PQ magazine, March 2021 by PQ magazine

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March 2021

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The new normal for accounting: what the future holds The time is now right for the creation of a new branch of accountants, says CIPFA CEO Rob Whiteman. A key speaker at the recent ‘2021 and beyond: The New Normal for accounting Around the Globe’ conference, he revealed the sustainable/social value accountants’ time had come. In another session Professor Mervyn E King, the author of the King Report on Corporate

Governance, claimed that calling someone a CFO has become a ‘misnomer’. “We need to welcome the Chief Value Officer,” he said. To this end, he revealed there will soon be academic courses for CVOs in South Africa and the UK, and you can expect to see the creation of the chartered chief value officer. King also revealed that by November we will see the formation of an International Sustainable

Standards Board. This was a truly global event, with delegates from Bahrain to Zimbabwe. In all, LSBU/PQ magazine were joined by participants from over 30 countries. Just under 300 people watched live, and already over 250-plus have watched the recording on YouTube. You too can check out the whole conference at tinyurl.com/159fqtfd

LOOKING AT POSITIVES FOR THE YEAR AHEAD How are your data analytic and IT infrastructure skills? Well, you may need to do some work on these, as they are the top skills employers are looking for in a PQ for 2021 – after your financial skills, of course. The latest Hays Salary and Recruiting Trends survey is out, and despite the current lockdown employers said they had a ‘positive’ outlook in the short term, with nearly 90% saying their organisation’s activity levels will either increase or stay the same for 2021. More than half (53%) are planning to hire new staff which, says Hays’ UK director, Karen Young (pictured), should be “encouraging for PQs who intend to look for new opportunities over the next 12 months”. When it comes to salary rises, PQs seem to have fared relatively well. Salaries in 2020 rose by 1.5% on average, which is higher than the average for the rest of the accountancy sector (which was 0.9%). Payroll, accounts receivable and insolvency practitioners saw the most generous salary rises, of over 2%. London, perhaps not surprisingly, tops the league of PQ salaries. An ACCA and CIMA finalist working in the capital can expect a yearly salary of £40,000, around the same as 2019. ACA finalists are ‘enjoying’ around

£38,000, but the big jump has come in the pay packets of CIPFA finalists. In 2019 they were earning £33,500, but in 2020 it had risen to £35,000. Meanwhile, in the Midlands, a CIMA finalist can expect more pay than those from other bodies, receiving between £35,000 and £36,000 a year. At the other end of the pay scale comes Wales and Northern Ireland. Finalist ACCA and CIMA PQs can expect £10,000 less than their London counterparts – £30,000. CIPFA and ACA trainees will also start on salaries of around £17,500 on average. That’s the lowest for the whole of the UK. The survey also asked PQs how they felt about their career prospects moving forward. Just 43% said they felt positive about their career – that’s a big drop on last year’s 60%. Uncertainty is on the rise, and 43% of respondents said they now feel worried about their career prospects. Some 83% claim their employers are not doing anything to reduce these uncertainties. Another interesting result from the survey was the number of PQs who are not happy about working from home. Just 12% say they would like to be working fully remotely. And just 30% want to be working half remotely and half in the office. • Take a look at the salaries for finalists, semi-seniors/PQs and trainees on pages 18–19.

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

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March 2021

IN THIS ISSUE p17

18 Salary survey Are you getting paid what you should be? We’ve got the latest figures from Hays

38 CIPFA spotlight Why the UK’s apprenticeship schemes are so important going forward

20 Podcasting Top tutor Tom Clendon has produced a series of educational podcasts just for accountancy students like you

39 World class How CIPFA is helping the Bangladesh government improve its public financial management

21 ICAEW spotlight How the institute is driving digital to evolve its qualifications

40 Personal development Tweaking the new you for 2021

22 Test bank So what do you know about investment appraisal?

News 04 CIMA pass rates Case study pass unveiled – and on the whole are pretty impressive 05 Drive for equality EY joins the Black British Network 06 Graduate jobs market So what are the prospects like for today’s graduates? A new report has the answers 08 FRC report New figures show many PQs are struggling to get qualified within five years 09 AAT news Popular CEO Mark Farrar has announced his decision to retire 10 ACCA exams Two-thirds of sitters failed the APM exam at the December sitting

12 Tech news Bitcoin is not the future – so says the Governor of the Bank of England Features, etc 14 Have your say Well done LSBU and PQ magazine for a great one-day conference; why is booking an ACCA exam so hard? And a pat on the back for the AAT. Plus our social media round-up 16 The economy There’s a long, hard road ahead for the UK, but there will be a recovery – albeit a fragile one 17 PQ Awards 2021 There’s still plenty of time to enter – but there’s no time like the present! Don’t forget, you can even nominate yourself, so go to it

23 Remotely invigilated exams Why it pays to be prepared when it comes to new ways of sitting your exams 25 Get ahead with Xero We are offering all readers the chance to get Xero certifications and badges – and all for FREE! 26 CIMA case studies How to tackle these important exams 28 Study tips We explain the concept of ‘the learning curve’, and how it will help you progress 29 ACCA exam tips We have FIVE pages of top exam tips and advice for the forthcoming diet, from our friends at BPP 34 Profile From fuel engineer to ICB Student of the Year, Elizabeth Carter’s story is a fascinating one 35 ACCA APM exam To use EVA or not to use EVA – that is the question 36 Tax Top tutor Neil da Costa likes to keep things simple – and this time it’s dealing with tax for Controlled Foreign Companies

p25 41 Careers Life at Newflex Ltd; our Agony Aunt Karen Young has more words of encouragement; and our Book Club review 42 Fun The lighter side of life; and more great PQ giveaways The columnists Robert Bruce Why clarity in financial reports is crucial

Prem Sikka Scrap the anomaly that is capital gains tax 8 Zoe Robinson Adapting to the new classrom – in your own home 10 Mike Day 6G really matters – it really will be a game-changer 12

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To subscribe go to www.pqmagazine.com Award-winning AAT courses and apprenticeships Flexible learning to suit your lifestyle mindful-education.co.uk/students PQ Magazine March 2021

ROBERT BRUCE Clarity has never been so important

This time last year I was about to head off with an old friend for a happy weekend in Paris to see France and Ireland provide an entertaining time on the rugby field. Like so much over the last year it never happened. Instead, the world has gone home and turned to home schooling. That goes for corporate enterprises as much as millions of young people wondering about their future. And here we are again thrown into the reporting and auditing season with precious little of the familiar framework around us. The only good thing is that, like wise teachers in times of crisis, regulators have given people longer to get their homework in. Annual financial reports can now be published within six rather than four months of the year-end and the half-yearly stuff can be published within four rather than three months of the relevant date. All very helpful. And it will emphasise as never before how cohesive audit committees and their Zoom and Teams schedules have to be to enable really effective reporting and auditing to take place. The complicated times we live in mean that the really important issues have to be focused on relentlessly as never before. Investors will be understanding, but they still want their information to be of the highest reliability. There has to be a balance between practicality and integrity. This year above all is a time to clear away the flannel and make the real issues very clear. Robert Bruce is an award-winning writer on accountancy for The Times

Shape of UK graduate jobs market in 2021 The UK’s top employers recruited 3,700 fewer graduates in 2020 than had been expected at the beginning of the year, according to the Graduate Market in 2021 report from High Flyers. Graduate recruitment fell in 13 out of 15 of the most soughtafter industries and business sectors, including accounting & professional service firms, engineering, and public sector employers. High Flyers said that the latest recruitment targets for the country’s leading employers suggest that the number of graduate jobs on offer in 2021 ‘may’ increase by 2.5%, but there remains considerable uncertainty for graduate employers and wider economy because of the pandemic. Public sector bosses are expected to be the largest

recruiters of new graduates in 2021, with a record 5,400 entrylevel vacancies available for

university leavers. Graduates starting salaries at the UK’s leading graduate employers

are expected to remain unchanged for the seventh year in a row in 2020, at a median starting salary of £30,000. For accounting and professional services jobs the average is slightly higher at £30,600. Analysis shows that accounting and professional services top employers were planning to recruit 5,327 graduates in January 2020. This was dramatically revised down to 4,444 in August 2020. The actual number recruited was 4,629. That is 11.1% down, with 580 vacancies cut. For 2021 accounting and professional services employers have said they are looking for 4,281 graduates. That’s 348 vacancies down on 2020’s actual numbers. You can find the full report at tinyurl.com/26n92rc6

ICAEW Professional Level results are in ICAEW Professional Level PQs sitting the Business Strategy & Technology paper for the first time managed a whopping 91.5% pass rate in December. Other pass rates weren’t quite as high, but the pass rate for first-time sitters of the Financial Management exam was a healthy 86.3%. The analysis of results shows that 66.2% of candidates who sat three papers in December passed them all. The vast majority of December sitters opted to sit either just one or two papers at the sitting. For those sitting one paper the pass rate was 73.4% leaving 813 PQs who sat one paper with no pass to show for their effort. In all, some 6,692 students sat the December 2020 session, with 11,057 exams attempted. A total of 4,733 candidates passed all the exams they took.

ICAEW DECEMBER 2020 PROFESSIONAL LEVEL RESULTS ALL FIRST ATTEMPT Audit & Assurance 75.2% 76.8% Financial Accounting & Reporting (UKGAAP) 75.5% 76.9% Financial Accounting & Reporting (IFRS) 73.7% 76.9% Tax Compliance 74.4% 77.1% Business Planning: Banking 65.4% 69.7% Business Planning: Insurance 81.6% 85.3% Business Planning: Taxation 73.0% 75.5% Business Strategy & Technology 89.6% 91.5% Financial Management 84.2% 86.3%

In brief Pap More Back to Basics PQ magazine has joined forces with Training Link’s Michele Butler to help you get to grips with the trial balance. In just six short minutes she will explain how to create the trial balance and why

you are doing it! Michele will let you know whether a balance is a credit or debit, and help you get to grips with ‘DEAD CLIC’. Check out the latest in the series at https://vimeo.com/500074449. We also have videos on double entry bookkeeping, the strategic planning process, and financial maths (for ACCA AFM sitters). Pap The Bottom Line Chartered Accountants Ireland has launched a new magazine for students – The

Bottom Line. Editor Liz Riley explains that the redesigned student publication has to live up to the institute’s central ethos “for tomorrow, for good”. She also said that besides being an accountancy term a ‘bottom line’ can also be defined as the essential fact of a discussion. Pap Refresh for IR Framework The International Integrated Reporting Council (IIRC) has published revisions to the International <IR> Framework,

to enable more ‘decision-useful’ reporting. The revisions, the first since the <IR> Framework was originally published in 2013, are the result of extensive market consultation. IIRC believes this consultation demonstrates that the conceptual thinking and principles of the <IR> Framework remain fit for purpose and robust, as evidenced by the 2,500 organisations in over 70 countries that use it. Check out the virtual launch event at tinyurl.com/ ydwt68mx PQ Magazine March 2021

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PQ news

PREM SIKKA Scrap the anomaly that is CGT

The post-Covid economy must prioritise social justice and equitable distribution of income and wealth. Rather than hiking taxes for the masses, the government needs to eliminate tax privileges enjoyed by corporations and the rich. Reform of capital gains tax is one example. Currently, all individuals in England receive an annual tax-free personal allowance of £12,500. Earned income between £12,500 and £50,000 is taxed at 20%, between £50,000 and £150,000 is taxed at 40% and anything above that is taxed at 45%. However, unearned income in the form of capital gains is taxed at lower rates. There is an annual tax free allowance of £12,300. Capital gains above that are taxed at marginal rates (from 10%–28%). Consequently, the wealthy have incentives to convert income to capital gains and pay tax at 28%, not the marginal rate of 45%. In 2018-19, the amount of taxable capital gains, known as chargeable gains, was £63bn. On this 276,000 people paid CGT of £9.5bn, at an average effective rate of 15%. If the gains were to be added to earned income then those concerned would most likely have been liable to pay tax at the rate of 40-45% rather than 15%. By scrapping the tax concessions on capital gains and taxing them at the marginal rates applicable to income tax the government could raise £14bn more each year to fund better public services. Prem Sikka is Emeritus Professor of Accounting at the University of Essex

FIVE YEARS’ TIME ACCA has 134,000 students who are still part qualified after five years of paying their subs. That is 30% of the total. The good news is that this is two percentage points lower than last year’s figure. CIMA’s 33,781 five-year-plus PQs account for 31% of student numbers, up on last year’s 30%. However, it is the AIA with 50%

A whopping 175,000 accountancy trainees are still trying to get qualified five years after they first signed up, according to Financial Reporting Council figures. The accountancy bodies based in the UK and Ireland have just ACCA over 600,000 PQs <1 102,456 studying with them 1>2 76,373 worldwide. Of them, 2>3 59,585 29% are still planning exams half 3>4 41,941 a decade after they 4>5 30,747 began their 5+ 134,084 accountancy TOTAL 445,186 journey.

of its students base now in the fiveyears-plus bracket that has the highest figures. This is even more than CIPFA, which now has 40% of its student members ‘with them’ for over five years. Meanwhile, the ICAEW has just 4% of its students still studying after five years. CAI, the Irish institute, has 9% and ICAS 8.6%.

TIME REGISTERED AS A PQ IN YEARS CIMA 23,466 18,306 14,441 10,554 6,501 33,781 107,049

CIPFA 548 643 542 578 651 2,039 5,001

ICAEW 9,042 7,278 6,099 4,798 1,731 1,293 30,241

CAI 1,793 1,575 1,421 1,236 350 636 7,011

ICAS 926 787 911 634 280 334 3,872

AIA 226 432 569 698 850 2,850 5,624

TOTAL 138,457 105,393 83,568 60,439 41,110 175,017 603,984

IASB proposes a replacement for IFRS 14 The International Accounting Standards Board has published proposals for a new accounting standard that would require companies subject to rate regulation to give investors better information about their financial performance. Rate regulation, which is common in some industries including the utilities and public transport industries, determines the amount a company can charge its customers for goods or services

supplied to them and the period when the company can charge that

Accountex London 2021 cancelled The organisers of Accountex London have announced the show has been postponed again. The new dates for the conference and expo, to be held at ExCel London,

are 11-12 May 2022. The plan is for Accountex Summit North to still take place on 21 September 2021 at Manchester Central. Event director Zoe Lacey-Cooper

employment to five million, with the number of owner-managers doubling to two million in the past 20 years.

freeze council tax at 2020-21 levels. Business pandemic tax reliefs are also being extended and the poundage rate of non-domestic rates will be cut to 49p.

amount. In some cases, the period when a company supplies goods or services differs from the period when the company can charge customers for those goods or services – and thus differs from the period when the company reports revenue in its income statement. The proposed Standard would replace IFRS 14 Regulatory Deferral Accounts. The deadline for comments is 30 June 2021.

said: “The current restrictions in place still pose a huge challenge to running Accountex London in May this year. As always, our priority is safety, and we feel that there are still too many issues in 2021 for us to be able to deliver the event.”

