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ACCOUNTING AND BUSINESS UK 02/2014
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WELCOME
Welcome
SEE OFF THE CYBER THREAT
Trojan horse, hacker, worm and virus are words

that have taken on new meanings in recent years. Our
cover image of these four horsemen of the cybersecurity apocalypse might seem dramatic, but as we
report in this months issue, cyber attacks on business
are on the increase. Our love affair with mobile
technology and social media is opening up new avenues
of attack, and the nature of the attackers themselves
is changing from hackers who do it for kicks and fame, to serious criminals
looking for financial gain. The good news is that there are steps you can take to
reduce the risks, so if you want to avoid a visit from the four cyber horsemen,
our cover feature on page 18 is a good place to start.
Other words taking on new meanings in business include integrated reporting,
a concept that is being supported by many bodies and businesses across the
accountancy, investor and commercial sectors including by ACCA and is now
gaining real traction. Leading proponents include The Crown Estate finance director
John Lelliott FCCA, subject of our main interview this month (page 14), who talks
about the property giants adoption of integrated reporting and the benefits it has
brought. We also hear from Professor Bob Eccles, member of the International
Integrated Reporting Council (IIRC) steering committee, on the importance of
engaging investors, and our CPD technical article this month (page 49) guides you
through the new integrated reporting framework, published in December.
Other new terminology you might find yourself grappling with, especially if you
are involved in producing the annual report, is fair, balanced and understandable
a new requirement of the UK corporate governance code. As we report on page
22, it has been introduced with the best of intentions. But as with many new
reforms, the realities of first-time adoption can be challenging for those on the
front line of corporate reporting.
Chris Quick, editor, [email protected]
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ACCOUNTING AND BUSINESS
CONTENTS
AB UK EDITION
FEBRUARY 2014
VOLUME 17 ISSUE 2
Editor-in-chief Chris Quick
[email protected] +44 (0)20 7059 5966
Asia editor Colette Steckel
[email protected] +44 (0)20 7059 5896
International editor Lesley Bolton
[email protected] +44 (0)20 7059 5965
Digital editor Jamie Ambler
[email protected] +44 (0)20 7059 5981
Sub-editors Loveday Cuming, Dean Gurden, Peter Kernan,
Eva Peaty, Vivienne Riddoch
Digital sub-editors Rhian Stephens, Eleni Perry
Design manager Jackie Dollar
[email protected] +44 (0)20 7059 5620
NEWS
Designer Robert Mills
6 News in pictures
A different view of
recent headlines
Production manager Anthony Kay

[email protected]
Advertising Richard McEvoy
[email protected] +44 (0)20 7902 1221
Head of publishing Adam Williams
[email protected] +44 (0)20 7059 5601
Printing Wyndeham Group
ACCA
President Martin Turner FCCA
Deputy president Anthony Harbinson FCCA
Vice president Alexandra Chin FCCA
Chief executive Helen Brand OBE
18 On guard Cybercrime
is becoming ever
more insidious and
sophisticated
ACCA Connect
Tel +44 (0)141 582 2000
Fax +44 (0)141 582 2222
[email protected]
[email protected]
[email protected]
COMMENT
22 Robert Bruce
What do we mean by
fair, balanced and
understandable?
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 2014
No part of this publication may be reproduced, stored or distributed without
the express written permission of ACCA.
Accounting and Business is published monthly by Certified Accountant

(Publications) Ltd, a subsidiary of the Association of Chartered Certified
Accountants.
24 Peter Williams Make

way for the arrival of
theCFTO
25 Jane Fuller Beware
excessive adjustment of
corporate earnings
26 Martin Turner
Integrated reporting
demonstrates leadership,
says ACCA president
CORPORATE
ISSN No: 1460-406X
FOCUS
14 Interview: John
Lelliott The Crown Estate
FD explains landowners
landmark work in
integrated reporting
Pictures Corbis
29 Lincolns Inn Fields

London, WC2A 3EE, UK
+44 (0) 20 7059 5000
www.accaglobal.com
8 News round-up
A digest of all the latest
news and developments
Audit period July

2012 to June 2013
154,625
27 The view from Dave

Fishwick of Bank of
Dave, plus snapshot
ontelecoms
CONTENTS
CPD
Reading this magazine to keep up

to date contributes to your nonverifiable CPD. Learning something
new and applying it in some way
contributes to your verifiable CPD,
as do the online questions related to
certain articles on the technical pages,
provided that they are relevant to
your development needs.
TECHNICAL
28 Sharpening the
scissors The European
Commission is working to
remove red tape
30 Back to reality Is the
US ready for a return to
normal monetary policy?
INSIGHT
32 Level playing field Are

ethnic minority-owned
SMEs at a borrowing
disadvantage?
49 IR nuts and bolts A

guide to the integrated
reporting framework
52 Technical update
The latest on financial
reporting, auditing, tax
and law
PRACTICE
57 The view from Lindsay

Hogg of Watts Gregory,
plus snapshot on
directtax
35 Graphics Corporate
responsibility reporting
58 A question of
management Make
sure you have the right
structure in place
36 Could do better Bob

Eccles on investors and
integrated reporting
61 Growth model The

UK franchise industry
isbooming
38 World view Report

from ACCAs International
Public Sector Conference
PEOPLE
40 Time to rebuild
Accountants are playing a
key role in the Philippines
typhoon relief effort
42 The cost of bribery
How corruption affects
small businesses
44 Careers Dr Rob Yeung
on organisational savvy
46 Marketing strategy
We introduce the central
concepts
48 Get in gear More tips
on speeding up monthend reporting
65 CV sparkle Make sure

you stand out when you
apply for an MBA course
68 Top score Robert
Mutchell of BP Ventures
on his move from football
to finance
ACCA
72 New ACCA members

78 ACCA Rulebook
Details of regulation
changes for 2014
80 Council Highlights
from the last meeting
82 News ACCA becomes
first global accountancy
body to embrace IR
NEWS | PICTURES
ALL CHANGE
Debenhams CFO Simon Herrick stepped

down after the retailer posted a profit warning
following poor Christmas trading. See page 12
LIFT STANDARDS
The Ministry of Defence must improve the

quality of its financial accounts, especially
when it comes to inventory control, warns the
House of Commons Defence Committee
SPOT THE DIFFERENCE
Latvians learn to tell counterfeit euro banknotes

from the real thing as Latvia became the
eurozones newest member on 1 January 2014
PICTURES | NEWS
GRAVITY PULL
Gravity starring George Clooney and

Sandra Bullock was filmed in the UK,
boosting Britains creative sector which
contributes over 71bn to the economy
NO TO NEW ROMANCE
Facebook has banned new dating adverts

from its website until after Valentines Day
due to complaints there were too many
MAKING HISTORY
As Janet Yellen takes over as the next head of

the US Federal Reserve, she becomes the first
woman in the post in its 100-year history
PUTTING IT ON ICE
In anticipation of the 2014 Winter Olympics this month in

Sochi, Ekaterinburg in Russia has unveiled its ice
town complete with ice runs, maze and sculptures
NEWS | ROUND-UP
News round-up
This months stories include agreement on European audit reform, KPMG reports UK
and global growth, government CFO post created, and audit rotations are on the rise
CO-OP INVESTIGATIONS
The Financial Reporting

Council has launched an
investigation into KPMGs
auditing of the banks 2012
financial statements. The
Financial Conduct Authority
(FCA) and the Prudential
Regulation Authority (PRA)
are to conduct investigations
into the crisis at The
Co-operative Bank which
revealed a 1.5bn capital
shortfall, leading to its bailout by bondholders and its
effective demutualisation
through a stock exchange
listing. The banks former
owner, the Co-operative
Group, and the House of
Commons Treasury Select
Committee are conducting
their own investigations.
The PRA said that its inquiry

would consider the roles of
former senior managers.
The FCA said that its
independent review will only
begin once it is clear that it
will not prejudice regulators
possible actions.
tax payments related to

Vodafones acquisition of
Hutchisons operations in
India in 2007, although the
Indian Supreme Court held
in 2012 that the country did
not have jurisdiction to levy
the tax sought.
VODAFONE PLEDGE
AUDIT REFORM AGREED
Vodafone has pledged its

commitment to countryby-country taxation and
to paying its fair share
of taxes. Vodafone has
now published its second
country-by-country
breakdown of taxes paid
and its economic
contributions. Vodafone
has itself faced criticism,
with Indias tax authorities
seeking capital gains
TRENDS
A compromise audit reform

proposal has been agreed
by the European Parliament
and European Union
member states that will
establish mandatory audit
rotation every 10 years.
Public interest entities
such as banks, insurers
andlisted companies
willbe permitted to
renew audit tenure only
once. Jointaudits will be
encouraged. Action will be

taken against perceived
conflicts of interest, with
tax advice by auditors
prohibited and a cap on
firms provision of other
non-audit services. New
rules will require more
detailed audit reports
focused on providing
relevant information to
investors. Full details of
thepackage are unlikely
to be published before the
spring; as a result, the
Competition Commission
has delayed its audit reform
consultation process by up
to six months.
KPMG GLOBAL RESULTS

KPMG reported a 3.7%
growth in global revenues
CHINA POISED TO TOP ECONOMIC LEAGUE TABLE
China will overtake the US in 2028 to become the worlds largest economy,
according to the Cebrs (Centre for Economics and Business Research) World
Economic League Table. India will overtake Japan in 2028 to become the worlds
third-largest economy. Other findings highlight that, by 2028, the UKs economy is forecast to be only 3% smaller
than Germanys and is likely to become the largest Western European economy around 2030.
China
Japan
$8,939
$5,007
$33,513
China
$32,241
US
India
$6,560
$6,415
$3,593
Japan
France
$2,739
Brazil
$5,143
UK
$2,649
Germany
$4,398
Brazil
$2,190
UK
$4,305
Russia
$2,118
Russia
$4,125
Italy
$2,070
Mexico
$3,697
Canada
$1,825
Canada
$3,677
India
$1,758
South Korea
$3,490
Australia
$1,488
Turkey
$3,461
2013
Germany
2028
$16,724
US
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10
NEWS | ROUND-UP
FRAMEWORK WELCOMED
There has been wide support for the International Integrated
Reporting Framework, launched in December. City of
London Lord Mayor Fiona Woolf (pictured) said that it is
underpinned by a new vision for how business goes about
business, while Jeremy Osborn of EYs climate change
and sustainability services called it a major milestone in
the development of corporate reporting. Larry Bradley,
global head of audit at KPMG International, said: It is time
to move business reporting beyond merely a discussion of
past financial performance. It was also welcomed by PwC
and Deloitte. More on pages 26, 36 and 49.
in the year ending

September 2013, driven
by strong performances by
the audit, tax and advisory
divisions. Strongest growth
was in the Americas, where
revenues grew by 6.7%.
Advisory revenues rose
globally by 6.5% and tax by
4.2%. The firm hired 45,000
people in the year, adding
an extra 3,000 partners and
staff, bringing total numbers
of partners and staff to a
record 155,000.
KPMG UK PROFITS RISE
KPMG has announced a

27% rise in UK profits to
455m in the year ending
September. Revenues
rose by 0.4% to 1.8bn,
increasing by 16% in the
audit function and 15%
in advisory, while staying
broadly static in tax.
Partner pay increased by
23% to 713,000 while the
employee bonus pool rose
by 20%. Simon Collins,
UK senior partner and
chairman, received 2.42m.
IFRS ON THE UP
International Financial
Reporting Standards (IFRS)
are now the de facto global
language for financial
reporting, according to
the IFRS Foundation. Some
122 jurisdictions have been
profiled by the Foundation
to examine their use; nearly
all are now committed to
IFRS and in 101 IFRS is
required for domestic listed

companies. Modifications
are rare, mostly temporary
and with limited application.
Michel Prada, chairman
of the IFRS Foundation
Trustees, said: The vision
of global accounting
standards has been publicly
supported by almost all
international organisations.
RISK ANALYSIS DELAYED

Regulatory assessments of
risk exposure at the worlds
largest banks have been
delayed by weaknesses
in IT systems. The Basel
Committee comprising
banking regulators from 27
countries is attempting to
compare risk profiles and
had intended to complete
the process by the end
of next year. However, the
Committee says that it is
now clear that IT systems
at 10 of the 30 largest
banks cannot provide the
necessary aggregated
information. Despite the
problem, the committee will
now extend its focus to midtier banks.
PwC DEAL APPROVED
Partners in the consultancy

Booz & Company have
approved its merger with
PwC. The transaction is
expected to conclude in
March, subject to regulatory
approval and the meeting
of merger terms. PwC says
that the merger will provide
a more comprehensive
consultancy service to
clients, with service offers
from strategy development
through to execution.
Dennis Nally, chairman of
PwC International, said:
The combination of PwC
and Booz & Company
will create the stand-out
professional services
organisation in the world,
working with a full range
of stakeholders to build
trust and solve important
problems from strategy
through execution.
ANALYTICS ACQUISITION
KPMG has acquired Link
Analytics, a US-based
analysis applications
consultancy. The deal is
intended to assist KPMGs
capacity to provide data and
analytics services to clients,
providing increased support
for clients growth plans,
acquisitions, loyalty schemes
and performance outcomes.
Data and analytics continue
to fundamentally transform
core business processes
and decision-making for our
clients, said John Veihmeyer,
chairman and CEO of KPMG
in the US and chairman
of KPMG Internationals
Americas region.
DISCLOSURES IMPROVED
Companies have responded
positively to the latest
corporate governance
and stewardship codes
by improving the quality

of their disclosures, said
the Financial Reporting
Council (FRC), but larger
companies are doing better
than small ones. There
has been an increase in
the tendering of audit
contracts and many large
companies now disclose
boardroom diversity policies
in advance of this years
requirement. Many more
companies arepreparing for
improveddisclosures in their
next reports.
CALL FOR PRUDENCE
The International Accounting

Standards Board (IASB)
should put prudence,
stewardship and reliability at
the heart of future revisions
of accounting standards,
says the Financial Reporting
Council (FRC). Roger
Marshall, chairman of the
FRCs Accounting Council,
said: In 2010, the IASB
made some changes that
downplayed the ideas of
prudence, stewardship/
accountability and reliability.
We are pleased that the
IASB has said that it will
reconsider this in the light
of work on the rest of the
Conceptual Framework.
Melanie McLaren, FRC
executive director for codes
and standards, added: It
is all too often said that
directors cannot recognise
their business from their
financial statements.
Accounting standards
should allow an appreciation
of the results of the
business model.
RSA INVESTIGATIONS
PwC and KPMG have

completed investigations
into alleged accounting
irregularities of 72m in
the Irish trading operations
of RSA Insurance. The
reports were not published,
but in a statement RSA
said: PwCs work supports
the boards view that
ROUND-UP | NEWS
CFO FOR WHITEHALL
A post of director general

for spending and finance for
all of government is to be
created, equivalent to the
role of a government CFO.
The recommendation came
from a Treasury review,
established after an earlier
report last June proposed
the creation of the CFO
post. ACCA chief executive
Helen Brand welcomed
the decision, saying:
Strong financial leadership
is essential for driving
even higher standards in
Whitehall and the proposed
role of a director general
for spending and finance
combining the head of
the government finance
profession and head of
public spending has the
potential to bring strong
and visible leadership for
financial management that
will allow finance to better
support decision-making
across Whitehall.
HMRC LOSES FII GLO

HMRC may have to repay
between 5bn and 6bn
in tax after losing the
so-called FII GLO case
in the European Court of
Justice. The court ruled

that HMRC was wrong to
impose a six-year limit on
claims for repayment of
advance corporation tax
that had been improperly
charged. In 1999 the
government conceded that
it had been wrong to treat
dividends received by UK
companies from foreign
subsidiaries differently from
those of UK subsidiaries.
But by the time this was
established in 2003, also
by the European Court of
Justice, it was impossible
for manycorporations to
meet the six-year limit for
seekingrepayments.
69% Australia
64% UK
$191,039
$176,814
57% Canada
$171,154
Audits of banks and building

societies need to improve
and to do so quickly, said
Council (FRC). The FRC has
embarked on a review to
consider why progress on
improving audit quality in
the banking sector has been
slow. In a statement, the
FRC said: Over the last five
years, the FRC has increased
its monitoring of bank and
building society audits in its
annual programme of audit
quality inspections, but the
findings have shown they
are below the average of all
audits inspected.
70% Hong Kong

$145,943
71% Brazil
$131,761
84% Mexico
$96,347
59% China
$68,422
86% India
$47,775
78% Malaysia
$38,814
CFOs ARE UPBEAT
$223,699
70% Taiwan
56% USA
$370,966
$284,145
64% France
FRC WARNS ON AUDITS
CFO confidence in the

economy is at a three-anda-half-year high, according
to the latest Deloitte CFO
survey. For the first time
since the financial crisis,
bank borrowing is seen as
the most attractive source
of finance. Half of those
surveyed give credit to new
Bank of England Governor
Mark Carney for his role in
raising confidence. But the
majority of CFOs expect
interest rate rises by the
middle of next year and
one in four expects a rise
thisyear.
$501,919
70% Singapore
Retirees expecting to leave an inheritance
$A
verage value of
inheritance retirees expecting to
leave (US$)
TRENDS
inappropriate collaboration
amongst a small number
of senior executives
in Ireland undermined
control effectiveness over
claims. RSA said the PwC
review concluded that the
groups control framework
is appropriate, but
recommended strengthening
financial controls in the Irish
operation and assurance
processes across the group.
KPMGs review was an
extension of its role as newly
appointed group auditor and
it found problems in Ireland
are not replicated elsewhere.
RSA is taking legal advice
over whether to take action
against former auditor
Deloitte. Deloitte declined
tocomment.
11
LASTING LEGACY
Globally, nearly seven in 10 (69%) retirees

expect to leave an inheritance to their
children, with an average value of nearly
US$150,000. Australian, Singaporean
and UK retirees are the most generous
globally, HSBC research shows. The Future
of Retirement: Life After Work? also found
thata high number of working-age people
expect to live off their inheritance after they
finish working.
12
NEWS | ROUND-UP
EY FINED OVER FAREPAK
EY has been reprimanded

and fined 750,000 after
Council found against it for
its audits of Farepak and its
parent company European
Home Retail. Partner Alan
Flitcroft has also been
reprimanded and was fined
50,000. EY and Flitcroft
admitted their conduct
fell short of expected
standards. They accepted
that insufficient evidence
was obtained for the audit
reports and so breached
audit standards.
FINE FOR FORMER FD
Former Bradford & Bingley

finance director Christopher
Willford has been fined
30,000 by the Financial
Conduct Authority for
failing to provide up-todate financial information
to his board ahead of its
2008 rights issue. In May of
that year, Willford received
information indicating that
the banks financial situation
may have been weaker than
expected, but he failed to
pass this on to his board.
His conduct fell short of
the FCAs standards, said
Tracey McDermott, the FCAs
director of financial crime
and enforcement.
MAZARS ACQUIRES
Mazars has acquired

Deloittes public sector
internal audit subsidiary,
which provides internal
audit services to councils
and health bodies in
London and South-East
England. The move follows
the success of Mazars in
winning public sector audit
contracts that became
available following the
abolition of the Audit
Commission. Some 120
Deloitte staff will transfer
to Mazars, making it one of
the four largest providers
of audit services to the
public sector.
AUDIT ROTATION ACCELERATES

London Stock Exchange Group (LSEG) has joined the
growing list of large companies putting their audits out to
tender. In a statement LSEG said that it would conduct a
tender process in light of the increasing diversification,
scale and reach of the organisation and also in line with
good corporate governance regarding periodic tenders.
Appointment of the successful audit firm is expected in
the summer. In other tender exercises, KPMG won the
Unilever and Berkeley audit contracts previously held by
PwC, while Deloitte won the Marks & Spencer audit from
PwC and Spirax-Sarcos contract from KPMG.
INVOLVENCY IN FIRMS UP
There was a 41% jump in
the number of accountancy
firms going out of business
last year, as small firms
faced a squeeze on profits
and cashflow, reports IT
provider Syscap. The number
of firms going bust in 2013
rose to 103, up from 73 in
2012. Philip White, chief
executive of Syscap, said
that firms were suffering
from several simultaneous
pressures, including
weakness in clients
cashflows, some small
firms bringing book-keeping
in-house, the raising of the
audit turnover threshold
and, for larger firms, the
slowdown in mergers and
acquisitions activity.
ALL CHANGE FOR FDs
Debenhams CFO, Simon

Herrick, has stepped
down, following poor end
of 2013 results for the
department store group.
Richard Meddings is leaving
his role as finance director
of Standard Chartered as
part of a restructuring of
the banks management.
Former finance director
of Burberry, Stacey
Cartwright, has been
appointed as chief executive
of Harvey Nichols. Nick
Luff, finance director of
Centrica, which owns British
Gas, has been appointed
finance director of
publisher ReedElsevier.
A4S FORMS CFO GROUP
Accounting for Sustainability

has formed a European CFO
Leadership Network to put
sustainability at the heart of
corporate decision-making.
The charity was founded by
Prince Charles, the Prince
of Wales. Network members
include the finance chiefs of
Sainsburys (John Rogers);
Unilever (Jean-Marc Hut);
Danone (Pierre-Andr
Terisse); Walmart EMEA
(Richard Mayfield) and
The Crown Estate (John
Lelliott, page 14). Co-chair
Rogers explained: HRH
The Prince of Wales has
rightly recognised the vital
importance of bringing
sustainability issues into
the very heart of corporate
governance and accounting.
CONSULTING CONCERNS
The US Public Company

Accounting Oversight Board
(PCAOB) is concerned
about the increased risk
of conflicts of interest
from the expansion of
audit firms consulting
arms, its chairman James
Doty has said. The Big
Four are to be called in
by PCAOB to discuss
the relationship between
audit and consultancy
operations. Dotysaid: We
simply cant be unaware
of the implications for
independence, objectivity,
scepticism, audit quality, of
any of these developments.
PRAXITY ENJOYS RISE
The Praxity international

alliance of firms has
reported a 9% rise in
revenues for last year.
Member revenues increased
from US$3.7bn in 2012
to US$4.1bn. The biggest
growth was in management
consultancy, where revenues
rose by 28%. Revenues in
litigation support grew by
18%, in corporate recovery
and insolvency by 13%, in
corporate finance by 12%,
tax by 10% and audit by
8%. Revenues grew by over
11% in North America and
in Asia Pacific, by 8% in
Africa and the Middle East
and by 7% in Europe.
ANY EXCUSE
An accountant claimed he
was so busy submitting
clientss tax returns that he
did not have time to do his
own. This was one of the 10
most bizarre excuses used
to explain late returns. The
number-one oddity was from
a self-employer builder, who
was in mourning for his pet
goldfish. Another taxpayer
was distressed by a volcanic
eruption, one man was
unable to collect his post
while doing a round-theworld cruise in his yacht and
another, more prosaically,
had his mail withheld by
hiswife.
Compiled by Paul Gosling,
journalist
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FOCUS | INTERVIEW
TWEET STREET
This floor of the Quadrant 3

development off Regent Street in
London will have Twitter as its tenant
INTERVIEW | FOCUS
15
THE WHOLE STORY

John Lelliott FCCA, finance director of The Crown Estate, explains why the vast
property portfolio owner is such an enthusiastic pioneer of integrated reporting
Renewables trailblazer
Not only is The Crown Estate in the vanguard of
developments in sustainable land and buildings
management, it is also a prime mover in offshore renewable
power in the UK. As the manager of the coastal seabed
out to the 12-mile limit of territorial waters, it works with
developers of offshore wind turbines and tidal energy
generators. To date it has run six offshore wind leasing
rounds, and two commercial wave and tidal leasing rounds.
The organisation is also at the cutting edge of corporate
reporting, having published an award-winning integrated
report for 2012/13, available on its website. Lelliott says
it felt like the natural thing to do after the appointment of
a new chief executive Alison Nimmo, in January 2012
prompted a fresh look at the organisations strategic
direction and the role of sustainability, in which he, as a
member of the management board, was heavily involved.
2001
Appointed finance director of

