Accountancy Cyprus - June 2018 by The Institute of Certified Public Accountants of Cyprus

No. 131 | june 2018

icpac 57th Annual General Meeting

the ONLY way forward for cyprus DISTRICT POST OFFICE CY-1901 NICOSIA, CYPRUS

The Journal of the Institute of Certified Public Accountants of Cyprus

POSTAGE PAID LICENCE no.33 SEALED UNDER PERMIT no. 133 ΠΕΡΙΟΔΙΚΟ ΤΑΧΥΔΡΟΜΙΚΟ ΤΕΛΟΣ ΠΛΗΡΩΜΕΝΟ ΚΛΕΙΣΤΟ ΕΝΤΥΠΟ ΑΔΕΙΑ ΑΡ. 133 ΑΔΕΙΑ ΑΡ. 239

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cont e nts UNIC: Preparing Tomorrow’s Accountants Today Interview with Professor Petros Lois, Head of the Department of Accounting at the University of Nicosia

Detecting and Preventing Financial Statement Fraud By Ioanna Markidou

Managing Change By Michael Antoniades

46 48

Information: The Role of Technology By Jane Fuller

accounting & audit

50 54 56 60 62

Steering Through the Private Debt and NPL Storm By Renos Ioannides

Improving Cyprus’ Tourism Product and Increasing the Numbers By George Andreou

The Economy in Cyprus Wonderland By Savvakis C. Savvides

the Regulatory and Supervisory Landscape of the Cypriot Fund Industry By Demetra Kalogerou

Government Ministries in Cyprus to have their own Chief Financial Officers By Sumita Shah

economy

THINKING AHEAD

cover story

ICPAC: 57th Annual General Meeting Structural Reforms, Digitalization & Business Ethos are the way forward for Cyprus. Highlights of the addresses to the Institute’s 57th AGM, plus photos.

64 66

VAT and Reverse Charge in the Construction Industry: The Case for Article 11B By Panayiotis Panayi

The EU Anti-Tax Avoidance Directive (ATAD) By Marios Fokides & Stella Koustai

taxation Time for a More Aggressive Promotion of Cyprus as a Fund Jurisdiction Interview with Christos Vasiliou, Board Member, Deputy Managing Director and Head of Advisory at KPMG Cyprus

To Go Solo or Not to Go Solo? That is The Question! By Spyros Yiassemides

72 74

professional services

Issue 131 june 2018 Time for Governance to Take Its Rightful Place By Petros Florides

Promoting Good Governance

Interviews with Theresa Minnie, Head of Outreach, ICSA, and Panayiotis Marinou, Training Manager, Infocredit Group

78 80

Market Recovery is More Than a High-Rise Trend

Interview with Yiannis Misirlis, Founding Director, Imperio Group

ISSN 1450-2380

A New Era for Larnaca? By Antonis Loizou

real estate

business in cyprus

10 84

Modern Challenges in Mergers and Acquisitions By Constantinos Kypriotis

financial services

institute news

Working at the Intersection of Business, Experience and Technology Interview with Kyriakos Kokkinos, Executive Director - Business & Technology Consulting, PwC Cyprus

The Institute Council Marios Skandalis (Chairman) Stavros Pantzaris (Vice-Chairman) Maria Pastellopoulou (Secretary) Members Nicos Chimarides, Odysseas Christodoulou,Â Pieris Markou,Â Gabriel Onisiforou, Petros Petrakis, Savvas Poyiadjis, Spyros Spyrou, Demetris Taxitaris, Demetris Vakis, Christos Vassiliou, Karlos Zangoulos General Manager Kyriakos Iordanou Address 11 Byron Avenue, 1096 Nicosia, Cyprus

Mailing Address P.O.Box 24935, 1355, Nicosia, Cyprus Tel: +357 22870030, Fax: +357 22766360 e-mail: info@icpac.org.cy www.icpac.org.cy

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Editor-in-Chief Ninos Hadjirousos, FCA

The publication is prepared by

Managing Director George Michail General Manager Daphne Roditou Tang Media Manager Antonis Antoniou

professional news

In-house Editor-in Chief John Vickers Coordination Pan Charalambous Art Direction Anna Theodosiou Design Alexia Petrou, Marios Kouroufexis Marketing Executive Kevi Chishios

A Novel Idea

Antigone Modestou, CFO at Cyta, has written four novels

out of office

New Corporate Criminal Offences and UK Government Tax Legislation

The British High Commission, in conjunction with Institute of Certified Public Accountants of Cyprus (ICPAC) and HM Revenue and Customs (HMRC), organised a seminar in June to inform the Cypriot accounting community about the new UK Corporate Tax Law and forthcoming changes in UK Tax legislation.

Commercial Manager Neofytos Constantinou Contact us for advertising Pavlos Giorkas pavlos.giorkas@imhbusiness.com Tel: +357 22505555, +357 22505566, Fax: +357 22679820 Address 5 Aigaleo St., Strovolos 2057, Nicosia, Cyprus, P.O.Box 21185, 1503, Nicosia, Cyprus Accountancy Cyprus is published quarterly by the Institute of Certified Public Accountants of Cyprus and is sent free to all members if the Institute as well as to a large number of other persons, companies and organisations. The Institute can accept no responsibility for the accuracy of contributed statements or articles appearing in this publication and any views or opinions expressed are not necessarily endorsed by the Institute, its Council or by the Editors.

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THINKING AHEAD

By Kyriakos Iordanou, General Manager, ICPAC

Governance of PAOs: Time for a Rethink?

hen the President of the Institute, Marios Skandalis, spoke at ICPAC’s 57th Annual General Meeting about the necessity to adopt and apply more advanced models of governance, thus reflecting more advanced operational systems and models, he was not only referring to public and private sector organisations in general. He was also referring to ICPAC itself. Robust, compact and effective governance is fundamental and must exist in an environment where meritocracy, ethos, transparency, competency, accountability and good organisational structures prevail. As market, legal and regulatory circumstances vary, they will unavoidably affect Professional Accountancy Organisations (PAOs), which currently face many challenges as regards their role and responsibilities, not only from a technical and regulatory angle but also – and maybe more importantly – from a public interest standpoint. The recent collapse of Carillion in the UK revealed the profession’s inherent risks and vulnerabilities. This particular case seems to be leading the way towards changes that might hit the local profession and PAOs, as well as the local oversight authority, but it may also have a more international effect. Hence, PAOs should re-examine their risk profiles on the one hand and, on the other, ensure that their governance structure is one that enhances their independence, competency and relevance. It is advisable that this exercise be done by the individual members of the boards of PAOs too, from wherever they may come. As active cells of the economy, professional accountants and their firms exist across the

whole spectrum of business activity. This increases their exposure and the impact of their work. At the same time, PAOs are loaded with regulatory responsibilities and act as watchdogs for the adherence to high professional and ethical standards by their members. The recent enactment of the EU Audit Directive and the Public Interest Entities Regulations will act as a game changer for PAOs, since they are now under the scrutiny of the oversight authorities. All of these have placed the accountancy profession high on the agenda of public opinion. As a result, it might be perceived that PAOs are susceptible to the undue influence of various market, business or even political factors. There can be influence and pressure from the oversight authorities too, either directly or indirectly through persons on the Boards of PAOs, should they originate from audit firms monitored directly by them. In addition, PAOs may need to address market perceptions that they are ‘controlled’ by specific groups of members or firms. The latter could also be an additional indirect vulnerability, as influence could be exerted through these perceived ‘controlling’ parties. Hence, there exists a premium reputational risk that has to be mitigated. It is not unreasonable to expect that, amid this hurricane of developments and challenges coupled with technological and regulatory advancements, PAOs will want to adjust and adapt to the new era. It might, therefore, be the right time to take bold decisions and reconsider their governance structure so as to enhance their independence (both actual and perceived) and competence. Maintaining a premium reputation is crucial for a profession based on a Code of Ethics. Ways to deal with this could include open-

ing up Board and Management structures to bring in additional competencies and knowledge. It is also of paramount importance to ensure that no-one at Board level is perceived to be controlling a PAO and a more balanced Board composition, covering all the professional activities of members, needs to be established. Equally crucial is the need to demonstrate a transparent decisionmaking mechanism, based on robust governance systems, and to establish appropriate regulatory, disciplinary and enforcement processes. This is, of course, a high-level strategic decision and one that is not confined to ICPAC but is very relevant to all PAOs across Europe at least. I believe that it needs to be addressed by IFAC and Accountancy Europe. We see what is currently going on in other countries (e.g. the UK) and what the potential solutions are. Things are changing and we should be adapting to these changes in an agile and proactive manner. The accountancy profession is a high-profile one by its very nature and global impact. Unfortunately, economic and financial crises in many countries and recent corporate failures have put the profession in a tight spot, which is why, in recent years, we have seen a surge of initiatives to switch from the self-regulatory regime to a highly monitored one. It is about time we took some initiatives and started doing things. My understanding is that we have to go back to basics, i.e. to the three pillars of good governance, compliance and ethics. They will form the foundations of sustainable and relevant organisations in the long term. Rethinking their governance structures and encouraging a supportive culture is arguably one of the most serious tasks currently facing PAOs going forward.

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News from the Boardroom

he second quarter of the year was particularly busy for the Council and the management of the Institute. The Council held four meetings during the period. Matters that dominated its attention included the 8th Nicosia Economic Congress, meetings with international professional organisations for prospective enhanced cooperation, US sanctions and matters related to the Central Bank of Cyprus, the upcoming Moneyval evaluation and other regulatory issues and, of course, the 57th Annual General Meeting of the Institute. The main activities and decisions of the Institute’s Council included the following:

Meetings with Officials During the second quarter of 2018, the President, Council Members and the General Manager held a number of meetings with government, political, business and other officials including, inter alia, the following: ICPAC took the initiative to liaise for achieving a common stance by all relevant stakeholders on the issue of shell companies. To this end, a number of meetings took place with all stakeholders in including the Central Bank of Cyprus, CIPA, CIFA, the Cyprus Bar Association and the Association of Cyprus Banks. 25 April 2018 The General Manager and a delegation from the Public Sector Committee met with officials of the Departments of Personnel and Public Administration of the Ministry of Finance to discuss the schemes of service related to qualified accountants who are members of ICPAC. 9 May 2018 The General Manager met with the Chairwoman of the Cyprus Securities and Exchange Commission to discuss issues arising from US sanctions and the circular issued by the Central Bank of Cyprus on shell companies. 11 May 2018 The General Manager met Vasilis Palmas, Deputy Minister to the President of the Republic, to discuss the same issues. 21-25 May 2018 The President, the General Manager and officers of the Institute travelled to London where they held various meetings and training sessions on matters relevant to cooperation agreements with ACCA. In addition, the General Manager met with the CEO

of ICAEW, Michael Izza, and discussed matters of mutual interest. The President and the General Manager also met with the International Compliance Institute (ICA), the Institute of Chartered Secretaries and Administrators (ICSA) and the Institute of Business Ethics (IBE) in order to reaffirm relations and expand the bilateral cooperation. 30 May 2018 The President and the General Manager met with Rea Georgiou, President of Cyprus Public Audit Oversight Board, to discuss matters related to cooperation between the two bodies. 29 May & 7 June 2018 Within the framework of closer cooperation among semi-government organisations, the General Manager held meetings with the Presidents of the Cyprus Tourism Organisation and the Cyprus Theatre Organisation. 6 June 2018 the General Manager met with Data Protection Commissioner Irene Loizidou Nicolaidou to discuss matters related to GDPR and its application to ICPAC and its members. 12 June 2018 The Vice President and the General Manager met with a team from Standard & Poor’s. 20 June 2018 ICPAC held its 57th Annual General Meeting at the Filoxenia Conference Centre in Nicosia, in the presence of political and business leaders as well as a large number of members. 20 June 2018 ICPAC had the pleasure to present the book “A Historical Account of Accountancy and Accountants in Cyprus” by Dr Christina Ionela Neokleous. ICPAC sponsored the publication of the book, all the proceeds of which will be donated to the Anemone Centre, which is part of the Cyprus Society for the Protection of Spastic and Handicapped Children. 28 June 2018 The President attended a meeting called by the Ministers of Finance and Foreign Affairs on issues arising from US sanctions and the circular issued by the Central Bank of Cyprus on shell companies. 28 June 2018 The Minister of Finance called ICPAC to discuss the possibility of reviewing the current tax regime. The meeting was attended by the General Manager and the Tax Committee of the Institute. 10 July 2018 The President and the General Manager met with the new President of the Cyprus Stock Exchange and discussed issues of mutual interest and ways further expand the bilateral cooperation. 13 July 2018 The President, Vice President and General

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Manager of the Institute met the Minister of Transport, Communication and Works, Vassiliki Anastasiadou, at her office. Also in June 2018 The President and the General Manager had the pleasure to meet with the Rector of the Cyprus University of Technology, Dr Andreas Anayiotos. It was an excellent opportunity to bring the two organisations closer together, opening new windows for cooperation. Dr Anayiotos was very supportive to ICPAC’s proposal for the establishment of a new Master’s degree in Compliance, Ethics and Regulation, especially designed for professionals and ICPAC members. The President and the General Manager also met with Zeta Emilianides, Minister of Labour, to discuss matters of mutual interest.

Other important meetings and activities 27 May 2018 The General Manager and the Chair of the Economic Crime and Forensic Accounting Committee of the Institute participated in a special training course organised by the Economic Crime Section of the Police. 4 & 5 June 2018 The General Manager and Amalia Hadjimichael, Monitoring and Compliance Officer, attended the workshop organised by Moneyval in light of its upcoming evaluation of Cyprus in May next year. Amalia Hadjimichael also attended various meetings with the Advisory Authority for matters relating to the Prevention and Suppression of Money Laundering Activities. 10 June 2018 The General Manager participated at the award ceremony of the 14th Accounting Olympiad. 18 June 2018 ICPAC and British High Commission in Cyprus presented a lecture on the new UK Corporate Tax Laws. 3 July 2018 Irene Loizidou Ioannou, Head Admissions and Licensing, represented ICPAC at the meeting of the Corporate Governance Committee of the Cyprus Stock Exchange. During the quarter, members of the Tax Committee, VAT Committee and Insolvency Committee were extensively involved in consultations on various bills and attended a number of meetings to this end. Other committees also provided significant input to ICPAC’s activities. ICPAC representatives also appeared before Parliamentary committees dealing with matters relevant to the Institute. Both the President and the General Manager had various meetings during the quarter with other officials, stakeholders and Members of the House of Representatives on issues relating to the Institute and the profession. ICPAC officials attended various business events and general meetings of related organisations and bodies in Cyprus.

ACCOUNTANCY CYPRUS

institute news

Fellowships from ICSA: The Governance Institute ICSA: The Governance Institute, the qualifying and membership body for governance professionals, held its annual Graduation and Membership Ceremony on 25th May 2018 at Merchant Taylor’s Hall in London, where hundreds of guests marked this very special occasion. The ceremony celebrated the success of new graduates of ICSA’s core qualifying scheme, as well as those qualifying in International Finance and Administration and other specialist governance qualifications offered by ICSA. It also recognised the achievements of those progressing to Associate and Fellow membership status. Among those receiving recognition and accreditation from Cyprus were ICPAC’s President and General Manager, as well as Theodoros Kringou, Managing Director of Infocredit Group, who all acquired Fellow (FCIS) status. Simon Osborne, Chief Executive of ICSA, said: “We are delighted to welcome three such strong proponents of good governance to our ranks. Good governance is as important in Cyprus as elsewhere in the world and Theodoros, Marios and Kyriakos are prominent champions of the benefits that good governance can bring to businesses and other organisations in Cyprus. We welcome them to the ICSA family and look forward to working with them to help drive governance forward in the region.”

ICPAC President Marios Skandalis, Director of Group Compliance Division at the Bank of Cyprus, commented: “The level of quality of a corporation’s governance is what determines the robustness of its cultural quality and consequently its operational effectiveness. How high this standard is set and how demanding the corporate governance benchmark will be, depends on the vision and values of its Board members and above all their ethos. ICSA is the institution that provides structured guidance, advanced competency and globally recognized certification to institutions and their officers that aim to adhere to world class corporate governance standards and business ethos.” Kyriakos Iordanou, General Manager of ICPAC, added: “Governance is the framework for the effective achievement of corporate goals and car-

rying out business efficiently and, on the other hand it can also serve as a shield to threats and risks, through appropriate compliance and control mechanisms. As a professional accountant myself, governance issues are highly correlated to my vocational activities and the ICSA qualification is a proof of ultimate quality and knowledge standards. Hence, achieving the status of a Fellow Chartered Secretary and Administrator enables me to carry out my duties in a most comprehensive manner. We at ICPAC are delighted to work with ICSA for the benefit for our members, by offering them various options for training, knowledge and qualification in corporate governance. I am confident that this cooperation will prove fruitful to all of us, and particularly to the economy in general through the application of best governance models

and practices” Theodoros Kringou, Managing Director of Infocredit Group, said: “I am truly honoured to be awarded the title of ICSA Fellow. Corporate governance forms an integral part of a business and affects all its parts, from leadership to communication and strategy – more importantly though it forms the business’ operational framework and the way the board governs the company. Good governance is distinguished by its emphasis on transparency, accountability and trust. It is these values that I hope to promote personally as well as through Infocredit Group’s cooperation with ICSA. Infocredit Group is committed to working closely with ICSA to help foster good governance and support its activities in Cyprus and the Middle East.” (See more on ICSA on page 80)

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Institute Committees Update

Shipping Committee In the 2nd quarter of 2018, the Committee continued its participation in the Shipping Incentive Schemes & Ship Registry Pricing Policy and Cooperation Enhancement within the Cyprus Maritime Cluster working groups, which discuss Cyprus’ national shipping strategy. The Committee also held meetings with relevant industry bodies, including the Deputy Ministry of Shipping, the Cyprus Shipping Chamber, the Cyprus Union of Ship-owners, the Central Bank of Cyprus and the Cyprus Statistical Department. Sylvia Loizidou Chairwoman

Auditing Standards Committee The Committee completed its work and deliberations with relevant stakeholders and issued the following Technical Circulars. • Technical Circular 1/2018, issued on 11 January 2018, relates to requesting and receiving confirmation from banking institutions with respect to the bank balances and related transactions of clients in the context of the audit. This Technical Circular, which replaces Technical Circular No. 56 (23 December 2013), includes a bank confirmation letter template in both English and Greek to be used by the Institute’s members during the bank circularization process. Furthermore, the Technical Circular includes guidelines been agreed with the Association of Cyprus Banks (ACB) and should be adhered to by auditors during the circularization process. • Technical Circular 2/2018, issued on 17 January 2018, provides an illustration in both English and Greek of the independent auditor’s report on the financial statements of European Union (EU) Public Interest Entities (PIEs). This illustrative audit report takes into account the requirements of Article 10 of EU Regulation 537/2014, Article 69 of the Auditors Law 2017, ISA 700 (Revised) and ISA 701. The Institute’s Μembers can use the illustrative audit report included in this Technical Circular in conjunction with any guidance from their network firms, where applicable. For illustrations of the independent auditor’s report on the financial statements of non-EU PIEs, reference should be made to Technical Circular TC 4 2017, issued on 6 June 2017. • Technical Circular 3/2018, issued on 15 March 2018, provides a letter template that can be used in replying to Banks’ requests for information on the Provident Fund’s sponsor from the independent auditor of the sponsoring entity. The template was designed in order to provide a reply at the request of banking institutions concerning information required in the context of the process that banks undertake in order to ascertain whether bank deposits of provident funds are “eligible deposits” for the purposes of compensation from the Bank Deposit Guarantee Fund. The auditors, following relevant communication and after obtaining any required approval from the provident fund, can use the letter template attached to the Technical Circular in formulating their replies. • Technical Circular 4/2018, issued on 25 April 2018, provides an illustration in both English and Greek of the independent auditor’s report on the financial statements of a Cyprus Branch that is itself a Public Interest Entity (PIE) in accordance with the Auditors Law of 2017. This illustrative audit report takes into account the requirements of Article 10 of EU Regulation 537/2014, Article 69 of the Auditors Law of 2017 and ISA 700 (Revised). The Institute’s Μembers can use the illustrative audit report included in this Technical Circular in conjunction with any guidance from their network firms, where applicable.

George C. Kazamias Chairman

Administrative Services Committee During the second quarter of 2018, the Committee continued discussing the three main areas that would impact Administrative Service Providers (ASPs): • 4th AML Directive. The Committee continued discussing the status of the finalization of the implementation of the 4th AML Directive and, in particular, concentrated on UBO and trust reporting requirements, limitations on cash transactions and obligations on reporting companies under trust arrangements. The law was finally enacted in April and, following that, the Committee reviewed its provisions, made comparisons with the respective law of other EU member states and drew conclusions. These will be considered and communicated to the management of ICPAC, which will participate in the discussions on formulating the regulations that will be relevant to the law. • Provisions of the amendments to the EU’s Anti-Money Laundering Directive (AMLD). The Committee was informed of the main provisions of the amendments to the EU’s Anti-Money Laundering Directive (AMLD), as published in December 2017 and due to be enacted into law by summer 2019. The Committee promptly commenced research into how these will have an impact on Administrative Service Providers and circulated commentary amongst its members that will assist in the formulation of a discussion paper that will eventually be forwarded to the management of ICPAC for consideration.

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• General Data Protection Regulation (GDPR). The Committee discussed extensively the regulations circulated by the competent authorities addressing data protection and focused on their implementation by Administrative Service Providers (ASPs). Due to the burden on ASPs for implementing GDPR requirements, the Committee expressed its availability to assist members who may seek the input of ICPAC in any way it can. As the regulation became effective in May 2018, the Committee is well informed and it is ready to assist in that respect. Costas Christoforou Chairman

Limassol-Paphos Coordinating Committee During the period 1 April 2018 to 30 June 2018, the Committee carried out the following activities: 18.04.2018 The Committee coordinated a seminar on VAT: Reverse Charge and the Tour Operators Margin Scheme, under which the method of calculation of the taxable value for travel agencies deviates from the general rules. 25.04.2018 The Committee coordinated a seminar on Financial Crime for Business Professionals. 09.05.2018 The Committee coordinated a seminar on the Anti-Bribery Management System based on ISO37001. 16.05.2018 The Committee coordinated a seminar on Ultimate Sales Skills Secrets. 23.05.2018 The Committee coordinated a seminar entitled ‘Are you ready for an AML Monitoring Visit?’ All the seminars were held at the St Raphael Resort in Limassol.

