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SG_cover.indd 1 17/04/2012 12:08

Adverts_May12.indd 4 16/04/2012 12:08

The Esplanade – Theatres on the Bay is a shining example of how an arts organisation can thrive fi nancially in an environment of sponsorship rather than subsidy. CEO Benson Puah describes the complex’s winning formula on page 12

SMES NEED TO BE NURTUREDSingapore’s small and medium-sized enterprises (SMEs) are an integral part of its economy. In a recent budget debate, deputy prime minister and finance minister Tharman Shanmugaratnam emphasised that keeping the sector thriving in Singapore is a way of achieving an inclusive society. He added that the transformation of SMEs over the next decade is also essential to raise productivity, incomes and living standards for Singaporeans.

But the minister admitted that SMEs are facing tough times in the current volatile environment. Neglecting them is not an option. As our feature on page 16 reveals, SMEs make up 99% of Singapore’s enterprises, employ 70% of the workforce and account for 60% of GDP.

It is in the city-state’s economic interest to focus on them even as Singapore continues to roll out the red carpet for foreign companies.

The reality is not lost on policymakers. Under Budget 2012 initiatives, the government will provide up to S$400m in financing annually. But while it seems generous, industry experts say that this falls short of addressing SMEs’ immediate concerns – rising costs of doing business. Labour and rental costs are eating into profit margins and recent increased curbs on foreign labour have emerged as a sore point.

Complicating these issues is ignorance of aid schemes. Statistics from a recent ICPAS survey revealed that 63.5% of SMEs are not even aware of the government assistance schemes available. The trend is indeed worrying. Observers argue that SMEs need to come out of their comfort zones and rethink their business models. To rein in costs and boost productivity, it is imperative to seek opportunities in overseas markets, especially in the Association of Southeast Asian Nations (ASEAN), where strong inter-country relationships and lower-cost environments outside Singapore allow them a better chance at survival.

It is clear that the old way of doing business does not cut it anymore. To sink or to swim depends on how fast SMEs are willing to restructure to Singapore’s changed environment.

Sumathi Bala, abeditor@accaglobal.com

TIME TO ROTATE?With calls to introduce mandatory auditor rotation, evidence suggests that it may cause more problems than it solves. Page 40

ALL CHANGENew and revised International Financial Reporting Standards are likely to have a major impact on companies in Singapore. Page 56

EXPERT INSIGHTS

Join ACCA and KPMG for a free, one-hour webinar as we explore how the finance transformation agenda is evolving through shared services and outsourcing.www.accaglobal.com/virtual

BIG AMBITIONS?For your next career move check out www.accacareers.com

3Editor’s choice

SG_B_Edletter.indd 3 17/04/2012 13:30

Audit period July 2009 to June 2010138,255

Features12 Artful accountancyBenson Puah, CEO of Esplanade – Theatres on the Bay, describes the venue’s winning formula

16 Support for SMEs Times are tough for smaller businesses but Budget 2012 may offer some solutions

19 At the coalfaceHow energy company China Shenhua has been transformed

24 Olympic winner As offi cial professional services provider for London 2012, Deloitte is already ahead of the Games

28 Smashing the glass ceiling Gender stereotypying remains a problem for the accountancy profession

30 Vietnamese visionIn an exclusive interview we meet Vietnam’s minister of fi nance, Professor Dr Vuongh Dinh Hue

VOLUME 15 ISSUE 5

Asia editor Colette Steckelcolette.steckel@accaglobal.com +44 (0)20 7059 5896

Editor-in-chief Chris Quickchris.quick@accaglobal.com +44 (0)20 7059 5966

International editor Lesley Boltonlesley.bolton@accaglobal.com +44 (0)20 7059 5965

Singapore editor Sumathi Balaabeditor@accaglobal.com

Chief sub-editor Eva Peaty

Sub-editors Dean Gurden, Vivienne Riddoch

Design manager Jackie Dollar

Designers Robert Mills, Jane C Reid

Production manager Anthony Kay

Advertising James Fraserjfraser@educate-direct.com +44 (0)20 7902 1210

Head of publishing Adam Williams

Printing Times Printers

Pictures Corbis

ACCAPresident Dean Westcott FCCADeputy president Barry Cooper FCCAVice president Martin Turner FCCAChief executive Helen Brand OBE

ACCA Connectmembers@accaglobal.com +44 (0)141 582 2000

ACCA Singapore435 Orchard Road#15-04/05 Wisma AtriaSingapore 238877+65 6734 8110 info@sg.accaglobal.com

Accounting and Business is published 10 times per year. All views expressed within the title are those of the contributors.

The Council of ACCA and the publishers do not guarantee the accuracy of statements by contributors or advertisers, or accept responsibility for any statement that they may express in this publication.

Copyright ACCA 2012 Accounting and Business. No part of this publication may be reproduced, stored or distributed without the express written permission of ACCA.

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www.accaglobal.com

AB SINGAPORE EDITIONCONTENTSMAY 2012

SG_Contents.indd 4 16/04/2012 18:15

TECHNICAL46 Update The latest from the standard-setters

48 CPD: Uncluttering annual reports Busy annual reports may obscure vital information

51 Frameworks for charities A look at the differences between the Charities Accounting Standard and Financial Reporting Standards

BRIEFING06 News in pictures A different view of recent headlines

08 News in graphicsWe show a story as well as tell it using innovative graphs

10 News round-upA digest of all the latest news and developments

VIEWPOINT33 Errol Oh Don’t resist the arrival of integrated reporting

34 Cesar Bacani Purchasing power parity tells us much about salaries

35 CORPORATE35 The view from M Nazri of Vector Scorecard Asia-Pacifi c Group, plus news in brief

36 Making boards better Directors must perform more effectively than ever

39 PRACTICE39 The view from Paul Lee of RSM Chio Lim, plus news in brief

40 A rotating debate Auditor rotation is causing a stir in the US...

43 Chilly reception ...and the proposals have met with scepticism in Asia

Regulars

CPDAccounting and Business is a rich source of CPD. If you read it to keep yourself up to date, it will contribute to your non-verifi able CPD. If you read an article, learn something new and apply that learning in some way, it will contribute to your verifi able CPD. Each month, we also publish an article or two with related questions to answer. If they are relevant to your development needs, they can also contribute to your verifi able CPD. One hour of learning equates to one unit of CPD. For more, go to www.accaglobal.com/members/cpd

Your sector

WorldwideThere are six different versions of Accounting and Business: China, Ireland, International, Malaysia, Singapore and UK. See them all at www.accaglobal.com/ab

ACCA NEWS55 CouncilElection time is coming

56 Setting standardsJoint forum addresses IFRS changes

58 Global forumsIntroducing ACCA’s Accountancy Futures Academy

62 CPDThe ACCA website now has a new, improved, CPD section

63 Dean WestcottACCA’s global forums have a vital role to play, says the ACCA president

64 NewsBusiness forum talks talent; members give to families in need

65 Kaka SinghDon’t overlook charities, says the ACCA Singapore president

66 CouncilHighlights from the fi rst meeting of 2012

Your sector

SG_Contents.indd 5 17/04/2012 15:41

01Flower fans flock to see cherry

blossoms in a Tokyo park. The annual spring trek to parks around Japan to take in the ‘sakura’ attracts millions

02 Tokyo Stock Exchange

and Daiwa Securities received the go ahead to help set up a new stock exchange in Myanmar

03The Communist Party in China

suspended former high-flying politician Bo Xilai from its top ranks and named his wife as a suspect in the murder of British businessman Neil Heywood

News in pictures6

AP_newsinpix.indd 6 16/04/2012 12:34

04 Former convenor of the Non-

Official Members of the Executive Council of Hong Kong, Leung Chun-ying, thanked his supporters and called for unity and inclusion after being elected as Hong Kong’s next chief executive on 25 March

05 Myanmar opposition

leader Aung San Suu Kyi will take her seat in parliament for the first time on 23 April, following her milestone election to political office

06 Coca-Cola’s plans to invest US$4bn

in China will come into effect this year. The soft drinks giant wants to take advantage of the country’s increasing middle-class population and urbanisation

07 German luxury carmaker BMW

sold more cars in China than in the US in the first quarter of 2012. The company sold 80,014 cars in China, 37% more than a year ago. It also posted record quarterly sales overall

7

AP_newsinpix.indd 7 16/04/2012 12:34

THE RACE IS ONAccording to a report by HSBC, the emerging economies led by China and India will power global growth over the next four decades. By 2050 China will overtake the US for top position, with Japan pushed back into fourth place. The World in 2050 update also predicts that the Philippines will surge to 16th place.

Economic league table dominated by the US, Japan and some European countries

West’s growth limited by high levels of income per head and weak demographics

US$210BNLosses due to Japan’s earthquake and tsunami in March 2011, according to Swiss Re.

$607BNValue of Chinese grocery sector at the end of 2011, beating the US.

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COUNTRIES STILL SLOW TO BRING WOMEN ON BOARDDespite the positive influence of mixed-gender boards, the latest Grant Thornton International Business Report shows that just 21% of senior management roles globally are held by women – little changed from the 2004 figure of 19%. Russia’s exemplary 46% may in part be a legacy of the Soviet Union’s equality ideology.

39%PHILIPPINES

39%THAILAND

27%VIETNAM

15%UAE

33%HONG KONG

25%CHINA

14%INDIA

28%MALAYSIA

2010ECONOMY

2050ECONOMY

2050

2010

24%AUSTRALIA

5%JAPAN

27%TAIWAN

23%SINGAPORE

INDIA: $8.2TR

CHINA: $25.3TR

USA: $22.3TR

JAPAN: $6.4TR

SOUTH KOREA: $2.1TR

SOUTH KOREA: $0.8TR

GERMANY: $3.7TR

INDONESIA: $1.5TR

INDONESIA: $0.3TR

MALAYSIA: $1.2TR

MALAYSIA: $0.1TR

USA: $11.5TR

JAPAN: $5.0TR

CHINA: $3.5TR

GERMANY: $2.1TR

INDIA: $1.0TR

News in graphics8

AP_B_graphics08.indd 8 17/04/2012 12:14

KEY: High risk Moderate risk Little or no risk Don’t know

MIND YOUR STEPThe banana skins index, a measure of anxiety levels in the financial sector, is at its highest since it began 13 years ago. Survey respondents say that the greatest threat facing the sector is the fragility of the world economy. The Banking Banana Skins 2012 survey is produced by the Centre for the Study of Financial Innovation and PwC. Figures for 2010 are in brackets.

MOVING ON UP The role of in-house finance teams is under the microscope again as CFOs look to expand their level of influence and encourage innovation and growth. Although the CFO’s role has developed in recent years, most believe that their focus over the next two years must revolve around day-to-day operations and greater engagement with external stakeholders. Respondents to KPMG’s survey From Keeping Score to Adding Value indicate that a number of challenges stand in the way of creating a more forward-looking and integrated finance department.

Organisational complexity

Professional staffing

Finance IT

Ability to respond to change from within

Ability to respond to change from outside

Relationship with other company groups

FEEL THE HEATAsian cities are challenging the top spots in the rankings for most competitive global city, in a survey by the Economist Intelligence Unit for Citigroup, Hot Spots: Benchmarking Global City Competitiveness. Singapore was the highest ranked Asian city out of a field of 120 global markets. US and European cities however remain the world’s most competitive, despite concerns over ageing, infrastructure and large budget deficits.

RANK 1 (4)MACRO

ECONOMIC RISK

1: NEW YORK 2: LONDON 3: SINGAPORE =4: PARIS =4: HONG KONG6: TOKYO 7: ZURICH 8: WASHINGTON 9: CHICAGO 10: BOSTON

RANK 2 (2)CREDITRISK

RANK 3 (5)LIQUIDITY

RANK 7 (–)PROFITABILITY

RANK 8 (7)DERIVATIVES

RANK 9 (12)CORPORATE

GOVERNANCE

RANK 10 (8)QUALITY OF RISK MANAGEMENT

RANK 4 (6)CAPITAL

AVAILABILITY

RANK 5 (1)POLITICAL

INTERFERENCE

RANK 6 (3)REGULATION

18

102

27% 50% 23% 1%

22% 56% 22% 1%

22% 53% 25% 1%

19% 54% 26% 1%

10% 41% 48% 1%

21% 53% 26% 0%

7

3

=4=4

69

9

INT_B_graphics09.indd 9 17/04/2012 12:58

SANCTIONS COULD EASEThe US will further ease sanctions against Myanmar, secretary of state Hillary Clinton announced. Some travel and financial restrictions would be relaxed, with Burmese leaders allowed to visit the US. European Union leaders had said previously that they would consider taking similar steps. The news follows by-elections in Myanmar in which pro-democracy leader Aung San Suu Kyi’s party secured a landslide win. Under the move, the US will name an ambassador and establish an office for its Agency for International Development in the country.

SGX REORGANISESSingapore Exchange (SGX) has announced a new organisational structure which will enable better leverage of growth opportunities in the region. It will be reorganised into five business units – derivatives, listings, market data and access, post-trade and securities – from 1 May. CEO Magnus Böcker will assume direct responsibility for listings and sales and clients, while its president, Muthukrishnan Ramaswami, will lead derivatives, market data and access, post-trade and securities. Separately, the bourse also said that its co-

president Gan Seow Ann has resigned after 11 years with the exchange to ‘review his interests’.

SLOWER GROWTH FORECASTSingapore’s economy will expand by 2.5% in 2012, slowing from 4.9% last year due to lower growth in manufacturing and financial services, according to a central bank survey. Economists polled by the Monetary Authority of Singapore also predicted that inflation would come in at 3.5% in 2012, up from the median expectation of 3.1% in December and at the top end of the MAS forecast of 2.5% to 3.5%. Economists were more bullish about domestic exports, predicting a 4.2% increase for 2012.

INFLATION STILL A CONCERNThe Monetary Authority of Singapore (MAS) is ‘very concerned’ that inflation has remained stubbornly high despite slowing economic growth, said trade and industry minister Lim Hng Kiang. ‘The MAS has no formal target for inflation. Its target is to maintain price stability and support economic growth over the medium term,’ he noted. The government is forecasting that inflation will slow to between 2.5% and 3.5% this year from 5.5% last year.

A stronger Singapore dollar helps to cap both imported and domestic inflation, he said.

RARE EARTHS REIGNED INChina has set up a rare earth industry group in a bid to streamline the sprawling sector and fend off complaints about Beijing’s seemingly monopolistic control. The US, European Union and Japan had lodged a complaint with the World Trade Organization, saying that China was choking off exports of rare earths to unfairly benefit domestic industries. China, a producer of over 95% of the world’s rare earths – which have a wide range of applications in the military and technology sectors in particular – has set output caps and export quotas on the coveted resource.

SONY TO AXE 10,000 JOBSSony will cut 10,000 jobs worldwide this year as it attempts to carry out sweeping reforms aimed at reviving the iconic but loss-making Japanese electronics giant. About half the planned job cuts are part of a restructuring of Sony’s chemical unit, as well as operations tied to its small and medium-sized liquid crystal display panels, the Nikkei said in its online edition. The company’s top seven executives, including its outgoing chief, would also give up their annual bonus, the report said.

TATA LOOKS TO ASEANTata Capital is banking on more deals between companies in India and the Association of Southeast Asian Nations (ASEAN), and is using Singapore as a springboard. The financial services arm of India’s Tata group has signed an accord with Singapore’s Economic Development Board (EDB) to bring more business to the region, via its international headquarters in Singapore. The company said that it was looking at crossborder mergers and acquisitions and other corporate finance activities, and expects significant growth in areas of private equity, private banking, fund management and investment banking.

INSURANCE UNDER SPOTLIGHTSingapore’s financial industry is set for a radical shake-up, this time involving tens of thousands of insurance agents and financial advisers who make their living through commissions. The Monetary Authority of Singapore (MAS) will launch a Financial Advisory Industry Review (FAIR) aimed at lowering costs and raising quality. Chief among the sweeping proposals is a review of the tiered structure of life insurance policy sales; currently the customer pays commissions not only to the agent but also supervisors. ‘Putting the customer first – that must be at the heart of all our efforts,’ said MAS managing director Ravi Menon.

