NQ magazine, December 2014

DECEMBER 2014

THE VOICE OF ALL NQs Contact us

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P16 CHARITY SORP New rules will affect those working in charity

ALL THE NEWS YOU NEED and a whole lot more Pages 4 and 7

ETHICAL DILEMMA: IT’S NO PICTURE POSTCARD Page 10

TIME TO PLAN YOUR NEXT CAREER MOVE? ISMAEL CHAND FROM TOP RECRUITER WALKER DENDLE ON PUTTING THE PIECES OF YOUR CAREER TOGETHER P20

P12 TECHNOLOGY

Take the lead – move your company into the cloud

MANAGEMENT ACCOUNTING PRINCIPLES VIEWPOINT Big ideas continue to shape the future Page 22

CIMA’s Naomi Smith explains the principles behind the principles

P8

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COMMENT NUMBER CRUNCHING

£25m EDITOR’S COMMENTS It’s fee time It’s that time of year for all you newly qualified members out there to pay your membership renewals. There was a post recently on CIMA Sphere – now CIMA Connect – which wondered how the institute could justify the new £259 fee.

There was a mixed response from fellow members. Some admitted to gritting their teeth and simply paying up. Others felt that represented much better value than the membership of other bodies. With this in mind we took a quick look at the membership fees of all the accountancy bodies. Putting aside the admission fees, which can be hefty, there are still some big differences.

Cheapest is the ACCA at £211, followed by CIMA (£259). CIPFA takes the middle position with a fee of £310. And the most expensive? Well, it’s not the ICAEW (£340). It is our friends north of the border who are the most expensive. ICAS demands £438 for membership – you can get two years at the ACCA for that!

What is interesting is none of the bodies, as we understand it, offers the option to pay by instalments. Isn’t it time that members kept the money in their pockets rather than bolster the coffers of the professional bodies? The ICAEW looked to allow this move, but it was defeated at Council by a vote of 21 to 26.

We have a jammed-packed NQ magazine for you this time – the last issue of 2014.

CIMA is writing about its new global management accounting principles, we also take a look in the cloud, and discuss how to plan your next career move.

So that’s it for 2014 – have a great break and we will see you in 2015!

In fact, the next issue is due to hit your inbox in early February. And, remember, you can take always look at our back issues at www.issuu.com. Just type in NQ magazine.

Graham Hambly, Editor (graham@pqaccountant.com)

the fund being put aside by Deloitte for employees who want to start their own business P4

132 pages the average length of an annual report – that is up from the 122 pages in 2013 P7

£6.5m

of gross income. This is one of the three criteria that makes you a small company P16

1 October 2014

is the date the revised UK Corporate Governance Code applied to accounting periods P14

number of principles in 4 the CIMA’s new Global Management Accounting Principles P8

10bn

are we really moving along the road to a 10-billion-peopled planet? P22

NEWS

Deloitte creates CIPFA exploring enterprise fund for employees Deloitte has recognised the demands of a new generation of young professionals by creating a £25m fund for employees who want to start their own businesses.

Employees will be given funding and allowed to work full-time on developing their business idea, while drawing on legal, risk, technology, brand, marketing and other support from within the firm to help turn their start-up ideas into strong businesses.

Deloitte felt it needed to address the demands of employees who aspire to a diverse and agile career.

The majority of businesses will be held in a newly formed business unit, Innovation Investments Limited, with a reward model to ensure mutual benefit for the entrepreneur and the firm.

Deloitte’s CEO, David Sproul, felt the new initiative offers a unique opportunity to pursue entrepreneurial ambitions while remaining an employee of Deloitte and benefiting from the strength of its brand, experience and expertise.

Interim reporting The FRC has issued a new exposure draft – FRED 56 – ‘Draft FRS 104 Interim Financial Reporting’, which will revise the FRC’s existing guidance on interim financial reports for consistency with new UK and Irish GAAP (FRS 102).

These proposals are relevant for entities that apply UK and Irish GAAP and prepare interim financial reports.

The FRC’s Roger Marshall emphasised that the publication of reliable interim financial reporting improves the ability of investors, creditors or others to understand an entity’s capacity to generate earnings and cash flows and its financial position and liquidity.

Draft 104 is based on IAS 34 ‘Interim Financial Reporting’.

Using an IFRS-based solution is consistent with the approach adopted for developing new UK and Irish GAAP. The FRC is also proposing to withdraw the Reporting Statement ‘Preliminary Announcements’.