Neophytos H. Neophytou Chairman

VAT Committee The Committee continued to deal with a number of outstanding issues as well as looking at new issues brought to its attention. The Committee met with the Tax Commissioner and discussed a number of issues relating to the imposition of VAT on land and rentals as well as matters arising from a number of recently issued VAT circulars. Following our discussions and representations, the Tax Commissioner advised that he intends to issue a new circular and/or notification clarifying specific cases involving the supply of undeveloped buildable land and rentals. The Committee also examined the proposed bill for the imposition of VAT on the transfer of rights of an immovable property, as published in the Official Gazette on 21/5/2018 and coming into force as of 1/9/2018. In addition, it examined the pro-

posed amendments to the VAT Law in relation to the Capital Goods Scheme, the imposition of a local reverse charge mechanism for the sale of mobile phones, tablets, laptops and game consoles, and finally the VAT treatment of Coupons which will come into force in all Member States on 1/1/2019. The proposed bills are expected to become Law in the coming months. Other issues already discussed with the Tax Commissioner and still outstanding include: • Various issues concerning administrators/liquidators. • The suggestion of the Committee to include holding and exempt companies within a VAT group. • The VAT treatment of Allotment contracts in the Hotel industry • The VAT treatment of services for the servicing of aircraft passengers (a new circular is expected to be issued on this matter) • The VAT treatment of transfer of buildable coefficient • The VAT status of trading in shares through a portfolio manager Finally, in cooperation with the Education Committee, the Committee presented to ICPAC members seminars ON the ‘reverse charge’ procedure as well as amendments to the Tour Operators Margin Scheme. Haris Charalambous Chairman

Education Committee During the second quarter of 2018, the Committee held three monthly meetings to discuss the organization of training seminars. In brief, it organized the following seminars: VAT on Reverse Charge and TOMS: One-day training events in Nicosia (17 April, 2018) and Limassol (18 April, 2018). Financial Crime – An Introduction for Accountancy Professionals: Half-day training events in Nicosia (24 April, 2018) and Limassol (25 April, 2018). Are you ready for an AML Monitoring Visit? Half-day training events in Nicosia (22 April, 2018), Limassol (23 April, 2018) and Larnaca (25 April, 2018). Equity and Business Valuation Issues Half-day training event in Nicosia (13 June, 2018). Overall, eight training events were organized in all cities during the second quarter of 2018.

Akis D. Kolokotronis Chairman

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Public Sector Committee During the second quarter of 2018, the Committee held three meetings and carried out the following activities: 1. The Committee has been following developments in the new Terms of Employment that are being prepared by the Audit Office, government departments and other public sector entities. Representatives of the Committee had a meeting with the Secretary of the Council of Ministers, Theodosis Tsiolas and senior officials of the Public Administration and Personnel Department, discussing the issue and raising concerns about the proposed Terms of Employment. 2. The Committee Chairman informed the Board of Directors of the Institute about these developments and asked the Board to intervene in order to raise the Committee’s concerns at a political level. 3. The Committee organizing a seminar on the Principles of

Public Administration Law in Nicosia on June 14, 2018. 4. The Committee Chairman, who is also a member of the Public Sector Committee of Accountancy Europe (ACE), updated the Committee about the meeting of the Public Sector Group of ACE in Brussels on March 2018, regarding recent developments regarding European Public Sector Accounting Standards (EPSAS) and International Public Sector Accounting Standards (IPSAS), as well as the other issues concerning public financial management. He also informed the Committee of the results of a meeting with the IPSASB discussing its 2019-2023 Strategy and Work Plan Stakeholder Consultation. Marios Hadjidamianou Chairman

Accounting Standards Committee During the second quarter of 2018, the Committee continued to implement its action plan and dealt with the following:

Projects Completed • Technical Circulars 29 & 40: The subcommittee completed the Greek version of the combined technical circular, which will replace Technical Circulars 29 and 40 as a result of recent amendments to the Companies Law. • Amendment to the Cyprus Companies Law (for compliance with the Accounting Directive: The Committee submitted proposed amendments to the Law (article 142) for compliance with the Accounting Directive. The amendments have not yet been published in the Gazette. • Restriction on distribution on development costs: The EU Accounting

Directive, which has been transposed into the Companies’ Law, entails provisions based on which no distribution of profits takes place unless the amount of reserves available for distribution and profits brought forward is at least equal to costs of development not written off and recognised under Assets. The Committee concluded that a legal consultation from ICPAC’s lawyers is not required. • Revision of Companies Law checklist: We completed the English version of the updated Companies Law Checklist. The Companies Law Checklist was amended due to recent amendments to the Companies Law, which were the result of the transposition of the EU Accounting Directive into domestic law. The updated Companies Law Checklist was sent to the ICPAC has been uploaded on the Institute’s website. • Disclosure of non-financial infor-

mation and diversity information by large undertakings and groups: The Chairman of the Committee held meetings with the Directorate General for European Programmes Coordination and Developments regarding the application of the amendments to the Companies Law as a result of the harmonization of Cyprus’ legislation with European Directive 2014/95/EU, relating to the disclosure of non-financial and diversity information by large undertakings and groups. A circular will be prepared by another Committee.

Projects in Progress and other actions • Preparation of separate and consolidated financial statements and presentation to the Annual General meeting: Following the revision of the Cyprus Companies Law, the Committee received a number of enquiries whether separate and consolidated

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financial statements should be presented together at the Annual General Meeting of the company. A subcommittee has been formed to clarify this matter. • Update on developments relating to IFRSs: The subcommittee updated the members of the Committee on recent developments relating to IFRSs on a monthly basis. During the meetings, there was a discussion on the ‘Revised Conceptual Framework for Financial Reporting’, IAS8 ‘Accounting Policy Changes (Proposed amendments to IAS 8)’, endorsement of the ‘Transfer of investment property’ (Amendments to IAS40) and of the ‘Prepayment features with negative compensation’ (Amendments to IFRS9). • Requirement for the presentation of financial statements under a European Single Electronic format: The committee is currently discussing the requirement of the European Transparency Directive for regulated companies to present their financial statements under a European Single Electronic format starting from 2020. • Exception from preparation of a management report: Following a request by certain members of the Institute, a subcommittee has been formed to clarify whether there is a requirement by the Companies’ Law for the preparation by a company of a management report, even when that company meets the exception criteria of the aforesaid law for the preparation of this report. • Accounting for General Data Protection Regulation and Cryptocurrencies: The Committee discussed the accounting implications of the General Data Protection Regulation and Cryptocurrencies and will consider further actions when an update is provided by the subcommittee, which has been created for this purpose. Yiannis Leonidou Chairman

Larnaca-Famagusta Coordinating Committee During the second quarter of 2018, the Committee carried out the following activities: • The Committee coordinated a seminar entitled ‘Are you ready for an AML Monitoring visit?’ at the Golden Bay Hotel, Larnaca. • A meeting was held with the VAT Commissioner of the Larnaca District Office, Demetris Stylianou, to discuss recent VAT developments.

Christos Antoniou Chairman

Advisory Services Committee During the second quarter of 2018, The Committee embarked on a number of initiatives relating to the provision of advisory services by ICPAC members, as summarised below. Following the evaluation of the results of a questionnaire circulated to members of the Institute, we identified a need for professional development in the area of valuations. We therefore organised, through the Education Committee, a seminar titled “Equity and Business Valuation Issues” in Nicosia on June 13, which attracted significant interest with more than 120 members and other professionals attending. Representatives of Committee met with the Directorate for Public Investment in DG EPCD, with whom we discussed the processes and policies in the “Manual for Pre-Selection and Appraisal of Public Investment Projects”. The Manual, prepared by DG EPCD, sets out in detail the process that has to be followed for the Project Appraisal of financially significant projects (with an investment equal to or more than €5 million), which involves the preparation of a feasibility study that incorporates a social and environmental impact analysis (Cost Benefit Analysis). This Project Appraisal process derives from the relevant provisions of the Fiscal Responsibility and Budget Systems Law (articles 8288). Another important meeting was organised with representatives of the Public Procurement Directorate of the Treasury of the Republic, at which we discussed the public procurement process. We were invited to submit our comments relating to the procurement of advisory services by the Government and the Public Sector in general, with reference to Model Tender documents that have already been developed by the Public Procurement Directorate. The Committee will follow up on this initiative and evaluate the need for further actions. At the same time, it will continue other initiatives, including the preparation of an index of key legislative provisions. Christophoros P. Anayiotos Chairman

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NEW

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institute news

Decisions of the Disciplinary Committee Ryserve Ltd

Allegation: The firm failed to comply with its obligation to submit the Compliance Officer’s Annual Report for the year 2015 to the Institute within the set deadline. 23 March 2018: The Institute’s Disciplinary Committee found the allegation proved. Order: Reprimand, €200 costs.

C. Hadjicostis & Associates Ltd New Council

he Institute of Certified Public Accountants of Cyprus (ICPAC) held its first meeting on 21st June 2018, following the 57th Annual General Meeting of the Institute. The new composition of the Council of the Institute for the period 2018 -2019 is the following: President: Marios Skandalis Vice President: Stavros Pantzaris Secretary: Maria Pastellopoulou Members: Nicos Chimarides, Odysseas Christodoulou, Pieris Markou, Gabriel Onisiforou, Petros Petrakis, Savvas Poyiadjis, Spyros Spyrou, Demetris Taxitaris, Demetris Vakis, Christos Vassiliou, Karlos Zangoulos

Allegation The firm failed to comply with its obligation to submit the Compliance Officer’s Annual Report for the year 2015 to the Institute within the set deadline. 23 March 2018: The Institute’s Disciplinary Committee found the allegation proved. Order: €300 fine, €200 costs.

Georgios Georgiades

Chris Constantinides & Associates

AeliusCircle Ltd ICAEW Scholarship at University of Cyprus The Institute of Chartered Accountants in England and Wales (ICAEW) is offering a scholarship to a student for the academic year 2018-2019 at the University of Cyprus. The scholarship is part of the ICAEW Foundation’s ‘Changing Futures’ scholarship programme and was announced during a meeting of ICAEW Vice President Fiona Wilkinson with professor Constantinos Christofides, rector of the University of Cyprus. The programme has successfully supported talented students experiencing financial difficulties at UK universities. “The ICAEW scholarship programme is about creating opportunities that will change the lives of talented and aspiring students in order to enable them to make the most of their abilities. I am glad that the foundation chose the University of Cyprus to offer its first scholarship in Europe,” Fiona Wilkinson said. “This scholarship will support a student each year during his/ her studies, who may not otherwise be able to join the profession of finance or accounting. We believe that there should be no restrictions on attracting the best and we are happy to work with the ICAEW Foundation to achieve our goal,” Christofides commented. For more information about the project, visit: www.icaew.com/foundation

C & N Auditors Ltd

Christakis A. Nikitas & Co. Ltd

Comform Global Services Ltd

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Order: Reprimand, €200 costs.

Georgiou & Prasanna Nominee Services Ltd

Order: Reprimand, €200 costs.

Costas Miaouli

D.C. Demetriou Ltd

DHP Audit Services Limited

Efstratiou Partners Esros Ltd

EXA Consulting LTD

Georgiou & Prasanna Ltd

KYC Management Services Ltd

Marios Kallis

Nansia Koutsou

Noa Circle Ltd

Photos Arestis & Son Limited

Prodromos Anastasiou

ACCOUNTANCY CYPRUS

institute news

NEW MEMBERS

4832

PANAYIOTA TOFA

ICAEW

4833

SOTIRIS KAMBANELLAS

ACCA

4834

DANIELLA ORFANOU

ICAEW

4835

PAVLOS TOUMAZOU

ICAEW

4836

MYRIA HADJIGEROU

ICAEW

4837

ELENA HADJICOSTA

ACA

4839

COSTAS KATELARIS

ACCA

4788

MICHAEL MALTEZOS

ACCA

4840

ANTONIS ARISTODEMOU

ACCA

4789

GEORGIOS TRIANTAFYLLOU

ACCA

4838

OMIROS ALEXANDROU

YEBT

IRENE VASILIADOU

ACA

4791

GEORGINA MALA

ACCA

4841

4793

ALEXIA ROSSIDI

ICAEW

4842

MARIA LIASSI

ACCA

SOCRATES IOANNIDES

ICAEW

4795

ANTIGONE VASSILIOU

ACCA

4843

4796

GEORGIOS FOTIOU

ACCA

4844

DEMETRIOS FRANGOS

ACCA

4797

CONSTANTINOS MOULLOTOS

ICAEW

4845

ANTIGONI DEMETRIOU

ACCA

MARINOS AGGELIDES

ACCA

4798

EKATERINI ARGYROU

ACCA

4846

4799

DEMETRIS LAMBROU

ACCA

4847

SOTIRIS KARAGIORGIS

ACCA

AGATHI CONSTANTINOU

ACCA

4800

ANTONIA ANTONIOU

ACCA

4848

4801

ATHINA PREZA

ACCA

4849

STEPHANI VOUDIA

ICAEW

4802

ANNA MARIA IOANNOU

ACCA

4850

CONSTANTINOS PAPACONSTANTINOU

ACCA ACCA

4803

SAVVAS KASPARIS

YEBT

4851

GAVRIELLA MICHAEL

4804

STAVROS IOANNOU

YEBT

4852

LOUKAS NIKOLAOU

ICAEW

DROSOULA MANOUCHOU

ICAEW

4805

SAVVAS PAPACONSTANTINOU

YEBT

4853

4806

ANDREAS VASSILIOU

ACCA

4854

ELIAS SKOULLOU

ICAEW

4807

GIAGKOS PAVLOU

ICAEW

4855

CONSTANTINA MERIKOU

ACCA ICAEW

4824

FOTIOS FOTIOU

ACCA

4856

MARILENA GOGAKI

4808

MARIA PILEDES

AIA

4857

THEODORA THEODOROU

ACCA

ALLA OHANIAN

ACCA

4809

CHRISTOTHEA THEOLOGOU

ICAEW

4858

4810

CONSTANTINOS CHRISTOFI

ACA

4859

DESPINA SHEITTANI

ACCA

4811

OLESYA KELESIDU

ACCA

4860

TATIANI ARISTIDOU

ACCA ICAEW

4812

OLIVIA MATHEOU

ACA

4861

IOANNIS AVRAAMIDES

4813

GEORGE SOUPPOURIS

FCCA

4862

KLEANTHIA MAMA

ACCA

MIKAELLA PATTICHI

ACCA

4814

NICOLETTA MICHAELIDES

ICAEW

4863

4815

PANAYIOTA SAVVA

ACCA

4864

SOFIA CHRISTOFI

ACCA

4816

SAVVAS SAVVA

ACCA

4865

MARIA KOMODIKI

ACCA ACCA

4817

ANGELOS EYTHYMIOU

ICAEW

4866

TEREZA POLYMNIOU

4818

CONSTANTIA TRIFTARIDOU

ACCA

4867

CHRYSTALLA THEOFANOUS

ACCA

ZACHARIAS HADJIANASTASI

ACCA

4819

GEORGIA PELEKANOU

ICAEW

4868

4820

PANICOS KOUROUYIANNIS

ACCA

4869

CHLOE STRATI

ACCA

4821

DESPO MICHAIL

ICAEW

4870

FILIPPOS CHRISTOFOROU

ICAEW ICAEW

4822

ANDREA CONSTANTINIDOU

ICAEW

4871

IOANNA KOLOVOU

4823

CHRISTOS IOANNOU

ACCA

4872

GEORGE APOSTOLOU

ICAEW

4873

ATHINA TSANGARIDOU

ACCA

Angelos Nicolaou

ACA

4825

NIKOLETTA PETRIDOU

ACCA

4826

ANNA MARIA TOFA

ACA

4827

ANNA APPIOU

ACCA

Removed

4828

VEATRIKI KALOPETRIDOU

ACCA

4829

MARIA PAPOUI

YEBT

4830

THEKLA TRYFONOS

ACCA

Reregistrations

4831

PANAGIOTIS ARGYRIDIS

ACCA

2861

Christina Savvidou

ACCA

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New Corporate Criminal Offences and UK Government Tax Legislation The British High Commission, in conjunction with Institute of Certified Public Accountants of Cyprus (ICPAC) and HM Revenue and Customs (HMRC), organised a seminar in June to inform the Cypriot accounting community about the new UK Corporate Tax Law and forthcoming changes in UK Tax legislation.

he June 18 event informed the accounting profession about the new “Requirement to Correct”, that requires all UK taxpayers to declare to HMRC, before the 30 September 2018, all their foreign income and assets, where there might be tax to pay. From 1 October 2018, new and substantially higher penalties will apply to UK taxpayers who have failed to pay all the tax due on foreign income and assets. The vast majority of people and businesses pay the right amount of tax. The requirement to correct legislation is aimed at those who fail to pay the correct tax on their offshore income or assets. Many people may not realise that some straightforward actions, such as renting out a property in Cyprus or transferring income and assets from one country to another, could mean having to pay tax in the UK. This includes having income from or an asset in Cyprus or anywhere else in the world. This must be declared to HMRC.

HMRC is therefore urging people to check they have paid the right tax on their offshore assets, before tougher penalties are introduced from 1 October 2018. Although the Requirement to Correct applies to people who pay tax in the UK, it could still affect people if they live abroad and pay tax outside the UK, for example people who rent out their UK home whilst living in Cyprus or another country. If you are concerned that you haven’t told HMRC about foreign income assets, or that you have transferred income abroad without paying the UK tax on it, you should make a disclosure to HMRC before the 30 September 2018. You could also consider taking independent professional advice before deciding what to do next. An HMRC official said, “The UK Government is getting much tougher on offshore tax evasion. This is the last chance to put things right before tougher sanctions are introduced in 2018. Tax evasion is a crime, committed by a dishonest minority, which unfairly places a greater burden on the honest majority of peo-

ple and businesses who pay the tax that they owe on time. “The Worldwide Disclosure Facility (WDF) gives people a last chance to come forward now to correct their past offshore liabilities and pay what is due, before tougher new sanctions and an unprecedented amount of data on those with offshore accounts in more than 100 jurisdictions is received under the CRS from September 2018.”

The UK Government is getting much tougher on offshore tax evasion. This is the last chance to put things right before tougher sanctions are introduced in 2018 The event also outlined the new ‘Corporate Criminal Offences’ legislation, under which companies from anywhere in the world can be liable for failing to prevent their representatives facilitating UK tax evasion, whilst companies based in the UK or who carry out any part of their business in the UK are

in scope for failing to prevent the facilitation of overseas tax evasion. Corporations and partnerships can be held criminally liable when they fail to prevent their employees, agents, or others who provide services on their behalf from criminally facilitating tax evasion. This is a significant change from existing law under which they can only be found liable for criminally facilitating tax evasion if the most senior members of the organisation – typically the board of directors - are aware of the facilitation. Companies can prepare themselves by putting in place procedures designed to prevent this and HMRC has published guidance to help with this: www.gov.uk/government/ publications/corporate-offencesfor-failing-to-prevent-criminalfacilitation-of-tax-evasion Further guidance on how to inform HMRC via the Worldwide Disclosure Facility, including how to register and when payment is due, can be found on the HMRC website at: www.gov.uk/guidance/worldwide-disclosure-facility-make-adisclosure

ACCOUNTANCY CYPRUS

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cover story

icpac 57th Annual General Meeting

Structural reforms digitalization business ethos the only way forward for cyprus

the New Council Marios Skandalis

Stavros Pantzaris

kyriakos iordanou

Maria Pastellopoulou

Gabriel Onisiforou

Pieris Markou

Petros Petrakis

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The 57th Annual General Meeting of ICPAC took place on Wednesday, June 20, 2018 at the Filoxenia Conference Centre in Nicosia. On behalf of President Nicos Anastasiades, the meeting was addressed by the Minister of Finance, Harris Georgiades, while the Speaker of the House of Representatives, Demetris Syllouris, was also present. The main speaker was the President of the Institute, Marios Skandalis. The event was also the occasion of the first public presentation of the book â&#x20AC;&#x153;A Historical Account of Accountancy and Accountants in Cyprusâ&#x20AC;? by its author, Dr Christina Ionela Neokleous.

Savvas Poyiadjis

Karlos Zangoulos

Demetris Vakis

Demetris Taxitaris

Spyros Spyrou

Christos Vassiliou

Odysseas Christodoulou

Nicos Chimarides

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vision strategy dedication MARIOS SKANDALIS In his address, Marios Skandalis said that if Cyprus is to remain competitive, all stakeholders need to focus on three specific areas: Tax Reform, upgrading the services offered to foreign investors and entrepreneurs, and Innovation & Technology. ICPAC’s view is that the existing tax regime has served the country very well but, Skandalis said, it is now time to look at reviewing it, taking into account current international standards and emerging trends. On the broader issue of professional services, the ICPAC President said that Cyprus’ current offering would appear to have reached its limits, given the way global developments are demanding changes. “Cyprus has become a reliable regional services centre and this role should be maintained,” he said, but warned that any thoughts of ending the current model should be abandoned. He called on all involved parties, particularly the Government and those in the private sector, to decide together what kind of service sector they want and how they can effectively deal with the various dangers that lie ahead so that Cyprus continues to remain credible and attractive to foreign investors and entrepreneurs. Marios Skandalis explained that the fo-

cus on innovation and the application of advanced technology cannot be relaxed. “We are already living in the digital age, where the capabilities of each country are only restricted by the limits of their technology. “Consequently, it is essential that a national strategy for technology and egovernance is drawn up as a matter of urgency so that we digitally transform the way state and corporate structures function. Unfortunately, complacency could easily turn the economy into a new Kodak, while constant flexibility and adaptation to the continuously changing environment will confirm our transformation into a new Amazon or Google!” He explained that ICPAC could not afford not to adapt to the new realities and, as a result, has worked hard, on the basis of its threefold plan of VisionStrategy-Dedication, to strengthen its administrative and organizational structure, upgraded its computer systems,

focused on improving its image and status at home and abroad through partnerships with internationally recognized bodies, endeavoured to upgrade the local accounting profession and the services it provides and to support all efforts to strengthen the economy and Cyprus’ role as an international business centre. In his address, Skandalis urged the House of Representatives and the Ministry of Finance to act on ICPAC’s proposal to amend both the Companies Law and the Assessment and Collection of Taxes Law to simplify procedures for SMEs. He also stated the Institute’s view of the necessity for the formulation of a strategic, long-term Master Plan for the economy in order to identify the country’s strong points and weaknesses, opportunities and dangers, and he stressed the need for the Government and the House to continue the programme of reforms of the broader public sector.

