Depending on your disposition, a recession is either a good or a terrible time
in which to prosper. It was certainly a difficult year to make your mark but
some managed to stand out.
Richard Meddings, finance at Standard Chartered, along with his opposite
number at HSBC, Douglas Flint, stood out for being involved with banks that rode
out the recession much better than most. Meddings became the Blue Chip FD of the
Year, while Flint took the prize for Outstanding Industry Achievement at the
Accountancy Age Awards.
Other FDs looked to 2009 to progress their careers. Marks & Spencer
finally launched a search for a new chief executive and FD Ian Dyson soon became
one of the favourites for the job. But it didn’t happen. The post went to
Morrisons CEO Marc Bolland. The appointment immediately raised questions about
Dyson’s future, but also that of Richard Pennycook, the Morrisons FD, who became
a clear candidate for the CEO’s post at the supermarket.
There were significant handovers in regulation too. Paul Boyle left the CEO’s
job at the Financial Reporting Council to be replaced by Stephen Haddrill (see
our interview this week).
HMRC brought charges against Roy Faichney and David Perrin of Vantis for tax
evasion, with many believing the pair were being used as an example to others by
the taxman. They deny the charges and the case remains in dispute.
Elsewhere the wrongdoing was absolutely clear. Both the Madoff and Stanford
scandals put accountants in the headlines for all the wrong reasons. Madoff’s
auditor David Friehling pleaded guilty to securities fraud but denied knowing
about the $65bn ponzi scheme, while Allen Stanford’s CFO James Davis also
pleaded guilty to fraud and is now helping the authorities with their
Aidan Birkett, head of corporate finance at Deloitte, got the job of
restructuring the £35bn debt of Dubai World, the state-owned gulf company that
had to go cap in hand to lenders asking for a debt moratorium. If anyone
exemplifies how accountants can find themselves caught up in internationally
important events, it is him.
The last 12 months have been a painful mix of redundancies, restructuring and
battening down the hatches for all firms. But the dire economic circumstances
have yet to yield a major casualty, either through litigation or a collapse into
Practices of all shapes and sizes have desperately shuffled staff around to
keep job cuts to a minimum, and while many partners have said goodbye to their
firms, some practices have attempted to keep student numbers up so that they
avoid a frenzied recruitment drive when things turn around.
Grant Thornton took an approach described by Accountancy Age as “brave”, in
taking the hit for its merger with Robson Rhodes in its 2008/09 results, leading
to its profits per partner dropping by 19%.
At the same time Titcheners entered administration following a series of
acquisitions that went wrong, a move that only temporarily staved off the
Around 500 firms are classed as in financial difficulty a month, according to
Begbies Traynor’s numbers, and the situation could get worse before it gets
better. Experts are predicting that continued cashflow problems will see more
firms disappear – either into insolvency or just simply swallowed up by rivals.
Something else to watch out for in 2010 are attempts at “mergers of equals” –
where firms merge offices but keep their separate identities. With the
likelihood of culture clashes and power struggles, we await the emergence of
this new model with great interest.
It could be said 2009 has been a monumental year for tax – but whether it has
been a good one depends on your perspective.
With it’s beefed up powers, HMRC will look back fondly on the last 12 months
but for those in the taxman’s crosshairs, this will be a year to (never) forget.
The seismic effect of the credit crunch on corporate tax revenues triggered
an HMRC offensive on avoidance and evasion, but at the same time an olive branch
was offered to struggling companies. More than £3bn of time-to pay arrangements
for VAT were cleared by HMRC. However individuals, companies and advisers were
all put on notice, and the hardening of the tax regime saw major multinationals
flee our shores for more welcoming fiscal destinations.
Vodafone and AstraZeneca have both fought bitter court battles with the
taxman on controlled foreign company issues, and businesses are still crying out
for clarification from policymakers.
