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By Martin Brassell, co-author of Banking on IP and Inngot CEO, on the new financial reporting standard and its implications for intangible assets

The new Financial Reporting Standard 102 (‘FRS 102’) comes into effect from the end of 2015 (where a company’s accounting year is the calendar year) and April 2016 (where it is the fiscal year). It changes the treatment of intangible assets for small and medium-sized enterprises (SMEs), who will now follow substantially the same rules as multinationals.

It’s therefore a good time to brush up on the identification and valuation of this category of assets, which is responsible for driving the majority of value in most companies. The main changes fall under two headings.

Buying or ‘merging’ companies

Currently, when two companies are combined, either merger accounting (adding the two existing balance-sheets together) or acquisition accounting (placing a fair value on all acquired company’s assets) might be permissible. FRS 102 states acquisition accounting must be used in nearly all cases (bar group reorganisations).

Also, acquisition accounting rules are being updated. Any excess paid over and above the fair value of the fixed assets and liabilities can no longer simply be characterised as ‘goodwill’. Instead, it needs to be broken down into goodwill and identifiable intangible assets, in a very similar manner to IFRS 3 (with some minor wording differences).

This means that the sources of intangible value that have never previously appeared on an acquired company’s balance-sheet will need to be identified and quantified.

The useful life of intangible assets and goodwill

FRS 102 preserves the option, previously available under SSAP 13 (which it replaces), of either amortising qualifying development costs of new products and services over a suitable period, or expensing these costs during the year in which they are incurred.

However, UK GAAP currently permits ‘goodwill’ to have an indefinite life, as long as the value is tested annually for impairment. Under FRS 102, the concept of an indefinite life falls away and a lifespan has to be specified for amortisation purposes.

If an asset’s lifespan cannot be determined reliably, a ‘default’ figure of five years must be used. This is much shorter than existing UK GAAP, under which it would have been customary to amortise some assets over a much longer period (up to 20 years).

Combine these changes with the reduced role of ‘hard’ assets, which are increasingly outstripped by spending on intangibles, and the number of businesses looking to reflect their real investment profile on their balance-sheet looks set to rise.

ACCA is currently running a UK pilot of the National Corporate Innovation Index methodology, which looks at the value created by intangible asset investment across a range of categories. ACCA members engaged with SMEs can participate and obtain a report for their client company by emailing Interest in participation needs to be expressed by 28 August 2015.


By David York, head of auditing practice, ACCA

An authoritative global survey of the views of smaller accountancy practices was published in March 2015 by the International Federation of Accountants. The survey concluded that the biggest challenge faced by firms was attracting new clients and half of those surveyed said they were concerned about differentiating their firm from the competition.

One UK firm that has cracked this problem is Green Accountancy. If you call yourselves Green Accountancy the differentiation from competitors is about as obvious as it can get.  But what lies behind this is an innovative service that any firm can add to its own service lines to give an edge in attracting new clients. In this case, clients that benefit from it may also get a ‘green advantage’ with their own customers.

ACCA has worked with Green Accountancy to promote this service. We issued detailed guidance in the form of Technical Factsheet 190, which is available as a free download on the ACCA website and crucially it is issued copyright free, to encourage firms, other accountancy bodies, or indeed anyone, to tailor it to their own needs: translate it, change UK to local figures, or include it in their own materials. The service is all about helping smaller businesses measure and reduce their main environmental impacts, so the more accountants that get involved in this the better. To quote ACCA Past President, Brendan Murtagh: ACCA believes that our members’ accounting and financial reporting skills have a key role to play in the transition to, and management of, the low carbon economy. By providing additional green accounting skills . . .  professional accountants will have a pivotal position measuring and managing carbon emissions.’

Recently we have released a video to introduce the service in detail and have put a transcript and the slide deck online.  There are also short articles that provide an overview: on the IFAC Global Knowledge Gateway as well as elsewhere on ACCA’s website.

The guidance was initially issued as ‘interim guidance’ because we wanted to improve it by responding to feedback from users. It is now (June 2015) due to be updated for 2015 year-end reporting and so, in addition to a feedback request in the factsheet itself (many thanks to those who have already provided their views) we have launched an online survey. The survey is not just for those who have introduced this service; anyone who has read the Factsheet can comment.  Please do so.


