PQ magazine, October 2016

October 2016

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CONTENTS

News 08ACCA exam feedback What you thought of the recent exams 10CIMA guide Institute tells you how many hours you need to put in to pass each paper 12The workplace Is automation a threat to services jobs?

13Making Tax Digital ATT has concerns over HMRC initiative Features, etc 06Mind your Ps&Qs Getting a worklife balance; our numeracy gaff; and pass rates compared 14New CIMA CEO We spoke to new chief Andrew Harding about the challenges ahead 17ACCA round-up What not to write in an exam; top tips; and we review the annual report

18CIPFA spotlight Calculating

the weighted average cost of capital; plus ACCA F1 in focus

22Let’s get technical Goodwill and how to account for it

30Tax exams Meet an ATT

prizewinner; and how to pass the CTA advisory exams 32Intangible assets Why changes to reporting are needed 34Careers #1 Top advice on how to ace that appraisal 35Careers #2 Life at PwC, social media stuff and our book review 38Fun stuff The wacky side of life; and our great giveaways The columnists Robert Bruce The crazy world of US litigation 8 Prem Sikka Financial reporting is losing its relevance 10 Carl Lygo Team GB proves that success is no lottery 12 Subscribe to PQ magazine It’s FREE – see page 37 or go to www.pqmagazine.co.uk ABC July 2015 – June 2016

32,238

24Cover story We launch the PQ Awards for 2017 – exciting!

26International standards The threats to sustaining the planet

27Premier crew We visited the award-winning college

28CIMA F2 Tackling the long-

term finance and WACC sections

29CIMA’s Objective Tests

Take our three-step approach and you are sure to get a pass

It’s PQ Awards time!

October 2016

ublisher’s statement: We send a digital issue of the magazine to an additional 8,908 requested readers Free to all accountancy students Annual subscription: £35 (£50 overseas)

We have a jammed-packed PQ magazine for you this month.

We are now ‘open’ for nominations for our PQ Awards 2017 – it really is your time to shine! If you feel awards are not for you then we want you to think again. There are lots of categories, some 17 the last time I looked. And if you get shortlisted in one of them you will be heading to London and the legendary Café de Paris for our special red-carpet awards night. So how about getting together with your colleagues and nominating yourselves for our ‘Accountancy Team of the Year’? Come on, who doesn’t want to win one of our coveted ‘PQs’?

CIMA working hard CIMA has been busy trying to improve the student experience. It has released a real student script for the strategic case study (a managerial and operational script is coming very soon). With the help of Peter Stewart we can also provide the complete study hour guide per CIMA OT paper (see page 10). For example, if you put in 150 hours over 13 weeks CIMA is saying you should pass P1! Now that’s the sort of ‘real’ information PQs want. On top of feedback for the September exam sitting we have also marked the ACCA annual report out of 10, and we found it to be a real winner (see pages 8 and 17). We also discover what would happen to you if you wrote “ACCA is a bloodsucker” (and a bit more) on your exam paper.

An honest man One of my favourite articles in this issue (page 30) is about ATT prizewinner Lewis Richardson (pictured). He believes that you shouldn’t change anything about your lifestyle to fit revision in. So how does he do it? Well, instead of spending time slumped in front of the TV he revises instead. What a refreshing approach from Lewis. He certainly has created the right balance to achieve success and still remain human!

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

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Paul has an in-depth knowledge of the ACCA syllabus and almost two decades of teaching experience, using analogies and examples to keep students interested in the subject.

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PQ have your say

email graham@pqaccountant.com Get the balance right Your article ‘Still studying five years on’ (PQ, September ’16) suggests a negative comparison with those bodies that have a low percentage of students still studying after five years (“the ICAEW and ICAS don’t have this problem”). Perhaps the ICAEW doesn’t have this ‘problem’ because many of the training contracts under which students study have a ‘pass-or-sack’ condition attached. A good motivator, I’m sure, but perhaps not suitable for the everyone who wants to be an accountant.

My take on these figures is that

it is partly a reflection of accountancy moving away from being a career choice for the elite,

of the privileged, to being a more open profession – something PQ seems to argue for.

I started my ACCA qualification in December 2008 and am due to take my last exam in December 2016. During that time I have seen my two children grow from toddlers to starting secondary school and I have managed to spend much of their childhood with them.

In addition, my relationship with my wife, who also works, remains strong. Are these two things more important than the speed I finish my qualification? I would say yes.

If I had had to take three exams at a time I am not sure everything would still be in such good shape,

given the amount of time it takes to study successfully.

I know there is an argument that a shorter qualification time means fresher knowledge but I am up-to-date in the areas I need to be and if I were to move into a different accountancy specialism I would have to re-study.

I’m sure it is the same for everyone, however long it takes them to qualify. Maybe some people who take longer than five years shouldn’t be doing accountancy. But I imagine many are trying to balance a demanding qualification with keeping a roof over their head and a soul in their family.

Stan Cullerne-Bown, by email

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

Time will tell…

F1 to F4 look comparable, but the minute we move onto F5 then the pass rates dip right down.

The sooner we introduce CBE exams the better, is what I say. If you look at the pass rate of the old paper-based F4 exam it had a 37% pass rate in June 2013 – this June the CBE pass rate was 80%. Some difference!

Name and address supplied

I have to admit that I am one of your five-year-plus accountancy trainees (see PQ September issue, page 8). However, my life is ‘complicated’ to say the least and the journey has not been straightforward. I don’t think that will make be a worse accountant when I finally get there – I think I will have a lot more to add than someone who has sailed through with firsttime passes.

In fact, it was good to see I am not alone. I am one of 160,000 PQs who haven’t thrown in the towel and are determined to become a member. I am also so close now I can smell it.

Name and address supplied The editor says: I think that you have completely the right attitude.

What is important is to complete the journey and become that NQ all your perseverance deserves (and you can then sign up for NQ magazine, too!).

ACCA versus ICAEW

As an ACCA trainee I am always interested when you print the pass rates of the other bodies. I see that while our Audit & Assurance paper pass rate hovers around the 40% mark, ICAEW students managed to achieve a 83% pass mark in their

It doesn’t add up!

A&A paper. CIPFA students did even better in June with a 91% pass rate, but I see you hid those results on page 31!

So my question is simple. Do the ICAEW and CIPFA have better teachers or easier papers?

The lowest pass rate for the

ICAEW exams you published was 78%. CIPFA’s was more mixed – they had two papers with 56% pass rates, but they then jump to 72%.

What us ACCA students would give to see pass rates like this.

Having said that, the pass rates for

On the front cover of PQ magazine (September 2016) you have the statistic “55/46 Percentage ratio of female to male students signed up to the ACCA”.

There is a commendable comment by Graham Hambly in his editorial about gender diversity (“with 46% of its members female, the ACCA is leading the way”), but it’s a schoolboy error for an accountancy publication – failing to check the addition. Spreadsheet rounding the control weakness? We all learn from our mistakes!

Still, the gaffs makes the publication readable. Keep up the good work.

Robin Mason, by email The editor says: Er, thanks for pointing that out Robin! You weren’t the only one to spot the error – apologies to all.

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

Published by PQ Publishing © PQ Publishing 2016

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PQ news

ROBERT BRUCE The crazy world of US litigation

The latest episode to emerge from the US legal system has been an absolute cracker. It involved a mortgage lender whose executives conspired with the executives at a bank to create a massive fraud which then collapsed, bringing the bank down with it. PwC audited the bank. This was seven years ago and eventually the bankruptcy trustee decided to sue PwC for $5.5bn for not detecting the conspiracy at the mortgage lender.

Even some American lawyers found this bizarre. One of the best-known lawyers in the world of auditors and litigation in the US, Michael Young, said it was “one of the weirdest cases I’ve seen in 35 years. It is like the crook suing the police for missing the crime.”

PwC eventually reached a settlement, although there was one detail that came up in court that should have accountants shaking in their boots and remembering how easy it is for nonsense to become credible. It transpired that a document from a decade ago had been put together by a PwC intern in which she recorded that she ‘felt’ the collateral for some of the loans was adequate.

This ought to have raised at least a sceptical eyebrow of someone reviewing it at the time. But a year later the identical paragraph appeared in the annual report. By this time it had achieved the patina of time and gravitas and swept through scrutiny. It is an awful warning for those who wish to avoid the daftness of American litigation. n Robert Bruce is an award-winning writer on accountancy for The Times

September feedback for the ACCA exams Confusion reigned at the start of the F8 ACCA September exams as students had to get their heads around a change in the question numbers – Q16, Q17 and Q18 becoming Q1, Q2 and Q3 respectively.

Some students said invigilators wasted valuable time explaining the changes and felt it was all very unprofessional. However, on Open Tuition’s noticeboard one PQ pointed out that if students were distracted by such a minor issue they were just using it as an excuse. He explained: “If I got distracted that easily I would be distracted every time someone asked for extra paper or went to the

bathroom.” He stressed students need to learn to ‘zone out’.

There also appeared to be some problems for CBE F5 sitters. One PQ revealed the exam was delayed for 35 minutes because of technical problems of various

kinds. The sitter was interrupted twice more by staff. At one point the exam was stopped so that the invigilator could call technical services.

Sitters described P2 as another time-pressured exam. However, many ‘liked’ the consolidation question this time around, as it was pretty straightforward.

F7 sitters found the September test tough. The big debate was whether Q32 or Q31 was the hardest. The jury is still out.

For P5 candidates time was the critical factor. There were also complaints about the length of the scenarios. One PQ said: “We are getting information overload.”

TIME TO WIN A PQ! We want to recognise those who are deserving of a PQ trophy. Yes, nominations are now open for the PQ awards!

Among the winners last February were the ICAEW for Accountancy Body of the Year and Kaplan Financial for Best Use of Social Media. Our PQ of the Year was Manuy Figueroa and the Distance Learning Student of the Year award

went to Mathura Atputhalingam.