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CIPFA has announced that it is examining how local authorities and other public bodies could make better use of Islamic finance as a source of borrowing. The institute believes that local authorities and public bodies should explore potential borrowing options in order to diversify the funding options available to them.

The move comes after CIPFA held a roundtable event to assess the use of Islamic finance with a broad range of stakeholders from local government, the banking sector, specialist Islamic finance legal advisers and a Sharia scholar.

Following the roundtable, CIPFA has committed to facilitate work with Islamic finance providers to explore products, which could be tailored to meet the needs of public service bodies.

This initiative comes after the Government launched the UK’s first sovereign Sukuk bond in June 2014, worth £200 million, in a bid to establish the UK as a global hub for Islamic finance. The issue was more than ten times oversubscribed, perhaps demonstrating the appetite for Islamic finance products in the UK. CIPFA’s Alan Edwards said: “Islamic finance is a growing source of funding around the world. CIPFA is committed to ensuring UK local authorities and public bodies get the chance to explore all funding options. Islamic finance may become an ethical and reliable source of funding.”

VAT and penalty changes ahead Nearly two-thirds of smaller businesses are unaware of the big changes to VAT due to come into force in January, according to a KPMG survey.

From 1 January 2015, VAT rules for sales of telecoms, broadcasting and e-services to EU consumers are changing. This means that VAT will no longer be charged and accounted for based on where the business supplier is established, but according to the EU country where the customer belong.

The changes should be good news for the UK economy, which is set to benefit by around £300m. This is because the VAT collected from UK customers will belong to the UK treasury, rather than to the country.

NQ Magazine December 2014

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NEWS

Annual reports keep growing Annual reports are getting longer, with the average length now standing at 132 pages, says new research from Deloitte.

The report ‘Annual report insights 2014: Providing a clear steer’ found that despite the growing length and increased regulatory emphasis on producing cohesive reports some 71% of companies are not showing up-front how they link matters such as company strategy, KPIs, business model, remuneration and financial statements.

Deloitte’s Veronica Poole said: “Companies have faced a lot of changes in the last year with the introduction of the strategic report.

We are seeing businesses including more narrative, particularly around remuneration reports. They also continue to provide voluntary disclosures where information is thought to be useful, such as net debt reconciliations and around tax governance. But, more could be done to produce clear and concise reports in order to ensure the most relevant information is presented to investor.”

The research found that nearly 43% of companies applying the UK Corporate Governance Code are not fully compliant. The most common areas of non-compliance are around the independence of directors and the composition of audit committees.

Boards are, however, making some, albeit slow, progress with getting women into the boardroom and audit committee reporting has improved considerable in terms of quality of insight.

New approach to audit reports

The ‘open workforce’ challenging corporate control of the costs

KPMG has announced a radical new approach to its audit reports. Going beyond minimum regulatory requirements, the firm is inviting all listed client companies to include KPMG’s findings in so-called ‘long form’ audit reports, which are published in a listed company’s annual report.

This approach extends beyond the Financial Reporting Council’s requirements for long-form audit reports and follows KPMG’s field-testing of the approach with three audits, including Rolls Royce Holdings plc, earlier this year.

KPMG’s Tony Cates said: “Until recently an audit report gave a binary yes/no opinion on a company’s accounts in heavily standardised, generic text. It was boilerplate and there was a lack of transparency as to the auditor’s more detailed findings behind the scenes.”

Cates explained that the financial crisis brought the audit profession sharply into focus. “The profession had, in almost all cases, complied with the standards but there was a gap between what the regulations demanded and what the investors and public more widely expected.

“Ultimately, this led to a loss of trust in audits, and so in accounts. The profession needed to change.”

Companies need to look seriously at the controls they need to put into place to take advantage of the current trends to reshape their workforces.

In a new report, CIMA explained that organisations around the world are rapidly reshaping their workforces with a complex mix of internal teams and external talent, outpacing their ability in many cases to effectively manage costs, performance and decision-making.

Many firms are increasingly relying on consultants, contractors, freelancers and outsource providers as they seek greater operational flexibility and agility in developing new ideas. This shift to the ‘open workforce’ is expected to accelerate in the next five years, with more than a third of those surveyed expecting at least half of their workforce to be made up of such external talent by 2020.

The worry is 60% of executives said they didn’t have high levels of oversight on the cost, performance and productivity of the external resources they use. Added to this are risks of data breaches, disclosure of competitive information and the struggle to maintain consistent decision-making at all levels.

CIMA CEO Charles Tilley commented: “The converging forces of globalisation , digitisation and market flux have given rise to a powerful new force – the open workforce. This trend holds the potential for new levels of agility, creativity and cost savings, but organisations aren’t equipped with the controls and practices necessary to maximise opportunities and offset risks.