Taxwatch Pap Self-employed tax target The Institute for Fiscal Studies (IFS) has called for controversial tax reforms that would increase bills for millions of self-employed workers and business owners. The IFS report points out that someone paid £40,000 on PAYE pays £3,300 more than a self-employed worker in the same role, and £4,300 more than someone working through their own company. The authors of the report claim that the ‘unfair’ treatment explains the rise in self8

Pap No change for Scots Income tax rates and bands will be unaltered for the coming year, the Scottish government has said. The thresholds for all but the top rate will rise in line with CPI inflation (0.5%). The government is also making an additional £90 million available to compensate local authorities that choose to

Proposed Scottish income tax rates – 2021-22 Starter rate: £12,570 – £14,667 (19%) Basic rate: £14,667 – £25,296 (20%) Middle rate: £25,296 – £43,662 (21%) Higher rate: £43,662 – £150,000

(41%) Top rate: Over £150,000 (46%) Pap Taxing times More than 10.7 million people submitted their 2019/20 self-assessment tax returns by the 31 January deadline, HMRC has revealed. The remaining 1.8 million (15%), whose tax return is now late, will not however be charged a late filing penalty provided they submit their return online by 28 February. Some 96% of all returns were filed online. PQ Magazine March 2021

news PQ

AAT’s Mark Farrar to retire PwC’s net zero aims PwC is making a worldwide commitment to achieve net zero greenhouse gas (GHG) emissions by 2030. It includes supporting clients to reduce their emissions, as well as reducing those from PwC’s operations and suppliers. The Big 4 firm will also reduce its travel footprint and plans to neutralise its remaining climate impact by investing in carbon removal projects. PwC’s net zero goal includes an aligned with a 1.5°C trajectory. PwC is committing to reducing its total greenhouse gas emissions by 50% in absolute terms by 2030. This includes a switch to 100% renewable electricity in all territories, as well as office energy efficiency improvements.

PQ Magazine March 2021

AAT CEO Mark Farrar is set to retire. He has led the AAT for seven years, taking over from Jane Scott Paul in 2014. Staff were told on Friday 16 January of his intention to leave the organisation this summer. Over his tenure, Mark (pictured) has introduced significant changes to the AAT, ensuring it stayed relevant to its members, students and the wider accountancy profession during times of major changes. He has been a passionate champion for issues such as gender equality and pay, increasing

the representation of women at senior levels within the organisation. AAT was the first accountancy body to sign up to the Women in Finance Charter, and has been a signatory of the Prompt Payment

Audit semi-senior job part qualified ACA/ACCA, Leatherhead, Surrey

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PQ Auditor, Surrey • Assist in liaising with clients, attending meetings, planning client visits and liaising with relevant departments within the firm. • Build relationships with clients and related third parties. • Lead on-site audit teams and complete jobs with minimal

Code since 2016. Mark also supported the credibility and value of accountancy apprenticeships through pushing for new standards, including lobbying on the apprenticeship levy. AAT President, David Frederick, said: “Mark has made a hugely valuable contribution during his time in post and AAT has moved forward significantly under his leadership. I and my fellow Council members are sorry to see Mark leave and we will undertake a thorough recruitment exercise to find a suitable replacement for him.” supervision, to deadlines and within budget. • Assist in the development and supervision of trainees. You will be ACA, ACCA, ICAS or equivalent qualified with foundation level exams completed. Salary on offer is £25,000 to £35,000 per annum. Application closes on 19 February. Go to: https://www.gaapweb.com/ job/4105877/part-qualified-auditor/

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ZOE ROBINSON Adapting to the home classroom

PQs have not escaped the disruption caused by Covid. However, the impact has been significant in one area: bedrooms have had to become makeshift classrooms almost overnight. Before Covid, learning took place in a single location inhabited by both student and teacher, but now there are three learning environments: the platform you use to access content, the place where you study and the space occupied by the teacher. Studying from a bedroom or using the dining room table is not the same as being in college; admittedly it’s more convenient but where you learn makes a difference to levels of concentration, recall and motivation. Behavioural psychologists tell us to design our surroundings to make better choices; here are a few ideas to improve your home classroom. Task association is the way your brain knows that when you’re in a certain place you will undertake a certain action. If you can, use the same room to study each time, maybe having mnemonics on the walls, your timetable and even inspirational messages. Manage friction by making some tasks easier and others harder, for example, putting your mobile phone in another room makes it harder to continually check it for messages. Too much choice makes following a routine and developing good habits difficult. Follow the same routines every day, arrive at your home classroom on time but remember to finish on time as well. Zoe Robinson is Learning and Programme Director at Kaplan Financial

The skies the limit: in lockdown, everyone celebrates their ACCA success in their own way. After five years and 22 exams, Shannon Burrows did it with coffee and some ACCA balloons!

Two out of three APM sitters fail in December The December 2020 ACCA pass rates are in, and APM has the dubious distinction of being the lowest paper pass rate (again!), with 32% of sitters passing this time around. That’s a slight dip in the rate for September (33%). This news will not come as a surprise for many, as one in four sitters felt the December sitting was a ‘disaster’ for them on Open Tuition’s instant post-exam poll. On the good news side, the PM pass rate rose 1% point to 40%. But AA pass rates fell to 39%, making it the ‘hardest’ paper for the Applied Skills level. AAA had an even lower pass rate of 35%, yet this is 2% higher than the previous sitting. Both ATX and AFM saw healthy jumps in their pass rates. However, all the Applied Knowledge papers

Deloitte laid bare over Autonomy audit The FRC has finally released the full report from the Independent Disciplinary Tribunal over the ‘misconduct’ of Deloitte and former partners Richard Knights and Nigel Mercer, in relation to the audits of Autonomy. The FRC previously announced the sanctions last September, but now you can read the tribunals damning final report – all 268 pages of it. We know that Deloitte received a severe reprimand and was fined £15 million for “serious and serial failure to discharge its

were down on September 2021 – between 2% and 4%. Outages aside, 120,000 students managed to get to the end of their December exams, sitting on average 1.275 papers (153,000 papers). ACCA executive director – strategy and development, Alan Hatfield, said: “We are delighted to have seen improved pass rates at Options exams in particular.” He explained ACCA has provided enhanced tutor-focused support on exam marking, especially in AFM, using past exam scripts. ACCA DECEMBER 2020 PASS RATES: BT 84%; FA 73%; MA 69%; LW 86%; TX 51%’ FR 48%; PM 40%; FM 45%; AA 39%; SBL 49%; SBR 47%; AAA 35%; AFM 42%; APM 32%; ATX 40%

critical public interest duty to uphold the reliability of the reporting of Autonomy”. In the view of the disciplinary tribunal these serious and serial failures, and the failures of one of Deloitte’s audit engagement partners (Knights) to act with integrity and objectivity, “could seriously undermine confidence in the standards of conduct of members and member firms… and the profession in general”. While it admitted misconduct charges Deloitte had argued that the starting point for any fine should be £7 million. However, the Executive Counsel ruled the case “involves a Big 4 firm guilty of seriously bad incompetence in respect of the audit of a major public company, where the errors were measured

HTFT Partnership obviously wanted to sing from the rooftops that all 36 of its Strategic Case Study CIMA students passed the November exam (on 15/1/21). HTFT Partnership’s Clare Finch told PQ magazine: “The pass rate is a testament to the quality of tutoring they received throughout their course, coupled with the amount of work they put in. The HTFT November 2020 SCS cohort found a way to finish a difficult year on a high for sure, we wish them the best of luck for the future.” David Evans, HTFT’s SCS lead, said: “Congratulations to all our SCS students on their incredible achievement! A big thank you to the amazing HTFT SCS team of writers, tutors and markers for creating and delivering such a fabulous course. CIMA recent recognised HTFT Partnership in its awards, and they are our reigning Accountancy College of the Year.

RI for ICAEW ICAEW’s March Professional exams in the UK have been moved to remote invigilation only. Certificate Level and CFAB exams in the UK have also gone the same way. For professional level PQs the booking window is now closed. ICAEW said: “Students health and wellbeing is at the heart of our decision, ensuring they are not unduly exposed to any potential risk from sitting an exam in an exam centre or travelling to an exam. After careful consideration of the government guidelines, we feel this decision is the safest option.” Trainees can find out more at tinyurl.com/2nhvz9g4

in nine figures or more, leading to the risk of widespread losses”. And it was pointed out that firms that had not committed misconduct would expect to see the fine imposed on one of the world’s largest accountancy firms to be one reflecting its stature, revenues and profitability. The £15 million fine is 3% of Deloitte’s operating profits for FY19 and less than 0.5% of its revenues for FY19. The firm has been ordered to provide a Root and Cause Analysis of “the reasons for the misconduct, why the firm’s processes and controls did not prevent misconduct, and whether the firm’s current processes would lead to a different outcome”. Find the full report at tinyurl.com/266bdyy9 PQ Magazine March 2021

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MIKE DAY Why 6G really matters

Say what, I hear you ask – 6G when we haven’t even got 5G properly rolled out yet? The adoption of 5G in the UK is quite robust and, according to GlobalData, is forecasted to reach over 26% of total mobile subscriptions by 2024. As a reminder, 5G is 100 times faster than 4G but not only that: 5G is – in theory – far better at utilising that speed. 5G could see the end of physical network cabling and take us much further to that promised land of ‘always on, anytime, anyplace, nearly anywhere’ information and computing resources. In my opinion, that will already further change business and accounting and it will definitely further promote all things cloud computing. But for me it’s 6G that brings with it the mind-boggling leap in thinking, where 6G is a 100 times faster than 5G and its lossless transmission in space will enable communication across vast distances. The University of Oulu in Finland predicts that 6G will lead to a future where any surface can be transformed, on the fly, into a control surface and any space will become a holographic screen when desired. Hardware devices as we currently know them would disappear. Have I gone too far? Is that all too ‘Minority Report’ for you? Well, China has breezed past the global competition in 5G technology and it is already well into testing 6G technology with the first satellites launched in November. Mike Day, Director, UK Education Sector, Xero

Bitcoin not the future Cryptocurrencies such as bitcoin and ethereum will not be the future of digital payments because they do not have a stable value, says the Governor of the Bank of England, Andrew Bailey. He told a meeting of the World Economic Forum that stable coins such as Facebook’s diem (they were called libra) and central bank digital currencies looked promising moving forward, but he was wary of cryptocurrencies. Bailey explained: “Have we landed on the design, governance and arrangements for a lasting

currency? No, I do not think we are there yet. I don’t think crypto-

currencies as originally formulated are it.” He went on to say that, like other central banks, the Bank of England is investigating whether to establish its own digital currency. The biggest concern for regulators remains the thorny question of privacy, and the access to personal information. Christine Lagarde, President of the European Central Bank, also has concerns that cryptocurrencies have become a favourite tool of money launderers. She said bitcoin is “a funny business” asset that needs global regulation.

Google set to boycott Australia

Scrap VAT on electric cars to boost sales Scrapping VAT on electric cars will help boost sales, says the RAC, after a study found that high upfront costs are stopping many motorists making the switch from petrol vehicles. The UK government provides a grant of £3,000 towards the cost of plug-in cars, although the RAC said this amount “seems to be going down each year”. Researchers felt that the government needed to either increased the grant or abolish VAT on electric cars to see if this helps sales. Taking off the VAT could bring down the price of such cars down by as much as £5,000.

It was also felt that the price differential for new cars was still too great – electric cars can be £10,000 more expensive than the equivalent petrol or diesel model. So, while the VW e-golf comes in at a price of £31,000, customers can buy a petrol Golf for £21,000. The range of electric cars was another concern. Drivers said they want to be able to drive from Edinburgh to Cambridge (375 miles) without having to recharge. The current range of electric cars is around 235 miles. In 2020, just over 108,000 pure electric cars were sold in the UK, that’s 6.6% of new car sales.

globally in the week before WhatsApp’s announcement (on 4 January), and 8.8 million times the week after.

accounting software to customers. With 63 million small businesses in India (10% of the global total), Tide is hoping enough of them are ‘digitally enabled’ to make the lender a market disruptor there.

Google has promised it will remove its search engine from Australia if legislators enact new laws to make the tech giant share royalties with news publishers. Australia is planning to go ahead with a world-first move to make the likes of Facebook and Google pay media outlets for their news content. It is being seen by many as a possible global test case for how governments could seek to regulate the tech giants. However, critics have said the legislation is ‘unworkable’. Australian PM Scott Morrison (pictured), said the government would not bow to threats.

Tech briefs Pap WhatsApp to share data Message platforms Signal and Telegram saw a huge surge in downloads across the world after WhatsApp ‘updated’ its terms and conditions. WhatsApp told its two billion users that it would be sharing their data with its parent company, Facebook. Interestingly, although the notification was sent to everyone the change does not apply to users in the UK or Europe. Analytics firm Sensor Tower said that Signal was downloaded 250,000 times 12

Pap Tide looks to India Tide, the online small business lender, is preparing to expand its operations into India. It has been a huge success in the UK, winning 340,000 business accounts in four years. Launched in 2017, Tide provides technology to power service such as invoicing and helps businesses link up their

Pap Council files on the dark web Cybercriminals who hacked Hackney Council’s computers have now published personal details of residents on the dark web. Experts supporting the council believe that what has been released is a limited set of data, and said it is not available on a public forum, nor visible through search engines on the internet. Council staff have been working closely with the National Cyber security Centre and Met Police since the ransomware attack three months ago. PQ Magazine March 2021

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A great conference I would like to congratulate LSBU and PQ for the excellent recent event, both in choice of speakers, their topics and the virtual arrangements. It increased my knowledge and many of the references will lead me into reinforced or new thoughts for the future of accounting in the growing importance of impact/ stakeholder capitalism and the aims of today’s governance of the UN Sustainable and Social Goals for its members. I feel sure it has also added to the knowledge of all delegates, both in their research and work practices now and in the future. PQ should be proud of this contribution to the university’s

learning programmes and society in general. The theme of ESG ran as a thread though the day as well as the contribution accountants

make to the economy, and will do as we emerge into a new digital world, learning to live with this new virus and its future mutations. Congratulations again on an excellent day of learning. Jeffrey Ridley, Visiting Professor of Auditing at LSBU The Editor says: Thanks Jeffrey. Our conference ‘2021 and beyond: The New Normal of Accounting Around the Globe’ has been a big hit. Nearly 300 people joined us on the day and everyone can now see what they missed on Facebook! Last time we looked over 250 people had already had a look. All you need to do is go to https://youtu.be/7anp9WwzN6k.

Our star letter writer wins a fantastic ‘I lovePQ’ mug!

We recently picked up a thread on a Facebook page about ACCA PQs and their mental health. “I am struggling a bit,” admitted one student. The support and advice came back quick and fast. One PQ simply said: “Lots of walking helped me a lot.” Another explained they should not worry about taking a break – the exams will still be there in nine months’ time. They admitted: “I have been doing my ACCA so long they have changed the name of the exams 3 times.” Yet another said they too had some mental health issues while studying, and revealed: “I took three months off from ACCA to get my head back in the game. Now when I find myself starting to struggle I try to increase my exercise and speak to friends.”

