The most recent articles from Accountancy Age

US business execs still unsure about IFRS

Mario Christodoulou — 2010-03-10T09:27:00.000Z

Mario Christodoulou, Accountancy Age, Wednesday 10 March 2010 at 09:27:00

US business execs still not convinced that US should adopt international standards

More than half of American business executives are not convinced the US should adopt international accounting standards, a KPMG survey has found.

KPMG asked 2500 executives in America whether they generally supported US adoption of international accounting rules, with 58% either opposed or undecided.

The questions were asked during a web seminar two days after US Securities and Exchanges Commission (SEC), Mary Schapiro, said she would delay a final decision on US adoption until 2011, and companies would not be permitted to begin using the rules until at least 2015.

However, almost half of respondants, 49%, said they would like the ability to adopt IFRS earlier before the SEC’s 2015 timetable.

“Much work needs to be done before a US change to IFRS,” said Janice Patrisso, partner and national IFRS leader at KPMG.

“While some uncertainty remains, companies are not slowing their IFRS conversion activities, with 49 percent of respondents saying they’d like the ability to adopt IFRS earlier than the anticipated 2015 or 2016 implementation date targeted by the SEC work plan and only 18 percent saying they will delay their IFRS plans based on the SEC’s February 24 announcement.”

Schapiro has said she will investigate the impact of IFRS on American companies, before making a final decision to switch. Meanwhile, the International Accounting Standards Board and its US counterpart the Financial Accounting Standards Board are harmonising their two accounting languages.

Further reading: US dawdles over adoption of international standards

Management consultants add £56bn value to clients

Kevin Reed — 2010-03-09T11:26:00.000Z

Kevin Reed, Accountancy Age, Tuesday 9 March 2010 at 11:26:00

Industry body extols its members in new report

Management consultants add £56bn of value to their clients, according to its industry body.

The Management Consultancies Association's (MCA) analysis of 1,800 consultig projects found that the majority of projects generate returns between two and 20 times their cost.

Alan Leaman, MCA chief executive, said: “Too many conversations about consulting start and end with the assumption that it is just a cost; we can now see that there is a significant return on this investment as well. This work is based exclusively on the views and experience of clients and the methodology was cautious.”

Further reading:

Watch Accountancy Age TV's interview with Alan Leaman on the MCA analysis

Accountant admits guilt in public fraud

Mario Christodoulou — 2010-03-09T08:22:00.000Z

Mario Christodoulou, Accountancy Age, Tuesday 9 March 2010 at 08:22:00

Former office of fair trading accountant created fake company

A former public accountant has pleaded guilty after trying to defraud the office of fair trading of more than £350,000, the Daily Telegraph reports.

Asif Haque, 38, of Harrow, north-west London, used a fake company to siphon off money from the department, falsely claiming for contracts using a fictitious company, between February 2008 and July 2008.

Haque pleaded guilty at Southwark Crown Court to 11 counts of fraud and one count of concealing, disguising or transferring criminal property.

Further reading: Accountant for Office of Fair Trading admits to stealing public money

Japan embraces new fair value rule

Mario Christodoulou — 2010-03-08T10:26:00.000Z

Mario Christodoulou, Accountancy Age, Monday 8 March 2010 at 10:26:00

World's second largest economy to use standard on Wednesday

Listed Japanese companies will begin using the new international fair-value accounting rule this week.

Come Wednesday, Japan will allow use of IFRS 9, the international fair value rule reworked in haste following the global financial crisis, the Financial Times reports.

The fair value principle forced companies to value assets at their market price and was blamed for amplifying the crisis as the value of financial instruments fell in illiquid markets, following the crisis.

The new standard works on a mixed measurement model which will allow controversial loan books to be valued at amortized cost, removing a key element of volatility.

Japan joins Australia and New Zealand, which have also absorbed the new rule into their accounting code.

Japanese adoption will place further pressure on Europe, which has so far failed to indicate whether it will absorb the standard.

Further reading: Japan in support of ‘fair value’ accounting

BP pays E&Y £54m in fees

Mario Christodoulou — 2010-03-05T10:28:00.000Z

Mario Christodoulou, Accountancy Age, Friday 5 March 2010 at 10:28:00

Big Four firm's fee drops on previous year's figures

Big Four accountants Ernst & Young earned £54m from oil company BP in audit and non-audit work, according to the multinational’s annual report.