It is essential that a national strategy for technology and e-governance is drawn up as a matter of urgency

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no new taxes HARRIS GEORGIADES Speraking on behalf of President Nicos Anastasiades, Finance Minister Harris Georgiades underlined the Government’s commitment to avoiding any new tax burden, noting that he agreed with the view that the tax system should remain simple, attractive and predictable. He spoke about the latest developments in the merger of Hellenic Bank and the Cyprus Cooperative Bank, noting that even the resulting increase in the public debt, which he said was necessary in order to finally deal with areas of uncertainty in the banking system, would not lead to higher taxes. He explained that the assignment to the state of the CCB’s large portfolio of nonperforming loans and fixed assets would provide an important new source of public revenue. On the subject of professional services, the Minister referred to the need to further improve the reputation and good name of Cyprus as an international business centre. “Maintaining the positive prospects of the services sector and expanding into areas

such as investment fund management requires total compliance with strict international and European standards,” he said, noting that, “Geopolitical developments create additional challenges but opportunities too.” Cyprus, he said, should show in practical terms that it is a model country when it comes to regulatory compliance, and this means greater effort and better cooperation between the public and private sectors. “And let me make it clear that compliance is one thing but bureaucracy and red tape are to be avoided.”

Compliance is one thing but bureaucracy and red tape are to be avoided

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icpac: a valuable partner DEMETRIS SYLLOURIS Modernization of the legislative framework that governs the operation of the state remains, as long as we are in a constantly changing socio-economic environment both in Cyprus and internationally, a current aim, said House Speaker Demetris Syllouris in his address to the Annual General Meeting. He assured those present that the House intends to work with the Executive and all stakeholders in the economy to reform state institutions and the way they function. “Responding to the challenges of the times, we have a duty and the ability to lead our country and its people to the threshold of a new era,”

Syllouris said. Speaking about ICPAC, Syllouris described the Institute as “a valuable partner in its monitoring and supervisory role” and as “a leading player in the joint effort we are all making, especially in the post-crisis era, to establish Cyprus internationally as a credible business and investment centre.” Recognizing ICPAC’s important role, the House of Representatives has enacted a large number of laws and regulations that are of direct relevance to ICPAC as the regulatory and supervisory body responsible for the audit profession, said Syllouris.

We have a duty and the ability to lead our country and its people to the threshold of a new era

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Uncovering the Secret History of Accounting in Cyprus Considering the size and importance of the accounting profession in Cyprus, it is surprising to learn that no-one has delved into its history and written about it. That has now changed, following the recent publication of a book by Dr. Christina Ionela Neokleous, a Lecturer in Accounting at the University of Essex. What inspired you to write “A Historical Account of Accountancy and Accountants in Cyprus”? The ‘secret’ history of accounting on the island was the motivation and inspiration for me to conduct this investigation into events and processes of which there are no written

records. resulting in new knowledge about accounting and the accounting profession in Cyprus. Furthermore, the high demand for accountants in Cyprus over the last decade made me want to meticulously examine the genesis of the profession and its development. Despite the significant role that the Institute of Certified Public Accountants of Cyprus (ICPAC) has played in the professional services sector, no study has ever been conducted to examine the history and development of the accounting profession. The book presents the development of accounting and accounting profession in Cyprus from the British colonial era to 2004 and the country’s accession to the EU. I have related historical accounting events to the social changes taking place at different times in the island’s history. Contemporary research has demonstrated that accounting is beyond mere numbers, technologies and artefacts. It is a social, political and economic phenomenon that has played an important role in the development of a country’s society, its people’s identity and its economic status. The lack of knowledge regarding the accounting history of Cyprus created a need to examine the subject by taking account of the ways in which ideological processes and social, economic and political factors interact and impacted the emergence and development of the accounting profession. This book presents critiques of what happened and continues to happen; it reveals

the conscious and unconscious underlying values and influences of which Cypriots at the time were unaware. As Marx said, “Men make their own history, but they do not make it as they please; they do not make it under selfselected circumstances, but under circumstances existing already, given and transmitted from the past.” Is the book aimed at accountants only? The book should be of interest to practitioners and scholars alike. However, it is not limited to these groups of readers only. Anyone interested in accounting issues is welcome to read the book and travel to the past, to the history of accounting and accountants. Practitioners are more focused on the technical aspects of accounting and orientated towards practical knowledge such as the preparation of financial statements, the audit of companies’ accounts, the provision of assurance about financial information for helping managers, investors, tax authorities and others during the decision making process. Limited consideration is ever given to the historical and theoretical aspects of accounting, so this book offers practitioners the opportunity to learn about the history of accounting in the country and, at the same time to understand, analyse and evaluate the processes, challenges, mistakes, lessons and areas for future reforms. For scholars, the book opens a debate about the politics of professionalism and profes-

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Events during the period 1955-1959 postponed the process until, one year after independence, a group of 21 accountants established ICPAC sional accountancy bodies. It also provides a benchmark for the study of the accountancy profession in smaller countries or small island economies, where there is currently no evidence available. It therefore adds to the literature new empirical findings on the development of the profession in these countries. During your research, did you come across any especially fascinating information concerning the profession in Cyprus? Every type of research brings surprises and unmasks new empirical findings. During the examination of the archives of the House of Representatives, the Press and Information Office and the oral histories, some fascinating information was revealed, notably various events that had significant impact on the development of the profession and the Institute. Inter-professional and intra-professional conflicts, appeals to the Court and the professional exclusion of some groups are just some of the aspects that have made the history of accounting in Cyprus more fascinating and also revealed historical evidence that few were aware of. Furthermore, attempts to regulate the profession in Cyprus uncovered the way in which social actors could interact and influence the process. These included the State, government ministers, the various groups of professional accountants, British professional accountancy bodies and Members of Parliament. One fascinating event was the first attempt to establish a local accounting society or club in Cyprus with the help and guidance of ACCA before independence in 1960. Although the attempt was unsuccessful, the correspondence between the pioneers of the accounting profession and ACCA during the colonial period showed their close relationship and the collaboration

with the British on professional matters. The creation of a regulatory space for the profession provided rich historical evidence on how various groups defended their professional status and/or attempted to protect a particular professional group. These events are unknown to most Cypriots and thus, the book provides the stories behind the successes, the failures, the inequalities and the protection of the accounting profession and ICPAC. Accounting seems to be a modern profession but it is apparently one of the oldest. How has it evolved over the years? The concept of accounting as a thought existed in the lives of people and societies even before the discovery of numbers and writing. This is documented in the historical findings for several ancient civilizations, such as Mesopotamia, Egypt, Rome and Greece. Landowners, emperors and kings were used to accounting, particularly bookkeeping, to keep records of their finances after sales and purchases. The role of accounting in society was seen as important and gained significant recognition in the development of trading and economic exchanges between countries and individuals. Accounting was considered a form of social power and control, shaped by social structures such as history, politics and social networks, globalisation and imperial powers. In this respect, behaviours and relationships among people, events and institutions influenced the advance of accountancy as a profession. When did the accounting profession start to flourish in Cyprus and what was the situation before then? The British colonial period, the offshore business era in the 1980s and the period after the ‘90s all played a significant role in

the emergence of the accounting profession in Cyprus. During the colonial era, Cypriots were not aware of the existence of accounting as a profession or of professional accountancy qualifications (ACCA and ICAEW). The British brought the accounting profession to Cyprus, changing its standing, which, in later years, would lead to the proliferation of accountants on the island. Professional accountants also contributed to the development of local economy acting as entrepreneurial accountants and by starting businesses from scratch, namely offshore businesses. The growth of foreign business activities and companies brought a need for accountants to the island and consequently, the proliferation of the profession, including training, qualifications and professional and educational development. From the ‘80s onwards, the accounting profession started to flourish locally. The trend continued during the ‘90s, when Cyprus obtained permission from ICAEW to train chartered accountants locally. That period was the high point in the reputation of the accounting profession in Cyprus. It became the most desirable career path for Cypriots and there was a great proliferation of local accounting/audit firms following mergers with foreign firms. What do you consider to be the biggest challenge facing the accounting profession today? The accounting profession has faced numerous challenges, including gender and ethnicity issues, professional conflicts between groups, state intervention during accounting regulation reforms and the struggle for recognition of the profession by the State, which was the main issue that caused conflict between various groups of professionals. Attempts to form a local accounting club

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Nowadays, the big challenge facing the profession concerns the criticism voiced by other countries and foreign organisations that Cyprus is a tax haven and a centre for money laundering

The British colonial period, the offshore business era in the 1980s and the period after the ‘90s all played a significant role in the emergence of the accounting profession in Cyprus

or society before independence and the success of ICPAC in 1961 showed the desire of the Cypriots for a local professional organisation. However, events during the period 1955-1959 postponed the process until, one year after independence, a group of 21 accountants established ICPAC. This led to challenges regarding who was eligible to become a member and to exercise the profession locally. Following the British model, ICPAC decided that only chartered and certified accountants would be allowed membership. Restrictions were placed on independent accountants, accountants who had graduated from Greek Universities, US CPA holders and Turkish Cypriot accountants. In certain cases, groups appealed to the court to acquire their professional rights and defend their professional status. Nowadays, the big challenge facing the profession concerns the criticism voiced by other countries and foreign organisations that Cyprus is a tax haven and a centre for money laundering. Professional accountants and ICPAC itself have been mobilised to defend the name of Cyprus and of the profession by taking relevant measures. Are you planning to write more books about the profession, either in Cyprus or elsewhere? This book revealed a number of

events and issues that need further investigation and could become separate books on the history of offshore business and the experiences of female accountants, while the history of the legal profession in Cyprus is an inspiring subject for further examination and writing. The narrative need not focus only on Cyprus; comparative studies could be conducted with other countries such as Greece, since Cyprus has a close affinity with Greek culture, customs, religion and education.

Copies of the book are now available, priced €10. All proceeds from the sales of the book will be donated to the Anemone Centre, which is part of the Cyprus Society for the Protection of Spastic and Handicapped Children. For more information and to order a copy, please contact the Institute’s offices.

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Euroglobal hosts the BKR EMEA Regional Conference in Cyprus The BKR EMEA Regional meeting took place at the St Raphael Resort Hotel from 26th to the 28th May 2018. Some 106 delegates and companions enjoyed the meeting, which was hosted by BKR Cyprus member firm, Euroglobal SEE Audit Limited. With business sessions on Saturday 4th May and Monday 26th May, the theme of the programme was improving your business. Howard Rosen, CEO, presented BKR Internationalâ&#x20AC;&#x2122;s view for the future.

Conference Lectures

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Andri Argyridou, Maria Nicolaou, Lakis Damianou

‘BKR: One Vision-One Voice’ and then the EMEA Scholarship Award as awarded to a promising local young accountancy student, Andri Argyridou. The Cyprus Investment Promotion Agency formally welcomed members to Cyprus and was followed by the regions statistical analysis, from Manchester’s member Les Nuter, drawing some fascinating points from the figures supplied by members.

At Hadjiantonas Winery Limassol (Members of the board and their spouses)

The afternoon included breakout sessions presented by Clarence Kehoe from New York and Iulia Lascau from Bucharest who looked at The Pros and Cons of Outsourcing, and Peter Andreou from People Achieve, gave a very lively session on Pitching for Business at the Highest Level. Monday morning commenced with an International Tax Commitee Chair’s update. This was followed by the keynote presentation on Neuro-Linguistic Programming (NLP) in an accountancy setting by guest speaker Demetris Stylianides. The conference finished off with an update on GDPR and the Employment Tax Practice Group, and a look ahead to future BKR meetings in 2018 and 2019. The social programme took full advantage of Cyprus’ unique history and Mediterranean culture, with a tour to the classical sites of the south coast of the island. Delegates visited the UNESCO World Heritage site at Kourion with its ancient classical era city and spectacular theatre that overlooks the Mediterranean and then to the Sanctuary of Aphrodite, which is the most famous of the Ancient Greek Goddess’ sanctuaries in the ancient world. All of this was accompanied by some excellent Cypriot food and hospitality.

Iulia Lascau, Euroglobal Romania Managing Director and Partner

Kourion Visit

ACCOUNTANCY CYPRUS

ACCOUNTING & AUDIT

UNIC: Preparing Tomorrowâ&#x20AC;&#x2122;s Accountants Today Professor Petros Lois, Head of the Department of Accounting at the University of Nicosia (UNIC), explains what an Accounting degree can offer students, especially in a professional services centre like Cyprus at a time when technology is drastically changing the business of accounting. Tell us about the wider importance of the field of Accounting in Cyprus and your commitment to this. Cyprus is a global accounting services hub and a perfect location to study Accounting, boasting one of the worldâ&#x20AC;&#x2122;s highest per-capita rates of chartered and certified accountants. Correspondingly, our commitment to education in Accounting mirrors the importance of the field to the island. Over the years, we have dedicated ourselves to

providing top-quality education in the fields of accounting, banking and finance and, today, we consider ourselves one of the top universities in the region in Accounting. What advantages does an Accounting degree from the University of Nicosia offer? The UNIC Accounting Programme addresses the individual needs and goals of our students. During their studies, they learn to challenge established thinking, embrace

new technologies, develop relevant attitudes and abilities, and continually assess the wider possibilities available in a challenging world. To that end, Accounting education at UNIC is facilitated through our Accounting Lab, utilising specialised software and offering practical training. Our experienced, professional faculty helps prepare students for leadership roles and for advancement in several exciting career tracks, in-

cluding accounting services, accounting information systems, taxation, internal and external auditing, corporate management accounting and management advisory. Our Accounting graduates are also in the excellent position to pursue professional qualifications (ACCA and ACA), as well as our Joint Masters Programme in Banking, Accounting and Finance with the Hellenic Open University and doctoral studies in related fields.

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As a ship needs an anchor, a business needs an accountant

Does the University collaborate with any organisations which provide students with internship opportunities? We believe it is essential that our Accounting students have internship opportunities. For a set period of time, they may be employed by local accounting and audit firms with which the University maintains close links. Internships are where higher education meets employment, allowing students to gain experience working in an organisation while studying. This is also enabled through our participation in the ERASMUS+ mobility programme. Students benefit greatly from such internship programmes, having made industry contacts, converting their academic knowledge into industry skills, while they gain an unforgettable life experience in the process. What are the career prospects offered to the University’s graduates and what are the opportunities for further professional qualifications? Our graduates are well placed to pursue a professional qualification leading to the professional title of Chartered and/or Certified Accountant.

I should note here that our Accounting Programme has been assessed by the two major UK professional accountancy bodies (ACCA and ICAEW), and enables graduates to apply for exemptions from the courses offered by these two bodies. The University’s Accounting graduates have excellent career prospects. They find work within a year of graduating in the accounting profession, the government and semi-government sector, the banking and financial services sector, as well as in the private business sector. How has the accountant’s role changed over the years? In recent decades, the accountancy profession has evolved considerably. Economic and political developments, combined with technological advancements, such as the advent of blockchain, have helped reshape the accountant’s role. Nowadays, accountants take part in the decision-making process, as an important asset to the business. As a ship needs an anchor, a business needs an accountant. Much of the manual work

Accountants have shifted from being information processors to data analysts

previously undertaken by accountants is now fully automated by cloud-based software. As such, accountants have shifted from being information processors to data analysts. In this new landscape, blockchain has been hailed by ACCA as transformative to the accountancy profession. And, according to ICAEW, using blockchain in the profession provides clarity over ownership of assets and existence of obligations, and could dramatically im-

prove efficiency. In today’s world, an accountant analyzes and interprets important information for decision-making, creating added value by utilising available resources, preparing and communicating the financial results to third parties, while being responsible for the satisfaction of stakeholders’ interests (government, banks, suppliers, clients, etc.), as well as for managing risks and protecting the assets of the company.

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ACCOUNTING & AUDIT

Detecting and Preventing Financial Statement Fraud The roles of the reporting company and the independent auditor By Ioanna Markidou, Senior Manager, Audit & Advisory Services, Deloitte Limited, FCCA, Member, ICPAC Economic Crime & Forensic Accounting Committee

any proposals have placed primary emphasis on the role of the independent auditor in deterring financial statement fraud. However, a close examination of the problem suggests that real reductions in fraud can best be accomplished by focusing on persons within the reporting entity itself.

The Reporting Company A recent study of alleged frauds revealed that improving the reliability of the internal control system would yield great benefits by reducing the incidence of internal control breakdowns. A requirement that management maintain an adequate internal control system would thus be an important part of any effort to prevent and detect financial statement fraud. Corporate governance and internal control are shared responsibilities between Directors, Management and all employees, with the Audit Committee playing an important oversight role. As part of

corporate governance arrangements, the Board may wish to consider whether: • There are established communication channels (such as whistleblowing arrangements) for individuals to report suspected breaches of law or regulations or other improprieties; and • There are specific arrangements in place for management monitoring and reporting to the board on risk and control matters of importance such as actual or suspected fraud and other illegal or irregular acts that could adversely affect the company’s reputation or financial position. Additional obligations apply to companies which provide regulated financial services and/ or which are subject to money laundering legislation (the ‘regulated’ sector).

Audit Committees The role of the Audit Commit-

Fraud is costly and it is often a moving target

tee is to act independently from the executive “to ensure that the interests of shareholders are properly protected in relation to financial reporting and internal control”. In the context of internal reporting mechanisms, the Audit Committee should have oversight of the company’s whistleblowing arrangements, should monitor the financial reporting process, the effectiveness of internal control and risk management systems, the statutory audit of the annual and consolidated accounts and the independence of the statutory auditor and, in particular, the provision of additional services.

Internal Auditors According to the International Standards for the Professional Practice of Internal Auditing, internal audit activity must “evaluate and contribute to the improvement of governance, risk management and control processes using a systematic and disciplined approach”. As part of this approach, it should provide “independent assurance on the effectiveness of the processes

put in place by management to manage the risk of fraud” The Internal Auditor must exercise due professional care by evaluating the potential for the occurrence of fraud and how it is managed. The Head of Internal Audit must report periodically to senior management and the Board of Directors on internal audit activities, including significant fraud risk exposures and control issues. Companies within the regulated financial services sector should ensure that internal audit has clear reporting lines to either an audit committee or an appropriate senior manager.

Employees There is no general duty on employees to report actual or suspected fraud to the Board of Directors, senior management, or the audit committee. However, there are some statutory obligations on certain employees to report specific concerns to external parties; for example, in the case of suspected money laundering or where professional obligations exist.

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The Role of the independent Auditor The External Auditor’s responsibilities to detect and report fraud are outlined in the International Standard on Auditing and are primarily concerned with fraudulent financial reporting and the misappropriation of assets which may cause a material misstatement in the financial statements. The External Auditor plays an important role in the provision of information between the company and its shareholders in relation to the financial statements. The auditor is engaged by the company to exercise professional skill and judgment for the purpose of giving shareholders an independent opinion on the truth and fairness of the company’s accounts. A company is required to appoint an auditor who must prepare a report to shareholders with an opinion on whether the annual accounts give a true and fair view of the company’s financial position.

The External Auditor’s Responsibilities Regarding Fraud The International Standard on Auditing 240 (ISA 240) outlines the auditor’s responsibilities in respect of fraud in the audit of financial statements. The auditor is concerned with two types of fraud: fraudulent financial reporting and the misappropriation of assets, which may cause a material misstatement in the financial statements. The auditor is expected to maintain professional scepticism regarding the existence of fraud throughout the audit process and is responsible for “obtaining reasonable assurance that the financial statements taken as a whole are free

It is important for us as a profession to continue the pursuit of finding ways to incorporate forensic training and procedures into an audit from material misstatement” caused by fraud or error.

The External Auditor’s Duty to Report Fraud Where the auditor has obtained evidence of actual or suspected fraud, the matter should be reported to either the appropriate level of management or to the Board of Directors on a timely basis. The auditor may also have an obligation to report the actual or suspected fraud externally to regulatory or enforcement authorities. This can override the auditor’s professional duty to maintain the confidentiality of client information

Financial Statement Analysis Financial statement analysis is a process that enables readers of a company’s financial reports to develop and answer questions regarding the data presented. Financial analysis techniques can help investigators discover and examine unexpected relationships in financial information. Unexpected deviations in relationships most likely indicate errors, but also might indicate illegal acts or fraud.

Comparative Techniques Relationships among financial data that do not appear reasonable should be investigated. Fraud examiners can employ the following techniques to help them identify such relationships: i.e. compare currentperiod financial information to

prior-period financial information, budgets, and forecasts, examine relationships among financial information etc.

ployees should then be tested through examination of supporting evidence.

Financial Relationships

Fraud examiners employ several techniques to manipulate plain, unconnected numbers into solid, informative data to interpret the company’s financial standing. Financial statement analysis includes the following: • Percentage analysis, including vertical and horizontal analysis • Ratio analysis • Cash flow analysis

An understanding of general relationships between certain financial statement balances is necessary to identify relationships that appear unusual. If sales increase, how should the cost of sales respond? If commission expense decreases, what would be expected of sales? Answers to questions such as these are the foundation of financial analysis.

Profit Margins Companies generate sales revenue by selling products or providing services. Likewise, companies incur direct and indirect costs related to producing or acquiring the products they sell, or providing the services for their customers. Ongoing pressure on profit margins indicates pressure on management, which could ultimately lead to fraud in the financial reporting.