A ‘PQ’ can really set your CV apart from the rest and can even get you a promotion. If you don’t believe us, ask our previous winners. The PQ awards night really does give everyone the chance to shine. But, as we always say, you can’t win it if you aren’t in it! So come on, get that nomination form filled in and sent off before

CIMA releases a real script

CIMA has released a new study resource for its Strategic case study students. It has published a real student script to show candidates the standard it expects from case study sitters.

The student script walks PQs

through a real answer to a February 2016 exam (variant 2). This is something PQ magazine has been campaigning for.

CIMA explains the answer has been transcribed and annotated, with observations on what makes a

‘superheros’ they can call when they get stuck! The BPP OCR Live tax team is now on hand to answer any of your tax exam problems.

Libby Morris, Nit Rabheru and Sheridan Gray can be contacted at att@bpp.com and cta@bpp.com.

Following the success of tax courses for both ACCA and ICAEW via the BPP Live platform, both CTA and ATT courses are now on offer via this medium.

AATSIG hits 5,000+ The AAT Students Independent Group now has over 5,000 members. The group was the winner of the Student Body of the Year prize at our 2015 award night (pictured) and just seems to go from strength to strength. Former student members are now running the CIMA Distance Learning UK and ACCA Distance Learning Group. They are ‘mustjoin’ groups for all PQs and aren’t just for distance learning students.

Manuy Figueroa you get distracted.

Discover how to get your nomination to us on page 24. strong performance, indicating what would have improved the answer.

The script was selected to demonstrate a comfortable pass – it earned a score in the 90s.

CIMA now plans to do the same for Managerial and Operational case studiers later in the year – so watch this space.

In brief A gold for AVADO AVADO, the online learning provider, has been awarded Gold ACCA Approved Learning Partner status. As the ACCA says: “Gold approval… requires learning providers to meet a range of challenging performance targets covering the institution’s overall management and, more specifically, its ACCA course management and delivery”.

Call the Tax Avengers!

Tax PQs have a new team of 8

AIA syllabus review The AIA has announced it is undertaking a syllabus review, with the aim of launching a new professional qualification in 2019.

The review will look at all aspects of the exams and work experience requirements. The AIA wants to make it clear that it will offer support and guidance to ensure any students that are midway through their exams at the launch of the new qualification are not disadvantaged and it promises robust transitional arrangements.

PQ Magazine October 2016

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PQ news

PREM SIKKA Financial reporting is losing its relevance The idea of a conceptual framework for financial reporting (CFFR) was to provide a theory for the preparation of financial statements. But CFFR is in tatters and disconnected from economic and legal considerations.

A company is a separate legal person. It is not owned by shareholders, though they enjoy controlling rights. The case of Gramophone & Typewriter Ltd v Stanley [1908] 2 KB 89 stated that “the directors are not servants to obey directions given by the shareholders as individual; they are not agents appointed by and bound to serve the shareholders as their principals”.

Shareholders have no long-term commitment to a company and rarely provide the bulk of capital at big firms.

Financial reporting is losing its usefulness. The abandonment of the realisation principle has enabled companies to show unrealised gains.

Prudence principle was abandoned and then reintroduced after pressure from the EU. Financial statements are now a mixture of historical cost, net realisable values (debtors and inventories), mark-to-market, mark-tomodel and present values (leases and pensions). Despite the banking crash and debacles about credit rating agencies, standard setters retain faith in the Efficient Market Hypothesis.

Capital maintenance was once the cornerstone of financial reporting, but it is hard to discern any capital that is being maintained. CFFR may promote an economic ideology, but is a poor guide to business performance. n Prem Sikka is professor of accountancy at the University of Essex

Your CIMA study hour guide CIMA has set out just how many hours you need to put in to pass the OTs. If you want to pass P1, for example, you need to put in 150 hours over 13 weeks. E1 takes slightly less time, at 134 hours over the same 13 weeks.

The institute has even broken down each paper into individual subject areas.

CIMA’s director of learning, Peter Stewart (pictured), said that

E1 P1 F1 E2 P2 F2 E3 P3 F3

A Hours Weeks 34 3 45 4 22 2 40 3 37.5 3 30 2 67 5 30 3 42 3

B Hours Weeks 20 2 38 3 65 5 27 2 45 4 80 5 A&B are combined

30 50

3 5

C Hours Weeks 20 2 45 4 30 2 28 3 45 4 33 2 27 2 30 3 41 4

D Hours Weeks 20 2 22 2 35 3 40 4 22.5 2 20 30

2 3

hear from students that they feel prepared because they are very familiar and comfortable with the content of the OT practice banks published by our learning partners.

This doesn’t always equate to mastery of the topic at the verb levels of ‘analysis’ and ‘evaluation’.”

• Nothing quite as structured for the case study exams currently exists. Would you like CIMA to provide a study time guide? Email graham@pqaccountant.com E Hours Weeks 20 2

20 30

F Hours Weeks 20 2

2 3

KPMG and InterActive join forces KPMG in India and InterActive have announced a tie-up to deliver online accountancy and finance programmes to students and professionals in India.

The first programme to be offered under this initiative is the ACCA qualification. Students will be able to benefit from the support and guidance of experienced KPMG in India accountants, who can contextualise theory with reallife application and provide real

insight into the Indian accounting industry.

The two will also be working together to promote ACCA-X.

Do you like me? You need to be nice!

How likeable are you? New research from the ICAEW found that ‘likeability’ is one of the key skills you need to have to get to the top. A survey of over 500 FDs and CFOs discovered that being a

Big 4 rival planned The Big 4 could soon become the Big 5 (again) if ex-Deloitte boss John Connolly has his way. Connolly is reported to be working with HG Capital on an audacious plan to create a rival of the Big 4. The idea is to create a Big 5 through acquisition. Documents filed at Companies House show that Connolly and HG have established Cogital Group, a new vehicle that will be used to create the new professional services venture.

Deloitte reports 10-year best It was a good year for Deloitte. The UK Group has reported revenue up 13.6% to £3.04bn.

10

although the times may look daunting they are a ‘belt-andbraces’ coverage of the syllabus.

He stressed: “Many students will have awareness of, or even mastered, some of the topics within each subject.”

He said the guides should also be useful to students who have been on structured courses yet struggled with the exams. Stewart said: “I

‘people person’ was even more important than having commercial awareness and an entrepreneurial mindset, although these skills are also paramount.

Technical skills were seen as the

This gives a distributable profit of £608m, which means the average equity partner earned a cool £837,000 (up 1.8%). The firm recruited 1,100 graduates and 200 school leavers during the year.

However, Deloitte has announced major changes to its recruitment process in FY16, with blind recruitment and academic contextulisation.

KPMG’s return to work initiative KPMG has launched an initiative designed to help talented people return to work after taking a career break. It is offering roles in management and tax practice to experienced professionals who have been out of the workforce for 18 months or more. Successful

Interactive’s COO, Vitaly Klopot said the alliance is likely to make the courses more accessible and affordable for India’s growing community of aspiring accountants.

Tuition fees will start at INR5,600 for ACCA foundation level papers, up to INR20,000 for the more advanced levels.

The first programme is now live.

For more details visit http://india.studyinteractive.org/ kpmginteractive2 foundation for success at senior level roles, but being technically competent is seen as a given at this level. But it appears if you can’t give a good presentation and don’t have a bit of emotional intelligence then you could be left counting the beans.

candidates will embark on a 12-week programme at KPMG, where they will be assigned a mentor and attend regular coaching sessions to help them update their skills and expertise.

PwC seeks tech specialists PwC’s UK audit assurance practice plans to recruit over 1,000 technology specialists in the next four years to meet increasing demand for its digital, regulatory and cyber security services. Partner Marc Bena said: “There is a real shortage of technology professionals in the UK. Our vision is to recruit and grow the technology leaders of the future in the same way that we have helped grow generations of finance leaders.”

PQ Magazine October 2016

Start to be great.

A bright future starts with a smart decision.

Places still available for a September or October start.

• BA (Hons) Accounting and Finance • FdA Foundation Degree: Accounting • Top-up BA (Hons) Accounting and Entrepreneurship

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PQ news

CARL LYGO Team GB proves that success is no lottery What an amazing summer Olympics for Team GB! With the largest medal haul for an ‘away’ games, the analysts have been identifying the secrets of the team’s success.

In 1996, at the Atlanta games, Team GB finished 36th with only one gold medal. Fast forward 20 years and Team GB is a medal winning machine, finishing second with 27 gold, 23 silver and 17 bronze medals. Team GB have become the first ever to increase the number of medals won following a ‘home’ Olympics (London 2012).

So what’s changed to have produced this remarkable turnaround?

It is being credited to Prime Minister John Major’s introduction of the National Lottery in 1994. There is also an element of ruthlessness in the way UK Sport has determined who gets what and how to back winners.

It’s just like a page out of Michael Lewis’ book Moneyball. On average each medal has cost £5.5 million and almost £350 million is being spent on Olympic and Paralympic Sports between 2013-2017 (a rise of 11% on London 2012). Individuals are sponsored so they can concentrate on preparing for competition depending on their performance or future potential. Finishing in the medals leads to up to £28,000 a year in lottery money. Finishing in the top eight in the Olympics leads to up to £21,500 in sponsorship a year, and those who are expected to win within the next four years can get up to £15,000. If only this formula could be applied to World Cup Football! n Professor Carl Lygo is chief executive of BPP

Automation a credible risk to business services jobs The business services sector is at high risk of automation in the next 20 years, says a new report from Deloitte.

The Big 4 firm suggests that automation will be seen as the answer to the rising cost of labour.

These spiralling costs are also happening at a time when the cost of technology is falling.

Deloitte says 800,000 (25%) to 1m (31%) of the 3.3m business service jobs have a high chance of being automated.

The only good news is these figures are lower than the national total (36%), highlighting that the

Pass rates hold steady

The pass rates for the July ICAEW advanced level exams are holding up nicely, with pass rate staying well above 70%.

Strategic Business Management remains the ‘easiest’ paper to pass, with a pass rate of 85.8% this time around.

The Case Study is the biggest challenge and the pass rate here slipped very marginally to 74.7% in July.

business services sector is less exposed than other areas of the UK economy.

