PQ magazine, October 2020 by PQ magazine

PQ magazine October 2020

www.pqmagazine.com / www.pqjobs.co.uk incorporating NQ magazine

THE VOICE OF ALL PQs

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ACCA EXAM PROBLEMS P4

AAA EXAM

How to avoid the rabbit holes

We report on the power supply and technology issues

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TECH ISSUES HIT AUTUMN EXAMS CFAB BEFORE WICKET P29 DIGITAL ID CARDS ARE COMING P32 LIFETIME GIFTS MADE EASY P33

This is the tax stuff you really ought to know when you walk into the exam centre

ICAEW and ACCA exam sitters suffer huge problems. Read about what happened INSIDE!

A GOOD LOOK?

First impressions are key to success in business

Mustaq Ahmed looks at how the cash accounting scheme works

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contents PQ

IN THIS ISSUE News 04ACCA exam woes A catalogue of technology ‘issues’ led to widespread misery for sitters 05Tax exams Bodies put trust in students with non-invigilated, open book exam sittings 06Connectivity problems Lack of a relaible internet connection could cause exam stress 08Taxing times Is it time for all tax advisors to be professionally qualified? 09ICAEW exams Institute offers early resits after some exams hit by technology problems 10CIMA case studies Students praised for rising to a new set of challenges 12Tech news Digital devices fly off the shelves during lockdown

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16Interview We spoke to CIMA’s

Features, etc 14Have your say ACCA exam nightmare is not good for my mental health; please help me choose my college; and a lot of fuss about a banana…

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October 2020

exam VP Stephen Flatman about the challenges the past six months has thrown up 17The tax gap PQ columnist Professor Prem Sikka asks the question: how accurate is HMRC’s tax gap figure? 18Accounting standards Test your knowledge of the regulatory framework with our IAS quiz 19ACCA spotlight Don’t dismiss working for a small accountancy firm when it comes to your next career move 20Contract law A basic knowledge of contract law will stand you in good stead 22ACCA AAA exam Richard Poole has some top advice on avoiding the pitfalls in this paper

23ACCA AA exam Some FAQs to help you pass the tough Audit and Assurance paper

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33Inheritance tax Neil Da Costa

explains how lifetime gifts work in a must-read article for tax students 34International standards Tom Clendon outlines the standard of fair value measurement and considers its application 36Study advice Cath Littler explains why you should embrace blended learning 37CIPFA spotlight Drew Cullen looks at the rise and rise of apprenticeships 38Cash accounting Our guide reveals all you need to know – thanks to Mushtaq Ahmed 40Working in practice Chris Downing explains why, in a period of upheaval, technology is becoming the accountant’s best friend 41Careers Life at office supplies compan CCL; our Agony Aunt Karen Young tackles your career ‘issues’; what not to do in an interview; and our Book Club Review 42Fun stuff – and our fantasic giveaways The columnists Robert Bruce When it comes to

24Your career First impression

really do matter – so how can you ensure that you make one? 27CIMA exams Interpreting your exam results is an important indicator of where you stand when it comes to your studies 28AAT distance learning Some sound advice on studying successfully at home in the form of 25 top tips 29Howzat! Meet top cricketer Matthew Fisher, who’s studying the ICAEW CFAB qualification while taking wickets for Yorkshire 30AAT resources Gareth John explains the thinking behind the AAT’s first week-long festival 36New technology Digital ID cards are coming – so how will that affect you?

audits, clarity is key Prem Sikka Honesty is the best approach for the UK’s auditors Zoe Robinson Why risk literacy should be on your CV Mike Day SMEs are vital to the UK’s economic recovery

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PQ news

GRAHAM HAMBLY Real news – all here first

The technical issues and power problems at this September’s ACCA exam centre sitting seem to have hit students across the UK and beyond. We covered the story extensively as it happened, and ACCA provided us with a full statement and apology. You can read all about it on this page. Maybe, however, you should also take a look at our website too, where we reported it all in real time. The first day feedback can be found at https://www.pqmagazine.com/accafirst-day-exam-blues-return/. ACCA were not alone having problems. The ICAEW Corporate Reporting exams seemed to suffer the same fate (page 9). We also look at the thorny issue of internet connectivity in this issue, something not often discussed (page 6). Did you know that Bristol had outages for 170 hours last year? Going back to the online exams, I do feel there is an expectation gap that still needs to be filled. Many PQs use two screens and even have a few bits of paper around when working, but when they enter the exam arena they are left to struggle with tiny 14’’ screens, chopping and changing constantly between windows. That, as many pointed out, is nothing like the work environment. But that is the exam, and maybe students need to practise in more realistic exam conditions. That means one small screen and no paper. On a lighter note, there will be not one but three accountants on this year’s Great British Bake Off, which starts on 22 September – so let’s all cheer on Peter, Hermine and Makbul! Graham Hambly is Editor and Publisher of PQ magazine and NQ magazine

Think positive One of AAT’s top trainers, Future Connect Training, has announced it is expanding its reach to more students. It has opened up branches in both Hounslow and Manchester this month. And we can exclusively reveal it has plans for Croydon, too. Check them out at https://www.fctraining.org/. The new centres join branches in Finchley, Harrow, Mile End and Birmingham, and FC Training’s success has even come to the attention of AAT itself! 4

ACCA exams hit again by technology ‘issues’ Technology issues and power supply problems hit the ACCA September sitting, with ‘misery Monday’ turning into ‘terrible Tuesday’ for many, as the problems in exam centres rumbled on throughout the week. And for some remote invigilated exam candidates their exams also ‘failed to launch’. The problems appeared more widespread on the Monday for AA and AAA sitters. PQ magazine heard of problems at centres in Bristol, Cardiff, Chelmsford, Coventry, Birmingham, Glasgow, London, Manchester, Norwich, Reading, Southampton, Stevenage and Watford. Problems with exam centres and remote exams were not restricted to the UK, either. We heard from students in the Netherlands, India, Pakistan and Zimbabwe. Students called it a ‘car crash’ and simply ‘dire’, and delays lasted from 45 minutes to seven hours. Many students were just thankful they had packed a banana or Twix to see them through the ordeal. Here’s what one Bristol sitter told us: “The exam cut out at 5pm and

we were kept there until 9pm without food (that’s seven hours in total), and then asked to leave and told that the exam was cancelled. I had no clue if our work was saved or anything.” The exam at Viglen House in London was also cancelled after candidates had waited five hours to sit it. One AA PQ explained: “The servers kept crashing and at 5.37pm we were all timed out.”

Statement from ACCA on the exam disruption “We are very sorry for the delays and disruptions experienced by some of our students sitting exams in the past two days. “While the majority of students had a smooth experience in very busy exam sessions, we failed to reach our own high standards in some venues. “Our initial reports show that issues were caused by problems with power supply at some centres and technology issues at others. We will continue to investigate what

went wrong and make changes where we can in order to improve. “Where possible, we will continue to offer students who have had exam sittings cancelled the chance to take the examination remotely within the next few days. “We will do our best to ensure that students do not lose out professionally as a result of these difficulties and we are happy to refund their examination fees, if we are unable to reschedule the examination.”

This sitting’s tough papers SBR and PM seem to have stood out at ACCA’s September sitting as the tough ones this time around. SBR was described as ‘horrible’ and ‘tricky’ all at the same time, and there were some worried

students after this one. PM was seen as a tough test. As one sitter said: “Literally only 20% of the syllabus came up”. In a poll 60% of candidates said they found it ‘hard’ or ‘a disaster’. One of the

On day two we heard that problems in the morning were having a severe knock-on effect for afternoon sitters. A Southampton PQ revealed: “We were told the exams were running one-and-a-half hours late. It finally started just after 4pm, so it was nearly 7pm once we had finished. I got home at 8.30pm. That was a long day!” Yet another student said: “It was chaos from the minute we arrived.” Things weren’t help by the fact that the ACCA Practice Platform went down at the end of August, or some last-minute changes to test venues for candidates. We even heard one story of invigilators and students turning up to the wrong centre. Students also feel that some of the computer equipment they are asked to sit the exams on isn’t up to standard: “The computer equipment was awful, tiny screens and my mouse didn’t work properly. There was even a girl behind me who left the room crying because her software crashed.” This all follows huge problems in March, where there were 12-hour delays at some centres. ACCA has provided us with a statement, which we have published in full here. most poignant posts read: “Seriously, I am so pissed off why they would do that to us. I studied 400 hours and still don’t know if I passed.” Other papers that PQs didn’t like were SBL and ATX. SBL sitters were surprised by the charity question, and ATX students found the exam tough. PQ Magazine October 2020

news PQ

CIPFA June ATT and CIOT plump for open book results a exams without remote invigilation mixed bag CIPFA students seemed to struggle with the Taxation paper this time around, with the pass rate falling from 82.3% in December 2019 to just 68.9% in June. Another worry is the slump in the Public Service Financial Reporting paper success rate. It has dropped below 50%, to a lowly 46.7%. CIPFA may also need to put in more resources to help those sitting Strategy and Policy Development. At 63.2% this is the lowest pass rate for over nine sittings. During that time the pass rate has been 70.7% â&#x20AC;&#x201C; 85.7%. The good news is that the Audit and Assurance pass rate jumped from 50% in December to 87.8% this summer, back to its normal number. CIPFA JUNE 2020 RESULTS: AA 87.8%; BCM 89.7%; CFR 59.6%; CGL 90.1%; FA 72.9%; FM 73.9%; MA 89.7%; PSFR 46.7%; SCS 72.3%; SPD 63.2%; SPF 71.9%; TAX 68.9%

The Chartered Institute of Taxation and sister body the Association of Tax Technicians have said its online November 2020 exams will not be invigilated and will be open book. Both bodies have stressed this is due to the current pandemic rather than any change to its exams. Students have been reminded that they are bound by the CIOT/ATT ethics guidelines, and must behave in the appropriate manner as a tax professional, act

with integrity, receive no external assistance and sit the exam in a room alone. The move follows the evaluation of the remotely invigilated June/July sitting of the CTA application and professional skills, and ATT paper 4 exams. The two bodies decided â&#x20AC;&#x153;it is not appropriate to use the same software product for the full November exam sessionâ&#x20AC;?. The honest appraisal was that the experience of candidates sitting the

AAT gets into bed with IMA AAT has announced a new partnership with the Institute of Management Accountants (IMA), to support the international advancement of the management accounting profession. AAT is now added to IMAâ&#x20AC;&#x2122;s list of â&#x20AC;&#x2DC;approved certifications for education requirementsâ&#x20AC;&#x2122;. The new partnership will mean AAT members with advanced accounting diplomas can become candidates for the IMAâ&#x20AC;&#x2122;s Certificate

Management Accountant qualification, without the need of a degree. The waiver also allows students who have completed and passed AAT Level 4 Professional Diploma in Accounting to access IMAâ&#x20AC;&#x2122;s global CMA credentials. AATâ&#x20AC;&#x2122;s Rob Alder

first remotely invigilated emergency summer session was too variable. So, both are using the Exam4 software for their November sessions. The Exam4 app has been successfully used for many years for the ADIT (Advanced Diploma in International Tax) exams. Moving forward, the CIOT and ATT said all its exams will be conducted remotely for 2021, and it will not be returning to exam halls.

(pictured) said: â&#x20AC;&#x153;Many students have successfully used AAT accounting qualifications as a springboard to chartered accountancy training. â&#x20AC;&#x153;We have developed many non-graduate progression routes from AAT over the years, and AAT is the only professional qualification that provides a quicker route to chartered status. It is great to have the recognition from IMA to provide another pathway for our students. We look forward to working with IMA.â&#x20AC;?

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PQ Magazine October 2020

PQ news

ROBERT BRUCE Seeing the wood for the trees

There ought to be an audit discipline called ‘The Wood For The Trees’. It would concentrate on the frequent confusion between issues that don’t signify much and so really shouldn’t matter, and issues that are essential to rigorously bear down upon. If a specific course could be devised that would enable people to avoid the confusion of not being able to see the wood for the trees then perhaps Jan Bouwens, Professor of Accounting at Amsterdam Business School, would be the person to teach it. He recently suggested that if we put audit scandals into proportion then we might see a very different picture. And he is right. One massive uncovered fraud doesn’t mean that many thousands of audits are also faulty or suspect. The nature of audit means that the work goes on behind closed doors. And where researchers have had access to audit processes over the years they have tended to confirm that much deterrent activity does go on in the normal audit process. When mistakes are made, and subsequently corrected, no one in the outside world gets to hear about it. It is part of the normal process. But the headlines about one fraud skews the public’s view and understanding of the many thousands of audits that complete their normal course without too much in the way of incident. And that deterrent doesn’t cost too much either. As Prof Bouwens points out, in 2019 the oil giant Shell paid an audit fee amounting to 0.015 per cent of its turnover. Not a high cost for seeing the wood clearly. Robert Bruce is an award-winning writer on accountancy for The Times

As accountancy exams move to remote invigilation the connectivity of your broadband becomes more important than ever. To help raise your anxiety levels Uswitch, the comparison service, has released a survey that claims nearly five million people in the UK suffered a ‘broadband outage’ lasting more than three hours in the past year, costing the economy £1.5bn. That adds up to 39% of respondents who experienced problems over the past 12 months. Put another way, it means in the past year the average affected home went offline for 29 hours. The reasons are numerous: power cuts, broadband provider had an outage, damage to external cables, or routine maintenance.

I have an outage!

The longest single outage happened in Leeds, where residents reported one incident lasting just shy of 55 hours. People in London reported the most instances of outages (seven in a year), while Cardiff experienced the fewest.

Britain’s outage capital is Bristol, which came in just ahead (and not in a good way) of Brighton and Belfast. The average amount of downtime per year in Bristol is a whopping 170 hours, way ahead of Brighton, which recorded a figure of 89 hours.

PwC delays annual results

worldwide from reporting. Revenue at the firm hit $43 billion for the first time for the year to the end of June, despite the pandemic. PwC’s Middle East and African operations reported the fastest growth in revenues – up 9.6% to $1.8 billion, followed by Asia, which achieved a 5% growth to $6.4 billion. The only region to show a decline in revenue was Australasia and the Pacific, which dipped by 1% to $1.7 billion in revenue.

