Archives For ACCA

Jamie Lyon NEW PHOTO

By Jamie Lyon, head of corporate sector, ACCA

Collaboration, collaboration, collaboration should be the new mantra for corporate evangelists. Speaking at our Asia CFO summit last week, I had the temerity to suggest that finance had to up its game in working cross-functionally, and that future business growth was dependant on greater collaboration between the CFO function and the rest of the executive team. In a customer focused and digital knowledge economy, collaboration is king to evolving the business model, realigning operational processes and mining (in particular) the enterprises’ intellectual capital to create value. Consider one of today’s most prized enterprise assets – data. Today, there are countless examples of savvy enterprises who continue to invest in breakthrough technologies to leverage the power of the data at their disposal. Yet we also know that many enterprises still aspire to a single source of data truth. Functional responsibilities continue to blur in the great data debate, and the unspoken question at the C Suite table remains this: who takes ownership or leads the enterprise wide agenda in this critical asset class?

I am duty bound to say the CFO function has an outstanding case to take the leadership role here. The CFO is the steward of corporate value, the keeper of the purse strings, and it is they who must primarily drive required enterprise ROI. But in today’s connected environment, understanding and leveraging the value of enterprise IP is critically dependant on reaching out and building alliances with the CMO, the CIO, the CHRO and other new emerging C suite roles; the assets and processes that create corporate wealth today typically have little respect for functional boundaries. The data example provides an outstanding opportunity for CFOs to move the dial on peer collaboration. Collaboration of this kind will bring much greater clarity and agreement across the executive table on the processes that will create value in the future, it will mean a much more effective capital allocation strategy for the business, and it should help the CFO lead a clearer line of sight tracking, measuring and reporting on the enterprise activities that matter most.

Collaboration, collaboration, collaboration. A new year’s resolution for every CFO.

Ewan Willars-7651

By Ewan Willars, director of policy, ACCA

Last week, the Prince of Wales’ Accounting for Sustainability project celebrated its 10th year anniversary. The great and the good of the sustainability world gathered in London to mark the occasion. ACCA was there, and we have also helped A4S identify the issues that will matter in the next ten years.

Looking back, the past decade has seen the sustainability agenda championed, challenged, and even denied.

Sustainability has been (and remains) an issue of fervent debate.

Policy-wise, there is of course more work to be done. The outcome of the Rio+20 global summit in 2012 showed that a global consensus on sustainability reporting is hard to achieve. Agreeing on reporting measures remains a challenge.

However, against these dynamic, and often difficult political, social, scientific and environmental contexts, A4S has played an instrumental and highly influential role in leading the sustainability debate. It has pushed for greater transparency from business, for clearer reporting and for an integrated approach to sustainability. A4S’s assertion that sustainability is critical for the future prosperity of the world is one that ACCA supports whole heartedly.

As a member of the executive board of the A4S project, ACCA is proud to play a part in A4S’s important work. With A4S, ACCA has published research into the developments and progress of sustainability and non-financial reporting, examining the wider corporate and social responsibility debate and the part the accountancy profession plays in sustainability reporting.

ACCA has long recognised that sustainable development is critical to society and business. The accountancy profession has a vital role in defining and delivering the means by which sustainable development is measured and reported.

To celebrate the 10th anniversary of A4S we conducted research amongst over 4500 of our students around the world, from Africa to Australia, to understand their hopes, fears and aspirations for the future, and specifically their thoughts on sustainability and business over the next ten years.

The main focus of our questioning was: what will the world look like in 2024 for them, as financial professionals of the future? We wanted to get opinions of tomorrow’s finance professionals  on how they believe the global macro sustainability trends will impact businesses and the role of accountants in 10 years from now.

To what extent do you think the following sustainability issues will have impacted businesses by 2024?

A4S 1

We asked the students what they saw as the key global trends that might impact business over the next ten years.  The top three concerns were the decline in natural resources; population rise and instability in the finance markets.

The impacts of social, environmental, population, economic and political changes are a concern to the majority of respondents – 78% said this was a worry, agreeing that the sustainability of businesses will be challenged as the world changes in the future.

Looking ahead to 2024 and beyond, to what extent do you agree with the following statements about the possible role of the finance and accounting profession?

  • 87% think finance and accounting professionals will need to provide businesses with more decision-making insight than now e.g. forecasting (so, more on what might happen in the future, than recording what has happened)
  • 79% think sustainability issues will be more prominent in business
  • 74% think the environment’s impact on organisations will be a bigger focus for finance and accounting professionals
  • 73% believe the role of finance and accounting professionals will be more crucial to the performance of businesses than it is now
  • 68% think sustainability considerations will impact my everyday working life
  • 68% believe the finance function will be key to creating a sustainable business
  • 62% think business will have established ways of addressing global sustainability issues
  • 57% believe there will be greater opportunities for finance and accounting professionals than now 
  • 34% believe the world will be a better place for me to live in

Our research also showed that finance and accounting professionals will need to provide businesses with more decision-making insight than now, such as forecasting and providing insights on more of what might happen in the future, rather than recording what has happened.