Partner Simon Barnes explained: “We expect the pace of automation to increase exponentially over the next few decades. Business services companies need to consider the full potential of intelligent automation, both as a way of improving operational efficiency and quality standards, and in order to innovate to remain competitive.”

ICAEW ADVANCED PASS RATES Case Study Corporate Reporting Strategic Business Management

July ’16 74.7% 79.6%

July ’15 75.6% 76.8%

85.8%

86.6%

The Corporate Reporting paper had an overall 76.8% pass rate.

However, when you drill down into the figures you discover that July students who sat this paper on its own for the first time did not perform that well. Just 45% managed to obtain a pass.

AAT extends global reach

Two more countries are set to join the AAT family.

New agreements with training providers means the AAT qualification will now be offered in Malaysia and the Cayman Islands.

The System & Skills Training Concept, a training provider in Malaysia, is the first in the country to offer the qualification. This follows the Malaysian Qualifications Authority approving the AAT qualification in May. In the Cayman Islands, Innovation Management & Professional Training (IMPT) is making AAT available alongside the Foundations in Accountancy (FIA) qualification.

• UAE was added last month.

Top Student: well done to Clive Howe, the winner of the Best Management Accounting Student at the Northampton University Awards.

PQ magazine sponsors the prize.

He is pictured with Liz Vokes

In brief Don’t be miserable at work Job satisfaction is vital for your health! A study has found that those who disliked their work in their 20s and 30s report higher rates of depression, worry and

insomnia later in life. Doctoral student Jonathan Dirlam said: “We found that there is a cumulative effect of job satisfaction on health that appears as early as your 40s.”

• See page 35 for more careers news.

Top of the class August saw the publication of the latest National Student Survey (NSS) and students on the accounting and finance degree at LSBU certainly showed their approval with a 100% of the 1,010

12

students surveyed saying they were satisfied with the course. LSBU came top in 22 of the 29 categories for accounting and finance compared with the other London universities. This news follows the DLHE stats which showed that 93.1% of LSBU accounting students are employed or in further study six months after graduating.

Apprenticeship views sought The government has published its proposals for a new

funding model for apprenticeships and further details on the apprenticeship levy. Under the plans for the levy, the government has proposed that employers that are too small to pay the levy – around 98% of employers in England – will have 90% of the costs of training paid for by the government. Extra support, worth £2,000 per trainee, will also be available for employers and training providers that take on 16- to 18year-old apprentices or young care leavers.

PQ Magazine October 2016

news PQ

RSM recruits 350 trainees as it boosts total workforce by 10% Top accountancy firm RSM has announced the appointment of a record 350 trainees across the UK, expanding the total headcount of the firm by a whopping 10%.

The group of trainees, including graduates and school leavers, will be working within its tax, audit, corporate finance, risk, restructuring, financial reporting and consulting teams. The new recruits will start their RSM careers on an intense training course and also commerce study towards their professional ACA, AAT, ATT, ICAS, ACA, CIA or CTA qualifications.

RSM is inviting applications for its 2017 intake for graduates and school leavers. The deadline for applications is 30 November 2016 and details can be found at https://www.rsmuk.com/careers

New recruits: RSM’s batch of 350 new trainees

Worry over Making Tax Digital The Association of Taxation Technicians has reiterated its call for a change to the timetable for the implementation of quarterly digital reporting by at least a year to ensure it is fit for purpose.

The ATT’s Yvette Nunn said it welcomed the decision to make all unincorporated businesses and landlords with income or turnover below £10,000 exempt. That said, the figure of £10,000 strikes the ATT as a very small threshold, and it is suggesting that it should at

least be aligned with the personal allowance each year, “otherwise it is overcomplicating tax for the very smallest businesses”.

James Colclough, a partner at accountant’s Wilder Coe, labelled the proposed £10,000 threshold an unrealistic ‘token number’. Citing guidelines from the Low Incomes Tax Reform Group (LITRG) he said: “A realistic sum should be aligned to the 3-line small accounts limit, or the limit for cash accounting for small business, which is £83,000.”

Amendments to IFRS 2

The International Accounting Standards Board has issued amendments to IFRS 2 Sharebased Payment, clarifying how to account for certain types of sharebased payment transactions. The amendments, provide requirements on the accounting for: • The effects of vesting and nonvesting conditions on the measurement of cash-settled shared-based payments.

• Share-based payment

transactions with a net settlement feature for withholding tax obligations.

• A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.

Companies are required to apply the amendments for annual periods beginning on or after 1 January 2018. Earlier application is permitted.

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Find out more – visit getrogo.com or call 0207 997 6755 PQ Magazine October 2016

13

PQ new CIMA CEO

Meet the new boss PQ editor Graham Hambly went for a chat with CIMA’s new CEO, Andrew Harding

P

Q magazine recently visited Rio to talk to CIMA’s newly appointed CEO, Andrew Harding. No, not a big Olympic junket – CIMA seems to have named all its meeting rooms at its HQ after places we would all like to go to on holiday! We could have just as easily been in New York, Johannesburg or Tokyo.

Harding took the reins at CIMA at the beginning of August from Charles Tilley, who stepped down to take on the role of executive chairman at the CGMA Research Foundation.

He joined CIMA in 2009 and more than anyone knows what a big job he now has on his hands.

Over the summer CIMA members, along with their counterparts in the AICPA, voted overwhelmingly to create the ground-breaking new Association.

And when the Association is formed in 2017 Harding will become the CEO of its management accounting unit and will be responsible for driving the impact of management accounting across the world.

Harding said: “It’s a huge privilege to be appointed chief executive as we enter this new chapter in CIMA’s history. To be combining the power of management accounting and public accounting for the first time through the power of the Association is so exciting.”

There will be no ‘big bang’ on 1 January 2017 when the Association becomes a reality. He reiterated that it will not be taking away anything that members value. He said: “The idea is to build on that and to give them even better value.”

Harding sees the Association as a winwin for CIMA’s PQs, ‘who will become members of the most influential accountancy body in the world’. They will also have an organisation which works with them, supporting their career, wherever it takes them. “They definitely

14

Harding: ‘AICPA is a world leader in CPD’

get better employability,” Harding claimed.

During our conversation we also touched on automation and the rise of the robots. Harding stressed that what business always needs to be is ‘relevant’, and the same is true of professional bodies. He wants to help give his members the skills to embrace challenges like automation, and feels they have to learn how to use it; if they work against it they will be left behind.

And in the same vein, he believes members have understood that they need to move into the future, and the Association is it.

He explained that when it comes to CPD the AICPA is a world leader. “They do it really well,” he stressed. Harding believes that CPD will become a vital component in a CIMA member’s armory.

“The future could be tough and we need to recognise the hard work members put in to keep themselves relevant,” he explained. This means CIMA is looking to formally badge and acknowledge those who have invested in their skills and learning.

In his role of CEO, Harding’s focus will

be on ensuring that members of the Association are in the strongest possible position by making the CGMA designation the must-have qualification for accountants working in business.

They will know that they have the skills and solutions needed now and in the future to make them the best-qualified people to provide business leaders with the information needed to drive further success.

The opportunities presented by the US market are also huge and will be another prime interest for Harding. He believes the Chartered Global Management Accounting (CGMA) designation will become a valid choice for graduates who want to work in one of the big US corporates.

Getting the global branding right will be a challenge. Do we need ACMA (or FCMA) and CGMA, for example? Harding understands these challenges, but he felt he had to ensure Association members keep ahead of the game, ensuring they were plugged in to the knowledge, resources and skills that would help them to succeed. The rest would fall into place. PQ

PQ Magazine October 2016

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ACCA round-up PQ

YOU CAN’T WRITE THAT! PQ magazine takes a look at a recent case that came before the ACCA Disciplinary Committee

O

ne ACCA student, Yushreen Busheera Sool, was severely reprimanded recently and ordered to pay costs of £2,605 for writing offensive content in her examination answer booklets during the December 2014 sitting.

The Mauritian student seemed to just ‘lose it’ in her P2 and P5 exam. She was reported in both cases by the examiners to ACCA Exams Conduct. The P5 examiner was particularly shocked at the language she used, saying: “The team leaders who has more than a decade’s worth of marking experience and myself were all commenting that it was probably the worst thing of that sort that they had ever seen.”

So what did she write? Here are some of her entries for the P5 paper: “x-factor I know, load factor is bullshit, you fat big snoot.. your face is like a big Chimpanzee, you ugly cockroach. Must ram your dickhead, bloody piglet.” “you silly Englishmen, trying to understand

what have I written. Bloody donkeys, you will not understand. Cheesy piece of shit, that’s what you all are.”

“ACCA is a bloodsucker (sucking money each and every time), making us poor students fail by 1 or 2 marks, then re-sit for exams, pay again.”

“I dedicate these 2 last pages for all the puffy sluts and gays that will be correcting this fucking shit paper.”

There was lots more (which you can see in full on the ACCA’s disciplinary section on the

TOPS TIPS

The annual review marked out of 10

ACCA integrated report & financial statement ACCA made an operating surplus of £4.27m for the year ended 31 March 2016. Fees and subs brought in £76m, helping the ACCA’s operating income grow to £175,696,000.

We also discover that income from qualifications and exams is just shy of £90m. At the same time, exam delivery costs came in a little under £11m.

Both membership and student numbers grew by over 5%, according to the latest integrated report. No one can fail to be impressed with the fact that during the year the ACCA recruited 107,536 new students. It believes it will have over half-a-million students this time next year.

The ACCA sold two building in Lincoln’s Inn Fields – one for £11.5m, the other for £14m. But anyone who has visited its new home at the Adelphi will say they made the right move.

CEO Helen Brand had a salary package of £370,746. Less than ICAS’s Anton Colella, who has a salary of £418,000, but more than CIMA’s Charles Tilley, who was paid £347,000.

