PQ magazine, November 2020 by PQ magazine

November 2020

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ACCA PROMISES IT WILL BE ‘MONDAY-READY’ ACCA is working hard to ensure there is no repeat of the September exam problems experienced by a significant minority of its students come December. It told PQ magazine that just over 94% of centre-based exams in the UK went by without a hitch. This left 6% of sitters who experienced long delays, and even cancellations. ACCA’s director of customer service, Leigh Currie, told PQ: “We apologise wholeheartedly and are determined to put things right.”

Post-exam, the ACCA invited students to an online meeting so it could hear directly from them about their ‘experiences’. PQ editor Graham Hambly was also invited to a Zoom meeting to discuss feedback and put forward suggestions. He told the ACCA that invigilators needed to be better briefed about what to do when things go wrong. With some students sitting at their exam terminals for up to seven hours in September, he said both water and snacks (fruit, etc) should be made available if there are significant delays.

ACCA explained that many of the venues used at the last session were new to hosting, because of ongoing closures and capacity issues at other venues. It is now working with those it is using again in December, to ensure they are fit for purpose and of the standard ACCA expects. For several sittings now those sitting the exam on the first day – the Monday – seem to have suffered the worse. Currie is committed to ensure these centres are ‘Monday ready’. You can read Currie’s article on page 17.

NEW ROUTES FOR TOMORROW’S CFO

The traditional career-ladder approach to becoming a CFO, where one role simply follows another, is changing forever, according to a report from ACCA and the Institute of Management Accountants. Instead, you need to think flexible pathways that embrace a variable range of career choices as the way forward. The ‘experiences’ that got today’s CEOs and CFOs into their current roles are no longer relevant, and the problem is many of the skills needed to get into these posts in 2020 are those that cannot be readily taught. Today’s more variable career structures are making the task of getting that experience even more problematic. The study acknowledges the importance of peer-to-peer networking and informal knowledge here, as many of the core skills cannot be directly learnt. Against this backdrop of disrupted career paths, the development of the next generation of CFOs is also becoming a real challenge. There is a worry that not enough attention is being paid to the nurturing of tomorrow’s finance leaders, said some two-thirds of those surveyed for ‘The CFO of the Future’ report. Recruitment

firm Barden’s Sandra Quinn suggested that just 10% of the CVs she sees fulfil the criteria that her clients are looking for in the CFO. She explained many people think they are ready, but

lack the breadth of experience necessary to fulfil the expectations. The good news is that most people surveyed (81%) felt that having an accountancy qualification will be either essential or strongly recommended for the CFO of tomorrow. The report explains that the CFO of the future will have a broader role too, one that is transformative within the organisation, strategic, and be a ‘right-hand’ to the CEO in many instances. The current pandemic has placed the CFO at the forefront of many entities, with the need to ensure liquidity paramount for many businesses. That said, their role has, according to those surveyed, moved away from the traditional focus solely on accountancy and finance issues. While these remain fundamental, they are not the only aspect that adds value to entities. The new reality is one where the CFO has a broader function across the piece, where performance is measured against the ‘3Ps’ of people, profit and purpose that are increasingly being used to evaluated success. • The report is at https://tinyurl.com/y4nl46we

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contents PQ

IN THIS ISSUE News 04CIMA exams Institute to offer free exam resits – again 05Working from home While home working suits many, it’s not for PQs, new survey finds 06EY recruitment Big 4 firm puts faith in young talent 08The workplace Junior accountants take their lead from experienced colleagues 09Workplace equality Voluntary targets ‘are not working for women’, says new report 10AAT dropping synoptics Changes to come into effect for AQ2022 12Tech news HMRC warning new students to be aware of fresh wave of tax scams Features, etc 14Have your say Why ACCA should go back to paper exam questions; well done to Kaplan for becoming more inclusive; and our social media round-up 16Best connections Top tips on how to make your internet quicker and more reliable 17ACCA exam woes ACCA’s Leigh Currie explains how the association is preparing to ensure the smooth running of the December exams 18ACCA AAA exam Advice on how to pass this tough paper, with examples of some common concerns voiced by students 19VAT update All you’ve ever wanted to know about the annual accounting scheme

21Game on! Edward Netherton

November 2020 40Personal development p40

Today’s professional accountant needs to stand out from the crowd. Pantelis C. Fouli explains how you can do this 41CIPFA spotlight The importance of lifelong learning 43Careers Life as the AAT President; our Agony Aunt Karen Young tackles another of your career ‘issues’; and our Book Club Review 44Fun stuff – and our fantasic giveaways

p35

30Sage advice Nikki Bruce of

p25 get AAT qualified in just 12 months 26Tackling audit questions You score marks more heavily if you answer audit questions in two parts, says Steve Widberg 27AACA SBL exam Some sound advice on the best way to pass the Strategic Business Leader exam 28Reconcilliations Gareth John explains what you need to know about how a reconciliation works

Softext Ltd explains what’s new in Sage 50cloud Accounts version 27 31Test bank Philip Dunn sets you a series of questions relating to measures of shareholders’ interest and risk 33Workplace stress Karen Young explains how you can manage your anxieties around job security 34Learning at home AAT studier Lyndsey Cole explains why she is swapping the classroom for distance learning 35Rollover relief Neil Da Costa endeavours to make a complicated subject very simple 36Insolvency We explain the changes brought in by the new Corporate Insolvency and Governance Act 2020 38Variance explained How to deal with questions on direct material mix and yield variance

The columnists Robert Bruce International audits getting lost in translation 6 Prem Sikka Banks continue to facilitate epic levels of corruption 8 Zoe Robinson Why question practice really does work 10 Mike Day Accountants have vital role in UK’s economic recovery 12

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reviews the games that will keep your spirits up in these difficult days – including Among US 22CIMA exams Stephen Flatman proffers six easy steps for your revision and exam preparation 23CIMA case studies We take a look at the recently published case study pre-seens 25A Greek odyssey Meet George Tampakas, who has managed to

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PQ news

GRAHAM HAMBLY Broadband says no

There is a new hidden exam stress for accountancy students, and it’s called connectivity! New research has found millions of UK households are struggling with poor broadband speeds, affecting those working from home, studying and, perhaps more importantly, trying to sit exams. Increased internet usage over the lockdown has led to more than one third of people, that’s equivalent to 10 million homes, reporting slower connectivity. Frequent complaints are connections that drop out regularly, broadband that fails when lots of people are online and connections that struggle with video calling. One in 10 households describe their broadband speed and reliability as ‘bad’. To this end we have some tips to help those suffering on page 16. ‘MONDAY-READY’ This month we report on ACCA facing the problems with the September exams head-on. It is promising December’s sittings will be ‘Mondayready’. We have talked to ACCA directly about this and they are genuinely trying to create a better student experience. Read how they are putting things right on page 17. Meanwhile, CIMA is offering a free resit again PQs for the next three months (led story on this page) and have streamlined their exemption policy (page 8). ICAEW has some pass rates to publish, finally, and has announced it’s going carbon neutral. We are still waiting to hear about AAT’s remote exam pilots, but we have been told big changes are coming with AQ2022 (page 10) and report from its virtual AGM. Graham Hambly is Editor and Publisher of PQ magazine

CIMA offering free exam resits – again CIMA has ‘reinstated’ its free exam resit offer, this time for three months. Any students who are unsuccessful in their exams during October, November and December will receive one free resit (go online for the full terms and conditions). PQs will receive an email from CIMA approximately five to 10 days after their exam confirming the exam credit has been added to their account. If you are unsuccessful in the exam you must wait for the email confirming the credit before going online to schedule the resit exam in the usual way. Some of CIMA’s T&Cs are: 1. Valid for any student sitting and failing a CIMA exam between 1 October and 31 December 2020. 2. This offer is valid for CIMA

Certificate in Business Accounting exams and Operational, Management and Strategic qualification objective test levels only. 3. This offer excludes Operational, Management and Strategic level Case Studies and any exam not in the English language. 4. To receive the free exam resit, the student must have attempted

and failed between 1 October and 31 December 2020. For example, no shows are excluded. 5. The free resit must be scheduled and taken within 90 days of the original sitting. No extensions are permitted. 6. 90 days credit will start from the date CIMA processes the exam credit. Each student will be notified by email within 10 days of their exam failure that a credit has been added to their account. 7. To be eligible students must have cleared any outstanding debt including their 2020 subscription fee. 8. Ineligible students include those where the invigilator has stopped the exam for an infringement of exam policy. Go to: www.cimaglobal.com/ Studying/CIMA-Online-Exams/

Are outdoor exams the way forward? Uzbekistan took radical steps to ensure students could sit the university entrance exams this summer. They took over the running track of the Pakhtakor Stadium in Tashkent. Over 1.4 million took the test over two weeks as they competed for just 150,000 places. For more fun stories turn to page 44.

Deloitte partners’ 17% pay hit Equity partners at Deloitte (there are 709 of them) will receive an average payment of £731,000 for the year to the end of May 2020, that’s down from the record £882,000 they were paid in 2019. That adds up to a pay cut of around 17%.

Revenues for the year increased by 9.1% to £4.31 billion, with the majority of that growth coming in the first 10 months of FY20. Growth in the final two months fell to 2%. During FY20 the total number of Deloitte employees grew to 20,510,

New qualifications boss Anna Howard has been appointed by CIPFA as its new head of qualifications and membership. She joins from Regent College London, where she was academic dean. Before that Howard spent over 10 years at London South Bank University. She is a qualified ACCA.

accounts. Audited financial results were due on 30 September, and Saatchi have admitted more time was needed for new auditor PwC to work through the accounts. We are talking weeks not days here. Shares are now suspended until the accounts are published.

an increase of 11.4%. The firm’s total UK tax contribution was £1.2 billion in FY20. This comprised £706 million on taxes collected on behalf of HMRC (VAT, PAYE and National Insurance), and £439 million of taxes borne by the firm (partner income taxes, NI, corporation tax and employer’s NI).

In brief Test Bank to test you How well do you know your stuff? Perhaps it’s time to check what really has sunk in by going onto PQ magazine’s Test Bank. We have tests on: • The interpretation of financial statements. • Variance analysis. • Accounting standards. • Measures of shareholders’ interest and risk. Go to www.pqmagazine.com and click on the ‘Test Bank’ bar at the top of the home page. 4

Saatchi shares suspended M&C Saatchi has suspended share trading after it missed the deadline for publishing its annual

Sustainability board needed The time is right for an International Sustainability

Standards Board to run alongside the International Accounting Standards Board (IASB), says the International Federation of Accountants. It said that the proposed board would address the urgent and growing demand from investors, policy makers and regulators for a reporting system that delivers consistent, comparable, reliable and assurable information relevant to enterprise value creation, sustainable development and evolving stakeholder expectations. PQ Magazine November 2020

news PQ

Selling the answers and cheating An ACCA Chinese student has been caught and disciplined after she placed an advertisement on the Taobao website offering to sit modules from the Ethics and Skills exam for other students for money. ACCA registered student, Zhao Xinghan, has now been removed from the student register and ordered to pay costs of £2,000. Lanyan Fang also recently came before the ACCA disciplinary committee. She was found guilty of taking handwritten notes to her exam desk. Fang was removed from the student register and ordered to pay costs to ACCA in the sum of £5,000. In another September case, Chenlu Liu was removed from the student register and asked to pay costs of £1,000 for taking handwritten notes to her Financial Reporting exam desk. You can see all the cases at https://tinyurl.com/y3bljb43

PQ Magazine November 2020

Accountants love working from home and want it to continue – unless they are PQs, according to a new poll from GAAPweb. PQs, particularly accounts assistants and finance assistants, felt they were less productive at home (45% and 54% respectively). This is despite the fact that some 78% of those surveyed claiming that remote working encourages more productive days. Junior staff seem to be struggling without faceto-face direction or assistance from their managers or mentors. A relatively high number of the most senior finance professionals,

Remote working is ‘not working’ for many PQs such as CFOs (36%) and FDs (31%), also feel that working from home hinders their productivity. Their broad, high-level responsibilities, combined with little opportunity for off-the-cuff conversations, may mean these senior professionals are not benefitting from the fewer meetings now taking place, and actually end up spending longer on telephone and video conferences than they

would usually spend in face-to-face meetings. The survey found that the overwhelming majority (97%) of accountants and other finance professionals have been working from home since the start of the pandemic (in March). Less than a third have now been told when they will return to office-based working, meaning 70% ‘remain in the dark’ about what their company plans.

AAT AGM is virtual for first time AAT’s first-ever virtual AGM went by without a hitch. David Frederick took over from John Thornton as President, becoming its 40th leader (see his Life at… on page 43). Frederick also talked members through the annual report (April 2019 to March 2020). He explained new student registrations have continued to be impacted by funding issues, particularly at Level 4, and that has meant the number of Level 4 students has declined.

He said that predicting what the further education landscape will look like in a post Covid-19 world is difficult, and admitted it is hard to plan for future student numbers. So, with that in mind, AAT has revised its 2018-21 business plans. Back to last year, and income rose to £31,631,000, up from £30,500,000 in 2018/19. Some 4,781 PQs became new members, and 24,002 new students signed up to the AAT qualification.

PQ news

ROBERT BRUCE The international audit tower of Babel The great Wirecard scandal looks set to run and run. The German payments group went down in June with some €1.9 billion in cash unaccounted for. Not an amount that you or I would have found easy to mislay. Auditors had, allegedly, not checked the cash at bank. Since then collapse, chaos and mayhem have ensued. Senior figures are being pursued by Interpol, have vanished or are already in police custody. Business schools everywhere will be sharpening up their analysis as they build a classic case study of failed governance and internal failures to spot the burgeoning fraud that will serve them well in lecture halls. It has all the hallmarks of a classic. Mysterious entities in offshore haunts. Management not knowing what colleagues overseas were up to. Business fundamentals ignored. Whistleblowers’ suspicions falling on deaf ears. And, in the great tradition, auditors are finding that the fingers of anyone wanting to deflect blame are pointing at them. Who knows what truth may come out of the investigations only just getting under way? But we are likely to find that, as has happened in such scandals over the years, auditors in one culture work under different pressures and expectations than another. The structures of their international networks tend to fall apart under scrutiny. And onlookers pretend that they should be acting as a quasi-supervisory board to ensure proper governance rather than as sceptical outsiders. It will be a mess all round. Robert Bruce is an award-winning writer on accountancy for The Times

EY has welcomed 1,048 graduates and apprentices in the UK this year, reinforcing its commitment to invest in and nurture young talent. This compares with 1,011 graduates and apprentices hired in 2019. Some 854 graduates and 194 apprentices have joined 14 EY offices. Edinburgh, Hull, Luton, Reading and Southampton have seen particularly strong intakes on last year. In line with EY’s commitment to recruit a diverse pool of talent, some 43% of recruits were female (up on 39% in 2019); 41% are from an ethic minority (up from 38%); and 3% are black. Hywel Ball, EY UK Chair, said: “I’m proud that we’ve maintained

EY reaffirms faith in younger talent our commitment to student recruitment this year, despite Covid-19, and that we’ve honoured all the conditional offers we made prior to A-level results. At a time when many young people are facing a challenging labour market, our apprenticeship, graduate and internship programmes provide students and school leavers with a great opportunity to gain real hands-on experience, while also enhancing their skills and gaining a qualification.”

