PQ magazine, September 2020 by PQ magazine

PQ magazine September 2020

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All the top tips you need for the ACCA upcoming exams as our experts tell it as it is

QUALITY OF AUDITS IS ‘UNACCEPTABLE’ The number of inspections may have been down because of Covid-19, but the number of audits requiring more than limited improvements remains unacceptable, says the Financial Reporting Council (FRC). It’s inspection work at the seven largest audit firms found 33% (29 out of 88) of their audits didn’t meet expected standards. Firms have made some improvements and FRC has observed good practices; for example, there was better group audit oversight and effective integration of specialists into the audit team at some firms. However, they are “still not consistently achieving the necessary level of audit quality”. The FRC is now calling on them all to “make further progress”. It said that improvements are needed in the same three audit areas: impairment of goodwill and intangibles; revenue and contracts; and provisions, including loan loss provisions. Nearly half (46%) of all ‘failings’ have been in these areas over the past three years. The worry for the FRC is that auditors are still not challenging, or standing up to, management in areas of complexity and forward-looking judgement. Other audit areas where it found faults in more than one firm this year include audit of inventory, group oversight, going concern and investment property valuations. The accountancy watchdog reiterated that it will take robust action for all reviews deemed to need improvements or significant improvements. To date, for the past three inspection cycles it has referred 28 audits across all firms inspected for consideration of possible enforcement action. The FRC’s David Rule said: “We are concerned that firms are still not consistently achieving the necessary level of audit quality. The tone from the top at the firms needs to support a culture of challenge and to back auditors making tough decisions.” ICAEW COO Vernon Soare said: “We are disappointed by the overall results, and support

efforts to drive up standards across the largest firms.” He stressed a robust professional scepticism is vital to delivering high-quality audits; however, recent events have reinforced the need for a broad focus on internal controls, fraud and viability that are critical to assessing whether a business is honestly run and has a future. He went on: “Audit committees also have an important role to play in challenging management, in addition to selecting auditors who will do the same, as the BEIS Select Committee has highlighted.” How the seven top accountancy firms faired on inspection: • Grant Thornton: nine inspections, with 44% (four) requiring improvement or significant improvements. That means five (56%) required no more than limited improvements. • KMPG: 18 inspections with 39% (seven) requiring improvement or significant

improvements. That means 11 (61%) required no more than limited improvements. • BDO: Eight inspections, with 37.5% (three) requiring improvement or significant improvements. That means five (62.5%) required no more than limited improvements. • PwC:17 inspections, with 35% (six) requiring improvement or significant improvements. That means 11 (65%) required no more than limited improvements. • EY: 15 inspections with 27% (four) requiring improvements or significant improvements. That means 11 (73%) required no more than limited improvements. • Deloitte: 17 inspections with 24% (four) requiring improvements or significant improvements. That means 13 (76%) required no more than limited improvements. • Mazars: five inspections with 20% (one) requiring improvement or significant improvement. That means four (80%) required no more than limited improvement.

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contents PQ

IN THIS ISSUE

September 2020 35CIMA spotlight Keeping a

News 04Sage survey A new type of profession is emerging, says survey from the software giant 05AAT changes Pricing policy to be revised after Ofsted steps in 06ACCA news #1 Association cancels exams across the world and publishes September exam schedule 08Black Lives Matter Deloitte launches Black Action Plan 09ACCA charity initiative Why you should run, walk and ride for the ACCA’s charity push 10ACCA news #2 Exam results delivered on time – but there are no pass rates 12Tech news Cyberattack targets universities and charities

sense of perspective will help you kickstart your CIMA studies, says Stephen Flatman

36Advanced tax When it comes to Current Year Basis opening year rules it pays to keep things simple

37Technological change Ken Garrett on how technological change is rapidly creating a new business landscape

38ACCA CBE SBR guru Tom Clendon offers some top advice on how to tackle a Strategic Professional CBE

39ACCA APM exam Geoff p34

40Personal development The

p17

Features, etc 14Have your say It’s about time we scrapped exam centres; AAT’s ‘blockbuster’ pricing

Cordwell guides you through the process of interpreting variances

changes; and sympathy for the ‘dress-down’ trainee 16Remote exams So what’s it like to sit an ACCA exam remotely? Oxford Learning Online joined the experiment… 17Profile We spoke to Devonne Burn, the new AAT Student of the Year, about her career, studies and life in general 18Exam advice Mocks really are important, so don’t neglect them 19Viewpoint Sole traders must not be left behind when it comes to helping businesses survive the pandemic, says ACCA’s Claire Bennison 20Back to basics Sunil Bhandari explains why a good knowledge of financial mathmatics is not optional if you want to get ahead

p40

22Financial statements Gareth John explains all you need to know about accrued and deferred income

more you develop as a person, the greater your chances of success – both in your career and your life

41Careers Life at Dumfries & Galloway Council; our Agony Aunt Karen Young tackles your career ‘issues’; and our Book Club Review

42Fun stuff – and our fantasic giveaways The columnists Robert Bruce Profession has

24ACCA exam tips We’ve got

FIVE PAGES of fantastic tips in this issue. We really are too good! 29Gender equality Why Women Count report shows FTSE 350 firms still have a lot of work to do when it comes to diversity 30AAT synoptic assessment The Premier Training team have some top advice on passing your Foundation Certificate Synoptic assessment 32An introduction to VAT It’s a complicated tax but an important one – so what do you really know about VAT? 34CIPFA spotlight Brendan McCarron explains why commercial skills are so important in a changing world

more explaining to do 6 Prem Sikka Professional bodies not fit to regulate the profession 8 Zoe Robinson Tax institute puts its trust in its students 10 Mike Day Digital adoption is the key to economic recovery 12

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To subscribe go to www.pqmagazine.com

PQ news

GRAHAM HAMBLY Our columnists rule!

One of the strengths of PQ magazine is our columnists. We perhaps don’t draw enough attention to Robert, Prem, Zoe, and Mike. With them you get a wealth of experience and expertise, not really seen anywhere else. One of our columnists, Prem, has even been made a lord! Lord Sikka, no less, writes for PQ magazine, and has been since the beginning. This month on page 8 he focuses on the role of professional bodies in antimoney laundering regulation, and asks where they were when certain Russians started to bring their money into the country! Then there Robert, a former editor of Accountancy Age and Times columnist. Our ‘voice of reason’ on page 6, he is calling on companies to develop a more expansive approach to company reporting. This month Zoe, one of the UK’s top tutors and a key innovator, talks about the CIOT letting its students sit open book remote exams with no remote invigilation (see page 10). Last, and by no means least, is Mike Day, director of Xero’s education sector. We brought him in when we decided PQ magazine needed to up our game on the tech side (page 12). I recently joined him at AATitude, First Intuition’s free online student festival, for the future of accounting and impact of technology lunch-time session. It really is a small world. In the September issue he is calling for tax relief on self-funded training to ensure the UK maintains its lead on digital technology. Happy reading. Graham Hambly is Editor and Publisher of PQ magazine and NQ magazine

A new kind of practice The growing demands from computer-literate clients mean a new kind of accounting profession is emerging, says a new survey from Sage. The fourth annual ‘The Practice of Now’ survey found more than half (51%) of respondents believe accountants joining the profession today need financial advisory skills, including cashflow and growth modelling. To provide these skillsets more accountancy firms are willing to recruit outside of the industry – 82% say they are open to recruiting candidates without an accounting background, such as project management or customer services. New talent has also become a vital source of innovation. Some 84% of accountants agree that prospective younger employees have progressive expectations,

attitudes and talent, which are forcing them to change and reflect in order to attract the best staff. The survey says accountants in practice are being forced to rapidly evolve their roles to become ‘change makers’, as digitalisation and growing client demands drive disruption and innovation across the industry. The results found that 82% of

CIMA ban on earplugs A new requirement has been added to CIMA’s online exam requirements – no earplugs are permitted during the exam. This is because “the invigilator may consider you are communicating with someone through them”. CIMA has also added advice about the use of a laptop and mouse. You can use a PC or a

laptop, including a Mac. You may also use a mouse and an additional keyboard. You are not, however, permitted to connect to an additional monitor. Students must check the system requirements and complete a system check before scheduling the exam. Sitters need

accountants’ clients are demanding more business advice and consultancy services. Nearly nine in 10 (87%) said they are expected to offer more flexibly and better services without an increase in rates. It all means accountants have had to invest more and faster to keep up with the market. You can see the full report at https://tinyurl.com/y24chboa to use the location and equipment that they intend taking the test on, and check the equipment reaches the minimum requirement. If the system test fails you should not schedule an exam until you can resolve the issue and pass the system test. If you have already scheduled you should cancel your exam (within the usual 48-hour cancellation period).

Tax havens to reveal ownership details Eight UK overseas territories say they will allow public access to their company ownership registers as part of a commitment to tackle illicit finance, by 2023. The eight are: Anguilla; Bermuda; Cayman Islands; the Falkland Islands; Montserrat; the Pitcairn Islands and St Helena; Ascension

Island and Tristan da Cunha; and the Turks and Caicos Islands. Gibraltar has already made the move (in March) to improve transparency, and the UK government says it is hopeful that the last remaining territory, the British Virgin Islands, will make a similar commitment soon.

consolidation – a key topic in all financial accountancy exams. To enter the draw just email your name and postal address to giveaways@pqmagazine.com. Remember, Tom is a previous PQ magazine Lecture of the Year, and teaches SBR with FMELearnOnline.

questions. So have you enjoyed the greater flexibility with working hours or can’t you wait to get back into the office? Maybe you have fallen in love with video meetings! Help GAAPweb create a real picture of what it has been like for accountants. Find the survey at https://bit.ly/WFHsurveyGW

The government already has arrangements in place with the overseas territories allowing UK law enforcement authorities access to information on the ownership of companies in their jurisdictions. This information improves the ability of law enforcers to detect money laundering and financial crime.

In brief Another top giveaway PQ magazine has teamed up with the ACCA SBR online lecturer Tom Clendon to give away five copies of the second edition of his book ‘A Student’s Guide to Group Accounts’, published by Kaplan. This colourful and welldesigned book has helped thousands of students really understand the principles of 4

Take homeworking survey GAAPweb are conducting a survey about the challenges, benefits and everything between, of working from home during the global pandemic. There are just 22

More Wirecard related arrests German prosecutors have arrested the former finance and accounting chiefs at Wirecard, along with the its boss Markus

Braun (again). Prosecutor Anne Leiding would only identify the two finance officials as ‘L and von E’. She believes that along with others in the company they agreed in 2015 to inflate Wirecard’s balance sheet by faking income. This in turn allowed the company to borrow nearly £3 billion from banks in Germany and Japan. How much of this money can be found, remains to be seen! The criminal investigation is centred on fraud, breach of trust, misrepresentation and market manipulation. PQ Magazine September 2020

news PQ

In brief Avado drops AAT tuition AAT has lost one of its top training providers, Avado. A winner of two recent AAT awards, including Best Use of E-learning, and a regular PQ magazine award winner, Avado has stopped offering accountancy training altogether. Those already signed up will be ‘looked after’, but no new joiners have been taken on since July. Avado stopped offering ACCA tuition after the December 2019 exam sitting. Students here, on apprenticeships and extended packages, were transferred to other training providers. Avado’s website now has just four academies, but none of them are for accountancy training – People, Marketing, Data and Technology. Get your voice heard ACCA is looking for university students to join their UK student advisory group. You could help shape and inform student-focused initiatives and help inspire future generations to join the world of accountancy. To join the group or find out more email ukbd@accaglobal.com by 25 August.

PQ Magazine September 2020

Changes to AAT pricing Big changes will be happening with the AQ2022 syllabus to keep AAT ‘current’, but one that was not anticipated was that it would no longer require students to pay an annual membership subscription! Instead, AAT will be moving to a new pricing model where students will register and purchase access to individual qualifications, for the lifetime of the qualification. The AAT stressed it will still offer and provide assistance to training providers and students in the form of support resources. These will be accessible via the AAT Lifelong Learning Portal.

PQ magazine understands that the change is being forced on AAT by Ofsted, who do not adhere to the current pricing model. AAT is now crunching the numbers to decide on the new pricing structure. The concern is it could have two pricing structures running in tandem, which could confuse some students, and also

mean one set of students benefits from lower prices. AQ2022 is being introduced in February 2022, but students can sit AQ2016 until February 2023. The new pricing model will be unveiled in April 2021. We understand AATs will pay an annual membership fee once they have qualified as new members.

It pays to go back to basics

maths that bit better. Sunil shows how to do financial mathematics calculations using ACCA official software, available on the ACCA practice platform TestReach, and use their spreadsheet. To watch Sunil in action just go to https://vimeo.com/446780185 You can read the accompanying article on page 20 of this issue. Also check out our Back to Basics series on our website – you’ll find it at www.pqmagazine.com.

Irrespective of the question style, understanding basic financial mathematics is essential for your exam success. PQ magazine has joined up with award-winning tutor Sunil Bandari to show you some of the key skills you need to master. He slants his 12-minute presentation to FM and AFM students doing CBE exams,

but it will be useful to any PQs wanting to understand financial

PQ news

ROBERT BRUCE The time for explaining has come

“Why not do more” has been the call to preparers of company accounts down the ages. It has always been a mystery why they don’t. The more companies can explain what they have done, the less likely they are to be hit by controversy later and the more investors, and regulators, will lap up the narrative. But the prevailing culture is still to stick to the minimum that the rules require or what the lawyers tell companies to hide behind. We are now in a period when the impact of the coronavirus makes uncertainty about even the future of a company, let alone the details, greater than at any time in history. There is a mass of help at hand. In late July the Financial Reporting Council, for example, issued an extensive document of advice that was packed with examples of best practice. But it also revealed examples of cautious, timid, and downright daft things that companies had already done. The mind boggles at some of it. Cash flow hedges were knocked on the head the day after balance sheet date. Interim reports, which you would hope had the best explanations, even if only to emphasise the uncertainty, were often short of any detail. In future, the FRC intends to ‘challenge’ firms that have not updated their going concern considerations. They give six broad areas where they will want detailed explanations. None are particularly unexpected. This is a time when bold efforts to explain will pay off. Stumbling along behind vague intentions just won’t cut it. Robert Bruce is an award-winning writer on accountancy for The Times

ACCA has made the decision (on 23 July 2020) to cancel September centre-based exams and to offer students the opportunity to take some of their exams by remote invigilation in the following locations: Armenia, Australia, Brazil, Ethiopia, Ghana, India, Kenya, Kuwait, Pakistan, South Africa, USA and Uganda. Currently, ACCA is planning for centre-based exams in all other countries, but because of Covid-19 it is obviously monitoring the situation closely. Only students who have entered for centre-based exams in these countries before the standard entry deadline will have the opportunity to take their exams remotely. The remote session September CBE 2020 timetable are listed below. Please note some exams will be available across both exam weeks, while some exam variants are not available at all.

Update on ACCA’s September exams Wed 9 Sept – (PM), (APM), (FAU) Thurs 10 Sept – (FR), (SBR) INT, IRL, UK Fri 11 Sept – (FM), (AFM), (LW) BWA, LSO, MYS, RUS, SGP, ZAF, ZWE

Week 1 Mon 7 Sept – (AA, (AAA) INT, IRL, UK, (FTX) LSO, UK Tues 8 Sept – (TX) UK, BWA, LSO, MWI, MYS, PKN, RUS, SGP, ZAF, ZWE, (ATX) UK, (SBL), (FFM)

Week 2 Mon 14 Sept – (AA) Tues 15 Sept – (TX) UK Wed 16 Sept – (PM) Thurs 17 September – (FR) Fri 18 Sept (FM) Note: DipIFR will not be available for students to take remotely in September. If you have booked DipIFR and your country exams are cancelled, you need to rebook in the December session.

Vale Financial Training becomes Oxford Learning Online Vale Financial Training, the wellrespected Oxford-based financial and accounting tuition specialist, have moved to a fully online service. As well as moving to an online platform, the company is rebranding as Oxford Learning Online, which it feels

better represents the new services it now offers to AAT and ACCA students. Liz Hulls Oxford Learning Online director, Liz Hulls, said: “Migrating to an online learning platform has been an exciting process for both our current

students and existing tutors. We’ve also been able to expand our team of experienced tutors with new recruits from further afield.” She stressed that the new online learning structure could see the start of many new course offerings. So, it’s a case of watch this space. For more details go to: https://oxfordlearningonline.co.uk

Summer holiday over for synoptics AAT synoptic windows might have finally opened again in early July (6th) after closing in March, but students were then hit with a three-week summer holiday! That meant another three weeks without any synoptics. So there were no AAT synoptic tests between 26 July and 16 August. The Advanced and

foundation synoptic windows reopened on 17 August, with the professional synoptic becoming available again from 24 August. For foundation sitters it will have been five months between assessment windows – they closed in mid-March and will only again be ‘made available’ in mid-August. That’s 22 weeks

between assessments. Students are being encouraged to sit timed mock exams, and get fellow lockdown students to mark their work to maximise their chances at the next sitting. AAT has also reminded PQs that the synoptic is a test of your commercial skills, so think of the synoptic as a real-life scenario.