TheCrown Estate.
1988
CV
he Crown Estate is a UK business that is steeped in

history yet has its sights set far into the future.
Back in 1760, King George III handed over the
crowns lands to the UK Treasury in exchange for a
fixed annual payment that later became known as the Civil
List. Fast-forward 250 years and The Crown Estate is a
commercially run property business with a diversified 8.1bn
portfolio that includes about half of Britains coastline and
almost all the surrounding seabed. Assets include Regent
Street in London, 15 retail parks, Windsor Great Park, three
marinas, numerous harbours and 17,000 moorings. In spite
of its name, it does not own the royal palaces. It is managed
on behalf of the nation. With a high public profile and
responsibility for the careful stewardship of such extensive
and valuable public assets, it is perhaps not surprising that
sustainability is at the organisations core.
John Lelliott, finance director since 2001, says
sustainability is about a lot more than looking at the
socioeconomic and environmental impact. He reels
off examples such as ensuring rural tenants have land
management plans; avoiding obsolescence and protecting
the ability to adapt; evaluating the impact of severe weather;
and much more. If you dont nurture and invest in your land
and buildings, you will compromise long-term value and the
potential rental income that can be realised from them, he
says. The bottom line, he adds, is the need to hand over the
property portfolio to the next generation in a better state.
Gained ACCA Qualification.
1985
Joined The Crown Estate as a management

consultant, later becoming head of finance.
1975
Joined HMRC. Primarily involved in VAT

administration but also had spells in both
Excise and Customs.
Adopting integrated reporting was a move that Lelliott

embraced with enthusiasm. The Crown Estate was already a
member of the International Integrated Reporting Councils
(IIRC) pilot programme. And Lelliott was a long-standing
member of HRH The Prince of Waless Accounting for
Sustainability Project he has recently become a member
of its CFO Leadership Network. He is also a member of
ACCAs Global Forum for Sustainability.
This confluence of factors, says Lelliott, led The Crown
Estate to take the plunge. One of the key things that the
integrated reporting framework wants you to articulate is
how you create value and what your business model is. Its
agreat way of communicating what the business does.
Lelliott emphasises that The Crown Estate is run very
much on commercial lines, but adds: Unlike a plc, which
has shareholders and analysts, we have myriad stakeholders
to whom we have to explain how we operate, how we create
value and what our strategy is.
And so The Crown Estate embarked on a three-year plan to
integrate its reporting. Introducing the concept in his finance
directors review, Lelliott wrote: This, our first integrated
report, helps to explain our business in a concise way and
starts to explain the interconnectivity of resources and
relationships upon which our business depends. The report
also highlights the organisations wider contribution, pointing
out it indirectly supports 94,000 jobs and contributes to the
UK economy through direct, indirect and enabled means.
16
FOCUS | INTERVIEW
8.6bn
Capital value at 31 March 2013.
253m
BASICS
Profits in the year to 31 March 2013,

handed over to the public purse.
345,000 acres
Size of rural and coastal landholding,

making The Crown Estate probably the
largest landholder in the UK.
5.2bn
Contribution to UK economy through direct,

indirect and enabled means as measured in
The Crown Estates first Total Contribution
report in May 2013, designed to measure
the value it creates.
*
*
Nothing comes easy. If you

want to progress then you have to
work hard.
TIPS
Dont be afraid of challenges,

changes or making decisions.
*
*
Its very important not just to listen,

but also to hear. Too many people
just listen.
Dont be complacent. Keep learning.
In the first year, the focus was on the business and the
material issues affecting it: 14 were listed, ranging from
attracting commercial partners and the effect of climate
change to government policy and creating amenity value.
Integrated reporting, he says, makes accountants look forward
much more. Next time around, he says, the focus will be
more on the six capitals listed in the IR framework: financial,
manufactured, human, intellectual, natural and social.
An integrated report is not one where youve just merged
your normal and your sustainability report, he explains. The
beauty of integrated reporting is the connectivity of it all. By
creating the business plan and working out those material
issues, and linking it to risk and governance, it has become
the framework of our business planning.
Putting the report together, says Lelliott, was very
much ateam effort that required a lot of hard work and
dedication. But he says that the benefit of it became more
and more apparent to people as they worked on it.
So will others follow The Crown Estates lead? Some of

our peers have been asking us how weve done it, Lelliott
says. The underpinning principle is about demonstrating
how you create value and the issues that affect your
business, so its just as relevant to any organisation be it
public or private as it is to us.
Some industry sectors lend themselves much more
easily to it than others, but more and more people are
seeing the benefit of it and the investor community is
starting to come round and demand more and more
information. Support from the top, he adds, is a critical
success factor. And it is vital that the finance director is not
only on board, but is the champion of integrated reporting.
The Crown Estate has won plaudits for its integrated
report, winning two categories in the coveted PwC Building
Public Trust Awards. Commenting on the wins, he says:
Producing it was a tremendous challenge, but also a
fantastic way of telling our story.
But Lelliott has more on his plate than integrated
reporting. He has responsibility for a 30-strong finance
team, as well as the internal audit function and a large IT
department. He explains: As we operate an outsourced
services model, and now with funds under management, it
is essential that we have a very robust IT network, systems
andcontrols.
Lelliott has also been in the hot seat at The Crown
Estateduring a period of significant growth. Over the
last 10 years revenue has increased by over 43% and had
capitalgrowth of over 100%, he says.
The unusual nature of the organisation, which is
INTERVIEW | FOCUS
controlled by Act of Parliament the 1961 Crown Estate Act

throws up some particular challenges. We operate under a
number of constraints, one of which is that we are unable to
borrow, so we have to manage our cash very, very carefully,
he says.
It also makes it challenging to compare its performance.
We describe ourselves as a major property company and
if you look at the capital value of The Crown Estate we
are equivalent to a FTSE 100 company, so we benchmark
ourselves against the big property players. One of The
Crown Estates objectives is to outperform a bespoke
benchmark provided through IPD, a real estate analyst.
Having moved from labyrinthine premises at Londons
Carlton House Terrace, The Crown Estate is now based
in open-plan offices just off Regent Street part, Lelliott
says,of The Crown Estates move to a more open and
transparent culture. He sits with his finance team, and the
chief executive is just a few metres away.
The office is opposite a huge building site, part of a 1bn
programme of redevelopment and investment in and around
central London, which is reconstructing and refurbishing
buildings as well as creating more pedestrian areas. Lelliott
says such projects are about creating destinations.
People want to go there because there is a more welcoming
shopping environment and experience. This helps our
retailers businesses and therefore our own by improving
rental value and thereby capital value. They also help attract
new retailers Lelliott points to the recently opened outlet
of J Crew, favoured by Michelle Obama, its first flagship
shop outside North America.
17
We stroll down Regent Street to the newly redeveloped

Quadrant 3 office building for photographs on a floor
that has since been let to Twitter. Other tenants include
Generation Investment Management, a sustainabilityfocused investment house co-founded by former US vice
president Al Gore, perhaps attracted by the buildings
pioneering sustainable features.
Lelliott says that the breadth and diversity of The Crown
Estates business means that he doesnt really have a typical
day. Thats what makes my job so interesting.
He believes that the ACCA Qualification has helped his
career in a number of ways. Although its possible to be
a finance director without being a qualified accountant,
he says that having a professional qualification gives you
the confidence to question and challenge. It also gives
you industry recognition of your ability and along with
experience enables you to have control of your destiny and
gives you choice. So I think its quite important.
Not that Lelliott has stinted on his life outside world.
Married with two grown-up children, he is a prog rock
fan and golfer. He also played cricket for many years in
Sussex, trained young cricketers and is vice chair of Asthma
UK. Like The Crown Estate, he has a diverse portfolio of
interests.
Chris Quick, editor
FOR MORE INFORMATION:
www.thecrownestate.co.uk
18
FOCUS | CYBERCRIME
PREPARE TO MEET
THY CYBER-DOOM
The speed of technology change and the colonisation of the workspace by personal and
mobile devices have allowed cyber-criminals to outsmart businesses by targeting their staff
19
CYBERCRIME | FOCUS
t wasnt meant to be this

into the corporate network than a
way. The internet was
direct network attack.
supposed to diminish
Workforce use of personal
barriers to communication
smartphones and tablet devices is
All organisations need to:
and information, and level all
the norm in many organisations,
understand the nature and likelihood
sorts of metaphorical playing
without validation of the business
of cyber threats
fields, but as well as the
case or appropriate safeguards, and
identify, assess and mitigate existing
benefits it has also brought
despite their inherent insecurity.
and emerging risks
hackers, trojans, viruses, worms
Tamir explains: Vulnerabilities allow
implement and maintain strong data
and all sorts of cyber-nastiness.
cyber-criminals to secretly install
privacy/security controls and policies
As for those level playing
malware on the employee endpoint
educate users on emerging risk
fields, well, they may have
device and essentially gain the
plan for increasing complexity
democratised the internet but
same level of corporate network,
make IT risk a board-level concern.
they have also created a vast
application and data access as
A single organisation can achieve only
new risk landscape, with such
theemployee.
limited outcomes by working alone.
joys as the selfie exemplifying
Its not the only way for cyberCompanies, industries and governments
technologys mixed blessings.
criminals to infiltrate corporate
will need to:
We want the world to see us as
networks, of course. Phishing
cooperate and share information on
we see ourselves, and because
remains an effective and popular
cybercrime
smartphone self-portraits
method for luring individuals to
create uniform global regulations.
provide a fast, cheap and
compromised websites and fooling
simple way to achieve this, the
them into downloading infected
phenomenon has gone global. So have the consequences.
files. Warnings and widespread awareness of the dangers
Nelson Mandelas funeral may have been an opportunity
of clicking on unfamiliar links and opening suspicious
to celebrate his life, mourn his passing and reflect on his
file attachments do not seem to deter. End users are not
achievements, but media coverage was dominated by a
completely to blame, says Tamir, because cyber-criminals
selfie of Danish prime minister Helle Thorning-Schmidt,
have got better at disguising their intentions, and smuggle
flanked by US president Barack Obama and British prime
malware in on the back of social media scams, fake surveys,
minister David Cameron. Cue eagerly anticipated thumbs up
free gift offers and must-see videos.
and heart-shaped emoticons.
Almost anybody can be snared by a new technique called
As with many trends that characterise our love affair with
a watering hole attack, which compromises websites that
mobile technology and social media, familiarity can create
cater to a particular audience. So while a high-tech R&D
a false sense of security. Many of us are so beguiled by the
facility or outsourcing service provider may have impressive
prospect of instant affirmation, so enamoured of the power
levels of logical and physical security, cyber-criminals can
at our fingertips, that we forget to think before we click
compromise much less secure websites (such as local
exposing individuals, organisations and entire countries to
services) that staff may be visiting as a way to find those
all sorts of risks. Because while we are using our new best
employees and compromise their personal devices.
friends to relentlessly collect, store and share vast amounts
And it isnt just tactics that are evolving. So is the nature
of personal and professional information, cyber-criminals
of cybercrime and the profile of the typical cyber-criminal.
are just as relentlessly developing new ways to exploit this.
Hackers used to attack for fame or fun, says Alex Lei,
Targeted attacks are on the rise and corporates breached
director of security sales, Symantec Asia South, but other
on a daily basis, often unaware that valuable information
motives have become more common. Kapil Raina, senior
is compromised or stolen. If the perfect crime is one that
director of product marketing with security specialist
goes completely undetected, then corporate cybercrime is
Zscaler, adds: Attackers have evolved from individuals
it, says Dana Tamir, enterprise security director with IBM
motivated by curiosity to well-funded criminal organisations
security company Trusteer. Cyber-criminals are quietly
seeking profit. Recent analysis by Verizon found that
andanonymously rummaging through corporate accounts
financially motivated cybercrime makes up 75% of all data
for confidential data, leaving without a trace, and then using
breaches, and that 20% of breaches are state-driven.
or selling the information for
economic gain.
And we all do our bit to
help them out. Tamir says:
Cyber-criminals have found
that compromising employee
endpoints is a far simpler path
RESPONDING TO RISK
*
*
*
*
*
*
*
*
THEY ARE QUIETLY RUMMAGING THROUGH

CORPORATE ACCOUNTS FOR CONFIDENTIAL
DATA, AND LEAVING WITHOUT A TRACE
20
FOCUS | CYBERCRIME
Last year Kaspersky Labs

Digital Darwinism, technology
uncovered one cyber-espionage
is evolving faster than many
campaign, dubbed NetTraveler,
individuals and organisations
which compromised more than
As the scale of cybersecurity threats seems
can adapt. It is hardly
350 victims in 40 countries.
destined to grow, so the source of those threats
feasible any more to have
Theyre just one big ugly gorilla
seems destined to shrink. Mobile devices are
in-house experts capable of
with a thousand faces and
getting smaller, faster and smarter, and the next
keeping track of fast-moving
we havent seen all of them
generation of computers smart dust will be
developments, says Rainer,
yet, says Costin Raiu, head of
able to do exponentially more despite being too
who suggests that external
Kasperskys global research and
small to identify with the human eye.
expertise is now essential.
analysis team. Cyber-espionage
The University of Michigan has already
For the finance profession,
targets typically include
created prototypes just one cubic millimetre in
this presents challenges and
government agencies, military
size but equipped with sensors that can monitor
opportunities. Dr Darren
contractors, and companies in
things such as temperature and movement, then
Hayes, an infosecurity expert
comms, health, nanotechnology,
transmit the data via radio waves. Such devices
at Pace University, finds more
energy, professional services
will be embedded in buildings and objects.
accountancy firms branching
and space exploration.
As if that isnt scary enough, engineers at MIT
into the lucrative areas of IT
While attacks on large
have taken inspiration from analogue electronic
risk assessment, fraud and
corporates and government
circuits and transformed naturally occurring
investigations, cybersecurity,
agencies grab the headlines,
biochemical functions into living calculators.
privacy and compliance. I
smaller entities are also at risk.
Using just a few genetic parts, the bacterial cells
meet accountants who no
According to Symantec, 31%
can compute logarithms, divide, take square
longer use their accounting
of all targeted attacks involve
roots, and remember the results.
expertise because of this
companies with fewer than
diversification, he says.
250 employees so if you think
Accountants in business are
your business is too small to be attractive or you dont have
broadening their horizons too. Joint ACCA and IMA research
anything worth stealing, think again. An attack on a large
during 2013 found cybercrime alongside cloud, mobile and
enterprise may offer greater rewards than an attack on a
big data on a list of technologies looming progressively
mid-sized or small business, but the likelihood that they will
larger in the remit of CFOs (see www.roleofcfo.com).
be less careful about their cyber defences does wonders for
ACCA chief executive Helen Brand says: Who would
their appeal.
have thought 10 years ago that technological trends would
Even the smallest organisation merits the attention of
become part of the CFO role? But they are and will continue
cyber-criminals if it stores and processes credit and debit
to do so. She suggests that we could see the rise of the
card data and other identifiable information on businesses
CTFO a chief finance and technology officer with a seat on
and individuals. Theft of digital information has already
the board. (See page 82.) Its certainly time that somebody
overtaken physical theft
made cybersecurity a board-level concern. Though if we are
as the most commonly
to combat emerging cybercrimes effectively,
reported fraud. As ever
and catch and punish attackers,
more products and
collaboration between
services are provided,
companies, industries
sourced and accessed
and governments will be
online, and mobile
required and politicians
devices proliferate, so
may need to put their heads
the security of data and
together to do more than
systems is becoming
take a selfie.
increasingly complex
and their governance
Lesley Meall, journalist
increasingly important.
In the face of all of
this, an effective and
proportionate plan of
Digital Darwinism:
action is a must (see
thriving in the face of
box, previous page).
technology change is at
As highlighted in the
www.accaglobal.com/
recent ACCA report
ab27
A WORLD OF SMART DUST
Making security your

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Joining physical, personnel and systems

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advantage through helping implement the
most cost effective and efficient approach
to building security into your business
operations.
Atkins helps clients to achieve this
competitive advantage by:
Striking the right balance between
people, processes and technology
Creating a safe environment to do
business
Reducing risk and vulnerability
Balancing spend on security to get best
value from the investment you make in
protecting your business.
Plan Design Enable
www.atkinsglobal.com/security
22
COMMENT | ROBERT BRUCE
Confirming the unconfirmable

Its one thing having to present clear annual reports and accounts, but the requirement
for boards to confirm they are understandable is a scary undertaking, says Robert Bruce
It is that time of year when colds
and flu come to the fore. But it is
also the time of year for many when
the preparation of the annual report
and accounts is in full flow. And that
means headaches, too.
This year one of the issues most
exercising people is one that, on the
surface, sounds simple. Starting with
year-ends falling after last September,
the boards of companies have to
put a statement in the report and
accounts confirming that they think
that the documents are fair, balanced
and understandable. Perfectly
straightforward, you might think. But in
an environment where the competing
pressures of compliance and
explanation are fighting it out together
it is not that easy.
When Robin Freestone, chair of The
Hundred Group which represents the
views of the finance chiefs of the FTSE
100 companies and who is also CFO
of publishing giant Pearson, was asked
late last year what was focusing their
minds, his first thought was this issue.
What does it really mean and how do
we interpret it? was how he summed
the difficulty up.
The change is a simple one in
wording but a complex one in meaning.
Moving from presenting understandable
documents to confirming that they

are indeed understandable creates
a different feeling of responsibility.
Having to make an overt statement
about something is different to being
asked to think about something, says
Kathryn Cearns, consultant accountant
at lawyer Herbert Smith Freehills. It
is a similar moment to the one a few
years back when directors, instead of
just saying that the company had given
the right information to auditors, had
to start confirming that they had done
so. To an outsider it may smack of
semantics. To a company director with
a legal adviser sitting alongside it has
the power to terrify.
Things do have to be reorganised
and more specific things have got
to be thought about, says Richard
Martin, head of corporate reporting
at ACCA. But there are cultural issues
here as well. And, as ever, they are
legal. At any moment the clammy hand
of compliance could stretch forward
and grab a director by the wrist.
Company directors and boards are,
mostly, literate and capable and no

one doubts their ability to string a few
sensible sentences together. But that
is not what we get. As analysts point
out, the legal and company secretary
departments are used to repackaging
the same hackneyed phrases year in,
year out. This worries the Financial
Reporting Council (FRC). We dont see
the process, says Chris Hodge, the
organisations director of corporate
governance, but the impression you
get is that in the past the task was
delegated to the company secretarial
and CFO team. What we are hearing
now is that boards are reviewing the
process. It will be a welcome change.
Annual reports and accounts have
become compliance statements, says
Jonathan Cobb, investment director
with Standard Life Investments.
We hope that the new reporting
requirements will encourage boards to
communicate more effectively what the
board and company has been doing.
The intent is good, says Jonathan
Hayward of consultancy Independent
Audit, and we need information to be
more personal about the company and
less boilerplate. But companies will
only inch forward. The legal framework
hasnt changed enough. Directors will
be advised by people whose job is to
becautious.
Legal issues
So there will be initial struggles
over the information and how it
is presented. But legal stumbling
blocks will be hard to shift. And
understandability will suffer. There
are no safe-harbour provisions when
it comes to the requirements of the
main US regulator, the Securities and
Exchange Commission, for example.
If you come under its aegis, says
Hayward, the lawyers will tell you to
put everything in. Boards may love
the idea of shorter reports but audit
committees produce board papers
over 1,000 pages long simply because
they have the annual report in them. It
makes your heart sink, he adds.
ROBERT BRUCE | COMMENT
23
It is still the concept of

understandable which provokes
the most queries. Financial services
companies are horribly complex. You
would probably expect only good
analysts to fully understand what the
report and accounts truly mean. And
there is the old question of whether
the numbers produced by International
Financial Reporting Standards are
understandable in the context of what
a well-informed outsider might want.
Companies which are only doing
one thing, even if it is on a global
scale, says Cearns, are easier.
But some companies are just more
complicated and it will be harder.
Sensible outcomes
TOUGH QUESTION
Hundred Group chair Robin

Freestone: What does it really
mean and how do we interpret it?
UNDERSTANDING THE NEW PROVISION

From 30 September 2013 year-ends onwards, premium listed companies
have to expand on the existing corporate governance code requirements.
Annual reports now have to include a statement that: The board
confirms that the annual report and accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the performance, strategy and business model
of the company. And following on from that: The board should establish
arrangements that will ensure that the information presented is fair,
balanced and understandable.
It is the need to confirm rather than simply present that is new.
And that is where the uncertainty lies. The concept has been there since
the Cadbury code and is in company law, says Chris Hodge, director of
corporate governance at the Financial Reporting Council. The additional
subjectivity is the test. It is more are you happy? that we are after, he says.
But there are signs that some

companies are using the new
regulations as a catalyst to get to
grips with the issue. They are setting
up project groups and pulling all
their departments together to ensure
sensible, and understandable,
outcomes. There is a need for a
good controlling guiding mind, senior
enough to say: this goes in and this
stays out, says Cearns, and to get
people to liaise with each other.
In the end it is all part of the push
towards greater narrative reporting. It
is powered by the need for reporting to
explain what a company is doing in such
a way that will not alienate the investor
base nor infuriate the general public.
The will to do this is invariably there.
But the old handicaps still linger. It is
all a continuation of improvement, says
Cearns. Narrative reporting has been
improving at the top end of the market.
This is a useful nudge.
In the long term pressures toward
understandability will continue and
reports will continue to improve, says
Hayward. And boards will welcome
thisbecause they like to understand
things, too.
Robert Bruce is an accountancy
commentator and journalist
FRC update to UK corporate

governance code is at
http://tinyurl.com/corpgov2
Interview with Robin Freestone is
at www.accaglobal.com/ab58
24
COMMENT | PETER WILLIAMS
Grow the hybrid

Incorporating corporate technology within the finance function will turn the CFO into a
CFTO, strengthening its grip on that coveted strategic role, says Peter Williams
Forgive the anonymity but this is
commercially sensitive stuff: a
financial analyst in a division of a FTSE
100 company was recently expressing
frustration at the uselessness of the
enterprise-wide CRM system. It may
be working for most parts of this large
and successful global business, but the
set-up wasnt helping his finance and
commercial teams to forecast revenues
and follow projects. This is not an
isolated problem: a utility company
sent me and doubtless thousands
of others a New Year letter saying a
payment had been missed due to data
problems. (The good news was I would
be charged twice shortly.)
When I trained in the mid-1980s,
the common approach for accountants
was to treat computers as a black
box: as long as you checked the inputs
and the outputs you could get away
with not knowing much about what
was happening inside. There were still
enough controls and physical ledgers
to mean the IT was important but not
immediately life-threatening.
Accountants cannot afford to be
Luddites any more, however, as proved
by the high-profile outages at RBS and
NatWest late in 2013: if your IT isnt
working, youre not working and nor
are your customers.
The reality for the financial

professionals working in large
corporates is that they need to be as
comfortable with handling big data
(as we call large and complex data
sets these days) as those who have
IT-specific job roles and titles. They
may now be more comfortable in their
grasp of technology but, while ability
and competence improve with general
experience, it can still be an enormous
stumbling block as the FTSE 100
divisional analyst showed.
The need for accountants to be able
to cope with complex information and
IT systems was recognised by ACCA in
a study covered on page 38 of last
months edition which suggested
that big data should be seen as an
opportunity for financial professionals,
offering the chance of re-invention to
take more of a future-facing role.
The report, Big Data: its power and
perils, suggests that the vast amount of
data continually collected, stored and

transferred by technologies is changing
business priorities and posing big
questions for leaders in organisations.
The challenge is to manage diverse,
disparate and often amorphous
datasets responsibly and profitably. If
that can be done, it should facilitate
improved performance. Get it wrong
and it will result in poor decisions,
breaches to data security and privacy
codes, and damage to reputation and
brand: in summary, destroyed value.
Of course, we all know the power
and freedom that technology offers: for
accountants, it removes some of the
tedium of routine aspects of internal
reporting and compliance work. Given
that freedom and by using key skills of
gathering, analysing, benchmarking,
modelling and forecasting, accountants
are in a good place to provide a new
service: making big data smaller and
distilling those vast reservoirs of
information into actionable insights.
And that is a strategic, proactive role.
This seems a long way from the
traditional role of score keeper, but if
the shift can be made then accountants
will have formed a bridge between
data science and data art, combining
analytical skills and sophisticated
models developed by mathematicians
to use the data to tell a story.
For those struggling to get the CRM
to work or to persuade their colleagues
to input the data in the correct
format, this vision may seem like a
dream. But talking to accountants
especially those working in or with
large organisations and in shared
service centres makes clear that the
storyteller role is not totally off-beam.
The concept of a hybrid finance/IT role
branded chief financial technology
officer or perhaps chief financial
information officer is gaining traction,
and it is only a matter of time before
we see a more formal recognition of
this shift.
Peter Williams is an accountant
and journalist
JANE FULLER | COMMENT
25
Exceptions prove the broken rule

Excessive adjustment of corporate earnings to exclude supposedly one-off costs is a
warning sign of a management team over-confident or under pressure, says Jane Fuller
After a bumper 2013 for equity
markets in the developed world,
companies will be under pressure to
repeat the trick this year.
They may try to buy growth, hence
excitement (among potential fee
earners) about the revival of M&A
activity. Or they may pursue the
organic path: recent surveys from
Deloitte and BofA Merrill Lynch show a
renewed appetite for capital spending
among both CFOs and investors.
But this spending could dent
profits in the short term, which is
not such good news for the keenly
watched price/earnings ratio. With
high expectations baked into the P,
companies will be under pressure to
keep up the E.
Pressure can lead to rule-bending.
One way companies do this is to
invite investors to ignore certain
costs because they are exceptional.
Management motivation is all the more
questionable if adjusted earnings are a
key factor in performance-related pay.
The UKs Financial Reporting Council
politely drew attention to the earnings
manipulation problem in a December
note entitled FRC seeks consistency in
the reporting of exceptional items. Its
Financial Reporting Review Panel had
found that some exceptional charges
incurred in the downturn had since
been released to pre-exceptional profits.
It set out guidance to discourage bias
and obfuscation in underlying profits.
Also know as non-GAAP
numbers, this more flattering view
of performance is often emphasised
at the expense of the International
Financial Reporting Standards (IFRS)
numbers. (No, they arent perfect, but
they are more objective.)
In the US, Jack Ciesielski, publisher
of research service The Analysts
Accounting Observer, has produced a
less polite commentary on the nonGAAP shenanigans of technology and
healthcare companies. In both sectors,
four out of five S&P 500 companies
report non-GAAP numbers. The net
effect for the tech cohort was to add
back more than US$40bn to net income

in 2012 about 60% more than in 2011.
Ciesielski points out the drawbacks
in various non-GAAP numbers,
including EBITDA (earnings before
interest, taxes, depreciation and
amortisation) the lazy analysts
cashflow. As for restructuring charges,

instead of the old abuse of big bath
provisions, they are now much more
like serial sponge baths.
Adjustments to IFRS numbers
are not all bad. The absence of IFRS
guidance on operating profits, for
instance, does leave a vacuum for
users of accounts, who are seeking a
clean platform for profit forecasts.
Data providers such as Morningstar,
which produces the E number for UK
share prices in the Financial Times,
have formulae to exclude genuinely
one-off gains and losses on the
disposal of a discontinued business,
for instance. The Johannesburg
Stock Exchange bravely lays down in
its listing rules a consistent way to
calculate headline earnings.
But it is a bit like herding cats.
Many users of accounts pride
themselves on their judgment of what
should be counted in or out. Others go
along too easily with the managements
smoothed version.
Amid the anarchy of adjustments,
what can be read into excessive use
of non-GAAP numbers? In the US tech
sector, maybe arrogance. Elsewhere,
stress: witness the 1bn difference
between core and statutory interim
operating profits last year at RBS.
At two simpler companies, Next and
EasyJet, the cleanness of the reported
numbers looks like a symptom of the
no-nonsense management behind their
success. By contrast, Autonomy, in its
last annual report before HP massively
overpaid for it, started adjustments at
the gross profit level and ended up with
earnings per share 35% higher than
the IFRS number.
Until IFRS revisits the statement of
profit or loss, it is good to see at least
one regulator paying attention. And
managements should bear in mind the
risk to their underlying reputation.
Jane Fuller is former financial editor
of the Financial Times and co-director
of the Centre for the Study of Financial
Innovation think-tank
26
COMMENT | MARTIN TURNER
The vision thing

Integrated reporting gives ACCA members another opportunity to demonstrate their
financial leadership and ability to add value, says ACCA president Martin Turner
It has always been a source of pride to me that I am a member of
a professional body that challenges convention and is at the
cutting edge of development.
ACCA has a long history of innovation. It opened the
profession to people of all backgrounds, becoming
the first truly international accountancy body in
the process. It has long recognised that the only
certainty in life and in business is that everything
will change. This is why we are committed to
working to ensure that its qualifications and
the way in which they are delivered continue to
meet the diverse needs of trainee professionals
and their employers, and to ensure that the
ACCA Qualification opens doors and enhances
opportunities for those who hold it.
Innovations have included being the first body
to examine in International Financial Reporting
Standards and on the framework on the Global
Reporting Initiative. Now, we have become the first
global accountancy body to introduce integrated
reporting to our qualification from December
2014. With shareholders and stakeholders calling for
more information which provides a more complete
picture of organisational activity, integrated reporting
will become ever more important, particularly since the
recent launch by the International Integrated Reporting
Council of a new integrated reporting framework.
Having tested most of the elements of integrated
reporting in its syllabus, ACCA has now brought them
together and it will form part of the assessment for
the ACCAQualification. We believe this will enable ACCA
members to demonstrate their leadership for the future, and
will put themat the heart of long-term value creation for their
organisations. It will also ensure the ACCA Qualification meets
the needs of employers in the modern global business
environment. I would urge all members to introduce
the initiative into their own organisations.
Thesubject is being extensively covered
in Accounting and Business, including
articles on pages 36 and 49 of this
months edition.
I and my Council colleagues are
committed to ensuring that ACCA
and its members remain at the
cutting edge of the profession.
We welcome your views on how
to continue to be the worlds
pioneering professional
accountancy body.
Martin Turner FCCA is a

management consultant
in the UK health sector
CORPORATE | SECTOR
27
The view from
I WOULD LIKE TO REVOLUTIONISE THE