PwC UK has said it needs to delay its full-year results until next year, as it can’t work out partner and staff pay and bonuses! The annual report was due in September, but PwC has revealed the impact of the pandemic means it will not release its accounts until January 2021. The Big 4 firm is reported as

saying: “Our current priorities are managing our business, supporting our clients and preserving jobs before we make any decisions about the quantum of the bonuses we pay to our staff and distributions to our partners.” PwC partners have already agreed a 20% cut in monthly profit distributions. All this hasn’t stopped PwC firms

School leavers losing out to graduates The UK’s current approach to apprenticeships leans too heavily towards highly qualified employees and not enough to school leavers, according to a new report from the Centre for Social Justice. It says too many employers are using the levy funding to rebadge existing training, or to accredit skills that existing staff already have. The CSJ believes that while the apprenticeship system should

play a part in reskilling established workers, it must not crowd out opportunities for people who are about to join the market – particularly during the pandemic, which is rapidly extinguishing their prospects. CSJ said that level 2 (intermediate) apprenticeships are in free fall, and their demise affects disadvantaged people who are more likely to undertake them. It claimed relatively few

level 2 apprenticeships are being approved, with levy-paying employers focusing more on higher-level apprenticeships, with squeezes on funding bands also depressing starts. One recommendation from the report is that an existing degreelevel qualification should not be able to draw down on apprenticeship funds to undertake a degree-level apprenticeship.

and training from a trusted education provider. AAT started offering its qualification in the Middle East in the 1980s and has trained 5,000 people in finance and accounting. It is now working towards this level of recognition across the rest of the United Arab Emirates and Middle East.

the Prize-Winner Award, and Global Excellence Award. The Prize-Winner Award recognises the academic partner institution that trained CIMA’s top student of the year in each country. The Global Excellence Award will go to colleges that achieve CIMA pass rates above the global average in the same calendar year. The only awards open for nominations are for teaching, research, campus culture and employability. For more email academic.partners@aicpacima.com.

In brief Kaplan chats with PQ… Check out PQ editor Graham Hambly talking to Kaplan head of learning Stuart Pedley-Smith about how to pass those accountancy exams. He reveals that the optimum period of study to pass a professional exam – it is 12 weeks! If you want to increase your chances of passing you also need to sit the exam two or three weeks after you finish your course. Pedley-Smith answers the question – does cramming work? In the second podcast he talks to John 6

Glover about the thorny issue of phones in the classroom (he wants you to turn it off!). Check them out at https://tinyurl.com/y38qht6n AAT recognised in Dubai AAT has been recognised as an International Certification Organisation by the Knowledge and Human Development Authority (KHDA) in Dubai. KHDA oversees the private education sector for the country, and accreditation gives learners assurance that they will receive high-quality qualifications

Rewarding excellence CIMA has launched Academic Partner Excellence Awards. Among the awards up for grabs are the CIMA Teaching Excellence Award,

PQ Magazine October 2020

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PREM SIKKA Audit sector needs a more honest approach The auditing industry has long used the ‘expectations gap’ as a political tool to dilute auditor responsibilities, especially for detecting and reporting fraud. It consigns challengers to negative spaces with the claim that intelligent people somehow don’t understand the purpose of an audit. Auditor duties are clear enough. In the case of Fomento (Sterling Area) Ltd. v Selsdon Fountain Pen Co Ltd [1958] 1 All ER11 at 23, judges said that an auditor’s “task is to take care to see that errors are not made, be they errors of computation, or errors of omission or commission, or downright untruths. To perform his task properly, he must come to it with an inquiring mind – not suspicious of dishonestly, I agree – but suspecting that someone may have made a mistake somewhere and that a check must be made to ensure that there has been none.” In the case of Assetco Plc v Grant Thornton UK LLP [2019] EWHC 150, the High Court awarded damages against auditors for failure to detect and report fraud. The judge said the auditor “breaches of duty included a failure to exercise proper scepticism which would have led to detection and prevention of fraud including representations and assumptions made by management”. On 28 August 2020, the Court of Appeal confirmed the judgment about auditor duties but reduced the damages from £29.8m to £20.8m for contributory negligence. Rather than mocking people for expecting robust audits, the audit industry needs to put its house in order and deliver meaningful audits. Prem Sikka is Professor of Accounting at the University of Sheffield

Time for professionally qualified tax advisors? All tax advisers should be professionally qualified, says the Chartered Institute of Taxation. It has given a cautious welcome to a government proposal for an ultimate legal requirement for anyone who wants to provide tax advice on a commercial basis to belong to a recognised professional body. There is another alternative on the table – a new government regulator of tax advisers – but the CIOT says this would be costly and MANAGEMENT ACCOUNTANT SIX-MONTH FIXED TERM CONTRACT. Your new company: Manufacturing client in Kettering. Your new role: Management Accountant – six-month fixed-term contract. What you'll need to succeed: Your new employer is seeking a Management Accountant to support with month end, P&L journals and prepayments and

ineffective. HMRC is calling for evidence on options to raise standards in the market for tax advice to benefit taxpayers and to better protect the public purse. CIOT supports the idea that the work of professional bodies (like itself) is properly recognised, and

PQ JOB OF THE MONTH other month end processes. You will need to have proven experience in a similar role, with a good knowledge of Excel and ideally Sage 200. This role will be 100% on site and is a full time role on a six-

so there should be a legal requirement for those who provide tax advice on a commercial basis to belong to a recognised professional body. The CIOT’s John Cullinane, admitted that there is a risk of excessive disruption to the system if agents and advisers who are not members of a recognised professional body are outlawed overnight. He went on: “We suggest a transitional period – which might involve a possible escalating level of requirements common to professional body members being applied to this population – to allow unaffiliated agents to adapt.” month fixed term contract to start immediately. The client will consider a part qualified or qualified by experience management accountant; you will be supported by the financial controller and financial accountant. Salary is £25,000 to £30,000 per annum. Application closes on 29 September 2020. For more go to: https://tinyurl.com/y32m8utz

230 jobs go as Robin Hood Energy collapses Robin Hood Energy (RHE) is shutting up shop with the loss of 230 jobs. This is despite the millions of pounds pumped into the venue by Nottingham City Council. British Gas owner Centrica is taking over the customer base of thousands of homes (112,000) and businesses (2,600). It has been suggested that the council has lost up to £38 million on the venture. The true lost will become clearer when the transfer of customers to British Gas is done. RHE was set up in 2015 with the idea of help tackle fuel poverty, with the additional claim of being the

first council-run energy company in the UK. Auditor Grant Thornton explained that RHE had lost money every year in its existence, and was struggling to find new customers, and had become dependent on council monies. British Gas has said it is

buying the customer base, but not the rest of the company. Following the launch of Robin Hood Energy, Bristol City Council launched its own venture. Bristol Energy went up for sale in June, after the council invested some £35m into the company.

‘household tax’ that would mean richer people pay more, says the outgoing director-general at the BBC, Lord Hall. He believes more progressive alternatives to the TV licence have to be looked at. Collection of the licence and tracking down evaders would be streamlined if the tax was collected with council tax (as used in Germany). The current set-up is guaranteed until 2027, but the government believes there is a need for a fee that works in a digital world.

Where to tax avoiders live? Towns commonly associated with city workers have the biggest concentration of people who admit to tax avoidance. A study by UHY Hacker Young found Windsor leads the UK for the highest concentration of ‘avoiders’. In the Berkshire town there were 23 disclosures of unpaid tax per 100,000 population last year. The UK average is seven disclosures per 100,000 people. Affluent towns in the Home Counties dominate the Top 20 areas for disclosures.

Taxwatch Passing on the tax Google plans to pass on the entire cost of a new UK 2% digital services tax to advertisers. It has written to its clients to tell them that from 1 November they will be paying a new 2% charge on their adverts served in the UK. Where the charge is higher – like in Austria and Turkey – the increase in charge will reflect the tax (in these cases 5%). Agencies have told Campaign magazine that the 2% UK levy will apply to media spend on Google Ads, but will not 8

apply to spend on DV360 Google’s demand-side platform, where programmatic ads are bought via an online auction. Amazon said it too would be passing on the cost of the tax to its marketplace sellers, and Facebook and Microsoft are expected to follow suit. eBay have bucked the trend, saying they will absorb the tax rather than pass the cost on to its buyers and sellers. Pap‘Household tax’ mooted The TV licence fee could be replaced by a compulsory

PQ Magazine October 2020

news PQ

ICAEW forced to offer early resits ICAEW was forced to offer a resit to ‘a small number of students’ who had their Corporate Reporting exam sitting disrupted by technical errors. Some advanced level students have expressed surprise that the ICAEW made the concession without making a public announcement. One twitter account holder, ‘Aug20 CR victim’, asked: “Where is the transparency?” The fear is some students who were affected have not been offered the resit option. Disrupted students were given a resit in mid-September. It was up to students to decide whether they resat the exam, based on how they felt they performed with the reduced time. However, if disrupted students decided to resit they will be awarded the highest mark out of the two Corporate Reporting exam attempts. Both their exams will be marked. An ICAEW spokesperson said: "We’ve offered a small number of students the opportunity to sit a

new Corporate Reporting paper after they experienced technical issues in exam centres which meant they couldn’t sit or complete the assessment. We have contacted these students directly and we apologise for any distress caused.”

Kaplan centres reopening Kaplan has said from September it will be running its normal array of computer-based exams, including ICAEW certificate, ACCA OnDemand CBEs, and CIMA, and it will continue to run AAT. Capacities are still reduced due to social distancing measures, but Kaplan is hosting as many exam sessions as possible to keep PQs progressing in the coming months. When it comes to classroom courses, Kaplan said student safety is a priority. “With reduced class sizes and extra social distancing measures we’re able to safely run

selected ACCA, CIMA and AAT courses from many of our training locations for new courses starting from 7 September,” it said. For CBEs, Kaplan’s primary focus has been supporting the needs of its AAT students who did not have a remote proctoring solution to be able to sit exams. Initially opening eight centres in July, it is now successfully running computer-based exams across all of its normal CBE locations (with the exception of Grimsby and Sheffield where students are advised to use the Hull and Leeds centres).

Making mental health a priority Deloitte UK, Morgan Stanley, Barclays, Eon and Unilever are among the 30 or so leading businesses who have now pledged to prioritise mental health as their employees return to the workplace, following research that shows many are struggling. Citing a recent Mind survey, they have signed an open letter detailing their commitment. The mental health charity’s survey revealed that lockdown has hit people’s mental health hard, and said it could get worse before it gets better. It found 35% of workers described their mental health as being either ‘poor’ or ‘very poor’. The thought of returning to work is causing anxiety levels to rise even more. The Mind survey also found that 65% of adults with pre-existing mental health problems said lockdown has made them feel worse. The figure was higher, at 75%, among those aged 13-24 (with pre-existing conditions). For more go to https://www.mentalhealthatwork.org.uk/commitment/ PQ Magazine October 2020

PQ news

ZOE ROBINSON Risk literacy should be on your CV

If you are studying to become an accountant you are most likely numerate, rational and logical – but are you risk literate? Here is a question to help you find out: can you interpret the data about coronavirus well enough to make an informed decision? At the time of writing, the government had announced that the ‘R’ number was between 1.0 and 1.2 in the UK for the first time since March. To be risk literate you don’t need to calculate R, but you should understand that it means 10 people with Covid-19 will go on to infect between 10 and 12 others. However, to make an informed decision you need to put this in context. For example, the figures are averages for the UK, and the infection rate in your area might be considerably higher or lower. What is the trend, is it increasing or decreasing? And if it’s increasing by 20% is that a lot? Hopefully you get the idea. The data only tells you so much; to make practical decisions about the risks involved you should ask questions and understand the importance of relative measures; what is this risk compared to something else? This is an area in which finance professionals excel; these skills are essential to understanding and interpreting numbers correctly. Perhaps we should be shouting more about our expertise. Not only can we add up, but we might also be able to advise as to whether it’s a good idea to meet up with friends tonight. Zoe Robinson is Learning and Programmes Director at Kaplan Financial

CIMA students rise to new challenges The CIMA case study May 2020 results are out and they are ‘looking good’. The operational case study pass rate held steady at 57%. Success at the management case rose to 67%, and the strategic case jumped to an even healthier 69%. CIMA’s examination VP, Stephen Flatman (pictured), said he has been humbled by the way students

have risen to the challenges facing them. “I have been really impressed with the way our students have reacted in lockdown,” he said. There are record numbers of students now planning for the MSC August sitting. CIMA CASE STUDY – PASS RATES The new May 20 Feb 20 Nov 19 Aug 19 syllabus pass 55% 68% 46% rates for the OTs are also Operational 57% Management 67% 49% 66% 64% out, covering the sitting 69% 59% 64% 64% between 1 January 2020 Strategic

Graduate job adverts fall by 60% The number of graduate jobs being advertised has fallen 60.3% compared with the same period in 2019, with industries such as marketing, construction and recruitment experiencing even larger drops. Research by CV-Library found that university leavers also appear to be giving up on their job hunt, as searchers for these roles have dropped by 8.4% yearon-year. Analysis shows that the average salary for graduate jobs currently sits at £24,626 per annum, 7.1% higher than a year ago. Alongside this, the study found certain industries are paying above-average wages for graduate positions including the public sector (£34,000); IT (£27,290); accounting/finance (£27,074); media (£26,958); and sales (£26,002).

Average graduate salaries were also highest in London (£27,259), with Newcastle on £27,250, Edinburgh on £24,857, and Manchester coming in at £24,740.