10 News round-up

SG_B_newsroundup.indd 10 16/04/2012 11:37

P24

NEW CEO FOR JETSTAR ASIAJetstar Asia has appointed its former CFO as the budget airline’s new CEO. Barathan Pasupathi replaces Chong Phit Lian, who stepped down as CEO last February. Paul Daff, most recently head of the Qantas Group’s Jetconnect subsidiary in New Zealand, will serve as interim Jetstar Asia CEO until 2 July. Pasupathi brings 16 years’ experience in senior roles across the energy, aviation and finance sectors.

CHINA IN SUPERMARKET SWEEP China’s supermarket sector was worth US$970bn at the end of 2011, surpassing the US market which was valued at US$913.5bn, according to food industry analysts IGD. The rapid expansion is being driven by China’s growing economy, rising wealth and inflationary food prices, it said. China’s grocery market is forecast to expand to nearly US$1.46 trillion by the end of 2014, three times its worth in 2006. The US, however, is forecast to grow by US$1.07 trillion over the same period.

INVESTMENT EXCEEDS GOALPrivate investment in Malaysia exceeded the government’s target last year as companies including Carrefour SA and General Electric pledged to expand in South-East Asia’s third-biggest economy. Investment rose to US$31bn, surpassing the government’s goal by 13%, prime minister Najib Razak announced in a live televised address to the nation ahead of elections due by early next year. The result is a sign that the nation is making progress on its economic and government transformation programmes, he said.

PROPERTY PRICES SPIRALHong Kong financial secretary John Tsang said that he is ready to step in if there are signs of overheating in the property market, and warned property buyers not to ‘blindly’ follow the market. Hong Kong’s housing prices rose more than 70% between the start of 2009 and mid-2011 due to record low mortgage rates and an influx of

mainland Chinese buyers. Prices have risen almost 4% this year, after falling about 5% in the second half, according to data.

PEOPLE’S DAILY LAUNCHES IPOThe online news portal of the People’s Daily, the newspaper of China’s ruling Communist Party, has launched an initial public offering (IPO) of its shares in Shanghai. It is aiming to

raise 527 million yuan (US$84m) to upgrade its technology and strengthen operations. The IPO comes as the newspaper faces increasing competition from private rivals such as Sina Corp and Sohu. China is the world’s largest internet market. There are currently more than 500 million internet users in China, a number expected to rise quickly.

LAI MOVES OUT OF TAIWANHong Kong media mogul Jimmy Lai, a pioneer of animated news, plans to sell his Taiwan business after allegedly suffering huge losses on the operation’s TV branch. The

chairman of Hong Kong-listed Next Media has entrusted an unnamed investment bank with selling the business, which also includes the Apple Daily newspaper and Next Magazine, for US$500m. Lai, a vocal critic of Beijing, expanded his media empire to the island in 2001, with the launch of Taiwanese editions of the weekly Next Magazine and the Apple Daily.

IFRS PANEL GETS WIDER BRIEF The International Accounting Standards Board (IASB) is to extend the activities of the International Financial Reporting Standards (IFRS) interpretations committee and issue fewer rejection notices, following its most recent meeting. Michael Stewart, director of implementation activities, outlined new proposals agreed by the committee, in response to the trustees’ call for a more active role in helping implement IFRS. The proposed new tools, agreed by the IASB, include allowing it to propose that application guidance (which has mandatory effect) be added as standard.

ASEAN LOSES ALLUREThe Association of Southeast Asian Nations’ (ASEAN) attractiveness to investors has declined, with the Philippines considered one of the least preferable destinations. Only 36.5% of respondents – down from 48% a year earlier – indicated the region as offering the best prospects worldwide for offshore direct investments between 2011 and 2014, the 2011–12 ASEAN Business Advisory Council (ABAC) Survey on ASEAN Competitiveness found. The decline corresponded with an increase from 12% to 27% in countries keen to invest in economies such as Australia, Brazil, France, Germany, Japan, Qatar, Russia, South Korea and the UK. China came second (27.9%) to the ASEAN region but saw a similar decline in attractiveness owing to a tightening labour market and rising wage levels.

11

The Philippines has lost its appeal as an investment destination

AnalysisTORCH BEARERAs official professional services adviser to the London 2012 Olympic and Paralympic Games, Deloitte has been competing in its own marathon, keeping tabs on 65 projects involving over 550,000 hours of work so far.

SG_B_newsroundup.indd 11 16/04/2012 11:37

When the Esplanade – Theatres on the Bay opened in 2002, it had its detractors. But 10 years

on, Singapore’s spikey-domed cultural centre has become a firm favourite with Singaporeans. More than 60 million people have visited the now iconic space, either attending one of the 20,000 performances that have taken place or dropping in to one of the many bars, cafes and restaurants that make the complex a hive of activity. Meanwhile, the Esplanade’s diverse programme of events has been recognised for its contribution to the city-state’s art scene.

‘The Esplanade has become a lifestyle destination that is accessible through a spectrum of price points. It’s got something for everyone which was really what our mandate was all about, ensuring that the broad public could come here,’ says Benson Puah, CEO of The Esplanade Co, the organisation which runs the arts complex.

Most importantly for Puah, the Esplanade has brought financial discipline into a sector that is not known for financial rigour.

‘When I decided to join the Esplanade, I knew instinctively that it had to serve the greater good and play a part in the transformation of our society – moving from pursuits to create material wealth, to enrichment. That has informed our mission and vision,’ Puah explains.

‘But the greatest challenge then in the art sector – in the context of the Singaporean society and mindset – was to bring to the sector the financial discipline it needed,’ Puah recalls.

Puah believes that a not-for-profit organisation should be run in the same professional manner as a listed company, yet this should not mean revenues are chased for the sake of it, he says.

‘Profit is a means to an end, rather than an end in itself. For a non-profit, money is a means to do other things in which there is intangible value,’ he explains.

Open and transparentOne of his first decisions at the Esplanade was to hire a CFO and to publish detailed financial reports that could stand up to scrutiny, like those of public listed companies, he says. This transparency is important to demonstrate good custody of the funds the government grants.

‘Many public cultural institutions in the West are heavily subsidised, sometimes up to 90% of their funding, but the Esplanade does not have a deficit-funding model, which means ‘you spend what you want and what you can’t pay we will give you’. Half of the income that we have is income that we earn, because our model is a matching one. I need to generate some income and reach a certain threshold

TOP OF THE BILLA philosophy of sponsorship rather than subsidy has ensured that the Esplanade is a leading light for the Singapore arts scene, as its CEO Benson Puah explains

The basicsTHE ESPLANADEEsplanade – Theatres on the Bay is one of the world’s busiest arts centres, officially opened on 12 October 2002. This architectural icon with its distinctive twin shells, is sited within Singapore’s civic district, just by Marina Bay at the mouth of the Singapore River.

The Esplanade aims to be a performing arts centre for everyone, and its programmes cater to its diverse audiences. Its line-up encompasses music, dance, theatre and visual arts, with an emphasis on Asian culture. It houses the 1,600-seat Concert Hall, with acoustics by Russell Johnson of Artec Consultants, and the 2,000-seat theatre, based on the traditional horseshoe format of European opera houses.

12 CEO interview

SG_F_Puah.indd 12 17/04/2012 12:13

13

SG_F_Puah.indd 13 17/04/2012 12:13

The CV2009–PRESENT

CEO of the National Arts Council.

1998–PRESENTCEO of The Esplanade Co.

1997CEO of Temasia Health (formerly known as HCS-HMI).

1995CEO of Sentosa Development Corporation.

1994General manager of Shangri-La Hotel Surabaya, Indonesia (opened the hotel).

1992General manager of Shangri-La’s Rasa Sentosa Resort, Singapore (opened the hotel).

1989Director and group general manager of Eaton Hotels International (Hong Kong).

1983 Various positions at the Mandarin Oriental Hotel Group (Hong Kong), and opened The Oriental, Singapore.

1982Various positions at the Hilton, Singapore.

beyond which I get some matching grants,’ he explains.

‘This model enforces a certain financial discipline to its management. All too often I’ve seen a certain sense of entitlement in the arts industry. But I feel there is always competition for public funds and we must justify that what we do offers certain social good and contributes to the intangible as well as tangible,’ he says.

The fiscal prudence that is a hallmark of the Esplanade’s culture today was actually established from the beginning, even though some of the practices introduced 10 years ago were unpopular, Puah points out.

‘Tickets are our main means of generating income. But at that point in time, lots of tickets were given away in the industry, and to people who could afford to buy them,’ he recalls.

Creating goodwillThe practice of giving away tickets was done in the hope of developing ‘goodwill’, but Puah believed such goodwill could be gained without sacrificing any of the Esplanade’s core income, though developing sponsorships and donations.

‘When you sell tickets, it not only generates income, but it also develops a notion of a value of what you do. It’s important that any member of the public who wants to support the arts does so by putting a value to it. So when we decided to be very careful in how we gave away our tickets that proved to be very difficult initially. We lost a lot of friends. But it is now an established practice,’ he says.

Another practice in the industry at the time was heavy discounting of tickets as the performance neared. ‘I believe discounting is counterproductive. First, the seats are already subsidised and second, you’re grooming a certain behaviour of waiting until the last moment. I’d rather reward early birds,’ he says.

Today, patrons booking tickets early can enjoy discounts of between 10% and 20%.

Puah believes that through its actions, the Esplanade is leading the way in developing sustainable business practices in the arts.

14

SG_F_Puah.indd 14 19/04/2012 11:40

The artsBenson Puah may not have had prior professional experience in the arts, but he has always been an artist at heart.

He started playing the piano when he was five, later playing the clarinet in a classical orchestra, being the drum major in a military band, and singing in a choir.

He was also the president of the literary debating and drama society at his alma-mater, the Anglo-Chinese School.

‘These experiences have given me a good basic insight of how difficult it can be to be an artist,’ he says.

‘We’ve established certain protocols that arts groups are following, for example in the relationship with sponsors and donors, which goes beyond courting friends and favours,’ he adds.

When Puah was selected to head the Esplanade, he was not an obvious choice as he had no professional experience in the arts and entertainment industry. He had spent the first part of his career working for some of the leading luxury hotel companies in Asia (Shangri-La, Mandarin Oriental) and then joined the statutory board Sentosa Development Corporation as its CEO in 1995 before moving on to healthcare as CEO of Temasia Health, a government-link company that was exploring healthcare as an export.

Sponsorship challengeWhile he sees some similarities between the hospitality industry and the arts, he admits he hadn’t been prepared in his previous jobs for dealing with the major issue of sponsorship that is so important in the arts industry. ‘That was a new challenge as a CEO,’ he says.

‘When it comes down to sponsorship, you have to realise that it’s not a donation. A company doesn’t give you something for nothing. So when you approach sponsors you should do it in a professional and business-like manner, understanding that the companies need value and understand what value they are seeking. We actually spend a lot of time understanding their business before we come up with propositions that we feel can benefit them,’ he says.

Playing a role similar to a brand consultant, the Esplanade has in some cases advised companies that other arts groups might be more suitable for them to sponsor, because their image branding will be better served by those groups for whatever reason, he says.

Puah notes the Esplanade has been able to grow the number of sponsors for the arts in Singapore because the art venue deliberately approached companies that were not already sponsoring art groups.

‘My mandate to my team was to develop other sponsors. Of course that was much harder, but I felt it was not useful to me to cannibalise the existing ones because our mandate is to grow everyone, not to grow at anyone’s expense,’ he explains.

Since 2009, Puah has also doubled as CEO of the National Arts Council (NAC). The dual role does pose some challenges in terms of potential conflicts of interest, as the NAC oversees the country’s art policies, but Puah says that one of his NAC colleagues handles any matters directly related to the Esplanade.

‘From early on, I’ve had multiple interests as I sit on various boards as a director. It’s already ingrained in me to compartmentalise my decision-making process. Where there are conflicts of interest I will make it clear that I have a conflict,’ he says.

Five-year planLooking forward to the next five years, Puah has one big wish: the expansion of the Esplanade with the addition of two medium-sized spaces, each with a capacity of 500 to 900 seats.

‘It’s a wish not a given. The government and the public has to be convinced it’s an investment worth making. But should it happen, it will allow us to do even more because there is a huge gap in Singapore for medium-sized theatres,’ he notes.

The Esplanade is also facing some challenging financial constraints.

‘We have almost reached the limit of our ability to generate income in terms of the hiring out of our art venues. There is really no scope for us to raise rentals because the arts groups will not be able to pay. Already there is a perception that charges for venue rentals are high even if we’re charging at subsidised rates and haven’t raised them since opening 10 years ago. Car parking is another source of income but there is a limit to how much people are willing to pay. The only area where we could raise more money is sponsorship but right now that will really depend on the health of the economy and the willingness of corporates to invest in arts and culture,’ he said.

‘We’ve reached a point where costs are rising and income is stagnating. That’s my main challenge,’ he says, pointing out that although the Esplanade’s funding has remained unchanged for the past 10 years, ‘which is quite an achievement’, he envisages more funding will have to be sought at the next funding review in 2015.

‘But we will still subject ourselves to financial discipline because I don’t believe in putting our hand out. We will look within ourselves first. But there is only so much to squeeze and I think we’ve already done so,’ he says.

Sonia Kolesnikov-Jessop, journalist

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In times of economic downturn and volatility, the casualty rate among Singapore’s small and medium-sized enterprises (SMEs)

is high. Operating on the margin, with the smaller ones literally running on a hand-to-mouth basis, these enterprises may be nimble compared with their large counterparts, but they are also extremely vulnerable. But leaving them to sink or swim simply is not an option when they make up 99% of Singapore’s enterprises, employ 70% of the workforce and account for 60% of gross domestic product (GDP).

Singapore has to pay attention to these SMEs and not just keep

attracting foreign companies, according to trade and industry minister Teo Ser Luck; the local business sector has to grow so that it will continue contributing to the economy and the job market. ‘We need more of our own champion companies to survive. How do we keep them intact? How do we keep the whole sector vibrant?’ he asks.

The question, posed during a recent Institute of Certified Public Accountants of Singapore (ICPAS) forum on growth for small enterprises during market uncertainty, is one that has troubled not just policymakers but companies themselves for some time. SMEs today face increasingly difficult challenges, says Ho Meng Kit, CEO

of the Singapore Business Federation (SBF). ‘Rental and other costs have eroded profit margins, and foreign labour constraints are making it even more difficult,’ he says, adding that because SMEs make up such a large proportion of SBF members, ‘SME issues are the issues of the SBF’.

And the biggest issue right now, it seems, is that of the bottom line: costs, costs and more costs.

Too expensive to succeed?Cost – rental, operating and manpower – is what kills SMEs, say business owners unanimously. In recent years, a number of homegrown success

stories have gone out of business for reasons that included costs outstripping their business model’s ability to compensate. In 2009, music retailer Sembawang Music declared bankruptcy, with owner and founder Dave Boo citing skyrocketing rental costs as the straw that broke the camel’s back. And in 2011, major book retailer Page One closed its Singapore outlets because rental was ‘not viable’ – although it retained stores in China, Hong Kong, Thailand and Taiwan.

The recent increased curbs on low-cost foreign labour have emerged as a particularly sore point with many SMEs. For example, an ICPAS survey of SMEs and small and medium-sized practices (SMPs) found that SMEs have

a median ratio of one foreign to four local employees.

Lawrence Leow, immediate past president of the Association of Small and Medium Enterprises (ASME), also says that many companies are concerned by the curbs, although they do see the need to reduce reliance on foreign talent. It is certain, however, that the government’s measures will increase the burden of both cost and talent attraction/retention on SMEs.

In this environment of persistently rising costs, the smallest SMEs will be hit hardest, says M Nazri, CEO of research consultancy Vector Scorecard Group (VSC). The challenge for microenterprises, he points out, is that such SMEs are not considered bankable despite having viable projects. As a result, a recent VSC study found that Singapore’s smallest companies suffer a total estimated financing shortfall of up to S$1.5bn, and their survival is commensurately affected.

‘A lot of microenterprises need bridging investments because of funding gaps in their cashflow. These gaps may span just one or two weeks but are enough to make them collapse,’ says former SBF CEO Teng Theng Dar, who also chairs VSC’s panel on international business and strategic assessments.