AAT bans face-to-face events until 2021 AAT face-to-face events – which had been put back until 30 September – have been cancelled until at least 31 December 2020. This follows recent announcements about Covid-19 and will ensure that AAT is able to maintain the health and safety of all its members and partners. AAT’s Andrew Williamson, said: “We’ll continue to deliver new updates, insights, learning and support through our wide range of online events.” The Future Finance conference,

for example, was transformed into two days of digital learning, including live Q&As, exclusive sponsor discounts and offers, and a wealth of practical advice – and it was all free. Williamson said that

the event attracted 2,500 unique member registrations, an increase of 509% on the number the faceto-face conference attracts. AAT also achieved a rating of 8.5/10 for the event overall from attendees.

ACCA mentoring scheme goes global

ACCA is launching a global rollout of its mentoring programme, connecting members and affiliates. This follows a successful pilot in six markets. Whether you are considering becoming a mentor or a mentee, ACCA says there are many benefits to joining the scheme, including: • Connect with members and future

members across ACCA’s global network. • Achieve personal and development goals. • Gain valuable insights and fresh perspectives. • Build confidence and enhance skills. • Support a culture of inclusion. ACCA’s director of professional

education, Reza Ali, said: “ACCA is really excited about this new mentoring programme, connecting our global family. Supporting our members and future members to succeed is at the heart of what we do.” ACCA members and affiliates can find out more on the website at https://tinyurl.com/y4rus88v

4) You need to keep adding something new to what you already know. 5) Concrete examples make it easier to understand, remember and visualise. 6) Use dual coding – use visual information and texts together. But remember replacing a word with a picture is not the same. • See https://tinyurl.com/y6jdursd

ransomware attacks, as students return to campuses. The National Cyber Security Centre (NCSC), part of GCHQ, said there has been a spike in attacks over the summer months. Newcastle University was one of the recent victims of a ransomware attack, which impacted services across the whole university. Other attacks have hit Northumbria University, Leeds City College and Bolton Sixth Form College. The NCSC’s Paul Chichester called the attacks “reprehensible”.

AA AB gets a new name The Accountant in Business (AB)/Foundations in Accountant and Business exam is changing its name to Business and Technology (BT)/Foundations in Business and Technology later this month. Technology has always been a key element in this exam, but ACCA wants the name to ‘better reflect’ the existing exam syllabus, and believes it shows the exam’s forward-looking focus. The only downside PQ can see is the fact ACCA no longer has a ‘Fab’ exam!

In brief Learn smarter, pass faster CIMA has reminded students of the six study techniques, produced by Kaplan, that will help you learn smarter and pass faster: 1) Revisit what you have studied – it will help retrieval and storage strength. It helps if you space your practice, rather than cram. 2) Study different subjects as opposed to studying one topic – it’s called interleaving. 3) Practise your retrieval skills – the process of reflecting back is very powerful. 6

Unis under cyber attack UK colleges and universities are suffering from unprecedented

PQ Magazine November 2020

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PQ news

PREM SIKKA Banks continue to facilitate epic corruption Despite the fines, banks continue to misbehave. The latest evidence comes from leaks relating to 2,100 suspicious activity reports filed by banks with the US government’s Financial Crimes Enforcement Network (FinCEN). They show that $2 trillion of potentially corrupt transactions passed through accounts at global banks including JPMorgan Chase, HSBC, Barclays, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon. All have previously been fined for failures over money laundering. The money passed through shell companies, often registered in secretive offshore tax havens. Banks are required to apply the ‘know your customer’ (KYC) rules before opening accounts. The leak shows that they regularly processed transactions for companies registered in secretive tax havens and did so without knowing the ultimate owner of the account. The FinCEN leaks refer to the UK as a ‘higher risk jurisdiction’. Over 3,000 UK-registered firms are named in the reports, more than any other country. Governments rarely prosecute bank directors for facilitating illicit cash flows or close rogue banks, so they have little incentive to behave honourably. Illicit profits boost share price, dividends and executive pay. Auditors rarely flag illicit practices. If banks fall on hard times, governments bail them out, and shareholders collect returns. Limited liability laws ensure directors don’t bear the cost of misdemeanours. It is a win-win situation for them. Social irresponsibility reigns supreme. Prem Sikka is Professor of Accounting at the University of Sheffield

Imitating good behaviour Junior accountants are much more likely to imitate a senior accountant’s behaviour if they feel that they have a say on their Kristof Stouthuysen

CIMA has ‘standardised’ entry into its professional qualification. There will now be two entry points at each level – at the start of a level before all the OTs or before the Case Study exam. The changes should mean students enter the right level of the qualification. It said: “Simple and clear entry routes to CIMA means that students do not need to wait to have their exemptions confirmed and you will be able to start taking CIMA exams immediately.” University students who register with CIMA will be awarded their exemptions right away, allowing

promotion, according to a new study from Vlerick Business School and the Foundation for Auditing Research. However, the research also showed that junior accountants only imitate their seniors when they perceive them as having a professional and critical working style. And if these seniors were perceived to be unprofessional and less critical in their work, then junior accountants tendered to ignore their guidance, even if it could affect their promotion chances. Professor Kristof Stouthuysen

said the study shows that junior accountants have a healthy dose of professional scepticism, and demonstrate their own professional and critical attitude. His colleague Professor Olof Bik said: “This study clearly shows that the quality of the audit is also determined by very human factors such as social interaction. Senior accountants and managing partners need to be aware that they play an exemplary role in the training of juniors. If the partner doesn’t have the courage to ask a client critical questions, you can’t expect a junior to do so.”

CIMA update on exemptions

them to start taking CIMA exams prior to graduation. You may qualify for exemptions if you: • Are a graduate with a qualification listed in the database of CIMA accredited programmes. • Are a graduate on a degree

programme that is related to the CIMA syllabus. • Are an of AAT student/member. • Have a MBA or a Master’s in Accounting. • Are a member or passed finalist of ICWAI or ICMAB, or a member of ICMAP. • Are studying or have completed a relevant qualification with another professional body. Go to the CIMA website to check how to apply for exemptions – https://tinyurl.com/yyft58gu

ICAEW ACA advanced level results published Just over 5,000 ICAEW advanced level students sat 8,147 exams in August (that’s 1.6 papers per student). The pass rates for all candidates was: Case Study 76.7%; Corporate Reporting 85.1%; and Strategic Business Management 87.6%. The results, the first since March, follow a ‘small number of students’ resitting the Corporate Reporting exams following technical problems. Despite the good results, the pass rate for those sitting Corporate Reporting on its own was just 67%, with 33% (153) of candidates having to resit next time.

Some 654 candidates opted to sit all three final level papers, and 64% of these passed all three, with another 28% passing two out of three. There were 12 students who failed all three. ICAEW’s executive director, learning and professional development, Mark Protherough, said: “These were the first exams we offered with remote invigilation and we are grateful for students’ patience during these unprecedented times. Their ability to study for and sit exams in challenging circumstances showed real determination and resilience.”

Taxwatch When bread is not bread… The rolls sold by Subway are so full of sugar that they can’t be considered to be bread, with zero VAT to pay, says Ireland’s Supreme Court. An Irish franchisee had claimed that there should be no VAT payable on rolls it used in heated sandwiches. However, the court has rules that the rolls cannot be taxed as bread, which would be classed as a ‘staple product’. Following the ruling the rolls are now subject to tax at 13.5%. Under Irish laws (VAT Act, 1972) 8

ingredients in bread such as sugar and fat can only make up 2% of the weight of flour in the dough. Subway’s dough, in both white and wholegrain rolls, contains about 10% sugar. PapTax relief on hair! We may never discover the truth about US President’s Donald Trump’s tax affairs. The ‘fake news’ that appeared in The New York Times says he paid no income tax in 10 of the previous 15 years, and in 2016 when he became

president paid just $750. This compares with the £1.8 million his predecessor in the White House, Barack Obama, paid in federal taxes in his first year in office. His rival for the presidency, Joe Biden, and his wife Jill, paid $3.7 million in federal taxes in 2017. One of the more interesting facts to come out of the story was the amount Trump spent on his hair during The Apprentice and written off as a business expense. That was a cool $70,000. Money well spent, we say. PQ Magazine November 2020

news PQ Sue Vinnicombe

Voluntary targets ‘not working for women’ Voluntary targets have boosted gender diversity on UK boards, but new research by Cranfield University’s School of Management warns that there are still too few women in senior leadership positions – such as CEO and chair – to drive long-term change. The annual Female FTSE Board Report, sponsored by EY, finds that although the FTSE 350 looks on track to reach the target of 33% of women on boards by December 2020, a lack of representation at the top could be impacting the number of women in the executive pipeline. The most notable increase in female representation is among non-executive director (NED) roles. In the FTSE 100 the percentage of female NEDs is at an all-time high

of 40.8%, while the percentage of female executives has risen only slightly to 13.2%. Cranfield University’s Sue Vinnicombe explained: “Our research establishes that it is not sufficient just to have a critical mass of women non-executive directors on a board in order to increase the number of women in the executive pipeline. “There need to be women in influential roles such as Executive Directors. The added dimension of Covid-19 means organisations must be pro-active to address the long-term impact of the pandemic on women’s careers.” She added: “With more focus on flexible working and wellbeing, it is an opportunity to progress the diversity agenda.”

BHP breaks hiring record BHP Accountants, the leading accountancy firm in Yorkshire and Derbyshire, has welcomed 35 new starters this summer. That’s a new company record. BHP has appointed 20 graduates, 11 trainees and four one-year placements. Four of the 35 new starters have now begun life at BHP, the remaining recruits will come onboard between September and January 2021. Lisa Leighton, Joint Managing Partner at BHP, said: “Despite the challenges that we have faced throughout 2020, we are committed to the future of the firm and we are delighted to be welcoming 35 new starters this year – the largest intake we have ever had.”

Wallace is new UKEB chair Pauline Wallace, a former PwC partner, has been appointed as the inaugural chair of the UK Accounting Standards Endorsement Board (UKEB). The UKEB has been set up to endorse and adopt new or amended international accounting standards on behalf of the UK, when the transition period comes to an end in early 2021. It will report to the Secretary of PQ Magazine November 2020

State on technical matters and to the FRC Board on its governance and due process procedures. The board will conduct research to ensure that the UK is at the forefront of developing opinions in accounting. It will also actively contribute to the development of financial reporting internationally, helping to ensure that UK views are effectively represented in this important area. 9

PQ news

ZOE ROBINSON Why question practice really does work As students get closer to the real exam they become more aware of the importance of practising questions. The logic is simple: if you practise questions that are similar to those asked in the real exam the more likely you are to pass. But why? The answer can’t be that you will remember the answers because you won’t be set the exact same questions, so how does practising a similar question help you answer a different one? Commonly referred to as ‘retrieval practice’, the reason question practice is so effective is because it forces you to reflect and bring past information forward to learn again. This process of reflection is not easy; in fact it’s the difficulty, or to be precise the effort, you put in that makes it so valuable. Retrieval practice is a wellestablished theory, and research has shown how big a difference testing can have. In an experiment, two groups of students were selected, with one group having a quiz every day. Both groups were then given a test that included questions that were either the same questions as in the quiz, similar questions to the quiz or different questions but on the same subject. The students that were quizzed on the course scored 21.8% higher than the control group on questions seen before, 17.6% higher on the similar questions and 12.7% higher on questions they had never seen. So the next time you’re choosing between reading your text book or doing some practice questions, you know the right choice to make! Zoe Robinson is Learning and Programmes Director at Kaplan Financial

AQ2022 to drop synoptics AAT will stop referring to the foundation, advanced and professional qualification stages when it introduces AQ2022. Instead, from 1 February, it will be Level 2 Certificate in Accounting, Level 3 Diploma in Accounting and Level 4 Diploma in Professional Accounting. PQ magazine also understands that the synoptic assessments are all going. At the foundation level (Level 2) it will be replaced by The Business Environment paper. Gone too at

foundation is the Use of Accounting Software assessment. However, AAT PQs will still be expected to know the advantages and disadvantages of computer software. There will also be an expansion of tax awareness at the lower level, and the principles behind the tax system. The big changes, according to tutors, appear to be at Level 3. One thing that is certain is that technology has arrived with block chain (and Bitcoin), AI machine learning, data analytics, cloud accounting and

real-time data all coming into the assessments. There will also be more emphasis on money laundering. At Level 4 the AAT is working hard to stop the duplication that appears in the tax papers. We understand there will be no IHT calculations in PTAX and no R&D in BTAX. Fixed overhead variances are back at this level and students will study both internal and external auditing. With the synoptic gone the new replacement is Internal Controls and Technology, which aims to be more ‘real world’. Cyberattacks, for instance, will be covered.

ICAEW to go carbon neutral

Since 2015, the institute has cut its carbon footprint by 20% through internal initiatives such as the installation of energy-efficient LED lighting. ICAEW has also pledged to cut overseas travel and to provide incentives for electric vehicles for those who drive for work. These and other projects will see its footprint decline by 20% by 2025 and 40% by 2030.

ICAEW has said that it intends to become carbon neutral in 2020. A long-term champion of sustainable issues, the institute will become the first major professional body to be carbon neutral. On top of this, ICAEW’s board has promised to continue to cut internal

Accountants ‘key workers for UK plc’ Small businesses are heralding their accountants’ increasingly critical role in keeping them running since Covid-19 arrived, considering them to be among the ‘key workers’ of the post-pandemic economic recovery, according to new research. The study by global small business platform Xero found 43% of small business (SME) owners said that their accountant has been crucial to their pandemic survival, with 37% saying their accountant helped them retain staff during the height of the lockdown.

UK audit governance changes for Deloitte Deloitte is establishing an independent Audit Governance Board (AGB) as part of the changes to its audit governance structure. Margaret, Baroness Ford of Cunninghame, will take up the post of independent non-executive chair of the AGB, along with the other independent non-execs, which include Jim Coyle, Almira Delibegovic-Broome QC and Shirley Garrood. Finally, to help provide a more diverse perspective to the AGB, it has set a Colleague Advisory Forum, made up of staff from a range of grades and parts of the business. This is in line with the Corporate Governance Code. 10

carbon emissions. Climate change and sustainability are embedded into many modules of the ACA syllabus, and ICAEW recently signed the Green Finance Education Charter, committing it to building green finance into its qualifications.

businesses said their accountant is more important to their business than ever before, while 14% said they have turned to an accountant for the first time. Meanwhile, 38% of SME owners said they have built closer relationships with their accountants in recent months. However, while one-third (32%) of SME bosses turned to their accountant for business advice when Covid-19 struck, 34% turned to government websites and resources, and 15% used friends or family. Almost half (45%) of small

More focus on ethnicity pay gap The number of UK companies calculating their ethnicity pay gap has grown significantly in the past two years, according to a study by PwC. A survey of more than 100 firms that collectively employ more than a million people found 67% are now collecting ethnicity data (up from 53% in 2018). For the bulk of companies not yet calculating their ethnicity pay gap, the most common reason for not doing so is a lack of ethnicity data. Most of those not collecting data put it down to GDPR restrictions, while others expressed concerns around low response rates, HR system capabilities or unease about how to ask questions around race and ethnicity. • PwC has been voluntarily reporting its ethnicity pay gap for four years.

