PQ magazine June 2016
www.pqmagazine.co.uk / www.pqjobs.co.uk
All the top tips you need for the ACCA June exam sitting as our experts tell it as it is
PwC trainee accountant with gambling addiction ‘died of shame’ Trainee accountant Joshua Jones (pictured), who jumped to his death last summer from the ninth floor of PwC’s London offices, ‘died of shame’ after being overwhelmed by his gambling addiction, his father told the recent inquest. His heartbroken father, Martin Jones, explained that his son, who was just 23, had led a double life. He revealed that when he went to Sussex University Josh blew all his student loans on gambling, and at the time of his death
owed up to £40,000 to banks, loan firms, friends and family. He told the coroner Shanta Deonarine: “Josh begged us not to tell PwC about his gambling. With his hockey and music friends he was life and soul of the party. We and some close friends knew the truth.” PwC’s Chris Butter said: “Josh was
a wonderful young man – bright and diligent, Those colleagues who were fortunate to have worked alongside him feel a great loss.” His father felt that more needed to be done to put pressure on the gambling industry to help addicts. In particular, he wants to see a shake-up of the online gambling industry so addicts can be permanently excluded from sites. The Coroner recorded a verdict of suicide.
AAT CLARIFIES RULES ON NEW RESIT LIMITS
The AAT unveiled the final version of its new-look AQ2016 at the Training Providers’ conference in Birmingham recently. And there is generally good news, although there is one small sting in the tail. The resit rules for 16 to 19 year olds have been changed. Now in any 24-month period (it was 12) these AAT students will have just two attempts to pass an AAT assessment. This new rule does not, however, apply to overseas or Scottish students! The main reason for this change is the fact that the AAT’s Foundation and Advanced qualifications (level 2 and 3) are now approved for Key Stage 5 delivery and will be listed on the performance tables from 2018. All those AATs over 19 years old will be pleased to hear that the Department of Education (DfE) rules do not apply to them and therefore there will be no resit limits at all. Another change is with employer engagement plans. Centres will have to show AAT that they are involving employers in a meaningful way. AAT will be monitoring this for all those providers with 16-19 year old students in England, but good centres should, of course, be doing this already. Percentage marks for each assessment will also be given to students under AQ2016. This will be welcome news and the AAT has shown ‘it is listening’. Students will find these published in their statement of achievement on MyAAT.
AAT’s Suzie Webb Feedback will still be provided, showing the areas where candidates did well and the areas they need to work on. PQ magazine was also able to establish what mark you will need to get a pass, merit and distinction. Remembering the pass mark of AAT assessments is 70%, it is hardly surprising that
a pass is 70%. A merit will be 80% and a distinction 90%. Students will need to take a look at the weightings, for example at Level 4 the new synoptic assessment counts for 35% of the grade. When it comes to the synoptic assessment the AAT has also worked delivery out here too now. So for Level 2 the test will be on average available every three out of four weeks. When it comes to the Level 3 and 4 synoptic test there will be windows six times a year. The AAT’s Director of Education, Suzie Webb, explained that AAT will keep an open mind about the placement of these windows and re-evaluate how this is working on annual basis. One thing AAT PQs will have to get used to is the wait for results. The synoptics all have elements of human marking, more depending on the level of assessment, so results will take six weeks to process. Webb stressed that the synoptic assessments reflect the growing importance for the accountancy profession at all levels to be able to write coherently and effectively as well as deal with technical elements of accountancy. The plan is for the AAT to put lots more online to support PQs. On top of the popular Green Light Tests it plans to introduce a Lucky Dip Green Light Test, which will randomly select areas from across a level. This will be an invaluable revision tool for those sitting synoptic tests.
“Without the ULE from Kaplan, I would not have achieved such a high score in my exams.” Adam Sibley ACCA Prizewinner F7, June 2015
Boost your chances of passing by up to 70% with the Ultimate Learning Experience
Ø
Get exam confident for the September exams by studying with the Ultimate Learning Experience (ULE), our recommended combination of Tuition, Revision and Question Based Day courses.
Classroom courses
Exam sitting
Live Online courses
Come to a classroom for a structured programme with maximum expert tutor support.
SEPT
Available for maximum flexiblity, our interactive lectures are delivered online by an expert tutor.
• ULE available in London, Bristol and Birmingham • Revision courses available in other selected locations
2016
Enrol today and Save £70 off ULE† 01908 540 068
www.kaplanfinancial.co.uk/pqule
Ø Based on an average pass mark across all Kaplan UK classroom centres and Live Online students sitting P7 in the June 2015 exams, comparing the pass rates of Kaplan students who sat the Ultimate Learning Experience (Tuition, Revision & Question Based Day) vs Tuition only. † Only available with ULE. T&Cs apply. Visit www.kaplanfinancial.co.uk for details.
• Flexibility to study online from anywhere • Lesson recordings to catch up at any time
comment PQ
CONTENTS
News 08ACCA optional papers PQs ‘terrified’ of final optional exams 10CIMA exams Latest pass rates are ‘consistent and fair’ 12CIMA pricing changes Institute to introduce tiered pricing based on world regions 13ACCA P7 exam Students must work harder, says the examiner Features, etc 06Mind your Ps&Qs ACCA P5 – my five attempts; why CBE exams are unfair to distance learners; and misgivings over CIMA tie-up 14Ethics Learning the lessons of the ‘Panama Papers’ 17ACCA tips We’ve two pages of the hottest tips especially for you
19ACCA examiners’ reports
What the examiners had to say about the feared optional papers
21Let’s get technical We take a look at forecasting cashflows
22SMEs and LSBU How London
June 2016 26CIMA P1 We focus on Section
A with some test questions 28CIPFA round-up Conference and other news from CIPFA 29Careers #1 How to deal with a counter job offer; and meet an ACCA award-winning student 30Careers #2 Life at PwC; plus the best of social media 34Fun time Accountancy’s lighter side; and more great giveaways The columnists Robert Bruce Why accountants need to communicate better 8 Prem Sikka Weakening the taxman is a false economy 10 Carl Lygo New salary data shows that some things never change 12 Subscribe to PQ magazine It’s FREE – see page 33 or go to www.pqmagazine.co.uk ABC July 2014 – June 2015
32,233
South Bank University is supporting small businesses; plus ‘A quick look’ at dealing with risk
24ICAEW spotlight Top tips
from lecturers attending the Partner in Learning conference
25CIMA E1 paper How to
manage the finance function, with particular reference to managing conflict
Publisher’s statement: We send a digital issue of the magazine to an additional 8,613 requested readers Free to all accountancy students Annual subscription: £35 (£50 overseas)
Gambling with lives The sad story of Joshua Jones is a stark reminder of the way addiction can take over your life. The PwC trainee really did lead a ‘double life’, and for anyone who has known a problem gambler won’t be surprised to see how quickly Josh got into financial trouble. I have personal experience of this terrible addiction, and know someone who got hooked on what is called the ‘crack cocaine’ of gambling – fruit machines. He managed to turn his life back around with help and regular visits to GA! For Joshua the shame became too much and he jumped from the ninth floor of PwC’s offices I noticed that The Times’ Rich List had a new group of high flyers, the online gambling site millionaires. And it is here that I, like Joshua’s heartbroken father, have real concerns. Who is monitoring these sites? Betting firms need to have the option of permanent exclusion from their websites. They must also all be working together so if you become excluded from one site then that ban applies to all sites. Gambling addition has to be taken very seriously. The Gambling Commission needs to be seen to be doing more. They did recently make Coral pay back nearly £850,000 to the victims of a problem gambler who had lost a fortune. The betting industry regulator criticised the bookie’s anti-money laundering procedures and safeguards against problem gamblers. But this is just the tip of the iceberg. First with the news Our lead story this month takes a look at the AAT’s new-look AQ2016 and it’s going to mean a big change for many students. It all seems pretty positive to me. The actual marks are so much better than just saying ‘competent’. Students will also be awarded a pass, merit or distinction, along with their mark. At the recent LATDG meeting the other professional bodies were not convinced about the merits of this system. Will employers deem you a failure if you don’t get a distinction? Will students keep taking the same test until they get one too? Graham Hambly, PQ magazine editor – graham@pqaccountant.com
Have you tried CIMAstudy yet? CIMAstudy is the only online learning resource developed by CIMA and offers one of the most flexible ways to study. We’ve recently made some improvements to our courses, so it’s even easier to study on the move.
Tablet friendly layout
Easier navigation
Faster load times
Why not try CIMAstudy for yourself with our NEW free demo, visit our website for details. Working in partnership with Kaplan our approved study materials provider.
www.cimastudy.com
ACCA JUNE EXAM PREPARATION
TO HELP YOU MAKE THINGS
EASIER
WE’VE DESIGNED THE PERFECT
REVISION COURSES
JUST FOR YOU
Our courses are led by award-winning tutors who will recap key ACCA syllabus areas and use past exam questions to focus on the techniques required to maximise your exam score.
You can choose from Weekend (an intensive 2-day course) and Extended weekend (a 3-4 day revision course, available from SatTue). Classes start 21 May.
For last-minute preparation we are offering a 1 day Question Based mock exam to help you hone skills before your exams. Available on weekdays from 25 May – 4 June.
BOOK ONLINE AT
www.LSBF.org.uk/SHOP | 020 3535 1111
PQ have your say
email graham@pqaccountant.com Try, try and try again I have finally passed my ACCA P5 exam with a mark of 70 after failing five times (marks in 40s) and am now an Affiliate. There’s been many times throughout my ACCA journey that I have wanted to give up – I felt incapable of passing P5 due to not understanding the requirements in the questions. I feel that the March exam had a combination of Alex Watt’s confusing style and a more understandable style. I decided to study differently for this last exam. For previous sittings
I had revised for such long periods of time and gone through past exams papers (which I found soul
destroying) and found that I was exhausted the week before the exam and having to force myself to revise. This time I left my revision until 10 days before the exam – I didn’t do any past papers and felt more refreshed and able to tackle the exam on the day. This approach is not recommended to anyone who hasn’t failed as many times as myself! When you’ve sat the exam this many times it’s impossible not to know the syllabus, it’s just about being able to think clearly on the day and apply that
knowledge in the exam hall. I have loved reading PQ magazine, and seeing other people’s comments regarding this exam gave me the belief that I was capable and that I wasn’t the only person feeling this pain. I’d like to say a great big thank-you to PQ magazine for helping me get through this and I now look forward to reading NQ magazine. Thanks again. Wendy Watkins, by email The editor says: Thanks Wendy, glad we could be of service and share the pain and joy! It is really interesting how you turned it all around.
The writer of the star letter each month wins a fantastic PQ memory stick! Online prejudice
I have just read the story on the front cover of PQ magazine headlined ‘ACCA to phase in new CBE exams’ (PQ, May 2016). Why are BPP and Kaplan the only colleges being allowed to offer tuition for the CBE exams in London? I am also told by the ACCA website that I cannot study on my own and then opt to sit the CBE exams come September. It seems strange that the ACCA is taking its exams online but isn’t allowing those who study online to take the test! That all seems a bit the wrong way round to me. I don’t live anywhere near any big city, so even
NEW LSBF
Why no vote for us?
ONLINE SHOP
I note that CIMA’s Andrew Harding says that the creation of a new association will mean us students are the main beneficiaries, yet we still have no vote in what could be
Book your Professional courses online in a few simple steps.