BANKING SYSTEM IN THE UK SOMEONE
NEEDS TO STAND UP TO THE BIG BANKS
DAVE FISHWICK, FOUNDER, BANK OF DAVE
SNAPSHOT:
TELECOMS
INDUSTRY
During late 2008 I set up my own

bank, Burnley Savings and Loans. The
reason behind it was quite simple I
wanted to lend money to businesses by
creating an ethical bank.
At that time I was and still am the
owner/director of the biggest minibus
company in the UK. Businesses that I
was supplying to were struggling with
accessing finance from the big banks,
and so I thought I should try and help
and do something about it or I would
have to stop supplying to them.
Not surprisingly, not everyone agreed
with the idea. I had to fight with bank
regulators, the Financial Services
Authority and I even went head to head
with politicians. To gain a bank licence
isnt an easy process, not even for me,
a successful large business owner with
an extensive portfolio of properties.
A lot of the regulations I had to jump
through to get my bank licence are
outrageous. However, despite all the
barriers put in front of me, I put the
bank into profit within 180 days.
Furthermore, one year after its
opening day, the bank put 1m back
into the economy by lending money to
businesses that otherwise would have
had to close their doors. The business
model is straightforward enough: I

turned an empty shop into a bank and
gave local savers a 5% interest rate on
their savings; their money is then lent
to local businesses and all profits go
to charities.
High-street banks give next to
nothing in the way of interest, and
we certainly give more than other
banks. We are able to provide rates for
savers and borrowers that beat those
offered by high-street banks and we
do it with a genuine personal service
for our customers. This bank is run by
the community for the benefit of the
community and my goal would be to
have a community bank in every town
in the UK.
I left school with no qualifications,
and started my professional career
as a builder at 16. I believe in hard
work and self-belief, and I think that by
surrounding yourself with good people,
good things will happen.
Its important to know your market
and to remember that your job as an
entrepreneur is to turn a no into a yes.
In this respect, I am relentless.
I would like to revolutionise the banking
system in the UK someone needs to
stand up to the big banks and I am
confident I can do it.
The global telecoms industry

is one of the most exciting
environments for finance
professionals to work in. With
continued strong growth in
connectivity demand, along
with persistent security
challenges, it is an industry
on the leading edge of
innovation and is a key
determinant of economic
growth across the globe.
Nicholas Kirk, senior
managing director, Michael
Page Finance, says: In
recent years, we have seen
significant change within the
telecoms sector, with larger
companies continuing their
M&A activity and smaller
businesses setting up.
With this consolidation
and SME growth, there
has been an increase in
competition, both from the
number of players in the
market, but also in price/
margin. This has resulted
in the need for telecoms
companies to drill down in
these areas, building up their
commercial finance teams
in order to truly analyse the
competition and their place
in the industry.
35K TO 45K
The starting salaries for

qualified ACCA accountants,
depending on background
and potential, according
to recruitment agency
Michael Page.
28
CORPORATE | COMPLIANCE
Taking the scissors to red tape

Critics complain that regulation and legislation in the EU bloc is overly burdensome for
businesses. So what is the European Commission doing to solve the problem?
Once upon a time, an overly curved
cucumber could not be labelled
cucumber in the EU because it did
not comply with the EUs definition
of the fruit, which included limits on
curvature. The European Commission
eventually modified the rules: ugly
and misshapen fruit and vegetables
can now be sold freely under their own
time-honoured names.
Yet the EU and the commission
are still portrayed as industrial-scale
generators of red tape laws and
regulations that throttle small and
medium-sized enterprises (SMEs).
The EU struggles to match the
worlds most business-friendly
locations. Singapore is the easiest
nation to do business in, according to
the World Banks June 2013 rankings.
Denmark leads the EU challenge in
fifth place, with the UK (10th), Finland
(12th), Sweden (14th), Ireland (15th)
and Lithuania (17th) also flying the EU
flag in the global top 20. But some of
the EUs big beasts Germany, France,
Italy and Spain do not make it into

that elite bracket.
When US companies can get new
products licensed and to market in
days, it should not take weeks or
months in Europe, leaders of six
high-profile UK businesses complained
in Cut EU red tape, an October 2013
policy paper produced by the EU
Business Taskforce at the invitation of
prime minister David Cameron.
companies, says Patrick Gibbels,

secretary general of the Brusselsbased European Small Business
Alliance (ESBA).
Yet significant steps have been
taken to make EU legislation lighter,
simpler and less costly through the
Commissions Regulatory Fitness
and Performance Programme (Refit).
Commission president Jos Manuel
Barroso stressed in October 2013 that
THE PROBLEM IS ALSO GOLD-PLATING

WHEN NATIONAL IMPLEMENTATIONS OF EU
LAWS ADD MORE LAYERS OF ADMINISTRATION
They urged the commission, which
has the exclusive right to initiate
legislation in the EU, to examine all
proposed new laws for their effects
on the blocs competitiveness. The
panel urged the commission to
reject any proposals that damage
competitiveness. It also suggested
that any new administrative burdens
imposed by economically useful
proposals should be offset
by reducing burdens of an
equivalent value elsewhere.
The commission should also
measure and report the financial
impact of proposals (and any
amendments made to them by the
European Parliament and Council
of Ministers).
The panel suggested a moratorium
on new EU proposals until the
existing legislative framework has
been evaluated. It also called for EU
legislation to be implemented and
enforced consistently a bugbear
of British euro-sceptics, who
claim, often wrongly, that the UK
is more scrupulous in this regard
than the rest of the EU.
All these suggestions reflect
concerns about the number
and scope of EU laws. The
cumulative effect of the sheer volume
of legislation is killing for small
EU-wide regulation was very often the

only way to achieve harmonisation and
give European SMEs access to other
countries in the internal market. One
European regulation often replaces
28 national regulations, so this is
simplification writ large.
But sometimes our legislation is
not as simple as it should be and it
creates unnecessary burdens, Barroso
admitted. The problem is also goldplating when legislation comes
from Brussels, but afterwards in the
transposition [to national legislation]
more and more layers of administrative
procedures are added.
The High Level Group on
Administrative Burdens is a business
and consumer group that has advised
the commission since 2007. Its
October 2013 meeting was addressed
by Dale Murray, an entrepreneur on
the UK governments EU Business
Taskforce, and Thomas Bustrup, deputy
director general of Dansk Industri, the
confederation of Danish industry.
Murrays presentation of the Cut
EU red tape report would have sounded
familiar. When in 2012 the commission
asked 1,000 businesses to identify
the most burdensome EU legislation,
a consistent hate list emerged. The
list included such regulations as
those covering VAT declarations, data
COMPLIANCE | CORPORATE
protection, product safety,

health and safety at work,
working conditions of workers
posted to another member
state, the logging of driving and
rest periods in road transport, VAT
refunds to businesses operating
across the EU, chemicals, waste
management and transport,
temporary agency work, and working
time. Many of these laws are
designed to overcome national
barriers to business in the EU, but do
not appear to be seen that way.
The EU seems keen to press ahead
regardless. In October, the
Refit programme published
examples of recent progress:
new rules to remove obstacles
to electronic billing and to
make invoices VAT-compliant
EU-wide, and measures to
simplify accounting and financial
reporting for millions of microcompanies and SMEs.
Initiatives pending a decision
include: a review to reduce the
complexity of recognition procedures
for professionals such as accountants;
amending public procurement
directives so only a winning bidder
need provide original certificates as
evidence of suitability to do the work;
mandatory e-procurement; and a single
set of rules for companies operating in
the EU to calculate taxable profits.
Red tape measure

The commission boasts to have
exceeded its original figure of a 25%
reduction of the admin burden by
2012, notes ESBAs Gibbels. He
argues that this could be inaccurate,
and administrative burdens could have
increased: We have often asked it to
calculate a [value for] net reduction
of administrative burdens, taking into
account all new legislation that has put
a burden on SMEs. We believe this may
result in a negative figure.
Gibbels claims that the
commissions efforts to reduce
burdens are often undone by the
European Parliament, ironically the
EU institution that is supposedly
closest to the people. For example,
the commissions proposed data
protection rules originally exempted
SMEs from onerous compliance
measures but these exemptions were
deleted by the parliament.
As for gold-plating, a June 2013

study by the Institute of Directors
(IoD) highlighted how UK governments
went well beyond EU minima in
implementing EU directives on agency
workers and working time.
But gold-plating does not mean the
commission can abdicate responsibility
to address its own regulatory
programme, says Alexander Ehmann,
IoDs head of government affairs,
adding that the commission should
look beyond infractions and whether
member states are doing enough to
comply with legislation. It should be
able to examine and communicate
non-prescriptively how different states
implement legislation.
This, he suggests, will allow
governments to see how others have
applied a lighter touch. Ireland, for
example, has a much lighter touch
than the UK in defining pay under
the EUs agency workers directive,
29
according to Ehmann. He adds:

Were not saying everyone should
take a minimalist approach,
but awareness of different
implementations could improve
understanding of what EU proposals
were rather than caking on extra
bureaucracy because of slightly
different interpretations by lawyers in
national government departments. The
commission has a role here; otherwise,
it ends up constantly being a punchbag for national governments.
The High Level Group on
Administrative Burdens mandate
runs out in October 2014. Bustrup
sees a need now for a concrete
political platform for businesses
and others to present proposals
to the commission for simplifying
legislation and regulation.
We are mostly consulted during
preparation of new EU legislation,
Bustrup says. This is important, but
administrative burdens are usually first
recognised when EU legislation is about
to be implemented. So we need a forum
to present obstacles deriving from
complex EU guidelines, interpretation
of legislation, inadequate national
implementation, etc.
He suggests such a forum could
be modelled on the Danish Business
Forum for Simpler Rules, which makes
proposals to the Danish government
and provides a fast-track mechanism
to tackle administrative burdens. The
Danish government must comply or
explain why not perhaps one reason
the country is the easiest in the EU in
which to do business.
When businesses or stakeholders
present proposals on how to improve
EU procedures and processes, they
should receive concrete answers from
the commission and be able to expect
a short processing time on solving
problems caused by administrative
burdens, Bustrup says.
Robert Stokes, journalist
Refit: http://tinyurl.com/refit1
European Small Business Alliance: www.esba-europe.org
The Midas Touch report: http://tinyurl.com/MidasTouch3
ACCA for small business: www.accaglobal.com/smallbusiness
30
INSIGHT | US ECONOMY
END OF EASY MONEY?

With the US economy recovering from a slump that started way back in 2008, the tricky
process of returning monetary policy to normal can begin. But is the world ready?
o far Americas bold experiment in monetary policy

appears to have worked. When former Federal
Reserve chief Ben Bernanke lowered interest rates
to zero and started buying trillions of dollars worth
of bonds, doom mongers fretted that a surge in inflation
would surely follow.
No such disaster occurred. Now with the US economy
recovering, Bernankes successor, Janet Yellen, can start the
laborious process of retuning monetary policy to normal.
But this process is not without its dangers. If the new Fed
chief moves too quickly she may stifle the US recovery, cause
chaos in the bond markets and send shock waves through
vulnerable financial markets such as India and Brazil.
The exit from easy money needs to be delicately
handled, says Mark Weisbrot, co-director of the Center for
Economic and Policy Research. The question is whether the
US or the world is ready for tighter policy. Jumping the gun
get by without the monetary drip-feed. The main cautionary

tale is 1937 a year when rate increases helped crush a
promising recovery from the Great Depression. In its haste
to return interest rates to normal, the Fed helped plunge the
nation back into recession, with industrial output dropping
by a third and unemployment jumping back up to 19%.
Weisbrot says: The US has not yet reached
escape velocity and any interest rate increases before
unemployment is close to 4% would be harmful.
Others believe the US is now more robust. Yellen will not
risk doing anything radical until she is convinced that the
economy is recovering, says Paul Ashworth, a US analyst
atCapital Economics. Even so there are promising signs
that the US can tolerate an end to monetary easing.
There are indeed positive signs. The US housing market,
which began its slump in 2007, is recovering. House prices
in 20 US cities climbed by 13% in the year to September
2013 the fastest rise in seven years.
One result is that fewer Americans are
burdened by negative equity and feel
able to spend, says Ashworth. That
has been good for employment.
Another tailwind has come from a
surge in oil and gas production, the
result of the relatively new drilling
technique of fracking. This has meant lower gas prices and
cheaper electricity for US households; consultancy IHS
recently estimated fracking has lifted household incomes
by $1,200 a year. US companies also benefit from bargain
price energy. IHS believes shale drilling will support 1.7
million US jobs this year and 3.5 million by 2035.
Even with tighter policy Capital Economics still believes
the US economy will grow by 2.5% in 2014 and 3% in 2015
far faster than European nations.
Meanwhile, higher US interest rates will create winners
as well as losers. Savers in society, such as pensioners
or those nearing retirement, actually see a boost to their
incomes as rates rise, says Ashworth. The positive effects
of going back to normality are often forgotten.
Assuming the US can take the Feds medicine, the second
question is whether the rest of the world is ready. Several
vulnerable countries stand out. Ashworth says: It is notable
that crises in the eurozone have tended to flare up when
the US stops buying assets. One possible reason is that US
government bonds represent the safest global assets. As the
JUMPING THE GUN WOULD BE BAD NEWS

FOR THE ENTIRE GLOBAL ECONOMY, ESPECIALLY
THE EUROZONE AND EMERGING MARKETS
would be bad news for the entire global economy, especially
the vulnerable eurozone and emerging markets.
Americas journey back to interest rate normality will be
in several stages. The US took the first step in this process
in late December, reducing its monthly asset purchases
by $10bn to $75bn. This tapering is expected to continue
over coming months. It may take until the autumn of 2014
before we see the Fed ceasing altogether to buy assets, says
Doug Handler, US economist for IHS Global Insight.
The next logical step for the Fed would then be to start
to reduce the size of its balance sheet, which has ballooned
from around $867bn in August 2007 to nearly $4 trillion
by last November. Reduction could be achieved through
a combination of reverse repos temporarily lending Fed
assets to banks and so draining their cash or by raising
the sums of idle reserve cash that banks are forced to hold
at the Fed. Finally, the Fed can start to raise interest rates
a move that most economists dont expect until 2015.
Since the Fed is required to focus only on US fortunes,
the key question will be whether the US is strong enough to
US ECONOMY | INSIGHT
31
BACK TO THE BREADLINE?
The US Federal Reserve strangled the 1937 recovery from

the Great Depression by cranking up interest rates too fast
return on these climbs, other governments and companies
have to offer investors a higher return in order to compete.
This can be a problem for the likes of Greece, Portugal and
Italy, where public finances are weak and vulnerable to even
small rises in interest rates. While the European Central
Bank can intervene to alleviate such pressures by buying up
bonds, such nations can be damaged in the meantime.
A host of emerging economies are even more vulnerable.
The nations you really have to worry about are those
that rely on foreign inflows of capital to buy imports and
service existing debt, says Sara Johnson, an international
economist at IHS. As Treasuries and safer options offer
a higher return, investors can demand a higher rate of
interest from riskier places, like developing nations, she
explains. Having a bloated government debt increases the
threat since higher interest rates increase the burden of
repayment. Morgan Stanley has identified a fragile five
Brazil, South Africa, India, Turkey and Indonesia most
likely to suffer in a world of rising interest rates.
India, for example, has an imposing current account
deficit equivalent to 5% of GDP. When the US looked like
ending quantitative easing last August which turned out
to be a false alarm the rupee fell sharply, losing a fifth of
its value over the course of the year. It has since rebounded,
partly on hopes that the more business-friendly BJP party
will be elected in May. Still, as interest rates rise again
it will likely feel the heat, says Win Thin, global head of
emerging-market strategy at Brown Brothers Harriman.
Brazil also has a substantial current account deficit
as well as high levels of external debt. Short-term foreign
borrowings equal 64% of its foreign exchange reserves,
according to Brown Brothers Harriman. In neighbouring
Peru, for example, such debt is a more manageable 11%
of foreign exchange reserves.
The economic damage can be severe when capital flows

out in this kind of scenario. Win Thin says: Such countries
face a painful choice of allowing their currencies to fall,
which exacerbates inflation and makes it harder to repay
foreign debt, or they can hike interest rates, which can entice
foreign capital to stay but raises the cost of borrowing for
businesses and consumers, and so slows economic growth.
Often they face the curse of a falling currency and rising
rates at the same time an economic hammer blow.
Jonathan Loynes, chief European economist at Capital
Economics, believes both the UK and the eurozone will follow
the Fed with a lag. The British economy has been doing
better, he says. But while GDP in the US is about 6% above
its 2008 level, British GDP is still about 2% below its peak.
This slack in the economy may prevent rates from rising until
the second half of 2015. Loynes argues that the European
Central Bank which determines eurozone rates will be the
last to move. The zone is still very weak, he says. It might be
only in 2016 that policymakers feel the need to raise rates.
The Feds easy money has not only helped the US
economy recover from the 2008 crisis. It also diverted capital
to emerging markets, boosting investment, asset values
and growth. The US economy may now be strong enough to
continue growing with tighter monetary policy, but it is far
from clear that this is the case for the rest of the world.
Christopher Alkan, journalist based in New York
Read our article on fracking in the US at

www.accaglobal.com/ab48
Fed balance sheet trends at http://tinyurl.com/fedBST
32
INSIGHT | ACCESS TO FINANCE
BANK ON FAIRNESS
The statistics are uncompromising: ethnic minority-owned SMEs are less successful
in obtaining bank loans. Racism, though, does not appear to be the explanation
n 24 November 2011, the deputy prime minister

delivered the Scarman memorial lecture in Brixton,
London, which he devoted to the creation of a fairer
and more equal society. If you were to read some
newspaper reports the following day it would have been
easy to assume that Nick Clegg had used the occasion to
accuse British banks of racism in their lending practices.
In one of the more measured reports, The Guardian
said hewas accusing banks of discriminating against
membersof ethnic minorities in the way they distribute
loans and set interest rates.
In truth, Cleggs speech was more nuanced. His main
point was to announce a review of bank lending to SMEs, to
uncover why minority-owned businesses apparently receive
less bank lending than the national average for all SMEs.
The statistics, on the face of it, seemed damning. An
analysis of market research company BDRC Continentals
SME Finance Monitor for Q1 2012 to Q1 2013 (the first full
BRIXTON CALLING
In a speech in Londons Brixton, Nick Clegg opened the debate

into the banking experiences of minority-owned businesses
year to include ethnicity data) showed that 87% of whiteowned SMEs applying for bank finance were successful,
compared with 77% of minority-owned businesses.
Clegg announced: Past evidence shows that firms owned
by individuals of black African origin have been four times
more likely than so-called white firms to be denied loans
outright. And that Bangladeshi, Pakistani, black Caribbean
and black African-owned businesses have been subject to
higher interest rates than white and Indian-owned enterprises.
He added, though, that a range of factors could be at
work, including a lack of good guidance and own capital to
invest, and an element of self-exclusion.
The resulting inquirys report, Ethic Minority Businesses
and Access to Finance, was published in July 2013.
ACCESS TO FINANCE | INSIGHT
It concluded that businesses where at least half the

management team come from ethnic minority groups make
up just 7% of all SMEs. It found no evidence that disparities
in bank lending were due to racial discrimination and
put the variances down to a number of business factors,
including shortage of collateral, poor creditworthiness, poor
financial track record and language barriers.
When you compare apples with apples, ethnic origin
makes no difference at all, says Richard Roberts, senior
economist for SMEs at Barclays. Banks discriminate only
against people who dont pay loans back; we have a duty
to be responsible lenders. He also points out marked
differences in lending rates for specific groups within the
minority-owned banner. Chinese and Indian-owned SMEs,
for example, generally have no problems in accessing
finance. The concern at the moment is businesses run by
new migrants from Eastern Europe, and often the problem
there is language and a lack of human and social capital.
Rosana Mirkovic, head of SME policy at ACCA, says: Weve
always been aware of the disparity of lending rates between
white-owned and minority-owned businesses, but the reaction
to Nick Cleggs speech made it a discrimination issue.
33
close links with minority-owned businesses, could make all

the difference. Research we have carried out pointed out
the pivotal role that accountants play in minority-owned
businesses and how central they are in giving business
advice, says Professor Monder Ram of the Centre for
Research in Ethnic Minority Entrepreneurship (CREME) at
the University of Birmingham.
Roberts agrees: SMEs that have taken professional
advice are much more likely to be successful in attaining
financing and as a result the business is more likely to
succeed and grow, he says.
This was echoed in the inquiry report: All parties
acknowledged the importance of sound business advice and
support in helping businesses and would-be entrepreneurs
get to the point where they are investment-ready.
Closed for business?
The advice of accountants will also be invaluable in tackling

a widespread perception that banks are closed to some
businesses. The recent Bank finance lost in translation report
from accountancy firm Kingston Smith suggests this is an
SME-wide issue. It found that many SMEs are loath to apply
for a bank loan because they believe that banks are unwilling
Key financing factors
to lend to smaller businesses yet more than three-quarters
As a member of the Enterprise and Diversity Alliance, ACCA
of SMEs applying for bank finance were successful (although
has long been involved in discussions about how to improve
the success rate in 2008 was 90%).
access to finance for all SMEs, and so decided to look at the
If you take 100 businesses, around 25 of them will have
figures in more detail. It identified the key factors that made
thought of applying for bank finance, says Roberts. Twenty
bank financing more likely as: a large and well-established
will have applied and 16 or 17 will have been successful. But
(ie more than five years old) business, limited liability,
of the five that didnt apply, only one will have
trained finance staff, regular management accounts, no
actually spoken to a bank. The remainder
cashflow issues, and a low or
will have assumed the bank would turn
minimal risk rating.
them down.
Fewer minority-owned
This seems a particular problem for
ADDRESSING THE FACTS
applicants meet all of these
minority-owned businesses. ACCAs
Nick Clegg: Firms owned by
criteria: only 52% of
research found that 5% of minority-owned
individuals of black African
minority-owned loan
SMEs had an immediate need for finance
origin have been four times
applicants are more
and wanted to borrow from a bank over the
more likely to be
than five years old,
coming three months, but had decided
denied loans
compared with 60% of
against it, compared with 3% of
outright
white-owned businesses,
white-owned businesses.
for example. Often the
Professor Ram says: The
nature of the business is
best way of overcoming the
the issue, says Mirkovic.
perception issue is to occupy
A lot of minority-owned
the same space and to
businesses are in retail and have
interact more. The fact
naturally low collateral.
is that banks and minorityA bigger problem is that minority-owned
owned businesses
businesses are often less well prepared when
need each other.
approaching a bank for finance. For example, 40%
So, too, it seems,
of those applying for a loan produced regular
do minority-owned
management accounts, compared with 47% of
businesses and
white applicants.
ACCA members.
This is where ACCA members come in, as their
financial expertise, combined with their often
Liz Fisher, journalist
Derek has just seen

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D WINNING SOFTWARE
OF AWAR
GRAPHICS | INSIGHT
INTO THE MAINSTREAM
The growth in the number of countries

and companies covered in KPMGs eighth
survey of corporate responsibility (CR)
reporting is just one indication of how CR
reporting has evolved into a mainstream
business practice over the past 20 years.
But many companies still shy away from
quantifying these risks in financial terms,
and few factor in the management of these
risks into executive remuneration.
35
QUALITY BY COUNTRY
Large companies in Italy, Spain and the UK lead the world for the quality of
CR reports. CR reporting has grown most in Asia Pacific: the regions reporting
rate averaged 49% in the survey two years ago; in the 2013 survey it is 71%.
KEY (SCORE OUT OF 100)

EY:
Italy 85
Spain 79
UK 76
France 70
5%
Australia 70
Number of companies that report the

potential impact of environmental and
social risks on their financial results
Netherlands 69
Germany 68
71%
Switzerland 63
Number of companies worldwide that

publish a corporate responsibility report
South Korea 60
Japan 55
87% vs 81%
US 54
China/Hong Kong 39
QUALITY OF REPORTING
The survey assessed the quality of the CR reports of the worlds

largest 250 companies (G250), and identified the leaders.
Large firms in the electronics and computers, mining and
pharmaceutical sectors produce the highest-quality reports.
Electronics and computers 75
Mining 70
Pharmaceuticals 70
Utilities 65
Communications and media 65
QUALITY BY CRITERION
46 Suppliers and the value chain
53 Stakeholder engagement
53 Governance
Automotive 64
58 Transparency and balance
62 Strategy, risk and opportunity
Transport 64
66 Materiality
68 Targets and indicators
CR REPORTING
In their CR reports, more G250 companies

mentioned the opportunities of environmental
and social megaforces than mentioned risks
The greatest improvement in CR reporting

by G250 companies needs to be made in the
category: suppliers and the value chain.
Food and beverage 59

Finance, insurance and securities 58
Chemicals and synthetics 58
Oil and gas 55
Trade and retail 55
Metals, engineering and manufacturing 48
Construction and building materials 46
THE SURVEY
The KPMG Survey of Corporate Responsibility Reporting 2013

covers 4,100 companies across 41 countries. It can be
downloaded at: http://tinyurl.com/kpmg-G250.
36
INSIGHT | INTEGRATED REPORTING
THE CONUNDRUM
Companies already practising integrated reporting complain that investors
show little interest. So what is to be done, asks Professor Bob Eccles
he recent publication of the

International Integrated
Reporting Councils (IIRC)
international framework
Robert G Eccles is professor of management practice
marks a milestone in integrated
at Harvard Business School. He has been studying and
reporting (IR). Many people and
working to change corporate reporting for 25 years and
groups including investors have
was awarded honorary ACCA membership in December
helped create the framework,
2013. His books on corporate reporting include One
which can be used by companies to
Report: Integrated Reporting for a Sustainable Strategy
improve the quality of information
(with Michael P Krzus). He is a member of the IIRC
available to providers of financial
steering committee, chairman of the SASB, and co-founder
capital to enable a more productive
of the Innovating for Sustainability social movement.
and efficient allocation of capital.
While financial capital can take
many forms, the main target audience, at least initially, is
argues that IR fosters integrated thinking, which facilitates
equity investors. So, how excited are investors about the
integrated decision-making, leading to better resource
framework? Or, to ask the question in a more cynical way,
allocation decisions for short, medium and long-term
will they even notice or care?
performance. This begs the question of whether the market
Some will particularly the big pension funds that
will recognise the value implications of these resource
have a long-term investment horizon given the long tail of
allocation decisions. Many executives are rightly sceptical
their liabilities, since the framework aims to promote in
that it will, given the markets short-term focus and
companies actions that focus on the creation of value over
obsessive attention to financial performance metrics like
the short, medium and long term. These pension funds are
earnings and revenue growth.
asset owners. The asset managers hired by asset owners
Yet it is a companys responsibility to make the case to
typically have a much shorter timeframe, often because of
its investors for the value to them in their own investment
the way they are evaluated and compensated by the asset
decisions of the information provided in an integrated
owners, typically on an annual basis. Sell-side analysts have
report. Companies believe they have to do this for such
even shorter timeframes, about a quarter.
things as major acquisitions or mergers, entry into highSo, much as I would like to believe otherwise, I dont
risk/high-opportunity markets, and expensive R&D and
expect the market today will be a driver for voluntary IR
product development efforts. Why shouldnt the same be
adoption without regulation. This is what has to change.
true for investments that build intellectual, human, social
Although regulation has happened in South Africa, for a
and relationship capital?
variety of unique historical reasons, it is not likely to happen
Up until recently, and somewhat immodestly, I had
in any other country any time soon. In places like the US, it
thought that there was no question about IR I hadnt
is hard to imagine the Securities and Exchange Commission
heardbefore. Then I interviewed a fellow academic, who
(SEC) transforming the 10-K annual performance summary
said that one of the companies hed investigated in his
to conform to the frameworks guidelines. And even if
research had told him it didnt support IR because its the
IR were mandated, it would likely result in a box-ticking
investors job to figure out the things that are supposed
approach given the lack of standards for information on
to be in the integrated report. Apparently, the company
such things as intangible assets and environmental, social
didnt want to explain its strategy because that would tip
and governance (ESG) performance. The US Sustainability
off its competitors.
Accounting Standards Board (SASB) is making progress on
Ive heard variations on this for years and think its a silly
this front but is still at the very early stages.
or naive point of view and not worth addressing here. The
Logically, companies should practise IR out of selfmore interesting issue is the companys assertion that it is
interest because of the benefits in doing so. The IIRC
not its job but the investors to figure out everything that
THE PIONEER PROFESSOR
INTEGRATED REPORTING | INSIGHT
37
LITTLE EVIDENCE EXISTS THAT INVESTORS