The site features a collection of self-help articles on topics such as returning to work, socialising, and managing increased workloads, along with information on all CABA’s support services.

insolvencies in the three months to June. Individual voluntary arrangements (IVAs) jumped a massive 42% in the same period to 24,932. However, bankruptcies fell by 40% to 2,415, and debt relief orders also decreased (down 30% to 4,806). These figures are slightly lower than expected and there has been a significant fall in company insolvencies because of Covid-19 state support. • The figures show in the 12 months ending Q2 2020, one in 387 adults became insolvent.

In brief Breaking up is hard to do… Listen to the FRC’s podcast on the operational separation of the Big 4. In the latest episode Claire Lindridge, the FRC’s Audit Firm Monitoring and Supervision Director, discusses the recent announced principles for operational separation with Kate O’Neill, the FRC’s Director of Stakeholder Engagement and Corporate Affairs. In the nineminute podcast they discuss the reason for the operational separation of the Big 4, how a 6

separate Audit Board will help to improve audit quality, and what it may all mean to challenger firms. Download the podcast at https://tinyurl.com/yx9gcknw Keeping yourself well As lockdown eases and new challenges emerge CABA, the charity for ICAEW students and members, has launched a new website – ‘Keeping Yourself Well’ (https://cabamywellbeing.org.uk).

Personal insolvencies rising Individual insolvencies jumped 12% during Q2 in England and Wales, according to the latest stats from the government’s Insolvency Service. The data shows there were 32,153 individual

graham talks to Kaplan brief fell off

PQ Magazine September 2020

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PQ news

PREM SIKKA Professional bodies not fit to be regulators

The UK’s Intelligence and Security Committee’s report on the expansion of Russian influence and its threat to national security is an interesting one. The key route is (often dirty) money invested in property and business, which requires knowledgeable intermediaries. The Committee said “lawyers, accountants, estate agents and PR professionals have played a role, wittingly or unwittingly, in the extension of Russian influence… often linked to promoting the nefarious interests of the Russian state”. The UK has 25 anti-money laundering regulators, including professional accountancy bodies, but they are ineffective. An HM Treasury/ Home Office report even stated that “some of those accountants involved in money laundering cases are assessed to be complicit or wilfully blind to money laundering risks”. Professional bodies are more interested in appeasing rather than regulating their members. A report by the Office for Professional Body AntiMoney Laundering Supervision, created to co-ordinate the regulatory activities of professional bodies, concluded: “The accountancy sector and many smaller professional bodies focus more on representing their members rather than robustly supervising standards… We were told, particularly in the accountancy sector, that professional bodies believed their members would leave if they took robust enforcement action.” There you have it. Professional bodies have no independence from members and are unfit to regulate. Prem Sikka is Professor of Accounting at the University of Sheffield

Deloitte unveils Black Action Plan As a direct response to the #BlackLivesMatter movement Deloitte has launched a Black Action Plan. Deloitte is now promising five key commitments: • “We will provide equal opportunities.” By reviewing all its employee life cycle processes, it will try to ensure any bias is removed. It promises to be transparent and regularly report on the outcomes based on data. • “We will focus on developing people to succeed and thrive.” It will introduce a firm-wide leadership development programme and mentoring opportunities to support and sponsor BAME colleagues. To help deal with ethnicity and race issues the well-being support and employee assistance programme will be enhanced.

PQ JOB OF THE MONTH PQ ASSISTANT MANAGEMENT ACCOUNTANT A successful business in north Manchester is looking to recruit a part qualified assistant management accountant. They are looking for an experienced and up-

• “We will drive and evolve our culture and behaviours.” There will be a mandatory training programme, and a Black Allies programme will be launched in the firm.

• “We will leverage the Deloitte brand and platform.” The firm will develop a relationship with a Black Charity and expand its portfolio of Black-owned social enterprises. • “We will measure and report on targets and outcomes.” Deloitte is committed to 12% of ethnic minority and 3% of black partners by 2025. Holding leaders to account for the targets it will also commit to targets across other grades to create the future pipeline. Deputy CEO Dimple Agarwal said: “We have listened, learned and started an important journey with people across the firm and with our black colleagues.” She added: “We are deeply committed to this action plan and the wider commitment by the firm that we can, and will, make a change.”

and-coming part qualified with a go-getting attitude, a positive mindset and a passion for teamwork. Reporting into the FD and assisting the management accountant, you will complete a range of duties covering transactional and month-end duties. There will be huge variety in the role and exposure to new duties to aid development.

The company is looking for a CIMA/ACCA/ACA studier, and experience of using Sage 50 is beneficial. Intermediate excel skills – Pivot tables and Vllokups essential. Salary will be between £25,000 to £28,000 a year, plus benefits. Closing date for applications is 4 September. For more information go to: https://tinyurl.com/y47p2ecg

Dimple Agarwal

IASB defers effective date of IAS 1 amendments The International Accounting Standards Board has issued an amendment to defer by one year the effective date of Classification of Liabilities as Current or Noncurrent, which amends IAS 1 Presentation of Financial Statements. Classification of Liabilities as Current or Non-current was issued

in January 2020, effective for annual reporting periods beginning on or after 1 January 2022. However, in response to the covid19 pandemic, the IASB has deferred the effective date by one year to provide companies with more time to implement any classification changes resulting from those amendments.

Classification of Liabilities as Current or Non-current is now effective for annual reporting periods beginning on or after 1 January 2023. The IASB did not make any changes to Classification of Liabilities as Current or Non-current other than the deferral of the effective date.

tax havens and favourable government tax regimes means the cruise industry has seen extremely low rates of tax in recent years. The concern is that there are no tax conditions attached to the Bank of England loans. For more go to https://tinyurl.com/y5tqhbcc/

which said Ireland had given the tech giant an unfair tax break. The court annulled the earlier decision due to a lack of evidence to show Apple had broken EU competition rules. The Irish government has always claimed that Apple did not receive any special treatment.

PapApple wins Ireland appeal Apple will not have to pay Ireland £11.6 billion in back taxes after it won its appeal in the European Union’s General Court. This overturns the 2016 ruling

OTS to carry out CGT review The Chancellor has asked the Office of Tax Simplification to carry out a review of Capital Gains Tax for individuals and smaller firms. As well as looking at opportunities

to simplify administration and the impact of technical issues, the review will explore areas where the present rules can distort behaviour or do not meet their policy intent, to help ensure the system is for purpose. The OTS now wants to hear directly from individuals and businesses, as well as professional advisers and representative bodies, about which aspects of CGT are complex and hard to get right. The OTS has published a survey and call for evidence: https://www. smartsurvey.co.uk/s/3HRSVY/

Taxwatch Cruising for a bailout The Bank of England has provided £325 million in lowinterest CCFF loans to cruise ship companies, despite the US government excluding the industry from its main financial assistant programme due to its links to offshore havens, says TaxWatch, the independent watchdog. Loans have been awarded to Royal Caribbean, the parent company of which is in Liberia, and Carnival, which is dual listed in Panama. TaxWatch explains that the use of 8

PQ Magazine September 2020

news PQ

In brief No exams at CIPFA venues CIPFA venues will remain closed for the September 2020 exam sessions. Students will, of course, be able to take exams at home or can choose a private setting other than their homes, but no exams will be offered at CIPFA venues. The institute has reminded students they have access to a Mental Health First Aider, who is aware of the pressures that studying brings and how the Covid-19 situation may be affecting them. Arise Lord Sikka… It is not many magazines can boast that their columnist has been made a lord! Well, we can at PQ magazine. Columnist and friend (for 40 years) Prem Sikka is among those on the latest list of those approved by the prime minister to take up the ermine. He still needs the Queen’s approval, but come September Lord Sikka will be making his inaugural speech in the House of Lords (we will let you know what he says). You can read his regular column on the page opposite.

PQ Magazine September 2020

ACCA has set up its first-ever walk/run/ride global challenge for members and students. The aim was to create something positive, that joins together ACCA’s global community, and which becomes a force for public good. Connecting its 700,000-plus members from every corner of the world, ACCA wants you to collectively walk, run and ride enough miles to reach around the world – or even go beyond! It is all in a good cause too – for the WHO-led Covid-19 Solidarity Response Fund. The first step is to donate at least

Walk, run and ride for ACCA challenge $10 to the fund. You then need to download the Strava App from the Apple store or Google Play store (create an account, if you don’t have one). Search for the

‘ACCA Global Run’ club and request to join. You will need to complete ACCA’s Google Form and provide details of your WHO donation and Strava account name. If you want to know more go to https:// tinyurl.com/yxzlb8e8

Covid-19 and a review of financial reporting Interim reports need to have more extensive disclosure of how companies have been affected by Covid-19, says the latest thematic review of company reporting by the Financial Reporting Council. That said, the FRC felt that companies were providing sufficient information to enable a user to understand the impact of the pandemic had on their performance, position and future prospects. Interestingly, FRC said in the

Coronavirus

CRISIS current climate it would encourage companies to consider the need for disclosures not explicitly prescribed by IFRS to enable users of accounts to understand the impact of events and conditions on a company’s position and financial

performance, as required by paragraph 31 of IAS 1 ‘Presentation of Financial Statements.’ Among the things FRC reminded firms that they need to do were: • Explain the significant judgements and estimates made in preparing their accounts. • Describe any significant judgements made in determining whether there is a material uncertainty about their ability to continue as a going concern. See https://tinyurl.com/yy3v7uau

PQ news

ZOE ROBINSON Trust me, I’m a tax student

If tax isn’t your area of specialism, you may not have come across the Chartered Institute of Taxation (CIOT). Their qualifications are specialised, highly respected and recognised as being difficult to pass. In response to the Covid-19 pandemic, CIOT acted decisively, being one of first to confirm a remote invigilation approach for an additional June/July exam sitting, a move that has now been seen from a number of other professional bodies. After reviewing the experience from different stakeholders’ perspectives, they have again blazed a trail, announcing an unprecedented approach for their next exam sitting in November. The proposal is that students will sit the exam remotely using essentially a word processing package to type and securely submit answers. But here is the interesting part – the November 2020 exams will be open book and non-invigilated; in effect, no one will be watching! Instead, you will be trusted, bound by the CIOT ethical guidelines. These require that you behave in the appropriate manner, act with integrity, receive no external assistance and sit the exam in a room alone. There will be checks and balances; the software will prevent students from accessing their hard drive, apps or the internet, but some may feel this path is too trusting. However, there is a nice symmetry to this approach; yes, it’s idealistic, but what better way to teach trust than by giving it? The million-dollar question is, if no one was watching would you cheat? Zoe Robinson is Learning and Programmes Director at Kaplan Financial

ACCA results delived on time – but there are no pass rates Despite the turbulence and continual uncertainty over the global pandemic, ACCA issued exam results, as promised, on 1 August for those who sat the summer July exams. In all, some 1,170 students are now new affiliates. The ACCA team has accelerated the introduction of remote invigilation and is working hard to ensure as many PQs as possible can sit this September.

Women count When the financial year closed there were more FTSE 100 CEOs named ‘Peter’ than women leaders in these roles. This, say the cofounders of The Pipeline, is simply ‘scandalous’. Margaret McDonagh and Lorna

ACCA introduced it in a targeted way in June for the on-demand exams, and in July some students were able to sit the Applied Skills and two of the strategic professional exams. He said: “Remote invigilation has worked as a trusted contingency measure. So far, in excess of 2,000 students have taken on-demand exams, with the number growing daily, and 1,648 students have sat exams remotely in the July session. In all, students from 73 countries have been able to make use of this method of delivery.”

Fitzsimons point out that UK-listed companies are also much more profitable when women make up more than one in three executive roles. New research published in The Pipeline’s ‘Women Count 2020’ report shows where at least onethird of the bosses are female the profit margin of listed firms is a

whopping 10 times that of those without. • Check out page 29 for the full story.

AAT awards: meet all the winners AAT has unveiled its lockdown Training Provider award winners. Student of the Year goes to Devonne Burn (pictured), from New College Durham. Apprentice of the year is Kaplan’s Zak Barwell. Large training provider is Abingdon and Witney College, and medium trainer was Training 2000. • Read Devonne’s story, page 17.

KPMG cuts numbers KPMG looks set to cut around 200 jobs and slash pension contributions in a bid to reduce costs. Sky News says that partners and affected employees were told the news in a briefing by UK chairman Bill Michael. Some 100 jobs will go from the consulting business, which employs 3,000 people. A similar number are expected to go from the internal business division. Sky News also reported that KPMG is launching a consultation on reducing pension contributions to 4.5% of salary. ‘Presenteeism is dead’ Presenteeism, the fear of leaving your desk 10

ACCA’s executive director, strategy and development, Alan Hatfield, explained: “For our centre-based exam sittings, Covid-19 presented us with hard but necessary choices to protect the health and safety of our future members and staff.” He said that ACCA has decided not to publish global pass rates, as just a quarter of the normal volume of students sat exams, and there was not a normal distribution globally. Turning to remote invigilation’ Hatfield (pictured) pointed out that

2020 TP AWARD WINNERS • Devonne Burn, Student of the Year • Zak Barwell, Apprentice of the Year • Nick Craggs, Tutor of the Year • Abingdon & Witney College, Large Provider of the Year • Training 2000, Medium Training Provider of the Year • The King John School, Small Provider of the Year • First Intuition, Distance Learning Provider of the Year • The Apprentice Academy, Apprentice Training Provider of the Year

could be over, says PwC chief Kevin Ellis. He believes that the shift to working from home, caused by the global pandemic, has “bashed away presenteeism for ever”. Ellis, who admitted in a recent interview he had never worked from home before, is now encouraging his staff to return to the firm’s offices on a voluntary basis. In early August some 5,000 (out of 22,000) spent time in the office. Ellis is hoping this will rise to 11,000 by the end of September. Mitie investigation closed The accounting watchdog has closed its investigation into Mitie Group’s accounts, which was launched following the announcement of profit warnings by the outsourcing company.

The FRC said that after a detailed review of the evidence, the Executive Counsel decided that “the evidential test for bringing enforcement action is not met”. That said, the investigation into Deloitte’s audit of Mitie’s Group’s financial statements for the years ended 31 March 2015 and 2016 remains ongoing. Recovery ‘slow and gradual’ The UK’s CFOs anticipate a slow and gradual economic recovery, as Covid-19 weighs on risk appetite, according to Deloitte’s latest CFO survey. Almost half of CFOs surveyed (49%) do not expect demand for their own businesses to recover to pre-pandemic levels until after Q2 2021. Just 8% are planning for sales to get back to normal before the end of this year. PQ Magazine September 2020

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PQ tech news

MIKE DAY Digital adoption is key to our recovery

A new report from the Entrepreneurs Network argues that small firms should make better use of digital technologies to tackle the sluggish productivity that characterised the pre-Covid economy and bounce back faster post lockdown. Although the UK is a world-leader in innovation, best practices are not spreading to all small and medium sized firms. Closing the digital gap and lifting productivity for SMEs quantifies the £16.6bn cost to the UK economy of this digital gap and shows what closing that gap would mean in terms of increased productivity. If the UK’s 1.1m micro businesses doubled their uptake of key digital technologies, it would lead to a £4,050 average productivity boost for the 4.09m workers employed by micro businesses, restoring four-fifths of lost productivity growth since the financial crisis, enabling businesses to bounce back faster post-lockdown. On a positive note, the UK outperforms the EU average on most measures of business digitisation. For instance, nearly a third of UK firms (30%) use cloud solutions (versus the EU average of 18%), but we lag behind Sweden, Netherlands and Finland in digital adoption. One recommendation is to allow tax relief for self-funded training. This would make self-funded training cheaper and bring the UK’s tax-code in line with other OECD countries. It could be limited to pre-approved digital training schemes to ensure that the goal of increasing business productivity is prioritised. Mike Day, Director, UK Education Sector, Xero

Massive cyberattack on universities and charities The personal information of more than half a million people at universities and charities across the UK may have been stolen by cybercriminals. The universities of Leeds, Reading, York and Oxford Brookes, as well as charities such as Young Minds, have now sent out warnings that their details were accessed in an attack in May. The company targeted was Blackbaud, a US-based software company, that provides services to

universities and charities around the world. It was a ransomware attack, and Blackbaud’s said its security team prevented the encryption of all its files, but it paid a ransom fee in order to ensure the copy of the

data stolen was destroyed. Despite the attack taking place in May, most UK universities were only informed of the problem in mid-July. The University of York has now contacted 181,000 students, staff and alumni, to explain their addresses, phone numbers, date of birth, professions, and student number could all have been stolen. The Information Commissioner’s Office is now on the case.

NatWest is developing behavioural biometrics, which could replace banking passwords. Next year, an additional form of authentication will be required for some transactions when Strong Consumer Authentication (SCA) comes into force. This is part of the PSD2 regulation and is an extra layer of security designed to prevent payment fraud and check that it is the cardholder making the payment. Behavioural biometrics works by analysing the unique ways a customer interacts with their device when making an online purchase. The technology uses this information to confirm who is

Behaviour biometrics making the purchase and does not access or share any private data held on the device. Working in the background of a transaction, the technology is able to deliver a seamless experience for customers, while ensuring a high level of security. The development with Visa, says NatWest, represents a major breakthrough in the application of biometric technology, and the bank will be the first to test the technology specifically for the purpose of SCA compliance.