On top of this, adds Gabriel Low, regional financial controller at GEA Westfalia Separator and a member of ACCA’s Global Forum for SMEs, the growing stringency of regulatory oversight is increasing the burden of compliance for SMEs, especially in view of their limited resources. The multiple layers of costs, in his opinion, are a

KEY TO PROSPERITYSingapore’s SMEs are facing high costs, forcing many out of business. Can measures in Budget 2012 help to once more open the door to growth for the local business sector?

WHILE INITIATIVES BENEFIT PRODUCTIVITY ANDINNOVATION, THERE IS A DEARTH OF SHORT- TERMMEASURES TO HELP SMES IN DIFFICULT TIMES

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potentially serious long-term problem, warning that they ‘may kill off the future SMEs by making it too expensive for entrepreneurship to succeed’.

A helping handUnder Budget 2012 initiatives, the government is expected to provide up to S$400m in financing for SMEs annually. Experts say that the Budget’s incentives are both attractive and generous, but still fall short. Tay Hong Beng, head of tax at KPMG, points out that while the various initiatives do benefit productivity and innovation, there is a dearth of short-term measures to help SMEs tide over difficult times. ‘Also, what is more important is perhaps to communicate with SMEs so they can fully understand how they may benefit from these enhancements,’ he says.

In fact, many small ones still do not access government schemes, either because they are not aware of them or because they find too many barriers in the way. Minister Teo pointed out as much during the forum, observing that while bigger SMEs have no problem accessing schemes, small ones often do, and yet they are the ones most in need of government assistance. ‘Those that are really in need are not necessarily those that you hear about or read about in the papers,’ he said.

Chung Lai Thoe, director for enterprise services at Spring Singapore, admits that reaching out to those SMEs is a challenge for her agency, tasked with developing the country’s economic growth and productivity. Spring is currently focusing on education for the microenterprises, the most vulnerable subset of SMEs and the least likely to access government assistance.

Some SMEs, Chung explains, are aware of the programmes but too busy with day-to-day business to take them up; others may not be aware of them at all, or may not know how to apply for assistance. Statistics from the ICPAS survey bear this out: according to Evan Law, acting CEO of ICPAS, 63.5% of SMEs are not even aware of the assistance schemes available.

Other ways in which the current Budget incentives need refinement to suit SMEs include the further scaling down of tax incentives, and the reduction of paperwork. Ajit Prabhu, head of tax at Deloitte, points out that many SMEs may not make sufficient profit to genuinely benefit from tax credits, while others may have such low expenses that they do not qualify for cash grants. In addition, says Benedict Soh, executive chairman of Kingsmen Creatives, more leeway needs to be given for training. ‘Not all companies

Small and medium-sized practices (SMPs) are SMEs, too – although this is often overlooked. And the accountancy sector, according to the National Productivity and Continuing Education Council, has the potential for productivity gains. They, too, can tap the National Productivity Fund for initiatives such as training and technology adoption – and they will need to.

‘SMPs need scale and scalability in a highly competitive and resource intensive industry,’ says Kaka Singh, president of ACCA Singapore. ‘They need requisite manpower, expertise and funding to serve the modern SMEs and SCMs (smaller components of SMEs), some of whom are the smaller listed companies.’

The solutions that work for other SMEs apply equally to SMPs, he adds. For example, cost has to be offset by productivity; manpower issues may mean that in order to gain the required skills, SMPs may have to consolidate into larger firms with at least five partners.

‘There will be fewer auditees but more regulations and audit standards, and higher technical expertise of the audit team,’ Singh predicts. ‘Unless the SMPs are comfortably large enough to serve the modern SMEs/SCMs, they are not likely to meet the current regulator’s expectations on quality standards.’

*SMPS ARE SMES, TOO

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can send staff to the approved courses, because those courses are very generic,’ he points out. ‘The majority of companies need a lot of specialisation, and the training needs a lot of customisation.’

On the whole, most companies believe that while Budget 2012 is a move in the right direction, its present form is more suited to large corporations and requires some tweaking to better meet the needs of SMEs. In the meantime, says the ASME’s Leow, it is a wake-up call for everyone. ‘We only started to talk about raising productivity and lowering costs when there was a downturn. But this budget forces us to think about our business model and our strategy.’

In the long termStrategy does indeed seem to be key for businesses that want to survive in the near future. The SBF recommends that SMEs focus on the two main areas of managing costs and increasing productivity, and offers several suggestions. Ho Meng Kit points out that there are many overseas opportunities for local businesses to grow their markets, especially in the Association of Southeast Asian Nations (ASEAN), where strong inter-country relationships and lower-cost environments outside Singapore allow a better chance at survival. ‘The economic fulcrum has clearly shifted from the West to the East, and being located right in the middle of Asia, we have an advantage,’ he says.

Other SMEs are changing their business model to reduce costs. Leow says that some companies affected by the manpower quota have begun subcontracting work to lower-cost neighbouring countries, or relocating their low-value operations out of Singapore. However, he cautions, these companies need to exercise moderation. ‘I would urge companies to keep their main operations in Singapore,’ he says. ‘A lot of companies want to come to Singapore, so it doesn’t make sense for them to relocate away. We have a very positive environment for doing business.’

Experts point to mergers and acquisitions (M&A) as another way for SMEs to pool their resources, especially those in labour-intensive, low-cost industries which will be especially hard hit by the new restrictions on foreign labour. Chiu Wu Hong, tax partner at KPMG, suggests that companies contemplating M&A take advantage of the refined M&A scheme in Budget 2012, whereby the government grants a 200% tax allowance on M&A transaction costs up to an expenditure cap of S$100,000.

In addition, he says, SMEs left short on manpower can look into tapping the pool of retirees and women who wish to re-enter the workforce. ‘SMEs which hire older workers can make use of the subsequent payouts to lower their business costs,’ he says, citing incentives for companies that employ Singaporeans aged 50 and above.

The other side of this is diversification, which allows companies to share certain costs across their various businesses. A fair number of SMEs are practising this: DIY retailer Home-Fix,

Small is beautiful: many of Singapore’s micro-enterprises – the most vulnerable of all SMEs – are unaware of the government support that is available to them

for example, has expanded into five other companies which share the same premises and accounting team.

And, of course, there is productivity. Lau Tai San, managing director of Kim Ann Engineering, says that SMEs will have to embark on more productivity improvements than they may have ever considered before, from upgrading the skills of their workforce to investing in technology. Citing his own company’s experience, he says: ‘For many years, we have not spent a lot re-engineering our productions processes and methods, which would have made our job easier.’ The reason, he explains, was cost. But in the current environment, SMEs will simply have to bite the bullet and absorb these costs over the short term.

The bottom line, says Ho, is that SMEs are in for a hard time, and there is no avoiding it. ‘Small companies must adapt to the changed environment in Singapore and face the hard truth that they do not have a lot of time to restructure.’

Mint Kang, journalist

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The global economic environment has changed significantly since the global financial crisis. Comprehensive

risk management has become an imperative and is a pressing issue faced by all executives and scholars. Under this environment, an internal control system based on comprehensive risk management has been pioneered by the world’s largest coal producer, China Shenhua.

The company, which has operations across a complete coal sector value chain, is representative of large state-owned enterprises (SOEs) that are of significant importance to the Chinese economy. Sales revenue and total profit stood at 208.197 billion yuan and 65.093 billion yuan in 2011 respectively, more than five times of that in 2004 (39.2 billion yuan and

11.8 billion yuan respectively). Shenhua has 56 subsidiaries

operating worldwide. Amid rapid economic growth and swift corporate expansion, our team confronted an unprecedented risk management challenge: how to strike a balance between rapid economic growth and risk control. I believe a study of Shenhua’s risk management and internal control system will provide useful insights for other large enterprises both in China and abroad.

Comprehensive systemSince its initial public offering on the Hong Kong Stock Exchange in 2004, Shenhua has been progressively

developing a tailored, comprehensive risk-oriented internal control system. This push comes as a response to external regulation and also specific internal control challenges that Chinese firms generally face. The system was literally built from scratch and was an organisation-wide effort that drew valuable lessons from international experience.

Shenhua’s internal controls and risk management are not affiliated with any single department or subsidiary, but

are essential to the company’s overall operations. Senior management has spared no effort in integrating internal control and risk management into the corporate culture and operations with the aim of achieving a self-learning, self-organised, self-adaptable, and self-optimising system in which risk awareness is embedded in daily operations and management.

As a result, Shenhua is enjoying healthy growth.

In order to implement internal controls, Shenhua evaluates each of the major risks each year, sets in process the risk control points, and defines the corresponding control measures and standards to ensure that control activities are arranged to each risk point. Key risk indicators were designed for monitoring the status of risks simultaneously, thereby accomplished effective risk management. In the following sections, Shenhua’s four major risk management experiences in 2010 are highlighted and discussed.

Branch management risksThe number of Shenhua’s subsidiaries (and branches) continues to rise through asset growth, mergers and acquisitions and restructuring, creating an increasingly complex organisational structure and management system. Ambiguous management systems and an imbalance of management controls over subsidiaries (and branches) by the head office prevented effective top-down communication. Resource sharing and coordination between departments also proved problematic.

RICHER SEAMSChina Shenhua’s CEO Dr Ling Wen explains how he introduced a comprehensive risk management system that transformed the coal-based energy company

THE SYSTEM WAS BUILT FROM SCRATCH AND WASAN ORGANISATION-WIDE EFFORT THAT DREWLESSONS FROM INTERNATIONAL EXPERIENCE

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Cranes unload imported coal from a ship at Lianyungang Port

Since 2008, Shenhua has been successively integrating its subsidiaries on a business sector basis. Strategically and economically, the integration of Shendong Coal Group was one of the most important milestone events in Shenhua’s history as it involveed four subsidiaries and branches in the Shendong Mining Area, Shenhua’s principal coal production unit. In the initial stage of integration, the management of the four subsidiaries and branches were decentralised. Due to a lack of supporting facilities and specialised management team, the company’s basic coal-related services provided by Shendong could not meet market requirements. To solve this problem, Shenhua enhanced internal and external communication channels, increased sharing of resources among subsidiaries, and strengthened audit/oversight functions.

After the strategic integration and restructuring of Shendong Coal Group, the subsidiary’s 17 underground coal mines and five surface supporting production units were included in the intrinsic safety management

system with uniform supervision and assessment. The head office is able to take tighter control over its subsidiaries and branches, as well as 17 mega mines thanks to the enhanced communication efficiency. The consolidation also significantly reduces cost, achieves economies of scale, improves resource utilisation, and reinforces risk supervision and control.

One year after restructuring, Shendong Coal Group continued to lead the world with the lowest mortality rate, and the unit production cost per tonne was 3.71 yuan lower than planned. Indicators related to security, output, efficiency and cost meet leading international standards and top domestic counterparts. Its output of coal accounts for 6% of China’s total, compared with 4.8% previously.

Coal market risksCoal market risk is an inherent risk for coal companies. On the policy front, the development of high-energy consumption industries is confined amid tighter macroeconomic policy modulation and energy-saving and emission-reduction policies. The

development of renewable energy and clean energy sources may reduce coal consumption. On the supply and demand front, the company is dependent on its key accounts due to a concentration of sales that gives buyers some bargaining power. Meanwhile, many power companies have begun to adopt vertical integration strategies and gradually integrated upstream coal production sectors to minimise costs in external purchase of coal.

Both policy and demand factors contribute to an increased number of coal producers, resulting in fierce competition for market share and quality resources. Combined with fluctuations in market prices, Shenhua’s operation performance has been directly affected.

In response, Shenhua accelerated the transformation of its sales methods by formulating a ‘mega-sales’ strategy and established the Shenhua Coal Trading Group based on the Coal Distribution Center in 2011, to manage coal sales and market risks centrally. Specific initiatives in this area included further consolidation of the multi-sector

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China Shenhua Energy Company was incorporated in Beijing, China on 8 November 2004. H-shares and A-shares were listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange in June 2005 and October 2007 respectively.

China Shenhua is a world-leading coal-based integrated energy company, with principal businesses covering coal production and sales, railway, port and shipping of coal-related materials, as well as power generation and sales. With the largest coal reserves, is the largest coal supplier in China. The company’s large-scale, effective, and safe production mode has become a model in China’s coal industry.

Being both the largest coal producer domestically and internationally, it is very representative of large centrally administrated enterprises in China that are of significant importance in the Chinese national economy. Its market capitalisation stood at US$84bn on 16 March 2012, with 4.52 times more net assets that when the company was established (US$18.58bn). It is the largest among all listed coal companies, or the fourth among all listed integrated mining companies worldwide. China Shenhua has 56 subsidiaries in more than 10 provinces and cities in China, and other countries and regions such as Australia and Indonesia.

In 2011, the company saw another rise in its businesses. The sales volume of commercial coals reached 387.3 million tonnes, representing a year-on-year growth of 23.7%. The total power output dispatch reached 167.61 billion kWh, representing a year-on-year increase of 27.3%. The revenues of 2011 amounted to 208.197 billion yuan and profit attributable to equity shareholders of the company for the year was 45.677 billion yuan. Basic earnings per share were 2.296 yuan.

*CHINA SHENHUA ENERGY COMPANYintegrated business model by securing both domestic and international supply and distribution channels, centralisation of corporate resources and decision-making, and increased attention to the recruitment and retention of highly qualified personnel.

Following integration, Shenhua Coal Trading Group has transitioned from production-based sales to production and operation-based sales. Economic belts of distribution; mining areas, areas along railway networks and coastal regions have gradually formed. Its distribution network has also extended to inland regions along the Yangzi River and thus expanded to the entire country. The creation of a large distribution network gives Shenhua an enormous advantage in gathering market information, allowing the company to seize business opportunities and attract new domestic and foreign customers. It also generates more timely feedback on the latest policies and market information to be transmitted to senior levels. As a result, the head office, more capable in recognising and managing market risks, can make effective and efficient strategic decisions.

For product sales, Shenhua Coal Trading Group focuses on product segments and differentiated operations: low-quality coal is strategically subjected to local consumption while high value-added products are sold using innovative sales such as pricing mechanism reforms, secondary distribution, electronic trading of lump coal and auction sales. After launching the new pricing mechanism, company sales increased year on year by 32.9% in the first half of 2011. Market risk has been successfully eliminated from the top 10 risks in its comprehensive risk management assessment of 2011.

Safety management risksThe coal, railway, port, shipping and coal liquefaction chemical sectors that Shenhua engages in all pose significant safety risks. As a state-owned enterprise

and the largest global coal dealer, Shenhua is entrusted with the crucial role of stabilising the coal market. Major accidents may disrupt Shenhua’s integrated operations, and adversely affect its competitive advantages.

Shenhua strives to ‘put an end to serious accidents, reduce general accidents, eliminate fatal accidents, and target zero mortality per million tons of raw coal production’. A production safety management mechanism has been set up for such a purpose, and it is under continuous refinement and upgrading. The five components of this system are risk management, personnel management, safety management, assessment management and information management.

Through mechanised operations and other technological reforms, Shenhua aims to drive sustainable and healthy development. Shenhua is actively promoting technology as a safeguard for production. It has actively upgraded its mechanised levels in coal mining to

reduce injuries. On 31 December 2009, the world’s first seven-metre long wall work face with high-seam thickness was put into place and Shendong’s Bulianta mine is expected to bring enormous economic and social benefits to the company.

In recent years, Shenhua has maintained a good safety record, and ranked as a leading player in the coal industry in terms of scale, efficiency and production safety. In 2010, its fatality rate per million tonne of raw coal was 0.0123, lower than the industry average in China and a leading level in the world. Fourteen coal mines were accredited as China 2009 Premium Safe and Highly Efficient Mines by the China Coal Industry Association, representing approximately 70% of Shenhua’s coal mines in production.

Overseas investment risksShenhua strives to fully utilise its capital funds through diversified

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A China Shenhua dock at Tianjin Port

investments to spread out risks and to improve its management and consolidate existing markets. I have repeatedly stressed the expansion necessity and acquisition strategy through domestic integration and overseas assets selection.

Given the larger scale and scope of overseas investments, investment risks are increasingly prominent. In order to mitigate these risks, China Shenhua has accelerated training of staff engaged in overseas assignments, strengthened public and government relation channels in foreign countries, and applied analytic frameworks to support overseas investment decisions.