WILL BE A DRIVING FORCE ANY TIME SOON TO
ENCOURAGE COMPANIES TO ADOPT IR
should be in an integrated report. I guess the argument here
is that investors, as either asset owners investing on their
own account or as asset managers paid by an asset owner,
have a big incentive to seek out information that reveals
market inefficiencies in a companys stock price. Thus the
company neednt provide an integrated report and can trust
the market to ferret out relevant information to ascertain its
true value. And all the while companies complain that their
stock is undervalued!
So where does that leave us? If investors dont care
about IR and companies believe its the investors job to pull
together the information that would go into an integrated
report, does that mean all the work of the IIRC is for
naught? The answer to this must be an emphatic no!. What
this conundrum means for me is that the work of the IIRC
goes beyond the important benefits

of better resource allocation decisions
by both companies and investors who
have a long-term view.
The IIRCs work shines a spotlight
on the duplicity of both companies
and investors. Companies should
quit complaining about the lack of investor interest or
saying that investors should figure out for themselves how
the company is creating value without the benefit of the
companys point of view. It is the companys responsibility
to make the case for its decisions if it truly does have a
long-term view and wants to attract investors who do as well.
Investors, in turn, need to take greater responsibility for
shaping the corporate reporting environment. They must
recognise that their competitive advantage lies less in
finding information that other investors havent, and more
in developing the deeper insights that can come from more
holistic reporting. Yes, regulation has a role, but it will be
most effective when companies and investors alike recognise
that markets work best when they want them to and take
responsibility for this.
38
INSIGHT | PUBLIC SECTOR
FRESH THINKING
ACCAs International Public Sector Conference had one overriding theme: the need
for more transparency and accountability in government financial reporting
shortage of accountants makes it

difficult for governments to build the
capacity for proper financial reporting,
ACCA deputy president Anthony
Harbinson told the fifth annual International Public
Sector Conference. Yet the need for high-quality financial
reporting is increasing, with rising public expectations
of service standards and infrastructure quality, at the
same time as austerity regimes cut public sector budgets.
Meanwhile, debt levels remain too high in many countries.
The failure of some governments to publish balance
sheets or financial reports undermines political
accountability. Professional accountants need to tell
public bodies that they should publish comprehensible
financial reports. Harbinson, who is also chair of UK
organisation the Consultative Committee of Accountancy
Bodies (CCAB) and director of safer communities for
the Department of Justice in Northern Ireland, added
pilot programme. Integrated reporting is essential

in the private sector, she added, in part because of
the disconnect between a companys tangible asset
valuation and its share price. In the 1970s, tangible
assets accounted for around 80% of a companys stock
price value; by 2009, this had shrunk to 20%. Yet many
intangible assets are not recognised on balance sheets.
Changing strategies
Integrated reporting is equally important in the public
sector. Organisations involved in integrated reporting
pilots find their strategies change because it makes
them consider more carefully how they use resources.
In the public sector, the debt crisis penalised
countries for their debt, a result of investors in the
past having had insufficient information for making
their investment decisions.
Ron Hodges FCCA, professor of accounting
at Birmingham University, told the
conference that the UK government had
used the private finance initiative (PFI)
and other public private partnerships
(PPPs) to take capital spending off
the balance sheet. Based on UK GAAP,
some 40bn of 56bn of PFI/PPP
capital expenditure in the period to
2010 was off-balance sheet. If International Financial
Reporting Standards (IFRS) or International Public
Sector Accounting Standards (IPSAS) had been used
at that time, 41bn of 47bn analysed PFI/PPP
capex would have been on-balance sheet.
The change of accounting treatment has led to
PFI/PPP schemes drying up. But some government
guarantees and future types of PPP may be offbalance sheet, such as the UKs Help to Buy scheme
and guarantees on future nuclear power output prices.
DEVELOPING NATIONS THAT HAVE ADOPTED

IPSAS HAVE RAISED THE QUALITY OF PUBLIC
FINANCIAL MANAGEMENT AND REDUCED COSTS
that ACCA is a leader in the development of financial
reporting standards, including in the public sector.
His comments came in his opening speech to the
conference, held in London at the end of last year, on
the theme of financial reporting for an open world.
The World Bank is one institution committed to
better financial reporting and it champions integrated
reporting in the private and public sectors. Its financial
reporting and analysis manager Zinga Venner said that
the bank is undertaking its own integrated reporting
PUBLIC SECTOR | INSIGHT
Eurostats head of government accounting Alexandre

Makaronidis reported that European Public Sector Accounting
Standards (EPSAS) will be based on IPSAS, with an IPSAS lite
for low-risk public bodies. Europes need for harmonised public
sector accounting standards was demonstrated by sovereign
debt crises and incorrect financial reporting by some member
states. The European Commission will issue a communication
on EPSAS in 2014, with a draft framework regulation by the
end of 2015 and subsequent implementation.
Patrice Schumesch, PwC global public finance and
accounting partner, explained that 54% of governments still
report on a cash basis; just 26% use accrual accounts only.
Within five years, he said, there will be a 142% rise in the
application of accrual accounting, with the biggest adoption
of IPSAS being in Asia, Africa and Latin America. It typically
takes three years to transition to accruals; the biggest
challenges are shortages in trained staff and IT requirements.
He added that broader reform of the finance function is
needed for IPSAS to have their full impact.
Concise and digestible

Philippe Peuch-Lestrade of the International Integrated
Reporting Council (IIRC) told the conference how integrated
reporting would work for the public sector. He said its
importance, in part, is to make financial reports more
concise and digestible. In some countries, including France,
public sector accounts are too large to be comprehensible
and so are read by few people. Integrated reporting will
be developed for the public sector for implementation
from 2020, said Peuch-Lestrade. It encourages integrated
thinking and requires a different approach to financial
management for example by recognising and mitigating
the future cost of climate change.
Hetan Shah, executive director of the UKs Royal
Statistical Society, told delegates that a data revolution is
taking place, with the stock of data doubling over the next
three years. We are living in the big data era. There is just a
lot more data around, he said. Public bodies are using data
to drive down costs, measure impacts, monitor risks and
better understand who uses public services and why.
Nida Naeem, an independent consultant and chair of
ACCAs subcommittee for the public sector in Pakistan,
argued that there is a vast difference in governance between
Pakistan and some other developing nations compared to
the advanced democracies. Reform of financial reporting
standards is less of a priority where governance is weak.
39
Stephen Emasu FCCA, chair of ACCAs Global Forum for the

Public Sector and a public financial management expert with
the IMF, explained that developing nations that have adopted
IPSAS have raised the quality of public financial management,
while reducing costs through improved efficiency. IPSAS have
increased financial reporting transparency and accountability,
but only where reporting is timely.
ACCAs head of public sector, Gillian Fawcett, closed the
conference, saying that speakers had consistently stressed
the topicality of the reform of public sector financial
reporting and the need to use improvements to strengthen
transparency and accountability. Fresh thinking is needed
on financial reporting, she said, such as the adoption of
integrated reporting in the public sector.
Paul Gosling, journalist
WATCH THE PRESENTATIONS ON VIDEO:
Anthony Harbinson, deputy president, ACCA:

Zinga Venner, financial reporting and analysis manager,
World Bank: www.accaglobal.com/ab53
Patrice Schumesch, global public finance and accounting
partner, PwC: www.accaglobal.com/ab54
Alexandre Makaronidis, head of government finance
statistics quality management and accounting, Eurostat:
Ron Hodges, professor of accounting, Birmingham
University: www.accaglobal.com/ab54
Philippe Peuch-Lestrade, deputy to the CEO, IIRC:
Hetan Shah, executive director, Royal Statistical Society:
Nida Naeem, chair of the subcommittee for the public
sector, ACCA Pakistan: www.accaglobal.com/ab56
Stephen Emasu, chair, ACCA Global Forum
for the Public Sector: www.accaglobal.com/ab56
40
INSIGHT | TYPHOON DISASTER
SUM OF DEVASTATION
Accountants have been at the forefront of the typhoon relief effort in the Philippines, as
they work to ensure efficient aid dispersal and help businesses get up and running again
fter monster typhoon Haiyan devastated much

of the Philippines Leyte and Samar islands, the
humanitarian aid machinery was quick to get
going, with spectacular footage of a US aircraft
carrier supplying horrified locals dominating the worlds
TV screens for days. Less headline-grabbing, but equally
important for the survival of thousands, has been the work
of auditors and financial reporters on the ground.
The Philippines had just been shaken by a pork barrel
scandal, implicating dozens of lawmakers, officials and
private citizens in the outright theft of money intended
for relatively small infrastructure and other development
projects. This has left storm victims wondering how much
of the donations and reconstruction funds for recovering
from Yolanda as the storm was called in the Philippines
has been, and probably will be, stolen.
Between theft and efficient aid dispersion now stands
thearmy of auditors, who also play a key role in helping
the regions small businesses to get back on their feet in
the longer run. This is a daunting task, given that not only
lives and property were destroyed but also much financial
data. Along with the estimated 6,000-plus people who have
died (the count at 3 January was 6,166 and rising), direct

economic losses could be at least US$6.5bn, according to
catastrophe-modelling analyst AIR Worldwide.
Of course, our challenges are plenty; to begin with, its
the unprecedented scope of the disaster and the need to
deal with very immediate expenditures and disbursements,
explains Maria Gracia M Pulido Tan, chairpersonof the
Philippine Commission on Audit (COA), in an interview with
Accounting and Business. Relief goods such as rice and
noodles have to be procured in huge quantities with little
paper trail because the survivors simply cannot wait for
bureaucracy to sort out the red tape, she elaborates.
Pulido Tan took over as head of the COA in 2011,
anditwas she, together with two other female officials
inkey positions, who exposed the pork barrel scandal,
earning the trio the nickname the three furies with the
Philippine media. The COA is mandated by the countrys
constitution to audit the receipts and distribution
of Haiyan donations that have coursed through the
national government agencies. Pulido Tans strategy to
keep corruption at bay is twofold: the audit needs to be
conducted almost simultaneously with the dispersion
TYPHOON DISASTER | INSIGHT
DAMAGE ZONE
Destroyed houses lie abandoned in Guiuan, on the tip of the

island of Samar, which bore the full brunt of Typhoon Haiyan
of relief goods and funds, and the COA must have an
overwhelming number of auditors on the ground. The
persistent threat of corruption is why we audit as relief
work happens where relief goods have been brought to,
where funds came from and so forth, she says.
Pulido Tan admits she is not aware of the exact number
of auditors at work on the relief effort, but that there are
41
collaterals for bank loans may no longer exist, except for

parcels of land which the bank may foreclose, he says.
Punongbayan adds that to make matters worse, the
standalone businesses in the areas hardest hit by the storm
may have receivables from customers who in most instances
are also typhoon victims, hence, will not be able to pay their
accounts. The businesses concerned will have to write off
such receivables, he predicts.
The countrys Bureau of Internal Revenue (BIR) has
said that taxpayers who are Haiyan victims may file sworn
statements of loss and other requirements necessary to
substantiate claim of losses within
40days if the losses are not paid
by their insurance company. Tax
deductions will also be given to
businesses that claim their losses were
due to theft, and can prove this, for
instance, by filing a police report.
At the time of writing, it was not
known whether the BIR would grant some tax breaks or other
reliefs, such as relaxation of documentary and substantiation
requirements, or extension of deadline for filing reports of
losses and documents, to the typhoon victims.
OUR CHALLENGES ARE PLENTY; TO BEGIN

WITH, ITS THE SCOPE OF THE DISASTER AND THE
NEED TO DEAL WITH IMMEDIATE EXPENDITURES
many. To achieve this, the COA drafted in the Philippine
Institute of Certified Public Accountants (PICPA) to help, as
well as the National Federation Junior Philippine Institute
of Accountants (NFJPIA).
According to PICPA executive director Jose M Ireneo,
under normal circumstances the institute would not audit
the receipts and distribution of donations going through
government agencies, but only those going through private
organisations, if commissioned to do so. That the COA
now fields a new approach by choosing us as partners
is probably because we have made a name for ourselves
participating in the audit of resources and accounting for
the last national elections, he says.
Another big challenge to auditors is how to deal with
individual enterprises that have been devastated by Yolanda.
According to Ben Punongbayan, founder of Philippine
accounting and consultant firm Punongbayan & Araullo, it
is first necessary to distinguish between big businesses,
particularly those based in the metropolitan area of the
capital Manila, and the independent, standalone businesses
in the calamity areas, which will typically be small.
The losses of the affected entity in the first group
generally would not be significant in relation to the total
operations of its parent company or head office; but it
is the small businesses that were severely affected in
relative terms, he says. He elaborates that their buildings,
warehouses, facilities and inventories might have been either
lost due to the typhoon or due to the subsequent looting
resorted to by some victims.
Punongbayan notes that if accounting records were also
lost or damaged, record reconstruction is a big problem
for standalone entities that operated only in the typhoonaffected areas, as they have no Manila head office to turn
tofor a backup.
But even with their data recaptured, they will probably
not be able to pay their debts to banks and suppliers, as
Auditing the losses

In terms of audits of the tax reductions, Punongbayan
points again at the difference between Manila-based
businesses and those operating solely in the typhoonaffected areas. Particularly for the latter, external auditors
will have difficulties in auditing the losses to be reported by
a business in its financial statements, as copies of previous
annual financial statements were required to be filed with
agencies whose offices typically have been located in the
same typhoon-affected areas, he says.
Furthermore, the original copies of supporting
documents, such as invoices, official receipts and contracts,
might have all been lost as well.
As to how the BIR is to deal with all that, Punongbayan
sees only one plausible direction: The BIR may be lenient,
and most likely it will be, he says, adding that small
businesses may receive some aid from the Philippine
government coming from the governments own funds or
donated funds, or both.
Jens Kastner, journalist based in the Philippines
Bureau of Internal Revenue:

www.bir.gov.ph/home.htm
Punongbayan & Araullo:
www.punongbayan-araullo.com
SGV: www.sgv.ph
42
INSIGHT | BRIBERY
SOUR SWEETENERS
A recent ACCA report investigates how bribery affects SMEs and how accountants can
help them to manage the risk. ACCAs John Davies and Rosana Mirkovic report
ribery is a long-standing feature

of human society. It occurs in all
countries, business sectors and
walks of life. It is also almost
everywhere a crime that affects the poor
disproportionately and is not, as some
might argue, a victimless crime.
Bribery is also gaining attention in
business life, where it is thought to be on
the rise because of harsh global economic
conditions. A 2013 survey by EY found
that nearly half of workers questioned
across Europe, the Middle East, India and
Africa think that bribery and corruption
are acceptable practices for businesses
trying to survive an economic downturn.
The issue has a special resonance
for the accountancy profession, which
stands for transparency in the financial
management of enterprises. The financial
statements that businesses produce for
shareholders, regulators and others
invariably prepared by accountants are
expected to reflect fairly and accurately
a businesss assets, liabilities and
transactions over the period under review.
ACCA surveyed its members across

the world who work as accountants or
general managers in SMEs or in public
d
istorts fair
practice, and received 915 responses.
competition, penalises
Some of the headline findings certainly
honest businesses and
justified our interest. The majority (62%)
perpetuates inefficient
of respondents believe SMEs are likely to
business practices
encounter bribery and corruption in the
u
nfairly diverts funds
course of their business dealings, and
that rightly belong to
think the risk has grown in recent years.
shareholders/citizens
And one-third believe the global financial
jeopardises growth by
crisis has left businesses more prepared to
deterring businesses
misstate figures in their annual accounts.
from investing in or
Yet we also found that many SMEs
trading with particular
arenot taking the right steps to mitigate
markets and sectors
the risks of exposure to bribery and
(a survey of 350
corruption. There may be good reason for
businesses worldwide
this as fewer than half our respondents
by Control Risks found
think that SMEs understand the legal
that 35% had been
definition of bribery and corruption
deterred from an
in their jurisdiction. With many SMEs
otherwise attractive
conducting business across borders
investment opportunity
in multiple legal environments, this
because of the host
uncertainty can have a big impact on how
countrys reputation for
they can cope with the risk. There was
corruption).
most confidence in SMEs understanding
the legal definition inCentral and Eastern
Stiffer sanctions
Europe, and least in the UK, where fewer
Governments in several countries have acted to deter acts
than a quarter thought SMEs generally understand the legal
of bribery by introducing stricter legislation. This tighter
definitions of bribery and corruption, despite the introduction
legislation has been accompanied by a greater commitment
of the Bribery Act in 2011, and significant efforts to raise
on the part of regulatory authorities to impose heavy
awareness of its implications by policymakers.
sanctions against those individuals and companies found
The lack of legal certainty may account for so many
guilty of bribery. In the biggest case of its kind so far,
respondents (44%) saying they are not convinced that the
German engineering company Siemens was fined $800m by
risk of sanctions deters SMEs from doing business with
the US authorities. To the financial cost of being found guilty some sectors or countries, while one-third believe it is not
in such cases can be added the likely cost of long-term
adeterrent at all.
damage to the companys reputation.
And this brings us to one of the most interesting of all
While much attention has been devoted to the problem of
the survey findings: SMEs support a legal framework that
bribery and corruption in the public sector and among large
applies the same standards to all organisations and want
corporates, ACCA has identified a lack of focus on small and
no truck with modified anti-bribery legislation for SMEs.
medium-sized enterprises (SMEs), which make up the major
Coupled with the finding that more than three-quarters of
part of the economy in all countries. As a result, we still
respondents believe high-profile prosecutions would be
have a very limited picture of how the issue affects SMEs.
mosteffective in helping SMEs to reduce their exposure
To improve awareness and understanding, in July 2013
to bribery and corruption risk, it shows that a strong legal
BRIBERY:
*
*
*
BRIBERY | INSIGHT
43
THE ANTI-CORRUPTION FIGHT

Police stand guard at a peaceful protest
against bribery in Tunis in 2012
framework, visibly enforced, is viewed as a priority by SMEs

in the interests of a corruption-free business environment
that works for businesses of all sizes.
Advice needed
This leads us to some important conclusions. Despite
recognising that bribery poses great challenges to them,
many businesses in the SME sector feel vulnerable and
in need of advice on protecting their interests. There is
arolehere for accountants in public practice to advise
theirclients on how to manage bribery risk. The report
offers some broad guidance to SMEs (and practising
accountants) on how they can put in place compliance
programmes at minimal cost.
The clear majority of accountants working in the
SME sector accept there is a sound business case for
adopting policies and practices designed to combat
bribery. A business that is committed to the adoption and
implementation of anti-bribery policies and practices
and can demonstrate it has done so is better placed to
do business with those large companies and public-sector
bodies that are obliged to follow such policies and practices
throughout their supply chains.
Respondents overall feel that SMEs should not be
subjected to more lenient expectations on this issue than

larger businesses. That said, the report makes the point
that the controls adopted by smaller businesses to combat
bribery need not be as all-encompassing and expensive as
those adopted by larger businesses, and should aim to be
proportionate to the risks that the business actually faces.
The full restoration of trust and confidence in the
business sector can be achieved only when stakeholders
believe that business is being conducted fairly and
transparently. By adopting a values-based approach,
businesses can help themselves and, indirectly, help
to achieve the wider goal of enhancing confidence in the
business sector as a whole. Accountants, who have twin
responsibilities to give best advice to their employers or
clients and an obligation to act in the public interest, have
amajor part to play in this process.
John Davies is ACCAs head of technical and Rosana
Mirkovic is ACCAs head of SME policy
The full results of ACCAs survey can be found at

44
INSIGHT | CAREERS
Career boost
Promotion comes faster if youre organisationally savvy as well as task-efficient, says our
talent doctor Dr Rob Yeung. Plus, office romance, eye candy for creativity, and more
TALENT DOCTOR: RELATIONSHIPS

Want to win in the career race? Of course you do. So
think about the extent to which you disagree or agree
with the following statements:
I am able to make most people feel comfortable and
at ease around me.
I pay close attention to peoples facial expressions.
I am good at getting people to like me.
Congratulate yourself if you strongly and wholeheartedly
agree with those statements. Because youre probably
strong on a skill called organisational savvy.
My new book, How To Win, presents advice culled from
published research on what has been shown to predict
success. One key finding is that people spanning
diverse groups such as finance analysts in the US
Midwest, construction workers in China, and experienced
managers in Germany get ahead when they have the
skill of organisational savvy.
Organisational savvy is also known as interpersonal
style, political finesse and street smarts. But what it
is called matters less than what it measures: the ability
to understand people, build relationships and persuade
others to side with us on projects.
The research tells us that our performance at work is
judged as much on our relationships our ability to form
them, strengthen them and rally support for ventures
through them as on our completion of mere tasks.
Push a plan through to completion in spite of how people
feel and you may end up making more enemies than
friends in the long term. But if you can persuade others
that they have a stake in your project, then you will win
both in terms of getting the work done and building a
coalition of allies for the future.
Thats how the world works nowadays. Simply
presenting an idea (however fantastic) to colleagues
or proposing a project that is good for customers is
not enough; we need to pitch things to people so they
personally get something out of it, too.
Im not saying that this state of play is necessarily
desirable or even healthy. All Im reporting is what
the science tells us. Whether we like it or not, those
individuals who invest in reading their colleagues and
focusing on the relationships as well as the tasks tend to
get promoted more frequently.
To hone your organisational savvy, make it a priority to
observe your colleagues more intently. Spend more time
with them. Try to work out why they behave the ways they
do. Are they motivated by money, recognition or status?
Do they act out of greed, fear or passion? Do they have
the organisations best interests at heart or their own?
*
*
*
The more time you spend with people

and the more you immerse yourself in
the language of their inner motivations, the more you
will understand how to influence and persuade them.
Sure, there are people who win the career race
without organisational savvy. But then there are those
who succeed without a good education too. It just makes
life more difficult if you dont have it. And why make life
harder for yourself than it already is?
Dr Rob Yeung is a psychologist at leadership consulting
firm Talentspace and author of more than 20 career and
management books including his latest, How To Win:
The Argument, the Pitch, the Job, the Race (Capstone,
10.99). Readers of this magazine can buy the book
with a 30% discount. Just visit wiley.com and enter the
discount code VBF62 at the checkout.
www.talentspace.co.uk
@robyeung
CAREERS | INSIGHT
SECRETS OF SUCCESS
Recruitment company Hays

recently surveyed more
than 800 FDs in the UK to
discover what drives them
and how they made it to one
of the most senior finance
positions in the business.
While some results
come as no surprise such
as it takes hard work and
time (45% of respondents
have more than 20 years
experience, and 64% are
men aged between 41 and
55) some are intriguing.
For instance, 25% of the
FDs dont have a finance
background, 36% think
that commercial awareness
is an FDs most important
quality, and only 37% have
worked outside the UK
(although 93% of those who
have believe that doing so
benefited their careers).
The good news for
those with FD ambitions
is that 42% of the survey
respondents are seeking
to move up the leadership
ladder. And with 76% doing
regular exercise or sport,
getting active seems a good
way to prepare for the role.
ROOMS WITH A VIEW
What do the Starship

Enterprise and a sea view
have in common? They
are both things that would
enhance peoples workspace.
A survey of 1,023
professionals by architectural
design firm Pod Space of
what inspires them in a
workplace reveals that a
beach view does it for 38%
and rolling hills for 35%,
while 40% reckon a coffee
machine is creativitys best
fuel. Other suggestions are
sheer comedy gold: a buffet,
a cat, a hammock and
pictures of David Coverdale
lead singer of 1980s big-hair
rock band Whitesnake.
This page is compiled and
edited by Neil Johnson,
editor, ACCACareers.com
45
THE PERFECT: OFFICE ROMANCE

Its Cupids month, a happy time for singlestem rose sellers, accordion players and
restaurant owners. St Valentines Day on
14 February must be the single most
awkward day for staff with office
romances, something thats ever
more common as our lives centre
increasingly on work.
According to a 2013 survey
by Career Builder, four out of
10 workers have dated a colleague
while three in 10 ultimately married
the colleague theyd dated. Keeping the
romance a secret was not a priority for most,
with 65% going public a 20% rise on 2006.
The first rule of office romance imagine
the break-up! is to ensure it does not
lose you your job. The second is to decide
whether it is the real thing or just a bit of
fun. Either way, be discreet. Try to avoid
having the same schedules, dont engage
in public displays of affection, dont neglect
other colleagues, and absolutely do not kiss and tell in the office.
Also, social media is now so habitual that people tweet every banal thought and
post the most personal things on Facebook, while the less said about the trouble that
Snapchat can get the amorous into, the better. In short, be careful how you document
that office romance.
THE BIG BREAK