Fitness giant Garmin back up and running Did personal fitness giant Garmin pay hackers £8 million to get its services up and running again? That is the big question being asked by cybersecurity experts. Garmin was forced to close its call centres, websites,

mobile app and online services after a ransomware attack; however, a week later many services were back up and running. To regain access Garmin needed to have the decryption toll to get its file back. Experts say

there is only one way to do that – pay the hackers! It is believed that the attack used ‘Wasted Locker’, a malicious software that disguises itself as a software update alert. The owners of this particular malware are the notorious Russian-based group Evil Corp.

Tech briefs PS5 production push Sony has said it will double PS5 production to meet the expected demand due to the pandemic. The company is now aiming to produce 10 million units ahead of its launch this winter. According to Bloomberg, Sony began mass production of the PS5 in June and expects to be able to manufacture 5 million complete units every three months. Even football under attack One Premier League football 12

club was close to losing £1m to hackers during a transfer deal, the National Cyber Security Centre (NCSC) has revealed. A new report explained that the email address of a Premier League club’s MD was hacked during a transfer negotiation, leading to an attempt to steal the £1m. It was only the intervention of the unnamed club’s bank that stopped the theft. In another incident an English Football League club suffered a significant ransomware attack that crippled its corporate and security

systems, blocking turnstiles and CCTV, which almost led to the postponement of a game. Uber to expand in the UK Uber has agreed to buy Autocab, its biggest rival in the UK, which operates a ride-booking app for independent minicab companies. Uber currently operates in 40 towns and cities, and the deal means it can access more than 75,000 vehicles in areas it does not operate through Autocab’s platform. Once

completed the deal will mean Uber will be ‘available’ in 170 towns. Uber said that Autocab would remain independent and have its own board of directors. Sage still growing Sage has reported a ‘resilient performance’ in the third quarter, and is predicting revenue growth for the full year of between 7% and 8%. Sage said it expected processing revenues and those from SSRS software to continue to fall. PQ Magazine September 2020

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Pick HTFT for AAT Starting September, we have live courses for AAT Level 3 and AAT Level 4. HTFT live: pre-recorded syllabus videos that lead into scheduled live online interactive Masterclasses (with expert tutors), all designed to support your mastering of knowledge – accompanied with computer based tests and mock exams For more information visit www.htftpartnership.co.uk/courses/aat/

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Study CIMA, choose HTFT Studying CIMA? Our HTFT live, HTFT on-demand and HTFT play resources are all here to help you prepare for, and pass, your exam. HTFT live: join our expert tutors live online for interactive Masterclasses, designed to support your application of syllabus knowledge. HTFT on-demand: drive your learning, with full flexible resources that you control HTFT play: Boxsets of topic recording and Proficiency exam-style practice assessments For more information visit: www.htftpartnership.co.uk/courses/cima CIMA F1 live starts 2nd September, CIMA F2 live starts 16th September and CIMA F3 live starts 29th September

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PQ email graham@pqmagazine.com

HAVE YOUR SAY Scrap exam centres I was shocked to read that CIMA believes its students should sit their case study assessments at a centre. Surely their remote invigilated exams should be ‘fit for purpose’ at home too. If they aren’t then there is a problem! There seems to be two very distinct camps developing. I read lots of positive stuff about how home exams take away the stress, and puts an end to lots of travelling, which is never good, especially in this hot weather. Other people like to take the test at a centre where they can guarantee quiet and connectivity. I have heard some students say they just couldn’t get in the right

frame of mind sitting at home. However, it seems to me that CIMA is asking people to go to centres because there have been some issues already with how the

case studies work online. The other big issue I have with centres is the whole pandemic thing. Having to wear a facemask isn’t something I think is conducive to taking an exam. On its website CIMA says that candidates in the UK and Australia are strongly recommended to wear a face mask or face covering in the test centre and while you take the test to ‘protect yourself and others’. That said, you are still able to take your exam if you do not have one. So you don’t actually have to wear one – or do you? I find it all so confusing, in what seems to be an increasingly confused world. Name and email address supplied

Our star letter writer wins a fantastic ‘I lovePQ’ mug! The price is wrong I was listening in on an AAT Facebook talk recently when the speaker revealed what he called a ‘bombshell’ – that Ofsted were forcing AAT to change its pricing structure. He said that when AQ2022 is introduced next February the annual subscription fee was being dropped, and we would have to pay per qualification. But how will any transitional period work, and what happens if you are part way through a qualification? How will the AAT be able to do that fairly? And what happens when we finally qualify? Will we still have to pay a joining fee and annual subscription for full membership? It does seem strange that Ofsted can insist on all this. My worry is that AAT will use the situation to put up prices. A concerned AAT, by email

Sorted, thanks to pqjobs.co.uk

Letter of sympathy Am I the only reader who felt a bit of sympathy for the ‘dress-down trainee’ who lost her case against

unfair dismissal (August, page 6)? Calling someone the ‘bald partner’ and helping yourself to large amounts of food at a work lunch seem quite normal to me! Wearing jeans and a jumper to work also don’t seem to be the crime of the century. The big

problem for me in all this is that she wasn’t well, and was off sick with depression and stress. I know the tribunal found in favour of the firm, but I hope this obviously very bright women is keeping safe and well in these troubled times. Joanne Short, by email

social media ROUND-UP So how did the ACCA July remote invigilated pilot exams go? “I want to do remote every time, it worked amazing for me. Saves me the stress of driving 60 miles there before the exam and I’m more comfortable using the PC I use every day,” said one sitter. Lots of PQs agreed and another summed it up best: “Me to, the only downside was not having paper to scribble on.” But some PQs were worried that the September exams could be cancelled: “I am worried now that I’ve got my September exams booked at a centre and they end up being cancelled and then I can’t get a remote.” Others were praying there isn’t a second Covid-19 wave before the exams. “I am hoping we can do centre exams, I’m find it really difficult to do at home to be honest. I am not sure I would be in the exam frame of mind.” Another PQ stressed: “I was finding it difficult enough to get my head around a CBE and driving to the centre instead of using the Tube. I can probably find a quiet place to do the exam, but I am a little worried about my equipment at home.” Check out page 16 for more on this subject. On a lighter note, we tweeted that it’s time for tea and biscuits! Brits in lockdown splashed out an extra £24m on tea and coffee, and £19m more on biscuits in the last three months.

Our favourite picture came from The Tab, highlighting the number of hours university students are spending studying at home each month. Top of the list was Cambridge with 59 hours, closely followed by York on 56.4 hours. Bottom were Belfast (27.7 hours) and Newcastle (33.6 hours).

PQ Magazine PO Box 75983, London E11 9GS | Phone: 07765 386489 | Email: graham@pqmagazine.com Website: www.pqmagazine.com | Editor/publisher: Graham Hambly graham@pqmagazine.com | Associate editor: Adam Riches | Art editor: Tim Parker | Contributors: Robert Bruce, Prem Sikka, Zoe Robinson, Mike Day, Tony Kelly, Phil Gammon, Edward Netherton | Subscriptions: subscriptions@pqmagazine.com | Origination services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email admin@pqmagazine.com

Published by PQ Publishing Ltd © PQ Publishing 2020

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PQ remote exams

No place like home So what’s it like to sit an ACCA exam away from the exam hall? Liz Hulls has the answer round 20 of our students bravely volunteered to be part of the ACCA pilot scheme for remotely invigilated exams. A few weeks before the exam they were asked to log into the exam system and run a test to check their webcam, microphone and operating system. Workspaces were frantically tidied for the required room photos. On the day of the exam, students were asked to log in 30 minutes before their allotted start time and re-run the system test. They accessed the exams through the ACCA portal, while being watched remotely via webcam after checking IDs and a full 360 degree view of the room. During the exam trips to the toilet were strictly banned, which sadly caused one of our students to have to abandon his four-hour exam halfway through. Scrap paper was not allowed but “using the scratch pad instead, wasn’t as bad as I had first thought”, claimed an FM student. Despite initial worries about not being able to use physical calculators these were permitted, as was water in a clear glass or bottle. The feedback was generally very positive.

Students found the experience much less stressful than sitting the exam at a centre. The absence of travel was persistently noted as a bonus, saving on time, stress and money. One student felt much less nervous – “it felt more like a mock exam and I forgot I was being watched at times”. Another student agreed that “it was easier to keep calm being

at home”. However, another student felt that he wasn’t in “exam mode” by not being at a centre. One student described feeling more nervous, she worried about being able to log-in or having internet issues, but now having done a remote exam “would be happier taking all exams at home”. Another student sitting FR loved the fact that having finished early she was able to end the exam and logout without having to wait for everyone else to finish. While the Applied Skills exams seemed to run smoothly, sadly the experience of the SBL students was more traumatic. One student was persistently unable to log-in to her exam. Another managed to start the exam but after 30 minutes ran into technical problems and was thrown out of the system completely. Unfortunately, they are both now waiting to sit their exam in September. A third student waited 20 minutes near the end of her fourhour exam for a system reboot, but hopes her exam was submitted. ACCA are investigating all of these cases thoroughly and have apologised to the students concerned. Some students will be praying that the Covid-19 situation allows the opening of exam centres in September, while others will be disappointed not to wander downstairs to the kitchen table to sit their ACCA exam!. • Liz Hulls, Director and Tutor, Oxford Learning Online (formerly Vale Financial Training)

ACCA ARE LOOKING FOR UNIVERSITY STUDENTS TO JOIN THEIR UK STUDENT ADVISORY GROUP The advisory group will shape and inform student focused initiatives and help inspire future generations to join the world of accountancy. 7R MRLQ WKH JURXS RU WR ğQG RXW more email ukbd@accaglobal.com – deadline 25th August. Know someone else who might be interested? Please pass the message on.

PQ Magazine September 2020

Interview PQ a weekly schedule that incorporates work, study and time for relaxation such as exercise and other treats. While studying I found that exercise outdoors has had large benefits to both my productivity and mental health. Any tips for passing those assessments? Always aim to be the best you can be. Studying hard, dedication and positivity have all influenced my exam results. Smile through your studies and aim for the stars is my best tip for passing AAT. Your college nominated you for the Student of the Year award. Was it a surprise? I was shocked at the nomination for the AAT award, but I was so grateful that my hard work, positivity and dedication has been recognised. I have been nominated for various awards throughout my accountancy and business management studies, but this one by far is my biggest achievement and I am so proud of myself. What was the first thing you did when you heard you had won? I certainly was not expecting to win the AAT Student of the Year award! I was so thankful all my family were there with me for this year’s online awards ceremony. The screams and cheering through everyone’s devices was overwhelming

Top of the class Devonne Burn, an account manager at CCL Office, is studying the AAT professional diploma Level 4 and Business management Level 4. Here she describes her journey to becoming AAT Student of the Year Were you always interested in a career in accountancy? At school I was more mathematically inclined, and this drove my passion and influenced my decision to study accountancy. My maths teacher was very inspirational through secondary school and had great belief in my mathematical talent. Working with numbers and problem solving comes so much more naturally to me than poetry or history ever did. I love a definite answer! When I first found out about the opportunities associated with studying AAT I immediately knew it was for me. AAT has allowed me to work full time while training to become a qualified accounting technician. Tell us about your day job. I work for an office and educational supplies provider, as an account manager. I manage my own base of clients, providing them I hope with an outstanding customer experience. My main roles include sales and purchasing. I love forming a professional relationship with my customers to give them a more bespoke service. PQ Magazine September 2020

My workplace just would not be the same without the amazing support from my managers; they are all really understanding of the balancing pressures associated with a full-time job and studying two level 4 diploma qualifications. Where do you see the AAT qualification taking you? My plan is to further my education and qualifications and I aspire to complete a chartered accountancy qualification such as ACA/ACCA. I am extremely grateful to have been given an amazing opportunity to teach in the college where I myself studied AAT. I am most excited to shape the learning of a new generation of AAT graduates. How have you found the whole work/life/study balance? The past few years – studying AAT, a business management qualification as well as working full time – has given me a great opportunity to work on my time management. To make sure I hit all my deadlines every Sunday night I made

How has lockdown been for you? I do not feel like my life has necessarily been hindered due to lockdown, I really enjoy long walks with our little Westie Jazz and bike rides. Lockdown has given me the opportunity to complete my studies, enjoy the outdoors a lot more and spend valuable time with my family. I have really missed spending time with my friends but our social distancing picnics in the park made all the difference and I am so thankful for the memories. What is the best advice anyone has given you? My managers have given me some amazing advice – from starting CCL at 16 years of age they have inspired me to be a strong and independent woman. The best advice they have ever given is to take every opportunity thrown my way because they believe I have amazing potential and can go very far in my career. It has been something that has really stuck with me and I appreciate every single piece of advice given. Have you ever lied about being an accounting technician? No! I am an honest and truthful individual. What you see is what you get. Do you have a favourite calculator? Yes! I love my Casio fx-83MS. It is ancient! My brother gave it to me when he left school. I do not know what I would do without it. What do you do to relax? My friends and family are a big part of my life. If I am not out for tea with the girls or relaxing on the sofa with loved ones then I am probably working out with my best friend, getting in shape for our girly holidays. 17

PQ exam advice

Don’t mock mocks Michael Tucker has six good reasons why you should take your mocks seriously

ightly or wrongly, some students consider mock exams as being an unnecessary or unfair task; if they have to do the real exam, why do a practice one as well? The fact is, mock exams are an extremely valuable tool for all students at all levels. A mock exam gives you the opportunity to pull together all of your learning in to one test. While we will always provide you with at least one mock exam per unit, doing at least one awarding body (ICB or AAT) mock exam is vital, and here’s why…

They’re a great early warning system Mock exams can be a real wake-up call to those, who up to now, have been progressing without too many issues. If the results of their mock indicate that they’re performing at a level below the required pass mark, then then still have plenty of time for further revision (and perhaps have a go at another mock) before the real thing. Getting your eye in While we can never fully emulate a formal exam, we will always try to make mock exams as realistic as possible. This helps you to practise your exam technique, including structuring your

time appropriately (and managing your nerves). Furthermore, taking an awarding body mock will expose you to how the exam is likely to be written and formatted, giving you further confidence for the formal exam. A good indicator Once you have completed an awarding body mock exam you will have a clear understanding of where you sit in terms of a predicted grade. This, combined with the mock exams that we provide, will give you maximum exposure to the topics that you will be tested on.

Identify any weaknesses Working within your own time constraints is very different than working toward a timed session! People very often perform very differently during revision settings as opposed to exam settings. Mock exams help you to spot any areas where you might struggle under timed conditions, giving you time to address these areas prior to the big day. Do what works for you Revision is a very personal thing. What works for you might not work (or be as effective) for anyone else. Some students do well by covering every available open space with Post-it Notes, others do well with flashcards, and others prefer to go over practice tasks/assessments repeatedly. Mock exams allow you to discover whether your revision techniques have worked on a practice run. If they have, fantastic, but if not, it gives you time to make adjustments prior to the real thing. Building confidence Many of the points above relate to students who might be struggling, but mocks are also highly beneficial to students who are doing well. Completing mock exams mean that you gain valuable confirmation that your approach to your studies is working. Getting grades for your mock exams help to keep you on track to success. After all, your success is our success! • Michael Tucker is Training Link’s head of operations

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“I chose ACCA because it’s the largest and most global professional body, and I believe it can take my career much further than other qualifications.” Joanne McCourt, Commercial Insight Manager, New Look

PQ Magazine September 2020

viewpoint PQ

Showing heart to sole traders Are we really all in this together? The plight of a forgotten minority suggests more must be done for struggling small firms, says Claire Bennison rom the start of the Covid-19 crisis the national motto has been: “We are all in this together.” But today I want to shine a spotlight on a business sector that’s been forgotten along the way, one that many of our UK members and future members probably connect with daily, or even work with them already or aspire to do so – small to medium sized businesses or SMEs. These are the many small business people who have felt the full impact of Covid while battling two unique problems. First, late payments. Lots of businesses have simply stopped paying invoices, and a lack of cash flow has knock-on effects throughout the economy. Some firms – even some household brands who should know better – have stated that they won’t pay suppliers till Covid-19 is over. This attitude is killing businesses which trade from month to month with a zero cash cushion to fall back on. And, secondly, small businesses have been largely excluded from measures to protect jobs and prevent bankruptcy. About two million business owners who trade through a limited company and dividend income didn’t qualify, such as those which pay themselves annually on PAYE but missed the HMRC deadline, despite paying themselves within the eligible financial year. Accountants are doubly-exposed to this largely hidden threat. First, because accountants work closely every day with businesses who are struggling. And second, because accountants themselves are

PQ Magazine September 2020

often sole traders and they know why they speak on this issue. That’s why ACCA teamed up with the Corporate Finance Network (CFN) – which speaks for independent accountancy firms – to run a twice monthly survey with our members who represent SMEs and entrepreneurs to track how they and their customers are managing. Latest results show increasing levels of tension and strain. The stories behind the stats came to life when we hosted talks with The CFN and the Forgotten Ltd campaign, which supports the directors of small limited companies. We heard many powerful and moving testimonies from people whose lives and livelihoods have been ruined by Covid-19, and about people who have suffered sleeplessness, depression and relationship breakdown. All too often, their only option in the face of a fall in revenue is to eat through savings or pension provisions, or to take on more personal debt. We heard of people who have fallen hopelessly into debt which they can never repay. Too many people have seen businesses into which they have poured their hearts, souls and working lives falter and fail, through no fault of their own. What we also heard loud and clear was that these people want to be treated fairly, with policies that include them. As Gina Broadhurst, the co-founder of Forgotten Ltd, said: “We represent two million companies employing 7.5m people. We are not fat cats or multimillionaires. We don’t want special treatment.

