UK AB ACCOUNTING AND BUSINESS UK 06/2013 U K .A B A C C O U N T IN G A N D B U S IN E S S 0 6 /2 0 13 TAX PLANNING THE MAELSTROM GOING CONCERN MUCH ADO TECHNICAL EQUITY ACCOUNTING ON THE INSIDE HOW TO BE A WHISTLEBLOWER ANYONE FOR TENNIS? WIMBLEDON FD ON PRIZE MONEY AND RAISING THE ROOF SPECIALLY NEGOTIATED DISCOUNTS FOR ACCA MEMBERS WHY PRETEND TO BE SOMETHING YOU’RE NOT? You’ll fi nd no camoufl age or hidden surprises in our policies, just plain English. Save 10% on home insurance 0844 248 1614 Save 10% on offi ce insurance 0845 512 0436 Save 5% on travel insurance 0845 643 6046 hiscox.co.uk/acca The home insurance offer only applies to 505 Home Insurance and is subject to a minimum premium. The offers are subject to underwriting criteria and only apply via the specifi c telephone numbers and website. The maximum age limit for annual travel insurance is 69 and is 59 for gap year travel insurance. Cases that do not meet Hiscox’s underwriting criteria may be referred to a Hiscox recommended specialist broker, where these offers will no longer apply. Policies are underwritten by Hiscox Underwriting Limited on behalf of Hiscox Insurance Company Limited. Hiscox travel insurance is arranged by Hiscox Underwriting Ltd and underwritten by Millstream Underwriting Limited on behalf of AGA International SA. Any reference to standard policies and to other insurers is based on a typical level of standard cover. Hiscox Underwriting Ltd is authorised and regulated by the Financial Conduct Authority. For UK residents and UK businesses only. 11719 04/13 Ads for June13.indd 7 03/05/2013 16:38 Editor’s choice 3 With the opening rounds of the Wimbledon tennis championships just weeks away, we go court-side with tournament finance chief Richard Atkinson, who tells us why bigger prizes are on offer – and the inside story of retracting roofs. See page 14 OPEN GAME It’s not just tennis stars who face intense scrutiny from all manner of critics over numerous aspects of their performance. Big businesses – whether listed corporates or Big Four accountancy firms – are finding themselves under unprecedented pressure to draw back their cloaks of privacy and tell the outside world more about how they operate and make decisions. To borrow from Aesop’s fables, attempts are being made to do this both by force and persuasion. The House of Commons Public Accounts Committee, under its chairman Margaret Hodge MP, is currently playing the role of the North Wind, blasting both companies and their advisers at the big firms over various aspects of their tax affairs (see page 28). Those in the firing line might with some justification protest that their positions are being misrepresented and over-simplified, and that they are being made scapegoats for a complex UK and global tax system. But they should beware of responding with too much moral outrage. Some 38% of the FTSE 100’s 22,000 subsidiaries around the world are based in tax havens, according to an ActionAid survey featured on page 8. While the PAC could perhaps fine-tune its blast, it is hard to argue that it is entirely misdirected. Sunnier persuasion is coming from the International Integrated Reporting Council, with its new integrated reporting framework (see last month page 18 and this month page 82) painting a vision of a world where wider, better corporate reporting benefits company and investor alike. Then there is the new move by Brussels to oblige companies to report on environmental and social matters (page 22). And if external forces cannot succeed in opening up what companies might want to keep hidden, then it has to come from the inside. We also report in this issue on moves to make whistleblowing easier (page 18). Whatever the driver, it seems there can be only one response – greater openness. Chris Quick, [email protected] CAVEAT EMPTOR WHAT AM I BID? FUTURE OF An acquisition With pressure ACCOUNTANTS that seems so mounting on the right can soon government to Our new iPad app go very wrong boost its coffers explores the 100 drivers indeed even when by disposing of of change shaping the BIG the due diligence Royal Mail and landscape for businesses AMBITIONS? is done, as our other assets, is and professional For your next sorry fable makes privatisation back accountants over the next decade, and includes move, check out only too clear in fashion? exclusive video interviews from leading experts. www.accacareers. Page 36 Page 48 Visit www.accaglobal.com/riapp com/uk AB UK EDITION CONTENTS JUNE 2013 VOLUME 16 ISSUE 6 Editor-in-chief Chris Quick [email protected] +44 (0)20 7059 5966 Asia editor Colette Steckel [email protected] +44 (0)20 7059 5896 International editor Lesley Bolton [email protected] +44 (0)20 7059 5965 Sub-editors Dean Gurden, Peter Kernan, Jenny Mill, Vivienne Riddoch Design manager Jackie Dollar [email protected] +44 (0)20 7059 