KEY WORKERS IN THE ECONOMIC RECOVERY FROM COVID-19 1. Delivery drivers/postal workers 2. Technology firms 3. Accountants/bookkeepers 4. Political leaders 5. Mentors/business coaches

EY UK adds 65 equity partners EY is strengthening its UK partnership with the appointment of 65 new equity partners. They consist of 26% women and 19% ethnic minority partners. This includes 25 partner promotions from within EY, which the firm says reinforces its commitment to nurturing homegrown talent, with 40 external hires. The appointments are closely in line with last year’s intake of 57 equity partners. In 2019, EY set targets to double the size of female and ethnic minority partners in its UK business to 40% female and 20% respectively by July 2025. PQ Magazine November 2020

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PQ tech news

MIKE DAY Accountants are vital to the economic recovery New research has highlighted the importance of accountants during the coronavirus crisis, with many SMEs now viewing them as the key workers of economic recovery. A study from Xero has revealed that nearly half (43%) of small business owners think that their accountant played a vital part in the survival of their venture during the pandemic. Crucially, 37% reckoned that their financial advisor was a key player in helping them retain staff. Even more impressively, 63% of respondents to the survey said that their accountant has delivered an undisrupted service, even during the worst periods of the lockdown when business had pretty much ground to a halt. While accountants and cloud-based software were core aspects of small business survival plans, 34% of those questioned said they’d used government websites and associated resources when Covid-19 first struck. Surprisingly, only 15% said they’d asked for help from family or friends. The research is welcome news for accountants, with 45% stating that their financial advisor is more important now than ever before. A further 14% reported that they’d been in touch with an accountant for the first time. And 38% of those surveyed claimed they now enjoy a closer relationship with their accountant than they had prior to Covid-19. Based on the research data, key areas of accountancy support for SMEs have been VAT (37%) and payroll (30%). Some 70% said they felt most reassured in the area of tax returns. Mike Day, Director, UK Education Sector, Xero

New HMRC tax scam warning to students Students who started university this year are being warned by HMRC that they are being targeted by a fresh wave of online tax scams. With universities taking a blended approach to online and face-to-face tuition this year, and an increase in remote working due to the pandemic, students could be left particularly exposed to the work of fraudsters, says HMRC. First years are also more vulnerable to these types of scams due to their limited experience of the tax system. HMRC has written to universities, through Universities UK, asking them to help ensure their students know how to spot a scam. More than two in five of UK consumers are unsure about whether 5G poses a risk to public health, according to additional findings from Deloitte’s Digital Consumer Trends 2020 research. Overall, 14% of UK consumers believe that there are health risks associated with 5G, rising to 18% of 25-34-year olds and 16% of those aged 16-24. Just 43% of UK consumers are confident that 5G does not pose a health risk. Deloitte’s Paul Lee said: “Worries about health impacts from radio

In August, HMRC received reports from the public of more than 74,800 scam emails, text messages and phone calls. Nearly 41,300 of these specifically offered bogus tax rebates. Thousands of these scams were targeted at students and the criminals involved appear to have obtained their personal university email addresses by unlawful means. These scams often offer fake tax refunds or help with claiming Covid-related financial support. Criminals also use phone scams to threaten taxpayers into handing over cash. Some 651,600 scams have been referred to HMRC since August last year. Of those, more

than 215,660 were voice or phone scams, known as ‘vishing’. Jesse Norman, Financial Secretary to the Treasury, said: “We are concerned that remote working because of Covid-19 could lead to more tax scams targeting a new and potentially vulnerable university intake.”

Health risks from 5G?

waves have always existed, flaring up at the launch of 3G, 4G and Tetra networks, but misinformation about health impacts from wireless

networks is more easily amplified than ever before.” He added: “5G myths have been among the most seen and shared untruths in 2020, with a cascade of 5G misinformation sweeping across social media, blogs, and fake news sites. The industry has a challenging but pressing task on its hands to educate consumers over the safety of 5G.”

Proposals to make e-scooters legal The House of Commons Transport Committee has said e-scooters should be legalised on roads, but riding on pavements should be prohibited. Privately-owned e-scooters are currently banned everywhere in the UK, except on private land. However, the committee believe the

scooters could become a green alternative to cars. Official trials of rented e-scooters have been taking place in several UK cities, with mixed success. The one in Coventry was ‘paused’ after just five days because of fears for pedestrian safety. E-scooters can travel at speed of

9–15mph. If legalised, the committee said that robust enforcement measures would be needed to stop riders using pavements. Committee chair Huw Merriman said: "E-scooters have the potential to become an exciting and ingenious way to navigate our streets.”

one-million plus rows Excel is now capable of.

H&M fined over staff privacy H&M Group has been fined £32 million for violating data protection (GDPR) rules in Germany. It has been found guilty of collecting and illegally storing private data on employees. The fashion brand kept too close an eye on its staff at the service centre in Nuremburg, even using private details obtained in informal chats to go on employees’ records. H&M has made an “unreserved apology” and promised financial compensation.

Tech briefs Blame the spreadsheet So Excel was to blame! The nigh-on 16,000 UK Covid-19 cases missed off the daily national figures in early October was all down to a ‘technical error’ from the use of an out-of-date Excel spreadsheet. CSV files from the labs were not being properly transferred to Public Health England’s Excel files. These figures exceeded the maximum file size, which meant some just dropped off the bottom, and all without anyone noticing for days. The real problem was the fact that 12

the PHE was using old Excel file format XLS, which can only handle 65,000 data rows, instead of the

AI: threats and opportunities London South Bank University’s Business School has added to its professional lecture series. Our favourite is Dr Vijak Haddadi’s one on AI, which he acknowledges is a really ‘hyped up’ topic with some utopian ideas around it. Check out the lecture, ‘AI – Risks & Opportunities for Business and for Society’, at https://tinyurl.com/y4tbwbop.

PQ Magazine November 2020

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HAVE YOUR SAY Paper for me please! I know we can’t turn the clock back, but I believe that the ACCA could do more to help itself when it comes to making the CBEs work better for students. Firstly, I would like to see paper copies of the exam questions on every exam desk. I don’t work in a total paperless office, and I work off two screens. I understand they can’t give us two screens (yet), so having the question on paper would help with time pressures. Secondly, the screens in exam centres need to be bigger. The 14-inch screens are just not big enough when you open different windows and start switching between them. I saw lots of

comments online from many PQs admitting to getting confused and spending too much precious time searching for the right download. This all adds to the stress.

All screens should be 20-inch as a minimum. I am happy to be told it needs to be smaller/bigger than that, but has anyone done any research in this area? Are all screens the same in every centre, and is there a minimum/maximum size for people sitting remotely invigilated exams at home? Ultimately, it would be brilliant if they allowed two screens. Is that such a tough ask? Remember, the exam fees went up in December, so standard prices range from £130 for applied skills to £222 for the SBL exam. What do you think, fellow travellers? Do we just take it or do we try to change things for all our future professionals? Name and email address supplied

Our star letter writer wins a fantastic ‘I lovePQ’ mug! Girl power! Well done to the female students for pointing out that their manuals are full of male managers. And well done Kaplan for reacting so quickly. It may seem only a small thing, but it can grate, and inclusivity needs to be addressed properly. I know we can get bogged down in the semantics, but while I am talking about it can I just say I really don’t like the word ‘chairman’. I also prefer ‘chair’ to ‘chairperson’, as it just seems simpler and less cumbersome. As one of my friends always says, in front of every man in a woman – all you have to do is add a ‘w’ and ‘o’. Joanne Offler, by email

Sorted, thanks to pqjobs.co.uk

social media ROUND-UP Accountants love their Excel spreadsheets, but they know they have their limitations. So you can imagine the response when we explained 16,000 UK Covid-19 cases were missed off daily figures because Public Health England was using an out-of-date Excel package. Gary McManus stressed: “Seriously, I can’t believe anyone would use Excel for this job. Maybe to analyse a database, but surely not as the database. Completely amateur.” Richard York added: “From what I have read the issue comes down to user error (wrong file extension). Whether or not Excel is the most appropriate tool is a secondary issue.” On LinkedIn David Taylor, at Counted, asked: ‘How do you find out if someone is good at their job?’ He explained you would ask a footballer to kick the ball about, an F1 driver to drive a few laps of the track. What do accountants get? He suggests they are asked to tell the interviewer about themselves for two hours and answer some pre-set competency questions. Why are so few companies actually testing candidates? He believes the idea of a test after the first stage to ensure competence could be the way forward. Radical stuff!

It all starts with AAA I sat three ACCA exams in September. My centre in North London (Swiss Cottage) had delays due to technical difficulties, candidates turning up at Swiss Cottage even when they should have been at Oval (docket issues). We had to socially distance to get into the exam ( which meant a big queue), and exam itself didn’t start until 9.45am. Masks needed to be worn the whole time except to use the bathroom. The AAA exam itself was

good and fair though – tricky question and a discontinued operation for Q2, but overall OK. Time pressured as always. Any chance on ACCA doing better in December? Name and address supplied The editor says: ACCA has reacted

to the problems and seems to have confronted its shortcomings. I am really hoping that this means they will put an end to those ‘Monday exam blues’ and get everyone talking about the exams rather than exam technical issues. For more on this turn to page 17.

We have also been tweeting regularly on #GBBO. There were three accountants on the show, and @pqmagazine asked: “What do Lupita Nyong’o, Sir Chris Hoy and Bill Bryson have in common? Answer: these were the heroes the three Bake Off accountants chose to make in cake form!” Kaplan UK told us: “All the accountants rising to the occasion, we love to see.” Cake, rising – get it?

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

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PQ working at home

Keep connected Following our recent story about poor internet connectivity, Uswitch provides PQ readers with 10 tips on improving your broadband speed

here are a number of reasons why your broadband connection could be slow, including multiple devices accessing the same network in your area, or a large number of devices on your home connection. Here’s ten tips to get better connectivity: 1. Carry out a broadband speed test (https:// www.uswitch.com/broadband/speedtest/) so you can see just what speeds you’re getting. Try doing this at different times of the day and take a screenshot or a note of the result. 2. Check and see if your browser software is up-to-date. Having the latest version of your browser can really help speed up the way web pages load. 3. Is your router next to any other wireless devices? Anything from a wireless doorbell to fairy lights can have an impact on the speeds you’re getting. Our tip would be to place your router on a small side table away from any other devices (rather than on the floor) and keep it switched on at all times. 4. Ensure you have a strong password

protecting your Wi-Fi network to make sure nobody else is using it — this is particularly important if you live in a flat or apartment. 5. Is your router firmware up-to-date? Your router should update automatically, but you can force a reset (check the back of the

device for instructions) and this can help with broadband speed. 6. Have you tried using a cable? Routers usually have an ethernet cable socket in the back of the device so you can connect directly to them. Try using this and running the speed test again to see if you get faster results. Again, keep a note of these speeds. 7. Have you checked for interference on your phone line? Purchase some microfilters or get them from your provider. Plug them into every phone socket in your house as they split the broadband and phone signals so they don’t interfere with one another. 8. Are you using a phone line extension cable? These (especially if they are long) can impact the speed of your broadband. If you need to use one, make sure it’s high quality and as short as possible and not tangled up. 9. Plug your router directly into the main phone socket. These sockets usually have a line running across the front of them. Make sure your router is connected to this socket then try running the speed test again. 10. Contact your broadband provider. If all else fails and you’re still struggling, then it’s worth getting in touch with your broadband provider. You can share your speed test results and they will work through a series of diagnostics to isolate the issue and get you back up to speed in no time. • Thanks to Uswitch for this article

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PQ Magazine November 2020

ACCA exams PQ

Putting things right ACCA’s Leigh Currie explains how the association is planning and preparing to ensure the smooth running of the December exams

e understand how important it is for future members to progress on their journey with ACCA to become professional accountants, and so we’ve been working hard over recent months to ensure exams can be taken during these challenging Covid-19 times. September saw the huge global logistics of running exams in centres and through remote invigilation, including the need to accommodate a boost in numbers due to June exam cancellations. The statistics for the UK show what a massive operational exercise this was, where we hosted 655 sessions at 65 venues. And this was the first time we delivered fully computerised exams nationally.

For centre-based exams in the UK, 94.2% took place without issue. And while the statistics show the sheer breadth of what we do when we run exams, we totally understand that for the 6% who experienced problems – a long delay, a cancellation or if the IT tripped-up – then these statistics are of no comfort. For those who experienced problems, we know how frustrating this was. We apologise wholeheartedly and are determined to put things right. Acting on your feedback Understanding what happened is vital. In the UK, we recently invited students to an online meeting so we could hear directly from them about their September exam experience to help us to identify where improvements can be made

and solutions found. Alongside the feedback from this online meeting, we are also using reactions received through other channels to help us with our lessons learned sessions. We are always striving to improve and feedback is an essential part of that. We know from the feedback we’ve had from future members, employers and learning providers that everyone’s working really hard to stay on track with their studies and exams. So we want to reassure PQ readers that a great deal of risk assessment and management work is taking place to ensure that our December exams are a good experience. Our initial review findings confirm the global pandemic’s significant impact on our exam centre network and the use of centres which we had to set-up at very short notice. Many of the venues we used for this last session were new to hosting our exams because of ongoing closures and capacity issues at other venues. Planningwise, some of the centres we used in September will be used again in December and we are working to make sure they are fit for purpose, and of the high standard our future members expect. We are also working with our centre partners to ensure the issues experienced do not happen in the future. We commit for these centres to be ‘Monday ready’ – so that on the Monday morning of the first exam, we have tested and tested again the systems and processes to reduce any risks. Understanding these root causes are part of our risk planning. We continue to work with our partners to ensure mitigation plans are in place for all the resources needed at exam centres – from people to IT to power. We’ll also make sure that if delays happen we’ll update you in a timely way about next steps. We’re also looking at the practicalities, that we have drinking water at the centres so that if there is a delay there will be refreshment available and facilities for comfort breaks. Of course, the ongoing current situation means we cannot be certain about what will happen in December. Covid-19 remains immensely disruptive for many and some external events are outwith our control. But we want to reassure PQ readers that we’re committed to the health and safety of our exam sittings, and to put things right for December as much as we can, so that our future members can take exams without any disruption or delay. Where we can learn from an issue and make a change to put it right, we will. • Leigh Currie, Director of Customer Service, ACCA

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PQ ACCA AAA exam

Help! I’m sitting AAA in December Helena Jones from Sonar Education provides some reassurance and motivation for those sitting this tough exam, with examples of some common concerns This is a very challenging and demanding exam. Yes it is, but less so for a professional accountant and auditor with a good eye for detail and a logical approach to solving problems. You are that professional, ready to demonstrate your knowledge, and your ability to apply it in a practical situation.