Andrew Harding
• Filter courses by date, subject & study mode • Select papers that suit your schedule • Buy your papers online straight away
I am terrified!
when more centres are allowed to offer CBE tuition in December I won’t be able to attend. Surely the ACCA needs to ‘approve’ online learning as one of the options during the phased approach. Name and address supplied
seem unable to change it. I hope when I qualify I won’t forget those I left behind! Name and address supplied
Thanks you for tweeting out the March results. However, it does make me terrified about what lies ahead. The optional papers, which we sit after passing all the key papers, seem to be an incredible stumbling block for so many PQs. I read the Open Tuition noticeboards regularly and there seems so much negativity and frustration from people who just don’t seem to be
SHOP ONLINE AT
www.LSBF.org.uk/shop 020 3535 1111
able to pass these final two papers. With just one in three PQs passing these papers at most sittings I am surprised there isn’t more of an outcry. I saw that some students are calling for a petition (PQ magazine, May 2016, page 12). I guess this will quickly be forgotten as they move on to the June sitting, which is just a month away. The exam cycle just means we get sucked into the system and
a massive change for CIMA and our future. The two bodies, CIMA and the AICPA, also seem very different, and I personally can’t see the synergies between the two. Aren’t the AICPA more audit focused? CIMA also can lay claim to being the more truly global body. I think they get more from us than we do from them. John Williamson, by email
DUE TO LACK OF SPACE OUR SOCIAL MEDIA UPDATES HAVE BEEN MOVED TO PAGE 30
PQ Magazine Fourth floor, Central House, 142 Central Street, London EC1V 8AR | Phone: 020 7216 6444 | Email: graham@pqaccountant.com Website: www.pqmagazine.co.uk | Editor/publisher: Graham Hambly graham@pqaccountant.com | Advertising manager: Polly Thrasivoulou polly@pqaccountant.com Associate editor: Adam Riches | Art editor: Tim Parker | Subscriptions: dom@pqaccountant.com | Contributors: Robert Bruce, Prem Sikka, Carl Lygo, Tony Kelly, Phil Gammon, Jo Daley | Origination and print services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email dom@pqaccountant.com
Published by PQ Publishing © PQ Publishing 2016
53% more likely to pass with BPP
*
You can be confident when you choose to study with BPP Professional Education as our latest pass rates prove you are 53%* more likely to pass your first CIMA exam with BPP Professional Education. Plus in the February 2016 Integrated Case Study exam sitting four of our CIMA students were recognised as Prizewinners: • Operational Level – 1st in World via our award winning Online Classroom Live
• Management Level - 3rd in World In Centre Classroom at BPP London
• Management Level – 1st in World In Centre Classroom at BPP Liverpool
• Strategic Level – 3rd in World In Centre Classroom at BPP Milton Keynes
The Achievement Ladder was very positive and ensured that self-study was used effectively. The gradual build up helped me prepare for the exam. Evelyn Smith, CIMA Prize Winner in the March 2015 ICS Exam
Book your programme today
03331 307 288 bpp.com/cima *53% based on BPP uplift of students sitting P2 Integrated Case Study exam in the February 2016 sitting compared with CIMA Institute Pass Rates to 31/03/16 for the first time.
PQ news
ROBERT BRUCE Why it pays to explain
Accountants always seem to skip the important stuff. They are so steeped in information and process that they fail to think about how they could tell the world about what they have done. Take a recent report from EY. They conducted a review of 100 annual reports and accounts and found that 42% of them hadn’t bothered to explain how it had made its money. Doubtless a good accountant could skim through the figures and reach a sensible conclusion about where the profits had come from. But that isn’t much use to anyone else. The same review found that only 9% of the firms had shown any link between strategy, KPIs, principal risks and pay. Again, an informed accountant could take a view, but no one else. It is no wonder that there is a huge disconnect between what companies think is a sensible level of remuneration, for example, and what the public thinks. This is not just a complaint about how accountants need to be better communicators. It is about the way accountants see their work. They are not just, as auditors, the providers of assurance. They are supposed to be the explainers, and that requires them to stand back and think themselves into other people’s mindsets. It is simple. Like the instructions that come with flatpack furniture, if they were critiqued by ordinary customers none of us would be sitting there on a Saturday afternoon with only half a shelf unit standing up. It is the same with annual reports. Explain things, simply. n Robert Bruce is an award-winning writer on accountancy for The Times
ACCA’s are ‘terrified’ of the optional test ‘Terrifying’ is how many students see the prospect of sitting the ACCA’s final optional papers. With just one in three candidates passing the March P5 sitting some PQs are wondering if the ACCA is making the exams “unnecessarily difficult to pass”. One PQ who passed his final paper took one look at the March pass rates and simply said: “Wow – they are getting lower”. In fact, the first-ever March sitting was a mixed bag. The pass rates of six papers rose when compared with the December sitting, five dropped and one stayed the same. The F7 examiner was pleased with the 51% pass rate. Some 50% of those who sat P1 in March also passed. In fact, all core P papers held steady. It was not such good news for P7 sitters. The examiner has said in her report that
ACCA EXAM RESULTS MARCH 2016 – WORLDWIDE Mar 16 Dec 15 41% F5 Performance Management 39% F6 Taxation 44% 53% F7 Financial Reporting 51% 45% F8 Audit & Assurance 41% 46% F9 Financial Managem’t 41% 45% P1 Professional Accountant 50% 47% P2 Corporate Reporting 47% 47% P3 Business Analysis 48% 47% P4 Adv Financial Managem’t 38% 35% P5 Adv Performance Managem’t 33% 29% P6 Adv Taxation 44% 42% P7 Adv Audit & Assurance 30% 39%
overall performance was poor, and stressed: “There was a clear lack of both auditing and financial reporting knowledge”. Many PQs resitting the exam had claimed that the March test was much harder than December, and the 30% pass rate backs up their case!
Sep 15 39% 47% 44% 42% 35% 48% 44% 45% 36% 30% 45% 29%
Dr Mary Bishop (pictured), ACCA’s Director of Learning, said: “Pass rates in most exams have at least remained steady and we’re pleased to see improvements in almost all of the Professional level exams.” She felt it was clear that students are still adapting to the rigour of the combined breadth and depth of the skills exam format.
Don’t ask, don’t get! Male accountants are more likely to push for a pay rise than their female colleagues, and are more likely to get one, says new research from the AAT. More than one in four men working in finance (26%) had asked for a pay rise in the last year, compared with less than one in five women. Conversely, three in five women (61%) have never asked for a pay rise. And it was a question of don’t ask don’t get, as nearly half of men surveyed (47%) had received a pay rise during the last year. This compares to 40% of women. The AAT’s chief HR officer, Olivia Hill, said: “These latest figures suggested men working in finance are far more positive about their worth and value in the workplace, and subsequently are more confident of asking for a pay rise, which many are receiving.”
The Association of Taxation Technicians (ATT) recently reached 8,000 members – a new record. The 8,000th member is Elizabeth Ashcroft, of Hartley Wintney, Hampshire, who works for Ashcroft Design & Construction
In brief Take more care! ACCA F9 candidates must take greater care when presenting answers to numerical questions in section B, says the examiner. It is also good exam technique to show all workings, but these need to be labelled. Remember, by showing your workings you can gain marks because you applied the right method even when numerical errors have been made. For our take on what the optional paper examiner’s said about the March sitting turn to page 17. 8
Don’t be 50 and in practice! ICAS has got into hot water over an “ageist” letter it sent to its members in practice. The letter, headed “The only constant is change”, explains that there is a tsunami forming on the horizon, which will hit the UK accountancy professional within the next five years. Auto-enrolment, FRS102, and quarterly reporting will have a profound effect on how practices operate. The letter says that for some these challenges, especially the 58% of practitioners who are
over 50, it may all be too much! These members are told: “It may be the impetus to handing on to the next generation”. GAAPweb offers placement GAAPweb, the UK’s top job site for accountancy and finance professionals (and part of the Trinity Mirror Digital Recruitment), have launched a competition to help kick-start the career of one undergraduate by offering a twoweek work experience placement in their finance team. The
competition is open to all degree students studying accountancy/ finance. Students need to submit their CV and complete a short online application form. Deadline for entries is 30 May. Record entry for tax exam Record numbers of students have applied to sit the CIOT’s Advanced Diploma in International Taxation. Some 784 students have entered for the June exams, a big jump from the first sitting when 30 students sat the exams in 2004. PQ Magazine June 2016
In par tnership with
Where professionals become international business leaders GGSB MBA / GGSB Master in International Business (MIB) / Executive Education / Language programmes Scholarships are available for January 2017 intake — enquire today to find out more.
■ Programmes delivered in English by the triple-accredited Grenoble Graduate School of Business (GGSB) ■ 18 month post-study work permit in Germany* ■ Careers Centre support T + 4 9 ( 5 11) 5 4 6 0 9 2 7 / E I N F O @ G I S M A . C O M *Available for MBA and Master’s graduates in Germany.
PQ news
PREM SIKKA Weakening the taxman is a false economy The leak of the papers of Panama law firm Mossack Fonseca provides insights into organised tax avoidance. The Panama Papers consist of 11.5 million documents relating to 300,000 companies. Behind a wall of secrecy provided by anonymous shell companies and trusts, and with the aid of accountants and lawyers, wealthy elites were busy constructing complex transactions to avoid taxes. The chances of mounting effective action by HMRC are low. Investigating tax avoidance/evasion is a labour and resource intensive task. HMRC has been deprived of these. Staff levels have fallen from 100,000 in 2004 to 56,000 now, with more cuts planned. The result is all too predictable. Despite considerable coverage, no test cases have been brought against Google, Amazon, Starbucks or other multinationals. In 2010, a whistleblower gave HMRC documents showing 3,600 wealthy individuals and arms dealers may be dodging taxes through HSBC’s Swiss operations. Just one prosecution followed. Since 2010, there have been only 11 prosecutions in relation to offshore tax evasion. HMRC told the Public Accounts Committee that it has the capacity to investigate only 35 wealthy individuals for each year. A poorly resourced HMRC can’t investigate tax avoidance/evasion or prosecute and thus can’t send out a strong deterrent message. The loss of revenues means prolonged austerity and higher bills for those unable to hire the so-called experts. n Prem Sikka is professor of accountancy at the University of Essex
CIMA latest pass rates are ‘consistent and fair’
There are no surprises and no shocks in the latest set of CIMA pass rates, says the institute. It believes these latest results show qualifying with CIMA is “achievable, fair and consistent”. CIMA OT pass rates Overall First time Total E1 87% 79% 76% P1 65% 45% 42% F1 83% 74% 71% E2 92% 84% 82% P2 68% 46% 42% F2 69% 47% 45% E3 77% 62% 59% P3 72% 51% 48% F3 71% 50% 44%
Steve Flatman, CIMA CASE STUDY EXAMS – 2015 the exams chief, Feb 16 Nov 15 Aug 15 May 15 was pleased to Operational 62% 61% 34% 67% see all the OT Management 64% 78% 77% 62% pass rates were Strategic 56% 62% 67% 70% going in the right direction. Only one first-time pass P2 pass rates are creeping up. For rate has fallen – E2. This was a the future, Flatman is predicting healthy 85% and is now just 84%! that P1 won’t necessarily have the Flatman told PQ magazine in an lowest pass rate. He also believes exclusive interview that pass rates OTs are really driving learning of can also continue to rise and the whole syllabus. revealed current data is showing Turning to the case study results, the rates are still going up. “We are Flatman revealed a slight drop in really encouraged with the way the Strategic Level to 56%. He felt students are getting to grips with this reflected the fact that it was a the syllabus and exam platforms,” fairly small cohort in February with he said. Even the dreaded P1 and many resitting.
Women top the ICAEW prize list
Women dominate the ACA Professional level results again, winning four of the five prizes up for grabs in March. PwC’s Ahmad Ali Qasim was the sole male prize winner for his performance in the Audit and Assurance paper. His firm also picked up four out of the five prizes, with only Alliotts Lisa Chen, who took first place in the tax compliance paper, managing to prevent a clean sweep by the firm. The other March prize winners were Susan Aryee, Catherine Overy and Heather Brown.
ICAEW PROFESSIONAL EXAM RESULTS Mar 16 Dec 15 Audit & Assurance 80.9% 74.9% FA & Reporting 87.4% 74.2% Tax Compliance 82.8% 73.4% Business Planning Tax 76.2% 77.3% Business Strategy 90.3% 88.4% Financial Management 84.9% 78.8%
Top pass rate this time was Business Strategy at 90.3%, closely followed by Financial Accounting and Reporting with a 87.4% pass rate. The toughest paper was Business Planning: Tax with a pass rate of 76.2%.
Generation Z are savviest online
Generation Z (16-24 year olds) job hunters have become the savviest when it comes to controlling their online identity, according to new research from CVlibrary. Some four out of five (83%) of this group are more careful about the pictures they post on social media, in
Top women employers The Big 4 accountancy firms all made it into The Times’ Top 50 Employers for Women 2016 list. PwC was one of the first organisations to publish its gender pay gap (in 2014). It has strengthened its inclusion strategy and work with the UN’s HeforShe. KPMG says it works to equip all its leaders to be inclusive and has set targets at all levels. The firm also focuses on its male colleagues to engage around gender parity. It too is involved in the HeforShe campaign and hopes this will be a catalyst for further change. EY says 95% of its partners have taken its inclusive leadership programme and it has reached its female partner target. It led the pledge for parity on International Women’s Day. Deloitte said it was proud of its return to work programme, report on the gender pay gap and programme for putting 1,500 leaders through inclusive workshops. Other employers on the list include the Home Office, Procter & Gamble, Unilever, Microsoft and EDF Energy. 10
case they are found by an employer (the national average is 71%). Three quarters of Generation Z’s also expect to be ‘goggled’ by a potential employer. Interestingly, they are less concerned when it comes to the use of their picture in the recruitment process. Some 32% felt it was fine to use a picture on a CV or application form.