BP is one of the most lucrative audit jobs, owing to the complexity, size and geographical spread of the business.

According to BP’s report, E&Y earned £13m from its audit of the company, £22m for audit of subsidiaries, £11m for “other services”, £1m for tax and a remaining £1m for different services again.

The full £54m makes it one of the largest combined audit and non-audit fee of any company in the FTSE 100.

The figure was lower than previous years. In 2007, the firm was paid £75m and in 2008 this was reduced to £67m

BP said, in its annual report, this reflected a drive to “raise efficiency in audit processes” as well as a reduction in tax services and services related to corporate finance transactions.

Read the full BP annual report

Deloitte acquires carbon advisory business

Rachael Singh — 2010-03-04T10:24:00.000Z

Rachael Singh, Accountancy Age, Thursday 4 March 2010 at 10:24:00

Big Four Firm beefs up its environmental advisory arm

Deloitte has acquired dcarbon8, the carbon and sustainability consultancy, as it looks to grow its environmental advisory division.

Guy Battle, dcarbon8's founder, is to become a partner, with the remaining employees also joining the Big Four firm.

John Connolly, CEO and senior partner at Deloitte, said: "This deal will bring together pioneering and highly skilled people from both organisations enabling us to offer an increased range and depth of carbon and sustainability advice to a broader number of clients."

Battle said: "The challenges facing business as the world moves towards a low carbon economy are enormous. We see the move to Deloitte as a fantastic opportunity to combine our respective skills adding the necessary depth and resource to allow us to meet the growing demands of our customers in this field. "

The recent announcement is the latest in an acquisition bonanza by Deloitte. Earlier this year the firm bought property advisory specialists, Drivers Jonas, to create a new real estate advisory business; consultancy business Simulstrat which specialises in business simulations; and prior to that it acquired ReportSource, the management consultancy company.

Further reading:

Making your business sustainable

Deloitte plays war games with new acquisition

Financial reporting: rise of the machines

Kirk Botula — 2010-03-04T00:30:00.000Z

Kirk Botula, Accountancy Age, Thursday 4 March 2010 at 00:30:00

Spreadsheets are still the financial reporting system of choice for many fund managers, but manual processes are slowly being phased out and automation is coming

Imagine a financial reporting system that relies on spreadsheet calculations and ‘ruler and eyeball’ manual processes for data management and validation. Then consider how one significant spreadsheet error could impact the integrity of key regulatory, financial and investor reporting data. It’s a risk scenario that seems counterintuitive to the vision of improving financial reporting transparency and control, but one inherent in the back-office infrastructure of many mutual fund and hedge fund shops.

Yes, it’s astonishing. Spreadsheets, manual processes and disparate systems still define the data management infrastructure in many fund shops. Error prone, inflexible and lacking scalability and process control, these reporting systems can no longer meet mounting reporting challenges in the fund industry. Driven largely by industry demands for transparency and control, the need for data consolidation and automation has never been greater.

Spreadsheets are still used pervasively in the back office. A June 2008 survey of fund administration managers and top executives found that half of the companies interviewed use spreadsheets for more than 25% of their fund administration work and 76% want to decrease their reliance on spreadsheets. And that’s not surprising—especially when factoring in the risk of errors. Research by a major accounting firm found over 90% of spreadsheets larger than 150 rows contained at least one significant formula mistake.

Greater transparency will mean new reports, additional disclosures, and more frequent reporting. Firms that still rely on manual processes and spreadsheets for financial and regulatory reporting simply won’t have the flexibility to scale to meet the challenge; their systems are too “brittle” and error prone to manage the load of reporting already in place.

The drive for transparency and control comes at a time when fund administrators are also dealing with a myriad of strategic challenges – from administering new, complex instruments to managing global regulatory and accounting compliance, such as the impending IFRS and US GAAP convergence.

The key to back-office control lies in streamlining and automating data management and report generation – from the collection of data, the creation of reports, the confirmation of report data and the delivery of information to regulators, auditors and investors. Such reports include a range of financial statements, regulatory reports and NAV figures.

