By David Hopkins, Business Engagement Manager for the Intellectual Property Office

In a recent survey 89% of accountants told us they thought it was important to gain a better understanding of intellectual property (IP).  In today’s competitive marketplace, the accountancy profession is recognising that understanding IP may give them an edge in attracting new clients and contribute to the growth of their existing clients.

Every business will own or use IP and could include for example a trading name, website, drawings, knowhow and technical innovation. These intangible assets are likely to play a significant role in a business’s future plans for sustainability and growth.

Businesses owning their IP rights can benefit in exploiting those rights in a number of ways. This may include creating licensing opportunities, adding value in the event of the sale of their business and if they approach business angels, venture capitalists for funding.

The main areas of IP are trademarks, copyright, designs and patents. One of the main barriers we hear raised by businesses in not protecting their IP is the cost. It should of course be seen as a relative cost, however. For example a UK trademark applied for online can cost for as little £170 and lasts for 10 years.

There are other benefits for businesses investing in the future. HMRC’s Patent Box offers an additional incentive for companies to retain and commercialise existing patents and to develop new innovative patented products. There is also the R&D Tax Credits and there is evidence to suggest that it is under claimed.

There are a number of good reasons why understanding IP will also help prevent a business from encountering difficulties. A limited company name does not necessarily give a business the right to use the name in business.  It may in fact be infringing someone else’s trademark so it is strongly recommended that before incorporating a free trademark search is conducted.

The basic rule in copyright is that the creator owns – therefore if a third party creates a website, logo, takes photos, drafts content – then they will own the IP rights unless there is an assignment of copyright.

The IPO is aware that many professionals aren’t confident in their understanding of IP rights. To address this they have designed IP Equip, an online learning tool to help you understand the basics of IP.

The course is free to complete and can be accessed via desktops, tablets and smartphones. It’s also CPD accredited and has received praise from the certification service for being ‘one of the best well thought out and executed courses’ the assessment team has seen.

As part of our outreach programme we are delivering a series of joint seminars with Companies House entitled Briefing for Accounting Professionals.   These events provide a great introduction to both IP and the latest news from Companies House.  The next event will be in Scotland and we will shortly announce dates and locations for next year’s programme here.

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By Carol A Adams, Monash University

Tony Abbott’s criticisms of the ANU’s divestment decision will come back to bite him. The tide of change is such that Vice-Chancellor Ian Young and the ANU Council will be seen as leaders. Others will follow.

Abbott has added his voice to a growing chorus condemning the decision by ANU to divest from seven resource companies, including treasurer Joe Hockey, education minister Christopher Pyne, and blacklisted companies Santos, Iluka Resources and Sandfire Resources.

But if these companies are unhappy with the analysis of their environmental and social performance, they should take responsibility for better valuing and reporting their environmental and social impacts.

The risk of fossil fuels

Abbott’s claim that divesting deprives fund members of a good investment could ultimately be proven incorrect. Even the generally conservative accounting profession is making an increasing amount of noise about the impact of climate change on asset valuations (or stranded carbon assets).

This is a particular issue in the fossil fuel sector.

“Fossil fuel companies should start accounting for the risk that their vast reserves may ultimately end up as stranded assets.” That’s the title of an article published by the Association of Chartered Certified Accountants (ACCA) earlier this year.

A report published last year by the ACCA and the Carbon Tracker (with a foreword by the president of the International Federation of Accountants) found that companies typically do not disclose information that is material to investors on carbon risk.

Why isn’t the Prime Minister of Australia outraged about that rather than a university taking action?

The ACCA/Carbon Tracker report argues that to integrate climate risk into their business, companies need to consider potential CO2 emissions of reserves, and risks to valuations of reserves if demand for fossil fuel energy falls.

Moves towards more disclosure

The Australian Government position is in stark contrast to the mood of recent events in Europe looking at the role of corporate reporting in sustainable development and incorporating the sustainable development goals.

The events, attended by a wide range of stakeholders, concluded that reporting by companies and mandatory reporting requirements were not providing sustainability information needed by investors to assess risk and long term performance.

This is where the focus of policy makers should be — not on a report prepared for ANU highlighting gaps in management and governance by companies of social and environmental sustainability issues.

Assessing environmental value

I know of companies which are starting to develop what they refer to as a “social and environmental profit and loss account” or “net impact statement”. Essentially they are evaluating what they are contributing to society and the environment, and setting against that their negative impacts.

This sort of information attracts ethical investors looking for long term returns. Some are starting to calculate how this impacts on financial profit.

KPMG released a report last month outlining what they refer to as a “true value” approach assessing how social and environmental risks and opportunities will impact on future financial profit. The report uses hypothetical case studies to measure the impact of this value created (or lost) by companies on profit.

A report in Australian Mining complaining about “sloppy criteria” for the divestment by ANU misses the point. It is up to companies to provide adequate information on their risks, policies and activities for investors.

And, at the end of the day, if the fundamental nature of a company’s business is unsustainable, other criteria for divestment, however “sloppy” are somewhat irrelevant.

Universities led charge against Nike…

Universities have a history of being a force for good. The complete turnaround by Nike on corporate social responsibility was due to widespread boycott of its sports products by US universities in the 1990s.

Nike had contracted with factories throughout Asia (which became known as Nike sweatshops) that were found out for using child labour, poor working conditions, excessive overtime, sexually harassing female workers and paying below the minimum wage.

This was widely publicised by CorpWatch (a US based research group), Naomi Klein in her book “No Logo”, Michael Moore and the BBC in documentaries and various anti-globalisation and anti-sweatshop groups.