We want parity with everybody else. We need the political will to change, to save businesses and jobs.” There are plenty of proposals about what that help could look like. ACCA contributed to TheCityUK’s Recapitalisation paper, which recommended ways to get cash to businesses and propose policy to prevent defaults. The Business Repayment Plan will convert government-backed business disruption loans into a tax obligation which is repaid alongside other taxes in a similar model to student loans. This means debt payback is proportional or ‘means tested’ against the revenue they recover. It could save many otherwise-viable businesses which are suffering illiquidity. ACCA is also helping lead the #LeaveNoBusinessBehind campaign, which is signing up professional accountants and offering training videos and written resources to help businesses understand why it’s important to plan and reforecast financially. ACCA believes more must be done to offer these businesses greater protection, to save the livelihoods of millions. After all, SMEs and their accountants are part of a connected value chain that benefits the UK economy, driving improved productivity, exporting globally and offering sources of employment. Given this, surely it’s time for small businesses to be included in this national effort, if we are to say truthfully that “we are all this together”. • Claire Bennison, Head of ACCA UK 19

PQ back to basics

Go figure! Good knowledge of financial mathematics is not optional – you need to be able to work the numbers, says top tutor Sunil Bhandari inancial mathematics is one of the key skills used in all the financial management/strategy papers set by the professional accountancy bodies. Irrespective of the question style – objective test, paper exam or the new computer-based exam (CBE) – understanding basic financial mathematics is essential. The fundamental concept behind financial mathematics is the ‘time value of money’.

Time value of money Simply, receiving $1 today is worth more that receiving $1 a year from now. Why? Because: • You can invest $1 now and earn interest (at r%). • Inflation means money loses value (purchasing power) with time. • The $1 received now is risk free, while $1 later may be risky. Symbols Here are some commonly used abbreviations in financial mathematics: PV = Present Value (today at Time 0). FV = Future Value (as on some specified future date, e.g. Time 1). r = Cost of Capital (expressed as a decimal, so 10% = 0.10). n = Number of periods (usually years). Compound interest Interest is not just earned on the initial amount invested (the simple interest approach), but also on the reinvested interest for the period of the investment. We get ‘interest on interest’ earned in each period. So after ‘n’ interest earning periods: FV = PV x (1+r)^n Illustration 1 Assume PV = $500, r = 6% (= 0.06), n = 3 years. What is the equivalent future value after 3 years? 20

FV = $500 x (1.06)^3 = $595.51 This formula also links ‘real’ and ‘nominal’ values. In this case, the cost of capital, ‘r’, is replaced with an inflation rate. Illustration 2 Real cash flow = $700, Inflation = 5% pa (= 0.05), n = 4 years. What is the nominal value of the real cash flow after 4 years? Nominal cash flow = $700 x (1.05)^4 = $850.85 Basic discounting This is the reverse of compounding. When given the FV, it can be converted back to its PV by applying the relevant discount factor. PV = FV x (1+r)^(-n) Illustration 3 FV = $595.51, r = 6% (= 0.06), n = 3 years. What is the equivalent present value? PV = $595.51 x (1.06)^(-3) = $595.51 x 0.840 = $500 The ‘(1+r)^(-n)‘ is called the discount factor. The exam will provide you with a discount factor table. (r = 1% to 20% and n = 1 to 15). Discount rate (r) Periods (n)

10%

0·990 0·980 0·971 0·962 0·952 0·943 0·935 0·926 0·917 0·909 1

0·980 0·961 0·943 0·925 0·907 0·890 0·873 0·857 0·842 0·826 2

0·971 0·942 0·915 0·889 0·864 0·840 0·816 0·794 0·772 0·751 3

0·961 0·924 0·888 0·855 0·823 0·792 0·763 0·735 0·708 0·683 4

0·951 0·906 0·863 0·822 0·784 0·747 0·713 0·681 0·650 0·621 5

If you a sitting ACCA FM, or the new ACCA AFM CBE, the ‘spreadsheet’ response area makes calculating multiple discount factors straightforward. Head up your spreadsheet with a row containing the number of each year, e.g. 1, 2, 3, and 4. Enter ‘(1+r)^(-n)’, referencing the ‘n’ to the cell containing 1. Then ‘copy & paste’ this formula across the page. Then multiply your cash flows by these discount factors. Alternatively, use the = NPV function directly. Annuity discount factor An annuity is defined as an annual cash flow that commences in one year’s time and continues for a defined period.

PQ Magazine September 2020

back to basics PQ Illustration 4 Cash Flow for 1 -3 = $500pa, r = 10% (=0.10). Using the basic discount factors (DFn), this could be presented as: PV = (500 x DF1) + (500 x DF2) + (500 x DF3) Which is the same as PV = 500 x (DF1 + DF2 + DF3) If we use the basic discount table shown above: PV = 500 x (0.909+0.826+0.751) = 500 x 2.486 = $1,243 Here, 2.486 is known as the annuity discount factor, or cumulative discount factor. This can be calculated directly using this formula: -n AF (n years, r%) = 1-(1+r) r Or (1 – (1 + r)^(-n))/r So AF (3 years, 10%) = (1-(1+0.10)^(-3))/0.10 = 2.487 (note the small rounding difference) In this case the annuity discount tables are very helpful! Discount rate (r) Periods (n)

10%

0·990 0·980 0·971 0·962 0·952 0·943 0·935 0·926 0·917

0·909 1

1·970 1·942 1·913 1·886 1·859 1·833 1·808 1·783 1·759

1·736 2

2·941 2·884 2·829 2·775 2·723 2·673 2·624 2·577 2·531

2·487 3

3·902 3·808 3·717 3·630 3·546 3·465 3·387 3·312 3·240

3·170 4

4·853 4·713 4·580 4·452 4·329 4·212 4·100 3·993 3·890

3·791 5

A cautionary note: many candidates make this common error: PV = (3 x 500) x 2.487 = $3,731. In ACCA FM and CIMA F3, this answer will be a distractor answer! Perpetuity discount factor (or perpetual annuity discount factor) A perpetuity is a series of same value cash flows. A growing perpetuity is a series of cash flows growing each period by a set %, g%. The discount factor for a growing perpetuity = 1/(r – g) Notice 2 things: 1. The first cash flow in the series is at time 1, but the value is at time 0. 2. If the perpetuity is not growing (g = 0), the discount factor = 1/r Illustration 5 Perpetual annual cash flow starting at time 1 = $800 pa, r = 9% (= 0.09) PV =$800 x 1/0.09 = $800 x 11.111 = $8,889 Illustration 6 Growing perpetual annual cash flow starting at time 1 = $800, r = 9% (=0.09), g = 3% (= 0.03) each year (=’per annum’, or pa) PV = $800 x 1/(0.09 - 0.03) = $800 x 16.667 = $13,333 Advanced and delayed annuities and perpetuities Annuities and perpetuities that start at time 0 have a simple rule: ADD 1! Illustration 7 Cash Flow for 0 - 3 = $500pa, r = 10% PV = PV = 500 x (1+ AF1-2) PV = PV = 500 x (1+ 1.736) = $1,368 Delayed annuities and perpetuities Can be valued either: a) by discounting a simple annuity/ perpetuity, or as b) a simple annuity/perpetuity, less the value of the missing cash flows Illustration 8 Perpetual annual cash flow starting from time 4 of $800 pa, r = 9% a) CF x (1/r x DF the year before the annuity commences) = $800 x (1/r x DF3) = $800 x (1/0.09 x 0.772) = $6,862 b) CF x (1/r – AF(3 years, 9%)) = $800 x (1/0.09 – 2.531) = $6,864 (rounding difference excepted). • Sunil Bhandari is an ACCA FM and AFM and CIMA F3 Tutor with FME Learn Online. See www.SunilBhandari.com PQ Magazine September 2020

PQ financial statements

Match made in heaven Gareth John explains all you need to know about accrued and deferred income n our financial statements we always need to make sure that we are correctly recognising the income and expenses of our business during the accounting period that they relate to. This is the accruals, or ‘matching’, concept. Most students work hard to understand how the use of accruals and prepayments ensures that expenditure is allocated to the correct accounting period, but often find applying the same principles to income harder to grasp. In this article we explain accrued and deferred income and how we post journal entries for them. Always remember that under the accruals concept it doesn’t matter when a sale is actually paid for by a customer, or when we send out the invoice for work completed. All that matters is whether we have done the work to ‘earn’ the income. • Sometimes we might invoice in advance for work being done at a later date. • Sometimes we might have done the work but not yet issued an invoice.

Income from a ‘normal’ cash sale If we earn some income by delivering goods to a customer and the customer pays for those goods immediately, then the double entry is: Dr Cash (the asset that we now own) Cr Sales (the income that we have ‘earned’ from delivering the goods; we have done the work!) This is a cash sale. Income from a ‘normal’ credit sale with an invoice If we earn income by delivering goods to a customer and they do not pay immediately, this is often because we offer them a credit period. At the point of the sale we would normally send them an invoice as a request for payment. The double entry for this is: Dr Sales ledger control account (the asset of the receivables balance owed by the customer) Cr Sales (we have still ‘earned’ income by delivering the goods even if we haven’t been paid yet) This is a credit sale. Note that the credit is still made to the sales account as we have still done the work. Accrued income Now, what if we have delivered goods to a customer who we offer credit to, but we haven’t issued an invoice yet? We still need to recognise the income earned as we have delivered the goods, but because there is no sales invoice to record in the sales day book, there would be no entry made to the sales ledger control account. We therefore need to recognise another form of receivable. This is income that we have ‘earned’ by doing the work, but that will be invoiced at some point in the future; this is called accrued income. 22

Now that is what I call a cash sale

The double entry for this is: Dr Accrued income (again, an asset that we are owed for the work we have done. Think of this as an ‘un-invoiced receivable’) Cr Sales (again, still recognising the income earned as we have delivered the goods) As long as we have delivered the goods we have ‘earned’ the income. It does not matter that we haven’t sent an invoice yet. Accrued income is a current asset as we are likely to raise the invoice soon, and would sit on the balance sheet (the Statement of Financial Position) under trade receivables. Eliminating accrued income When you do raise an invoice for the goods that the customer has received you can eliminate the accrued income as follows: Dr Sales ledger control account (now that you have raised an invoice that will be recorded in the sales day book) Cr Accrued income (getting rid of our ‘un-invoiced receivable’ now that it has been invoiced) Deferred income Deferred income is the exact opposite of accrued income. It is when we receive payment from a customer for something that we haven’t done yet, so we haven’t actually ‘earned’ the income. It occurs in situations where a customer pays in advance for goods that we are going to deliver in the future. As we haven’t ‘earned’ the income yet, we cannot recognise the sales income yet. Instead we recognise a liability called deferred income. It may seem strange that we are recognising a liability when we are dealing with a customer but if they pay in advance for goods then we owe them that money until the point when we deliver

the goods. If we fail to deliver we will have to repay them the amount that they have paid. The double entry is therefore: Dr Cash (the payment we have received in advance from the customer which will now be in our bank account) Cr Deferred income (the liability we owe to the customer until we deliver their goods) Deferred income is a current liability and would sit on the balance sheet under trade payables. Eliminating deferred income When we deliver the goods to the customer, we have now done the work to ‘earn’ the income and will no longer have to potentially pay them back. The double entry posted is: Dr Deferred income (to remove the liability no longer needed) Cr Sales (as we have now ‘earned’ the income) Other forms of income In some tasks the ‘income’ being dealt with may be something other than the sale of goods, for instance you may see rental income. The basic double entry here is much the same as above. So, if a tenant has occupied some space that we own (meaning that we have ‘earned’ the income) but we haven’t yet invoiced them, this is accrued income: Dr Accrued income Cr Rental income (instead of sales) If a tenant pays in advance for the next period, it is deferred income as we haven’t ‘earned’ the income yet: Dr Cash Cr Deferred income • Gareth John is chief executive of First Intuition Cambridge PQ Magazine September 2020

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PQ ACCA exam tips

Here’s what you want and need – our exam tips for September, with help from BPP PM The current format will form the structure of the examination. Make sure that you are familiar with this. Section A (30%) Multiple choice – 15 questions worth two marks each This will examine all areas of the syllabus. Section B (30%) Mini-case – three mini-case scenarios each with 5 sub requirements worth two marks each. Each requirement will be independent and can therefore be answered in any order. This will examine all areas of the syllabus Section C (40%) Constructed response – two questions worth 20 marks each; these can be further broken down into multiple parts of varying length. This will examine syllabus areas A, C, D and E only. As any syllabus area could be tested in sections A and B the best advice is to study all areas of the syllabus. Areas expected to be tested in Section C include (but are not limited to) budgetary systems, planning and operational variances, mix and yield variances and evaluation of the company performance (either as a whole, or on a divisional basis). Given the fact that this is a performance management paper you would be advised to be prepared to evaluate some performance. PM has the following syllabus areas: 24

A. Information, technology and systems for organisational performance. B. Specialist cost and management accounting techniques. C. Decision making techniques. D. Budgeting and control. E. Performance measurement and control. General advice: There is no longer any formal reading and planning time at the start of the exam. However, you are strongly advised to plan answers to section C questions before starting to type. Ensure that you refer to the scenario in your answer. Finally, the examining team have repeatedly stated that they expect students to study broadly for all the syllabus areas meaning that question spotting is not a good idea, instead students should expect the unexpected. The exam will be approximately 40% calculation and 60% discussion, meaning that it is not sufficient to be able to perform all of the calculations. Interpretation and application are crucial, especially in section C. TX In section A there will be a wide range of topics tested as there are 15 Objective Test questions (OTQs). We would expect at least a couple of these OTQs to be devoted to the administration of income tax and corporation tax. So candidates should ensure they are

comfortable with the following: • Due dates for the payment of income tax (including payments on account). • Due dates for the payment of corporation tax (including instalments for large companies). • Filing dates for the income tax and corporation tax returns. • Penalties and interest for late payments and returns. Also, likely to be tested in section A of the exam are the following topics: • VAT rules on registration, impairment loss (bad debt) relief, and the SME schemes relating to cash accounting, annual accounting and flat rate schemes. • Inheritance tax due on lifetime transfers both in the donor’s life and on death. • Statutory residence tests for individuals. • Identification of groups of companies for corporation tax loss reliefs and gains. • Trading loss reliefs for both companies and sole traders. It is important to remember that section A offers the TX examining team an opportunity to test the whole syllabus, so practising on all kinds of TX questions from the practice and revision kit will help build on and complement your existing knowledge. In section B of the exam the questions will be similar to those of section A but there will be a longer scenario to deal with. This means a slightly different exam skill is necessary as you have more information to work through and each OTQ will require you to find the relevant information or data in that scenario. It is not a difficult skill, but we would hope you have had time to practice an extensive range of section B questions from the practice and revision kit before attempting the real exam. In section C you will face the longer, constructive response questions with scenarios and much more open requirements. Your answers will need not just sound technical knowledge, but also the application of that knowledge to the question you have been asked. Furthermore, your answer will have to be presented logically so the marker can follow your thought processes. At least 50% of your revision time should be spent answering the section C questions in the practice and revision kit to build up confidence and speed in a way that will also maximise marks. 1. Remember to learn your income tax and corporation tax pro formas. 2. Calculations which require no more than two or three entries into your calculator can be included on the face of your pro formas (e.g. time apportioning a salary). Calculations which are more complex (e.g. company car benefits) need separate workings which are properly referenced (W1, W2, etc) and have a heading. 3. Actually attempt the narrative parts of the requirement – aim for as many sentences as there are marks with each sentence containing something technical. Keep your paragraphs to no more than 3 sentences long. 4. In both numerical and narrative answers leave plenty of space on the page. So in pro formas – leave a gap between each PQ Magazine September 2020

ACCA exam tips PQ line (you may need to add something in). Show workings DOWN the page, rather than ACROSS the page as it makes them easier to mark. In narrative answers leave a line or two between each paragraph just in case you remember something later. Well spaced answers are also easier to mark – and you always want to keep the marker happy. We know that the two longest questions will focus on income tax and corporation tax. These are likely to include the following: • Employment benefits. • Property income. • Relief for pension contributions. • Adjustments to profit to arrive at trading income for both companies and sole traders – in past sittings we have seen a number of questions whereby you have to correct errors in computations included in the scenario. • Capital allowance computations. So, remember to cover the whole syllabus when using the practice and revision kit. Finally, remember the pass mark is 50% so you don’t need to be perfect. If you don’t know something have a guess and move on. Sometimes you have to do that in order to get follow through marks in section C questions. If you make a mistake, but then use that incorrect figure later in a subsequent calculation, then that’s fine – you can only lose the mark once. In sections A and B never leave an OTQ unanswered − have a guess if you don’t know the answer. It might be right! FR Section A: • Fifteen two mark objective test questions on a wide range of topics including several on consolidation and interpretation of financial statements. • Expect a few questions on non-core areas (e.g. inflation, specialised entities). Section B (Case questions): • Three separate scenarios with five objective test questions on each scenario; each question is worth two marks. • Each scenario could be a mix of topic areas or focused on one topic and will usually consist of two/three calculations and two/ three narratives. • Questions are not dependant on each other and can be answered in any order. Section C (Constructed response questions): • Two 20 mark questions, one covering interpretations and the other preparation of financial statements. • One question is likely to be in the context of a single company and one in the context of a group, so you could have a single company interpretation and a groups preparation or vice versa. • Accounts preparation questions may include extracts or standalone calculations or full statements of profit or loss and other comprehensive income and/or statement of financial position. • Both questions will cover the accounting for items from other areas of the syllabus. • May include a short separate part, e.g. with a statement of changes in equity, statement PQ Magazine September 2020

of cash flows extract, earnings per share calculation or linked written topic. • A consolidation question would include one subsidiary and often an associate, with adjustments, e.g. fair values, deferred/ contingent consideration, PUP on inventories/PPE, intragroup trading and balances, goods/cash in transit. • A single entity question could be preparation from a trial balance or restatement of given financial statements with the usual adjustments for depreciation, revaluation and current/deferred tax (including deferred tax on revaluations) plus a mixture of adjustments on other syllabus areas, e.g. leases, substance over form issues, financial instruments (change in fair value or amortised cost), share issues, government grants, inventory valuation, revenue recognition or construction contracts. AA AA has the following exam format: Section A is three mini-case style scenario-based questions each with five two mark questions based on the scenario (total 30 marks). Each mini-case question will test single topic areas of the syllabus and so will either test syllabus area A, B, C, D or E. We would particularly expect questions in Section A to focus on syllabus areas A and E. For section B, Q16 is a 30 mark question. Then there’s Q17 and Q18, two 20-mark questions. All three questions in Section B will be broken down into sub requirements and be scenario based. The majority of marks in each question will test syllabus areas B, C and/or D. Areas expected to be tested in Q16 to 18 include: • Audit planning. • Audit risk (identification and explanation of audit risks from a scenario and explanation of the auditor’s response to each risk). • Internal audit. • Internal controls (identification and explanation of deficiencies in internal control and the recommendation of suitable internal controls or description of tests of controls). • Audit procedures (both substantive procedures and tests of controls). AA has the following syllabus areas: A. Audit framework and regulation. B. Planning and risk assessment. C. Internal control.

