle)
Disasters can be natural as well as human-inspired: restaurant in Bangkok, Thailand, as a river in spate dumped vast quantities of floodwater in the city (right)
GET THE RULES FOR RISK MANAGEMENT REPORT AT: www.accaglobal.com/researchandinsights
19
AB_Feb_2012.indd 19 23/01/2012 12:11
20
A similar number said it helped people think more widely about the possible consequences of a decision, and only marginally fewer said it encouraged decisions that reflected the interests of all relevant stakeholders. In times of global economic uncertainty, such input can make the difference between success and failure.
‘Instability is the new stability,’ said the FD of a leading investment and insurance business. ‘The banking crisis has morphed into the sovereign debt crisis, and now we are confronted by the real risk of a double-dip recession.’ According to this FD, an integrated approach is key to a finance team’s successful risk management.
However, there is some way to go before risk management – and the role of accountants in its implementation – is fully integrated. According to KPMG’s global Risk Management Survey 2011, 42% of C-level executives were dissatisfied with the quality of risk management integration into strategic planning, project assessment, capital allocation and budgeting – all areas where accountants should be making a valuable input.
But the key message from the survey, devised and analysed by Matthew Leitch of Internal Controls Design, and detailed in the resulting report, Rules for Risk Management: Culture, Behaviour and the Role of Accountants, is that accountants are aware of the issues and keen to get involved. Businesses should not waste this opportunity.
Chris Quick, editor-in-chief and Philip Smith, journalist
*IDEAL INPUT
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
US snowstorms can be so violent as to force the declaration of a state of emergency; good risk management means being aware of – and ready for – the worst
*RISK HEALTHCHECKACCA has developed an online tool allowing businesses to compare themselves to practices and experiences from businesses in the survey, and identify areas for improvement. You can find it at: www.accaglobal.com/researchandinsights
Questioning proposals even when they are by senior people
Recognising uncertainties and being willing to seek and use relevant data
Divorcing decision-makers’ personal interests from decision-making
Choosing actions that are ethical
Choosing actions that are legal
Thinking carefully about decisions, and using calculations/models if possible
Requiring compelling business cases for new ideas
Achieving consensus
Unquestioning compliance with instructions from senior people
ACCA’s study asked how accountants could influence the decision-making process
AB_Feb_2012.indd 20 23/01/2012 12:11
21
A bad example
[As a decade of Sarbanes-Oxley has shown, heavy-handed regulation can be a matter for regret, says ACCA president Dean Westcott
Whenever there is a major financial scandal, the call inevitably goes out for tighter regulation to prevent such a thing from ever happening again.
That call is not always heeded but this year marks the 10th anniversary of an occasion when it most certainly was. The Sarbanes-Oxley Act will be 10 years old in July. Designed to thoroughly plug the gaps that enabled executives at Enron and WorldCom to get away with what they did, the law placed onerous responsibilities and duties on executives, and forced companies and their accountants to set up elaborate and expensive internal controls.
It has been argued that Sarbox has been good for corporate governance as well as the credibility of accounts. But question marks remain about its effectiveness and serious criticisms have been made of the huge costs it has imposed on businesses. Critics also point out that it failed to prevent the collapse of Lehman Brothers – the outrider of the financial crisis.
Some have warned of the danger of repeating the mistakes of Sarbox in the current process of reforming audit practice. It is undoubtedly healthy to have a root and branch examination into whether audit could have done more to alert companies and regulators about impending financial problems and whether audit practice should evolve so as to maintain its value and relevance. But some of the proposals currently being put forward appear to be based on the same optimistic assumption that underlay Sarbox – namely, that the way to prevent corporate malpractice is to impose rigid and bureaucratic rules from the top.
ACCA is studying the proposals issued by the EU at the end of last year on both audit and financial reporting. The key issue for us is that the needs of the users of annual accounts are protected. But we should not ignore the question of cost and the risk of imposing regulatory costs that are disproportionate to the benefit sought.
We urge regulators around the world to bear in mind the experience of Sarbanes-Oxley and to focus as much on meeting the challenges of today and tomorrow as on fixing the problems of the past. I know ACCA will continue to call for balance in ensuring any new regulation is good for business and in the public interest.
Dean Westcott FCCA is finance director of Hinchingbrooke Hospital in Cambridgeshire, England
Comment
AB_Feb_2012.indd 21 23/01/2012 12:11
22 Comment
FIA – a fi rst for ACCARonnie Patton on a bold step forward in accounting education
Ronnie Patton is president of ACCA Ireland. Email [email protected]
ACCA has a long and admirable track record of ‘firsts’, and most members will be aware of the times when we have been at the forefront of important developments.
However, unless you are involved in the examination scheme in some capacity, you may not be aware of a recent initiative, which offers significant benefits to students and employers, and which promises to maintain ACCA’s reputation as an innovative and forward-looking organisation – if as many members as possible get involved.
FrameworkDecember 2011 saw the first examinations under the Foundations in Accountancy (FIA) qualification framework taking place. This new approach to ACCA’s awards will have most impact at the technician level. The Certified Accounting Technician qualification has now been totally integrated with the professional qualification, and offers a number of exit awards. Students gain qualifications, which are tailored to their job role, through certificates in financial and management accounting, auditing, financial management, a diploma in accounting and business and the Certified Accounting Technician qualification.
For students, it means that it is possible to begin studying with ACCA and obtain an interim qualification, which is then seamlessly integrated with the professional qualification. This will be attractive to anyone who wants to obtain a work-based qualification, but is reluctant to commit to the full professional programme, without ruling out that possibility entirely.
A benefit for everyoneFor employers, qualifications tailored to specific job roles are now available, so that accounting staff can develop skills that are directly relevant to their job.
The resulting improvement in staff skills will lead to improved confidence and more effective performance, which must be a benefit in the current environment.
Speaking as someone who was a member of the group that developed the previous qualification framework, which FIA now replaces, I am the first to recognise that this is a significant improvement. However, while I am confident that this framework provides the best scheme for training and accrediting accounting staff, I also believe ACCA won’t be able to drive home the advantage that the framework provides without support from members.
Group supportThere are three groups who will play key roles in making FIA a success – employers, students and tuition providers. Tuition providers respond to demand and, I would argue, it is up to ACCA members to make FIA the qualification of choice for their accounting staff. FIA meets the needs of members and employers by providing well-qualified and competent staff. It also meets the needs of students as it offers relevant, tailored qualifications, and it meets the needs of tuition providers through a sustainable course.
So my challenge to members throughout Ireland in 2012 is this: what can you do to build ACCA’s profile? Could FIA be a start? Find out more at www.accaglobal.com/en/qualifications/glance/fia.html
AB_Feb_2012.indd 22 23/01/2012 12:11
24 Practical tips for a tax audit, limiting liability in a partnership and accounting software review
31 The view from Colm D’Arcy and a fresh perspective on outsourcing
23Practice
The view from:Wexford: James J Ffrench FCCA,Leonard Doyle & Associates, Wexford town
Q What’s in your inbox?A My inbox, at this moment in time contains the following: ebriefs from the Revenue Commissioners, ACCA weekly news and technical updates, discussion groups through LinkedIn, such as ACCA Ireland, Accountants In Practice and Qualified Accountants In Ireland and, finally, of course, AB Direct update. Q What lessons have you learned about business?A Take the time to build a profile of your ideal client and target your networking to reach them. Speak to those who are already predisposed to want what you offer. Networking is a means of ‘meeting and greeting’ those individuals but it is essential that you network selectively. Networking can easily become far more time-consuming than is worthwhile otherwise. Don’t network by joining every sports club, charitable group and local business group that you can find. These will merely cost you time and effort and may, ultimately, provide little or no business.
Q What tips would you pass onto others? A Don’t undervalue the service you provide. In this difficult operating environment, it is easy to react to clients’ concerns over the level of their fee. Undervaluing your service will only damage the relationship between you and your client. It will also have an effect on you personally. Reducing fees can often be an immediate ‘knee-jerk’ reaction over your client concerns, but it is much better to talk to your client, explaining the basis for the fee and the value-add you bring to their business.
Q What has been the hardest part in terms of growing the business?A Existing clients are finding it difficult and new business is scarce. The adage ‘if you’re not growing, you are shrinking’ is not always true. Maintaining existing business is the key and offering new services and added value is a way forward. With regards to new business, there are opportunities still out there, limited though they may be. Surviving 2011 was a success in itself and we can only hope for better in 2012.
AB_Feb_2012.indd 23 23/01/2012 15:33
audit with the Revenue auditor. For the client, a qualifying disclosure
will mean they will not be investigated by Revenue with a view to prosecution; they will suffer lower penalties; and details of the settlement will not be published by Revenue.
No loss of revenueAnother important matter to be considered when preparing a qualifying disclosure in relation to VAT or Relevant Contracts Tax is whether a ‘no loss of revenue’ (NLOR) argument can be made in accordance with the Code of Practice for Revenue Audit. If, based on the code, a practitioner can successfully make an NLOR case, he/she will achieve significant savings for the client. The tax underpaid will not be collected and only a relatively small penalty and, perhaps, some interest will be payable.
Other matters to be discussed with the client are the records which the Revenue auditors will require for review
date of the Revenue audit notification letter so as to secure an agreed period of time (generally up to 60 days) in which to prepare and make a prompted qualifying disclosure. During this agreed period, the practitioner works with the client to quantify the amount of tax underpaid, along with statutory interest.
The qualifying prompted disclosure can then be presented to Revenue at any time before the audit commencement date, in writing, and must include: (a) Background information relating
to the matters giving rise to the disclosure along with a calculation of the tax and statutory interest;
(b) A declaration signed by or on behalf of the client to the effect that the disclosure is correct and complete; and,
(c) A payment of the tax and interest as calculated.
The quantum, if any, of penalties can be agreed at the conclusion of the
When Revenue intend to carry out an audit of a client’s return or returns, they will give notice, generally 21 days, to both the client and practitioner. This letter will set out the scope of the audit, i.e., the taxes and years to be audited. It will also state the proposed date of commencement of the audit.
The first and most important matter to be discussed with a client, on receipt of a copy of the audit notification letter, is whether the client needs to make a prompted qualifying disclosure to Revenue in advance of the commencement of the audit. Once an audit notification letter has been received, the client cannot make an unprompted qualifying disclosure in relation to the matters within the scope of the audit. If a review of the client’s tax returns – and tax affairs generally – establishes that there are tax underpayments resulting from non-compliance, Revenue should be notified of that within 14 days of the
Practical tips for a tax auditEamonn Coates offers some practical advice for accountants whose clients face a tax audit
24 Practice
AB_Feb_2012.indd 24 23/01/2012 12:12
25
giving rise to the underpayment of tax was due to an innocent error and not to carelessness, no penalty applies. The practitioner’s negotiating skills and experience in handling Revenue audits will be called into play in securing the most favourable outcome for the client.
If a prompted disclosure was not made and the Revenue auditors are satisfied that the return or returns are correct, they will say so, and effectively the audit will conclude at that point.
However, if Revenue has concerns and is of the view that there are undisclosed tax underpayments, the auditors will wish to discuss their concerns with the client and the practitioner. If, however, at the conclusion of negotiations, it is agreed that there is a tax liability, the client will be expected to make an offer to the Revenue, to include tax, interest and penalties. In cases where a qualifying disclosure was not made to Revenue, penalties can be as high as 75% of the tax underpaid. Again, if the matter giving rise to the tax underpayment came about due to an innocent error or is a technical matter, no penalty should apply.
In situations where a qualifying disclosure had not been made, details of settlements in excess of €33,000 will be published, where the penalty component exceeds 15% of the tax. A practitioner will achieve a significant benefit for the client if a penalty of 15% or less of the tax can be agreed.
In the case of cashflow difficulties, instalment arrangements can be agreed. For clients unlikely ever to be in a position to discharge the full liability, a reduced amount can be agreed. When a practitioner successfully guides a client through a Revenue audit, benefits for the client can include lower penalties and no publication of any settlement detail. For the practitioner, the benefit is a strengthening of the relationship with the client.
Eamonn Coates is director of taxation services, Deloitte Ireland. Email [email protected]
between any pre-audit meeting and the formal commencement of the audit.
AttendanceThe Revenue audit is generally carried out on the client’s premises. Suitable accommodation (i.e., a private room or office) should be arranged. At the commencement meeting, both the client (i.e., a sole trader or a designated company director) and practitioner should attend. If a prompted disclosure is to be made and has not been done before the initial meeting, it should be done at the meeting. This opening meeting should also be used to agree an outline work plan with the Revenue auditors and also to agree lines of communication. The work plan would include matters such as the length of time the auditors propose to spend on the premises, the records they wish to review, and particular areas they wish to focus on. It is very important to establish agreed lines of communication with the Revenue auditors for answering any queries they may have while they are on the client’s premises. This line should be from the Revenue auditor to the client or financial controller. Revenue auditors should not ask questions of staff members generally, and staff should be instructed not to answer questions from the Revenue auditors, but to refer them to the agreed contact person.
Finalisation of audit When the Revenue auditors have concluded their examination of the books and records, they will generally request a closing meeting to conclude the audit. Again, the practitioner should attend this meeting.
If a prompted qualifying disclosure has been made by the client and is accepted by Revenue as being complete, the question of penalties will need to be discussed. On the assumption that the prompted qualifying disclosure is the first made by the client, the level of penalties can range from 10% to 50% of the tax underpaid. Penalties do not automatically apply. Where the matter
at the start of the audit and suitable accommodation for the Revenue auditors.
If there is any doubt as to what records are required, the practitioner should contact the Revenue auditors to agree on what records will be available. In some cases, particularly where the client is a large business or organisation, a pre-audit meeting with the Revenue auditor might be arranged. Such a meeting can be beneficial to all parties as an understanding can be reached on what particular areas Revenue will target and the records/documents which they will require.
Where Revenue proposes to carry out a computer or e-audit, they will often suggest a pre-audit meeting to enable the Revenue auditor to familiarise him/herself with the client’s IT systems. Any such pre-audit meetings are not a part of the formal Revenue audit process, and the client still has the opportunity to make a prompted qualifying disclosure at any time
AB_Feb_2012.indd 25 23/01/2012 12:12
Limiting liability in a partnershipStephen Chessher and Mary Smith offer advice to accountants in partnership
engagement letter should be sent each year and the terms of the letter reviewed and amended if necessary, for example, to reflect issues arising from previous audits. The scope of the audit should be set out clearly, as should issues such as whether the auditor is also to prepare the financial statements and the respective responsibilities of joint auditors. The client should countersign and return a copy of the engagement letter as evidence that the terms of engagement have been agreed.
The engagement letter should distinguish clearly between statutory audit work and any related advisory work, a distinction that may not be obvious to many clients. Advisory work should be carried out under a separate engagement that may be the subject of limitations that cannot be applied to the statutory audit.
claims not only from their own clients but also from third parties who rely, to their detriment, on the audited accounts. Third parties, to whom a duty may be owed can include banks and other lenders, potential investors and purchasers, individual shareholders, directors (in their personal capacities), creditors and others.