ACCA-X is one year old
The ACCA’s innovative online learning programme, ACCA-X, is close to signing up 100,000 students as its first-year anniversary approaches. ACCA-X offers digital courses to help open access to the accountancy profession. Its two free courses – Introduction & Intermediate Financial and Management Accounting – have had 92,000 enrolments. Both these courses form part of the ACCA’s Diploma in Accounting and Business. There are now five ACCA-X courses that run four times a year. The paid-for courses are Accountant in Business, Management Accounting and Financial Accounting. • ACCA-X recently picked up the Best eLearning and Online Education award at the International and European Association awards night in Berlin. PQ Magazine June 2016
PQ news
CARL LYGO Salary data shows some things never change The rich get richer and equal pay for women is still not a reality. These are the two conclusions I drew from new ground-breaking research on graduate salaries. The Institute for Fiscal Studies (IFS) has issued a study of UK graduate salaries 10 years on from graduation, based on student loan records of 260,000 individuals over a 10-year period. Student loans were first introduced in 1999-2000 in the UK and the repayment history of those first graduates is now producing some interesting data. The headlines focused on the fact that graduates from the London School of Economics earn more than those from any other UK university. Medicine and economics degrees deliver the highest average salaries 10 years out for graduates. Beneath these headlines was the revelation that students from the richest 20% of homes earn more in the workplace than the other 80% of students, with an average earnings gap 10 years after graduation of £8,000 a year for men and £5,300 for women. The data also clearly showed the large pay divide between men and women. Ten years after graduation male medical students earned a median wage of £55,000 compared with £45,000 for women. In fact, in the top 10 most lucrative degrees to study, only in European languages and literature degrees did the average women’s salary exceed or match the average male salary (women earned £26,400 compared to men £25,000). n Professor Carl Lygo is chief executive of BPP
New tier pricing for CIMA exams
CIMA is introducing a tiered pricing system for its exams, based on three new regions. A spokesman told PQ magazine that the purchasing power of some currencies in Africa have fallen by 50%, and CIMA had became concerned that if it did not act students would no longer be able to study with the accountancy body. The world according to CIMA has been split into three: Western Europe, Rest of the World and Africa. The Western Europe region includes Turkey, Australia, Singapore, the US and Canada. CIMA has said that for students in Western Europe regions the cost
of exams will go up on average 5.5% (or £6.20). The institute promised the changes, which take effect on 1 July 2016, were ‘net neutral’ for CIMA. Any student who has already booked an exam after this date won’t be asked for more money. However, if you now book an exam after 1 July you will pay the tiered price. The spokesman stressed that CIMA wants to help businesses succeed everywhere, and to do this it needed to reflect exchange rate anomalies. The move means students fees in sub-Saharan Africa will go down by 16–17%.
As part of a broad review CIMA also revealed students will soon be able to pay CIMA via PayPal. The institute apparently still receives bank drafts from some students, which have a big hidden cost for these PQs. “We have to make CIMA easier to do business with,” explained the spokesman, “and this is one way of doing this.”
Helping higher education students
One way to helping university students learn the valuable skill of managing their finances would be to introduce monthly maintenance payments, says ACCA’s CEO Helen Brand (pictured). She felt that this would be better than paying one-third of the annual amount at the beginning of each term, as is currently the case. This already happens in Scotland, she explained, and mirrors how payment is received in
the working world much more closely. Another initiative she would like
to see is the introduction of a savings account with incentives. The government could offer under18s a match savings account based on an ISA incentive. So, if the student saves £1,000 the government would match this amount once the person enters further/higher education. Brand pointed out that some 40% of students leave education with an overdraft, the average debt being £894.
IASB amends IFRS 15 revenue standard The International accounting Standards Board (IASB) has issued amendments to IFRS 15 Revenue from Contracts with Customers, to help clarify some requirements and provide more transitional relief. The amendments should clarify how to identify a performance
obligation (the promise to transfer a good/service to a customer) in a contract. They should also help the understanding of when a company is a principal (the provider of a good/service) or an agent (arranging for good/service to be provided).
Finally, the changes proposed will help determine whether the revenue from granting a license should be recognised at a point in time or over time. The amendments have the same effective date as the standard – 1 January 2018.
In brief Specimen papers released CIMA has released specimen case study answers, using a real student script, to show what a pass looks like. PQ magazine, along with many leading tutors, has been campaigning for the institute to publish students’ papers so PQs can understand the standard expected. CIMA’s scripts will be anonymous and should show a student who achieved a mark of around 95. CIMA’s Peter Stewart explained that this should become an invaluable resource to all students studying the case study. Parking fines not tax deductible Security firm G4S cannot set its parking 12
were a business expense and so could be used to reduce its profits for tax purposes.
fines against its tax bill, the tax tribunal has ruled. G4S Cash Solutions aimed to reduce its corporation tax bill by around £580,000, but the first-tier tribunal has ruled in HMRC’s favour in rejecting the bid. G4S incurred parking fines usually while delivering consignments of cash over the pavement. The firm claimed these
CIPFA student conference date CIPFA students need to put Wednesday 13 July in their diary, the date of the annual CIPFA student conference. Part of CIPFA’s annual conference, which takes place in Manchester, PQs can dip in and out of the main conference too, all for no charge! It’s a great chance to network and understand the dynamics of change in the profession. The CIPFA Student Network will also be out in force, explaining what it has planned for the year ahead. To sign up go to www.cipfaannualconference.org.uk PQ Magazine June 2016
news PQ
On the buses: how to succeed when your fail maths GCSE
Are you working hard enough? P7 examiner doesn’t think so!
ACCA P7 March sitters have come under fire for being unprepared for the exam and simply not putting in enough effort into learning many of the basics. This assessment of the March sitting comes from the P7 examiner who is not a happy woman. With a 30% pass rate this time around, the examiner said that the overall performance of sitters is poor. She said many candidates were “not properly prepared for this wideranging exam and were unable to adequately apply their knowledge to answer the questions set”. The examiner felt too many students focus on the minutiae of a point and produce a list of everything they knew about a topic. This is irrespective of whether it is relevant or not. Another
worry is the clear lack of both auditing and financial reporting knowledge, which isn’t helpful if you are sitting an advanced audit and assurance paper! Another concern for the examiner was the candidate’s inability to differentiate between business risk and audit risk in Question 1. There was also confusion between outsourcing and the use of an audit expert. So, do you know your Type 1 or Type 2 reports as detailed in ISA 402 ‘Audit Considerations Relating to an Entity Using a Service Organisation’? • See page 19 for more on the P7 examiner’s report, and to find out what the other optional examiners had to say.
Billionaire transport tycoon Brian Souter is living proof you can be successful and an accountant without a maths O-level! The son of a bus driver had wanted to be an accountant but couldn’t go to university at first because he didn’t have that maths O-level. So Souter went to Dundee College and studied for a diploma in economics and accounts, before eventually getting in to university. All through higher education he worked as a bus conductor and in the week he sat his exams he
reportedly worked 77 hours on the buses! He qualified just as Mrs Thatcher became Prime Minster and that’s when he saw a gap when coach routes were deregulated. Investing his savings of some £12,000, he went into business with his sister, a nurse, who put her house up as collateral, and £25,000 from their dad. Stagecoach was born when they bought two second-hand buses, offering routes from Dundee to London and Aberdeen to Glasgow. The company now has 14,000 buses and sales of £3.2bn.
ICAEW bans digital watchs from exams The ICAEW has confirmed that digital watches will not be permitted in any ICAEW exam from June 2016. This includes the certificate, professional and advanced level exams. This action has been taken in order to protect the integrity of the exam, said a spokesman. He
believed it will also prevent the accidental breach of the ICAEW assessment regulations by individuals wearing smart watches as their normal timepiece. Analogue watches will still be permitted in the exam hall, but may be subject to inspection.
YOU’LL BE AVOIDED AT DINNER PARTIES. If you’re struggling with your current accountancy body exams, or are just tired of being treated like a number, there is an alternative. As an accountancy body committed to customer service, we can personally help you through every step in the process of becoming an accountant. We believe that if you want to be an accountant, you should - even if that means less enjoyable dinner parties. Call 0191 493 0262 Visit aiaworldwide.com We believe you should count.
PQ Magazine June 2016
13
PQ ethics
Lessons of the Panama Papers
Accountants need to remember to take an ethical approach, says Neil Arnott
L
et’s start with a little quiz. Here goes: Who – or what – is Mossack Fonseca? Is it: A. A rather pleasant Chilean white wine? B. A Uruguayan centre-forward who plays for Barcelona? C. A Panamanian legal firm at the heart of a ‘leak’ which indicates it was involved in activities facilitating money laundering and tax evasion on a global scale? The answer is, of course, C – although you would have been forgiven for never having heard of it until a few weeks ago, when over 11 million documents from the company were leaked (the ‘Panama Papers’). These papers reveal, among other things, vast numbers of individuals and companies using ‘off-shore’ companies, many of which are based in UK crown dependencies and overseas territories such as the Cayman Islands and the British Virgin Islands. Mossack Fonseca deny they have done anything wrong, and claim their activities have been misrepresented. So let’s have a look at the key issues in a story that is likely to run and run. Big corporations and wealthy individuals generally like to minimise the amount of tax they pay – and there is nothing wrong with avoiding tax. Tax avoidance means the use of legal tax planning to reduce a tax liability – a simple example is the use of an individual’s annual investment allowance in an ISA. This is simply sensible tax planning – it is perfectly legal and makes sound financial sense. Tax evasion, on the other hand, is the illegal avoidance of tax; it could be by understating income, overstating expenses or simply not declaring income that would otherwise be taxed. These activities are, of course, both unethical and illegal.
14
Perhaps it’s not a Panama hat day…
However, there is a huge area which falls somewhere between tax avoidance and tax evasion. The release of the Panama Papers probably only confirmed what most people have known for a long time – that the bigger the corporation or the wealthier the individual, the ‘murkier’ their finances become. It is not illegal to form, or be a director or shareholder of an offshore company – one that has its base in one of the socalled tax havens. It has been estimated that $7.6 trillion (a trillion is a 1 followed by twelve zeroes!) – or 8% of the world’s wealth – is safely tucked away in tax havens, with extremely low (or zero) tax rates. The effect of this is that around $200 billion a year of tax revenue is potentially lost. To put this into context, this is approximately the same as the gross domestic product (GDP) of South Africa! By ‘hiding’ the ‘true’ nature of business
structures, by ensuring that profits are only made in countries with low tax rates while losses are recorded where the tax relief is highest, and by investing personal wealth in ‘shell’ companies that operate under a veil of secrecy, the wealthy are able to avoid paying tax – but this of course relies on having access to expert advice on how to establish these extremely complex arrangements. This is where ‘specialists’ such as Mossack Fonseca come in, and in addition to solicitors there are also accountants who offer such advice and support. While there is nothing wrong – legally or ethically – with helping clients avoid tax, there is perhaps a greater issue here. It has emerged that many of Mossack Fonseca’s clients were of ‘dubious’ integrity, including individuals against whom economic sanctions were already in place. One of these was Alaa Mubarek, the son of former Egyptian president Hosni Mubarek. In 2011, the EU had imposed economic sanctions on both father and son, freezing all their assets. Yet in 2013, just two years later, Mossack Fonseca incorporated a company by the name of Pan World Investments – the beneficial owner of which was none other than Alaa Mubarek. Mossack Fonseca claim that they undertake client due diligence (CDD) on all new clients, yet this was clearly lacking in rigour as they either failed to identify Mubarek as the beneficial owner – or conveniently ignored the fact. Remember, the main purpose of CDD is to investigate the true nature of a potential client to identify if there are any ethical or other reasons not to accept them as a client. There are a number of examples of this process failing that have emerged from the leaked records. There are a number of clear messages that the Mossack Fonseca case highlights for accountants with regard to their professional ethics. We all study professional ethics – and are subject to our professional body’s code of ethics – yet here is a real-life situation where they appear to have been ignored and it has taken an anonymous whistleblower to bring them to light. Anyway, enough of such unethical behaviour... did someone mention a nice glass of Chilean white wine? PQ • Neil Arnott is a course tutor at Premier Training
PQ Magazine June 2016
• BA (Hons) Accounting and Finance • FdA Foundation Degree: Accounting • Top-up BA (Hons) Accounting and Entrepreneurship AAT level 3 will guarantee direct entry into undergraduate year 1 AAT level 4 will guarantee direct entry into undergraduate year 2
No 1 London Modern University for graduate starting salaries (Sunday Times University Guide 2016)
No 1 London University for ‘Teaching Quality’ and ‘Student Experience’ in the area of Accounting and Finance (Guardian league table 2016)
• Guaranteed halls accommodation during your first year* • Free gym membership • Free Microsoft Office 365 and SPSS software
• BA (Hons) Accounting and Finance • ACCA, ICAEW and CIMA Accredited • Two year completion route for AAT Level 4 or ACCA F1-F3 holders • Central London Location
*Southwark Campus only. Conditions apply, check online
Bring it on. www.lsbu.ac.uk/pq Up to 9 paper exemptions for some professional accreditations once graduated.* *9 for ACCA, 7 for ICAEW and 5 for CIMA
London South Bank University 103 Borough Road, London, SE1 0AA 0800 923 88 88 | Course.enquiry@lsbu.ac.uk
“I am an award winning certified bookkeeper ”
Student of the year – LUCA Awards 2011
“I am grateful for ICB’s help and support in starting my own practice. Having started 3 years ago, I have come a long way and enjoy the freedom and fulfilment of being self-employed. I manage a large portfolio of clients and plan to continue expanding.” Moolchand Dubey MICB CB.Dip PM.Dip
To find out if you could become a bookkeeper call
0845 060 2345 www.bookkeepers.org.uk/PQ
The Institute of Certified Bookkeepers
ACCA exam tips PQ
The exams are coming thick and fast, so here are our tips for June’s papers First Intuition.