Use scratch pads ‘minimally’ ACCA students sitting CBEs have been reminded that nothing on the scratch pad gets marked, so you should use it ‘minimally’. Aileen Edgar, an ACCA exam coach, recently led a webinar for ACCA ATX tutors and she stressed when it comes to the scratch pad it is best to use it for planning your

CEOs signal shift to home-office models UK towns and cities will undergo an inevitable transformation as a result of Covid-19, with 68% of UK CEOs believing there will be an enduring shift towards low density office usage and 35% expecting a similar move towards deurbanisation, according to PwC’s latest survey. The CEO Pulse survey results suggest that the consequences of home working are starting to fundamentally filter into long-term thinking about existing office accommodation models, says PwC’s Simon Hampton. He explained: “Prior to the pandemic, we were already noticing a significant shift in the way people 10

and 31 July 2020. And here they are: E1 81%; E2 90%; E3 76%; F1 77%; F2 59%; F3 57%; P1 52%; P2 53%; P3 55%. Moving forward, the pass rates will be updated on a quarterly basis. Flatman said that students had taken the new syllabus in their stride, and he was proud of his team, who had remotely invigilated exams up and running just seven weeks after the lockdown was announced. • You can read our full interview with Flatman on page 17.

answers and noting down key points you are not sure about. Edgar said the practise platform, available for learning providers and students, should be an essential part of preparing for ACCA CBEs. Other key points are: • Copy and paste the requirements into the word processor respond

choose to consume – physical retail assets versus online, served via logistics warehousing for example – but with lockdown this home delivery trend has swiftly accelerated into food and perishable items with a new, often more elderly, buyer group joining the younger, tech-

space and close down the requirements box to keep your window clutter-free. • Consider using the table function within the word processor option for short calculations rather than jumping between the spreadsheet and the word processor window. • Assign a purpose for each of the four highlighter colours, for example key dates, action words, types of tax, concerns.

savvy generation.” He felt it would be short-sighted of us to think it won’t result in different looking town centres and suburban areas in the future. CEOs are divided about what role cities will play in the future, with a third believing the shift towards de-urbanisation (away from urbanisation) is enduring, with another third believing it is temporary. Conversations with UK CEOs also suggest that a new hybrid model is emerging with work being ‘something people do rather than a place to go to’. The survey shows that one in four CEOs (24%) are already prioritising digital adoption as well as making their workforces more flexible and smaller, a move that will enable them to be leaner and more agile. PQ Magazine October 2020

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PQ tech news

MIKE DAY SMEs are vital to our economic recovery

The role SMEs play in the UK economic recovery is vitally important. There are 5.9m SMEs who make up 99% of all businesses, 60% of employment and 52% of the revenue of UK plc. One of the advantages of cloud accounting is that the power of having financial data in one place leads to the ability to analyse at a macro level, in this case the Xero customer base. This reveals trends relating to the recovery of the UK’s small business economy following the impact of Covid-19, showing tentative improvements in revenue and payment times. Based on anonymised and aggregated data from thousands of customers in the UK, Small Business Insights (SBI) showed signs of recovery, with revenue improving by 11% in June. Although revenue was still down on last year, it improved from 29% down in May to 18% down in June (year on year). The data shows that construction (12% down in the year to June, compared with 41% down in May) and manufacturing (3% down in June, compared with 24% in the year to May) saw the most revenue improvement in June. Hospitality (51% down in the year to June, compared with 63% in May) and arts and recreation (37% down in June, compared with 48% in May) experienced the lowest revenue improvement. Despite signs of recovery being seen in revenue figures, job losses have continued. Employment dropped another 4% in June. Mike Day, Director, UK Education Sector, Xero

Digital devices fly off shelves One in five UK adults (21%) bought at least one new digital device as a result of spending more time at home because of the Covid19 pandemic, according to Deloitte’s Digital Consumer Trends 2020 report. In total, up to 21.2 million digital devices were purchased during the first two months of the lockdown period, including two million printers and monitors. The researchers found that UK adults used 170.3 million devices daily during the first two months of lockdown, equating to 3.5 devices on average per person. Games consoles, laptops, smart speakers and e-readers saw the highest uptick in usage. Among those who own the devices, daily usage of games consoles rose by 10 percentage-points, with 44% of owners saying they used their console daily, up from 34% in Zoom, the video conferencing app, has seen revenues shoot up as second-quarter profits more than doubled due to the current ongoing pandemic. Revenues jumped by 358% to just under £500 million (£496m) for the three months to 31 July. That was well above analysts’ predictions. Profits rose to £138 million, with

2019. Meanwhile, daily smart speaker usage jumped from 59% to 66%, and laptops usage was up from 67% to 73%. Interestingly, fitness bands and smart watches both experienced a decline in usage as consumers spent more time at home. Deloitte’s report found that TVs (bought by 6%), smartphones (6%), laptops (6%) and games consoles (5%) were the most popular devices bought during lockdown. That means three in five (59%) of consumers now have

access to a smart TV. However, ownership of desktop or tower computers fell from 45% to 40% in 2020. Overall, Deloitte’s research finds that UK adults now have access to 5.1 digital devices on average, totalling more than 250 million devices across the UK, and this peaks among high earners. For those with an annual income of less than £13,500, 72% own or have access to a digital device, compared with 94% of those earning more than £75,000.

Sales boom for Zoom the number of customers using Zoom rising by 450% compared with the same period a year ago. Zoom is a free service for many, although it has really benefited from big-paying corporate clients. These large customers more than doubled from around 450 to 988

during the quarter. It hasn’t been all plain sailing, as its popularity has meant increases in the number of outages, and its reputation was not done any favours either when it was discovered the company shared user data with Facebook.

Amazon reveals corporation tax bill Amazon paid around 2.1% of its revenues in tax last year, according to the latest filed results (for last year). This is despite earnings jumping by 25% to £13.73 billion. It means the online giant paid £293 million, up from £220 million in the previous year. By comparison Tesco, the UK’s largest retailer, paid £1.8 billion

(4.9%) on its £37 billion revenues in direct taxation. The announcement will again sit uneasily with those who believe Amazon, currently valued at $1.6 trillion, does not pay its fair share of corporation tax. Amazon says that the UK government has encouraged it to invest with tax incentives (capital allowances and

speed of 150mph and will carry four passengers. The 47-mile from Brighton to London would take 30 minutes by air taxi.

between 2009 and 2018, and includes a penalty of £20 million for stalling the payment. This latest news comes after Google settled a £870 million criminal investigation and Apple paid up £450 million. The introduction of a tax on sales for the big tech giants is still a threat in France.

research and development credits), and these all helped to reduce its corporation tax bill. It also claims that it has invested more than £23 billion in its UK operations since 2010, and more than £690 million last year in its UK infrastructure. Amazon directly employs some 30,000 people in the UK.

Tech briefs Hail the flying taxi A British-start-up, Vertical Aerospace, has claimed that it is four years away from offering commercially operating flying taxis. Customers will be able to travel up to 100 miles in the winged taxi, which is called VA-1X. The aircraft is powered by electricity, has a 15metre wingspan, with a cruising 12

Facebook stumps up Facebook has paid £95 million to settle a longstanding financial dispute with the French tax authorities. The monies include a tax adjustment relating to its profits

Scammers target students HMRC recently warned students about a fresh wave of cyber frauds offering them bogus tax refunds. The department

explained it would normally expect to see a small, regular flow of scam referrals from students, but recently saw a sudden spike in students reporting suspected scams sent to their official university and college email addresses. When new scams emerge targeting students at particular universities, HMRC finds that they often spread. The department has therefore warned students to take a moment to think before parting with personal information. PQ Magazine October 2020

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PQ email graham@pqmagazine.com

HAVE YOUR SAY Our exam nightmares The terrible technical issues surrounding the ACCA exams seems to have carried on into the second day for many sitters. I sat at Anglia Ruskin University, Chelmsford and we didn’t start until circa 11am – two hours after the posted start time. The delayed start time was just one of nearly a dozen issues, which meant that I was not in the correct mental state for the exam. This was my first CBE exam, and I am thankful that I only have one more CBE to take, plus a retake of AAA. Are you, as a magazine, able to put pressure on ACCA to get any answers or even an apology

regarding these issues? I’ve just received the email from ACCA asking for feedback on the exam and cannot wait to respond to it! Name and email address supplied • I am an ACCA student and sat AAA remotely on Monday 7

September. My experience was awful! I didn’t expect it and was shocked by the technical issues and delays. ACCA needs to provide us with clear guidance on delays and directions regarding relaunching the test. The OnVue support system was not supportive, the invigilator was too slow, providing only vague comments and inadequate help. I was scared to relaunch because I thought I was already signed in. It would really have helped if the ACCA had told us we might have experienced delays. Name and email address supplied The editor says: There’s lots about the latest exams in this issue. Our extensive coverage (page 4) also includes a statement from ACCA.

Our star letter writer wins a fantastic ‘I lovePQ’ mug! Day three problems I tried to sit the SBR exam on 10 September. The invigilator was unable to release my exam and I had to forcefully give my consent to revoke the sitting. It was so disheartening. I wish those technical errors had not happen – I have invested six months for these exams, studying long hours and have just spent a miserable day achieving absolutely nothing. Name and email address supplied

Sorted, thanks to pqjobs.co.uk

Who’s the best? I would like to study from home but am having trouble deciding which training provider I should go with. I know every year you have the PQ awards and I’ve been looking into this to help me decide. Can I get a list of recent winners? Name and email address supplied The editor says: Watch this space!

Why the banana? Please explain the picture you used with your ‘ACCA exam blues’ story in the last issue – two eyes on an inverted banana. Name and email address supplied The editor says: With all that was happening with the ACCA exams this month this was one of the stranger emails we received. I liked

the ‘sad’ banana face – some students had been stuck at their exam desks for over seven hours and all they had to eat was a banana or a Twix, they had told us. When I relayed

this information to the emailer I wasn’t expecting the response: “It may give the wrong sensual impression because of the inverted arched banana…”

social media ROUND-UP There was lots of social media noise about the technical issues at the ACCA September exams so we thought that we would look at some of the other issues that came up this month. A PQ studying CIMA E2 raised a problem she had with her Kaplan manuals on LinkedIn: “I am disappointed and disheartened to see that in my study text book, managers are repeatedly referred to as he/his. Terrible example of inclusivity.” A fellow CIMA PQ agreed: “I noticed the same. Not in every book, but I thought it was probably just because I was having a lot of conversations recently about this sort of bias, so I was being oversensitive.” To its credit Kaplan quickly responded: “We are also disappointed to see this and we will feed this back to our internal team who are focusing on improving inclusivity in the area of our business that need it.” ICAEW students had issues with the Corporate Reporting exam. ‘Aug20 CR Victim’ tweeted us: “ICAEW just offered some candidates another chance to retake last week’s advanced level CR exam in mid-September without making public announcement, is this considered fair and transparent ? Answers/ discussion already everywhere on the internet!” Another PQ went further: “…total exam shambles and scandal by ICAEW for August sitting. Incompetence, cover ups, shady backroom deals. How can they ask their members to act ethically when they cannot even uphold the core principle of integrity? Zero transparency or fairness. We want answers.” ICAEW did act quickly to offer affected students re-sits two weeks later. But students were obviously very angry. You can read the full story on page 9.

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

Published by PQ Publishing Ltd © PQ Publishing 2020

PQ interview

CIMA rises to the challenge PQ editor Graham Hambly chats to CIMA’s Steve Flatman about the tribulations of the past six months ccountancy bodies have had a mixed pandemic. Some have struggled with the lockdown and remotely invigilated exams. Others, like CIMA, seem to have taken it all in their stride. PQ magazine recently caught up with Stephen Flatman, CIMA’s examination VP, over Zoom (of course) to discuss the latest pass rates and how it has been for CIMA in the ‘new normal’. Remember, this is the institute that just seven weeks after total lockdown had its remote invigilated exams ‘live’. Flatman was proud (and rightly) about how his team and partners reacted – but his biggest praise was for the students. He said: “I have been humbled by our students and their resilience. They came with us and made this a really positive journey.” He admits a project like launching online remote exams would normally take two years. Necessity truly is the mother of invention. Tens of thousands of objective tests have now been successfully completed and the pass rates (see page 10) have really held up. The May case study pass rates were particularly impressive.

And numbers look great for the August case study – the MCS is going to be the biggest sitting ever. Flatman (pictured) reminded us too that the new syllabus was added to the mix in January 2020. But a quick look at the E-pillar OT pass rates, where many of the changes happened, show again tutors and students have risen to the challenge. Even the P1, P2 and F2 pass rates are rising. CIMA moved online exams way back 2015 meant, with partner Pearson, it had a solid basis to move forward. The technology was continually improving, so when Covid-19 hit it was well placed to make the changes needed. That is not to underestimate the work involved. Some people have been surprised with CIMA’s honesty, too. It recently told students that if they are sitting the case study then the exam centres option might be the best one to take. Connectivity is still an issue, and he said individuals will know what theirs is like better than CIMA. He also understood that those

shielding will have to go for remote invigilation, and he said this ‘experience’ will improve as the product gets better. With the World Health Organisation saying the pandemic could be with us for two more years, Flatman explained everything he was doing was to help students to get qualified. Something CIMA did recently was to offer a free exam resit if candidates were unsuccessful in their exam during June and July. It has definitely been showing its student-centric side for some time. For example, CIMA also became the first accountancy body in the UK to end the practice of charging exemption fees for new students. This was something PQ magazine has been campaigning for on all students’ behalf – to no avail until last August (2019). CIMA explained the move would encourage both accessibility and social mobility. Finally, when we asked about students’ wellbeing, he said by providing online exams for everyone and keeping the exams the same CIMA had been able to provide certainty in what has been an uncertain world. That, he believes, should not be underestimated. PQ

It’s what we call

career flexibility Get the business qualiﬁcation that takes you where you want to go.

PQ Magazine October 2020

the tax gap PQ Lady Green, the spouse of BHS CEO Sir Philip Green, was the ultimate beneficial owner and sole director of Carmen. She also owned most of the shares in BHS. Therefore, the sale and leaseback transaction was between companies under the control of the Green family. Over the lifetime of the sale and leaseback agreement (2002-2015), BHS paid £153 million in rents to Carmen. These rents were a tax deductible expense and reduced the UK corporation tax liabilities of BHS. The profits of Carmen were not taxable in Jersey as corporate taxes are normally levied on profits made on the Island. Carmen paid out its profits as dividends to its beneficial owner Lady Green, who was resident in Monaco and not liable to pay income tax on the dividends. All transactions were perfectly legal.

How accurate is HMRC’s tax gap? Estimates of the tax gap need to be improved, says Prem Sikka. Here he explains why

etween April and June the UK economy shrank by 20.4% compared with the first three months of the year and is officially in recession. One way of reviving the economy is by reducing inequalities and boosting the purchasing power of the masses through redistribution of income and wealth. The conventional wisdom, not necessarily shared by advocates of modern monetary theory, is that tax revenues are crucial for redistribution and wealth transfers. However, this project is continuously hampered by leakage of tax revenues.

The tax gap The term ‘tax gap’ is frequently used to refer to the leakage of tax revenues. It is the difference between the amount of tax that should, in theory, be paid to Her Majesty’s Revenue and Customs (HMRC), and what is actually paid. The tax gap may arise from avoidance, evasion, arrears, errors, and a variety of other reasons. For 201819, it is estimated to be around £31bn1. For the previous decade, it was estimated to be around £34-35bn a year. HMRC’s model2 is challenged by others and they estimate tax gap to be between £58.6bn and £122bn a year3. Despite the methodological differences of various models, these are, at best, ball-park figures. 1 2 3 4

The measurement of tax gap is complicated by related party and intragroup transactions which shift profits. This can be illustrated by a couple of examples. Related party transactions BHS4, a major retailer, collapsed in 2016. In December 2001, it sold a number of its properties to Carmen Properties Limited, a company registered in Jersey, for around £106 million. The properties were immediately leased back to BHS in return for annual rent payments.