Beware the ‘DM fail’

It’s what everyone dreads – pressing the send button on a tweet that should have been a direct message.

The ‘DM fail’ can lead to real embarrassment and ridicule, but imagine what sort of press you would get if you were the CFO of the social network Twitter and you did it!

NQ Magazine December 2014

Anthony Noto, who joined Twitter this year as its finance chief, recently tweeted a message about a takeover deal which was obviously intended for private eyes only. Noto’s tweet read, “I still think we should buy them”, and was quickly deleted. But the post had already been captured by an eagle-eyed journalist.

The CFO’s post led to a flurry of speculation about the target Twitter, which is seen as needing to boost user numbers and revenue.

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MANAGEMENT ACCOUNTING

Setting the global standard CIMA’s Naomi Smith explains the principles behind the new Global Management Accounting Principles

L

ast month, CIMA and the American Institute of CPAs launched the first universal set of Global Management Accounting Principles, which are designed to form the standard by which management accounting is performed across all organisations. The four Principles can be applied in businesses large and small, public and private. They help bring structure to chaotic complexity and empower evidence-based decision-making. Applied in tandem, they break down silos through influential communication; surface the most relevant and reliable data for examination; drive analysis that reveals impact on organisational value and put focus on integrity and trust to protect an organisation’s long-term sustainability.

Too often, executives and even non-execs take a short-term view of a company’s performance, and focus too heavily on financial reporting, quarterly results and annual growth rates. This can be illustrated by research undertaken recently by McKinsey, which has shown that boards still spend the bulk of their time on “quarterly reports, audit reviews, budgets and compliance instead

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of on matters crucial to the future prosperity and direction of the business”. The temptation to look only at short-term results may be especially – and understandably – strong during times of recovery, when the instant gratification of positive figures comes as a welcome change and can dominate boardroom thinking.

Yet the importance of long-term thinking has never been more pertinent than in this age of globalisation and the digitisation of information – Google’s Eric Schmidt claims that every two days we create as much information as we did from the dawn of civilisation until 2003. The amount of data with which companies are presented is almost dizzying, and making use of it effectively is increasingly challenging. Furthermore, without analysis, insight and communication, this data cannot be translated into knowledge; Chief Finance Officers (CFOs) have access to information which can give them a broader view of a company than has previously been the case, but how can they use it effectively, and what data should they be looking at in the first place?

NQ Magazine December 2014

MANAGEMENT ACCOUNTING

One thing which is becoming apparent is that financial reporting is no longer enough to give CFOs and other board members a complete overview of the business; rather, they need to look beyond past performance figures and develop a longer term view to see the full picture and put in place sustainable plans.

An abundance of data can be an intimidating prospect, which is why it is essential for companies to be able to source the most appropriate information available. There may be a temptation to overlook more abstract, future-oriented, non-financial data in favour of historically focused accounting information which can lead to misguided short-term decision-making and a long-term strategy which is not fully informed. In light of this, the Principles provide a framework for identifying relevant information and ensuring high-quality analysis.

However, many businesses are not yet able to use non-financial data as a basis for decision-making, as they lack the right infrastructure. Better business starts with robust management accounting systems. Whereas financial reporting can be likened to looking in the

NQ Magazine December 2014

rear-view mirror of a car, Management Accounting helps businesses to look at the road ahead, bringing to the fore the best available financial and non-financial evidence and forecasted information, providing more objective insight on which to base judgements.

The Principles complement the CGMA Competency Framework and CIMA’s work on integrated reporting.

They lay the foundations for the integrated thinking that drives integrated reporting. In turn, integrated reporting provides a better way for organisations to tell the full story of their operations and show how they create value.

We urge every Chief Executive, Chief Financial Officer and boards of directors around the world to use the Principles as the basis for benchmarking and improving their finance functions.

You can read more about the Principles at http://www.cgma.org/Resources/Reports/Pages/ GlobalManagementAccountingPrinciples.aspx NQ � Naomi Smith is CIMA’s Head of Policy

Research, Research and Development

9

No

ETHICAL DILEMMA

happy holiday

What do you do if you are put under pressure to participate in fraudulent activity?

Outline of the case You and your wife have recently moved to a remote coastal town in order to further your wife’s career. You have found employment as financial accountant to a local private company. The company’s operations are all related to tourism and it has, as its principal asset, a large Victorian hotel.