F5 • MCQs on the whole syllabus. • ABC. • Environmental accounting. • Limiting factors. • Relevant costing. • Flexed budget and budgeting discussion. • Transfer pricing. • Mix and yield variances. F6 • Employment benefits. • Basis periods. • Partnerships. • Pensions. • Loss relief for individuals and companies. • Groups of companies. • PAYE. • Administration of tax. • VAT small company schemes. • CGT: Entrepreneur’s relief, PPR, share disposals. F7 • MCQs on the whole syllabus. • Interpretation of accounts, including ratio calculations and written analysis. • Preparation of consolidated SFP and/or SPL with associate, PUP and fair value adjustments. • Preparation of single company accounts including tangible noncurrent assets, intangible assets, taxation and IFRS 15. Possible written element or EPS calculation. F8 • MCQs on the whole syllabus. • Ethics. • Audit risk and auditor response. • Internal control – deficiencies, implications and recommendations. • Audit evidence and substantive testing. • Subsequent events, written representations and going concern. Modified auditor’s reports. F9 • Discussion of the economic environment and the impact on interest and exchange rates. • Working capital management – receivables and payables plus operating cycle. • Investment appraisal & cost of capital. • Business valuations. • Risk management (currency risk calculations). P1 • 50-mark scenario question, to include ethics, governance and risk management. P2 • Q1: Group question on disposals or cash flows. PQ Magazine June 2016
• Ethics. • Revenue recognition. • Leases – current issue. • Deferred tax. • Share based payments. • Pensions. P3 Section A • Environmental analysis, people with financial analysis. Section B • Project management. • Strategic action. • Information technology – pricing strategy. P4 • International investment appraisal techniques focusing on risk management tools such as value at risk. • Impact on WACC following hedging of interest rate risk. • Capital structure; traditional debt finance and Islamic finance – Sukuk Bonds. • Financial restructuring. P5 • Critique an existing performance management system and the performance hierarchy. • Quality as a critical success factor. • Value based approaches to performance management. • Effective use of information systems. • Environmental performance/ analysis. • Balanced scorecard or Performance Prism. P6 • Group relief and consortium relief for companies. • Incorporation relief. • IHT planning. • Patent box.
• Share schemes. P7 • Business risks in a scenario. • Identifying ethical and other professional issues in a scenario. • Matters to be considered and audit evidence for a couple of core accounting issues. • Money laundering. • Insolvency issues. • Discussion on audit reports.
BPP.
F5 • Q1-3: All areas of the syllabus. • Q4: Planning and operational variances, mix and yield variances, and evaluation of company performance. F6 • Employment benefits. • Property income. • Relief for pension contributions. • Adjustments to profit to arrive at trading income for both companies and sole traders. • Capital allowance computations. • Likely 10-mark questions on VAT, IHT and CGT. F7 Q1-2 • Interpretation or statement of cash flows. • Consolidation (if Q3 is not a consolidation). • Other possibilities – conceptual framework, intangible/tangible assets and impairment, provisions and contingencies, revenue and grants, financial instruments, discontinued operations/assets held for sale, or earnings per share. Q3 • Financial statement preparation (30-marker). • Single entity or a consolidation
(statement of profit or loss and other comprehensive income or/and statement of financial position). • Statement of changes in equity, statement of cash flows extract, earnings per share calculation or linked written topic. • Consolidation including one subsidiary and often an associate, with adjustments, eg fair values, deferred/contingent consideration, PUP on inventories/PPE, intragroup trading and balances, goods/cash in transit. • Single entity preparation from a trail balance or restatement of given financial statement with usual adjustments for depreciation, revaluation and current/deferred tax. F8 Q1-4 • Ethical threats and safeguards. • Corporate governance and internal audit. • Audit planning, materiality, audit procedures (especially substantive procedures), audit finalisation and audit reports. Q5-6 • Audit risk. • Internal controls • Audit procedures – substantive procedures and tests of control. F9 • Calculations on improvements to receivable management – early settlement discounts and factoring. • Weighted average cost of capital calculations – components. • Ratio analysis to support financing decisions. • NPV calculations, possibly correcting an incorrect NPV given by the examiner, which includes incorrect tax and inflation calculations. P1 • Read any new articles recently published by the examiner. • Use of stakeholder. • Ethical and other CSR theories applied to scenarios • Use of risk and governance – board directors, remuneration and reporting. P2 Section A • Preparation of a statement of financial position and/or a group statement of profit of loss, and other comprehensive income or statement of cash flows. • Accounting adjustment and social/ethical/moral aspects of corporate reporting. Section B, Q2-3 • Deferred tax, foreign currency transactions, financial instruments, pensions, share-based payment, non-current assets (recognition Continued on page 18 17
PQ ACCA exam tips Continued from page 17 and/or impairment of tangible and intangible assets), borrowing costs, the effect of accounting treatments on earnings per share or ratios. • Industry-based testing range of standards such as accounting policies and the framework, leases, grants, IFRS for SMEs, reorganisations, provisions, events after reporting period and related parties. Q4 • Current development in corporate reporting and problems with existing standards – revision of the conceptual framework, regulatory issues over adoption and consistent application of IFRSs, implementation issues, application of the definition of control and significant influence (equity accounting), improvement in performance measurement, classification in profit or loss vs OCI, integrated reporting, revenue recognition. • Group accounting. P3 • Integrated reporting will increasingly feature in P3. • Project management. • Times series, relevant costing, decision trees and decision making techniques. • Role of corporate parent, including BCG matric/Ashridge. • Business process change, including the POPIT model and Harmon’s process-strategy matrix. • E-business, e-marketing, and the impact of Big Data on areas like the 7Ps and CRM. P4 Q1 • Project appraisal – domestic and overseas. • Business valuations – cost of capital calculations. • Risk management (hedging). Q2-4 • Risk management – currency or interest rate. • Business re-organisation. • Real options. • Ethics and general financing issues – dividend policy. P5 Q1 • Numerical techniques – KPIs,
18
EVA, transfer pricing, financial reporting measures, analysis of quality related costs, ABC. • Performance management frameworks – building blocks model or balanced scorecard. • Know the difference between evaluating a performance report and evaluating the underlying performance of the organisation. Q2-4 • Quality management – Six Sigma. • Information reporting – CSFs and KPIs, non-financial performance indicators. • HR frameworks – reward and appraisal systems. • Risk management and environmental management accounting. • Performance management frameworks – building blocks, performance pyramid, balanced scorecard. P6 • Groups of companies with overseas aspects. • Unincorporated business particularly loss relief or involving a partnership. • Capital gains tax versus inheritance tax. • Overseas aspects particularly the new rules on residence. • Personal service company. • Company purchase of own shares. • Enterprise investment schemes/venture capital trusts. • Change in accounting date. • Takeover. • VAT partial exemption. • Transfer of trade versus sale of subsidiary. • Disincorporation relief. • Pension contributions. • Patent box, research and development expenditure. P7 Section A • Planning, risk assessment, evidence gathering and practice management issues. • Non-audit engagement, with the prospective financial information (PFI) or due diligence. • Audit completion or consolidated groups. Section B • Audit evidence and financial
HEALTH WARNING
These tips should only be used in conjunction with proper study. We cannot guarantee that these topics will appear in the actual exam as we have not seen the exam papers. Examiners are not predictable so it is vital that all core syllabus areas are revised fully. reporting issues. • Practice management, including ethics and quality control. • Reporting issues, including completion and communication.
LSBF.
F5 Section B • ABC and target costing. • Relevant costing. • Budgeting theory with flexed budgets. • All advanced variances. • Divisional performance and transfer pricing. F6 • Chargeable gains – company making disposals with rollover and holdover relief. • IHT – calculating IHT on lifetime gifts into a trust when the donor is still alive. • VAT – due date for registration, calculation of VAT payable. • Income tax – adjustment of profit for a sole trader/partnership, including capital allowances, for a sole trader in the beginning or middle of the trading cycle. • Corporation tax – calculating corporation tax, large company and instalment payments. F7 • Section A: MCQs can cover any topic in the syllabus, but at least half will be on standards.