In Ireland, auditors are prohibited from excluding or limiting their liability to their clients, i.e., to the company and its members as a body. However, that is not to say that there are no steps that an auditor can take to reduce his or her exposure and, in any event, the statutory prohibition does not apply to third parties.
Engagement lettersThe importance of the engagement letter cannot be overstated. An
The absence, in Ireland, of business structures such as limited liability partnerships means that accountants are exposed to unlimited liability. Not only the firm’s assets but also personal assets are at risk and, in an extreme case, an accountant may face bankruptcy and financial ruin. Against this background, the extent to which accountants may reduce or limit their liability is worth close consideration.
Audit workAt risk of stating the obvious, if the audit is planned and executed in accordance with recognised auditing standards and guidelines and, if the audit planning, procedures and reviews are properly documented, you will reduce the likelihood of a claim being made against you and maximise the prospect of successfully defending any claim that is made. Auditors face
26 Practice
AB_Feb_2012.indd 26 23/01/2012 12:12
FraudMany claims arise from the auditor’s alleged failure to detect fraud. The primary responsibility for preventing and detecting fraud lies with the directors and this should be set out in the statement of directors’ responsibilities forming part of the financial statements. The auditor should also set out in his or her engagement letter the extent of, and the limitations of his or her own responsibility in this regard, to the effect that the audit will be planned so that the auditor has a reasonable expectation of detecting material misstatements in the financial statements resulting from fraud. Provided that the auditor is able to show that he or she has used appropriate criteria to measure ‘materiality’, it follows that he or she should have some protection against
schedules, which can be produced if the audit is called into question. It is particularly important that explanations of discrepancies provided by clients are properly recorded and meetings with management minuted;
• If it is necessary to issue a formal management letter, consider copying it directly to each of the directors so that there can be no question that all directors have been made aware of the issues raised; and,
• If the audited accounts are provided to third parties in draft before being signed off (which should be avoided as far as possible), it should be made clear on the face of the accounts that they are draft and liable to be altered and, therefore, should not be relied upon.
DisclaimersIt is now common for auditors to include a disclaimer in the audit report by which they seek to exclude their liability for loss occasioned to third parties to the fullest extent permitted by law. A disclaimer is helpful in seeking to establish that an auditor does not owe a duty of care to parties who may rely on the audited accounts other than the members. It is not, however, the end of the matter. It is unlikely to be effective if the auditor has had direct dealings with a third party that are inconsistent with the terms of the disclaimer. Other steps that the auditor can take to improve the prospect of successfully defending a claim include:• Ensure that the audit plan and all
investigations, tests, stock takes, analytical reviews and so on are evidenced by working papers and
27
AB_Feb_2012.indd 27 23/01/2012 12:12
28 Practice
the client. If that has been done and if the client has signed a copy, there should be little scope for future argument that the client was unaware of, or did not agree to, the limit.
The amount of any cap is a matter for commercial judgment but, obviously, it should be set at a level no higher than the amount of the firm’s professional indemnity insurance cover.
Limitations or exclusions in the engagement letter (which will be issued only to the client), should also be included as far as possible in reports and other documents:• Reports should be addressed solely
to the client. If a report is intended to be passed to other parties, those other parties should be identified as precisely as possible and a note included to the effect that the report should not be provided to additional parties without prior written agreement;
• An appropriate disclaimer of liability to third parties should be included; and,
• The status of a document should be clear from its face and if it is issued in draft, it should be marked as such.
Finally, thought should be given to the terms on which an engagement is terminated. It may be wise to issue a ‘disengagement’ letter, particularly in relation to tax matters so that it is clear what work has been carried out and which adviser will be responsible for any remaining work.
ConclusionIn summary, ensure there is a detailed letter of engagement signed by the client for each separate assignment and note that limitations of liability and disclaimers may be effective, but care must be taken to ensure that they are not inadvertently overridden and a duty of care assumed in circumstances where it is not intended.
Stephen Chessher is a partner and Mary Smith is a solicitor in Beale and Company. Email [email protected] and [email protected]
That should certainly be the case if the lender seeks reports from the auditor on compliance with loan covenants.
Non-audit workAs for audit work, the first priority in controlling exposure is to issue a comprehensive engagement letter for each assignment. This is even more important for non-audit work than for audit work since, to a large extent, the scope of an audit is prescribed by company law and auditing standards. It is vital to delineate the scope of the assignment, the identity of the client (if not obvious) and/or those who can reply on the advice and any restrictions or limitations under which the work is to be carried out, for example reliance on information provided by others (where that information is not to be independently verified).
Other terms that may usefully be set out in an engagement letter include: • Restriction on the client disclosing
reports or advice to third parties without consent. If consent is given, you may wish to seek additional protections in the form of indemnities from the client and ‘hold harmless’ letters from the third party;
• Stipulation that reports are not intended for any purpose or recipient, other than the specific purpose and recipient for which they were prepared;
• Disclaimer of liability to third parties as already referred to and/or a note that insofar as any third party might seek to rely on your work, they do so at their own risk; and,
• Exclusion of liability where information has been misrepresented or concealed by the client.
Does the cap fit? Accountants are able to limit their liability for non-audit assignments and there is no good reason why they should not do so. A limitation or cap on liability should be included in the engagement letter and should also be drawn specifically to the attention of
claims for losses caused by minor defalcations.
It is often the case that when a claim lies against an auditor for failing to detect fraud, a similar claim (by the members of the company and/or affected third parties) will also lie against the directors and officers of the company. But, in the absence of insurance, the directors and officers may not be in a position to satisfy claims made against them.
Joint and several liability is likely to apply, which means that the liability of the directors and officers may be visited upon the auditor. A proactive step that the auditor of a larger company may take is to insist that the directors and officers carry insurance against their own liability to a level similar to that of the auditor.
Lending and investment decisionsAnother fertile source of claims, against auditors, are claims for losses incurred by lenders and those making investment decisions in alleged reliance on the audited accounts.
A disclaimer included in the audit report may be effective in negating liability but care must be taken to ensure that the effect of the disclaimer is not overriden by inconsistent actions taken by the auditor. If, for example, the auditor corresponds directly with a lender or potential investor or provides additional information or any form of assurance over and above the content of the audited financial statements, it becomes far more likely that a court will find that a duty of care exists, regardless of any disclaimer.
It is not uncommon for banks to attempt to establish the existence of a duty of care by seeking an acknowledgement from the auditor that the bank may rely on the audited financial statements. If a practitioner decides that it is prepared to provide specific assurances to a lender or other identified third party, the safest course of action is for that to be done under a separate engagement with the lender, via a separate letter of engagement.
AB_Feb_2012.indd 28 23/01/2012 12:12
Software reviewIrish accountants assess the software packages they use
29
Q Why did you choose the accounting software package you use?A It’s hard to reflect back to the not-so-long-ago era when there were no PCs or they were ‘archaic’. Software packages are now critical, value-added and enabling tools for recording, presenting, analysing and enabling informed decisions for any organisation. Our business needs require us to capture details of past and present performance, as well as future projections, in an increasingly complex and demanding environment. These reasons have been the driving force in choosing a database consolidation system to deliver reliable and integrated accounting information for our company.
Q What are its strong points?A The robust points that stand out are: (i) expandable coverage of the
widely diverse business; (ii) ability to drill down to the source of all consolidated information and so improve accountability; (iii) capability to expand the database system to capture specialised areas, such as treasury information, in a bespoke way; and (iv) considerable R&D resources to support development.
Q Any areas you’d like to see improved?A There are trade-offs in using any software, between visibility of records, quality of performance and cost. Still, there are numerous areas that improvement is feasible: first, implementation plans to roll out parts of the software across the business need to account realistically for the impact on workload, including learning curves and resolution of critical issues. Second, hidden costs on pricing can be
an obstacle, which may cause budget and timing extensions. Third, technical competency is both hard and expensive to find, especially when deadlines are looming.
Q Tell us about any other office manager or customer-relations management software you use?A Bloomberg and Salmon are two other software packages I use regularly for treasury reporting needs. Bloomberg is a global package with continually updated information on economic and financial instrument related data, which is of great use to get an immediate snapshot. Salmon is a rather specialised but competent software that stores company data on treasury records that are easily consolidated for reporting. Finally, there is always Excel; what would accounting be without it?
Dimitris Karagiorgis FCCA, group treasury accountant, CRH, Dublin
AB_Feb_2012.indd 29 23/01/2012 12:12
COMMERCIAL ANNOUNCEMENT
FLEXIBLE OPTIONS FOR CASH FLOWRecent findings from a study carried out by the European Central Bank (ECB) and European Commission has shown that over a fifth, or 22.6%, of Irish small and medium-sized companies surveyed said that loan applications they made in the past six months were rejected outright. It also showed that Irish SMEs are the second most likely in Europe, after Estonia, to have their bank loan applications rejected – highlighting the plight SMEs are facing when attempting to secure credit with traditional lending institutions. These problems facing many Irish SMEs are compounded by two key elements, a lack of access to credit and a culture of late payments, according to Bibby Financial Services director Graham Byrne. ‘There is widespread perception amongst traditional lenders that SMEs are a high-risk sector and the unwillingness to release credit continues and shows
no sign of abating. SMEs need to be aware that they can access the funds they need from alternative finance providers such as Bibby Financial Services,’ he says. ‘Invoice finance is an immediate and flexible way of supporting cashflow. With a reputation for offering flexible, tailored invoice finance solutions and with a 200-year-old history we are well positioned to work with SMEs now and going forward. Bibby Financial Services has a substantial funding facility in place to facilitate Irish SMEs. Bibby Financial Services is able to help businesses by offering a comprehensive credit management facility. We offer a flexible funding and collections service by releasing cash tied up in outstanding customer invoices whether raised against domestic or overseas trade.’
Or
How Do You Manage Your Accounts?
www.bigredbook.comCall Now On 1890334555, E-mail: [email protected]
This
This
Accounting Made Simple
AB_Feb_2012.indd 30 23/01/2012 15:55
32 A fresh perspective on outsourcing
23 A view from James J Ffrench, practical tips for a tax audit, limiting liability in a partnership and accounting software review
The view from:Dublin: Colm D’Arcy FCCA, director of fi nancial operations, Hertz European Service Centre
Q What lessons have you learned about business?A I have learned a great deal about business over the years, from the value of knowing the customer to creating shareholder value. Probably the most important principle of business, in the current climate, is cash is king. You may be a very profitable business but, if you are unable to determine whether or not your business is generating or consuming cash, it will not be long before you come unstuck. The principle is the same for large organisations and street vendors alike.
Q What tips would you pass on to others?A My guiding principle is to always surround yourself with the best people. As a people manager, one of your most important tasks will be to ensure that you have the right people in the correct positions. Understanding what skills are required for each role and having the appropriate assessments will help you make an informed decision. Candidates who are qualified or in the pursuit of a professional qualification such as ACCA will, in my opinion, always have an advantage.
Q What do you see as your key challenge for 2012?A Success, in 2012, is going to depend on our ability to flex our business in line with the market conditions. With so much uncertainty, our business needs to focus on what we do well and deliver a service that exceeds our customers’ expectations, while also being the enablers for revenue growth and new initiatives.
Q Tell us about Hertz Europe Service Centre?A The Hertz Europe Service Centre (HESC) was established in Swords, Co. Dublin in 1996, with the formation of our Centralised European Reservation and Customer Care Centre. This was followed by the migration of our back office financial operations functions in 2000. We provide services to our corporate partners in the UK, Germany, Belgium, Luxembourg, Netherlands, France, Switzerland, Spain, Italy and offer support to our EMEA franchisee partners. The Hertz Corporation (a subsidiary of Hertz Global Holdings, Inc.) is the world’s largest general-use car rental brand.
31Corporate
32 A fresh perspective
AB_Feb_2012.indd 31 23/01/2012 12:12
A big priority for CFOs in today’s global economy is how they shape the finance function to drive business performance. There are three big priorities: reducing the cost of running the finance function in the first place, improving the efficiency of finance processes, and making finance a more effective and able partner for the business.
The key tools in the toolbox that finance leaders have turned to to drive these initiatives have been shared services and outsourcing. ACCA has just published its first report on how leading organisations are transforming the finance function. Finance Transformation: Expert Insights on Shared Services and Outsourcing presents insights from experts at 20 of the world’s leading companies on the success of transformation through shared services and outsourcing. In the report the likes of Coca-Cola, Shell, Unilever, AstraZeneca, PwC, Ernst & Young, KPMG and Deloitte share their perspectives on the current issues, challenges and opportunities in the shared services and outsourcing space.
Shared services started in the 1980s in the US and by the 1990s had migrated to Europe. Today shared services are a global phenomenon, with leading companies and finance leaders seeking to explore the benefits they can bring to finance operations. It’s not hard to see why. Shared services and outsourcing operations have been an overwhelming success for the businesses that have adopted them.
Cost no-brainer The obvious draw is reduced cost, as consolidation of finance activities into specific locations has driven significant scale benefits, and most importantly tapped into significant labour arbitrage between different geographies. Put
simply, it replaces relatively expensive management accountants in mature economies with their equivalents in cheaper locations.
But to sell the benefits of shared services and outsourcing on cost alone would significantly underplay the other benefits of ‘remote delivery’. Labour arbitrage may not in the future be as compelling as it once was, but the other benefits from remote delivery continue to shine through.
So what are these benefits? First, there is standardisation. Remote
delivery takes finance processes that seek the same outcomes across different geographies and turns them into one, ensuring consistency and understanding of how these processes work, rather than variations on a theme, and leveraging technology to deliver them.
Second, remote delivery brings transparency. The transfer of finance activities into remote delivery centres gives the business and the finance function greater visibility on how finance operations work and how they can best
No turning backIt is clear that shared services and outsourcing are here to stay and will increasingly help fi nance functions to drive business performance, reports ACCA’s Jamie Lyon
LABOUR ARBITRAGE MAY NOT IN FUTURE BE AS COMPELLING AS IT ONCE WAS, BUT OTHER REMOTE DELIVERY BENEFITS CONTINUE TO SHINE THROUGH
32 Corporate
AB_Feb_2012.indd 32 23/01/2012 12:12
support business aims, which helps drive accountability and ownership.
Third, remote delivery offers control. The use of shared services and outsourcing for finance helps drive better financial control across the organisation and makes the auditing process more effective and efficient, with controls typically located in one or a few locations rather than dispersed across the business.
Fourth comes quality. Better finance processes drive qualitative outcomes that are better first time round. They also start to drive greater insight into the business metrics and outcomes that matter, and the understanding of how processes may affect these.
These four benefits are often cited as the key advantages of shared services and outsourcing, but there are others. Businesses often say that shared services and outsourcing help reduce finance operating risk (linked to transparency). In particular, businesses that choose to keep remote delivery units in-house through captive shared service centres say this lets them drive and retain specialised capabilities that may be important to the organisation – for example, regulatory skills.
