PQ magazine, August 2016

PQ magazine August 2016

www.pqmagazine.co.uk / www.pqjobs.co.uk

THE VOICE OF ALL PQs

AAT: THE CBA RESULTS P22

P12

So what were the success stories – and the failures – from the most recent set of exams?

PRACTISE THE ACCA’S CBEs

Top advice from Alan Hatfield

Contact us

email: graham@pqaccountant twitter: @pqmagazine call 020 7216 6444

P14

PLANNING AHEAD P26

You’ve taken your exams, so what’s your next step?

2015 ANNUAL REPORTS

We review the annual reports – so who’s really was the best?

GREAT ADVICE ON HOW TO PASS THE CIMA MANAGEMENT INTEGRATED CASE STUDY P16

ACCA: YOU’RE THE JUDGE!

F4 students must understand the P20 Tort of Negligence

MANAGING THE UK’S ECONOMY

Monetary policy and quantative easing P22

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comment PQ

CONTENTS

News 08CIMA scores All the results from the latest set of exams 09ATT initiative Tax institute launches CIOT pathway 10ACCA tie-up ACCA forms strategic alliance with CA ANZ 12CBE exams ACCA publishes specimen papers for new exams Features, etc 06Mind your Ps&Qs A CIPFA apology; new ACCA resources; top advice from a dedicated PQ; and a baffled CIMA sitter 14You’re the judge Getting to grips with the Tort of Negligence concept for ACCA F4; plus A Quick Look at IFRS 11 16CIMA case study How to get through the Management Integrated case study 18CIMA F3 paper In part one of a three-part series we look at the topic of long-term finance 20Annual reports We took a long, hard look at the bodies’ annual reports on your behalf.

So who has the best one?

22AAT exam results The good, bad and ugly percentage scores; plus a selection of photos from the recent members’ conference

August 2016 24Let’s get technical Tools the

government can use to help manage the economy 26Careers #1 Life after exams – what should you be doing?

27Careers #2 Life at Tata Motors; our book review; plus the best of social media 31Fun time Useless A-levels; a Family Guy gag; plus more of our great giveaways The columnists Robert Bruce Matters of principle and why they are important 8 Prem Sikka Why workers should sit on our companies’ boards 10 Carl Lygo East Africa and its ‘European’ experiment 12 Subscribe to PQ magazine It’s FREE – see page 29 or go to www.pqmagazine.co.uk

Don’t make it Messi!

My son often argues with me about who is the best footballer who ever played. Sorry, I can’t engage him in the same way about the ‘best accountant’! Of course I am right, as I have Pele at number one and Maradona (a drug cheat) at two. They both changed the game. He has Lionel Messi as his champion. But what happens to a hero if he is sentenced to 21 months in prison for tax fraud? Messi is now facing millions of euros in fines for using tax havens in Belize and Uruguay to conceal earnings from image rights. That said, neither Messi or his dad are expected to serve any time in jail. In Spain, if you are sentenced to less than two years in jail you can serve your sentence under probation.

In need of a friend For CIMA and ACCA PQs there has been some big news this month.

The AICPA and CIMA have agreed on creating an ‘association’. How this works in reality will be interesting to see – remember, they aren’t actually moving in with each other. It’s like a platonic relationship and we all know how they end! However, just as CIMA thought it had the limelight then another landmark agreement comes along. The ACCA and CA ANZ have unveiled a new strategic alliance. Where were they hiding that one?

ABC July 2014 – June 2015

32,233

Publisher’s statement: We send a digital issue of the magazine to an additional 8,866 requested readers Free to all accountancy students Annual subscription: £35 (£50 overseas)

An annual digest We lead this month with the accountancy bodies’ annual reports. As always, we are moaning about CIPFA. We think CIPFA is one of the UK’s leading accountancy bodies, but not when it comes to the transparency of its top executives’ pay. Every accountancy body (including the AAT) provides the name and exact salary of their top-paid employee – CIPFA doesn’t! We undersand that Rob Whiteman might be embarrassed about having his pay packet on show, but everyone else does it – except him.

Does CIPFA have anything to hide?

Graham Hambly, PQ magazine editor – graham@pqaccountant.com

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PQ have your say

email graham@pqaccountant.com A CIPFA explanation It is with interest that we note the unhappiness of a CIPFA member with our new e-assessment programme (PQ letters, July ’16).

Firstly, an unreserved apology to anyone involved who did suffer additional stress from issues with the process and systems.

Early feedback shows that a minority of students and their employers had problems, but every individual deserves our full support and attention through their studies and as a member. All feedback, such as that published recently, is welcome and helpful.

The new approach was

developed in response to requests from CIPFA’s students and employers from across the world,

who needed a flexible approach to exam sittings. Developing the system revealed a number of additional advantages that we felt were of benefit to all our students, regardless of location, including the ability to introduce additional exam sittings and turning around marks faster, and for employers in reducing incidental costs (such as travel to exam centres).

While we do have to apply rules about how exams are sat to maintain integrity, we have at least three different options available and we explored a few more in the most recent sitting on request from those experiencing most difficulties.

Unfortunately, the last sitting

(our first full roll-out) also revealed some shortcomings in our preexam communications, on-the-day technical issues and the turnaround time in some support areas. We are learning from these, and are consulting widely with students and employers over improvements that we can make.

Although the indicative completion rate of exams taken is the highest of any first-adoption online exam system there is, of course, still room for improvement.

Every student deserves our support to our highest possible level, and we will always seek to accommodate individual requirements.

Giles Orr, CIPFA Director

The writer of the star letter each month wins a fantastic PQ memory stick!

Dedication pays off

I am pleased to say that I am now fully CIMA qualified, having passed my case study in the February sitting, and I have now had my experience approved.

I sat my first CIMA professional level exam in November 2007. I have had almost two years off from the exams so the time taken in total was almost seven years. I passed my exams either first or second time, until I got to the strategic level, where I struggled. I failed F3 four times in a row and almost gave up on several occasions – I just couldn’t see how I was going to get through to the end.

Through sheer persistence and determination I managed it, and my advice to students in a similar situation is don’t take no for an answer – if you fail just keep going.

I know it’s easier said than done but be stubborn and say to yourself, “I will do this”! Not everyone passes exams first time and it really is worth it in the end.

I would be grateful if this letter made it into the magazine as I’m sure there are students that are in the same position as I was in. Also, please can I now subscribe to NQ magazine? I have been waiting so long to ask that!

Les Caswell, by email

We’re here to help

I’m responding to your article ‘ACCA’s are terrified of the optional test’, as I really don’t want our students to be alarmed or terrified of the Professional level exam option papers (PQ, June ’16). I wanted to take the opportunity to highlight our resources to support students.

Employers recognise that the ACCA qualification is rigorous and challenging and this is partly what makes our students attractive to them. It’s a qualification that can be trusted. The Professional level exams are set at Masters level – as evidenced by our position on education frameworks in the UK, Ireland and other countries. This demonstrates that the standard of these exams is appropriately challenging to ensure that students who pass are able to demonstrate the skills required by the workplace.

ACCA works really hard to ensure that the exams are fair, at the right standard and can be managed in the time available – they are evaluated externally before coming to students.

ACCA provides a lot of support for students approaching all exams, including the Options. Pass rates are higher for students attending

our Approved Learning Providers and using Approved Content from Becker, BPP and Kaplan. For those students unable to attend tuition, we publish detailed ‘self-study guides’ – see our website for examples.

For students who do not pass first time, we additionally provide detailed retake guides in every subject too – again, see our website for examples.

These guides help students use effectively the broad range of resources produced on our website to guide them through their studies, whether working with or without a learning provider.

All relevant resources are highlighted through the free online magazine SA which is sent to students and can be personalised for their own studies.

We hope this provides reassurance and maybe raises awareness of some of the support available to students.

Dr Mary Bishop (pictured), Director-Learning, ACCA

Confused by CIMA

I had something interesting happen

to me a couple of weeks back. I struggled with CIMA F3 recently but one failure left me very perplexed. I received feedback stating where I had been ‘proficient’ and ‘not proficient’, according to CIMA’s complicated exam results. Turns out I had been proficient in all areas with a mark of 97 (bearing in mind the pass rate can change depending on the questions you receive).

According to CIMA, you cannot query results but I felt this needed clarifying, so I emailed demanding an explanation.

To my surprise, CIMA confirmed an administrative error had happened and one of my areas was ‘not proficient’ and my fail result was correct. I requested to see my exam due to this error but this was rejected.

Has any other student had this error before and what steps did they take?