In November 2011, Shenhua established Shenhua Overseas Development & Investment Co, split from Shenhua International, to focus on developing overseas markets and seeking international investment opportunities. As an independent investment company, it can rely on China Shenhua’s mega distribution network, obtain market information

and use the previous investment platform and experience of Shenhua International in expanding overseas businesses. It can also form highly qualified investment teams to gather information, make model-based calculations, formulate strategies and execute projects. Professional investment analysis and risk controls bring higher investment quality and yield, and help China Shenhua to pursue its ‘going-out’ strategy.

Conclusion and outlook Prior to its risk management reforms, Shenhua experienced unbalanced and ineffective management controls over its subsidiaries, inefficient resource sharing and coordination, inflexible pricing mechanisms, dispersed sales function, weak distribution and supply chain networks, and lax overall budget control and supervision on safety of projects. With a comprehensive risk-based internal control system in place, the company greatly enhanced its market risk response capability and facilitated prompt communications,

efficient resource sharing and business process optimisation.

Looking forward, Shenhua will continue to enhance its comprehensive risk management by integrating internal controls and risk management into production and operations.

Globalisation is a path that enterprises must take to become world-class while international competition will inevitably bring globalisation risks as well. As such, effective response to risks alongside globalisation is also one of the company’s major strategic missions. With the objective of developing into ‘the most competitive, dynamic and world-leading integrated energy enterprise’, Shenhua will continue its management innovation for the incorporation of risk management approaches into the company’s globalisation process.

Dr Ling Wen, who holds a PhD in engineering, is director and vice president of Shenhua Group Corporation. Dr Ling is also the executive director, president and CEO of China Shenhua Energy Company, which is listed in Hong Kong and Shanghai. He also serves as the general director of Shenhua Charity Fund.

GLOBALISATION IS A PATH THAT ENTERPRISESMUST TAKE WHILE INTERNATIONAL COMPETITIONWILL BRING GLOBALISATION RISKS AS WELL

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CTP_AD_250x192.indd 1 05/03/2012 4:04 PM

Adverts_May12.indd 2 16/04/2012 12:08

Wheels of fortune: Olympic qualifying event at Stratford Velodrome

Number of tickets to Olympics/Paralympics

Number of Olympic sports taking place

Number of venues for Olympic events

Number of Olympic athletes competing

Number of Paralympic athletes competing

Number of sports kit items sourced by Locog

Area in sq km of Olympic Park

Number of nails needed to construct Velodrome

10.8M

26

34

10,500

4,200

1M

2.5

300,000

*2012 IN FIGURES

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Staging the greatest show on earth is fraught with all kinds of difficulty. There is rich potential for budget overruns,

urban gridlock, athletes turning up at the wrong time in the wrong place and with the wrong equipment, security meltdowns and plenty more. But there is also the opportunity for London, the UK and all involved to shine, and this is very much the hope of Deloitte, in its wide-ranging role as adviser-in-chief to the 2012 Olympic and Paralympic Games.

The London venue became a reality in 2005 when, amid great fanfare, the city beat Paris for the right to host the 2012 Games. Deloitte’s own Olympics journey began in earnest two years later, when it was appointed official professional services provider, giving partners and staff a once-in-a-generation chance to be involved in an event that is both hugely exciting yet daunting in its scale and organisational complexity.

Deloitte provides tax, management consulting and financial support services to the London Organising Committee for the Olympic and Paralympic Games (Locog), and is planning and coordinating no fewer than 65 separate Games projects.

The eight-year secondmentThe Deloitte partner with the biggest Olympics profile is Neil Wood, the man charged with ensuring the Games runs within budget. He became Locog’s CFO in 2005 and by the time the Games end he will have been seconded for a staggering eight years.

Indeed, around 130 of Deloitte’s UK staff have been seconded to work on

Locog. An estimated 550 staff and 45 partners at the firm will be able to put the Games on their CVs in one way or another.

Deloitte’s broader Games delivery work includes keeping the Games and the city moving and building capability right across the major organisations involved with the Games. Efficient organisation is an event that doesn’t feature in any Olympics calendar but shining at it will be the equivalent of gold for Deloitte.

Event organisation skills are in increasing demand globally, and the expertise demonstrated in 2012 can be exported to other organising committees and major event hosts. At the time of writing, Deloitte had put in

a staggering 550,000 hours of work for the 2012 Games across a number of the ‘Olympic Family’ including Locog, the British Olympic Association, Greater London Authority and Olympic Park Legacy Company.

As a ‘tier-two’ sponsor, Deloitte is thought to be paying in the region of between £20m and £30m for the privilege of doing the work for Locog which accounts for the vast majority of the hours delivered. It is, the firm says, an investment which generates a return through the way in which the sponsorship is activated – particularly in building client relationships and by impacting

recruitment and retention of star performers.

Much as athletes put their all into getting to the Olympics, a large number of Deloitte staff have been vying to work on the 2012 project.

Heather Hancock, Deloitte’s global lead partner for London 2012, says: ‘Sport is about commitment, passion and an endless focus on getting the big and the small things right. I am delighted to be working to help ensure this same commitment, passion and detail filters right through the delivery efforts of the British Olympic Association.’ The BOA selects, leads and manages Britain’s athletes for the Games and, along with the sports minister and the mayor of London, is

one of Locog’s three key stakeholders. There are three parts to Hancock’s

remit: service delivery, sponsorship activation, and integration with the firm’s global activities. ‘All the secondments we make to Locog, the advisory work we provide and our wider contributions to the Olympic and Paralympic family come under my oversight,’ she explains. ‘I’m also managing partner for innovation and brand, so I have executive responsibility for our sponsorship of London 2012 and how we activate that across the UK.’

Hancock also coordinates the worldwide Olympic sponsorship

With around 130 of its staff seconded and over 550,000 hours on the clock so far, Deloitte is at the heart of preparations for London 2012. We catch up on the current state of play

‘EVERY BUSINESS IS SEEKING THAT SAME ABILITY TO TACKLE COMPLEX CHALLENGES IN PRESSING TIMESCALES WITH TIGHT BUDGETS’

With around 130 of its staff seconded and over 550,000 hours on the clock so far, Deloitte OLYMPIC DRIVE

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Field of dreams: the Olympic Stadium *UNDER BUDGET?

relationships that the other Deloitte firms are delivering.

Deloitte’s support for the BOA’s preparations has focused on helping to create the framework for managing the hugely complex task of mobilising and managing hundreds of athletes through preparation, qualification and competition programmes.

One such project is final Team GB camp at Loughborough University. Over a seven-week period across June and July, every single Team GB athlete will pass through Loughborough.

One of the significant milestones of the Loughborough camp will be the allocation of kit to each athlete. This is the moment when competing at London 2012 becomes very real and where athletes connect receiving their kit with the fact that they are one of 550 chosen to represent their country this summer.

The camp requires the coordination of the athletes and thousands of items

UK sports minister Hugh Robertson claims the Olympics is likely to come in under budget after revealing the event will probably not need to tap its entire £9.3bn public funding package.

Latest quarterly accounts show £527m of unspent contingency budget remaining, with the most recent assessment of likely risks showing that more than £100m is likely to remain unspent and will be returned to the Treasury.

This is in contrast to recent revelations claiming the cost of staging the event had spiralled to more than £12bn. The government’s public sector budget for the Games has already risen substantially from the £2.37bn quoted in 2005 when London won the right to stage the 2012 Games.

Sky News had reported that an extra £2.4bn had been added to public sector spending as a consequence of further spending in areas such as additional anti-doping control officers, paying London Underground workers not to strike, governmental operational costs and legal bills over the controversial Olympic Stadium tenancy decision.

Sky said that additional costs would further swell this figure, with the police being allocated £1.1bn in counter-terrorism funding and a £4.4bn budget for the security and intelligence services. The extra cost of 12,000 police officers on duty during the Games and the £6.5bn being spent on transport upgrades could bring the ultimate cost of the 2012 Olympics to more than £24bn.

However, Robertson says he is increasingly confident that the project will come in under budget and that the government would ‘not quite empty the piggy bank’, adding: ‘It is fair to say we are increasingly confident we can land this on time and within budget. It is enormously encouraging that we are 96% complete and still have £500m in the budget.’

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‘THERE IS SUCH A BUZZ. TO BE PART OF THE HOME TEAM AT THE GREATEST SHOW ON EARTH IS AN AMAZING EXPERIENCE AND OPPORTUNITY’

of equipment tailored for each one. Some athletes will attend as individuals, others as part of a team, some for a few hours, others for days; all will have the opportunity to train at the camp.

Deloitte has helped plan and cost the operation, manage the associated risks and ensure that all parts of the organisation are working together to deliver a memorable experience.

The Olympic experienceFor Deloitte staff, taking part in organising the 2012 event has been an unforgettable experience. Staff on secondment at the BOA will return to the firm after the Games and have opportunities to translate the experience of delivering results in a high-pressure, complex environment to other clients. They will be more experienced consultants, will have worked client-side for a considerable time and developed their skills in delivering highly complex programmes.

One former Deloitte employee who won’t be returning to the firm after the Games is Kate O’Sullivan. She joined the BOA as Olympic programme director permanently in 2011, following

her work on leading programme management for the Vancouver 2010 Winter Olympics. She remained at the BOA to lead programme management for London 2012.

O’Sullivan says: ‘I started at Deloitte through the graduate scheme and working there laid the foundations for everything that has followed and presented me with incredible opportunities. Before I was seconded to the BOA, I experienced a whole host of roles in different clients and in-depth training that has been the bedrock of what I do every day.’

Deloitte’s work has clearly impressed other Olympic organisations, with numerous enquiries received about how Deloitte and the BOA has gone

about the work. While there has been much

consideration of the legacy the Olympics will leave in London, Deloitte’s expertise will have a lasting BOA legacy of its own in the shape of programme controls, greater focus on the value of detailed plans,

budgets and improved communication across the organisation. Hancock says: ‘The BOA has been hungry to learn and tailor techniques for its own requirements. It will be ahead of its rivals in Rio in 2016. Other organisations want to learn from the BOA and observe its work.’

Robust portfolioFrom the firm’s point of view, its work with the BOA and the Games has been fantastic for showcasing its skills to potential clients. After all, whether you’re the CEO or a new recruit, sport is an attention-grabber.

Hancock adds: ‘It’s such an interesting and exciting platform to explain what we can achieve. And every

business is seeking that same ability to tackle complex challenges in pressing timescales with tight budgets.’

With the opening ceremony edging ever closer, the pressure and excitement continues to build.

O’Sullivan says: ‘We’re really into the countdown to London 2012 now and there’s such a buzz of excitement. This is an event that will touch a huge percentage of the British population and resonate around the world. To be part of the home team at the greatest show on earth is an amazing experience and opportunity.

‘A home Games only happens once in a generation, possibly a lifetime, so it’s hard to predict what it will throw up for the host country. There are 26 sports over two weeks – but outside that everything is fluid.

‘The vast range of domestic and international stakeholders makes it even more challenging and complex. That means that our plans need to be agile enough to respond to change on an ongoing basis right up to the end of the closing ceremony.’

It is difficult to imagine a bigger, more challenging or more prestigious stage to be on – and that doesn’t just apply to the athletes.

Alex Miller, journalist

Heather Hancock: passion and detail

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According to the Gender Diversity Survey 2011, the first of its type on the extent of gender inequalities in the

financial sectors of Asia Pacific, four in 10 (39%) financial professionals from Hong Kong and China believe that they have been discriminated in the workplace or are aware of others being discriminated.

Conducted in November 2011 by global online recruitment firm eFinancialCareers in partnership with The Women’s Foundation, the survey polled 374 financial professionals from Hong Kong and China. Fifty-four per cent of the respondents were male and the rest were female.

Over half (53%) of the finance professionals surveyed said that there is a gender income gap in the financial services industry. Male-female income disparity appears more prevalent in higher-powered positions – 51% said there is a significant gap in pay in top managerial positions.

Forty-two per cent believe being a man makes it easier to get promoted. And 34% sensed a gender bias in the recruitment process.

‘Do I think equality in financial services is a problem? Yes, I do,’ says Kay McArdle, board chair of The Women’s Foundation, a charity dedicated to improving the lives of Hong Kong’s females. ‘The results further support that women are not represented, despite being successful from a financial perspective.’

China ranked 61 in the sixth annual World Economic Forum Global Gender Gap Report 2011. Iceland, Norway, Finland and Sweden have maintained their top global rankings in the last five years, she says.

In Hong Kong, the Sex Discrimination Ordinance was introduced in December 1996. But, according to Community Business, a not-for-profit group which champions the role of women in the Asian corporate world, women make up just 2% of the CEOs and 9% of board members of companies listed on the Hang Seng Index.

‘Gender stereotyping which works against women is still prevalent, both in the upper sector of the job market and at home. Such biases, though perhaps more subconscious than explicit, hold back capable women from advancing as far as their abilities allow, says Lam Woon-Kwong, chairperson of the Equal Opportunities Commission (EOC).

The EOC received 24 job-related sex discrimination complaints up to November 2011, up from 16 in 2010. By stereotyping and confining female staff from contributing their best, companies waste talents and missed business opportunities, Lam says.

McArdle agrees, saying that women within financial services have proven themselves to be a ‘real asset’.

‘A firm which has some women in its highest leadership ranks will have higher earnings per share, a higher return on equity, and stock prices than competitors with few or no senior women. And that’s been held up by research,’ McArdle says.

Male bravadoGeorge McFerran, head of Asia Pacific of eFinancialCareers, spearheaded the survey after receiving more enquiries from his clients on how to retain talent. The survey shed light on the root causes of gender bias: 57% of respondents believe that men are more likely to put themselves forward for promotions.

‘They believe that men are more aggressive when it comes to pushing for opportunities and pay rises. That perhaps explained why the gap exists,’ McFerran says.

Without a study, the extent of gender equality in the accountancy sector is unknown and the EOC do not break down complaints by industries.

But according to professor Judy Tsui, chair professor of accounting at the Hong Kong Polytechnic University (PolyU), men still dominate the partnership ranks of accountancy firms.

‘Though there is an increasing trend that more women make it to the partnership ranks, the top ranks are still predominantly male,’ Tsui says. ‘

‘In a Chinese society like Hong Kong, the prescribed gender role for women is still very much for them to take up childcare and domestic responsibilities, making it hard for women to make advances in career as they have to juggle family responsibilities and career aspirations,’ Tsui says.

EOC founding chairperson Fanny Cheung Mui-ching agrees, adding that a lack of work-life balance in the accountancy industry is also a factor.

‘People in accounting work long hours until late evening. It makes it difficult for women because most of them have to care for their family,’ says Cheung, director of the Gender Research Centre of the Chinese University of Hong Kong. ‘If they choose to spend more time to take care of their family, they must give up career advancement as it requires a lot more involvement from them.’

Rosanna Choi, immediate past chairman of ACCA Hong Kong and partner of accountancy firm CWCC, says ‘gender inequality still exists’ in the local accountancy sector. She notes

A MORE EFFECTIVE MIXDespite more women now entering the accountancy profession than men, gender stereotyping is still holding them – and the whole profession – back

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caption style

however that gender bias in Hong Kong’s accountancy sector is less than in mainland China.

‘On the mainland, the situation is better in multinational corporations. In traditional firms, more senior positions tend to be held by men,’ Choi says.

But according to legislative councillor for accountancy Paul Chan, ‘gender inequality is not so serious’ in the sector.

‘It is true that more men hold senior positions than women. It was because the total male population was much more than women in the past,’ says Chan, who is also past president of ACCA Hong Kong. ‘But in the past 10 years, there have been more women coming to the trade. The female population to male in the profession is almost 50:50.’

He says that women have taken up many senior positions in recent years, including director of accounting

services, deputy director of audit, and the chief

executive of the HKICPA.‘Many senior partners in the Big

Four are women,’ he adds.Choi observes that gender inequality

is changing, because female accounting graduates have outnumbered males in recent years.

At PolyU, out of the 176 students admitted to the 2011–12 BBA accountancy programme at the School of Accounting and Finance, 94 are female, according to Tsui.

Paternity issuesMcFerran says that gender stereotyping affects men too. ‘Hong Kong doesn’t offer paternity leave. Australia offers up to 18 weeks paternity leave. And the UK offers up to 20 weeks,’ he says.