5620 Designer Robert Mills Production manager Anthony Kay [email protected] Advertising Richard McEvoy [email protected] +44 (0)20 7902 1221 Head of publishing Adam Williams [email protected] +44 (0)20 7059 5601 Printing Wyndeham Group Pictures Corbis ACCA President Barry Cooper FCCA Deputy president Martin Turner FCCA Vice president Anthony Harbinson FCCA Chief executive Helen Brand OBE ACCA Connect Features Tel +44 (0)141 582 2000 Fax +44 (0)141 582 2222 [email protected] [email protected] 14 Interview: Wimbledon FD [email protected] Richard Atkinson As far as the Accounting and Business is published by ACCA 10 times per year. All All England Lawn Tennis Club’s views expressed within the title are those of the contributors. finance boss is concerned, rain The Council of ACCA and the publishers do not guarantee the accuracy stopping play at Wimbledon of statements by contributors or advertisers, or accept responsibility for will soon be all in the past any statement that they may express in this publication. The publication of an advertisement does not imply endorsement by ACCA of a product 18 Blowing the whistle Doing or service. the right thing needn’t mean Copyright ACCA 2013 pressing the self-destruct Accounting and Business. No part of this publication may be reproduced, button on your career stored or distributed without the express written permission of ACCA. 22 Disclosure directives The Accounting and Business is published by Certified Accountant (Publications) Ltd, a subsidiary of the Association of Chartered Certified EU is moving toward pushing Accountants. large corporates into social and environmental disclosures ISSN No: 1460-406X 24 Transaction tax trouble Could the imposition of a 29 Lincoln’s Inn Fields Tobin tax by the eurozone’s London, WC2A 3EE, UK biggest economies trigger a +44 (0) 20 7059 5000 new credit crunch? www.accaglobal.com Audit period July 2011 to June 2012 148,106 Worldwide There are six different versions of Accounting and Business: China, Ireland, International, Malaysia, Singapore and UK. See them all at www.accaglobal.com/ab Regulars Your sector BRIEFING 35 CORPORATE 06 News in pictures 35 The view from Andi Lonnen of A different view of recent headlines Andi Lonnen Business Services; plus 08 News in graphics news in brief We show a story as well as tell it using 36 Buyer, beware A salutary tale innovative graphs of what can go wrong when an SME 10 News round-up acquires another business A digest of all the latest news and developments 39 PRACTICE 12 Politics European audit reform moves closer TECHNICAL 39 The view from Yerzhan Dossymbekov of Grant Thornton, 51 Update The latest on financial Kazakhstan; plus news in brief VIEWPOINT reporting, auditing, tax and law 40 Interview: Maria Pinelli EY’s 27 Peter Williams If it’s small 56 R&D revolution Tax breaks for global vice chair of strategic growth businesses that are to rescue the tech innovators markets explains how best to work with economy, we’re in for a long haul 58 CPD: equity accounting IAS entrepreneur clients 28 Robert Bruce Tax has become a 28 requires joint ventures and toxic issue associations to be equity-accounted 45 PUBLIC 30 Barry Cooper 61 CPD: management theories The 45 The view from Iain Hasdell of the The alliance first instalment in a five-part series Employee Ownership Association; plus between a small news in brief business and its CAREERS 46 Hinchingbrooke Hospital Is the accountant is a franchise medicine working? match made in 66 Compliance Risk control posts 48 Privatisation As a new round of heaven, says the multiply in the financial sector selling off public assets looms, what’s ACCA president 68 Success You’re going to up for grabs? 33 Jane Fuller need to work hard, and have the Much ado about technical knowledge, going concern communication skills and right outlook, too 70 New ACCA members Those who achieved membership in Q1 2013 76 Dark passion By day an FD, by night a noir CPD thriller writer Accounting and Business is a rich source of ACCA NEWS CPD. If you read it to keep yourself up to date, it will contribute to your non-verifiable 79 CPD With the My Development hub, e-learning is CPD. If you read an article, learn something flexible, convenient and cost-effective new and apply that learning in some way, it will contribute to your verifiable CPD. Each 80 Diary Events around the country month, we also publish an article or two with 81 Global Forum Symposium The risk and control related questions to answer. If they are failures spawned by the global financial crisis have relevant to your development needs, they left major question marks hanging over corporate can also contribute to your verifiable CPD. governance, so what are the answers? One hour of learning equates to one unit of 82 News Help to shape the integrated reporting CPD. For more, go to framework