Unexpected Relationships When analytical procedures uncover an unexpected relationship among financial data, the fraud examiner must investigate the results. The evaluation of the results should include inquiries and additional procedures. Explanations derived from em-

Analytical Procedures

Conclusion In order to better protect the public from fraud and to maintain the credibility of the audit profession, accounting researchers must continue to explore ways that can help improve auditors’ abilities to detect and to limit fraud. Fraud is costly and it is often a moving target. The prevalence of fraud requires that auditors be vigilant when considering the possibility of fraud during the financial statements audit. It is important for us as a profession to continue the pursuit of finding ways to incorporate forensic training and procedures into an audit as a means to improve auditors’ fraud detection performances.

ACCOUNTANCY CYPRUS

ACCOUNTING & AUDIT

Managing Change Auditors in Cyprus need to be proactive and set out a vision for the future of the profession.

By Michael Antoniades, Board Member, KPMG Limited

ooking back at the evolution of our profession, we can easily identify the milestones that have resulted in a change to how stakeholders view the role of our profession. In the post-1974 years, the offshore business was a norm. Finding ways of taking advantage of jurisdictions like Cyprus, offering tax incentives to businesses opting to trade through them, was not only legal but was considered a clever way of planning international affairs. Moving forward to 2004, the offshore business had to be abolished since it was not acceptable to the EU, so our decision to join the European family meant that we had to give up the offshore idea. An acceptable solution, which was also a practice in other jurisdictions within the EU,

involved a reduced tax-paying regime, which resulted in a change of foreign investment in Cyprus. On the one hand, entities that wished to continue paying negligible taxes had to leave but, on the other, we attracted set-ups that were willing to pay a certain level of taxes while enjoying the privileges offered by an EU member country. Coming to 2013, we experienced the economic/financial collapse that coincided with â&#x20AC;&#x201C; or maybe resulted in â&#x20AC;&#x201C; the introduction of the AntiMoney Laundering Law (AML) and the adoption of Common Reporting Standards (CRS) in 2014, enabling the automatic exchange of financial

It is obvious that regulators have assigned roles to us that we and our clients are not used to

information between authorities. In addition, industry regulators appeared to become more demanding, while placing additional reliance on our reports for prudential regulation purposes. Finally, the regulators of our profession now demand the highest standard of quality for our work and we have an obligation to deliver it. So what does all of the above mean for us? We have traditionally been audit firms, issuing opinions to shareholders. Even though our legal framework states otherwise, practically our audit work now extends to regulators and other stakeholders, implying increased accountability and potential exposure. We have a framework in which we perform our work (ISAs and IFRSs). It is debatable whether this framework addresses the needs of the regulators. Is there an expectation gap between what we think we should be doing and what regulators and other stakeholders think that we are doing? Probably there

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is; thus, should we be reconsidering the scope of auditing and accounting standards? Compliance with AML requires us to ask questions and seek evidence, such as who are the beneficial owners? What is their source of income? Has it derived from legitimate sources? Is there any suspicion of tax evasion? Has there been a violation of any other rules and regulations like international sanctions and if yes, what are the legal implications of those for our work and opinions? Do the operations of the entity have substance and, if not, does this imply that we may be facilitating tax evasion, etc.? Are we being reshaped from auditors and advisors into a ‘tax police’ force? Is this a role that our profession should be undertaking or is it a mandate for someone else? Should we be developing audit programmes over and above to those required by ISAs for addressing these legal requirements? Looking at the industry, it is debatable whether it is ready to accept such a rapid

change; resentment is, in many cases, inevitable. Shareholders approach our requests with suspicion and scepticism, even though they may have nothing to hide. An auditor has always been a ‘headache’ but talking to an advisor has always been acceptable. Taking on

Are we being reshaped from auditors and advisors into a ‘tax police’ force? the role of tax policeman is not something that companies expect of us and they will treat us with suspicion and aggressiveness. They used to come to us for advice on tax and other incentives and/or threats, so now having us review their circumstances from a tax evasion perspective (even though it could end up being beneficial to them) it is not something that they can easily get along with.

So what should be our next steps? It is obvious that regulators have assigned roles to us that we and our clients are not used to and have not been prepared to undertake. Let’s be proactive. Let’s engage in constructive discussions with all stakeholders and get them to understand what we have been doing and how different this might be to what they may have in mind. Let’s make a critical analysis of what we can change (and what we cannot) and set out a vision for the future of our profession. Based on that, let’s draw up an action plan that will enable us to get there. Let’s communicate effectively with regulators, politicians, the industry and our standard setters (in Cyprus and abroad) aiming to achieve this vision. We not only have an obligation to do this for our future colleagues but we owe it to ourselves as professionals who have worked hard to develop our profession to where we are today!

ACCOUNTANCY CYPRUS

ACCOUNTING & AUDIT

Information: The Role of Technology Are traditional metrics still relevant?

By Jane Fuller, Fellow, CFA Society, Co-director, Centre for the Study of Financial Innovation

f investing is as much an art as a science, any debate about the impact of technology is bound to prompt as much fear as hope. The hope is that technology will help collect, sift and analyse the billions of bits of information that exist on companies and other assets, and on their customers, economic activity, trade flows, the weather â&#x20AC;&#x201C; anything that influences stock, bond and derivative prices. The fear is simply that automation and machine learning, via artificial intelligence (AI), will replace us. On 5 June 2018, CFA Institute and the IFRS Foundation hosted a panel debate at the Guildhall in London, asking whether traditional metrics are still relevant amidst rapid technological advancements. The Guildhall debate provided stimulus for both types of reaction. Hopes Quantitative analysis has been around for decades, enabling a statistical and modelled approach to investing that

rules out human biases. The escalation of technological developments in data collection and analytics, including AI-driven back-testing against price movements, has ushered in a new era in systematic investing. Data can now be collected on customer behaviour by tracking their mobile phones, on trade via sensors in ship containers, on the movement of goods in and out of warehouses. The latest analytics can then search for past price correlations and use these to predict future movements. It is an edge in active investing that can be quickly eroded, but which can also move on quickly to the next set of unstructured (and therefore previously underused) data. For a systematic investment operation, this relegates traditional financial information to a smaller part of the relevant data pool. Its continuing value lies in its structure, notably standardised definitions, in its comparative reliability and in the long run of evidence on links to price movements. New sources of data

are tested against the traditional variety. Those new sources include monitoring the tone of voice of executives at analyst meetings (CFOs are apparently more reliable than CEOs), and could move on to detecting emotion via tiny facial changes in video clips.

Understanding business is still more important than understanding the details of programming For auditors, testing of managementâ&#x20AC;&#x2122;s figures will be able to take in the whole set rather than samples. The application of AI to the analysis of all this means that the anomalies and outliers thrown up by the process are more likely to be genuinely worthy of investigation. The prospect of machines doing the grunt work while humans investigate the results is an appealing one. But a gap

ACCOUNTANCY CYPRUS

Humans cannot compete with the speed of algorithmic reactions

remains between theory and reality, and the issue of data quality and integrity persists – how clean are the inputs? Preparers of accounts are focused on automation, particularly in drawing together data from different sources. Here the elimination of humans helps as they are more prone to errors (and to manipulating the data) than are robots. The acceleration in the process is also important and suggests that the time taken to report financial information to investors can also be shortened. As for trading, that is already highly automated. Humans cannot compete with the speed of algorithmic reactions. This means that much buying and selling is already dictated by technology, which is cheap and efficient. But it might make flash crashes more likely, either because of a systems failure or because of similar program designs, creating automated crowd reactions. Fears Technology-driven price crashes are

one of the dangers that exchanges and regulators will continue to grapple with, although humans may welcome the chance to take advantage of these dislocations (if they can get rapid enough access to the distorted prices). Will the importance of data analysis and software programming make the professions of financial analysis and accounting more or less attractive? There is a concern that, as with the statistical emphasis in economics, people interested in the human aspects of the subject will be put off. ICAEW integrates training on technology into its audit courses, but understanding business is still more important than understanding the details of programming. Where does this leave fundamental analysis? Standardised information has always been the analyst’s friend, enabling comparisons over time and between asset classes and their constituents. Important questions include whether more data means better data, and whether human biases are baked into the algorithms sifting it.

Standardised definitions remain important and the International Accounting Standards Board’s project on the primary financial statements will produce more sub-totals, possibly including operating income and earnings before interest and tax. Given clean inputs of well-defined data, the outlook for robo-investing - from smart stock screens to dynamic rebalancing of portfolios – is tantalising, as illustrated by the advance of automation in exchange-traded funds. But with so much of the technological approach related to price movements and gaining a relative edge, the fundamental question is who is setting prices with an eye on fundamental value? All the developments of recent years have done nothing to allay fears of asset price bubbles. So the role of humans is crucial at least in exercising scepticism about the geewhizz claims for technological advances. How will the data scientists incorporate that into their algorithms?

ACCOUNTANCY CYPRUS

economy

Steering Through the Private Debt and NPL Storm Cyprus needs a Government-supported National Private Debt and NPL Strategy, aiming at a comprehensive, structured and multi-faceted resolution of excessive private debt and the massive number of outstanding SME and household NPLs.

By Renos Ioannides, Principal, KPMG Limited

In The Midst of the Storm When Cyprus embarking upon its turbulent journey into the unknown territory of elevated Non-Performing Loans (NPLs) and excessive private debt, little did we know that, more than five years later, we would still be facing the same ‘whims of the weather’ and the same hardships, with no sign of a safe harbour yet in sight. Private sector debt is still unsustainably high and the country’s NPLs to GDP ratio is by far the highest in the eurozone. The real economy, represented by households and SMEs, continues to be in extreme distress with the respective NPL ratios lingering well into the fifties (refer to the diagrams and table below - sources CBC, IMF).

Private Debt

NPLs

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Steering Through the Storm

pany or selling them off to third parties, albeit a helpful addition to the toolkit, cannot be considered a panacea in the absence of other complementary actions, given that the level of private debt will remain substantially unaffected.

Steering through the storm invariably needs a captain at the wheel to provide directions, a compass to guide us through and a number of executors who will implement instructions. In other words, we need an authority to take overall and undisputed responsibility and accountability of the issues at hand, we need the guidance of thorough and diligent planning, and we need knowledgeable and dedicated implementers to convert plans into actions. It is time for the country to take a longterm, holistic and forward-looking approach, learning from the lessons and experiences of the past five years. The safe harbour we are longing for can be reached by proactively designing a strategic blueprint, as opposed to the firefighting, piecemeal tactics of the past which have been, to a great extent, retrospectively imposed upon Cyprus as a result of our inertia. Our most recent ‘Russian roulette’ crisis, which led to a typical pandemonium of last-minute deliberations and recriminations and a bank run of our own making, must be abolished from our lives once and for all. This can only be achieved by, at last, advocating a fully comprehensive, proactive strategic framework, which I call Private Debt and NPL Strategisation. It is crucial to appreciate that shifting NPLs onto an asset management com-

What does Private Debt and NPL Strategisation Entail? Essentially, it refers to a Government-espoused National Private Debt and NPL Strategy, aiming at a comprehensive, structured and multi-faceted resolution of excessive private debt and the massive number of outstanding SME and household NPLs. Specifically, the Strategisation approach is envisaged to take the form of a country-wide, bank-wide project, which will give rise to: i. independent and objective borrower segmentation across all NPL portfolios (all banks, non-terminated and terminated accounts). This segmentation will distinguish among viable borrowers, over-leveraged but viable borrowers, nonviable borrowers and non-cooperative borrowers. It will provide a solid and fair definition and identification of those truly vulnerable/deprived borrowers who are in real need of social assistance (whether they are classified as having NPLs or not), ii. the design of portfolio-based strategies on the basis of the borrower segmentation, the primary objective being to match the level of debt with the sustainable debt servicing capacity of viable borrowers,

The real economy, represented by households and SMEs, continues to be in extreme distress

iii. professional execution of these borrower strategies. The above must be backed up by an effective operational insolvency framework and judicial system, which will facilitate and promote timely and cost-effective enforcement resolutions where necessary (non-viable, non-cooperative borrowers), combined, at the same time, with the targeted protection of genuinely vulnerable borrowers. Importantly, enhancement of the framework will lead to the natural uncovering of all those strategic defaulters, who have usurped the insolvency framework’s inefficiencies to date. Although such segmentation and execution strategies may have been adopted by banks, they have arguably been followed on an ad-hoc, individual basis and have invariably been impacted by each bank’s specific embedded – and possibly limiting – legacy structures, policies, procedures, criteria and biases and have had disappointing results so far (for households and SMEs alike). What Strategisation proposes, instead, is a fully comprehensive country-wide strategy and action plan – the diagram depicts an indicative Strategisation blueprint. The power of this model lies in its uncomplicated simplicity, its directness and robustness and its all-encompassing penetration.

It is time for the country to take a long-term, holistic and forwardlooking approach, learning from the lessons and experiences of the past five years

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How Will Strategisation Work? A strategic mix of independent expert resources will be required to work through the inter-dependent components: i. A governing body of independent experts with overall and undisputed responsibility and accountability for the Strategisation Project (â&#x20AC;&#x2DC;the captainâ&#x20AC;&#x2122;): this body will set the terms of reference, the objectives, the Project milestones (shortto long-term) and will overview and monitor implementation and adherence. ii. Knowledgeable, specialised technocrats, who will carry out the foundational part of the Project: a complete segmentation analysis of, and corresponding strategies for, all NPL borrowers across all banks, utilising uniform analytical tools and criteria and pre-defined time cut-off criteria (the compass). iii. Dedicated executors: independent debt servicing and real estate asset management specialists. hese will be the experts who will be implementing the strategies on a day-to-day basis. iv. Specialised legal and insolvency experts will build upon the existing insolvency and judicial/enforcement frameworks, the essential facilitators of the Strategisation approach, with a

view to re-designing them for maximum effectiveness and efficiency. Although recent changes to a handful of laws are a move in the right direction, so much more is required: a widespread upgrading in a multitude of inter-related legislation and regulations (the tools) and a simultaneous comprehensive overhaul of the foundational infrastructure and set-up of the judicial system (the mode of execution). What are the Benefits of this Approach? i. A truly holistic approach linking all inter-interdependent parts of the puzzle. ii. Unbiased independence and objectivity. iii. Zero tolerance to political or thirdparty intervention. iv. Undisputed Project responsibility and accountability. v. Project management approach, with milestones and strict monitoring. vi. Standardized collection and analysis methods, processes and procedures. vii. Tested tools and methodologies, uniform and consistent criteria, universally acceptable results and reporting. viii. Well-informed, fair and sustainable portfolio-based strategies for each cat-

Our fragile economy is unable to withstand the weight of excessive private sector debt and the massive volume of NPLs for much longer egory of borrowers. ix. Expertise, dedication and objectivity in the day-to-day dealing with each NPL case. x. Uncovering of strategic defaulters and targeted protection of vulnerable borrowers. xi. Costs to be borne by lenders and the State.

Conclusion Our fragile economy is unable to withstand the weight of excessive private sector debt and the massive volume of NPLs for much longer. Whatâ&#x20AC;&#x2122;s more, if we simply continue to passively react to emerging hurdles, this will inevitably lead to a shipwreck when the next storm (crisis) hits our country. Nevertheless, the proverbial safe harbour is a real destination. The route to take us there is a truly forward-looking and persistent Strategisation approach, underpinned by a proactive all-inclusive and multidisciplinary strategic framework.

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ISO/TR 13028 (Informa�on and Documenta�on - Implementa�on Guidelines for Digi�za�on of Records).

kaniklides@kaniklides.com

ACCOUNTANCY CYPRUS

economy

Improving Cyprus’ Tourism Product and Increasing the Numbers Cyprus can accommodate up to 5 million foreign tourists if it takes the right steps. By George V. Andreou, Board Member, KPMG Limited

ourism in Cyprus occupies a dominant position in the country’s economy and is one of the most important pillars of its Gross Domestic Product. According to data derived from a passenger survey by the Cyprus Statistical Service (CYSTAT), tourist arrivals in 2017 increased by 14.6%, compared to 2016. In 2017, 3.6 million people visited Cyprus, compared to 3.2 million in 2016. This year the numbers continued to break records for January-May, with tourist arrivals of 1.1 million in 2018 compared to 990,000 in the corresponding period of 2017 (an increase of 14.5%). For JanuaryApril 2018, revenue from tourism is estimated at €382.5 million compared to €357.7 million in the corresponding period of 2017 (an increase of 6.9%). However, this year’s statistics reveal a significant decline in arrivals from Russia and United Kingdom, two of the traditional markets from where tourists visit Cyprus all year round. It seems that significant number of Russian tourists are going to Turkey as well as Egypt and Tunisia. The turmoil around the Turkish lira has made country’s services and products very competitive. Additionally, the rouble has weakened against the euro, partly due to sanctions im-

posed on Russia and its entrepreneurs, thus making Cyprus more expensive, compared to non-EU countries. However, while there is uncertainty about arrivals from the traditional UK market, significant increases in tourist arrivals from other countries such as Israel, Lebanon, Poland and the Scandinavian countries have been recorded. Additionally, this year an increase has also been recorded in the available number of beds, mainly due to government incentives as many hotels in Paphos, Limassol, Larnaca and the Famagusta District have proceeded with renovations and extensions, improved their online presence and liaised with a large number of tour operators. There is an absolute necessity for comprehensive planning of the tourism sector if Cyprus is to adopt to the new circumstances and its tourism product will continue be the star-performer of the economy. It is worth noting that the island offers many competitive advantages to visitors and the existing infrastructure, services and facilities have proved to be satisfactory thus far. I have strong reasons to believe that Cyprus can accommodate up to 5 million foreign tourists due to the following developments and facts: • Cyprus is one of the safest destinations in the Eastern Mediterranean region with a stable economy and political system. • The construction of marinas will strengthen nautical tourism. Adding to the

success of Limassol Marina and following its example, a new 600-berth luxury marina is under construction in Ayia Napa, while plans are in place for marinas in both Paphos and Larnaca. These marinas are expected to attract nautical tourists all year round. • The license granted to the City of Dreams Mediterranean casino resort is expected to strengthen efforts to increase tourist arrivals. The casino will open in 2021 and the resort will include a 500-room hotel, with conference, leisure and event facilities. Moreover, it is important to strengthen the island’s aviation connectivity with new markets while, in parallel, boosting the dynamic cruise sector. • Enhancement of sports tourism with more teams and groups of athletes visiting Cyprus for their winter training. The construction of golf courses is already considered a successful tool to attract tourism, taking advantage of the island’s climate. Additionally, diving tourism has considerable growth potential, following the Cyprus Tourism Organisation’s decision to sink four vessels in 2015 to create more artificial reefs in addition to the famous Zenobia shipwreck. • Promoting medical tourism. Cyprus is well-known for providing high-quality healthcare in a technologically advanced environment. There are already several exclusive spa hotels and the island’s climate is also beneficial for this specific market sector and possibly for the development of the rehabilitation centres.

There is an absolute necessity for comprehensive planning of the tourism sector In conclusion, the creation of an integrated but feasible strategy for the tourism sector is now more necessary than ever. It requires examining trends in the international market, exploring ways to attract tourists from new markets, studying the accomplishments and advantages of competitive destinations and identifying the personal needs of visitors. In this way, our tourism product will be significantly strengthened and will assist other areas as well, such as investments. By implementing these elements as part of a holistic tourism strategy, Cyprus can begin to tackle the longstanding problem of seasonality.

ACCOUNTANCY CYPRUS

economy

the economy in cyprus wonderland By Savvakis C. Savvides, economist, former senior manager, Cyprus Development Bank, regular visiting lecturer, Harvard University & Queen’s University

olitics in Cyprus reminds me of the dialogue between the Cheshire Cat and Alice in Lewis Carroll’s Alice in Wonderland, when Alice asks which road to follow, while clarifying that she does not know where she wants to get to. The Cheshire Cat replies, “If you don’t know where you are going, any road will take you there”. This seems to be the guiding light of our inept political leadership and it practically describes our politicians when setting economic policy. For this reason, I will try to lay out some ground rules and define some objectives, which, I hope will also set some priorities for realistic and attainable economic policy goals: 1. Without setting sound foundations for the economy, there can be no stable and lasting economic development. 2. The biggest obstacle, which is holding the economy to ransom and preventing economic growth, is the huge private (and public) debt. 3. The “rescue” of the banks cannot by itself lead to sustainable economic growth when companies and households are deep in debt and having balance sheets with depleted equity or

even with negative net worth. 4. Non-performing loans (NPLs) are only a symptom of the real problem of the economy, which is the enormous level of private debt. 5. Any solution that may reduce the NPLs on the banks’ balance sheets but which does not reduce private debt (such as, for example, the packaging and sale of loans) is not a cure and does not help economic recovery. 6. “Solutions” that squander provisions as discounts offered to prospective suitors in order to entice them to buy the loans (sadly it seems to be the only option being considered) only make the problem of private debt worse and a lot more difficult to solve.

Serving the Establishment The decision to encourage banks to use their provisions to offer discounts to vulture funds so as to entice them to take the loans off the balance sheets – aided by the new legal framework which, in its wisdom, the House of

We need to engage in more sophisticated and imaginative ways of structuring loans

Representatives recently enacted into law – risks another financial crisis through the uncontrolled transfer of wealth and other assets pledged to the banks. Our political leadership’s submission to the banks’ wishes opens the door wide to those who are after a quick profit by raiding their balance sheets, with or without the consent of those who currently control the banks. Undoubtedly, this short-sighted policy serves only the major shareholders who now control the banks and whose prime concern is to register an accounting profit by selling the loans within the allowed margins afforded by the sizeable provisions they are being forced to make. In this manner, these shareholders avoid having to recapitalise the banks by providing additional equity themselves. However, this road will surely lead the country and its people to a new and much bigger economic calamity. This is because the proposed solution in no way reduces private debt. On the contrary, debt becomes entrenched as the provisions will no longer be available for loan write-offs, which are a prerequisite for making viable restructurings. Loan provisions are hence eliminated by being sacrificed as discounts on the altar of the sale of loans to third parties.