Women are also not given enough time to spend with their newborns, causing some to quit their jobs. The average maternity leave in developed countries is 13 weeks on full pay. But women in Hong Kong have just 10

weeks’ maternity leave and are paid fourth-fifths of their monthly salary.

Family friendly practices in workplaces are also lacking. Only 2% of the surveyed respondents said that there is onsite childcare in their firms, and only 4% reported having childcare subsidy. Only 30% respondents said their companies offer flexible scheduling or let their staff work from home.

To solve the problem, Cheung says the government must provide sustained education in schools and the community to change the culture. The EOC, which provides tailored training workshops to financial institutes, urges the government to invest much more in childcare support, as well as legislating for rights such as paternity leave.

Cheung, McArdle and others also urge businesses to promote gender diversity by providing fairer promotion opportunities and enhanced childcare policies for both male and female employees. These include allowing job sharing, home working, near workplace childcare facilities, and childcare leave. ‘They should not have stereotypes on women, and focus on their abilities. Companies must realise gender diversity is an asset,’ Cheung says.

McFerran says that the finance industry should also promote policies to help both men and women spend more time with their families.

‘As the financial services industry grows, it will increase competition for talent,’ McFerran says. ‘Making sure that its expectation gap has been bridged will be a significant way for companies to help hold on to their valuable talents and ultimately grow their businesses.’

Sherry Lee, journalist

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Professor Dr Vuong Dinh Hue was appointed minister of finance in 2011 following a five-year tenure as auditor general of the State Audit of Vietnam. A respected and highly regarded figure within the accountancy profession, Professor Hue has been at the forefront of education in Vietnam, serving concurrently as dean of the accounting faculty and vice rector at the Hanoi University of Finance and Accounting over a number of years.

Q What challenges do you face as Vietnam modernises its business infrastructure and develops its accountancy profession? A The weak infrastructure is a ‘bottleneck’ in Vietnam’s current development. Vietnam considers the synchronous and modern infrastructure development one of the strategic breakthroughs in socioeconomic development of the country by 2020. The biggest challenge for the Ministry of Finance and myself as the minister is how to mobilise and allocate resources in the economy – including the state budget, government bonds, official development assistance and capital from all economic components – in the best way to meet the huge demand today. Moreover, it is also challenging to use these resources most effectively, ensuring the balance between borrowing and paying capacity, financial security and public debt safety.

To the accountancy and auditing sector in Vietnam today, the biggest challenge is to develop and complete the regulations of accounting (laws and norms) according to international practices and make them consistent with the specific conditions of Vietnam, especially the application of the

principle of ‘market price’. In addition, the sector’s management organisation and operation supervision need to be reformed so as to be compliant with the law, effective and helpful, to promote the service development to ensure the transparency of economic and financial information, as well as to support sound economic decisions. In particular, it is critical to improve the quality of the sector’s human resources. They must be talented – shown in knowledge, experience, profession – and ethical enough to work in the state’s management bodies, career organisations and in every company.

Q What do you seek to achieve as minister of finance? Why? A Vietnam’s finance sector, as well as myself, are always directed to a transparent, strong and sustainable finance industry for the sake of the prosperity of people and the strong nation of Vietnam. To the accountancy and auditing sector, I would like to promote the highest value of accounting tools to improve the financial transparency and accountability of all agencies and units, organisations and individuals, contributing to make the country’s finance industry healthy.

Q What did your experiences at the State Audit of Vietnam teach you? A My 10-year experience at the State Audit of Vietnam, including five years in the position of auditor general, have helped me get a sufficient overview on the financial status, macro and micro economic management, including both strengths and weaknesses. This is very useful for me in my new position. More importantly, I understand the values and benefits of audit and I am

continuing to increase those values and benefits, together with my colleagues, the State Audit, audit firms and the auditing professional associations.

Q How important is the relationship that ACCA has in Vietnam with the Ministry of Finance and the State Audit of Vietnam in the development of the accountancy profession? A ACCA is the first international professional body to place its office in Vietnam and has made a remarkable contribution in the development of our accountancy sector in recent years. With the aim to internationalise Vietnam’s accounting personnel, the Ministry of Finance signed a memorandum of understanding with ACCA in 2003 to organise examinations for ACCA certification and Vietnam’s accountant certification. This partnership programme truly brings the opportunity for local auditors to become international auditors. The programme has attracted over 5,000 students and about 500 people have received ACCA certificates.

I appreciate the effective cooperation between ACCA, the Ministry of Finance and the State Audit in developing and completing the legal framework, professional standards and especially collaborating with Vietnam’s universities and professional organisations to train and update knowledge and broaden experiences for accountancy staff in Vietnam.

Q How has the accountancy profession changed in Vietnam? And how do you envisage it developing over the next few years? A Vietnam’s accountancy industry has made remarkable progress. A new

VISIONARY ACCOUNTANTIn an exclusive interview with Accounting and Business, Vietnam’s minister of fi nance, Professor Dr Vuong Dinh Hue, talks about accountancy’s role in the country’s growth

*THE MINISTRY OF FINANCE

30 Interview

AP_F_MinHue.indd 30 12/04/2012 13:25

Over the past five years,Vietnam’s Ministry of Finance (MoF) has survived the global financial crisis without a crash and worked to tackle high inflation. But although Vietnam’s inflation has slowed for five consecutive months (to 17.17% in January 2012), it’s still high and the MoF has recognised that more needs to be done.

The Independent Auditing Law, which came into effect on 1 January 2012, overcomes the limitations of previous decrees and will improve and develop services. Notably, it gives the MoF responsibility for managing independent auditing.

The MoF has sought to control the state budget and work towards growth, entering into an agreement in February with the State Bank of Vietnam to tighten cooperation and spur information exchange. The two sides would jointly develop and supervise the financial market and manage taxation and customs affairs, in particular tax collection,

import and export of precious metals, and money trafficking and laundering, as well as working together on the international stage.

The MoF is set to develop the country’s banking and investment industry in accordance with a directive signed by prime minister Nguyen Tan Dung. The directive outlined steps to be implemented between now and 2020 to improve legal frameworks, boost the quality and number of listed companies, attract new investors, allow foreign investors greater access to the local market, and safeguard investors. The MoF will be responsible for restructuring stock market operations, securities firms and rules governing listed companies so that they meet international standards. In addition, it will shortly complete the revision of regulations aimed at boosting the domestic bond market, and allow the establishment of new investment institutions, including voluntary pension funds.

*THE MINISTRY OF FINANCE

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market-oriented legal framework on accounting – from the highest level of accounting law and the law on independent audit to the benchmark system, accounting mechanism and professional ethics standards – has been formed; the enterprise system providing accountancy services as well as human resources has been developed; the activities of accountancy professional organisations have been carried out and strengthened; and partnerships with international organisations such as the International Federation of Accountants, Confederation of Asian and Pacific Accountants, the ASEAN Federation of Accountants and ACCA have been reinforced.

In the future, given the country’s progress and extensive integration into the global economy, Vietnam’s accountancy sector will have big potential to develop strongly. Accounting and auditing are not only the tools of economic and financial management; it continues to be a service sector and also a career recognised and highly appreciated. The Ministry of Finance is currently developing strategies for accounting development vision to 2020. Its targets are to complete and fully establish the legal framework and professional standard system, to expand the service market and to develop human resources, as well as to improve management and supervision capacity in this industry. The number of accountancy companies, accounts and auditors are expected to double by 2015 and triple by 2020 in order to meet the increasing demand of the

economy. The development in terms of quantity, quality and professional capacity will, step by step, confirm Vietnam’s accountancy profession locally and internationally.

Q You were awarded honorary membership to ACCA for your extraordinary contribution to the development of the accountancy profession in Vietnam. How did it feel to be acknowledged in this way? A I have and will continue to coordinate and work closely with ACCA, the accountancy professional organisations and the state authorities to promote the vigorous growth of the industry in Vietnam. The main priorities in the coming period include completing the guidance documents for implementing the Independent Audit Law; updating, amending and supplementing Vietnam’s accounting standards to be closer to international practices; studying the Accounting Law and submitting to the National Assembly amendments and supplements; and especially enhancing training and development activities for experts, both in terms of quantity and quality, with importance attached to professional ethics.

Q You are a professor who has spent many years teaching. How much did you enjoy your career in education? A I have spent nearly 23 years teaching accounting at graduate, postgraduate and doctorate level, and I feel appropriate for this job. Teaching always gives me an exciting pressure; you are always required to broaden knowledge, enrich experiences

Professor Dr Vuong Dinh Hue, pictured with ACCA chief executive Helen Brand, was made an honorary member of ACCA for contributions to the development of the accountancy profession in Vietnam, particularly for his role in supporting education. The award was given to Professor Hue by ACCA president Dean Westcott in October

Born on 15 March 1957 in Nghe An province, Professor Hue has a degree from the Academy of Finance in Hanoi and a PhD from the University of Economics in Bratislava, Slovakia.

2011–PRESENTMinister of Finance.

2001–11Deputy auditor general, State Audit Office of Vietnam, going on to become auditor general.

1979–2001Lecturer, Hanoi University of Finance and Accounting (HUFA), going on to become deputy dean, acting dean, dean and vice rector.

and improve skills in the accounting and teaching professions. Teachers’ happiness is to see their students succeeding and growing, and to feel fresh in their life and works.

Q What advice would you give today’s graduates in Vietnam who are thinking about embarking on a career in accountancy or finance?A Accountancy in particular and finance in general will be always an attractive and challenging career. You should always take advantage of every opportunity to improve your knowledge, experiences and skills and, more importantly, to learn to be careful and have good ethics. The development of Vietnam’s accountancy industry and its expansion into the regional and global market absolutely depend on the capacity of human resources, especially the level of professional, foreign language (English) and information technology skills.

Professor Hue was interviewed by AB’s Asia editor, Colette Steckel

PROFESSOR HUE

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Comment

It is no surprise that there is not yet a universal acceptance of integrated reporting (IR), which combines financial and non-financial information in corporate reporting. Such a big and forward-looking idea gains believers a few at a time, and complete buy-in – if it ever comes – will take years.

Meanwhile, it is important to address the concerns of the naysayers, in order to hasten the pace of conversion.

One of the questions surrounding IR stems from the perception that it is a concept championed only by accountants. The gripe is that the existing financial reporting standards already give companies a lot of reporting to do, and that accountants have no business loading directors and managers with more reporting responsibilities.

However, this view does not take into account that the key proponent of IR is the International Integrated Reporting Council (IIRC), whose mission is to ‘create a globally accepted IR framework which brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format’.

It is made up of an international cross-section of leaders from the corporate, investment, accounting, securities, regulatory, academic and standard-setting sectors.

The IIRC’s composition tells us that the push for IR cannot be driven by any one party; the initiative has to involve all stakeholders.

More than the bottom line[It doesn’t matter who is pushing for integrated reporting, says Errol Oh, change must be welcomed as

stakeholders increasingly want to know how companies’ activities impact the environment and society

At the same time, there is no denying that the accountancy profession has a central role in the promotion of IR. Although the work of accountants traditionally focuses on financial information, there is no reason to believe this will be their sole contribution to an integrated report.

After all, as with other professionals, accountants are expected to be credible and competent, and they already have plenty of experience and expertise with corporate reporting.

This is not to say the leap into IR will be effortless. Accountants

need to deepen their understanding of environmental, social and governance (ESG) aspects of business and firms will probably find it worthwhile to set up in-house ESG units.

Accountants should see this as a great opportunity to expand their capabilities and to strengthen their position as the people who enable others to have trust and confidence in corporate reports.

So, yes, there is commercial justification for the accountancy profession to support the transition to IR. However, the growing demand for IR is not manufactured by accountants.

Sustainability and corporate social responsibility are on the way to becoming cornerstone concepts of the corporate world. Stakeholders are increasingly keen to know how a business makes its mark not just in terms of finances, but also through its impact on society and the planet. Eventually, all companies will

also be judged by their performance in ESG

matters. This is why it makes sense for IR to find a place in the corporate sector.

Directors and managers will do well to lead change instead of having to be dragged

kicking into adopting IR.In the end, it does not matter

who spearheads the campaign to popularise IR. We should

instead focus on striving towards the best outcome possible.

Errol Oh is executive editor of The Star

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AP_COM_EO.indd 33 16/04/2012 15:11

Comment

The hottest reads on the website I edit are usually stories about salaries. I’m not surprised. At the end of the day, dollars and cents are still the key determinants of recruitment and retention.

There are certainly many interesting nuggets in the recently issued 2012 Hays Salary Guide. For example, finance professionals with expertise in cost management, regulatory issues, product control and corporate governance and with realistic salary expectations ‘can be confident that 2012 will provide them with a good opportunity to secure a challenging career move and increase in package’, the report’s authors write.

However, the wages reported are in local currencies, which make it difficult to compare inter-Asian market rates – something that is increasingly important as Asia’s finance professionals become expats in China, Hong Kong, Singapore and even Japan.

The numbers make more sense when the currencies are converted into purchasing power parity (PPP) dollars. PPP is a methodology used by the World Bank to factor the cost of living in GDP numbers. In the case of salaries, the equivalent PPP dollars for salaries in low-cost China will be higher than the equivalent PPP dollars for salaries in high-cost Japan.

Indeed, when CFO Innovation converted the Hays-reported currencies into PPP terms, CFO salaries in China turn out to be higher, at PPP$212,000 to PPP$528,000 a year, compared with CFO salaries in Japan

Are you paid enough?[Job satisfaction may not just be about the money, but fi nance professionals must make sure they are

compensated at or above market rates to promote strong recruitment and retention, says Cesar Bacani

(PPP$116,000 to PPP$241,000). This is because cost of living is lower in China than in Japan.

In PPP terms, CFO salaries in Hong Kong are higher than in either China or Japan, at PPP$221,000 to PPP$516,000 a year. That’s because in nominal US dollars, the value of CFO salaries in Hong Kong is is higher than in China, offsetting the lower

cost of living in China. On the other hand, the cost of living in Hong Kong is cheaper than in Japan, offsetting the higher value in nominal US dollars of CFO salaries in Japan.

The highest CFO salaries, however, are in Singapore, at PPP$273,000 to PPP$570,000 a year. That’s up to 23% higher than in Hong Kong. Singapore salaries go a longer way because housing and education are cheaper in Singapore compared with Hong Kong.

One other question that the Hays guide answers is how salaries in

practice compare with salaries in business. The survey suggests that

it is more financially rewarding to head

internal control in companies rather than work as a

senior manager in an accountancy firm.

In Hong Kong, a senior audit manager can expect to earn

the equivalent of US$97,000 to US$142,000 in annual salary

and bonuses. In contrast, as head of internal audit in a company, he or she can expect a compensation package (excluding bonuses) of up to US$193,000. That’s 36% more than the top salary for a senior audit manager in an accountancy firm.

So there you go. In pure salary terms, it is more lucrative for accountants to be in business rather than in practice. And the most financially rewarding place to work is Singapore, followed by Hong Kong.

But don’t forget to factor in non-financial elements when making career

choices. Job satisfaction, a clear career path and a nurturing environment are also important.

Cesar Bacani is editor-in-chief of CFO Innovation Asia

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AP_COM_Cesar.indd 34 12/04/2012 14:39

Q Which of your services is most in demand? A For the private sector such as banks and investment companies, our flagship product allows them to produce a rapid analysis of many underlying clients in a relatively short period of time. Among our public-sector clients, government ministries have a preference for our programme that provides them with the tools and expertise with which they can promote SME (small and medium-sized enterprise) development. And our VWO (voluntary welfare organisation) and NGO (non-governmental organisation) clients prefer an economic scorecard product.

Q Do you see the use of your scorecards becoming more widespread? A We certainly do. We see more public agencies and NGOs wanting to ensure that their personnel’s technical, functional and behavioural aspects are aligned to those of the organisation. We also see foreign businesses wanting to set up regional headquarters in Singapore.

Q How can the scorecards work for different organisations? A Each of our scorecards can be customised to meet the respective needs of our clients at very competitive pricing. The interface and analyses can be modified so that they are relevant to the client.

Q What plans do you have for this year? A We have successfully formed a series of boards of advisers – chaired by prominent and highly capable people in their respective fields.