Freeing up financeThis, in turn, raises the broader issue of talent development. By consolidating and centralising finance operations, the business gains visibility over the skills it needs and the talent at its disposal. This is not just about visibility in the remote delivery centre: similar benefits should accrue to the retained function as staff are freed up to develop skills in necessary areas.
Caroline Curtis FCCA, formerly senior director of controllership accounting and reporting, EMEA, Yahoo, says: ‘Our shared service centres bring many benefits – speed of execution, reduced operational risk, specialised capability when it may be needed (for example, with regulatory issues), operational flexibility and an ability to control talent development effectively.’
TO READ ACCA’S REPORT ON HOW ORGANISATIONS ARE TRANSFORMING THE FINANCE FUNCTION, VISIT www.accaglobal.com/transformation
TO READ ACCA’S REPORT ON HOW ORGANISATIONS ARE TRANSFORMING THE FINANCE FUNCTION, VISIT www.accaglobal.com/transformation
Given these benefits, it should come as no surprise that ACCA’s report shows that there will be no turning back from shared services and outsourcing. Businesses have already stripped out significant costs in their finance operations, and other benefits have started to accrue. It seems that shared services and outsourcing for finance are here to stay.
While ACCA’s report concludes that shared services and outsourcing have been a success, there is much more that can still be done. In particular, the priority of many businesses is not finance transformation per se; an efficient and cost-effective finance function is beneficial, but increasingly business leaders want to understand how the finance model can improve business outcomes and profitability, and the role of shared services and outsourcing in this. They seek to drive the finance model that best meets the needs of the business and which is fully integrated with the business.
Anoop Sagoo, senior executive for business process outsourcing at Accenture, says in the report: ‘The CFOs that I work with see finance
transformation as a vehicle and tool to drive change. What they are most interested in now is performance.’
Jamie Lyon, ACCA head of employer services
* Next month, we will be looking at the challenges involved in outsourcing
* If you are a CFO or FD interested in finance transformation, shared services or outsourcing and want to contribute to ACCA’s programme, please contact [email protected], +44 (0)20 7059 5513
Anoop Sagoo Caroline Curtis
33
Shared services and outsourcing have been an overwhelming success and are now recognised as key components of a best practice finance function. Remote delivery is an idea whose time has come and any organisation with multiple back-office finance functions is likely to benefit from a shared service structure – whether run as a captive or outsourced. The labour arbitrage that has driven nearshoring and offshoring over the past 10 years will decrease. But even if there is little cost arbitrage to be gained from a low-cost location, there are many other benefits, such as the adoption of a single best practice and more productive process, better spans of control, and standardised and enhanced data and reporting. Such benefits will ensure that consolidated transaction processing and even higher value activities will continue to make good business sense. There is no turning back.
*VIEW FROM DELOITTE: PETER MOLLER, PARTNER
AB_Feb_2012.indd 33 23/01/2012 12:12
Aidan Clifford FCCA, advisory services manager, [email protected]
34 Technically speaking
IN THIS ARTICLE:
• 01 ODCE information booklets updated.
• 02 Charity act: minister clarifies implementation arrangements.
• 03 ESMA encouraged preparers to comment on sovereign debt.
• 04 Micro-businesses to be exempt from new regulations.
• 05 CRO and Auditor Registered Numbers – clarification issued.
• 06 Proposed internal control good practice guidance issued.
• 07 News on the timing of US adoption of IFRS.
• 07 Government accounting for toll roads: clarification by IPSASB.
• 08 Redundancy and temporary workers – changes in legislation outlined.
• 09 IAASB issues practice note on auditing financial instruments.
• 09 Important clarification and changes by ASB.
• 10 Accounting for financial instrument update.
01 ODCE UPDATEThe series of seven ODCE information booklets, first issued in 2007, have been updated for changes in company legislation and reissued. The booklets set out the principal duties and powers of companies, company directors, company secretaries, members and shareholders, auditors, creditors, liquidators, receivers and examiners. The booklets can be downloaded from www.odce.ie
02 CHARITY ACT 2009In a recent speech by the minister for justice, Alan Shatter, to the ICTR Annual Conference, the minister said: ‘I simply
cannot see that we are in a position to fully implement the Charities Act on a statutory basis at the moment’. The minister noted that the Scottish regulator needed 50 staff to run their Charity Commission and that, as the sector could not afford to cover the cost of regulation and the state could also not afford to run it, the legislation would have to be put on hold. In the speech, the minister called for voluntary adherence to codes of best practice in the sector.
03 SOVEREIGN DEBT In July 2011, ESMA encouraged preparers to comment in their financial statements on any sovereign debt that they may hold and to provide a breakdown, by country, of the amounts held. ESMA has since conducted a survey of the treatment of Greek sovereign debt in financial statements and, arising from this review, has issued the current statement. The statement is in two sections: the first is on matters to be considered by issuers and their auditor with IFRS in relation to sovereign debt. The second section is the results of their review. Full details are at www.esma.europa.eu
04 SMALL BUSINESS REGULATIONThe EU Commission has presented a new approach to ensure that the EU responds better to the needs of small businesses. From now on, the European Commission will seek, wherever possible, to exempt micro-enterprises from EU legislation or introduce special regimes so as to minimise the regulatory burden on them. As of January 2012, the Commission will:• Step up the search for exemptions
or lighter requirements for micro-enterprises in existing and new EU legislation;
[ACCA’s Aidan Clifford rounds up some of the changes Irish accountants should be aware of
AB_Feb_2012.indd 34 23/01/2012 12:12
35
• Strengthen the processes by which micro-enterprises and other SMEs are consulted when reviewing existing EU regulation and preparing new EU laws; and,
• Produce annual scoreboards to evaluate the real benefits for businesses and to ensure a continuing focus on their needs and interests.
05 CRO AND AUDITORSOn 1 April 2011, CRO introduced a new system whereby an auditor registration number (ARN) must be inserted on a B1 (annual return form) when an audited set of accounts is filed with the CRO. The system is designed to ensure that only auditor’s reports, signed by statutory auditors are filed with the CRO and, at the same time, protect auditors from having their ARN or their name used on an auditor’s report without their consent. As part of this system, CRO has been issuing a monthly email providing auditors with a list of companies who used their ARN on a B1 form during the preceding month. Auditors can then email the CRO if they did not conduct an audit for any one of the companies on the list. Following a review of the system, the CRO has decided to make available to auditors/firms the option of receiving an instant email alert each time a B1 form is filed containing their ARN number. The CRO is encouraging any auditor/firm whose numbers are manageable to choose the instant email option. The advantage of the instant email is that, if an ARN has been used fraudulently, and the instant email is responded to immediately by the auditor, there would be a better chance
of the CRO being able to stop the annual return from being registered. With monthly emails, most of the annual returns on the list will have been registered by the time the auditor/firm receives the email and, once registered, an annual return can only be removed from the Register by way of a High Court order. 06 IMPROVING INTERNAL CONTROLSThe Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) has issued proposed international good practice guidance, Evaluating and Improving Internal Control in Organisations for public comment. The aim of this guidance is to establish a benchmark for good practice in maintaining effective internal control in response to risk, and help professional accountants in business and their organisations create a cycle of continuous improvement for their internal control systems. See www.ifac.org/paib for further details.
07 DELAY ON IFRS The US-SEC published the transcript of a speech made by James L. Kroeker, SEC chief accountant, at a recent American Institute of Certified Public Accountants national conference on current SEC and PCAOB developments. In this speech, Mr Kroeker discussed the timing of a final report to be issued by the SEC staff on the incorporation of IFRS for US issuers. See www.sec.gov/news/speech/2011/spch120511jlk.htm for further details.
08 INSURANCE ACCOUNTINGThe IASB insurance contracts project
team has prepared a webpage that reports on the boards’ joint tentative decisions on this project. The webpage is designed to help interested parties evaluate the impact of those decisions on the forthcoming standard. It also invites feedback on various topics.
09 PENSION PROVISIONThe Pensions Board has launched a consultation on the simplification of defined contribution pension provision – see the related consultation document at www.pensionsboard.ie. The consultation is open until Wednesday, 29 February 2012.
10 ACCOUNTING FOR TOLL ROADSThe International Public Sector Accounting Standards Board (IPSASB) has approved a new standard, IPSAS 32, Service Concession Arrangements: Grantor. Service concession arrangements provide a way for the government to build or upgrade the infrastructure necessary to maintain and improve critical public services such as toll roads and hospitals and schools using private sector finance, sometimes called public/private partnerships. The use of service concession arrangements is expected to increase due to the on-going global financial and economic crises. Until now, however, public sector entities had no international guidance on how to report such transactions. IPSAS 32 addresses the grantor’s accounting in such arrangements using an approach that is a mirror of that used for the private operator’s accounting in IFRIC12, Service Concession arrangements. IPSAS 32 is available to download free of charge from www.ipsasb.org
AB_Feb_2012.indd 35 23/01/2012 12:13
Technical36
Associated CompaniesThe rules relating to associated companies were rewritten and apply to accounting periods ending after 31 March 2011. Associated companies are defined in S25(4) of the Corporate Tax Act 2010. ‘A company is an associated company of another at any time when one of the two has control of the other or both are under the control of the same person or persons.’The new test is therefore a two-part test:1) Would the companies be associated
under the old associated company rules? If no, the companies are not associated under the new rules; If yes, the companies may be associated under the new rules (subject to 2 below).
2) Is there ‘substantial commercial interdependence’ between the companies? If no, the companies are not associated; If yes, the companies are associated.
Examples of commercial interdependence include:* Loans between companies and/or
cross-guarantees.* Similar trading activities.* Shared workforce.* Doing essential work for each other.* Sharing contracts/clients.* Forming joint ventures.* Using each other’s plant/equipment.* Inter-company purchases.It’s important to note the disregards that apply. For example, a holding company will be disregarded as an associated company where it doesn’t trade, has one or more 51% subsidiaries and is a passive company.A passive company:* Has no assets other than shares in
51% subsidiaries.* Has no income other than dividends.* Distributes dividends in full.* Has no chargeable gains.* Has no management expenses of
any consequence.* Makes no qualifying charitable
donations which are deducted from profits.
For more, go to www2.accaglobal.com/tax_associated_companies
Intrastat revised due dateAs highlighted last month, the due date for submission of intrastat declarations is now planned to apply from 1 April.HMRC states: ‘This measure will take effect on 1 April 2012. Intrastat declarations for the period 1 to 31 March will be due on 21 April; all subsequent declarations will be due on the 21st of the month.’ It will impact on businesses that are required to submit declarations of their trade with other EU member states using an intrastat declaration ie, those with intra-EU trade in excess of £600,000 per annum for arrivals (EU imports) and/or £250,000 per annum for dispatches (EU exports).HMRC has now updated Notice 60 Intrastat General Guidance to reflect the change. The notice is effective now and as well as being easier to read, it withdraws the option to submit paper forms, brings forward the due date of submission of forms to the 21st day of the month, clarifies that Nature of Transaction Codes 40 and 50 can only be used where no change in ownership takes place, and announces that the threshold for using the low value consignment simplification procedure has been increased from £130 to £180. The notice also contains web-based and telephone contact details regarding the two ways to submit data electronically:* Via the internet (Intrastat Online
Services).* Using Electronic Data Interchange
(EDI).For more, go to www2.accaglobal.com/tax_vat_intrastat
Small pension potsDraft guidance has been made available explaining how a change in legislation allows individuals aged 60 or over with small personal pension pots of £2,000 or less to have two such pots paid as a lump sum in a lifetime. The 2012 regulation change inserts a new regulation 11A into the Registered Pension Schemes (Authorised Payments) Regulations 2009.The conditions that need to be met, for a small lump sum to be commuted
under regulation 11A are that:* The payment is made on or after 6
April 2012.* The payment is made to a member
who has reached the age of 60.* The ‘small lump sum’ does not
exceed £2,000.* The payment extinguishes the
member’s entitlement to benefits under the arrangement.
* The member has not previously received more than one payment under Regulation 11A.
Further guidance can be found at www.hmrc.gov.uk/pensionschemes/small-pots-guidance.pdf
Pension transfersDraft guidance has been made available that is intended to apply from 6 April, regarding the transfers of pension savings to qualifying recognised overseas pension schemes. The guidance summarises that the changes are to firm up the tests to be an overseas pension scheme, to make the rules work as originally intended, and to introduce new information and reporting requirements.For more, go to www.hmrc.gov.uk/pensionschemes/draft-guidance-qrops.pdf
PAYE/NIC security depositsFrom 5 April, HMRC will be able to ask employers to pay a security deposit where there is serious risk that they won’t pay over their PAYE or Class 1 national insurance contributions.HMRC has said that it will use this power ‘to target those employers who have a record of using bankruptcy and phoenixism as a way of stepping away from their creditors, leaving debts unpaid with HMRC and legitimate suppliers’. It is similar to the regime that exists for VAT, insurance premium tax and environmental taxes. In the same statement, HMRC said that it ‘will not use these powers where a business is having genuine financial difficulties’.
Glenn Collins, head of technical advisory, ACCA UK
Northern Ireland notes
AB_Feb_2012.indd 36 23/01/2012 12:13
Technical
FEBRUARY 2012 General
14 PAYE P30 monthly return and payment for January 2012 (ROS extension to 23 February 2012). 14 PSWT F30 monthly return and payment for January 2012 (ROS extension to 23 February 2012). 15 PAYE Form P35 for 2011 (ROS extension to 23 February 2012). P60s for 2011 must also be issued to employees by 15 February. 15 PSWT Form F35 for 2011 (ROS extension to 23 February 2012). 15 RCT Principal contractors to file Form RCT35 (ROS extension to 23 February 2012).
Companies
14 Dividend Withholding Tax Return and payment of DWT for distributions in January 2012.
21 Corporation Tax Return and final payment for accounting periods ended 31 May 2011 (ROS extension to 23 February). 21 Corporation Tax Preliminary tax for accounting periods ending 31 March 2012 (ROS extension to 23 February). 21 Corporation Tax First installment of preliminary tax for ‘large’ companies for accounting periods ending 31 August 2012 (ROS extension to 23 February). 29 Form 46G – Return of Third Party Information Form 46G for accounting periods ended 31 May 2011.
MARCH 2012 General
1 Household Charge Due date for application for payment of household charge by installments. First installment of €25 due on 13 March 2012. 14 PAYE P30 monthly return and payment for February 2012 (ROS extension to 23 March 2012).