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Accommodating the Banks while Reducing Private Debt There are, however, methods that the banks can employ and ways in which to utilise the provisions productively in order reduce private debt and, at the same time, avoid what they fear most (of having to provide new capital). But to make this happen, we need to engage in more sophisticated and imaginative ways of structuring loans among various project parties so as to meet both the needs of the borrower and the bank shareholders. The borrower needs to have a viable project and one which takes on no more debt than he/she can adequately serve. The bank, on the other hand, needs to be assured that a restructured loan which remains on their books will not return to haunt them as a new NPL. Such arrangements could, with some transparent criteria, also include the involvement of the State, if needed, while ensuring fair play for the taxpayer. Let me illustrate this with an example. The bank should be obliged by law to offer the same discount to its client before it offers the loan on its own or in a package to a third party for purchase. The client should then be given 3-6 months to repay and fully settle the

loan. If, say, a borrower owes the bank â&#x201A;Ź500,000 and the bank proposes to sell this loan to a Fund at 60% discount, i.e. a purchase price of â&#x201A;Ź200,000, the borrower should be formally informed of this and be given the chance to come up with the settlement amount of â&#x201A;Ź200,000 plus interest within, say, 6 months. There are usually two problems with the refinancing of restructurings, which, in this case, will not apply or they will be greatly mitigated. One has to do with the ability of the borrower to repay the restructured loan, which may not be possible in the current state of the Cyprus economy. This hurdle, however, will be greatly lowered because of the significant write-off that the banks are willing to make (but were not willing to risk if the loan had remained on their books). The second obstacle is usually the entanglement and commitment of the collateral securing the existing loan. But again, since the existing loan will be settled (completely repaid), the new bank that

Solutions can be found with good will and an open mind

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may be financing the reduced amount needed by the client to settle his/her loan can have an agreement for the collateral or some of what guaranteed the old loan to be transferred to the new financing bank at the same time as the new loan is advanced and the old loan is completely repaid. In the case where a bank may want to do the restructuring itself, it may opt to put into an escrow account an amount which may be as high as the total of the provisions that it may otherwise be willing to offer by way of a discount to someone who will buy the loan. The bank will have full control of this escrow account, either on its own or with the government if it is a case where the State may participate to enable some viable loan restructurings. The borrower will thus be obliged to make up the reduced instalments while the bank will have enough funds set aside in the escrow account, which will act as a buffer to ensure that the new loan will not return as an NPL.

The Way Forward The main objective should be to seek solutions which utilise the existing provisions to reduce private sector debt rather than waste them on discounts to third parties. Those who buy the loans only want to maximise their short-term profit by using all the leverage that the collat-

The main objective should be to seek solutions which utilise the existing provisions to reduce private sector debt rather than waste them on discounts to third parties

eral and guarantees attached to the loan as well as the new legislation afford them. The end result of this is that it will then be far easier for these non-bank entities to grab the assets of the borrowers rather than engage in write-offs, which can potentially make the repayment viable. Innovative solutions that also aid the economy and ease the private debt burden can be found if the sensitivities and the ability of the interested parties to manage some risks are taken into account. I have personally made similar arrangements in my 30 years of studying and implementing such project finance arrangements. It is extremely difficult, however, if the politicians do not want to open their minds to new ideas and the only thing that seems to interest them is to convince the electorate that “other politicians” are to blame! The bottom line is that solutions can be found with good will and an open mind. But this is perhaps a lot to ask from our politicians. With apologies to Lewis Carroll, if Alice were to ask the Cheshire Cat, “Which is the road that leads to economic recovery?” the reply ought to be, “The one that channels provisions into write-offs for loans that support viable projects in the economy and hence repairs the balance sheets of the people rather than just dressing up those of the banks”.

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economy

the Regulatory and Supervisory Landscape of the Cypriot Fund Industry Substantial improvements will create all the necessary preconditions for further growth of the collective investment sector By Demetra Kalogerou Chairwoman, Cyprus Securities & Exchange Commission

n an ever-changing regulatory environment, the fund industry is also being impacted by changes. The implementation of the Investment Services and Activities and Regulated Markets Law of 2017, which harmonises Cy-

prus law with MiFID II and came into effect on 3 January 2018, also affects UCITS management companies and external Alternative Investment Fund Managers (AIFMs), which have extended their authorisation to include portfolio management and, potentially, noncore services, such as investment advice. The development of the collective investment and asset management sector is of key importance to CySEC due to the numerous advantages it generates for the Cyprus economy, not only by offering an alternative source of financing for private initiatives

but also by strengthening the establishment of Cyprus as an international services centre. The task of establishing an integrated regulatory framework for the development and the governing of the collective investment sector in Cyprus over the last 6 years was made possible by the efforts of CySEC, in close collaboration with the Ministry of Finance and the valuable contribution of the Cyprus Investment Funds Association (CIFA). The national legal framework was harmonised with the fourth European UCITS Directive in 2012, with the fifth Directive following suit

in April 2016. This triggered the approval of the Open-Ended Undertakings for Collective Investment Law that regulates the establishment and operation of UCITS funds and UCITS fund management companies. In 2013, the Alternative Investment Fund Managers Directive was also transposed into national legislation. This AIFM Law regulates the establishment and operation of fund managers that handle funds in excess of â&#x201A;Ź100 million and has made possible the passporting of these services to the rest of the EU and third countries where possible.

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Pursuant to the enactment of the Alternative Investment Funds Law, AIFs and their managers are authorised and regulated by CySEC under a more modern and comprehensive regime. The enactment of the AIF Law (which is a national law) made possible the establishment and operation of different alternative investment funds that, subject to certain conditions, can be marketed to Retail and Well Informed/Professional Investors. In its effort to make the whole investment fund regime in Cyprus even more attractive, CySEC has promoted, among others, various changes to the legal framework governing collective investment schemes. Substantial improvements will create all the necessary preconditions for the further growth of the collective investment sector, which is expected to contribute substantially to the further progress of our country’s economy. Although the legislative framework was completed relatively recently, notable growth is being observed in

CySEC has authorised 118 Alternative Investment Funds, of which 34 invest directly in Cyprus the sector. So far, CySEC has authorised 118 Alternative Investment Funds, of which 34 invest directly in Cyprus. Also, CySEC has authorised 12 UCITS and UCITS Management Companies. The Alternative Investment Funds are managed by 90 Fund Managers, of which 20 are Alternative Investment Fund Managers that can manage funds with over €100 million of assets each. By the end of 2017, total Assets under Management were around €3 billion. Interest

in the setup and authorisation by CySEC of alternative investment funds is still strong and there are at this moment more than 70 pending applications for licensing for different fund structures. To assist the process, several changes have been made within CySEC to make the processing of applications more efficient, by diminishing unnecessary delays. In particular, additional staff have been assigned to the relevant department and various procedural improvements intro-

duced. Also, a process to announce tenders is under way, in order to facilitate the electronic submission of funds’ applications via the CySEC website. CySEC is committed to sustaining Cyprus’ momentum in becoming a location of choice for the domiciliation and administration of Investment Funds and the healthy growth of the funds and fund management sector is at the heart of this.

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economy

Government Ministries in Cyprus to have their own Chief Financial Officers Focused and empowered leadership is essential to driving higher standards in financial management and ensuring that finance is integral to decision-making at the very highest level across the public sector. By Sumita Shah, Regulatory Policy Manager, ICAEW

n most private sector companies, from the big corporations down to smaller sized firms, the finance leader is involved in all key decisions. Indeed, finance leadership models in the private sector vary but, across large multidivisional organisations, there are some common features. In contrast in the public sector, there is often a mismatch in policymaking, with economists and policymakers taking the lead in big decisions without involving the finance leaders. In ICAEW’s new

publication, The Role of Financial Leadership in Sustainable Public Finances in its Better Government Series, we explore the role that finance leaders can and should play in managing sustainable public finances. We explore the drivers of strong financial leadership and the skills and competences that, in our view, a strong finance leader should have. Senior leaders from around the world provide their thoughts on the importance of strong finance leaders in the public sector. They explore the practicalities of financial leadership

that is needed to tackle the problems that many governments are facing – whether it be to drive through public sector reforms or to tackle increasing government debts and deficits. The authors give their insights on: • The importance of having finance professionals as leaders in the public

Radical changes are needed if governments are to manage public finances in a sustainable manner

sector; • What a successful finance professional leader should look like and the specific skills/qualities that they need to have; • The challenges that finance professional leaders within the public sector face and how they can tackle them; • How a finance professional leader can make an impact in government so that people listen when they speak; and • How governments can ensure that they have the right people in place for these leadership positions. The publication is directly related to the situation in Cyprus, since

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the island is still trying to recover from the financial storm it experienced in 2013. This crisis made the need for sound financial management across the Government not only obvious but urgent. The still ongoing Public Financial Management (PFM) reform is a result of the need of the economy and society as a whole to ensure that Cyprus operates in a stable economic environment, with sustainable public finances. The publication explores the multitude of roles that finance leaders should be playing in the public sector: from instilling financial disciplines across government (accountability, transparency, governance and ethics) and providing strategic advice to policymakers on key financial policy decisions, to strengthening standards, improving balance sheet management and driving value for money across government. A major part of the PFM reform in Cyprus is the reform of the finance function in the Line Ministries. The Treasury of the Republic has recognised the need for this reform and has taken the initiative to establish a modern finance function in all Line Ministries. This function will be headed by the Ministry’s Chief Financial Officer (CFO) who must be a professional

It is important that finance leaders have integrity, courage and the ability to build widespread support for change which advances the public interest accountant and have the characteristics of a finance leader, as described in the publication. The roles associated with the new finance function include: • Strategy and Planning of resources • Financial Reporting on an accrual basis • Processes and Systems and • Compliance The publication discusses the need for finance leaders to have both a strategic and a detailed understanding of how government works and be effective communicators and influencers to help shape policy and debates. It is therefore important for such leaders to have a combination of soft skills as well as the detailed technical skills. We explore the skills and competences that we think are important for a finance leader in the public sector, and note that it is also important for these leaders to demonstrate a level of

emotional intelligence in addition to their leadership skills. While the specific leadership attributes and skills will differ depending on circumstances, cultures and individuals, it is important that finance leaders have integrity, courage and the ability to build widespread support for change which advances the public interest. In Cyprus, the Government and the Minister of Finance, in particular, are actively supporting this reform, which enables the Treasury to make the promise for sound financial management feasible. The skills element has been an important factor; we believe that the Treasury and the Government as a whole can rely on the skills and competencies of finance professionals, who will be given the role of finance leader (CFO) in each Line Ministry. This is exactly the Sumita Shah message of this publication. In Cyprus, the Government seems to have realised and recognised the added value that finance professionals can provide and it remains with the Treasury to prove that this trust is worthwhile.

Governments around the world are going through enormous change and, as in Cyprus, public sector reforms are high on their agendas. If governments are serious about making change, politicians and civil servants should ensure that the roles within governments are fit for purpose. Radical changes are needed if governments are to manage public finances in a sustainable manner – it is therefore essential for the right finance leadership role and the right structures to be in place. In Cyprus, we are taking steps to achieve this. And if governments are to get this right, the finance leader roles mush be filled with people that have a track record of cutting through bureaucracy – with both the technical skills for the task and the strength of character to challenge public sector financial cultures.

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taxation

VAT and Reverse Charge in the Construction Industry: The Case for Article 11B Article 11B of the Cyprus VAT Laws, which governs the reverse charge on construction services, has been around for six years. Recently there has been some discussion about whether it should be abandoned. What is article 11B? Why was there a need to introduce it? And why it should not be abolished? By Panayiotis Panayi, BA, ACA, Director, Chelco VAT Ltd

The mechanics of article 11B When there is a supply of construction services from one Taxable Person (TP) to another, then the VAT is discharged by the recipient of the services under the reverse charge mechanism. Where the recipient has the full right of deduction, there is no VAT payable/refundable and it is just a matter of accounting entries. The supplier does not charge VAT on its invoices and notes ‘Reverse charge – article 11B’ on them. The need to introduce article 11B On 9 March, 2012, law Ν.16(Ι)/2012 was published in the Cyprus Gazette, introducing article 11B to the Cyprus VAT Law Ν.95(Ι)/2000. The reasoning report introducing the legislation noted the following as to why the introduction of article 11B was necessary: (a) Support of economic growth and liquidity support for developer companies, and (b) Tackling tax avoidance and evasion.

(a) Support of economic growth and liquidity support for developer companies Prior to article 11B, the developer paid VAT on invoices received by constructors. Even if the developer had a full right of deduction of input VAT, there was a timing difference from the time it paid the VAT to the time it recovered it, either by set off with output VAT on sales or as refund from the Tax Department (TD). This created a need for the developer to finance the VAT which increased the financing cost of projects

Abandoning article 11B will bring back the legal ‘window’ which allowed fraudsters to operate

at a time when financing was already a problem. With the introduction of article11B the developer no longer pays VAT to the constructor. The VAT is self-charged and has a neutral impact when recovered in full thus avoiding the need for financing. (b) Tackling tax avoidance and evasion Application of the reverse charge mechanism for such transactions is allowed as an option to Member States under article 199(1)(a) of the VAT Directive as a measure for tackling tax evasion. The problem faced by the TD in Cyprus was that constructors would register for VAT and issue invoices with VAT to clients. Without paying that VAT to the TD, they would then disappear. At the same time, their clients, having paid for the services and with a legal invoice at hand, would recover the input VAT accordingly. This meant that the TD was forced to refund input VAT which

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it never received as output VAT. Considering the magnitude of transactions in the construction industry, one may realise that this tax evasion resulted in significant losses of public revenue. By introducing article 11B there is no need for funds to change hands for VAT purposes as the VAT is discharged by the recipient under reverse charge and not paid to the provider. Thus, with a very simple solution it was possible overnight to tackle this fraud and plug a big hole for public revenues. Should we keep or abandon article 11B? The part of the property market which targets foreign investors for passport purposes seems to have gone into overdrive, showing the first signs of a property bubble ready to burst. On the other hand, the property market for the Cypriot population, albeit being dragged higher by foreign investors, does not show the same signs. Fewer properties than demand are being built targeting the local market and this is evident from rental prices which keep rising to unprecedented levels. The effects of article 11B are not really a factor affecting the market. This is especially true now that the banks have once again started fund-

Abandoning article 11B, when the market has started to understand it and learned how to correctly implement it, would be a mistake ing both developers and buyers, eliminating the small difference of the effects of article 11B and VAT financing. Most importantly, the introduction of article 11B has been a determinant factor in tackling tax evasion in the construction industry which created huge losses for the TD. Abandoning article 11B will bring back the legal ‘window’ which allowed fraudsters to operate. Other methods used by Tax Authorities in other Member States have not been as effective and have always led to higher administrative costs as they equate to more stringent audits by the Authorities. Admittedly the ‘cost’ of article 11B has been pushed down the chain to the constructors, who now purchase with VAT but sell without VAT. This creates VAT

refundable amounts for them, causing a timing difference and potentially a liquidity problem. In recognition of this drawback of the law, the TD has proceeded to audit such entities in due time. Where the TP has been found to be in compliance with its obligations, it has since been receiving refunds within 4-5 months from submitting a request. At the same time, VAT refunds might be set off against other taxes the TP might have payable. Thus, if a TP who bears the ‘cost’ of article 11B is up to date with its tax compliance obligations, it has tools available to help eliminate this ‘cost’. To this end, it is concluded that abandoning article 11B when the market has started to understand it and learned how to correctly implement it, would be a mistake. The deeper effects, especially those of tax evasion, of such an action need to be considered and understood before a final decision is taken. At a time when the European Commission is discussing a universal application of the reverse charge mechanism, discussions of abandoning article 11B in Cyprus are simply without merit, especially when it has been proven that it has significantly helped combat tax evasion.

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taxation

EU Anti-Tax Avoidance Directive (ATAD) By Marios Fokides, Director, Tax & Legal Business Tax Services & Stella Koustai, Director, Tax & Legal Business Tax Services

n 12 July 2016 and 29 May 2017, the European Council adopted new rules addressing some of the practices most commonly used by large companies to reduce their tax liability. The EU Anti-Tax Avoidance Directive (ATAD) sets a common minimum level of protection across the EU by introducing anti-tax-avoidance rules in five specific fields: • Interest limitation • Exit taxation • General anti-abuse • Controlled foreign company (CFC) • Hybrid mismatches

A common EU approach The Directive will ensure that the OECD anti-Base Erosion Profit Shifting (BEPS) measures are implemented in a coordinated manner in the EU, including by 7 Member States that are not OECD members (including Cyprus) and covers

all taxpayers that are subject to corporate tax in a Member State (MS).

Approval and implementation The MSs will have until 31 December 2018 to transpose the Directive into their national laws and regulations, except for the exit taxation and hybrid mismatches rules, for which they will have until 31 December 2019. With respect to the interest limitation rules, MSs that have targeted rules that are equally effective may apply those until the OECD reaches agreement on the relevant minimum standard, but at the latest until 1 January 2024. Cyprus will very soon transpose into legislation the ATAD provisions. In November 2017, the Cyprus Tax Department (TD) has issued a draft legislation for ATAD which was held for public consultation. The legislation covers all ATAD provisions mentioned above.

The Tax committee of The Institute of Certified Public Accountants of Cyprus (ICPAC) has already reviewed the proposed legislation and submitted preliminary comments for discussion. Although ATAD does not provide much flexibility to MSs on the application of the provisions, in certain cases there are important technical elections for MSs to make, when implementing such provisions in their domestic laws. In that respect, the discussions currently taking place between the Tax Committee and the TD concentrate on these areas, together with a few other potential law changes that may take place, in an effort for Cyprus to remain a competitive and attractive jurisdiction. Below, we provide high level overview of the ATAD provisions, some preliminary comments on the proposed draft legislation and brief comments on the expected impact that these new rules may have on the Cypriot businesses.

Overview of the ATAD provisions

1. Interest Limitation General overview The objective of the interest limitation rule is to discourage taxpayers to engage in BEPS through excessive interest payments between associated enterprises. Effectively, these rules are targeting multinational groups that may finance group entities in high-tax jurisdictions through debt and paying back inflated interest to subsidiaries resident in low-tax jurisdictions, with the result being the shifting of profits to the low-tax jurisdiction (and thus achieve a reduced tax liability for the group as a whole). The interest limitation rule to be introduced provides that exceeding borrowing costs (EBC) will only be deductible up to 30% of a company’s EBITDA (earnings subject to corporate income tax + interest + tax adjusted amount of depreciation and amortization) of the entity.

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EU Tax Commissioner Pierre Moscovici

The Directive includes provisions to enable MSs to apply this rule at a group level, i.e. borrowing costs and the EBITDA may be calculated at the level of the group and comprise the results of all its members. The taxpayer may be given the right to: • deduct EBC of up to EUR 3m (threshold applies both at an entity level and at a group level); • deduct EBC if the taxpayer is a standalone entity. In addition, the Directive provides for certain exemptions with regards to long-term infrastructure projects and loans taken before 17 June 2016 (both optional). Further, the Directive provides that MSs may exclude financial undertakings (e.g. credit, insurance and certain other qualifying institutions) from the scope of the interest limitation rule. In case where the taxpayer is a member of a consolidated group, MSs may opt to offer the taxpayer the opportunity to either escape the interest limitation rule or even reduce the

amount of interest restriction, if the results of the standalone entity satisfies certain ratios. Finally, the Directive provides for options to utilize nondeductible excessive borrowing costs and unused interest capacity in other periods (i.e. carry forward and carry back). Preliminary elections made by Cyprus TD According to the draft legislation and in accordance with the interest limitation provisions, the TD made the following preliminary elections: • Each standalone entity may fully deduct EBC up to a EUR 3m threshold (maximum amount allowed by the Directive). • It is not clear whether the Cypriot domestic tax legislation, as it currently stands at the moment, can accommodate the application of the rule at a group level. This matter is expected to be further investigated from a technical angle in the following months. • Adopt grandfathering provisions for loans concluded before

17 June 2016 and exclude loans that are used to fund long term EU public infrastructure projects. •Equity escape provisions are expected to be adopted, which will offer taxpayers the right to escape from the interest restriction rule. • Carry forward of nondeductible EBC and unused interest capacity over a period of 5 years. Impact and Assessment On the understanding that the minimum €3.000.000 will be finally adopted within our domestic tax legislation, as a safe harbour threshold, the impact of this rule will be restricted to structures that are highly leveraged, incurring high amounts in borrowing costs that would exceed the said threshold in each tax year. Nevertheless, most of the holding structures currently held in Cyprus claim low or now EBCs as tax deductible, following the application of the existing interest restriction rules included in

the Cypriot income tax law. We provide below more details as to how we envisage that the interest limitation rule may affect Cypriot companies: • Trading and construction companies: We consider that there is a limited number of Cyprus trading companies, where their EBC exceeds the threshold of EUR 3m, therefore the impact of the interest limitation rule is not expected to be significant. Nevertheless, this rule will certainly affect large construction companies that may incur significant borrowing costs during the construction phase, a period where their EBITDA may be negative. • Back-to-Back financing companies: Companies that engage in back-to-back financing arrangements should not have tax deductible EBC, as such structures are captured by existing interest expense restriction provisions. Furthermore, the applicable Cypriot armslength provisions would deem interest imposition so as to suffice a minimum margin. • IP companies: May be adversely affected since they do

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not usually earn interest income that would reduce the amount of EBC. It is therefore, expected that interest expense incurred by highly leveraged companies that used their debt funding to acquire the IPs, may be subject to the interest limitation rules whereas, under the current legislation the whole interest expense is deductible. • Holding companies: May only be affected with respect to interest deduction granted for the acquisition of wholly owned holdings or investments held for more than seven years. On a separate note, it is worth mentioning that within the draft proposed legislation for ATAD, the TD introduced provisions to abolish the first and the second reservations of article 11 (15) of the Income Tax Law concerning the seven year interest restriction rule and the wholly owned holdings rule.