D. Audit evidence. E. Review and reporting. General advice: Where questions are based on a scenario it is essential that you use the information in the scenario to make your answers relevant. You should also think about how you will present your answer – try to use a tabular format in your solutions where relevant as the examining team have stated that candidates who do this score better. Pay attention to the verbs used in question requirements as these indicate the number of marks available. For example, the verb “explain” requires a sentence and will score one mark if properly explained, whereas the verb “list” simply requires you to list out information with no further explanation and this will score a half-mark per point. Finally, please read the Examining Team’s Comments relating to past exams which are on the ACCA website: https://tinyurl.com/yyl79xtd FM Section A: 15 multiple choice/objective test questions worth two marks each. Questions will often be knowledge based (testing your knowledge of key technical terms) and will balance out the questions in Section B and C of the exam to make sure that all aspects of the syllabus are examined. It is therefore likely that a good number of these questions will test your understanding of financial management and objectives (ratio analysis, the concept of shareholder wealth) as well as the economic environment and financial institutions topics (financial intermediation, fiscal and monetary policies). The efficient market hypothesis is likely to be tested here, too. Section B: Three 10 mark mini case-studies. Each case–study will be broken down into five separate two mark multiple choice questions (so 15 questions in total). Areas expected to be commonly tested in this section are working capital management (e.g. the operating cycle, the impact of a change in credit period or accepting a factor’s offer); business or security valuations (e.g. methods of valuation); and financial risk management (most likely mainly in the form of currency risk but it is possible that at least an aspect of interest rate risk is examined here). Section C: Two 20 mark questions which will be broken down into sub requirements and be scenario based. These two questions will focus mainly on syllabus sections C, D and E. Section C is working capital management, section D is investment appraisal and is likely to feature NPV with inflation and tax. Section E is business finance; either an evaluation of financing options (interest coverage and gearing ratios are likely to be important here) or a cost of capital and analysis are most likely. Whichever of these three topics does not feature in section C is likely to appear in section B of the exam. Keep checking the ACCA website for articles in the lead up to the exam, any articles written by the examining team are often tested and are important to read. SBR It is vital that you read the examiner’s approach 25

PQ ACCA exam tips article available on the ACCA website. ACCA has also published several exam technique and technical articles that you should read as part of your exam preparation. Specifically for the September 2020 exam session, ACCA has released two articles called â&#x20AC;&#x2DC;Revising for the September 2020 exam sessionâ&#x20AC;&#x2122; (parts 1 and 2). These are available in the exam technique section of the SBR exam support resources section of the ACCA website www.accaglobal.com. If you are sitting the CBE there are resources you should access here. If you were planning to sit in September, you should check here for updates. The exam Section A will be two questions, worth 50 marks in total. Question 1 â&#x20AC;&#x201C; usually 30 marks: â&#x20AC;˘ Q1 will be based on group accounting. Be aware that this question may test any aspect of group accounting, including consolidated statements of cash flows, overseas subsidiaries and associates and JVs. â&#x20AC;˘ Make sure you attempt all parts of the requirement in Q1. The most recent examinerâ&#x20AC;&#x2122;s report stated that some candidates are not attempting the required calculations and therefore struggling to gain a pass mark on this question. â&#x20AC;˘ To score well, you need to do the calculations and explain the principles underlying the calculations you have performed. Question 2 â&#x20AC;&#x201C; usually 20 marks, including two professional marks: â&#x20AC;˘ Q2 will cover the reporting and ethical implications in a given scenario. Make sure you consider any threats to the fundamental principles of ACCAâ&#x20AC;&#x2122;s Code of Ethics and Conduct in your answer. â&#x20AC;˘ Two professional marks are available in this question for application of relevant ethical principles to the scenario. In order to gain the marks, your answer must be realistic and sensible. Stating that all issues should immediately be reported to the legal authorities without further discussion is unlikely to be awarded the professional marks as this advice is not realistic. â&#x20AC;˘ Make sure that you only spend the allocated amount of time on the second question (e.g. 20 mark question = 20 x 1.95 minutes per mark = 39 minutes maximum). The examiner has recently commented that students seem to be spending too long on

examined in either Section A or Section B of the exam. A question on current issues may require the application of existing accounting standards to a current accounting issue â&#x20AC;&#x201C; for example, accounting for cryptocurrency. â&#x20AC;˘ The Conceptual Framework has featured significantly in SBR exams to date â&#x20AC;&#x201C; be prepared for this to be the case in September 2020 as well. General advice One last thing. Make sure you plan your time at the beginning of the exam (and stick to it) to ensure you donâ&#x20AC;&#x2122;t over-run on particular question â&#x20AC;&#x201C; it is 1.95 minutes per mark (or 1.8 minutes per mark if you allocate 15 minutes to reading the paper). Good luck!

this question and not leaving enough time for the rest of the exam. Section B will be two questions, worth 25 marks each: â&#x20AC;˘ Section B can deal with any area of the syllabus and may be based on a short scenario, a case study with several parts, or an essay. â&#x20AC;˘ Section B will always include a question or part-question involving the analysis or appraisal of information from the perspective of a stakeholder. Make sure you have a go at answering this question. There is no â&#x20AC;&#x2DC;rightâ&#x20AC;&#x2122; answer at this level â&#x20AC;&#x201C; marks will be awarded for sensible points that have been applied to the scenario. â&#x20AC;˘ There are two professional marks available for the question that covers the stakeholderâ&#x20AC;&#x2122;s perspective. To gain these marks, you must discuss the issue from the perspective of the stakeholder â&#x20AC;&#x201C; e.g. if asked for the investorâ&#x20AC;&#x2122;s perspective, you must answer from the investorâ&#x20AC;&#x2122;s perspective. â&#x20AC;˘ Current issues are usually examined in Section B as a part of a question (not a full question). However, current issues could be

SBL Strategic Business Leader is ACCAâ&#x20AC;&#x2122;s case study exam at the Strategic Professional level. As with all other ACCA exams Strategic Business Leader is examined as a closed book examination. Unlike the other Strategic Professional level exams which are 3 hours and 15 minutes in duration, the Strategic Business Leader exam has a duration of 4 hours. Strategic Business Leader builds upon the knowledge that you gained at the â&#x20AC;&#x2DC;Applied Knowledgeâ&#x20AC;&#x2122; and â&#x20AC;&#x2DC;Applied Skillsâ&#x20AC;&#x2122; levels. However it does also have its own distinct syllabus content. As with all other ACCA examinations the pass mark for Strategic Business Leader is 50%. You will not be issued with any pre-seen information in advance of sitting your exam as everything you will require will be made available to you within the examination itself. The Strategic Business Leader exam will focus on one main organisation, and all of the question requirements will relate to this organisation. You may have to take on a variety of roles which may require you to adopt an internal or external perspective when answering questions. You will also be required to respond to a variety of people within the organisation. All of the questions in the exam are compulsory. Every Strategic Business Leader exam will consist of 80 technical marks and 20 Professional Skills marks. Question requirements in the exam will assess and link several subject areas from across the syllabus, and these will test your ability to construct appropriate responses and to carry out numerical analysis. The Strategic Business Leader syllabus consists of the following areas: A. Leadership.

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PQ Magazine September 2020

ACCA exam tips PQ B. C. D. E. F. G. H.

Governance. Strategy. Risk. Technology and data analytics. Organisational control and audit. Finance in planning and decision making. Innovation, performance excellence and change management. I. Professional Skills General advice: Effective time management is important. While 4 hours (240 minutes) may initially sound like a lot of time in which to attempt the exam, it is crucial not to become complacent in how you use this time. The Strategic Business Leader exam is demanding, and as such you need to give careful consideration to how you will manage your time to make the most effective use of it. ACCA recommend spending approximately 40 minutes reading, planning and interpreting the requirements and the information/exhibits provided. Based on this estimation when planning the amount of time you will spend on each requirement you should look to allocate 2.5 minutes per mark on offer. This time allocation is based on the fact that the exam is 240 minutes in duration, once the 40 minutes reading time is deducted this gives 200 minutes to write up your answer in order to earn the 100 marks on offer. You can earn the 20 Professional Skills marks by virtue of attempting the 80 technical marks on offer, so we can divide the 200 minutes remaining over the 80 technical marks to give 2.5 minutes per mark. It is important to note that you can spend longer than the recommended 40 minutes reading and planning your answer. If you do choose to spend longer on this task then you will need to bear this in mind when you come to writing your answers. Alternatively, you may prefer to work on the basis of two minutes per mark (being 200 minutes divided by 100 marks). Regardless of the method you use when allocating your time it is crucial that you stick closely to your timings as this should help to ensure that you do not spend too long on one question requirement to the detriment of those you are yet to attempt. Reading question requirements: The Strategic Business Leader exam will contain all of the information that you will require to answer the question requirements set. This information will be presented in a series of exhibits. To help you locate the exhibits most relevant to answering a specific question it is therefore important that you take the time to read the question requirements set carefully as this should help to direct you. Furthermore, reading the question requirements carefully is important as this will indicate the role and the perspective from which you are expected to answer the question. Identifying this early on is important as it will drive how you construct your answer. Planning your answer: Clearly, if you have gone to the trouble of preparing an answer plan it is important that you use it when writing up your answer. To get the most from your answer plan it is therefore important that you include as much detail as you think will be helpful when the time comes to write up your answer. PQ Magazine September 2020

When planning your work it is important to bear in mind the ACCA’s guide of using 40 minutes for reading and planning. As mentioned earlier you need to remember that some question requirements may require you to conduct some numerical analysis. For example, you may be asked to analyse the performance of the organisation featured in the exam. It is important that you plan the numerical analysis that you intend to perform to ensure that you only focus on performing those calculations that are going to support your answer and provide you with something to talk about. Producing lots and lots of unnecessary calculations for the sake of it will only serve to waste your time in the exam. Understanding the syllabus and the appropriate use of theoretical models in the exam: To stand the best chance of passing the Strategic Business Leader exam, you will need to have a good understanding of the entire syllabus. However, it is important to remember that unlike other exams that you may have sat in the past, questions in the Strategic Business Leader exam will not ask you to simply regurgitate your knowledge of a particular topic or theoretical model. Requirements will test your ability to apply your understanding of the subjects covered in the Strategic Business Leader syllabus in the context of the question scenario. Furthermore, requirements will not specifically ask you to use a particular model in answering the question. Whether to use a theoretical model when constructing your answer will be a matter of judgement that you will need to weigh up in light of the information presented to you in the exam. Attempting plenty of questions in the lead up to your exam is the most effective way of developing your judgement in this area. Understanding the difference between technical marks and Professional Skill marks: Technical marks relate to the knowledge (which we discussed in the previous section), there are 80 technical marks on offer in the exam. By contrast the 20 Professional Skills marks are awarded for displaying the following skills and behaviours: • Communication. • Commercial acumen. • Analysis. • Scepticism. • Evaluation.

Every Professional Skill will be tested in every Strategic Business Leader exam sitting. The Professional Skill being tested will be specified under each question requirement. As you prepare to attempt the exam it is crucial that you take the time to attempt as many practice questions as you can. To increase your chances of exam success you need to ensure that you take sufficient time to develop your understanding of the Professional Skills. Visit the technical articles page of ACCA’s website. There are often very useful articles on ACCA’s website which cover key exam topics and subjects which may help with your exam preparation. There are also a number of articles about how to approach the exam and how to exhibit the professional skills in your answers. All technical articles can be found here: https:// tinyurl.com/y3dm7sat APM Q1 of the APM exam will focus on a range of issues from syllabus section A (strategic planning and control), section C (performance measurement systems and design) and section D (strategic performance measurement). Section A (50 marks) contains one compulsory question. In recent exams question 1 has often required linking a business’s mission to its performance objectives using the concept of CSFs and KPIs. You may well also have to critique and recommend improvements to performance reports and the balanced scorecard and/or information systems could well be tested in this context. The assessment of performance is also likely to be tested and this could easily include benchmarking as a theme. Financial performance measures (ROCE/ RI/EVA etc) are also likely to be commonly examined in question 1, but don’t neglect nonfinancial issues from syllabus section D such as quality management and reward systems. The ACCA have said that one of the section B questions in Q2-3 will come from syllabus section E (performance evaluation and corporate failure). In section B, commonly tested areas include quality management, information reporting (e.g. Big Data, Lean Information), the application of strategic models (such as PEST, Porter’s 5 forces, the Value Chain), HR frameworks (e.g. reward & appraisal systems), risk management and environmental management accounting. Keep checking the ACCA website for articles in the lead up to the exam, any articles written by the examining team are often tested and are very important to read. The article on the examiner’s approach is especially worth reading and analysing. ATX The exam will comprise of two compulsory questions within Section A, which will both of a case study style. The first question will be 35 marks in length and the second will be for 25 marks. One of these questions will focus on personal tax issues and the other will focus on corporate tax issues. In question one there will be four professional skills marks and in section A there will be five marks on ethics. 27