• Section B: Consolidations/ published accounts will be a 15/30 marker, or vice versa; the remaining 15 marker will probably be on interpretation with adjustments needed beforehand. If you are registered for the exam and feel reasonably prepared give it a go: September sees the biggest expansion to the F7 syllabus for at least 15 years. P2 • Q1: CFS or BS or PL, in that order. • Q2/3: Usual suspects drawn widely from the syllabus. • Q4: Maybe financial asset impairment, equity accounting, SMEs, sustainability, leases. P3 • Strategic analysis. • Strategic choice. • Management accounting techniques to support decision making (possibly close or continue). • Process re-engineering and the need for IT controls. • Project management. P4 • Hedging interest rate risk using forward rate agreement, interest rate futures, options on interest rate futures and collars. • Real options – to abandon, expand or delay using the BlackScholes option pricing model. • Investment appraisal using adjusted present values, modified internal rate of return and internal rate of return. • Cost of capital using the principles of Modigliani and Miller prepositions or geared and ungeared betas. • Calculation of project specific WACC or WACC of combined activities. • Valuation of business using free cash flows and price-earnings ratio methods. Best mode of payment – cash offer or share exchange. P5 • EVA. • Appraising performance metrics. • Balanced scorecard. • Impact on performance management. PQ • Corporate failure. Go to pqmagazine.co.uk for F8 and P6 tips from LSBF – and loads more great study advice
PQ Magazine June 2016
ACCA exams PQ
NOTHINGOPTIONAL
We take a look at the examiners’ reports for the March sitting of the dreaded ACCA optional papers
P4 . Students should understand that this is an advanced level paper that builds on the knowledge and skills examined in F9. The examiner wants you to take on the role of a senior financial professional who is able to recommend and make financial management decisions that are likely to affect the entire business. You also have to be able to demonstrate your ability to read and digest quickly comprehensive and detailed questions. The important word here is ‘quickly’! As a senior manager you need to be able to work under scheduled deadlines and the examiner believes that to be successful in this exam you need to be able to demonstrate the ability to prioritise and manage your time. Business reports and proposals are expected to be succinct, professionally written and easy to read with clear headings and conclusion. That is what you need to produce in the exam. Sustained study over a long period of time (we aren’t told how long here) is also a key to success in this paper. Q1 looked at how exchange rate fluctuations are influenced by inflation. Students were then asked to look at the impact of a capital investment project on the value of the company and look at its effect on dividends. Q2 asked candidates to apply the adjusted present value technique to a proposed investment project. For Q3 sitters had to demonstrate their understanding of a partnership merger and how such mergers can be valued. Q4 wanted to test how knowledge of real options strategy using the Black Scholes pricing model can add to investment appraisal decisions. Risk factors in option theory was also there, along with government funding. P5 . The examiner is worried that no one is reading the reports, as previous advice seems to have been ignored. The March report reiterates that good candidates distinguish themselves by being aware that if they come to this exam expecting to repeat memorised material they will probably only score between 20-30%. PQs also need to ensure they have filled in the gaps in basic knowledge (models and techniques), and this might PQ Magazine June 2016
actually mean they need to refresh your F5 knowledge. Q1 started by asking students to explain the performance pyramid. It then went on to the evaluation of operational performance indicators and their reliability. Then we moved to activitybased budgeting and an evaluation of two budgeting methods. The Building Block model was key to Q2. Sitters were then asked to provide the benefits of a real-time unified database. Q3 was all about decision-making under risk and uncertainty. Q4 looked at performance measurements in the public sector. The 3Es’ structure helped in part (a). P6 (UK) . The examiner felt the standard at the March exam was ‘fairly satisfactory’. When you go into this exam you need to spend sufficient time carefully reading the question and thinking before you start writing. Another key to success in P6 is to answer every part of the four questions. Finally, you need good knowledge of the tax rules, particularly some of the more fundamental rules brought forward from the F6 syllabus. Q1 looked at the acquisition of overseas businesses as branches or subsidiaries. You also had to consider the VAT treatment of purchasing goods and services. Finally, you were required to explain the tax implications of a transfer of trade and assets. Q2 required you to correct a number of errors relating to income tax, CGT and IHT liabilities for a married couple. HMRC’s penalty regime also came into play and the action you would need to take before becoming their tax adviser. Q3 was on CGT implication of two disposals, the IHT reliefs on the death of a taxpayer and application of IR35. Q4 concerned the tax treatment of an
individual shareholder of the sale of shares back to the company, with corporation tax and VAT thrown in. Q5 was about business partnerships and calculation of income tax liability for a tax year, including a redundancy package. P7 . The overall performance in this sitting was ‘poor’, with it being fairly obvious that many candidates had not properly prepared for this wide-ranging exam. Too many candidates focused on the minutiae of a point and missed the wider implications of the issue in hand. There was also a clear lack of both auditing and financial reporting knowledge. Q1 centred on business risk. The examiner is worried that many candidates were unable to differentiate between business and audit risk. Candidates needed to identify and discuss four risks of material misstatement. The examiner felt this should have been straightforward stuff. Sitters were then required to consider how outsourcing the credit control function should be audited. Here there was confusion between outsourcing and using an audit expert. Students need to know their IAS 402. Q2 looked at three financial reporting issues. Candidates needed to provide exam procedures in relation to prospective financial information. You were faced here with a deferred tax, a convertible bond and an operating lease. Q3 was not a popular option. This looked at the risk of fraud in revenue recognition. Q4 was the most popular optional question and focused on ethics and practice management. Q5 set out four potential audit adjustments and required candidates to consider their impact on the audit report. PQ 19
Enhance your reputation The CTA qualification is held in high regard by employers and their clients – and it contributes to career progression. It enhances reputation and value and ensures credibility of the individual and the employer.
Tax is Held in High Regard Find out more about how the CTA can help your career and to register as a student at: www.tax.org.uk/workingintax
ACCOUNTING AND FINANCE COURSES DESIGNED TO TAKE YOUR CAREER TO THE NEXT LEVEL – FULL TIME, PART TIME AND ANYTIME (ONLINE). APPLY NOW FOR SEPTEMBER 2016!
TOPDOG
ABERDEEN BUSINESS SCHOOL www.rgu.ac.uk/topdog
AAT exams PQ
LET’S GET TECHNICAL
I
love the festive season and even though it is still only May I am already looking forward to my favourite meal of the year: Christmas dinner with all the trimmings. Among my many talents I am pretty handy in the kitchen so I tend to take control of the cooking on the big day. Something that in the past I was never quite sure about was exactly how to cook the turkey – there seemed to be as many different ways as there are cooks. But what I have learned in recent years is that while there is indeed more than one way to cook a turkey they all taste great with cranberry sauce and sprouts… mmm! A few months ago I wrote an article on cashflow forecasting (see www.firstintuition.co.uk/pq-article-oncash-flow-forecasting/), a key topic in the level 4 cash management paper and also a critical part of running a successful (and solvent) business. That article focused on what is sometimes known as the ‘receipts and payments method’ of forecasting cashflows. This method involves: • Identifying the various cash receipts the business expects: cash from customers, proceeds from asset disposals, issues of shares, etc. • Identifying the various cash payments the business will need to make: payments to suppliers, wages and salaries, rent payments, etc. • Comparing receipts to the payments in each month to predict whether the cash balance will increase or decrease However, there is more than one way to cook a turkey! Another important way that we can forecast cashflow is the ‘statement of profit or loss account and balance sheet method’. In this method (as the name may suggest) we use information contained in the P&L and balance sheet to predict the overall cashflow in a period.
The starting point If we have a forecast statement of profit or loss we can identify the expected operating profit for the period we are forecasting. This operating profit figure is a good starting point as it will include all of the transactions for the period (such as sales, purchases and other expenses). However, we will need to make a few adjustments. Dealing with non-cash items that are included in operating profit The first thing that we need to recognise is that the operating profit figure includes certain transactions that are not actual cashflows. A good example would be depreciation. Depreciation is an PQ Magazine June 2016
Gareth John serves up some mouth-watering advice on forecasting cashflows accounting journal that recognises an expense in the period (so reducing operating profit), but there is no actual payment of cash (so cash doesn’t actually fall). This means that simply using operating profit would understate the actual cash position of the business. To remove the impact of depreciation we need to add the expense back to operating profit to restate it to a more accurate ‘cash profit’. Another non-cash item that would need to be adjusted for is any profit or loss on disposal of non-current assets as these affect operating profit but aren’t actual cash movements. To remove their impact on operating profit we would: • Add back any loss on disposal. • Deduct any profit on disposal. Dealing with cash items that are not included in operating profit As well as adjusting for non-cash items that are included in operating profit, we also need to adjust for cash items that are not included in operating profit. This tends to relate to items on the balance sheet but would also include payments for tax (as operating profit is the profit before tax is dealt with). One thing to watch for with tax is that we must deduct the tax actually paid in the period which may not be the same as the tax charge in the P&L for the period. Movements in balance sheet items The other significant adjustments required are for movements in balances of assets and liabilities on the balance sheet. Consider a simple example: imagine that we made one sale for £100 in the period and that there was no cost of making the sale. This would give a profit figure of £100. But does this mean that
the cash balance would have increased by the same £100? Well, what if the sale was on credit and the customer has not paid us yet? This would mean that trade receivables had increased by £100 and that there was no increase in cash at all. The profit earned on the sale has been ‘soaked up’ by the increase in trade receivables. Another way to think about this is that an increase in trade receivables is ‘bad for cash’ as it means we haven’t been paid yet so we would deduct the increase from our operating profit when reconciling to actual cashflow. If trade receivables were to decrease in a period this is ‘good for cash’ as it means credit customers are paying faster so we add the decrease to operating profit. Similarly: • We deduct increases in inventory as these are ‘bad for cash’ as we have to pay for the stock. • We add increases in trade payables as this is ‘good for cash’ as we are paying suppliers slower and keeping the money. • We deduct increases in non-current assets (when we have made acquisitions) as this is ‘bad for cash’. • We add any proceeds from asset disposals as this is ‘good for cash’. So we end up with a reconciliation that might look something like: £ Operating profit (our starting point) 50,000 Add back depreciation +4,000 Deduct profit on disposal of NCAs (2,000) Deduct tax paid (12,000) Deduct increase in trade receivables (3,500) Add decrease in inventories +1,000 Add increase in trade payables +4,000 Deduct acquisition of NCAs (6,500) Add proceeds from disposals of NCAs +5,000 Net change in cash position +40,000 PQ
• Gareth John is a tutor/director with First Intuition and helps to manage their AAT distance learning programme. He was PQ’s Accountancy Lecturer of the Year in 2011 21
PQ small business
SMEs stealing a march London South Bank University School of Business has won the prestigious Small Business Charter Award. So why is this sector of the economy important for PQs?
S
mall businesses accounted for 99.3% of all private sector businesses at the start of 2015 and 99.9% were small or medium-sized (SMEs). Total employment in SMEs was 15.6 million; 60% of all private sector employment in the UK. And SMEs’ combined annual turnover of £1.8 trillion represents 47% of all private sector turnover in the UK. This sector is thriving and with a record 5.4 million private sector businesses at the start of 2015, an increase of 146,000 since 2014 and 1.9 million more since 2000, there is a massive opportunity for accountants to work to support the exciting growth in this area. However, to be effective players within this sector accountancy training needs to be applied and focused as much on mind-set and the development of attributes such as resilience and risk taking as it is on the application of UK GAAP and other guidance published by the UK’s Financial Reporting Council (FRC). At London South Bank University (LSBU) this is exactly what’s happening. Having been presented with the Bronze Award in recognition of support for SMEs by the Small Business Charter, London South Bank University joins an elite group of top business schools countrywide. LSBU and its School of Business are located in a dynamic, diverse and rising area of London just south of the Thames. Recognising and embracing the fact that the majority of undergraduates supplement student loans by working enables close contact with many local SMEs. LSBU helps its students to see this as a great opportunity to design personalised futures,
mutually beneficial to all parties while creating links with the local community. Anne Kiem, Interim Executive Director of the Small Business Charter (SBC) and Chief Executive of the Chartered Association of Business Schools, said: “It is fantastic to see that the business school has helped many local businesses grow and have a focus on how they can help SMEs. LSBU has demonstrated high quality business support, engagement and research and the enterprise linking support to students particularly stands out.” Over the past academic year, LSBU has supported 53 student and graduate start-ups and 130 business ideas. LSBU’s Entrepreneurship and Innovation Institute also offers students start-up schemes, workshops, competitions and internship placements at a number of SMEs. Receiving the SBC award Professor Mike Molan, Dean of LSBU’s School of Business, commented: “At LSBU our philosophy is very much to use the expertise in the School of Business to support the enterprise aspirations of our students as well as the growth and expansion of start-ups and SMEs in our local
A QUICK LOOK AT... Risk analysis in capital investments is one of the most controversial areas in finance. There are several methods available to access the risk of a project such as sensitivity analysis and simulation analysis. Sensitivity analysis (“what-if” analysis) examines such questions as “what if sales are 20% lower than predicted” for the project. Various permutations and combinations can be easily examined using spreadsheets. Simulation analysis, as applied to risk in capital investment projects, attempts to generate a simulated probability distribution of the net present value or other significant criterion. It is considered to be a flexible and versatile tool for examining risk in capital projects. Neither sensitivity analysis nor simulation provide a clear-cut decision rule on whether or not 22
community. This award recognises our efforts to bring businesses, students and entrepreneurs together, to drive local economic growth.” More than 70 SME tenants are based within LSBU’s Clarence Centre for Enterprise and Innovation, and hotdesking is also provided for students and graduates receiving support through the SPARK, ROCKET and Graduate Entrepreneur Scheme (GES) entrepreneurship programmes. LSBU places emphasis on stimulating, augmenting and developing future business based talents. To enhance social mobility, networking opportunities, work experience and mentoring programmes for students LSBU works closely with a number of external bodies such as the Institute of Financial Accountants (IFA). Of the association with the IFA, the SBC Assessors said: “The area of work with the IFA is an area of best practice. The Institute itself comprises mainly sole traders and SME operators; it was apparent how much they value the relationship with the school.” Another strong relationship the LSBU School of Business has is with the Institute of Directors (IoD): “The close relationship with the IoD is a model for other business schools. The endowment is substantial and of great symbolic value,” said the SBC Assessor recently. Potential employer, prospective student or those simply intrigued can find out more about enterprise opportunities at LSBU at http://www.lsbu.ac.uk/student-life/studententerprise. PQ • Danusia Wysocki and Sarah Moore-Williams, LSBU School of Business
Dealing with risk in capital investment appraisals
a particular project should be undertaken, although they provide a rich seam of information which may be applied to the decision. On the other hand, assuming that information about the risk characteristics of a project are available various methods exist which are specifically designed to help decide if the project should be accepted or rejected. Under the risk profile method the probability distribution of the net present value (which is an absolute measure) is converted into the probability distribution of a profitability index (which is a relative measure) and is then compared with the maximum risk profile acceptable to the management for the expected profitability index of the project. A simpler method is to use a risk-adjusted
discount rate to access the project – in other words, to use a higher discount rate if the project is considered more risky. The difficulty is, of course, to decide how much higher the discount rate needs to be depending on the circumstances. Another option is to use the certainty equivalent method under which the expected cash flows are transformed into their certainty equivalent by applying suitable equivalent coefficients. The resulting cash flows are then discounted at the risk-free rate of interest. • Gerard Long is an AIA Achieve e-tutor. The AIA Achieve team is producing a series of ‘A Quick Look at….’ articles and more can be found on the AIA website: www.aiaworldwide.com/ a-quick-look-at. PQ Magazine June 2016
A fresh approach to accountancy training First Intuition is PQ Magazine's Private College of the Year 2016. We focus on a high level of study support to help you pass your exams first time.