I can never produce answers like ACCA’s model answers in the time available. You are not expected to. ACCA’s answers are very comprehensive and often cover more points than the maximum marks that can be awarded. They are well-written and provide an excellent learning and revision tool, so use them as such.

The syllabus is HUGE! The AAA syllabus builds on that of AA, so much of it will be familiar already.

There are no easy marks. Maybe not at this level, but there are some straightforward marks available, for example four marks for professional presentation in Question 1. Make sure you practice enough to maximise your chances of scoring well on these.

The examiner could test anything from the syllabus and there is no choice. There are only three questions. The examiner approach article (ACCA AAA Examiner Approach) gives some useful guidance, for example: • Question 1 will be set at the PLANNING STAGE of the audit. • Section B will always have one question on the COMPLETION STAGE. Admittedly, this does not narrow it down very much but at least you will know broadly what to expect in two of the questions.

There is an awful lot of reading for Question 1. This reflects the real world, where we often have to work with information from a variety of sources. Sufficient CBE practice will provide a strategy for dealing with the various exhibits and organising the information on the screen. I need a lot of accounting knowledge for AAA. Congratulations on being an accountant! Much of this knowledge comes from previous studies and from SBR, which you will, of course, have passed already.

I will run out of time. Remember the three-word slogan: practise, practise, practise. Time management is always important in an exam, and in AAA you must move on from Question 1 after you have used up half of the total exam time, otherwise you really will run out of time in Section B. At least it’s easy to work out your time split: 50/25/25. • Helena Jones, Sonar Education. See www. sonareducation.com

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PQ Magazine November 2020

VAT PQ

VAT Annual Accounting Scheme Future Connect Training’s Mushtaq Ahmed looks at the Annual Accounting Scheme What is the Annual Accounting Scheme? • The Annual Accounting Scheme is designed to reduce paperwork and help businesses with their budgeting and cash flow (Kashflow. com). • Usually, VAT-registered businesses submit their VAT Returns and payments to HM Revenue and Customs 4 times a year. From 1 April 2019, most businesses needed to keep digital VAT records and use software to submit VAT Returns. When you submit your VAT Return you either: i. Make a final payment - the difference between your advance payments and actual VAT bill. ii. Apply for a refund - if you’ve overpaid your VAT bill. iii. The scheme would not suit your business if you regularly reclaim VAT because you’ll only be able to get 1 refund a year. Eligibility - you can join the Annual Accounting Scheme if: • You’re a VAT-registered business. • Your estimated VAT taxable turnover is £1.35 million or less in the next 12 months. • VAT taxable turnover is the total of everything sold that is not VAT exempt. If your taxable turnover is more than £1.6 million, you must leave the scheme ASAP. Exceptions - you cannot use the scheme if: • You left the scheme in the last 12 months. • Your business is part of a VAT registered division or group of companies. • You are not up to date with your VAT Returns or payments. • You are insolvent. PQ Magazine November 2020

How to join the scheme: • Online - when you register for VAT. • By post - fill in VAT600 AA and send it to the address on the form. Confirmation you’ve joined the scheme is sent to your VAT online account (or in the post if you do not apply online). How to leave: • You can leave the scheme at any time, but you must leave if you’re no longer eligible. • To leave, write to HMRC and they will confirm when you can leave. From this date, you must account for your VAT in the usual way. • You have to wait 12 months before you can re-join the scheme. VAT return VAT Return deadline: • There are 12 months in your VAT accounting period. • Your VAT Return is due once a year, 2 months after the end of your accounting period. Payment deadlines: • You must make advance payments towards your VAT bill (either monthly or quarterly). Payment

Deadline

Monthly

Due at the end of months 4, 5, 6, 7, 8, 9, 10, 11 and 12

Quarterly

Due at the end of months 4, 7 and 10

Final payment

Within 2 months of month 12

How much do you pay? Each payment is either: • 10% of your estimated VAT bill (monthly payments). • 25% (quarterly payments). • The amount is based on previous VAT returns (or estimated if you’re new to VAT). • HMRC will write telling you when your instalments are due and how much they’ll be. • The final payment (known as a ‘balancing payment’) is the difference between your advance payments and the actual VAT bill confirmed on your VAT Return. • You may be due a VAT refund if you’ve overpaid HMRC. (Gov.uk) Pros & cons The Advantages: • Less paper work involved. • File report once in a year. • Easy to manage the cash flow. • An extra month to complete the VAT return. • Calculation is easier, especially for partially, exempt or for Retail Scheme. • Reduction in number of VAT returns from FOUR to ONE. The Disadvantages: • Payments may be higher as it based on previous Year’s Performance. • If the difference proves too significant than interim payments can be adjusted. • Seasonal or other variations may have an adverse effect on cash flow. • You are obliged to tell HMRC if your tax liability is projected to be much higher or lower than previous year. • Mushtag Ahmed is accounts training manager at Future Connect Training 19

derby.ac.uk/ACCA

ACCA tuition and revision classes • Courses starting September 2020 for December 2020 exams • Revision classes in November 2020 - included in tuition or available independently • Learn from experienced professionals to improve your ACCA exam technique

Find more information on our website at derby.ac.uk or speak to programme leader Nagin Lad directly: n.lad@derby.ac.uk

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

Game on!

reviews PQ character throughout the various sections of the challenges.

PQ magazine’s gaming guru, Edward Netherton, talks you through the current ‘it’ games, which are a nice way to get a break from the current doom and gloom

detective skills. Imagine the film The Thing, only instead of terrifying shapeshifting aliens it’s quirky little cartoon astronauts.

Among Us (Android, IOS, Windows) Among Us has a very basic premise. Up to 10 people join in a game, and play as a ‘cartoon’ crew of a spaceship. All the players must work on certain tasks, such as connecting wires and prepping rockets, so that their mission can continue. The twist in the game is that two of the players are not part of the crew; they are secretly ‘impostors’ and have a hidden task to eliminate the rest of the crew. What entails is a modern rendition of Cluedo, where each player must watch the other players closely and try to piece together which among them are the secret saboteurs. If a player is found dead, or someone feels they have sufficient evidence against another, they can call an emergency meeting, where the hitherto communication-less crewmates can converse with one another and share observations and suspicions. An incredibly fun experience with friends, or by yourself, Among Us is an exceptional way to work on communication, teamwork and

Fall Guys (Playstation, Windows) Need to just sit back and chill out? Fall Guys is a multi-player game that is reminiscent of TV shows such as Total Wipeout and Takeshi’s Castle. The premise is fairly simple. There are 60 ‘jellybean-esque’ characters, each controlled by players, and they must run a series of playful gauntlets until there is only one remaining. With a variety of colourful and playful levels, mostly consisting of platforming challenges and obstacles to evade, you can play with friends or random players to compete for the win. When not dodging giant rolling balls or spinning rotors you may have to memorise a pattern on a floor tile or even compete in a game of tag to keep yourself in the competition. An excellent way to sit back and relax, Fall Guys lets you exercise your brain without any strain as you learn to control and move your

Papers, Please (Windows, Linux, IOS) Has isolation left you feeling a withdrawal from bureaucracy? If so, then Papers, Please is the game for you. This 2013 indie game (subtitled ‘A Dystopian Document thriller’) puts you in the role of an immigration officer working in the fictional Eastern-Bloc country of Arstotzka. Throughout your time in Papers, Please you must assess a variety of individuals trying to enter the state of Arstotzka by evaluating their passport and visas, and checking for fraudulent documents or incorrectly filed paperwork. Although this may sound very humdrum, the game is actually intense, as you must juggle between doing your job correctly to keep your family fed by the totalitarian government, and helping people trying to escape from their impoverished and desperate lives. What starts as a parody of bureaucratic procedure soon turns into a thrilling game of cat-and-mouse (albeit via paperwork and government forms) as you have to toe the line between being a good person and avoiding suspicion from your superiors. A perfect way to help improve your critical thinking, and explore some deeper and darker themes than a lot of games provide, Papers, Please is a great way to see just how important and dangerous navigating officialdom can be.

With our video you can master the rules of double entry bookkeeping in just eight-and-a-half minutes. So do you know your credits and debits? You can find Tom’s feature explaining all on page 22 of the July issue.

TOM CLENDON: DOUBLE ENTRY BOOKKEEPING Accountancy can be simple if you know the basics. PQ magazine has gathered together the top tutors in the world to help us help you. Our Back to Basics video series will guide you through some of the fundamental topics of accountancy. Each video comes with an accompanying article... Tom Clendon takes you through Double Entry Bookkeeping PQ Magazine November 2020

Sean Purcell looks at the Strategic Planning Process Sean looks at the three steps you need to understand the strategic planning process – analysis, strategic choice and strategic implementation. See pages 24-25 in the August issue for the accompanying feature. Sunil Bhandari delves into financial maths This presentation is slanted to ACCA FM and AFM students sitting the CBE exams, but will be useful for any PQs wanting to understand financial maths that bit better. See pages 20-21 of the September issue for the accompanying article. Check out these short videos at www.pqmagazine.com. Either click on the video bar at the top of the home page or scroll down to the video section

PQ CIMA exams

Get yourself exam ready Stephen Flatman proffers six easy steps for your revision and exam preparation

ur students have been incredibly resilient over the past six months, they have put in a lot of hard work and this has been reflected in the latest CIMA pass rates. To help you sustain your success, our academic experts have put together their best revision tips to make your exam preparation more effective and help you stay motivated: 1. Create a tailored revision plan: first, you need to think about how much time you will realistically be able to study for each week. Based on this, create a revision plan that covers key areas of your exam, write down exactly what you need to do for each session and how long they will last (don’t forget to

schedule revision breaks!). To boost your attention span, consider varying your revision aids by using a combination of written, audio and visual formats. 2. Familiarise yourself with the exam: you

Key revision resources

• CIMA study planner – https://planner. cimaglobal.com/ • CIMA question tutorials – https://home. pearsonvue.com/cima/questiontutorials • CIMA exam blueprints – https://www. cimaglobal.com/examblueprints • Exam guidance – https://bit.ly/3cYU1H3

should spend some time to familiarise yourself with the exam format, features, time aspects, response requirements and process of the exam. Knowing in advance what’s expected of you during the exam will make you feel more prepared and help you beat exam stress. 3. Switch to active learning: not everyone learns in the same way or at the same pace, some of you may retain information better through seminars, lectures, textbooks or presentations (what’s known as passive learning) while others will better absorb information through participation in workshops, group discussions or practical projects (what’s known as active learning). To ensure that you’ve correctly retained information and know how to apply your theoretical knowledge, try scheduling some active learning such as practising revision questions. 4. Cover your bases: make sure that you understand what it takes to pass each exam and how it is scored based on the core activities of the CIMA exam blueprints. Throughout your revision, you should regularly assess what’s going well and what’s proving more difficult to master. You may want to keep a list of your common mistakes and their solutions on hand to aid your memory. 5. Practice, practice, practice: studying and practising are the best ways of ensuring that you are well prepared, and know what to expect, when you sit your exams. During your revision, we also advise that you take mock exams so you can truly assess what needs to be improved or learned before your exam day. Sitting a mock exam is also essential to help you refine your exam technique and time management skills. 6. Get ready for exam day: between your professional and personal commitments, exam day will be here before you know it. Whether you’re taking your exam online or at a test centre, make sure that you know what the procedure is. For example, if you’re sitting your exam online, check that you’ve performed a system test beforehand. Whether you pass or fail your exam, make sure that you understand your results, including both the areas where your performance – was particularly strong and the areas where your performance might have fallen short. Good luck on the next step of your CIMA journey! • Stephen Flatman, Vice President, Examinations, Management Accounting, The Association of International Certified Professional Accountants

Award-winning AAT courses and apprenticeships Flexible learning to suit your lifestyle mindful-education.co.uk/students 22

PQ Magazine November 2020

On the case Welcome to knowledge city November’s case study for Strategic level PQs is all about Knowledge City Technology Park. That’s KCTP to you (a senior manager in the finance function) and me. You report directly into the board advising on special projects and strategic matters. Located close to a leading technology university, this science park offers buildings and offices to rent, with scope to extend buildings and adapt them to tenants’ needs. Privacy for companies is also key here. Technology park owners generally look for sites on the outskirts of cities where land prices are cheaper, especially those that are near airports and other transport networks. Being close to a university is another

key strategic consideration. You want access to leading researchers and have access to a ready supply of future employees, in the form of graduates. Tenants can be anything from a start-up to a subsidiary of major corporations, we are told. They all like the idea of collaborating, so having a good mix of tenants is vital. The 24-page case also talks about problems with electrical ‘spikes’ and the importance of investing in infrastructure. On top of protecting electricity supply, high-speed data is crucial, along with security and tailored office support. As these are general out-of-town sites parking becomes important, as is a frequent bus service. KCTP is the country’s largest technology

November 2020 and February 2021 Strategic Case Study Examination

November 2020 and February 2021 Strategic Case Study Examination Pre-seen

Contents

Technology Parks Knowledge City Technology Park KCTP’s – vision, mission and values KCTP’s - Board of Directors KCTP’s - Principal risks Extracts from KCTP’s financial statements Sypark’s consolidated statements of: Profit & Loss Changes in Equity Financial position KCTP’s – Share price history News stories

©CIMA 2020. No reproduction without prior consent.

Page 3 7 10 11 13 14

16 16 17 18 19 - 24

Building bricks for MCS success Who doesn’t love a plastic brick construction toy? Management Case Study November sitters need to forget their Lego and think Prybloxx. Denmark also becomes Varanda for the November (and February 2021) case. Interestingly, we are told Prybloxx imitates the success of the leading brand’s sales, but it sells bricks by weight. Refreshing product ranges is another key to its success. As finance manager in the head office you will be reporting into Alex McDonald, the senior finance manager.