By Mark Cornell, market director – Western Europe and North America, ACCA

This week, we launch a new ad campaign called “Aspire to Lead

With posters in London Underground stations (Holborn and Euston for example) and online, we’re shouting loud about the value of accountancy and finance professionals to business.

We have real accountants in the ads – yes, real ones – who have agreed to be the stars of a campaign that illustrates accountancy is a great career choice. They – and we – believe that training to be an accountant gives you the skills, knowledge and strategic insights to climb the career ladder in many sectors, in many countries.

The “skills” word has come up in the news a lot recently – from Barclays CEO Anthony Jenkins in the Sunday Times, to Travelodge’s Chief Executive Peter Gowers, and Dame Pauline Neville Jones from Business in the Community talking about skills on BBC Radio 4’s Broadcasting House recently.

These business leaders expressed concern about whether schools were equipping young people with the ‘life skills’ they need for employability. They said there are still basic gaps in literacy and numeracy and so young people seemingly lack the essential “skills of everyday life”.  Gowers said he has to train apprentices and young staff on how to shake hands, and get eye contact. They were echoing Jenkins’ comments in the Sunday Times, where he said the UK is in danger of having a nation of awkward teens – unable to shake hands and get eye contact.

Helen Brand OBE, ACCA’s Chief Executive, wrote recently in City AM that the lack of soft skills can affect the bottom line, and that we need to see younger people as assets to business.

With the right training, development and mentoring – and perhaps a smattering of natural talent – young people can reach their aspirations to become confident leaders.

The leadership equation

Relevance is also part of this leadership equation. ACCA has always believed in providing a qualification that is relevant to today’s business market, providing accountants and finance leaders that the world needs.

This is why the ACCA Qualification not only covers the technical skills such as taxation and audit, but also management accounting and performance management. And there’s also a soft skills module which all ACCA members can now complete an optional professional skills module during their studies. This includes two modules – Communicating Effectively and also Working Relationships.

As a parent myself, perhaps we’re a bit too hard on youngsters – we’re expecting them to hit the working ground running; we tend to forget that these digital natives are ahead of the curve when it comes to exploiting technology, and this is a definite skills-set business needs.

I know from personal experience, starting as an apprenticeship with BT, just how important it is to not only learn the technical skills to do your job, but also to develop communication skills.

Starting at an apprenticeship level you have to prove you have the all-round ability to rise through the ranks and become a leader. Being a leader is about more than just knowing your job. It’s about being able to communicate effectively with everyone, regardless of their level. Being able to negotiate, being able to inspire confidence in those around you and motivate them.

Apprenticeships are a hugely important route in to the workforce and over the past decade we’ve seen a huge rise in the number of businesses offering apprentice-level training in finance. This has opened the profession up to talented individuals who may not be able to afford to go to university, or who are put off by the ever increasing amount of debt that today’s graduates are carrying. We believe that is a hugely positive thing. ACCA has always believed that becoming a finance professional is about ability and dedication, not ability to pay for a degree.

So for those aspiring to lead, what does the future hold? Previous research from ACCA and IMA called Future Pathways to Finance Leadership revealed that to get ahead, the CFO of the future needs to understand and handle risk, have strategic insights, be tech and data savvy, be prepared to be an excellent deal maker and possess excellent leadership skills, communication skills, strategic skills and change management skills. They need to be The Complete Package.

It’s clear our Aspire to Lead stars have these skills in abundance. They also prove that ACCA members are plying their knowledge and (soft) skills in every sector across most markets across the globe – from traditional accountancy practices, to the Big 4 to oil and gas to technology, to corporate and financial services and of course in the public sector.

I’d love to hear what you think about leadership and meeting aspirations. Leave your views in the comment section below this blog, and I hope you see our ads soon.

Chas Roy-Chowdhury-14

By Chas Roy-Chowdhury, head of taxation, ACCA

As the 2013 UK Budget approaches next week, ACCA called for the Chancellor of the Exchequer to use the Budget to increase the personal allowance threshold further than planned, without decreasing the level at which the 40 per cent tax band bites.