FAST FACTSLocations: South-East Asia, China, Hong Kong, India, the Middle East, UK and USClientele: Private institutions, NGOs and government agenciesFavourite book: Artificial Intelligence by George F Luger and William A Stubblefield

NEDS IN INDONESIA DO WELLNon-executive directors (NEDs) in Indonesia earn more than their peers in Singapore, Malaysia and Thailand, according to a recent Hay Group report. Boards in Singapore also meet the least often and hold the least number of committee meetings compared with the other three countries. The report, which analysed data from 200 large companies in the four countries between 2008 and 2010, found that in 2010, median salaries for NEDs in Indonesia topped the rankings at US$178,600, while those in Singapore took home US$75,300. NEDs in Thailand were paid US$46,600, and those in Malaysia received US$46,300. Much of the pay came in the form of bonuses in Indonesia (52%) and Thailand (33%), while remuneration for NEDs in Singapore was mostly composed of director’s fees (92%) and share-based compensation (8%).

MAJOR COMPANIES TEAM UPSoftware and information services provider ChinaSoft International and information and communication technology (ICT) company Huawei have formed a new joint venture (JV) company specialising in software outsourcing. The JV, 60% owned by ChinaSoft and 40% by Huawei, is based in Xi’an’s High-Tech Industries Development Zone. It is expected to generate 3.6 billion yuan by its third year of operation. ChinaSoft, which is listed in Hong Kong, has 15,000 staff located in 25 cities around the world, while Huawei provides ICT solutions in more than 140 countries.

The view from: Singapore: M Nazri, CEO, Vector Scorecard Asia-Pacifi c Group

35 Corporate The view from M Nazri of Vector Scorecard Asia-Pacifi c Group; how to build better boards

39 Practice The view from Paul Lee of RSM Chio Lim; how proposals to introduce mandatory auditor rotation have been met in the US and Asia

35Corporate

AP_YCORP_intro.indd 35 16/04/2012 14:38

‘IT IS COMMON THAT THE CHAIRMAN IS THECEO. PUT SIMPLY, SUCH A DIRECTOR EMBODIES THEEXACT REVERSE OF AN INDEPENDENT DIRECTOR’

To help optimise board performance, the Audit Committee Institute (ACI) Malaysia developed The Directors’ Prism: Building Better Boards. This guide helps organisations to challenge the status quo and elevate board oversight and corporate governance.

ACI Malaysia, sponsored by KPMG, was set up to educate audit committee members and thereby promote effective audit committee processes.

Defining the prismThe Directors’ Prism is a diagrammatic expression of the board of directors and how it relates to other players in the corporate ecosystem. The board sits at the pinnacle of the prism, symbolising its oversight of the entire organisation. It is supported by the various board committees to which it cascades its responsibilities – audit,

nomination, risk, and remuneration – at the centre of the prism.

Meanwhile, management and auditors form the base of the prism, denoting the board’s reliance on their services to execute its oversight responsibilities. The collective stakeholders surround the prism, seeking assurance from the board that the company is being well-governed and will discharge its obligations.

Seven questionsTo advance corporate governance, the Directors’ Prism advises companies to ask seven key questions. While these seven questions were compiled to help boards achieve successful

oversight, they are not exhaustive; instead, they are a starting point for further assessment and incremental improvements by boards.

1 What makes up an ideal board? Board quality depends on a diverse mix of factors such as the competence of the chairman, collective board expertise, and the perceived independence of non-executive directors. ‘The essential characteristics of a strong chairman are often personal attributes,’ namely, clarity of vision, strong leadership qualities, and the personal courage to manage tough issues.

Collectively, the board should demonstrate broad knowledge, sound judgement, unblemished integrity, and the courage and ability to challenge and probe into difficult issues.

Individual directors should possess the expertise relevant to the company’s line of business.

‘It is important that the board is not reliant solely on management to provide it with such expertise,’ warns the guide. Meanwhile, audit committee members must be financially literate and at least one member of the audit committee must fulfil the financial literacy requisite under Bursa Malaysia’s listing requirements.

The senior independent non-executive director plays an important role in the board as the director to whom concerns may be conveyed, especially in a landscape where board independence may be compromised.

‘In Malaysia, it is common that the chairman of the board is the managing director or the CEO. Put simply, such a director embodies the exact reverse of an independent director.’

2 How can the board be sustained? Assess director remuneration: compensation should be sufficient to compensate directors, while removing conflicts or biases due to excessive remuneration. Provide the board with sufficient resources to discharge its duties, including access to company secretarial services.

Directors should be provided with ongoing professional development training to enable them to discharge their fiduciary duties. Also recommended are formal induction programmes for new directors to familiarise them with their duties, current issues and the organisation.

Finally, boards should be cognisant of related party transactions involving directors, which can compromise board independence and corporate governance.

3 How can the board’s effectiveness be enhanced? The guide recommends holding private or ‘in camera’ board meetings with only directors present prior to management joining in, as well as holding audit committee meetings ‘in camera’ with the external auditors.

It is also important to identify issues early and keep communications channels open with management and auditors in the run-up to the year-end board meeting. ‘Questions of substance should not be raised for the first time at the year-end board meeting.’

Boards should meet as frequently as company matters require, while allowing sufficient time in between

Call for better boardsA challenging business environment, increased stakeholder expectations and enhanced regulatory scrutiny means the pressure on directors to perform has never been tougher

36 Corporate

AP_YCORP_betterboards.indd 36 12/04/2012 13:26

Source: Audit Committee Institute Malaysia/KPMG in Malaysia

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‘RISK MANAGEMENT SHOULD ALWAYS BE ON THEBOARD AGENDA, DEMONSTRATING THE BOARD’SCLEAR OWNERSHIP OF RISK MANAGEMENT OVERSIGHT’

meetings for work to be done. The board committees should submit reports of sufficient depth to the chairman to enable the board to fulfil its oversight duties.

Finally, boards should conduct self-evaluation to assess its performance and effectiveness, perhaps to the extent of requesting feedback from senior management.

4 Is the board cognisant of company strategy? Are directors alert and sceptical regarding earnings management? ‘Directors need to know enough about the company to recognise when inappropriate earnings management practices are present.’

The guide warns boards that ‘specific areas of attention warrant special attention. They can be particularly vulnerable to interpretations that may obscure financial volatility and adversely affect the quality of reported earnings.’ These areas are revenue recognition, changing estimates, abuse of the materiality concept and capitalisation and deferral of expenses.

Boards should also take note that in Malaysia, the Companies Act 1965 states that the board, and not management, is responsible for the preparation of the company’s financial statements. The act makes no distinction between executive or non-executive directors – all are equally accountable, notes the guide. Thus, it is critical that the board keeps abreast of financial reporting developments to discharge its duties satisfactorily.

5 Is the board addressing the risks facing their organisation, especially financial risks? ‘Risk management should always be on the board agenda, demonstrating the board’s clear ownership of risk management oversight.’

Directors on the boards of owner-managed companies, the most common type of business in Malaysia, face a challenging set of risks, such as the lack of a formal management structure and established corporate governance programmes and dominant leadership which strains existing controls and may set the wrong tone at the top, notes the guide.

The board should also be alert to fraud risk facilitated by technological advances, and ensure that an effective whistleblowing mechanism is in place to protect employees who make disclosures in the public interest.

6 Is full use being made of external and internal auditors? Since the external and internal auditors are key drivers in facilitating the board committee’s oversight duties, an efficient board makes full use of the two.

How can an effective relationship be established with the external auditor? The audit committee is advised to develop policies to appoint and remove the external auditor, to safeguard auditor independence, to understand the audit cycle and to assess its performance.

Since the listing requirements make it compulsory for listed companies to have internal auditors, the audit committee should determine that the internal and external audit functions complement and coordinate their audit efforts to optimise assurance and the control environment.

7 Can the board see the bigger picture? Boards are advised to focus on current and emerging issues that may affect their organisations, such as regulatory developments and economic shifts. For example, the Malaysia Competition Act 2010 which took effect on 1 January 2012 features two major prohibitions – anti-competitive agreements and abuse of dominant positions – that could affect business as usual.

Boards should also watch out for round tripping – the act of artificially inflating volume and revenues, which in reality adds no profit – which is gaining keener scrutiny from regulators.

Boards should also be mindful of trends favouring corporate sustainability, government diversity policies to place more women on boards, and disgorgement, which is ‘the repayment of profits arising from irregularities in trading shares or other securities.’

To read the report, go to http://tinyurl.com/cwfl9zf

Report summary by Nazatul Izma Abdullah, journalist

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Q What are your expectations for the coming year? A From experience, we have come to expect uncertainties, shorter economic cycles and opportunities in downturns. Markets have generally been positive in the first quarter and we will monitor the situation closely. We continue to see our clients growing

and expanding their businesses in this region. We have been advising them on several fronts, from structuring crossborder investments, to mergers and acquisitions and transaction support. As for Singapore, we see significant interests in the governance, risk and consulting business among listed company boards.

Q What is the biggest challenge you face? A Given Singapore’s tight employment market, I would say it is about attracting and retaining individuals who share our firm’s values and the passion to go the extra mile in serving clients.

Q What’s your top priority right now? A Many of our new clients are from referrals due to our focus on quality service. My top priority is to ensure we keep to this promise.

Q What lessons have you learnt from recent experience? A There are no short-cuts in successfully growing a professional services firm. You need time to bring on board and develop leaders, build the firm’s culture, ensure processes are in place and attract the right target clients. As leaders, we also need to ensure we have a succession plan in place to groom the next generation of leaders.

FIRM FACTSFirm structure: RSM Chio Lim is the audit and tax arm of Chio Lim Stone Forest (CLSF), the largest accountancy firm outside the Big Four in SingaporeStaff numbers: CLSF has approximately 630 staff in Singapore and 300 in five locations in ChinaFavourite activity: Running at dawn for 45 minutes to an hour, taking time to reflect and prepare for the day ahead

DELOITTE QUITS TWO AUDITS Deloitte resigned as auditor of two Chinese companies listed in Hong Kong within days of each other. On 22 March, the firm said it had quit as auditor for the Chinese milk formula products-maker Daqing Dairy Holdings, hours after its shares were suspended. A week earlier, Deloitte had resigned from auditing Boshiwa International Holdings, a clothing retailer which holds the licence to manufacture Harry Potter and Bob the Builder-branded children’s clothes, reportedly citing that it was not satisfied with the responses to questions about some of the company’s transactions. This included a recorded pre-payment of 392 million yuan to a supplier. After its shares were suspended, Boshiwa said it would appoint a new auditor and was considering establishing a special investigative committee.

CAPGEMINI WINS MSTD TENDERConsulting, technology and outsourcing services provider Capgemini has won a tender issued by the Maharashtra Sales Tax Department (MSTD) to implement a business intelligence and data warehouse solution. The MSTD contributes almost 55,000 crore to the coffers of the Maharashtra state government, which oversees India’s second most populous state and whose capital is Mumbai. Capgemini’s solution will enable the MSTD to analyse economic parameters to set targets for revenue collection. It is also designed to help the department expand its taxpayer base and prevent tax evasion losses.

The view from: Singapore: Paul Lee, managing partner, RSM Chio Lim

39 Practice The view from Paul Lee of RSM Chio Lim; how proposals to introduce mandatory auditor rotation have been met in the US and Asia

35 Corporate The view from M Nazri of Vector Scorecard Asia-Pacifi c Group; how to build better boards

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Since the early 1970s, auditor rotation has been the subject of some debate in America and elsewhere. With the recent financial market crises, the topic has again reached the public policy domain with the US Public Company Accounting Oversight Board’s (PCAOB) Concept Release on Auditor Independence and Audit Firm Rotation on 16 August 2011. At that time the PCAOB reported that, for the largest 100 companies (based on market capitalisation), auditor tenure averaged 28 years, and 21 years for the 500 largest companies.

According to PCAOB chairman James Doty, the main reason to consider auditor term limits is that ‘they may reduce the pressure auditors face to develop and protect long-term client relationships to the detriment of investors and our capital markets’. More specifically, the release states: ‘By ending a firm’s ability to turn each new engagement into a long-term income stream, mandatory firm rotation could fundamentally change the firm’s relationship with its audit client and might, as a result, significantly enhance the auditor’s ability to serve as an independent gatekeeper’ (PCAOB Release No. 2011-006, page 9).

Audit deficienciesIn the concept release, the PCAOB, while indicating that improvements in the rigour of inspections and the remediation process have improved audits, expressed concerns about both the frequency and the type of audit deficiencies it continues to find. For example, in its inspections of the largest accounting firms from 2004 to 2007, it noted:

‘Inspectors continue to find deficiencies in important audit areas, both established and emerging. These

areas include critical and high-risk parts of audits, such as revenue, fair value, management’s estimates, and the determination of materiality and audit scope. These deficiencies occurred in audits of issuers of all sizes, including in some of the larger audits they reviewed. In some cases, the deficiencies appeared to have been caused, at least in part, by the failure to apply an appropriate level of professional scepticism when conducting audit procedures and evaluating audit results. In addition, even in areas where inspectors have observed general improvement, deficiencies continue to arise.’

In particular, the PCAOB noted that the audits in which inspectors faulted the firms’ application of professional scepticism and objectivity included ‘some of the larger audits inspected’ (pages 5–6).

With this in mind, the release focused on the role of mandatory auditor rotation in improving independence and objectivity in audits, and asked for feedback on the following key issues, among many others:

* Will rotation significantly enhance auditors’ objectivity, professional scepticism and ability and willingness to resist management pressure?

* What effect would a rotation requirement have on audit costs?

* Would a periodic ‘fresh look’ at a company’s financial statements enhance auditor independence and protect investors?

* If the board decided to move forward with the proposal, what would be an appropriate term?

* To what extent would a rotation requirement limit a company’s choice of an auditor?

With the comment period closing in December, we see the balance of the argument in the ‘nay’ camp, with the

majority of corporate respondents decidedly against mandatory rotation. More specifically, they suggest that in today’s complex environment a deep level of knowledge around a company and its industry, its operations and financial history is mandatory in conducting an effective audit, which calls into question the wisdom of shortening engagements. Under these circumstances, rotation will result in less effective audits, not the other way around. For example, says Douglas Muir, CFO of Krispy Kreme Doughnut Corporation, ‘Forced rotations may remove valuable institutional knowledge from the audit process precisely when the audit committee believes that such expertise is necessary for the protection of investors and other users of financial statements.’

Cost concernAlso, at a time when the US economy is still struggling to regain its economic footing, costs are the biggest concern, with rotation potentially significantly increasing audit fees and related expenses. As Scott Kuechie, executive vice president and CFO of Goodrich Corporation, explains: ‘The cost of the audit would most likely increase significantly as more audit hours would be required to learn the accounting and processes at the new client. Likewise, the cost of client support would also increase to support the auditors.’ Therefore, he concludes, ‘We do not believe that the benefit of mandatory auditor rotation would exceed the cost.’

And what do the auditors have to say about mandatory rotation if in fact there is an opportunity to increase audit fees? This time, the auditors seem to be decidedly in agreement with corporate America. More specifically, Deloitte and Touche (the only Big Four firm to have responded in writing to the proposal)

Little support for sell-by datesIn the wake of reporting catastrophes, the PCAOB is proposing mandatory auditor rotation in the US. But is this a solution in search of a problem, asks Ramona Dzinkowski

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‘THE COST OF THE AUDIT WOULD MOST LIKELY INCREASE SIGNIFICANTLY AS MORE AUDIT HOURSWOULD BE REQUIRED TO LEARN THE PROCESSES’

makes clear that they really don’t think auditor rotation will cut it when it comes to ‘increasing auditor independence, objectivity and professional scepticism’. CEO Joe Echevarria, commenting on behalf of Deloitte, concludes the following based on ‘an objective assessment of the literature on mandatory rotation’:

* Research studies show that restatements and frauds are less likely to occur with longer auditor tenure.

* The majority of studies on mandatory rotation reach an unfavourable conclusion on the balance between costs and benefits.

* If mandatory rotation were required at the 500 largest US companies, a 10-year phase-in process would entail 50 auditor changes every year compared to the recent average rate of five per year.

* The economies and capital markets of countries that have adopted mandatory rotation are not directly comparable to those of the US. Some countries that have adopted the policy have discontinued or curtailed it. Research that is available tends to be unfavourable on the effects of mandatory rotation.