The company operates around the world and it aims to pay a living wage for all its workers (page 13). The case study also takes a look at Ckonstro, Prybloxx’s closest rival, which has baby bricks (for really small children), and engineering kits that enable the construction of complicated mechanical models. Something schools might be interested in? One ‘news report’ (page 21) looks at issues around recycling and over-packaging. The other reports highlights the importance of online

Sleep tight with the OCS pre-seen Operational case study studiers should sleep easier with the November pre-seen! The case study for the next two sittings homes in on AmaZZZing Beds, a company that sells mattresses and beds through a network of 120 stores and online. On top of selling major brands it has its own brand, but doesn’t export. The country’s largest retailer by revenue, it is owned by a private equity investor. After years of stagnation there has been a five-year growth in sales in this industry, as wellbeing and sleep quality takes centre stage. The figures show that AmaZZZing Beds makes two-thirds of its money from mattresses. Some 30% of its revenue and 33% of gross

CGMAX Operational Case Study Exam - November 2020 - February 2021

November 2020 - February 2021 Operational Case Study Examination Pre-seen material

CONTENTS: 1 2 3 4 5 6 7 8 9 10 11 12

Content Your role Introduction The directors Production and Finance teams Extract from the AmaZZZing Beds website: Our products Extract from the AmaZZZing Beds website: Our production process for mattresses Other information about company operations The mattress and bed industry in Eastland Financial statements for the year ended 30 June 2020 Budget information for the year ending 30 June 2021 Article Tax regime of Eastland

Page 2 3 4-5 6 7-8 9-10

11-14 15-17 18-20 21-24 25 26

PQ Magazine November 2020

profits comes from the mattresses and beds it makes. Looking at the directors we have a CEO who has “an increasing interest in green and ethical issues”, and recycling. The production director is keen to expand the range of mattresses and beds the company makes, and a logistics director who is replacing the delivery fleet with hybrid vehicles, which is 35% complete. Finally, there is the FD who has lots of expertise in IT and is responsible for the company’s IT systems. Some of the things we took out of the case: • Leaving store managers to decide which mattresses and beds are displayed in its smaller stores, seems ‘interesting’. • Despite being the country’s largest retailer, it has no corporate customers. • Beds are manufactured for inventory rather than for a particular customer order. • Its springs are supplied by a single supplier close to the production facility. The

CIMA pre-seens PQ

We take a look at the recently published case study pre-seens park. Floated in 1999 the university retains a 20% shareholding, with the rest traded on the stock exchange. The ties between the university and KCTP are tight, and it has had successful collaborations with other universities. Security is flagged as an issue as are tenancy agreements, which at just 12-months long seem a little short! That said, most tenants only stay for two years. All the board appointments seem relatively recent, and the university have a NED on the board (it’s the only link between the university and KCTP management). The principal risks seem clear – health and safety, tenant turnover, servers, cyber security, and security in general. There’s also a competitor just 15 miles away (Sypark). Among the news stories is one about the development of computer simulations and virtual models that could threaten science parks. Another looks at the take-off of 3D printers. selling, the rise of engineering kits, and toys as collectables. Check out Lego https://www.lego.com/ en-gb/aboutus/legogroup/, Mega Bloks https://www.megabloks. com/en-us/, and see Cada Bricks’ range at https://www.yourwobb. com/collections/cada The case study covers both the November and February 2021 exams. CIMA Management case study exam – November 2020 & February 2021 – pre-seen

November 2020 & February 2021 Management Case Study Examination Pre-seen material

Contents

Page

The History of plastic construction toys

Prybloxx

Prybloxx product ranges Pricing issues

The manufacturing process

6 7 8

Sales

Consumers

Management structure

Business Model

Costing information

Extracts from Prybloxx’s annual report

Extract from Ckonstro’s annual report

News reports

©CIMA 2020. No reproduction without prior consent.

relationship with this supplier is excellent and let’s hope they remain so! The memory foam also comes from a single supplier from abroad. • Many people are digitally monitoring their sleep patterns (page 14) – are smart beds the future? Sleepsters, a rival, have launched one. • The success of online retailer Robert Mattresses, with its vacuum-packed recycling box, might come up somewhere. Recyling of old mattresses is a major concern (page 17). • There are eight well-known brands – too many? Robert Mattresses looks like a good candidate for a takeover. • Check out Dreams https://www.dreams. co.uk/mattresses, Mattressonline https:// www.mattressonline.co.uk/, and Simba https://simbasleep.com/products/hybridduvet-with-stratos • Looking at these sites we thought pillows, duvets, and kids beds! The case study covers both the November and February 2021 exams. 23

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profile PQ

One man’s Greek odyssey Meet George Tampakas, who talks us through his career journey from engineer to estate agent, DJ and, finally, accountant

y name is George Tampakas and I was born in Athens on the 28 March 1988. I attended and finished all three school levels of the Greek educational system (primary, gymnasium, lyceum) and graduated in June 2005, entering the University of Piraeus the following year to study in the department of automation engineering. I soon came to the conclusion that this subject (and career) was not the one I wanted to follow, so I quit my studies and grabbed an opportunity to work as a real estate agent, mainly dealing with property sales and evaluations. PQ Magazine November 2020

This lasted from 2007 to 2012 then, due to the economic crisis in Greece, the property market crashed. The next step in my life was totally different. My second passion, after numbers and finance, is music and so I became a disc jockey. This was a big chapter in my life which continued for seven years until September 2019. Then came a life-changing moment, when I decided that I wanted a new challenge; I wanted to move to a place where I could work hard, reach my potential and progress without limits. I decided to move to London (in September 2019) and I immediately started searching for

universities, courses, colleges and anything that would help me achieve my goals and start a career in economics. When I came across the AAT’s courses, and searched for more about this qualification and the prospects that would follow, I knew that it was for me. My passion for numbers, my interest in understanding how a company works, the economic control of an organisation, budgeting, revenue, expenses, investments and all the relevant aspects of accounting made me want to start studying immediately. Not having any previous experience was not a problem at all, as my motivation and determination were (and continue to be) so high that I wanted to learn more and more and progress, as I mentioned before, without limits. I started working full time in October as a lettings agent, but also decided simultaneously to start studying AAT with Training Link, starting from level 2 and setting a goal to be qualified within a year. Within the last year I have managed to finish my level 2, level 3 and level 4 studies, making me fully qualified – within just one year! Despite Coronavirus, I am more than happy to have exceeded my initial goals, having achieved a distinction in six exams and having passed all bar two exams with a mark above 80%. At the same time, I have already progressed to ACCA and am preparing for my first exam. Furthermore, despite the difficult times that everyone is experiencing with the pandemic, and the moments of uncertainty that have affected so many people, I am grateful that I have been given the opportunity to turn my passion for accounting into my new career. I have already started working in a successful accounting practice, demonstrating every day the education and knowledge that the AAT and Training Link have taught me. Can you imagine that? One year ago, I was a disc jockey in Greece without any studies, and within a year, without English being my native language, I now work as an accountant in London, having completed the AAT and having moved forward to the ACCA. You never know what life will bring, but the future looks bright and I am excited about my new life. Finally, I would like to mention the reasons why I decided to study via distance learning. I am a person who wants to feel independent, and this means that I don’t want to have time schedules and be bound to a set timetable. I want to study at my own pace and the more I study the faster I will progress. Also, not attending classes will keep my motivation high, as I have to push myself to get a deeper knowledge of the study materials. Furthermore, not having to attend classes enabled me to study and work at the same time. Finally, I would like to take this opportunity to thank Training Link and my tutors Michele and Jennifer, who played a big part on my successful AAT journey! 25

PQ audit reports audit opinion will be qualified”. The only alternative conclusions would be ‘unmodified’ (no problems), ‘adverse’ (pervasive misstatement), and ‘disclaimer’ (pervasive inability to obtain sufficient appropriate evidence).

Two is better

than one

Those sitting ACCA AAA and AA exams should answer audit report questions in two parts, says Steve Widberg

his article is relevant to students studying for the ACCA exams in Audit and Assurance (AA) and Advanced Audit and Assurance (AAA). A judge in a court of law has to be very careful when selecting language appropriate to a prisoner’s sentence. He/she will use words such as “five years in prison” rather than “five years in a dirty building with bars on the window”. Similarly, we must use appropriate language when explaining the impact of a particular issue on the audit report, in order to leave no room for ambiguity. I recommend that, in audit report questions, you structure your answer in two sections: 1. Impact on the AUDIT OPINION. 2. Additional paragraphs that may need to be included in the AUDIT REPORT. Audit opinion Consider the following scenario: “Boxo (the client) has a profit before taxation (PBT) of $5m. In the opinion of the auditor, potentially obsolete

inventory is overvalued by $1m.” I would always write four sentences: 1. Explain the problem, demonstrating accounting knowledge. “Inventory must be measured at the lower of cost and net realisable value (NRV). In this case, because of obsolescence, NRV is $1m less than cost.” 2. Assess whether the problem is immaterial, material or pervasive. “The overstatement of inventory is material because it represents 20% of PBT”. (Note that anything less than 5% would normally be immaterial and anything exceeding 100% would be pervasive.) 3. Explain the reason for modifying your opinion. “The audit opinion will be modified on the grounds of material misstatement.” (Remember that the alternative reason for modifying the opinion is ‘inability to obtain sufficient appropriate evidence’, which would be relevant, for example, if a client had inadequate accounting records). 4. Give your conclusion. “In conclusion, the

Additional paragraphs in the audit report You may need to refer to the inclusion of additional paragraphs in the audit report. I want to concentrate on the ones that are most significant in the exam: 1. Basis for opinion paragraph. This is relevant if you have modified the audit opinion (above). So, in the scenario we discussed, I would say: “The auditor will explain the reason for modifying the opinion and its financial effect in a basis for opinion paragraph. The basis for opinion paragraph is set out below the opinion in the audit report.” 2. Other information paragraph. The financial statements are often published alongside other information, such as Strategic or Governance Reports. If these additional reports are misleading or inconsistent with the financial statements, this will be reported in the ‘other information’ paragraph. (Note that this used to be known as an ‘other matter’ paragraph, but this is no longer the case). 3. Material uncertainty relating to going concern paragraph. It is very common for companies to face uncertainties which may threaten its going concern. Examples would be renewal of a major customer contract or bank finance, or a potential product ban following safety concerns. These uncertainties must be disclosed by the directors in the notes to the financial statements. In these circumstances the auditor will draw attention to such matters in a ‘material uncertainty relating to going concern’ paragraph. (Note that this used to be known as an ‘emphasis of matter’ paragraph, but this is no longer the case). 4. Key audit matters. Key audit matters paragraphs are only relevant to a company listed on a Stock Exchange. In order to help narrow the ‘expectation gap’ between what auditors do and what the world believes they do, the auditor will highlight those matters that he/she believes were of most significance during the audit. Such matters include key audit risks (e.g. valuation of inventory at a retailer), matters involving significant judgement (e.g. fair values attributed to the assets of a subsidiary) and significant transactions or events (e.g. a major reorganisation). In all cases the auditor must explain how each key audit matter was addressed during the course of the audit. Conclusion You will need to practise as many audit report questions as possible. Ensure that you use the sub-headings ‘audit opinion’ and ‘additional paragraphs in audit report’ in order to give structure to your answer. Finally, make sure that you reach a single conclusion – examiners do not approve of candidates who sit on the fence and suggest a whole range of opinions. • Steve Widberg is a tutor at Open Tuition PQ Magazine November 2020

ACCA exams PQ

SBL: a very different beast Are you thinking about sitting the SBL paper? Then Ashim Kumar has some top advice on how to tackle this compulsory paper

n September 2018, ACCA Professional papers, P1 and P3 were replaced by the Strategic Business Leader (SBL) examination. SBL is a compulsory paper; you must pass it! This brief article explains what to expect. The objective of SBL According the the ACCA’s own definition, it is to “demonstrate organisational leadership and senior consultancy or advisory capabilities and relevant professional skills”. The SBL exam SBL is a four-hour (unseen) case-study based exam, which will include one scenario on which all questions will be based. In addition, it will contain substantial data in the form of ‘Exhibits’. The Exhibits may take the form of reports, press articles, company websites, minutes of meetings, memos and so on. The extra hour given to candidates in the exam is to allow the analysis of this large volume of data and identify facts relevant to each answer. There will be up to five compulsory questions, each with sub-parts. Candidates will be required to answer from different stakeholders’ perspectives, e.g. project manager, internal auditor, etc. Each examination will contain a total of 80 technical marks and 20 professional skills marks. Professional skills marks are awarded for communication, commercial acumen, analysis, scepticism, and evaluation. A failure to demonstrate these essential skills in the examination, will greatly reduce the chances of success. As we see, it is not enough to be technically competent; our clients and employers (and the examiner) rightly demand more from us. We are after all, highly trained professionals! PQ Magazine November 2020

The SBL syllabus SBL must not be seen as simply a merger between P1 and P3; it is a different ‘animal’ altogether. Although it does take some topics from P1 (Governance), and from P3 (Strategy), there are many additional areas included (Leadership). The core areas of this syllabus are leadership, governance, strategy, risk, technology and data analytics, organisational control and audit, finance in planning and decision-making, innovation, performance excellence and change management, and professional skills. This is clearly a very broad syllabus and candidates will be expected to combine a knowledge of different topics to produce a comprehensive solution; much as you would in a real business situation. Assumed knowledge Candidates will be assumed to have a knowledge of: • Ethics and Professional Skills Module (EPS). • The Applied Skills papers (AB, LW, PM, FR, AA and FM). See here for more information on the SBL Competencies expected: https:// tinyurl.com/y2m6e8os • The ACCA does not expect you to carry out detailed technical calculations from previous subjects; it does, however, expect you to be aware of, and apply principles and tools from earlier studies to a real-world problem. For example, the question may provide the NPV of a project and expect you to incorporate an analysis or critique of that information, in your answer. Therefore, you need to know the implications of a positive or negative NPV and use that as a part of your answer to make a recommendation or, draw a conclusion. So, you may say in your solution: “A positive

NPV of $1m is prima facie support for the decision to accept a project; however, a number of other factors will also need to be considered.” You would incorporate other relevant factors as provided in the question: for example relative size of the investment, possible competitor response, risk of obsolescence of this project, stakeholder response and so on. You would then provide a balanced recommendation, which incorporated all the issues discussed. Exam preparation The SBL examination is unlike anything that you would have encountered in your studies at Applied Skills or Knowledge stages; so we need to take a new approach in preparing for it: 1. Apply a combination of theoretical, analytical and practical tools in crafting a real-world answer. In fact, I advise students to use the state/explain/apply rule. 2. Understand how to present your answers in a professional way. 3. Reflect the highest ethical standards in your recommendations. 4. Read outside the subject. Quoting real-world examples to reinforce your points in the exam, will earn you professional marks; let’s pick them up. 5. Familiarise yourselves with the Examiner’s approach and suggestions on how to answer the questions. See here for more information: https://tinyurl.com/yyhkmryg 6. You will need to practise treating the exam like a real-world scenario and not an academic exercise, approaching each question from the perspective of a different stakeholder, and applying professional skills when attempting your answers. This is a challenging paper; pass rates are around 50%. Students need a tried-andtested approach to apply, if they are going to pass. • Ashim Kumar is a tutor at www. fmelearnonline.com/acca-sbl/ 27

PQ reconciliations that were identified. The key when looking at each issue is to work out which of our two records is wrong and how it then needs to be corrected.