The company is owned by the two directors – a husband and wife – who are actively engaged in the day-to-day running of the business. You get on well with the directors and staff, and the directors of the company are clearly popular and well respected in the local community. You are still within your probationary period of employment.

The company had faced some serious cash flow difficulties shortly before you took up your post. However, a remortgaging arrangement has, apparently, eased the financial pressure.

The managing director comes to you with a company cheque for £4,000, which he has already signed. He asks for your counter-signature, explaining that it is the deposit for the design work and furnishings for some of the hotel bedrooms.

There is a formal invoice from a design studio, but you are surprised as you were not aware that any such outlays had been planned. Nevertheless, given the explanation and the supporting invoice, you counter-sign the cheque.

Out of curiosity, you decide to conduct some research into the design studio. This indicates that it is a company that had, in the past, a high level of indebtedness. You note that 10

the company secretary appears to be the daughter of the directors for whom you work.

Two days later, the managing director comes to you with another cheque, this time for £25,000, again needing only your counter-signature. There is a supporting invoice from the same design studio. You are hesitant, and the managing director explains that he is only asking you to counter-sign the cheque because his wife is not in the office. He says that it is important to submit the cheque promptly so that it may be banked before 30 April.

You ask why there is such urgency, particularly as there is no evidence of any design work having started. The managing director laughs and replies that the money should be back in the hotel bank account by the middle of summer.

He explains that the cheques are needed urgently to settle outstanding directors’ loan accounts at the design studio, as its year end is approaching. Once the year end has passed, the money should be returned to the hotel company and a supporting credit note received.

Key fundamental principles Integrity: How can you act honestly with regard to the operations and accounting function of your employer? You must encourage fair dealing and truthfulness.

Objectivity: You must strive to find a persuasive solution to this ethical dilemma, although there are significant pressures upon you to accept an arrangement that involves blatant dishonesty.

NQ Magazine December 2014

ETHICAL DILEMMA

Professional competence and due care: It may be complicated to resolve this dilemma, and so you should consider whether or not you have the necessary expertise.

You may need to take advice.

Considerations Identify relevant facts: You are being asked to take part in a transaction that you know is dishonest. You believe that, if you refuse to comply but do nothing more, the transaction will take place nevertheless. Consider relevant accounting standards, applicable laws and regulations (including taxation requirements), as well as the ethical requirements of your professional body.

Identify affected parties: Key affected parties are you, the directors of the tourism company, the directors of the design company, and users of the design company’s accounts, including the tax authority. Your wife may also be affected by the course of action that you take.

Who should be involved in the resolution: As well as involving the directors, you may be required to involve others outside the tourism company. If so, you should consider the objective and timing of their involvement. If you wish to discuss possible solutions with the accountant or directors of the design company, you must safeguard the principle of confidentiality.

Possible course of action It may require a degree of moral courage, but you must NQ Magazine December 2014

refuse to counter-sign the second cheque. You should encourage the directors to explore legal ways to assist the design company that are both ethical and do not risk the reputation of their company. Making a loan to the design company may be possible, but you should ensure that you have sufficient knowledge concerning the tax and other consequences of any movements on the directors’ loan accounts in the design company.

Before discussing any possible solutions with the directors of the design company or their accountant you should ensure that you have the written authority of all parties to discuss their financial affairs. You should ensure that you are in possession of all relevant facts before you provide advice, but also recommend to the directors of the design company that they take independent advice.

If you feel unable to influence the situation, then you may conclude that the fraudulent transaction will take place.

You must disassociate yourself from the final accounts if you know them to be misleading. Whether or not this results in your resignation, you should seek advice from your professional body, and take independent legal advice, regarding any responsibility you might have to disclose the fraudulent activity to the appropriate authorities.

You should document, in detail, the steps that you take in resolving your dilemma, in case your ethical judgement is challenged in the future.

NQ 11

TECHNOLOGY

You future is in the cloud

Barbara Kroll explains that sometimes no matter how busy you seem to be you have to take the initiative

O

kay, you’re a busy and ambitious manager with non-stop client responsibilities. You’re desperate to become a partner, but the day-to-day pressure of your current role is intense; your targets and KPIs are difficult enough, but to make matters worse, you’ve not only got to win the business, you’ve got to process it too. It’s a nightmare, and it’s making you stressed.

But now one of the partners has thrown something new at you: she wants you to drive the implementation of a standardised cloud-based accounting system right across the practice. She says it will create workflow efficiencies and prepare the firm for scalable growth – and she’s looking to you to deliver it.

The rationale is simple. Accounting in the cloud can help increase productivity, reduce stress and, at the same time, ensure client satisfaction is both high and profitable.