and move business forward www.accaglobal.com/members/cpd 6 News in pictures 01N ew Hollywood blockbuster Iron Man 3, starring Robert Downey Jr, features an accountant in a desperate situation 02Bermuda is among the British overseas territories to sign agreements on sharing tax information with a number of European countries. See page 10 03S ir Alex Ferguson is retiring after 26 years managing Manchester United Football Club. The English club was the first sports team in the world to be valued at US$3bn 7 04F or the first time, the BBC is considering accessing bond markets for up to several hundred million pounds in order to finance commercial arm BBC Worldwide 05 Apple has raised US$17bn in the biggest corporate bond sale ever. The move will help the company avoid the tax costs of bringing its overseas cash back to the US, say commentators 06W illiams Grand Prix Holdings, the company behind British-based Formula One team Williams – pictured at the Chinese Grand Prix – suffered a £5m pre-tax loss in 2012, due to an accounting change 07Q ueen Elizabeth II and her husband Prince Philip met the president of the United Arab Emirates, Sheikh Khalifa bin Zayed al Nahyan, at Windsor Castle during his state visit to the UK in April 8 News in graphics HOOKED ON TAX HAVENS According to research by charity ActionAid, tax haven structures are near-universal among the UK’s biggest listed companies. Every one of the 78 FTSE 100 corporates with operations in developing countries is a prolific user of tax havens, and the charity says that fragile public revenues in those countries are being undermined by corporate profit shifting. 38% of the 22,000 overseas subsidiaries owned by FTSE 100 companies are based in tax havens 58% of the 1,780 overseas 10 98 2 companies owned by FTSE 100 banks FTSE 100 companies FTSE 100 companies with FTSE 100s with no are based in tax havens with HQ in a tax haven subsidiaries in tax havens subsidiaries in tax havens FISHING FOR TALENT GETS EVER HARDER 87% Some 83% of financial services executives globally are either very or somewhat concerned about their Most SME ability to hang on to top performers (see bottom graphic), according to the latest Robert Half Global FDs rate a Hiring Report. Outside Asia Pacific, Germany and Canada are among the most anxious, with 87% and practice’s 84% net concern scores respectively. Those with finance and accounting expertise are most in demand. ability to challenge DIFFICULTY OF LANDING SKILLED FINANCIAL SERVICES STAFF them as the key factor in their selection, KEY: according to a survey by SKS Business Services. Somewhat challenging 53% 56% 54% 62% SME FDs who would 33% 30% 29% pay higher Very fees for challenging better quality, All countries US UK according to SKS. s WORRIED ABOUT LOSING TOP PERFORMERS KEY: e hr u t ng Somewhat concerned ofi M n 31% All countries 52% 48% US 29% 24% UK 59% Very i concerned 9 DIGITAL CONVERSATIONS AND THE C-SUITE PwC’s 5th Annual Digital IQ Survey shows that strong executive leadership and collaboration are crucial to building lasting value from information technology. The results show that those companies with strong relationships between the CIO and other C-suite members are four times as likely as those with less collaborative teams to be top performers (respondents who said they are in the top quartile of margin growth, revenue growth and innovation). WHAT IS DIGITAL IQ? Digital IQ is a measure KEY: of how well companies Yes understand the value of No technology and weave it Don’t know into the fabric of their organisation. COLLABORATORS Strong collaborators think differently and act differently and were 75% 19% 5% 59% 26% 16% often found to achieve Strong collaborators Other stronger results than other respondents in A strong collaborator’s roadmap links business and IT efforts. The study asked if a single, the survey. multi-year roadmap for the overall business strategy existed in the firms surveyed? KEY: Americas Europe Asia Pacific Strong collaborators Others % % 61 % % 32% 30% 43% 32% 32% % 36% 24% 46 37% 51 39% 30% 46 37% 8 1 32% 26% 33% 37% 29% 31% 17% 16% 30% 24% 21% 37% 39% 32% 45% 54% 47% 56% 35% 25% 31% 37% 36% 43% Social media Social media Public cloud Public cloud Private Mobile Mobile Data mining for internal for external infrastructure applications cloud technologies technologies and analysis comms comms applications for employees for customers Strong collaborators are more likely to be investing in emerging technologies in areas like mobile, social, cloud and big data. Which of these technologies are you currently investing in? KEY: Americas Europe Asia Pacific More than 1,100 senior executives were surveyed in the PwC study. 48% are based in the Americas, 30% in Europe, and 22% in Asia Pacific. Visit http://tinyurl.com/aw7pqpu for the full survey. 