ACCA booking woes I thought I should drop you a line regarding the issues ACCA appear to be having over bookings for the remote exams in March. Having spent two hours on hold to them last week and over an hour this morning (and on both occasions being cut off) I am still not sure if I have booked the correct exams. I understand that there may have been issues with the new format but it’s not like they haven’t had time to work out the process since the exam cancellations last June. Exam anxiety isn’t really an issue for me but ineffective management and poor internal processes do keep me awake at night. Why doesn’t ACCA practice what they preach? It all confirms my belief that I should have taken the CIMA route to qualification. Jo, ACCA Student The Editor says: We have contacted ACCA about this – see next month’s issue for more on this.

Well done AAT Well done the AAT for keeping their assessment ‘available’ during the current lockdown. I was worried I’d have to put my studies on hold but it means I can really focus on

getting qualified and get something positive from this mess. Booking an assessment wasn’t as straightforward as I had hoped but I have found somewhere to sit my next exam. One happy AAT PQ

Making the best of it I loved Cath Littler’s piece in last month’s PQ about her dad – it put a smile on my face. We can all take inspiration from the way we have adapted to the new normal. Name and email address supplied

Many were happy to tell their story: “I’ve just taken a year out from the ACCA hoping to start back next month, but I really started to suffer and had a lot going on at work and I would find myself crying all the time. I ended up having counselling and as I say I’m hoping to start back in Feb. You just need to do what is best for you I’ve taken up yoga and trying to stay positive.” Finally, one PQ came up with a really nice idea: “I feel like we need a wellbeing group where we can come to if we’re feeling low and just get some nice words and virtual hugs.” There was also recently a post on Accounting Student Network that caught our eye: “Can’t wait to receive my new shiny BTAX book. I hate electronic books, far better to have a hard copy.” Fellow PQs were quick to agree: “Hard copy for defo”, and “I don’t like electronic books, no good for my eyes!” As another PQ pointed out: “I agree, I tried an e-book and didn’t like it at all, nothing like a good old-fashioned printed book.”

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

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PQ the economy

The hard road ahead ACCA’s chief economist Michael Taylor has hopes for an economic recovery this year, but warns it will be a fragile one

any PQs will agree that seeing the back of 2020 was a great relief. Without doubt, it was one of the most heartbreaking and tragic years in recent times, filled with immeasurable loss, and while the start of this year has seen much of last year’s leftovers remain there is still hope for the remainder of 2021. However, this of course does not negate the immediate action needed to mitigate the impact the pandemic has had on health systems worldwide and the global economy.

What happened in Q4 of last year? This is the biggest economic shock we’ve witnessed in decades. Both the immediate and short-term outlook shows confidence has stalled in the latter part of last year, underlining uncertainty for the year ahead. In ACCA and IMA‘s most recent Global Economic Conditions Survey (GECS), accountants and financial experts say economic confidence in late 2020 had stalled and remains fragile heading into 2021. The survey, which captures thoughts from over 3,000 professionals worldwide that advise thousands of businesses, tracks confidence and fear indices. Findings revealed global orders, employment and capital investment indices recorded a further modest improvement – but still point to activity well below the pre-crisis level in 2019 Q4. Also, the ‘fear’ indices show concern about customers and suppliers going out of business – edged lower in Q4 but remain at an elevated level. This clearly underlines the extreme uncertainty in the global economic outlook at the start of this year. Looking ahead, we should see recovery, but precisely when and how strong it will be is very uncertain. What is anticipated is we will see a weak start, followed by a recovery gathering momentum through the second half. Much depends on the evolution of the Covid19 virus and variants relative to the progress of vaccination programmes and there is great uncertainty surrounding these developments. In reference to the survey, respondents seemed to agree with 50% of those surveyed in Asia Pacific, North America and South Asia expecting sustainable recovery in the second half of this year. The most optimistic in this respect is the Middle East, where 54% expect recovery during the first half of the year, which is a likely consequence of a recovery in oil prices. What was the picture in the UK? The UK suffered the biggest fall in GDP among the G7 economies last year – by around 11% for the whole year. The length and severity of the first lockdown in March resulted in a near 16

quarter collapse in GDP in Q2. And while there was a strong rebound in the third quarter, a second wave of infections in the autumn led to yet another national lockdown and inevitable economic contraction albeit on a much smaller scale than earlier in the year. A quarterly contraction of around 2% in Q4 would leave UK GDP almost 12% below its precrisis level of a year earlier. This fall is almost exactly twice the peak-to-trough fall in output during the global financial crash of 2007-2009. And so far this year, record infection rates and hospitalisations has triggered a third national lockdown that will last through most – if not all – of the first three months of the year. so economic contraction is inevitable. An early and ambitious vaccination programme has created expectations of a significant and permanent easing of the most restrictive measures during Q2. Thereafter, recovery should gather momentum with potential for a strong catch-up, driven by consumer spending. And we can’t discuss the economic landscape within the UK, without mentioning Brexit. On 31 December 2020, the UK left the single market

and customs union of the EU and entered into a trade deal that meant that no tariffs or quotas on trade between the EU and UK. At least for this year, UK’s new trading relationship with the EU is not likely to have a significant influence on UK GDP, since demand is already weak. Covid-19 infection rates and the rollout of vaccines will be dominant influences on the UK economy in coming months. The ‘reset’ The pandemic has shown how a collective global force is needed to address the impact it has had on national economies and health systems, as well as the environmental, social and technological challenges we currently face. At the end of January this year, global leaders set the agenda at Davos, pushing the ‘Great Reset’ button to build entirely new, sustainable foundations for our economic and social systems. Despite the current backdrop, there is hope and a window of opportunity to shape recovery of the global economy. And hopefully this time next year, we’ll be telling a very different story. • Michael Taylor is ACCA’s chief economist PQ Magazine March 2021

awards 2021 PQ

TIME TO

SHINE

AWARDS CATEGORIES 0 PQ OF THE YEAR 0 NQ OF THE YEAR 0 DISTANCE LEARNING STUDENT OF THE YEAR 0 ACCOUNTANCY GRADUATE OF THE YEAR* (*New category) 0 APPRENTICE OF THE YEAR 0 STUDENT BODY OF THE YEAR 0 ACCOUNTANCY BODY 0 ACCOUNTANCY COLLEGE – PUBLIC SECTOR 0 ACCOUNTANCY COLLEGE – PRIVATE SECTOR 0 ONLINE COLLEGE OF THE YEAR 0 LECTURER – PUBLIC SECTOR 0 LECTURER – PRIVATE SECTOR 0 STUDY RESOURCE OF THE YEAR 0 INNOVATION IN ACCOUNTANCY 0 BEST USE OF SOCIAL MEDIA 0 TRAINING MANAGER/ MENTOR 0 ACCOUNTANCY TEAM 0 ACCOUNTANCY PERSONALTY 0 EDITOR’S SPECIAL AWARD

Who is going to win one of our ‘PQs’? Well, that’s up to you – so get nominating! o you know anyone who deserves a PQ magazine award nomination? Our awards are now in their 18th year, and have become ‘the’ awards to be seen at. That may be a little harder this year, but we will still try to make the evening one to remember. For the first time the awards will be online, but we will endeavour to keep some of the essence that make the PQ awards night unique – so expect some surprises! The premise of the awards is still the same – we are looking for the people who have helped you on your journey. That could be a fellow PQ, tutor or mentor. We are also happy for you to enter yourself. Many PQs work tirelessly without recognition, and

we know how a shortlisting can really help to make a CV stand out from the crowd. In the past we have even had sons and daughters who have put forward their mums and dads for an award. Our awards are totally independent – our judges make sure of that. This means those used to winning awards don’t automatically get a prize from us. Everyone is judged on their merits. All we need at this stage (by 19 March) is 250 words on why you think your nominee should win. Please state clearly what category you are entering, too. You can download the nomination form at https://tinyurl.com/y5jtj8dr. When you have completed it return it to us at awards@pqmagazine.com and we will do the rest. If you want to post it to us then send your entry to: PQ magazine, PO Box 75983, London E11 9GS. As we’ve said, the deadline for entries is 19 March and there will be no extensions this year – sorry!

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PQ Magazine March 2021

PQ salary survey

Trends for the year ahead Karen Young, director of Hays Accountancy & Finance, looks back at 2020 and provides an insight to what 2021 may hold here is lots to unpack from the year just gone, which unfolded in a way that nobody could have foreseen. However, the pace of change is not slowing down. We’ve got lots in store as the world of work for PQs continues to develop and react to impacts from the pandemic. Based on new data from over 600 PQs in the Hays Salary & Recruiting trends 2021 guide, here is a glimpse into what 2021 might have in store.

Positive about the short term Despite the whirlwind that 2020 was, employers have a positive short-term outlook on the whole. Most (87%) expect their organisation’s activity levels to increase or stay the same throughout the year, which is good news for the finance profession and its direction over the year ahead. Another encouraging sign from employers is that over half (53%) are planning on hiring new staff in the year ahead. This is just a touch under the figure for last year (60%), but should still be encouraging for PQs who intend to look for new opportunities over the next 12 months. Employers hunting for new skills For PQs in this position, it’s important to be aware of what employers are looking for – which unsurprisingly has changed somewhat as a result of the pandemic. The skills on employers’ wish lists now look somewhat different. Finance skills unsurprisingly still top the list of skills in demand, but new technical skills are coming to the fore. These include data and analytics (needed by 22%) and IT infrastructure (21%). Non-technical or soft skills also have a firm place in the spotlight, reflecting a new world of work in which we are interacting differently and facing new challenges. Salaries have fared better than most Looking at salaries finds that PQs faired relatively well in terms of salary rises over the past year. Salaries rose 1.5% on average, which is higher than the average for the whole of the accountancy and finance sector (0.9%) and the UK average (1.2%). Professions including payroll, accounts receivable and insolvency saw the most generous salary rises of over 2%. Working practices will diversify The vast majority of accountancy and finance professionals switched to full-time remote working around the time of the first national lockdown in March 2020 and nearly two thirds (65%) say this has been positive for their organisation. It doesn’t however look to be the most popular option going forward, as only 12% say they would like to be working fully remotely in 12 months’ time. Over a third (36%) say they would like to be working mainly remotely with some time in the office, and 30% want to be working half remotely and half in the office. It certainly looks as though being fully based in an office is a thing of the past and that a variety of working patterns will be taken up. There’s plenty of food for thought here for employers and employees about how to tackle the year ahead. Despite entering the year under lockdown restrictions and with a wounded economy, there are certainly still things for PQs to be optimistic about in the year ahead. Download the full survey at: https://www.hays.co.uk/salary-guide 18

Scotland AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £22,000 £33,000 £30,000 £34,000 £31,000 £30,000 £25,000 £33,000 £28,000

North West AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £19,000 £35,000 £30,000 £35,000 £30,000 £33,000 £30,000 £30,000 £26,000

West Midlands AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £22,000 £35,000 £30,000 £36,000 £29,000 £30,000 £27,000 £35,000 £28,000

South West AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £25,000 £37,000 £32,000 £37,000 £31,500 £32,000 £27,000 £34,000 £30,000

PQ Magazine March 2021

salary survey PQ

North East AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £19,000 £33,000 £26,000 £33,000 £28,000 £31,000 £25,000 £30,000 £26,000

Yorkshire & the Humber AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £21,000 £34,000 £28,000 £33,000 £27,000 £30,000 £26,000 £30,000 £26,000

East Midlands AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £22.000 £33,000 £28,000 £35,000 £28,000 £30,000 £26,000 £30,000 £27,000

East of England Wales AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £21,000 £30,000 £26,000 £30,000 £28,000 £28,000 £22,000 £30,000 £25,000

AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £22,000 £36,000 £32,000 £36,000 £30,000 £33,000 £28,500 £36,000 £30,000

London AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ

Typical £25,000 £44,000 £36,000 £44,000 £36,000 £35,000 £29,000 £38,000 £35,000

South East AAT Studier ACCA Finalist ACCA PQ CIMA Finalist CIMA PQ CIPFA Finalist CIPFA PQ ACA Finalist ACA PQ PQ Magazine March 2021

Typical £25,000 £40,000 £35,000 £41,000 £33,000 £33,000 £28,500 £36,000 £30,000 19

PQ podcasting

Listen and learn I

when jogging. During the first lockdown I fulfilled a secret ambition when I was invited to be a guest on a podcast. ACCA invited me to discuss online learning. I enjoyed the process and was inspired to start my own podcast series. Tempted though I was to record my musings on the music of Paul Weller or the team selections of Eddie Jones, I chose to broadcast about IFRS and the ACCA SBR exam for the benefit of students.

Learning from podcasts I also regularly tuned into Evan Davis’s business programme ‘The Bottom Line’. I learnt so much from this show. It became a private challenge to me to drop some nugget of information that I had learnt from it into every lecture!

Tom’s ACCA SBR podcast A typical episode sees me take a topic – say impairment – and talk through the basics, normally for about 15 minutes. I have recently recorded a couple of episodes with guests. For example, with George who is an ACCA student. He took his December ACCA exam remotely and he shared his experience of that. Fellow lecturers Sunil Bhandari and Sean Purcell have also been on the podcast, both waxing lyrical about the ACCA practice platform and their own exams. So, if you want to learn a bit more about SBR, or just revise your knowledge of accounting standards, then tune into my podcast. It is available on many platforms, including Spotify and Google. But I have an unusual surname, so by searching ‘Clendon podcast’ you will find it! • Tom Clendon is an ACCA SBR online lecturer with FMElearnonline

Tom Clendon is a big fan of podcasts – so much so he’s started producing his own series to help PQs with their learning

first got into listening to podcasts during the years I lived in Singapore. I used to teach in Singapore during the week, but at the weekends I would fly and teach ACCA in another city. I was a flying faculty. My monthly circuit was Hanoi, Kuala Lumpur, Ho Chi Minh City and Hong Kong. That’s a lot of stamps in my passport and a lot of time hanging around in airports. I developed the routine of working in the lounge where there was wi-fi, but relaxing on the flight by listening to podcasts that I had downloaded. For humour I would listen to Nicholas Parsons host an episode of ‘Just a Minute’. For sport I would listen to Radio 5’s ‘Fighting Talk’. And for human interest and light entertainment I don’t think you can beat ‘Desert Island Discs’ (what a back catalogue!).

So fast forward three years. I am back in the UK. No longer flying – well who is? I am still listening to podcasts, but now in the car or

It’s what we call

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PQ Magazine March 2021

ICAEW spotlight PQ

Digital evolution: how the ACA is changing this year Exciting developments are coming in 2021. The ICAEW’s Shaun Robertson and Adam Birt explain all

he ACA is constantly evolving to ensure it remains relevant, flexible and fit for purpose, arming students with the knowledge and skills they need for their future. For 2021, one of the most exciting developments is new exam software. From March onwards, data analytics software will be built into certain Professional and Advanced Level exams enabling students to explore and interrogate ‘real’ client data for their answers and so demonstrate their analytical and interpretive skills. Alongside the new data analytics software, word processing and spreadsheet software and tools such as a spell checker, calculator, notepad and highlighter all build up into a fully functional and user-friendly digital exam environment. By making it as familiar and intuitive as possible, it allows students to focus on demonstrating the higher skills of analysis, interpretation, drawing conclusions and making recommendations. The technology is an enabler.

a broader basis. We haven’t vastly increased the focus on ethics within the exams – it’s always been there. We’ve just raised its profile and reminded people that being a professional is all about being ethical.