KAMRAN MALIK ACCA
Kamran Malik has been a financial controller in Fortune
500 companies such as Emerson and now Flowserve since
the age of 22. Not many people can say that. But what hes
most proud of is building finance departments that work
well as a team, in which everyone shares in one anothers
successes. Obviously, one of Maliks biggest challenges
was seniority at such a young age: Sometimes if you
reach a senior position at a relatively young age, you
need to make that extra effort to build relationships
within the organisation your age can cause you to
be seen as a newcomer. But it was very exciting
and I was able to overcome that in a few weeks due
to the knowledge and skills I learned through my
ACCA Qualification.
Maliks top tips:
Job interviews: Look committed and

find out as much as possible about the
company. Look your smartest. Make
sure you meet all the criteria detailed
in the job description. The key is being
confident.
CPD: The best thing is to work for ACCA
Approved Employers, or make sure you
learn new things whenever possible and

more importantly document them.
The best advice Ive ever come across:
Albert Einstein once said: Try not to
become a man of success; rather,
become a man of value. This quote
has really inspired me and I think it
encapsulates great advice.
46
INSIGHT | MANAGEMENT AND STRATEGY
Marketing strategy
In this second article in our series on marketing, Dr Tony Grundy
covers the main concepts for finance professionals to know
We now turn to the key
ingredients of a marketing
strategy in this second
of three articles on the
subject. These include:
marketing, product
and channel mix and
customer segmentation
customer value and
competitive positioning.
This article will cover some
of the central concepts in
marketing, giving you as the
accountant the vocabulary
to converse with sales and
*
*
traditionally a very simple

idea but there are merits
in simplicity. Basically the
marketing mix consists of
four key elements the
four Ps:
price
product
promotion
place.
Price is a fairly self-evident
idea, but these days pricing
is complex. For example,
only yesterday, after much
shopping around on the
*
*
*
*
price as a saver ticket that

a lady opposite had bought,
I was put off the train at
Stoke-on-Trent. Obviously
it needs more than a few
postgraduate degrees to
understand internet pricing
models! Needless to say, I
gave the train manager a red
card for destroying customer
value as the train was going
off without me.
Pricing decisions are
often made tactically, as
in this instance, but they
THE LONGER ARM OF TESCO
Tesco has extended its reach into multiple other channels,

including home deliveries ordered via its website
marketing executives, and

to see where you might help
them, particularly in their
decision-making.
These articles are in
an ongoing series on the
sort of material that would
be covered by an MBA,
designed to give accountants
a broader business vision.
Marketing mix
The marketing mix is a key
concept in marketing. It is
internet I bought a ticket

for two trains at very
specific times to and from
Manchester from London on
Virgin Trains. I paid 78. I
arrived early at London and
was encouraged to board
an early train by a Virgin
member of staff.
I was then informed
by the train manager that
strictly I was on the wrong
train and, even though I had
paid almost the identical
should be made according

to the price sensitivity of
demand, the perceptions
of customers, competitive
conditions, and how and
where the company is
seeking to position itself.
That makes pricing highly
strategic and thus pricing
options have to be carefully
evaluated.
Product is about the
actual tangible or less
tangible object or service
CPD
Get verifiable CPD units

by answering questions
on this article at:
www.accaglobal.com/abcpd
that is delivered. There has

been an increasing amount
of demand devoted to the
less tangible and also the
service elements of our
lives. Even more than this,
some astute marketeers
emphasise the experience
of buying and consuming
something. The cleverest
ones even pinpoint the
emotional aspects of such
experiences. So there is a
lot more to the product than
meets the eye.
Promotion is about
the mix of advertising and
promotions including
discounting, which is used
to stir and capture demand.
It is often an act of faith by
marketeers and can be a
no-go area for accountants.
It has to be said, however,
that in this area there
is much mileage for the
scientific and quantitative
study of advertising and
promotion initiatives by
way of experimentation
with the variables. Here
the accountant can lend a
hand provided they do so
intelligently and sensitively.
Place is about
geography and physical
location. In retail it is said
that success is often about
location, location, location.
Using the example of Virgin
Galactic, the leader in
sub-orbital private space
travel, flights will be from
New Mexico. But they could
be from other places too.
They could also be to other
places the options might
be New Mexico to Australia,
Canada to China, or Iceland
to Thailand.
Curiously the four Ps
feel limited and in need
of an update. Some have
MANAGEMENT AND STRATEGY | INSIGHT
suggested people and

processes. I also feel
there is a case for including
both, as people are key
to customer service, and
processes are crucial in
much product delivery,
with customers now often
expected to engage in these
themselves.
I might also add
positioning, as the four Ps
lack the element of targeting
certain customers and also
specific customer needs,
household and petrol, but

these have been extended
into other, non-food areas,
such as pharmacy, leisure,
clothes, etc. Tesco has gone
further still into financial
services, including banking
and insurance, and also
into selling utilities, mobile
phones and optician
services and products.
Increasingly it has extended
into new products and new
markets in an act of classic
diversification.
segments against products

and also against channels.
Again, with Tesco we can
look at segments such
as single people, married
couples, families, the
retired, males versus
females, different socioeconomic and ethnic
groups. These can be
related to the consumption
of products and the use
of channels, and even to
product types such as
mainstream, finest,
NEEDLESS TO SAY, I GAVE THE TRAIN MANAGER

A RED CARD FOR DESTROYING CUSTOMER VALUE AS
THE TRAIN WAS GOING OFF WITHOUT ME
which is a crucial element in
marketing strategy.
So thats seven Ps.
The final thing to add
is that in our first series I
described the optopus as a
way of generating strategic
options. Not surprisingly,
there is some overlap with
the Ps but the optopus
also has value delivery as
a mixture between logistics,
place, processes, alliances
and more. At the end of the
day, it is what works for you.
Product and channel

mix and customer
segmentation
As well as the marketing
mix we need to look at
the product and channel
mix. These are the various
combinations of different
products and marketing
channels that are part of
the architecture of the
business model. This can
be usefully represented as a
matrix of products against
channels; if done visually,
this becomes a very helpful
planning tool.
For example, if we look
at a simple model of a
retailer like Tesco, there are
traditional product areas
like food, wines, spirits beer,
In addition, channelwise, it extended into Tesco

Superstores, Tesco Metros,
Tesco Expresses, Tesco
Extras, and home delivery
(Tesco.com).
Coincidentally, I had
a hand in facilitating all
of these at the time. In
terms of the tools used to
develop Tescos marketing
strategies, SWOT, the
strategic option grid,
Porters five forces, etc, from
our first series of articles
on strategy were all used.
This once again highlights
the huge overlap between
competitive strategy and
marketing strategy.
All of these count as
channels. This innovative
spreading out of the
business matrix, combined
with Tescos hunger, speed
and drive throughout the
19962006 period, was
very much responsible for
Tescos huge success in the
UK and then internationally.
Tesco moved faster than its
rivals and thus conducted a
classic offensive marketing
strategy based on
decisiveness and speed.
As well as matrices of
products against channels,
we can map out customer
value, branded and

own-label products. These
matrices are very useful
for business and financial
planning, and are obviously
key for the accountant.
Customer value
and competitive
positioning
Once we have mapped out
what businesses we are in
according to the business
matrices explained above,
then we can investigate
customer value added and
competitive positioning.
The simplest way that I
have found to understand
customer value is to split
the distinctive areas of value
added from the more basic
areas of value. The former
are called the motivator
factors and the latter the
hygiene factors.
Motivator factors
are those which are so
strong and relevant to
the customer experience
that they make it hard to
47
switch to competitors.
They also strongly
encourage repeat and
increased purchases.
Hygiene factors rarely
add value if met unless
that particular market is
characterised by extensive
mistrust. Prior to 2008, for
example, people trusted
banks and felt their money
to be secure there: how
things change!
It is possible to map
any customer experience
by a horizontal straight
line on paper, with the
motivator experience added
as upward lines or vectors
(sometimes known as force
field analysis), according
to their relative importance
and strength from the
customers perspective. The
hygiene factors are drawn
downwards in proportion to
their not having been met,
according to importance
and strength. The overall
balance gives a really
good sense of the overall
customer experience.
This can then be
used for benchmarking
real and perceived relative
value added vis vis
competitors (at least
externally). This external
positioning, combined
with internal strengths
and weaknesses, therefore
gives a very good idea of
overall competitive
positioning.
Motivators and hygiene
factor delivery are key to
brand strength, which in
turn leads to great margins
and growth.
Dr Tony Grundy is an
independent consultant
and trainer, and lectures at
Henley Business School
www.tonygrundy.com
For previous Tony Grundy articles on strategy and
management theories, visit www.accaglobal.com/abcpd
48
INSIGHT | MANAGEMENT AND STRATEGY
Fast month-end reporting: part two

Delight the chief executive by completing your month-end reporting process inside
three working days. David Parmenter continues his explanation of how it is done
This second article with tips
on streamlining your monthend reporting continues
where last months left off.
5 Avoid high processing
of accounts payable (AP)
invoices at month-end
The last thing the AP team
needs is to receive a tsunami
of invoices on the last day
of cut-off. It is important
to push processing back
from the last day of the
month (day 1) by avoiding a
payment run at month-end.
It is better practice to have
weekly or daily direct credit
payment runs with none
happening within two days
of month-end.
6 Early closing of the AP
ledger and accruals
If AP is held open after
month-end, you will find it
difficult to complete prompt
month-end reporting. What
is the benefit of holding
open AP for one or two days
(day +1, day +2)? We could
hold the accounts payable
open for six months after
month-end and still not get
the plumbers invoice that
arrives when they realise
they have forgotten to
invoice for work done.
Better practice is to cut
off AP at noon on the last
working day or earlier. For a
tight cut-off, budget holders
will need to have cleared all
outstanding issues regarding
purchase invoices a day
earlier (day 2) to give the
AP team time to meet the
cut-off deadline. Budget
holders can then complete
their accruals in the
afternoon of day 2, as long
as they are given a guarantee
that all invoices sent to AP
within the deadline will be

processed prior to the AP
cut-off, or accrued directly
bythe AP team.
7 Early closing-off of
accounts receivable (AR)
Immediately close off AR on
the last working day or, better
still, noon on the last working
day, with transactions in the
afternoon carried forward
to the first day of the new
month. Closing off earlier
may be required for an
organisation where the sales
representatives make a lot
of sales, and create a lot
of paperwork, on the last
working day of the month,
eg car dealers. You simply
tell them, All sales made on
the last day of the month
will now be in the following
month. This will start their
game a little earlier.
8 Early capex cut-off
Why perform depreciation
calculations at month-end
when clever organisations
close off capital projects
at least one week before
month-end? Any equipment
arriving in the last week is
therefore treated as if it
arrives next month. It can
still be unwrapped, driven or
NEXT STEPS
1 Email me ([email protected]) for some
more tips on how to improve AP processes.
2 Move cut-off of AP to noon on the last working
dayor earlier.
3 Move cut-off of AR to 5pm or noon on the last
working day.
plugged in. The depreciation

is calculated and posted by
day 3. In my workshops
I have found accountants,
with organisations where
depreciation is not
significant, who use the
depreciation calculations
from the annual plan and
correct to actual at month 6,
11 and 12.
9 Early inventory cut-off
If the last day of the
months production is
delaying your month-end,
make the inventory cut-off
at the close of business on
day 2 with all production
on the last day being carried

forward to the next month.
This gives one day to check
the valuation and records.
Always avoid a month-end
stock count: these should be
done on a rolling basis and
be held no nearer to monthend than the third week
of the month a jewellery
chain I know counts watches
one month and gold chains
the next at a quiet time
during the month.
David Parmenter is a
writer and presenter on
measuring, monitoring and
managing performance
Read the first part of this article at www.accaglobal/ab51

www.davidparmenter.com
www.davidparmenter.com/courses
49
INTEGRATED REPORTING | TECHNICAL
CPD

on this article at:
The International Integrated

Reporting Council (IIRC)
has recently released a
framework for integrated
reporting. This follows
a three-month global
consultation and trials in 25
countries. The framework
establishes principles
and concepts that govern
the overall content of an
integrated report.
An integrated report sets
out how the organisations
strategy, governance,
performance and prospects
lead to the creation of value.
There is no benchmarking
for the above matters and
the report is aimed primarily
at the private sector, but it
could be adapted for public
sector and not-for-profit
organisations.
The primary purpose
of an integrated report
is to explain to providers
of financial capital how
an organisation creates
value over time. An
integrated report benefits
all stakeholders interested
in a companys ability to
create value, including
employees, customers,
suppliers, business
IR the nuts and bolts

Graham Holt outlines the purpose of, and whats involved with,
adopting the IIRCs new integrated reporting framework
partners, local communities,
legislators,
regulators and
policymakers,
although it is not
directly aimed at
all stakeholders.
Providers of financial
capital can have a
significant effect on
the capital allocation and
attempting to aim the report
at all stakeholders would
be an impossible task and
would reduce the focus and
The culture change should

enable companies to
communicate their value
creation better than the
often boilerplate disclosures
under International
Financial Reporting
Standards (IFRS).
The report acts
as a platform to
explain what creates
the underlying value
in a business and how
management protects this
value. This gives the report
THE IIRC HAS SET OUT A PRINCIPLE-BASED

FRAMEWORK RATHER THAN SPECIFYING A DETAILED
DISCLOSURE AND MEASUREMENT STANDARD
increase
the length of
the report. This
would be contrary
to the objectives of
the report, which is
value creation.
Historical financial
statements are
essential in corporate
reporting, particularly for
compliance purposes, but
do not provide meaningful
information regarding
business value. Users need
a more forward-looking
focus without the necessity
of companies providing
their own forecasts.
Companies have
recognised the benefits of
showing a fuller picture
of company value and
a more holistic view of

the organisation. The
International Integrated
Reporting Framework will
encourage the preparation
of a report that shows
their performance against
strategy, explains the various
capitals used and affected,
and gives a longer-term view
of the organisation. The
integrated report is creating
the next generation of the
annual report as it enables
stakeholders to make a
more informed assessment
of the organisation and
its prospects.
Culture change
The IIRC has set out
a principle-based
framework rather
than specifying a
detailed disclosure and
measurement standard.
This enables each company
to set out its own report
rather than adopt a
checklist approach.
more business relevance

than the compliance-led
approach currently used.
Integrated reporting will
not replace other forms
of reporting, but the
vision is that preparers
will pull together relevant
information already
produced to explain the
key drivers of their
businesss value.
Information will only
be included in the report
where it is material to the
stakeholders assessment
of the business. There were
concerns that the term
materiality had a
certain legal
50
TECHNICAL | INTEGRATED REPORTING
connotation, with the result

that some entities may
feel they should include
regulatory information in the
integrated report. However,
the IIRC concluded that the
term should continue to be
used in this context as it is
well understood.
The integrated report
aims to provide an insight
into the companys
resources and relationships
which are known as the
capitals and how the
company interacts with
the external environment
and the capitals to create
value. These capitals can
be financial, manufactured,
intellectual, human,
social and relationship,
and natural capital, but
companies need not adopt
these classifications. The
purpose of this framework
is to establish principles
and content that governs the
report, and to explain the
fundamental concepts that
underpin them. The report
should be concise, reliable
and complete, including
all material matters, both
positive and negative, and
presented in a balanced way
without material error.
Key components
Integrated reporting is built
around the following key
components:
1 Organisational overview
and the external
environment under which
it operates.
2 Governance structure
and how this supports its

ability to create value.
3 Business model.
4 Risks and opportunities
and how they are dealing
with them and how they
affect the companys
ability to create value.
5 Strategy and resource
allocation.
6 Performance and
achievement of strategic
objectives for the period
and outcomes.
7 Outlook and challenges
facing the company and
their implications.
8 The basis of presentation
needs to be determined,
including what matters
are to be included in the
integrated report and
how the elements are
quantified or evaluated.
The framework does not
time to enable comparison

with other entities.
An integrated report may
be prepared in response
to existing compliance
requirements; for example,
a management commentary.
Where that report is also
prepared according to the
framework or even beyond
the framework, it can be
considered an integrated
report. An integrated report
may be either a standalone
report or be included
as a distinguishable
part of another report
or communication. For
example, it can be included
in the companys financial
statements.
require discrete sections to

be compiled in the report,
but there should be a highlevel review to ensure that
all relevant aspects are
included. The linkage across
the above content can
create a key storyline and
can determine the major
elements of the report, such
that the information relevant
to each company would be
different.
An integrated report
should provide insight into
the nature and quality of the
organisations relationships
with its key stakeholders,
including how and to what
extent the organisation
understands, takes into
account and responds to
their needs and interests.
Furthermore, the report
should be consistent over
creation. These terms can

include the total
of all the
capitals,
the benefit
captured
by the
company,
the market
value or
cashflows of the
organisation, and
the successful
achievement of
the companys
objectives.
However, the
conclusion reached was
that the framework should
not define value from any
one particular perspective,
because value depends upon
the individual companys
own perspective. It can be
shown through movement of
Nature of value
The IIRC considered the
nature of value and value
CPD

on this article at:
capital and can be defined

as value created for the
company or for others. An
integrated report should not
attempt to quantify value,
as assessments of value
are left to those using the
report.
Many respondents felt
that there should be a
requirement for a statement
from those charged with
governance acknowledging
their responsibility for the
integrated report in order
to ensure the reliability and
credibility of the integrated
report. Additionally it would
increase the accountability
for the content of the report.
The IIRC feels that
the inclusion of such a
statement may result in
additional liability concerns,
such as inconsistency with
regulatory requirements
in certain jurisdictions
and could lead to a higher
level of legal liability. The

IIRC also felt that the
above issues might result
in a slower take-up of
the report and decided
that those charged with
governance should, in time,
be required to acknowledge
their responsibility for the
INTEGRATED REPORTING | TECHNICAL
integrated report,
while at the same time
recognising that reports in
which they were not involved
would lack credibility.
There has been
discussion about whether
the framework constitutes
suitable criteria for
report preparation and
for assurance. The
questions asked concerned
measurement standards to
be used for the information
reported and how a
preparer can ascertain the
completeness of the report.
Future disclosures
There were concerns
over the ability to assess
future disclosures, and
recommendations were
made that specific criteria
should be used for
measurement, the range
of outcomes and the need
for any confidence intervals
to be disclosed. The
preparation of an integrated
report requires judgment,
but there is a requirement
for the report to describe
its basis of preparation
and presentation, including
the significant frameworks
and methods used to
quantify or evaluate material
matters. Also included is the
disclosure of a summary
of how the company
determined the materiality
limits and a description of
the reporting boundaries.
The IIRC has stated
that the prescription of
specific key KPIs (key
performance indicators)
and measurement methods
is beyond the scope of
a principles-based
framework. The
framework contains
information
51
on the principle-based
approach and indicates
that there is a need to
include quantitative
indicators whenever
practicable and
possible. Additionally,
consistency of
measurement methods
across different reports is
of paramount importance.
There is outline guidance
on the selection of suitable
quantitative indicators.
A company should
consider how to describe
the disclosures without
causing a significant loss
of competitive advantage.
The entity will consider what
advantage a competitor
could actually gain
from information in the
integrated report, and will
balance this against the
need for disclosure.
Companies struggle to
communicate value through
traditional reporting. The
framework can prove an
effective tool for businesses
looking to shift their
reporting focus from
annual financial
performance
to long-term
shareholder
value creation. The
framework will be
attractive to companies
who wish to develop their
narrative reporting around
the business model to
explain how the business
has been developed.
Graham Holt is director
of professional studies at
the accounting, finance
and economics department
at Manchester Metropolitan
University Business School
Download the international framework at

http://tinyurl.com/ochqrqg
HRH The Prince of Wales endorses the new International
Integrated Reporting Framework:
http://tinyurl.com/pnzxz3t
52
TECHNICAL | UPDATE
Technical update
Glenn Collins, ACCA UKs head of technical advisory, provides a monthly
round-up of the latest developments in financial reporting, audit, tax and law
in the context of its external
environment, lead to the
creation of value in the
short, medium and long
term. You can find more at
www.theiirc.org. A longer
article on the framework
can be found on page
49, with extensive further
commentary on pages 26,
36 and 82.
REPORTING
INTEGRATED REPORTING
As highlighted last month,
the integrated reporting
framework has been
published. Integrated
reporting is voluntary and
continues to be adopted
by businesses around
the world. It aims to
inform, by way of concise
communication, as to
how an organisations
strategy, governance,
performance and prospects,
IAS 27 AND IAS 19
The International Accounting

Standards Board (IASB)
hasissued Exposure Draft:
Equity Method in Separate
Financial Statements
(Proposed amendments to
IAS 27) and narrow scope
amendments to IAS 19,
Employee Benefits entitled
Defined Benefit Plans:
Employee Contributions
(Amendments to IAS 19).
Both allow for early adoption
and more can be found at
www.accaglobal/advisory
FRS 101
FRED 53: Draft Amendments to

FRS 101, Reduced Disclosure
Framework (2013/14) sets
out proposed amendments
to FRS 101. The proposed
amendments include
changes to IFRS 10, IAS 27,
IAS36, IFRS 7 and IFRS 13.
FRS 101 and
amendments apply for
accounting periods beginning
on or after 1 January 2015,
with early application
permitted. You can find FRED
53 at www.accaglobal/
advisory; comments are
required by 21 March.
AUDIT AND ASSURANCE

ENGAGEMENTS
International Standard on
Assurance Engagements
(ISAE) 3000 Revised,
Assurance Engagements
Other than Audits or Reviews
of Historical Financial
MICRO-ENTITY ACCOUNTS
SI 2013/3008 The Small Companies (Micro-Entities Accounts) Regulations are now
in force. They apply to financial years ending on or after 30 September 2013. To be
regarded as a micro-entity, at least two of the following conditions need to apply:
turnover must be not more than 632,000
the balance sheet total must be not more than 316,000
the average number of employees must be not more than 10.
Turnover needs to be proportionately adjusted where the financial year is a period, not a
year. The number of employees calculation is set out in the SI and determined as follows:
A find for each month in the financial year the number of persons employed
undercontracts of service by the company in that month (whether throughout the
month or not),
B add together the monthly totals, and
C divide by the number of months in the financial year.
Companies House has included micro-entity accounts onthe register.
The Financial Reporting Council has issued FRED 52 Draft Amendments to the
Financial Reporting Standard for Smaller Entities (effective April 2008) Micro-entities.
These allow micro-entities taking advantage of the regulations to continue to prepare
financial statements in compliance with the FRSSE. It is open for comment until 12
February 2014. You can find more about micro-entity accounts, including links to the
SI, guidance and FRED 52, at www.accaglobal/advisory
*
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*
Information, has been

revised and is effective for
assurance engagements
when the report is dated on
or after 15 December 2015.
Each assurance
engagement is classified as:
either an attestation
engagement or a direct
engagement
either a reasonable
assurance engagement
or a limited assurance
engagement.
To use the ISAE it is
expected that certain
conditions are in place. This
includes the practitioner
being subject to ISQC1 and
the engagement team and
reviewer being subject to
Parts A and B of the Code
of Ethics for Professional
Accountants. More at
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*
REVIEW ENGAGEMENTS
As highlighted last
month, the International
Federation of Accountants
(IFAC) has issued a Guide
to Review Engagements,
which coincides with the
coming into effect of the
updated standard ISRE
2400 (Revised). It is
effective for periods ending
on or after 31 December
2013. IFAC suggests that
a review engagement is
another form of assurance
that can meet the needs
of some SMEs without
putting an undue strain on
time and other resources,
and that it provides some
level of independent
assurance to increase the
credibility of their [SMEs]
The guidance is aimed at
supporting practitioners and
contains examples, work
UPDATE | TECHNICAL
programmes, extracts from

the standard and checklists.
The guidance can be found
at www.accaglobal/advisory
TAX
rewritten to include
legislative changes, the
Tax Law Rewrite and new
chapters on the simpler
income tax rules. It has
also been updated for
accountancy changes
introduced by new UK GAAP.
In the section on stock,
the HMRC guidance states
that the guidance in this
chapter refers to sections
13 and 23 of FRS 102.
Other accounting standards
that deal with inventories
(or stock) and construction
contracts (or long-term
contracts) are SSAP 9, UITF
40, IAS 2 and IAS 11, none
of which contains principles
that are substantially
different to sections 13
and 23 of FRS 102. It also
highlights in BIM34055
Change of basis of computing
taxable profits: accounting
policy changes: section 10
of FRS 102 that there are
no significant differences in
the treatment of accounting
policy changes between
FRS 102 and the current
standards FRS 18 and IAS 8.
More at www.accaglobal/
advisory
IMPORT AND EXPORT
CAMPAIGNS
ENGAGEMENT PARTNERS
International Education
Standard (IES) 8,
Professional Competence
for Engagement Partners
Responsible for Audits of
Financial Statements, has
been issued with requests
for comment by 17 April.
You can see the draft at
http://tinyurl.com/ifac-ies8
IAASB MEETING
At its December meeting, the International Auditing
and Assurance Standards Board (IAASB) approved
a consultation paper on its proposed strategy 2015
to 2019 and a work plan for 2015 and 2016. The
main features of the work plan are three major
projects on scepticism, updating ISQC 1 and
the special considerations relevant to financial
institutions, as well as gathering further information
on group audits and developing a process for a
post-implementation review of the revised Auditor
Reporting standards. Comments will be requested
byApril 2014.
IAASB also approved the Audit Quality Framework
which will be published in early 2014, and
continuedits discussion of possible changes to a
number of ISAs to improve auditing of disclosures in
IAASB continued to discuss comments received
on the exposure draft (ED) revising ISA 720 (Other
Information). The IAASB hopes to be able to approve
a new version of for re-exposure in March 2014,
although further time may be needed.
The meeting also included an update from Canada
on its development of an assurance standard on direct
reporting engagements and an update from the task
force that monitors the IASB work.
The consultation period for the ED package
onAuditor Reporting has now closed and will
be thekey project for 2014. Audit firms and
others wishing to undertake research and to
make representations may also wish to look to
the timingsincluded in the Indicative Timing
forProjectsinthe IAASBs Work Program for
20152016 and Beyond.
IAASB Consultation Paper, Proposed Strategy for
20152019 and Proposed Work Program for 20152016
can be found at http://tinyurl.com/iaasb-5yr;
comments are requested by 4 April.
Sue Almond, ACCA technical director
53
ACCOUNTANTS REPORTS
The Solicitors Regulation
Authority has highlighted
that firms with no insurance
must not carry out work on
live matters. It highlighted
that new professional
indemnity insurance policy
was required by 1 October
but that a 90-day extension
was allowed. They then
stated that this period
ended on 29 December
and firms that still did
not have cover should now
haveclosed.
HMRC has updated its basic

guide to import and export,
Guide to Importing & Exporting:
Breaking down the Barriers.
It follows a similar format
to the guidance it replaced,
providing an introduction,
sections on import, export
and transit procedures, and
concluding with explanations
of duty relief procedures. It
is, as was its predecessor, a
lengthy basic guide running
to 78 pages. However, the
changes and updates have
been highlighted to assist
businesses in reviewing their
procedures. The guide can
be found at http://tinyurl.
com/hmrc-import
BIM
The Business Income

Manual (BIM) has been
The Let Property Campaign

targets the residential
property letting market and
offers a chance for landlords
in this sector to get up to
date or put right any errors
they have made.
The Health and Wellbeing
Tax Plan campaign
is focused on health
professionals. Notification
was required by 31
December 2013, followed by
disclosure and payment of
the taxes and penalties owed
by 6 April 2014.
You can find out more at
UPDATES
Notice 725: The Single

Market has been updated.
The notice provides guidance
on when VAT is charged
54
TECHNICAL | UPDATE
RTI: REPORTING, PAYMENTS