Sarbox sufficient?Finally, as to the need for the PCAOB to explore extra rules around auditor independence, others suggest that Sarbanes-Oxley has actually covered it off quite nicely. Says Robert C Greving, chairman of the audit and enterprise risk committee of CNO Financial Group, a US$32bn holding company: ‘The rules put in place by the Sarbanes-Oxley Act charge the audit committee with the selection and oversight of the audit firm... We believe the audit committee is in the best position to evaluate whether the auditors are independent and objective and whether it is in the best interests of the shareholders to initiate the

process of selecting a new firm.’At the end of the day, would shorter

engagements have prevented some of the reporting and assurance catastrophes of the last two decades? Arnold Hanish, CFO of Eli Lilly, calls

into question any relationship between audit failure and audit tenure outlined in the PCAOB release: ‘We are not aware of any relevant data or evidence linking lengthy audit firm tenure to audit failures. In the release, the PCAOB attempts to draw a line between the numbers of audit failures identified as part of their inspection process and the tenure of the audit firm. In evaluating this relationship, it is important to note that the sample of audits that the PCAOB inspects is not a representative sample as a risk-based approach is utilised so that the board can focus their review on the most error-prone situations.’

He concludes that the evaluation of this topic as a concept release is ‘premature without the existence of any factual data to establish a clear link between mandatory audit firm rotation and increased independence,

objectivity and professional scepticism on the part of the auditor’.

Hanish suggests that in place of mandatory rotation, the PCAOB considers further limiting the scope of non-audit services the audit firm can provide to its audit clients. In particular, he calls for the PCAOB to be more prescriptive on all other non-audit services that can be provided, potentially limiting all advisory services. ‘We believe,’ he

says, ‘that action in this area may address the PCAOB’s

concern that the auditors are attempting to maintain good

client relationships at the expense of performing a quality audit to engage in more lines of business and provide additional services to the company.’

Other observers, like Richard Hawley, CFO of Nicor, also suggest that audit

rotation answers nothing. Having been on both sides of the situation (as an audit partner, a Fortune 500 and 1000 CFO and chair of a public company audit committee), he is ‘very concerned that consideration of mandatory rotation of audit firms is a wonderful theoretical solution looking for a non-existent problem’. Furthermore he questions the need for yet more government intervention in corporate business. ‘My issue with the proposal are many,’ he says. ‘First, it presumes the company boards and management...are not capable of selecting firms that will live up to professional standards, and are in need of government assistance in making a change when necessary. I don’t believe there is any significant evidence to suggest that is the case.’

Ramona Dzinkowski is a Canadian economist and award-winning journalist

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China’s plans for mandatory rotation for large publicly listed companies may put pressure on Hong Kong

Accountancy firms in Asia Pacific are distinctly unenthusiastic about the Public Company Accounting Oversight Board’s (PCAOB) Concept Release on Auditor Independence and Audit Firm Rotation.

In its letter to the PCAOB, CPA Australia opposed mandatory audit firm rotation due to a lack of clear evidence of the audit quality improvement that would result. The Japanese Institute of Certified Public Accountants said that mandatory audit firm rotation would make it difficult for audit firm personnel to gain specialised knowledge and experience in specific industries or areas and may also result in low-balling of audit fees, while increasing audit costs.

The Hong Kong Institute of Certified Public Accountants (HKICPA) is also against the system, as noted in its submission to the European Commission’s (EC) green paper on audit policy back in December 2010 and subsequent views on the PCAOB’s concept release.

‘There is nothing to suggest that mandatory rotation actually increases auditor quality,’ says Chris Joy, executive director of the HKICPA. ‘Our view is that the quality of audits is absolutely paramount and anything that might detract from audit quality is not a sensible move.

‘Simply put, we do not favour mandatory rotation. There are very few jurisdictions where it is required and I am aware that in places where it has been implemented it has been quietly dropped some years later. Basically, it doesn’t work,’ he says.

The evidence against mandatory rotation isn’t hard to find. The most widely quoted study is one from 2003 by the SDA Bocconi School of Management in Italy. It found that the practice increased concentration in the audit market and had a negative

impact on audit service costs while increasing startup costs and decreasing audit fees.

More findingsSimilar results emerged in a 2010 paper by academics from Hong Kong’s Lingnan University, the Chinese University of Hong Kong and the Central University of Finance and Economics in Beijing. They used data from China, which has a two-year cooling-off period, and found that audit partners with a lengthy partner-client relationship were more likely to rotate back to their former client. Furthermore, the rotation back of audit partners was associated with weakened audit quality in the second year of the cooling-off period.

As if this wasn’t enough to seriously undermine the sagacity of the

proposal, the majority of firms don’t want it. To date, 96% of submissions received from the profession oppose mandatory rotation.

In Hong Kong, the majority of firms agree with the HKICPA, lending their support to broader regulatory concerns about mandatory rotation. At KPMG International, for example, Hong Kong-based global chairman Michael Andrew says that the proposal would drive audit costs up in the long term and decrease audit quality.

‘Companies might be prepared to sacrifice quality for cost. Equally, if a firm can only do the audit for a set period and can’t get any other services it may as well reprice the audit because its ability to achieve proper margins and utilisation may be compromised. I suspect it would drive down costs in the short term but increase them in the

No evidence of successIt is not just companies in the US which have come out in opposition to the PCAOB’s proposals for mandatory auditor rotation – fi nance professionals in Asia are also sceptical

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‘IN PLACES WHERE IT HAS BEEN IMPLEMENTED ITHAS BEEN QUIETLY DROPPED SOME YEARS LATER.MANDATORY ROTATION DOESN’T WORK’

longer term. It will also increase costs for the company transitioning the auditor because it will also have to change its internal auditor, valuer, actuarial consultant, maybe even its tax adviser,’ he says.

In terms of the impact on choice of auditor, Andrew highlighted the very real possibility of a greater concentration of audit firms in the marketplace. ‘The larger firms have more financial clout. Auditors may become circumspect about whether they take on some of these audits. If they’re doing significant work elsewhere economics may dictate that it’s better not to take on another audit, which is a relatively low-margin, high-risk exercise.

‘The overall impact of this being imposed could be significant. We’ll lose some audits and gain others but there’s a huge cost to doing this. Tendering for an audit is an expensive process. It ties up time in terms of the management, the company and the auditors. It’s hard to see the merits or the advantages or

even the problem that this proposal is trying to redress,’ he says.

In some respects, the profession needs to take a step back and determine the objective of mandatory rotation in order to tackle the bigger question of how to improve audit quality in the post-global financial crisis world. It is two-fold: first to deal with the risk of over familiarity, that audit firms working for a client over a number of years will lose their independence; and second, that by rotating the audit firms, this may provide more opportunities for the mid-tier firms.

To address the first objective, the issue of auditor firm independence, there is already a requirement for listed companies in Hong Kong to rotate the audit partners under the code of ethics in the Hong Kong Standards on Quality

Control. According to Albert Au, chairman of BDO, that is a more effective way of reducing familiarity threats than mandatory rotation.

‘Mandatory rotation increases the costs of an audit and also could inadvertently affect the quality of the audit itself, particularly for a large multinational client with complex businesses. Just to take on a client of that size and complexity would mean

that an audit firm would have to put in substantial investment in terms of educating its people and gearing up resources. If you were then to impose mandatory rotation in a six-year cycle, which is what the EC has put forward, this is too short for any efficiencies or knowledge to kick in,’ he says.

To provide mid-tier firms with more opportunities, Au notes that BDO’s experience in jurisdictions where mandatory rotation is imposed was that it had seen a greater concentration of business in the hands of the Big Four firms. ‘For a large audit client to get rotated out of BDO the chances are the business will then go to a Big Four firm. But for a Big Four audit client being rotated out the chance is smaller that the business will then go to a mid-tier firm. Our experience is that we suffer a net loss of large clients,’ he says.

Swimming against the tideOne firm, however, has come out in support of the proposals. In a letter to EC president José Manuel

Barroso and EC commissioner Michel Barnier, RSM International expressed support for reforming the audit profession, stating that the proposals will ensure more competition in the industry if

the extent of external auditor concentration at the top of listed company markets is reduced. The network said more action is

needed to reduce the market share of dominant audit networks and

maintain regular, fair and transparent tendering as well as joint audits to include non-Big Four participants.

Should the proposal move ahead in Hong Kong, the territory would likely look to mainland China for guidance, as mandatory auditor rotation for financial institutions and some state-owned enterprises has already been implemented. Furthermore, China’s Ministry of Finance is understood to be propagating rules that may require mandatory rotation for the very largest publicly listed companies. This may add to pressure on Hong Kong to align with capital markets over the border despite the fact that few in the territory are clamouring for it.

‘In Europe, most of the economic studies carried out on the proposals demonstrate that it’s detrimental to the economy not advantageous,’ Andrew says. ‘The only people who seem to like it are politicians and academics. No one in business, not many regulators and not many auditors think it’s a good idea.

‘The major audit firms have suggested a number of positive steps that are much more meaningful in terms of addressing the issues: for example, working more closely with prudential supervisors and being prepared to audit the assurance investor information, risk models and critical KPIs that an investor needs. This mandatory auditor rotation proposal misses the point of how to improve audit quality. I call it a lost opportunity.’

Kate Watson, journalist

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Adverts_May12.indd 1 16/04/2012 17:49

A monthly round-up of the latest from the standard-setters

INTERNATIONAL

FINANCIAL REPORTINGThe International Accounting Standards Board (IASB) has issued amendments to IFRS 1, First-time Adoption of International Financial Reporting Standards, addressing the treatment of loans from governments at below-market rates of interest. The amendments are mandatory for periods beginning on or after 1 January 2013 and provide first-time adopters with relief from full retrospective application of IFRS in respect of such loans. Earlier application is permitted.

AUDITINGThe International Auditing and Assurance Standards Board (IAASB) has issued a revised version of ISA 610, Using the Work of Internal Auditors. This addresses the responsibilities of external auditors when using the work of internal auditors. Revisions have also been made to ISA 315, Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment, to explain how the internal audit function and its findings can assist in making risk assessments.

The revised standards are effective for audits of periods ending on or after 15 December 2013.

In revising ISA 610, the IAASB has also agreed requirements and guidance on the responsibilities of external auditors where

they intend to use internal auditors to assist them during the audit. The IAASB has been liaising closely with the International Ethics Standards Board for Accountants (IESBA) and will only incorporate the further changes into ISA 610 when the IESBA has completed its deliberations on proposals to change the definition of engagement team.

The change in definition will address a perceived inconsistency in respect of the ability of external auditors to use a client’s internal auditors.

FINANCIAL STATEMENTSMany entities rely on their accountants to assist them in preparing their financial statements. The IAASB has issued a revised version of International Standard on Related Services (ISRS) 4410, Compilation Engagements, which addresses the practitioner’s role and responsibilities, including the considerations prior to accepting an engagement and the importance of quality control.

The wording of the compilation report is also expanded to clarify the role of the practitioner and explain the key features of a compilation engagement. The revised standard is effective for compilation reports dated on or after 1 July 2013.

Yvonne Lang, director, Smith & Williamson

SINGAPORE

FULL CONVERGENCE REVIEWIn March, the Accounting Standards Council (ASC) completed its review of the plans for full convergence of the Singapore Financial Reporting Standards (SFRS) with the International Financial Reporting Standards (IFRS) for Singapore-incorporated companies listed on the Singapore Exchange (Singapore-listed companies), and has concluded that full convergence will not be implemented in 2012, after the ASC identified key outstanding issues.

The timeline for full convergence will be adjusted in tandem with international developments, and will depend on the progress of several key projects undertaken by the International Accounting Standards Board (IASB) that are still in progress and not expected to take effect before 1 January 2015. The ASC had also noted that major capital markets such as the US are still in the process of working out their IFRS convergence plans.

The ASC will continue to work closely with the IASB and other regional standard-setters to ensure that the IFRS continues to reflect the economic substance of underlying transactions in Singapore and the Asian region. It will also continue to consult local stakeholders on the convergence implementation plans. More details at www.asc.gov.sg

EXPEDITED REVIEW PROCESSThe Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) jointly signed a memorandum of understanding (MOU) in March, on the Expedited Review Framework for Secondary Listings. The objective of the framework is to speed up the processing of secondary listing applications and relevant disclosure documents.

This framework is available to entities that are incorporated and whose shares are listed primarily on the main market of an exchange in jurisdictions that are signatories to the MOU. Where corporations satisfy the requirements, signatories will review applications within 35 business days, compared to the normal review time of up to 16 weeks.

Malaysia, Singapore and Thailand are the first three jurisdictions to sign the MOU. Other securities regulators and stock exchanges of Association of Southeast Asian Nations (ASEAN) jurisdictions may join by signing the MOU as and when they are able to satisfy the requirements.

More information at www.theacmf.org

MAS SIGNS MOU WITH ESMAIn March, the Monetary Authority of Singapore (MAS) and the European Securities and Markets Authority (ESMA) signed a memorandum of understanding (MOU) on the supervision of credit rating

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agencies (CRAs). The MOU paves the

way for the enhanced sharing of supervisory information between the two authorities for more effective supervision of crossborder CRAs operating in Singapore and within the European Union (EU).

In addition, ESMA also announced that it considers Singapore’s regulatory framework for CRAs to be in line with EU’s CRA regulations, thereby facilitating EU-registered CRAs to endorse credit ratings issued in Singapore. More details at www.esma.europa.eu

TAX COOPERATION ENHANCEDAlso in March, Singapore and Turkey signed a protocol to incorporate the internationally agreed standard for the exchange of information for tax purposes, on request, in their standing Agreement for the Avoidance of Double Taxation (DTA). The protocol will come into force after its ratification by both countries.

The full text is available at www.iras.gov.sg

Joseph Alfred, policy and technical adviser, ACCA Singapore

MALAYSIA

MINIMUM WAGE DETAILS On 21 March 2012, the government announced that the details of the highly anticipated minimum wage were due to be announced on 1 May – Labour Day. The

announcement will affect an estimated 3.2 million workers in the private sector.

CORPORATE GOVERNANCE CODEThe Securities Commission (SC) has released the Malaysian Code on Corporate Governance 2012 (MCCG 2012) as the first major deliverable of the Corporate Governance Blueprint 2011 launched last July.

The code is aimed at enhancing board effectiveness of listed companies through strengthening composition, reinforcing independence of directors and fostering commitment, and will be effective from 31 December 2012, although listed companies are encouraged to make an early transition. More at www.sc.com.my

AMENDMENTS TO STANDARDS The Malaysian Accounting Standards Board (MASB) has issued minor amendments to its financial instrument standards:

Amendments to Malaysian Financial Reporting Standards (MFRS)

* Mandatory effective date of MFRS 9 and transition disclosures (amendments to MFRS 9 (IFRS 9 issued by International Accounting Standards Board (IASB) in November 2009), MFRS 9 (IFRS 9 issued by IASB in October 2010) and MFRS 7).

* Disclosures – Offsetting Financial Assets and Financial Liabilities

(amendments to MFRS 7).

* Offsetting Financial Assets and Financial Liabilities (amendments to MFRS 132).

Amendments to Financial Reporting Standards (FRS)

* Mandatory effective date of FRS 9 and transition disclosures (amendments to FRS 9 (IFRS 9 issued by IASB in November 2009), FRS 9 (IFRS 9 issued by IASB in October 2010) and FRS 7).

* Disclosures – Offsetting Financial Assets and Financial Liabilities (amendments to FRS 7).

* Offsetting Financial Assets and Financial Liabilities (Amendments to FRS 132).

The amendments are effective for annual periods beginning on or after 1 January 2014 and are required to be applied retrospectively.

More information is available at www.masb.org.my

CRITERIA ON INCOMPLETE ITRFThe Inland Revenue Board (IRB) has issued the criteria on incomplete income tax return forms (ITRF). The IRB says that an incomplete ITRF will be returned to the taxpayer effective from 1 January 2012 and, for any late resubmission, penalty under subsection 112(3) of the Income Tax Act 1967 will be imposed.

The ITRF form is available at www.hasil.gov.my

Vilashini Ganespathy, head – technical and professional development, ACCA Malaysia

HONG KONG

ADVANCE PRICINGThe Inland Revenue Department (IRD) has released DIPN No.48 on Advance Pricing Arrangement (APA), explaining the process under which an APA may be granted. The programme will roll out from 2 April 2012.