PQ ACCA exam tips Section B will comprise of two compulsory 20 mark questions. These will be in a more succinct, note-form style. The whole syllabus is examinable throughout the exam. The exam will examine candidates’ ability to analyse and evaluate the tax implications of various situations, numerical calculations will only be required to assist in producing an answer and no purely numerical questions will be set. Remember, these exam papers would have been written prior to the Covid-19 outbreak and, as such, you should not be addressing any aspect of the virus in answering this paper. Any tax breaks available due to the outbreak are not examinable. Topics/scenarios we would expect to see are: • Personal income tax scenarios which could involve: investing in a pension; investing in EIS, SEIS or VCTs, share schemes; employment income possibly with termination payments; a personal service company; property income or a takeover. • Unincorporated business – particularly including loss reliefs, partnerships or basis period rules. • A question focussing on overseas issues – this could be income tax, capital gains tax, inheritance tax or a corporate scenario. • Capital gains tax versus inheritance tax including availability of reliefs. • Corporate scenarios – likely to focus in more depth on intangibles; research and development; losses; corporate groups or consortia. • Special corporate scenarios such as liquidation; purchase of own shares; close or investment companies. • A business transformation scenario question such as selling a sole trade business, incorporation, or, in a corporate context, the sale of shares versus the sale of trade and assets. • Other common types of question/ calculation to expect are: • Reviewing a pre-prepared computation to spot, explain and correct errors. • Calculations such as “tax saved through an action”, “after-tax proceeds”, “the value of a post-tax inheritance”, “net spendable income” or the “net of tax cost of something”. Don’t forget that across the scenarios we will typically expect to see VAT marks available partial exemption, land & buildings, transfer of going concern, capital goods scheme, overseas VAT and registration/ group registration tend to be frequently examined. There will also likely be a couple of marks for stamp duty points if you remember to think about it in your planning! Finally, don’t forget your basic administration points are also likely to be examined – when do we need to pay tax, when do we file a return and what if either of those are late? AAA By now, you should have a good idea of what to expect – the most recent AAA exams have contained no real surprises, although you should be prepared for the look and feel of the 28

embedded email and supporting exhibits. If you are sitting the CBE there are resources you should access here. If you were planning to sit in June, you should check here for updates. AAA has the following syllabus areas: A. Regulatory environment. B. Professional and ethical considerations. C. Quality control and practice management. D. Planning and conducting an audit of historical financial information. E. Completion, review and reporting. F. Other assignments. G. Current issues and developments. Section A will comprise a case study, worth 50 marks, set at the planning stage of the audit, for a single company, a group of companies or potentially several audit clients. Candidates will be provided with detailed information, which will vary between examinations, but is likely to include extracts of financial information, strategic, operational and other relevant information for a client, as well as extracts from audit working papers, which could include the results of analytical procedures. The date will be set as 1 July 20X5. Candidates will be required to address a range of requirements, from syllabus sections A, B, C and D thereby tackling a real-world situation where candidates may have to address a range of issues simultaneously in relation to planning, risk assessment, evidence gathering and ethical and professional considerations. Four professional marks will be available in Section A and will be awarded based on the level of professionalism with which a candidate’s answer is presented, including the structure, layout and clarity of the answer provided. Section B will contain two compulsory 25 mark questions, with each being predominately based around a short scenario. There are no optional questions in AAA. One question will always test syllabus section E, and candidates should therefore always be prepared to answer a question relating to completion, review and reporting. There are a number of formats this question could adopt, including, but not limited to, matters to be considered and evidence expected to be on file, a going concern assessment, the impact of subsequent events, evaluating identified misstatements and any corresponding effects on the auditor’s report. Candidates may also be asked to critique

an auditor’s report or a report which is to be provided to management or those charged with governance. The second Section B question can be drawn from any other part of the syllabus, including sections A, B, C, D and F. Syllabus section G on current issues is unlikely to form the basis of a question on its own, but instead will be incorporated into the case study or either of the Section B questions depending on question content and the topical issues affecting the profession at the time of sitting the exam (for topical issues, see technical articles below). General advice on topical technical content and exam technique: The previous version of this subject regularly tested topical issues which were covered by the examiner’s technical articles (for example, the evaluation of misstatements in December 2017). There are also five exam technique articles that you MUST read covering ethics, risk, accounting issues, audit procedures and reporting. All of the examining team’s articles can be found here. You are strongly advised to keep referring to these articles in advance of the exam. AFM All AFM exams will have questions which have a focus on section B of the syllabus (Advanced Investment appraisal) and section E (Treasury and Advanced Risk Management Techniques). These syllabus areas are therefore high priority areas for your revision. Q1 (section A): We would expect section A questions to cover a number of different syllabus areas, emphasising the need to have a good broad knowledge of the syllabus (so you are strongly advised not to target your revision on a small number of syllabus areas). However, questions are often based on core syllabus areas such as: project appraisal (domestic or overseas), business valuations and business/financial reorganisations; these areas often include cost of capital calculations. Risk management may also feature in a number of different ways e.g. value at risk, real options, hedging, risk mapping. Q2–3 (section B): • Risk management (currency or interest rate). • Dividend policy and general financing issues. • Real options. General advice: The 50 mark compulsory question will, inevitably, draw from a number of different syllabus areas. The examiner has said that he does not plan exams by referring to past exams (i.e. checking that the whole syllabus is being tested over the course of a number of exam sittings). These factors mean that question spotting extremely difficult for this paper. Remember that this paper is not a maths exam – in all exam questions the examiner is interested in your ability to communicate well and to give good management advice that relates to the scenario in the question. Keep checking the ACCA website for articles written by the examining team in the lead up to the exam, these are often tested and are important to review. PQ Magazine September 2020

diversity PQ

Why women count

PQ magazine takes a look at the clear evidence that FTSE 350 boards still have a mountain to climb when it comes to diversity. And this inaction is hurting the bottom line! hen the financial year closed there were more FTSE 100 CEOs named ‘Peter’ than women leaders in these roles. This, say the co-founders of The Pipeline, is simply ‘scandalous’. Margret McDonagh and Lorna Fitzsimons point out that UK-listed companies are also much more profitable when women make up more than one in three executive roles. That means the British economy and shareholders have missed out on a gender dividend of £47 billion in pre-tax profits, enough money to keep the NHS running for a full five months. New research published in The Pipeline’s ‘Women Count 2020’ report shows where at least one-third of the bosses are female the profit margin of listed firms is a whopping 10 times that of those without. However, the report explains in the 350 biggest British plcs fewer than two in 10 CFOs are women, only 4% of investment managers are women, and just 5% are led by a female CEO. Former Prime Minister Theresa May says there can be no good explanation for the massive underrepresentation of women at the top of British business – so it must change. She said: “That needs buy-in from the top. Every single male CEO who looks around his boardroom table to see nine out of 10 male faces staring back at him needs to ask himself what he is doing to make his business one which his daughter or granddaughter can get on in.” Accountant Lord Bilimoria said gender diversity at the top levels of UK businesses requires ‘urgent attention’. While progress has been made with non-executive representation on boards, the same he felt could not be said on the executive side, where progress has remained slow. He went on: “The report shows how failure to develop and promote women into CEO or C-suite roles has

PQ Magazine September 2020

serious consequences, not least for profitability.” The reports executive summary picks four main themes, which are: Lost profits FTSE 350 companies that have executive committees with female membership of more than 33% have a net profit margin over 10 times greater than those companies with no women at this level. Companies with no women on their executive committees have a net profit margin of 1.5%, whereas those with more than 33% women at this level reached an impressive 15.2% net profit margin. The UK economy and shareholders have missed out on an additional £47 billion in pre-tax profit. This is how much money could have been gained if the companies with no women on their executive committees this year had performed with the same net profit margin as companies with more than 33% female membership on their executive committees. Going backwards on women leaders At the time of writing, there are just 13 women CEOs of FTSE 350 companies. That’s a mere 5% of company leaders. On the 17 April 2020 there were more CEOs named Peter (six) than there were women (five). Women CEOs are critical to driving gender diversity at senior levels. Companies in the FTSE 350 led by women have an average one in three people being women on their executive committees, which falls to an average of one in five for companies led by men. Chief Financial Officer (CFO) is another important company role where women fail to get to the top. Women enter finance in large numbers, but few make it to CFO. This year just

16% of CFOs are women. A broken springboard Executive roles containing a profit and loss (P&L) responsibility are considered to be key for future CEOs, yet in the FTSE 350 90% of P&L roles on executive committees are held by men and only 10% by women. A staggering 68% (over two-thirds) of FTSE 350 companies do not have a single female executive committee member in a P&L role, raising serious questions about the desire for positive change in so many businesses and the prospects for women seeking to make it to CEO. The story for men could hardly be more different with just 1% of FTSE 350 companies having no men with P&L responsibility on their executive committees. Worrying signs amid green shoots of progress The Pipeline welcomes the 2.7% increase of female membership on executive committees in the FTSE 350. Women now make up 19.8% of total executive committee roles, compared to men who make up 80.2% of these roles. We note most of this increase comes from the FTSE 250, as the increase of female membership on FTSE 100 executive committees has slowed to 1.4%. This year, it’s heartening to see more women in functional roles, for example in HR, begin to break through in larger numbers to top jobs. We also observe that those companies which are already good at promoting women are doing even better. Unfortunately, similar numbers of companies as last year remain all-male bastions, with 15% of FTSE 350 businesses refusing to have a single woman on their executive committee. As we’ve explained, we see no change to P&L roles or women succeeding to the top job of CEO. This is another generation of female talent lost. At the current rate of growth, we will miss another generation of female talent before we have any hope of parity. • Check out the full report at: https://www. execpipeline.com/wp-content/uploads/2020/07/ The-Pipeline-Women-Count-2020-FINALVERSION.pdf 29

PQ AAT exams

Cutting out the errors The Premier Training team can help you pass your AAT Foundation Certificate Synoptic assessment. So read on…

minute. Give yourself plenty of time and contact your tutor if you are unsure about something.

re you starting to worry because your AAT Foundation Synoptic assessment is approaching? Don’t panic, you are not alone. Marks are lost due to the simplest mistakes that can easily be avoided. A Synoptic assessment can seem daunting because it is seen as being ‘the big one’, but remember how far you have come already. You do have the knowledge, you can do this and you can gain your AAT Foundation Certificate in Accounting qualification. Here are some of the most common mistakes (and solutions) to bear in mind ahead of your assessment – and good luck!

5) Exam date Mistake: Booking an exam on a personal/ occupational busy day is not a good idea! Solution: Choose your exam date wisely and smartly. Ideally, an exam should be booked on a personal/occupational stress-free day.

1) Read the instructions and questions thoroughly Mistake: Lack of attention and not reading the instructions or questions properly. Solution: Make sure to read the instructions carefully. Don’t skim over; take your time and re-read them so that you are clear on what you need to do. Make sure you completely understand what the questions (tasks) are asking of you. Do not skip words, and do not assume that you know what the question is asking. Read and read again until you are absolutely sure of what you are being asked. Take your time to analyse the questions in front of you and remember to relate

your answer to the given scenario. 2) Communication skills Mistake: Communication skills not up to the required standard. Solution: Simply stating one word answers is not acceptable; you must back it up and explain or expand your answers. Remember that all the units are related; review what you have learned previously. Describe and explain your answer based on the scenario given. 3) Spelling and grammar Mistake: Poor spelling and grammar – students lose countless marks due to poor use of spelling and grammar. Solution: When you are happy with your answer, re-read it. Read it to yourself to ensure it makes sense and double-check your spelling. 4) Lack of revision Mistake: Lack of revision! Solution: Do not lose your knowledge. Review all previous units. Make sure your double entry bookkeeping is still fresh in your memory. Do not assume you will remember your earlier units and do not just focus on the areas of the course you liked. Remember to re-read your study materials; complete the practice questions again to refresh your memory. Do not try to revise everything last

6) Out of time Mistake: Running out of time by panicking and not time managing properly. Solution: Manage your time and keep calm. If you don’t understand a question – do not panic, move onto the next question and go back to it at the end. Use the marks available to help guide you on how long you need to answer a question. If it is only worth two marks then there is no point spending 10 minutes on a two-mark question. Keep your eye on the time but remember it’s not a race and the AAT have provided enough time to complete the exam in a good steady pace. 7) It is not a race Mistake: Rushing through the exam. Solution: There are no brownie points for finishing your exam in the quickest time! You must take your time and answer each question to the best of your ability. • These top tips were supplied by the Premier Training tutor team.

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PQ Magazine September 2020

Get a step ahead with Xero Advisor Certification Having a sound knowledge of cloud accounting software is invaluable in a competitive job market. Get the Xero Advisor Certificate and stand out from the crowd. To get started, speak to one of the education providers or accounting bodies â&#x20AC;&#x201C; ACCA, ICAEW, AAT, ICB, IAB, Kaplan, Avado, Premier Training, First Intuition, The Career Academy or Reed.

PQ VAT made simple

An introduction to VAT Rabia Rehman explains how value added tax works – and it’s probably a bit more complicated than you think it is… Difference between exempt and zero rated Zero Rated 0% • Children Cloths • Newspapers

VAT RATES

• Building Services for Disable People Std. Rated 20% • Petrol

Within Scope of VAT

Circumstance

Threshold

i. VAT registration

i. More than £85,000

ii. Registration for distance selling into the UK

ii. More than £70,000

iv. Less than £83,000

v. Completing simplified EC Sales List

v. £106,500 or less and supplies to EU countries of £11,000 or less

VAT rate VAT is levied on most goods and services provided by registered businesses in the UK and some goods and services imported from outside the European Union. The rates are: • Standard rated – 20% • Reduced rated – 5% • Zero rated – 0% • Exempt – 0% • Outside scope of VAT 32

• Domestic use of Electricity

Exempt 0% • Financial Services • Education • Insurance

Outside Scope of VAT

Non-tradeable • Wages • Bank Charges • Payment to HMRC • Voluntry Donation to Charity

Zero Rated:

Exempt:

• Zero-rated items are goods on which the Government charge VAT but the rate is currently set to zero

• Exempt items are goods on which no VAT is paid or charged, but which still need to be recorded on the VAT Return.

• E.g children’s clothes and footwear, water, basic foods, books and newspapers.

• E.g land, postal services, health services, betting and gaming.

Outside scope of VAT If something is outside the scope of VAT it means that VAT doesn’t apply at all. If you sell these goods and services, you won’t charge any VAT. If you buy them, there won’t be any VAT to reclaim. VAT INCLUSIVE

VAT EXCLUSIVE

Tax inclusive is the price including VAT

Tax exclusive is the price expressed without the VAT.

iii. Registration for bringing goods into the iii. More than £85,000 UK from the EU iv. Deregistration threshold

Reduced Rated 5%

• Elderly People over 60

VAT threshold The thresholds for registering for VAT or joining a VAT accounting scheme from 1 April 2017:

• Electricity, Heating, Gas

• Children Car Seat

alue added tax (VAT) was introduced in the UK in 1973. It is the third-largest source of government revenue, after income tax and National Insurance, and is administered and collected by HM Revenue and Customs. VAT registration Businesses with a turnover of more than £85,000 must register to pay and charge VAT on the products and services they buy and sell. Other businesses can choose to register for VAT voluntarily. When you register, you’ll be sent a VAT registration certificate. This confirms: • Your VAT number. • When to submit your first VAT Return and payment. • Your ‘effective date of registration’ - this depends on the date you went over the threshold, or is the date you asked to register if it was voluntary. You can register voluntarily if your turnover is less than £85,000, unless everything you sell is exempt. You’ll have certain responsibilities if you register for VAT.

• Taxi Fares

Exclusive VAT Inclusive VAT

INPUT VAT

OUTPUT VAT

• Input tax is the VAT paid on the purchases of goods and services

• Output tax is the VAT charged on sales or taxable supplies PQ Magazine September 2020

VAT made simple PQ VAT is payable or reclaimable

conditional sale or credit sale. • Importing goods from within the EU. • Moving goods outside a customs warehouse. VAT returns

Output Vat > Input VAT = Payment to HMRC Output VAT < Input VAT = Refund from HMRC VAT rates for EU The European Union’s VAT system is based on the destination principle. This means that VAT (only) must be paid to the government of the country in which the consumer who buys the goods lives. According to EU law, EU Member States are required to levy a standard VAT rate of at least 15% and a reduced rate of at least 5%. When a zero rate is applied no VAT has to be paid by the consumer but you still have the right to deduct the VAT you have paid on purchases directly (Europa.eu). What is the Cash Accounting Scheme? The Cash Accounting VAT Scheme is a method of reporting VAT on the basis of payments made or received. Usually, the amount of VAT you pay HMRC is the difference between your sales invoices and purchase invoices. With the Cash Accounting Scheme you: i. pay VAT on your sales when your customers pay you ii. reclaim VAT on your purchases when you have paid your supplier How to join • You must be eligible to join the scheme. • You join at the beginning of a VAT accounting period. • You don’t have to tell HM Revenue and Customs (HMRC) you use cash accounting. (Gov.uk) How to leave • You can leave the scheme at any time. • You must leave if you’re no longer eligible to use it, leave at the end of a VAT accounting period. • You must report and pay HMRC any outstanding VAT (whether your customers have paid you or not). • You can report and pay the outstanding VAT over 6 months. • If your VAT taxable turnover exceeded £1.35 million in the last three months you must report and pay straight away. • You must pay immediately if HMRC has written to you to withdraw your use of the scheme. Eligibility You can use cash accounting if your business is registered for VAT and your estimated VAT taxable turnover is £1.35 million or less in the next 12 months. You must leave the scheme if your VAT taxable turnover is more than £1.6m. Exceptions You can’t use cash accounting if: • You use the VAT Flat Rate Scheme – instead, the Flat Rate Scheme has its own cash-based turnover method. • You’re not up-to-date with your VAT Returns or payments. • You’ve committed a VAT offence in the last 12 months, for example VAT evasion. You can’t use it for the following transactions; use the standard scheme instead: • Where the payment terms of a VAT invoice are six months or more. • Where a VAT invoice is raised in advance. • Buying or selling goods using lease purchase, hire purchase, PQ Magazine September 2020

Box to be Completed

Box no.

Comments

VAT due in this period on sales and other outputs

Box 1

• Identify the total sales. • Calculate the VAT. • The total is divided by six. • Amount is then entered into Box 1.

VAT due in this period on acquisitions from other EC Member States

Box 2

• Box 2 is only used if items have been bought from other EC (European Community) countries. • The figure will be taken from purchases, not sales. • Multiply any purchases by the rate of VAT (20%). Often this box will be £0. The treatment of items included in this box may be affected by the UK leaving the EU.

Total VAT due (The sum of boxes 1 and 2)

Box 3

• Box 3 is the sum of Boxes 1 and 2. • It is automatically calculated when the return has been completed.

VAT reclaimed in this period on purchases and other inputs (including acquisitions from the EC)

Box 4

• The general rule is that VAT can be reclaimed by businesses on goods and services bought by the business that has been charged by the supplier. • As the business makes standard, reduced or zero-rate supplies, Box 4 is the amount of VAT reclaimed from purchases and other expenses (Input VAT). • If any acquisitions from EC member states were included in box 2, this amount must also be included.

Net VAT to be paid to HRMC or reclaimed by you (Difference between boxes 3 and 4)

Box 5

• Box 5 is the difference between boxes 3 and 4. • It is automatically calculated when the return has been completed.