April 2014 approaches fast and with it potential Real
Time Information (RTI) late-filing penalties. These are:
100 for schemes with one to nine employees;
200 for schemes with 10-49 employees;
300 for schemes with 50-249 employees; and
400 for schemes with 250 or more employees.
Schedule 50 Finance Act 2013 inserted new late-filing
penalties for RTI returns into Schedule 55 Finance Act
2009 and allows for:
one late-filing penalty to apply automatically each
month or quarter, regardless of the number of RTI
returns due from an employer;
an initial unpenalised default each tax year;
a manual tax-geared extended failure penalty to
apply where a return is outstanding for three months
or more and the information it would have contained
has not been included in a later return; and
some flexibility for new employers around applying
late-filing penalties when they first pay an employee.
Existing micro-employers with under nine employees
(and, where appropriate, their agents) who need more
time may get up to two years to adapt their processes
to ensure they are ready to report all payments in real
time before April 2016.
You can find more about the legislative changes,
FPS and EPS submissions, why scheme contractedout numbers are required and what to do if you
dont have the scheme number, how the employment
allowance will be claimed and other RTI updates
at www.accaglobal/advisory. You may wish to join
other accountants expressing views and considering
solutions to filing and payment problems, such as the
use of BACS, at www.payerti.org
*
*
*
*
*
*
*
*
and accounted for on

movements of goods within
the EC Single Market, and
also on how businesses
should account for VAT
on goods that they buy
from other EC member
states. The updates were to
paragraph 16.19 regarding
VAT registration numbers for
member states, the inclusion
of Croatia and changes to
references for Ireland.
Notice 60: Intrastat Guide
has been updated regarding
the arrivals exemption
threshold which has been
increased from 600,000 to
1,200,000 from 1 January
2014, and the delivery terms
threshold which has been
increased from 16,000,000
to 24,000,000 from 1
January 2014.
Notice 34: Intellectual
Property Rights has
been rewritten following
Regulation (EU) No
608/2013. This notice
replaces one of the same
name from November 2012.
The notice explains HMRCs
European Union customs
enforcement of intellectual
property (IP) rights and
highlights options that are
available to enforce these
rights. It also highlights the
process for protection.
You can find more at
www.accaglobal/advisory.
Please also see IP business
support below.
TAX INFORMATION
HMRC business and agent

content is gradually being
transferred to the Gov.
UK site. If you use the site
you may wish to link to the
transition blog which informs
businesses and agents about
content, tools and other
information that has been, or
will be, transferred. You can
also comment and suggest
changes. Visit https://
hmrctransition.blog.gov.
uk Agents should also link
to https://taxagents.blog.
gov.uk
EMPLOYEE OWNERSHIP
Employee ownership
received another boost last
year with the consultations
on tax reliefs for the
trust model of employee
ownership. The draft
legislation was published
with a short period of
consultation that closes on
4 February. It highlights the
type of trust that will benefit
and new CGT, IHT and IT
reliefs. The CGT and IHT
reliefs will have effect on and
after 6 April 2014 and IT
relief will have effect on and
after 1 October 2014.
advisory
ACCESS TO FINANCE
SME CREDIT DATA
Competition in banking:
improving access to SME
credit data is a consultation
open until 21 February.
The intention is that the
government would require
banks to share information
on their SME customers
with other lenders through
credit reference agencies.
The proposals are intended
to improve the ability of
challenger banks and
alternative finance providers
to conduct accurate SME
credit scoring and, by
levelling the playing field
between providers, make it
easier for SMEs to seek a loan
from a lender other than their
bank. The government then
intends to legislate in the next
session of parliament.
What is clear is that
businesses will also
need to carefully review
the information that
they placeon the public
record.You can see the
consultation at http://
tinyurl.com/gov-sme
LAW
IP BUSINESS SUPPORT
ACCA has worked with
the Intellectual Property
UPDATE | TECHNICAL
55
BUDGET DATE
The Budget will take place on 19 March. ACCA will issue its Budget newsletter and
guidance within 48 hours. The ACCA Budget breakfast will take place on 20March.
More details at www.accaglobal/advisory
Office to produce a
new tool that supports
advisers and businesses.
The tool provides users
with information on how
to protect assets. It also
allows users to access
a library of intellectual
property (IP) materials that
includes business checklists
for this very important
financial reporting and
tax area. Patent Box, with
its 10% corporation tax
rate, is an example of
one of the tax benefits.
In the patent section of
IPEquip, the tool takes users
through a planning section
whichexplains:
getting started
patent application basics
importance of secrecy
patent searches
potential markets
application timing
application process pacing
professional advice
IPEquip assists
businesses and their
advisers to identify assets
that may be protected by
IP rights. It has four short
modules of basic IP advice
*
*
*
*
*
*
*
*
on trademarks, patents,
design and copyright,
asset types that are
important forthe business
to identify and that are
also important for tax and
reporting purposes. When
the modulesare completed
advisers and businesses
gain access to a library
of resources including
consultancy checklists and
business guides.
advisory
AUTO-ENROLMENT
As previously highlighted,
employers with 50 to
249persons will be
stagedbetween 1 April
2014 and 1 April 2015.
If you, or businesses
and charities that you
work with, fall within this
group you will need to
make arrangements now
to inform employees, to
find a suitable provider
and tocomply with the
registration process.
Those with under 50
persons have later staging
dates but should use
the Pensions Regulators

planning tools: http://www.
thepensionsregulator.gov.uk
The Pensions Regulator
has updated its suite of
guidance with a series of
seven guides to assist with
the auto-enrolment process.
In addition to being
common sense and good
practice, communication by
employers with workers is a
legal requirement of autoenrolment. The guidance
takes employers through
the process. It states that:
Employers must write to
their staff within one month
of their staging date to
tell them they have been
automatically enrolled or
postponed. After staging,
when automatic enrolment is
business as usual, they must
write within a month of the
day a new staff member
joins or becomes eligible to
be automatically enrolled
(six weeks from 1 April
2014). The exception is for
existing scheme members
who mustbe contacted
within twomonths.
The section on
56
TECHNICAL | UPDATE
different letters for different

workershighlights the
different rights of workers
and that an employer
mustwrite to tell them
whatthese rights are.
Following the explanation
they provide a series of
templates that can be used
by employers.
You can find this and the
other six guides at

SUSPICIOUS ACTIVITY
The National Crime

Agency website (www.
nationalcrimeagency.gov.
uk) highlights basic contact
details such as phone
contacts. However, reporters
may wish to continue to use
online reporting. This can be
found at www.accaglobal/
advisory
CONSUMER CREDIT ACT
In its current form ACCAs

Group Consumer Credit
Licence ceases on 31 March
2014. This currently covers
the following categories
of business:
Category A Consumer
Credit
Category C Credit
Brokerage
Category D Debt
Adjusting
Category E Debt
Counselling
Category G Debt
Administration
Category H1 Provision
of Credit Information
Services (including
creditrepair)
From 1 April practitioners
who previously relied on
*
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BUSINESS OPPORTUNITY FOR ACCA MEMBERS

On the back of the governments launch of Growth Vouchers, a project to provide
30m of subsidised business support for small business, we outline the project and
highlight an opportunity for ACCA members.
The project will see up to 15,000 small businesses receive a maximum contribution
of 2,000 from the government in order to seek advice and professional support
across five key areas: sales and marketing, management and leadership, access to
finance, employment relations, and making the most of digital technologies. ACCA has
been working with the Department for Business, Innovation & Skills (BIS) since the
inception of the scheme and is one of the founding professional bodies populating a
Growth Vouchers marketplace where the business receiving a voucher will be helped to
find advisers with whom they can spend it.
ACCA practitioners are eligible to take part as suppliers. Being profiled on the
marketplace represents an opportunity to be matched and to develop new relationships
with growing and ambitious companies. For ACCA, supporting the project means
showing our support for the growth of the economy and the Great British entrepreneur.
The marketplace is being managed by small business network Enterprise Nation
www.enterprisenation.com. Small businesses will visit the marketplace and search for
an adviser by location or by professional category.
The Growth Vouchers project runs from January 2014 to April 2015, with BIS and
the Cabinet Office continuing to monitor results for three years beyond this point. They
will look for evidence as to whether seeking advice helps a business to grow.
You can find more about Growth Vouchers via Enterprise Nation at
www.growthvouchers.co.uk
the registration will need

to have considered and
acted on the options
that are available, which
include direct registration

with the regulator. You
can find updates on the
latest position, including
information on direct
registration with the Financial
Conduct Authority, at www.
accaglobal/advisory
PRACTICE | SECTOR
57
The view from
I GET GREAT SATISFACTION HELPING CLIENTS

FIND SOLUTIONS TO THEIR BUSINESS NEEDS
LINDSAY HOGG FCCA, MANAGING PARTNER,
WATTS GREGORY, CARDIFF
My career in accountancy
started when I applied
for a job as a trainee
accountant with Deloitte
Haskins & Sells UK,
which then merged with
Coopers & Lybrand (which
then merged with Price
Waterhouse to become
PwC). I remember the
interview well. Dressed
in a new suit and cowboy
boots, I somehow convinced
the interviewer that I was good
with numbers.
Having been in business for 30 years,
I am now the managing partner
for Watts Gregory. I combine my
position with the role of client contact
partner. However, in an organisation
with approximately 50 people you
have to undertake many roles. In a
partnership-style organisation, the
biggest challenge is managing your
fellow partners. Finding the right
balance of managing while still
remaining an important fee earner is a
key balancing act.
First and foremost, I see myself as a
general practitioner, which I consider
to be an expertise in its own right. In
looking at ways to broaden the service
offering of the firm it was decided
that each partner should develop
an additional expertise and I opted
for corporate finance. The two skills
complement themselves when offering
a cradle to grave service to SMEs.
The best feature of my role is its
diversity. No two days are the same.
I really enjoy the interaction and
challenges that come with advising
clients. Similarly, as a part owner of
an SME, I have the daily challenges my
clients do. This added dimension does
help in your empathy with

clients, but I must confess
to giving advice to clients
on the lines of do as I say,
rather than do as I do.
Much has been said of the
importance of SMEs in the
economy mix; however,
when it comes to business
support, the government
has a poor track record
in delivering cost-effective solutions.
As SMEs widely regard accountants
in practice as their most trusted
business adviser, I would like to see
the professional bodies champion the
cause of practitioners to deliver the
support aid to SMEs.
This would allow greater development
within the profession and broaden
the traditional service offering. The
mantra should be: what support
do SMEs need and how can we as
professionals deliver it?
I get great satisfaction when helping
clients find solutions to their business
needs. The skill is in tailoring the
solution. I dont profess to be the
original thinker there are far smarter
theorists than me but having worked
with the great and the good, and
not so good, in hundreds of
businesses, I have gained the
knowledge and experience to deliver
good practical advice.
Being a passionate Welshman I do
like my rugby. I also like to travel, so
watching the Lions in Australia was an
obvious win-win situation for all, except
for my wife. I like to keep fit and take
time to train during the week, as well
as cycle and walk over the weekend,
especially if the route takes in the
oddpub.
SNAPSHOT:
CORPORATE TAX
Corporate tax is a wideranging area including both
compliance and planning.
Specialists can find
themselves dealing with
everything from corporation
tax returns to transfer pricing
to helping companies plan
their domestic and foreign
tax positions, along with the
tax implications of everything
from an acquisition of
business assets through to
corporate restructures and
mergers.
Corporate tax accountants
work with organisations to
structure transactions and
operations in a tax-effective
manner, mitigate tax risk and
comply with tax laws.
Mike Gibson, a director in
Ernst & Youngs tax technical
knowledge team, says that the
biggest challenge is the sheer
scale and complexity of the
legislation involved.
He adds: Even on a purely
UK domestic level, the length
of the existing legislation
can be daunting and there
is oftena large amount of
information to be processed
in a short period of time, with
deadlines that often cannot
bemoved.
48%
Percentage of UK CEOs that

want the UK government to
create a more internationally
competitive tax system,
according to PwCs 2014
Annual Global CEO Survey.
58
PRACTICE | MANAGEMENT
The model and who runs it

Continuing their series on building a sustainable and successful practice, Andrew
Jenner and Phil Shohet look at the structural model and management setup
Whether its a partnership, LLP or
corporate structure, a practice is
managed by a group of partners/
directors, usually led by a managing
partner, but sometimes run by
committee, with all the partners
believing that they have an equal say
in the decisions.
Few of these partners have any
formal business management training,
and the reality for many firms is that
the controlling power lies in the hands
of one or two individuals, with everyone
else being expected to toe the line.
Despite what might seem to be obvious
disadvantages, this professional
structure has served well for many
years. However, at this point in the 21st
century, is it the ideal business model
for an accounting firm to follow?
The accountancy marketplace
has changed dramatically and the
increasingly aggressive commercial
environment in which firms operate
requires a much greater level of
business management skills. The
pressures are coming from all aspects
of a firms business: fees, efficiency,
productivity, brand awareness, and
to some extent internationalism. This
highlights the need for change in the
organisation and above all for better
and stronger people to lead it.
Many of the changes are clientdriven. Personal and corporate
clients now look for a diverse range
of business management and
development advice outside the tax
and audit compliance services that are
viewed as a necessary evil.
Diversification into new specialisms
means the old portfolio style of
management is no longer appropriate.
Partners cannot be expected to master
every specialist service their clients
need, so a departmental setup is
needed to give access to the whole
range of skills in the firm. While lead
partners still have control of their
own clients they must be prepared to
bring in specialists. This can only be
effectively controlled and monitored
within a departmental framework.
A further driver for change is that

a substantial sector of the profession
has simply outgrown the traditional
management concept. At the top end
of the scale are the large national
and international firms which are now
organised and run no differently from
any other big corporation. At the other
end are the small firms for which the
traditional partnership structure is
still valid.
In the middle lie medium-sized
firms. Some of them are extremely
successful, others are struggling; the
gulf between the excellent and the
mediocre is becoming ever wider.
Unless there is a willingness to adopt
KEY QUESTIONS
do we do things this way?
* Why
Why are we in this market?
* Why do we need this office?
* Why do we do this kind of
* work?
do we have so many
* Why
partners?
also increases and limited liability or

LLP status becomes more attractive.
Reducing risk will also help firms to
attract the high-calibre individuals
they need to maintain and improve the
TO SURVIVE REQUIRES TAKING A REALISTIC

VIEW OF THE FIRMS PROSPECTS AND THEN
DOING SOMETHING ABOUT THEM
modern management methods,
coupled with a determination to
change the way the firm has been
doing things, the mid-size sector will
shrink, and that will be detrimental to
both the profession as a whole and the
business world.
Multi-functional accounting
firms face the strongest pressure to
incorporate and make radical changes,
mainly because they have reached the
limits of partnership size and there
will be growing conflicts of interest
between their different sectors.
Pressure for incorporation comes from
a need for development capital, the
need to invest in new offices and new
facilities, particularly information
and communications technology,
which is now central to the success of
every practice.
There is also the question of limited
liability. There are risks attached to
an equity partnership, with partners
being individually responsible when
things go wrong. As firms provide an
increasing range of specialist services,
the potential for problems arising
range and quality of the services that

they provide.
This will not suit every firm. Smaller
practices may well find that, provided
their quality of earnings is good,
they will not need to incorporate as a
way of raising development capital.
Conversely, if profitability is poor the
firm will not be attractive to outside
shareholders looking for good returns.
With partner demographics as they
are, filling the management void is one
of the toughest tasks facing a firm.
It is made harder because the likely
candidates may not have identified that
this is a situation they would ever wish
to undertake. The managing partner
role is not a part-time position, yet the
perception is that it can be undertaken
in addition to normal client workload.
The reality is different: generally
speaking, an effective managing
partner will spend no more than 30%
of their time on client work.
Identifying a successor is an
added problem. Frequently the
new incumbent finds that the role
is demanding and different from
MANAGEMENT | PRACTICE
what they have been used to. They

have to adapt and move out of their
comfort zone and fundamentally take
responsibility and exhibit authority and
accountability, not to mention develop
leadership in the practice and find and
develop new partners.
Historically, promotion has been
based on technical proficiency rather
than commercial accomplishments,
but the present day requirement is
for new partners to be commercial,
focused on client service, able to
build sound relationships, capable
of problem solving to produce
positive outcomes, and be good
communicators. Prospective partners
should be coached or mentored in
advance of their appointment to help
them assign their time in the most
appropriate way.
The alternative is to recruit through
a lateral hire or merger, bringing the
required skills into the firm through
an individual capable of operating
at a higher level from day one. This
also overcomes the difficult issue of
younger qualifieds who are averse to
the risks of business ownership.
Looking at the top 100 and the
independent firms in the regions, it is
not difficult to identify firms that are
not only well managed but also well
led. Conversely, it is possible to see
firms that are neither, firms that are
going nowhere, unprofitable relative to
their peer group and losing partners
and key staff.
We live in difficult times. To survive
requires taking a realistic view of the
firms prospects and then doing
something about them. Present
circumstances will fully challenge the
skills of all managing partners, and
what served the firm well in the past
may not be suitable for the future.
Whoever has the role must be
granted the authority to go with
the responsibility; both facets are
essential, one without the other is

unacceptable.
In a world dominated by technicians
a managing partner must be a people
person with good inter-personal
skills. They must be able to influence
the other partners, all of whom have
strong individual authority and are not
used to being told what to do. Yet each
must be told and understand what
their role is in the business and be
encouraged to play to their strengths
a key factor if the firm is to prosper.
Andrew Jenner FCCA and Phil Shohet
FCCA are directors, KatoConsultancy
59
Part 4: Getting into shape,

Part 3: Supercharge your firm,
Part 2: Strategy for success,
Part 1: Time for a change,
Kato Consultancy:
www.kato.uk.com
DATA PAGE
Bank Base Rates
Date
7.8.97
6.11.97
4.6.98
8.10.98
5.11.98
10.12.98
7.1.99
4.2.99
8.4.99
10.6.99
8.9.99
4.11.99
13.1.00
10.2.00
8.2.01
5.4.01
10.5.01
2.8.01
18.9.01
4.10.01
8.11.01
6.2.03
Rate
7.00%
7.25%
7.50%
7.25%
6.75%
6.25%
6.00%
5.50%
5.25%
5.00%
5.25%
5.50%
5.75%
6.00%
5.75%
5.50%
5.25%
5.00%
4.75%
4.50%
4.00%
3.75%
Rate
7.00%
6.75%
6.50%
6.25%
5.75%
5.65%
5.50%
5.75%
6.00%
6.25%
6.50%
6.75%
6.50%
6.75%
Figures compiled on 14 January 2014
Retail Prices Index
Date
10.7.03
6.11.03
5.2.04
6.5.04
10.6.04
5.8.04
4.8.05
3.8.06
9.11.06
11.1.07
10.5.07
5.7.07
6.12.07
7.2.08
10.4.08
8.10.08
6.11.08
4.12.08
8.1.09
5.2.09
5.3.09
Rate
3.50%
3.75%
4.00%
4.25%
4.50%
4.75%
4.50%
4.75%
5.00%
5.25%
5.50%
5.75%
5.50%
5.25%
5.00%
4.50%
3.00%
2.00%
1.50%
1.00%
0.50%
Source: Barclays
Mortgage Rates
Date
1.6.01
1.9.01
1.10.01
1.11.01
1.12.01
1.3.03
1.8.03
1.12.03
1.3.04
1.6.04
1.7.04
1.9.04
1.9.05
1.9.06
February 2014
Date
1.12.06
1.2.07
1.6.07
1.8.07
1.1.08
1.3.08
1.5.08
1.11.08
1.12.08
1.1.09
1.2.09
1.3.09
1.4.09
4.1.11
Rate
7.00%
7.25%
7.50%
7.75%
7.50%
7.25%
7.00%
6.50%
5.00%
4.75%
4.50%
4.00%
3.50%
3.99%
Existing Borrowers - Source: Halifax
January
February
March
April
May
June
July
August
September
October
November
December
1998
159.5
160.3
160.8
162.6
163.5
163.4
163.0
163.7
164.4
164.5
164.4
164.4
1999
163.4
163.7
164.1
165.2
165.6
165.6
165.1
165.5
166.2
166.5
166.7
167.3
13th January 1987 = 100
2000
166.6
167.5
168.4
170.1
170.7
171.1
170.5
170.5
171.7
171.6
172.1
172.2
2001
171.1
172.0
172.2
173.1
174.2
174.4
173.3
174.0
174.6
174.3
173.6
173.4
2002
173.3
173.8
174.5
175.7
176.2
176.2
175.9
176.4
177.6
177.9
178.2
178.5
2003
178.4
179.3
179.9
181.2
181.5
181.3
181.3
181.6
182.5
182.6
182.7
183.5
2004
183.1
183.8
184.6
185.7
186.5
186.8
186.8
187.4
188.1
188.6
189.0
189.9
2005
188.9
189.6
190.5
191.6
192.0
192.2
192.2
192.6
193.1
193.3
193.6
194.1
2008
4.1%
4.1%
3.8%
4.2%
4.3%
4.6%
5.0%
4.8%
5.0%
4.2%
3.0%
0.9%
2009
0.1%
0.0%
-0.4%
-1.2%
-1.1%
-1.6%
-1.4%
-1.3%
-1.4%
-0.8%
0.3%
2.4%
2010
3.7%
3.7%
4.4%
5.3%
5.1%
5.0%
4.8%
4.7%
4.6%
4.5%
4.7%
4.8%
2011
5.1%
5.5%
5.3%
5.2%
5.2%
5.0%
5.0%
5.2%
5.6%
5.4%
5.2%
4.8%
2012
3.9%
3.7%
3.6%
3.5%
3.1%
2.8%
3.2%
2.9%
2.6%
3.2%
3.0%
3.1%
2013
3.3%
3.2%
3.3%
2.9%
3.1%
3.3%
3.1%
3.3%
3.2%
2.6%
2.6%
2.7%
Source: ONS
HM Revenue & Customs Rates

OFFICIAL RATE*
Effective Date
6.3.99
6.1.02
6.4.07
1.3.09
6.4.10
Rate
6.25%
5.00%
6.25%
4.75%
4.00%
*Benefits in Kind: Loans to employees

earning 8,500+ - official rate of interest.
Official rate for loans in foreign currencies: Yen:
3.9% w.e.f. 6.6.94; Swiss F: 5.5% w.e.f. 6.7.94
(previously 5.7% w.e.f. 6.6.94).
INTEREST ON UNPAID / OVERPAID

INHERITANCE TAX
Effective Date
27.1.09
24.3.09
29.9.09
Rate
1.00%/1.00%
0.00%/0.00%
3.00%/0.50%
INTEREST ON LATE PAID

INCOME TAX, CGT, STAMP DUTY
AND STAMP DUTY RESERVE
Effective Date
6.12.08
6.1.09
27.1.09
24.3.09
29.9.09
Rate
5.50%
4.50%
3.50%
2.50%
3.00%
INTEREST ON OVERPAID
INCOME TAX, CGT, STAMP DUTY
AND STAMP DUTY RESERVE
Effective Date
6.11.08
6.12.08
6.1.09
27.1.09
29.9.09
Rate
2.25%
1.50%
0.75%
0.00%
0.50%
w.e.f. 6.3.09
0.00% (0.00%)
0.00% (0.00%)
0.75% (0.00%)
0.75% (0.00%)
0.75% (0.00%)
0.75% (0.00%)
w.e.f. 6.2.09
0.00% (0.00%)
0.00% (0.00%)
1.00% (0.50%)
1.00% (0.50%)
1.00% (0.50%)
0.75% (0.25%)
w.e.f. 9.1.09
0.00% (0.00%)
0.00% (0.00%)
1.50% (0.75%)
1.25% (0.50%)
1.25% (0.50%)
1.25% (0.50%)
Encashment rates shown in brackets. Above rates are paid gross but are liable to tax.
Late Payment of Commercial Debts

From
1.7.12
1.1.13
To
31.12.12
30.6.13
Rate
8.50%
8.50%
From
1.7.13
1.1.14
To
31.12.13
30.6.14
Rate
8.50%
8.50%
The Late Payment of Commercial Debts (Interest) Act 1998

For contracts from 1.11.98 to 6.8.02 the rate applying is the Bank of England
Base Rate that was in place on the day the debt came overdue plus 8%.
The Late Payment of Commercial Debts (Interest) Regulations 2002
For contracts from 7.8.02 the rate is set for a six month period by taking the
Bank of England Base Rate on 30 June and 31 December and adding 8%.
LIBOR
January
February
March
April
May
June
July
August
September
October
November
December
2010
0.62%
0.64%
0.65%
0.68%
0.71%
0.73%
0.75%
0.73%
0.74%
0.74%
0.74%
0.76%
2011 2012 2013

0.77% 1.08% 0.51%
0.80% 1.06% 0.51%
0.82% 1.03% 0.51%
0.82% 1.01% 0.50%
0.83% 0.99% 0.51%
0.83% 0.90% 0.51%
0.83% 0.74% 0.51%
0.89% 0.68% 0.52%
0.95% 0.60% 0.52%
0.99% 0.53% 0.51%
1.04% 0.52% 0.52%
1.08% 0.52% 0.53%
3 MONTH INTERBANK - closing rate on last day of month
2008
209.8
211.4
212.1
214.0
215.1
216.8
216.5
217.2
218.4
217.7
216.0
212.9
2009
210.1
211.4
211.3
211.5
212.8
213.4
213.4
214.4
215.3
216.0
216.6
218.0
Courts
ENGLISH COURTS
2009
-1.7%
-5.7%
-1.1%
1.7%
0.9%
1.1%
0.3%
0.3%
0.9%
0.7%
0.8%
0.7%
January
February
March
April
May
June
July
August
September
October
November
December
2010
217.9
219.2
220.7
222.8
223.6
224.1
223.6
224.5
225.3
225.8
226.8
228.4
Whole GB economy unadjusted

*Provisional
2010
0.6%
5.2%
6.6%
0.4%
1.1%
2.1%
1.8%
2.1%
2.3%
2.1%
2.1%
1.3%
2011
229.0
231.3
232.5
234.4
235.2
235.2
234.7
236.1
237.9
238.0
238.5
239.4
2012
238.0
239.9
240.8
242.5
242.4
241.8
242.1
243.0
244.2
245.6
245.6
246.8
2013
245.8
247.6
248.7
249.5
250.0
249.7
249.7
251.0
251.9
251.9
252.1
253.4
Source: ONS
2011
4.3%
1.0%
2.4%
2.5%
2.4%
3.4%
3.1%
2.1%
1.8%
2.1%
2.1%
2.0%
2012
0.1%
0.5%
0.9%
2.4%
1.8%
1.4%
1.6%
2.3%
1.8%
1.3%
1.3%
1.3%
2013
1.1%
0.7%
-0.7%
4.4%
2.0%
1.0%
0.9%
0.7%
0.9%
1.1%*
2011
522.6
523.3
524.8
525.3
525.4
529.6
533.1
524.6
525.5
531.8
520.4
510.7
2012
514.2
514.3
528.9
521.7
523.6
528.3
526.3
518.5
519.3
517.2
521.1
524.0
2013
519.8
524.3
530.6
540.6
543.2
550.8
556.7
550.5
553.1
558.5
565.3
553.6
Figures include bonuses and arrears

Source: ONS
House Price Index

2009
517.2
515.3
508.3
508.6
520.7
514.0
520.1
524.1
533.5
535.4
536.0
541.3
January
February
March
April
May
June
July
August
September
October
November
December
2010
535.7
537.2
543.1
552.7
547.6
538.5
544.8
546.6
529.6
534.9
528.4
522.7
All Houses (January 1983 = 100)
Exchange Rates
Certificates of Tax Deposit

up to 100K
100K+ 0-1 mth
100K+ 1-3 mth
100K+ 3-6 mth
100K+ 6-9 mth
100K+ 9-12 mth
2007
201.6
203.1
204.4
205.4
206.2
207.3
206.1
207.3
208.0
208.9
209.7
210.9
% Change Average Weekly Earnings
% Annual Inflation
January
February
March
April
May
June
July
August
September
October
November
December
2006
193.4
194.2
195.0
196.5
197.7
198.5
198.5
199.2
200.1
200.4
201.1
202.7
2007
2008
2009
2010
2011
2012
2013
YEN
233
198
142
142
133
132
143
MARCH
US$ SFr
1.97 2.39
1.99 1.97
1.43 1.63
1.52 1.60
1.60 1.47
1.60 1.44
1.52 1.44
Source: Halifax
on last working day
1.47
1.25
1.08
1.12
1.13
1.20
1.18
2007
2008
2009
2010
2011
2012
2013
DECEMBER
YEN US$ SFr
222 1.99 2.25
130 1.44 1.53
150 1.61 1.67
127 1.57 1.46
120 1.55 1.45
139 1.62 1.48
173 1.65 1.47
1.36
1.04
1.13
1.17
1.20
1.23
1.20
Income Support Mortgage Rate

Effective Date Rate
Effective Date Rate
Effective Date Rate
17.12.06
18.2.07
17.6.07
12.8.07
13.1.08
16.3.08
18.5.08
16.11.08
1.10.10
6.58%
6.83%
7.08%
7.33%
7.08%
6.83%
6.58%
6.08%
3.63%
From 1.10.10 the standard interest rate will be the BoE published
monthly avge mortgage interest rate. Can claim mortgage interest
on, up to 200,000 of the motgage. Waiting period 13 weeks.
SCOTTISH COURTS
Judgment Debts: High Court (& w.e.f. 1.7.91 County Courts) 8% w.e.f. Decrees: Court of Session & Sheriff Courts 8% w.e.f. 1.4.93 (previously
15% w.e.f. 16.8.85).
1.4.93 (previously 15% w.e.f. 16.4.85).
Funds in Court: Special Rate (persons under disability) 0.5% w.e.f.
NORTHERN IRISH COURTS
1.7.09 (previously 1.5% w.e.f. 1.6.09). Basic Rate (payment into court) Judgment Debts: High Court: 8% w.e.f. 19.4.93 (previously 15% w.e.f.
0.3% w.e.f. 1.7.09 (previously 1% w.e.f. 1.6.09).
2.9.85). County Court 8% w.e.f. 19.4.93 (previously 15% w.e.f. 19.5.85).
Interest in Personal Injury cases: Future Earnings - none. Pain &
Interest on amounts awarded in Magistrate Courts 7% w.e.f. 3.9.84.
Suffering - 2%. Special Damages: same as Special Rate - see Funds
in Court above ( Special Rate payable from date of accident to date ADMINISTRATION OF ESTATES
of judgment).
England & Wales: Interest on General Legacies: 0.3% w.e.f. 1.7.09
Interest Rate on Confiscation Orders in Crown & Magistrates Courts: (previously 1% 1.6.09). Interest on Statutory Legacies: 6% w.e.f.
1.10.83 (previously 7% w.e.f. 15.9.77).
same rate as applies to High Court Judgment Debts.
All rates and terms are subject to change without notice and should be checked before finalising any arrangement. No liability can be accepted for any direct or
consequential loss arising from the use of, or reliance upon, this information. Readers who are not financial professionals should seek expert advice.
Data specially compiled for
by
the advisers portal
www.moneyfactsgroup.co.uk
The UKs largest provider of savings and mortgage data
Tel: 01603 476 476
FRANCHISING | PRACTICE
61
New year, new franchise?