So how can accountants manage these future challenges? ACCA’s policy paper, Sustainability Matters (May 2014), said that the global accountancy profession has an important role in making organisations more responsible and accountable in the pursuit of sustainable development.

From sustainability reporting to integrated reporting; the assurance of non-financial reporting and disclosure; climate change; natural capital and the green economy – accountants are central to making the sustainable equation add up and make business sense.

In terms of integrating sustainability issues into business in the future, do you see finance and accounting professionals becoming…?

  • 54% believe they will be much more involved
  • 34% said somewhat more involved
  • 8% said same level as today
  • 3% said less involved
  • 1% said not involved 

Accountants’ professional skills in developing metrics, information systems, reporting and designing economic instruments, among other business attributes, will help make economies greener, companies more accountable, and achieve global and national measures that look beyond economic output to factor in non-traditional measures, such as human well-being and natural capital.

The bottom line is that the finance professionals of 2024 will have more challenges ahead of them than now, with research from the UN and the OECD telling us that climate change will have a major impact on business. The OECD’s Environmental Outlook 2050The Consequences of Inaction” (2012) said that: “Climate change presents a global systemic risk to society. It threatens the basic elements of life for all people: access to water, food production, health, use of land, and physical and natural capital.”

We believe that the young accountants of today will go on to develop the skills, abilities and knowledge to shape and change the future; many are already doing so. Our hope is that by 2024, the accountancy professional, wherever that person may be working, will be creating a brave new world with sustainability integral to it.

SH  01

By Sarah Hathaway, head of ACCA UK

We teamed up with the New Statesman to discuss this subject matter at the three party conferences – see a link to the report at the bottom of this blog, but here is my takeaway.

I think you would be hard pressed to find someone who does not think business cares about politics; politicians set the framework in which business operates, a working relationship is paramount. But do politicians care about business; does it only care about a certain type of business? This was the broader theme for the discussion.

The last few years have been difficult; the pressure on the public purse was always going to lead to trade-offs and some issues taking prevalence. And our members support austerity (mild or severe) if imposed at the right pace.

However if recovery is to continue, access to finance is key. As an organisation that supports members from small to large businesses, we recognise that their needs are distinct but that they are also intertwined; businesses do not operate in silos, they are party of a larger supply chain. We are keen to push all three of the parties to continue to champion alternative forms of finance and access to it. We know from our members that this is crucial and the small business bill has taken steps to improve this. There is some evidence that all parties recognise the importance of it but it’s about making sure the practical regulation works for business.

The issue of Europe was unsurprisingly part of the debate at Conservatives; as a global organisation we recognise the need for stability, that’s what our members want and that’s what is needed for businesses to attract long-term sustainable investment. Why would we cut ties with our biggest trading partner? That’s not to say reform isn’t needed, but reform from within not from the outside.

Of course discussing Europe involves a debate around immigration; that debate must be an honest one. We have a skills gap and so while we are working to plug that over the medium-term, we still need to fill it in the short-term. We believe all parties need to recognise that and taking students out of the net migration figure and treating them as a talent pipeline for business will help achieve that.

Ultimately politics involves trade-offs and risks, much in the way business does, but it is about calculated risk, evidence and taking a long-term view.

Politics is at its best when it recognises that it doesn’t have all the answers and that it shouldn’t try to. Instead as with any good relationship, the success comes through hard work, collaboration and concession on both sides.

To download a copy of the report click here.

SH  01

By Sarah Hathaway, head of ACCA UK

For those of you who have not yet seen, ACCA UK has launched Who accounts for social mobility? This paper was based on a survey of our members and students. Firstly thank you to all of you who took the time to take part in the survey your feedback was very insightful and highlighted what diversity there is among both students and members, across geography, age, gender and background.

Open access is at the heart of what ACCA believes; an open society is a fair one. We conducted the survey to get a greater understanding of whether what we are doing to encourage this is working, and to get a clearer picture of what you think. From the results, and other research and initiatives we are involved in we believe the government and business is not doing enough to ensure that everyone can get to the top.

Last Monday the government’s Social Mobility and Child Poverty Commission launched its annual State of the Nation Report which looks at the UK as a whole to see whether the government is doing enough to ensure it reaches its child poverty targets and that social mobility is improving. Unfortunately much like our report, the Commission found the government to be lacking; we do face losing a talented generation if we do not do more.

The government claims to be focused on an inclusive growth agenda, but studies demonstrate that western countries with low social mobility have lower economic growth. If both the government and the opposition do not begin to take social mobility more seriously, we will become a permanently divided nation. To start with we would like to see a commitment from all three of the political parties to end the abuse of unpaid internships and ensure that businesses are advertising them freely and fairly to all. We were concerned to see that 43% of those who took our survey said they were unpaid, it simply isn’t good enough and both government and business must end this practice.

Secondly we would like to see a commitment to more effective dissemination of careers advice through the education system. As our own social mobility research shows, very few accountants find their way into the profession via their school or university. Improving teachers’ and careers advisers’ understanding of accountancy would make a significant contribution to improving access to the field, thus increasing social mobility.