14 PSWT F30 monthly return and payment for February 2012 (ROS extension to 23 March 2012). 19 VAT Bi-monthly VAT3 return and payment for the period January/February 2012 (ROS extension to 23 March 2012). 31 Share Options Return of information in relation to share options or rights granted in the year ended 31 December 2011 31 Household Charge €100 household charge payable for those not paying in installments. Companies
14 Dividend Withholding Tax Return and payment of DWT for distributions in February 2012 21 Corporation Tax Return and final payment for accounting periods ended 30 June 2011 (ROS extension to 23 March). 21 Corporation Tax Preliminary tax for accounting periods ending 30 April 2012 (ROS extension to 23 March).
Tax diary
37
21 Corporation Tax First installment of preliminary tax for ‘large’ companies for accounting periods ending 30 September 2012 (ROS extension to 23 March). 31 Form 46G – Return of Third Party Information Form 46G for accounting periods ended 30 June 2011. Individuals
31 Basis of Assessment Deadline for claiming Separate Assessment and nominating Assessable Spouse for 2012.
Information supplied by the Irish Tax Institute. Disclaimer: This is a calendar of the main tax compliance deadlines but is not intended to be an exhaustive list. While every effort has been made to ensure the accuracy of this information, the Irish Tax Institute does not accept any responsibility for loss or damage occasioned by any person acting, or refraining from acting, as a result of this material.
AB_Feb_2012.indd 37 23/01/2012 12:13
partnership may be paid without deduction of PAYE or USC. Such treatment will only apply where prior approval is granted by Revenue following a written request.
(b) USC treatment of cross-border workers Revenue has clarified in eBrief No. 81/11 the USC position that will apply for the tax year 2012 in respect of certain ‘cross-border’ workers. Where a temporary assignee to Ireland is a ‘posted worker’, i.e., sent by his or her employer to work in Ireland for a period of up to 24 months, that individual is generally chargeable to USC at a maximum rate of 4%. Posted workers wishing to avail of this treatment should supply Forms A1 and S1 to Revenue. Revenue notes a change in practice from 1 January 2012 in relation to ‘frontier workers’, i.e., workers who are resident in other EU Member States (including Northern Ireland) but who travel to Ireland to exercise the duties of their
employment here, returning to their home country at least once a week. For 2011, such individuals were subject to a maximum USC charge of 4%. However, in 2012, they may be subject to higher rates of USC. Full details are provided in the eBrief.
(c) USC treatment of non-residentseBrief No. 82/11 contains guidance on the USC treatment of individuals who are resident and working in a country with which Ireland does not have a double-tax treaty and who exercise all of the duties of their employment in that country. For 2012, an employer holding a PAYE exclusion order will not be required to deduct USC when paying employment income to such individuals. An employer not holding a PAYE exclusion order in respect of such individuals will be required to deduct USC when paying employment income to them. Those employees should apply to Revenue after the end of the tax year for repayment of any USC deducted.
Revenue updates – a round-upIn this article:01 Revenue issue guidance on a
number of areas.02 Supreme Court rules in O’Flynn
Construction anti-avoidance case.03 €100 household charge becomes
payable.
01 Revenue guidanceRevenue issued a number of briefing documents in late December 2011. Key points are summarised here:
(a) Tax and USC treatment of directors’ remunerationTax Briefing 06/11 clarifies Revenue’s position on the tax and Universal Social Charge (USC) treatment of remuneration arising from having or exercising the public office of director of an Irish-incorporated company. Revenue states that it is a long-established principle of Irish tax law that a director (including a non-executive or non-resident director) of an Irish-incorporated company holds an Irish public office. The remuneration arising from that office is chargeable to tax in Ireland under Schedule E, the income is within the scope of the PAYE system, and income tax and USC must be deducted at source. Where the income is mandated or allocated to a third party (e.g. to another company), rather than paid directly to the director, this arrangement does not bring the income outside the scope of deduction at source under the PAYE and USC systems. Notwithstanding the above principle, Revenue has clarified that, with effect from 1 January 2012, directors’ remuneration paid to partners (who are solicitors or accountants) of a legal or accountancy
In this article:01 Revenue issue guidance on a
number of areas.02 Supreme Court rules in O’Flynn
Construction anti-avoidance case.03 €100 household charge becomes
payable.
38 Technical
AB_Feb_2012.indd 38 23/01/2012 12:13
(d) Guidelines on ‘attachment’ Finance Act 2011 granted Revenue the power to compel the employer of a taxpayer who owes a debt to Revenue to deduct the amount of that debt from the wages/salary of the taxpayer and pay it over to Revenue. This process is known as ‘attachment’ of wages/salaries. Prior to Finance Act 2011, Revenue already had the power to ‘attach’ other debts owed to taxpayers who are in default of debts owed to Revenue.
Revenue eBrief No. 86/11 was issued in December and it contains guidelines on the ‘attachment’ process. A final demand must have issued to the taxpayer prior to issuing a Notice of Attachment to the taxpayer’s employer. In addition, the guidelines confirm that ‘attachment’ of wages/salaries may only apply in the following circumstances:• The total debt (including tax,
interest and penalties) must be at least €10,000;
• The taxpayer’s gross earnings must be in excess of €50,000 per annum based on the most recent year for which Revenue has a P35 or P60. Revenue will not use a P35 or P60 more than two-years old; and,
• The debt must be in default for at least six months.
02 Supreme Court rulingIn December 2011, the Supreme Court delivered its judgment in the first case in which it was required to consider the provisions of Ireland’s general anti-avoidance law, section 811 TCA 1997. The case in question, which involved O’Flynn Construction Co. Ltd, was decided in favour of Revenue in a majority 3:2 verdict. The judgment will be of value in interpreting the application of section 811, which the judgment described as a provision of ‘almost mind-numbing complexity’. The case concerned a complex series of transactions entered into by the defendants in 1991 and 1992. In
summary, it involved the transfer of export sales relief (ESR) reserves from a company within the Dairygold Group to O’Flynn Construction Co. Ltd, a company engaged in the construction business, and the subsequent payment of a tax-free dividend to two individuals. The issue that the Supreme Court was required to decide was whether this amounted to a ‘misuse’ or ‘abuse’ of the ESR provision. The Court found that ‘[a] scheme which allows the shareholders in a non-exporting company to benefit from export sales relief on the profits of the non-exporting company, is surely a misuse or abuse of the scheme having regard to the purpose for which the provision is provided’. Judgment was delivered in favour of Revenue.
03 Household charge becomes payableThe €100 household charge has become payable, and a dedicated website (www.householdcharge.ie) has been set up to provide information and to answer some frequently asked questions on the charge. The website also contains a facility whereby the charge can be paid online. Householders have until 31 March 2012 to pay. However, where the charge is paid by instalments (i.e., four instalments of €25 each), the direct debit mandate must be set up by 1 March 2012 and the first €25 instalment must be paid by 13 March 2012.
Cora O’Brien is director of technical services, Irish Taxation Institute. Email [email protected]
39
AB_Feb_2012.indd 39 23/01/2012 12:13
S202 and auditor liensS202 of the Companies Act 1990 is in need of reform as the wording of the section is problematic, argues Andrew Feighery
loss account or income and expenditure account of the company complies with the requirements of the Companies Acts, and,
(d) will enable the accounts of the company to be readily and properly audited.’
The effect of non-compliance with S202 can result in the imposition of fines and criminal liability on officers of the company under S203 and personal liability for some or all of the
S202 CA states:‘Every company shall cause to be
kept, proper books of account, whether in the form of documents or otherwise, that –(a) correctly record and explain the
transactions of the company,(b) will at any time enable the
financial position of the company to be determined with reasonable accuracy,
(c) will enable the directors to ensure that any balance sheet, profit and
While the intent of S202 of the Companies Act (CA) 1990 is to ensure that companies keep proper books of account by holding directors responsible for non-compliance with its provisions, the court’s interpretation of the provisions potentially impose unfair measures on auditors of limited companies by requiring them to release their working papers and accounts and relinquish any lien over such works that they ought properly to hold.
40 Technical
AB_Feb_2012.indd 40 23/01/2012 12:13
disadvantage on auditors by refusing them a lien over their intellectual property where there are unpaid fees. Given that a lien is a well-established principle of common law, enjoyed by other professionals such as bankers, architects and solicitors, this potentially leaves auditors in an unacceptable position in current recessionary times. This article focuses on the court’s interpretation of what constitutes proper books of account under S202, in an attempt to
works. Their advice appears to be based on the premise that, by withholding such documentation, it could lead to proper books of account not being maintained by the company and as such, an infraction of S202 occurring potentially leaving its members liable under S203 and S204 CA.
While there is no authoritative case law dealing directly with this matter, it is submitted that such advice, if correct, causes a distinct competitive
company’s debts attaching to company officers under S204.
By virtue of the fact that an auditor is an officer of the company and having regard to the court’s jurisprudence on this area, professional accountancy bodies have advised its members acting in the capacity as auditor to a limited company to release working papers on their audit with the audited financial statements to any successor auditor regardless of whether there are unpaid fees owed in respect of such
41
AB_Feb_2012.indd 41 23/01/2012 12:13
given to court depends on causation, culpability and duration. In the absence of further case law, it remains to be seen whether a court would consider a failure by an auditor to release his or her working papers would result in the imposition of liability. In conclusion, while a cursory glance at S202 may lead one to believe that it is merely confined to directors’ failure to keep proper books of account as has been held in cases such as the Director of Corporate Enforcement v. Patrick Rodgers and Paul Rodgers, and Keane v. Kalsi, the section as currently worded actually nullifies an auditors’ lien over his intellectual property. Given the unfair effect of this, we now examine the nature of liens, what the courts jurisprudence has adjudged in this regard and whether the true interpretation of S202 conflicts with the common law position on auditors’ liens.
Nature of liensA lien is a long established right under common law. They may be defined as ‘a right of a person to retain possession of the owner’s property until the owner pays what he owes the person in possession’. They are further categorised as particular liens and general liens. A particular lien may be defined as ‘a lien over property which can be retained only until payment of a particular debt due in respect of that property is paid’.
A general lien is further defined as ‘a lien over property that can be retained until payment of all amounts that the debtor owes the creditor, however arising’. With regard to such liens, it is generally accepted that an auditor does not have a right to a general lien only a particular lien; although there is a dearth of authority in support of the former. For the purposes of this article, we shall assume that a particular lien, ought to only exist as it sufficient to demonstrate the specified unfairness of the law.
would be if by using such basic records an accountant would be able to construct further records that would enable the financial position of the company to be determined. These comments indicate that accounts need not be available, but must be capable of being created by an accountant, thereby implying in any event that auditors’ working papers must be made available for such purposes.
This view was endorsed in the subsequent case of David F. Mehigan v. John Duignan, where the court held that the company did not keep proper books of account by virtue of missing prime books and records (such as stock sheets, cheque books and invoices). Therefore, the company had not properly recorded its financial transactions to enable its financial position to be determined with reasonable accuracy and its accounts to be readily and properly audited. Accordingly, it appears that an auditor withholding information could be held in contravention of S202. However, the more pressing matter under S203 and S204 CA is whether they would be held personally liable for such infraction. Assistance on this matter can be obtained from the case of O’Keefe v Ferris, in which the learned judge stated that a contravention of S202 would require as a condition precedent to liability, any of the following to occur: (a) Such infraction to contribute to the
company’s inability to pay its debts;
(b) The infraction to create substantial uncertainty as to the company’s assets and liabilities; and,
(c) Such infraction to impede the orderly winding up of the company.
The judgment acknowledged the highly discretionary powers afforded to the courts under the aforementioned sections but justified these by virtue of the Companies Acts being a post-1937 statue. It stated that the discretion
understand whether an auditor could be held so liable, the nature of liens and what the courts consider such liens to encompass before suggesting proposals to rectify this miscarriage of law.
‘Proper books of account’While ss. 202 (3)(a) to (d) CA attempt to define proper books of account, it is far from a succinct definition and implies more than the mere keeping of books of account by the requirement that such books must give ‘a true and fair view’ of the state of affairs of the company and explain its transactions. As there is little alternative assistance to be gleaned from the Companies Acts in interpreting the meaning of ‘proper books of account’, we turn to case law to attempt to define same and as such whether a failure by an unpaid auditor to surrender their working papers and accounts to a successor auditor could result in liability or sanctions being imposed on them under the Companies Acts. From an examination of such jurisprudence, it appears so. In R v. Bennett and Anor, the courts indicated that audited accounts would be required to comply with the section by stating that merely retaining or storing such records as happen to come into possession is not sufficient but that there is an obligation imposed to create such records which are not already in existence and retained. Some doubt is cast on this decision, however, in the case of Brian Conroy v. Mary Corneill and John Corneill, where Smyth J. stated that the phrase ‘books of account’ does not require them to show the financial position of the company but that they must as such enable the position to be determined. The judgment stated that, while the requirement to keep proper books of account would not be complied with if the company kept only basic accounting records, such as cheque books, deposit books, bank statements, invoices and the likes, it
42 Technical
AB_Feb_2012.indd 42 23/01/2012 12:13
Auditors liensThe first decisive case in which an accountant or auditors lien was adjudicated upon is the UK case of Re; Hill, ex parte Southhall (1848). In that case, the judge stated he could see no reason whatsoever why accountants should not have a lien of some kind, although he did not elaborate upon whether such lien should be specific or general. It was over a century later before the matter came before the courts attention again in the case of Chantrey Martin v. Martin. In that case, it was held that working papers brought into existence by accountants in the preparation of a final audit of a client’s books are the property of the accountant, both in respect of documents owned by the defendants and those which are subject to the lien. The courts further strengthened the right to a lien by refusing any process of discovery or inspection because they felt that this would invalidate the lien.
In Woodworth and Another v. Conroy and Others, the right to a lien was endorsed further. The defendants, a firm of accountants, were requested by their former clients on the termination of their relationship to return their documents, papers and correspondence which were in the defendants’ possession. The defendants refused the request and sent fee notes to the plaintiffs claiming substantial sums for outstanding fees. It was held in the subsequent appeal, that accountants in the ordinary course of their work of producing and auditing accounts, advising on financial problems and negotiating with the Revenue, had at least a particular lien over books of accounts, files and papers which had come into their possession in the course of that work and, therefore the defendants had a lien over their files in respect of any unpaid fees. It should be noted, however that the courts have never endorsed the right of an accountant or auditor to hold a lien over a client’s
43
issued guidance in accordance with such interpretation and claim that a member is entitled to exercise a lien over their accounts and working papers provided the following conditions are satisfied:(i) The documents retained are the
property of the client who owes the money and not of a third party.
(ii) The documents must have come into the possession of the member by proper means.
(iii) Work must be done by the member in respect of the documents and a fee note must be issued in respect of such works or an oral demand made for payment within a reasonable period of time.
(iv) The fees for which the lien is exercised must be outstanding in respect of such work and not in respect of other unrelated work.
The guidelines further state that such liens are subject to the general exclusions referred to infra such as statutory books of companies and the companies own books and records. However, in spite of acting in accordance with such authorities, an auditor could be held in contravention of S202 CA by virtue of the current wording of the section. On this basis, it is submitted that this imbalance and potential miscarriage of law be immediately amended by excluding auditors from the provisions of S202 CA in circumstances where there are unpaid fees owed to them. It is submitted that such amendment would restore the bona fides of the section in ensuring that directors and not auditors are responsible for maintaining proper books of account and further ensure that an auditor was paid in a proper and timely basis for their rendered professional services.