2. Exit Taxation General overview The objective of this provision is to ensure that where a taxpayer transfers assets or its tax residence out of the jurisdiction of a MS, that MS taxes the economic value of any capital gain created in its territory even though that gain has not yet been realized at the time of the exit. According to the Directive, a taxpayer shall be subject to tax to an amount equal to the market value (MV) of the transferred assets at the time of exit, less their value for tax purposes in any of the following cases: • a taxpayer transfers assets from its Head Office (HO) to its Permanent Establishment (PE) in another MS or third country

so as the MS of the HO no longer has the right to tax the transferred assets due to the transfer; HO ->PE; • a taxpayer transfers the assets from its PE in a MS to its HO or another PE in another MS or in a third country in so far as the MS of the PE no longer has the right to tax the transferred assets due to the transfer; PE ->HO, other PE; • a taxpayer transfers its tax residence to another MS or to a third country except for those assets which remain effectively connected with a PE in the first MS; • a taxpayer transfers the business carried on by its PE from a MS to another MS or to a third country in so far as the MS of the PE no longer has the right to tax the transferred assets due to the transfer. According to the provisions of the Directive, taxpayers should be given the right to defer the payment of an exit tax by paying in instalments over 5 years, in specific circumstances, as stipulated in the directive. In such cases, the MS may charge interest as well as request for a guarantee. In certain cases, (e.g. in case of a sale of the transferred assets or the business, a subsequent transfer of the transferred assets to a third country, etc.) and where a taxpayer was previously given the right to defer the payment of an exit tax, the deferral of the payment shall be discontinued and the tax debt should become recoverable. Furthermore, where the transfer is to another MS, that MS shall accept the value established by the MS of the taxpayer (or the PE) as the starting value of the

assets for tax purposes, unless it does not reflect the assets’ market value. The above should not apply in cases that assets are set to revert to the MS of the transferor within a period of 12 months and to asset transfers relating to the financing of securities, assets posted as collateral or where the asset transfer is executed for prudential capital requirements or liquidity management. Draft legislation issue by Cyprus TD Although the draft legislation for ATAD does include the exit taxation provisions, according to the Directive MSs have until 1 January 2020 to transpose this provision into their national laws. The Cypriot draft legislation is in line with all above provisions. Impact and Assessment Although the draft legislation does not contain and neither explicitly exempts assets that are exempt from tax in accordance with MSs domestic legislations, it is understood that exit taxes would only affect structures that hold assets that are not tax exempt. The transfer of tax neutral assets (e.g. titles) should not be affected. Furthermore, there should be harmonization of this provision with the merger Directive and the relevant re-organization provisions within the Cypriot income tax legislation (articles 26-30).

3. General Anti-Abuse Rule General overview MSs should introduce and incorporate in their tax system a General Anti-Abuse Rule (GAAR) to tackle abusive tax practices that have not been

specifically dealt with through other tax provisions. The aim of the GAAR is to fill in gaps in the MSs domestic legislation and should not affect the applicability of specific AntiAbuse Rules. For the purposes of calculating the corporate tax liability, MSs should ignore any arrangements that have been put in place for the purposes of obtaining a tax advantage that defeats the object or purpose of the applicable tax law and are not genuine. “Non-genuine arrangements” are defined as transactions/arrangements not put into place for valid commercial reasons, which reflect economic reality. The Directive provides that in the cases of non-genuine arrangements the tax liability shall be calculated in accordance with national law. Draft legislation issue by Cyprus TD The draft legislation is in line with the ATAD article and is expected to be implemented by 1/1/2019. Impact and Assessment Cyprus legislation already includes a General Anti-Abuse provision within the Assessment and Collection of Taxes Law. According to Article 33, if transactions/actions undertaken by a person are deemed to be fictitious or non-genuine, the TD may ignore such transactions as if these never incurred and tax that person accordingly. Although the GAAR provided within ATAD is very similar to the existing Article 33 contained within our Assessment and Collection of Taxes Law, it is considered that the new provision is broader in scope and easier to be enforced by the TD.

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In this respect, anti-avoidance provisions will be introduced within our Income Tax Law (ITL) which should give the power to the TD to ignore non-genuine arrangements, which do not have a valid commercial reason that reflect economic reality. GAAR will apply only for corporate transactions.

4. CFC rules & computation of CFC income General overview The controlled foreign company (CFC) rules intend to reattribute the income of a low-taxed controlled foreign subsidiary to its parent company. According to the ATAD provisions, the MS of the parent company will treat an entity or a PE (based in another MS or in a 3rd country) as a CFC, if the following condition are met: • The parent holds (directly or indirectly) participation of more than 50% of the voting rights, more than 50% of the capital, or is entitled to receive more than 50% of the profits of the entity or the PE; and, • The actual corporate tax paid by the entity or the PE in the CFC jurisdiction is lower than the difference between the corporate tax that would have been charged on the entity or the PE under the applicable corporate tax system in the MS of the parent and the actual corporate tax paid on the profits in the CFC jurisdiction. In principle, the CFC provisions prescribe that the parent company becomes subject to taxation for certain non-distributed income of the CFC.

According to the Directive, the MS of the parent company may choose to include in their tax base, the income described under one of the following two models: Model A • The non-distributed income of the entity or PE derived from “passive income”. Model B • The non-distributed income of the entity or PE arising from non-genuine arrangements put in place for the predominant purpose of obtaining a tax advantage. Draft legislation issue by Cyprus TD The draft legislation currently been discussed is in line with the ATAD provisions and is expected to be implemented by 1/1/2019. Although the preliminary draft legislation provides for Model A as a method of calculating CFC income, this is under discussion between ICPAC tax committee and the Cyprus TD. Currently it is considered whether the non-genuine arrangement approach (Model B) may represent a more attractive alternative compared to Model A, that Cyprus should finally adopt. Nevertheless, developments and elections made by the other MSs may also affect the final decision to be adopted by Cyprus. According to Model B, an arrangement or a series of arrangements should be regarded as non-genuine to the extent that the entity or the PE would not own the assets or would have not undertaken the risks which generate its income, if it were not controlled by a company where the significant peo-

ple functions are carried out. According to the Directive, MSs that elect Model B, may include an exemption/carveout under this method for CFCs that either: • have accounting profits of less than EUR 750k and nontrading income of less than EUR 75k, or • have accounting profits of more than 10% of operating costs. Impact and Assessment Although the introduction of CFC rules would most likely not have a significant impact on the attractiveness of the Cyprus tax system compared to the rest of the EU countries, on the premise that corresponding CFC rules would be introduced across all MSs, groups that hold directly or indirectly participations in no tax jurisdictions may be impacted by the implementation of this provision. It is important to carefully examine multi-jurisdictional structures in order to ensure that the implementation of the CFC rules will not to result in multiple taxation, something that is beyond the scope of the Directive.

5. Hybrid mismatches General overview Hybrid mismatch is the result of differences in the legal characterization of payments or entities and how these differences surface in the interaction between the legal systems of two or more jurisdictions. The effect of these differences is often a double deduction or a deduction of the income in one state without inclusion in the tax base of the other.

According to Article 9 of the Directive: • To the extent a hybrid mismatch results in a double deduction, the deduction shall be given only to the MS where such payment has its source. • To the extent that a hybrid mismatch results in a deduction without inclusion, the MS of the payer shall deny the deduction of such payment. The scope of the hybrid mismatch provision is limited to hybrid mismatches between MSs while in the Annex to the ATAD, ECOFIN requests from the EC to also put forward a proposal for hybrid mismatches with third countries. Draft legislation issue by Cyprus TD The draft legislation currently been discussed is in line with the provisions of ATAD and is expected to be implemented by 1/1/2020. Impact and Assessment At the moment, we do not have provisions that tackle down hybrid mismatches that result in double deduction. We do however, have a provision in our ITL (Article 8(20) that provides for taxation under CIT of any dividends that constituted an allowable deduction in the jurisdiction of the dividend paying company (e.g. the dividend is treated as interest). As it stands, the hybrid mismatch provisions are not expected to have a significant impact on Cyprus companies as the Directive only provides for hybrid rules in cases when only MSs are involved which limits the impact until similar provisions are introduced to other third countries.

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professional economy services

Time for a More Aggressive Promotion of Cyprus as a Fund Jurisdiction Following recent amendments to the legal framework of funds and funds management, Cyprus has become an extremely competitive funds jurisdiction, says Christos Vasiliou, Board Member, Deputy Managing Director and Head of Advisory at KPMG Cyprus. KPMG is a global a professional service company business and one of the Big Four auditors. What is the key to its success? KPMG is one of the leading professional service providers both internationally and in Cyprus, with its people being the leaders in their field of expertise. We are known for the high standard of quality of services offered and the values that we portray. KPMG provides a wide selection of services which are summarized as audit (the core service), tax and advisory services. We are always assessing the needs of our clients, businessmen and the community in general and we adapt to their needs. We believe

that the key to success is always being ready to adjust to your clientâ&#x20AC;&#x2122;s needs. What, in your opinion, are the most important issues and challenges facing tax professionals worldwide today? There has been a huge increase in the tax administration work that needs to be done. Since the global financial crisis, we have seen several EU and OECD directives on monitoring the exchange of tax information between authorities. FATCA, the standard established by the US administration, and CRS, established by the OECD, have basically lifted banking secrecy. Additionally, there is a lot of pressure on intermediary service providers in terms of providing information about tax planning structures, especially after the linkage of tax structuring solutions in Luxembourg. One trend, which I believe is beneficial for Cyprus, is the requirement to establish substance in the countries in which companies are considered as tax residents. Cyprus can play a big role in this by taking advantage of the benefits it can offer to organizations which may seek to transfer their base and headquarters here. How do these issues and challenges affect the profession in Cyprus? Cyprus, as a member of the European Union and of the OECD, has to incorporate all directives into its national legislation. Very recently there was a holistic amendment to the laws and regulations affecting the audit services. Cyprus is an open economy and is therefore affected by

the international and European economic and political situation. For example, the sanctions imposed on Russian entrepreneurs are affecting businesses in Cyprus. As already noted, the trend is towards establishing substance in the country of residence and this entails moving away from the old model that we knew until now. As a result, the professional community has to adjust the scope of its service offering accordingly. In order to resolve the problem of NPLs in Cyprus, what do you think is the best strategy that the Government and the banking sector should follow? The last package of measures adopted by the House of Representatives is a decisive step towards combating the issue of the high percentage of nonperforming loans. The foreclosure legislation has become more effective while online auctions will make the whole process more efficient. It should be emphasized, however, that decisions by the courts in cases involving loan agreements need to be taken faster. Now that obstacles preventing the sale of loans have been lifted, I expect that we will see significant activity in the loans secondary market in the near future. The tools

The key to success is always being ready to adjust to your clientâ&#x20AC;&#x2122;s needs

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that banks have available have also been increased through the enactment of legislation relating to securitizations. Of course, it is very important to monitor the effectiveness of the new legislation and, where necessary, to proceed with the required amendments. How would you describe the Government’s Cyprus Investment Programme (formerly the Citizenship by Investment Scheme)? Is it sustainable? The Cyprus Investment Programme has contributed significantly to the recovery of the economy. We have managed to attract wealthy investors from all over the world and it is our responsibility to implement the reforms that will assist them in their business and enhance the value of their investment. Recently there have been changes to the programme, regulating the service providers, who must adhere to a specific code of conduct, and banning any kind of advertising that suggests that the programme is all about “selling passports”. It is very important to continuously assess the effect of the demand through the programme on the real estate and construction sectors and take the necessary steps where needed. I am pleased to note that we have recently seen investment in other sectors of the economy, which is also due to the Cyprus Investment Programme. The sustainability of the programme will depend on our actions and by “our” I am referring to all the key players in the immigration services. Do you have any specific proposals that

We want to continue our efforts aimed at making KPMG become the clear choice for our people, clients and the society could make Cyprus an even more attractive location for funds and their management? I believe that now is the time for promoting Cyprus more aggressively as a fund jurisdiction. Following recent amendments to the legal framework of funds and funds management, Cyprus has become an extremely competitive funds jurisdiction and compares favourably with other well-known fund centres. It is crucial to enhance the efficiency and speediness of the licensing process while the establishment of a well-known custodian bank on the island will assist in attracting more professionals to become involved in the specific industry. From January 1 2019, you will become the new CEO of KPMG Cyprus. What new responsibilities will this entail for you? As I have already stated, KPMG is one of the biggest professional service providers on the island. Being the CEO of such an organization is a huge challenge. There are three pillars which need to be addressed in managing the organization. The first one entails making the it an attractive place to work in by providing the right environment to existing and prospective Christos members of staff. It’s Vasiliou about transforming the organization into being

an employer of choice. The second relates to maintaining and even taking the organization one step further, in relation to its standing in the marketplace, both in terms of increasing the range of services it offers as well as increasing the depth of existing services. As the market has changed dramatically over the past few years, we need to adapt to these new market and technology needs. Clients demand specialization and expertise at much greater levels than before. The third pillar relates to the image we present to society in general. We want to continue the work we have been doing so far to help the economy grow as this is for the benefit of Cypriot society. Support for local economies and society is also achieved through a well-established programme of corporate responsibility. We want to continue our efforts aimed at making KPMG become the clear choice for our people, clients and the society.

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professional economy services

To Go Solo or Not to Go Solo? That is The Question! By Spyros Yiassemides BA, MSc, ACA, Partner Yiassemides & Co

o you decided to pursue a career as a qualified accountant. Not only that, but you have also secured your first summer internship in one of the Big Four audit firms so as to learn the ropes before taking on the full-scale traineeship. Good for you, both for the decision and the proactive action. Some years down the road, you will come to the realization that the qualification that you have obtained represents a professional passport in your hands. Staying within this analogy, there will come a time in the course of your career when you will think about the next destination in your trajectory, perhaps your final one. At this point, you may find yourself in Shakespearean mode, sans skull, iterating the allimportant question: â&#x20AC;&#x153;To go solo or not to go solo?â&#x20AC;? Thinking about taking years upon years of professional expertise and redeeming these, not by means of career progression within a large corporation but by placing them as the foundational knowhow of your own Audit or Accountancy or Tax or Consultancy or All-Of-ThePreceding practice, is indeed a very intriguing idea and a scary one. Going solo entails putting a great deal of effort into building your practice

from the ground up. There are clients to be found so as to make the whole thing viable, systems to be installed, office space to be rented, equipment to be bought, and the list goes on. You will also need a certain amount of savings on which to live until your own practice starts providing a steady flow of income that will come to replace the salary you were earning in your previous employment. Stress will come knocking at your door and it will then be up to you whether to open and invite it in. Being resilient to stress by not succumbing to it every time is one of the most important prerequisites to going solo. Those who push forward in the face of adversity are the ones who manage to power through the obstacles and make it to greener professional pastures. Letting go of a steady salary cheque for the sake of going solo is surely not advised for the faint-hearted. But when even those who are, by nature, risk-averse take that leap of faith and get out there, drafting balance sheets and calculating EBITDAs for their own clients, they eventually find out, when the debris has settled, that it was worth it, all 10 litres of cortisol secreted! All the blood, sweat and tears that followed the bold decision to break free of the salaried regime and do something alone (or by partnering up with some fellow aspirers) have finally

paid off. After all, hard work always pays off in the end. Why would someone want to go solo, you may ask. There are reasons aplenty. Below are some of the most common ones, as revealed by people who have made the coveted switch: 1. Autonomy: Being in 9-to-5 salaried employment means that you are a fixed asset (pun intended) that can be found in your office at any given time within standard working hours (or even past those, if this is the tone set within your organization). Coming and going as you please is not tolerated; at best it is frowned upon, at worst it comes with a formal warning. Having your own practice furnishes you with autonomy, the kind that enables you to create your own flexible working hours. You may

Being able to pick your clients and establish the breadth and depth of your workload is one of the greatest pros of going solo

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choose to divide your day into time blocks, some of them comprising social life and others work, and decide how to best utilize these. And since nowadays technology is at our fingertips, you may decide to work out of a cafeteria (there is even a proper term for that –“cofficing”) and use your smartphone as a mobile office. 2. Work/life balance: When you have your own practice, you have a say about how much work you will do. More importantly, you have a say on how many hours you will be working each day, since they are a direct result of the clientele that you choose to maintain. Being able to pick your clients and establish the breadth and depth of your workload is one of the greatest pros of going solo. 3. You are your own boss: Starting your own practice comes with your very own business title - “the boss”! Whether the term applies only to you, meaning that you are the boss of you, or in the case that work piled up and you have hired employees to help you cope, thus being their boss, the fact is that going solo has the power to remove all the superiors from your professional life, leaving the client as the only person to whom you need to report. In the immortal words of Sam Walton, “There is only one boss - the customer”.

Those who push forward in the face of adversity are the ones who manage to power through the obstacles and make it to greener professional pastures 4. Your sense of accomplishment is elevated: You win some, you lose some. The saying holds true in any walk of life, including running your own practice. When it comes to business development, some days you will have wins, others you will experience losses. Clients come and go, either for their own personal/professional reasons or because circumstances call for it. That said, experiencing a new client win – and knowing that it is all thanks to you and your efforts – provides a feeling of elation that pairs well with the sense of accomplishment accompanying the said win. Both the feeling and the sense are more intense than when achieving a new win while working for somebody else. The reason? Client ownership. 5. You build for the future: What you are effectively doing by going solo is building a professional brand from the ground up. You then add value to it, progressively, through professionalism, commitment, hard work, ethos and a

myriad of other traits that are imperative in securing the longstanding status of a newborn business. Many years down the road, and assuming that you have put in the work, you will find yourself standing before a business that you’ll be proud to call your own. And if along the way you are blessed with children and one (or more) of them happens to become a qualified accountant just like mommy or daddy, then what better hands to pass your practice on to than those of the next generation? On the other side of the scale, we have the hardships encountered when the underlying leap of faith is taken. In the eyes of the motivated professional, these are not deterrents but rather opportune instances to prove to the world that nothing is impossible when you put your mind to it. It’s like that saying, “A champion’s mind perceives obstacles as opportunities for small victories on the way to a grand one”. Let us look then at some typical difficulties experienced upon going solo: 1. Finding clients: Your clientele is your practice’s lifeline. Without clients, a business simply cannot be sustained. To enable your company not just to survive but to thrive, you will need to be constantly out there, seeking new

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clients. Networking events, professional services expos, presentations, seminars/ workshops by regulatory bodies and other institutions, all offer opportunities for bringing in new clients through your ever-expanding Rolodex of contacts. 2. Monitoring/quality reviews by regulatory bodies: Having your own practice comes with regulatory requirements. When you are an employee in an organization, you may not even notice that a monitoring review has been carried out, but when you run your own practice, make no mistake, not only will you notice that such a review is being conducted, you will feel it coming a mile away and, when it is underway, you will be involved at a nuts-and-bolts level with it. 3. Hiring the right people: So you have kicked it off the right way and now business is booming. Kudos are in order. That said, you now have to consider hiring people to help you cope with the increased workload. Trainees are a cost-efficient solution but you

To enable your company not just to survive but to thrive, you will need to be constantly out there, seeking new clients

need to make sure that you add value to them as they do to you, by training them properly and effectively. If you need more expertise, you can hire qualified accountants with some years of post-qualification experience or even go for management level hires. In any case, you need to screen your candidates meticulously before extending an offer their way and you also need to put them on a certain probation, so as to ensure that what you hire (and pay for) is what you get! 4. Staying ahead of the competition: This is true of all businesses but, in the professional services sector, it is crucial that you be persistently on your toes, keeping abreast of contemporary developments in the fields of taxation, reporting and auditing standards, company law and everything else that has an impact on how you conduct business. Reading business journals, attending seminars and workshops offering knowledge updates/refreshers and talking to people in your professional circle will stand you in competitive stead when bidding for an account alongside other professional firms and the client unleashes a barrage of technical questions and will choose the firm that provides the most knowledgeable answers. 5. Being the last line of defence: Since you’ll be the boss, you will also be the last line of defence when it comes to your clients’ needs and requirements. Every time a deliverable goes out to a client, you will be held responsible for its quality, correctness and suitability to

Every time a deliverable goes out to a client, you will be held responsible for its quality, correctness and suitability the client’s requirements. You shouldn’t think of this as a stress-inducing role, though, but rather as a quality control measure which will ensure that all deliverables sent to clients are of an impeccable and immaculate nature. So there you have it. The road for going solo may not be strewn with rose petals but nor is it strewn with thorns either. As with every new beginning, you will find it difficult, even overwhelming, at first and you will go through peaks and valleys, both during the set-up phase of your practice and while running it, even though you will eventually come to the realization that both the ups and the downs are necessary in every business endeavour that we undertake, in equal measure. We find elation in the peaks but it is with the valleys that we learn how to really grow and take both ourselves and our business to the next level. Now the only thing that remains to be done (after obtaining your professional qualification) is to put your Shakespearean suit on, hold your courage up instead of a skull, and ask yourself that one question that will change your professional life forever: “To go solo or not to go solo?” The answer lies within you.