A balancing act Gareth John explains everything you need to know about how a reconciliation works

typical accounting system might be dealing with enormous numbers of transactions every year; cash and credit sales, purchases, wages, rent, interest received, bank loans repaid… the list goes on and on. Any errors that arise with any of those transactions can have a serious impact on the accuracy of the financial statements produced at the end of the accounting period. Accountants therefore like to have a variety of checks in place to try to spot errors that have been made so that they can be corrected. One such check is a reconciliation. A reconciliation is where we compare two balances from different places in our accounting records that we know should be the same figure. If they are not the same then we know that we need to make some adjustments. For example, a bank reconciliation is where we compare the balance on the cash account in our nominal ledger with the balance on the bank statement to see if they give the same figure. Sales Ledger Control Account reconciliation Let’s consider a sales ledger control account reconciliation where we compare the balance of the sales ledger control account (SLCA) with the total of the list of individual customer account balances in the sales ledger. This is to ensure that the trade receivables figure that we show on our balance sheet is correct. Here’s an example: The balance on the SLCA has been compared with the total of the list of sales ledger accounts to see if they agree. The balance showing on the SLCA is £15,120 and the total of the list of sales ledger balances is £9,010. They don’t agree, so something must have gone wrong somewhere. After a bit of investigation the following five issues have been identified: 1. The sales ledger column in the cash receipts book was totalled as £5,400 when it should have been £4,500. 2. A contra for £1,000 was only recorded in the sales ledger. 28

3. A credit note for £600 in the sales returns day book was not posted to the sales ledger. 4. A total in the sales day book of £790 was recorded in the nominal ledger as £7,900. 5. A balance of £500 was duplicated in the sales ledger listing. In order to deal with the five issues I think it’s a good idea to consider the starting position that we have in the two records that we are comparing, perhaps noting them down on a piece of paper. Sales Ledger Control Account The SLCA records the total amount owed to us by all of our credit customers. It is part of the nominal ledger so can be shown as a T-account. Since the SLCA records the asset of receivables of the business the balance would be a debit: Sales ledger control account Dr Initial balance

Let’s look through each difference in turn. 1. The cash receipts book is one of the books of prime entry (BOPEs). We know that the nominal ledger includes all of the totals from the BOPEs. If total of cash receipts from credit customers in the BOPE is wrong, the SLCA will also be wrong. Customer receipts reduce the balance owed by customers so if they were too high by £900, the SLCA balance will be too low. Therefore, to correct the issue we need a debit on the SLCA. 2. A contra entry for £1,000 is missing from the sales ledger control account. A contra is where we offset balances on the sales ledger control account with balances on the purchase ledger control account to reduce both balances. Therefore, to add the missing contra and reduce the receivables figure we need a credit on the SLCA. 3. Issuing a credit note reduces what a customer owes us. If one is missing from the sales ledger then the total of the list of balances will be too high. Therefore, to account for the missing credit note we need to reduce the total. 4. The sales day book is another BOPE. This error will have resulted in too large a credit sales figure being debited to the SLCA. Therefore, we need a credit of the difference of £7,110 to correct this. 5. If a balance on the sales ledger was duplicated (included twice) the total of the list of balances will be too high. Therefore, we need to reduce the total. Showing how each of the five issues need to be corrected we get: Sales ledger control account Dr Initial balance 1. Cash receipts

15,120

Sales Ledger The sales ledger is where we keep a record of the amount that each individual credit customer owes us. If we add up all of those individual account balances to give a total, it should be the same as the balance on the SLCA. In this example it is different by several thousand pounds. The sales ledger is not part of the double entry system used in our nominal ledger so we don’t normally show it in the form of a T-account.

15,120 2. Contra 900 4. Sales Day Book

Corrected balance (Bal Fig) 16,020

£ 1,000 7,110

7,910 16,020

Total of the list of sales ledger accounts Initial total

£9,010

3. Missing credit note

(£600)

5.Duplicated balance

(£500)

Corrected total of the list of sales ledger accounts

£7,910

Total of the list of sales ledger accounts Initial total

£9,010

We can now consider each of the five issues

You can see that the corrected balance on the SLCA now equals the list of sales ledger accounts, both giving the same figure of £7,910. They now reconcile!. • Gareth John is Chief Executive of First Intuition Cambridge PQ Magazine November 2020

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PQ software Connected services

Sage advice Nikki Bruce of Softext Ltd explains what’s new in Sage 50cloud Accounts version 27

rom 5 October 2020, Sage Version 27 was made available to all customers, new and existing. With some of the biggest changes to the software in recent years such as the inclusion of the Custom Alert feature and improvements to user management tools now is the best time to plan your upgrade. Here I’ll discuss some of the biggest changes coming to Sage 50 Accounts software in the latest version release. Company process improvements In previous versions of Sage Accounts software, the steps for creating a new company were not always easy to follow. Therefore, based on feedback from customers, Sage has now streamlined this process in the latest version. The menu will now display just four simple, clear options for adding a new company or linking to an existing company. Another addition to note is the ability to search for companies – a particularly useful feature for accountants working with multiple organisations. Custom Alerts Again, for version 27 Sage have taken into account feedback from their customers and added one of the most requested features – Custom Alerts. These alerts will be available to use in customers, suppliers and products and can be set to appear as a pop-up or a reminder with a text box to include the required information. For example, this new feature will be useful for including notes such as preferred delivery addresses for customers, or reminders that orders must be approved by a certain member of staff before placing an order with suppliers.

Custom Alerts can be set to appear when invoicing, creating purchase orders, creating quotes, and producing sales orders. Alternatively, the new alert feature can also be used in the products area to notify users when products are coming to the end of the line with no future stock available, or as a way to link to similar products that staff can recommend to your customers. Users will also have the ability to temporarily disable alerts or to delete them altogether once they are no longer needed. User management improvements Previously known as ‘Access Rights’, the new user management feature lets you easily control who has access to your data and how much access they have. As access is defined at the point of creating for each user, you can ensure that users only see data that they need to perform their roles. If you have a third-party accountant or bookkeeper with remote data access, using user management you can grant them the ability to create other accountant or bookkeeper users when necessary. User management also allows you to grant remote access without having to log into Sage Drive separately so you can manage all connected and non-connected users and advisors from directly within Sage 50 Accounts. In Sage version 27 you will also be able to see all users and any active sessions. You’ll also be able to access Sage ID from within the user screen and for added security, you can make it a requirement that new users must change their password upon logging in for the first time.

There are currently three separate processes for Cloud services each requiring a different ID, these processes are: Sage Drive, Bank Feeds, and Invoice Payments. With version 27 these processes will merge into a single Sage ID with only one ID required to set up all three cloud services. It will also be possible to merge existing IDs into one single ID for existing users. Anyone wishing to use the improved connected services will need to upgrade to Sage v27 after March 2021 – this includes both new users and existing users. For new users, Sage have created new menus to simplify the onboarding process, making it easier to create a single Sage ID and utilise features such as remote data access, data sharing, and managing remote users. It is also easier to retrieve forgotten encryption passwords should any of your users forget them. Under the settings tab, users can scroll down to ‘Remote Data Access Settings’ where they will see an option to show password/passphrase. Sage version 27 also includes the ability to pause and resume syncing on Sage Drive. This is particularly useful for accountants and bookkeepers who only need to access the data each month or every quarter – they can simply choose to sync the data only when they need it. Client manager In Sage version 27, accountants can also set up Sage Drive as a main site using Client Manager. This allows the accountant to host the client data themselves and gives them more freedom in allowing accountants within their practice to work remotely. Sage Drive If you’re not already using Sage Drive, it’s worth taking the time to get set up and see how it can enhance your Sage 50 Accounts software. Sage Drive improves the accessibility of your Sage data whilst retaining all the benefits and features of your desktop software. You can access your data anywhere with an internet connection and allow for continuous data syncing for accuracy across all platforms. With Sage v27 and Sage Drive you can also retrieve forgotten passwords and pause data syncing when necessary, as well as granting real-time access to your data for your accountant or bookkeeper. Legacy features Sage version 27 will see some older ‘legacy’ features being retired or reinvented, this is based on analysis from Sage users showing that these features are rarely used. The features that will no longer be available from Sage v27 onwards include Task Manager, Nominal Graphs, Dashboards, Phone Dialer, Process Maps, and Configuration XMLs. Also, as discussed above, some integral features are also changing. The Management Centre will switch to User Management with improved features and functionality, and support for Bank Feeds and Sage Drive will be withdrawn for Sage versions below v24.2. • If you are using an older version of Sage now is the perfect time to upgrade. Visit https:// softext.co.uk/ PQ Magazine November 2020

test bank PQ

So what do you know? Philip Dunn sets you a series of questions relating to measures of shareholders’ interest and risk

he summarised Financial Statements of Davenport-Dunn Art Supplies Plc for years ended X1 and X2 are shown

below.

Statement of Profit or Loss X1 £m Revenue Operating Profit Finance Costs Profit before Tax Tax Expense Profit for Period

X2 £m

980.00

1,170.00

35.00

43.20

3.96

31.04

39.24

9.31

11.77

21.73

27.47

The following Ordinary Dividend had been paid in each year. X1 £4.76m X2 £5.99m Statement of Financial Position X1 £m Non-Current Assets

X2 £m

15.84

26.47

Current assets

216.68

238.38

Total Assets

232.52

264.85

Share Capital

19.80

Retained Earnings

64.78

86.26

Total Equity

84.58

106.06

39.60

Please answer the following MCQ tasks below: Risk: 1. Calculate Gearing/ Leverage (Debt: Debt+Equity) X1 X2 (a) 46.80% (a) 37.33% (b) None of these (b) 27.19% (c) 31.89% (c) 81.82% (d) 87.26% (d) None of these

Equity and Liabilities

Non Current Liabilities Long Term Borrowing Current Liabilities

108.34

119.19

232.52

264.85

The nominal value of the issued share capital comprised Ordinary Shares of £0.25 each. Current Market Price per Share: X1 £1.50 X2 £1.75.

Shareholders’ Interest: 2. Calculate the Return on Equity/Shareholders ‘Funds. X1 X2 (a) 36.70% (a) 37.00% (b) 9.34% (b) 26.90% (c) 25.00% (c) 25.90% (d) 25.69% (d) 10.37% 3. Calculate Earnings per Share. X1 (a) 39.19 pence (b) 78.38 pence (c) 27.44 pence (d) 54.87 pence

X2 (a) 49.55 pence (b) 34.68 pence (c) 99.10 pence (d) 69.37 pence

4. Calculate the Price Earnings Ratio. X1 X2 (a) 3.83 (a) 3.53 (b) 1.91 (b) 5.05 (c) 5.47 (c) 1.76 (d) 2.73 (d) 2.52 5. Calculate the Dividend per Share. X1 X2 (a) 5.00 pence (a) 7.56 pence (b) 6.01 pence (b) 15.12 pence (c) 12.02 pence (c) 5.00 pence (d) 10.00 pence (d) 10.00 pence 6. Calculate the Dividend Yield. X1 (a) 3.33% (b) 4.01% (c) 8.01% (d) 6.67%

X2 (a) 4.32% (b) 8.64% (c) 2.86% (d) 5.71%

7. Calculate the Dividend Cover. X1 (a) 6.52 (b) 7.35 (c) 3.63 (d) 4.57

X2 (a) 6.55 (b) 4.59 (c) 7.21 (d) 5.77

• Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books

Answers: (1) X1 c, X2 b, (2) X1 d, X2 c, (3) X1 c, X2 b, (4) X1 c, X2 b, (5) X1 b, X2 a, (6) X1 b, X2 a, (7) X1 d, X2 b Registered Tuition Provider

PQ Magazine November 2020

the workplace PQ

Take a deep breath…

How ‘secure’ are you feeling at work? Karen Young explains how you can manage anxiety around job security

he world of work has been awash with change and uncertainty for most of this year, which has understandably left many feeling anxious about the security of their jobs. These feelings are a very natural response to what is happening around us and shared by many. There’s no denying that it’s been a tough year for PQs, but I do believe that the Coronavirus crisis is revealing a world of new opportunity and unfolding a new era of work. It will be different, but that doesn’t mean that it will necessarily be worse. The change that Covid-19 has brought might provide an invaluable opportunity to review your career plan and ensure you’re making good decisions for your future. Here are some steps you can take to calm your anxieties and feel more secure in your job. I’d like to share some quickfire tips in the hope that at least a couple of these resonate with how you’re feeling and help you to calm your anxieties and feel more secure in your job. 1. Acknowledge your anxiety We have no choice but to accept that

PQ Magazine November 2020

we are going through a period of rapid and unforeseen change, which will likely continue for some time. So as a first step, acknowledge the anxiety which this has caused. Having some self-awareness will help you to begin to overcome these feelings and take control. 2. Focus on what is in your control At times of anxiety, it’s easy to lose perspective and feel like everything’s spiralling out of control. Therefore, my next tip is to take the time to consciously identify the things that you do have ‘under control’ in your life. Whether it’s in your personal or professional life, focus on areas where you trust in your abilities and are confident in how you perform, how you act and come across. This should help dissipate any uneasiness you feel about your job or at least pin them to a specific area, where you can think about some actions to take. 3. Don’t suffer in silence Asking for help is never a sign of weakness. It shows that we care and are committed to

doing a good job. Think about someone at work who you trust and can approach for a reassuring conversation about your situation. Opening up to someone can be incredibly cathartic and gives you the opportunity to clear up any uncertainties which might be heightening your concerns, and an objective view helps too. Reframe change as opportunity If the change of this year is at the core of your anxiety, try to reframe the way you see this change. Change really can provide some valuable learning lessons which will power your long-term professional growth. Shifting your mindset to recognise this is easier said than done, but the more you practice, the more engrained this will become. Look for the positives Force yourself to see some positives in the current situation, rather than focussing on what you perceive to be the disadvantages. For example, have you been able to work with new people? Have you taken on new responsibilities which you enjoy? Or maybe you’ve developed some new skills throughout all of this? Even in the most challenging situations there are always positives to be found, no matter how small. Enrich your life outside of work You should without a doubt be taking time outside of work to look after your wellbeing. Try to invest time in doing things for yourself which are unconnected to your career. It’s a great way to proactively occupy your mind and keep any anxieties at bay. Remind yourself that this is temporary You’ve worked hard to reach this career stage, and the current situation isn’t going to unravel all of that hard work. If you’re in doubt about this, take the time to list your strengths and the things that you have learned. It will make you feel more positive and remind you that whatever might happen in the future, you can be confident that you have developed a valued skillset which will outlast the current climate.

The future is bright Hopefully these tips will help mitigate some of the anxieties that you may be feeling about the security of your job and better enable you to deal with any anxieties that remain. Adopting the most positive and forward-looking mindset you can will help you continue to thrive professionally throughout the crisis and beyond. • Karen Young, Director of Hays Accountancy & Finance

PQ distance learning

Flexibility is the key AAT studier Lyndsey Cole explains why she is swapping the classroom for distance learning

fter completing AAT Accounting Levels 2 and 3 at college, Lyndsey Cole has opted to study her Level 4 Professional Diploma in Accounting from home. Here she explains why distance learning is the perfect option for the final step of her AAT journey. “Earlier this year I had just finished my Level 3 from home due to lockdown and, although there were some virtual lessons, I did most of the learning and studying myself. That gave me the confidence to sign up online with Premier Training,” explained Lyndsey. “I had also made a few friends on the previous levels so we decided we would continue to work together and support one another as we had been over the last two years. “Some other considerations with distance learning were the package and price. With online learning I also got a free Xero course, which as my employer was considering switching over to Xero, I thought that would be great to do. “In addition, the books were included and all sent straight out, along with some other resources which were really useful. These were always an extra at college.”