Andrew Feighery is an associate with CGC Associates. Email [email protected]
original books of account. This was established in D.T.C. (C.N.C.) Ltd. v. Gary Sergeant & Co. in which the court sought to examine whether an accountant or auditor could exercise a lien over ‘accounting records’ as defined under Section 221 of the Companies Act 1985 (broadly identical to S202 CA 1990). It was held that an accountants’ lien over a client’s books of account, files and papers in respect of unpaid fees was unenforceable in so far as it conflicted with statutory provisions requiring such documents to be available for inspection by the company’s officers or to be kept in a specified place and that original documents, which constituted accounting records, did not cease to be such merely because the information contained within them had been collated and transposed in whole or in part onto a fresh document. The jurisprudence of the courts clearly establishes that an auditor has a particular lien where there are outstanding fees due to them. Indeed, it is stated that the courts actually appear to favour liens as they recognise alternative courses of action, such as litigation, often leave the debtor in a position whereby any judgment obtained may not be capable of enforcement. They have also stated that the retention of documents rather than an unsatisfied judgment is generally of greater value to the debtor and intrinsic to any lien is that the documents subject to the lien cannot be copied or inspected. They have copperfastened their views by stating that before granting an order for inspection of such documents such sum that equates to the fee should a ordinarily be lodged in the court.
ConclusionThe foregoing jurisprudence clearly outlines that the courts strongly endorse an auditor’s lien over his or her intellectual property where there are unpaid fees. The institutes have
AB_Feb_2012.indd 43 23/01/2012 12:13
44 Technical
01Has there been an evolution in the sophistication of credit control in the last few
years? Without a doubt, recognition of the importance of credit control among Irish businesses has improved greatly. In good times, credit control is important; in bad times, it is critical. All of a business’ working capital and finance needs, and its ability
Derek McDermott, head of asset and commercial fi nance, Bank of Ireland Finance, on the role of invoice discounting as part of a business’ overall credit management strategy
FULL CREDIT GIVEN
AB_Feb_2012.indd 44 23/01/2012 12:13
45
to pay bills, are predicated on the predictability of cashflow. Companies are seeing the link more clearly between effective credit control and confidence in their inflows, which, in turn, may mean they need less headroom in their banking facilities and have less ‘urgent events’ to tackle.
02Do you see any recurring mistakes being made?If a debtor only has a
limited amount of money to pay, they will pay the person who is making the most noise. A company that is sloppy in its credit control is, effectively, allowing someone else to be paid ahead of them. In a limited pool of cash, you want to make sure you get your fair share. Credit control is not
04People are generally cynical about banks at the moment. How does that impact on
business?I would say that actions speak louder than words and our business reps are out there, pounding the pavements, looking to grow our business. Of course, opinions vary and you can only change them one person at a time, but when you look at how we are growing our book, I think that indicates that we really are open for business.
05For people looking for a new line of credit, what do you offer?Firstly, it’s important to
recognise that the demand for credit is well down at both an individual
about ringing up and being abusive. Credit controllers are professionals who deal with their customers on the basis of documentation and systems.
03Tell us about Bank of Ireland Finance?Bank of Ireland Finance is, essentially, three
businesses. It’s an invoice discounting/working capital business and it’s a leasing business with two main focuses – one, a provider of asset finance solutions to the business and corporate base and, two, a motor-franchise business, providing stock to retailers and consumer finance through HP. Our franchise relationships cover approximately 50% of car sales in Ireland.
AB_Feb_2012.indd 45 23/01/2012 12:13
up 13% year-on-year. Generally, across the industry, people draw down about half of what’s available and, at any one time, about €2.7bn would be available. At Bank of Ireland, we discounted sales of €9.6bn to September of last year. Of that, about €3.3bn involved exports, to over 40 different countries. For 2012, we expect to grow by 20%, through a combination of existing and new customers.
08Have bad debts increased over this time?Our bad debts are
higher than they would have been in the 2007/08 period but they are
long time that we are not the lender of last resort. This is not factoring: your banking relationship is between you and your bank, and no one else. Our customer base, and that of our competitors, includes some of Ireland’s largest corporations as clients. Our largest single facility is for a customer with a turnover of €1bn annually. A business of that sophistication has many different options and, clearly, sees this as the right one.
07How is invoice discounting growing?The market in the period up to June 2011 was
and corporate level. Where there is a demand for working capital, it’s built on an expectation of growth. It’s important that our business representatives understand a business in its entirety and, particularly, what is driving this working capital requirement. If you understand those dynamics, you have a real shot at putting a financing package in place that will last.
06Do companies turn to invoice discounting too late in the day?Invoice discounting
providers on the market, including ourselves, have been saying for a
46 Technical
AB_Feb_2012.indd 46 23/01/2012 12:13
but, secondly, when you run your business, you always want to know which companies you are refusing and why. In a job interview, if you don’t get the position, you ask for feedback. In invoice discounting, if we feel this is not a deal we want to get into, we will explain why, whether it’s a systems issue, a debtor-quality issue, or to do with the company. It should all be interesting feedback to a company because, if we have doubts or concerns, they are likely to want to address them for their own benefit.If there is a way to fix them, we will sit down and talk about it and, when they are fixed, we will look at the opportunity again.
understanding the difference between a budget and a projection, between what they want and what’s likely to happen. They can make sure that the model of projections is flexed so that it’s covered for turnover increases or falls. Either can have a huge effect on the facilities you ultimately get. It’s important that all this is interrogated, in advance, before the customer is put through their paces by a bank.
10Do you quantify your refusal rate? What are the learnings for companies refused?
We analyse this monthly, firstly, because we have reporting obligations
at acceptable levels. No one likes bad debts and they could always be lower, but they are at levels we are comfortable with.
09What role do you see for financial advisers as companies engage with you?
Good advisers can bring the experience they have had with other businesses or other banks to the table. As an external set of eyes, they provide a valuable perspective and balance; they can ensure the appropriate levels of flexibility and stress testing are applied. With the help of a financial adviser, a business can come to a bank
D&B BUSINESS INFORMATION SOLUTIONSWith a growth in the number of businesses that are paying more slowly and evidence, anecdotally, of companies seeking to renegotiate payment terms with their suppliers, it is clear that companies are seeking to enhance the level of cash available to the business.Clearly, the extension of credit is a key part of any value proposition to a prospective new customer. However, the best way of ensuring that this does not place one’s own business at risk from any potential future debt is to have a sound understanding of that business as well as laying out a planned strategy for collections and communicating this effectively with both the sales team and the customer.The majority of businesses will look at an ageing debt simply in terms of the age and value. At D&B, we would also recommend that other factors be taken into account, namely, risk and wider corporate relations. For example, a
debtor owing €10,000 that has just been flagged up by D&B as receiving serious detrimental information should be prioritised over other debtors, even if the payment terms have not been reached.In addition, to fully understand risk exposure, it is necessary to look at not only the individual business but also any other transactions the business may have with other members of the corporate family, the identification and risk assessment of the debt in its totality being the ultimate aim of any effective credit controller. The ability to then be able to provide the analysis to senior members of the management team would demonstrate an assured understanding of where the risks may lie, how those risks are made up from across family groupings and finally that the ongoing maintenance of the debt is well managed, visible and up to date. Find out more at www.dnb.co.uk
COMMERCIAL ANNOUNCEMENT
47
AB_Feb_2012.indd 47 23/01/2012 12:13
Planning to secure fi nanceA focused business plan will improve your chances of securing fi nance, according to Niall Rice
In the current economic environment, it is difficult to obtain finance for all types of businesses. In order to help position a business with the best opportunity for securing finance, an approach focused on logical and comprehensive presentation of information needs to be taken when compiling projections and plans. Such an approach should include the following considerations:
Accurate information.It is critical to have easy access to accurate financial, product and HR information across the business. For businesses with well-organised and up-to-date systems, the process of preparing a business plan is made that much easier. For any restructuring or funding plan to be supported, banks need to have confidence and be able to easily verify the base information coming from the business.
48 Technical
AB_Feb_2012.indd 48 23/01/2012 12:13
Strength of negotiation positionIn seeking support for a bank or external investor for a business plan, it is important to consider what negotiating position should be taken on key aspects. As part of the preparation for negotiation, it is a good idea to carry out a sensitivity analysis on the key variables. For example, you should consider how the business plan will perform if interest rates change or sales/variable costs increase or decrease by, say, 10%. The results of key sensitivities or ‘what if’ scenarios, will provide a more realistic range of outturn results for the business plan.
ConclusionThe process of preparing a detailed business plan can be an excellent way to go ‘back to basics’ and understand how to strengthen the performance of any business. By making available to a bank or external funder, fundamental quantitative and financial information in a structured way, the key aspects of the business can be assessed quite quickly and a decision given, hopefully, to support the plan.
Additionally, if the financial model, which contains all of the detailed assumptions and calculations, is set up correctly it can be used as a monitoring check of actual versus budget performance and an early warning system if the business plan is not working. The goal of a well-presented business plan is to assure future support from a funder and ultimate survival.
Niall Rice is a partner in RSM Farrell Grant Spark’s Restructuring and Insolvency Department. Email [email protected]
Concise presentationOrganised presentation of key factual information assists a bank to better understand the commercial proposition, and more importantly, the potential risks attaching to the business. From logical and structured information, it should be easier for the bank to verify the assumptions that generate the projections.
Realistic assumptionsAssumptions are the fundamental building blocks of any business plan. The banks will want to focus on understanding the assumptions used to generate, for example, extra sales, i.e., is it by increasing volume and reducing sales price, and, if so, how realistic are the assumptions of the costs of increasing volume? In the hotel and catering industry, for example, there is a substantial amount of benchmarking information available on key performance indicators (KPIs). The KPIs relating to hotels will generally focus on room occupancy, average room rate and revenue per available room.
Factual emphasisA good business plan will concentrate on reporting factual statements and assumptions that can be easily verified and lead into structured arguments to support the outcome. While it is undoubtedly important to communicate the emotional aspects and determination to succeed that is behind most businesses, the overriding plan needs to based on robust commercial facts. If this approach is adopted then, very often, the accompanying written part of the business plan can be quite short, as the main aspects are dealt with as part of the assumptions and projections within the financial model.
49
AB_Feb_2012.indd 49 23/01/2012 12:13
COMMERCIAL ANNOUNCEMENT
GROWING ROLE IN HEALTHCARE PROVISIONHSF Health Plan, the health cash plan provider, based in Ennis, Co. Clare, is playing a growing role in the provision of healthcare in Ireland today. Over 100,000 Irish people are covered by HSF Health Plan and over 900 organisations in Ireland from the voluntary, public and private sectors offer HSF Health Plans to their staff, with that number continuing to grow. HSF Health Plan has committed not to increase its premiums in 2012, amid significant price hikes by private health insurers in their premiums and warnings of possible further rises in the coming months. While a health cash plan doesn’t pay private hospital or operation costs, it gives money back for a wide range of everyday healthcare costs including GP, prescription, consultant, dental, optical, physiotherapy and chiropody, along with grants for hospital stays, birth grants and worldwide accident cover. In addition, all HSF Health Plan policy holders have free access to a qualified doctor, 24/7 all year round, through a GP telephone advice line. ‘Cash plans are playing an important and growing role in
the provision of healthcare in Ireland. Unlike any other insurer, HSF Health Plan delivers the benefit when and where it’s most needed,’ says Roy Smith of HSF Health Plan. ‘We want to reassure employers that there is an affordable and trustworthy option on the market that can help their employees manage the cost of their unavoidable everyday health expenses and help prevent illness and absenteeism.’ Premiums for an HSF Health Plan start at €9.50 per month, covering the policy holder, spouse or partner and dependent children up to the age of 21. Policy holders can either pay through a direct debit from their bank or through the payroll deduction system. HSF Health Plan is the trading company of the charity, the Hospital Saturday Fund, which has been operating in Ireland for over 60 years and is regulated by the Health Insurance Authority (HIA) and the Department of Health and Children. The company helps policy holders budget for their everyday healthcare costs by making small regular contributions to the plan. Find out more at www.hsf.ie
AB_Feb_2012.indd 50 23/01/2012 15:38
51Technical
Health check 2012With disposable incomes squeezed and health insurance costs rising, it pays to look closely at the tax reliefs available for medical expenses, as Crona Brady explains
Budget 2012 was Ireland’s fifth austerity budget since 2009 and some welcome news was that the traditional tax reliefs available in the medical care sector remained untouched.
Dental and optical Dental and optical treatment is an area which causes most confusion when it that comes to claiming tax relief. Routine treatments such as extractions, scaling, fillings, insertion and repair of artificial teeth do not, unfortunately, qualify for tax relief. Examples of dental expenditure which do qualify for relief include crowns, veneers, gold posts and inlays, root canal treatment, bridgework, implants, wisdom teeth extraction carried out in a hospital, periodontal and orthodontic treatment.
AB_Feb_2012.indd 51 23/01/2012 12:13
With regards to optical treatments, sight testing, provision and maintenance of glasses and contact lenses do not qualify for tax relief.
Treatments abroadInterestingly, you can claim tax relief on medical treatment (including dental treatment) obtained outside of Ireland but you cannot claim for the travelling expenses incurred in getting the treatment, unless the health care required is only available outside of Ireland. Where the condition of the individual requires another person to travel with them to receive the treatment, the travelling costs of that individual can also be claimed. One condition of receiving treatment abroad is that the practitioner providing the care must be entitled to practice in the country in which the care is provided. For claims made for the years 2007, 2008 and 2009, the medical treatment centre in which the treatment is carried out must be on the Revenue list of approved hospitals and nursing homes. This is not required from 2010.
Nursing home fees Payments made to a nursing home whether for yourself or another person, who may or may not be a relative, may also qualify for tax relief. The important point to note is that tax relief on these specific expenses is available at your marginal rate of tax. In some cases, it may be possible to get relief granted during the tax year in which the expenses are paid, rather than having to wait until the end of the tax year. Local tax offices deal with these on a case-by-case basis. Where children are
52 Technical
AB_Feb_2012.indd 52 23/01/2012 12:13
insurance company. In cases where an employer pays medical insurance on behalf of an employee, tax relief at source is not allowed. An employee can claim the relief due by having the credit coded onto their certificate of tax credits or by submitting a claim form to your local PAYE division. It is important to note that where an employer pays your medical insurance premium for you, a benefit in kind charge arises for you. PAYE, PRSI and the Universal Social Charge will be deducted by your employer to the value of benefit provided.