ACCOUNTANCY CYPRUS

presents

The 4th International

Friday, 5 October 2018 Hilton Park Hotel, Nicosia, Cyprus

The

International

Compliance Forum

ComplianCe: Business enaBler or a mere Control meChanism Full participation at the Forum corresponds to 5 CPD units

Presented by

Sponsors

With the Support of

In Association with

Under the Auspices of

The Institute of Certified Public Accountants of Cyprus

Communication Sponsors

Organisers

reporter For further information and registration contact: IMH, 5 Aigaleo Str., 2057 Strovolos, P.O.Box 21185, 1503, Nicosia, Cyprus Tel.: +357 22505555 | Fax: + 357 22679820 | E-mail: events@imhbusiness.com | Website: www.imhbusiness.com

www.imhbusiness.com

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BUSINESS in cyprus

Time for Governance to Take Its Rightful Place By Petros Florides

• know the responsibilities of that role, and how it differs from that of others • assume accountability for reaching the destination • possess the necessary knowledge, skills and experience • adhere to accepted norms and protocols • be contextually aware and responsive to changing conditions • execute duties efficiently and effectively, and • stay in constant communication with interested parties

discipline that adds long-term value to an organisation for the benefit of all interested parties. The subject of corporate governance was first catapulted into public consciousness courtesy of a series of corporate scandals in the UK (e.g. BCCI, Guinness, Polly Peck, Mirror Group Newspapers) in the 1990s. A decade later, the subject once again stole public attention with another series of corporate scandals – this time in the US (e.g. Enron, WorldCom, Tyco, Global Crossings). Throughout this period, the discussion on corporate governance has been largely dominated in the UK by the accounting/auditing profession and in the US by the legal profession. The high standards demanded by both the aforementioned professions have ensured the development of a comprehensive methodology over the past 30

The above should help provide a deeper understanding of the oft-quoted statement that “Corporate governance is the system by which an organisation is directed and controlled.” and should clarify how governance is as much concerned with the future as it is with the past and present. Thus, corporate governance must take its rightful place as a strategic

The European Commission’s recent recommendation for Cyprus calls the country to adopt key legislative reforms aimed at improving efficiency in the public sector

f we consult an etymological dictionary, we will learn that the word “governance” comes from the Greek reference to piloting a ship. With this insight, it should be understood that governance is, fundamentally, a discipline that requires those who ‘govern’ to (amongst other things):

years or so for implementing robust corporate governance, even allowing for some philosophical differences in approach (e.g. principles-based ‘comply or explain’ in the UK/EU versus rulesbased ‘comply or else’ in the US). The achievements in enhanced transparency and accountability – two essential pillars of any customer orientated governance system – should be acknowledged and celebrated. However, it can also be argued that the resulting fallout of the 2008/09 global financial crisis (not to mention the economic fiasco that plagued Cyprus in 2013) has meant that the benefits of enhanced corporate governance have not been sufficiently felt by the general public. Whilst this perspective may underestimate the achievements that have been made, it is hard to argue against the call for further improvements to be developed and implemented. Recent developments in the sphere of corporate governance are an encouraging sign that such calls have been heard. Some of the most notable include: 1. The fourth iteration of the King Code of Corporate Governance (a.k.a. ‘King IV’) produced by the Southern African Institute of Directors in 2016 that has, amongst other things, adopted

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a ‘stakeholder inclusive’ approach (i.e. removed primacy consideration towards the shareholder thus facilitating integrated/non-financial reporting) based on a philosophy of ‘apply and explain’ that goes further than ever before to ensuring the principles contained in the Code are adhered to and clearly communicated to stakeholders 2. Consultation on a revised UK Corporate Governance Code 2017/18 being led by the Financial Reporting Council considering, amongst other things, director duties, executive pay, board composition (including member diversity), stakeholder empowerment and corporate governance in large non-listed entities, 3. The International Framework for Good Governance in the Public Sector produced by the International Federation of Accountants (IFAC) and the Chartered Institute of Public Finance & Accountancy (CIPFA) in 2014, with an emphasis on a ‘whole-systems-based’ approach underpinned by principles pertaining to: ethics & integrity, stakeholder engagement, holistic sustainability, effective interventions for achieving desired outcomes, capacity building, risk management & internal control, and transparency & accountability. The above developments, and emphases contained therein, demonstrate how corporate governance is now playing a strategic role and is involved in shaping organisational culture with a greater focus on outcomes as experienced by a wider range of interested parties. It can also be seen how the latest developments in corporate governance are much more

The benefits of enhanced corporate governance have not been sufficiently felt by the general public Petros Florides is the Chair of the New Governance Team that is operating under the auspices of the IoD (Cyprus) in collaboration with ICPAC, IIA, EIMF, CIIM and CyAQ. HE is an honours graduate in Accountancy, a Chartered Management Accountant, a diploma-holder of the Institute of Directors, a Chartered Fellow of the Chartered Institute for Securities & Investments (CISI) and a Certificant of the Institute of Risk Management. He serves on the Board of the IoD Cyprus and is co-founder and President of the CISI Cyprus National Advisory Council. He is employed as a Senior Regional Governance Advisor for World Vision International and also serves on a number of Boards in the private and third sectors.

sensitive to qualitative considerations that may not be objectively measured or easily defined. As a result, the effective execution of a Board member’s role and responsibilities has become more nuanced than was the case previously. This may be especially relevant to members of Boards of public sector organisations that exist for reasons other than making a profit. Moreover, in addition to often enjoying a monopoly regarding the provision of a particular good or service, public sector organisations may also benefit from tax-payer funded government subsidies and various protections not afforded to the private sector. Therefore, governance in the public sector must be given the same, if not more, attention as is the case with the private sector. Indeed, the European Commission’s recent recommendation for Cyprus calls the country to adopt key legislative reforms aimed at improving efficiency in the public sector, including governance of state-owned enterprises and local authorities (COM(2017) 512 final). To facilitate this outcome, a draft code for good governance in the public sector in Cyprus has been drawn up by a collaboration of volunteers from the public, private and other sectors – including representatives of ICPAC. The draft code has been informed by the latest developments mentioned above and elsewhere and is now undergoing a consultation period for further improvement. The Code should be available for wider dissemination in the near future.

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BUSINESS in cyprus

Promoting Good Governance ICSA ICSA: The Governance Institute is the UKâ&#x20AC;&#x2122;s professional body for governance. With over 125 yearsâ&#x20AC;&#x2122; experience, it works with regulators and policy makers to champion high standards of governance and provide qualifications, training and guidance. Last year it signed a cooperation agreement with ICPAC and, earlier, this year, selected Infocredit Group to represent the Institute in Cyprus and thus offer its products/services to governance professionals. Here, Theresa Minnie, Head of Outreach at ICSA, speaks about the work of the Institute. The significance of corporate governance seems to be growing these days so it is quite surprising to learn that ICSAâ&#x20AC;&#x2122;s history goes back more than 125 years. Obviously the organization and the world have both changed but is there still a key principle that has continued throughout the years? When the Institute of Secretaries, as we were then known, was formed in 1891, the governments of the day were keen to put corporate life and the economy on a surer footing to increase public confidence in business. This is still something which resonates today. Companies need to encourage people to work for them, do business

with them and attract investment. They can only do this if the public has confidence in the way that they operate. Integrity, ethical behaviour and trust are of the utmost importance. How companies engage with employees, customers, suppliers and other stakeholders builds wider confidence in the way businesses are run and helps deliver more sustainable business performance. Our members are right at the heart of this, promoting accountability, transparency, integrity and stewardship to ensure that organisations operate in a manner which is most productive. The other buzzword is compliance. What exactly is

the difference between governance and compliance? Governance and compliance are closely associated terms but they have subtly distinct meanings. Compliance is about adhering strictly to laws and regulations. While governance involves a measure of compliance, it is a broader concept and not simply a box-ticking exercise. Simply put, governance is the practice of running an organisation in line with its own purpose and values, ensuring

that decisions are taken by the right people according to the best principles and procedures so that the organisation can meet its obligations to stakeholders. What does the Chartered Secretary qualification represent and why should someone want to obtain it? The Chartered Secretary qualification is the gold standard of the governance profession. It builds a unique breadth of technical skills

Integrity, ethical behaviour and trust are of the utmost importance

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The Chartered Secretary qualification is the gold standard of the governance profession that equip people for a varied career at board level and validates their knowledge with an internationally respected accreditation. Anyone working in governance who has the desire to reach the top of the profession should aspire to qualify as a chartered secretary. Being chartered demonstrates a capability in governance and compliance that draws together many disciplines, such as strategy, finance, law, regulation and risk, and shows a practical understanding of the dynamics of Boards and organisations. The ICSA website states, “You do not have to be a chartered secretary to work in governance” and also “We recognise that becoming chartered is not right for everyone who does governance, risk and compliance work”. Aren’t you rather playing down the importance of the qualification

by saying this? Not at all; we are simply recognising the fact that many people work in the governance field in roles that might not necessarily require the level of depth of understanding afforded by the full qualification. Chartered membership of ICSA demonstrates the extensive knowledge and skills needed by those with broad governance responsibilities in roles such as company secretary, corporate counsel, head of governance or head of risk and compliance. There are, however, a multitude of other titles that apply to people working in governance, risk and compliance at a lower level or in sectors outside the corporate world and we offer many ways to qualify, reflecting the needs of different sectors, and the balance between governance and compliance in different roles. Whatever the level of qualification, be-

ing professionally qualified through ICSA shows that people understand how law, finance and governance operate in an organisation and we would always advise that all organisations have a qualified governance professional at board level. How does a company’s culture reflect its approach to governance? Good governance is based around organisational purpose, leadership, integrity, decision-making, risk and control, Board effectiveness, diversity, openness and accountability. Culture is an integral part of this.

Theresa Minnie

Without the right corporate culture in place, it is more difficult for organisations to take good quality, ethical decisions, something which is crucial in terms of enabling companies to create longterm value more effectively. You addressed the 2nd Corporate Governance Conference, in Nicosia in May. As Head of Outreach at ICSA, do you spend a lot of time outside the UK encouraging professionals in other

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countries to obtain the Chartered Secretary qualification? Is your foreign membership growing? I spend a large percentage of my time travelling outside the UK to promote the importance of good governance to both members and nonmembers internationally. ICSA: The Governance Institute represents the interests of members and students resident in over 60 countries and we have branches in many jurisdictions, such as the Channel Islands, the Caribbean, East Africa and Mauritius, that I visit on a regular basis. Changes in working practices mean that it is increasingly challenging for membership organisations to attract and retain members, but we have reinvigorated our branch network in recent years and recently opened a branch in Ghana. We have a strong offer in terms of qualifications, training and guidance and we are working a number of partners internationally to increase the number of people that we reach overseas. In addition to Chartered Secretary, ICSA also offers

vice governance and a diploma in charity management. We also have certificates in corporate governance, company secretarial practice and share registration practice, employee share plans, charity law and governance, academy governance and sport governance. What is more, we have developed qualifications that cater to our main regions, including a certificate in company secretarial law and practice for Ireland and our suite of International Finance and Administration qualifications for international finance centres such as Jersey, Guernsey, the Isle of Man and further afield. We also recently introduced a foundation programme to help people with no previous understanding of the business environment. The first part of the ICSA qualifying programme, it has been designed to give people a grounding in the topics that the qualifying

Our collaboration with ICPAC and Infocredit Group further enhances the importance of good governance in all businesses numerous other qualifications. Tell us about them and to whom they are aimed. As governance has grown in importance we have expanded our offer to move beyond the corporate world and built a portfolio of single sectorbased governance qualifications. Above and beyond our core qualifying scheme, we have created qualifications for governance professionals working in charities, the health service, academies and sporting bodies. We now have advanced certificates in corporate governance and health service governance, as well as professional diplomas in governance and health ser-

programme covers, including an introduction to the areas of law and finance. Our qualifications are aimed at people across all sectors and organisations, from the smallest SME to listed companies, private, public, etc. Our qualifications are set at different levels and therefore prior experience in an area is not a prerequisite for entry at certificate level. In 2017, ICSA signed a cooperation agreement with the Institute of Certified Public Accountants of Cyprus (ICPAC) as well as with Infocredit Group. What kind of response do you expect from the Cypriot business sector to the ICSAâ&#x20AC;&#x2122;s qualifications? ICSA is passionate about educating businesses on the value and importance of good governance. Cypriot businesses are becoming more and more aware of the significance of having properly trained and qualified staff in this area. Our collaboration with ICPAC and Infocredit Group further enhances the importance of good governance in all businesses.

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BUSINESS in cyprus

Promoting Good Governance infocredit Panayiotis Marinou, Training Manager at Infocredit Group, explains the importance to Infocredit of the agreement to represent ICSA in Cyprus.

Infocredit Group has signed an agreement with ICSA to represent the Institute in Cyprus and thus offer its products/services to governance professionals. Why is the agreement important to Infocredit? Infocredit Group, as a leader in risk management solutions and business information provider, is always in search of products and services that will support and enhance our business partnersâ&#x20AC;&#x2122; progression. The partnership with ICSA complements the portfolio of services of the Group in an area which has emerged internationally while locally this has started to gain ground. Corporate governance and compliance are among Infocreditâ&#x20AC;&#x2122; s areas of expertise. Do you think your new role as ICSA representative in Cyprus will help raise even greater awareness of these issues? Corporate governance has

always been on the top of the agenda of major businesses in Cyprus. Nonetheless, there was limited guidance and information about the available qualifications for individuals who wanted to support their professional progression and for business to develop the career of their staff, while having properly qualified people in corporate governance. Therefore, we believe we can act as the single point of contact for any individual or a company who would like to find out more about the ICSA qualifications. How do you intend to go about offering ICSA courses, exams and qualifications? All qualifications and examinations are offered mainly online via the accredited ICSA tuition provider and our strategic partner BPP Jersey. One can also follow the self-study mode should one wish. On the other hand, we can deliver, upon request,

a blended learning of face-toface and online training. Are you confident that there will be considerable demand for the various ICSA qualifications in Cyprus? Is there a particular one that you expect to be especially popular? We are very positive. Currently, we have a significant number of requests by individuals working mainly in the financial services sector, looking to further progress their career by acquiring an ICSA qualification. The large number of delegates during our two Corporate Governance conferences has also shown a great interest in the ICSA

Panayiotis Marinou

qualifications. We believe that the Fast Track professional route of the Chartered Secretary qualification will be the most popular in Cyprus.

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financial services

Modern Challenges in Mergers and Acquisitions By Constantinos Kypriotis, Senior Manager, KPMG Limited

t is more than evident that the financial services sector is currently undergoing a period of major restructuring. The recent deal between Hellenic Bank and Cyprus Cooperative Bank has been just a small example of the challenging arrangements that the banking system has experienced over the last few years, not only in Cyprus but on a global scale. The liberalisation of markets and market globalization have allowed mergers and acquisitions to happen in much less time than in the past. The role, structure, operations and services of financial institutions have evolved significantly over the past decades, in their effort to adapt to a continuously changing financial environment. The need for extra capital, so that financial institutions can maintain sufficient reserves, as well as shareholder pressure for higher revenues, have led the banking sector to proceed with mergers with, and acquisitions of, other institutions. Generally, financial institutions

proceed with such arrangements in order to capitalize on economies of scale and, at the same time, minimize costs. Similar strategic movements by banks aim to achieve significant growth in their size and customer base and to improve their credit line capacity. However, the impact of such restructurings entails opportunities and threats, both to investors and to society, as well as more certainty for the economy itself. Five of each are summarized below.

Opportunities 1. Maximization of shareholder value. This is achieved through an increase in the share price as a result of investor confidence and an increase in share capital reserves. Certainly in the long term, this will be maintained only if accompanied by the corresponding profitability. 2. Banks become more competitive. New and diversified products at lower prices may be offered and less com-

mission charged. Consequently, the customer base will benefit as well, while the new entity aims to take advantage of the timing and attract additional market share. 3. Economies of scale are created in terms of technical progress and advanced capabilities, which will be integrated into the new entity. Investing in such areas may require extensive funding that can only be provided by large groups rather than smaller regional institutions. Similarly, new technology will put the new entity ahead of the competition and new services, especially in the areas of online and telephone banking, will benefit consumers further. 4. Reaction to the disintermediation effect, that is to eliminate traditional intermediary services through other 3rd party agents, (brokers, funds investors, insurance) and bring back clients by offering these services under the new entity. This, in turn, will increase the profits of the Group as new

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revenues will arise from diversified sources. 5. Access to other economies, either geographical or financial. The merger with, or acquisition of, another entity may reduce entry barriers resulting from the lack of knowledge or experience in a particular market.

Threats 1. Integration of new systems is one of the biggest challenges that new entities face. Banking systems, accounting

Integration of new systems is one of the biggest challenges that new entities face

records, client/suppliers information, control of other financial systems, etc., are just a few of the areas that will need to be integrated. As these require both time and cost, any delay in the implementation process may put the entire deal at risk. 2. Productivity can be affected to a great extent in two ways. Firstly, different corporate cultures may generate conflicts, from top management to lower level staff. Secondly, the sense of future uncertainty, a lack of motives and the absence of clear targets may lead significant employees to quit at an early stage. Moreover, for employees being transferred, the feeling of insecurity or fear of eventually losing their job may affect productivity to a great extent. 3. Increased payroll costs (especially in the short term) due to voluntary exit schemes for redundant staff. 4. Focus on the daily operations will be obscured as managerial attention is

constantly being distracted or diverted to the challenges of integration. 5. Increased marketing and advertisings costs. The new venture must be embraced by the customers and trust gained. Therefore, additional spending on commercials, brochures and trademarks is required. From the above, it is clear that such deals have both their pros and cons, so investment decisions should be scrutinized by experts in the field, such as valuators, and by auditors with vast experience in banking audits. Consequently, added value from mergers and acquisitions will derive from the creation of a competitive advantage that cannot be duplicated by others. Therefore, when such strategic decisions are taken, investors should focus on capitalizing on these advantages, while minimizing or controlling any disadvantages in a way that benefits not only shareholders but society and the economy overall.

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REAL ESTATE

Market Recovery

is More Than a High-Rise Trend The Cyprus property market is now recovering, though it still has a long way to go if it is to return to its pre-crisis state, says Yiannis Misirlis, Founding Director of Imperio Group, who notes that, contrary to popular belief, high-rise luxury apartments in Limassol only account for around 11% of sales.

Fourteen years after the creation of Imperio Group, what would you say is the key to its success? The key to success is staying true to your values, on both a personal and professional level. Socrates once said “The greatest way to live with honour in this world is to be what we pretend to be”, and that means staying true. The real work of our lives is to understand what matters the most, discover who we may become in the future, and then help as a result. At Imperio, from the very beginning, our target has been to design, build and provide the market with exquisite properties that would not only become landmarks for the cities they are located in but would also serve as a “home” for the people or organisations they house. I believe that the consistent passionate work of our young and talented team has achieved exactly that. In almost 14 years, we have established Imperio as a recognizable brand driven by unique design characteristics, quality, reliability, and extremely high customer satisfaction. In just over a decade, we have grown into a truly global organization with an active presence on three continents.

How do you view the Real Estate industry right now? Do you think it has bounced back from the post-2013 slump? Real estate is a cyclical business. Our job as businessmen is to understand each phase in the cycle, so we avoid taking unnecessary risks. Although the recession of 2010-2013 had a strong adverse effect on our industry, I strongly believe that the market is now recovering. “Bouncing back” might be a misleading term to use at present as it suggests that the market has fully recovered. We have still a long way to go to achieve full recovery. After all, the numbers speak for themselves: over 21,000 units were sold in 2009, but under 9,000 units were sold last year (2017). Having said that, there is definitely increased movement in the market, largely driven by the positive developments in the economy, which has registered a GDP growth rate of over 4%. Other factors include the restored confidence of property buyers, both at an international and local level, while the Government’s introduction of tax incentives, such as the reduced real estate transfer fees and the abolishment

of immovable property tax, have greatly contributed to fuelling growth in the property market. There appears to be a local trend towards high-rise luxury properties at present. Do you see this continuing in the foreseeable future? On a global scale, buyers are turning towards high quality residences with 5-star amenities and impressive views and Cyprus is just beginning to follow in the same direction. Until recently, the market was more focused on villas; now that demand is shifting and the market is responding accordingly. Yet, it is important that we put things in perspective: In 2017, Limassol sold about 400 units in high-rise buildings from a total of almost 3,500. So, the city’s dependency on high-rise luxury apartments is only around 11%. Isn’t there a danger that, once again, the industry may become over-reliant on foreign buyers? International property investors have always been – and will always be – a very important part of the equation in

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Tackling the NPL issue requires both a clean-up programme and the implementation of a distinct and advanced operating model

The Icon, Limassol

Cyprus. The key is to make sure that both we, as a business community, and the authorities act and behave wisely to avoid over-reliance on any single market segment or product. At the moment, the market fundamentals are good. No single foreign market dominates sales in Cyprus, so it is safe to say that there is no risk of over-reliance. The efforts made by the professionals in our industry to promote our country on a global scale and attract Cyprus-lovers to the island are delivering results. At the same time, the local market is regaining its strength. How successful has the government’s Citizenship by Investment Scheme been? Do you think that it should be extended indefinitely? The Citizenship by Investment scheme is not something we invented in Cyprus.

Countries like Australia, Canada and the USA have been offering such schemes for decades. Where authorities around the world aim to jump-start economic activity in a given sector – and in the case of Cyprus the real estate sector – investment incentives have proved instrumental to strengthening development. Therefore, I do not believe that these schemes should be abolished or altered in any way. Such practices are a suitable tool for development in Cyprus, and we should continue to welcome foreign investors who would like to relocate and move part of their wealth to Cyprus. However, I feel that this scheme is receiving more media coverage – and more credit – than it deserves. The recent leak from the Parliament revealed that in 2017, the Citizenship by Investment scheme attracted 503 investors who in-

vested in roughly 1,000 properties, from a total number of over 8,700 units sold that year. That amounts to, again, close to 11%, not more. In your opinion, what would be the best strategy to be followed by the Government and the banking sector in order to tackle the problem of NPLs? Non-performing loans are always an area of concern for banks and these are a consequence of a weak economic environment, which significantly reduces the capacity of borrowers to fulfil their debt obligations. Hence, tackling the NPL issue requires both a clean-up programme and the implementation of a distinct and advanced operating model ensuring that problematic loans are addressed effectively at an early stage – the sooner, the better! The scale and substance of

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the clean-up depend very much on the characteristics of the portfolio. Actions that are often taken include portfolio sales, outsourcing to overcome an acute capacity shortage, etc. In practice, the ability of a bank to absorb losses resulting from a clean-up is very often a limiting factor. In addition to one-off actions, banks also need to enhance their NPL management capabilities. Obviously, the ability to manage problematic portfolios in an effective and timely way will be crucial for many banks in the near future, in order to relaunch profitability and comply with the expectations of the Central Bank. To do so, banks have to be diligent in designing a comprehensive approach, which should define both the credit management strategy and a coherent operating model. This will require significant investments to build dedicated infrastructures, acquire skills and know-how, review the organizational design and define governance models. Key to the necessary changes is the mindset: credit management is not the source of bad loans, but if it is done well, it will create additional value for the bank. Of your many developments, give us some information about what you consider to be your flagship project right now. Imperio is now constructing The Icon,

and we are proud to be the “architects” behind one of Limassol’s landmark residential developments that will decorate the city’s skyline for decades to come. The Icon is a sophisticated development in terms of architecture and design and it will meet the highest interior design standards. It can be compared to high-rise developments we see in London, Miami and New York. Construction work began earlier this year, and occupancy is planned for 2020.