The second tax amnesty for rich individuals with assets held offshore began,
and the view from the ground is it is distinctly less friendly than it sounds.
Banks were told to give up account information to help HMRC amass files on
offshore account holders, causing them confidentiality issues.
Advisers were branded alchemists by Dave Hartnett for allegedly turning
income into capital and avoiding tax payments, much to the chagrin of the
How do you sum up insolvency in 2009? Lehmans, if you had to do it in a word –
but to some extent that would be unfair just to restrict this short piece to
We’ve seen major high street brands enter insolvency, such as Threshers and
Borders. The revival of the CVA process has won approval of landlords, bringing
some relief to Blacks Leisure, Focus DIY and most importantly JJB Sports. The
pioneering work by KPMG, which saw landlords accept compromise agreements at
JJB, won the firm an Accountancy Age Award.
Administrators putting businesses into pre-packs have been criticised for the
opacity of the process. The SIP 16 regulation was introduced to keep tabs on
Others have voiced concerns over insolvency practitioners handling of
bankruptcies and IVAs. Both processes have been on the government’s radar.
ehmans’ story was one of tremendous ups and downs for PwC’s Tony Lomas and
his fellow compatriots. While Lehmans will still dominate the insolvency
profession next year, here’s what we think will be the byword of 2010 – Dubai.
Environmental issues have crept up the agenda for finance directors throughout
the year, with impending legislation set to increase their compliance burden.
One of the biggest factors in focusing FDs’ minds is the upcoming government
legislation forcing large companies to pay for their carbon emissions under the
Carbon Reduction Commitment. And, as if to increase the confusion, the
legislation has also undergone rewrites in the past 12 months.
Earlier in the year finance directors were told they would have to register
and start the scheme in April 2010. They were then told they just had to
register by April 2010.
The biggest concern surrounding the CRC for FDs came from the announcement
that two years of emissions would have to be pre-accounted and pre-paid for in
April 2011. Confused? So were many finance chiefs. As the dust settles and the
deadline looms the government have finally drafted what is to be the final
version of the CRC which entails FDs registering in April 2010 and paying for
emissions in 2011.
Security fears have been among the biggest factors holding back accounting
practices from embracing online technology.
Although the issue there have been many reassurances from software vendors
about the safety of allowing financial information to be used over the internet
through cloud computing or Software as a Service, the technology still brings
many accountants out in a cold sweat.
And on a final note, what happened to Microsoft’s foray into small business
accounting software? It’s big plans way back in 2005 have fallen by the wayside,
with quite frankly a bit of a whimper. Mamut has been left to pick up the
The year ahead
Next year will see the economy recover – but don’t expect everything to be easy.
Last month we reported the astonishing number of accountancy firms, 500, that
find themselves in financial trouble each month.
With a recovery expected only in the third quarter by most people, that’s
unlikely to change for at least the first half of next year. There will be a
special focus on the business management of firms, a direct call for ‘physician,
Business recovery departments will continue to prosper. The rate of business
failure lags behind improvements in the general economy, so if you are an
insolvency specialist work will continue to flow even as the economy recovers.
Key debates will rumble on – not least the one about what on earth an audit
should set out to do. The crisis has quiet rightly thrown a spotlight on to this
question, not because audit failed but because it became patently clear that
audit tackles only a very narrow brief. The key will be whether auditors prove
willing to engage in this debate. After all, it also implies increased risk if
the scope of audit is broadened, and nobody likes that.
2010 will also be the year that the new chief regulator at the Financial
Reporting Council, Stephen Haddrill, settles into his new role. His focus will
be on shareholders. Their role in the crisis has so far been underplayed and
Haddrill has the opportunity to take their obligations much more seriously.
Lastly, as the economic rescue effort dies down, more attention might be
focused on the International Accounting Standards Board and its status. The
French don’t like it and the IASB seems to be gaining few friends in Brussels
after a frenchman took over as international markets commissioner at the EU.
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