Is now a good time to start your own
practice by buying into a franchise? Or
if you already own a business, should
you be thinking about expanding it
and becoming a franchisor?
UK economic growth is still below

the levels everyone would like to see.
According to figures from the National
Institute of Economic and Social
Research, the economy grew by 1.9%
in 2013 and is still 1.2% smaller than
it was before the recession.
But there is one particular sector
that has been outperforming the
wider economy hands down. The 2013
NatWest/British Franchise Association
(BFA) franchise survey shows that the
franchise sector has grown by 20%
since the UK entered recession back
in2008.
Kelly Blackmore-Lee, BFAs head of
compliance, says: Its a proof of the
resilience and the success of the model
local business owners operating
under a larger, often national brand,
with the support of the franchisor
and a network of fellow franchisees.
Imagine whats going to be possible as

the economy gets back on track.
Accounting, tax and bookkeeping
franchises are big business, targeting
and serving small business clients.
Just look at the success of UKwide networks such as TaxAssist
Accountants and Certax, with growth
rates well ahead of the Big Four and
others, says Blackmore-Lee.
TaxAssist has a fee income of more
than 30m and almost 200 franchisees
across the UK serving 47,000 clients.
It reports year-on-year growth of 14%
against a backdrop of a slowdown in
the accountancy sector generally.
Sarah Robertson, TaxAssists
business development director, says:
Weve bucked the trend by offering a
welcoming, straight-talking approach,
with accountants in shopfront offices
right on the high street. The formula
has brought us sustained growth

throughout the recession and a strong
platform to optimise the opportunities
as the economy recovers.
While the accountancy franchise
giants have been around for 15 years
and longer, some of the relatively
recent entrants are reporting rapid
growth, too.
Elaine Clark started her online
practice CheapAccounting.co.uk in
2007 and franchised it in 2009. She
says: Weve been busy throughout
the recession because people wanted
to cut costs. Now were getting even
busier because the recovery is giving
people an appetite for starting a small
business or doing something on the
side that might later become their
main career.
The market is big and it is growing.
Clark adds: Currently, there are 4.5
62
PRACTICE | FRANCHISING
million businesses in the space we

operate in 3 million of the selfemployed and 1.5 million small limited
companies and that numbers rising.
There seems to be enough work
for everyone wanting to jump on the
franchise bandwagon, too. Even
ourbest-performing franchisees
havenot saturated their territories,
says Robertson.
We often have business leads
that we cannot progress due to the
geographical constraints of providing
a local accountancy service, so we are
actively recruiting more accountants to
meet that demand.
As a franchisee, you assume you will
reach profitability and growth quicker
than if you start out on your own.
Figures from the NatWest/BFA survey
seem to confirm this of those new to
the industry (up to two years), 80% are
already turning a profit.
Alan Philpott has been a
CheapAccounting franchisee since last
October. He says: I have an average
of one enquiry per day, 23 clients of
which Im confident more than 80%
will lead to repeat business, and a
database of referrals some of whom
will become clients when they are
ready. I wouldnt have got all this so
soon without the national brand.
Overall, 92% of the franchisees in
the 2013 survey reported profitability
last year and one in four were running
multiple outlets.
Both are long-term trends that have
been consistent since before the turn
of the century and outstrip equivalent
independent start-up figures, says
Blackmore-Lee. The support from a
good franchise means that you dont
necessarily need substantial experience
in order to become a successful
business owner.
Some of the resale figures could

be a testament to the strength of the
business model, too. The TaxAssist
network has recently seen its first
million-pound office sale to new
owners, at a multiple of 1.25 of
revenues, and the new owners plan to
double the offices 850-client base in
the next five years.
But what about the other side of
the coin? Grant Thorntons International
Business Report shows that business
optimism in the UK has soared by
74% over the past year, while a survey
from Lloyds Banking Group suggests
that it is now at a 20-year high and will
rise even further in 2014. Businesses
respond to this rising confidence by
ramping up their investment plans, so
like marketing and exposure your

success will be very short-lived.
It is a crowded marketplace too,
so you need to be bold and you need
to be different. You have to stand out
with a different message, says Clark.
The name CheapAccounting is like
Marmite, you either love it or hate
it, but it is the one thing that people
always remember.
Not everyone believes that
expanding a practice by franchising is
a good idea. It can devalue what we
do and have a detrimental effect on
brand equity, says Russell Nathan,
commercial partner at HW Fisher. For
a mid-tier firm, so much of what we do
is about providing advice and guidance
to our clients, which is outside of
I HAVE ONE ENQUIRY A DAY, 23 CLIENTS AND

A DATABASE OF REFERRALS. I WOULDNT HAVE
GOT ALL THIS SO SOON WITHOUT THE BRAND
some existing independent practices
will no doubt be considering starting a
new accounting franchise.
If, at the outset, the franchise
model is set up correctly, accountancy
practices can grow via the investment
of others at a quicker rate and at much
lower cost than is possible organically,
says Blackmore-Lee.
You can try and replicate the
success of other franchisors, although
Clark offers a word of caution: Yes,
someone could easily whack up a
website, copy another model and
say we are a franchise, but getting
people on board is a different thing.
Then, unless youre bringing in clients
for those people or offering them
something they couldnt do themselves
the role of just being a qualified

accountant. Its this expertise and
knowledge that cannot be transferred
to a franchised practice as easily as a
brand name or logo.
Nathan believes franchised practices
work well in the routine finance areas
that do not require building long-term
relationships and knowing the clients
outsourced bookkeeping, management
accounts preparation, payroll and tax
compliance, and so on. Over the next
10 years, I expect to see many smaller
practices and one-man bands merging
to form more networks, he says, but I
dont believe these will be in the form
of franchises.
Iwona Tokc-Wilde, journalist
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64
18
ITS
YOUR
MOVE
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THE POSTGRAD PAGES | PEOPLE
65
Competing at the highest level

Its important to make the most of your finance credentials when applying for an
MBAcourse. Here are some top tips on how to sell yourself effectively
According to the Financial
Times, the highest-ranking
business school in the
world is Harvard, followed
by Stanford Graduate
School of Business. But the
US does not dominate for
long. At number four the
London Business School is
the highest-ranked British
institution, and schools in
France, Singapore, Spain
and China all make it into
the top 10.
Each one now offers
bespoke MBAs for finance
professionals, as part of the
standard MBA course or a
specialist finance masters
qualification.
The combination of
finance and masters
qualifications is something
that ACCA takes very
seriously. ACCA and Oxford
Brookes University have
combined their strengths
as leaders in international
education to produce a
blended-learning global MBA
programme designed for
ACCA members.
The programme has
received Association of
MBAs (AMBA) accreditation
and EPAS accreditation
awarded by the European
Foundation for Management
Development (EFMD), which
establishes a global quality
measure for business and
management programmes.
Meanwhile, the London
School of Business and
Finance allows you to

combine your ACCA
Qualification with an MBA.
So with increased
remuneration an obvious
result of having an MBA
under your belt, it isnt
hard to see why finance
professionals are queuing
up at the doors of both the
top-ranked business schools
as well as more conveniently
located regional institutions.
But how can you make sure
that, as a finance expert,
your application stands out?
Stacy Blackman, MBA
blogger and head of Stacy
Blackman Consulting, says:
Students with finance
backgrounds comprise
the largest percentage of
the incoming class at top
business schools. Many
firms require an MBA for
senior-level careers, leading
finance industries to feed
heavily into the most
competitive schools.
Applicants often wonder
how to stand out from their
equally impressive peers.
No matter how remarkable
your pedigree, business
schools dont want a class
filled with individuals of the
same profile. Working hard
to stand out with a highly
typical career background
is going to be the largest
hurdle to admission.
Blackman says there are
several ways to set yourself
apart. The first is to seek
Interested in doing an MBA,

MSc or other postgraduate
qualification? Our special
quarterly section of Accounting
and Business explores the options
and the issues involved.
66
PEOPLE | THE POSTGRAD PAGES
out non-traditional
volunteering opportunities.
Personal pursuits add
another dimension to your
MBA application, she says.
However, the reality for
finance professionals is that
a long working week rarely
allows time for meaningful
extracurricular activity.
If thats you, find flexible
volunteer opportunities.
Look for activities that are
not face-time based. Focus
on action, or a small amount
of time on weekends.
She adds it is also vital to
liaise with your referees so
that they say the right thing
on your application. Make
sure your recommenders
demonstrate that you
are exceptional among
your peers, and provide
information that shows how
you are different, she says.
Secret weapon
Recommendation letters
are one of the best secret
weapons for application
success. While it is poor
form to write that you are
better than your peers, your
referees have licence to
compare at will and state
that you are more ethical,
creative and personable.
Make sure they provide
specific examples of your
excellent work. You may
want to provide a bulleted
list of projects you worked
on together, especially if
you were praised for the
results. A performance
review or meeting can be
a useful source for specific
compliments if you are
unsure how to steer your
recommenders.
Your application should
also highlight unique work
accomplishments. MBA
admissions committees
will understand if you are
junior in your career and
have limited authority to
lead officially at work,
but even small-scale
accomplishments can show
how you lead, which is the

most important aspect MBA
programmes are looking for.
Make sure your
application highlights
work accomplishments
outside the norm, says
Blackman. Think about
what you do at work that is
outside your typical deal or
investment-focused work
and your peers. Instead of
talking about analysis you
conducted or due diligence
you performed, think about
the time you trained interns
or organised a community
service event.
The fourth and final tip
Blackman gives is to forge
strong ties with the school
you are hoping to attend.
It may feel like everyone
around you is also applying
to MBA programmes this
year. The positive aspect
of this is that people you
know from work, college or
perhaps even your sisters
cousin-in-law are now
students or alumni at your
target schools.
Reach deeply into your
network and talk to everyone
you can about your goal.
Having personal touchpoints at your target schools
will allow you to put together
compelling essays. At some
schools, you may benefit
from supplemental letters
if a friend or contact is
especially supportive of your
candidacy. As a minimum,
current students and alumni
are more than happy to talk
about their experiences and
share them.
The beauty of the MBA
application process is that
every applicant is unique.
While many applicants have
similar credentials, the
admissions process gives
applicants an opportunity
to go beyond numbers
and statistics and present
a snapshot of who they
reallyare.
Beth Holmes, journalist
EUROPE LAGS BEHIND ASIA

There was a 14% rise in global MBA job opportunities
in 2013, according to QS TopMBA.com Jobs and
Salary Trends Report.
The report, which surveyed over 4,300 MBA
employers, found that Asia is the worlds most
dynamic MBA market, with a 20% growth rate.
RAISING THE BAR

Business schools often differentiate themselves with
new and innovative courses.
The University of Vermonts School of Business
Administration has raised the bar and introduced
the Sustainable Entrepreneurship MBA to put its
graduates in a position to launch their own startups.
MASTERS OF AFRICA
Three graduate courses at the American University in
Cairos School of Business have been rated the best
in Africa, according to Eduniversals 2013/14 ranking
of top masters programmes.
The top three programmes are the institutions
MBA, MA in economics and MA in economics in
international development.
You want to increase

shareholder value.
Your CFO believes
the only way is to
increase dividends.
Other managers
believe you should
reduce dividends and
re-invest profits.
Think you can find an
alternative that works?
Think. You can.
Facing challenges makes
careers. On a Manchester MBA
youll work as a consultant on
live business problems. Youll
take electives developed in
partnership with industry and
professional bodies. Youll study
at our international centres and
enhance your global network.
Invaluable experience by any
standard. We offer ACCA
members exemptions on our
Accelerated Finance Pathway.
Meet us to find out why so
many of our MBA graduates go
on to work as finance directors
or chief financial officers.
Original Thinking Applied

mbs.ac.uk/mba/events
68
PEOPLE | THE CHALLENGE
From football to finance

Continuing our series on ACCA members facing career challenges, Robert Mutchell
FCCA, CFO of BP Ventures, talks about making the switch from football to finance
education, he says. Thats

one of the best things about
football the focus is on it
being a short career.
Trainees were expected
to complete their education
on day release but, rather
than study sport, Mutchell
took a BTech in business
and finance, and studied for
A-levels in the evenings.
Everyone else did their
college on a different day so
Follow the dream but dont

neglect your education.
TIPS
Career challenges are

nothing new to Robert
Mutchell, who switched
from being a professional
footballer to a finance
professional. The challenges
he has faced have arguably
been greater since he hung
up his boots, but the lessons
he learned at an early
age have stayed with him
throughout his career.
Now the CFO of BP
Ventures and head of finance
at BP Alternative Energy, he
faced his first big decision
when only 15: he had been
scouted by Oxford United
and was training with them
at weekends and holidays,
but he had also reached the
finals of the county tennis
championships.
On the day before the
final, a phone call came from
Oxford to say we had a youth
team match against Aston
Villa the next day, he says. I
went to the match and didnt
pick up a racquet again for
another 15 years.
As an apprentice at
Oxford, Mutchell came under
the guidance of youth team
coach and future England
manager Steve McClaren and
learned some early lessons
in career-building: He used
to disappear for a week and
then come back and say
hed been at Inter Milan, so
wed all be doing drills like
Inter Milan. You understand
how someone can go from
being journeyman player to
England manager when you
see how they utilise people
they know in the game.
Even back then Mutchell
was looking to the future.
My parents said follow
the dream but at the same
time make sure you get an
*
*
*
Use what differentiates you to get

noticed.
Network and understand other
peoples worlds.
Dont be afraid to take a chance.
ONCE YOU START THOSE EXAMS IT LEADS YOU IN.

I HAD A THIRST AND A DESIRE, AND I WAS INQUISITIVE
ABOUT HOW THE BIG BOYS DID IT
Id be the only apprentice
in on Thursdays, he recalls.
I had to clean all the boots
and put all the kit out and do
all theother jobs before the
pros came inthe morning.
Mutchell played
professionally for five
years, moving from Oxford
United to Barnet before
becoming semi-professional
at Stevenage, whichallowed
him to further develop his
financial career.
Golden opportunity
I was in the dressing room
one dayand someone from
the Footballers Further
Education and Vocational
Training Society came in, he
recalls. They basically said,
Wevegot 50mto fund the
education of professional
footballers and we cant give
it away: whether youwant to
fly planes, drive trains orbe
an accountant weve got
funding available.
A family friend steered
him towards ACCA, he
recalls. I said, I would love
to be a footballer until my
mid-30s and I think Ive got
commercial and business
acumen, but Im not sure
what I want to do. He said,
If you are comfortable with
numbers and enjoy business
theres really nothing better
than trying to qualify as an
accountant. A lot of business
leaders come from that
background and it will open
doors when you come out of
the game.
He went part-time at
Stevenage to do some work
experience before becoming
audit junior at Leedhams
and then audit senior at
Jerroms, where he gained
his ACCA Qualification in
1998. That gives you a
fantastic grounding and an
understanding of how it all
works, he says. But once
you start doing those exams
it leads you in. I had a thirst
and a desire, and I was
inquisitive about how the big
boys did it.
A speculative approach
to KPMG Birmingham
proved successful, after

a partner was impressed
by Mutchells interesting
background andeducational
achievements.
That was when the
football began to drift off a
bit, he says. It was a great
period in my life because I
was still playing good-level
sport but at thesame time
building a career.
After three years the
opportunity came to move
to Abu Dhabi for three
years working with the oil
industry. Playing football
even part-time was no longer
an option, but the skills
still proved useful for social
games with local clients,
most of the local KPMG
partners being cricket fans
fromPakistan or India.
I learned the pidgin
Arabic for shoot, pass, left
and right, he says.
Working in a small office
broadened his experience,
but Mutchell was looking
forward to getting back into
the thick of it in the UK. But
THE CHALLENGE | PEOPLE
69
another decision point came

when BP decided to begin
its Sarbanes-Oxley project
just as Mutchell was due to
return to the UK.
Up to that point I had
been thinking, am I going to
be a partner atKPMG? he
says. I think I had my head
turned by the culture of BP.
Moving to oil giant BP
in 2005 brought him closer
to business, but then he
faced his biggest challenge:
breaking out of financial
control into a leadership role.
It was a steep learning
curve. I had to immerse
myself in the technical and
commercial aspects of the
business very fast, working
out how best my financial
control and accounting
background could add value
to the strategic direction of
the business.
Branching out
Mutchells response was to
take on extra projects such
as becoming BPs graduate
recruitment representative at
Birmingham University.
All of a sudden youve got
to network to understand all
these different roles in BP
because the graduates are
asking you about that, he
says. Then later when you
get an opportunity you can
demonstrate you understand
the challenges and the risks
because you are talking the
language of the people that
are interviewing you.
Mutchells efforts paid
off when he was nominated
for BPs career acceleration
programme. After becoming
financial manager of BPs
corporate venturing unit, he
broadened his commercial
role by working with the
innovative companies in
which BP invests.
In BP the roles can
be very narrowand deep,
but this is broader: one
day youll be dealing with
budgets and forecasting,
and the next youll besitting
on a board as a non-exec,
he says.
Mutchell also has his
own team to encourage:
If people tell me they
arent sure they can do
something, I say give it a

go. As opportunities arise I
encourage my team to step
into roles that challenge
them. If its not something
that they enjoy or where
they can excel, then we

always have our qualified
accountant background to
fall back on.
Mick James, journalist
72
ACCA | NEW MEMBERS
Celebrating membership
Three glittering ceremonies were held across the UK to welcome new members
and give them the opportunity to learn about the benefits of membership
In 2013 over 3,000 members
qualified with ACCA in the
UK. Achieving membership
is a momentous stage in
anyones career and well
worth celebrating.
In recognition of their
success, ACCA held three
ceremonies across the UK to
honour new members in the
company of friends, family
and peers. Each event also
provided a great opportunity
for our newest members to
learn about the benefits of
membership and consider
their future options.
The ceremonies
commenced in Cardiff on
10 October, where 100
new members and guests
attendedthe event at the
St Davids Hotel and Spa.
The guest speaker was Ray
Hurcombe FCCA, chief
executive of Ty Hafan, who
gave an inspiring speech
about his career in finance.
The spotlight moved to
Edinburgh on 7 November,
where 115 members and
guests gathered at the George
Hotel. Faith Simpson, from
Faith Simpson Accountants
shortlisted for Scottish
Female Entrepreneur of the
Year 2013 gave a humorous
speech about her journey into

membership and the benefits
of a successful career in
accountancy.
Finally, Londons
Dorchester Hotel provided
the venue for the gathering
of 425 new members and
guests from across England
and Malta on 4 December,
where Stephen Brown FCCA,
CFO of the Rugby Football
Union, gave an enlightening
and inspirational story about
how ACCA has supported his
personal journey to one of
the most senior jobs in sports
administration in the UK.
At each ceremony ACCA
deputy president Anthony
Harbinson spoke briefly
about the benefits of
membership and how it can
support new members.
Our 2014 programme of
new member ceremonies is
currently being developed.
Look out for details via our
website and direct to you via
email during the summer.
Every members story is
different. Why not share your
experiences of membership
and why you are proud to
be an ACCA member on
Twitter using the hashtag
#ACCAProud.
I WOULD ENCOURAGE
FUTURE NEW MEMBERS TO ATTEND
SUCH AN EVENT AS IT IS A GREAT
OPPORTUNITY TO CELEBRATE WITH
FELLOW NEW MEMBERS AND BE
INSPIRED BY ACCA STAFF WHO
MAKE YOU REALISE THAT SO MANY
OPPORTUNITIES ARE AVAILABLE
CRAIG O'DONNELL ACCA
'I AM PART OF A GLOBAL

PROFESSIONAL BODY AND I CAN
NOW WRITE ACCA AFTER MY NAME,
WHICH GIVES ME RECOGNITION
WORLDWIDE AAROHI SHAH ACCA
HELP WITH YOUR CAREER
To take the next step in your career, visit ACCA
Careers to browse the latest vacancies and read
guidance on how to prepare a CV/covering letter
and for job interviews. www.accacareers.com/uk
ACCA MEMBER BENEFITS

If you want to understand more about the many
benefits of ACCA membership visit our website,
where you can browse The benefits of ACCA
membership brochure, view a selection of FAQs and
watch a short video, all at www.accaglobal.com/
memberbenefits
SCOTLAND
Members and guests

celebrate at the George Hotel,
Edinburgh. Guest speaker was
a shortlisted Scottish Female
Entrepreneur of the Year
ENGLAND
The Rugby Football Union's

CFO addressed 400 attendees
at the London gathering
NEW MEMBERS | ACCA
73
WALES
St David's Hotel and Spa was the venue for the

gathering in Cardiff, attended by 100 people
We continue our quarterly listing of new ACCA members, here showing those who
achieved membership in the last three months of 2013. Congratulations to all!
Abdullah Hasan Ali Al
Haddad
Aamir Majeed Khan
Oluwatoyin Abatan
Hadiza Kakati Abba
Gana
Abdul Majeed
Julie Abraham
Alan Adams
Ashleigh Adams
Sarina Adams
Adejare Moses Adeniji
Adebowale Sola
Adeyemi
Sarah-Jane Adisi
Jocelyn Adlington
Anne Adedoyin
Agbedahunsi
Wederly Aguiar
Asad Ahmad
Afzal Ahmed
Muddasar Ali Ahmed
Syed Masum Ahmed
Gulay Akbas
Temidayo Isaac Akinlade
Mohammed
Abdulraheem Hasan
AL Kubati
Fawwaz Ali
Duncan James Anderson

Rea Andrews
Anne Perveen
Abimbola Anthony
Danish Arif
Olaniyi Ariyibi
Jacqueline Armstrong
Rishi Arora
Grace Yvonne Arthur
Lovely Ashaiku
Dean Ashton
Rachel Ashton
Helena Auld
Sarah Austin
Sheenagh Jeanette
Austin
Olamide A Ayemowa
Olusola Abayomi
Babalola
Badar Tanwir
Samantha Badman
Samuel Bailey
Martin Ball
Simon Ball
Allister Vaughan Bannin
Matthew Stephen Bath
Stefan Battrick-Newall
Jonathan Bayliss
Sarah F Beauvalet
Amy Bennett
Christopher Bennett
Mark Bennett
Elodie Besson
Xiaoru Bi
Adedayo Bidmus
Laura Bilcliff
Catherine Black
Alan Blackhurst
Mark Graham Borking
Katarzyna Borkowska
Denice Boudry
Binaebi Bozimo
Leigh Brabender
Graeme Bradford
Andrew Brawley
Sally-Ann Bray
Kaye Briscoe
Helen Brook
Richard Brooks
Joseph Brough
Robert Brown
Ryan Browning
Laurie Bruel
Matthew Brummitt
Tanya Nandita Bundhoo
Hayley Burbeary
Fiona Burgess
Anna Busko
Ria Jennifer Caines