Difference between Accrual and Cash Accounting Scheme Differences

Cash Accounting

Accrual Accounting

Meaning

Income and Expenses are only recognised through Cash

Income and Expenses are recognised when they are done (on the mercantile Basis)

Includes

Only cash expenses, Cash Incomes

All Expenses and All Incomes

Nature

Simple and Easy to understand

Complex and difficult to understand

Recognized By

Not recognised by Companies Act

Recognised by Companies Act

How accounting is done

When Cash is Received or Paid

When Revenue is earned or loss is Incurred

Focus

Liquidity

Revenue, Expense, Profit, Loss

Why Useful

We can quickly get how much cash the business generated (i.e. Net Cash Flow)

We can understand how much Profit or Loss a business has made during a Particular period

Holistic in Approach

NO, because it only talks about Cash

YES, because it includes all of the transactions

Which one is more Accurate:

Accuracy of Cash Accounting is Doubtful since it doesn’t take every transaction into Accounting

It is a more Accurate method of Accounting

PQ VAT made simple Pros and cons Advantages

Disadvantages

i. Using cash accounting may help your cash flow

i. If you buy a lot of your goods on credit this scheme can be a disadvantage as you cannot reclaim your input VAT until you pay your creditor.

ii. If your customers are slow payers as you do not pay your output VAT until you are paid

ii. If your VAT returns are usually reclaiming, this could mean you receive your VAT repayment later than under an accruals basis.

iii. If a customer never pays you, you don’t have to pay VAT on that bad debt as long as you continue to use the Cash Accounting Scheme.

iii. If you leave the cash accounting scheme, you will have to pay all outstanding VAT on bad debts. iv. In addition to keeping all required VAT records and accounts for standard VAT accounting, you must also retain full evidence and records of receipts and payments such as bank statements and cheque stubs, and paying in slips.

• Rabia Rehman is a VAT Trainer at FC Training

Facing the new realities Brendan McCarron explains the importance of commercial skills in an increasingly uncertain world

he world as we know it is changing – and we must do our best to adapt amid uncertain and challenging circumstances. Both austerity measures and Covid-19 have had an unprecedented effect on the public sector. In recent years it has become increasingly common to see local authorities engage in commercial activity to make ends meet, and as a result we see a demand for new skills from burgeoning public finance professionals. In understanding the skills necessary to combat the ambiguity we currently face it’s important to consider what has caused the trend towards commercialisation.

In the private sector, a commercial mindset is the number-one skill required by recruiters. The public sector is rapidly catching up in its demand for accountants with commercial skills and ramping up its commercial activities in the wake of Covid-19 in ways that were unheard of before. This trend towards commercialisation has occurred for a number of different reasons. The general downturn in the economy has given rise to competition between the private and public sectors, resulting in the private sector entering public sector markets that it would not have touched a few years ago. These private sector competitors are also using penetration strategies, such as price competition, to gain

market share and outcompete public sector incumbents. Another important factor to consider is the loss of income for councils in the wake of Covid-19. Revenue for local authorities from business rates has become less certain as local companies have been left in disarray during the lockdown period. As the public sector begins to recover from these challenges, it becomes increasingly necessary to possess the capacity to take on larger projects and work with more sophisticated customers. To gain a commercial mindset, the place to begin is understanding the business models that your organisation uses – in reality, what delivers the organisation’s value in policy and monetary terms? In order to operate in a more commercial world, an appreciation of essential marketing tools and basic skills like costing, forecasting and budget control are essential. In future, knowledge of how to use data to look for opportunities and unmet need will also become increasingly important. CIPFA offers a Diploma in Commercial Skills course that explores all of these issues, tailored for public finance professionals who are experiencing new challenges in the shift towards commercialisation. The course follows a similar format to an MBA – providing instruction on core techniques taught in business schools, such as strategy, marketing, commercial finance and operations. In an environment of increasing uncertainty and volatility, these competencies will become critical. While a strong background in commercial skills will be essential to your future career, it will also be useful for navigating the cultural shift that is currently taking place across the sector. In the past, many considered the public sector to be slow moving and resistant to change. But when Covid-19 hit, we were able to move mountains to bring the sector forward in response. If the same approach were taken in other areas, such as social services or flexible working, who knows what could be achieved? This begins by ensuring that future leaders have strong commercial skills and a desire to bring about change for the people in society who need it most. • Brendan McCarron, CIPFA Senior Consultant PQ Magazine September 2020

CIMA spotlight PQ

Keeping a sense

of perspective Stephen Flatman has 10 tips to kickstart your CIMA studies he Covid-19 situation has thrown so many parts of the lives we take for granted into disarray. As we worry about the health of our loved ones, many things we might have considered to be important suddenly appear less so, including our studies. However, if you feel ready to resume your learning journey but have lost the focus or motivation to do so, we can help. Given we are living through such disquieting times it’s important that you are sure you’re fully ready to pick up your studies. Of course, there are lots of reasons why you might have lost motivation to study – not necessarily Covidrelated. If so, this article will also help you. We polled some of our students to find out how much the pandemic had affected their studying. Some 52% told us they’d lost concentration, and 30% reported that their progress has slowed. When we asked them what they thought was the reason their progress had slowed, more than two-thirds

PQ Magazine September 2020

said they were struggling to balance work and studying from home. Although this is understandable, it is also surmountable – your career depends on you doing that. Remember, in the current jobs market where uncertainty is the norm, having a professional qualification such as CIMA is still a key differentiator for employers. You owe it to your future to keep on the journey you started. So what can you do to help yourself? Let’s look at what we can do to beat two of the main challenges – motivation and concentration. Motivation 1. Remind yourself, using positive framing, what you’re hoping to achieve by taking this course. So “I want to get a job promotion” rather than “I don’t want to be stuck in this job forever”. 2. Is achieving this objective within your control? What can you do to ensure you put yourself in the best position to reach your goal – accepting that some things (such as passing

the exam itself) may to a certain extent be outside your control. 3. What will you gain and lose as a result of this: gain new knowledge, better competence, confidence; lose some of your free time. 4. If one of your reasons for not resuming your studies is “it’s not the right time”, try asking yourself “If not now, when is the right time”? Realistically, what are you waiting for (if anything)? 5. Write these down – you’ll find that seeing the words on paper seems to make this abstract thinking concrete. Concentration 1. Reduce distractions when studying – for example, don’t have your mobile phone within eyesight and switch off audible alerts. 2. Have clearly defined targets. 3. Relax and stay calm – a frazzled brain is less receptive to storing information because it’s in survival mode, concentrating on the fundamental things it needs to do to keep you alive. 4. Try de-stressing, taking slow, deep breaths, or maybe going for a walk. 5. Avoid too much stimulation (not too much tea or coffee!). If you want to find out more, you can discover other tips to help you get going at https://bit. ly/2DrlRxB • Stephen Flatman, Vice President, Examinations, Management Accounting, The Association of International Certified Professional Accountants

PQ advanced tax If there is no accounting period ending in the second tax year, tax the profits from 6 April to 5 April in the second tax year. Rajiv starts trading on 1.1.2022 and prepared accounts 30 June. His first two periods are as follows 1.1.2022 – 30.6.2022 £24,000 profits 1.7.2022 – 30.6.2023 £36,000 profits The first tax year is 21/22 Tax actual profits from 1.1.2022 – 5.4.2022 24,000 x3/6 = £12,000 The second tax year is 22/23 The accounting period ending in the second tax year is 30.6.22 which is just 6 months in in length so tax the first 12 months of trading Tax 1.1.2022 – 31.12.2022 £24,000 + 6/12 x £36,000 = £42,000 The third tax year is 23/24 The accounting period ending in the third tax year is 31.12.23 which is 12 months in length so tax under CYB

CYB opening year rules: keep it simple

Tax 1.1.2023 – 31.12.2023 £36,000 Rajiv has overlap profits of £12,000 + 6/12 x £36,000 = £30,000 which are deducted from the final year’s assessment. Emma starts trading on 1.1.2022 and prepared accounts for the 18 months to 30 June 2023.

Neil Da Costa explains a subject that causes many students problems in the exam hall

Her first period was as follows

n this article I am going to show you how to ‘keep it simple’. Having been an Advanced Tax lecturer for more than 20 years I am fully aware of which areas strike terror into tax students’ hearts. These areas feature regularly in the tax exams and by ensuring you understand them, you can be confident of earning these marks in the question. Here, I will be explaining the current year basis opening year rules using simple examples. The bedrock for taxing self-employed individuals is the current year basis or CYB. Under CYB, the profits taxed are those of the 12-month accounting period ending in the current tax year.

The first tax year is 21/22

Alina has been trading for many years and prepares accounts to 31 December. For the year end 31 December 2022, she has taxable profits of £50,000. In which tax year will these profits be taxed? 31 December 2022 falls into the tax year 22/23 and the accounting period is 12 months in length so Alina will be taxed on £50,000 profits in 22/23. These profits are subject to income tax and national insurance. When a sole trader starts trading, the assessment for the first tax year is always based on the actual profits from the date of commencement to the 5 April of the first tax year. The second tax year is more technical, and this is where the confusion sets in. The rules for the second tax year are based on the length of the accounting period ending in the second tax year. If the accounting period is 12 months in length, 36

the assessment is based on current year basis. The third tax year is almost always based on the current year basis. Amobi starts trading on 1.1.2022 and prepared accounts 31 December. His first two periods are as follows: 1.1.2022 – 31.12.2022 £24,000 profits 1.1.2023 – 31.12.2023 £36,000 profits The first tax year is 21/22 Tax actual profits from 1.1.2022 – 5.4.2022 24,000 x3/12 = £6,000 The second tax year is 22/23 The accounting period ending in the second tax year is 31.12.22 which is 12 months in length so tax under CYB Tax 1.1.2022 – 31.12.2022 £24,000 The third tax year is 23/24 The accounting period ending in the third tax year is 31.12.23 which is 12 months in length so tax under CYB Tax 1.1.2023 – 31.12.2023 £36,000 Amobi’s profits for the first three months of £6,000 have been taxed twice. These are called overlap profits and are deducted from the final year’s assessment. CYB can only be used for the second tax year if the accounting period is 12 months in length. If the accounting period is not 12 months in length, then special rules apply in order to tax 12 months in the second tax year. If the accounting period is less than 12 months, tax the first 12 months of trading. If the accounting period is more than 12 months, tax the last 12 months of trading.

1.1.2022 – 30.6.2023 £72,000 profits

Tax actual profits from 1.1.2022 – 5.4.2022 £72,000 x3/18 = £12,000 The second tax year is 22/23 There is no accounting period ending in the second tax year so tax the actual profits of the second tax year Tax 6.4.2022 – 5.4.2023 £72,000 x12/18 = £48,000 The third tax year is 23/24 The accounting period ending in the third tax year is 30.6.2023 which is 18 months in length, so it is not possible to tax under CYB As the accounting period is more than 12 months, tax the last 12 months of trading 1.7.2022 – 30.6.2023 £72,000 x12/18 = £48,000 Emma’s overlap profits are 1.7.2022 – 5.4.2023 which are 9/12 x £72,000 = £36,000. An easy method of computing overlap profits is as a balancing figure. Profits taxed are £12,000 + £48,000 + £48,000 = £108,000 The actual profits are £72,000 Overlap profits are £108,000 – £72,000 = £36,000 Both methods for computing overlap profits are acceptable in the exam. You have now mastered the basics of CYB opening year rules and will be able to approach exam questions without trepidation. • Neil Da Costa is a senior tax lecturer with Kaplan PQ Magazine September 2020

disruptive technologies PQ

The white heat of technology Ken Garrett explains how technological change is rapidly creating a new business landscape disruptive technology is one that displaces an established technology and revolutionises an industry, or creates a completely new industry, usually rapidly. Contrast this to more gradual and predictable change, which well-run businesses will adapt to as they formulate their strategic plans. For example, record labels kept pace as sound technology moved from vinyl to cassettes to CDs. Fundamentally, the products and their delivery were the same. iTunes, Spotify and other streaming services are usually classed as disruptive technologies: there is no physical product to be distributed, record stores are not needed, customers can buy single tracks rather than a whole album. Bands now make most of their money from touring rather than selling physical products. There can be arguments about which technologies rank as disruptive rather than merely being a substantial step in the development of an existing product or service. But these arguments are largely academic and do not necessarily help established businesses to survive technological trauma. In addition to music example above, examples of disruptive innovation typically include the following: • Netflix – video by the Internet replaced buying or hiring DVDs.

PQ Magazine September 2020

• Skype – telephone calls and video calls over the internet replaced expensive conventional telephone technology. • Zoom and Microsoft Teams – interactive meetings replace (or will replace) much office space, business travel and business hotels. • Digital photography – largely replaced conventional film. • Additive manufacturing (3D printing) – small volume production and prototypes can be made cheaply. • Electric vehicles – replace petrol and diesel power. • Challenger banks – companies, such as Revolut and Monzo, challenge traditional clearing banks by being entirely online, greatly reducing their operating costs. • Blockchain technology – a way to hold information securely so that it can be added to but not changed retrospectively. For example, recording who owns land, securities or gold. The technology also allows the creation of cryptocurrencies such as Bitcoin. • DNA analysis and gene editing – increasingly used by pharmaceutical companies to design tailored products for individuals or to try to replace defective genes. You will see that many disruptive technologies arise from digital innovation.

Many disruptive innovations have important consequences for whole business ecosystems (suppliers, customers and related industries) and not just for the industry that is immediately affected. For example, electric vehicle technology will affect: • Vehicle manufacturers. • Component manufacturers. • The petrochemical industry. • Mining (more metals needed for batteries but less metal needed for catalytic converters). • Filling stations – recharge points rather than fuel tanks and pumps. • Garages – different skills needed to repair and service vehicles. • Renewable energy production to provide pollution-free electricity. • Car parks – might have to install charging points to attract customers. • Recycling industries – very different material to recover and recycle. When a disruptive technology appears, industry incumbents react in a number of ways: • They try to ignore it and tell themselves that it will have no future. Of course, this might work – not every piece of disruption is going to be successful – but the decision to ignore must be taken after properly reviewing the opportunities and threats presented by the new technology. • They try to fight it. For example, music companies fought digital streaming until they realised that it would happen illegally anyhow so they might as well embrace it and earn from it. • They recognise the threat but are slow to act. For example, Kodak did recognise that digital photography threatened their (very good) products but they underestimated the speed that it would take over. • They try to carve out a distinct niche where the old technology is still preferred. For example, there is still a market for vinyl music recording. • They accept that the new technology will sweep the board. For example, the Encyclopaedia Britannica stopped publishing sets of printed books after 244 years. The internet and sites such as Wikipedia mean that continuously updated, authoritative information is now freely available online. (Encyclopaedia Britannica is still available online as a subscription service, but many users think that the free Wikipedia is better because of rapid updates – though it can be susceptible to inappropriate editing.) It is tempting for businesses to ignore, fight or react slowly to disruption. Their current operations allow good profits, good dividends for shareholders and comfortable bonuses for management: then along comes a pesky disrupter who threatens all of that. This is also why existing businesses are not normally the ones to promote disruptive technology: why kill the goose that lays the golden egg? However, failure is the likely outcome for companies that react to disruptive technologies by attempting to suppress them or by ignoring those promoted by emerging companies. • Ken Garrett is a tutor at Open Tuition 37

PQ ACCA Strategic Professional is interest free and from local government it represents financial assistance. It is a government grant (IAS 20). The initial recognition of the liability will be at fair value (IFRS13) and determined as the present value of the future cash flow. This will be less than the monies received. But I digress into the detail of SBR.

Six of the best SBR guru Tom Clendon has some top tips for tackling ACCA Strategic Professional CBE

his September sees students in the UK and Ireland – and in many other countries across the world – sit their Strategic Professional exams as CBE. So here’s my tips on passing this tough paper

to the requirements of the question to the information in the exhibits. That way when it comes to starting to answer the question you only need to study the information that is relevant

Tip one Fail to prepare for CBE and prepare to fail! ACCA have laid on some fantastic resources to enable you to prepare and become familiar with the CBE environment. Becoming familiar with test reach and the practice platform is like learning to drive. It is kinaesthetic. This means you have to do it, not just read articles in PQ about it!