The flexibility of distance learning, especially during the current pandemic, was also a major attraction for Lyndsey. She said: “I was conscious that due to Covid-

19 we might find ourselves in local lockdowns and so forth, so I didn’t want the pressure if I had a house full again that I also needed to work and study. I could put a hold on the studies or just reduce them as I got to choose when the exams were.” Far from being concerned about a lack of support, from a college or classroom-based teacher, Lyndsey was reassured by the presence of the Premier Training tutor team. She added: “One of the most important things was knowing there was a tutor available should I need one. I didn’t know how much I would need them, but it was a bit like a safety blanket where you want one just in case. “I knew the next level was going to be hard and I had my friends as support, but when I was banging my head on a brick wall as it just didn’t make sense, I wanted to know someone would be there to help.” So, what’s next for Lyndsey – ACCA or CIMA qualifications perhaps? “At the moment, I swing from ‘yep, going to do the lot and go for ACCA’ to ‘goodness, level 4 is tough enough, that’ll do!’ So I’m not too sure what I will do after this,” she said. “I’m really enjoying learning though, so it would be a shame to stop, but I also need to decide what I really want from my career and whether I need any other qualifications or not.” • Thanks to Premier Training for this article. Find out more about the benefits of AAT distance learning at www.premiertraining.co.uk

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PQ Magazine November 2020

tax PQ Now, the gain is held over separately until the earliest of three events: sale of replacement, replacement obsolete and 10 years after the replacement is bought. The important thing to remember here is not to reduce the cost of the depreciating asset.

Rollover relief made simple Neil Da Costa endeavours to make a complicated subject very simple

ere, 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 the 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 deal with rollover relief using simple examples. Rollover relief When a business sells a building used in its trade, a capital gain will arise. If the sale proceeds are reinvested in a replacement building within a period of one year before to three years after the disposal, the gain can be postponed under rollover relief. The replacement building must also be used in the trade of the business and any sale proceeds not reinvested result in a gain crystallising immediately Simple example: Apricot Ltd A Ltd sells an office building for £800,000, resulting in a capital gain of £350,000 in June 2019. PQ Magazine November 2020

In June 2020, A Ltd buys a freehold office building for £700,000. The replacement office building was sold for £1 million in 2025. Sale proceeds from the original office building retained by the company were £100,000, so £100,000 of the gain crystallises immediately. The balance of the gain (£350,000 – £100,000) = £250,000 is postponed by deducting it from the cost of the replacement office building. The means that the base cost of the replacement building is £700,000 – £250,000 = £450,000. When the replacement building is sold in 2025, we use the base cost to find the gain. Gain arising in 2025 will therefore be £1 million – £450,000 = £550,000. As the replacement building was bought after December 2017 there is no indexation allowance available. Holdover relief If the sale proceeds are reinvested in a depreciating asset with a life of less than 60 years (leasehold buildings or fixed plant and machinery) then the gain is postponed under holdover relief.

Simple example: Apricot Ltd A Ltd sells an office building for £800,000, resulting in a capital gain of £350,000 in June 2019. In June 2020, A Ltd buys fixed plant and machinery for £700,000. The machinery became obsolete in 2024 and was sold for its £100,000 scrap value in 2025. Sale proceeds from the original office building retained by the company were £100,000, so £100,000 of the gain crystallises immediately. The balance of the gain (£350,000 – £100,000) = £250,000 is postponed under holdover relief and held over separately until the earliest of three events: 1. Sale of replacement asset 2025. 2. Replacement obsolete 2024. 3. 10 years after the replacement is bought 2030. The gain of £250,000 will crystallise in 2024. The cost of the machinery is unchanged at £700,000. When the machinery is sold in 2025 for £100,000, a capital loss will arise of £100,000 – £700,000 = £600,000. HMRC will not allow the company to claim the capital loss as tax depreciation in the form of capital allowances has already been given. Tax planning While rollover relief postpones the gain until the replacement asset is sold, holdover relief only offers temporary relief and the gain is postponed temporarily for a maximum of 10 years. As a result, rollover is preferable to holdover relief. Capital Gains Tax Groups For CGT groups, the direct shareholding must be at least 75%, while the indirect only has to be 51%. Companies in the same CGT group are treated as a single entity and gains can be rolled over between different group members. Simple example: Apricot Ltd Apricot Ltd owns 75% OSC of Blueberry Ltd. Both companies are UK resident. A Ltd sells an office building for £800,000 resulting in a capital gain of £350,000 in June 2019. In June 2020, B Ltd buys a freehold office building for £700,000. Sale proceeds from the original office building retained by the group were £100,000 so £100,000 of the gain crystallises immediately. The balance of the gain (£350,000 – £100,000) = £250,000 is postponed by deducting it from the cost of the building bought by B Ltd. The means that the base cost of the replacement building is £700,000 – £250,000 = £450,000. You have now understood rollover relief and can easily pick up marks on this popular exam topic. • Neil Da Costa is a Senior Tax Lecturer with Kaplan 35

PQ new legislation

New insolvency rules explained

What does the new Corporate Insolvency and Governance Act 2020 mean for your clients? Debbie Cockerton explains all

he government are trying to get the country back on its feet and people back to work, although uncertainty around the future in our new normal world seems to remain. The government have given lots of support for businesses, to try to get them through these very difficult and unprecedented times and they have rushed through the Corporate Insolvency and Governance Act 2020. But how i this actually help businesses? The Bill received Royal Assent on 25 June 2020 and commenced on 26 June 2020. It creates the largest change to our corporate insolvency regime for more than 20 years and gives distressed businesses the breathing space they need at this challenging time. One of the key provisions is the introduction of the new role of a ‘Monitor’, who oversees the moratorium period that is introduced. This new role is reserved only for licenced Insolvency Practitioners and the Monitor must supervise the company’s affairs to evaluate if the company can be rescued as a going concern. The new act introduces a 20 business days renewable moratorium period and, in this period, businesses will be protected from creditor action, which will enable the directors to seek specialist restricting advice or a rescue. It also introduces cross-class ‘cram down’ to bind creditors, even those creditors that vote against it and the court sanctions the plan as fair and equitable. The duration of the moratorium may also be extended in a number of ways. Suppliers are prevented from ceasing service

or changing their terms for goods and services that they need to continue to trade, which will ensure that any rescue is not jeopardised. There is protection in place to ensure that payment for these services, which are classed as ‘essential supplies’ are paid and these supplies can be ceased if this causes hardship. The new moratorium leaves the directors in office and the directors can obtain a moratorium by application to court for a court order, but the company should not have an outstanding winding up petition. In the Covid19 period, the moratorium can be obtained by the filing method, even if there is an outstanding winding up petition against the company. The directors must file a statement that the company is or likely to become unable to pay its debt. If a moratorium is obtained, creditors will not be able to petition for the winding up of the company, no resolution for the winding up can be made by the shareholders, no application for an administration may be made other than by the directors, no notice of intention to appoint an administrator by the holder of a qualifying floating charge and no administrative receiver may be appointed. With regards to the restrictions for creditors on enforcement and legal proceedings, no right of forfeiture can be exercised in relation to premises occupied by the company; no enforcement of security over the company’s property; no repossession of goods and no legal process can be issued or continued against the company or judgements enforced. However, this does not apply to employment

disputes. This is welcome news for struggling companies as it provides a temporary protection from creditors, but it is not good news for landlords and suppliers who are also in need of cash, because it prevents them from putting pressure on the debtor to pay the debt. The moratorium may also be used by companies seeking to reach a compromise with trade creditors who would have otherwise used a Company Voluntary Arrangement (CVA) in order to achieve a compromise at the same time with the financial creditors. There are some temporary extensions that have been brought in and these are to do with the holding of Annual General Meetings (AGM) and this has been extended and any AGM which should be held between 26 March and 30 September 2020 can be extended to the end of the period, or a later date. The Secretary of State has the authority to further extend, but no more than eight months. The need for filing of accounts has also had a temporary extension. It applies where the filing period ends after 25 March to 30 September 2020. There was also a temporary suspension of Wrongful Trading Section 214 Insolvency Act 1986 which was announced on 28 March 2020 and covered the period of 3 months from 1 March 2020. During these difficult times, irrespective of the suspension of wrongful trading, directors will continue to have potential liability during the Covid-19 period and beyond and this can include fraudulent trading, misfeasance, preference payments, breach of fiduciary duty and director disqualification proceedings. • Debbie Cockerton is a partner at DCA Business Recovery PQ Magazine November 2020

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PQ the troubleshooter

Direct material mix and yield variance explained Philip Dunn tackles a subject that is of specific relevance to ACCA trainees preparing for assessment in F5 Performance Management

he rationale embedded in the syllabus structure states that mix and yield variances and planning and operational variances are explored and the link is made to performance management. In syllabus Section D – budgeting and control (4) includes direct material mix and yield variances. in a later article planning and operational variances will be considered. In many industries for example, chemicals, paints, food processing and textiles more than one material is used in the manufacturing cycle of a single or batch of products. It is quite common in such circumstances for management to require further information as to the reason for the direct material usage variance. Traditionally where standard absorption or standard marginal costing is used in such businesses, the variance is analysed as: Direct material usage variance Direct material mix variance Direct material yield variance Example (1) Dunfeeds Ltd produce a pet food ‘DF3’ It is produced using a standard mixture per tonne of product: 60% of D1 @ £75/tonne 30% of D2 @ £60/tonne 10% of D3 @ £40/tonne During an eight-hour shift 100 tonnes of product were produced and the actual material content was:

65 tonnes of D1 @ £72/tonne 28 tonnes of D2 @ £61/tonne 11 tonnes of D3 @ £40/tonne Total input 104 tonnes. In approaching variance analysis for these more sophisticated situations it is important to identify all the variable factors involved. At a glance it can be seen that the standard and actual prices differ as there are price variances in both D1 and D2. The actual consumption of raw material tonnage is 104 tonnes for 100 tonnes of product which suggests a yield variance and the mix differs from the standard shown above. Definitions These were once defined by CIMA as: • Direct material mix variance. Total material input in a standard mix at standard prices less actual material input at standard prices. This is a sub-set of the direct material usage variance applicable where materials are combined in standard proportion. It shows the effect on cost on variations from standard proportion. • Direct material yield variance. Standard quantity of material specified for actual production at standard prices less the actual total material input in standard proportions at standard prices. Example (2) In a further production period based on the standard mixture shown above, it is assumed that a process loss of 10% is anticipated. During the period output was 81 tonnes and the actual inputs and costs were: PQ Magazine November 2020

the troubleshooter PQ Actual consumption

Actual price

Actual cost £

D1 56 tonnes

£73

4088

D2 32 tonnes

£61

1952

D3 12 tonnes

£39

468

Total input 100 tonnes

£6508

There are five variances to be identified here: • Direct material cost variance. • Direct material price variance. • Direct material usage variance that sub divides to: • Direct material mix variance and; • Direct material yield variance. There are various approaches to this type of problem, the which follows is based on an approach to variance analysis by a former professional associate and late friend Joe Baggott (City of Birmingham Polytechnic), who with his excellent presentations on this topic made learning an enjoyable journey. The approach is to arrange the data in tabular form using the following key to column headings: S = Standard A = Actual P = Price Q = Quantity M = Mixture Referring to the Example (2) above for a production of 81 tonnes with a 10% process loss the input would be 81 x 10/9 = 90 tonnes and converted to standard proportions as: (60:30:10) would show: D1 54 tonnes, D2 27 tonnes and D3 9 tonnes. Production of 81 tonnes of ‘DF 3’ Raw Material

tonnes

£75

£73

£60

£61

£40

£39

Columns

100

(1)

(2)

(3)

We then evaluate the quantities within the mix shown in columns (1), (2) and (3) above by either standard or actual prices. For example column (A) shown below is from column (1) D1 54 tonnes @£75/tonne = £4050

Direct material cost variance Column (A) less Column (D) £6030 – £6508 £478 Adverse This is the difference between the standard cost of the actual output and the actual cost. Direct material price variance Column (C) less Column (D) £6600 – £6508 £92 Favourable This is the difference between the standard and actual prices multiplied by the actual quantities. Direct material usage variance Column (A) less Column (C) £6030 – £6600 £570 Adverse This is difference between the standard usage and the actual usage at the standard prices. The Direct material then sub-divides to: • Direct material mix variance • Direct material yield variance Mix: Column (B) less Column (C) £6700 – £6600 £100 Favourable This simply identifies the change in the mix – the difference between the standard and actual mix at standard prices. Yield: Column (A) less Column (B) £6030 – £6700 £670 Adverse This identifies the change in usage to achieve the actual volume of output and is termed the yield. Summary: £ Direct material cost variance

£478 Adverse

Direct material price variance

92 Favourable

Direct material usage variance

570 Adverse £478 Adverse

Sub-division of the usage variance Column

D1 D2 D3

(A) SQ SM SP £ 4050 1620 360 £6030

PQ Magazine November 2020

(B) AQ SM SP £ 4500 1800 400 £6700

(D) AQ AM AP £ 4088 1952 468 £6508

Direct material mix variance

100 Favourable

Direct material yield variance

670 Adverse £570 Adverse

Having read this overview of these advanced variances please when preparing for your examination give some thought to what factors may have contributed to the variances shown above. • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books

PQ professional development

Stand out from the pack Today’s professional accountant needs to be different from the rest. Here Pantelis C. Fouli explains how you can do this

his is not an article to tell you how, what and when to study. Here I’ll attempt to touch upon the number-one skill a professional accountant should possess to stand out from of the pack. This was inspired by a speech my personal development coach, Michael Virardi, gave to a large group of freshman college students here in Cyprus. If this advice on how to stand out from the pack becomes available to us even before we commence our studies or even during our studies, imagine the impact one could make once qualified and out in this dog-eat-dog world, fighting for a place at the table. The number-one skill to possess to be a successful professional is differentiation. The idea of the professional accountant stepping his/her foot out into the professional world should be akin to what the late Rolondo Virardi would say, and that was: “When you meet someone (either over the phone or face to face) and you turn your back (or hang up) there are only three things they can say about you: something positive, something negative and nothing at all. The last two options for me are negative.” Remember, we are responsible for the lasting memory we leave behind and this responsibility is ours on a daily basis. And to be memorable, you need to be different. Darwin said: “It is not the strongest of the species that survives, it is the one that is the most adaptable to change.” And change is definitely well apparent in 2020. So how do we differentiate from the pack and give ourselves the upper hand in this global economy that is changing by the day?