Nick Osborne, by email The editor says: Thanks Nick – we’ve covered this story on page 10

DUE TO LACK OF SPACE OUR SOCIAL MEDIA UPDATES HAVE BEEN MOVED TO PAGE 27

PQ Magazine Fourth floor, Central House, 142 Central Street, London EC1V 8AR | Phone: 020 7216 6444 | Email: graham@pqaccountant.com Website: www.pqmagazine.co.uk | Editor/publisher: Graham Hambly graham@pqaccountant.com | Advertising manager: Polly Thrasivoulou polly@pqaccountant.com Associate editor: Adam Riches | Art editor: Tim Parker | Subscriptions: dom@pqaccountant.com | Contributors: Robert Bruce, Prem Sikka, Carl Lygo, Tony Kelly, Phil Gammon, Jo Daley | Origination and print services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email dom@pqaccountant.com

Published by PQ Publishing © PQ Publishing 2016

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PQ news

ROBERT BRUCE A matter of principles

It was 10 years ago that ICAS issued a report arguing that financial reporting needed to be based on principles rather than rules. The world has, largely, moved in that direction ever since. In the UK in particular, principles have the upper hand. It is not necessarily a coincidence that, thanks to the FRC, company directors have to certify that reports are ‘fair, balanced and understandable’. It has become a rallying cry. It is very hard to argue that something in the report that is not fair or balanced should be in there. And that is the point.

Principles are things you can have an argument and a discussion about.

If it is a rule that is much harder and, as the US experience shows, rules can lead, when unfairly applied, to results that are the opposite of what was originally intended. This was memorably demonstrated a year after the publication of the ICAS report, when a conference was held in New York to discuss its ideas. One speaker, US lawyer, Michael Young, ended his presentation with a highly effective theatrical gesture. He waved two books above his head, a slim one and a thick one. The first was the Declaration of Independence, the second FAS133, the accounting standard then dealing with derivatives. “The Declaration of Independence is principle-based,” he pointed out. “FAS133 is rules-based.

And I’d much rather be defending the Declaration of Independence.”

And there was, as any lawyer could tell you, no answer to that.

Latest CIMA results show pass rate rise CIMA’s OT pass rates just can’t stop going up! The new results show the overall exam pass rates are tracking up by at least one or two percentage points in every paper.

CIMA’s exam chief, Steve Flatman, was particularly pleased with the rise in the P3 and F3 pass CIMA OT pass rates Overall First time Total E1 88% 80% 76% P1 67% 47% 42% F1 84% 74% 69% E2 93% 86% 83% P2 72% 52% 43% F2 72% 49% 45% E3 80% 65% 60% P3 77% 55% 50% F3 75% 55% 49%

CIMA CASE STUDY EXAMS – 2016/2015 May 16 Feb 16 Operational 67% 62% Management 63% 64% Strategic 46% 56%

rates. Both have seen a 20% increase in overall pass rates from a year ago, when CIMA released its first set of results.

For Flatman, these latest results show the exams are “consistent, reliable and fair”, and he felt some traditionally ‘difficult’ papers – such as P1, P2 and P3 – now seem very achievable.

The case study pass rates also held up in May, with the exception of the Strategic level, where the pass rate slipped to 46%. Flatman has already looked into this and explained there were more students resitting this paper in the summer cohort.

For the first time CIMA released

ACCA has revealed that it is looking at its multi-currency pricing structure. This is in direct response to concerns from members and if instituted could have massive ramifications to the ACCA’s 400,000 international students.

The association is currently

assessing the impact such a move would have on IT systems and financial risks of currency fluctuations.

At present fees have to be paid in pounds sterling.

ACCA’s Mark Cornell said: “We hear from members, affiliates and

Sponsorship up for grabs

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PQ attacked

8

Aug 15 34% 77% 67%

grade descriptors with the results.

These are designed to help show students where they are failing.

Flatman stressed that this was not just for looking back, but to help students going forward, too. He felt it is vital that CIMA is clear and transparent about the standards expected of exam candidates.

CIMA pre-tested the descriptors with both students and other stakeholders and they “really loved” this new approach, said Flatman.

• PQ magazine would like to thank CIMA for allowing us to print the pass rates in full. It means all students now get the pass rates a week earlier too – on 15 July!

ACCA to review policy on currency

n Robert Bruce is an award-winning writer on accountancy for The Times

Trainee accountant Adil Jamil was attacked in his BMW in Leyton, London, a few days after the Brexit vote by an attacker wielding a metal pole and reportedly screaming racist abuse.

His windscreen was smashed before the attacker was pinned to the ground by an off-duty security guard.

Jamil said: “Since Brexit there seems to be a rise in these attacks and people need to look out for each other, no matter who it is.”

Nov 15 61% 78% 62%

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students that multi-currency payment options would greatly enhance their ACCA experience, so it is important that we assess this and indeed other issues raised by members to ensure that we focus on providing the best value possible to all members.” will consider candidates without any relevant qualifications or experience, as well as those who may already be working in the profession and have already started building up their accounting qualifications.

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Closing date for applications is midnight 31 August 2016.

See www.premiertraining.co.uk/ sponsorship for all the details.

BPP University launches language course for ACCAs BPP University has developed a new free English language course to help ACCA students at every stage of the qualification.

All students can now access the new course designed to support the English language skills needed for the ACCA F1-P7 exams. It is available online as a self-directed and flexible learning programme. The support will include around 70 one-hour modules and

have been specifically designed to identify and reduce some of the common difficulties that students who don’t have English as a first language may encounter throughout their ACCA exam journey.

The innovative new course is written and delivered

by BPP University’s School of Foundation and English Language (SoFELs).

Go to accaglobal.com/bppenglishforacca for more.

PQ Magazine August 2016

news PQ

CIMA/AICPA form new association

New tax pathway launched by ATT The Association of Taxation Technicians (ATT) and Chartered Institute of Taxation (CIOT) have launched a new flexible route to obtaining both the ATT and CIOT qualifications.

The new Tax pathway will allow students to study for both the ATT qualification and the gold-standard CTA qualification together in less time.

Those opting for this route will have one fewer exam to sit, too.

ATT President Michael Steed said: “ATT is delighted to launch

the new Tax Pathway, with the CIOT. The Tax Pathway has been designed to deliver the highest quality qualifications in tax while reducing time out of the office, study costs and duplication of study.”

At the launch Steed said the pathway gave students an “agile qualification”, and was a direct response to the needs of both students and employer.

The pathway goes live on 1 September, although anyone who has already booked up can transfer onto the new scheme

CIMA and AICPA members have agreed to join forces to create a new association.

Some 89.7% of CIMA members recently voted for the changes, and the Association will launch in 2017. It will represent some 600,000 current and next-generation professionals worldwide.

Both bodies insist that the new organisation is designed to complement rather than replace them. CIMA is also keen to stress its structures and royal charter will remain, as will its management accounting focus.

Students have been promised access to more learning tools. CIMA believes its PQs will also benefit from the increased recognition of the qualification.

New production accounting diploma The National Film and Television School (NFTS) has unveiled a new parttime 12-month diploma in production accounting, in partnership with the Production Guild.

The diploma is ideal for those already working in a finance or accounting role and who are keen to move into the film and television sector. Students will learn the specialist knowledge required to work as a production accountants and help establish key contacts to enable them develop their careers, says the NFTS. Applications are open for the new courses until 13 October 2016.

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The Institute of Certified Bookkeepers 9

PQ news

PREM SIKKA Workers on the board can avert pensions crisis The BHS debacle shows that shareholders made millions while 20,000 employees are facing massive cuts to their pension rights because the company did not repair the pension scheme deficit. BHS is not alone, and the same fate may befall thousands of other employees. A recent report by investment advisors AJ Bell shows that 54 of the FTSE100 companies with a pension scheme deficit paid £48bn in dividends in 2014 and 2015. In 2014, the same firms had a £52bn deficit on their pension schemes. Dividends paid by 35 of the FTSE100 firms were bigger than their pension scheme deficits.

In 2014, Royal Dutch Shell had a pension scheme deficit of £6.7bn, but paid out dividends of £7.5bn and £8bn in 2014 and 2015. AstraZeneca had a deficit of £1.87bn in 2014, but paid a dividend of £2.2bn and £2.4bn in 2014 and 2015. Vodafone had a deficit of £549m but paid dividends of £3bn and £3.04bn for 2014 and 2015.

The statistics show that companies prioritise appeasement of markets and shareholders over obligations to employees. Directors personally benefit from dividend payments as they hold shares and high dividends also increase value of their share options.

Corporate governance structures need to change. Employees help to generate corporate wealth and should have a significant presence on boards of major firms. This would enable them to remind directors of the social consequences of their practices. n Prem Sikka is professor of accountancy at the University of Essex

New landmark alliance ACCA and the Chartered Accountants Australia and New Zealand (CA ANZ) have unveiled a new strategic alliance which both believe will add value to members both locally and nationally.

By sharing expertise across geographies and sectors the alliance will ultimately create a stronger voice on behalf of 308,000 members and 480,000 students across 181 countries.

One area that the bodies plan to

work closely on from the start is the promotion of their accounting technician propositions. The ACCA has CAT, which competes directly with the AAT. The move will also provide an opportunity for dual membership of both bodies. ACCA members resident in Australia and New Zealand will be invited to apply for CA membership, and CA ANZ

CIMA F3 PQs baffled by ‘wrong feedback’ Many CIMA F3 students have been left dazed and confused after receiving their OT results and feedback recently. Some of these PQs were told they were proficient in all areas, but were still told they had failed. “Can this be possible?” asked one F3 student.