There are various steps you can take to bring more transparency to your financial reporting systems and enable data consolidation and process automation.

Understand and document your objectives

With multiple stakeholders involved, setting objectives is a complex task. But the energy invested up front will pay off in the long run by helping to ensure your efforts are aligned with your company’s strategic goals. Setting successful objectives involves:

* Identifying the right stakeholders (internal providers of data, fund administration staff and any internal/external clients, and outside auditors that rely on financial reporting).

* Prioritizing business goals that are driving the decision – for example, data control, risk mitigation, cost reduction or elevating service levels.

* Making sure senior leadership is aligned with the department-level team, for example, where the team doing the work thinks the initiative is about increasing efficiency, while senior management only wants to reduce costs.

Strategic thinking

Think strategically about how your company’s business plans, regulation and customer expectations will create increased demand for financial reporting flexibility. Consider how:

* Internal and external consumers will place greater demands for more timely, flexible and accurate reporting on your company.

* The need to quickly and efficiently adapt to new regulations will impact reporting demands, staff resources and the ability to scale.

* The proliferation of new and more complex instrument types will create challenges for greater reporting flexibility.

Conduct a gap analysis

Analysis will enable your company to compare its current state with its desired state. At its core are two questions – where are we and where do we want to be? As you move to develop an automated financial reporting system, a gap analysis can help map current processes and costs to what your processes and costs will look like post-implementation.

It can also help identify all manual processes in your current state and where they can be eliminated, while quantifying the variances between your current state and desired state, thereby providing valuable ROI data to justify your investment.

What is automated and what is not?

With financial reporting software, there are different degrees of automation. If your goal is to mitigate risk in the back office by eliminating manual processes, you must understand what aspects of the financial reporting process can and cannot be automated. Consider the entire financial reporting process – from the collection of raw data from your accounting system to the delivery of a published document or electronic report.

Back-office fund administration is evolving – fast. Just a few years ago, the concept of automated financial reporting was embraced by just a few early adopters who stepped forward to take a leadership role in shaping the future of fund administration. Back then, the innovators, unconstrained by conventional thinking, were envisioning what the world of fund administration could be today. Their insight has resulted in new ways to gain control, reduce costs and improve efficiency by automating the data collection, creation, confirmation, and delivery process.

What will the future for fund accounting and administration look like? As you embark on your endeavor to improve transparency and control, remember you are making a long-term strategic decision. Your challenge is to implement a system that will help you meet your company’s immediate needs, as well as your needs for whatever comes next.

Kirk Botula is chief operating officer of Confluence, a global leader in fund administration automation

Video: The value of consulting

2010-03-02T16:10:00.000Z

Accountancy Age, Tuesday 2 March 2010 at 16:10:00

Current and future trends in the consultancy market explored

Kevin Reed talks with Alan Leaman, chief executive of the Management Consultancies Association, about the group's latest survey into the return companies receive from consulting work and future trends in the industry.

Podcast: to download this programme as an audio-only mp3 file, click here

Audio: The value of consulting

2010-03-02T16:09:00.000Z

Accountancy Age, Tuesday 2 March 2010 at 16:09:00

Current and future trends in the consultancy market explored

To view this programme on Accountancy Age TV, click here

Turner quizzed on bank rules

Mario Christodoulou — 2010-03-02T08:58:00.000Z

Mario Christodoulou, Accountancy Age, Tuesday 2 March 2010 at 08:58:00

FSA chief to be quizzed on accounting treatment

The head of the UK’s financial watchdog will be quizzed on whether banks should have tighter controls, when he appears at parliament today.

Lord Adair Turner, head of the Financial Services Authority (FSA) will speak on how the banking industry might me changed, in the wake of the crisis, and possibly changes to financial statements.

It comes a month after Turner appeared at the ICAEW to argue for a third line or through-the-cycle measure which would force banks to save money in the good times, to compensate for the bad.

Banks would put save money according to what stage they are judged to be in the economic cycle.

The idea is being viewed with caution by accountants. Since the crisis accounting standard setters have been guarding against the pollution of accounts with regulatory data.