Tip three Reflect. The information that you’re given in a question will be given for a reason. So reflect on why you have been given it. For example, in SBR you may be told that the company has obtained an interest free loan from the local government. The first reaction is that the company has a financial liability that is accountable under IFRS9 Financial Instruments. But why are you told it is interest free? Why are you told that the loan is provided by the local government? Both of these facts are relevant in understanding the accounting treatment. Because the loan

Tip two RTFQ – read the full question. Yes that’s right, the FULL question! This means reading the requirement first and then skim reading the exhibits. You should notice a direct correlation

Tip four Is it time or knowledge that is holding you back? I wonder what the limiting factor is that could prevent you from passing the exam. Is it time or is it knowledge? Many students who don’t pass just don’t answer enough of the exam to earn a pass. So is that they don’t have the knowledge or don’t have enough time? If you were given five hours or six hours to do the exam would you feel confident of passing the exam? If the answer is no then you are not ready for revision and need to study and gather more knowledge. If the answer is yes, then you are ready for revision and the only thing between you and actually passing the exam is doing questions and practising time management techniques to make sure you reach your potential. Ideally, you get your questions marks so you can improve by reflecting on the feedback and feed forward given to you. Tip five Improve your time management. The numberone piece of advice that I can give you is to do exam questions to time and using the test reach practice platform. You should also be aware in your planning process how long you should be spending on each question. I recommend that for a 10-mark question it should take you 18 minutes. It is always easier to earn marks at the start of the next question than to extract the last mark out of the previous one. It is therefore necessary to be ruthless and to move on when you have finished spending the requisite amount of time on a particular question. But, I repeat, the best way to improve your time management is to do exam questions to time. Tip six Register for the free webinar. ACCA is holding a free webinar to support students who are sitting SBR as a CBE exam in September. This webinar will take place on 17 August 2020 at 11.00 am (UK). To register or to access a recording click here. • Tom Clendon is an ACCA SBR guru and lectures online for FME Learnonline. Go to www.tomclendon.co.uk

Registered Tuition Provider

PQ Magazine September 2020

ACCA APM exam PQ

Interpreting variances What do you need to know about the ACCA’s APM paper? Geoff Cordwell is just the man to tell you ariances were added to this syllabus a good few years ago and we have had a couple of questions since then, but there are still a number of juicy areas for the examiner to go at. Variance calculations tend to be examined in the management accounting and performance management papers lower down in the ACCA’s scheme and so the examiner is much more likely to ask you to consider interpretation of variances (Cortina M/J 2019) or ask you to comment on flawed variance calculation systems (Godel Jun 2014). This is in keeping with the high level of this paper and the long-standing desire of the examiner to deliver accountants to the market that can evaluate existing systems and encourage change for the better in performance management systems that they come across. The question then becomes, I suppose, what sort of things go wrong in businesses that do use variance systems? Since, if we understand that, then we have a better idea of what type of exam question we might face in this examination. Equally, we might have a better idea of what to look for in our own employer’s systems when it comes to flawed variance reporting. Let’s consider these systems of variances. In each case the existing system is described in italics and a second paragraph to explain what is wrong and what needs to be done.

Example 1 The budget for a fruit grower is produced late in the previous year and the total cost is divided by 12 to get a monthly budgeted cost. This is then compared to the actual cost each month to get a variance. The main issue here is poor budget profiling (or spreading). Surely this business is seasonal? This method of profiling will result in some months with favourable variances and some with adverse variance regardless of the quality of the actual performance. This completely undermines the budget and variances process. PQ Magazine September 2020

Example 2 The budget for a meat importer is raised for the inclusion of an assumed exchange rate. Each month the original budget is compared to the actual cost and a variance calculated. The meat buyer’s performance is assessed from these numbers once a variance is calculated. The main issue here is the problem with exchange rates. Exchange rates are a factor outside the control of most buyers and indeed most businesses. Factors outside the control of the responsible person should be formally adjusted in a “revised budget” splitting out the “planning error”.

Total Variance

Planning Variance

Operational Variance

Shows financial affect of factors outside our control

Shows financial affect of factors within our control

Example 3 The budget for delivery costs in a postal business is set using standard costs and predicted delivery volumes. This budget is not adjusted for delivery volumes actually achieved as “The budget is the budget” as they say in this business. These are then compared to monthly actual costs to show the variance. Delivery volume

Standard cost

Budget

21,000

$5 per delivery

Actual

24,000

Variance

Budget $105,000 $116,000 ($11,000) ADV

The issue here is that this implies that the budget is not adjusted for actual delivery

volumes. This is known as not “flexing” the budget. Had the budget been flexed the flexed budget would have been: 24,000 x $5 = $120,000 and a favourable variance of $4,000 would have resulted. This error is surprisingly commonplace in businesses and can be very misleading and demotivating for the staff being assessed. Example 4 The business had a responsibility accounting system whereby all variances are allocated to those responsible for that area. For example any material price variance is allocated to the buyer and any material usage variance is allocated to the production manager. This is not varied from month to month for consistency purposes. In March the buyer bought poor quality and hence cheaper material. This was all used in production. The Material Price Variance was $5,000 Fav and the Material usage Variance was $8,500 Adv. This has its positives. Variances should be allocated to responsible individuals. This makes it clear exactly who is responsible. However there is a dependency issue. The actions of the buyer may have directly influenced the performance of the production manager and that is unfair. Poor quality materials can be more difficult to use or result in more waste. This issue would need resolving, possibly by the reallocation, after due investigation, of some or all of the material usage variance back to the buyer. When preparing for this paper think hard about what is wrong with traditional systems and form an opinion. It is very likely that you could be asked to evaluate a system in the APM exam so you should prepare for that. • Geoff Cordwell is an ACCA APM Online Tutor with FME Learn Online. Go to www. geoffcordwell.com 39

PQ personal development

Points of view Pantelis C. Fouli explains the importance of personal development to your career prospects

xams are over, summer time is here, and it’s time to kick back, or at least put the accountancy books aside and take stock. It has been a challenging year to date, we have won many battles and we have learnt from the setbacks. Working on one’s personal or selfdevelopment should be a priority for anyone and it’s during these times of reflection and evaluation that personal development should be practised to expedite our growth and continue on this wonderful journey we call life.

What is personal development? Personal development focuses on developing yourself to grow more, become more and have more. And there are many ways to develop: it could be reading a book on finances, where you learn how to save or invest money, or a book on how your mind works and why it’s so powerful. Why should we do personal development? Everything starts in the mind, with a thought. If you want to grab a glass of water you first have to think about drinking water, and then think about getting up, walking to the kitchen to grab a glass, etc. If everything starts in the mind – from 40

the way we talk, to the way we handle people, to the way we do business – then developing that mind with the right thoughts and feelings is of course crucial. Besides, if personal development focuses on changing the way you think, act and behave in a positive, new way, it means your results will also improve positively. That means that if you don’t have the results you want, and it does not matter in what aspect of your life, you should do personal development every day. Personal development truly does make a difference. Not if you only do it for a couple of days, but if you are persistent with it can literally bring magic into your life. What’s has personal development taught me? Perspective: Stand two individuals opposite each other and ask them to tell you what they see. Each of them will give their own perspective on how they view the world. I am sure we have all seen this before, but have we actually taken the time to take stock and evaluate how it applies to our own life? Perspective is how we see the world, our own reality. It’s unique to us and us alone. But is our reality the only one that exists? Absolutely not.

Every person has their own realities, whether it’s job positions or people in general. These positions and perspectives are based on our reality. We live in a professional world that moves fast and where people do not always take the time to step back. Leaders often confuse their perspectives with reality and have difficulty truly understanding the point of view of others. A perspective is not right or wrong by default. It just is what it is: the point of view of a single person based on their life experiences and values, among other things. We each have one; sometimes we share it with others, and sometimes we do not. I would like to leave you with these questions to ponder on. Our perspectives shape how we act or react in a situation. Grasping the concept of perspective is important to the next stage of your personal development as the leaders of tomorrow. So ask yourselves these questions: 1. What could be different in your leadership if you chose to be more generous in your interpretations of perspectives? 2. What could be different in your personal leadership if you could better take, seek and coordinate perspectives? • Pantelis C. Fouli is ACCA qualified and an ACCA Advocate and student mentor. For anyone wishing to get in touch with me, connect with me via LinkedIn (https://www.linkedin.com/ in/pantelisfouli ) but please mention in the personal message that you are a PQ reader PQ Magazine September 2020

careers PQ

Dear Karen

Life at Dumfries & Galloway Council

Ask PQ’s very own agony aunt Karen Young when you need advice from a real expert. Email your dilemma to graham@pqmagazine.com, and he will pass on the best ones to Karen

Ross Fraser is a finance officer working in Treasury and pensions. He qualified with CIPFA in December 2019. He also walked off with the NQ of the Year prize at the PQ awards in London’s Café de Paris in February.

THE DILEMMA Having worked remotely for the past few months during lockdown I feel like I’ve gone from being an integral member of my team to barely visible and struggling to gain recognition for my work. As we look set to be working remotely for the near future, do you have any advice on how to get noticed? KAREN’S RESPONSE It’s not uncommon to be struggling for recognition as the world of work has changed for practically everybody, even those not based remotely. I’ve got some tips on staying visible which I think should help, but the key thing to note while working remotely is that you will need to actively keep in touch with your manager and colleagues, even if at first it might feel like you are overcommunicating. I’d recommend starting by making some diary changes with your manager. Although they should have oversight of your tasks and responsibilities, slotting in some regular times to talk will give you more opportunities to discuss your work, priorities for the day, week or month, your achievements and, on a longer-term basis, your career goals. Use this time to seek feedback, as this will give them the opportunity to acknowledge your efforts. And express interest in upcoming projects so you are more likely to be put forward for a leading role. Aside from your manager, it’s important that you feel noticed and valued by your team. Meetings are a prime opportunity for this even if they are held virtually. Before each meeting, think about what your purpose and value might be, as this will help you identify opportunities to participate and speak up. Take a few moments at the beginning and end of each meeting to catch up with your colleagues less formally and build rapport. Finally, keep developing your wider network. Virtual coffee mornings, online industry events and an active LinkedIn profile will help you put your name out there and gain some visibility with a wider network of professionals. • Karen Young is a director at Hays. She is passionate about helping people to find the right job, and companies to find the right person PQ Magazine September 2020

What time does your alarm go off? 7am Monday to Saturday, never on a Sunday. What is the first thing you do when you get to your desk? Read the daily emails from the Local Government Information Unit, the Treasury and pension advisors. What’s on your desk? Due to home working more clutter than when I am in the office. What’s the best thing about where you work? Currently, the walk to work takes one minute, but normally it’s the buzz of an open plan office. Where’s your favourite place for lunch? I make my own lunch. What can you see when you sit at your desk? At home the car park for the local prison, in

the office the car park for a vet. Which websites are your favourites and why? Twitter for breaking news and Instagram for pictures. Which websites do you use for work? BBC News, LinkedIn, other councils, Google – the usual suspects. How many hours a week do you spend in meetings? About five or six. What time do you leave the office? Usually 4.30pm–5pm, but on a Thursday it’s 3pm for golf. How do you relax? Golf in the summer, curling in the winter, the gym and seeing my friends. What’s your favourite tipple?

Jack Daniels and Coke. How often do you take work home with you? Everyday right now! But in normal circumstances very rarely. What’s your favourite TV show? The West Wing Summer or winter? I like being outdoors in all weathers so I’m going to say both. Pub or club? Pub. Who is your hero? Bruce Springsteen. What is the first thing you are going to do when lockdown is over? Spend some quality time with family and friends that I’ve not been able to see since the middle of March. If you had a time machine where would you go? The time of the Industrial Revolution, when change really happened.

phrases thrown in. In the original advert applicants were told they should have ‘a background in an industry or similar setting’. The new one talked about ‘joining a close-knot team with a family feel’. There was also a promise of a mentor. Women applications rose from 8% to 46% of the total.

mental health over the past three months, says new research from CV-Library. Job security appears to be the biggest concern, with 54% of accountants worried about not being able to find a new job. A third (37.5%) of respondents are also worried about losing their job. But some 58.3% of those surveyed said their employer is doing enough to support their mental wellbeing. But that leaves 41.7% who aren’t!

In brief Avoid ‘masculine coding’ If you want to hire more women it may be time to cut out words like ‘confident’, ‘competition’ and ‘champion’ in your job adverts. Thames Water used these words in a recent ad and found the overwhelming applicants were male. Using an online tool the company found that the job had inadvertently been ‘masculine coded’. It was rewritten in a more neutral tone, with a few feminine-coded

Mental health worries One in three (38.6%) of finance professional admit that they have struggled with their

The PQ Book Club: books you should read Why We Do What We do: Understanding Our Brain to Get the Best Out of Ourselves and Others by Helena Boschi (Wiley, £14.99) The human brain today is always on. Technology sees to that. Everything is instant, which is both a good and a bad thing. So what does Dr Helena Boschi tell us about it all? Well, men’s brains are, on the whole, 10% to 12% bigger than women’s. But the doctor stresses a big brain does not necessarily mean a more intelligent brain. A human brain, for instance, weighs 1.3–1.5kg, and an elephant’s is 5kg. You should also remember all brains begin life as female!

Chapter 3 is all about ‘our brain and memory’. The big tip here to take away is – sleep! If you aren’t getting enough, short naps of between 10 and 30 minutes during the day will boost and restore brainpower. Exercise protects the neurons from damage too, increasing oxygen-rich blood flow to the brain. Diet is another key factor, you need to eat your fish – salmon, mackerel and tuna. Green tea and walnuts should also be on the menu. Boschi asks the question we all want to ask – is the internet making us stupid? The answer seems to come back as ‘yes’. Digital amnesia tests show 90% of us cannot even remember our

children/ partner’s phone numbers. We also seem to be losing the ability to reflect, deliberate and associate – all skills our memory needs to encode and store for later retrieval. PQ rating 5/5 What the author wants is for us to respect our brain’s power as well as its limitations, nurturing it with healthy habits and, above all, with genuine laughter and joy. This book’s simple layout, use of graphs and top tips made it a joy to read. 41

PQ got a story, funny or serious, you want to share? Email graham@pqmagazine.com

Five more ‘crazy’ taxes There’s been a beard and a hat tax, but they are no more. We gave you five defunct taxes last month, and here’s five more whacky taxes that have fallen by the wayside: • Window tax, introduced in 1696, was in effect a wealth tax. Certain exemptions were given, particularly dairies, cheese rooms and milk houses, as long as they were clearly labelled. This was not a popular tax, as it was seen as a tax on ‘light and air’. You can still see the bricked-up windows on some old buildings, too. The tax was repealed in 1851. • Playing cards were taxed as early as the 16th century. Then in 1710 the English government dramatically raised taxes on cards and dice. Forgeries became widespread, and the tax wasn’t removed until 1960. • In 1660 fireplaces became taxable. People bricked them up to avoid paying the tax. This one was repealed in 1689. • King Henry I (1100-1135) allowed knights to opt out of their duties to fight in wars by paying a tax called ‘scutage’. King John raised the rate 300% and started charging it to all knights in years in which there were no wars. Some say this excessive tax was a contributor to the call for the Magna Carta. • In 1795 William Pitt the Younger introduced a tax on aromatic powders that men and women put on their wigs. It was the equivalent to £30 a year in today ‘s money and the records show that it led to a marked decline in wig wearing – or was that just changing fashions? Thanks to New Forest Tax Accountants for the list.

Half of UK emissions created overseas Half of the UK’s carbon footprint now come from emissions released overseas to produce imported goods, says a report from University of Leeds. Emissions from making products such as clothes, food and electronics imported into the UK are currently counted as the responsibility of the manufacturing country, and are not included in UK official statistics. These hidden emissions accounted for 46% of the overall carbon footprint last year. Concern is mounting that the UK’s commitment to becoming carbon neutral by 2050 excludes emissions from producing imports.

’ WEV E

Getting qualified can be tough. With all the talk of space travel one creative ACCA PQ on Facebook couldn’t resist linking their study travails to another world...

World’s richest man The world’s richest man, Jeff Bezos, just can’t stop getting richer! On Monday 20 July his vast fortune jumped by £13 billion – in one day. Bezos’ 11% stake in Amazon has surged, with estimates that his fortune has risen $74 billion since the start of the year to $189.3 billion. That’s a net worth exceeding Qatar, with its GDP put at $183 billion. Bezos’ ex-wife, who was given 19.7 million Amazon shares as part of the divorce settlement, is the 13th richest person in the world.

Fat cats are… fat!

There is a direct link between high body weight and corruption, according to a study by Montpellier Business School in France. Researchers took frontal face images of 299 cabinet ministers in 15 post-Soviet states and used a computer algorithm to estimate their body-mass index. The study claims greater average weight for each cabinet ‘highly correlated’ with greater corruption in their countries, as calculated by Transparency International, the World Bank and the Index of Public Integrity. The study concludes that obesity can be a measurable indicator of ‘grand political corruption’ when information of officials’ actual expenditure is unobservable.

Baby names need tax agency approval Choosing a child’s name can be taxing – in Sweden it is more so, as it has to be approved by the tax agency before they turn five. If a parent fails to do so they face a fine of up to £610. The law is not an old one; it was introduced in 1982 to prevent citizens using offensive and confusing names (and royal ones). So, what names have been rejected? Well ‘Ikea’ didn’t make it past the adjudicators, nor did ‘Brfxxccxxmnpcccclllmmnprxvclmnckssqlbb11116’. That one was a protest about the law! Another agency member must have been at work when ‘Lego’ and ‘Goggle’ were approved.

GOT THE L OT

Mindfulness puzzle Dr Gareth Moore’s ‘The Mindfulness Puzzle Book’ giveaway in June was so popular we have three more copies to give away this month. The idea is to provide you with relaxing puzzles to de-stress and unwind. The new owner of this book will literally feel the tension release as they focus on each achievable and fun task, and experience the endorphin reward buzz as they successfully complete each puzzle. Well, that’s what the blurb says on the book cover! There are adult versions of dot-to-dots, mazes and even colouring and spot-the-difference puzzles. To be in with the chance to win this great prize email ‘Puzzle Book’ to giveaways@ pqmagazine.com. Remember we need your name and address so we know where you want us to send the prize.

Learn to love tax How are we going to pay for the pandemic? Our debt is currently running at 100% of GDP, and some say we’ll have to raise taxes to pay this debt off. Well, we have a t-shirt for that! In fact, we have just two ‘I love tax’ t-shirts left in the box (both large), and one could be yours. To enter this great giveaway send your name and address to giveways@ pqmagzine.com. Head up your email ‘I love tax’ 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 11 September. The main draw will take place on Monday 14 Septmber 2020.

TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM 42

PQ Magazine September 2020