Improved flexibility and accessibility Two further technological advances are digital textbooks and remote invigilation. All ACA and ICAEW CFAB

PQ Magazine March 2021

Learning Materials are now published digitally and can be accessed anywhere via any device. This saves 262 tonnes of paper each year and is more convenient and accessible than ever with everything in just one workbook. Highlighting, word searching and making notes is quick and intuitive. Text size and background colour can be adjusted and there is even a read-aloud ‘text to speech’ option. During open-book exams, students can access their digital textbooks and notes via the ICAEW Bookshelf. Clean, unannotated copies of permitted

texts can be accessed within other exams. Before the pandemic, ICAEW was exploring remote exam invigilation and it’s now here to stay. From 2021 onwards, students can choose to sit exams at an exam centre or from a personal location such as home. Raising the profile of ethics The new Ethics Learning Programme, launched in October 2020, looks much more broadly at why ethics is important to the profession, and how technology has changed some of the ethical considerations. It really gets students to think about ethics on

Upskilling for the future The need for knowledge of the fundamentals won’t change, but in a world of rapid technological, environmental and societal change, the professional skills that chartered accountants offer – ethics, professional scepticism, analysis and interpretation, communication, resilience – are increasingly important. Building these skills in the professionals of the future is central to the ACA – and assessing them effectively is key to the new exam software. This is the start of a journey and the focus for the coming years remains to continually develop the ACA and making a good, robust accountant ready for the future. Find out more at icaew.com/ futureACA • Shaun Robertson, Director, Education and Qualifications and Adam Birt, Head of Qualifications, Strategy and Development, ICAEW Reproduced with the permission of ICAEW, this article was first published on Student Insights (January 2021).

PQ test bank

Down on the farm Dr Philip E Dunn tests your knowledge of investment appraisal

hilip Stentiford is an agricultural contractor based in North Yorkshire. He is considering investing £120,000 in one of two machines. The forecasted cash flow from these over a five-year period is listed below: Machine (A) Yr1 £40,000 Yr2 £50,000 Yr3 £30,000 Yr4 £45,000 and Yr 5 £25,000 Machine (B) Yr1 £25,000 Yr2 £35,000 Y3 £50,000 Yr4 £40,000 and Yr5 £25,000 The business has a cost of capital of 12% and discounts projects at that rate. NPV Factors at 12% Yr1 0.893 Yr2 0.797 Yr3 0.712 Yr4 0.636 and Yr 5 0.567

Q7: Management need to know what Discounted Cash Flow Rate the machine with the higher NPV is achieving. Discount the machine showing the higher Net Present Value at 20% and calculate its Net Present Value. NPV Factors at 20% Yr1 0.833 Yr2 0.694 Yr3 0.579 Yr4 0.482 and Yr5 0.402 Q8: Calculate the Internal Rate of Return (IRR) for the machine relevant to Q7. Management suggest that if the second machine could achieve an Internal Rate of Return of 16% they may invest in both machines. Q9: Calculate the Net Present Value of your second choice machine using a rate of 20%. Q10: Calculate the Internal Rate of Return of the machine relevant to Q9.

Q1: Calculate the Net Present Value of Machine (A).

Q4: Calculate the Discounted Payback Index/ Profitability Index for Machine (B).

Q2: Calculate the Net Present Value of Machine (B).

Q5: Calculate the Discounted Payback Period for Machine (A).

Q3: Calculate the Discounted Payback Index/ Profitability Index for Machine (A).

Q6: Calculate the Discounted Payback Period for Machine (B).

Q11: Bearing in mind your answer to Q10, is it likely that the management would invest in both machines? • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books

THE ANSWERS Q1: £19,725; Q2: £5,435; Q3: 1.16; Q4: 1.05; Q5: 3 years 10 months; Q6: 4 years 7 months; Q7: £ (2,870); Q8: 18.98%; Q9: £ (16,605); Q10: 13.97%; Q11: Although the second machine (B) has an Internal Rate of Return of 13.97% that is in excess of the Cost of Capital. It is not yielding the 16% mentioned by management and therefore on this criteria would not be adopted.

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PQ Magazine March 2021

remote invigilation PQ

Preparation is everything Judith Bennett offers some advice on preparing for ACCA’s RI exams

s many PQ readers know, we introduced remote invigilation (RI) last year, and I provided an update about it in PQ’s August 2020 edition. For those of you preparing for the forthcoming March exams, we want to help you get ready for RI by sharing our top tips.

The RI journey We introduced RI back in May 2020 for both our on-demand and session-based exams, as we recognised the disruption and frustration students faced as a result of exam cancellations. We took the decision to bring in RI much earlier than we had planned to provide an immediate solution for students who were unable to sit centre-based exams and to help you keep your learning on track. We know how keen many of you are to progress. RI offers the opportunity to continue with exams despite Covid-19 disruption. To introduce RI, we had to move quickly to get the systems in place and we acknowledge we’ve had some teething problems in these initial sessions. We’ve listened really closely to your feedback and have acted on it. PQ Magazine March 2021

We started RI in June for our on-demand exams (Applied Knowledge and Foundation level exams) and September for our session-based Applied Skills exams. And again, in December, we were able to offer remote invigilation as widely as possible in circumstances and locations where our centre-based exams were cancelled due to Covid-19. With the continuation of restrictions in many markets, we’re also offering RI for March exams. As you all know, with RI, exams are taken online and we’ve chosen the most robust and rigorous form of invigilation. This means you’re supervised remotely by a live invigilator as well as the AI running checks on your background at the same time. There is a thorough system of checks involving biometrics, artificial intelligence and recording – rigour, security and integrity are paramount. We also run several checks during our post exam processes, again ensuring the absolute integrity of the exam you take and the results you get. There’s no getting around the RI system! Preparing for March exams Sitting an exam under RI conditions is obviously

a very different experience to an exam in a centre. The very nature of RI delivery means the infrastructure needed to run a successful exam relies on your home or work IT connectivity and broadband connection stability. Most students who have sat RI exams successfully completed theirs without any technical issues. We investigated the minority who experienced problems and our analysis shows the following top three reasons for technical issues: 1. Poor connectivity or interruptions to internet connection: to help reduce the chances of your connection dropping, we recommend using a wired connection if possible. Pop-up blockers should be disabled to prevent interruption and Internet cookies should be enabled. 2. Failure to meet the technical requirements: it’s extremely important to check your computer or laptop meets the minimum technical requirements and passes the system test. Failure to meet the technical requirements means you should not book a remote exam. Doing a systems check is vital, so we advise completing system checks which are fully detailed in the ‘before you book section’ of our website, and that you complete your question practice in the ACCA Practice Platform. 3. Corporate firewalls: work computers generally have more restrictions, such as corporate firewalls, that may prevent successful delivery. If you need to use a work laptop, we advise you to check the network configuration on this Pearson Vue check list on their website at tinyurl.com/icfuac7i Guidance on minimum requirements, system tests, preparation and more are available on our remote ready webpage, so do please read and complete the checks prior to your exam, and on exam day too. It’s essential to your exam success. Also, read our troubleshooting guide in advance of the exam. This is so you know what to do next if you experience technical issues. If this happens during your RI exam, and if you feel you’ve completed enough to be marked, then we’ll consider mitigating circumstances, which can be made through MyACCA. Also, tune in to our advice in a recent podcast with Graham Hambly, the editor of this magazine, and ACCA’s head of learner experience, Paul Kirkwood. It’s an excellent listen which offers advice from both about preparation. We also have a great podcast with a recent prize winner who sat his exam through RI so check that out, too – at tinyurl.com/2l4brcyu We are sure that if you follow these preparation steps you will have a positive experience of remote examination – and we wish you the best of luck in your forthcoming exams. • Judith Bennett, director – professional qualifications, ACCA 23

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Xero offer PQ Xero Tax. This pack of eLearning takes about 10 hours and details will follow in the next PQ magazine, so don’t miss it. This is all fantastic for digital skills and employability; with Xero Certifications in very high demand we have seen hundreds of students gain employment in both practice and industry since launch. As 83% of accountants in practice believe understanding technology is now as important to them as understanding accountancy, tech knowhow is now a higher priority than ever before (Xero research with Censuswide 2016).

Get ahead with Xero Certifications and Badges – for FREE Xero qualifications offer a unique combination of education and employability – and PQ has got together with Xero to offer them to you for free nlike any other accounting software provider or platform, Xero now offers a mix of education opportunities that benefit PQs, training providers and, ultimately, employers. Our mission is to help you become the best you possibly can, as efficiently as you can.

Demonstrate your abilities Xero Advisor Certification is the core way for accountants and bookkeepers to demonstrate their knowledge and understanding of using Xero in practice. Originally, this was only available to those already working and using Xero – but now that’s all changed. Advisor Certification has opened up opportunities for anyone with ambitions to work in this new world of cloud accounting. Taking around eight hours to complete, the course consists of a complete pack of self-paced e-learning modules, getting to grips with cloud fundamentals and an introduction to the Xero platform. Completing this certification doesn’t just show a commitment to working in the industry, it saves employers hours in training new joiners on PQ Magazine March 2021

unfamiliar software – it’s good all round. All you need to do is to visit Xero Advisor Certification and create a Xero login, choosing PQ magazine as the organisation, and you are ready to start your learning journey. We’re also very pleased to announce that you are now able to continue with your learning, again for free. It’s highly recommended that you complete the Advisor Certification first but then you can continue on to Payroll Certification, App Advisory Badges, Security, Hubdoc and

Changing the face of education Last year, we unveiled Xero Learn – a brand new way for training providers to introduce cloud accounting to their students and deliver a digital skills agenda. This unprecedented shift creates a more flexible way of teaching and learning as both tutor and student have access to a full, live version of Xero wherever there’s wi-fi – so, they can use it on any device, anywhere, any time – and it’s all backed up in real-time. Students learn using real life business simulations, and tutors have greater control and creativity than ever before. They’re able to create, and view progress on, in-Xero exercises and manage their students’ access to Xero. So, it’s not just a chance for their students to get a broader education but for tutors to add another string to their bow. We’re excited to see the first wave of students successfully passing the ‘Using Accounting Software’ module of their AAT and ICB qualifications – using just Xero, a groundbreaking achievement. Everyone’s a winner No matter where you are on your accountancy and bookkeeping journey – just starting out, sharing your knowledge or growing your practice – you can benefit from these initiatives. If you’re learning the ropes and making yourself stand out to potential employers, you have the opportunity to shine – demonstrating a thirst for knowledge and an understanding that the world of accountancy is evolving. If you’re bringing on this new generation of accountants and bookkeepers, Xero can provide all the tools and support you need to successfully train them in cloud accounting, gaining genuine experience, not just hypotheticals. If you’re bringing new blood into your practice, you can look out for candidates with Xero Certifications or accounting software qualifications through recognised training providers – you’ll be hiring the cream of the crop. Where else can you find that combination of qualification, added value and employability? Zoe Robinson, Director of Learning for Kaplan UK said: “Whilst knowledge of accounting concepts will always be important, the Xero Certification course gives our students a practical understanding of the impact cloud accounting technologies has on the profession – and helps them better apply their knowledge to add value to their clients.” If you are a training provider and would like to know more, please go to https://www.xero.com/ uk/partner-programs/xero-learn 25

PQ CIMA case study exams

Mastering the case CIMA’s Clancy Peiris explains how you should plan your answers for the case study

answer is simple – read as many times as it takes for you to understand it!

he single most common complaint from the CIMA case study (CS) examiners, across all three levels, is that students have ‘’failed to answer the question that was asked”. There are a whole range of different ways of not answering a question. Many students are determined to prove how much they’ve learned, regurgitating learned material and ignoring the question. Others answer only part of the question, even though the examiner may have required several things to be done in order to get full marks, perhaps due to running short of time. Some answer the question they hoped would be there, rather than the one that actually is! There is one-size-fits-all solution that can address all of these challenges – answer planning. When we read the question requirement, the buzzwords in it trigger an influx of thoughts in our heads. These thoughts are just mental associations of syllabus topics you studied previously, your experiences or just some random ideas that have some sort of association with the buzzwords in the question requirement. However, the ‘radiant-thinking’ brain does not generate these thoughts in a coherent order or one which is strictly ‘relevant’ to the question set by the examiner. For instance, read the question below and then pause for a moment to check what crossed your mind immediately after you finished reading it: ‘’Discuss how the conflict between Joe and other managers at GS could be resolved.’’ [MCS: Aug 2020 variant 1 - section 2c]. You will probably see that if you start producing an answer straight after reading the question requirement, you face the risk of not answering all parts of the question set by the examiner precisely and within the allowed time. CIMA CS examinations are computer-based, hence answers must be typed in as opposed to using pen and paper. Therefore, it’s important to know where you can plan your answer. As most students do, you may answer plan in your head. On average the human brain can generate 35-48 thoughts per minute. However, neurological science has demonstrated that the human brain is incapable of focusing on two things at once, hence thoughts generated rapidly keep fading off to leave space for ‘new’ thoughts. So, answer planning in your head is not going to be a great help. The alternative is to ‘think on paper’ which allows you to explore your own thoughts, ideas, and insights regarding a particular topic. Some students use the ‘clean-wipe’ pad and the marker pen provided during the examination for answer planning; however, this isn’t very time efficient because you cannot copy/paste from it into the electronic ‘answer sheet’ on the computer screen. The next best alternative seems to be to use the onscreen ‘scratch pad’ to plan your answer but you will still have to copy paste it on the electronic ‘answer sheet’. Having considered all these options, the best place to answer plan is the onscreen ‘answer sheet’ itself.