Why choose First Intuition? Flexible learning solutions Small classes to help us get to know you Unrestricted tutor support by phone and email ...and fresh coffee to keep you going
www.fi.co.uk
"There is no question they are the best in their league. Excellent service, premises and staff" ACCA F5 student
London 02073 239636
Birmingham 01212 313050
Bristol 01173 540190
Cambridge 01223 360405
Chelmsford 01245 209900
Leeds 01134 677770
Luton 01582 733900
Maidstone 01622 755100
Manchester 01612 286564
Reading 01189 504173
PQ ICAEW spotlight
Top tips from
TOP TUTORS ACA tutors and examiners attended this year’s ICAEW Partner in Learning ACA conference. 2016 was the biggest conference so far, with over 185 delegates at the two-day event. Here are the top exam tips from the event Advanced level . Case study: You must undertake your own research and analysis of the Advance Information (AI), and be able to explain it in your own words. You won’t have time to refer to large volumes of additional information in the exam – you must have a thorough understanding of the business described in the AI before the exam. Number your pages correctly (1, 2, 3, etc) and use headings and sub-headings. Consider whether you’re writing an internal or external report and always use language that is appropriate for the audience. Ethical issues may occur in any of the three requirements. Be careful about trying to predict what the requirements will be. This creates the risk of using pre-prepared material which does not address the question in the exam, particularly for Requirement 3. Watch the time: equal marks are available for each requirement. Strategic Business Management • Apply professional scepticism. • Apply realism – what would you advise in the real world? • Answer requirements in order. Corporate Reporting ‘Why’ and ‘because’ are important words when answering a question. If you find yourself not explaining ‘why’ or writing ‘because’, you may not be accessing the higher level marks. If you are asked for the key audit risks or financial reporting matter you need to select the most significant issues. So not setting out generic points or procedures – only those relating to the scenario. The application of knowledge is important rather than copying large sections of definitions from the standards. Sometimes it can be helpful to identify the accounting standard and to write out definitions, but this should be done in an applied manner. If you are asked to adjust the financial statements before performing financial statement analysis, it is so your analysis can tell a more interesting story. 24
Professional level . Business Strategy • Think beyond legality, transparency, effect and fairness. • Use given performance measures in written analysis, as well as calculations made. • Widen your scope to other ethical principles: honesty, integrity and accountability. • Use methodical approach to implication of data.
Financial Management Leave a note next to your answer if you recognise it is wrong and do not have time to amend it. Examiners will award follow through marks and these are easier to gain if a note is written for the examiner. Being able to do calculations in reverse is a good test of your understanding. Refer to industry averages and show industry average calculations whilst relating it to the company you have mentioned in your answer. Make sure you explain what the numbers mean when the question asks you to. Tax Compliance During the exam, all the information you need is in the question. For example, if the question doesn’t state whether an individual is married then you should assume they are single. When you are answering a question on inheritance tax, you should show workings that relate to nil rate bands. Show the starting nil rate band and the amount used up.
Business Planning: Banking This is not a general banking exam. The focus is on ICAEW chartered accountants in the banking industry or working in audit and assurance for banking clients. It is useful for candidates to review the annual reports of different banks before the exam. In particular, the management report located at the beginning of the annual report is helpful as it provides information on the bank’s performance, risk analysis and strategy. It is also useful to read the extended auditor’s report which identifies key risks affecting the audit strategy.
Financial Accounting and Reporting As a guide, if there are, say, more than three figures in a working, a separate working should be produced rather than including a bracketed working on the face of the pro forma financial statements. Always read the requirement, if it says ‘prepare’ or ‘calculate’ then no explanation is required and no marks are available for any such explanation given – it simply wastes time. Only prepare proformas and workings needed for the question’s specific requirements rather than all proformas that you have learned for that topic area. Tailor your answer to the question. Label workings, show totals and carry totals through to proforma financial statements if appropriate (eg, PPE workings) – provide a clear audit trail. Complete extracts or financial statements including showing correct inflows/(outflows) for a statement of cash flows – one-sided brackets gain no marks.
Business Planning: Insurance This is not a general insurance exam. The focus is on ICAEW chartered accountants who work in the insurance industry. Exam questions can be set around key sectors of the insurance industry. Questions are likely to focus on audit and assurance engagements, business planning and risk management. It is useful to review the annual reports of different insurance firms. In particular, the management report and the extended audit report, paying particular attention to the auditor’s areas of concern and responses.
Audit and Assurance As organisations are developing techniques to examine large volumes of data, you are expected to have an understanding of data. You need to be aware of the role of the FRC, including both the regulation and research aspects. If a scenario has been given, ensure your answer explains the requirement in the context of the scenario. In the exam, read the requirement carefully to ensure you have captured everything and have answered all requirements. • Thanks to the ICAEW for this article
Business Planning: Taxation A good, brief plan often shows in a well worked answer. Credit is given for applying knowledge to the facts/scenario in the question and for demonstrating skills, such as drawing conclusions and providing recommendations.
For exam resources, webinars, study articles, past papers, mark schemes and examiners’ tips visit icaew.com/ examresources
PQ Magazine June 2016
CIMA E1 paper PQ
CONFLICTRESOLUTION Rebecca Evans on how conflict can arise within the finance function, and why this may be both good and bad
M
anaging the finance function makes up 15% of the CIMA E1 syllabus with two lead learning outcomes.
B1 . • Discuss the purpose of the finance function and its relationship with other parts of the organisation. • Demonstrate the contribution the finance function makes to the sustainable delivery of the organisation’s strategies in a range of contexts. • Analyse the components of the finance function. • Discuss the potential for conflict within the role of the finance function. B2 . • Explain how the finance function supports the organisation’s strategies and operations. • Explain the activities fundamental to the role of the finance function. • Explain the contemporary transformation of the finance function. Not only is an understanding of this syllabus area important for E1, but it’s also key for the operational case study. Managing the finance function has been examined twice in recent exam diets, firstly in Variant 2 May 2015, where students were asked to discuss the contents and benefits of a SLA, and secondly in November Variant 4, in the context of considering the impact a new customer would have on the finance function. At the CIMA conference, managing the finance function was identified by the CIMA examinations team as the area where students demonstrate the weakest level of performance. This is often because trainee accountants think they can answer the questions using their experience from the workplace and as a result don’t give it the attention it needs when they are studying. Unfortunately for them, although much of the syllabus does cover content that PQs would pick up from their everyday work life, there are areas that could, and clearly are, catching students out. One such area is the potential for conflict within the finance function. Conflict within the finance function Conflict is a disagreement between people or groups with opposing opinions, views or principles. Within organisations conflict can take two forms: destructive conflict that is harmful to an organisation or individual, that can often lead to individuals or groups becoming alienated and demoralised; and constructive conflict, which can be viewed more positively as it encourages change and innovation alongside bringing problems to the surface so they can be identified and addressed. In the E1 syllabus we are asked to consider conflict arising as result of three key factors: PQ Magazine June 2016
• Interdependencies and independence. • Short term versus long term. • Capital versus revenue expenditure. Interdependencies occur as individuals, groups or departments rely on others. In the context of the finance function this could be a reliance on information or resources, for example. A member of the finance team may rely on another person (either within, or external to, the finance function) for information to be able to complete a task. For the accountant, this is a high priority and they need the information now, but the person providing the information may have different priorities and as a result is slow to respond to the request. This difference in priorities and the dependence the accountant has on the work of another member of the organisation could cause conflict. The conflict would be exacerbated if the delay had consequences such as on the achievement of the accountant’s objectives or remuneration. Independence is not relying on others for aid or support; not depending upon something else for existence or operation. Within the finance functions different individuals or groups may operate independently and as a result create conflict. For example, management accountants produce information with a focus on internal stakeholders, with few rules in terms of how it is presented or the method of calculation. Financial accountants, however, produce information mainly for external stakeholders, in accordance with accounting standards and company law. In many cases, the information produced by the two teams doesn’t reconcile as a result of it being produced in two separate ways. Conflict could well arise over the validity of each department’s figures. Equally, independence could create conflict between finance and another department. In order for the internal auditors to remain impartial
and objective they must remain independent – that is not influenced or controlled by others. However, this can make the auditors appear detached, so when they carry out the audit they can be perceived as interfering or as overly monitoring other functions. This can understandably create tension and conflict particularly when it comes to reporting anomalies or potential fraud. Conflict could be as a result of different time horizons. For example, a research and development team will have a long-term focus as it may take many years for their ideas to result in value for shareholders. The finance team, when having to meet short-term profit targets, may propose a cut in the R&D budget to save money. This inevitably creates conflict – short-term profits or long-term potential value. Capital versus revenue expenditure decisions can also be a source of conflict. For example, whether to invest in a new machine which is more efficient or whether to continue spending high levels on maintaining old, potentially inefficient machines. Different stakeholders will have differing views which could lead to disagreement. Equally, there may be conflict over how to treat expenditure. When applying accounting standards, the financial accountant may conclude that a particular transaction is revenue based, whereas the management accountant may view the transaction as being capital based. Conflict is a problem for all organisations. As finance professionals we can help avoid destructive conflict by identifying the potential sources of such conflict and using our communication skills to explain an alternative interpretation or put forward a different perspective. PQ • Rebecca Evans, Head of ACCA and CIMA, Kaplan Financial 25
PQ CIMA P1
PAINTING A PICTURE Kate Williams focuses on section A of the P1 paper, setting you some questions to test your knowledge
A
s accountants the only art we can achieve is painting by numbers – right? And if we use CIMA P1 pass rates I am afraid the picture is not a pretty one! But fear not, your P1 pass is within your reach: just follow my three top tips: 1. It is not enough to crunch the numbers. A fair student can number crunch but an excellent student will understand why we are doing so. 2. Your exam technique must be on point. Time management, good use of shorthand proformas, confidence in your own ability. 3. Question practice is extremely important. However, this must be teamed with complete syllabus coverage. You must break down each and every syllabus area and learning outcome within your question practice. Section A: Proficiency . This article focuses on ensuring you are proficient at Section A: Cost Accounting Systems. This area covers 30% of your exam and on the day you will face 18 questions. These will cover the concepts of absorption and marginal costing, merits and use of activity based costing, the realms of variances and their interpretations, also looking at quality costing and environmental costing. Bear in mind that half of these are likely to be theory based questions. I am sure you’ll agree that this section’s syllabus is extremely wide and varied and this is where question focus and strong syllabus coverage is key. It would be all too easy to stick to one area of revision here; think Leonardo de Vinci, who clearly loved painting hair but was not so keen on smiles – hence the Mona Lisa. Below you will find six questions that look at different areas of Section A. You can get the answers by emailing james.taylor@htftpartnership.co.uk. I have also prepared six questions on Section B: Budgeting. Again, these can be obtained by email. THE QUESTIONS 1. Which of the following would be considered an appraisal cost under Environmental Accounting principles: A: Medical costs of local people following health concerns. B: Site survey costs pre and post production. C: Compensation payments to employees following illness caused by work process. D: Staff health and safety training costs. 2. A company produces three products and has the following information available. Selling Price Variable Cost Overhead Cos Profit/(loss)
A 40 20 24 (4)
B 50 16 22 12
C 70 40 14 16
3. Identify which of the following statements refer to absorption costing, marginal costing, both techniques or neither technique (you may use each option more than once): Fixed costs are charged in period incurred Closing inventory is based on a value of direct materials only Closing inventory reduces over the period and leads to a higher profit Overhead absorption rate is used Options: Absorption Marginal Neither marginal costing costing nor absorption costing
Both marginal and absorption costing
4. Which of the following statements would justify a favourable labour rate variance? Select ALL apply. 1: An increase in the hourly labour rate due to imposed minimum wage limits by the government. 2: Improved processing methods meant that the actual number of hours per unit was less than planned. 3: The labour used was as a lower grade than standard. 4: A decision to reduce the number of faulty goods produced, led to a higher grade of staff being used whose hourly rate was $3 per hour more than the standard labour hourly rate. 5. A company has identified the following details for its production of product F. Material A 6kg $12 Material B 4kg $16 The actual number of units produced were 1,000 which used 5,900kg of material A and 4,200kg of material B. Identify the Adverse Mix variance to the nearest whole $ 6. A company has identified the following details for its production of product F. Material A 6kg $12 Material B 4kg $16 The actual number of units produced were 1,000 which used 5,900kg of material A and 4,200kg of material B. Identify the Adverse Yield variance to the nearest whole $ • Kate Williams is a tutor at HTFT Partnership and is CIMA’s Ask a Tutor for the Management Integrated Case Study, May 2016. Next month she will focus on Section C, with extra Section D questions
The company has now switched from absorption costing to activity based costing and has identified overheads costs to be allocated as $4, $16, $40. Which of the following statement is correct? A: B: C: D:
26
Selling price for product C is currently set too high. Activity based costing reduces the overall overhead cost. Product A is profit making using activity based costing. Product B is indifferent to the costing technique used.