Sarah Calladine
Joe Callow
Amanda Caranese
Nuha Ceesay
So Yeon Chae
Peter Chan Sui Hong
Stephen Chang
Kush Channa
Kathryn Chapman
Rebecca Charlesworth
Shomuz Chaudhury
Jenny Cheung
Keith Chikopa
Mwila Chisabingo
Aman Chohan
Jurun Choudhury
Dagmar Cikelova
Stephen Clark
Luke Collins
Stuart Connolly
Mark Cordwell
Hannah Costar
Natalie Cousins
Christopher Cowburn
Emily Coy
Hayley Crainie
Simon Craske
Ben Crouch
Mohammad Rafey
Dahar
Liam John Daines
Mohammed Dalal
Mamta Keval Dattani
Christine Daultrey
Nila Dave
Carmel Davey
Rachael David
Philip Davies
Ashley Davis
Mark Alan Davis
Glen Dawson
Manisha Dayalji
Kevin De Silva
Jennifer Joan Dean
Garinder Singh Deol
Jaymina Desai
Claire Devlin
Sharsha Raeeza
Dharamsi
Isha Dhot
Andrew Dickinson
Vaneeasha Dindyal
Jennifer Doran
Maharshi Doshi
Mohit D Doshi
Barbara Down
Lindsay Druckman
74
ACCA | NEW MEMBERS
Luke Dryden
Sylwia Dulczewska
Kirsty Duncan
Alison Hunter Dunsmuir
Laura Dyer
Adam Antony Dynowski
Malik Earle
Andrew Easby
Patrick Eastabrook
Sinclair Nnenna Ebeh
Jamie Edge
Chloe Elizabeth Edwards
Chinua Ejem
Anna Elagina
Max Ellis
Rachael Ellison
Rachel Ellison
Nikola Elsworth
Forji Emmanuel
Atemnkeng
Nicholas James Epton
Rhodri Evans
Farida Murtaza
Abdulhussein
Laura Michelle Farley
Adam Farmer
Amanda Farrell
Peter Fauchon
Ivan James Ferguson
Lesley Jean Finlayson
Louise Fioretti
Scott Fisher
Karolina Fledrzynska
Elena Carla Florescu
Sunita Fokeerah
Angela Forrest
Michael Fortune
Luca Frascone
Kristina Fraser
Herve Patrick Fromageot
Kay Louisa Stewart
Frost
Gloria Gahan
Neshal Galsinh
Anna Ganjolla
Susan Gannon
Daniel Gardner
Joy Garrould
Michele Garside
Dilyana Ivanova
Georgieva
Victoria Giles
James Reginald Gleeson
Alison Glennie
Ebere Eileen GogoKurubo
Ruth Going
Krishnan Gola
James Minis Gomez
Andrea Gorbea
Karen Gould
Jonathan Goulding
Patrice Gras
David Grassby
Joanne Green
Luke Green
Tamara Jillian Gregorio
David Robert Gregory
Suren Grigoryan
Kirsty Jayne Grimes
Lin Gui
Karan Gulati
Lala Habibzade
Ermias Habtay
Lynne Victoria Hadden
Ayesha Hafeez
Katie Hale
Hammad Karim
James Hampton
Darren Hancock
Kay Elaine Hardesty
Frank Harling
Fiona Harrison
James Harrison
Madeleine Harter
Samantha Lorraine
Harvey
Daniel Hedges
Donna Henry
Robin Hetem
Katie Hickson
Daniel Hill
David Hill
Martin Hill
Samantha Louise Hill
Lindsey Hills
Claire Louise Hillsdon
Clive Himsworth
Felicia Hing
Max Hoare
Sarah Hodgett
Anna Holt
Matthew Hotham
Martin John Howarth
Maria Howell
Chun Yang Hu
Jing Hu
Michael Graham
Hubbard
Phillip John Hughes
Joanne Carole Hulse
Alexander Humphries
James Humphries
Sunnia Hundal
Dilwar Hussain
Imtiaz Hussain
Khalil Hussain
Qasim Hussain
Kayleigh Hutchings
Andrew Huxley
Sayuri Ikenouchi
Glenda Inocencio
Matthew Irvine
Nargis Islam
Ojiugo Iweha
Debra May Jackson
Risha Jain
Ganeshan Jeganthan
Claire Jennings
Debra Jayne Jevons
Irena Jevtic
Marie-Louise Johnson
Mark Johnston
Mark Anthony Johnston
Kelly Jones
Luke Jones
Nadine Jones
Sian Jones
Cynthia Shormey Jordan
Dipen Joshi
Ranjaka Kaggoda
Arachchy
Anna Kalinina
Kazim Kanani
Mariya Kaneva
Komal Kapadia
Aneta Kardas
Natalia Kaygorodtseva
Victoria Keefe
Iain Richard Keen
Jessica Ann Keetch
Lucy Keir
Eamon Kelly
Francesca Kelly
Sarah Kelly
Sarah-Jane Kemp
Khalid Hafeez Bhatti
Uzair Khan
Nadia Khatoon
Nina Khimani
Sabina Kiladejo
Ben King
James King
Mark King
Claire Kinman
Alex Kirk
Hazel Kirk
Anthony Kirwan
Lovely Nidhi Kohli
Oleg Kononov
Chris Korten
Agnieszka Kosacz
Iro Maria Kourea
Zakakiotou
Jaspal Singh Kunner
Jason Kyte
Shruti Lakhani
Haeso Amawa Komla
Lakte
Olivia Lancaster
Patrick Laney
Adam Law
Olga Leach
Simon Christopher
Leach
Samantha Lefevre
Wendy Leightley
Annie Leonard
Neil Stuart Leonard
Fan Li
Helen Li
Jinwei Li
Stella Wing Hin Li
Lim Bee Ling
Tom Lind
Melissa Littlewood
Yiqing Liu
Christian Benjamin
Lloyd
Gemma Elizabeth
Lloyd
Ian Lloyd-Jones
Emma Lockett
David Lomas
Alfonso Lopez
Michael Luck
Katarzyna Lucka-Ott
Priscilla Luk
James Christopher Lum
Fahim Mohmed Lunat
John Macgregor
Macdonald
Angus Duncan
MacGillivray
Emma Mackrell
Pratik Madhani
Meghna Mahatma
Vaibhav Mahindru
Shezad Mahomedali
Jue Mahoney
Cynthia Muoti Makau
Mahesh Pahalaj Makhija
Nathalie Malanda
David Christopher
Mallagh
Joyce Anne Martin
Olufunso Oladeinde
Martins
Natalie Marie Mascall
Lorna Masika
Karen Masose
Dominic Mayes
Edward H McAdam
Claire McArdle
Craig Mcavinue
Graeme McClure
Thomas Mcdonald
Conor McHugh
Margaret McLaughlan
Craig Mcveigh
Dawn Louise Meikle
Lisa Mellon
Bruna Menegatti
Sajjad Ali Merali
Hisham Merchant
Aimee Miller
Ashley Miller
Ryan Millward
Andrew Stephen Minifie
Sarah Frances Minty
Nainesh Mistry
Brian Mitchell
Katherine Mitchell
Mohamed H Mohamed
Nizam
Mohsin Shahid
Mahmood
Graham Monnier
Shaun Mooney
Nicholas Moran
Roli Faith Mordi
Hayley Morgan
Joceline Ayako Morley
Rebecca Morris
Sarah Morris
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76
ACCA | NEW MEMBERS
Hayley Morrissey
Oluwafunmilola
Benedicta Mosaku
Shaun Muller
Shafie Mussa
Gerhard Myburg
Lence Nakeva
Jude Wamulo Nampala
Romas Narmontas
Alexander Nawrat
Alexandru Ionut Neagu
Angela Jane Neale
Angela Negru
Melanie Nel
Paul Robert Netto
Ben Newbury
Nicholas Newton
Guido Mlibazisi
Ngandu
Kim Thien Nguyen
Alex Nicholson
Shaun Nixon
John Patrick Norman
Nabil Norris Halani
Kevin Norton
Nicholas Oakley
Yamoah Obeng
Vivekanand Obheegadoo
Rosaleen OCallaghan
Carl OConnell
Hira Odedra
O Temilade Ogedengbe
Olutosin Omowunmi
Ogunnusi
Oluwatosin Ojo
Yetunde Christianah
Okele
Stephen Ochieng Okelo
Joseph Gbemi Olawoye
Afolake Oluwakemi
Olufeko
Peter Anuro Onyango
Daniel Oram
Antonella Orecchioni
Olubukola Olabisi
Orowole
Alexander Oseji
Michael O Oshosanwo
Andrew James
OSullivan
Lucy OToole
Tolulope Ayedun
Otufowora
Georgietta Oyebode
Christopher Page
Gregory John Pamment
Rohit Suresh Pankhania
Ekaterina Panshina
Klara Papp
Sarah Parker
Mark Partridge
Gitesh Patel
Hiral Patel
Jayesh Patel
Neelum Patel
Priyanka Patel
Roshni Patel
Roshni Patel
Tejal Patel
Viren Patel
Zainool Patel
Jemma Patstone
Louise Pattison
Daniel Peach
Sharon Peevor
Amy Penstone-Smith
Olena Perebyynis
Achila Ruvini Perera
Tracy Peterson
Galya Petrova
Kaluba Phiri
Dominic Trevor Piearce
Justyna Pietrzyk
Deepthi Pindoria
Rachel Plumb
Silvia Podolska
Ket Yin Ashley Poon
Shilen Popat
Seren Prendiville
Michelle Louise Presland
Jane Catherine Price
Matthew Price
Sarah Louise Proctor
Prishnee Purhooa
Muhammad Qasim
James Quinn
Raayan Zafar
Hiten Rabadia
Aiysha Rahim
Annabel Rapinett
Behnaz Rayati
Andrew Rees
Muhammad Riaz
Nina Richardson
Sharene Ricketts
Victoria Jane Rimell
Paul Ripsher
Edward James Roberts
Jasmine Roberts
Paul Robinson
Robert Rodzoch
June Elizabeth Rogers
Hayley Ronan
Rong Xing
Cassandra Rose
Samantha Rose
Colette Rowbottom
Daniel Rowland
David Roy
Jelena Rsumovic
Dilan Ruparelia
Lilia Rusu
Phillip Rutherford
Kimberley Ryalls
Shazia Sadiq
Amy Saklatvala
Michel Salomon
Maria Eloisa Sanchez
Paula Sanchez
Camargo
Olga Sands
Sarfraz Ali
Lucy Saunders
Sarah Saywell
Laura Searle
Seekhu Khalid
Mahmood
Joelle Sandra Serret
Sheku Sesay
Anjni Shah
Darshil Shah
Manasvi Shah
Meera Shah
Miran Shah
Shamas Ul Haq
Adnan Shan
Deepa Sharma
Jagrut Sharma
Kapil Sharma
Martin Peter Shave
Charis Shaw
Philip Sheen
Sheraz Ahmad
James Shippey
Christopher Short
Brenda Shrewsbury
Alexandra Miriam
Sibborn
Safila Sichone
Amardeep Singh Sidhu

Shivali Sikka
Matthew Silton
Daniela Simkova
Stuart James Simon
Matthew Simpson
Tina Prisca Sinihelm
Tatiana Slutu
Daniel Smith
Shaun Smith
Marion Ann Soave
Laura Jane Sparks
Katherine Spooner
Steven Starbuck
Craig Stearn
Anna Stevens
Michael Stroud
Kerry Studden
Alan Chaim Style
Jack Sully
Jonathan Sutcliffe
Olena Sutherland
Andrew Sutton
Nicola Sutton
Alex Tarvin
Andrew Robert Taylor
John Taylor
Karen Ann Taylor
Isabelle Ngekep
Tchombe
Kishan Teli
Dipali Thakkar
Bhavesh A Thakker
Amrik Thethi
Donna Louise
Thompson
Graeme William
Thompson
William Thompson
Zsolt Tildy
Joe Tipton
Sarah-Jane Tolan
Mike Toone
Gemma Townsend
Richard Treadaway
David Treasurer
Sarah Treeby
John David Truman
Phuong Nga Truong
Charlotte Tupling
Jack Turley
Joe Turner
Vicky Turrell
Tarak Uddin
Dhanya Vamadevan
Nilesh Varsani
Agnieszka Veasey
Bethan Vong
John Wager
Bibhuti Wagle
Emily Walker
Lisa Walker
Dominique Waller
David Walsh
Mark Warne-Smith
Jonathan Watt
Steven Thomas Webb
Clare Ann Webber
Niran Chandrika
Weerasinghe
Kathryn Welsh
Louise Welsh
Jing Wen
Rebecca Westgarth
Anna Wheeler
Danielle Whitaker
Rebecca Whitaker
Dawn Whittington
Gemma Wickens
Alexander Wilkie
Emma Lisa Wilkinson
Daniel Williams
Eloise Williams
Kerry Williams
Matthew David
Williams
Osian Tomos Williams
Trevor Barry Willock
Michael Wilson
Thandar Win
Cindy Kin Yee Woo
Donna Wood
Michael Woodington
Jamie Lee Wright
Janice Wylie
Beth Xu
Xiaojuan Yan
Liu Yang
Yue Yang
Shabina Yasmin
David Yeates
Muhammad Ahmed
Younus
Alicja Zajac
Donka ZanevaTodorinski
78
ACCA | RULEBOOK
Bye-law and regulation changes

ACCAs Ian Waters outlines the main changes to the ACCA Rulebook that
have come into force this year, simplifying and enhancing the regulations
Significant changes have
been made to the ACCA
Rulebook, and these take
effect from 1 January 2014.
During 2013, extensive
changes have been agreed,
having undergone due
process. Many of the
changes have been made
with the objectives of:
simplifying the
regulations so that they
are easier to navigate,
giving them better
structure and clarity
using plain English
wherever possible
enhancing consistency
across the regulations
consolidating the
interim orders provisions
(previously within the
Authorisation Regulations
and the Complaints and
Disciplinary Regulations
(CDRs)) into a new set of
regulations, the Interim
Orders Regulations.
At its AGM, members of
ACCA also approved changes
to ACCAs bye-laws.
*
*
*
*
Section 1 Royal
charter and bye-laws
Most of the changes to the
bye-laws have been made to
enhance clarity, including
clarity that ACCA can
determine the geographical
seat of any disciplinary
proceedings, and that
the law of England and
Wales applies to the
contractual relationship
between ACCA and its
members, students, etc. In
addition, the changes:
ensure that a former
member or member firm
is contractually liable to
pay amounts due arising
from disciplinary action
brought in respect of
matters that occurred

while still a member or
member firm
simplify the impact
of criminal offences
committed outside the
UK and civil proceedings
taking place outside
the UK
clarify the obligation to
inform ACCA of matters
that might indicate
liability to disciplinary
action, including matters
relating to oneself
enable ACCA to bring
disciplinary action more
than five years after the
relevant person ceases
to be a member, relevant
firm or registered student,
where it is deemed to be
in the public interest.
Section 2 Regulations
Membership Regulations
Changes to these regulations
provide clarification that:
many provisions within
the Authorisation
Regulations apply
to aspects of the
Membership Regulations
details of a decision to
withdraw an individuals
membership, affiliate
or registered student
status following a
bankruptcy event (or
to attach conditions to
membership, affiliate or
registered student status)
may be published.
There are enhancements to
clarify service requirements,
and specifically to permit
service by email.
Finally, amendments
have been made in
respect of the mutual
recognition agreement
with the Malaysian
Institute of Certified Public
*
*
Accountants, which was

renewed in late 2012.
Global Practising
Regulations
A new annex has been added
to the Global Practising
Regulations. Annex 6
addresses the requirements
of the South African
Revenue Service in order
for ACCA to be a controlling
body for registered tax
practitioners.
Regulatory Board and
Committee Regulations
In this set of regulations,
specific situations affecting
an individuals suitability
to remain as a committee
member, assessor or legal
adviser have been identified
in regulations 4(4) and 4(5),
including Mental Health Act
provisions.
Provisions have been
included setting out the
constitution of Interim
Orders Committees and
Health Committees. A
panel member is prohibited
from sitting on a Health
Committee considering the
relevant persons fitness to
participate in the appeal
process if the panel member
was a member of the
committee that determined
the case at first instance.
As explained earlier, all
references to interim
orders have been removed
from these regulations
and the CDRs, as they
now appear in the Interim
Orders Regulations. The
and the CDRs also make
provision for health matters
and the power to refer to a
health hearing.
In order to gain
consistency between these
regulations and the CDRs,

regulation 6 now carries
appropriate provisions
with regard to notice of
hearings, the submission of
information by the relevant
person and amendments
to allegations. With regard
to publicity, regulation
6(12)(b), in respect of the
publication of directions and
conditions imposed upon an
adjournment, is a provision
analogous to the CDRs.
In addition, there is now
provision for appropriate
publicity whenever a relevant
person relinquishes his
certificate before a hearing
takes place.
Other changes to highlight
include the following:
Regulation 3(2)(f)
explains the admissibility
of evidence, including
the appropriate evidence
arising from earlier civil
or criminal proceedings.
Regulations 3(5) and
6(16) provide that
written reasons should
usually accompany a
written decision or notice
of orders.
Regulation 8(2) provides
for the Admissions and
Licensing Committee to
amend, vary or rescind
an order, to the advantage
of the relevant person,
where new evidence
comes to light which
fundamentally invalidates
the same, eg where an
order is on the basis of a
criminal conviction that is
subsequently overturned.
(Similar provisions have
been included within the
CDRs and the Appeal
Regulations.)
Regulation 11(2)(f)
represents a change
RULEBOOK | ACCA
to the effective date of

service in respect of
service by email.
Complaints and Disciplinary
Regulations
Regulation 9(1) itemises the
requirements of a notice
to a relevant person. It also
requires the relevant person
to notify ACCA of whether
he intends to attend the
hearing, call witnesses,
etc. Regulation 9(3) details
the case management
provisions.
Regulation 12, in respect
of orders and sanctions,
notes that the Disciplinary
Committee must start by
considering the least serious
disposal first. It has also
been amended to reduce the
upper limit on compensation
to a complainant to 1,000.
Such compensation is
intended to reflect any
inconvenience suffered by
the complainant as a result
of the relevant persons
failure to observe proper
standards, rather than
any claim for damages
recoverable in legal
proceedings.
The regulations have been
amended to provide much

more information concerning
matters that are rested on
file. Other changes to note
include the following:
A relevant person will, in
future, usually be named
in pre-hearing publicity.
Former members,
former affiliates and
former students may
be required to go to the
Admissions and Licensing
Committee in the case
of an application for
readmission.
There is a new regulation
concerning consequential
orders (regulation 13).
Regulation 16(2)
provides that written
reasons should usually
accompany a written
notice of findings.
Regulation 21(2)(f)
represents a change
to the effective date of
service in respect of
service by email.
Appeal Regulations
Many of the changes to
these regulations are
consequential changes as
a result of the new Health
Regulations. Consistent with
*
*
*
*
*
other sets of regulations,

there are also amendments
in respect of the provision
of written reasons, the
naming of the appellant
in pre-hearing publicity,
and service by email. In
addition, regulation 13(2)(b)
provides that an application
for costs to be recovered
from the appellant may, by
agreement, be considered
without a hearing.
Interim Orders Regulations
Hearings of the Interim
Orders Committee
(including review hearings)
will, ordinarily, take place
in private. However, the
committees decisions are to
be published.
Health Regulations
This new set of regulations
brings together the
regulations concerning
a members ability to
participate in proceedings.
Health hearings are to take
place in private, unless the
relevant person applies for
79
a hearing in public and the

Health Committee grants
the application. All orders
will be published.
Section 3 Code of
Ethics and Conduct
ACCAs Code of Ethics and
Conduct has been amended
in order to implement
changes to the International
Ethics Standards Board
for Accountants Code of
Ethics for Professional
Accountants. These changes
are primarily concerned with
conflicts of interest and
breaches of requirements of
the code.
A change to the
Insolvency Code of Ethics
has been effected to reflect
the requirement that a
member shall observe the
code, while retaining a
principles-based approach
within the code itself.
Ian Waters is regulation and
standards manager, ACCA
ACCAs Rulebook can be viewed at

www.accaglobal.com/rulebook
80
ACCA | COUNCIL MEETING
Council highlights
The last meeting of 2013 heard reports from International Assembly members and FEE
president Andr Kilesse, while ACCA future strategy featured prominently on the agenda
Councils final meeting
of 2013 took place at 29
Lincolns Inn Fields on 23
November, following on
from the annual meeting
of ACCAs International
Assembly. Assembly
members Ahmad Darwish
(UAE) and Roy Tsang (Hong
Kong) were invited to give
reports to Council on the
outcomes of the Assembly
meeting, focusing on the
discussions around ACCAs
future strategy.
Council was also pleased
to welcome Andr Kilesse,
president of FEE (the
European Federation of
Accountants), who gave a
wide-ranging presentation on
FEEs views on audit, public
sector and tax policy, and
the importance of SMPs for
FEE and ACCAs involvement.
A number of other
matters were debated at the
meeting on 23 November.
Council considered the
regular report of the
chief executive covering
a number of strategic
developments both within
and outside ACCA and
developments in key
markets. The report also
included an overview of
ACCAs performance in
the year to date, including
a financial summary.
Council approved a
global policy for ACCA
on taxation. Taxation is
and will remain high on
the agendas of policy
makers, businesses and
professional advisers
around the world. It is
therefore timely that
Council should adopt
a number of guiding
policy principles which
can be used as the basis
for ACCAs position in
the public debates on
principles and practices.
It also supported a
recommendation from
the Governance Design
Committee regarding
an outline package
of changes to ACCAs
public interest oversight
arrangements, including
a related timetable. Full
developed proposals will
be brought to the next
Council meeting in March.
member Japheth
* Council
Katto gave a presentation
to Council on his term on
the board of IFAC and the
future challenges facing
the organisation.
In other business, Council
agreed a timetable for
choosing its preferred
nominee for vice president
in 2014-2015. 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.
The meeting closed with a
three-hour session devoted
to discussing and developing
ACCAs strategy to 2020.
Leading futurologist and
scenarios expert Magnus
Lindkvist gave a thoughtprovoking talk on the
emerging trends and how they
shape strategy development.
Chief executive Helen
Brand introduced ACCAs
draft strategy to 2020.
Council members then broke
into discussion groups to
debate the draft strategy.
GLOBAL MATTERS
Japheth Katto talked about his

term on the board of IFAC
The next Council meeting
will take place in Dubai on
13 March, as part of the
biennial series of meetings
held in markets of key
importance to ACCA. A
number of stakeholder
engagement events will be
held around the meeting,
which will be followed by
visits by smaller groups of
Council members to other
countries in the region.
HOW WILL YOU SOURCE CPD IN 2014?

One of the big advantages of ACCAs CPD policy is that it includes all types of learning,
provided that the learning you identify is relevant to your role. You may have not even
considered some potential sources of CPD.
Professional forums offer networking opportunities with people who share your interests
and objectives. Its a place where stimulating discussions on recent developments occur
and learning from these can contribute towards your CPD. ACCA has a number of official
social media platforms that could offer you verifiable or non-verifiable CPD, depending on
how your learning is applied. For examples of how learning can become verifiable CPD, visit
the Keeping CPD Evidence section of Managing your CPD at www.accaglobal.com/cpd.
Find us on LinkedIn or Twitter to connect with fellow members and get daily updates on
the range of CPD opportunities, including the most up-to-date online articles. You can also
use My Development (www.accaglobal.com/cpd) to find e-learning opportunities that will
allow you to learn when it suits you. If you are a new ACCA member, you can use the CPD
i-guide to learn more about your CPD requirements (http://cpdiguide.accaglobal.com).
82
ACCA
INSIDE
ACCA
80 Council
November meeting
highlights
78 Rulebook update
Details of regulation
changes for 2014
72 New members
26 ACCA president
Integrated reporting
introduction shows
leadership
50%
Percentage of
a global survey
of 1,300
employers who say ACCA
is the leading global
professional accountancy
body in terms of
reputation, influence and
size. Find out more about
membership benefits at:
www.accaglobal.com/
memberbenefits
ABOUT
ACCA
ACCA is the global
body for professional
accountants.
We aimto offer
business-relevant,
first-choice
qualifications
to people of
application, ability
and ambition around
the world who seek a
rewarding career in
accountancy, finance
and management.
We support our
162,000 members
and 428,000
students throughout
their careers,
providing services
through a network
of 89 offices and
active centres.
www.accaglobal.com
Integrated reporting first

Building on its reputation for innovation, ACCA will introduce
integrated reporting into its qualification from December 2014
ACCA has become the
firstglobal accountancy
body to introduce
integrated reporting into
itsqualification.
Students will be
examined on integrated
reporting for the first time
when it is introduced into
the ACCA Qualification from
December 2014.
It follows the launch of
the International Integrated
Reporting Councils new
framework in December.
Alan Hatfield, director

of learning at ACCA, says:
ACCA has a history of
innovation and anticipating
trends. We were the first
professional accountancy
body to examine in
International Financial
Reporting Standards and the
first, in 2000, to examine on
the framework of GRI, the
Global Reporting Initiative.
We continue to enhance
our syllabus on a regular
basis to ensure that
ACCA members are at the

forefront of good practice.
This means that we can
be confident that ACCA
members are complete
finance professionals,
equipped with skills to work
in all sectors.
This change resonates
well with ACCAs
core values, such as
opportunity, innovation and
accountability.
More on pages 26, 36
and 49.
SAY HELLO TO THE CFTO

Greater reliance on technology could see the
rise of the chief financial technology officer
(CFTO) in 2014. This was the message of this
years CFO Month, an annual initiative of ACCA
and IMA (Institute of Management Accountants)
that champions the CFO role.
Cybersecurity, cloud technology, virtual
and augmented reality, digital service delivery
and even artificial intelligence and robotics are
featuring more and more in business strategy,
said ACCA chief executive Helen Brand. We
could see the rise and rise of the CFTO as a regular seat on the board.
ACCA and IMA also collaborate on RoleofCFO.com (pictured here), the website for all
things CFO. For more on the rise of the hybrid role, turn to page 24.
DUBAI DATE FOR COUNCIL

ACCAs Council, comprising senior members from
around the world, will hold its annual meeting
this March in Dubai. Additional meetings will
be heldin Bangladesh, Oman, Pakistan and Sri
Lanka to further relationships and partnerships
acrosstheregion.
Issues will include the demand in the Middle East,
North Africa and South Asia (MENASA) region for
complete finance professionals accountants who can
work all along the financial value chain and are well
placed to be strategic leaders, ensuring organisational
stewardship and compliance. Developments in
corporate reporting and women in finance will also
behigh on the agenda.
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THE MAGAZINE FOR FINANCE PROFESSIONALS
UK
DISASTER
RECOVERY
PHILIPPINE ACCOUNTANTS AND THE RELIEF EFFORT
FROM FOOTBALL TO FINANCE

PROFESSIONAL PLAYER TURNS CFO
ECONOMICS THE END OF EASY MONEY?
BRIBERY THE TRUE COSTS FOR SMEs
ACCA RULEBOOK CHANGES

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ACCOUNTING AND BUSINESS UK 02/2014

THE CROWN ESTATE

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Accounting and Business is published monthly by Certified Accountant

24 Peter Williams Make

ISSN No: 1460-406X

ACCOUNTING AND BUSINESS

29 Lincolns Inn Fields

Audit period July

27 The view from Dave

Reading this magazine to keep up

32 Level playing field Are

49 IR nuts and bolts A

57 The view from Lindsay

36 Could do better Bob

61 Growth model The

38 World view Report

65 CV sparkle Make sure

72 New ACCA members

ACCOUNTING AND BUSINESS

Debenhams CFO Simon Herrick stepped

The Ministry of Defence must improve the

SPOT THE DIFFERENCE

Latvians learn to tell counterfeit euro banknotes

ACCOUNTING AND BUSINESS

Gravity starring George Clooney and

Facebook has banned new dating adverts

As Janet Yellen takes over as the next head of

In anticipation of the 2014 Winter Olympics this month in

ACCOUNTING AND BUSINESS

The Financial Reporting

The PRA said that its inquiry

tax payments related to

AUDIT REFORM AGREED

Vodafone has pledged its

A compromise audit reform

encouraged. Action will be

KPMG GLOBAL RESULTS

CHINA POISED TO TOP ECONOMIC LEAGUE TABLE