Step 1: Read the task (question) carefully The obvious first step in answer planning is reading the question requirement together with the incidental (unseen) information provided for the task. How many times should you read the question requirement? The 26

Step 2: Investigate the background of the task (question) The second step is to understand the background to the requirement and exact examiner-expectations in the task set. The questions below might be helpful in this quick background investigation and the acronym ‘FORMAT’ will help you to remember them. • Format of the answer (e.g. report, discussion paper, briefing note, etc). • Objective (or the purpose) of the task (e.g. recommendation to the board). • Recipient of your work (e.g. line manager or a colleague without finance background). • My role as simulated in the exam (e.g. Finance Manager in the MCS examination). • Action or the verb (e.g. Discuss how the conflict…). • Time allowed (and marks) for the task. Let me illustrate this with a question from the August 2020 MCS examination (variant 1 section 3) ‘’Please send me some notes so that I can respond to Ted. I would like you to explain: • Firstly, how the five performance measures operate within the structure of Alpaca and their relevance to his role if GS becomes part of the Alpaca South division. [sub-task (a) = 60%] and • Secondly, how any risks arising from the three issues he identified could be managed. [Sub-task (b) = 40%]’’ The examiner requires your answer in the ‘notes’ format hence you may start the answer with a broad heading such as “Notes: Performance Measures and Management of Risks’’ to cover both the sub-tasks. The immediate recipient of your notes will be the line manager (Liz Petrov); however, Liz needs these notes (the objective) to respond to Ted Drummond who is both new to his organisation (GS) and has not worked in a divisionalised structure before. This background information will inform you as to the depth of explanation you will have to include in your answer. This is how the examiner gives you “hints” about the extent to which you should demonstrate your technical understanding of the syllabus topic(s) in your answer. Management CS (MCS) examination candidates are expected to simulate the role of a Finance Manager (my role) with the overall responsibility for monitoring and implementing of strategy and the job focus is on the medium term. Therefore, in effect the broader action expected in the MCS examination from candidates is to ‘advise’ their line manager by providing the information asked for. This is particularly important when the question requirement is in ‘conversational language’ (e.g. “I need your opinion on…’’, “What do the tables tell us about…”). Complete understanding of the role simulation, core activities and assessment outcomes (as in the examination blueprint) will really help you to interpret and understand exactly what the examiner expects in your answer. Sometimes, the action required is explicit through the verb(s) in the task. Step 3: Structure Planning The above background analysis may be done in your head, but you will have to incorporate it into your ‘thinking on paper’. You will do this on the onscreen ‘answer sheet’ answer-plans when you get on to the third step – structure planning, which in essence is to sketch each requirement of the task as a series of headings for the answer, along with indicative time and marks allocation for each requirement. I will illustrate this using the same question above. This is a 45-minute Task and you will see the clock on the top righthand corner of the computer screen starts ticking away backwards from 45:00. A total of 25 marks are allocated for this task and it is split between sub-tasks (a) and (b) as 60% and 40% respectively. This means, you are expected to spend 60% of the time allowed (27 minutes) on the sub-task PQ Magazine March 2021

CIMA case study exams PQ (a) to earn 15 marks. And, the balance 18 minutes (40% of 45 minutes) on the sub-task (b) to earn 10 marks. Look at each sub-task carefully to see whether they can be split further into sub-headings. Look for ‘and’, commas and full-stops in the requirement. For instance, in the sub-task (a) you will see ‘… and …’ – this means that you may be expected (not always) to provide two different things in your answer. You may either provide these ‘two different things’ under separate sub-headings or you must ensure to cover these ‘two different things’ under one sub-heading. Please see the alternative structure plans for sub-task (1) in the table below. You may use ‘bold’ and ‘underline’ formatting tools in the electronic ‘answer sheet’. Structure planning provides a structured layout allowing you to allocate your time in proportion to the allocated marks and, most importantly, answer ‘all’ requirements in the task. This largely answers the frequently asked question, ‘’How many points should I make in my answer?’’. It’s worth remembering that marks will be equally split among the sub-requirements in each sub-task, hence you will have to split the time equally, too. Notes: Performance Measures and Management of Risks To: Liz Petrov From: Finance Manager [do NOT write your personal name here]

Notes: Performance Measures and Management of Risks To: Liz Petrov From: Finance Manager [do NOT write your personal name here]

(a) Performance Measures (15) - 27 min Explanation of five performance measures (8)

(a) Explanation of five performance measures and their relevance to Ted (15) - 27 min

Operating profit margin

Occupancy rate

Staff turnover

ROCE

Overall guest rating on Visitadvisor

Explanation of relevance of five performance measures to Ted (7)

(b) Managing Risks (10) - 18 min

Operating profit margin

Risk 1: increase in staff turnover (4)

Occupancy rate

Risk 2: bars and restaurants must close by 23:00 (3)

Staff turnover ROCE Overall guest rating on Visitadvisor (b) Managing Risks (10) - 18 min Risk 1: increase in staff turnover (4) Risk 2: bars and restaurants must close by 23:00 (3) Risk 3: visitor tax (3)

PQ Magazine March 2021

Risk 3: visitor tax (3)

Step 4: Content Planning The fourth step is content planning. This involves adding in the main points (a word or two) for each sub-heading. At this stage, read the question requirement again to ensure that the points you have added remain relevant so that you are answering the exact question set by the examiner. You can now quickly type the triggers or pointers under each sub-heading, as you see in the below table. (a) Explanation of five performance measures and their relevance to Ted (15) - 27 min Operating profit margin Explain [this measure] Can Ted influence or control? Relevance to Ted

(b) Managing Risks (10) - 18 min Risk 1: increase in staff turnover (4) Explain [this risk] [Your] advice – explain and justify Risk 2: bars and restaurants must close by 23:00 (3)

Occupancy rate Step 5: Produce the answer Now you have got an answer plan with guideposts. The next step is to type the answer in one go! Remember, CIMA CS examination tasks will be practical and applied, not theoretical or academic. To be successful, you will have to perform the core activities in the same way, and to the same standards, that would be valid and valued in the workplace. The below checklist depicted by the acronym ‘PEARL’ may help you convert your answer plan into a complete answer with a passing score. • Have I stated each Point clearly and completely? • Have I Explained (or Examined) my points in adequate depth? • Have I simulated the role through my Analysis and building Arguments? • Have I Related my points appropriately applying and referencing to the scenario? • Have I Linked-back to the requirement through integration of my knowledge and/or points? (you may do this in a short conclusion to the answer) It must be stressed that the nature of the case study examination tasks means that a range of responses will be valid. The marker reads your answer for a given task, in full. This is to ensure that the marker adopts a holistic approach to marking, which means your answer to each task is read and judged on its merits. Therefore, use the five-step plan of attack in articulating and producing winning answers for your CIMA CS examinations. • Clancy Peiris, Senior Learning Development Manager, CIMA 27

PQ study tips

Practice makes perfect

for your RI exams Jo Tuffill explains the concept of learning curves, to help you get faster and better at remote exams ith many ACCA students facing remote invigilation for the March exam the motto ‘practice makes perfect’ comes to mind. However in the ACCA Performance Management syllabus it is called the ‘Learning Effect’. Repeating the task means you will get quicker and better. I decided to do an experiment, called ‘Try it without paper’. I wanted to see what the learning rate was for my students using the online scratch pad and calculator(optional) to complete some tricky two-mark numerical questions. The issue is, with 1.8 mins per mark, you need to

The Learning Curve

complete the questions in 3.6 minutes, without your tried-and-trusted scrap paper. The learning effect means that every time you double the number of times you complete the task you will reduce the cumulative average time of the task by a fixed learning percentage. The graph below shows this. As with any task there will come a point where the performance will reach a steady state. This will then become the standard completion time for the task. In their first attempt, it took around five minutes and so I asked them to repeat the task another three times. Their cumulative average

time came down to around four minutes. This is a learning rate of 90%. At first sight, that seems too slow but is it? The four minutes is an average time over all four attempts, we need to know the actual time of the fourth attempt. Does this then meet the standard of the 3.6 minutes for the question? That is exactly what is asked of you in the PM exam. Required Did they meet the target of the fourth attempt to be within 3.6 minutes? Answer Using the exam formula Y = aXb Y = cumulative average in minutes a = the time for first attempt, so here five minutes X = the number of attempts so here four times b = log(LR)/log(2) with a LR of 90% then b is – 0.152 To get the actual fourth attempt you need to find the cumulative time for four and take away the cumulative time for three. The cumulative time for four is 5 x 4-0.152 = 4.05 minutes x 4 = 16.2 minutes The cumulative time for three is 5 x 3-0.152 = 4.23 minutes x 3 = 12.7 minutes So for the fourth attempt it was 16.2 – 12.7 = 3.5 minutes Success, within the 3.6 minutes time limit! The moral is all students need to become proficient at using the CBE tools during these times of remote invigilation. The ACCA platform is available for you to use. For Applied Skills papers there are three CBE exams and blank workspaces to practice with. Your tuition provider should also be showing you how to complete questions online, too. So get practising, repeat, learn – and you will succeed. • Jo Tuffill is an ACCA PM tutor with FME Learn Online

PQ Magazine March 2021

ACCA March exam tips PQ

TOP TIPS 4U Here’s our ACCA exam guidance for the March sitting, courtesy of BPP

Performance Management (PM) As any syllabus area could be tested in sections A&B the best advice is to study all areas of the syllabus! Sorry, but you knew that. Areas expected to be tested in section C include (but are not limited to): budgetary systems, planning and operational variances, mix and yield variances, and evaluation of the company performance (either as a whole, or on a divisional basis). Given the fact that this is a performance management paper you would be advised to be prepared to evaluate some performance. PM has the following syllabus areas: A. Information, technology and systems for organisational performance. B. Specialist cost and management accounting techniques. C. Decision making techniques. D. Budgeting and control. E. Performance measurement and control. General advice: You are strongly advised to plan answers to section C questions before starting to type. Ensure that you make reference to the scenario in your answer. Finally, the examining team have repeatedly stated that they expect students to study broadly for all of the syllabus areas, meaning that question spotting is not a good idea, instead students should expect the unexpected. Since the introduction of MCQs this advice is even more critical because more topics can be tested. The exam will be approximately 40% calculation and 60% discussion, meaning that it is not sufficient to be able to perform all of the calculations. Interpretation and application are crucial, especially in section C. Taxation (TX) (UK) In section A there here will be a wide range of topics tested as there are 15 OTQs. Tutors expect at least a couple of these OTQs to be devoted to the administration of income tax and corporation tax. So, candidates should ensure they are comfortable with the following: • Due dates for the payment of income tax (including payments on account). • Due dates for the payment of corporation tax (including instalments for large companies). • Filing dates for the income tax and corporation tax returns. • Penalties and interest for late payments and returns. Other topic areas likely to be tested in section A of the exam are: • VAT rules on registration, impairment loss (bad debt) relief, and the SME schemes relating to cash accounting, annual accounting and flat rate schemes. • Inheritance tax due on lifetime transfers both in the donor’s life and on death. PQ Magazine March 2021

• Statutory residence tests for individuals. • Identification of groups of companies for corporation tax loss reliefs and gains. • Trading loss reliefs for both companies and sole traders. It is important to remember that section A offers the exam team an opportunity to test the whole syllabus, so practising all kinds of TX questions from the practice and revision kit will help build on and complement your existing knowledge. In section B of the exam the questions will be similar to those of section A, but there will be a longer scenario to deal with. This means a slightly different exam skill is necessary as you have more information to work through and each OTQ will require you to find the relevant information or data in that scenario. It is not a difficult skill, but we would hope you have had time to practise an extensive range of section B questions from the practice and revision kit. In section C you will face the longer, constructive response questions with scenarios and much more open requirements. Your

answers will need not just sound technical knowledge, but also the application of that knowledge to the question you have been asked. Furthermore, your answer will have to be presented logically so the marker can follow your thought processes. At least 50% of your revision time should be spent answering the section C questions in the practice and revision kit to build up confidence and speed in a way that will also maximise marks. 1. Remember to learn your income tax and corporation tax pro formas. 2. Calculations which require no more than two or three entries into your calculator can be included on the face of your pro formas (e.g. time apportioning a salary). Calculations which are more complex (e.g. company car benefits) need separate workings which are properly referenced (W1, W2 etc) and have a heading. 3. Actually attempt the narrative parts of the requirement – aim for as many sentences as there are marks with each sentence containing Continued on page 30 29

PQ ACCA March exam tips something technical. Keep your paragraphs to no more than 3 sentences long. 4. In both numerical and narrative answers leave plenty of space on the page. So, in pro formas – leave a gap between each line (you may need to add something in). Show workings down the page, rather than across the page as it makes them easier to mark. In narrative answers leave a line or two between each paragraph just in case you remember something later. Well spaced answers are also easier to mark – and you always want to keep the marker happy. We know that the two longest questions will focus on income tax and corporation tax. These are likely to include the following: • Employment benefits. • Property income. • Relief for pension contributions. • Adjustments to profit to arrive at trading income for both companies and sole traders – in past sittings we have seen a number of questions whereby you have to correct errors in computations included in the scenario. • Capital allowance computations. Finally, remember the pass mark is 50% so you don’t need to be perfect. If you don’t know something have a guess and move on. Sometimes you have to do that in order to get follow through marks in section C questions. If you make a mistake, but then use that incorrect figure later in a subsequent calculation, then that’s fine – you can only lose the mark once. In sections A and B

never leave an OTQ unanswered − have a guess if you don’t know the answer. It might be right! Financial Reporting (FR) Section A: • Fifteen 2-mark OTQs on a wide range of topics including several on consolidation and interpretation of financial statements. • Expect a few questions on non-core areas (e.g. inflation, specialised entities). Section B (Case questions): • Three separate scenarios with five OTQs on each scenario; each question is worth 2 marks. • Each scenario could be a mix of topic areas or focused on one topic and will usually consist of two/three calculations and two/three narratives. • Questions are not dependant on each other and can be answered in any order. Section C (Constructed response questions): • Two 20-mark questions, one covering interpretations and the other preparation of financial statements. • One question is likely to be in the context of a single company and one in the context of a group, so you could have a single company interpretation and a groups preparation or vice versa. • Accounts preparation questions may include extracts or standalone calculations or full statements of profit or loss and other comprehensive income and/or statement of

financial position. • Both questions will cover the accounting for items from other areas of the syllabus. • May include a short separate part, e.g. with a statement of changes in equity, statement of cash flows extract, earnings per share calculation or linked written topic. • A consolidation question would include one subsidiary and often an associate, with adjustments, e.g. fair values, deferred/ contingent consideration, PUP on inventories/ PPE, intragroup trading and balances, goods/ cash in transit. • A single entity question could be preparation from a trial balance or restatement of given financial statements with the usual adjustments for depreciation, revaluation and current/deferred tax (including deferred tax on revaluations) plus a mixture of adjustments on other syllabus areas, e.g. leases, substance over form issues, financial instruments (change in fair value or amortised cost), share issues, government grants, inventory valuation, revenue recognition or construction contracts. Audit & Assurance (AA) All three questions in section B will be broken down into sub requirements and be scenario based. The majority of marks in each question will test syllabus areas B, C and/or D. Areas expected to be tested in questions 16 to 18 include:

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PQ Magazine March 2021

ACCA March exam tips PQ • Audit planning. • Audit risk (identification and explanation of audit risks from a scenario and explanation of the auditor’s response to each risk). • Internal audit. • Internal controls (identification and explanation of deficiencies in internal control and the recommendation of suitable internal controls or description of tests of controls). • Audit procedures (both substantive procedures and tests of controls). AA has the following syllabus areas: A. Audit framework and regulation. B. Planning and risk assessment. C. Internal control. D. Audit evidence. E. Review and reporting. General advice: Where questions are based on a scenario it is essential that you use the information in the scenario to make your answers relevant. You should also think about how you will present your answer – try to use a tabular format in your solutions where relevant as the examining team have stated that candidates who do this score better. Pay attention to the verbs used in question requirements as these indicate the number of marks available. For example, the verb “explain” requires a sentence and will score one mark if properly explained whereas the verb “list” simply requires you to list out information with no further explanation and this will score 0.5 mark per point. Finally, please read the examining team’s comments relating to past exams which are on the ACCA website: http://www.accaglobal. com/uk/en/student/exam-supportresources/ fundamentals-exams-study-resources/f8/ examiners-reports.html. Financial Management (FM) Questions in section A will often be knowledge based (testing your knowledge of key technical terms), and will balance out the questions in section B and C of the exam to make sure that all aspects of the syllabus are examined. It is therefore likely that a good number of these questions will test your understanding of financial management and objectives (ratio analysis, the concept of shareholder wealth) as well as the economic environment and financial institutions topics (financial intermediation, fiscal and monetary policies). The efficient market hypothesis is likely to be tested here too. Each section B case-study will be broken down into five separate 2-mark MCQs (so 15 questions in total). Areas expected to be commonly tested in this section are working capital management (e.g. the operating cycle, the impact of a change in credit period or accepting a factor’s offer), business or security valuations (e.g. methods of valuation), and financial risk management (most likely mainly in the form of currency risk, but it is possible that interest rate risk is examined here). Section C’s two 20-mark questions will be broken down into sub requirements and be scenario based. These two questions will focus mainly on syllabus sections C, D and E. Section C is working capital management, section D is investment appraisal and is likely to feature NPV with inflation and tax. Section E is business PQ Magazine March 2021