Members: 188,137 (2015 – 178,169) Students & Affiliates: 480,813 (455,778) Staff: 1,199 (1,137) PQ SAYS: Is it just me? I prefer the financial statement to the integrated PQ Magazine October 2016

website, under ‘Reasons for Decision’, dated 1 June 2016)! But it didn’t stop there, and in the P2 exam she wrote two columns with what she considered ACCA stood for. “A – academically retarded, C – coolest idiots, C – cunningly ignorant, A – accidentally Fetars.” Again, she had some other ideas for ACCA. When contacted, Sool sent a mobile phone message back saying she was “extremely very sorry for everything”. She explained she was frustrated and “wrote all sorts of bullshits. Please do not penalise or remove me from ACCA. It is humans that err and make errors and should be forgiven. It’s the first time I got so depressed that I was out of my mind.”

The ACCA disciplinary committee noted that Sool had stated she was depressed and asked if she wanted to submit medical evidence covering the period during which she sat the exam. She did not respond.

In her absence the committee decided that her behaviour amounted to misconduct and brought discredit both to herself, ACCA and the accountancy profession. It felt an admonishment nor a reprimand would sufficiently reflect the seriousness of the committee’s findings.

This case may be subject to appeal. PQ

Here’s our 10 tips to ensuring success in the ACCA Exam Hall – so read and remember!

1) Plan your time at the beginning of the exam and stick to it – it is 1.95 minutes per mark (or 1.8 minutes per mark if you allocate 15 minutes to reading the paper and choosing your section B questions).

2) Don’t spend too much time on numerical parts at the expense of written parts. It is often easier to pick up marks in written questions than in complex numerical ones. report. There are some great numbers in the integrated report, yet I like to know how much the ACCA is pulling in in qualification and exam fees, and you only get that nitty gritty in the financial statement.

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Top 10 countries, for year ended 31 March 2016 UK China Malaysia Pakistan Nigeria Singapore Mauritius India Ireland Zimbabwe

79,672 63,377 42,017 37,635 18,301 18,266 11,698 10,910 10,900 10,000

3) 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.

4) Plan answers to section C questions before you start writing.

5) Pay attention to verbs used in question requirements as these indicate the number of marks available. ‘Explain’ requires a sentence and will score 1 mark if properly explained, whereas the verb ‘list’ simply requires you to list out information and will score 0.5 marks per point.

6) Try to use a tabular format in your solutions where relevant – the examiners say that candidates who do this score better.

7) Keep checking the ACCA website for articles written by the examiner in the lead up to the exam – these are often tested.

8) The professional level marking team like to see that you know the rules that need to be applied. So remember to include relevant conditions and effects of certain actions.

9) Remember to write succinctly – the markers expect you to write in full sentences. Keep paragraphs short (3-4 sentences) and use headings and space between the paragraphs.

10) Don’t panic: if have put the work in, you know if you are struggling so will many other people.

17

PQ CIPFA spotlight

No avoiding the cost of capital

cost of capital.

Let’s explore step one in more detail, as this could be a short question in itself.

Changes to the FM exam mean you need to be able to calculate the weighted average cost of capital The new exam format Like other assessments for the professional qualification, the format of the FM exam has changed. It now comprises 30 multiple-choice questions (each worth one mark), three five-mark questions and three 10-mark questions.

All questions are compulsory, with a pass rate of 50%.

In the old exam format students could choose questions that suited their preferences (choose four from five 25mark questions). The new exam format will change this, and a more rounded knowledge of the syllabus will now be required.

specifics of this topic could be tested in a number of ways.

There are four main steps when calculating the cost of capital: • Calculate the individual costs of capital.

• Calculate the market value of each cost of capital and the total market value of the company.

• Calculate the proportions of the market value that each source of capital represents.

• Finally, calculate the weighted average

Weighted average cost of capital This is one of those areas that students could have ignored in the previous format, to a degree – it was likely to come up once or maybe twice across the paper. But with the new compulsory format and multiple-choice questions the

Calculate individual costs of capital Here we must first identify which sources of finance we are using: ordinary shares, preference shares, redeemable or irredeemable debentures, or other fixed rate debt. There are a number of formulas used here, many of which can be found on the formula sheet.

For ordinary shares we might need to use the dividend model with growth or without growth, or we might have to use the capital asset pricing model. For preference shares, irredeemable debentures and other fixed rate debt the calculations are straightforward; just watch out for the tax when dealing with debt. Redeem debentures are the toughest calculation, and here we would use the IRR calculation identifying the appropriate cash flows and using suitable discount factors.

In summary, a wider range of cost of capital calculations could be tested and the best way to prepare for this topic is to prepare as many calculations as possible. PQ • Karl Ballard, Kaplan

PQ ACCA F1

A study technique that will help you crack F1 It would be a C.R.I.M.E. to fail this paper – just use our mnemonics to help you get that pass

T

he ACCA paper F1 syllabus is incredibly varied and the amount of information that you may be examined on can be scary. However, there are simple things that you can do to help build and retain knowledge and this is not just for the F1 paper – you can use the same techniques throughout your ACCA journey.

Mnemonics are one fabulous way that you can build and retain knowledge. Take this question for example: Which of the following is NOT a component of an effective internal control system?

A Control environment B Control monitoring C Internal audit D Risk assessment All of the four options seem plausible but the answer becomes obvious if you knew that the essential components of an effective internal control system can be represented by: C Control activities R Risk assessment I Information systems 18

M E

Control Monitoring Control Environment

Mnemonics can be effective at helping to remember lists of detail and other key terms.

During our F1 course I share my own mnemonics with the class, but actually the best mnemonics are often ones that you generate yourself. When I started to teach F1 the areas in which I struggled to retain knowledge the most were management theory and team roles, so I started to try to create mnemonics to help me remember key information. For example, I could never remember all of the Belbin Team Roles, and so created the mnemonic CRISP FETE. And once I was able to remember the roles I found it easier to remember what each role actually involved.

C Chairman, coordinator R Resource investigator I Implementer S Shaper P Plant F E T E

Finisher, completer Monitor-Evaluator Team worker Expert, specialist

But please take care – don’t use up too much

valuable time trying to create mnemonics for which, if you are lucky, may help in one or two questions in your exam. Also, while I think that mnemonics are wonderful at helping build and retain knowledge, you obviously need to remember what each letter stands for and they, of course, don’t ensure that you understand the topic.

I’ve got one more mnemonic for you and that is for Peter Drucker’s five main categories of management. The mnemonic is MODES, and once again while it doesn’t build your understanding of Drucker’s work it can help you build your knowledge of these key elements.

M Job Measurement O Organising work D Developing people E Motivating Employees S Objective Setting As you can see, I’ve not used the first letters of each of the elements but there’s no rules about creating mnemonics – it must simply be a mechanism to help you recall information.

In summary, mnemonics are a valuable tool that you can use throughout your ACCA studies to help retain and recall knowledge. Mnemonics won’t pass the exam on their own but they can help make the process a little easier. PQ • Paul Kirkwood, lead ACCA tutor, AVADO PQ Magazine October 2016

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The AAT–ACA route really can give you a great start to your career. I was attracted to the worldwide recognition of the ACA qualification and the opportunities it could offer.

Soon after qualifying as an ICAEW Chartered Accountant I secured a secondment to Australia which, alongside completing the ACA, has been the highlight of my career. I am now Technical Accountant at SIMSL. The job is continually challenging as there are always new requirements which

require you to think hard, challenge yourself and draw on your accounting experience.

The skills I gained from the AAT and ACA qualifications helped me apply the knowledge I learned during my training to my job. It’s given me a great start and continues to help me through my career.

Thomas Ansell ICAEW Chartered Accountant, Technical Accountant, Steamship Insurance Management Services Limited

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I chose ICAEW’s ACA qualification as I believe it is the highest regarded accountancy qualification.

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PQ AAT exams

LET’S GET TECHNICAL

I

have spent a long time hunting for a subject for this month’s article, but then I hit upon the subject of goodwill. Goodwill?

Hunting? Anyone?

Ok, I’ll get my coat, but before I do I want to tell you a bit about the accounting version of goodwill, which is covered in the AAT ‘Final accounts for sole traders and partnerships’ unit, and its replacement under AQ2016, ‘Final Accounts preparation’.

Goodwill is the amount someone would pay over and above what the assets are actually worth on paper when buying a business. You may pay more than what the assets are worth because the company has a great reputation that you think will lead to future sales.

Alternatively, it may have a unique research and development team, which consistently develops market-leading products. Basically, it is something you cannot see, but you feel will bring money into the business in the future. It is difficult to assign a specific value to goodwill, as each business’ goodwill is unique to that business and fluctuates, so we do not show it in the final accounts. The only time when we know the value of the goodwill, is when someone buys the goodwill, as then it is worth what someone is willing to pay for it.

Let’s look at a scenario. Matt and Ben own a small film production business and run it as a partnership. Matt is the talented one and does all the hard work, Ben tends to ride on Matt’s coat tails, so they split the profit in the ratio of 2:1 in favour of Matt. So, for every £3.00 of profit generated, Matt will receive £2.00 and Ben will receive £1.00.

After a few years, the company begins to perform really well, and Robin wants to join the partnership. The business only really owns a few computers, but the Robin is willing to pay £60,000 in excess of the value of the computers. This is because they have just secured the rights to a film about someone with extreme memory loss, which is sure to be a box office success.

Robin is well known in the film industry, so when he joins the partnership they agree to split the profits in the ratio of 2:1:2, or for every £5.00 profit the business marks, Matt will get £2.00, Ben will get £1.00 and Robin will get £2.00.

As a percentage of every pound of profit earned going forward, Matt and Ben will actually

22

Nick Craggs explains the concept of goodwill, and how to account for it keep less than before. Effectively, they have sold a proportion of their rights to any future profits, and instead of receiving cash, their capital account (the amount the business owes them personally) is increased, which they could later take out of the business in cash.

To credit their capital accounts, we introduce the goodwill in to the accounts using the original profit share ratio. So, remember Matt and Ben used to split the profits 2:1. As a result, we debit goodwill (being an asset) and we credit the capital accounts, in the ratio of the original profit share agreement.

