Archives For ACCA

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By Sarah Hathaway, head of ACCA UK

The results of the Social Mobility and Child Poverty Commission survey give cause for grave concern and demonstrate that not enough is being done to prevent Britain remaining an exclusive ‘club’ at the top of our society. Relative social mobility, the extent to which an individual’s chances depend on their parent’s class or income, seems to be shrinking.

This summer Thomas Picketty’s book Capital: in the 21st Century reignited a debate for western governments to address the issue of inequality. The book has ignited political discussion across Western Europe; Picketty’s central thesis is where the rate of return on capital outstrips economic growth, wealth inequality ineluctably rises. The impressive amount of data he uses to back up his thesis is why the book has received such acclaim. However despite the excitement which surrounded the book and a call for action, today’s survey results are a reminder that clearly concern about inequality and social mobility has not translated into action. Or that any action has taken effect?

In our recent submission to the Social Mobility and Child Poverty Commission’s State of the Nation report we called on an end to unpaid internships and a recent survey of our members showed us that not only do our members feel strongly on this issue but 76% of the 1,500 surveyed also felt their companies should pay the living wage. Social mobility cannot be viewed in isolation and the level of income inequality is an issue that all three of the parties should address. The report recognises that practical steps can be taken to prevent the drive towards improving social mobility settling into a pedestrian pace.

The commission has rightly called on government to collect data on its staff and lead by example and we hope the government will take note of this. ACCA is currently working to do the same; a founding feature of ACCA is accessibility and we continually review our policies to ensure that our qualification is open to everyone whatever their background.

Today’s results demonstrate that we cannot afford to soften and settle into a pedestrian pace, but the reality is that change is slow. Inter-generational mobility, as the name suggests, takes a lifetime to achieve. There is a need for practical solutions and we urge organisations of all sizes to adopt the Professions for Good Social Mobility Toolkit. The toolkit does not claim to be a silver bullet but is designed for organisations to be able to tailor it according to resource. Built from the ground up, the toolkit is fit for use by small employer organisations with no dedicated HR functions, with easy low-cost recommendations.

The SMCP Commission’s survey has done well to put further pressure on governments to act – public bodies must ensure they do too.

ACCA will be publishing a report on social mobility in the autumn.

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By Sarah Hathaway, head of ACCA UK

For many young people, this time of year is filled with anticipation, maybe even fear, and then hopefully reward once those hard-fought results are confirmed. Those of us that took our GCSEs and A levels over 20 years ago may struggle to remember the details of results day, but I for one can remember being paralysed with indecision as to ‘what next’.

It’s still the case in many schools that university is ‘the’ recommended destination, at any cost, but even then it’s which university, which course, which career. You would hope these students are also aware of other routes to a valuable career – school leaver schemes, apprenticeships, further education, professional education… ‘How do I make that seemingly all-important decision’ and ‘who do I turn to for advice’ are definitely on the FAQ list for August. However, new research from The Student Room says there is a “black hole” in school careers advice.

From a personal perspective, I usually offer a couple of pieces of advice when I meet young people looking for some insight. Firstly, never assume your next decision is your last. Where your career path starts does not dictate where it ends up. I can speak from experience there – and you will have many opportunities to change direction, specialise or do further study. Modern careers are not as linear as they used to be, and employers do value a wide range of experience, if you know how to sell them the benefits of that variety in experience.

Secondly, seek advice and information from as many different sources as possible. That may be parents, friends’ parents, their work colleagues, your work experience mentor, teachers, careers specialists. There are often lots of people willing to share their own perspective, if you just ask. But everyone’s knowledge is limited in one way or another, so gathering as much as possible before making a decision is important.

And this is true for many people. At ACCA we have people joining us who have made a decision to be an accountant in their 20s, 30s, 40s, even 50s! People who may have been working in finance for a while who have decided to build on their experience, mums coming back into the workplace, those who have worked in an entirely different sector and want a change. The majority of these people too will have tapped into advice from a number of different contacts or places. And they’ve made a decision that, at that point in time, a professional accountancy qualification is the route for them. If you’re 18 and looking for an alternative to university, it may be the right decision for you too.

Many of the A-level students who get their results this week are on their way to becoming a finance professional without even realising it. Three GCSEs and two A levels (including maths and English) is enough to pursue ACCA’s globally recognised qualification, which is a badge of credibility with employers.

Find out more about studying to become an ACCA finance professional.