Further reading:

Treasury Committee - Inquiry

US fair value rules complicate convergence, warns Turner

De Boer lined up KPMG job before Copenhagen talks

Accountancy Age — 2010-02-26T09:46:00.000Z

Accountancy Age, Accountancy Age, Friday 26 February 2010 at 09:46:00

UN climate change chief talks on his move to Big Four firm

Yvo de Boer, KPMG’s latest climate change tsar, said he was in discussions to leave the UN before Copenhagen talks fell apart, The Guardian reports.

De Boer said he did not have the stamina to see another two years following the talks.

"This isn't the sort of job you get in six weeks after Copenhagen…When Copenhagen failed to deliver what I had hoped, I thought maybe I should put it on ice and stick around for a while to see it through. But it could take another two years ... and I don't think I've got the stamina," he said.

Read our profile of Yvo de Boer: Change of climate

Read the full story at: The Guardian

FSA fines RSM Tenon £700,000 over Lehman advice

David Jetuah — 2010-02-26T09:12:00.000Z

David Jetuah, Accountancy Age, Friday 26 February 2010 at 09:12:00

RSM Tenon fined in the first enforcement action resulting from the FSA’s review of marketing and distribution of structured products

The financial services regulator has fined RSM Tenon £700,000 for " significant failings in its advice and sales processes relating to Lehman-backed structured products."

The FSA also came down hard on RSM Tenon for "having poor systems and controls to prevent unsuitable advice in its structured product and pension switching business."

This represents the first enforcement action resulting from the FSA’s review of the marketing and distribution of structured products, particularly those backed by Lehman Brothers, concluded in October 2009.

The FSA said Tenon "failed to treat some of its customers fairly" in relation to its sales of Lehman-backed structured products between November 2007 and August 2008.

Andy Raynor, Chief Executive of RSM Tenon, said: "I am satisfied that all the issues the FSA have highlighted in their report have been addressed. We have treated this issue extremely seriously and Tenon Financial Services has co-operated fully with the FSA.

"Since 2007 TFS has continued to enhance the training of consultants and strengthen their systems and controls. With effect from January 2010, these activities have formed part of our enlarged financial management business and have access to the full support and resources of the group.

"I am very confident that the new management team of RSM will continue to grow the business in a controlled and compliant manner."

Further reading:

Head of tax role ditched at RSM Tenon

David Jetuah — 2010-02-25T09:59:00.000Z

David Jetuah, Accountancy Age, Thursday 25 February 2010 at 09:59:00

UK's seventh largest firm says it will have heads of discipline within tax, but confirms Andrew Jupp's role of national head of tax has been dropped

RSM Tenon has dropped the role of national head of tax as part of it sweeping merger moves.

Accountancy Age learned this week tax chief Andrew Jupp was leaving RSM Tenon, now the UK's seventh biggest firm.

Across the Audit, Tax and Advisory service lines the firm says it will have "heads of discipline" within tax – for instance VAT, employment, tax investigations and strategic tax advice.

"Each of the disciplines has its own head, ensuring that every possible aspect of tax has maximum impact and benefit for our clients. This gives far greater prominence to taxation than any of our competitors," an RSM Tenon spokeswoman said.

Tenon's link-up with RSM Bentley Jennison was seen as a major success but the combined firm is now trying to smooth out the overlap caused by having offices in the same region.

The changes have not affected its service offering RSM Tenon stressed.

"The commitment of RSM Tenon to tax has been and is unparalleled.The firm has led the way in planning for our clients with The Wealth Experience - this will continue."

RBS audit chairman Hunter to step down

Kevin Reed — 2010-02-25T09:37:00.000Z

Kevin Reed, Accountancy Age, Thursday 25 February 2010 at 09:37:00

Archie Hunter to leave RBS after six years

RBS audit committee chairman Archie Hunter is stepping down.

The former KPMG Scottish senior partner will quit the role at RBS' AGM in April after six years in the role.

A search for his replacement is "well advanced", said the bank.

Chairman Philip Hampton, praised Hunter for his loyal service.

Hunter was ICAS president in 1997/1998.