Information is power, and to update our primitive brain (who still faces the same issues they did millions of years ago) is to update, or upgrade, our soft skills. To be more adaptable, to be able to communicate better, have more empathy and resilience, work more efficient as a team and develop a greater sense for your emotional intelligence (otherwise known as emotional quotient or EQ). EQ is the ability to understand, use and manage your own emotions in positive ways to relieve stress, communicate effectively, empathize with others, overcome challenges and defuse conflict. The skills developed by professional accountants during their studies will get the job done; however, developing a greater sense of EQ will get the job done in an extraordinary fashion. Information is out there in abundance, but the professional who manages to communicate with his audience and find them the right information and how it will impact them will be ahead of the pack. That is being different in today’s society. Working from home (remotely) now gives corporations the flexibility to hire from a global portfolio. This is great news for us all in the sense of the opportunities, but on the flip side not so good since now the talent pool is flooded. This is precisely why today’s professional accountant stepping out into the corporate world needs to be focused on differentiation, to separate from the pack. Be the first person to enter the room, if you are on time you are late. Do not wait until you graduate from college or university to start

building your personal brand, start today. And one of the best platforms to do this, for free, is LinkedIn. Life is too short to learn everything, so learn from others on LinkedIn. Adopt a 7/7/7 philosophy (as taught by Michael Virardi), which is to make sure you respond to any given matter in: • 7 seconds (if you’re not doing anything urgent). • 7 minutes (if time permits). • 7 hours (if it has to be done at the end of a working day). We are flooded by professionals who do not even have the common courtesy to respond to sincere requests in a timely manner. Who do you think has more chances of landing that job if you arrive early, have done your homework and who has also been superprompt with any requests from the prospective employer? Who do you think will land that project if your proposal lands on the prospective client’s desk in record time? Be different, stand out, make yourselves and your organisation proud. Buddha once said everyone would experience 10,000 joys and 10,000 sorrows in their lifetime. Make sure you embrace this quote and adopt a mindset that allows you to have an impeccable attitude when you have nothing and yet patience when you have everything. To finish, my coach always reminds me that while I may be having a bad day, it’s not a bad life. Life is about choices and there are only ever two: be positive or be very positive. • Pantelis C. Fouli is ACCA qualified and an ACCA Advocate and Student Mentor. Anyone wishing to get in touch with him can connect via LinkedIn (https://www.linkedin. com/in/pantelisfouli), but please mention in a personal message that you are PQ reader. PQ Magazine November 2020

CIPFA spotlight PQ

Learning for life Sarah Shreeves stresses the importance of investing in lifelong learning

earning is a never-ending process. As the world changes around us and new uncertainties arise, it becomes even more necessary to build on existing skills and develop new ones that are fit for the future throughout our lives and careers. In September, the government announced a renewed investment in continuous education for adults. We are glad to see that the importance of lifelong learning is being recognised at a national level. This is something that we at CIPFA have understood for quite some time. A focus on continuous education is not only crucial for individuals, but also for businesses. There are myriad benefits to continuous professional development, especially at a time when many businesses are having to make difficult decisions and sectors are struggling to survive the pandemic. In the face of shrinking budgets, one of the first cuts to be made is often to the training budget. Arguably, this is short sighted. Having a well-promoted and applied CPD scheme can create real benefits for employers and generate a tangible return on investment. Highperforming organisations need to be ready for change, with people who are both skilled and highly motivated. A robust CPD scheme can enable this, by developing these characteristics in employees: • Highly skilled – training will not only by being invested in will go the extra mile, enable you to up-skill your current staff. offer discretionary effort and will be less Having a well-publicised policy that offers likely to leave. good opportunities for CPD will enable • Ready for change – organisations cannot you to attract the best applicants for your simply do the things they’ve always done; vacancies. they must evolve and change. Employees • Highly motivated – many studies must have the necessary skills not only for demonstrate that the provision of today but also for tomorrow – to enable opportunities to learn and develop are very survival, innovation and growth. individuals at pqstrong jobsmotivating ad 193 xfactors 74 for 16/3/10 08:30 PageIn 1recognition of this, CIPFA offers a range of work. Motivated employees who feel valued short courses developed specifically for public

sector organisations. These courses provide the opportunity for delegates to learn new skills which can immediately be implemented in the workplace. In addition to accountancy and financial reporting training, we also offer courses in commercial skills, leadership and fraud investigations – just to name a few. Our accountancy apprenticeships are offered at three different levels – Level 3 Assistant Accountant, Level 4 Professional Accounting Technician and Level 7 Professional Accountant. All CIPFA courses are flexible and designed to meet the needs of students at various stage of their careers, as well as the needs of their employers. It’s not necessary to attend university to become a skilled practitioner in accountancy, and it’s never too late to develop new expertise. CIPFA students and delegates range from those just beginning their careers to individuals with years of experience who hold management positions. While Covid-19 has caused significant disruption throughout the sector, we have been able to adapt by moving our courses and training online for the foreseeable future. Even amid a pandemic, we are providing our students and delegates with a reliable means to continue their learning at a time when many industries are facing an uncertain future. Although we can’t predict what will happen tomorrow, we can prepare for it through continuous professional development. The government’s renewed investment in lifelong learning is a welcome indication that education and training will remain priorities in a postCovid world. At CIPFA, we will continue adapting to the new normal by offering a wide range of opportunities for individuals to obtain new skills across the lifespan of their careers. • Sarah Shreeves is CIPFA’s Head of Training

Sorted, thanks to pqjobs.co.uk

PQ Magazine November 2020

careers PQ

Dear Karen

Life at AAT

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

David Frederick is the new President of AAT and managing director at Marcus Bishop Associates. He holds the FMAAT, FCPFA and FCCA qualifications, as well as an MBA (Manchester Business School) and a BA Econ (Leicester Polytechnic)

THE DILEMMA Being physically away from my office for the past six months has made me reflect on what I want from my current job and future career. At the moment these are just thoughts spinning around my head – so I was wondering if you had any guidance on how to make this reflection constructive? KAREN’S RESPONSE Reflecting on your career at any point in time is important, but you’re right, it needs to be a constructive process. Here are some questions I’d recommend asking yourself: • Does your current job bring you happiness? When our days largely consist of work, this is one of the first things we should consider. Reflect on what parts of your job you enjoy the most and whether these are helping you take steps towards fulfilling your longterm career aspirations. • Does your job play to your strengths? Think about what you’re naturally good at and whether you get a chance to exercise this in your current role. This might illuminate how you can upskill and develop your natural abilities. • Do you connect to the purpose of your job? Look critically at your organisation’s values and mission statement. Question whether this makes you feel motivated, rewarded and fulfilled and if it doesn’t, think about how you can make your work better align to your own moral code. • Would you do as your employer does? Many organisations have faced tough times this year, which has revealed a lot about their ethos and approach. Reflect on whether you agree with your organisation’s response to the circumstances of this year and whether you’ve felt supported. Make some notes as you’re thinking, so that if you need to make changes you can be clear about what those need to be and why. Above all, remember that the purpose of this reflection is to refocus or maintain clarity about what you want to be doing in your life and how you can stay satisfied and successful at work for the long term. • 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 November 2020

What time does your alarm go off? I rely on my internal body clock except Thursdays, when my alarm goes off at 5:30pm for my weekly 6:30am meeting. What is the first thing you do when you get to your desk? Take a few minutes to get into the zone before kick-off! What’s on your desk? Two screens, keyboard and mouse, glasses, pen, highlighter, small collection of scribbled meeting notes plus my meeting book for more notes! Where’s your favourite place for lunch? Alleyns Head in Dulwich. It’s a great place to relax with the team or clients. What can you see when you sit at your desk? A row of

wonderful front gardens and tree tops in the distance, which provides a welcome break from whatever is on my screen. How many hours a week do you spend in meetings? On average 15-20 hours. What time do you leave the office? 6pm-7pm. How do you relax? What’s that? In the good old days it was any opportunity to watch Harlequins; see a play; and walking. My attempts to maintain a diary is great therapy! What’s your favourite tipple? As a teetotaller it has to be a pint of orange and lemonade or tonic water and ice. What’s your favourite TV show? Columbo, Inspector

Morse, A Touch of Frost, A Question of Sport, Rugby Special. Summer or winter? Summer, but it used to be winter when I was able to play club rugby. Pub or club? Definitely a quiet pub like Alleyn’s Head in Dulwich. Who is your hero? No specific hero, but many inspirational life contributors who have taught me how to overcome life’s setbacks. What is the first thing you are going to do when lockdown is over? Get tickets for the Stoop to go and watch Quins and get out to the theatre, if they still exist! If you had a time machine where would you go? To the future, to see the changes and impact of digitalisation and technology on our sector.

Companies House overhaul The UK’s record of companies is to get an overhaul so that there are better checks on whether directors are who they say they are. The move by the government comes after years of evidence that Companies House is serially used and abused by criminals. The longdelayed reforms will mean companies will need to prove who their directors are. There has been concern that billions of pounds of illicit money is being laundered because of current Companies House systems.

Ex-BT FD loses OBE A former finance director at BT, Hanif Lalani, who was implicated in an insider trading scandal, has been stripped of his OBE. He is an FCMA. In 2012 Lalani was fined £1.4 million by the French authorities following BT’s investment in the IT services company Net2S. Five members of his extended family were also heavily fined. An announcement in The Gazette (the official public record) on 18 September said Lalani’s OBE, awarded in 2002, was now “cancelled and annulled”.

In brief Daimler fined over testing Daimler has agreed to pay a £1.2 billion fine to end US government claims that it cheated air pollution tests with its Mercedes cars and vans. While still denying the claims, the move means Daimler avoids a lengthy court battle. The manufacturer has also paid out £600 million to settle a class action lawsuit brought by vehicle owners in the US. It has also promised to ‘fix’ the affected vehicles at no cost to the owners. The US government has estimated this will cost another £310 million.

The PQ Book Club: books you should read Working from Home: Making the New Normal Work for You, by Karen Mangia (Wiley, £16.99) As Karen Mangia says in her new book, we all knew that virtual workplaces were coming, we just didn’t think they would come this soon! Just like remote exams. It seems like everyone has a remote career now, but will it mean your boss will forget you exist? And how do you inspire teams and get noticed? Don’t worry, Mangia answers those questions. This just-in-time book is superb. The forward by James Hinchcliffe is worth the purchase alone. What better than to ask a racing driver to talk about us all trying to live faster! He was

involved in a 230mph crash and likens his experience to the pandemic – it is a case of #ChallengeAccepted. Hinchcliffe also says that “love is greater than fear”. This has to be the lesson for the new normal. Mangia stresses we are all shift workers, which means work and home has become blurred (it was already the case for our alwayson mobile world). Let’s get down to her main point. She firmly believes that “the good news is working from home, ultimately, is better”. But then Mangia has been working from home since 2002. What is really good about this book, however, is she is here to

help you find success. When it comes to online meetings she says wear headphones, don’t come on a group call unmuted, and understand that interruptions will happen. All good practical stuff. There’s also a great chapter on career guidance and job search strategies, too. PQ rating: 5/5 This book couldn’t be more timely, and while some of the advice might seem obvious the author really does know what she is talking about. A great little book. 43

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

A letter to Bake Off fans

#Jerusalemadancechallenge Brendmo Incorprated, a South African accountancy firm, certainty rose to the #Jerusalemadancechallenege craze, proving its “team consistently seeks to reach higher standards in delivering quality business solutions that builds long lasting relationships”. They certainly know how to entertain their clients and lift spirits amid the pandemic too! Check them out at: https://www.youtube.com/ watch?v=aUxMe3oqmrs. So, is it time for your firm to join the global trend of dancing to Master KG’s Jerusalema? Any more examples please send to graham@pqmagazine.com.

Aat

PQ magazine recently came across the fact that Aat (‘The Great One’) was a queen of an ancient Egyptian 12th Dynasty. Of all the wives of Amenemhat III, only her name is known to modern archaeology with any certainty. She is buried at Dahshir and was about 35 years old at her death. • The AAT is celebrating its 40th birthday this year.

When accountant Mak was the second contestant to be booted out of the Great British Bake Off tent he went in style. There was some controversy after the judges saved Rowan, who had a disastrous biscuit round. But Mak stayed humble to the end and penned a wonderful letter which the show released, perhaps to ease the outrage. Mak’s letter said: “There aren’t that many shows on TV that brings a nation together. In recent times only one sticks out and it’s the Bake Off. A show of legendary stature and iconic value. The stars aligned for me for series 11 (2020). The world was in turmoil but for me, 2020 was all about the Bake Off. The privilege to have been selected and go in front of the nation with my quirky features was unbelievable.” He added: “It was an honour to be a part of a show that was a beacon of light – there is always hope in baking. Let’s end oppression and inequality through our kindness and love. Go Bake Off!” He’s a star with words as well as numbers! You can read our weekly stories online following the remaining two accountants.

Rule Britannia! CIPFA CEO Rob Whiteman recently got involved in the Last Night of the Proms debate about ‘Rule Britainnia’. As the song says: “Rule Britannia! Britainnia rule the waves! Britons never, never shall be slaves”. He says it is time to change these outdated words to acknowledged the sad heritage of enslavement. Whiteman suggests: “Britons ever, ever ever shall be brave”. There wasn’t universal agreement, however. One commentator said: “We need to learn from history to move forward and extinguish racism not rewrite it.” #lastnightoftheproms

Time to ditch the fax machine

Japan finally looks ready to ditch the fax machine. Your view of this futuristic nation might be somewhat knocked when you discover 95% of businesses and a third of households still have a fax machine. Japanese minister Taro Konon has said there needs to be an end of the culture of paper and ink. Many businesses also still use a Hanko stamp for signing contracts and other documents. However, the moves to stop the use of Hanko may be harder fight.

’ WEV E

Newman in The Times couldn’t help but get in on the act that is President Trump and his tax returns. It’s our favourite cartoon this month!

GOT THE L OT

The World of Frida Kahlo They call it puppy love It’s time to piece together Frida’s world! We are We have found the cutest ever puppy and dog giving away a wonderful 1,000-piece jigsaw puzzle puzzles book ever. ’Dot to Dot Puppy Love’ by Laura Callaghan this month. You can journey is an irresistible collection of the cutest dogs across a vibrant Mexican landscape, where and puppies. We can promise these loveable paintings and pets flourish amidst indigenous plant puzzles will make you smile as you complete life and vignettes from the artist’s life. Explore Frida the cute pooch portraits. Each adorable image Kahlo’s expectational story, delve into her art, and ranges from 100 to 500 dots. So relax and spot a huge cast of characters. This great giveaway unwind with these cuddly puppy puzzles. [Have even includes a fold-out poster. we said cute enough time?] To be in with the chance to win this great prize send your name and To enter this great giveaway send you name address to giveaways@pqmagazine.com. Head up your email ‘Frida’ and and address to giveaways@pqmagazine.com. Head up the email ‘Puppy we will do the rest. Love’ and we will enter you for the prize draw. 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 13 November. The main draw will take place on Monday 16 November 2020.

TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM 44

PQ Magazine November 2020

PQ magazine, November 2020

Articles inside

Zoe Robinson Why question practice really does work

The columnists

Prem Sikka Banks continue to facilitate epic levels of corruption