The double entry will be: Debit Goodwill account £60,000 Credit Matt’s capital account £40,000 Credit Ben’s capital account £20,000

We do not keep the goodwill in the accounts, as it is so subjective. The goodwill was worth £60,000 at that point in time, and was only worth £60,000 to Robin. We need to eliminate the goodwill from the accounts. So, we remove it by crediting the goodwill, and debiting the capital accounts in the ratio of the new profit share agreement, which if you remember was 2:1:2, to Matt, Ben and Robin respectively.

As such, the double entry for this will be Debit Matt’s capital account £24,000 Debit Ben’s capital account £12,000 Debit Robin’s capital account £24,000 Credit goodwill account £60,000

The overall effect is that the goodwill has gone, and Matt’s capital account has been credited with £16,000 (the credit of £40,000 less the debit of £24,000) and Ben’s capital account has been credited with £8,000 (the credit of £20,000 less the debit of £12,000).

This is their financial compensation for the loss of some potential future profits. Whereas Robin’s capital account is a debit of £24,000, this means he owes the business money! This is money he owes for the right to receive his share of any potential future profits.

Partnership accounting is a large part of this unit and it will play a big part as to whether or not you will pass the exam. However, if you follow the rule of bringing in the goodwill under the old profit share ratio and removing it under the new profit share ratio, you should not go wrong.

Why don’t you have a go at this scenario?

Norman and Stanley share profits equally, until Fletcher joins the partnership. At the time Fletcher joins the partnership, goodwill is valued at £66,000.

Going forward, the business will split the profit equally between all three partners. What will be the closing balance on each partner’s capital account after Fletcher joins the partnership?

You can see me work out the answers at: http://www.firstintuition.co.uk/ category/ aat/level-3/ PQ • Nick Craggs is a tutor at First Intuition

PQ Magazine October 2016

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YOUR TIME TO

PQ Awards 2017

SHINE

We are now open for nominations for the PQ magazine Awards 2017 – so get your entry in now!

L

ondon’s Café de Paris, the new home for the PQ awards night, was rocking earlier in the year for our 13th ceremony. We are now dusting ourselves down to get ready for our 14th awards night, but it won’t be the same if you aren’t there with us!

Yes, we are now open for nominations for the PQ Awards 2017. There are 17 coverted ‘PQs’ up for grabs, so do it early and get your nominations in.

Our awards are definitely the place to be. Among our 250 guests in February was Mark Protherough, the ICAEW director of learning, CIMA’s new CEO Andrew Harding and ACCA’s director of learning, Dr Mary Bishop.

As always, we will be looking for a college and lecturer from both the private and public sectors.

For the first time in 2016 we had joint winners of our Public Sector Accountancy College of the Year category. Both, by sheer coincidence, came from Wales – Gower College Swansea and University of South Wales.

So what do we need from you? All you have to do is write 250 words and provide any supporting evidence separately on why your nominee should be shortlisted for one of our awards. Remember, we allow you to nominate yourself. This is not a time to go all shy on us. All nominees get to come along to the best awards night there is in accountancy! Don’t you deserve some recognition for all your hard work? What about the whole team?

But remember, we are all about quality and not quantity. Those with most entries don’t win – just one nomination form goes into the judging room.

To get started just download our application form from the website. Go to www.pqmagazine.co.uk and click on the ‘pq awards’ bar to download the form. Alternatively, just email us your entry directly, making it clear which category you are nominating for. It is important that we have all your details too, because we may need to invite you to the Café de Paris.

Once you have everything ready send it to awards@pqmagazine.com or post to: The Editor, PQ magazine, 4th Floor, Central House, 142 Central Street, London EC1V 8AR. Deadline for all nominations is Friday 16 December 2016. PQ

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PQ Magazine October 2016

Awards 2017 PQ

PQs OF THE YEAR

2016 – MANUY FIGUEROA During the week, AAT Manuy Figueroa works at St Mary’s Services Chartered Certified Accountants, but at the weekend he plays bass and percussion for Latin American music makers Manzana Tropical. He is also the first PQ of the Year winner not to attend the awards night – he had chickenpox! Winning the award was a fantastic boost to his confidence, and he is now off to Leeds Beckett University to study for an accountancy degree (he gets nine exemptions from the ACCA exams, too).

PQ Magazine October 2016

2015 – STEPHANIE MOONAN Stephanie was working for the Walton Centre NHS Foundation Trust when she was nominated for the PQ of the Year. On winning she was congratulated personally by her CEO and executives team, which she said was very special.

She didn’t come straight into accountancy. In fact, she studied A levels and worked in a shipping company, call centre, supermarket and bingo hall before she joining the NHS. She studied AAT while working in payroll, progressing into financial accounts. She is ACCA qualified.

2014 – JAMES FIELD James Field didn’t always want to be an accountant and after university he moved into retail, where he stayed for some 15 years. He then decided that his career wasn’t going anywhere and signed up to an AAT course. When we met up with him he was studying ACCA and working for Cheesmur, a successful building contractor in East Sussex. But it wasn’t always the case, and it was Field’s dedication to the company’s finances that his bosses wanted to acknowledge. We were happy to help!

25

PQ international standards

SUSTAINABILITY AND THE UNGC: IT’S THE REAL THING

Keeping the planet clean for our children is laudable, but regulation could get in the way, says Martin Jones

S

ustainability is the buzz word of the moment. The evidence that global warming threatens the planet is terrifying. And it seems sustainability has its roots in a groundswell of desire to leave a survivable environment for our grandchildren. But sustainability means more than this. The United Nations Global Compact (UNGC) identifies five principles for sustainability and it’s worth taking a look because it is an eloquent framework: 1. Principled business: Businesses should operate with integrity – respecting fundamental responsibilities in the areas of human rights, labour, environment and anti-corruption.

2. Strengthening society: Sustainable companies look beyond their own walls and take actions to support the societies around them.

3. Leadership commitment: A public commitment by the chief executive, with support from the board of directors, is required to participate in the Global Compact.

4. Reporting progress: A Communication on Progress (COP), typically included as part of their sustainability or annual report, providing company stakeholders with an account of their efforts to operate responsibly and support society.

5. Local action: Companies should act within their local community to deliver on the above.

The UN are a powerful bunch, with lots of money and clout. So it is perhaps not surprising that 13,000 entities have signed up. Notice that the UNGC has this special report named the ‘COP’.

But the granddaddy of sustainability reporting is the Global Reporting Initiative (GRI). These guys pioneered sustainability reporting in the 1990s when most of us were still coming to terms with global warming. Their moral authority means that 82% of the top 250 entities worldwide use GRI. Another international consortium, the worthy Climate Disclosure Standards Board (CDSB), is attempting to advance its own sustainability reporting guidance.

In the US, the Sustainability Accounting Standards Board (SASB) has issued standards that enable listed entities to comply with US Securities and Exchange Commission filing regulations.

In 2014, the European Parliament passed regulation that makes qualifying EU entities disclose sustainability information. In Japan, Singapore and Taiwan, draft legislation is planned to 26

make sustainability reporting mandatory.

And so the list goes on.

The problem So what is the problem? It is that all this legislation and regulation is clogging up the natural process of communication. A Singaporean business with substantial supplies from Taiwan and debt listed in the US has those three national bodies to think about in the context of sustainability even before the business looks at the alphabet soup of UNGC and GRI and CDSB. This weight of rules has two effects.

Reporting entities tend to report in order to fulfil the various rules instead of communicate and reporting entities report huge volumes of information that users find difficult to manage. These problems each have a name. The first is called ‘boiler plate’, the second is called ‘clutter’, and they are both dreadful for the underlying corporate reporting. The result is huge unmanageable annual reports with impenetrable legal language.

The scary thing is that much of the regulation is recent, but sustainability reporting has been developing for many years. To take a real example, Coca-Cola is a US entity and US reporting has a reputation for useless cluttered boiler plate. But Coca-Cola already had good stuff on sustainability before the regulation proliferated. I remember seeing a lovely colourful page in their annual report a few years back showing where they get there water and how they dispose of waste so

as not to poison the environment. It was good public relations, sure. And there might have been a touch of enlightened self interest in the story telling. But the point is Coca-Cola was communicating sustainability information and the regulation may snuff this out.

The solution So what is the solution? Integrated reporting. Well, that is one view anyway.

Integrated reporting means two slightly different things. The first is an idea. An entity should strive to deliver a single coherent annual report with clear messages that consistently resonate throughout the report by addressing the various divergent regulatory requirements with an eye to the big message throughout. The second meaning is an actual report. In order to deliver a single coherent message to the majority of users the entity should produce a mini report called the ‘integrated report’ that focuses on the key issues and allows the necessary legal clutter to be relegated to the annual report.

That seems a sensible short-term solution for the reporting entities to use and is the spine of Coca-Cola’s solution.

The long-term solution is that all the regulators should bang their collective heads together to produce a single body of guidelines – but I cannot see that happening any time soon. PQ • Martin Jones lectures at LSBF PQ Magazine October 2016

college visit PQ

PQ visits the team that was recently named AAT’s Distance Learning Provider of the Year

P

remier Training landed two trophies at the 2016 AAT Training Provider awards. It walked off with the Distance Learning Provider of the Year, and Jessica Leyland won the Student of the Year award, so the PQ team thought it was time we went to visit them at their Lincolnshire base.

Rose Crockett is the powerhouse behind Premier, and is incredibly proud of her latest award. As she told the Grimsby Telegraph: “It is the biggest award in our industry… I put it down to the fact that we can adapt and change at a minute’s notice.”

Crockett launched Premier in 1999 and started her love affair with AAT in 2000. She began with literally nothing, and we are talking no chairs here (there’s a great story there)!

Premier now employs over 21 people and is looking for new premises so it can grow some more.

But Crockett has never forgotten those early days and the importance of the personal touch, which made Premier an almost instant hit with students. “We never want to lose that,” she stressed.

Crockett believes that her tutors are a key part of what makes Premier special. “We provide three

The Premier league

marked assessments and a mock exam for each paper,” she explained. These are very skills-based, so are more ‘real world’, which helps the penny drop and are of practical benefit, too.

Tutors also spend time to ensure each PQ stays on track and truly understands what they are trying to learn.

It was Crockett who also

E G E L L CVOISIT

initiated the annual sponsorship programme.