Furthermore, it can help practices grow their client-base without disproportionately inflating their cost-base or heaping more pressure on their employees.

So how can it do this? Well, by standardising online accounting methodologies, cloud accounting helps automate many common processes and removes onerous, unnecessary or duplicate data entry exercises, freeing staff to focus on client liaison, strategic consultancy and business development. This means that practices can manage more clients within the same system – but using far fewer resources.

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Furthermore, by simplifying processes, employees, remote bookkeepers and even clients can benefit from real-time access to dynamic financial data. This accessibility liberates users from the constraints of inconsistent and disparate processes, and reduces the gap between input and output – accelerating deliverables and driving performance. In the process, workflow is optimised, client engagement is improved and quality is enhanced. The inherent impact on profitability is significant.

But despite the obvious benefits, the implementation of such transformational technology does depend on structured change management – and the appointment of an internal advocate to champion online accounting, secure buy-in and drive change. The best advocates are ambitious, entrepreneurial and commercially astute – and recognise that the opportunity to leverage technology could just give them their chance to shine.

NQ Magazine December 2014

TECHNOLOGY

So you’re a busy and ambitious manager with non-stop client responsibilities – and a partner wants you to drive the implementation of a standardised cloud-based accounting system right across the practice. What are you going to do?

Sure, you’re stretched and stressed – but try looking at the bigger picture.

The invitation to lead change is a major career opportunity. Your natural instincts may tell you that if you accept the challenge your time will be even more squeezed, your client relations will suffer and your blood pressure will soar. But in fact the opposite is true.

If you don’t grasp the opportunity, the reality is stark; you’ll stay busy, stay stressed and, despite your lofty career ambitions, you’ll stay exactly where you are. So why take the risk?

Don’t work harder, work smarter.

NQ Reach for the cloud. ● Barbara Kroll is managing director of

Twinfield UK

NQ Magazine December 2014

13

THE CODE

It’s all about the code The FRC has issued an updated version of the UK Corporate Governance Code, which raises the bar for risk management.

PQ editor Graham Hambly takes a closer look

T

he Financial Reporting Council (FRC) has confirmed that boards must include a ‘viability statement’ in their strategic report to investors. This, the watchdog hopes, will provide an improved and broader assessment of long-term solvency and liquidity.

It is expected that this statement will have to look forward significantly longer than 12 months, which can be difficult at the best of times. The changes are also designed to make companies focus on aligning reward with the sustained creation of value.

The updated version of the UK Corporate Governance Code (the Code) has also been changed in relation to remuneration. Boards of listed companies will now need to ensure that executive remuneration is designed to promote the long-term success of the company and demonstrate how this is being achieved clearly to shareholders.

The FRC’s Stephen Haddrill said the changes to the Code are designed to strengthen the focus of companies and investors on the longer term and the sustainability of value creation.

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He said: “The changes on going concern implement the reforms proposed by Lord Sharman, whose work has stimulated a sea change in thinking about the assessment and reporting of risk and business prospects.”

Haddrill stressed that the Code will continue to operate on the principle of ‘comply and explain’, which has served investors and the UK corporate sector well for over 20 years.

The key changes to the Code include:

Going concern, risk management and internal control ● Companies should state whether they consider it appropriate to adopt the going concern basis of accounting and identify any material uncertainties to their ability to continue to do so. ● Companies should robustly assess their principal risks and explain how they are being managed or mitigated. ● Companies should state whether they believe they will NQ Magazine December 2014

THE CODE

e

Forget the pirate code, we are talking the FRC code here!

be able to continue in operation and meet their liabilities taking account of their current position and principal risks, and specify the period covered by this statement and why they consider it appropriate. It is expected that the period assessed will be significantly longer than 12 months. ● Companies should monitor their risk management and internal control systems and, at least annually, carry out a review of their effectiveness, and report on that review in the annual report. ● Companies can choose where to put the risk and viability disclosures. If placed in the Strategic Report, directors will be covered by the ‘safe harbour’ provisions in the Companies Act 2006.

Remuneration ● Greater emphasis be placed on ensuring that remuneration policies are designed with the long-term success of the company in mind, and that the lead responsibility for doing so rests with the remuneration committee. ● Companies should put in place arrangements that will enable them to recover or withhold variable pay when appropriate to do so, and should consider appropriate vesting and holding periods for deferred remuneration.

NQ Magazine December 2014

Shareholder engagement ● Companies should explain when publishing general meeting results how they intend to engage with shareholders when a significant percentage of them have voted against any resolution.