CIMA’s director of exams, Stephen Flatman, has confirmed that all students have now “received the correct grades for the exams they have taken”. He explained that CIMA experienced

technical problems, which led to a number of students receiving incorrect feedback concerning section C of F3 OT exams taken between 1 May and 1 June 2016.

He said: “On discovering this, we immediately conducted a full audit and then contacted all affected students, as well and updating their CIMA records.

“We understand that this may have been stressful for those affected. We would like to assure all our students that we have introduced additional safeguards to prevent such an error re-occuring.”

members will be invited to apply for ACCA membership, subject to meeting the eligibility criteria of the other body.

ACCA President Alexandra Chin, pictured, said that CA ANZ is a natural partner for ACCA, sharing its commitment to upholding the highest ethical, professional and technical standards.

AAT unveils CBA results Introduction to Payroll Skills is the hardest AAT assessment to pass, according to the latest success rates (see page 22). The Level 2 paper had a pass rate of just 43.4% for the year ending 31 December 2015. The next lowest pass rate at Level 2 is Computerised Payroll Skills with a pass rate of 77.1%.

Personal Tax remains the real test at Level 4. It has a UK pass rate of 46% and an international one of just 26.7%.

The AAT has also released the overall CBA success rates. Perhaps not surprisingly they go down as students progress. So at Level 1 the pass rates are 92.4%; by the time PQs get to Level 4 they are 63.2%.

FREE WEBINARS FROM BPP AIM TO HELP TAX STUDENTS To help PQs get the most from their ATT/CTA studies and help boost their confidence BPP is running free 90-minute webinars via its Online Classroom Live platform this August.

The ATT webinar will run on Monday 8 August and start at 6pm.

The CTA webinar takes place a day later on Tuesday 9 August, at 6pm.

The webinar will help students manage the volume of information they receive – there’s a lot of tax legislation out there. You will also be shown effective study tips and how to pass the exam.

In addition, students will have the option of asking questions and have the chance of interacting with fellow ATT/CTA students.

If you would like to attend (or listen to a recording) then register your interest at http://accountancy. bppeloqua.com/webinars

Standards Board is amending IFRS 3 and IFRS 11. The amendments are designed to provide a clearer guidance to help distinguish between a business and a group of assets when applying IFRS 3. They also clarify how a company should account for a previously held interest in a business, if they were acquiring control or joint control of that business.

differentiating themselves from their ‘competitors’ – the Association of Taxation Technicians (ATT) qualification. ACCA members are eligible for up to two exemptions.

Without these PQs need to pass three certificate papers – two core subjects and one non-core plus two additional papers, Law and Professional Responsibilities & Ethics, which are examined through E-assesement. See att.org.uk for more details.

FRC on the case The Financial Reporting Council has launched two new big investigations. One is into PwC’s conduct in relation to the audit of BHS; the other is into KPMG’s audit of HBOS. The investigation into the conduct of KPMG Audit Plc’s audit of HBOS plc goes back to the year ended 31 December 2007. The investigation was instituted by the FRC’s conduct committee following the completion of the Executive Counsel’s preliminary enquiries.

In brief New offer from ACCA/CSOEC An innovative new certificate in business valuations has been launched by ACCA in partnership with CSOEC. The certificate is accessible globally, and is available in both English and French for anyone interested in applying the principles of valuing businesses to any type of business. The course costs £199, discounted to £149 for ACCA members.

Standard amendments The International Accounting 10

ATT route for ACCA PQs ACCA members interested in tax have a great way of

PQ Magazine August 2016

PQ news

CARL LYGO East Africa apes the European experiment On the day of the EU referendum I was in Nairobi for the Annual Conference of East African Universities. There is a lot of interest in the UK accounting qualifications in East Africa. In 2011, the Institute of Certified Public Accountants of Kenya (ICPAK) entered into a reciprocal agreement with ICAEW so qualified members could apply for reciprocal membership. In 2015, ICPAK entered into a strategic partnership with the ACCA, and CIMA also offers exemptions for qualified members of ICPAK. But as the British voted on their future in the EU I was surprised to learn about the EU equivalent in East Africa and Africa.

The East African Community (EAC) comprises of Burundi, Kenya, Rwanda, Tanzania and Uganda with South Sudan having agreed a treaty to join this year. The objective is to create an East African Federation, a single sovereign state (sounds familiar). In 2010, the EAC launched its own common market for goods, labour and capital, with the goal of creating a common currency and monetary union by 2023. The EAC is a part of the African Economic Community (AEC) which in turn has the goals of creating a common currency, a central bank, free trade areas, a customs union and a single market.

The result of the referendum came in just as we were about to start day two of the conference. There was a round of applause from the audience as the result was announced and the speaker “welcomed Britain back”.

Interesting times ahead for all of us! n Professor Carl Lygo is chief executive of BPP

TIME TO PRACTISE YOUR CBE EXAMS

The ACCA has taken a giant step forward with the publication of its specimen papers for the new CBE exams, being launched this September.

Anyone planning to sit the newlook F5–F9 exams can now sit the practice exam by going to bit.ly/ACCA-CBEtest.

The CBEs involve the use of spreadsheets and word-processing question types, which the ACCA believes better reflects the workplace.

The association is also keen to stress these new-style exams test exactly the same learning outcomes to the same standard as the paper-

Alan Hatfield based exams, which will be running in parallel in September.

Students will need to have the following browsers to take advantage of these new resources: Chrome 31.0, Firefox 33.0, Internet Explorer 11.0 and Safari 8.0. You

will also need to ensure you have applied the Mircosoft update to support the new currency symbol for the Russian Rouble (Windows 7 and above). Pop-up blockers on your browser have to be disabled before commencing the exam and your screen resolution has to be set to 1280 x 1024.

Alan Hatfield, ACCA’s Executive Director – Strategy & Development, told PQ that early feedback from both employers and students had been very encouraging.

He said they liked the question types and use of spreadsheets and word processing in the assessments.

What does your chief executive get paid?

ICAEW’s CEO Michael Izza got a nice rise in his pay packet again this year, according to our review of the annual reports. His remuneration now stands at a cool £554,000, after an increase of £9,000. One CEO who seems to be catching Izza up fast is ICAS chief Anton Colella – his salary jumped to £418,000 in 2015.

It should be remember that while the ICAEW generates income of

£101.6m and has a membership of 146,000, ICAS has an income of just £15.58m and membership of 21,000.

CIMA’s Charles Tilley received a package worth £347,000 and AAT’s Mark Farrar took home £174,000.

CIPFA still doesn’t provide open and transparent information when it comes to its top-paid employee. We can only guess that it is CEO Rob

Most finance directors believe the time is now right for governments and international agencies to work together to abolish offshore tax havens.

The poll, conducted for The Times newspaper and ICAS, discovered 73% of finance leaders think paying the right amount of tax is more a reputational issue, not just a

FDs want to end tax havens technical or compliance imperative.

ICAS CEO, Anton Colella said: “This shows that the UK’s finance leaders are in agreement that we need to enter a new era in international corporate taxes to restore trust in the global tax system

Whiteman who is earning between £210,000 and £219,999. It appears that the institute has no intention of following the good practice of the other accountancy bodies. The AAT even provides a ratio of the CEO’s emoluments to its lowest-paid employee, which is eight.

• Go to page 20 to see our annual reports review in full.

and in business.”

Some 80% of those polled also felt the leaked Panama papers would lead to further legislation to clamp down on tax avoidance. But at the same time they want a simpler tax system at home.

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PQ Magazine August 2016

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PQ ACCA F4

YOU’RE THE JUDGE Tort is an important concept that F4 students must get to grips with. Here Paul Kirkwood and Catherine Murphy explain it by way of a couple of precedent-setting cases

T

he case of Sayers v Harlow UDC (1958) is a celebrated case in the area of English law called the ‘Tort of Negligence’. This is an important topic within the ACCA F4 syllabus and by reading about and understanding key cases you can help build your knowledge, which will help you pass your exam.

In this case, Ms Sayers paid to use a public toilet but when she came to leave the cubicle she found the lock and handle were defective and so she couldn’t open the cubicle door. In the 1950s public toilets were usually looked after by an attendant so Ms Sayers tried to attract attention for several minutes to no avail.

As no one came to help she tried to climb out, firstly by stepping onto the toilet itself and then using the toilet roll holder, which unfortunately gave way under her weight causing her to fall and break her leg.

Ms Sayers sued Harlow UDC, who were responsible for the maintenance of the public toilet, arguing that they had been negligent in not properly maintaining the cubicle lock and handle.

But was she successful in her claim?

Outcome of the case Ms Sayers was partly successful in her claim for damages. It was held that the injuries she suffered were a natural and probable consequence of the defendant’s

Court in session: the judge in question is none other than co-author Paul Kirkwood!