PQ Magazine June 2016
MAKE REJECTION A THING OF THE PAST WITH PRACTICAL TRAINING AND GUARANTEED WORK PLACEMENT Practical Training Courses: Ÿ Sage Line 50 Ÿ Sage Payroll Ÿ Excel Spreadsheet Ÿ Value Added Tax (VAT) Ÿ Management Accounts Ÿ and others
Ÿ
Daytime, Evening and Distance Courses: Ÿ AAT Level 2 Certificate in Accounts Ÿ AAT Level 3 Diploma in Accounts Ÿ AAT Level 4 Diploma in Accounts
Ÿ
FREE Apprenticeships: Ÿ Accounting Ÿ Business Admin Ÿ Customer Service
Age 16-23?
To Register Today Call: 020 7252 9331 Visit: www.thetrainingplace.org Email: admin@thetrainingplace.org
Apply Now For AAT May/June Start Dates
PQ CIPFA round-up
NEW RE-SIT EXAMS FOR PQs IN 2016
Following the introduction of CIPFA’s flexible online examinations, the Institute has announced a new exam sitting in September this year. The additional sitting is designed so that students can re-sit their June exams and will help alleviate pressure for those students not achieving a pass. All UK and international online exams will be offered with exception of strategic stage exams, which will be available in June and November 2016 only. The re-sits run from
5 – 9 September. CIPFA has reminded students that they should continue to take scheduled exams in June or November 2016 as originally assumed. Full tuition is not available for the September re-sit exams, although revision packages are under development. Further information is available at www.cipfa.org or direct from CIPFA by email – customerservices@cipfa.org. Or telephone 020 7543 5600.
Popular CIPFA Accountancy Apprenticeships programme recruiting for the third year
CIPFA 2016 Student Conference set for Manchester in July
After three years in London, CIPFA’s Annual Student Conference and Exhibition will be held in Manchester from 13 to 14 July. As the sector heads into the seventh year of fiscal consolidation, now under a majority Conservative government, attention is turning to the future of the finance profession. Students are invited to join the event on Wednesday 13 July to access expert industry insight on how public services are evolving to ensure long-term growth and regeneration. The dedicated student conference is free to attend for CIPFA student members. A special offer two-day conference ticket for students is also available for £90 + VAT. The discounted ticket allows students to benefit from the full conference experience with recommendations from CIPFA on key sessions of interest to students. Visit www.cipfaannualconference.org.uk for further information and book your ticket.
CIPFA’s scheme to nurture top talent in the public sector through accountancy apprenticeships continues to build momentum after its launch two years ago. The CIPFA programme offers on the job training in financial management for those individuals qualified to AAT Level 3 or equivalent, through its apprenticeships in public service organisations and global accountancy firms. During a one-year placement apprentices work with CIPFA’s partner employers while studying the AAT level 4 Diploma one day a week.
The scheme aims to make a real difference to the employment opportunities of talented young people in local communities. The programme is ideal for those who are looking for an alternative route into a career in finance without being saddled with the long-term debt of a university degree. It’s also open to mature applicants who may be looking for a new opportunity or change in career. CIPFA’s next apprenticeship intake starts in October 2016. More details about the scheme, entry requirements and current vacancies can be found at cipfa.org/apprenticeships.
This month Kaplan is giving lucky PQ readers the chance to win free tuition for an ACCA module of their choice (either Knowledge, Skills, Essentials or Options), plus three runners-up prizes for a paper of their choice*! As ACCA’s chosen Approved Content & Platinum Tuition Provider we work closely with ACCA to deliver some of the best courses on the market. Enter now for your chance to experience them for yourself at www.kaplan.co.uk/accacomp (*Choose from Knowledge, Skills, Essentials or Options Live Online tuition courses only. Terms & Conditions apply. See website for details.) 28
PQ Magazine June 2016
careers PQ
A
fter your job applications, interviews and then the excitement of accepting a new job offer, you will of course need to approach your employer and hand in your notice. It is at this point that your employer may make you a counter-offer to try to change your mind and get you to stay. This could take many forms: a straight increase in basic salary, additional company benefits, a sought-after promotion or new job title, additional responsibility, a change in role, more involvement in projects that interest you – or any combination of these, and it may catch you off guard. It can be a difficult dilemma and upset the plans you have in place when you hand your notice in, but it doesn’t need to be. Here’s how to handle a counter-offer.
How to deal with that counter offer It’s a nice position to be in, but how do you deal with it, asks Karen Young
Be clear in your resignation letter: Firstly, try to avoid being put in the position of having to deal with the awkward situation of a counter-offer. Be clear in the detail of your resignation letter and that you are intent on leaving, and not interested in receiving any counter-offer scenario. Don’t act in haste: Next, if you receive a counter-offer, don’t accept in haste in a moment of flattery. If you have planned to leave and are confronted with something that could upset your plans, don’t let anyone persuade you into doing something you really don’t want to do. Be honest with yourself: Be honest with yourself about your reason for leaving your job. Think about the reasons that you wanted to leave in the first place and why you started a new job search. Our research, the Hays UK Salary & Recruiting Trends 2016 report, found that the top reason stated by finance professionals for leaving their current role (29%) was a lack of future opportunities. Therefore, think carefully if a change in benefits or
increased salary will truly satisfy you in the long term. Consider the longer term impact: Consider how accepting a counter-offer will make you appear to your employer and organisation. Once you’ve stated your intentions to leave your loyalty will always be in question. You’ve made it clear that you don’t necessarily see your long-term career progressing within this organisation, so you’ve got to think about whether this will affect your
employer’s decision-making when considering future promotions.
Will you still want to stay? If you are tempted to consider a counter-offer, will you get itchy feet to leave again shortly? It is telling that the Hays UK Salary & Recruiting Trends 2016 research found that 58% of employers said they counter-offered employees, but that only half of these employees were still with their organisation a year after receiving the counter offer. Do the job you want to do: We all spend a significant part of our day – and lives – in the office, so make sure that you are happy doing the job that you want to do. Do not let an unexpected counter-offer stop you in your tracks. Thank your employer for the opportunity and politely reaffirm your intention to leave, unless the counter-offer sufficiently meets your desires. If you receive a counter offer you will need to consider your original reasons for leaving – if the cons still outweigh the pros your decision to resign was right. Being absolutely sure you are doing the right thing for your own career is crucial. Compare your salary and benefits with the Hays UK Salary & Recruiting Trends 2016 report at salaryguide.hays.co.uk PQ • Karen Young, Director, Hays Accountancy and Finance
award winner PQ
Top tips from a record breaker Meet top ACCA studier Himani Singla, a record-breaking distance learning PQ with First Intuition
If you have a bit of dedication and a strong will you too can become a prizewinner. I managed to earn a rank in almost every paper and I am sure you too can do the same if you put the work in.
imani Singla, now a NQ, has an exam record that is hard to beat. She came first in India for her F5, F6, F7, F8, P1, P2, P3 and P6 exams. What went wrong with F9 and the other optional paper is all we have to say! We asked Singla some questions that might help you in your journey:
What was it like studying with First Intuition? Initially I was scared of this whole online concept, especially as these were professional exams, but the whole experience enabled me to understand that we don’t always need a classroom. Online tutors are very helpful and ready to answer your queries, but you too should take the initiative and mail them on a regular basis. You don’t want a big list of things you don’t know piling up!
H
How did you prepare for your ACCA exams? Proper planning, hard work and time management enabled me to succeed in my ACCA exams. My primary focus was to understand the concept and then practice as many questions I could to make myself comfortable with the topic. In your opinion, what is the secret to becoming an ACCA prizewinner? PQ Magazine June 2016
How will your ACCA qualification help you in your career? I work for KPMG and studying ACCA helped me understand a lot of concepts that were just a term to me earlier. ACCA will, I am sure, be a gateway of global opportunities, enabling me to prosper in my career in future. PQ 29
PQ careers
social media ROUND-UP We have just launched a new LinkedIn Group just for ACCA PQs everywhere – it’s called ACCA Study Zone. With so many changes on the horizon in 2016 for ACCA PQs we thought the time was right to create a truly independent and authoritative forum where students and tutors can talk freely. So please do join the group and help us get the message out there about the ACCA Study Zone.
You will also see PQ magazine getting more involved on social media, and on Facebook in particular. Someone recently moaned to us that we have all this great insight and we weren’t letting everyone know about it. We will make sure that we disseminate what we have everywhere to give you the inside track. But remember it is here in the magazine too, and its totally free to all PQs worldwide. The e-magazine can be read anywhere! What’s more, we will soon be rolling out the CIMA Study Zone and AAT Study Zone, too. We have been tweeting away to our 2,850 followers. They were the first to see the ACCA and CIMA pass rates. ACCA students were shocked by the March pass rates – as one student said: “Only 1 in 3 candidates pass P5 paper, so terrifying.” Another PQ wanted to know: “Is this being looked at by ACCA, exams unnecessarily difficult to pass, takes an hour to read the paper properly.” On seeing the pass rates Jae Lambert said: “Oh gosh! F5 didn’t look too good!” Then there was: “P7 30% JEEEE????” and lots of emojis in evidence. It was great to read how AAT PQs are using us as a ‘reward’. Mel Scrivin tweeted: “Revision for @YourAAT L4 BDGT going well. Rewarding myself with a break…and reading @PQMagazine ! :/ @StudyAAT”. There was also an interesting tweet recently from Richard Clarke in answer to a moan about MCQs. “well mcqs are always tough but not helped by them being set by a team and not the examiner #noconsistency.” 30
Life at PwC Shabbir Merali, 24, has worked as a Senior Associate in Banking & Capital Markets in London for two-and-a-half years. An ACA studier, he studied economics at University College London. He scored the highest mark in the world at the ICAEW Advanced Level What time does your alarm clock go off on a working day? First alarm goes off at 6.45am. But that promptly gets ‘snoozed’ a few times before I actually get out of bed at about 7.10am. What’s the first thing you do when you get to your desk? Check my emails. What’s on your desk? We have a hot-desking system so nothing. What’s the best thing about where you work? The people – we’ve got a strong team at the client site and I joined with a great bunch of people in my intake. Where’s your favourite place to go for lunch? Assenheims 56. What (or who) can you see when you sit at your desk?
I sit with my team so can usually see a bunch of smiling faces… Which websites are your favourites and why? BBC Sport, Netflix and The Economist Which websites do you use for work? The FT for wider industry research and Companies House/HMRC to search for regulatory questions. How many hours a week do you spend in meetings? Probably about 10–15. What time do you leave the office? It varies depending on time of year, but on average 7pm. How do you relax? Playing
sports, especially football. How often do you take work home with you? I try to stay late at the office rather take work home when I’m busy, so not that frequently. What is your favourite TV show? House of Cards. Summer or winter? Summer. Who is your hero? Nassim Taleb. If you had a time machine, where would you go? The Renaissance period. If you hadn’t chosen accountancy, where might you be right now? Probably still in finance, or perhaps banking. Or starting my own business.
level roles to mid and senior level professionals.
tenure of the UK’s top bosses is five years and three months.