Other issues The FRC has also highlighted the importance of the board’s role in establishing the ‘tone from the top’ of the company in terms of its culture and values. The directors should lead by example in order to encourage good behaviours throughout the organisation.

In addition, the FRC has emphasised that key to the effective functioning of any board is a dialogue, which is both constructive and challenging. One of the ways in which such debate can be encouraged is through having sufficient diversity on the board, including gender and race.

Nevertheless, diverse board composition in these respects is not on its own a guarantee. Diversity can be just as much about difference of approach and experience. The FRC is considering this as part of a review of board succession planning and will consider the need to consult on these issues for the next update to the Code in 2016.

The revised Code will apply to accounting periods beginning on or after 1 October 2014.

NQ 15

THE NOT-FOR-PROFIT SECTOR

Charity case

Kate Sayer explains how the new Charity SORP, which comes into effect in January, will affect the sector’s accounting processes What is the Charity SORP?

What’s different in the FRS 102 SORP?

It is a Statement of Recommended Practice, which sets out how charities should prepare their annual accounts and report on their finances.

The main change in FRS 102 is a move to ‘fair value’ as the basis for including transactions and balances. We have not moved away from historic cost completely, but it will be necessary to consider fair value more frequently. Other matters in the FRS 102 SORP: ● all entities have to prepare a statement of cash flows. ● income including legacies should be recognised when their receipt is ‘probable’ rather than certain. ● all charities must disclose the total amount of all employee benefits received by ‘key management personnel’ for their services to the charity – this is the senior managers. ● all charities must disclose the fact that there were no employees who received pay over £60,000 or disclose the number of employees remunerated above £60,000 in bands of £10,000. ● charities are encouraged to disclose their remuneration policy in the trustees' annual report. ● governance costs are no longer shown as a separate row in the Statement of Financial Activities (SoFA) but must be disclosed in the notes. ● comparatives are required for each column of the SoFA, but may be provided in the notes to the accounts. ● gains and losses on investment assets are part of the income or expenditure of the charity and therefore go ‘above the line’. ● material items should be disclosed separately in the accounts, as should extraordinary items. ● all charities have to make a statement about going concern, either explaining any material uncertainties or risks to cast doubt on it or the factors that support it.

Why has it been changed?

The SORP is an interpretation of the financial reporting standards and generally accepted accounting practice in the UK. Because these have changed, the SORP has to be updated. The introduction of Financial Reporting Standard 102 (FRS 102) has been a radical departure as this brings together a whole series of piecemeal standards and guidelines on general accounting into a single standard. FRS 102 also includes specific sections on public benefit entities.

Why are there now two SORPs? As well as FRS 102, there is an existing accounting standard for smaller entities called the Financial Reporting Standard for Smaller Entities (FRSSE). As many charities are small, it seemed appropriate to issue a version of the SORP that would apply specifically to small charities.

Which charities can follow the FRSSE SORP? The small company thresholds are used for determining what is small, even if you are not a company. Currently, this means that you have to be below two out of three of the following criteria for the current and preceding year: ● ● ●

Gross income of £6.5 million.

Balance sheet total of £3.26 million.

An average number of employees of 50.

What are the pros and cons to choosing the FRSSE SORP? The main advantage is that your accounts will change very little as the FRSSE describes current accounting practice.

However, the FRSSE does not cover charity items such as voluntary income and heritage assets, so you have to look to FRS 102 for the appropriate accounting treatment in those cases. In addition, the future of the FRSSE is uncertain and it is currently being updated. It is likely that a new version will adopt some of the principles of FRS 102 but it is also possible that it will be scrapped in the medium term.

When do the changes take effect?

You need to apply a new SORP for your accounting period beginning on or after 1 January 2015. So the first year end affected is 31 December 2015, but you need to consider whether you will be making changes such as revaluations, which would have to be reflected in the comparative balances. In that case you need to think about getting a revaluation as at the transition date, which will be from 31 December 2013, as this will form the opening position for the comparative in the first accounts prepared under FRS 102. You may also need to consider whether you have to change your accounting treatment of transactions in 2014.

How do I know which SORP to choose?

You have to choose the FRS 102 SORP if your income is greater than £6.5m or you think you will exceed the small company threshold in the near future. The Charity Commission has prepared a useful helpsheet which sets out the differences between the FRS 102 version and the FRSSE version of the SORP. 16

Where can I find out more?

The Charity Commission has a microsite for the SORPs and Sayer Vincent has a special page on their website for SORP 2015 which will be regularly updated.