Nike originally denied the claims and expressed a view that what happened in supplier factories weren’t its concern. This only served to increase the campaign against it. Nike now takes transparency, accountability and corporate responsibility seriously and has restored its reputation.

And social and environmental sustainability practises in the supply chain are of increasing interest to large corporate customers concerned about reputation risk.

… and tobacco

The British Universities Superannuation Scheme (USS), at the time the third largest fund in the UK, made a significant response, through a campaign for responsible investment led by academics through “Ethics for USS” and students through “People and Planet” in the 1990s.

They questioned the morality of investing in tobacco which was dropped by the Australian Sovereign Wealth Fund last year. As a result of the academic and student led campaigns, the USS became the first large UK pension fund to adopt a socially responsible investment policy.

The approach included engaging with companies in which they invested to drive change towards more responsible behaviour. The USS sets out its proactive approach and explains its rationale for not divesting in companies on moral and ethical grounds only and legal advice that it is not permitted to make decisions purely on a moral or ethical stance here.

Students taking the lead?

In any case there is a strong and increasing link between some “moral and ethical grounds” and financial returns. In recognition of this Australian superfunds have also called for greater disclosure on Environmental, Social and Governance risk.

This is not to say that universities themselves should not being doing much more to develop future leaders able to respond to climate change and sustainability challenges. But that is another issue.

Of course, we must not forget that in making the decision to divest, Ian Young and the ANU Council were responding to student protests. They are the true leaders in all of this.

The ConversationCarol A Adams is a part time Professor at Monash University and consults through Integrated Horizons. She writes on her website ‘Towards Sustainable Business’ at http://www.drcaroladams.net

This article was originally published on The Conversation.
Read the original article.

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By David York, head of auditing practice, ACCA

‘You can’t manage what you don’t measure'; so is that why ACCA has issued Technical Factsheet 190 Carbon accounting for small businesses? To give accountants the tools to help smaller businesses measure their outputs of greenhouse gasses. So they can manage them – reduce them – and help ‘save the planet’.

Partly. Plenty of organisations have been trying to make measurable and reportable the environmental (and other) impacts of business. But almost without exception, these initiatives have been aimed at, and only been taken up by, large corporations.

There is nothing wrong with that. ACCA has been prominent in promoting sustainability reporting and now integrated reporting for giant businesses for which measurable reductions can make significant contributions to reducing global warming. But more can be done.

These existing initiatives are not readily scalable down to very small businesses. The GRI G4 Sustainability Reporting Guidelines for example have over 90 pages and are issued with a 260-page implementation guide. The authoritative Greenhouse Gas Protocol corporate standard is over 100 pages.

In complete contrast, the essence of the ACCA guidance is contained in ten pages. It does this by introducing a simple form of carbon accounting. The simplification comes primarily from narrowing down the scope of reporting to concentrate on common businesses’ activities that have significant measurable emissions, typically energy use and transport.

This makes it potentially accessible to all, so that businesses are not deterred by either the amount of time it will take to complete the carbon accounts or the complexity of the process. The guidance has been developed in conjunction with Green Accountancy, an ACCA registered practice that successfully provides this service in the UK.

The factsheet explains the form of reporting, provides a methodology, and sets out ‘conversion factors’ – the means to convert physical measures, such as electricity used, into a carbon equivalent. Guidance is also provided on the relevant professional responsibilities, such as a suitable engagement letter, and on marketing this new service.

Marketing has a sting in the tail. The client must have trust in a firm’s ability to provide the service. There are many ways to build that trust, but there is one sure way to destroy it: unless a firm ‘practices what it preaches’ and does its own carbon accounting, it will have no credibility.

Brian Cox has got it easy…

accapr —  19 September 2014 — Leave a comment

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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/ )

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By Terence Jeyaretnam, director, Net Balance

The International Standard on Assurance Engagements (ISAE 3000) is a standard used globally for assurance engagements for audits or reviews of historical non-financial information. Here at Net Balance, a specialist sustainability firm, we use the ASAE3000 (along with the more qualitative AA1000AS), its Australian cousin, generally alike in scope and application. While the ASAE3000 has always allowed non-accountants to use the standard, the IAASB has only recently adopted this provision.

From experience we believe there are numerous benefits when utilising the suite of ISAE/ ASAE 3000 in conjunction with the AA1000 Assurance Standards (AA1000 AS), which has traditionally been the domain of specialist sustainability firms. The AA1000 AS is a holistic sustainability-focussed standard designed specifically for assessing and strengthening the credibility and quality of an organisation’s social, economic and environmental reporting.

Here at Net Balance we encourage the revised ISAE 3000 to be used in conjunction with a detailed approach of the AA1000 AS, and be applied together during the phases of planning, obtaining evidence and establishing quality controls.

Having the experience of successfully completing over 250 Assurance engagements, we believe a more complete assurance can be undertaken by using both the AA1000 AS and the ISAE 3000 in combination.

Accordingly, this revision creates new opportunities for Assurance providers housing subject matter experts in sustainability to provide Assurance to all organisations. Numerous advantages include:

  • Increased representation of materiality – Defined by the assurance provider and the client organisation, subject matter experts using their professional and experienced judgements can now delve deeper into complex topics such as supply chain issues, water, waste management, or even inform clients about the global landscape on human rights.
  • Risk identification – Subject matter experts understand the clients’ business and operations and therefore they can leverage past experience to address existing risks and to identify new sustainability-based risks.
  • Value add – Subject matter experts can provide feasible value adding recommendations. This is an increasingly important factor as most reports received by management from assurance providers should provide strategies to help clients understand both the risks and opportunities in a fast changing regulatory environment.

Read Deloitte’s viewpoint on the matter here