ConclusionIn summary, many people may not be aware that they are entitled to claim tax relief for many medical procedures. In a time of likely increases in taxes and less disposable income, it will come as welcome news to many to hear that a cash injection may be available simply by gathering up your receipts and logging on to www.revenue.ie
Crona Brady is a tax managerin Grant Thornton, Dublin. Email [email protected]
How to claimIndividuals can claim online by registering for PAYE Anytime on the Revenue website or can, alternatively, complete a Form Med 1 (for medical expenses) or a Form Med 2 (for non-routine dental expenditure, which your dentist will complete for you) and submit to Revenue via post. It is important that you keep your receipts for at least six years in the event that Revenue asks you to submit the receipts for inspection.
Health insurance Where you pay your own health insurance premium, tax relief is granted on such premiums at source. This means that you pay a reduced premium equal to 80% of the gross amount to your health insurance provider. This is the same as getting tax relief at the standard rate of 20% but the tax credit is granted directly by the insuring company. Additional relief is available for people who are aged 60 and over. For individuals aged between 60 and 69, additional relief of €625 applies, for individuals aged between 70 and 79, the relief is €1,275 and €1,725 for individuals over the age of 80. This relief is granted directly by the
receiving treatment for cancer or children have permanent disabilities, tax relief may also be available on essential costs such as travel costs to and from hospital for the child and parent/guardian, special clothing and hygiene products, telephone costs related to the treatment of the child, where it can be shown that such expenditure is directly incurred in connection with the treatment. For individuals with kidney problems and who undergo dialysis and CAPD (Continuous Ambulatory Peritoneal Dialysis), tax relief is available on items such as travel expenses, telephone, electricity, and laundry expenses. Where a blind person keeps and maintains a trained guide dog, supplied by the Irish Guide Dogs for the Blind, an annual amount of €825 can be claimed as a qualifying health expense and, thereafter, a tax credit will be included on the individuals notice of tax credits.
Expenditure by another bodyIt is important to note that you can only claim medical expenses that are paid by you; you cannot claim relief for expenditure that has been or will be reimbursed by another body such as VHI or HSE or if you have or are to receive compensation for such expenses. A key point to note is that you can claim tax relief for expenses paid by you on behalf of any individual. So if you pay expenses for your children, your parents or a friend, you can claim tax relief. Where more than one individual pays for the health care, each individual can claim relief in respect of the portion paid by them.
53
AB_Feb_2012.indd 53 23/01/2012 12:13
Statements across frontiers?Just how comparable are fi nancial statements across national boundaries, given the clear and concise language in IAS 1? Graham Holt explores the evidence
IAS 1, Presentation of Financial Statements, requires that an entity whose financial statements comply with International Financial Reporting Standards (IFRS) has to make an explicit and unreserved statement of such compliance in the notes. Financial statements cannot be described as complying with IFRS unless they comply with all the requirements of IFRS, including International Financial Reporting Interpretations Committee interpretations (IFRICs). Inappropriate accounting policies cannot be rectified either by disclosure of the accounting policies used or by notes or explanatory material. On the basis of the above statements, it could be assumed that the comparability of financial statements could be assured, as the language used in IAS 1 is clear and concise.
Recently staff at the US Securities and Exchange Commission (SEC) analysed the annual consolidated financial statements of 183 companies, including both SEC registrants and companies that are not SEC registrants, which prepare financial statements in accordance with IFRS. The 183 companies were domiciled in 22 countries and approximately 80% were domiciled in the European Union (EU), with companies from Germany, France and the UK representing just over half. The companies in the analysis represented 36 industries and were selected from the Fortune Global 500, a listing of the world’s largest companies by revenue.
The standards reviewed were those in effect at 31 December 2009.
It was found that company financial statements generally appeared to comply with IFRS requirements. However, it was felt that the transparency and clarity of the financial statements in the sample could be enhanced. Many companies did not appear to provide sufficient detail or clarity in their accounting policy disclosures to support an investor’s understanding of the financial statements, and some also used terms that were inconsistent with the terminology in the applicable IFRS. Further, some companies referred to local guidance, the specific requirements of which were not clear.
Differences in the application of IFRS affect the comparability of financial statements across countries and industries. In the sample, any lack of comparability seemed to be caused through application of IFRS, or due to options permitted by IFRS or the absence of IFRS guidance in certain areas. In other cases, differences resulted from what appeared to be non-compliance with IFRS.
Differences arising from the standards themselves were affected by guidance from local standard setters or regulatory bodies that narrowed the range of acceptable alternatives permitted by IFRS or provided additional guidance or interpretation. There was also a tendency by some companies to carry over their previous national practices in their IFRS financial statements.
In the absence of a specific applicable IFRS, an entity is required first to consider guidance in an IFRS standard that relates to similar issues, and then to consider the IFRS Framework. The entity may also consider recent pronouncements of other standard-setting bodies that use a similar conceptual framework, other accounting literature and industry practices, if they do not conflict with IFRS. Approximately 20% of companies in the analysis referred to local guidance for a specific transaction as part of their accounting policy disclosures. An interesting case arose where a company elected to rely on the pronouncements of another standard setter as regards their revenue recognition accounting policy. Subsequently the standard setter changed its guidance but the company did not incorporate the changes that the standard setter had made. IFRS is silent on this matter.
IFRS requires compliance with IFRICs. However, like new IFRSs, IFRICs are not mandatory immediately. For example, in the EU, IFRICs are not implemented until after the European Commission adopts them. As a result, some companies in the EU adopted IFRICs at dates later than companies outside the EU. This practice can cause differences in accounting practices that the IFRICs are issued to address, due to a timing difference.
IFRS permits a departure from specific requirements of IFRS if an entity determines that the application of that requirement would result in the
GET VERIFIABLE CPD UNITSAnswer questions about this article onlineStudying this article and answering the questions can count towards your verifi able CPD if you are following the unit route and the content is relevant to your development needs. One hour of learning equates to one unit of CPD
Technical54
AB_Feb_2012.indd 54 23/01/2012 12:13
COMPANY FINANCIAL STATEMENTS GENERALLY APPEARED TO COMPLY WITH IFRS STATEMENTS, BUT TRANSPARENCY COULD BE ENHANCED
financial statements being so misleading that they no longer meet the objectives of the Framework. This is often referred to as a ‘true and fair override’. There were no examples of the true and fair override in the sample.
There were significant differences in the presentation of the statement of cash flows. IAS 7, Statement of Cash Flows, permits the use of the direct or indirect method of
presentation. The vast majority of companies used the indirect method, with companies in two countries primarily using the direct method. This was due to the use of the indirect method being prohibited at the time of initial adoption of IFRS. Further, there were many variations relating to the profit or loss measure used as the starting point to determine operating cash flows. Additionally, there were differences in the classification of items within the operating, investing and financing categories.
For example, most companies in the insurance industry classified their investment activities within cash flows from investing activities but some presented investing activities within cash flows from operating activities, either on a gross basis or net of payments of related benefits and
claims. IFRS defines cash equivalents as ‘short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value’. Differences were seen in the items classified as cash equivalents; these ranged from balances at central banks to investments with a maturity exceeding three months.
IAS 38, Intangible Assets, defines an intangible asset as ‘an identifiable, non-monetary asset without physical substance’ and requires each entity to ‘assess whether the useful life of an intangible asset is finite or indefinite’. Some companies determined that certain types of intangible assets – for example, brand names – had a finite life, while others determined that the same type of intangible assets had an indefinite life. The brand names included some of the world’s most recognised brands. Additionally some companies disclosed useful lives that appeared to be capped at a maximum length rather than using an assessment of the useful life of the asset. Companies can select either the cost model or the revaluation model as their accounting policy and must apply that policy to an entire class of intangible assets. All of the companies elected to
use the cost model to account for intangible assets.
IAS 36, Impairment of Assets, requires assets to be evaluated for impairment individually, or, if the recoverable amount of an individual asset cannot be determined, by cash-generating unit. A cash-generating unit is ‘the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets’. It was seen that there were several levels defined as cash-generating units, including: the operating segment; below the operating segment but not defined; one level below the operating segment; two levels below the operating segment; and the individual store or outlet. This is obviously a cause for concern in terms of the nature and accuracy of the impairment charge.
One-third of companies disclosed that they entered into transactions within the scope of IAS 40, Investment Property. IAS 40 permits companies to elect to use either the fair value model or the cost model. Most companies applied the cost method, with those that used the fair value model mainly in the banking sector. There were problems with those companies who used the fair value model; several did not disclose the methods and significant assumptions used to determine the fair value of the investment properties, as required by IFRS. Also, there were variations by country in the determination of fair value for investment properties. The
TO GET THE QUESTIONS GO TO www.accaglobal.com/ab_tech
TO GET THE QUESTIONS GO TO
financial statements being so claims. IFRS defines cash equivalents use the cost model to account for
5555
AB_Feb_2012.indd 55 23/01/2012 12:14
CPDunits on the web
THERE WERE INSTANCES IN WHICH LOCAL REGULATIONS REQUIRED A SEPARATE ACCOUNTWITHIN SHAREHOLDERS’ EQUITY
determination of fair value of investment property was regulated in one country, while in another it was measured for fair value in accordance with guidance published by a national organisation. Fair value should reflect market conditions at the end of the reporting period.
In IAS 37, Provisions, Contingent Liabilities and Contingent Assets, IFRS requires a provision to be recognised
when an entity has a present obligation whether legal or constructive as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle that obligation, and a reliable estimate can be made of the amount of obligation. Most companies stated these recognition criteria in their accounting policy, but did not provide any additional explanation as to how the criteria were applied. Some disclosed that one of the criteria applied to recognise a provision would be that no inflow of resources of an equivalent amount was expected. IFRS does not allow offsetting in the statement of financial position of amounts recoverable from third parties. In addition, some entities did not discuss the recognition criteria in IAS 37 but indicated that they looked to legal experts to
determine whether a provision should be recorded.
There were several instances in which local laws or accounting regulations required the use of a separate account within shareholders’ equity to provide for specifically mandated reserves. IFRS gives no guidance regarding the presentation of these separate accounts. A group of companies in a particular country disclosed that 10%
of profit was transferred to a non-distributable statutory surplus reserve in shareholders’ equity in accordance with national accounting standards. Similarly, an entity disclosed that national law required it to maintain a general reserve within shareholders’ equity for the risk of impairments equal to 1% of risk assets, which are defined by law.
IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations, requires: a) assets that meet the criteria to be
classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets to cease; and
b) assets that meet the criteria to be classified as held for sale to be presented separately in the statement of financial position and
the results of discontinued operations to be presented separately in the statement of comprehensive income.
Companies tended to address some, but not all, of the criteria required for classification as discontinued or held for sale. Several companies described accounting practices that did not appear to comply with IFRS. For example, one of the criteria used to classify an asset as held for sale was that a sale would be completed within one year from the statement of financial position date, rather than one year from the date of classification. Another company classified assets as held for sale that were not available for sale in their present condition. This is inconsistent with IFRS, which requires that the asset ‘must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets’.
There were other differences reported by the SEC in relation to deferred tax, operating segments and revenue recognition. As stated above many of the differences seemed to stem from national policies carried over at the time of transition to IFRS and national laws and regulations. It does appear that the aim of producing comparable financial statements across boundaries has some way to go.
Graham Holt is an examiner for ACCA, and associate dean and head of the accounting, finance and economics department at Manchester Metropolitan University Business School
units on the web
56 Technical
AB_Feb_2012.indd 56 23/01/2012 12:14
57Careers
Seven reasons why people fail at interviewCaroline Matthews offers some timely advice to job seekers
marketing, administration and accounts. This can put employers off as they usually look to hire individuals who are focused on one career path. Therefore, in the event of you being open to any career, prepare different types of CVs for different fields and tailor for each employer and application.
Lack of subject knowledgeIrrespective of you being a new graduate or an experienced professional, revisit your subject before going for the interview.There are many chances that you will be asked questions about your subject, particularly if you are applying for a position related to the course you studied.
Lack of confidenceWhen a candidate uses too many negative words such as, ‘I am not sure’, ‘Maybe I can’, etc., it portrays a lack of confidence to the employer. Instead use words such as ‘surely’, ‘I can do it’, ‘it’s challenging but I can do it’ and so on. However, there is a fine line between confidence and arrogance, so be careful! Also, negative body language can be the downfall of an interview. So make sure to sit up straight, make direct eye contact and smile.
Caroline Matthews is manager of Career Source. Email [email protected]
candidates. They are completely unaware of what the job requirements are. If you don’t understand the job description properly, then how can you prove that you are the right person and match for the job? If you are going through a recruitment agency or dealing with a company direct, get the job description and review it properly. In the event of not receiving a detailed job specification, spend some time on the Internet to know about your role type and industry sector.
Lack of skillsResearch has shown that more than 70% of candidates don’t effectively sell their skillset when interviewing. Remember a good qualification alone is not sufficient, but having and demonstrating a range of other skills such as good communications, interpersonal skills, analytical abilities, personality and so on are also vital. Unfortunately, most candidates don’t realise this.
No proper focusDuring the interview, some candidates lose out, because they are not able to convince the employer about their interest in the position applied for. For example, if you are applying for a job in marketing, stay focused on it and keep the conversation relevant to the marketing field and sector.Some candidates often list various fields and sectors of interest on their CV and when interviewing, such as
Success does not always come at the first attempt. This applies to interviews too. Remember it often takes understanding and practice for people to perform well during interviews.
Candidates often complain that they got rejected despite having done ‘well’. There are many reasons why a person fails in an interview, but here are some of the more the common ones.
Lack of preparationOf all the reasons, this is the foremost one. It includes not researching the company well, inappropriate dress code, being completely unaware of possible interview questions and positive answers. You don’t sit an exam without studying – the same goes for interviewing.
Casualness‘Winging it’ does not apply to interviews. You need to be prepared and 100% geared up before the interview. A casual attitude can often translate into casual answers and casual body language, both of which do not bode well with potential employers and are perceived as a lack of interest in the job. In this current tough employment market, this is not the right impression to be making.
Failing to understand the job roleThis is a typical problem with some
AB_Feb_2012.indd 57 23/01/2012 12:14
NEW ORDERInternational Federation of Accountants board member Japheth Katto takes an accountant’s-eye look at the future of the Asia Pacifi c economies
Japheth Katto
As an African accountant, I view the rise of Asia Pacific as hugely significant. Africa’s links
with the region are deepening and expanding. For instance, Australia’s trade with Africa is growing at an average of 6.1% a year and China ended 2010 as Africa’s biggest trading partner. As I pointed out at the Confederation of Asian and Pacific Accountants (CAPA) Conference in Brisbane, Australia, last year, where I was a speaker, Africa’s great potential in energy, minerals and commodities will make the continent the next frontier for the Asia Pacific economies.
From Australia to Vietnam, Asia Pacific’s population is growing as strongly as its economy and many of its markets have emerged as robust global players over recent years. Of course, beyond the glowing gross domestic product (GDP) figures, markets in the region face some big risks.