Intragroup Transactions: The Case of Intragroup Debt From December 2006 to March 2017, Thames Water was owned by Macquarie Bank based in Australia. For 11 years Thames operated through a labyrinth of companies, with some registered in the Caymans. Thames Water was loaded with intragroup debt through entities in the Cayman Islands and elsewhere. Its debt ballooned from about £2.4 billion to £10 billion and interest payments swelled the charges for customers. For the period 2007 to 2015, the company paid £3.186 billion in interest to other entities in the group alone. This would have been paid without deduction of any withholding tax as the UK is a party to international tax treaties, which facilitate the payment of gross amounts to most foreign-resident companies and individuals. Entities in the Caymans and other low/no tax jurisdictions would have received the amounts tax free. At the same time, Thames Water would have been able to claim a tax deduction for the interest payments in the UK and reduce it corporation tax liability. It paid about £100,000 in corporation tax for the period 2007 to 2016. Macquarie and its investors averaged returns between 15.5% and 19% a year. Conclusion Tax revenues can make a qualitative difference to people’s lives but estimates of the tax gap are difficult as numerous arrangements are not captured by headline statistics. The relevant transactions often have the appearance of normal, legal and commercial transactions and can only be unravelled by detailed investigation and taxed, if the law permits it. Tax avoiders/ evaders do not volunteer information about their practices and frequently hide behind the cloak of confidentiality. Company accounts do not provide information about tax avoidance strategies used to reduce tax bills. In this vacuum, HMRC needs to increase the number of investigations. • Prem Sikka is Professor of Accountancy at the University of Sheffield

HMRC, Measuring tax gaps 2020 edition Tax gap estimates for 2018 to 2019; https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/907122/Measuring_tax_gaps_2020_edition.pdf HMRC, Measuring tax gaps 2020 edition Methodological annex; https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/905563/Measuring_tax_gaps_2020_edition_-_methodological_annex.pdf Raczkowski, K. (2015). Measuring the tax gap in the European economy, Journal of Economics and Management, 21(3): 58-72. House of Commons Work and Pensions committee, BHS, 20 July 2016, https://publications.parliament.uk/pa/cm201617/cmselect/cmworpen/54/54.pdf

PQ Magazine October 2020

PQ test bank

Your standard quiz Philip Dunn sets you a test on your knowledge of accounting standards and the regulatory framework 6. Which IAS/IFRS states the following ‘the lower of cost and net realisable value’?

Please answer the following tasks: 1. The IASs and IFRSs are now referred to as the consolidated versions of: (a) Auditing Standards (b) Accounting Standards (c) Financial Reporting Standards (d) International Financial Reporting Standards

7. Which IAS/IFRS recognises an Asset when it will provide future economic benefit to an entity and it can be measured reliably? 8. Which IAS/IFRS provides guidelines that include: Operating Activities, Investing Activities and Financing Activities?

2. Which IAS/IFRS would deal with the distinction between an adjusting event and a nonadjusting event?

4. Which IAS/IFRS defines the term ‘Control’?

9. Which IAS/IFRS covers reference to customer, income and revenue?

3. Which IAS/IFRS uses a definition that reads ‘a transaction or other event to which an acquirer obtains control of one or more businesses’?

5. Which IAS/IFRS states an objective of Financial Statements is to provide information on Financial Position, Financial Performance and Cash Flow of an entity?

10. When Goodwill arises in a Business Combination its carrying value is compared with its recoverable amount on an annual basis under the scope of which IAS/IFRS?

11. Which IAS/IFRS contains definitions to distinguish between Research and Development? 12. Which IAS/IFRS refers to warranty obligations, legal and constructive obligations? 13. IAS 12 contains guidelines to deal with what? 14. Leases until most recently have been the subject of IAS 17 that in 2019 was superseded by which standard? 15. The IASB is the Standard setting operation of which organisation? • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books

Answers: (1) D, (2) IAS 10 Events after the Reporting Period, (3) IFRS 3 Business Combinations, (4) IFRS 10 Consolidated Financial Statements, (5) IAS 1 Presentation of Financial Statements, (6) IAS 2 Inventories, (7) IAS 16 Property, Plant and Equipment, (8) IAS 7 Statement of Cash Flows, (9) IFRS 15 Revenue from Contracts with Customers, (10) IAS 36 Impairment of Assets, (11) IAS 38 Intangible Assets, (12) IAS 37 Provisions, Contingent Liabilities and Contingent Assets, (13) Income Taxes, (14) IFRS 16 Leases, (15) IFRS Foundation

+DYH \RX ERRNHG \RXU H[DPV IRU 'HFHPEHU \HW" Find out more: accaglobal.com/bookexams

PQ Magazine October 2020

ACCA spotlight PQ

It pays to think small

Don’t overlook a small medium-sized practice for your next career move, says Aleksandra Zaronina-Kirillova

s a PQ you’re probably now at the stage where you’re figuring out the next steps on your career ladder. Perhaps the trans-national operations of a global Big 4 powerhouse have always been an aspiration of yours? Or maybe working for government or a non-profit ticks the box. But have you ever considered working for a small medium-sized practice (SMP), having more of a direct relationship with local business? As we all know there are not many professions as diverse as accounting, so setting time aside to really weigh up your options would be time well spent. I hope by reading this article you’ll gain some perspective as to why a SMP shouldn’t be overlooked as a career destination and could potentially be your next major move. ACCA recently launched a report entitled ‘Careers in small medium-sized accountancy practices’ with the Chartered Accountants Australia and New Zealand. We spoke to over 60 SMP experts from 20 different countries about talent, attraction, development and retention within smaller accountancy firms. And below are 10 key takeaways as to why SMPs provide a fantastic opportunity for all ambitious accountants: 1. SMPs help businesses and society as a whole Does the idea of talking directly to the business, the owner and the decision-maker interest you? If you want to achieve direct

PQ Magazine October 2020

impact, then a SMP is definitely worth considering. Accountants not only provide vital support to business owners, but they also have an extensive social role. 2. SMPs offer personal growth development and a ‘long-term’ career The smaller accountancy firms focus closely on learning and are keen to develop their employees in a number of ways. They offer opportunity to develop skills not just for the job in hand, but relevant to an entire professional career. This can be through formal and informal training for professional qualifications, training in technologies and data-management or needs-based training, which is often led by the employee. 3. SMPs have embraced a multi-generational workforce Some people thrive in a family atmosphere with the mixing up of age groups. Various age groups provides an array of opportunities for inter-generational collaboration and teamwork, mentoring and talent development. 4. SMPs are a springboard for career mobility A smaller practice offers the chance to work with a variety of business owners, but not limited to just local clients. There’s a real opportunity to engage with a variety of experts across the business, including mentorship from leaders. The thorough business and financial

grounding a professional will receive by working at a smaller firm can lead to a move to a much larger practice or even entrepreneurship in either accountancy or another field. 5. SMPs are creative Accountants are expected to spot problems and be proactive with their solutions. Practices are organised in a non-hierarchical structure that encourages innovation and agility, allowing all employees to contribute ideas, no matter the level of experience. Smaller firms are often at the forefront of adopting digital accounting software and are linking up with major fields, such as big data, block chain and cybersecurity. They are also working with some of the most exciting clients, for example: rapidly growing start-ups – often digital pioneers themselves. Many of these smaller firms have started from scratch and have no legacy systems, which might hinder or delay upgrading to a new, advanced system. 6. SMPs are ethical SMPs are assurance providers for small businesses. Accountants are expected to hold them to account and are supported by a strong ethical code in defining what is right and doing the right thing. 7. SMPs are a people business Their work involves regular direct contact with a variety of clients and will suit and further develop outgoing, confident communicators. 8. SMPs offer employees the chance to see results of their work Employees get to see the concrete results of their work when working for a smaller practice, due to the size of the teams and the close interaction with businesses. This component is often missed when working for larger corporations where there is a high degree of disconnection between an individual’s work and achieved results. SMPs provide the opportunity for professionals to shape the success of concrete businesses and seeing the impact of their work. 9. SMPs provide the chance to share in the success of the business A number of SMPs have ownership structures where an employee can be rewarded for high work achievement by sharing in the business’ success, via different types of reward structures, such as a share of company equity. 10. SMPs offer a good work-life balance Smaller firms are taking advantage of digitalisation to offer individuals benefits such as flexible and remote working. They want their offices to be informal and enjoyable places where people want to come to work. Many of us have had to press pause, re-evaluate and adjust to a new world due to the devastating Covid-19 pandemic. The crisis has emphasised how SMPs are not only resilient, but how they’re showing their wider contribution to society; and how professionals are increasingly looking for more purposeful and meaningful careers, which is why a move to an SMP is such an attractive route to success. • Aleksandra Zaronina-Kirillova is ACCA’s head of SME 19

PQ contract law

The fundamentals

of contract law Agreements form the basis of contracts – although not every agreement is a binding contract, says Dr Jeremé Snook

Contracts are usually legal binding agreements and form part of both business and personal commitments. Contracts all contain terms and conditions which gives the parties’ own rights under that contract. For example the employment contract contains terms as salary, notice to terminate and job title. Contracts also form part of consumer laws. For example, The Consumer Rights Act of 2015 provides rights which ensure that products, whether bought at shops or online must be of a satisfactory quality and fit for their advertised purposes. Any claims regarding goods can be maintained against the retailer from whom the goods were bought. You have a legal right to return faulty goods within 30 days of purchase – but this does not apply to downloads such as games, music or apps. Otherwise, products can be returned or replaced – after the 30 days expires – you can even allow the retailer one opportunity to repair faulty goods or digital content which you regard as unsatisfactory quality. If the product cannot be repaired, or any replacement is itself defective, you have the further right to receive a full refund. These are just some of the consumer rights. These are rights under Statute – you often read on products that “Your statutory rights are unaffected”, so your first thoughts should be to use these rights. Statute Law is enforced by the courts. But where did the contractual rights first emerge? The answer is from the common law and case law rules relating to contracts – so read on!

e often make agreements without forming a contract – for example, a promise to dig your own garden is unlikely to amount to a contract. The reason is that only one of a number of elements required for a contract to be legally enforceable is involved.

Those elements which make an agreement binding are: • An offer. • Its acceptance. • Exchange of consideration. • Along with an intention to create a legal

obligation. • By those with an interest in and a capacity to make the contract. • Acting in the absence of mistake, misrepresentation or other vitiating factors. A contract need not be in writing to be a legally binding agreement, but must contain the above elements if it is to be upheld in the courts. The two most essential elements are the offer and acceptance. An offer is made when a statement is made of the terms on which the person (or company) making the offer is willing to buy goods or services from or sell goods or services to a named person, group of people or to the public generally. The offer must not be too vague. It must be clear what is being bought or sold, and at what price – otherwise the offer is automatically invalid; Scammel vs Ouston, 1941. The offer can be to one person only (say an offer by X to sell Y a car for £1,000) but can be to a group of people. In the Carbolic Smokeball Company case, Carlill v Carbolic Smokeball Company, 1893, the company had promoted its product by offering to pay £100 to any person who suffered from influenza after using its smokeball as directed. Mrs Carlill did use the smokeball, and was subsequently ill with influenza. She claimed the £100. The court agreed that in placing its advertisement the company had made an offer to Mrs Carlill, and to everybody else who read it. Mrs Carlill had accepted the offer by buying the smokeball on those terms. Supply of information alone by one person to another does not amount to an offer to enter into a binding contract (although there may well be a duty of care involved – such as in the supply of references). In the case of Harvey v Facey, 1893, an PQ Magazine October 2020

contract law PQ inquiry about whether the owner would sell Bumper Hall Farm was met with the reply ‘Bumper Hall – £900’. This, said the court, amounted to a valuation not an offer to sell, and expressed no desire to accept any intended offer. Neither do negotiations that precede any offer and amount to an ‘invitation to treat’, amount to an offer. Invitations to treat include: • Displays of goods in a shop window (in the famous Fisher v Bell, 1961, case. It was decided that a shopkeeper who displayed flick knives in the shop window had not broken the legislation forbidding the sale of such goods since the display amounted to an invitation to potential buyers to make an offer which could be refused or accepted). • Displaying goods on shelves in a selfservice shop (in the equally well known Pharmaceutical Society of Great Britain v Boots, 1952, case it was held that the policy of requiring shoppers to seek advice from a pharmacist before purchasing prescription drugs on display was not an offer to sell goods but an invitation to treat). • Auctions – the auctioneer invites bids from the floor and thus the offer comes from the intending buyer of goods, not the auctioneer. • Advertisement in the media – they amount to an invitation to make an offer on the terms stated (in Partridge v Crittenden, 1968, Partridge saw an advert for wild birds in breach of legislation, but the advert was an

invitation to treat not an offer). • Tenders – they are an invitation to negotiate terms prior to accepting any offer of work. Once terminated, offers may no longer be accepted to form a contract. They can be terminated in a number of ways. They can be revoked prior to acceptance. Revocation should, if possible, be made in the same way that the offer was made. It must be received by the offeree before it is effective although may be communicated via a trusted third party (Dickinson v Dodds, 1876). Any offer will lapse after a reasonable period of time. In Ramsgate Victoria Hotel v Montefiore, 1866, acceptance of an offer to purchase shares in the company was ruled ineffective since it had not been made within six months. Industry norms on acceptance of contracts may well be influential of whether or not an offer has been deemed to have lapsed. Offers may also be terminated by rejection – which may be in the form of a counter offer as in Hyde v Wrench, 1840. Here an offer to sell a farm at £1,000 was met by a counter-offer of £950. A refusal to sell was made at this point, and an attempt to offer the original price was also rejected. Acceptance of a contract may be made orally, in writing or by conduct – so long as this is communicated to the offeror. It is not possible to communicate acceptance by remaining silent. (Felthouse v Bindley, 1863).

There are two major exceptions to this general rule concerning rewards and delivery. In the case of a reward posted for information or return of property, the offeree will not need to reply before he or she seeks out the information or property – conduct of the search is itself acceptance of the offer, although the claimant must have known of the reward before coming forward. Special rules apply to acceptance made by the post. In Adams v Lindsell, 1818, it was held that a contract had been made as soon as a letter of acceptance had been placed in the post, and not at the point it was delivered to the offeror. Provided the letter is correctly addressed and stamped acceptance is effective even if it never reaches the offeree’s home or office. This rule does not apply to modes of instantaneous communications such as the telegram or fax. In these cases, the offeror must receive the communication. As a practical point it is wise to specify at the outset any intention that the postal rules will apply since then there can be no doubt as to the terms of the contract. Also be wary in dealing with the HMRC and other authorities since regardless of the law of contract they are generally able to uphold deadlines for receipt of returns and payment which specify a date by which they must have been delivered. • Dr Jeremé Snook, Senior Lecturer in HRM, Sheffield Hallam University Business School

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PQ ACCA AAA exam are 16% of the way to a pass in this question. There is: - One for format. - One for an introduction and conclusion. - One for subheadings and structure. - One for clarity of explanation. • Ethics: Practice these questions. This is an easy area to score quickly. See my threestage approach above to tackle ethics. What are the key differences between the CBE and the paper exam? • The CBE exam presents the information in exhibits. • It is possible to highlight key parts as you go through. • There is a Word Processor and a Spreadsheet to present your answer.