On the case: Catherine Murphy points the finger

(Harlow UDC) actions. It was also held that her actions were not unreasonable in the circumstances and that the injuries were therefore a foreseeable consequence.

However, there are defences that can be used when being

To see ‘You’re The Judge’ in action see www.homelearning college.com/judge

sued for negligence. One of these is the concept of ‘contributory negligence’, which can be used when a person suffers damage that is partly of their own making and partly the fault of any other person or persons. A claim in this respect is not lost but the damages recoverable can be reduced at the

A QUICK LOOK AT...

Accounting for joint arrangements is an example of a topic where the accounting standard (IFRS 11) is relatively straight forward to apply. The difficult part is identifying if a joint arrangement exists, and if one is present deciding what type of arrangement is it. The following questions will help you determine the correct accounting treatment.

Does a joint arrangement exist?

Under exam conditions many students fail to recognise that a joint arrangement exists or jump to the conclusion that it does exist. This is the real challenge when applying IFRS 11.

The crucial point in determining whether you are dealing with a joint arrangement is whether joint control exists. This means that all material decisions relating to the arrangement require 14

discretion of the court to allow a just and equitable outcome taking into account the claimant’s share in the responsibility for the damage.

In this case, Ms Sayers had been contributorily negligent and had her compensation reduced by 25%.

Another example of this can be seen in the case of Foom v Butcher (1975), where the occupants of a car who were not wearing their seatbelts were injured following a traffic collision caused by the negligent actions of another driver. This case was finally decided in the Court of Appeal, where the injured persons had their damages reduced by 25% due to their contributory negligence by not wearing seatbelts.

‘You’re the Judge’ is just one of the many innovative and engaging activities that forms part of Home Learning College’s ACCA course. PQ • Paul Kirkwood is lead ACCA tutor and Catherine Murphy is ACCA product and community coordinator at the Home Learning College

IFRS 11 – Joint Arrangements

the unanimous consent of the parties sharing control. Joint arrangements can exist between two or more parties, remember decision making based on a simple majority is not a joint arrangement. A joint arrangement is where all parties need to agree for a decision to be made.

What type of joint arrangement is it?

Joint arrangements are either joint operations or joint ventures. It is not easy to remember the difference between the two, but try to think about a joint operation being something that is within the normal operating activities of the organisations involved. A joint arrangement that is organised through a separate vehicle, where all parties have rights to the net assets of the arrangements is likely to be a joint venture.

What is the correct accounting treatment?

Once you know the type of joint arrangement the treatment is straightforward.

For a joint operation, a joint operator in both their individual and consolidated accounts should recognise the operation in relation to their interest in all of the individual elements of the arrangement. e.g. the assets and liabilities.

For joint ventures the equity method should be use on consolidation, in individual accounts the venture should be recognised in accordance with IAS 28, i.e. at the lower of cost or net realisable value.

• Caroline Chaffer is an AIA Achieve e-tutor. The AIA Achieve team is producing a series of ‘A Quick Look at….’ articles and more can be found on the AIA website: www.aiaworldwide.com/a-quick-look-at.

PQ Magazine August 2016

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PQ CIMA case study

A SPARK OF I Clare Finch and the HTFT team look at the Management Integrated case

H

opefully you have booked your exam slot and are now ramping up for the SparkSpace case. I would say after the pressures of sitting the Management level OT papers (E2, F2 and P2) you may actually find you enjoy the preparation for case study. First step is to get very familiar with the pre-seen and with your ‘part’ in this experience. For three hours you will be the SparkSpace Financial Manager, reporting to Gerald Sim, the Senior Financial Manager.

The exam The case study exam is a computer based exam of three hours – there is no reading time added.

The exam aims to integrate and apply the knowledge tested in the objective test exams.

The exam is based on: • Pre-seen material which is already published on CIMAConnect.

• Additional unseen material given to you in the exam room.

The answers you give will be long form and typed into the exam system, this will consist of all forms of modern communication, including emails, reports and briefing notes as examples.

Some 39% of the MICS is based on knowledge of the F2 and P2 Learning outcomes plus the assumed knowledge brought forward from F1 and P1. So you need to make sure you bring technical knowledge to the MICS party Writing skills For those who have completed the F2, E2 and P2 papers under the 2015 OT style of paper this will be the first time you will get to display to CIMA your ability to ‘write’ long form answers at managerial standard. You will need to be able to combine the competencies from the CIMA framework with an ability to structure an answer with a ‘logical flow’. Practising answering long form questions based on SparkSpace is going to be key. If your tutor offers to mark homework take them up on the offer, as getting as much feedback as possible is very important.

Focus The most important skill on the day is not mentioned in the competency framework but basically is this: have you answered the tasks set with sufficient application to SparkSpace? Some calculations are included where they give context but the focus needs to be on the written parts of these questions.

You have a great job, overseeing the management accounting function for SparkSpace, including preparing the budget.

You need to be aware that P2 is the lead paper on MICS and therefore being prepared for technical questions on Advanced Management

16

Accounting is key. Note you also get (whoop whoop!) to “assist the Finance Director on special projects as and when required”. So you are expecting tasks from F2 (and often F1) and from E2 (and often E1) also.

SparkSpace You are going to get one of the five variants.

Each variant has four sections. You get 45 minutes to answer the task within the section.

The task will have more than one part and answering all parts of the task, before the system moves you on after 45 minutes, is key.

The elements of the task can be pulled from the P pillar, the F pillar and the E pillar. The variants are built around a major theme. Being very familiar with the SparkSpace pre-seen can help you to feel comfortable with the subject matter on the day, but you must answer the question as set on the day not ‘one you did earlier’! You need to be prepared for a ‘curved ball’ variant.

Often one variant is rogue and it would be impossible for anybody to have seen the angle coming. It is quite positive to get the rogue variant as the more difficult the variant the easier it can be for you as an individual to shine.

An easy paper may seem like a ‘gift’ but you have to outperform other candidates. It can be hard to believe but a tough paper is often easier to pass for a competent student who thinks on their feet, generate ideas and answers all parts of all tasks.

SparkInnovate The HTFT team agrees that Page 8 of the preseen offers a likely theme for one variant.

Students need to be very happy with the content of the pre-seen and how it links to the CIMA Syllabus. Read the extract below from the pre seen: SparkInnovate Large sums of money are being spent on research and development (R&D) projects in the IT industry are often long-term and speculative.

SparkSpace aims to maximise the value of its expenditure on R&D through its SparkInnovate initiative.

SparkInnovate is SparkSpace’s vehicle for funding research, primarily through Westland Central University. Through SparkInnovate, SparkSpace sponsors research studies by academic staff and also supervised postgraduate research projects. As part of this initiative, SparkSpace has donated a powerful data processing cluster to the university. SparkSpace benefits from its engagement with the developing research activities, many of which have led to commercially viable products. There have also been indirect outputs arising from observing how the science and engineering

academics at the university have configured the data processing cluster in order to process their research data. Such observations have yielded a number of improvements to the design of future machines and also the operating instructions given to clients.

SparkSpace also maintains close contact with the university by offering placements to undergraduate students. This offers SparkSpace insights into current developments in areas such as computer science and electronic engineering.

It also creates contacts with students whose career ambitions may well put them in a position to recommend SparkSpace to future employers.

SparkInnovate has delivered significant value from SparkSpace’s investment in R&D. SparkInnovate – P2 focus This part of the pre-seen ties easily and directly into the key P2 theme of performance management. SparkSpace need to have an effective way of measuring the performance of SparkInnovate. The unseen may well give information about the current performance measurement system and ask you to suggest an alternative. Students need to be aware that there is no ‘correct answer’ in this situation. Any reasonable approach would be acceptable.

PQ Magazine August 2016

CIMA case study PQ

INSPIRATION SparkInnovate – F2 Focus MICS students need to be aware that standards from the F1 syllabus are being examined on MICS as frequently as the F2 accounting standards. Therefore you need to be prepared to explain accounting for research and development costs from the F1 syllabus.

See below the extract from SparkSpaces notes to the accounts:

INTANGIBLE ASSETS Patents W$ million Cost as at 30 September 2014 Additions Cost as at 30 September 2015

950 370 1,320

Amortisation as at 30 September 2014

379

Charge for year

191

Amortisation as at 30 September 2015

570

Net book value at 30 September 2015

750

Net book value at 30 September 2014

571

Page 3 tells us that SparkSpace uses IFRS

What is key is that the SparkSpace board have information that allows them to understand how research activities are progressing. A balanced scorecard approach could be used, with a scorecard available for each major research project. Measures could be included relating to major milestones being achieved.

Students need to be aware that with regard to research it can be very difficult to establish whether value for money is being obtained.

Using multiple criteria for performance measurement can reduce the risk of dysfunctional behaviour.

Students will need to use the unseen on the day and assess what they are told is currently being used for performance management and consider if the claim that SparkInnovate has delivered significant value or whether other approaches could add more value.

Past variants have been known to tailor requirements on assumed knowledge from the operational papers. This extract for SparkSpace allows for further discussion on appropriate costing techniques. One recommendation would be to use Lifecycle costing given the heavy investment within Research and Development.