This provides at least one lucky candidate a lifechanging opportunity to gain the AAT qualification free of charge.

The 2015 overall winner was 36-year-old Darren Sykes, who gave up his job and studies to care for his wife.

He is hoping to use the AAT qualification to land a job in accountancy and to continue his studies to become a chartered accountant and run his own business. PQ

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KEYNOTES INCLUDING: • MARK WICKERSHAM, #1 best-selling author: The Magic of 3: An Introduction to Price Psychology.

• JENNIFER WARAWA, Executive Vice President of Product Marketing at Sage: Shifting from Redundant to Relevant to Indispensable.

• BOBBY CHADHA, Product Manager and Start-Up Mentor at Intuit: Preparing for the digital revolution.

SPECIAL PQ READER OFFER: ONLY £85! QUOTE PQSUMMIT16 WHEN BOOKING QUEEN ELIZABETH II CENTRE, LONDON MONDAY 3RD OCTOBER 2016 9:00-5:30 CALL: 0207 856 2567 PQ Magazine October 2016

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The Institute of Certified Bookkeepers 27

PQ CIMA F2

YTM: the detail is here

In the last of our series on the long-term finance and WACC section of the F2 syllabus, John Sharratt investigates the yield to maturity calculation

Remember, YTM considers interest pre-tax. Therefore, to calculate YTM: YTM = i/Po

In article 2 we looked at cost of debt (kd) and how it is calculated. The calculation of yield to maturity (YTM) is very similar to the kd calculation.

This can often cause students to answer incorrectly. A lot of the detail within questions will be exactly the same as that provided for a kd calculation so it is easy to go wrong.

The important difference is the context of the question. Yield to maturity looks at the scenario from the perspective of the investor: the provider of finance. For example, the associated bank or sponsor of the Olympic Games may be approached to lend to the Olympic Organisation Committee to help finance the numerous construction projects required. They will want to know the yield to maturity before providing any loans. Basically, what return will they receive on their investment?

The YTM calculation are very similar to the kd, the calculations are given below: long term redeemable or irredeemable debt: YTM = i Po

YTM = 15.6%

redeemable debt:

IRR calculations

The big difference for YTM calculations is related to tax. Investors receive interest, rather than pay interest. They will earn investment income from providing the finance. Interest income does not create tax relief.

Therefore, all interest inflows within YTM calculations are included PRE – TAX (GROSS of tax).

The kd questions provided above could give the exact same information but you may be required to calculate the YTM from the investors perspective.

I’ve recreated Q1 and Q3 but from a YTM perspective. Here is how the answers would differ: Example – YTM questions Q4) YTM for long dated/irredeemable bonds BOLT has in issue £125 million of long-dated bonds issued at par with a coupon rate of 15%. The ex interest market price of the bond is $96.

The corporate income tax rate is 30%.

Calculate the YTM of the long dated bonds giving your answer to 1 decimal place.

Answer Q4 =15.6% Technique Q4 Long dated bonds are considered the same as irredeemable bonds. YTM is calculated as YTM = i/Po

A QUICK LOOK AT...

The concept of the ‘sharing economy’ has emerged as a business model based on the idea of consumers sharing their experiences with one another.

C2C (consumer to consumer), as it is known, is having a major effect on retailers. The growing use of social media, and what some are calling social e-commerce, means anyone with access to the internet is able to search out information on consumers’ experiences at virtually no cost.

One of the important ideas behind C2C is that consumers with good experiences become ‘prosumers’ for a product or service. The best known site for feedback is Trip Adviser, which is now looked at by millions of people when 28

YTM =

15 96

Q5) Yield to maturity for redeemable bonds RIO has issued some 4% $100 loan notes, which are redeemable in five years’ time at a premium of 5%.

The current market value of the loan notes is $96 ex interest.

Corporation tax is paid at 28%.

Calculate the yield to maturity for the loan notes to one decimal place. Use discount factors of 5% and 10% in your calculations.

Answer Q5 = 5.9 % Technique Q3 To work out the YTM for redeemable bonds a net present value calculation for the cash flows associated with the loan will be performed using 2 discount rates. In this case that is specified as 5% and 10%.

Remember, interest in YTM is always considered pre-tax (gross of tax).

Year

Cash flow

0 1–5 5

-96 4 105

Discount factor at 5% 1 4.329 0.784 NPV

Present value -96.000 17.316 82.320 ––––– 3.636

Discount factor at 10% 1 3.791 0.621

Present value -96.000 15.164 65.205 ––––– -15.631

Once the net present value using each discount rate has been calculated, an IRR calculation will be completed to work out the YTM. This uses IRR = r1 + (NPV1/(NPV1-NPV2) YTM = r1

NPV1

+

NPV1 – NPV2

x

(r2-r1)

Where: r1 = lower discount rate r2 = higher discount rate Using IRR: IRR = 5% + [3.636/(3.636 + 15.631] x (10%-5%) x = 5.9%

PQ

• John Sharratt is a CIMA content specialist with Kaplan Publishing

The sharing economy

deciding on holiday destinations, hotels, and car hire. Most retailers now include an online link to customer reviews with products and services purchased being given an overall rating from ‘excellent’ down.

The aim for the retailer is to create a ‘bandwagon effect’, where consumers promote a product or service to a large number of potential consumers. The challenge for the business is to ensure it is able to meet expectations so it needs to invest and build scale quickly, as the first mover advantage is significant. This is why some companies, for example Spotify, offer generous free trials in order to grow rapidly, and Uber taxis offer a significant discount for first-time users.

The debate about how to adapt business models and strategies sensitive to an economy where consumers increasingly share their experiences is interesting. Most retailers are already engaged in using the concept of C2C. Sharing in this way actually empowers consumers and promotes competition. The challenge for businesses is to build a reputation for value and service, and then to encourage consumers to share their positive experiences with one another.

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

PQ Magazine October 2016

CIMA’s Objectives Tests PQ

I

have always thought that taking exams is part knowledge and part technique. In fact, during most of my teaching career I have often said that to pass professional accountancy exams you need three skills in equal measure: knowledge, technique and time. With the onset of objective testing has this option changed? Well, no it hasn't!

For objective tests I believe that technique is very important; it can make the difference between a pass and failure.

The most important tip is this: make sure the first time you take the exam isn't the first time you take it for real. In other words, practise, practise and practise.

What you need to do is not only test your knowledge but also practise your exam technique as well and to time.

If you were entering for a marathon you wouldn’t just turn up on the day and run.

You would train. This training would consist of short runs, longer runs, trying different techniques, different paces until you found something that really worked.

This is what you need to do in the final build up to your exam. Also, you wouldn’t run a marathon in a brand new pair of trainers, would you? No! So make sure you practise questions using the calculator (from CIMA’s approved list) that you will use on the day. Even practise using a single piece of paper or laminate sheet like you get in the exam.

With objective tests, careful reading of the question is crucial. One word can change the whole meaning of the question. Watch out for double negatives and check how many answers you have been asked to select.

You have on average 90 seconds to attempt each question, so with this in mind can you really afford to read and then re-read a question a second or even third time?

So here’s Peter’s three-pass technique First pass: Aim to do over 10 questions in each 15-minute period (there is a timer on the computer screen). Start at question 1 and ask yourself the question, can I do it quickly? If the answer is yes, do it. If the answer is no, flag the question (there is a button top right) and move on.

Second pass: Again, aim to do 10 questions per 15 minute period. Start at your first flagged question and this time ask yourself the question, do I think I can do it? If the answer is yes, do it; if not leave it flagged and move on.

If a question has a long scenario, read the question (at the end, normally) first, so you know exactly what you’re looking for in the scenario. Think about what type of information is needed to answer the question, and then look for the information in the scenario.

Attempt the questions and remove the flag as you do it.

Third pass: Now go back again to your PQ Magazine October 2016

THREE STEPS TO

HEAVEN

How to take CIMA’s Objective Tests – or Peter's Three Pass Technique!

first flagged question, work out how much time is left and try to spend equal time on the still flagged questions. Don’t leave any multiple choice question unanswered – if you don’t know which answer is correct, exclude those which you know are wrong and make an educated guess. You have nothing to lose as there is no negative marking in the exam.

• Peter Nunn is a Live OnLine tutor at Kaplan

Remember you must…

If a question does look ‘subjective’ stop thinking too much about it. This is an objective test after all. Think what it says in the textbook. Try a ‘simplistic’ common sense approach. It is normally the correct one. If you over-analyse it, you will get yourself even more confused.

The questions students are finding

most challenging are the ‘Select ALL that apply’ questions. Of course, you need to select the most obvious answers, but which ones? Well, it is least likely to be one or all of them, so 2/3/4 should be your ‘favourites’ – but a much better approach is to try spotting the ones that don’t apply.

If you find yourself using far too much time on a question, guess and move on.

Try to attempt ALL the questions in the 90 minutes, even if you have to guess at a few.

Never go back to questions you have already answered. You'll only waste time and talk yourself out of what is probably the correct answer.

Finally to pass exams you do not have to follow my technique but you must at least have one. Good luck! PQ 29

PQ ATT prizewinner

TOP PERFORMER Lewis Richardson achieved the best performance by an apprentice in the November 2015 ATT exams. So we asked him how he did it What attracted you to a career in tax? It is a funny story. I applied for a job working in audit at BHP and I was turned down but offered a job in tax. I have not looked back and most certainly do not regret working in tax rather than audit!

What is it like working for BHP, do you have a typical day? No two days are the same. Being an independent, regional firm I am working across all areas of tax to gain a wider exposure to everything. This means that I can begin work with a plan and have different things given to me – meaning my plan goes out of the window!

How is the ATT qualification helping you with your work? It helps a lot initially, given that everything is fresh in your mind. Long term it gives you an awareness of everything. For example, even if you have forgotten the specifics, you are still aware of things such as pre-owned asset charges, etc.

As an apprentice do you feel you missed out not going to university? Absolutely not. People only talk about the good parts of university, which means some people feel they have

missed an opportunity, but I feel I can live that lifestyle outside of work, regardless.