Avoiding the rabbit

holes in AAA Richard Poole FCCA gives some key tips to avoid the common pitfalls in ACCA AAA exam

Key subject areas where students need to be comfortable • Business Risk versus Audit Risk versus Risk of Material Misstatement: In Q1 of the exam (which focuses on the planning stage of an audit) there is always approximately half of the marks dedicated to explaining one of these three risk areas (or a mix of them). The different types of risk are often confused by students. You must know the difference, as you will not get marks if you talk about the wrong one. • Audit procedures: This is another key area within Q1. Students often forget to explain why they are doing procedures and don’t explain the procedures in enough detail? For example, I’ve lost track of how many times I have read ‘review board minutes’ as a procedure. This will get little credit unless you say what you are looking for in the board minutes and relate it back to the question specifics! • Audit reports: You must know the content and structure of an audit report so that you can critically analyse what has been omitted or put in the wrong place in the audit report. • Audit opinions: Do you know the difference between: - A qualified opinion and an unqualified opinion? - An adverse opinion and an except for opinion? • Do you know: - When and why they are issued? - Where they are presented in the Audit 22

Report? - What they say? • Accounting standards: How can you comment on how to audit Borrowing Costs (IAS23) unless you know what the accounting standard says? Students often tell me that they are going to re-read their SBR/FR accounting standards. My advice is to do this through Question Practice otherwise it is a cumbersome task. • Ethics: The approach is the same each time. a. What is the threat? e.g. intimidation threat. b. Specifically, why is it a threat? e.g. boss threatening me that I will lose my job if I don’t make adjustments to the financial statements. c. Safeguards/actions? e.g. talk to someone more senior about your concerns. What are the key bits of exam technique required to pass? • Timing: 1.8 minutes per mark is crucial. Try not to overrun. • Plan: Reading the question and thinking about what the key issues are at the start of every question is key. Work on 1.8 minutes a mark rather than 1.95 minutes a mark, so that you take account of 5 minutes of planning in each of the three questions in the exam. • Structure: Write in 2 to 4-line paragraphs so as to keep your points short, concise and snappy. • Presentation marks: In Q1 of the exam there are always 4 presentation marks. If you can set out your answer in a professional way, you

How is the CBE exam different to the paper exam? • The CBE exam enables students to copy and paste the requirements into the word processor so that everything is in one place and there is limited risk of missing a part of the requirement. • The CBE exam enables candidates to present numbers in a spreadsheet. The formula can be used so this reduces the amount of writing of formula required. • The presenting of the information in exhibits often means that exhibit 1 relates to part (a), exhibit 2 to part (b), etc. This helps students to break the information down into more manageable parts. Why do my AAA products have such success with students? I have considered the above four areas and created my products to ensure that students don’t fall foul of these common mistakes. I have done this through: • WhatsApp support – I always try to respond to students within 24 hours. Students can also benefit from seeing my historic responses to questions. • Adaptability – By seeing the types of questions being asked on WhatsApp, I can guide students to the best questions appropriate to their needs. • Recorded products – As the material is prerecorded students can learn around their work/life commitments. • Students can submit questions to me regularly which enables me to give advice on exam technique and the technical side. • Revision product – By working through full past exams in the Test Reach CBE software, students learn by seeing me discuss both the technical side of the question as well as tips on how I use the technology. Students get the opportunity to then submit questions within Test Reach for me to mark and feedback on. • Mock product – Students get the opportunity to submit a full mock exam in the Test Reach Software, or on paper (PDF) and get my feedback in both a recorded and a written form, plus my exam tips within 24 hours of submission. • Richard Poole FCCA – Online AAA and ATX specialist tutor at FME Learn Online PQ Magazine October 2020

ACCA AA exam PQ

Audit & Assurance FAQs

Helena Jones from Sonar Education answers your questions about how to tackle this tough test of your knowledge and application

What are the key skills required to pass the AA exam? It is easy to forget in the heat of the exam that the pass mark is 50%, so you do not need to get 100% of the marks. Winning a prize or achieving high marks is a great bonus, but for most students the important thing is to pass the exam at the first attempt. The exam is practical, based on scenarios, and all questions are compulsory. This means that there is nowhere to hide and a broad knowledge across the whole syllabus is essential. Question scenarios will be unique, so rote learning will only get you so far. You will need to think on your feet and apply your knowledge to the specific task in hand, rather than a similar question you might have attempted in the past. Auditing is a practical skill, and the exam will test that. Sonar Education’s suite of three mocks is designed for maximum syllabus coverage, and at the end of each exam you will be shown some metrics that allow you to see at a glance if you are weak in any of the main syllabus sections. Why do we need accounting knowledge for AA? Because auditors audit financial statements in the main, and those financial statements are put together from financial information. Knowledge of the accounting standards that determine how that financial information is gathered, recorded and organised, is therefore essential. Auditors express an opinion that the financial statements have been prepared in accordance with the applicable accounting framework, and that they PQ Magazine October 2020

What do assertions mean and why are they so important? Basically these are explicit statements made by management when putting together the financial statements. For example: “This transaction is included in the revenue figure because a sale of goods to a customer did in fact take place.” If this assertion is true there will be an audit trail, or evidence, to demonstrate the occurrence of this transaction, and audit procedures will be designed with finding this evidence in mind.

What do we need to know about what is going on in the audit profession? Unlike in AAA, there is no specific syllabus area for current issues and developments, but it is still important to keep up-to-date. ACCA articles are useful, and you should of course read every issue of PQ magazine! For example, in the July 2020 issue there were two articles about recent happenings at Wirecard. Unfortunately, the audit profession is under the spotlight yet again, for all the wrong reasons, and it is high-profile news like this that prompts the regulatory authorities to take stock, and to take action. The reputation of auditors has not been good since the days of Enron, if not before this scandal, and the question arises again and again, ‘why didn’t the auditors spot that?’ You might like to try answering that question, and thinking to yourself what procedures you would have designed to reduce the risk. Who said auditing was dull?

How has technology affected the audit process? Today’s students will find this hard to believe, but those of us of a certain age will remember accounts being recorded in dusty leather-bound ledgers (yes, really!). We still use the term ledger, but now it is more likely to be a computer file than a physical object. We can now work virtually paperless, and the trend for increasing technology, for auditors and accountants in general, is unlikely to slow down any time soon. Skills in reading and manipulating data are becoming as essential part of the auditor’s tool kit.

What are the main changes going from AA to AAA? For those students thinking of choosing this option at Strategic Professional level, the good news is that your AA knowledge is still relevant. The same ISAs and standards are examinable, plus a few more. The key difference is that you are now in a more senior role in a question scenario, so you will be an audit manager rather than an audit assistant, for example. As in real life, a more senior role requires more advanced skills. • Helena Jones is a director at Sonar Education

are free from material misstatement. Will I need to do any calculations in the AA exam? You might be asked to calculate ratios and trends as part of using analytical procedures so don’t ditch the calculator. Syllabus area B4(c) specifies that you will need to compute key ratios as well as being able to interpret them.

PQ practical help

First impressions What can you do to make a good first impression? Training Link provides some top tips

ou and your business have less time than you might imagine to make a positive first impression. Perhaps it is important to remember: “A different version of you exists in the minds of everyone who knows you.” First impressions are hugely important, especially in a business environment, but do you know how much (or little) time you have to actually make one? Within the first seven seconds of meeting someone for the first time, they would have already formed a solid impression of who you are (rightly or wrongly). When determining traits like trustworthiness, there is some research to suggest it’s even less – just a tenth of a second! When you are meeting potential clients for the first time, or attending a networking event or branch meeting, what can you do to make a good first impression? Make the most of your initial meeting There are many situations when making a first impression counts, but let’s start with the most common: meeting someone in person, whether it’s meeting a prospective client, or attending a networking event (it will happen again!). It should go without saying, but you need to dress and groom appropriately. By this, I don’t mean you must wear your “go to” power suit every time; the occasion would largely determine the dress code. That being said, regardless of the occasion, people will judge you on your looks long before they judge your words or actions. It only takes a fraction of a second to start making initial assumptions; we all do it, so why should it be different when someone spots you for the first time? The stark reality is, like it or not, there will be certain expectations placed on our appearance (clothing, hair, makeup etc.) in terms of professional events, so

dressing appropriately for the event will start you off on the right foot. A smile is a powerful thing! When you smile at someone, it has a disarming effect. You appear more approachable and trustworthy. A warm smile within those first seven seconds might be all it takes to forge a stronger first impression. Remember too that it’s not what you say, but how you say it. When speaking to someone for the first time, it’s all about the quality of your speech rather than the quantity. At any initial encounter, don’t concern yourself too much about sharing vast swathes of information as quickly as possible. This might seem like a great way to impress people, but it’s more likely to overwhelm them, making them shut off from you. Instead, speak slowly and clearly. This will result in you being

more articulate and will give your listener more time to digest what you’re saying. Speaking slowly and deliberately is also a sign of confidence, which is central to making a good first impression. In some instances, less really is more! A good posture also conveys confidence, strengthening your first impression. Maintaining it might also increase your own feelings of confidence, giving you more confidence in your interactions. Presenting your website While an office space is important, it is not necessarily your store front; more and more bookkeeping and accounting businesses now exist primarily in a digital environment, with your website being a key component of forming a first impression. Website visitors will only give you a few seconds of their time before making a quick assessment about staying or leaving, so keep things concise. Site visitors may form an impression of your site in as little as 50 milliseconds. A clear, concise heading or tagline should let prospective clients know exactly what they can expect from the rest of your content. Make your website intuitive to use. If a new visitor is confused in the first few seconds, they’re going to leave. Photos and videos are very powerful tools, so if you can use them, do so (with caution!) 50 milliseconds may not be long enough to guarantee even a tagline will be read, but humanising your brand by including photos or videos can help. “Why (with caution)?” I hear you ask… People will easily see through generic, non-specific content, so if you’re going to use photos and/or videos, make sure they’re relevant and personal to you and your brand. No matter how you’re forming a first impression with your clients and contacts, it’s important to work quickly to avoid facing the consequences of a negative or non-existent first impression. The more you practice, the more confident you’ll become, and the more you prepare for your future interactions, the more targeted your approach can be. •Thanks to Training Link for this article. For more great articles go to https:// training-link.co.uk/articles/

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CIMA exams PQ

It’s a results business T

Stephen Flatman explains how you can best interpret your CIMA exam results

he CIMA professional qualification focuses on employability – bridging the skills gaps of newly qualified finance professionals worldwide, meeting the needs of both business and people. Our syllabus is truly competency based, enabling our students to develop the skills employers are really looking for. Passing your CIMA exams demonstrates to employers that you not only have the technical knowledge but also the business, leadership and people skills necessary to succeed, and help your organisation succeed, in the modern business world. What exams will I need to take when studying the CIMA professional qualification? You will need to sit a maximum of 12 computerbased exams, including: • 90-minute Objective Tests for each of the three learning pillars within the three levels of the professional qualification, meaning that you will sit up to nine objective tests. They include short multiple-choice questions, number entry questions, drag-and-drop questions, and they are available on-demand, all year round. • Three-hour Case Study exams at each level after you have passed all three Objective Tests, meaning that you will sit up to three Case Study exams. Case Study exams use pre-seen material, and assess your application of knowledge to real world scenarios and are available four times a year. If you have already completed a relevant degree or professional qualification, you may be exempt from sitting some CIMA exams meaning that you can qualify sooner – but that’s not all. PQ Magazine October 2020

Last year, we removed our exam exemption fees so no one will be put at a disadvantage for undertaking prior learning. With CIMA, everyone can build their dream career. How will I receive my exam results? This will depend on the type of exams you sat. Objective Tests are computer marked, so as soon as you have completed your exam you will receive a provisional result of either ‘pass’ or ‘fail’. Your final result, scaled score and detailed feedback on your performance against the syllabus will be published on MyCIMA within 48 hours. Case Study exams are human marked, so it will take about six to eight weeks for your final results to be published on MyCIMA after the close of the Case Study window. They will include a ‘pass’ or ‘fail’ grade, a scaled score and detailed feedback on your performance against each core activity. What do I need to look at to understand my exam results? Your first instinct will probably be to focus on whether you have received a ‘pass’ or ‘fail’ grade for your exam. This is, of course, important as it will give you an overview of your general performance, and whether you have met the required passing standards for a specific exam. However, you need to dig a little deeper to get a full picture of your exam performance. For Objective Tests, you need to look at your performance in each content area and whether you received a grade of either ‘proficient’ or ‘not proficient’. This will give a clear indication of the areas you performed well in or need to improve

on, this is particularly useful to know ahead of sitting your Case Study exam. For Case Study exams, you need to look at the feedback you received for the performance descriptors for each core activity as outlined in the exam blueprints. This will help you identify areas where your performance was particularly strong, highlighting which skills you can build on for future exams, or where you have fallen short, highlighting areas that you need to study further. What are scaled scores and why do you use them? Over the years, our students have told us that they really like CIMA’s flexible structure and on-demand exams. Offering exams every single day of the year means that we must have multiple versions of each Objective Test and Case Study exam running simultaneously – this ensures greater flexibility and exam security. We take great care when selecting questions for each exam version to ensure fairness, but minor differences in exam difficulty can remain. That’s why we needed to find a way to present exam results so that each student knows how they performed compared to others sitting at the same time whilst taking a different version of the exam. Scaled scores are the industry standard approach to solving this problem. By using scaled scores we can ensure that you receive a score that gives a fair representation of how you performed in the exam – no matter which version of the exam you took. • Stephen Flatman, Vice President, Examinations, Management Accounting, The Association of International Certified Professional Accountants 27