Lifecycle costing will ensure that all costs are included when making pricing decisions.

PQ Magazine August 2016

SparkSpace is based in Westland, where the currency is the W$ and financial statements are prepared in accordance with IFRS. Students need to be prepared therefore to explain the IAS 38 Intangible assets rules for accounting for research and development costs.

There are strict criteria that must be met for the recognition of a development assets. For the expense to be treated as an asset as per the notes to the accounts SparkSpace must have met the criteria: • Probable future economic benefits from the asset, whether through sale or internal cost savings.

• Intention to complete the intangible asset and use or sell it.

• Resources are available to complete the development and use or sell the intangible asset.

• There is the ability to use or sell the intangible asset.

• The project is technically feasible so the asset is available for use or sale.

• Expenses attributable to the intangible asset during its development can be measured.

Development expenditure should be amortised over its useful life as soon as commercial production begins Research costs must be expensed and therefore the ‘Investment’ in research cannot actually be treated as an asset. It is written off as incurred to the statement of profit or loss SparkInnovate – E2 Focus The E pillar is often triggered by a planned

change and the impact on staff. For example, SparkSpace could start to be concerned about the relationship with Westland Central University, competitors could also start working with the university and they could consider setting up an in-house research and development department.

This would trigger project management, change management and people issues.

Innovation appears to be significant to SparkSpace and they need to understand their Development Total approach to W$ million W$ million strategy formulation – 250 1,200 considering 180 550 developing a 430 1,750 resource-based approach (like 147 526 Apple) to invent, 106 297 research and have 253 823 unique, core competencies 177 927 within the 103 674 organisation.

If they decided to bring R&D in-house they would have to recruit a research and development director.

Students may have to advise on the selection and recruitment process both for the leadership of this new division and the staffing.

Negotiation skills can also be examined here as this decision could damage the close relationship they have with the university. This can lead to SparkSpace losing the access they currently have to new recruits and the pool of placement students.

Ethics could be brought in here, if there was any suggestion of SparkSpace trying to poach key staff from Westland Central University. The issue of staff retention can also be covered here.

Once the department is established can SparkSpace manage to retain marketable staff in a competitive environment Finally, with this case your E1 assumed knowledge on the HR cycle is looking very key.

SparkSpace are certainly in a growth period, with many posts to be filled. Staff retention and motivation issues seem to be key.

Conclusion Try to enjoy your case study experience. Throw yourself into the role, get familiar with the case by reading some of it each day, get your ‘idea generating’ head on, be practical.

Practice as many tasks as you can, keep applying to the pre-seen. Do not rote learn, but get ready to apply all you learnt in the underpinning exams. PQ • Clare Finch is Partner at HTFT Partnership.

The HTFT August MICS team includes Kate Williams, Jodie Lucas and Kirsty Blount 17

PQ CIMA F2

Playing the long game

In the first is a new series John Sharratt focuses on the long-term finance topic in F2 Advanced Financial Reporting

I

n this series of three articles I will explore in further detail some of the areas of CIMA F2 that have become an Achilles’ heel for students.

As I’m sure you know, 2016 is an Olympic year, with the games taking place in Rio. Just as the IAAF (the International Association of Athletics Federations) monitors the performance of its athletes, CIMA regularly monitors the performance of students on their CBEs to identify unusual trends and spot student weaknesses.

Like a triathlon, but with more mental than physical pain, the CIMA F2 syllabus is split into three main areas: % Sources of long-term finance Financial reporting Analysis of financial performance and position

15 60

25 15 –––––––– –––––––– 100 60

CIMA reports that the topic areas F2 students consistently love to hate are not from the hefty financial reporting section; not the dreaded consolidation with its sub-subs, PURP adjustments, mid-year acquisitions and disposals et al. Neither is it the IASs – you seem to know the difference between the accounting of available for sale and fair value through profit or loss financial instruments; between equity settled and cash settled share based payments. It isn’t the analysis topic, with its treacherous “apply all” requirements and finickity financial statement evaluations. Surprisingly, it is the smallest topic area in the exam that is consistently the Eddie the Eagle of F2 (Winter Olympics references count, too) – sources of long-term finance.

It is easy to see why students perform poorly on this topic area. I’d imagine a disproportionate amount of classroom and course time (and rightly so) is devoted to the more technical and wide ranging financial reporting syllabus content. As a result, students will spend much of their time focusing on these meaty parts to the detriment of the longterm sources of finance topic. Like a British 100m relay runner who focuses on training hard to run fast but neglects to learn how to actually pass on the baton, your chances of success are limited if you disregard this topic area.

18

Number of exam questions per exam 9 36

• John Sharratt is a CIMA content specialist with Kaplan Publishing

At least nine questions will be set on this topic. The actual content of the syllabus is fairly restricted and as a result you can predict with confidence a number of areas in which you would (almost) guarantee will appear in your exam – narrative questions on the markets and methods of raising finance, equity vs debt finance, characteristics of preference/ordinary shares; calculation questions on cost of debt, cost of equity, yield to maturity and WACC. This indicates that the sources of long-term finance topic, like a Russian athlete’s urine sample, is worth spending that extra bit of time studying.

In these articles I am going to initially focus on the origins of the calculation elements in the long-term sources of finance topic – cost of debt, cost of equity and yield to maturity.

This will be followed by two further article providing further details and exam question technique on cost of debt and yield to maturity.

Origins of the calculations Being discerning readers of PQ magazine and, as such, educated individuals I am sure you are aware that the Olympics originated with the ancient Greeks. The origins of the mysterious calculation of cost of debt (kd) and cost of equity (ke) is less widely known among the student fraternity. This may contribute to students struggling with the content of the calculations.

The formulas quoted in the formulae sheet and textbooks for kd and ke are derived from the calculation of the present value of cash flows received in perpetuity.

The receipt of a perpetuity may, allegedly, help the decision when it comes to deciding where to host large sporting events like the Olympics or the World Cup. Allegedly. Did I mention allegedly…?

To receive cash flows in perpetuity is to obtain a constant stream of identical cash flows forever. The present value of

perpetuity is given as: PV = Cashflow x 1 r e.g the present value (how much you would pay in today’s prices) for a 50c dividend in perpetuity with a discount rate of 10% = 0.5 x 1 0.1 = $5 You would expect to pay $5 today (the share price) for shares giving a 50c dividend in perpetuity.

Another way of expressing the perpetuity formula is: PV (today’s price) = cashflow r With a bit of jiggery pokery, the formula can be rearranged as: r = cashflow PV (price) The cost of debt and cost of equity formulas are just riffs based upon this formula, illustrated below.

Cost of debt kd (for irredeemable debt) = i(1-T) Po i = interest = cash flow from loans Po = Ex-interest market value = price of the loan This calculation will be investigated further in next month’s article.

Cost of equity ke = d Po d = dividend = cash flows from shares Po = Ex-dividend share price = price To enable us to understand these calculations that are commonplace with the F2 exam, understanding the origins of the calculations arise from perpetuity calculations is essential knowledge.

In the next article I will be outlining how you can become gold medallists in the different disciplines involved within the cost of debt calculation. PQ PQ Magazine August 2016

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PQ annual reports

HOW’S YOUR BODY Yes, it’s that time again folks – annual report time. Here is what we found for you…

AAT

2015 was a good year for the AAT as new student numbers and membership both grew. Total membership increased by 1.3% to 135,369, and the student intake rose by 4.7% to 27,605 (2014: 26,359).

The number of new training providers moved in the right direction too, and grew by 54 in the UK and eight globally.

In 2015, AAT ‘entered’ seven new markets, including Ireland and Singapore.

During the year the AAT’s Greenlight test also passed a significant milestone – over 2m tests have now been taken since 2012. The qualifications department was also busy launching seven new qualifications.

The finances show a surplus of £1.962m for this year on an income of just over £27m. This is despite a £341,000 investment loss, put down to the fall in global stock markets and turmoil from China.

Student and affiliate member fees brought in £7.819m. Full member subscription fees brought in an additional £6.599m.

The accounts reveal AAT CEO Mark Farrar was paid a total of £174,000 in pay and benefits. The ratio of the CEO’s emoluments to the lowest paid employee is 8.

Members: 135,369 (2014 – 133,600) Students: 74,498 (54,736) Staff: 235 (218) PQ SAYS: The Q&A session at the front of the report with the President and CEO was a nice touch. But we couldn’t find how many students AAT actual have.

There were no pass rates either 7/10 20

CIMA

1,834 international students, and signed six international agreements with partners.

The two big PQ stories also feature heavily: the ICAS/CIPFA integrated audit qualification, and its totally online exams (from December 2015).

The financial summary shows a financial loss of £980,000 from total income of £27.14m.

CIPFA spent £6.3m on educating and training student members and brought in £4.3m in income.

Sad to say, CIPFA still doesn’t tell us who earned what at the top level. We want those names and exact salaries, and wonder why members and students don’t want that too!