For example, while China and India now have economies that compete with the US and Japan, their low-cost production bases are forcing middle-income countries in Asia Pacific to find new ways of remaining competitive. Then there is the fear of recessionary contagion from the West, not to mention the risk of
failures in corporate governance and risk management that have been so painfully felt in the West.
Financial markets and economies are experiencing increasing and rapid change. The biggest of all is the tilt from Western economies to the BRICS (Brazil, Russia, India, China and South Africa).
And it’s not just the BRICS. Following close behind are the emerging economies known as the Next 11 or N-11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam), many of which also lie in Asia Pacific.
Yet the current state of markets and economies is a cause for real concern. ACCA’s latest quarterly surveys of the world’s accountants – people who have their fingers on the pulse of the economies in which they work because they deal with the real and tangible needs of businesses – make for grim reading. In the second quarter of 2011, confidence in the economy among global respondents plummeted because of the Western world’s continuing economic malaise. Even in Asia Pacific, until then so immune, accountants reported the first-ever net loss of confidence since the survey began, a trend confirmed in the third and fourth quarter reports.
Sovereign debt also remains a clear and present risk. According to the most recent edition of The Economist’s World Debt Guide, which shows overall debt as a percentage of GDP, Europe is far more highly leveraged than the BRICS. The figure for Britain is 495%, Spain 370% and Italy 316%, compared with 195%, 129% and 71% for China, India and Russia respectively. Not all of Asia Pacific looks so healthy, though: the figure is 492% for Japan and 306% for South Korea.
But the skills and competencies of the accountancy profession all over the world also represent an opportunity for development. In its report, Competent and Versatile: How Professional Accountants in Business Drive Organizational Sustainable Success, the International Federation of Accountants (IFAC) identified eight interlinked drivers of that success: a customer and stakeholder focus; effective leadership and strategy; integrated governance, risk and control; innovative and adaptive capability; financial management; people and talent management; operational excellence; and effective and transparent communications.
As creators, enablers, preservers and reporters of sustainable value,
58 ACCA
AB_Feb_2012.indd 58 23/01/2012 12:14
The shape of the future: the Tri-Bowl exhibition centre is part of the US$40bn Songdo new city being built from scratch near Seoul, South Korea, to service the three booming north-east Asian markets of economic giants China, Japan and South Korea
GLOBAL POWER WILL SHIFT FURTHER TO EMERGING MARKETS. THE DRIVING FORCE OF GLOBALISATION WILL NO LONGER BE WESTERN MULTINATIONALS BUT INTERNATIONAL COMPANIES BASED IN EMERGING MARKETS
accountants are central players in many of these themes. In preparing reports they must enhance transparency and communication so that the reports resonate with stakeholders, who may not be based in the region. Brevity, relevance and flexibility are the gold standard here.
The drive towards global accounting standards is both a challenge and an opportunity for accountants. In Asia Pacific, the timing and degree of convergence on International Financial Reporting Standards (IFRS) in various jurisdictions both vary. Australia, Malaysia and Singapore, for example, have almost fully aligned with IFRS; some countries such as Taiwan have set a timeline for convergence, while others have not yet committed to specific plans. There is, however, an increasingly clear recognition that convergence with IFRS is inevitable.
The influx of money into Asia Pacific economies means that a great many questions are being asked about how companies can effectively manage the legal and reputational risks. Ethical issues are as pertinent in Asia Pacific as in the rest of the world, and businesses must operate with a clear sense of values. Ethical leadership from the top is a necessity.
Governments in Asia Pacific have been proactive in tackling bribery and corruption. As early as 1999, the region’s leaders recognised the challenge and along with the Asian Development Bank and the OECD established the Anti-Corruption Initiative for Asia-Pacific. The World Economic Forum’s Partnering Against Corruption Initiative (PACI) has also been doing good work to tackle the issue. It is challenging the belief held by some that bribery and corruption oil the wheels of business – its research shows that corruption actually increases the cost of doing business globally by up to 10% on average. We accountants have a huge role in fighting corruption, and must abide by standards of conduct set by the International Ethics Standards Board for Accountants.
The economic, political and environmental climate has exposed shortcomings in financial regulation, financial reporting, corporate transparency, climate change and assurance provision. It is in addressing these shortcomings that the accountancy profession can help markets in the Asia Pacific region – and indeed around the world – cope with the challenges of the future.
In ACCA’s report Where Next for the Global Economy: A View of the World
in 2030, an expert panel (of which I was privileged to be a member) hypothesised, among other things, that global power will shift further to emerging markets. The driving force of globalisation will no longer be Western multinationals but international companies based in emerging markets.
This levelling of the global playing field will stimulate competition among countries for access to finance. More volatile global markets will become the norm. Regulation will be applied at a global level, reflecting the ability of business, capital and people to cross borders. A multipolar world of super-specialised regions will develop, spurred by information technology. Education will be increasingly seen as a growth enabler and those countries that value education and invest in it should reap the rewards.
It’s a vision of a brave new future: a world economy with parity between markets and a much wider range of key players, sharing power and influence in a new order that will bring greater global prosperity.
*This article is based on a presentation given to the CAPA Conference 2010
Japheth Katto FCCA, CPA (U) is CEO of the Capital Markets Authority in Uganda and an IFAC board member
59
AB_Feb_2012.indd 59 23/01/2012 12:14
The e-learning suite spots[We take a look at just some of the ways in which ACCA members can gain access to CPD learning op-
portunities by engaging with a range of online platforms and initiatives
One of the biggest attractions of ACCA’s CPD suite is the flexibility that allows it to be applied to all types of learning. Members can use this to their advantage when planning and sourcing CPD where it is not possible for them to attend courses or face-to-face events. Here we look at just some of the ways members can source CPD learning through engaging with the online platforms available.
Social networking and learning on the moveCommunication platforms are evolving rapidly, offering professionals new and innovative ways to communicate. The increase in the use of mobile communications allows you to network and learn whenever it suits you. ACCA has a number of official networking
groups that have the potential to offer you new learning, both in terms of verifiable and non-verifiable CPD. There are ACCA sites on LinkedIn, Facebook and Twitter. Alternatively, you might prefer to use ACCA’s own e-learning gateway at: virtuallearn.accaglobal.com/pages
PodcastingWith podcasts you can automatically receive the latest file covering your chosen topic as soon as it becomes available. You will find ACCA podcasts on current and relevant topics of interest to members. Members are able to access a series of podcasts (to which they can subscribe free of charge) on the ACCA website through the following link: www.accaglobal.com/podcasts/members Many more relevant podcasts are also available elsewhere on the internet. A good place to start is the iTunes Store.
Distance learningDistance learning is an excellent option that allows you to follow a particular
course by taking it online rather than in a classroom. It offers an opportunity that not only allows you to learn and apply the course syllabus to your role, but also opens up the opportunity of networking with fellow delegates online. Online networking in this way can facilitate lots of questions and debate on topics that are of interest to you for your role or career. Distance learning is also informative, inspiring and – most importantly of all – relevant to your CPD.
Voluntary work through professional forumsProfessional forums are another networking opportunity that can help you to source learning in your area of interest that could be relevant to your role. Often these can be sourced online but they still give you the opportunity to meet face to face periodically. Networking with people who have similar professional interests and objectives may open up opportunities to keep up to date with recent developments both locally and globally.
You can only count CPD learning as verifiable if you’re able to answer ‘yes’ to the following three questions:
1) Was the learning relevant to your role/career?2) Were you able to apply the learning to your role/career?3) Did you retain evidence of your learning?
If you have undertaken general learning that is not related to a specific outcome, it is likely to be non-verifiable CPD. Such learning includes general reading and research.
*REMEMBER…
FOR MORE INFORMATION ON CPD OPPORTUNITIES, PLEASE VISIT www.accaglobal.com/members/cpd
60 ACCA
AB_Feb_2012.indd 60 23/01/2012 12:14
6161ACCA diary
BELFASTPresident’s Debate6 February18.00 – 20.00Ulster Members’ NetworkVarious SpeakersRadisson BluTwo CPD units
ACCA Ireland President’s Dinner17 FebruaryACCA IrelandDr Stephen Martin, CEO, Olympic Council of IrelandMerchant Hotel
IFRS for the Public Sector14 March09.30 – 12.30Robert Kirk, University of UlsterVenue TBCThree CPD units
Practitioners’ Conference 124 March09.30 – 16.30Practitioners’ NetworkPark Inn, Clarence StreetVarious SpeakersSeven CPD units
CORKTaxation Update2 February18.00 – 20.00Munster/Connaught Members’ NetworkMichael Mullins, Moore Stephens NathansClarion, Lapps QuayTwo CPD units
Fraud and Special Assignments21 March09.15 – 16.15Practitioners’ NetworkClarion Hotel, Lapps QuayPatrick D’Arcy, Grant ThorntonSeven CPD units
Bankruptcy27 March18.00 – 20.00Munster/Connaught Members’ NetworkTom Murray, Friel Stafford Corporate RecoveryClarion, Lapps QuayTwo CPD units
DUBLINIFRS in a Hurry1 February18.00 – 20.00Financial Services NetworkAidan Clifford, ACCA IrelandClarion Hotel, IFSCTwo CPD units
Taxation Update15 February18.15 – 20.15Leinster Members’ NetworkDerek Andrews, Andrews Tax ConsultingRadisson Blu Royal, Golden LaneTwo CPD units
FRS for MEs16 February09.30 – 16.30Corporate SectorRobert Kirk, University of UlsterRadisson Blu Royal, Golden LaneSeven CPD units
People, Problems, Productivity – Top HR Issues21 February 18.00 – 20.00Leinster Members’ NetworkTerry Harmer, NLC TrainingClarion, Liffey ValleyTwo CPD units
Business Breakfast22 February07.30 – 09.00Business Leaders’ ForumEamon Gilmore, TánaisteWestbury Hotel, Dublin 2Two CPD units
Introduction to Treasury Products22 February09.15 – 16.15Financial Services NetworkClarion Hotel, IFSCDerek Taylor, Taylor AssociatesSeven CPD units
Public Sector Seminar in association with the IPAMarchPublic Sector ForumVenue TBCVarious Speakers
Financial Instruments Update7 March18.00 – 20.00Financial Services NetworkClarion Hotel, IFSCFergus Condon, Ernst & YoungTwo CPD units
International Women’s Day Breakfast8 March07.30 – 09.00Joanne Richardson, American Chamber of Commerce IrelandRadisson Blu Royal Hotel, Golden LaneTwo CPD units
Company Law9 March09.30 – 16.30Corporate SectorSharon Sheehan, Dublin Business SchoolVenue TBCSeven CPD units
Fraud and Special Assignments14 March09.15 – 16.15Practitioners’ NetworkHilton Hotel, Charlemont PlacePatrick D’Arcy, Grant ThorntonSeven CPD units
Top Ten Risks in Business14 March18.15 – 20.15Leinster Members’ NetworkColm Devine, Ernst & YoungRadisson Blu Royal, Golden LaneTwo CPD units
Tax Compliance and Topical Updates for the Corporate Offi ce22 March09.30 – 16.30Corporate SectorPaul Muphy, MJ Kelly & CoRadisson Blu Royal, Golden LaneSeven CPD units
Practitioners’ Conference 131 March09.30 – 16.30Practitioners’ NetworkFitzpatrick Castle Hotel, KillineyVarious SpeakersSeven CPD units
The Five-Year Government Plan for the IFSC28 March07.30 – 9.00Financial Services Network BreakfastGibson Hotel, The Point VillageKen Owens, PricewaterhouseCoopersTwo CPD units
AB_Feb_2012.indd 61 23/01/2012 12:14
62 ACCA diary
DUNDALKPlanning and Managing Board Meetings23 February18.00 – 20.00Leinster Members’ NetworkPaula Phelan, Mason Hayes+Curran and Paula Mullin, executive and communications coachFairways HotelTwo CPD units
Incorporation – The Way Forward?15 March18.00 – 20.00Leinster Members’ NetworkSasha Kerins, Grant ThorntonCrowne PlazaTwo CPD units
GALWAYTaxation Update1 February18.00 – 20.00Munster/Connaught Members’ NetworkDerek Andrews, Andrews Tax ConsultingMenlo Park HotelTwo CPD units
Fraud and Special Assignments29 February09.15 – 16.15Practitioners’ NetworkClayton Hotel, BallybritPatrick D’Arcy, Grant ThorntonSeven CPD units
Technical Update28 March18.00 – 20.00Munster/Connaught Members’ NetworkAidan Clifford, ACCA IrelandMenlo Park HotelTwo CPD units
LETTERKENNYTechnical Update21 March14.00 – 18.00Ulster Members’ NetworkDerek Andrews, Andrews ConsultingRadisson BluFour CPD units
LIMERICKTaxation Update22 February18.00 – 20.00Munster/Connaught Members’ NetworkAlan Lawlor, Wallace O’DonoghueClarion, Steamboat QuayTwo CPD units
Practitioners’ Conference 13 March09.30 – 16.30Practitioners’ NetworkCarlton Castletroy Park HotelVarious SpeakersSeven CPD units
PRSI in Family Employment13 March18.00 – 20.00Munster/Connaught Members’ NetworkBrendan CaseyClarion, Steamboat QuayTwo CPD units
MULLINGARTaxation Update29 February18.00 – 20.00Leinster Members’ NetworkDarragh Kilbride, Kilbride ConsultingMullingar Park HotelTwo CPD units
NAASTaxation Update8 February18.15 – 20.15Leinster Members’ NetworkJulie Herlihy, Baker Tilly Ryan GlennonOsprey HotelTwo CPD units
SLIGORevenue Update9 February18.00 – 20.00Munster/Connaught Members’ NetworkDerek Andrews, Andrews Tax ConsultingThe GlasshouseTwo CPD units
Taxation Update29 March18.00 – 20.00Munster/Connaught Members’ NetworkAlan Lawlor, Wallace O’DonoghueThe GlasshouseTwo CPD units
TRALEETaxation Update28 February18.00 – 20.00Munster/Connaught Members’ NetworkPat Sheehan, Horwath Bastow CharletonTralee ITTwo CPD units
WATERFORDNAMA Update6 March18.00 – 20.00Munster/Connaught Members’ NetworkBrian McEnery, Horwath Bastow CharletonTower HotelTwo CPD units
AB_Feb_2012.indd 62 23/01/2012 12:14
63ACCA Approved Employer
The view from:Kay Shanahan FCCA, fi nance director of Global Consumer Small and Medium Business Operations, Dell
Q Tell us about your role in your organisation?A I have worked with Dell for eight years in various positions. These included roles in finance operations, in the EMEA Accounting Services Centre and as executive assistant to VP of operations. Today, I am finance director of Global Consumer Small and Medium Business Operations. My global finance team is responsible for financial planning, analysis and decision support for Global Consumer Small and Medium Business Operations. One of the exciting elements of the role is partnering with the business in decision making to build a global consolidated efficient organisation with common policies, procedures and controls in place.