PQ AAT distance learning

Study tips from the top P

Premier Training tutors have put together 25 tips for AAT distance learning students

remier Training asked their team of knowledgeable tutors for their best pieces of advice for AAT distance learners and have compiled them for students. The training provider hopes this helps reassure students that even though they are studying from home, they’re never alone. Often one of the most difficult hurdles is actually getting organised to start a course of home study. There is no single ‘set’ way to plan your study time as what works for one person may not work for another, but here are a few suggestions to help AAT students get started… 1. Introduce yourself to your tutor so you build a rapport from day one. They will be your first port of call when you need study support. 2. Set yourself specific weekly sessions and make sure everyone in your life knows this is your study time. Saturday morning or Sunday afternoon are favourite times for many, but choose what suits you best. 3. Tell friends and family that you are unavailable 28

for the duration of each session, just as though you were out at the gym (or pub!). 4. Set target dates according to your timetable. While these dates are not mandatory, you should look on them as goals in your achievement. 5. Make notes as you go through the tutorial. It is easier to learn if you write it down and then they become useful revision notes later. 6. Place sticky notes on pages where you have questions. This will save you time when you call to speak to a tutor. 7. Be organised in your approach – half-anhour’s work only when an opportunity crops up rarely gets things moving, whereas a strict study regime usually works wonders. 8. Sticking to a regime is often difficult to start with but, if you persist, you and others around will get used to it. 9. Remember we are available on the phone for tutor support Monday to Thursday until 8pm, Fridays until 5pm and on Saturday mornings, too. 10. As well as telling all your family and friends

that you will not be available during specific times you should also switch off your phone. 11. Around six hours of study per week, spread across two or three sessions, is a good starting point and then you can see how it goes from there. 12. Don’t go too fast just because you can. Take each topic at a time and learn it thoroughly. Understanding is more important than simply knowing the mechanics of the calculation. 13. Try to avoid study when you are over-tired. You will take in very little if you do. Believe it or not, the same applies to people who study and are hungry. 14. It’s better to try and find out how to do things on your own – you will have more chance of remembering. But there may come a time when it really doesn’t make sense. Don’t sit there for hours (or days in some cases) – pick up the phone and ask your tutor. 15. Wait for feedback from work that has been submitted before attempting the next assignment. 16. It is good advice to keep to the course outline and try to submit work consistently – evidence shows that students who do this get to the end point much quicker and with better results. 17. Don’t leave it too long from receiving feedback from a mock assessment before sitting the ‘live’ assessment. 18. Always complete the AAT practice assessments before sitting exams. 19. Ensure you know what your weaknesses are and complete as much practice on the areas as possible. This will give you the best chance of passing in the live assessments – especially where written tasks are required. 20. Ensure you read the questions carefully and double check your answers. 21. Make sure there are no gaps in knowledge as this can have a detrimental effect on the overall outcome when it comes to live exams. 22. Don’t become lonely. This can be the most demotivating aspect of distance learning. Join the ASN group and keep in touch with your tutor and course advisor. We are here to help even if it is just a quick chat or more in-depth assistance. 23. Success under the AQ2016 standards comes more easily to those students who study regularly and make continuous progress, particularly due to the requirements of the final synoptic assessment. Students that study ‘ad hoc’ tend to do less well, losing motivation as they struggle with the understanding more, and have to go over their previous learning materials to a greater degree to maintain the skills needed for their final assessment. 24. You’re not going to get everything right first time and success isn’t just a single point in time and neither is failure. Failure is simply another practice round but it’s easy to get frustrated when we don’t master a skill straight away. So, regular practice is the key to success! 25. Do not sit the synoptic exam until you have passed the mandatory units. • Thanks to Premier Training for this article PQ Magazine October 2020

interview PQ

CFAB before wicket! Meet Matthew Fisher, a Yorkshire cricketer who just happens to be studying for the ICAEW CFAB qualification in his spare time

ricketer Matthew Fisher made his debut in June 2013 for Yorkshire against Leicestershire, at the tender age of 15 years and 212 days. He became the youngest cricketer to play in a competitive county game. For you cricket buffs out there the previous record was held by a Welshman, Royston GabeJones. In May 2015, on his debut in the T20 Blast he took five Derbyshire wickets. He has captained the England Under 19s, represented the MCC and England Lions, but has also hit some injury speedbumps along the way. That’s not uncommon for pace bowlers. During lockdown Fisher didn’t decide to learn a new instrument or language. He chose to study for an accountancy qualification, under the watchful eye of regular PQ contributor Philip E Dunn. Opting for the CFAB, he is now an ICAEW student and he will shortly be sitting his first module examination. We asked him how it was all going, and here’s what he said…

PQ Magazine October 2020

Why did you decide to study accountancy? During lockdown, I was picking my brains at what I could do outside of cricket. I enjoyed maths at school, and sorting my payslip out at the end of each month, so I thought naturally that accountancy might be something I would enjoy. How have you found the ICAEW manuals – does the information stick easy? The manuals have been very useful and easy to understand. I have a certain method of reading all the information in the chapter first and then make notes after, and then consolidate with Philip weekly on that topic. You are to take your first exam soon. Are you as confident as opening the bowling for Yorkshire? Interesting question. I would say after recently bowling quite well in the first game back of the season that I’m edging towards opening the bowling, but there’s nothing a bit of revision can’t fix so hopefully will be as confident at both very soon. Any advice for fellow students? I would say consistency is the key, to have time periods in

your routine or week that are designated to your study and that remains consistent each week. I have struggled a lot more now cricket has started to have the time set aside, but I need to get back on track as soon as cricket gets quieter. What’s the hardest part of studying? Similar to the above. I found during lockdown it was really easy to get into a routine and to remain consistent, but I feel like when there are distractions that’s the hardest part of keeping the routine going. The actual studying part I really enjoy. Anything that tests my brain gives me a sense of accomplishment which makes me happy. How has the lockdown been for you? Lockdown has been refreshing. I feel like everyone says they will have some time to relax and think about plans for the future, etc. but I feel no one ever does that properly. I think lockdown emphasised to a lot of people what direction you’re going in and whether it’s the right one or not. It gave me reinforcement that my cricket is the most important, which I have always felt, and I want to become the best player I can be over the next 10 years. And it also made me look at how I can get better outside of cricket. For me, this is something that gets me away from the game and makes me feel like I’m more than just a cricketer and that I have another string to my bow.

PQ AAT resources since the format and content of these exams is very different to others. Expert tutor Crystal Haygreen, Director of AAT studies, and other colleagues shared their top tips on how to pass these tricky papers first time: https://www.youtube.com/ watch?v=t5iEfKmdJaA&feature=youtu.be “How the AAT supports you and your studies & Training on communication skills for accountants” The AAT remains the premier entry-level qualification for aspiring accountants and in this session Crystal spoke to guest speakers Ross Grange and Neil Maguire from the AAT to find out what support they offer their students, particularly relevant at this challenging time for so many. Crystal is also joined by a renowned guest speaker who we were very lucky to have appear. Alex Bond presented a brilliant masterclass on how accountants can improve their crucial communication skills to supercharge their career prospects! Find the full session here: https://www.youtube.com/ watch?v=RLZ8g6pEDBc&feature=youtu.be

AATitude festival First Intuition’s Gareth John explains the rationale behind its first week-long AAT festival

he uncertainties of lockdown, and the resulting suspension of AAT assessments, meant that many studiers ground to a halt for many weeks. First Intuition thought that a great way to help them refocus on their studies and to give a sense of community to students struggling with studying remotely was to run a free online student festival…open to all! And so, with an ambition to inspire and motivate AAT students who might have felt in ‘lockdown limbo’, First Intuition’s AATitude Festival was born; a week-long schedule of events with a multitude of expert speakers covering a wide variety of technical, interpersonal and career topics! The festival offered a unique virtual space to draw together a multitude of perspectives, experiences and expertise. PQ Magazine brilliantly got in on the act to help spread the word to students who would benefit from this event and given it was the first time such a student event had ever been run it was amazing to get around 1,500 registrations from across the UK. This article recaps some of the activities that took place over the week meaning that you don’t have to miss out even if you missed it. Myself and my colleagues picked out some of our personal highlights. “How to achieve a distinction panel discussion” Nick Craggs, AAT Distance Learning Director, thought the ‘how to achieve a distinction’

panel discussion was one the best sessions. He was joined by three students, Nick Wiggs, Phoebe Warner and Denitsa Gavrilova, who came to share their tips as to how to not just pass assessments, but how to ‘boss them’ and get a distinction. You can find a recording of the session: https://www.youtube.com/ watch?v=CpjQf4oOBrc&feature=emb_title Only 1% of students achieve a distinction at level 4, which both Nick and Phoebe did, so it was really interesting to hear what they did in the run up to their assessment, and on exam day itself. “The changing role of the accountant and the future of accountancy” I am personally fascinated by the way that technology, automation and AI is affecting the world of finance, so I was delighted to host a panel discussion on this topic with leading industry observers. I was joined by Graham Hambly, editor of PQ Magazine, Steven Drew, Head of Markets and Products at AAT, and Andy Turpin, Director of the Virtual Finance Office at PEM Chartered Accountants. The session covered a broad mix of the practical and human changes that we are already seeing affecting the way that accountants work, which you can watch at: https://www.youtube.com/ watch?v=Ew1Oxe80T-I&feature=youtu.be&list= PLJ_43MbElIDqMA5dUgjN7sluwCBx-BNJV “Skills to succeed in synoptic assessments” Many students are nervous about sitting their Synoptic assessment.This is understandable

“Accounting qualifications to consider after completing AAT” It was an early start again on the final day of festival for Ben Bullman, Managing Director and myself, but worth it for a great chat about study options after finishing AAT. We regularly see how the AAT helps students enter and successfully progress with ICAEW, CIMA and ACCA. Ben and Gareth talked through exemptions, timescales, top tips and Ben’s personal experiences of succeeding with study beyond AAT. Catch up at https://www.youtube. com/watch?v=uIbJTdLRQDM&feature=youtu.be if you need the low-down. “Stories from AAT students who are changing their lives with the qualification” Bullman’s favourite session was the brilliant final headline act where we heard the study and career journeys of Rebecca Fay (former AAT Apprentice of the Year), James Duggan (former Royal Family chef turned accountant) and also the incredible Arsenal and England player Leah Williamson, who is making great progress with her AAT studies alongside her hugely successful football career. We even had a surprise appearance from another sporting AAT student, paralympic athlete Stephanie Millward MBE, her Gold medal and an Olympic torch! Such inspiring stories for aspiring accountants to hear! Watch the whole fascinating session at: https://www.youtube.com/ watch?v=YrOPgXs25NM&feature=youtu.be AATitude Playlist These are just a handful of our highlights from the first AATitude Festival – you can see a full set of recordings on the AATitude YouTube Playlist at: https://www.youtube.com/playlist?list =PLJ_43MbElIDqMA5dUgjN7sluwCBx-BNJV We can’t wait until AATitude 2021! • Gareth John is a director at First Intutition PQ Magazine October 2020

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PQ technology the

Digital ID cards are coming PQ editor Graham Hambly examines a government initiative for online identity cards, and weighs up the pros and cons

nline ‘ID cards’ for all UK citizens are coming, as the government’s Digital Identity Strategy Board develops new principles to boost the secure use of your digital identity. The proposals come after it was revealed that 2.6 million people made a claim for the Self-Employment Income Support Scheme online (since May 2020), but 1.4 million had no prior digital identity credentials and so needed to pass through HMRC’s identity verification service. Increasingly, people are required to prove their identity to access services, whether it is to buy age-restricted items on and offline or make it easier to register at a new GP surgery. Cabinet Office Minister Julia Lopez said: “We want to ensure there is transparency for people when they create and use digital identities quickly, safely and securely and we are committed to enabling this.” Plans are now being put in place to update existing laws. A consultation on the legislation will look at specific rights for individuals, an ability to seek redress if something goes wrong, and set out where the responsibility for oversight should lie. It will also consult on the appropriate privacy and technical standards for administering and processing secure digital identities. Hannah Gurga, Managing Director of Digital Technology & Cyber at UK Finance, said:

“Removing the barriers to creating secure digital identities, combined with the necessary safeguards, will make it easier for people to use online services while at the same time helping to prevent criminal activity such as money laundering and terrorism. Developing a legal framework for digital identity is therefore an important next step and we look forward to working with the Government as it develops its proposals.” The new government Digital Identity Strategy Board has developed six principles to strengthen digital identity delivery and policy in the UK. They are: 1. Privacy: When personal data is accessed the individual will have confidence that there are measures in place to ensure their confidentiality and privacy; for instance, a supermarket checking a shopper’s age, a lawyer overseeing the sale of a house or someone applying to take out a loan. 2. Transparency: When an individual’s identity data is accessed when using digital identity products they must be able to understand by who, why and when; for example, being able to see how your bank uses your data through digital identity solutions. 3. Inclusivity: People who want or need a digital identity should be able to obtain one; for example, not having documentation such as a passport or driving licence should not be a barrier to having a digital identity.

4. Interoperability: Setting technical and operating standards for use across the UK’s economy to enable international and domestic interoperability. 5. Proportionality: User needs and other considerations such as privacy and security will be balanced so digital identity can be used with confidence across the economy. 6. Good governance: Digital identity standards will be linked to government policy and law. Any future regulation will be clear, coherent and align with the government’s wider strategic approach to digital regulation. For example, firms verifying your identity will need to comply with laws around how they access and store data. The UK government is also exploring how secure checks could be made against government data. In September, the Document Checking Service Pilot scheme was launched by the government to give people easier and safer access to digital services which require identity checks, such as online mortgage applications, financial services and recruitment onboarding. The new service will also help organisations tackle fraud and test if there is a market for this type of digital identity checking service. The pilot, which will run for approximately a year, will deliver significant time savings for people who previously went through in-person processes to verify their identities. It will also provide financial savings for organisations who can move their identity proofing processes online.

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PQ Magazine October 2020

inheritance tax PQ

Lifetime gifts made simple Neil Da Costa explains lifetime gifts and IHT – this is stuff tax students really ought to know

n this article I am going to show you how to ‘keep it simple’. Having been an Advanced Tax lecturer for more than 20 years I am fully aware of which areas examiners say that students struggle with. These areas feature regularly in the tax exams, and by ensuring you understand them you can be confident of earning these marks in the question. In this article I will be showing you how to treat lifetime gifts for inheritance tax using simple examples. Computing lifetime tax There are two types of lifetime gifts – gifts to individuals and gifts to trusts. Gifts to individuals are called potentially exempt transfers (PETS) and are tax free while the donor is alive but do consume the annual exemption of £3,000. I will not be covering the other exemptions available in this article. On the other hand, gifts to trusts are called chargeable lifetime transfers and taxed immediately at 20%. A transfer of value for IHT is computed based on loss in value to the donor, so if the donor is paying the tax on the CLT, the gift is net of 20% tax or 80%. As a result, the tax is 20/80 or 25%. If the question does not tell you who pays the tax, use 25%. Whilst the donor is alive, only allocate the nil rate band to CLTs. Simple example: Natalya Natalya makes a gift of £400,000 to her son Sergei on 1.1.2018 and also makes a gift of £400,000 to a trust for her grandchildren on 1.1.2019. The nil rate band is £325,000 and Natalya pays the tax on the gift to the trust. Compute the lifetime tax payable. The gift on 1.1.2018 is a PET valued at £400,000 and would consume the annual exemption of £3,000 for 17/18 and the annual exemption of £3,000 for 16/17 brought forward. The value of the PET is therefore £400,000 £6,000 = £394,000 and is tax free while Natalya is alive. The gift on 1.1.2019 is a CLT valued at £400,000 and would consume the annual exemption of £3,000 for 18/19. The annual exemption for 17/18 has already been utilised by the PET so is not available. The value of the CLT is therefore £400,000 £3,000 = £397,000 and to find the IHT, we simply deduct the NRB and tax at 25%. The tax payable by Natalya is £397,000 £325,000 = £72,000 x 25% = £18,000. If the CLT falls between the 6 April–30 September, the tax is payable on the 30 April of the next tax year. On the other hand, if the CLT falls in the second half of the tax year (1 October–5 April), the tax is payable six months after the end of month in which the gift took place. Natalya made the CLT on 1.1.2019 so the £18,000 tax is payable on 31.7.2019. PQ Magazine October 2020