There has been a big change, however.

In 2014, someone at CIPFA business earned over £250,000.

Now the top paid employee at CIPFA business earns around £120,000.

The senior employee at CIPFA, we are guessing that is CEO Rob Whiteman, also got a pay rise. How much is anyone’s guess! All we know is in 2014 that ‘person’ was paid between £200,000 and £209,999. For 2015, the salary rose to between £210,000 to £219,999.

Finally, you will be pleased to know CIPFA’s Mansell Street HQ saved 32.1 trees, 56,700 litres of water and 2,457 tonnes of carbon dioxide.

Members: 13,960 (2014 – 13,560) Students: 4,092 (3,692) Staff: 274 (256) PQ SAYS: CIPFA has produced a lovely clean report, a real favourite. But its lack of transparency will always count against it 5/10

CIMA generated a financial deficit of £1.9m in 2015 on a turnover of £54.2m.

The annual report goes on to explain it ‘acquired’ (we don’t like that word) 30,023 new students during the year, which is a 15% reduction on 2014 and 19% below the annual target.

CIMA admits that the revised syllabus and new assessment platform has had a profound impact on CIMA’s business model. But it was able to report pass rates have dramatically increased from 46% to 62%. Now that is good news!

Strong competition from other professional bodies also isn’t helping, particularly in Africa and Asia. And you can add the strength of sterling to the pot, which makes everything more expensive!

During 2015, CIMA’s member population passed the 100,000-barrier and now stands at 102,942 (that’s a 3% increase year-on-year).

Outgoing President Myriam Madden homed in on gender diversity and highlights the 45:55 female to male student ratio.

Turning the financials we are really not liking the ‘acquire’, ‘deepen’, ‘retain’ and ‘fulfill’ tag lines, they really don’t work for us. The figures show exams and exemptions brought in £12.48m in 2015.

Unfortunately, we can’t see student sub income ads it is clubbed together with member fees (totally £34.68m).

Members: 102,942 (2014 – 99,943) Students: Total CGMA and student population 279,137 (271,353) Staff: 201 (200) PQ SAYS: This report is getting a bit messy.

The tie-up with AICPA means that everything gets integrated and less clear. We couldn’t tell you how many students CIMA has, and neither could CIMA! 6/10

ICAEW

CIPFA

Despite the challenging climate CIPFA was able to report that membership in 2015 grew for the first time in several years. Membership increased by 400 during the year to 13,960. Spookily, student numbers grew by the same amount (400) to 4,092.

The institute is certainly growing its international credentials too and now has

NOTE: The ACCA’s Annual Report is not due to be published until September – we will review it then

2015 saw the highest number of student admissions since 1993 at the ICAEW – and the 8,256 total is much higher than the 6,645 it targeted for.

And as a result of whole university departments registering with it in the UK and South East Asia the institute’s CFAB intake rocketed to 5,542.

The financials show the ICAEW generated £101.6m, generating an operating surplus of £300,000.

Membership stands at a healthy 145,746, which was lower than the target PQ Magazine August 2016

annual reports PQ

Y DOING? for 2015 because “of a higher than expected number of reported deaths�!

Increasing access and diversity is a key strategic objective and the ICAEW financially supported 35 students directly in their studies.

Internationally, ICAEW opened offices in Vietnam and Indonesia, and ran mock exams in Indonesia to enable students to get a taste for ICAEW training.

The institute was also proud of its first MOOC, produced with Leeds University on ‘The Importance of Money’. This might get another mention in the 2016 report as in February is walked away with a PQ Award!

Revenue from member fees and subs rose during the year by 4% to ÂŁ45.2m. Income

from qualifications increased by ÂŁ900,000, reflecting the record growth in ACA and CFAB intakes.

Learning and development costs, however, jumped by nearly ÂŁ2m to ÂŁ17.4m.

Members: 145,746 (2014 – 144,167) Students: 24,149 (22,001) Staff: 711 (685) PQ SAYS: This report really works for us.

It was easy to find what we needed and we loved the ICAEW’s five-year summary, which helps put everything into context.

Top of the class with 8.5/10

ICAS

The message from ICAS in 2015 is all about ‘building a professional community’. One of the key headlines for ICAS was the launch of its ‘Power of One’ business ethics initiative. The ‘virtual ICAS’ also became more of a reality in 2015 and its partnership with CIPFA was another ‘landmark’.

ICAS has been doing better with its under-35s and getting them ‘engaged’. A top initiative here is the ‘One Young CA’ competition. The institute is also proud of the fact that its Foundation is now helping 70 young people. That’s far more than what the ICAEW is doing!

The annual report stresses the number of students trained by ICAS remains ‘extremely healthy’. For 2015, the student intake was 992, up on the 903

You’ll never guess what I heard...

taken on in 2014. But what we don’t get is the total number of students in contracts or pass rates.

Membership subscriptions remain ICAS’s main source of income (48%). In 2015 this income was £7.5m.

Total group income rose by ÂŁ445,000 in 2015 and a profit before tax was ÂŁ170,000. Total income for the year was ÂŁ15.575m.

Members: 20,709 (2014 – 20,401) Students: ? (3,140) Staff: 142.2 (137.8) PQ SAYS: An OK read but nothing special. Not the best report, but not the PQ worst so 7/10

S TUDY. ACHIE V E . PROG RE SS .

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21

PQ AAT conference and results

RESULTS IN T

he AAT has now released the results for its assessments for the year ending 31 December 2015.

The papers with the lowest pass rates are the usual suspects – Introduction to Payroll Skills (L2) with 43.4% and Personal Tax (L4), which has a pass rate for the year of just 46%. The concern for the AAT will be that the PTAX pass rate is still going in the wrong direction. Six months Level/Assessment name L1 Access L1 Bookkeeping and Accounts L1 Computerised accounts L1 Computerised Payroll Administration ** L1 Spreadsheets software L2 Applied Business Communications and Personal Skills L2 Accounting skills to run your business *

Future proofing the profession

The AAT’s annual conference recently took place over two days in Birmingham. It is open to both affiliates and students, so make sure you don’t miss out next year!

L2 Basic costing L2 Control accounts, journals and the banking system L2 Computerised accounting L2 Computerised Payroll Skills L2 Developing Study Skills L2 Introduction to Payroll Systems L2 Processing bookkeeping transactions L2 Spreadsheet Software L2 Work effectively in accounting and finance L3 Accounts preparation L3 Computerised accounting* L3 Costs and revenues L3 Prepare final accounts for sole traders and partnerships L3 Indirect tax L3 Professional ethics L3 Spreadsheet software L4 Budgeting L4 Business tax L4 Credit control L4 Cash management L4 External auditing L4 Financial performance L4 Financial statements L4 Internal controls and accounting systems L4 Personal tax*

ago the pass rate was 47.4%, and in 2012 believe it or not the pass rate for this assessment was 78%.

AAT has revealed that the overall CBA success rate at Level 4 for the year was 63.2%. This rose to 74.3% for Level 3, and a much more healthy 90.1% and 92.4% at Level 2 and Level 1 respectively.

The next report for the year-ending 30 June 2016 will be available in PQ magazine in November. PQ

Short Code AA BKAC COPA

UK 95.0% 82.0% 92.7%

Int'l 93.5% n/a n/a

World 94.8% 82.0% 92.7%

CPYA

78.4%

n/a

78.4%

SPRS

92.2%

n/a

92.2%

ABPS

55.1%

n/a

55.1%

ASYB

63.2%

n/a

63.2%

BCST/BCCG

94.7%

89.8%

94.3%

CJBS

86.9%

80.8%

86.6%

CPAG CPSK DSSK

94.7% 77.1% 86.5%

75.6% n/a n/a

93.4% 77.1% 86.5%

IPSY

43.4%

n/a

43.4%

PBKT

89.9%

83.9%

89.5%

SPSO

82.6%

n/a

82.6%

WKAF

92.8%

80.5%

91.9%

ACPR/API COAG CSTR

60.8% 83.3% 80.8%

45.3% n/a 62.4%

59.2% 83.3% 78.7%

FSTP

84.2%

71.1%

82.7%

ITAX PETH SDST BDGT BTAX CRDC CSHM EXTA FPFM FSTM

81.4% 74.0% 82.9% 71.3% 63.2% 77.5% 58.4% 83.5% 60.0% 71.0%

62.7% 55.0% 57.8% 44.9% 48.1% 44.1% 20.3% 40.9% 30.8% 44.1%

79.2% 71.9% 80.5% 67.3% 61.3% 61.3% 52.7% 59.7% 56.1% 67.0%

ISYS

88.9%

77.1%

86.5%

PTAX/PTX

46.0%

26.7%*

46.0%

Less than 50 assessments (ASYB = 19, COAG = 18, PTAX Int = 15) ** Less than 100 assessments (CPYA = 97) 22

PQ Magazine August 2016

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PQ AAT exams

LET’S GET TECHNICAL

Gareth John explains the devices governments can use to help manage the economy

A

re you sitting comfortably? Then I’ll begin. Once upon a time there were two pretty princesses…

I was reading my daughters their bedtime story one night when they asked me about the different ways that the government can manage the performance of the economy. Given the relevance of our discussion to some AAT papers (not to mention a typical career in finance!) I thought I would share my thoughts with you.