You can go all the way If your goal is to become a CEO at a FTSE 100 company then getting an accountancy qualification is still the best way of getting there, according to new figures. Almost one in four (23%) of CEOs are a qualified chartered accountant. The research also discovered that the average
Bonus not big enough? New research has suggested young professionals are set to turn their backs on the financial sector because the bonuses aren’t big enough. The Big 4 firms were included in the study, which discovered 83% of people with one to two years’ experience were dissatisfied with their bonus.
In brief SMEs are driving growth Despite a degree of uncertainty in the financial markets the latest job index from Robert Walters shows vacancies for accounting and finance professionals rose by 24% in the first quarter. In particular, it has been small to medium sized businesses that are looking to recruit. The worry is there has been a move away from demand for more junior, newly qualified
The PQ Book Club: books you should read The Little Black Book of Change by Paul Adams and Mike Straw (Capstone, £12.99) This book is subtitled ‘The 7 fundamentals for change management that delivers’, which rather neatly sums it all up. With this tome the authors – both with more than 20 years’ experience of senior management in blue chip corporations – want to change the stat that says 60-70% of organisation change projects are doomed to failure. Their ‘magnificent seven shifts’ are: Letting go of the past; Developing breakthrough ambition; Creating a bold new vision of the future; Engaging the players in the bold new future; Cutting through the DNA; Keeping the organisational
future-focused; and Gaining energy from setbacks. These, the authors say, will enable leaders to “predictably and consistently make extraordinary things happen by design”. Adams and Straw highlight the myriad impediments to change, then suggest ways these hurdles can be overcome; for example organisational culture, self-limiting beliefs and even fear of change itself. One of the many strengths of this book is that these ‘hurdles’ to organisation change are clearly and concisely explained, illustrated with helpful case studies. The solution is then outlined, also using real-life examples, and at the end of each chapter is a neat box containing ‘Key takeaway practices’ – the key points the
reader should take away from that particular chapter. The budding accountant can learn a lot from these pages. The book is just 144 pages long, and easily read in an afternoon. Once digested, an interesting exercise is to gauge how many of the ‘issues’ outlined by the author you recognise. This will help you gauge the ‘culture’ within your firm. Transformation is key to the success of any organisation. As the authors say: “It’s fun! It’s a creative journey. where you continually adapt and carve your way through unchartered territory.” PQ rating 5/5 There’s much wisdom in these short chapters PQ Magazine June 2016
investing in people Business Analyst
Assistant Accountant
Entertainment, Berkshire
Manufacturing, Middlesex
Salary on application
£25,000
• Part-qualified accountant. • A career defining move for an ambitious, dynamic and intelligent individual to join a global video games developer and publisher responsible for many AAA titles. • Providing detailed and insightful analysis to the upper management team including the Director of Business Analysis. • Assisting in preparing regular budget processes and monthly rolling forecasts, which will include the creation of physical and digital forecasts for new releases. • Variance analysis and commentary of product sales performance. • Developing insightful reports and analysis of market trends. • Contribution to the price protection and allowances provisions process.
• Part-qualified accountant. • A fantastic opportunity for a driven individual to join an internationally recognized manufacturer with progression opportunities. • To assist/support the Financial Controller in preparing all monthly, corporate and adhoc reporting. • To assist the Financial Accountant with month end tasks to ensure that all local and key European corporate financial reporting deadlines are met. • Preparing and reconciling with the Financial Accountant all inter-company and European accounts. • Assisting the Financial Accountant with all aspects of the balance sheet. • Administering the UK-wide treasury cash pool. • Experience with SAP and multi currency preferable.
redefining financial recruitment T +44 (0)20 8408 9999 E info@walkerdendle.co.uk www.walkerdendle.co.uk
MANAGEMENT ACCOUNTANT Salary: ÂŁ24,328 Location: Macclesfield
Champions students to shape the future of education – and create a better world As the Management Accountant you will support the preparation of financial information for departments and nations and improving collaboration across the business in order to provide financial expertise and business partnering to the wider business. Ideally you will be working towards your CIMA/ACCA qualification and able to produce monthly management reporting packs supporting the Commercial Accountants with their analysis and able to work to tight deadlines with excellent attention to detail. You will need to be someone who is a proactive thinker and be a confident user of excel, and have the ability to identify errors and coach and support non-financial colleagues with their understanding of financial awareness and analysis. This role offers a competitive salary and generous benefits package, which includes: l 27 days holiday (plus 1 extra day each year to a maximum of 30) plus 4 days over the Christmas period as well as public holidays l Childcare voucher scheme with a further childcare allowance to support parents l Flexible working options l An individual health cash plan l Employee assistance scheme including a GP advice line, virtual doctor, counselling, medical information and legal advice l A generous pension scheme (employer matched up to a maximum of 6% of basic salary) l Access to learning and development opportunities For more information and to apply for the role please go to http://www.nus.org.uk/jobs Deadline for applications is 31st May 2016 at 5pm NUS is committed to being an inclusive employer and having a diverse workforce. We particularly welcome and encourage applications from Black, Asian and minority ethnic backgrounds.
Sorted, thanks to pqjobs.co.uk
PQ jobs pqjobs.co.uk
TAKE OWNERSHIP OF YOUR CAREER Shouting about your successes and career ambitions can feel uncomfortable for many people, but this skill is important if you want to get ahead in your career. According to our Hays Global Gender Diversity Report 2016, both men (32%) and women (44%) do not feel they have the opportunity to communicate their ambition and self-promote in the workplace. Making sure other people know what your goals are will help make sure you’re considered for future opportunities, and give you greater control of your career path. To find out how we can help you get ahead in your finance career, email karen.young@hays.com or call 07834 260029. Alternatively, you can visit us online.
hays.co.uk/pq
PQ magazine About you Title...................................................... First name............................................ Surname .............................................. Company name .................................. ............................................................ Department.......................................... Full postal address
Home
▫
Work
▫
............................................................
The easiest way to get your free monthly copy is to go online at www.pqmagazine.co.uk, or you can fill in the form below and send it to: PQ Magazine, 4th Floor, Central House, 142 Central Street, London, EC1V 8AR Study please tick a box in 1A or 1B 1A Please indicate accountancy body you belong to and tick the box of the next set of exams you are hoping to sit ACCA
▫ CAT
CIMA
▫ Certificate
▫ F1-3
CIPFA
▫ Certificate
▫ Diploma
ICAEW
▫ CFAB
▫ Professional
▫ Advanced
ICAS
▫ TC
▫ TPS
▫ TPE
Tax
▫ ATT
▫ CTA
AAT
▫ Level 2
▫ Level 3
▫ Operations
▫ F4-F9 ▫ Management
▫ T4
▫ Strategic
▫ Level 4
1B Studying for an accountancy degree/MBA/MSc Do you work in accountancy and finance
▫ P Papers ▫ Strategic
▫ Year 1
▫ Yes
▫ Year 2
▫ Member ▫ Year 3
▫ No
If yes, what is your job title? ..........................................................................................................
............................................................
* How do you want to receive your PQ magazine?
............................................................
Please tick your preferred mode of delivery for your free monthly magazine.
Postcode ............................................ Phone .................................................. * Email ................................................ ............................................................
▫ Online (please supply email address)
Sign below
▫ By post (UK only)
to receive your monthly
PQ magazine totally
free
Sign here ............................................................................Date........................................................... ▫ Please tick here if you do not wish to receive direct marketing promotions from other companies.
PQ magazine reserves the right to refuse a free copy of the magazine if the applicant does not comply with the terms and conditions of circulation.We will use your details to send you a copy of the magazine and any further information we feel would be of use.
PQ got a story, funny or serious, you want to share? Email graham@pqaccountant.com
WHICH EXAMS ARE THE HARDEST? The London Accountants Training Discussion Group (LATDG) recently held a great ‘Institute Question Time’, where all the bodies answered questions from the training providers. The AAT, ACCA, CIMA, CIPFA, ICAEW and ICAS all turned out. PQ magazine’s Graham Hambly asked the first question on the night: “Which accountancy body has the hardest exams?” After much discussion about learning outcomes, CIPFA’s Daniel Cutts said: “Ours!” But as the discussion continued in the bar afterwards it was perhaps felt the right answer to the question is: “The ones I took!”
FORTUNE CREEPY OCCUPATIONS – YOU AREN’T ONE! Accountants can breath a sigh of relief – they are not on the latest ‘creepiness’ ratings of occupations. The recently published list has clowns and taxidermists at one and two respectively. Then comes sex shop owners, funeral directors and taxi drivers. And the least creepy? Apparently it is meteorologists and teachers.
SWINGING
ACCOUNTANTS
SHOW ME YOUR SHOES
Accountant Roy Maggs hit the headlines recently after he decided to sue a swingers’ festival that had refused him entry. Apparently Maggs did not provide the two references and photos needed to attend ‘Swingfields’, a three-day event held each year at a secret location. Maggs wanted his money back (the £127.85 he paid for an Earlybird Gentleman’s ticket) but was refused, so he took his case to court. Unfortunately he lost, although Swingfields’ owners have suggested with his new-found references he will be allowed to attend the next event.
NOT THE WHOLE BOOK, PLEASE University students can’t read whole books any more because they find them too challenging, academics have claimed. Due to shorter attention spans and an inability to concentrate on nuanced arguments professors felt many of their students found the thought of reading books to the end too daunting. The worry is that just using the internet won’t allow students to make more considered arguments and controversies in their coursework and exams.
W E ’V E
ICAS members get a top magazine called CA. It has some great adverts too for high-end watches from the likes of Patek Philippe and Christopher Ward. But you can never get away from the fact the readers are accountants because there are also ads for work shoes that cost just £32.50 a pair (we ordered ourselves a pair of penny loafers).
EVERYONE NEEDS A CHARTERED ACCOUNTANT
There was a great story from Victoria Wood’s accountant David Gill in The Times after her untimely death. In 1970 he was rung by Wood, who wanted to see him because “I believe I need a chartered accountant”. What she really wanted was tax relief for her grand piano. And she once told Gill she was a apprehensive about going on tour with Jasper Carrott. Don’t worry, he told her – one day you’ll be bigger than him. It made her laugh!
IN THE STARS The Sunday Times Rich List was published recently. Top of the pile were property and internet gurus David and Simon Reuben – worth £13.1bn. Born in Mumbai, they came to Britain in the 1950s and went to state schools. We always like to see the star signs of the richest 1,000. Top of the Rich List by some way are Geminis, followed by Leos and those born under the Sagittarius sign. And bottom? Well, again by some distance is Scorpio, followed by Libra and Cancer.
GOT THE L OT
THE EUROS EXPLAINED
Exams exams everywhere, what is there to look forward to? Well, for football fans there are the Euro 2016 championship in France, of course! Some 24 teams will be competing for the big prize, with England, Wales, Northern Ireland and the Republic of Ireland to cheer on. And we have three copies of the official tournament manual to give away. Email graham@pqaccountant.com along with your name and address to be in with a chance of this giveaway. Head up your email ‘the euros’.
LUCKY NUMBERS Here’s your chance to win an ICAEW calculator – a Casio FX83 GT PLUS, perfect to help you study towards an upcoming ACA Certificate Level exam. This is the actual calculator that you will be provided with on exam day and we have five to give away. To be in with a chance of winning this great giveaway send your name and address to graham@pqaccountant.com. Head up your email ‘Calculator’.
Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries must be received by Friday 27 May. The main draw will take place on Tuesday 31 May 2016.
TO ENTER THESE GIVEAWAYS EMAIL GRAHAM@PQACCOUNTANT.COM 34
PQ Magazine June 2016
EXECUTIVE EDUCATION
COURSES IN NEW YORK
London School of Business & Finance (LSBF) has now joined forces with Manhattan Institute of Management (MIM), giving you the opportunity to study LSBF’s Executive Education courses in the heart of New York. • Postgraduate Certificate in Accounting and Financial Management • Postgraduate Certificate in Global Marketing • Postgraduate Certificate in Project Management • Postgraduate Certificate in Consulting Management • miniMBA
Internship opportunities available in New York. Find out more: www.LSBF.org.uk/pq-new-york | 020 3005 6236
Now there’s nothing standing in your way At De Broc School of Business you can expect leading-edge practical business education with a focus on your employability. This year you could be eligible for a UK government loan of up to £10,000, as well as a range of other funding options. Choose from postgraduate courses in: Finance | Marketing | Management | Human Resources
T: 0800 107 6766 E: admissions@debroc.ac.uk W: debroc.ac.uk