The gross chargeable transfer is £397,000 (net) + £18,000 (tax) = £415,000. Computing extra tax on death If the donor dies within seven years of the lifetime gift, the gift is now taxed at 40% and results in an additional tax liability payable by the donee, six months after the end of month of death. The tax on death is reduced by taper relief and by any lifetime tax previously paid. The percentages for taper relief are provided in the tax rates. Simple example: Natalya Let’s now assume that Natalya dies on 1 May 2023, which is less than seven years from the gifts. Extra tax payable on PET The PET of £394,000 took place on 1.1.2018, which is five–six years before death and 60% taper relief is available. When computing the tax, it is important to understand that the NRB will now be allocated to the PET as it took place before the CLT. To compute the tax, we simply deduct the NRB from the gross chargeable transfer and tax it at 40%. £394,000 - £325,000 = £69,000 x 40% =

£27,600. This tax is then reduced by 60% taper relief £27,600 x 60% = £16,560 This means that Sergei has to pay tax of £27,600 - £16,560 = £11,040 on 30.11.2023. Extra tax payable on CLT The CLT of £415,000 took place on 1.1.2019, which is four-five years before death and 40% taper relief is available. When computing the tax, it is important to understand that the NRB has already been used against the PET and is not available for the CLT. In addition, Natalya paid tax of £18,000 which can be deducted to find the tax payable on death. However, there can never be a refund of lifetime tax paid. £415,000 x 40% = £166,000. This tax is then reduced by 40% taper relief £166,000 x 40% = £66,400 We can also deduct the £18,000 lifetime tax previously by Natalya. This means that the trustees have to pay tax of £166,000 - £66,400 - £18,000 = £81,600 on 30.11.2023. Well done! You have now understood lifetime gifts and IHT. • Neil Da Costa is a Senior Tax Lecturer with Kaplan 33

PQ international standards

IFRS 13 explained T

Tom Clendon looks at the standard of fair value measurement and considers its application

he objective of the standard is to provide a single source of guidance for fair value measurement where it is required by a reporting standard. IFRS 13 does not extend the use of fair value; it provides guidance on how it should be determined when an initial or subsequent fair value measurement is required by a reporting standard. Definition of fair value Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. Thus the standard defines fair value on the basis of an ‘exit price’ notion and uses a ‘fair value hierarchy’, which results in a market-based, rather than entity-specific, measurement. So much for theory. Now that the standard has settled down its application is beginning to be examined. Let us see how fair values are applied in practical situations. Question: Marina Bay An investor has acquired control of Marina Bay and is conducting a review of the subsidiary’s assets and liabilities to ascertain their fair value at the date of acquisition in order to determine goodwill. Marina Bay has been supplying goods to the pharmaceutical industry for many years. A particular medicine sold by one of the pharmaceutical companies has resulted in serious side effects in a minority of persons prescribed with this drug. A legal class action was launched last year against the pharmaceutical company. As a supplier Marina

Bay has been named as a co-defendant in the case. It is estimated that if the case is successful then Marina Bay could be liable for damages of $100 million. Legal advice suggests that there is only a 5% chance of the case being successful. If the matter goes to court then it will take three years to resolve. Marina Bay has not recognised any liability on the grounds that there is no probable out flow of economic benefits. Marina Bay has owned some land for many years adjacent to its head office in the centre of the city. It is currently used as parking for staff. The land is carried at its original cost of $2 million in the financial statements of Marina Bay in accordance with its accounting policy. On the basis that the land is used as a car park then it is estimated that it has a value of $3 million. If the land were to be sold then a buyer might be expected to pay $10 million because of the development potential. Required: Discuss how the contingent liability and the land can be measured at fair value in the group accounts. Answer: Marina Bay Answer fair value of the contingent liability While at the individual company stage Marina Bay is correct in not recognising any liability on the basis that it does not meet the probability test threshold of IAS 37 Provisions – it is necessary in a business combination for the acquiror of Marina Bay to consider the fair value of the assets and liabilities it is taking over. At first glance it does seem unusual that we are considering the fair value in the context of a liability, but nevertheless IFRS13 does address

this issue. In the context of a liability fair value is the amount that Marina Bay would pay to transfer a liability in an orderly transaction between market participants. This basically means that fair value is the market value. But in this example, there is no market value to observe so we fall back an estimate (technically level three in hierarchy of fair values). On this basis the fair value of the liability could therefore be measured using expected values (5% x $100 million) $5 million, and further this should be then discounted for three years to reflect the time value of money. Answer fair value of the land Fair value in the context of an asset is the amount that the asset can be sold for in an orderly transaction between market participants at the measurement date. With a non-financial asset in arriving at the fair value it is necessary to consider alternative legal uses in order to arrive at the best price. That Marina Bay has no plans to sell the land and uses it as a car park is therefore not relevant to determining its fair value. On the open market the land would be valued with its development potential in mind. In the group accounts, the fair value of this land at the date of acquisition is $10 million. This results in a fair value adjustment of $8 million and in effect reduces the measurement of any goodwill that arises. • Tom Clendon is a former PQ lecturer of the year. He is the online ACCA SBR tutor with FME Learnonline and the SBR guru for ACCA. Get in touch with him via WhatsApp – 07725 350793. See www.tomclendon.co.uk PQ Magazine October 2020

PQ study advice

It’s time to dive into the deep end of blended study Cath Littler explains how you can adapt to, and make the most of, blended learning

olleges and training providers are busy adapting their course delivery plans due to the Covid-19 outbreak. This means that many accounting students will find themselves studying a blended learning course this September, with some of their study online rather than in the classroom. If you are accustomed to solely classroombased learning, then the prospect of moving to a blended approach might be daunting. I work with Mindful Education who specialise in blended learning courses and apprenticeships and we believe that this approach offers learners the best of both worlds. “I never thought online teaching would be effective and this has completely changed my view! Mindful will be my go-to in future if I need learning support/ delivery” AAT Level 3 Online & On Campus learner, Gower College Here are some pointers on how to make the most of your blended learning course.

Make the most of the technology New learning platforms can take a little while to get used to, but generally learners will quickly

get the hang of it. Those who take a blended learning course actually find that technology, combined with face-to-face learning, really makes for an enriched learning experience. Recorded online tutorials can be re-watched if you need a reminder. And you can retry online tasks that you have been set if you feel that you need more practice. Mindful’s online questions self-mark so you can see how you have done straight away. Other activities, like spreadsheets or written tasks give sample answers for you to compare your work to. Use online chat tools, such as class WhatsApp groups, to keep in touch with your classmates, share ideas and ask for help. “Videos allowed me to pause, rewind and replay so I could learn at my own speed, and with a block of questions after every video I was able to test my learning more frequently, then go back to the videos if I was still struggling.” AAT Level 4 Online & On Campus Learner, Greater Brighton Metropolitan College

Engage with feedback Blended learning also optimises

opportunities for you to gauge your progress through progress reviews, portfolio work and reflective statements. Self-marking online questions, which give correct and incorrect feedback, help to embed understanding. Make sure you participate in any feedback opportunities as any areas of concern can be built into the next tutor-led session. “I found the questions and tests extremely helpful, especially being able to keep retrying to test if I’d retained knowledge while waiting a long time for exams (due to lockdown).” AAT Level 3, Online & On Campus Learner, Milton Keynes College

Ask for help If you are having online tutorials, it’s not as easy for tutors to pick up on visual clues. So, if you need some assistance then you might have to ask. Blended learning means that tutors can dedicate more time to giving personalised support and you may not need to wait until your next campus session to ask for any help or advice you may need. Colleges will be using a range of online tools to keep in touch and if you are one of those who doesn’t like to put their hand up to ask questions, then you may feel more comfortable raising questions online, which you can then go through with your tutor. In summary We’ve all learned that being thrown in at the deep end might not be such a bad thing if it helps you to embrace new ways of learning. It may take a short while to get to grips with this new approach, but you will quickly adapt to blended learning and may come to enjoy the range of options and flexibility it brings. • Cath Littler is Head of Learning & Development (Accounting) at Mindful Education, and a former member of the AAT’s Learning and Development Board PQ Magazine October 2020

CIPFA spotlight PQ

This is what success looks like Drew Cullen, Interim Director of Education and Lifelong Learning, looks at rise and rise of apprenticeships

pprentices pave the way for the future of the public finance profession, and it is crucial that they are adequately assessed on their performance to ensure that their learning goals have been met. A top priority at CIPFA is ensuring that each apprentice receives the highest quality instruction and individual attention to adequately prepare them for a successful career in an uncertain world. Recently, CIPFA has had something to celebrate regarding the End Point Assessment (EPA) for our Level 7 apprentices. Following a desktop audit of our EPA function, we received the final report from the External Quality Assurance Organisation, OpenAwards. They judged our assessments to be fair, reliable and user-friendly with excellent moderation and grade confirmation processes. Those who are familiar with apprenticeships know that the purpose of an EPA is to determine if the apprentice is adequately trained to perform the role that they have been trained to do. In the case of our Level 7 apprenticeship, 89% of apprentices who undertook this assessment

passed successfully. After completion of the EPA, apprentices are then designated Professional Accountants and ready to take the lead in strategic financial management in a wide variety of settings and sectors. The EPA for the Level 7 apprenticeship was deemed relevant, reliable and efficient â&#x20AC;&#x201C; qualities that we are constantly striving for in order to ensure that our programmes provide the best possible career preparation for burgeoning public finance professionals. We have received feedback that our materials are user friendly and well designed, and the process fair and accessible. Above all, our Level 7 apprenticeship provision was graded to be effective in all areas of instruction and assessment. We work to ensure that out assessors are highly qualified and knowledgeable practitioners with extensive experience in their fields. This guarantees that assessment results are reliable and fit for purpose. We believe these are key components of a successful apprenticeship programme. In addition to improving the assessments

themselves, we are continually looking to enhance our feedback processes for current and former participants. A system is in development for capturing this crucial information to guarantee that our training and assessments are of the highest quality and personalised for apprentices and employers. In addition to the Level 7 Professional Accounting Apprenticeship, CIPFA currently has two other apprenticeship pathways to choose from â&#x20AC;&#x201C; beginning at Level 3 Assistant Accountant and Level 4 Professional Accounting Technician. Each of these pathways is tailored to what apprentices and employers seek to achieve throughout the programme. At CIPFA, we welcome feedback on our programmes and are aiming to constantly evolve as the sector and needs of students change. Amidst the current uncertainty in the world, our goal is to make sure that each apprentice is adequately prepared for whatever the future may bring. This begins with reliable instruction and fair assessment to help navigate the journey of a new career in accountancy.

ONE WEBSITE TO RULE THEM ALL! Check our new funky PQ magazine website

Go to pqmagazine.com â&#x20AC;&#x201C; where nothing is fake, and all the news is real! PQ Magazine October 2020

PQ cash accounting

The cash accou Mushtaq Ahmed looks at how the cash accounting scheme works

What is Cash Accounting Scheme? • The Cash Accounting VAT Scheme is a method of reporting VAT on the basis of payments made or received. (Debitoor.com) • Usually, the amount of VAT you pay HM Revenue and Customs (HMRC) is the difference between your sales invoices and purchase invoices. With the Cash Accounting Scheme, you: i. pay VAT on your sales when your customers pay you ii. reclaim VAT on your purchases when you have paid your supplier How to join: • You must be eligible to join the scheme. • You join at the beginning of a VAT accounting period. • You don’t have to tell HM Revenue and Customs (HMRC) you use cash accounting (Gov.uk.). How to leave: • You can leave the scheme at any time. • You must leave if you’re no longer eligible to use it, leave at the end of a VAT accounting period. • You must report and pay HMRC any outstanding VAT (whether your customers have paid you or not). • You can report and pay the outstanding VAT over 6 months. • If your VAT taxable turnover exceeded £1.35 million in the last 3 months you must report and pay straight away. • You must pay immediately if HMRC has written to you to withdraw your use of the scheme. You are eligible for cash accounting if: • Your business is registered for VAT. • Your estimated VAT taxable turnover is £1.35 million or less in the next 12 months.

Bridge experience gap between AAT theory and practice with Future Connect Training at: fctraing.org/aat.php • You must leave the scheme if your VAT taxable turnover is more than £1.6 million. You can’t use (exceptions) cash accounting if: • You use the VAT Flat Rate Scheme - instead, the Flat Rate Scheme has its own cash-based turnover method. • You’re not up to date with your VAT Returns or payments. • You’ve committed a VAT offence in the last 12 months, for example VAT evasion. You can’t use it for the following transactions

use standard scheme instead: • Where the payment terms of a VAT invoice are 6 months or more. • Where a VAT invoice is raised in advance. • Buying or selling goods using lease purchase, hire purchase, conditional sale or credit sale. • Importing goods from within the EU. • Moving goods outside a customs warehouse. • Mushtaq Ahmed is the accounts training manager at Future Connect Training

VAT return Box to be Completed VAT due in this period on sales and other outputs

Box no. Box 1

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

Box 2

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

Box 3

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

Box 4

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

Box 5

Comments • Identify the total sales. • Calculate the VAT. • The total is divided by six. • Amount is then entered into Box 1. • Box 2 is only used if items have been bought from other EC (European Community) countries. • The figure will be taken from purchases, not sales. • Multiply any purchases by the rate of VAT (20%). Often this box will be £0. The treatment of items included in this box may be affected by the UK leaving the EU. • Box 3 is the sum of Boxes 1 and 2. • It is automatically calculated when the return has been completed. • The general rule is that VAT can be reclaimed by businesses on goods and services bought by the business that has been charged by the supplier. • As the business makes standard, reduced or zero-rate supplies, Box 4 is the amount of VAT reclaimed from purchases and other expenses (Input VAT). • If any acquisitions from EC member states were included in box 2, this amount must also be included. • Box 5 is the difference between boxes 3 and 4. • It is automatically calculated when the return has been completed. PQ Magazine October 2020

cash accounting PQ

unting scheme

Difference between Accrual & Cash Accounting Scheme Differences

Cash Accounting

Accrual Accounting

Meaning

Income and Expenses are only recognised through Cash

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

Includes

Only cash expenses, Cash Incomes

All Expenses and All Incomes

Nature

Simple and easy to understand

Complex and difficult to understand

Recognized By

Not recognised by Companies Act

Recognised by Companies Act

How accounting is done

When Cash is Received or Paid

When Revenue is earned or loss is Incurred

Focus

Liquidity

Revenue, Expense, Profit, Loss

Why Useful

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

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

Holistic in Approach

NO, because it only talks about Cash

YES, because it includes all of the transactions

Which one is more Accurate

Accuracy of Cash Accounting is Doubtful since it doesnâ&#x20AC;&#x2122;t take every transaction into Accounting

It is a more Accurate method of Accounting

Pros & Cons Advantages i. Using cash accounting may help your cash flow. ii. If your customers are slow payers as you do not pay your output VAT until you are paid. iii. If a customer never pays you, you donâ&#x20AC;&#x2122;t have to pay VAT on that bad debt as long as you continue to use the Cash Accounting Scheme.