NQ

NQ Magazine December 2014

THE NOT-FOR-PROFIT SECTOR

â—? Kate Sayer is a partner at Sayer Vincent and was on the SORP committee that drafted the new Charity SORP NQ Magazine December 2014

016-017_NQ_1214.indd 17

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01/12/2014 14:03

ENTREPRENEURSHIP

Snake alive!

Karan Bilimoria, the founder of Cobra beer, has had his ups and downs. But one thing is for sure – this chartered accountant is never down for long!

I

t was way, way back in 1989 that Karan Bilimoria founded Cobra Beer. He felt the lager on offer was just too gassy, it just didn’t go with a wonderful Indian curry.

OK, today some 98% of UK’s Indian restaurants now serve it and Cobra is readily available in most supermarkets, but it hasn’t all been plain sailing.

For those who don’t know, Bilimoria studied accountancy at London Metropolitan University.

Interestingly, way back in the early 1980s, he still managed to accumulate £20,000 worth of student debt. Oh, he also studied law at Cambridge University.

When he launched Cobra, at the tender age of 26, he did it out of the back of a Citroen 2CV, while many of his friends were taking nice salaries from Goldman Sachs.

Created with his friend Arjun Reddy, today Cobra is a wonderful success story. It has won some 78 gold medals at the Monde awards and has a turnover of £54m. But the company has also nearly collapsed three times.

The last time (2009) it was the small matter of £70m worth of debts and involved a pre-pack

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administration. Bilimoria, quite unsually, repaid all the secured creditors and is paying the unsecured ones now.

He explains that Cobra was focusing, perhaps too intently, on growth. Ultimately, it lead to a joint venture with US brewer Molson Coors. They paid £14m for a 50.1% stake in the company.

So who does Bilimoria see as his natural competition? Well, Peroni for one. And he sees no reason why Cobra can’t be as popular in most English pubs in a few years time – so he’s thinking of expansion again.

You must also have seen those ‘The Boss’ ads. By day a beer magnate, by night a bra magnate! These are designed, we are told to make consumers see Cobra as the beer that can be drunk anywhere.

The accountant also has a political side; he is after all Lord Bilimoria of Chelsea. He has very strong views on immigration. Born in India, he has campaigned for the reinstatement of post-study work visa. This would allow students to stay and work in the UK for two years after graduating. He believes overseas students should also be taken out of net immigration targets.

“We should actually be trying to increase the number of international students coming here,” he said.

And don’t forget about the £10bn they bring into the economy.

Lots has changed, he says, in the three decades he has lived in the UK. Perhaps the most important is how we think of entrepreneurs. They are no longer seen as carpet salesmen, but something to really celebrate.

Long that may continue, he says.

NQ

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ENTREPRENEURSHIP

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Your career

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NQ Magazine December 2014

YOUR CAREER

Planning your next move

You’ve just qualified – so what’s next? Ismael Chand explains the options open to you

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or many NQ accountants, the next step in the journey after qualifying is often one of the most uncertain and worrying parts of their career. So we’ve put together this piece in the hope that it might make the murky road ahead seem a little clearer.

The crucial thing at this stage is to remain motivated and determined to progress your career.

It’s all about getting PQE, as this is what your future employers will look at. Working out your next steps isn’t an easy thing to do; you should already be discussing it with your managers and mentors.

What are the progression opportunities internally? What is your company policy on succession planning? And what is their attitude to continued professional development?

There’s also the small subject of financial reward. Some companies will award salary increments or bonus payments to employees for completing professional exams; have you checked whether you qualify for such rewards?

Now that you are a qualified professional in employment you would be right in thinking that you increase in value to your employer, and also to the market. So it stands to reason that this should be reflected in your annual remuneration.

After you’ve explored and actioned all of the internal opportunities you should begin looking at what’s on the market. When it comes to finding good opportunities for work there is no substitute for hard graft. Browsing through LinkedIn, looking at jobs boards and discussing with people in your own network will often help to uncover opportunities you didn’t know existed. The next thing to look at would be to contact your local and regional financial recruitment consultants.

Remember, a good recruitment consultants shouldn’t just encourage you to move because of their financial gain. They should help you to work out your options. Consultants can analyse what skills you have, and what type of roles you would be suited to. Recruitment consultants are uniquely positioned to see both sides of the market, and should be able help steer your career.

It’s worth being picky about who you choose to represent you. Selecting agents who have long-term experience in NQ Magazine December 2014

financial recruitment is probably the safest bet. These guys know the space, and will be able comment on the activity levels within the market. They’ll be able to tell you how the sector is moving, not only generally, but also specifically within your salary bracket, and with regards to the types of roles you are interested in pursuing.