What are your top tips for studying? I would say do not change anything about your lifestyle to fit revision in. My technique is that I never sacrifice anything for revision; however, the times that I would get home from work and watch TV or watch TV all day on a Sunday I would spend revising. Also, I am a night owl so I would revise late at night.

Do you find it difficult to be studying hard when your friends are out partying? As above! I never sacrificed going out partying to revise, I just fitted the revision around a busy lifestyle.

What do you do when you are not studying?

When I’m not studying I’m usually on a football pitch, cricket pitch or in a restaurant with my girlfriend (all of which I pay for!).

Have you ever lied about the fact that you work in tax? I’ve called myself an accountant rather than a tax adviser just so people don’t get confused! My brother thought I collected tax

Richardson: ‘do not change anything about your lifestyle to fit revision in’

from people, which didn’t go down very well!

If you could change one tax law what would it be and why? I would bring tax rates for myself down to zero and increase everybody else’s tax to compensate!

Where do you see yourself in five years time? I see myself at BHP but managing a team of people like myself and trying to nurture them and develop them into the ways of BHP. I would like to be ACA and CTA qualified and making my first steps to becoming a partner. PQ

PQ CTA exams

Five tips on passing a CTA advisory exam Nitin Rabheru has a five-step plan to get you through the CTA advisory exams. So read, digest – and put them into action!

1. Knowledge At the advisory level it cannot be denied that there is a lot to learn. But learning what you need to know is just the first stage.

For many students this can often be the first hurdle. Some spend too much time using the study manuals without minimal question practice, others tend not to cover all areas of the syllabus.

Students must have a good understanding of all areas of the syllabus and allocate more time to topics they find difficult.

I recommend all my students create a revision folder from day one of the taught course, divided into all key areas to ensure they have sufficient technical coverage by the time they get into the exam.

2. Structured question practice The key to success is being able to identify key issues, scenarios and tax problems within a question. Not knowing where to begin or how to start a question is a very common barrier to passing.

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No matter where you are in your studies you need to start reviewing, annotating and planning/practising questions and continue doing this until the exam. Many students underestimate the importance of reviewing past exam questions and examiners’ reports.

3. Learn to give advice It is important that you do not simply knowledge dump, you need to think about the tax impact on the client.

When giving advice in the exam you need to use the correct format, as well as stating the general position and applying your knowledge you have worked so hard to learn to the actual scenario/question.

Remember to also state due dates and timings of any relevant elections together with a reason as to why you think that election is or is not beneficial.

Try to provide a recommendation stating what the client should or should not do.

4. Be prepared Create self-made pass cards, crib sheets

or model answer plans as well as practise writing sentences out in full, too. Work through calculation questions and prepare computational proformas. The more mistakes you make during the study phase the better. Be sure to make a note of these mistakes to avoid repeating them in the exam.

5. Rehearsal I would recommend practising a full paper before the real exam or a few. This will enable you to think about skills such as time management as well as the application. PQ • Nitin Rabheru is a tutor at BPP’s OCR Live Faculty PQ Magazine October 2016

Enhance your reputation!

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

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

PQ ethics

Intangible assets: change is needed I

ntangible assets such as brands, people, know-how, relationships and other intellectual property make up a greater proportion of the total value of most businesses than tangible assets, such as plant, machinery and property.

The current international consensus among auditors and accounting standards setters is that all acquired intangibles should be recognised on the balance sheet, but that internally generated intangible assets, in almost all circumstances, must not be. In Brand Finance’s view, this creates a blind spot for accountants, investors and other stakeholders and disadvantages companies that create value rather than just acquire it.

The present situation does at least represent some form of progress. It was only in 2001 that FAS141 introduced the requirement for US companies to capitalise acquired intangibles following an acquisition. Under the standard, intangible assets should be separately disclosed on the acquiring company’s consolidated balance sheet. It was even later (2004) that IFRS3 introduced the same requirement as a global standard and a further year hence when, in 2005, all listed companies in EU member countries adopted IFRS. Step in the right direction At present, approximately 90 nations have fully conformed with IFRS, with a further 30 countries and reporting jurisdictions either permitting or requiring IFRS compliance for domestic listed companies. This is a step in the right direction and the widespread adoption of IFRS accounting standards means that the value of disclosed intangible assets is likely to increase in the future.

However, the present situation remains far from ideal. Brand Finance produces its Global Intangible Finance Tracker (GIFT) report annually, examining 57,000 companies (with a total value of US$89 trillion) across 160 jurisdictions. The study reveals a number of potential pitfalls arising from inadequate reporting of intangibles.

From the perspective of analysts, pricing shares with insufficient information about company assets leads to a broader, less helpful spread of values. Investors acting on the incomplete information (and the analyst reports that draw upon it) are in effect,

32

It’s time for a revolution in the reporting of intangible assets, says David Haigh forced to act with one eye closed. In turn, this has a host of negative effects for those responsible for managing the businesses. Share price volatility is one, affecting the stability and sustainability of finance. Hostile takeover is another significant risk. Lack of information about the true value of their assets leaves boards and shareholders in a naïve position, prone to acquiesce to acquisitions that should not take place or to sell individual assets at less-thancompetitive prices.

This even has implications for national economies. Whether at the government or corporate level, intangible assets are ‘undisclosed’ on balance sheets and are all too easily overlooked by those who should be protecting them. There are many keen to exploit this lack of

vigilance. Markets are erratic and a dip in share price leaves companies open to opportunistic bids, potentially snuffing out a nation’s pioneering brands in lucrative, tertiary industries. Ownership, profits and expertise may flow out of the country as a result, or worse, the acquisition may be by asset strippers with no concern for the long-term interests of the business, its employees or the country.

In Brand Finance’s view, a commitment to undertake an annual revaluation of all company assets, including tangible assets, acquired intangibles in previous years and internally generated intangibles, would be a boon for boards, accountants, investors, analysts and even governments.

‘Fair value reporting’ In effect, under this scheme of ‘fair value reporting’ management would be required to report its assessment of the total value of the business at each year end together with supporting assumptions. The transparency and clarity this would afford would enable boards to make more effective use of their assets, accountants to have a truer picture of asset values, and investors and analysts to more accurately price shares.

There is clearly a strong and growing appetite for this. As part of the GIFT report, Brand Finance, CIMA (the Chartered Institute of Management Accountants) and the IPA (Institute of Practitioners in Advertising) recently conducted survey of Equity Analysts and CFOs. Over 50% felt brands were becoming increasingly important in risk management and lending decisions and over 70% felt brands were becoming increasingly important in M&A activity.

Some 68% of analysts and 58% of CFOs thought all internally generated brands should be separately included in the balance sheet and that all intangibles should be revalued each year.

There is clear evidence that both producers and users of financial accounts want to see a radical change in the antiquated way intangible assets are reported. With US$30.5 trillion in intangible value undisclosed and growing annually, a revolution in the reporting of intangible assets cannot come a moment too soon. PQ • David Haigh, Brand Finance This article first appeared in NQ magazine, August 2016.

To read NQ magazine go to issuu.com and search for NQ magazine PQ Magazine October 2016

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PQ careers

Ace that appraisal Karen Young gives her expert advice for surpassing expectations in that all-important appraisal

T

he saying “fail to prepare, prepare to fail” rings particularly true when it comes to appraisals or performance reviews. To maximise the value of your appraisals you need to be ready for the meeting, ask the right questions and be open to receiving feedback. It is up to you to capitalise on the opportunity to discuss your progress and career plans and make the most of this one-on-one time with your manager. No matter what structure your company uses to review performance, the way you should prepare is the same.

Preparing for appraisals is about providing evidence that you have met or exceeded your objectives. Your last appraisal document should not be filed away gathering dust. It is important to constantly assess yourself against the objectives that you have agreed with your manager. Keep an on-going record of your achievements as you make them rather than trying to collate a year’s worth of evidence the day before your meeting. Take the time to

carefully look back at the objectives you were set at your last review or when you joined the organisation. Assess how well you have met each objective against the criteria set, and what could be improved in the future.

Be prepared to evaluate your performance according to each objective by providing specific examples and figures to prove your achievements. Include positive feedback from colleagues or external customers as it highlights the value you add to the team. You should also demonstrate your wider professional development and show where your performance has been enhanced by developing skills such as

communication, commercial awareness and leadership, all of which are highly valuable to today’s accountants.

Appraisals aren’t just about your past performance, they will also be used to set the agenda for your career progress in the year ahead. Come to the meeting with an idea of where you want to be in a year or even five years’ time and how you will achieve the next steps in your career plan. Think about where you need to further develop your skills and the support you will need to do this. Your manager will have their own expectations for your development and this meeting is a chance to discuss how you will work towards these. Setting new goals together will keep you motivated and on track.

What if your company doesn’t use a formal appraisal process? You should still ask your manager for time to review your performance on a regular basis. Asking to review your performance demonstrates your desire to perform well and develop your career. Whether these reviews are formal or informal in your company you should be working towards objectives throughout the year and have a method of reviewing these.

Remember, it is up to you to make the most of your appraisal meeting. So make sure you refer to your objective documents regularly throughout the year to avoid a last minute rush to prepare.

For more information and job opportunities for PQs visit www.hays.co.uk/pq PQ • Karen Young, Director, Hays Accountancy

Accountancy career opportunity:

TRAVEL à v «« ÀÌÕ Ì ið " i } L> µÕ> wV>Ì ° www.accaglobal.com/students

34

PQ Magazine October 2016

careers PQ

social media ROUND-UP PQ magazine put lots of ACCA tips on our website for the September exams, rather than put them in the magazine this time around. We put them on the home page as well as the study zone to ensure you didn’t miss them!

We also used Twitter to give you some more last-minute tips from FTMS’s Tom Clendon and Marty Windle. So it really is worth signing up to @pqmagazine!

But don’t worry, we will put December exam tips in the magazine – promise.

One of our top retweets this month was the story about what you should wear to get ahead in the City.

Apparently, brown shoes, a shirt with a pocket (are you a cleaner?) and a loud tie are no-nos. Jay B explained that black shirts can also kill your career.