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. finance; either an evaluation of financing options (interest coverage and gearing ratios are likely to be important here) or a cost of capital and analysis are most likely. Whichever of these three topics does not feature in section C is likely to appear in section B of the exam. Keep checking the ACCA website for articles in the lead up to the exam. Strategic Business Reporting (SBR) It is vital that you read the examiner’s approach article available on the ACCA website. ACCA has also published several exam technique and technical articles that you should read as part of your exam preparation – read the two articles called ‘Revising for the September 2020 exam session’ (parts 1 and 2). These are available in the exam technique section of the SBR exam support resources section of the ACCA website www.accaglobal.com. The exam section A will be 2 questions, worth 50 marks in total. Question 1 - usually 30 marks: • Q1 will be based on group accounting. Be aware that this question may test any aspect of group accounting, including consolidated statements of cash flows, overseas subsidiaries and associates and JVs. • Make sure you attempt all parts of the requirement in Q1. The most recent examiner’s report stated that some candidates are not attempting the required calculations and therefore struggling to gain a pass mark on this question. • To score well, you need to do the calculations and explain the principles underlying the calculations you have performed. Question 2 - usually 20 marks, including two

professional marks: • Q2 will cover the reporting and ethical implications in a given scenario. Make sure you consider any threats to the fundamental principles of ACCA’s Code of Ethics and Conduct in your answer. • Two professional marks are available in this question for application of relevant ethical principles to the scenario. In order to gain the marks, your answer must be realistic and sensible. Stating that all issues should immediately be reported to the legal authorities without further discussion is unlikely to be awarded the professional marks as this advice is not realistic. • Make sure that you only spend the allocated amount of time on the second question (e.g. 20-mark question = 20 x 1.95 minutes per mark = 39 minutes maximum). The examiner has recently commented that students seem to be spending too long on this question and not leaving enough time for the rest of the exam. Section B will be two questions, worth 25 marks each: • Section B can deal with any area of the syllabus and may be based on a short scenario, a case study with several parts, or an essay. • Section B will always include a question or part-question involving the analysis or appraisal of information from the perspective of a stakeholder. Make sure you have a go at answering this question. There is no ‘right’ answer at this level – marks will be awarded for sensible points that have been applied to the scenario. • There are two professional marks available for the question that covers the stakeholder’s perspective. To gain these marks, you must discuss the issue from the perspective of the stakeholder – e.g. if asked for the investor’s perspective, you must answer from the investor’s perspective. • Current issues are usually examined in section B as a part of a question (not a full question). However, current issues could be examined in either section A or section B of the exam. A question on current issues may require the application of existing accounting standards to a current accounting issue – for example, accounting for cryptocurrency. • The Conceptual Framework has featured significantly in SBR exams to date – be prepared for this. General advice: Make sure you plan your time at the beginning of the exam (and stick to it) to ensure you don’t over-run on particular question – it is 1.95 minutes per mark (or 1.8 minutes per mark if you allocate 15 minutes to reading the paper). Strategic Business Leader (SBL) As with all other ACCA exams SBL is examined as a closed book examination. Unlike the other Strategic Professional level exams which are 3 hours and 15 minutes in duration, the SBL exam has a duration of 4 hours. The exam builds upon the knowledge that you gained at the ‘Applied Knowledge’ and ‘Applied Skills’ levels. However, it does also have its own Continued on page 32 31

PQ ACCA March exam tips distinct syllabus content. As with all other ACCA examinations the pass mark for SBL is 50%. You will not be issued with any pre-seen information in advance of sitting your exam as everything you will require will be made available to you within the examination itself. The SBL exam will focus on one main organisation, and all of the question requirements will relate to this organisation. You may have to take on a variety of roles which may require you to adopt an internal or external perspective when answering questions. You will also be required to respond to a variety of people within the organisation. All of the questions in the exam are compulsory. Every SBL exam will consist of 80 technical marks and 20 Professional Skills marks. Question requirements in the exam will assess and link several subject areas from across the syllabus, and these will test your ability to construct appropriate responses and to carry out numerical analysis. The SBL syllabus consists of the following areas: A. Leadership. B. Governance. C. Strategy. D. Risk. E. Technology and data analytics. F. Organisational control and audit. G. Finance in planning and decision making. H. Innovation, performance excellence and change management. I. Professional Skills. General advice: While 4 hours (240 minutes) may initially sound like a lot of time in which to attempt the exam, it is crucial not to become complacent in how you use this time. ACCA recommend spending approximately 40 minutes reading, planning and interpreting the requirements and the information/exhibits provided. Based on this estimation when planning the amount of time you will spend on each requirement you should look to allocate 2.5 minutes per mark on offer. This time allocation is based on the fact that the exam is 240 minutes in duration, once the 40 minutes reading time is deducted this gives 200 minutes to write up your answer in order to earn the 100 marks on offer. You can earn the 20 Professional Skills marks by virtue of attempting the 80 technical marks on offer, so we can divide the 200 minutes remaining over the 80 technical marks to give 2.5 minutes per mark. Alternatively, you may prefer to work on the basis of 2 minutes per mark (being 200 minutes divided by 100 marks). Regardless of the method you use when allocating your time it is crucial that you stick closely to your timings as this should help to ensure that you do not spend too long on one question requirement to the detriment of those you are yet to attempt. Reading question requirements: The SBL exam will contain all of the information that you will require to answer the question requirements set. This information will be presented in a series of exhibits. To help you locate the exhibits most relevant to answering a specific question it is therefore important that you take the time to read the question requirements set carefully as this should help to direct you. Furthermore, reading the question requirements carefully is important as this will indicate the role and the 32

perspective from which you are expected to answer the question. Identifying this early on is important as it will drive how you construct your answer. Planning your answer: Clearly, if you have gone to the trouble of preparing an answer plan it is important that you use it when writing up your answer. To get the most from your answer plan it is therefore important that you include as much detail as you think will be helpful when the time comes to write up your answer. When planning your work it is important to bear in mind the ACCA’s guide of using 40 minutes for reading and planning. As mentioned earlier you need to remember that some question requirements may require you to conduct some numerical analysis. For example, you may be asked to analyse the performance of the organisation featured in the exam. It is important that you plan the numerical analysis that you intend to perform to ensure that you only focus on performing those calculations that are going to support your answer and provide you with something to talk about. Producing lots and lots of unnecessary calculations for the sake of it will only serve to waste your time in the exam. Understanding the syllabus and the appropriate use of theoretical models in the exam: To stand the best chance of passing the SBL exam, you will need to have a good understanding of the entire syllabus. However, it is important to remember that unlike other exams that you may have sat in the past, questions in the SBL exam will not ask you to simply regurgitate your knowledge of a particular topic or theoretical model. Requirements will test your ability to apply your understanding of the subjects covered in the SBL syllabus in the context of the question scenario. Furthermore, requirements will not specifically ask you to use a particular model in answering the question. Whether to use a theoretical model when constructing your answer will be a matter of judgement that you will need to weigh up in light of the information presented to you in the exam. Attempting plenty of questions in the lead up to your exam is the most effective way of developing your judgement in this area. Understanding the difference between technical marks and Professional Skill marks: Technical marks relate to the knowledge (which

we discussed in the previous section), there are 80 technical marks on offer in the exam. By contrast the 20 Professional Skills marks are awarded for displaying the following skills and behaviours: • Communication. • Commercial acumen. • Analysis. • Scepticism. • Evaluation. Every Professional Skill will be tested in every SBL exam sitting. The Professional Skill being tested will be specified under each question requirement. As you prepare to attempt the exam it is crucial that you take the time to attempt as many practice questions as you can. To increase your chances of exam success you need to ensure that you take sufficient time to develop your understanding of the Professional Skills. Visit the technical articles page of ACCA’s website: There are often very useful articles on ACCA’s website which cover key exam topics and subjects which may help with your exam preparation. There are also a number of articles about how to approach the exam and how to exhibit the professional skills in your answers. All technical articles can be found here: https:// www.accaglobal.com/gb/en/student/examsupport-resources/professional-examsstudyresources/strategic-business-leader/technicalarticles.html. Advanced Performance Management (APM) Q1 section A: Q1 of the APM exam will focus on a range of issues from syllabus section A (strategic planning and control), section C (performance measurement systems and design) and section D (strategic performance measurement). Section A (50 marks) contains one compulsory question. In recent exams Q1 has often required linking a business’s mission to its performance objectives using the concept of CSFs and KPIs. You may well also have to critique and recommend improvements to performance reports and the balanced scorecard and/or information systems could well be tested in this context. The assessment of performance is also likely to be tested and this could easily include benchmarking as a theme. Financial performance measures (ROCE/ RI/EVA etc) are also likely to be commonly PQ Magazine March 2021

ACCA March exam tips PQ examined in Q1 but don’t neglect non-financial issues from syllabus section D such as quality management and reward systems. Q2-3 section B: ACCA have said that one of the section B questions will come from syllabus section E (performance evaluation and corporate failure). In section B, commonly tested areas include quality management, information reporting (e.g. Big Data, Lean Information), the application of strategic models (such as PEST, Porter’s 5 forces, the Value Chain), HR frameworks (e.g. reward & appraisal systems), risk management and environmental management accounting. Keep checking the ACCA website for articles in the lead up to the exam, any articles written by the examining team are often tested and are very important to read. The article on the examiner’s approach to APM is especially worth reading and analysing. Advanced Taxation (ATX) (UK) The exam will comprise of two compulsory questions within section A which will both be of a case study style. The first question will be 35-marks in length and the second will be for 25-marks. One of these questions will focus on personal tax issues and the other will focus on corporate tax issues. In question one there will be four professional skills marks, and in section A there will be five marks on ethics. Section B will comprise of two compulsory 20-mark questions. These will be in a more succinct, note form style. The whole syllabus is examinable throughout the exam. The exam will examine candidates’ ability to analyse and evaluate the tax implications of various situations, numerical calculations will only be required to assist in producing an answer and no purely numerical questions will be set. Remember that these exam papers would have been written prior to the Covid outbreak and, as such, you should not be addressing any aspect of the virus in answering this paper. Any tax breaks available due to the outbreak are not examinable. Topics/scenarios we would expect to see are: • Personal income tax scenarios which could involve: investing in a pension; investing in EIS, SEIS or VCTs, share schemes; employment income possibly with termination payments; a personal service company; property income or a takeover. • Unincorporated business – particularly including loss reliefs, partnerships or basis period rules. • A question focussing on overseas issues – this could be income tax, capital gains tax, inheritance tax or a corporate scenario. • Capital gains tax versus inheritance tax including availability of reliefs. • Corporate scenarios – likely to focus in more depth on intangibles; research and development; losses; corporate groups or consortia. • Special corporate scenarios such as liquidation; purchase of own shares; close or investment companies. • A business transformation scenario question PQ Magazine March 2021

such as selling a sole trade business, incorporation, or, in a corporate context, the sale of shares versus the sale of trade and assets. • Other common types of question/calculation to expect are: • Reviewing a pre-prepared computation to spot, explain and correct errors. • Calculations such as “tax saved through an action”, “after-tax proceeds”, “the value of a post-tax inheritance”, “net spendable income” or the “net of tax cost of something”. Don’t forget that across the scenarios we will typically expect to see VAT marks available. Partial exemption, land & buildings, transfer of going concern, capital goods scheme, overseas VAT and registration/group registration tend to be frequently examined. There will also likely be a couple of marks for stamp duty points if you remember to think about it in your planning! Finally, don’t forget your basic administration points are also likely to be examined – when do we need to pay tax, when do we file a return and what if either of those are late? Advanced Audit & Assurance (AAA) You should by now have a good idea of what to expect – the most recent AAA exams have contained no real surprises, although you should be prepared for the look and feel of the embedded email and supporting exhibits. AAA has the following syllabus areas: A. Regulatory environment. B. Professional and ethical considerations. C. Quality control and practice management. D. Planning and conducting an audit of historical financial information. E. Completion, review and reporting. F. Other assignments. G. Current issues and developments. Section A will comprise a Case Study, worth 50 marks, set at the planning stage of the audit, for a single company, a group of companies or potentially several audit clients. Candidates will be provided with detailed information, which will vary between examinations, but is likely to include extracts of financial information, strategic, operational and other relevant information for a client, as well as extracts from audit working papers, which could include the results of analytical procedures. The date will be set as 1 July 20X5. Candidates will be required to address a range of requirements, from syllabus sections A, B, C and D thereby tackling a real-world situation where candidates may have to address a range of issues simultaneously in relation to planning, risk assessment, evidence gathering and ethical and professional considerations. Four professional marks will be available in section A and will be awarded based on the level of professionalism with which a candidate’s answer is presented, including the structure, layout and clarity of the answer provided. Section B will contain two compulsory 25 mark questions, with each being predominately based around a short scenario. There are no optional questions in AAA. One question will always test syllabus section E, and candidates should therefore always

be prepared to answer a question relating to completion, review and reporting. There are a number of formats this question could adopt, including, but not limited to, matters to be considered and evidence expected to be on file, a going concern assessment, the impact of subsequent events, evaluating identified misstatements and any corresponding effects on the auditor’s report. Candidates may also be asked to critique an auditor’s report or a report which is to be provided to management or those charged with governance. The second section B question can be drawn from any other part of the syllabus, including sections A, B, C, D and F. Syllabus section G on current issues is unlikely to form the basis of a question on its own, but instead will be incorporated into the Case Study or either of the section B questions depending on question content and the topical issues affecting the profession at the time of sitting the exam (for topical issues, see technical articles below). General advice: This subject often tests topical issues which have been covered by the examining team’s technical articles (for example, the impact of data analytics in September/ December 2020). There are also five exam technique articles that you must read covering ethics, risk, accounting issues, audit procedures and reporting. Advanced Financial Management (AFM) All AFM exams will have questions which have a focus on section B of the syllabus (advanced investment appraisal) and section E (treasury and advanced risk management techniques). These syllabus areas are therefore high priority areas for your revision. Q1 section A: You can expect section A questions to cover a number of different syllabus areas, emphasising the need to have a good broad knowledge of the syllabus (so you are strongly advised NOT to target your revision on a small number of syllabus areas). However, questions are often based on core syllabus areas such as: project appraisal (domestic or overseas), business valuations and business/financial reorganisations; these areas often include cost of capital calculations. Risk management may also feature in a number of different ways e.g. value at risk, real options, hedging, risk mapping. Q2-3 section B: • Risk management (currency or interest rate). • Dividend policy and general financing issues. • Real options. General advice: The examining team have emphasised that exams are designed to make question spotting extremely difficult for this paper, so it is important to have a broad understanding of the key aspects of each syllabus area. Don’t over-emphasise numerical analysis in your revision – remember that this paper is not a maths exam and in all exam questions the examiner is interested in your ability to communicate well and to give good management advice that relates to the scenario in the question. Keep checking the ACCA website for articles written by the examining team in the lead up to the exam, these are often tested and are important to review. 33