PQ Magazine October 2020

Disadvantages i. If you buy a lot of your goods on credit this scheme can be a disadvantage as you cannot reclaim your input VAT until you pay your creditor. ii. If your VAT returns are usually reclaiming, this could mean you receive your VAT repayment later than under an accruals basis. iii. If you leave the cash accounting scheme, you will have to pay all outstanding VAT on bad debts. iv. In addition to keeping all required VAT records and accounts for standard VAT accounting, you must also retain full evidence and records of receipts and payments such as bank statements and cheque stubs, and paying in slips. 39

PQ working in practice to client data. For many, however, that just isn’t feasible. The data is often spread across different parts of the client’s businesses, and complex calculations and data entry can sap valuable time. The first step to disruption, is to embrace the cloud. Moving client data to the cloud makes it far more accessible and easier to analyse. Accountants can review the data in real-time, improving client service and the speed of delivery. Cloud accounting tools also make it easier to swiftly create reports, view business finances, and model business plans and outcomes for clients. With the right technology, accountants are empowered to master their clients’ data. Armed with fresh insight, they can provide targeted advice to fill the vacuum, and provide novel services like consultancy on business transformation.

Accounting in practice: adapting to the new normal Chris Downing explains how in a period of constant change, technology is becoming an accountant’s best friend

n accountant’s new normal is a state of constant, rapid change. The rules are shifting all the time as government loan programmes pitch up or down. In this swiftly evolving environment, a whole host of challenges emerge. For example, to provide a cash flow projection tomorrow, accountants need access to a year’s worth of bookkeeping data today. They also need the time and resource to work through that data quickly and efficiently. Fortunately, technology is helping accountants automate business functions and collaborate to provide a faster, more agile and varied consultative service. Sage’s annual Practice of Now report shows the profession is evolving, as 93% of practicing UK accountants claim new technology is helping meet demands and drive new value for their business. Those that fail to embrace technology run the risk of falling behind. Learning from the disruptors You don’t need to be disruptive to be the disruptor. Across many different industries, disruption tends to follow a familiar pattern. Incumbent players are shown to be insufficiently 40

agile – resistant to change and failing to adopt new capabilities. In short, they gradually stop delivering the value clients seek and are usurped by more innovative competitors or new market entrants. Accountants aren’t experiencing the same competition from technologically agile startups as some other industries. Yet there is still plenty of client-driven disruption. As clients struggle to adapt and maintain continuity postcovid, they’re increasingly turning to accountants for advice, from government grants to how to generate new sources of revenue. To rebuild your practice in this new environment, accountants should learn the disruptor’s lesson: it’s not just about delivering a better service than competitors but also providing new offerings that others aren’t. This can be achieved by assessing market conditions, altering business practices and, most importantly, understanding your client and what will really help them. To give clients targeted, expert advice, accountants should understand every aspect of their business. This level of understanding can only come from strong visibility and accessibility

The first to finish However, client understanding is only half the battle. In the new normal, the pace of change is accelerating rapidly. Decisions made under pressure can have major repercussions on a business for years to come. So, accountants must invest seriously in process efficiency to deliver at the speed required and minimize human error or inefficiencies created through manual processing. In the current environment, accountants don’t have the time for staff to spend on repetitive, time-consuming data management tasks. Yet, many accountants continue to expend precious resource on classification and cleansing. Instead, they should look to robotic process automation (RPA), using software and AI or machine-learning capabilities to handle highvolume repeatable tasks. RPA is already one of fastest-growing segments of enterprise software, with spending expected to reach $2.4 billion in 2022. It can free up time for account teams by automating tasks like data input and output, reconciliation, and data quality management. AI can review millions of transactions that would have traditionally taken hours to do manually – spotting anomalies and making recommendations. Automated solutions never tire and are immune to human error, all the while improving accuracy and delivery time. The best thing is that AI embedded in solutions will only get better with time. Gradually, less intervention will be needed by staff. The AI can also become more proactive in assigning resources because it adapts to the flow of client data in the business. Technology is the enabler – helping accountants seize the opportunity to be change makers rather than spectators. Adopting cloud technology gives accountants the ability to remotely manage their client data, accounts, and people all in one place. AI completes the circle, helping to streamline data entry and admin through automated invoicing systems. As further processes are automated, accountants will have more time for what’s most important – building relationships with clients and meeting their needs. • Chris Downing, Director for Accountants & Bookkeepers at Sage PQ Magazine October 2020

careers PQ

Dear Karen

Life at CCL Office

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

Devonne Burn is an account manager at the office supplies company, based in Gateshead. She is studying for the AAT professional diploma L4 and business management Level 4. Devonne was recently named AAT Student of the Year

THE DILEMMA I’ve been applying for new roles and was recently offered an interview which will take place virtually. I’m excited about it but also not sure about how to find the time while I have responsibilities in my current role and can’t work flexibly. Do you have any advice on how I should approach it? KAREN’S RESPONSE Congratulations are in order – landing a job interview is fantastic news and might lead to an exciting new step in your career. However, it can be daunting working out how to fit it in with your current responsibilities and a rigid schedule. Firstly, I would suggest scheduling the interview outside your working day if it’s possible. Voice your preference for an early morning, lunch time or after work slot, which I appreciate is sometimes easier said than done. Explain your situation at the earliest opportunity and suggest some possible times. While you want ample time to prepare, remember that interviewing virtually means you won’t have to factor in travel time. If you do have to rearrange due to existing work commitments, you’re showing that you are a loyal and honest employee which is of course only a positive thing. Another approach is to book the day of the interview, or half of the day, off as annual leave. This will help you get in the right headspace for the interview rather than fighting off distractions from your current job. It might also provide a good opportunity to spend the day focussing on any other applications. If you do take time off, it can be tempting to invent an elaborate excuse or story but I’d recommend being as vague as possible or not giving a reason altogether, which is better than being caught out by a complicated lie. Alternatively, consider being honest with your manager about your upcoming interview if you feel it’s appropriate. Often they are comfortable having these conversations and the honesty can lift a weight off your shoulders. Hope this helps and good luck! • Karen Young is a director at Hays. She is passionate about helping people to find the right job, and companies to find the right person PQ Magazine October 2020

What time does your alarm go off? 6.30am, as my strict beauty regime is a must! What is the first thing you do when you get to your desk? Organise my paperwork for the day ahead. What’s on your desk? A central pink keyboard, an essential Devonne touch to an otherwise plain desk. Oh, and not forgetting the gifted personalised coffee cup. What’s the best thing about where you work? My colleagues go above and beyond – they have been extremely supportive during all my studies. Where’s your favourite place for lunch? La Cucina, a familyrun deli. I would recommend their chicken shawarma. What can you see when you sit at your desk? I have a lovely view of an industrial estate! It may

not be a beautiful nature reserve, or a high rise view of New York, but it’s home and I’m proud of it. Which websites are your favourites and why? Pink Boutique and Kurt Geiger are favourites of mine; they replenish my wardrobe with the latest dresses, handbags and shoes. Which websites do you use for work? CCL’s own website, and our suppliers’ including Hope Education and Vow Europe. How many hours a week do you spend in meetings? One or two hours in team talks. What time do you leave the office? I officially finish work at 5pm; however, I am always there to give a helping hand if I need to stay later. With a great team beside me it is never a rush to get out of the door. How do you relax? Going out for

tea with the girls or relaxing on the sofa with loved ones – or working out with my best friend. What is your favourite tipple? I’m torn between a French martini and a classic strawberry daiquiri... both best served on the beach. What’s your favourite TV show? I’m a movie type of girl. A takeaway in my PJs with a romcom sounds like perfection. Summer or winter? It has to be summer? Nothing better than a bit of sunshine, relaxing by the pool and enjoying the atmosphere the good weather brings. Pub or club? An old school club. Who is your hero? I grew up in a working class background, my mam is not a doctor and my dad is not a world class engineer but they are heroes to me nontheless. They have backed me every step of the way.

What not to do in an interview… Hugging a prospective boss is now out, but there are still some fatal errors you should avoid at the interview stage if you want to get that dream job. The first mistake is not doing your homework about the company and your interviewer. You should have checked out their LinkedIn profile and followed the company tweets at the very least. Handshakes are out these days too, but a smile is just as welcoming. If you aren’t sure about this then practise! Stand opposite the mirror and smile – what do you see? If it’s not something you do a lot of, try

to discover what looks the most welcoming, and it doesn’t have to mean coming out all teeth blazing. Interviews are tough and you can feel like you are being interrogated. But, as granny used to say, make sure you “sit up straight”. Also, be aware of your body language. Try not to rub your nose too often! A few nods helps and try to look interested at all times. Something interviewers hate is a candidate who keeps looking at their phone. You sometimes don’t ever know you are doing it! Another is speaking poorly of the ex-boss. The hiring manager will only start thinking what you will say about them.

The PQ Book Club: books you should read How to Be A Well Being – Unofficial Rules to Live Every Day, Dr Andy Cope, Jim Pouliopoulos & Sanjeev Sandhu (Capstone, £10.99) We are told it is time to ditch the old wisdom and take life into our own hands if we truly want to be a well being! The authors (all three of them) provide 22 rules for life that ‘just work’. And, as we love numbers, we loved this concept. Among the rules are: #1 Life Isn’t fair; #6 Say ‘thank you’; and #15 Your Smart Phone is making you stupid. But the rule that really caught our eye was ‘be more dog’. Let’s explain: this rule is all about abundance and scarcity. But to get there you have to get past

three dogs and one dog bowl of food, and some water… And don’t skip past the opening chapter ‘A Quick Word About Rule Breaking’, which explains life is a precious gift, so it makes sense to ensure you are ‘alive part’ is properly alive. It is explained that ‘presenteeism’ is a business word that’s used to describe people who show up but go through the motions. Except ‘presenteeism’ isn’t just about work. It can apply to the rest of your 4,000 weeks (the 76 years you have here), say our authors, and that’s not good. They may have created 22 rules, but before that they tell you it’s the rules that are the problem

– just not their ones! What they really want you to do is re-imagine, re-engineer, re-think, and re-remember the rules. And, finally, remember to beware the clocks – they are watching you. They are not ticking their time, they are ticking yours, so every second counts. PQ rating: 5/5 I hope you can tell we really enjoyed this one. It is well-written and couldn’t be timelier. We also loved the reallife examples and home truths. We are off to do some living… 41

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

Idle thoughts Idles, the British post-punk rock band, have most definitely hit the big time. Drummer Jon Beavis is called the ‘taxman’ by his bandmates, maybe because of his sensible haircut and glasses! But wait until you see him play – he’s manic. However, there is a connection to the actual taxman – lead singer Joe Talbot’s mum worked for the Inland Revenue in Exeter!

Your top ‘work from home’ tunes Don’t ask us why, but energy company Gazprom Energy has used data from Spotify to discover the most frequently featured songs on UK accountants’ playlists. Accountants, it seems, enjoy popular rock and hip-hop music the most. Compared with the UK average, accountants chose more old-school music that had a slightly lower BPM. Accountants also avoided ‘Work from Home’ by Fifth Harmony and ‘9 to 5’. So, you have TOTO’s ‘Africa’, Biggie’s ‘Juicy’, ‘Hotel California’ and Jay-Z and Linkin Park’s all-time classic ‘Numb/Encore’ side-by-side. And there’s Scott at number 7 ‘trying to text his accountant’ in the mountains (it’s in the lyrics). But, where’s Abba’s ‘Money, Money Money’, or ‘Don’t Stand So Close to Me’ by the Police? Here is the accountant’s top 10: 1) Money in the Grave – Drake 2) Numb/Encore – Jay-Z 3) Sex on Fire – Kings of Leon 4) Juicy – 2005 Remaster – The Notorious B.I.G. 5) Hotel California – Eagles 6) Jumpman – Drake 7) Beibs in the trap – Travis Scott 8) Africa – TOTO 9) 1985 – Bowling for Soup 10) Earfquake – Tyler, The Creator Read the full story at https://tinyurl.com/ y3e8xnwo

’ WEV E Marvellous mandalas

Apple and pears A US small business owner is battling Apple for the right to use a pear in the logo on her recipe app. In a legal filing Apple said the image was too similar to its own logo and would hurt its brand. Natalie Monson, the app owner, has accused the tech giant of bullying, and has said she is prepared to fight back. Well, here’s the logos. We will let you decide if a pear looks like an apple! It’s a mad, mad world…

Lucky number for £250,000 A Chinese mobile phone number ending in five eights has been sold for £250,000 (2.25 million yuan). The number eight sounds similar to the Mandarin word for prosperity, and phone users are obviously willing to pay a premium to service providers for that special number. The telephone number was put up for sale by a Beijing court as part of a forced sale of the debt-ridden owner’s assets. A number ending with five eights was sold for just £23,000 in January 2019. And earlier this year a phone number ending with eight sevens (also an auspicious number) sold for £430,000.

The Price of Football Combine a stand-up comedian, a BBC radio journalist and a teetotal colour-blind accountant and what to you get? Well, if the three are Kieran Maguire (accountant), Dap Dip and Kevin Day then you have a podcast series with over one million downloads! University of Liverpool football finance lecturer Maguire is a PQ regular, too, and has won one of our much-coveted awards. Check out the podcast at https://tinyurl.com/y4mwfm72

Apt names

The Times loves to celebrate ‘apt’ names, loving the ones that are more inappropriate. In the 1980s in Bromsgrove it explains there were two orthopaedic doctors called Mr Graves and Mr Toombs! At a hospital in Swindon at the same time there was a head of finance called… Mr Fiddler. Happy days!

GOT THE L OT Soda jerk

We have three copies of ‘Dot to Dot Marvellous Square Root is a fantastic craft soft drinks Mandalas and Creative Crystals’ to give away this firm, which uses only whole fruit. They month. If you win this great prize you will be able make everything in their East London soda to relax and unwind as you take some time out for works, and in an effort to support other small yourself to join the dots in these beautiful mandala businesses we are giving away a Square Root and crystal patterns. Completing the detailed designs Bottles and Bag Combo to one lucky reader. will help put your mind at ease and each image You will receive a selection of fine fizz plus a smart, sturdy, Square Root Soda can also be coloured in if you wish. There are over bag made from 100% Fairtrade cotton, to take your sodas with you on the go. 10,000 dots to play with! If you want to drink soda with real taste visit https://tinyurl.com/y6qjjtw5 To enter this great giveaway send your name To be in with the chance to win this great prize send your name and and address to giveaways@pqmagazine.com. Head up the email address to giveaways@pqmagazine.com. Head up your email ‘Soda jerk’ ‘Marvellous Mandalas’ and we will enter you for the prize draw. and we will do the rest. Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries Terms and conditions: entry giveaway Youonmust send11your must be received by Friday One 8 May. Theper main draw willplease. take place Monday Mayname 2020.and address to be entered for the draw. All giveaway

entries must be received by Friday 16 October. The main draw will take place on Monday 19 October 2020.

TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM 42

PQ Magazine October 2020

PQ magazine, October 2020

Articles inside

Prem Sikka Honesty is the best approach for the UK’s auditors

The columnists

Zoe Robinson Why risk literacy should be on your CV