He is currently chairman of Macfarlane Group plc, a director of Edinburgh US Tracker Trust and a governor of the Beatson Institute for Cancer Research.

Further reading:

Bank bonus tax could boost Treasury coffers by £3bn

Cloud computing and franchises: raining down opportunities

Gary Turner — 2010-02-25T07:41:00.000Z

Gary Turner, Accountancy Age, Thursday 25 February 2010 at 07:41:00

Accountants have often found it difficult to work with franchises due to the disparate nature of the businesses and the geographical spread. But cloud computing could solve these problems

Franchises are big business. The franchise industry is booming in the UK, with the number of franchise units increasing by 44% over the last decade. Franchising accounts for £10.8bn annually in sales. But they are quite a different operational set-up compared with the average SME. They may operate as small businesses, but have to report information to another organisation. Typically, most accountancy practices have not specifically targeted franchises and, if they have come across them, have found it difficult to explore the potential of this niche market any further.

However, the changing world of technology is enabling accountants to target such groups more effectively, including franchises. In particular, online, or cloud accounting means that it becomes more feasible to support a franchise and its franchisees, however geographically dispersed.

In the cloud

For the non-technical, let’s quickly remind ourselves what cloud computing actually means. Rather than software applications and data residing on your PC’s hard disk, they are stored remotely and accessed over the internet. Updates are carried out by the software provider and, because the applications and data are securely stored ‘in the cloud’, there is no risk of them being lost if your PC, server or hard disk crashes. Payment is usually a flat monthly fee and there are no software licenses or upgrade costs to worry about. Moreover, even the smallest SME can now have access to the kind of technology previously only available to big firms with deep pockets.

Supporting franchises

Cost saving is not the long-term driver for cloud computing and, when it comes to franchises, it provides the foundation for a whole new way of working with niche client groups. For example, by having virtual online accounting, you could offer franchise owners a centralised service that provides a standardised template of all franchisees’ books, rather than having to interpret different record-keeping methods. This makes it easier and quicker to spot any anomalies or problems, then help the franchisee to deal with them. Also, if franchisees are using the same online accounting tools, then inconsistencies in reporting are substantially reduced. The economies of scale that this approach provides can mean that online accounting becomes even more cost-effective.

Franchisors can choose to include online accounting as part of the franchisee package and, in turn, the franchisor’s chosen accountant can offer their clients an all-in-one package, including online accounting. This is already happening and, not surprisingly since most SMEs have to be very cost-conscious, this is an appealing offer.

Online accounting can also help to overcome the geographic barriers that have made addressing client communities such as franchises traditionally difficult. The client and the accountant can have access to the books anytime and anywhere, so gone are the days of needing to put a USB stick or a bunch of files in the back of a taxi and goodbye to site visits to the client’s premises. Online accounting can even be accessed on a Blackberry or an iPhone – and that’s not just theory: we’re aware of plenty of users who do just that.

Downsides

Too good to be true? Let’s look at the possible downsides. Security is the elephant in the room here. Many are still too worried about crucial financial data being hosted away from their own premises and the accessibility that cloud computing offers also leads to fears that data can be easily stolen.

But, in my opinion, it’s a concern that has had its day. Security technology has come on in leaps and bounds in recent years and, although I cannot speak for other vendors, Xero has certainly never had any security scares. Is a CD, USB stick or a box full of paper any more secure? The latter isn’t even backed up.

Some clients may be wary of their accountants having real-time access to their financial data and yes, this will mean that some SMEs will want to remain offline, but this visibility of online accounting is one way in which accountants can add value to their client relationships; for instance spotting problems before the year end, meaning that they can be dealt with more quickly.

A final possible negative is cloud computing may feel very new to some people. There are going to be pockets of franchisees (and other clients) who aren’t ready for the online world but, equally, I’d estimate that an even greater number are very familiar with the internet. Most of us use the web and online services all the time, without being aware of what we are doing. Online accounting will be a natural evolution for many.

Whether it is to meet the specific needs of franchises or other clients, online accounting has the ability to help accountants to not only more effectively address the needs of niche groups, but target these potential revenue sources, providing new areas of future business.

Gary Turner is UK managing director at Xero

Further reading:

xero.com