PQ profile

From fuel engineer to ICB bookkeeper Meet Elizabeth Carter, the ICB Student of the Year and proud owner of a LUCA award lizabeth started her career as a fuel engineer at a steelworks after gaining a chemical engineering degree. However, after three years she decided on a career change and left to become a maths teacher. She found teaching a really rewarding job, but it was just too ‘all consuming’. After having her first child, Elizabeth cut down her hours to part time, and then two more children followed (as they do). It was then that she decided that teaching didn’t fit in well with her family life. Having three young children with the eldest starting school made Elizabeth re-evaluate those lifestyle choices. What she was craving was the flexibility to choose her own working hours, so that she could attend school concerts and plays, and generally have a better work/life balance. Elizabeth volunteered at her local ‘sling library’, helping parents carry their babies and toddlers safely and comfortably in slings and carriers. It was at a sling library that a fellow volunteer suggested she become a self-

employed bookkeeper. The more she thought about it, the more it appealed, so she took the jump and left teaching and started training. She initially bought an e-course from Groupon, but it was dreadful! “I don’t think I ever heard from my tutor,” she said. It was then that a friend recommended ICB, so she decided to take the plunge and sign up to Training Link’s complete bookkeeping package. In February 2020 her first set of books arrived in the post, and Elizabeth got stuck in, initially on nursery days and in the evenings. She even admits she started to really enjoy it, with her study days becoming her favourite days. Then lockdown hit, and she lost her nursery days, so instead worked during nap times and after bedtime. She is forever grateful that the ICB and Training Link offered a ‘business as usual’ service, and she was able to progress rapidly during lockdown. By the time she had got to M8 (the end of Level 3) even that was available online. Studying really saved her during the

pandemic, she said. Parenting three children aged five, three and one was not easy without going out. It was easy to feel despondent, but she had her bookkeeping and she was trying to get a chapter done every day. “Every day I was so thankful that I had switched to ICB so that my time was not wasted,” she stressed. Elizabeth decided to keep studying to complete all her qualifications before actively trading as a self-employed bookkeeper. She has now completed level 2 (A1, A2, A3), level 3 (M4, M5, M6, M7, M8, and costing and budgeting) and level 4 (SAT, DFS and corporation tax). Elizabeth has also completed the Diploma in Payroll Management course. “I cannot believe how much I have been able to learn in such a short time,” she said. She is now excited about her career as a bookkeeper, and feels that it will fit into her life perfectly. Elizabeth explained: “I am confident that I will enjoy the work and that there is work available. After studying, my next challenge is finding it!” ‘Bottesford Bookkeeping’ is not going live yet, but it won’t be long!

PQ Magazine March 2021

ACCA APM exam PQ

To use EVA or not to use EVA

– that is the question

The mere mention of the concept of economic value added can send some PQs into panic mode. Panic not – Geoff Cordwell is here to explain all here can be little doubt that one the most common topics that appears in the ACCA APM examination is economic value added (EVA). It is clearly a favourite topic of the examining team. And I am not surprised, because it is brilliant. The holy grail of performance managers has always been to properly align the needs of the shareholders (for cash dividend and an increased market value of the business) with the performance management system (PMS) used to appraise the performance of the directors. So often the PMS falls short here. For decades companies have chosen to assess performance using profit, ROCE or even RI and the question is, is this right? The examiner wants you to be able to make the case for the suitability of the PMS, when compared to the needs of the shareholder. Why? Because he wants you to be able to make the case even after you qualify. To improve the PMSs everywhere you go. To improve the reputation, even, of the accountant. But here’s the rub. While there are some standard arguments outlined in many textbooks and course materials the examiner wants you to be able to apply yourself to a particular situation. Is EVA a good approach for this business? What is wrong with a profit based appraisal here? And this is more difficult. This is why reading skills and writing skills are so important in APM. It is also why application skills are vital to a pass in

PQ Magazine March 2021

this paper. It is also why both reading/writing skills and application skills are specific new modules in my digital courses. You have to be able to spot the clues in the questions by effective reading, be able to communicate your ideas, by concise and precise writing, and you must be able to apply yourself to the scenario. So, let’s look at how the examiner has tested these ideas in a previous question. In Jenson, Lewis and Webb (JLW), from the March/June papers in 2017, the examiner planted clues for you to use to argue that EVA could be an appropriate performance measure for the businesses two profit centred divisions. In JLW, one of the divisions had created a large provision for doubtful debts. There is nothing wrong with that of course, but provisions are so easily manipulated. So once created, the divisional manager can use it to reduce or increase reported profits as desired. In EVA, provisions are not allowed, partly because they are not a cash flow of course, but also because it removes the ability of the directors to manipulate results and mislead shareholders. A double benefit, therefore: EVA 2, profits 0! Also, in JLW the same division had spent $90,00 on advertising a new product. Advertising new products is vital of course, but it’s pain today (the cost) for jam tomorrow (the revenue). A profit motivated manager might easily take a short-term route. Cut down on the advertising and ‘bank’ a bigger profit, then leave

the business before the chickens come home to roost. In EVA, advertising for long-term gain can be capitalised in the EVA accounts thus removing the short-term pressure to show profit and ‘perform’. EVA scores again to lead 3-0. The examiner is cunning though. He desperately does not want students to rote-learn all the arguments in favour of EVA and then write them down. This is a high-level exam so you must understand and apply. So, in JLW the two divisions were very different. One traded only domestically and the other exported everything. Even a rudimentary knowledge of risk would tell you that exporting is riskier and if ‘return’ relates to risk (more risk demands more return) then the benchmark or target for the two divisions should be different. EVA does not reflect risk differences automatically. EVA scores an own goal! So, we’re in for a tense last few minutes. The moral of this is that the examiner rarely sets up a question where there is no counter view. Be prepared to argue both ways and the markers will love you for it. Can you put general arguments in your answer? Things you’ve studied. Things you’re just desperate to get out of you so that you can get on with your life. Well, yes, if they’re relevant and properly applied. For example, you may have read that EVA is complicated. To be fair, it is likely you think it is pretty complicated yourself! And it is. So, can you get this valid point into the answer of JLW? I think you can, I certainly put the point in my answer in my material, but you must make sure it is relevant and properly applied. In JLW, the manager in charge of one of the divisions was described. She was arguing about controllable profits and that non-controllable costs should be excluded from her bonus calculation. And she’s right. It follows then, that this manager could understand EVA if it were introduced because it is likely she has the intellect and knowledge. So, you need to be careful. The standard argument is that EVA is complex, and some might not understand it. Introducing performance measures that managers do not understand is a very bad idea. How can they react? How can they improve a measure that they do not understand? In JLW though that standard point is not quite valid. The manager would probably understand EVA, given her good knowledge of other performance management principles. In house buying we are told that three things are important. Location, location, location. In ACCA APM its application, application, application. • Geoff Cordwell is an ACCA APM specialist tutor and provider of digital courses. See Geoffcordwell.com and FMELearnonline.com 35

PQ tax

Controlled foreign companies made simple Once again, top lecturer Neil Da Costa has a simple solution for a complex issue n this series, I explain topics students struggle with using simple examples. This month, I will be showing you how to deal with Controlled Foreign Companies (CFCs) using exotic islands and electric eels.

CFCs – a definition Many UK companies have set up overseas resident subsidiaries in tax havens to reduce their UK tax liability. Companies that are resident overseas are not subject to any UK corporation tax. In addition, overseas dividends are not subject to UK corporation tax. A CFC is therefore a non-UK resident company that is controlled (51% OSC) by UK resident companies that have artificially diverted profits away from the UK. Anti-Avoidance Rule The UK company is subject to a CFC tax charge equal to all the CFC profits it is entitled to taxed at the UK tax rate of 19%. Double Tax Relief (DTR) can be claimed based on the lower of UK and overseas tax and can always be claimed even in the absence of a double tax treaty. Simple example: CFC tax charge Big Ltd (UK) sets up a 100% owned CFC in Paradise, where the rate of tax is just 2%. The CFC has no commercial objective apart from reducing the UK corporation tax liability. The CFC has profits of £1m. There is no double tax treaty between Paradise and UK. Compute the CFC tax charge for Big Ltd (UK) assuming that no exemptions apply. The CFC tax charge is based on the share of the CFC profits that Big Ltd (UK) is entitled to taxed at 19% (100% x £1m x 19% = £190,000). Double Tax Relief will be available based on the lower of UK tax (£190,000) and the overseas tax (£1m x 2% = £20,000) so DTR is £20,000. The CFC tax charge is £190,000 – £20,000 = £170,000 which will be added to the corporation tax liability of Big Ltd (UK). The anti-avoidance rule effectively removes any tax benefit to Big Ltd (UK) of setting up a CFC in a tax haven. 36

CFC Exemptions If any one of five exemptions apply, there is no CFC tax charge. The five exemptions can be remembered by the mnemonic ‘Electric Eels Love Low Tax’ (imagine someone swimming in the Cayman Islands being electrocuted). Exempt Period: The first 12 months of the overseas company coming under control of the UK companies. It is not available to newly incorporated companies. Excluded Territories: The overseas country is in a country that is not a tax haven and is included in a list of excluded territories. Low Profits: The CFC has trading profits of not more than £500,000 or investment income of not more than £50,000. Low Profit Margin: The CFC has a profit margin of less than 10% based on operating expenditure. Tax Exemption: The rate of tax in the overseas country is at least 75% of the UK tax rate. (19% x 75% = 14.25%) Simple example: CFC Exemptions Big Ltd (UK) has got the following five overseas subsidiaries. Explain which CFC exemptions apply. Big Ltd buys 100% OSC of a company A Ltd that has been trading for many years. A Ltd is a CFC and its profits are £1m for the first year owned by Big Ltd. Claim the exempt period exemption for the first 12 months from the date that Big Ltd buys

the company. Big Ltd owns 100% OSC of a company B Ltd. B Ltd is a CFC and its profits have been £5m a year. B Ltd is resident in Happyland. Happyland is on the list of excluded territories. Claim the excluded territory exemption for all years avoiding a CFC tax charge for Big Ltd. Big Ltd owns 100% OSC of a company C Ltd. C Ltd is a CFC and has trading profits of £400,000 and investment income of £45,000. Claim the low profit exemption as the CFC has trading profits of not more than £500,000 and investment income of not more than £50,000 in the 12-month period. Big Ltd owns 100% OSC of a company D Ltd. D Ltd is a CFC and has made profits of £1m on sales revenue of £12m. Claim the low profit margin exemption as the profit margin is 1/12 – 1 = 1/11 = 9.09% which is less than 10%. Big Ltd owns 100% OSC of a company E Ltd. E Ltd is a CFC and is resident in Beachland. Beachland has a corporation tax rate of 15%. Claim the tax exemption as the rate of tax in Beachland is more than 14.25%. By taking advantage of the CFC exemptions, UK companies can still get a tax benefit through setting up companies in tax havens. • Neil Da Costa is a Senior Tax Lecturer with Kaplan. He believes in keeping things simple and making tax fun PQ Magazine March 2021

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PQ CIPFA spotlight

Why apprenticeships

are a vital resource

Helen Woods explains why apprenticeship schemes are more important than ever, and unveils details of a new one it’s set to launch ovid-19 has caused high levels of uncertainty for most industries – unemployment is higher than it’s been in recent memory, and many who are beginning their careers might be feeling that they have limited options for the foreseeable future. The beginning of 2021 has brought new challenges, with the implementation of additional national lockdowns and the economy continuing to suffer. Both students and employers face extra uncertainty about what the future holds – which makes career routes that complement the traditional university path, such as apprenticeships, more important now than ever before. Apprenticeships are a great tool for both students and employers to learn crucial on-thejob skills. These will become ever more relevant as the world continues to change. For employers, apprenticeships present an invaluable opportunity to tailor training to the exact skills needed for existing jobs and to develop their teams to be adaptive and responsive. For students, apprenticeships are a fantastic additional option for entering the workforce. In the public sector, and in finance in particular, there

will always be a need for bright minds to enter the field or grow and develop their roles, often contributing unique insights into what their local communities need. CIPFA offers multiple apprenticeships for individuals at all stages of their career journeys – from those just starting out in the workforce to those who have been working in the sector, perhaps for years, but who are ready to develop their role. Our Professional Accountancy Apprenticeships can be undertaken at Level 3 (Assistant Accountant), Level 4 (Professional Accounting Technician) and Level 7 (Professional Accountant). Each level can be tailored to best fit employers and apprentices, and our in-house team will help guide you through the process from joining all the way to qualification. This year, we will be introducing a new apprenticeship that is particularly relevant for a post-Covid world. The CIPFA Counter Fraud Investigator Apprenticeship is different to anything that has been available before. During the 24-month programme, apprentices gain all of the valuable skills necessary for counter fraud professionals working in the field. Uniquely,

CIPFA apprentices are also able to gain the wellregarded Accredited Counter Fraud Specialist (ACFS) accreditation, which is recognised by employers across the professional field, in addition to their apprenticeship. The classroom sessions are delivered online, fully supported by a set of online learning resources and professional coaching by mentors with industry experience. Upon completion, apprentices will be prepared to enter directly into the Government Counter Fraud profession. The apprenticeship is aimed at all organisations that have a counter fraud function – both central and local government. As we move forward, apprenticeships are a vital resource for both students and employers. They provide the opportunity for individuals from diverse backgrounds to begin valuable careers while earning income and developing crucial workplace skills in a specific field. Through all of the current uncertainty and beyond, there will always be people who need the help and support of our public services. Entering a career in the public sector enables individuals to gain knowledge and skills that will contribute to decisions that underpin the delivery of services that will help those in our communities who need support the most. Undertaking an apprenticeship is one of the best ways to gain the experience needed to make a difference in the world. For more information on our apprenticeship offerings, please contact apprenticeships@cipfa. org or cfi-apprenticeship@cipfa.org to learn more about the Counter Fraud Investigator apprenticeship. • Helen Woods, CIPFA Apprenticeship Delivery Manager

PQ Magazine March 2021

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CIPFA competencies

Worldwide solutions Katja Lamers explains how Bangladesh is improving its public financial management through CIPFA’s key competencies

s public services around the world continue to experience new challenges resulting from the pandemic, developing key competencies to support public financial management is increasingly important – no matter where you are practising. At CIPFA, we believe there are several key competencies necessary for public finance professionals to meet today’s challenges head on and prepare for the future. In addition to the development of relevant technical skills, finance professionals must develop awareness of their local public sector context, as well as how to increase public value through effective communication and leadership. These competencies are crucial both in the UK and abroad. Recently, CIPFA has been involved in a project to develop these skills in Bangladesh. Bangladesh has historically suffered from corruption and a lack of transparency in management of public funds – which has impacted the quality of public services delivered to those in need. Bolstering public financial management systems in Bangladesh will help strengthen oversight and increase the effectiveness and efficiency of public service delivery.