On a global scale, buyers are turning towards high quality residences with 5-star amenities and impressive views and Cyprus is just beginning to follow in the same direction

Yiannis Misirlis

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REAL ESTATE

A New Era for

Larnaca? Something is changing in Larnaca, with many projects being undertaken in both the public and private sector. Not before time! By Antonis Loizou, FRICS, Antonis Loizou & Associates Ltd, Property Valuers, Property Consultants & Estate Agents

omething is changing in Larnaca. Particularly noticeable is the renovation of the old town extending from the coastline up G. Afxentiou Avenue and from the McKenzie Beach area to the gas installations. Here are eight examples: 1. At long last there are a couple of potential suitors for Larnaca Port/Marina but there are hiccups related to the requirement of the Larnaca operator to pay some sort of compensation to the Limassol port operator. We understand that this is not a large amount and so, rather than losing long-awaited foreign investors, it would be better for the Government to undertake the burden (estimated to be around €100.000 p.a.). 2. Six new small boutique hotels have recently been built and, when added to those under way, coupled with the upgrade to Saint Lazarus Square, the renovation of old buildings and the new Municipal market, they will add to the old town’s popularity. 3. The troubled Phinikoudes hotel and shopping centre seems to be on the way to having its problems resolved but it is a project that, even when the legal tangles between the investor and the Municipality are overcome, will not be ready for four years. 4. The Radisson Blu hotel and the new skyscraper on Makarios Avenue across the road from the marina will add an air of glamour

to the town, as will the projects at the McKenzie fishing harbour (now under way). 5. McKenzie Beach is still in a mess regarding issues of ownership but, these notwithstanding, it is becoming more and more popular with tourists and, especially, with Nicosia families who enjoy the extensive beach, ample space to play and plenty of entertainment places there. 6. The Metropolis Shopping Mall on the outskirts of the city has finally received the green light. Once completed, will add a cosmopolitan development to both Larnaca and its suburbs.

McKenzie Beach is becoming more and more popular with tourists and, especially, with Nicosia families 7. The decision to remove the former fuel installations and the gas/oil tanks along the Dhekelia Road is a major issue for the town. We understand that the area will be (or should be) zoned for high-rise office and apartment developments which are nowhere to be found in the seaside area of Larnaca. A lot of work is required and we do not expect the benefits of this to appear earlier than in 5-6 years from now. 8. The town has not yet become a location for high-end sales and demand for real estate is forthcoming mainly at the lower end, mainly apartments in the region of

€100.000-€250.000, mainly from Lebanese/Libyan nationals, whereas Nicosia buyers are now showing interest in units near the beach. Demand for Airbnb and villas to let is on the rise, as is demand for residential plots with a high building density (over 140%) for apartment development. Larnaca remains the only town that is still “on the beach” since Larnaca residents can walk straight onto the Phinikoudes and McKenzie beach areas. There are still many ifs and buts regarding Larnaca town development but at least something is moving in the right direction. Unfortunately, Larnaca has a problem with its own residents, as opposed to those in Limassol who act as one and know what they want. It seems that the new Mayor has all the prerequisites for good management and success as long as he can deliver despite the small groups that will object to any development (such as the Dhekelia Road, which is being held back yet again after 12 years of waiting). Only time will tell. The broader Larnaca district is privileged to have an extensive beach in the Pervolia/Mazotos/Ayios Theodoros area, which could be partially used for small sailing boat shelters and sports such as wind and kite surfing, football/futsal, etc, and it appears that the long-awaited Tersefanou golf course project is now up for sale by the Bank of Cyprus. Will it finally happen? Who knows? Let’s keep our fingers crossed!

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● Maintenance & Cleaning Contracting ● Office & Corporate Cleaning ● Commercial Cleaning ● Shopping Centers Cleaning

Client Portfolio

ContaCt details: 2, Eschilou, Engomi, Nicosia | email: timosc@cytanet.com.cy | tel: 22772945 | Mbl: 99606373, 99449574 | Fax: 22776948

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ICT

Working at the Intersection of Business, Experience and Technology Kyriakos Kokkinos, Executive Director - Business & Technology Consulting at PwC Cyprus, explains how the firm applies technology solutions to enhance its clients’ organizational performance. What does your role at PwC as Executive Director – Business & Technology Consulting entail? I, along with the wider team of leaders across the PwC global network, am leading a diverse group of strategists, designers, technologists and data scientists who help clients applying technology solutions for enhancing organizational performance through breaking down silos, unearth new value and make tomorrow. Our goal is to transform business outcomes and results by delivering innovation to our clients. Whether we are designing unforgettable customer (our client’s clients) experiences that can help regain a client’s competitive edge or deploying new digital assets to increase efficiencies in the supply chain, we bring together elements of the business to drive results across the whole organization. We do

this by working at the intersection of Business, Experience, and Technology (BXT), which combines the best of PwC in a way that’s faster and more agile, from ideas to results. How do you view the future regarding digital business and what role is PwC playing in that future? Digital technology has transformed the scope, scale and potential of business over the last decade. In doing so, it has disrupted the business models of traditional organizations at a rate never experienced before. ‘Digital’ is not just about technologies; rather it’s about what technology can enable. It is about how technology can help our clients grow and sustain a competitive advantage in a period of unprecedented technological change. It involves new ways of solving problems, creating

unique experiences and accelerating business performance. Digital technologies, trends, markets and economies are in a constant state of flux and organizations are in a continuous search for innovation.

Digital’ is not just about technologies; rather it’s about what technology can enable Global megatrends, such as demographic changes, shifts in global economic power, climate change, urbanization, energy, etc., are all being impacted and or shaped by technological breakthroughs such as the Internet and artificial intelligence. We help our clients harness the potential of

innovative new technologies by assessing their current use of digital tools and suggesting new ways of working to transform both what they do and how they do it. Our vision for PwC Digital services is to be recognized by our clients as the ‘gold standard’ in digital and their trusted advisor and provider of integrated end-to-end solutions from strategy and innovation through to execution. I avoid the words ‘digital strategy’ as strategy is digital; it is not a separate organizational initiative but an integral part of every aspect and function of an organization. Hence, we see digital elements in HR, sales, production, operations, everywhere. The art of being ‘digital’ is how you bring it all together. What digital services does PwC offer to its clients and

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how do they benefit from these services? We help our clients to reimagine business with integrated end-to-end digital solutions and services from strategy and innovation to execution, generating the best customer experience across all channels. Our Digital Services are a full-service team of strategists, designers, and technologists who work hand-in-hand with clients to turn ideas into transformational digital businesses. These services include: • Strategy and Digital Transformation advisory services: Helping clients transform and achieve competitive advantages (Strategy, System Design/Requirements/ Selection, Cloud services adoption, Customer Experience Transformation) • Organizational Readiness and Cultural Fit for Digital: Helping clients assess their digital fitness, identify and address gaps in terms of people, processes, systems and culture. • Cybersecurity & Privacy: Helping clients protect their systems and data (Security Strategy Consulting, Framework and Roadmap, Policy Standards and Procedures (ISMS), Controls Design, Technology & Security Risk Assessments, IT Network Audits, IT risk assurance services, Business Continuity) • Data & Analytics: Helping clients unlock the value from their data, through deep data insights and enhanced data governance (Business Intelligence, Data Governance/ ManageKyriakos Kokkinos

ment, Data Quality Management, Data Modelling ) • Artificial Intelligence AI, Robotics Process Applications RPA and Machine Learning ML: Helping clients understand and adopt state-of-the-art technologies (AI, RPA, ML) and trends that are shaping the future of automation (design and deploy applications with deep learning, data sciences and algorithms etc.). We believe that AI is a key lever that, along with Internet of Things (IoT), is driving the future of Industry 4.0 and is a ‘must’ master domain • Enterprise Applications: Helping clients efficiently and effectively adopt and deploy applications and systems (Consulting for ERP implementation assessment, Policies & Procedures, Solution implementation (SAP, Salesforce etc.)) • IT Governance and Structure: Helping clients optimize their IT competencies, skills and structure to better fit into the current and future trends of technology

How do you help in practice? In a nutshell, we help our clients harness the potential of innovative new technologies by assessing their digital fit as well as their current use of digital tools and suggesting new ways of working to transform both what they do and how they do it. Whether our

Standing still and just watching is not an option; being ready to ‘ride the wave’ will yield huge benefits clients want to reimagine a future customer service experience, create mobile apps that connect customers to their brands or enroll company stakeholders in the business case for change, we can help deliver an accelerated path forward. We help companies apply these capabilities lenses to a variety of business situations: • Company identity: How should the company position/ re-position itself in the market and what capabilities are required? • Growth Strategy: How should the company identify/ evaluate growth opportunities relative to its strengths and develop a strategy to drive sustainable, profitable growth? • Port-

folio Strategy: What businesses should belong to the portfolio long term and how should the company prioritize investments? • Inorganic Growth: Which acquisition targets should the company consider because they either leverage or enhance its capabilities? How should it integrate the target? • Operating Model: What operating model is needed to ensure day-to-day decision making is focused/ aligned with the company’s strategic priorities? • Functional Strategy: How should a function shift its activities to focus primarily on those that are strategically important to the enterprise? • Cost Cutting: How should the company reduce costs while ensuring that its longterm prospects are strengthened and its key capabilities remain intact? • Capability Building: What should the company’s capability agenda be and how can it further develop its distinctive capabilities? What are the new trends in the area of IT that businesses should be looking out for? Well, there are numerous essential technologies that we foresee to have a huge impact in the near future. To name a few: Artificial Intelligence AI, Blockchain, Robots, Internet of Things (IoT), gene techs, drones, augmented & virtual reality, 3D printing. All these and a few more are really re-defining our future in the same way that the Internet in the 90s has impacted our living today. We are already getting a flavour of how

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they ’taste’ and they are already being felt in some key aspects of our life as well as business environment; their real impact, though, at a personal, social, organizational and economic level, is on its way and will be really felt big! Preparedness, the agility to adopt and adapt are all key in making the best out of them. Standing still and just watching is not an option; being ready to ‘ride the wave’ will yield huge benefits. Another key aspect is that of data as a new form of capital; the explosion of data is revolutionizing business. Data-led insight can add business value to every part of the value chain and every area of business decision-making. Organizations of every type need robust data analytics to support intuition and experience. Also, the impact of AI and robots is high on the agenda; I believe we will see, more and more, humans and machines collaborating in unpresented partnerships for augmenting human capacity and making our planet, organizations and homes a better place to live and work. Cyber Security and Data Privacy are just some of PwC’s services in the technology department. How do you ensure that your customers trust you with their data? Well, this is a vital question! The digital revolution means more open, interconnected and collaborative ways of working, collaborating and transacting. In fact, we operate in a world where we don’t own the systems we use or have full control on the data we rely on; this brings new

We are in the ‘business of trust’ and we have zero tolerance towards any kind of compromise on data privacy and governance challenges in the domain of cyber risks and creates the need for revisiting the chapters of security and introducing new regulations on how we manage data and privacy. At PwC, our core business is clients’ data; our clients trust us with their data for processing, advice and custody. We are in the ‘business of trust’ and we have zero tolerance towards any kind of compromise on data privacy and governance. Prompted by GDPR compliance, the firm adopted the network’s framework through the Network Data Protection Program (NDPP) to achieve a robust level of protection and appropriate use of the personal data of our people, clients, vendors and other stakeholders. Our local Data Protection Policy lays out the baseline of data protection requirements regarding the collection, handling and use of all personal data across our firm, taking into consideration the General Data Protection Regulation (GDPR) requirements and local laws. As you know, Information and technology assets are highly valuable and must be closely safeguarded. At

PwC, we operate within an increasingly electronic, interconnected and regulated environment that requires a consistent and standardized approach to securing technology and information assets. Information assets should be protected from unauthorized use, disclosure, potential theft, alteration or destruction. Effective information security management enables information to be shared while minimizing risk exposure. PwC has developed its Information Security Policy to safeguard the confidentiality, integrity and availability of the Information and technology assets used by the PwC member firms and it is aligned to ISO/IEC 27002:2013 Information technology - Security techniques Code of Practice for Information Security Management industry standard. Are Cypriot company leaders taking issues like cybersecurity seriously enough? Yes, I am confident that they are taking cybersecurity risks and threats very seriously and are aware of the potential impact of cyber-attacks on their organizations. According to the findings of PwC’s 21st Annual Global CEO Survey, the speed of technological change (67%) and the cyber threats (66%), are cited as the most significant business threats for CEOs in Cyprus as regards their company’s growth prospects. What we see in some Cypriot companies is that cybersecurity is still regarded as an IT function but this needs to change! Cybersecurity is a c-level agenda item, with IT (the CIO and or CTO) being the custodian

and advisor to the CEO and the Board for cybersecurity matters. Organizations should develop a holistic cybersecurity governance approach, to improve their ability to defend, identify and respond to cybersecurity attacks. What are PwC Cyprus’ plans regarding digital transformation in the next 3-5 years? Our clients’ trusting of their digital transformation starts from our knowledge to transform ourselves as a company. PwC has a holistic and very comprehensive digital transformation plan that started a few years ago and is continuously being adjusted to the evolving needs of the firm as well as the capabilities offered by emerging technologies. We are the world’s leading ‘digitally fit’ professional services firm and we are where top talent wants to be for a professional career. We are expanding our creative and collaborative workspaces and digital tools so that we are culturally fit in the digital age. In this respect, we have embarked our own exciting digital transformation journey that helps us remain relevant and fit for the future as PwC. Embracing digital and changing the way we work together and with our clients, gives us the opportunity to work in a more agile, efficient and innovative way. Technology is fundamentally changing the way we live, work and interact with each other at PwC. Our strategy is to digitally transform ourselves and be the ‘gold standard’ as a digitally-fit organization, reimagining the way we work!

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Organizations should develop a holistic cybersecurity governance approach.

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PROFESSIONAL NEWS

Preparing the Market for IFRS 17 IFRS 17 Insurance Contracts was issued by the International Accounting Standards Board (Board) in 2017 and comes into effect in 2021. Financial journalist Liz Fisher takes a look at what the new Standard means for the investor community.

he insurance sector has long been a special case when it comes to financial reporting. The complexity of insurance, its long-term nature and the inherent difficulty in identifying ‘revenue’ as any other business would understand it has set it apart – with the result that an insurance company’s financial statements look and feel unlike any other. But that will change in 2021 with the imple-

mentation of the Board’s new global Standard, IFRS 17 Insurance Contracts. The new Standard represents a seismic change not only for the insurance companies that will use it but for the user community, and particularly for analysts covering the sector across the world. Some compare the scale of the change to the 2005 adoption of IFRS Standards in Europe; insurers’ financial statements and key performance indicators will be

radically transformed. ‘I’ve been covering the insurance sector for almost 20 years and it’s by far the biggest change I have seen,’ says Doug Young of Desjardins Capital Markets in Canada. While many are expecting a turbulent beddingin period when the Standard first comes into effect, insurance analysts across the world believe it will make a huge difference to the consistency and comparability of insurance companies.

Strengthening the Accountancy Profession in Myanmar In April 2018, IFAC, the International Federation of Accountants, announced its first accountancy capacity building project in Southeast Asia. The project will assist the Myanmar Institute of Certified Public Accountants (MICPA) in its work to strengthen the accountancy profession in Myanmar. IFAC has selected the Association of Chartered Certified Accountants (ACCA) to partner with MICPA on the project. ACCA will partner with MICPA to build a sustain-

able professional accountancy organization that can act as the cornerstone of the profession in the country. The project will deliver a strategic plan and new governance structure for MICPA, in consultation with key national stakeholders. Myanmar, currently in the process of democratic transition, is one of East Asia’s fastest growing economies. The new government is committed to attracting investment for sustainable growth, and its support of this project demonstrates its recognition of the critical role that the accountancy profession can play in this process.

Global Accounting Ethics & Audit Standards Achieving Worldwide Adoption

early 80% of jurisdictions worldwide have adopted International Standards for Auditing for mandatory audits, while more than 60% have fully adopted the international Code of Ethics for Professional Accountants, according to a new study by IFAC – International Federation of Accountants – on rates of adoption of international standards across 80 of the jurisdictions in which IFAC’s more than 175 member organizations operate. High-quality international standards are

essential pillars of the global financial architecture. Their adoption and implementation improve the availability of the high-quality financial information in the public and private sectors that improves decision making and ultimately results in greater economic growth, development, and accountability. The data is included in a first-of-its kind report that assesses and publically reports on the global status of the adoption of international standards, International Standards: 2017 Global Status Report. The report details the high rates of adoption around the world, driven

by IFAC and its member organizations, and positive results in several key areas, including ethics, financial reporting standards, and quality assurance, and provides examples of success and tools for continued progress.

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Helping Small and Medium Practices Thrive in the Global Economy IFAC Guide to Practice Management 4th Edition Includes New Section on Leveraging Technology

mall- and medium-sized practices (SMPs) in a digital, globalized world need to adopt “good practices” to best serve their clients. IFAC (International Federations of Accountants) has released an updated publication, the Guide to Practice Management for

Small- and Medium-Sized Practices Fourth Edition, to help SMPs meet this challenge. The Guide will help SMPs improve their management and operational efficiency and support their sustainability and success. Now in its fourth edition, the Guide is organized into eight stand-alone modules, including a new module on Leveraging Technology. The revised Guide addresses a comprehensive range of topics including strategic planning, managing staff, client relationship management, risk management and succession planning. The new Leveraging Technology module

IAASB Invites Stakeholders to Help Shape the Future of EER Assurance

he International Auditing and Assurance Standards Board (IAASB) invites all interested stakeholders to its global series of discussions to help shape the future of assurance over emerging forms of external reporting (EER). Save the Date! November 8, 2018, 11:30 – 16:00 Accountancy Europe, Avenue d’Auderghem, 22-28/8, B-1040 Brussels Why you should attend The IAASB is developing non-authoritative guidance to address key challenges arising in the performance of assurance engagements over EER performed using its assurance standard, ISAE 3000 (Revised). To help shape the future of IAASB’s assurance over EER, the half-day discussions will cover: • progress in the development of the first phase of the draft guidance; • implications of the guidance for assurance engagements; and • assurance issues faced in your region. Who should attend The events are open to all. The IAASB wants to engage with those who prepare

EER reports, assurance practitioners, regulators, standard-setters, investors and other users of EER reports. Accountants and non-accountants alike are encouraged to attend and participate to help shape the IAASB’s work in this area. How to register To express initial interest, please email IAASBmeetings@iaasb.org with your name, organization, country and the event you would like to attend. We will then notify you when registration opens. For updates, please visit our website and follow us at @IAASB_News and #EERassurance. What is EER? EER encapsulates many different forms of reporting, including, but not limited to, integrated reporting, sustainability reporting and non-financial reporting about environmental, social and governance matters. Such reports may be prepared under legislative or regulatory requirements and established frameworks, standards and guidance issued by international or national standard setters.

covers how technology developments are fundamentally changing the way organizations operate and recognizes that SMPs must adapt to service their clients that utilize technology. Included are topics such as developing a technology strategy, hardware and software options, technology risks, new and emerging technologies, and leveraging technology for practice innovation. In order to help IFAC member organizations and practices maximize the Guide’s use, IFAC has updated the Companion Manual, which provides suggestions on making best use of the Guide.

2018 World Congress of Accountants

he future of business lies with the accounting profession. Join the world’s leading financial experts in Sydney, Australia, November 5-8, 2018 for the next World Congress of Accountants. This year’s theme, Global Challenges. Global Leaders., will inspire and inform your thinking on the future of accounting and our profession, and provide a unique opportunity to help shape that future.

ACCOUNTANCY CYPRUS

OUT OF OFFICE

A Novel Idea All ICPAC members naturally have a life beyond accountancy and, in each issue of the magazine, we take a look at how one of them spends his/her free time. Antigone Modestou is CFO at Cyta but she has also written four novels.

What inspired you to write your first book? I started writing my first book during a business trip to Kiev in 1995, when I found myself in a hotel without comprehensible television, having been warned not to go out walking alone in the city at night, and with a pile of bestsellers at hand, none of which had the power to keep my interest beyond page 50. At the same time, I was carrying deep in my soul the amazing true stories of a number of nuclear physicists, told by their close acquaintances, which had a decisive impact on my career choice between nuclear physics (my dream profession) and accountancy… One of those stories was linked to Kiev… The atmosphere was so conducive, I couldn’t resist taking the big step into writing. Did its publication change the writing process for you? My first book came out of a synthesis of a series of short stories. When I revisited it in a critical manner, I decided that only by plotting the entire book, end to end, could I achieve the level of cohesion I was aiming at, and this is what I have been doing ever since. I strive to be more and more critical with my work and take in the comments I hear, so that every book is better than the previous one, in an effort aimed at continuous improvement.

etc., takes years and is done in any small piece of spare time. Working on corrections and additions to the first draft can also take years, and is done everywhere and at any time! I have trained myself to keep out every noise… for example, I can work in a café at a busy airport, oblivious to what’s happening around me, without any problem!

Antigone Modestou

Do you write every day? It’s impossible for a professional accountant in a position of responsibility to deal with writing every day. However, I always have my writer’s eye open. I pick up small elements that will fit into my next book. I take notes or store articles, news and other publications, to serve as sources or inspiration for the future. Where do you do most of your writing? Due to the scarcity of time, I have developed the ability to work anywhere. I only need peace and quiet for the first draft, which I try to do in consecutive free days during my summer vacation. Preparatory work, research,

How do you manage to balance your full-time job as CFO of Cyta and writing? Every day, no matter how late at night I finish work, I think about an element of my new book: a character, a part of the plot or a research element. This alleviates the aches and pains of stress and also keeps the book alive and going, even if I am not able to actually write for a long period. How long did it take to finish your most recent book? Five years, due to my lack of “free” time! Have you ever considered becoming a full-time author? No. I believe that when art becomes a profession it is tainted, to a greater or a lesser extent, by ‘the need to sell’. This is a particularly treacherous trap for a writer, because freedom of expression is a particularly important element in his particular type of artistic endeavours. Disengagement from “the need to sell” ensures that there are no conscious or subconscious reservations about freely expressing ideas, opinions, issues of ethos, etc.

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