Ahead of the UK general election in May, we will be working with the government and the Commission to look at what we believe should be done and how we can contribute. We are going to be hosting several roundtable discussions in Scotland, England and Wales working with a whole host of organisations to look at what is required to make sure that no one feels there is a glass ceiling.

Do keep an eye out on Twitter, Linkedin and Google+, as well as here, where we will keep you updated on our progress.

Brian Cox has got it easy…

accapr —  19 September 2014 — Leave a comment

JP  03

By Jason Piper, manager for tax and business law, ACCA

The recent launch of the OECD’s proposals for the BEPS project resulted in a deluge of response, commentary and reaction.

Too much is ill, mis or uninformed, and often from people who ought to know better. There’s a rush to present simplified answers, to try to clear everything up with a couple of soundbites and a nod to popular opinion.

But it’s not simple.

People say “oh, it’s not rocket science”. As these things go, rocket science is actually a comparatively simple bunch of equations. Rocket engineering on the other hand, now that’s difficult. Any 6th form physics student can (or at least, should be able to) do the theoretical calculations on how much fuel you need to get a given payload to escape velocity. But actually designing the pumps, tanks & nozzles to get the stuff to burn, let alone actually building them (hands up anyone with the knowledge of metallurgy to understand precisely which alloys you should be using where?) is a different matter, and only the most gifted and dedicated of amateurs have even a hope of getting a rocket to actually work (and even then they’d be the first to admit their debt to the professionals who build the parts).

Tax is much the same. Should everyone pay a fair amount of tax? Well that’s so trite it barely even deserves to be a question.

What is a fair amount of tax? You might as well ask what’s the right shade of blue, or how tall should a politician be.

Laws are the next best proxy we have to fairness when it comes to tax. But then the laws are (to put it mildly) complicated. And Brian Cox can point to planetary movements, reel off the equations, and explain what’s happened. When someone asks why a baseball pitch doesn’t work the same way, that’s easy – baseballs are operating in an atmosphere, and under another heavy gravitational field. And there’s no real mileage in trying to establish the physics of what would happen to a baseball in space, or a planet in the earth’s atmosphere and gravity, because the two scenarios are implausible. And there’s no need to worry about how a watermelon would operate at high altitude, or a whale sized object on the edge of the atmosphere, because such things don’t exist. There is no gentle graded curve between the tiny everyday objects that we all handle and work with and the vast numbers and forces which operate in astronomical models. There’s a clear break between them; no need for complex transitional calculations.

But tax isn’t like that. There’s no legal difference between the structure your window cleaner can set up to run his business and the one that a multinational might use to handle its international treasury function. There’s no difference in principle between the calculations that a business handling nuclear waste reprocessing does to work out its tax liability and those that a corner shop might do. And the tax system isn’t just trying to run one set of equations at once; it’s got two or three sets to cope with (companies, partnerships, limited vs unlimited liability variants, sole traders – they’re all valid forms of business, and it’s open to business to mix and match the legal forms to get itself the best result.) So it’s a bit like having planets that can behave like baseballs if they want to.

And the best bit is that the tax system isn’t like physics, which gets done to us and we just have to try to work it out from the evidence. The international tax system is something we’ve done to ourselves (albeit perhaps indirectly, in that it’s actually the work of elected politicians).

Now, I have to say that if we were in a position to be able to revise the equations that govern the temperature that the sun burns at, or the force exerted by gravity, I’d probably advise caution in the choice of those writing the new rules. I’d certainly want them to have a pretty firm grasp of astrophysics; a background in marketing or even an advanced degree in economics just wouldn’t quite be what I was hoping for.

But when it comes to the tax rules, there is a nasty tendency for the value of knowledge and experience to be ignored. I’m sure it would be terribly helpful to have the sun coming out at night instead, when the light would be more useful. Clearly weakening the force of gravity would make us all lighter and put diet clubs out of business overnight. Spinning the planet’s axis of rotation through 90 degrees would put London in the tropics and make for much warmer winters; bound to be a good thing.

It’s fairly obvious that actually none of those would be terribly good ideas, and no half-sane scientist would ever fall for them. But of course that’s another advantage the physicists have; they can be reasonably certain that their system works and they’re not at serious risk of breaking it. Tax systems aren’t like that. The British one was described this week as “complex, confused, irrational, punitive and in urgent need of root and branch reform”. And that got it a rating of 21st out of 34; quite what they’d have to say about the US system (33) or the French (34) is anybody’s guess. And yet unsound proposals get put forward for tax all the time in the comments columns of the internet, and explaining why they won’t work can require a degree of engagement and willingness to learn that all too few seem prepared to put in. I’d love to help more people understand the basics of tax system design, it’s really important stuff. I’ve tried to do some of it here: http://bit.ly/TaxSimplicity

But please, don’t ask me to condense 746 pages of BEPS documentation into 140 characters. It’d be about as much use as posting  and if you know what that means, you don’t need me to explain it.

(It’s the Tsiolkivsky Rocket equation, for which I must thank Randall Munroe, of XKCD – see http://what-if.xkcd.com/7/ )