Matt Bishop was more concerned about the suspiciously high pass rates for the ACA advanced level exams. You can see them on page 12.

We also use Twitter for the latest news. How would we have known that Bob Marley’s accountant, Marvin Zolt, had died without us following BPP’s Carl Lygo? Zolt was accused of ‘diverting’ US$13.4m in royalties from Marley’s estate.

We are also a member of some great Facebook groups. One of our favourites is CIMA Distance Learning UK’s. There is a great story on there about a student who managed just 24% in their F1 mock. She ran out of time and failed to complete half the paper. The next day she sat the real thing and passed it! Asked what she put her success down to she said: “My technique is really simple. The most important thing is the high motivation and intense study.” She also admits to reading the whole manual.

Over on LinkedIn, don’t forget to add our ACCA Study Zone to your groups.

With the introduction of CBEs it’s vital you keep ahead of the game, and hopefully we can help you with that.

You do need to make sure you keep your LinkedIn profile up-to-date. If you don’t have one then you need to get one!

PQ Magazine October 2016

Life at PwC Rob Mann, 26, is a senior associate based in Bristol, having joined the firm last September. He has a BA (Hons) Accounting and Finance from Plymouth University and was recently elected the ICAEW Student Council (ISC) Chair for 2016-2017 What’s the first thing you do when you get to your desk?

Power up the laptop and get a cup of tea – really exciting…

What’s on your desk? We hot desk, so just a phone, my laptop and the said cup of tea.

What’s the best thing about where you work? The people – they make coming to work much more enjoyable.

Where’s your favourite place to go for lunch? This great pasty shop just around the corner from the office.

What (or who) can you see when you sit at your desk? As I hot desk I have a different view and see different people each day.

How many hours a week do you spend in meetings? This

varies, I can’t put a set number of hours on it.

What time do you leave the office? It’s different every night, it’s one of the aspects of being an auditor that varies the most.

How do you relax? Swim, run, socialise, watch TV.

How often do you take work home with you? I try not to take work home, I prefer to stay in the

office a bit later instead.

What is your favourite TV show? I have two – Suits and Brooklyn Nine-Nine.

Summer or winter? Summer every time!

Pub or club? People who know me best would probably answer this as club, but it does depend on the occasion.

If you had a time machine, where would you go? Ancient Egypt – this was always my favourite history topic at school.

If you hadn’t chosen accountancy, where might you be right now? I haven’t given it much thought, but I was thinking about being a biochemist just before I went down the accountancy route.

In brief Sage gets hacked off Sage boss Stephen Kelly picked the perfect time to take a break from Twitter! He recently announced he was off on his hols, and so taking a social media break, “inspired by #digitaldetox”. It was then that some 200 companies’ accounts were hacked at Sage! Bet he wished he had turned his phone off altogether. As Sage’s website says: “It’s never been more important to be vigilant when it comes to security”.

Three-day week is the future Mexican billionaire Carlos Slim believes that a three-day

working week is the answer to most of the world’s problems. The former richest man in the world allows his telecom workers who are past retirement age to work

for four days a week on full pay.

He says businesses need the knowledge and experience of older workers. He now wants companies to cut these workers’

hours down to three days a week, to help create space for others.

The added benefit of having four days a week free would also encourage a lot of economic activity, Slim claimed – more tourism, entertainment, arts, culture and sport.

It’s lonely at the top Apple CEO Tim Cook has claimed that his job is ‘lonely’, despite earning a cool £7.9m last year. He said: “The adage that the CEO job is lonely is accurate in a lot of ways.” However, he went on to say he wasn’t after any sympathy. Not sure where he was going to get that from!

The PQ Book Club: books you should read The End of Accounting and the Path Forward for Investors and Managers by Baruch Lev and Feng Gu (Wiley, £33.99) The premise of this extremely complex and well-researched book is a simple one – that a company’s financial reports are not worth the paper they are written on. The authors – both accountancy academics – argue that the financial metrics used to calculate a company’s financial position are no longer relevant in today’s business environment. They go further, arguing that new ways are needed to measure a company’s

performance.

Lev and Fu document extensively how financial disclosure has lost its effectiveness, using real-world examples including Shell, Pfizer and Netflix. By way of an example, in the latter’s case, quarterly earnings in April this year fell short of analysts’ estimates. But rather than plummet, Netflix’s share price rose almost 18% on the announcement. The authors argue that investors ignored the backward-looking accounting information, reacting enthusiastically to a sharp rise in the forward-looking new-

subscribers indicator: 4.9 million versus the expected four million. They add: “Furthermore, astute investors noticed that a major reason for the earnings shortfall was Netflix’s large investment in future growth – technology development; 9% of sales – which accountants expense in the income statement.”

Perhaps it’s time for the regulators to re-assess the old, tried-and-tested methods?

PQ rating 5/5 Fascinating – but scary stuff for accountants.

• Win this book – see page 38 35

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RESULTS MATTER NOW MAKE THEM COUNT Congratulations, the wait is over and your results are here. Make the most of your preparation and hard work by taking the next step in achieving your career goals.

With the exam season behind you, now’s the perfect time to focus on your future. Don’t leave it to chance by wishing for an opportunity to come along, talk to the experts.

Hays specialises in part and newly qualified recruitment, working with leading organisations to offer you access to a wide range of jobs across the UK. We currently have over 800 vacancies in the commercial and public sectors as well as professional accountancy practices.

Whatever your career aspiration may be, we can find you the most suitable jobs to advance your career. So whether you’re an enterprising management accountant, an expert financial analyst or an aspiring tax professional, we can help you to achieve your ambitions.

To find out about our latest roles, or discuss the opportunities we can offer you, contact Karen Young on 07834 260029 or email karen.young@hays.com

hays.co.uk/pq The HAYS word, RECRUITING EXPERTS WORLDWIDE and POWERING THE WORLD OF WORK slogans and associated logos and artwork are trade marks and/or copyright works of Hays plc © 2016.

All rights reserved. NQ-14880

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SAYING NO TO $8.2M Eric Ben Artzi (pictured) is obviously a man of great principle. The former Deutsche risk officer helped expose false accounting at the bank. US regulator the SEC then offered him his ‘reward’ – a cool $8.2m. He explained that he was refusing the money because he thinks the bankers responsible for the false accounting, not the bank’s shareholders, should have paid the $55m fine handed out by the SEC. What would you have done?

HAVE THEY BANNED IT? Have your employers suddenly taken more interest in what you do at lunchtime? Maybe they are worried you have the Pokemon Go bug! There has already been a backlash against this latest trend. Boeing has issued a company-wide ban on the game after over 100 staff had installed it onto their work phones. Boeing claimed staff were unable to make a “conscious decision to not play Pokemon at work”.

SHOW ME THE MONEY

A new gallery is opening in the Bank of England’s museum this month, looking at the story of money and its relationship to forgers and counterfeiters. During World War Two the Nazis devised a plan to flood the UK with fake banknotes. The Bank of England was so frightened of this threat that they withdrew all its notes above £5 from circulation for several years and redesigned the five-pound note. Well, the bank has been at it again, and from 13 September the new polymer fiver will go into circulation. In fact, it even has its own website – www.thenewfiver.co.uk!

The old paper fiver goes out of circulation in May 2017, when it will cease to be legal tender.

• The Bank of England museum, in Threadneedle Street, is free and opens 10am to 5pm Monday to Friday.

’ WEV E

SLIM CHANCE

OF CASH New research (from Germany) has found that chubby men are more generous with their money than their slimmer peers.

And skinny men are not just tight with their cash – if they do decide to share it, it is most likely to be with someone who is slim. And skinny men are even more reluctant to share their food when they are hungry (which, we assume, is most of the time).

ONLY SUPERHEROES NEED APPLY

Hats off to the tax tutors at BPP. They are now providing a free tax exam advice service for ATT and CTA students – find it at att@bpp.com and cta@bpp.com. If you have a problem then you can be sure that Libby Morris, Nit Rabheru and Sheridan Gray can help. To illustrate this they have had themselves squeezed into cartoon superhero costumes and are calling themselves the ‘Tax Avengers’. Who said tax wasn’t fun?

DOWN UNDER SQUAT LAVATORIES PANNED The lavatories in a new building used by the Australian Taxation Office (ATO) in Melbourne have come under fire from far-right politician Pauline Hanson. It appears that squat toilets have been installed and Hanson is arguing that anyone who can’t use a conventional one may struggle to give accurate financial advice! She said: “The question I pose is, if they can’t work out how to use a westernized toilet, how are they expected to work out our tax system and give advice to ordinary Australians?”

HOW MUCH? Australian smokers will have to fork out £23 for a packet of fags by 2020 under a series of new tax hikes announced recently. The government has said it will raise tax on tobacco by 12.5% each year from now on, generating an estimated £2.4bn in revenue. Currently, a packet of cigarettes costs around £15 in Australia, much higher than the UK average of £9.16. In Poland that same packet costs £2.74. The Cancer Council of Australia said the hikes will prevent tens of thousands of cancer deaths.

GOT THE L OT

Just stay calm

Do you need to lose yourself in Millie Marotta’s Animal Kingdom colouring book?

We have three copies of her bestseller to giveaway this month. Hey, what other accountancy magazine would be trying to help you keep calm around exam time? All you will need if you win this fab prize is some pens, pencils and a bit of imagination.

To be entered for this giveaway draw send your name and address to graham@pqaccountant.com. Head up your email ‘Animal Kingdom’, and we will do the rest.

The End of Accounting We have three copies of Baruch Lev and Feng Gu’s latest book, ‘The End of Accounting and the Path Forward for Investors and Managers’, to give away this month. They claim that the financial information being produced no longer reflects the performance and value of business enterprises. Don’t worry – they have a solution! We have reviewed this book in this issue – see page 35.

To be in with a chance of winning a copy of this book send your name/address to graham@pqaccountant.com, headed up ‘End of Accounting’.

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 7 October. The main draw will take place on Monday 10 October 2016.

TO ENTER THESE GIVEAWAYS EMAIL GRAHAM@PQACCOUNTANT.COM 38

PQ Magazine October 2016

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