The performance of the economy of a country is extremely important to everyone who lives there as it affects the availability of jobs, the wealth of the population, the prices of goods for sale, interest rates on loans and exchange rates, among many others aspects of day-to-day business – and life.

If an economy is not growing this is known as a recession and can lead to unemployment and a reduced level of wealth in the economy. If an economy is growing very quickly this can seem good in the short term, but often leads to a recession when the ‘bubble bursts’ (in the same way that a big night out can leave you feeling rather poorly the next day).

In essence, the government doesn’t want the growth of the economy to be too slow or too fast; just a sustainable level of modest growth. This is sometimes referred to as the ‘Goldilocks economy’ as it is ‘not too hot, and not too cold’.

The government takes an active role in trying to manage the performance of the economy and this can have an impact on the businesses that operate there. There are two principal forms of government economic policy; monetary policy and fiscal policy.

Monetary policy Monetary policy is the way that the government manages the economy by influencing the supply of money (hence ‘monetary’ policy). In general terms: • If the economy is not growing fast enough the government will want to increase the supply of money to improve levels of demand and speed the economy up.

• If the economy is growing too fast the government will want to reduce the supply of

24

money to slow the economy down in order to prevent it becoming a ‘bubble’.

There are different ways that the government can manage the supply of money in the economy: • Changing interest rates (the most common approach): in a recession, the Bank of England may reduce interest rates. This will reduce the cost to businesses and individuals of borrowing money and also makes it less attractive to save the money that they do have. Both of these things will increase spending and result in greater levels of demand for goods that will help to get the country out of the recession.

• Influencing bank lending: in a boom the government can sell gilts (forms of low-risk investment) to banks. This will reduce the amount of money that the banks have to lend, therefore reducing the money supply. In a recession they can buy back these gilts to give money back to the banks to allow them to lend more which will increase the money supply.

• Altering the availability of consumer credit: if the government encourages extension of additional credit to the public they are likely to spend more as a result which will help to improve demand levels in the economy.

• Creating more money: the government can create extra money (possibly by literally printing more banknotes) and pump this into the economy. The government does this by buying assets from commercial banks in exchange for the newly created money. This will give the banks more money in their accounts to lend out to businesses and individuals.

Quantitative easing In recent years many governments throughout the world have engaged in quantitative easing (QE) as a way of improving economic performance during the worldwide financial crash. QE is an unconventional form of monetary policy where the Bank of England creates new money electronically in order to buy investments like government debt back from investors such as banks.

With the extra money they now have the banks can lend the money to people in the economy. This should lead to an increase in the amount the people have to spend which will help to fuel growth of the economy during a recession.

One of the reasons that QE has been used in the past few years is that interest rates are already very low (virtually 0% in a lot of countries) which makes the normal monetary policy approach of reducing interest rates to speed up the economy a bit useless. As a result, governments have felt the need to pump money into their economy directly. As the level of economic activity increases this should lead to reduced levels of unemployment in the economy but can lead to higher levels of inflation. PQ • Gareth John is a tutor/director with First Intuition and helps to manage their AAT distance learning programme For the full article, which includes how the government uses fiscal policy, go to the AAT section of the Study Zone – pqmagazine.com

PQ Magazine August 2016

Enhance your reputation!

The CTA qualification is held in high regard by employers and their clients – and it contributes to career progression.

Find out more about how the CTA can help your career and to register as a student at: www.tax.org.uk/workingintax

PQ careers

Life after exams Karen Young gives guidance on what to consider after your exams and before your results

F

or many of you the final stage professional accountancy exams are behind you and you will be receiving your results in the coming months. Although it can feel like a time of professional limbo, the period between finishing exams and receiving results offers you a window of opportunity to look ahead to life after exams. As soon-to-bequalified accountants the career path ahead of you will require some planning and choices, so don’t forget to take the chance after your exams and before getting your results to clear your head and think about your professional future.

Use this time to explore how you can capitalise on your fully qualified status and think about the next steps in your career path.

In working out the right path, ask yourself – what do I enjoy? What industry or environment do I see myself working in? Researching organisations and job roles will help you to make these decisions. This is equally important whether applying for internal jobs or promotions,

or considering taking your CV to the external job market. Discussing options with a recruiter can enable you to explore the market opportunities and gain a better understanding of different job roles, working environments and sectors, but more importantly it will give you an external benchmark against which you can compare the choices available to you with your current employer.

The demand for newly qualified accountants continues to be strong across all industries and sectors and there are no current signs of this slowing. This is good news for those of you expecting strong exam results, as a great set of grades will open up new and exciting career avenues for you to explore.

Planning your career and filling in your skills gaps will give you a competitive advantage. So don’t rest on your laurels after your exams. Don’t overlook the value of expanding your softer skills; employers are always on the look-out for well-rounded applicants with a range of skills.

Think about any additional training you might need to develop your IT or communication skills, and use these upcoming weeks to work on a skill that you haven’t previously had a chance to dedicate time to.

We all have to deal with what life throws at us.

Sometimes things just don’t go as well as we

planned, exams included. Planning your career and developing your skills is as important if not more so if you worry your exam results may not be what you had hoped for. Planning your career development will give you a goal to focus on and will help motivate you during any retakes.

Expanding your skills will enhance gaps in your CV and help to boost your morale, which will increase your chances of success next time.

Good luck, wherever life after exams takes you.

For further information visit www.hays.co.uk/pq PQ • Karen Young, Director, Hays Accountancy and Finance

YOU’LL BE LIKED BUT NOT FOR YOUR STORIES. If you’re struggling with your current accountancy body exams, or are just tired of being treated like a number, there is an alternative. As an accountancy body committed to customer service, we can personally help you through every step in the process of becoming an accountant. We believe that if you want to be an accountant, you should - even if your tales of tax returns bore people.

Call 0191 493 0262 Visit aiaworldwide.com We believe you should count.

26

PQ Magazine August 2016

careers PQ

social media ROUND-UP CIMA exams can be tough, so can anyone help Mia Seymour? She told the CIMA Distance Learning Facebook page she needed tips to stay awake while studying (surely CIMA study material is more interesting than that?), and she wants recommendations on pens that don’t hurt your fingers when you write.

The Uni-ball Jetsream Ballpoint Pen – 0.7mm – Alpha Gel Grip Series – Black Body, came back the recommendation.

She is still waiting for alternatives to coffee!

We also loved Rachel Connolly’s revision plan – get your boyfriend to invite the lads around to watch the football and stay at work to get some proper study time in.

The CIMA Distance Learinng Facebook page is open to all studiers and you would be mad not to join!

Meanwhile, our news story that more needs to be done to improve gender diversity in NHS finance departments was one of the biggest retweeted stories this month. Why is it that just 26% of finance directors are female when 62% of the finance workforce are women? Many workers just don’t think the recruitment process is fair, explains the report from Future-Focused Finance.

PQ magazine’s ACCA exam feedback and new tougher exam rules also got a lot of people retweeting and adding new comments. Kerry Crook said in her exam hall “clear pencil cases were banned today. Reasons why?” Beth told us that bottles have been banned for a while but added: “Was told someone had printed a label with exam info on but might be a myth.”

And we couldn’t help but smile when Bro Azri said the P7 exam was “time pressured all the way to China”. We will be watching closely again come September.

In the meantime, watch out for our tweets and news on our website about the ACCA pass rates. They are due out on Monday 18 July. PQ magazine is particularly interested in the F5, P5 and P6 pass rates. F5 and P6 were deemed the problem papers in June. P5 sitters were convinced the examiner had gone on holiday and been replaced with someone nicer!

PQ Magazine August 2016

Life at Tata Motors Peter North, 35, has worked for five years as a Systems Accountant at Tata Motors European Technical Centre, based in Nuneaton. AAT qualified, he is now studying CIMA. He once played snooker against former world champion Shaun Murphy.

What time does your alarm clock go off on a working day? 5:30am.

What’s the first thing you do when you get to your desk?

Log on to my PC, make a drink.

What’s on your desk? Two monitors, laptop, paperwork.

What’s the best thing about where you work? Seeing innovative ideas and designs come to fruition.

Where’s your favourite place to go for lunch? Subway.

What (or who) can you see when you sit at your desk?

The new NAIC building being constructed, which will become TMETC’s new home shared with Jaguar Land Rover and Warwick Manufacturing Group.

Which websites are your favourites and why? BBC – very up-to-date news and sport.

Which websites do you use for work? HSBCNet, Google.

How many hours a week do you spend in meetings?

Around six to 10.

What time do you leave the office? Around 4pm.

How do you relax? Snooker, cricket, cinema.

What’s your favourite tipple?

A good single malt scotch whiskey.

How often do you take work home with you? Not very often – I like to concentrate on my young family. I have three children aged nine, four and two.