10 News round-up TERRITORIES TO SHARE INFO of them in a non-timely manner. Australia, continental Europe, Canada All British Overseas Territories acting KPMG said it remained of the view and Singapore. For 61% of those willing as offshore financial centres have that it was independent in its audit to move, the most common reason is now signed an information disclosure of Pendragon, but that it was ‘very to seek improved quality of life. Dave agreement with the UK government. disappointed’ that a partner failed Way, managing director of Marks The British Virgin Islands, Anguilla, to dispose of shares on a timely Sattin, said: ‘Despite the lucrative offers Bermuda, Montserrat and the Turks basis and that the firm failed to deal available for accountants overseas, and Caicos Islands have followed the ‘appropriately with that failure’. money is way down the list of their top Cayman Islands in reaching agreement priorities for an international move.’ with the UK Treasury. Gibraltar has NON-FINANCIAL REPORTING BOOST Many young accountants want to work also signed the agreement, but already The European Commission intends abroad for life experience, having complies with the measures. Under to amend two accounting directives missed out on a gap year. the new concord, the jurisdictions to assist with greater non-financial will automatically exchange account disclosure by companies. The A MILLION RTI USERS information with the UK, France, measures would affect about 18,000 More than a million employers are Germany, Italy and Spain. The businesses in the EU and improve using RTI to supply PAYE information. arrangements will cover accounts held reporting transparency on social Ruth Owen, HMRC’s director general by individuals, companies and trusts. and environmental issues. The move for personal tax, said: ‘This is at the The Isle of Man and Guernsey are was welcomed by the International top end of our expectations. However, expected to join the arrangement. Integrated Reporting Council, whose we’re not complacent and are carefully chief executive, Paul Druckman, monitoring submissions, but so far FRC TO INVESTIGATE KPMG said: ‘We believe the Commission’s things are going well. We have had The Financial Reporting Council is proposals are an intelligent and logical lots of feedback from many employers to conduct two investigations into milestone on the continuing journey saying that RTI is easy to use. We know KPMG. One relates to its audits of towards integrated reporting as part it will take time before all employers motor group Pendragon for the 2010 of the evolution in corporate reporting adapt to RTI, but any who haven’t and 2011 years. The investigation globally.’ See feature, page 22. started reporting in real time should do will consider whether the firm was so quickly.’ independent in conducting the audit, SEVEN IN 10 LOOK BEYOND UK given that a former partner is now Seven out of 10 accountants based in STANDARD FOR UTILITIES the company’s chairman. A second the UK would work abroad, according to The International Accounting investigation relates to an allegation a Marks Sattin survey. The most popular Standards Board (IASB) has proposed that a KPMG audit partner held destination is the US, where 42% of an exposure draft for industries, such shares in an audit client and disposed accountants would work, followed by as transport and utilities, that are subject to rate regulation. Regulators’ decisions can have substantial impacts WORLDSPREADS SUES EY on entities revenues and on the timing Ernst & Young is being sued over its of payments. Existing International audits of Worldspreads, which is being Financial Reporting Standards (IFRS) administered by two KPMG partners. do not provide specific guidance on Jane Moriarty, special administrator of rate regulated activities. The IASB Worldspreads and restructuring partner is proposing an interim standard at KPMG, said: ‘The appointment of that would allow entities to preserve administrators followed the discovery of their existing accounting policies, accounting irregularities.... We have been with some modifications designed to reviewing the reasons for the company’s enhance comparability. failure..... Following our initial review of this data and consultation with legal REVISED CODE FOR SMES counsel, we have decided to take action A revised corporate governance code against the firm’s auditors to protect for SMEs has been produced by the the position for clients and creditors.’ Quoted Companies Alliance, with Ernst &Young responded: ‘We do not support from the Financial Reporting accept that we are liable for any losses Council. Revisions since the previous suffered by Worldspreads or any related version published in 2010 include a party and we will vigorously defend any greater focus on the benefits of how proceedings.’ good governance can improve trust