From 6 April this year, those turning 65 years old will no longer benefit from the higher personal allowance pensioners receive, which means some pensioners, who fall into the new 40 per cent tax bracket because of income from savings, dividends and part-time work, will be bitten by their tax bill.

This is a classic example of giving with one hand and taking with the other. It looks good for the Government to say that they are extending the personal allowance, but it is only true for the ever-shrinking population of 20 per cent taxpayers. By dropping the threshold for the 40 per cent income tax bracket, many hardworking people who will begin paying 40 per cent for the first time will lose the benefits of the increased personal allowance and they will need to pay additional tax on such things as savings and dividend income.

This is no longer the 1980s where only a small number paid the 40 per cent income tax. Many people who are working but struggling at the lower end of that bracket will not get much respite from an increase in the personal allowance. The Chancellor of the Exchequer should use the Budget on 20 March to give taxpayers a much-needed boost and raise the personal allowance for all income tax rates otherwise it is being less than honest.

Thirty years ago only five per cent of workers paid the 40 per cent tax rate – this has now more than doubled to more than 15 per cent today, which means more people will be affected by this change, even if their salaries do not sit comfortably in that threshold i.e. are on the borderline.

Is it fair to do this to pensioners who have paid their taxes throughout their working lives, only to penalise them for saving some of their pay for later in life?

It will be interesting to see how the Budget pans out and how the general public react to it as I believe it will be challenging times ahead.

Don’t forget to follow our Twitterfeeds for live coverage and comment on the Budget as it is announced on Wednesday 20 March from 12.30pm.





The big picture fades

aksaroya —  28 January 2013 — Leave a comment

By Romano Dzinkowski, economist and business journalist

2012 brought CFOs in the US so much to get to grips with on financial standards and mandatory auditor rotation that precious little headspace was left for strategic direction of business.


2012 was a tough year for US corporate accountants. With heads down, eyes focused on managing risk, and more often than not buried in compliance and tax issues, there was little room for strategic growth for the finance C-suite. While most CFOs would claim their role is to be a true business partner and a critical forward-looking thinker on the C-level team, last year was full of distractions.

First, the US Financial Accounting Standards Board (FASB) issued up to 15 new exposure drafts (13 at the time of this writing) and seven freshly linked new standards. CFOs were also anxiously awaiting the final revisions to several big memorandum of understanding projects with the FASB and International Accounting Standards Board (IASB) – on financial instruments, impairment, hedge accounting, accounting for macro hedging, leases, and, last but not least, revenue recognition. Many finance folks were busy figuring out exactly what the proposals would mean for them.

Also on the standards agenda, the FASB and newly formed Private Company Council (PCC) proposed a new, simplified framework for modifying US GAAP for private companies. There was much debate on whether what many are calling a two-GAAP system would ultimately be good for corporate America as a whole. That argument continues.

Also in 2012, the coming of International Financial Reporting Standards (IFRS) was again a source of confusion for public company CFOs who would have liked some direction one way or another. An announcement regarding adoption (or not) was expected at the end of 2011, and again in 2012…but none was forthcoming. This has angered many US finance chiefs who would like a heads-up for their planning cycle and have already started going down the IFRS adoption path.

Against the backdrop of a fairly heavy accounting standards agenda came the threat of mandatory auditor rotation in the US, which many CFOs say would make their life much more complicated, not to mention expensive. The Public Company Accounting Oversight Board is now deliberating on what, if anything, it is going to do about changing the rules on mandatory auditor rotation in 2013. Currently, most votes are in the nay camp.

At the same time, COSO – the Committee of Sponsoring Organisations of the Treadway Commission – released a significant update to its original risk management framework, which many SOX 404 filers have adopted. The new model has been criticised for being prohibitively large for all but the bigger public companies with the resources to adopt it. COSO is revising the document; the hope is that the new framework will be ready for CFOs to start implementing in 2013.

So what does it all foreshadow for the role of the CFO this year and beyond? More of the same, says a recent ACCA/IMA study released in October 2012. CFOs, predicts the study, will continue to be challenged by the tug of war between their role as senior strategist and business partner and the ever-increasing demands of greater compliance,control and regulatory complexity.

This post first appeared in Accounting and Business International, January 2013.