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By Helena Barton, Partner – Sustainability, Deloitte Denmark
Member, ACCA Global Forum for Sustainability
Chair, GRI Stakeholder Council

The revised ISAE 3000 standard brings welcome guidance to assurance practitioners engaged to obtain assurance on sustainability reports.

A key feature is that the ISAE 3000 now ‘stands alone’, i.e. practitioners can use it without reference to other auditing standards. One of the other changes is the ‘opening up’ of the standard to use by non-accountants, who are not subject to the same independence and ethics codes as professional accountants. It was clear that a growing number of non-accountants were (and are) declaring that they “complied with” or performed the assurance engagement “in accordance with” ISAE 3000, without stating which independence requirements and ethical frameworks they had complied with to perform the engagement – or perhaps without even realising that some significant ethics requirements and quality control standards underpinned ISAE 3000.

So to encourage greater transparency and correct misapplication of the standard, the IAASB decided to make it explicit that non-professional accountants can use ISAE 3000 as a standard for performing assurance engagements provided that they comply with professional or legal requirements for independence and ethics which are at least as demanding as those in the IESBA Code of Ethics for professional accountants and that they identify such requirements in the assurance report.

However, this revision might present a hurdle for some assurance practitioners who have not yet put in place the comprehensive ethics frameworks and quality control programmes that enable compliance. We may therefore continue to see unsupported formulations of reports which reference ISAE 3000 – and they may go unchallenged, unless somebody takes it upon themselves to do so.

The revised ISAE 3000 clarifies the scope and work effort for limited assurance engagements through the inclusion of tables which allow practitioners to more clearly see how a limited assurance engagement differs from a reasonable assurance engagement in practice.

It also provides more guidance for limited assurance engagements, which includes a better understanding of risk and response. And it requires practitioners to provide more detail in the assurance report on the actual work performed. Particularly for a Limited Assurance engagement, a description of the “nature, timing and extent of procedures performed” helps the users to really understand the conclusion made in the assurance report.

All in all, these are good developments, which we welcome. Users are entitled to expect objectivity, quality and professional scepticism to underpin any independent assurance engagement, and increased transparency around the work effort and controls to ensure this.

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By Jamie Lyon, head of corporate sector, ACCA

We’ve been talking about finance transformation for some time. The early 1990s witnessed the first moves towards business shared service operations, and yet our programme of work suggests many finance departments are still in the early years of adoption; remarkably some haven’t even started yet.

You could be forgiven for thinking finance transformation should be an art that has been mastered by now. It hasn’t, because enterprise change is difficult and amongst many other things, it’s about people change. All the experience and all the evidence continues to point to massive change challenges in changing the finance enterprise to drive down cost (and yes, its still a cost play, contrary to what some may say), and improve efficiency and value. ACCA is currently leading a global programme of research on how finance functions can become more effective. Its smart finance function campaign seeks to understand what practices the CFO organisation is adopting to drive more value for the organisation. Finance transformation has been, and continues to be, one of the ways in which the value equation can be addressed. But truth be told, many enterprises and CFOs continue to struggle to deliver all the benefits once promised. So what goes wrong? Perhaps my colleague Deborah Kops of Sourcing Change hits the nail on the head: ‘One of the biggest challenges for finance leaders is acknowledging that there’s no set of regulations for change. Mastering what is often considered ‘soft stuff’ is key to transformation success. It’s generally not comfortable for a profession that lives by rules.’

ACCA’s think-tank on business and finance transformation, which includes senior executives from some of the world’s leading enterprises that has decades of change experience such as Deloitte, Shell, Accenture, Unisys, Pearson, and GSK, has just released its latest report on finance change, and identifies 10 key requirements needed for effective finance function change to take place.

They are:

  1. Establishing the vision – the criticality of spending time conveying the transformation vision and goal.
  2. Buy in – The importance of CEO and senior management support and sponsorship of the programme.
  3. Communication – The need for constant communication on what is changing and the rationale for change.
  4. Preparation – Ensuring finance teams are bought in and committed to the change, and having an effective plan to manage the change process.
  5. Resources – Access to adequate programme resources at each critical stage of the transformation process, from developing strategy to achieving ‘business as usual’ acceptance.
  6. Patience – Accepting that large finance transformation initiatives can be revolutionary and evolutionary with most change processes taking longer than expected.
  7. Organisation redesign – Remembering that redesign and use of finance shared services or outsourcing necessitates change in the retained finance function too – the imperative of changing the finance enterprise in its entirety.
  8. Maintaining middle management – Successful change management is key to retaining the middle layer of finance management that is critical to core processes. Yet all too often, middle managers’ numbers are aggressively reduced to justify a business case for shared services and outsourcing, or they are lost in the shuffle.
  9. Alignment between capability and ambition – Often finance leaders overstretch themselves to realise a vision that is way beyond their, or their enterprises’, ability to achieve. Being realistic about the organisation’s change potential is essential.
  10. Working within the culture – Those who implement complex, multi-scope, multi-geography finance transformation programmes, particularly in business-line-led organisations, will experience the greatest change challenges. Gauging the type of change the culture will allow is an imperative.