Another point to consider when picking an agent is that a good partnership with your recruitment consultant could, and should, be one that lasts for the entirety of your career. You can count on a good consultant to help you find the best roles in industry at any point in time; whether it’s temp, permanent or part-time work.

We’re confident that if you put a plan of action together that considers these elements, you will take the next step in your journey. Remember that these things should always be carefully planned. If you find that six months down the line things aren’t working out as you had imagined, don’t fret. Careers are a bit like puzzles; you might know what it should look like but it still takes a lot of work to fit together the little pieces that will eventually make the whole. And, hopefully, in the long run you’ll look back and be pleased to have learned from all of your decisions.

Until next time, NQ. Oh, and personal congratulations NQ from me on passing your exams!

● Ismael Chand, Talent Management Executive,

Walker Dendle Financial Recruitment

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VIEWPOINT

Border country Excting times lie ahead as big ideas continue to shape the planet’s future, says Dr Steve Priddy

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he best, the most exciting, the most innovative, the way we make fastest progress always seems to be on the boundary, at the edge of our thinking, outside our comfort zone. I reflected on this on the long, carbon-fuelled trek from Irkutsk in Siberia to London’s Heathrow. After a week of workshops that pushed this author way beyond his middle-class prejudices and attitudes I was left again – this was my third visit – with that melancholic tinge that comes from the mix of being homeward bound and regret at leaving that place of the exiled and of inconceivably vast physical space.

We had spent the week – technical university masters students, faculty, the old Londoner – opening up the theme of innovation in the upstream (exploration and extraction) oil, gas and energy sector. Along the way we touched corporate governance, ethics and risk; petroleum tax design and implementation; institutional analysis and why Gazprom’s relationship to the EU is so tortured; and, of course, the growing, stumbling development towards renewable energy.

Our best arguments were over the nature of the ‘resource curse’ – the idea that countries that are well endowed with natural resources seem to slip backwards in terms of economic growth and the quality of their governance. I presented a World Bank paper that had compared Russia’s progress with that of Canada – two countries with very similar resource reserves, but with very different institutional capability. My class were strong in their disagreement that Russia had gone backwards since 1998 – this was simply not true, they said.

What we did agree on was that it is a good thing to be a young person in anything to do with energy today. Everyone was pretty much agreed that as we prepare to depart 2014 we move one year further along the road to the 10-billion-peopled planet. Latest population predictions actually do not forecast this figure. Generally, it is thought that population will peak around 2075 before even more remarkably beginning to reduce in absolute terms, and that we will not reach that number. However, that rate of increase coupled with the peak of a range of indicators – oil, food, deforestation, water scarcity, greenhouse gas emissions – means smartness on the part of our species unmatched in our evolution.

And goodness me, how smart we have become.

Horizontal drilling, exponential cost reductions in solar and wind technologies, carbon capture and storage, Moore’s Law unabated, nano-technology and Big Data, it seems innovation is breaking out or continues to break out everywhere. Politicians, policy makers, regulators, even sections of the press are behind the curve of what is actually happening in our society. It is the likes of you and I who are remaking and reshaping this world to be fit for the future.

In 2015, it will be you, the newly qualified accounting community, who will continue to live in what has been since the global banking crisis of 2008, a Golden Age for the accounting profession.

In a seminal recent paper (1) carbon accounting is explored as the unstable object at the interface of at least five colliding frames – the physical, the political, the market-enabling, the financial and the environmental/social. You will be the professionals who bring your measuring and analytical skills to the 10-billion-people planet and its very different reporting requirements, and in so doing create the place where carbon is cut out. And where ‘collision’ was an academic concept just three years ago, a firm as eminent as PwC now uses it as a business driver.

Check out http://www.pwc.co.uk/issues/megatrends/ collisions/megatrends-the-collisions.jhtml Have a great Christmas break and look forward to NQ 2015 in these most interesting of times!

“The more it changes, the more it stays the same” – Al Stewart, ‘Nostradamus’

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● Dr Steve Priddy is Head of Research at the London School of Business and Finance (LSBF) SRP (1) Ascui F and Lovell H (2011) As frames collide: making sense of carbon accounting, Accounting, Auditing and Accountability Journal, 24,8, 978-999 NQ Magazine December 2014

VIEWPOINT

NQ Magazine December 2014

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Your jobs board I need to find pqjobs.co.uk now!

PQ jobs pqjobs.co.uk