What is your favourite TV show? The Apprentice – I entered a few years back and got through to the first group interview stage.

Summer or winter? Summer.

Pub or club? Pub. Who is your hero? Muhammed Ali – an iconic figure who transformed the world and the way we look at cultural diversity.

If you had a time machine, where would you go? About three years into the future.

Without wanting to wish my life away, I would gladly skip by the exam stress!

If you hadn’t chosen accountancy, where might you be right now? My other career choice was graphic design.

No further action will be taken by CIMA.

accountants living in the East Midlands. See the next issue of NQ magazine for the full story.

In brief PQ admonished PQs need to be aware that as student members of a professional body their standard of work is under constant scrutiny. CIMA registered student Tracy Thomas recently agreed, by way of a consent order, to the imposition of a sanction of an admonishment over a complaint that she failed to retain appropriate information (timesheets, invoices and delivery notes) to support claims for payment from her firm’s clients.

North versus south Southern accountants enjoy a better standard of living that their counterparts in the north, according to a leading recruitment consultancy. That said, it also found that accountants in the South West have the best quality of life in England.

Bottom of the index ranking were

I’ll have the same If you have an important business lunch (do they still exist?) then you need to order the same food as the person you are trying to impress, say scientists. Apparently, people who eat the same foods are more likely to trust one another, smooth out problems and even make more lucrative deals.

The PQ Book Club: books you should read Great Answers To Tough Questions at Work By Michael Dodd (Capstone, £12.99) As a former foreign correspondent and political interviewer, Aussie Michael Dodd is used to asking the tough questions. In this book he helps the reader develop the skill of how to answer tough questions and turn difficult situations to your advantage (exactly what it says on the tin).

Fundamentally, this is a book about communication, and how to improve your all-round skills.

How many times have you stumbled through the answers to a series of searching questions? Or thought of a devastating riposte an hour after

you’ve finished the conversation? Well, digest the lessons from this book and those days will be behind you.

It is split into two main parts.

The first deals with tactics and strategies to tackle tough questions, and includes advice on harnessing the power of stories, adopting the correct tone of voice and how to deal with various personality types.

The second half helps readers apply this new-found wisdom to rise to the challenges the workplace brings, from the job interview to contract negotiations.

Observing lessons of how not to react while in the spotlight can also be illuminating, says the author. He cites the

example of former CEO of BP, Tony Hayward. He made an infamous gaffe after the Gulf of Mexico oil spillage in 2010. During the furore about what the company was doing to tackle the devastation he told one reporter that “I want my life back”. The reputational damage to both him and the oil giant was immense.

While your misplaced comments will almost certainly not cause such damage you can do yourself – and your company – many favours by reading this book and digesting the lessons within its pages.

PQ rating 5/5 This really should be your summer holiday reading 27

forging real partnerships Management Accountant

Group Finance Analyst

Leisure, Surrey

FMCG, West London

£32,000 to £35,000

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• Part Qualified CIMA/ACCA • Key member of the team, reporting to Senior Finance Manager • Responsible for monthly revenue recognition, reconciliation and commentary • Delivery of month end results in line with group timetable • Intercompany account reconciliation, and settlement • Produce and review balance sheet reconciliations highlighting potential risk • Delivery of consistent accounting policies and procedures with the ability and desire to improve processes • Experience of Hyperion Financial Management, Cognos and TM1 useful

• Part Qualified CIMA/ACCA/ACA • Ownership of the reporting and planning process for overhead budgets • Preparing forecasts, reporting and working capital balances for c30 cost centres • Reporting on variances and challenging forecast • Interaction with overseas country teams and integration of new acquisitions in conjunction with cost centre owners • Contribute to annual plan and quarter forecasts, supporting cost reduction initiatives • Significant interaction with senior management team offers excellent opportunity to make an impact and build a profile within the business

redefining financial recruitment T +44 (0)20 8408 9999 E info@walkerdendle.co.uk www.walkerdendle.co.uk

YOU’VE WORKED HARD NOW IT’S OUR TURN As a soon to be qualified accountant, all your hard work will have finally paid off – so what’s next?

Hays is a leading recruiter in accountancy and finance.

We’ll do the hard work to put you in touch with some of the UK’s top companies from a wide range of sectors.

We also have a number of expert consultants who can advise you on developing and showcasing your skills and experience to get you ahead in your finance career.

To speak to an expert consultant, or to find out about the range of opportunities we have available, email karen.young@hays.com or call 07834 260029.

Alternatively, you can visit us online.

hays.co.uk/pq

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USELESS A-LEVELS The i newspaper recently published a list of A-levels it thought were of little use to man, woman or beast. It named the five it had little time for, and on the list were leisure studies, world development, communication and culture, accounting and philosophy. What, asks PQ magazine, is wrong with an A-level that helps the entrepreneurs of tomorrow prepare and understand accounting concepts? We also like philosophy, where students can learn the importance of morality! There isn’t enough of that out there.

EGYPT’S LOST WORLD OF TAXES

The magnificent Sunken Cities: Egypt’s Lost Worlds exhibition at the British Museum reveals the treasurers from the lost cities of Thonis-Heracleion and Canopus. And tax is there in the form of a wonderful complete stela. It advertises a 380BC royal decree of the Egyptian pharaoh Nectanebo I and states the 10% of the taxes collected on all goods imported from the ‘Sea of the Greeks’ into Thonis-Heracleion and on all trade operations at Naukratis were to be donated to an Egyptian temple.

TAXING MORALS

Roger Daltrey, The Who’s 72-year-old lead singer, has very definite views on taxation. In a recent interview he said he wasn’t worried about rich people putting money in tax havens. “All this moral thing about tax is bullshit.

Go looking to pay more tax? Are you kidding? We are incredibly over-taxed already. I find it kind of ironic that with the offshore Panama thing, the only politician with questions to answer was Jeremy Corbyn. He put [his tax return] in late so he was fined a hundred quid, and he hadn’t declared a pension. Does that make him a crook? We are all so bloody self-righteous.”

I’M AN ACCOUNTANT TOO!

SPEND YOUR WAY TO SUCCESS PQ magazine wondered if it was with a pinch of irony that a recent copy of Economia (the mag for ICAEW members) printed a picture of the Bournemouth FC manager and chairman in its ‘Football Finance Healthier Than Ever’ story! This is the same Bournemouth who were fined £7.6m for breaching the fair play rules.

The Cherries posted a £38.3m loss for the 2014/15 season after spending £30.4m on players to help get promotion.

The fine was only revealed when the club accounts were registered with Companies House

’ WEV E

HMRC’s chief executive Jon Thompson recently appeared before the Public Accounts Committee where his many job titles were questioned by chair Meg Hillier. He explained that on top of his CEO title he was also a Permanent Secretary and the Principle Accounting Officer – Spending. Thompson was appearing to talk about the quality of services to personal taxpayers. Fortunately, the services have improved drastically. For April and May this year 90% of calls were actually answered, and the average wait time was six minutes. You don’t want to know how bad it was before!

BEWARE MIDGET ACCOUNTANTS

Family Guy is a pretty ‘out there’ cartoon series. So we weren’t surprised when Stewie Griffin (the baby) decided to tell an accountancy joke in one episode we just happened to be watching. Well, you can’t say we didn’t warn you. Here it is: Why aren’t there any midget accountants?

Because they always come up short…”

DO YOU REMEMBER WHEN…?

PQ magazine was recently flicking through some old issues when we came across a feature in the September 2006 issue looking at four decades of accountancy. For the class of the 1990s’ student we had none other than Rob Whiteman, now the CEO of CIPFA. He admitted that “we maintained the student ethos of the 1970s to consume a great deal of alcohol after lectures”. Good boy. The average house price in 1990 was £59,785 and a pint of beer cost £1.14.

GOT THE L OT

Your IFRS Pocket Guide

We have five IFRS ‘Pocket Guide to IFRS Standards: the global financial reporting language’ to giveaway, coutesy of the IFRS Foundation. The updated guide gives an overview of adoption of IFRS standards and the IFRS for SMEs standard in 143 countries around the world. This is a fantastic reference tool, and we promise you won’t be able to put it down!

To enter this great giveaway send your name and address (remember we have to send the guide to you) to graham@pqaccountant.com. Head up your email ‘IFRS Pocket Guide’

Colour yourself calmer We have three copies of Millie Marotta’s ‘Wild Savannah’, a colouring book adventure to help calm your nerves this summer. Her latest book is a collection of illustrations of all kinds of wild and wonderful creatures from our planet’s swaying grasslands. So, whether you enjoy colouring as a great way to beat stress or simply want to step back from your digital world then this is the giveaway for you.

Simply email your name and address to graham@pqaccountant.com – head up you email ‘Wild Savannah’ and we will do the rest.

Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries must be received by Friday 5 August. The main draw will take place on Monday 8 August 2016.

TO ENTER THESE GIVEAWAYS EMAIL GRAHAM@PQACCOUNTANT.COM 30

PQ Magazine August 2016

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