Q What is your biggest work challenge right now?A As a global finance leader, a challenge for me is working, influencing and giving direction to colleagues in different timezones, i.e., in the Americas, Asia, Europe, the Middle East and Africa. The key is regular communication. Although I may not be able to visit each region regularly I do weekly one-to-ones and bi-weekly staff meetings to keep the team aligned and working together.
Q How do you plan to overcome this?A As a global technology leader, Dell focuses
on integrating technology and innovation into all aspects of our business. As a result, I can do my one-to-ones with my team in any location using softphone or video conferencing or live meeting. I also stay in touch daily with all of the team using instant messaging. Dell also has its own internal chat facility, where globally, real time, we are up to speed on what is happening in the business. This use of technology helps me to stay in touch with developments across the world and ensures that the challenge of managing a virtual team is simplified and enables me to be very efficient with my time.
Q How does the ACCA Approved Employer Programme help you achieve your goals?A To be part of the ACCA Approved Employer Programme, Dell needs to be able to demonstrate it has a continuous development programme in place. This ensures every ACCA member has a career plan, with the opportunity to rotate to various finance roles within Dell to add to their finance knowledge building blocks. As an Approved Employer, Dell hosted a networking event in association with the ACCA, which allowed us to meet up with our corporate colleagues in the midwest of Ireland. Una McShane of ACCA visits Dell regularly, providing excellent support to assist Dell in following its career development programme.
AB_Feb_2012.indd 63 23/01/2012 12:14
8 March 2012 | 7.30aM | radisson hotel, Golden lane, dublin
Guest speaker: Joanne Richardson, American Chamber of Commerce IrelandTickets €30 per person
booking: Contact Cathy McGann at +353 1 498 8918 or [email protected]
ACCA Ireland International Women’s Day breakfast
ACCA – the global body for professional accountants
www.accaglobal.com/ireland
Kindly sponsored by www.rsmfarrellgrantsparks.ie
8 March 2012 | 7.30aM | radisson hotel, Golden lane, dublin
Guest speaker: Joanne Richardson, American Chamber of Commerce IrelandTickets €30 per person
booking: Contact Cathy McGann at +353 1 498 8918 or [email protected]
ACCA Ireland International Women’s Day breakfast
ACCA – the global body for professional accountants
www.accaglobal.com/ireland
Kindly sponsored by www.rsmfarrellgrantsparks.ie
AB_Feb_2012.indd 64 23/01/2012 12:14
WORLDFIRSTRobert Leighton, Co. Down, came first in the world in the Advanced Taxation paper from the June 2011 exam sitting. At the time of sitting the exam, Robert was employed by Johnston Kennedy DFK and is now employed with FG Wilson. Robert is pictured here with ACCA Ireland president Ronnie Patton
Council highlights Highlights of the meeting on 26 November
Council’s final meeting of 2011 took place at 29 Lincoln’s Inn Fields on 26 November. This was held immediately following the annual meeting of ACCA’s International Assembly. Assembly members Shalini Popat (Kenya) and Nisreen Rehmanjee (Sri Lanka) were invited to give oral reports to Council on the outcomes of the Assembly meeting, including the debates Assembly members held around the topics of the advent of the e-professional and the future of ACCA’s global policy development.
Council was also pleased to welcome Olivier Boutellis-Taft, chief executive of the Federation of European Accountants, who gave a topical presentation on the European Commission’s green paper on audit.
A number of other issues were debated at the meeting.
* Council met in break-out groups to discuss issues around the advent of the e-professional, a topic which had also been considered by the International Assembly. The discussions focused on how technological advances are changing the role and skills of the finance professional, the key drivers for the increasing use of technology and a profile of the next generation of worker. The outcomes of the discussions will help to inform the development of ACCA’s strategy in this area.
* Council also considered the regular report of the chief executive, covering a number of strategic developments both within and outside ACCA and developments in key markets. Council was particularly pleased to note that ACCA had been awarded a contract to advise on the development of a new post-university professional accountancy programme in Singapore.
* Following an earlier decision that Council’s next international meeting should be held in Nairobi in June 2012, Council received a report on arrangements for the meeting, together with proposals for a programme of events involving members, students and other important stakeholders. The meeting in Nairobi will take place on 23 June, after which smaller groups of Council members and senior staff will undertake visits to Ethiopia, Tanzania and Uganda in order to maximise the opportunity for stakeholders in the region to meet with representatives of ACCA’s governing body.
* Council agreed recommendations from Nominating Committee regarding skills criteria for non-Council members on a number of its standing committees.
* In other business, Council agreed a timetable for choosing its preferred nominee for vice president in 2012–13. It also received presentations from the chairmen of the governance design and market oversight committees on the work plans for their committees for the coming year.
Council will next meet in London on 10 March 2012.
8 March 2012 | 7.30aM | radisson hotel, Golden lane, dublin
Guest speaker: Joanne Richardson, American Chamber of Commerce IrelandTickets €30 per person
booking: Contact Cathy McGann at +353 1 498 8918 or [email protected]
ACCA Ireland International Women’s Day breakfast
ACCA – the global body for professional accountants
www.accaglobal.com/ireland
Kindly sponsored by www.rsmfarrellgrantsparks.ie
8 March 2012 | 7.30aM | radisson hotel, Golden lane, dublin
Guest speaker: Joanne Richardson, American Chamber of Commerce IrelandTickets €30 per person
booking: Contact Cathy McGann at +353 1 498 8918 or [email protected]
ACCA Ireland International Women’s Day breakfast
ACCA – the global body for professional accountants
www.accaglobal.com/ireland
Kindly sponsored by www.rsmfarrellgrantsparks.ie
65
GO FOR GOALInternational aid agency GOAL is calling on accountants interested in working in the developing world to attend its recruitment information evening at the Irish Aid Centre, O’Connell St., Dublin, on 8 February, from 6pm to 8pm. The agency has regular openings for accountants as financial controllers, internal auditors and donor compliance officers. In all, 20% of GOAL’s international staff, including country directors, hold qualifications in accountancy, including ACCA.To find out more about the recruitment night email [email protected] or call GOAL on 01 2809 779.
Pictured at the ACCA Ireland June 2011 examination prize-winners breakfast in Dublin on Thursday 27 October are (left to right) Joanna Boguslawska, joint first in Ireland and 13th in the world for Advanced Financial Management; Deirdre Burke, third in Ireland and 13th in the world for Advanced Performance Management; Ronnie Patton, president, ACCA Ireland; Sarah Datti, first in Ireland and fifth in the world for Financial Reporting; and Colin Byrne, second in Ireland and ninth in the world for Corporate Reporting
AB_Feb_2012.indd 65 23/01/2012 12:14
63 Approved Employer Q&A
65 Council highlights
Inside ACCA
ACCA Ireland student successThe continued success of ACCA Ireland students in the June 2011 examinations was recognised over two events during October and November 2011.
Pictured at the ACCA Ireland examination prize-winners lunch in Belfast on Thursday 3 November are Malgorzata Domanska, third in Ireland and 17th in the world for Financial Reporting; Ronnie Patton, president, ACCA Ireland; Irene Troughton, first in Ireland and 11th in the world for Financial Management; Janine Frances Morgan, second in Ireland and 14th in the world for Advanced Audit and Assurance; Maeve Gormley, first in Ireland and sixth in the world for Business Analysis and joint first in Ireland and joint 16th in the world for Advanced Financial Management; Colm McGrath, third in Ireland and 12th in the world for Advanced Taxation; Sarah Scott, second in Ireland and eighth in the world in Advanced Taxation
66 ACCA news
ACCA Ireland student success
BRAND AWARDED OBEACCA chief executive Helen Brand is pictured at Buckingham Palace in London in December, shortly after receiving her OBE from the Queen.
She was made an Officer of the Order of the British Empire in the Queen’s official Birthday Honours list in June last year, for services to accountancy.
Brand said: ‘I truly believe that this honour is in recognition of ACCA’s success of which I am extremely proud to have played a part, alongside its members, students and staff around the world.
‘I was delighted to be able to share the special investiture day with my family, whose immense support has allowed me the privilege of serving as chief executive.’
AB_Feb_2012.indd 66 23/01/2012 12:14
Bank of Ireland 192x260.indd 1 13/12/2011 15:09:55
The The thinking behind the search
Industry & Commerce / Financial Services
Senior Project Accountant Technology Our client, a market leading Irish multinational, requires a highly commercial ACCA to assist in the review, setting of controls and structures for business partnering as the Group expands across several markets. The role will involve working with fi nance and management in various regions, co-ordinating group objectives whilst supporting both fi nance and commercial local teams. Will suit an ACCA with an internal audit / fi nancial control background. Salary €70 – 85,000 + benefi ts
Financial Reporting Manager Plc Our client, a highly reputable plc wishes to appoint a Financial Reporting Manager within their Group Finance function. With strong technical understanding and experience in consolidation, you will be comfortable operating within a strict deadline reporting environment. You will have responsibility for the delivery of the Group’s fi nancial statements under IFRS including interpretation of accounting standards and resolution of complex accounting and fi nancial reporting issues. Salary €60 – 65,000 + benefi ts
Senior Management Accountant FMCGCommercially astute ACCA required for a growing division of a large FMCG business. As a key member of the team, you will have a leading role in the preparation of monthly management accounts and production of in-depth KPI reporting for presentation to management. Reporting to the CFO, you will have a strong focus on the annual budget, fi nancial analysis and involvement in quarterly forecasting. You will be ACCA qualifi ed with up to 3 years’ PQE in a commercial fi nance team. Salary €55 – 65,000 + benefi ts
Tax Accountant TechnologyUS fi rm with a large international operation require a Tax Accountant to join their international accounting function based in Dublin North. Reporting to the International Financial Controller, you will have a Big 4 / Top 10 training, ideally within Corporate Tax with exposure to cross border transactions. Salary €50 – 60,000 + benefi ts
Revenue Accountant TechnologyLeading international technology fi rm with operations in Dublin wishes to appoint a Revenue Accountant. Providing support, fi nancial control, reporting and assurance to project managers across the business, you will be responsible for communicating this fi nancial performance to senior management. Strong analytical skills are required along with the ability to meet strict deadlines within a fast paced environment. Will suit ACCA with 2 – 3 years’ PQE experience in revenue recognition and US GAAP. Salary €50 – 55,000 + benefi ts
Financial Accountant BankingOur client, a Financial Institution in Dublin South, is seeking to recruit an ACCA to join their Group Finance function. You will be required to deliver weekly, monthly and annual fi nancial information including year-end statutory accounts. This opportunity will suit a newly qualifi ed ACCA practice trained, technically strong and eager to gain commercial experience. Strong analytical skills and advanced excel will also be required. Salary €45 - 55,000 + benefi ts
Practice
Audit Director This is a unique opportunity for a strong Audit Director to join a highly reputable, large fi rm, based in Dublin city centre. The client base ranges from small to large sized indigenous and international corporates. Having secured a signifi cant amount of new assignments recently, the Audit Division is expanding their senior
management team. As Audit Director, you will have strong technical ability, client relationship management skills and experience in managing junior colleagues. This role is an ideal opportunity for a Senior Audit Manager or Audit Director eager to progress their career towards Partner level within a strong international practice fi rm. Salary €90 – 100,000 + benefi ts
Tax ManagerA leading professional services fi rm currently seeks an experienced tax professional to join their Dublin offi ce. The ideal candidate will have a number of years’ experience managing a large client allocation and will have an ACCA and / or Professional Tax qualifi cation. There is strong evidence within this practice of the management ethos of career development for progressive employees. The role offers strong “upward” career progress. Salary €70 – 85,000 + benefi ts
Audit Assistant ManagerHighly reputable accountancy practice seeks an experienced ACCA professional to join their Audit Team in their Dublin offi ce. This is an exciting opportunity for an ambitious professional wishing to fast track their career with a department that is experiencing signifi cant growth and winning exciting new projects. The role will involve assisting in managing a portfolio of clients across a variety of sectors. Salary €50 - 60,000 + benefi tsAudit Seniors Highly reputable accountancy practice seeks newly qualifi ed ACCA’s to join their audit division to work closely with the management team. Joining an established team with responsibility for a diverse and varied portfolio of clients, you will have a strong technical understanding of accounting fundamentals. You will be proactive in your approach to all engagements to ensure minimisation of risks and provide support across all business functions. Salary €35 – 45,000 + benefi ts
Corporate Finance ProfessionalHighly reputable accountancy practice seeks a Corporate Finance professional to join their Team in their Dublin offi ce. This is an exciting opportunity for an ambitious professional wishing to progress within a department that is experiencing signifi cant growth and winning exciting new projects. Will suit ACCA’s who would have an interest in the Corporate Finance area. Salary €50-60,000 + benefi ts
Regional & International
Senior Management Accountant FMCG Co. Cavan Corporate Accountant FMCG Munster Internal Auditor Plc Regional Group Reporting Accountant Plc Co. Cavan
Financial Controller CaribbeanThis position, within a highly reputable fi rm forms an integral part of the Senior Management team where the successful Financial Controller will operate at Group level and have responsibility for all aspects of the Finance function and fi nancial reporting at Group level. You will be required to hire, train and ensure the day to day management of the Finance team, provide monthly, quarterly and annual fi nancial reporting to the Shareholders, actively participate in the company fi nancial matters and maintain relationships with fi nancial institutions. In-depth experience of consolidation is a key focus for this position and operational cash-fl ow management and balance sheet control will be essential elements of the role. Will suit FCCA at Finance Director level eager to gain international experience. Salary € 150 – 200,000 + benefi ts
Lincoln 192x260 Jan/Feb.indd 1 18/01/2012 17:19:20
AB_Feb_Cover_2012.indd 2 23/01/2012 14:02
TAKINGTHE PULSE
ACCA’S SURVEY OF BUSINESS SENTIMENT
NEW ORDER THE RISE OF THE ASIA PACIFIC ECONOMIES
SECURING FINANCE FOCUSED BUSINESS PLANNINGOUTSOURCING NO TURNING BACK
CPD STATEMENTS ACROSS FRONTIERS?
ALL IN IT TOGETHERTHE ROLE OF THE FINANCE PROFESSIONAL IN MANAGING RISK
TALKING TRANSFERS GERARD FEENEY FCCA ON A NEW DEVELOPMENT IN IRISH ACCOUNTING
TAX AUDIT TIPS PRACTICAL ADVICE LIMITING LIABILITY ADVICE FOR PARTNERSHIPSS202 AND AUDITOR LIENS THE NEED FOR REFORM
ABIETHE MAGAZINE FOR BUSINESS AND FINANCE PROFESSIONALS
ABIE IE.A
B A
CC
OU
NTIN
G A
ND
BU
SINE
SS 02
/20
12
ACCOUNTING AND BUSINESS IRELAND 02/2012
CPDget verifi able cpd points by reading technical articles
AB_Feb_Cover_2012.indd 1 23/01/2012 14:02