Find out more about our Smart Finance Function campaign at www.accaglobal.com/smart.

This blogpost was first featured in CFO World in July 2014 

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By Jason Piper, tax and business law manager, ACCA

Among the themes covered in the ongoing debates around BEPS and international tax, there’s been a strand of discussion around “tax competition” – the practice by governments of attempting to make their jurisdiction look more attractive than others by reducing the tax burden on businesses.

The argument runs that by encouraging a move away from taxation of business, tax havens and rich countries are imperilling developing countries who need tax revenues.

But if making your tax system “competitive” costs you money, why would anyone bother? Perhaps because the indirect consequence is that you make more out of the VAT, PAYE and simple GDP effects of inward investment than you lose by reducing the tax due on any profits that the company may book in your jurisdiction.

For that to work though, you need a number of conditions to be true. In particular, you need to have effective collection mechanisms for VAT, and a secure taxpaying base of employees. You need to be comfortable that you have the economic capacity to service the increased production and demand for the GDP growth to have value.

For most developed countries that is very much the case. They typically collect 30-40% of GDP in taxes, and less than 10% of that comes from corporation tax – so 3-4% of GDP is collected as corporation taxes. But in developing countries, the level of GDP collected as tax falls to 10-20%, while the proportion of overall taxes attributable to corporation tax rises to nearer 20%. So we’re still looking at around 2-4% of GDP collected as corporation tax.

And that means that the economics of “tax competition” doesn’t work for a developing country; it would need to have twice the GDP impact per pound of corporate profit untaxed to get in the same level of VAT or employee income tax as recompense – yet proportionally the amount of tax that developing countries should typically be able to extract from the international businesses who might invest in them should be far higher. The reason that big business goes to developing countries is typically natural resources – and those resources are not typically mobile. If business wants them, there’s only the one jurisdiction they’ll be coming from, so the local government should have business in a firm grip when it comes to extracting tax revenues.

And there’s another twist. Remember those percentages of GDP collected as tax? Well, it’s generally reckoned that a nation needs to devote around 15% of its GDP to government in order for government to be stable. Or in other words, if you as a business are looking at investing into a market where less than 15% of GDP gets collected as tax, then you’ve got more to worry about than just business rates and form filling; there’s a good chance that the whole infrastructure will be unstable. Whether that’s political instability, or a lack of roads on which to transport your produce, there’s going to be additional risk factors to play into your analysis of whether the investment is sound.

And therein lies the challenge for a business decision maker. In a developed country, with a high level of maintained infrastructure and political stability, corporate tax is a pure cost to be managed down. The net marginal benefits accruing from payment are nil, while the government may even be prepared to forego those taxes in order to attract your business; official resistance to corporate tax minimisation is likely to be low.

In a developing country, taxes paid to central government may have a very real benefit to business, for the simple reason that without them the whole investment may become worthless in very short order. Tax is not so much a deduction from profits as a cost of sales; it’s an essential element in allowing those profits to be earned in the first place.

To be fair, this probably isn’t something that big business needs to be told. They know full well that however valuable the resource in a mine might be on paper, it’s worthless if they can’t safely extract and process it. Political stability is a key element of their risk analysis. If the people at the top of multinationals weren’t smart enough to have worked this stuff out for themselves, they wouldn’t be there.

But there’s a lot of other people who haven’t spent a lifetime making difficult decisions based on complex yet incomplete information. And if they end up running tax administrations, then there’s a risk that they might consider tax holidays for big business to be a good way forward to attract international investment – when in fact, it may be the very last thing they need, and the very last thing that a rational business would ask for. What’s sauce for the goose may not be sauce for the gander, or indeed the value burger of your choice. When it comes to domestic tax policies in respect of international investment, it most definitely is horses for courses.