This project has been another example of CIPFA’s success with virtual learning over the past year. In addition to supporting our students in the UK, it has also enabled hard-working professionals to continue working to strengthen financial management systems around the globe, despite the impact of Covid-19. Delivery is entirely virtual, a new approach for our associates, and we are operating in close coordination with an established working group to organise workshops and conduct interviews. The overall goal of the project, which began in September 2020 and is scheduled to run until April 2021, is to support a future-ready public financial management workforce in Bangladesh through three specific objectives. The development of a public financial management

competency framework unique to the country, a training needs assessment, and a code of conduct for public finance professionals. No two competency frameworks will be exactly the same. The project seeks to identify the specific needs of public finance professionals in Bangladesh to develop a framework that best suits the local context. Through job analysis of relevant public finance functions in the Bangladesh government, we can implement a plan to embed the competency framework and update job profiles accordingly. The training needs assessment also involves reviewing relevant policies, processes and systems to assess the nature and extent of required public financial management competency development in different tiers of the government. The establishment of a code of conduct is another crucial part of improving public financial management. Through reviewing relevant policies and guidelines related to behaviour and ethics of government and financial personnel, we can develop and implement a code of conduct for Bangladesh public finance professionals that improves transparency and fights fraud and corruption. In an increasingly interconnected world, achieving best practice in public financial management will always be incredibly important. CIPFA remains dedicated to supporting this goal in the UK and around the world. • Katja Lamers, CIPFA International Programme Manager

Sorted, thanks to pqjobs.co.uk

PQ jobs pqjobs.co.uk PQ Magazine March 2021

PQ personal development

Tweaking the ‘new you’ in 2021 Pantelis C. Fouli explains how making regular small tweaks in your life can lead to big and positive changes he new year has come and gone. New year resolutions have been set and most people have already given up on them and are drifting towards Spring with no hope in sight. As busy accountancy students we keep hearing from the ‘experts’ about work-life balance, but is there any? Darren Hardy doesn’t believe so. Instead, he uses the ‘Wheel of Life’ to break it down:

2. 3. 4. 5. 6.

In a perfect world all, aspects of the wheel should be in equilibrium if we are to attain ‘balance’, but Hardy goes on to say that our priorities shift daily and we should be conscious daily of the areas where we need to focus. As an example, if one is unfortunate to get hit with an illness, he/she will automatically shifts all energies into getting better (physical/mental), so there is no chance of having a ‘balance’ in the other areas. The same holds true if a family member needs your daily attention for some period of time; again, our priorities shift to that, leaving ‘gaps’ in the other areas. The main message here is to not be too hard on yourself for not being able to attain this balance, but be aware of where you are expending your daily energy to make the necessary course corrections if necessary. Kristin Sherry is a big believer that answering the six questions below will help you to see where you have been, where you are at and where you should be heading to: 1. What did I accomplish in 2020 that was important, or I valued?

What’s going well that I can leverage? What could be different or better? What’s getting in the way of improving #3? What’s one thing I would change? How might I get what I need to make #5 happen? Sherry said: “Take time to answer these questions and you’ll have a meaningful and focused foundation to plan what’s next.” Another daunting aspect is people’s ideas regarding ‘vision boards’. I used to be a big believer in putting up the pictures of the ultimate GOAL I wanted to achieve, but then it dawned on me: if I wanted to lose weight, what good would it do to see a picture of a trim, masculine model day in and day out? Would our mind not believe that we are already there and work against us? The anxiety would be daunting. If I had to walk 1,000 steps why would I look at all 1,000 on a daily basis? Just focus on the three steps we need to take today and that’s it. Celebrate the small win. And repeat tomorrow. Vision boards are a great tool and by all means put up your dream house, car or body up there, but the MAIN focus should be on the action steps to GET THERE. The work, the grit, the blood sweat and tears. Focus on the path, the journey and NOT on the end goal. I hope these very small tweaks assist you in some small way to break free from the stereotypical way of thinking. I would love to hear from you if you tried out these tweaks or if you have done so already, then I could celebrate your NEW TWEAK wins with you. Till next time. • Pantelis C. Fouli is ACCA qualified and an ACCA Advocate and Student Mentor. For anyone wishing to get in touch with him, connect via LinkedIn (https://www.linkedin.com/in/pantelisfouli ). Please mention in the personal message that you are a PQ reader.

PQ Magazine March 2021

careers PQ

Dear Karen Ask PQ’s very own agony aunt Karen Young when you need advice from a real expert. Email your dilemma to graham@pqmagazine.com, and he will pass on the best ones to Karen THE DILEMMA Do you have any advice on putting healthy work habits in place? KAREN’S RESPONSE I’m a great believer in developing healthy habits in your professional life. So here are some golden rules for developing new habits that will hopefully get you off on the right foot. 1. Be clear about what you want to achieve. Be honest, you’re not going to want to stick to something if you can’t see the benefit of it. That’s why it’s key to be clear about what you want to achieve. 2. Be realistic. A habit is a practice or tendency that you repeat over and over again. It’s through this repetition that you will eventually see results. So be realistic about how long it might take to see a benefit from your habit – don’t expect a career transformation after a week. 3. Be prepared for setbacks. Although repetition is key, it’s highly unlikely that you’ll be able to stick to your habit on every single occasion. Things change and life inevitably gets in the way. Accept from the outset that this will happen and you won’t beat yourself up about falling off the bandwagon occasionally. 4. Get some support. While ultimately you are in control of your habits, having some support along the way will help you on your way to success. This is where your career mentor, manager or colleagues come in. Let them know what you’re trying to achieve and what support you might need from them along the way. 5. Reward and celebrate. Who said developing good habits has to be boring? Put some rewards in place at key milestones and allow yourself to reflect and celebrate the benefits that your habit eventually brings you. • Karen Young is a director at Hays. She is passionate about helping people to find the right job, and companies to find the right person

PQ Magazine March 2021

Life at Newflex Ltd ACCA Affiliate Ryan Wale is a management accountant who recently top-scored in the ACCA SBL exam, studying with HTFT. Ryan has a degree in Economics What time does your alarm go off? 5:30am – earlier when England are playing cricket in India, Australia, etc How long is your commute to that desk and is it better now? I commuted from Stourbridge to Birmingham which was ok. Now my desk at the end of my bed, so the commute is not too bad. Do you have a favourite lunch? I have become addicted to sausage rolls. It is going to take a monumental effort to get into my work suits now. What can you see when you sit at your desk? I have a spectacular view of a car park. Not exactly the Grand Canyon, but it will do. Which websites are your

favourites during lockdown? The Economist and FT, and I love a good political podcast. However, I do watch a lot of sport, so it is good to have a balance. How many hours a week are spent in online meeting rooms? I should think at least a couple of hours a day – 10 hours a week. Are you spending more time working now than normal? Definitely! Working from home means start and finish times become blurred. How do you relax? Going for walks with my partner is really relaxing. Outside of lockdown it is going out with friends/family and playing/watching sport. What is your favourite tipple? A pint of Bathams – and I’m partial

to a glass of Rioja. What’s your favourite TV show? Peep Show. What is the best film you have watched recently? The documentary about Lance Armstrong, it really blew my mind. Summer or winter? Summer. Pubs or clubs? Pubs now for me. Do you have a hero? My Grandad. He was a union man in the 1980s/90s and had a few scuffles with politicians, not least John Major. After that Jimmy Anderson and Jack Grealish! What is the first thing you are going to do when lockdown is over? I cannot wait to get down Villa Park or Edgbaston for a test match. After that seeing family and friends in my local pub.

susceptible to ‘cooking the books’ than smaller, struggling ones, says a study published in Justice Quarterly. “Prestigious companies were more prone to engage in financial fraud, which was very surprising,” said Jennifer Schwartz, Washington State University sociologist and lead author on the study. “We thought it would be companies that were struggling financially, that were nearing bankruptcy, but it was quite the opposite. It was the companies that thought they should be doing better than they were, the ones with strong growth imperatives – those were

the firms that were most likely to cheat.”

In brief Pap Record AML fine Money transfer company MT Global Limited has been handed the largest-ever fine issued by HMRC, £23.8 million, for significant breaches of the money laundering regulations. HMRC said the company fell down on its risk assessments, record-keeping, controls and procedures and fundamental customer due diligence measurers – that’s almost everything! Pap Who commits most fraud? Multinationals with strong growth profiles are more

Pap New digital bank launched JPMorgan Chase is launching a new bank for the UK’s retail banking market. The twist is that it will be digital only, so will go up against Goldman Sachs’ Marcus business and the likes of Starling and Monzo. The new bank will trade under the Chase brand, and is promising to offer “a new take on current accounts”. Co-president Daniel Pinto described the decision to launch a digital retail bank in the UK as “a milestone”.

The PQ Book Club: books you should read Don’t Push Too Many Trolleys: And Other Tips from Navigating Life and Business, by Ying Tan (Wiley, £18.99) We quickly discover that the author of this great book is both a Liverpool fan and a qualified CIMA. But we won’t hold that against him. He admits he was lucky. After graduating with a BA (Hons) in accounting and finance degree at Kingston University, his new employer UBS paid for his ‘expensive’ CIMA course. But then he knew the benefits of getting qualified, and soon after joined Deutsche Bank. Next up was Goldman Sachs, where he

rose to be a Vice President by the age of 26. If we press the fast-forward button we discover he is now CEO of Dynamo, the UK’s leading mortgage broker. You may know Dynamo by its trading name – The Buy to Let Business. It generates roughly £2.8 billion of mortgage business annually and has a turnover of £12 million. Ying points out that communication is the key to the success of any relationship. He believes the best bosses are approachable, and thinks “many employers don’t appreciate the value of explaining their decisions to their employees”.

As a boss you also expect loyalty from your team, so you have to be loyal to begin with. He doesn’t like it when people say they “under promise and over deliver”. He likes to think of himself as the “Goldilocks boss” – not promising too much, not promising too little, promising what is “just right”. PQ rating 5/5 This is a very personal book, and that is its strength. Expect to see lots of references and pictures of Liverpool FC! 41

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

Press blue for sad

Going for positivity Lockdown seems to be affecting the music we listen to. Analysis by Spotify suggests happier songs are becoming more popular; it uses an algorithm to score the positively of a song on a rising scale from 0 to 1. So here’s a top 10 of positivity (not our top 10!). All these tracks have reached Spotify’s weekly top 200 since March 2020. We have left out the Christmas songs! • Earth Wind & Fire, September (0.98) • Foster the People, Pumped Up Kicks (0.97) • Niall Horan, No Judgement (0.96) • Clean Bandit and Mabel, Tick Tock (0.95) • Gerry Cinnamon, Sometimes (0.96) • Jonus Brother, Sucker (0.95) • Ed Sheeran, Shape of You (0.93) • Toploader, Dancing in the Moonlight (0.87) • Whitney Houston, I Wanna Dance With Somebody (0.87) • Kenny Rogers, The Gambler (0.87) Our only concern is Foster the People’s track is actually about a school shooting. Not sure how ‘happy’ that is…

New wearable technology has been developed to help your boss track your emotional health. The Moodbeam wristband links to a mobile phone app and web interface. It has two buttons, which you press to ‘express’ your current mood – a yellow one for happy and blue one for sad. The information is then correlated on a dashboard, where employers can measure the emotional state of their workers. The Moodbean One comes in at just £49.95. Check it out at tinyurl.com/1ietpvrc

Apple can’t stop growing Apple set new records for the final quarter of 2020 as sales grew by $111 billion. That is up 21% on the same period in 2019. There are now 1 billion iPhones in circulation globally. Growth was particularly strong in Q4 in China – up 57%. As only a CFO could, Apple’s Luca Maestri said: “The products are doing very well all around the world.” Sales of iPhones now generate more than half of Apple’s revenue, accounting for $65.6 billion of the total. Revenue generated by its Mac computers and iPad reached $48.68 billion and $48.44 billion respectively.

A song for the taxman Ed Sheeran paid £28 million

in tax, putting him at the top of the UK musician chart, according to The Sunday Times Tax List. Not bad for a 29-year-old, says top tax tutor Neil da Costa. He explained this was more than double the tax paid by the Queen (£13 million) and six times the liability paid by Robbie Williams (£4.6 million). Ed’s tax consisted of corporation tax –19% of £7 million payable by his company, which then paid him a £10m dividend, attracting an income tax liability of £3.8 million. In addition, his successful world tour resulted in huge earnings, leading to an additional tax liability of £17.4 million. No doubt, said Da Costa, he was able to mitigate his tax liability by pension contributions and investments under the EIS, SEED and VCT schemes. He felt this is commendable – it would have been easy for Ed to relocate to a tax haven, like Sir Lewis Hamilton did. “No wonder ‘Afterglow’ is still on my playlist!” said da Costa.

’ WEV E

Flying cars are coming The world’s first urban airport built specifically for flying cars and drones is being developed in the UK. A temporary airport will be built in Coventry in late 2021, to allow small electric passenger-carrying aircraft to operate in an urban area. The site will also be open for parcel delivery drones and electric cars. Called Air One, the zero-emission airport should be open in November, to coincide with Coventry’s year as the UK City of Culture.

Renewables beat fossil fuels The UK generated more electricity from renewable sources than from fossil fuels for the first time in 2020. New analysis from Ember and Agora Energiewende found wind turbines, solar panels, hydro-electric and biomass plants together accounted for 42% of all electricity generated. Fossil fuels (most of which are gaspower plants) accounted for 41% of the total. The remaining 17% comes from nuclear. In 2019, renewables made up 37% of the domestic generation and fossil fuels 45%. New wind farms mean that almost a quarter of UK power generation now comes from wind turbines.

GOT THE L OT

Wellbeing Journal We have three copies of The Wellbeing Journal: Creative Activities to Inspire, to give away this month. Developed in partnership with Mind, this beautiful hand-illustrated companion is filled with a variety of simple exercise to help support your wellbeing. There are also colouring pages, drawing prompts, quotes to contemplate and lots of space for you to record your own thoughts and feelings. To be in with a chance of winning one of these books send your name and address to giveaways@pqmagazine.com. Head up your email ‘Wellbeing Journal’ and we will do the rest.

Mindfulness puzzles Up for grabs this month are three copies of Dr Gareth Moore’s Mindfulness Puzzle Book – a wonderful collection of relaxing puzzles that help you de-stress and unwind. You will feel the tension release as you focus on each achievable and fun task, and feel the endorphin buzz as you successfully complete each puzzle. To enter this giveaway send your name and address to giveaways@pqmagazine.com. Head up the email ‘Puzzle Book’ and we will enter you for the prize draw.

Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries must be received by Friday 12 March. The main draw will take place on Monday 15 March 2021.

TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM 42

PQ Magazine March 2021