ISLAMIC BOND CONSULTATIONAmendments are proposed in the Inland Revenue Ordinance and Stamp Duty Ordinance to provide a level playing field for common types of sukuk and their conventional counterparts in terms of profits tax, property tax and stamp duty liabilities. The legislative proposals also aim at attracting sukuk issuers to use Hong Kong as an Islamic finance platform. Comments are invited by 28 May 2012.

TRUST LAW REFORMA public consultation on the review of the Trust Ordinance was conducted in 2009. Based on the consultation conclusion, the Financial Services and the Treasury Bureau has prepared the detailed legislative proposals on trust law reform for further consultation, which cover clarification of trustees’ duties and powers, better protection of beneficiaries’ interests and modernisation of trust law. The consultation period will close on 21 May 2012.

Sonia Khao, head of technical services, ACCA Hong Kong

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Bin the clutterClutter in annual reports obscures relevant information and makes it harder for users to identify the key points about a business’s performance, says Graham Holt

The effects of clutter have typically come in for little consideration by the preparers of annual reports, but the phenomenon is increasingly under discussion, with initiatives recently launched to combat it.

The Financial Reporting Council (FRC) in the UK is one organisation that has called for a reduction in clutter in annual reports. And the International Accounting Standards Board (IASB) commissioned the Institute of Chartered Accountants in Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) to make cuts to the disclosures required by a group of International Financial Reporting Standards (IFRSs), and to produce a report.

Clutter in annual reports can be a problem for users. It obscures relevant information and makes it more difficult for users to find the key points about the performance of the business and its prospects for long-term success. The main observations of a discussion paper, called Cutting Clutter, that was published by the FRC were:

* There is substantial scope for segregating standing data in a separate section of the annual report (an appendix) or putting it on the company’s website.

* Immaterial disclosures are unhelpful and should not be provided.

* The barriers to reducing clutter are mainly behavioural.

* There should be continued debate about what materiality means from a disclosure perspective.

It is important for the efficient operation of the capital markets that annual reports do not contain unnecessary information. It is equally important that useful information is presented in a coherent way so that users can find what they are looking for and gain an understanding of the company’s business and the opportunities, risks and constraints that it faces.

However, a company must treat all its shareholders equally in its provision of information. It is for each shareholder to decide whether to make use of that information. It is not for a company to pre-empt a shareholder’s rights by withholding information.

Too many rules?A significant cause of clutter in annual reports is the vast array of requirements imposed by laws, regulations and financial reporting standards. Regulators and standard setters have a key role to play in cutting clutter both by cutting the requirements they themselves already impose and by not imposing unnecessary new disclosures. A listed company may have to comply with listing rules, company

law, IFRS, the corporate governance codes and (if it has an overseas listing) any local requirements, such as those of the Securities and Exchange Commission (SEC) in the US. A major source of clutter is that different parties require differing disclosures for the same matter.

For example, an international bank in the UK may have to disclose credit risk under IFRS 7, Financial Instruments: Disclosures, the Companies Acts, the Financial Services Authority’s disclosure and transparency rules, the SEC rules and Industry Guide 3 as well as the requirements of Basel II’s pillar 3. One problem is that different regulators have different audiences in mind for the requirements they impose. Their attempts to reach more actual or potential users can lead to a loss of focus and structure in reports.

There may be a need for a proportionate approach to the disclosure requirements for small and mid-cap quoted companies that take account of the needs of their investors, as distinct from those of larger companies. This may be achieved by different means. For example, a principles-based approach to disclosures in IFRS, specific derogations from requirements in individual IFRSs or the creation of an adapted local version of IFRS for SMEs. Time and cost pressures can lead to

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48 Technical

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GET VERIFIABLE CPD UNITSAnswer questions about this article onlineStudying this article and answering the questions can count towards your verifi able CPD if you are following the unit route and the content is relevant to your development needs. One hour of learning equates to one unit of CPD

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AP_INT_T_HoltCPD.indd 48 16/04/2012 17:35

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defensive reporting by smaller entities and to a preference for easy options, such as repeating material from a previous year, cutting and pasting from the annual reports of other companies and including disclosures that are of marginal importance only.

Behavioural barriersThere are behavioural barriers to reducing clutter. The threat of criticism or litigation is one. The risk of future litigation may outweigh any benefits from eliminating catch-all disclosures. As a result, preparers of annual reports are likely to err on the side of caution and include more detailed disclosures than strictly necessary to avoid challenge from auditors and regulators. Removing disclosures is seen as creating a risk of adverse comment and regulatory challenge. Disclosure is the safest option and therefore often the default position. Preparers and auditors may be reluctant to change this unless the risk of regulatory challenge is reduced. There is also a tendency for companies to repeat disclosures simply because they were in the annual report last year.

However, while explanatory information may not change from year to year its inclusion remains necessary to an understanding of aspects of the report. There is merit in a reader of an annual report being able to find all of

this information in one place. If the reader of a hard copy report has to go to a website to gain a full understanding of a particular point, it heightens the risk of making the report less accessible. And even if the standing information is kept in the same document but relegated to an appendix, that may not be the best place to facilitate a quick understanding of a point. A new reader may be disadvantaged by having to hunt in the small print for what remains key to a full understanding of the report.

Preparers wish to present balanced and sufficiently informative disclosures and may be unwilling to separate out relevant information in an arbitrary manner. The suggestion of relegating all information to a website assumes that all users of annual reports have access to the internet, which may not be the case. A single report may best serve the investor, by putting all the information in one reference document rather than scattering it across a number of delivery points.

Yet shareholders are increasingly unhappy with the substantial lengthening of reports in recent years. This has not resulted in more or better information but more confusion as to the reason for the disclosure. A review of companies’ published accounts will show that large sections such as the

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AP_INT_T_HoltCPD.indd 49 19/04/2012 11:45

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statement of directors’ responsibilities and the audit committee report are almost identical.

Materiality should be seen as the driving force of disclosure, as its very definition is based on whether an omission or misstatement could influence the decisions made by users of the financial statements. The assessment of what is material can be highly judgmental and can vary from user to user. One problem may be that disclosures are being made because a disclosure checklist suggests they may need to be made, without assessing whether disclosure is necessary in a company’s particular circumstances. However, the whole point of such checklists is to include all possible disclosures that could be material. Most users of these tools will be aware that the disclosure requirements apply only to material items, but often this is not stated explicitly for users.

One of the biggest challenges is the changing audience for the annual report. Its original purpose was to report to shareholders, but preparers now have to consider many other stakeholders including employees, unions, environmentalists, suppliers, customers, etc. The disclosures required to meet the needs of this wider audience have contributed to the increased volume of disclosure. The growth of previous initiatives on going

concern, sustainability, risk, the business model and others identified by regulators as key has also expanded the size of the annual report.

Big but perfectly formedIt is not necessarily the length of the report that is the problem but the way in which it is organised. The inclusion of immaterial disclosures will usually make this problem worse but, in a well-organised report, users will be able to bypass much of the information they consider unimportant especially if the report is online. It is not the length of the disclosure of accounting policies that is itself problematic, but the fact that new or amended policies can be obscured in a long note running over several pages. A further problem is that accounting policy disclosure is often boilerplate, and provides little detail of how companies apply their general policies to particular transactions.

IFRS requires disclosure of ‘significant accounting policies’. In other words, it does not require disclosure of insignificant or immaterial accounting policies. Omissions in financial statements are material only if they could, individually or collectively, influence the economic decisions that users make. In many cases, they would not. Of far greater importance is the disclosure of the judgments made in selecting the

accounting policies, especially where a choice is available.

A reassessment of the whole model will take time and may entail changes to law and other requirements. For example, clutter could be removed by not requiring the disclosure of IFRS in issue but not yet effective. Currently, disclosure seems to involve listing each new standard in existence and each amendment to a standard, including separately all those included in the annual improvements project, regardless of whether there is any impact on the entity. The note is then a list without any apparent relevance.

The IASB has asked for comment on its forward agenda in which it acknowledges that stakeholders have said that disclosure requirements are too voluminous and not always focused in the right areas. However, the drive by the IASB has been to increase disclosure to address comparability between companies. Therefore, in the short to medium term, a reduction in the volume of accounting disclosures does not look feasible, although the IASB will consider this area for its post-2012 agenda.

Graham Holt is an examiner for ACCA, and associate dean and head of the accounting, finance and economics department at Manchester Metropolitan University Business School

50 Technical

AP_INT_T_HoltCPD.indd 50 16/04/2012 17:36

RSM Chio Lim’s Woo E-Sah looks at what charities need to consider when deciding whether to use the Charities Accounting Standard or Financial Reporting Standards

‘What are the main differences between the Singapore Financial Reporting Standards (FRS) and the Charities Accounting Standard (CAS)? Which should I adopt?’

This is probably the one question charities started asking themselves when the Accounting Standards Council (ASC) issued the new CAS as an alternative financial reporting framework for charities in Singapore.

Before the issue of the CAS, the frameworks available were the FRS or the Statement of Recommended Accounting Practice 6, Accounting and Reporting by Charities (RAP 6). Typically, charities used the FRS for measurement criteria and the RAP 6 for disclosure templates.

The CAS is more focused, taking into account the peculiarities of charities. It is, in essence, a fit-for-purpose and simpler framework for charities, see table below.

The CAS is not applicable to charities that are (1) government-funded

educational institutions and (2) statutory bodies scheduled in the Accounting Standards Act.

One point to note is that ‘significant investee’ is not defined by the CAS, which may give rise to judgmental issues and diversity in practice for charities with investees.

What are the key differences? The table overleaf and continued on page 54 summarises the key differences between the CAS and the FRS.

PresentationThe statement of comprehensive income under FRS 1 requires all revenues/gains and expenses/losses to be included in the statement, with details disclosed in the notes. Fund accounting remains the key feature of charity accounting. The CAS requires the statement of financial activities (SOFA) to show all incoming resources and resources expended in the year on all funds separately including capital

gains and losses, and a reconciliation of movements. Unlike the FRS, there is no statement of changes in equity as there are no owners. This will be clearer to the public as it shows, at one glance, how the charity receives and uses resources to further its objectives.

Unlike the FRS, a third balance sheet is not required when there is restatement/reclassification in prior year figures. This will lower the cost of preparing financial statements.

Asset-related grants and donationsThe FRS permits two methods of accounting for grants. One sets up the grant as deferred income which is recognised as profit/loss on a systematic and rational basis over the useful life of the depreciable asset. The other method accounts for the carrying amount of the depreciable asset net of the grant, for which asset will now have a reduced depreciation charge. A significant difference is the removal of asset approach for grant accounting in the CAS.

The CAS, on the other hand, prescribes that asset-related grants or donations are to be recognised in SOFA as received and not deferred over the life of the asset. The relevant fund will then be reduced over the useful life of the asset in line with its depreciation.

Borrowing costs and development costsCharities with assets under construction or internally generated

Frameworks for charities

Applicability? Choices available For financial periods beginning on or after: 1 July 2011 1 January 2015 FRS or CAS Companies limited by guarantee Other charities and IPCs (CLGs) and large institutions of without significant public character (IPCs)1 without investees significant investees, subsidiaries, associates and joint ventures FRS CLGs and large IPCs with Other charities and IPCs significant investees with significant investees

1Gross receipts over S$10m in the two immediately preceding financial years

51Technical

SG_T_charity.indd 51 16/04/2012 14:48

intangible assets are not allowed to capitalise the borrowing costs or development costs incurred. These costs are expensed when incurred. The FRS, on the other hand, requires capitalisation of these costs if they meet the capitalisation qualifying criteria.

PPE, intangible assets and investment propertiesThe CAS prescribes the cost method for property, plant and equipment (PPE), intangible assets and investment properties. Revaluation is not allowed. Assessment of indication of impairment is only required for investment properties but not for PPE or intangible assets.

This is different from the FRS which allows an alternative measurement method that allows PPE and intangible assets to be measured at revalued amounts and investment properties, at fair value. There is a pull for low depreciation charge in appendix 3 of the CAS.

The FRS requires indication of impairment assessment to be performed for these non-current assets. However, if there is a significant difference between the carrying amount and market value of investment or other properties, the market values and the bases used are to be disclosed.

The simplified cost model (and without indication of impairment assessment) under the CAS is likely to lower compliance costs.

Investment in financial assets Charities with investments in equities, bonds or other financial instruments will be impacted by the measurement criteria under the CAS.

The CAS requires these to be stated at cost. The FRS allows cost or fair value methods depending on the relevant FRS 39 categories for investments (ie HTM, AFS, FVTPL, loans and receivables). This reduces the cost required to determine the fair value of financial instruments under the FRS.

Additional disclosure requirements under the CASTo reinforce the importance of accountability to donors and how their donations are used, the following requirements are included in the CAS:1 The definition of related parties

under the context of the charity sector and the related disclosure requirements.

2 Additional disclosure requirements

in relation to loans given to any parties including the loan recipient’s relationship with the charity and/or board members, the amount, collaterals obtained, interest, repayment terms and any amounts repaid. This is required even if the loans have been fully settled during the year. Charities using the FRS are required to comply with additional regulatory requirements under the Charities (Accounts and Annual Report) Regulations 2011 relating to

disclosures on loans extended to any party.

3 It is not a common practice for governing board members or their close family members to receive remuneration or benefits from the charity. If there is, disclosure of all remuneration, including non-cash benefits and compensation, advances, credits and guarantees are to be disclosed. A negative statement is required if no remuneration or benefit is given.

ConclusionIt is mandatory for charities to continue to comply with the FRS or the CAS by the specified implementation dates. Early adoption is encouraged as the RAP 6 will cease to be available. Charities are also discouraged from switching between the CAS and existing standards (eg the FRS) unless there are compelling reasons to do so. This is to ensure comparability of the charity’s financial statements across periods.

Charities adopting the CAS need to consider the modification costs (if any) of the existing accounting system and the need to retrain accounting-related staff. The CAS aims to simplify reporting needs, increase the level of transparency and accountability to the donating public, and enhance consistencies in accounting practices and presentation across charities.

Woo E-Sah is a partner and head of NPO practice at RSM Chio Lim LLP

52 Technical

SG_T_charity.indd 52 16/04/2012 14:48

What are the key differences? A summary of the key differences between the CAS and FRS.

Topic CAS FRS

Presentation *Statement of financial activities (SOFA): *Statement of comprehensive income and • By fund categories including restricted and statement of changes in equity. unrestricted funds. • Material funds and summary of each fund’s assets * Three-column statement of financial position and liabilities in column format in the notes. presentation when there are any restatements or reclassifications for the past year. *Third balance sheet is not required (P24). *Option between direct and indirect method *Statement of cashflows – indirect method (P396). for statement of cashflows. Asset-related *Recognise all asset-related grants and donations *Choice of capital approach or incomegrants and as income in SOFA. approach to account for government grants.donations *Relevant fund will then be reduced over the useful life of the asset in line with depreciation (P72).

Borrowing and *Expense all borrowing and development costs *Borrowing costs directly attributable todevelopment immediately to SOFA (P182 and P220). acquisition, construction or production of a costs qualifying asset and development costs that are capitalised.

Property, plant *An item of PPE measured at cost (P180). *Choice of cost model or revaluation model. and equipment (PPE) *PPE shall not be revalued. Not necessary for yearly *Required to perform impairment assessment. assessment of any indication of impairment (P189). *PPE is depreciated based on estimated *To disclose market value when there is significant useful life. difference between the carrying amount and market value of properties (P201).

*Appendix 3 provides guidelines for depreciation policy for buildings on short-term government land. Intangible *Intangibles measured at amortised cost (P219, 225). *Choice of cost model or revaluation model.assets *Intangibles assigned a finite useful life not exceeding *Goodwill and other intangibles with indefinite 10 years (P226). lives are reviewed for impairment and are not amortised. *Intangibles not to be revalued and not necessary for yearly assessment for any indication of impairment (P231, 493).

53

SG_T_charity.indd 53 16/04/2012 14:48

Topic CAS FRS

Investment *Measured at cost (P238). Necessary for yearly *Choice of cost model (depreciation lessproperties assessment of any indication of impairment. impairment) or fair value model with changes into profit/loss. *Investment property shall not be revalued or measured at fair value (P238).

*To disclose market value when there is significant difference between the carrying amount and market value of properties (P252). Preservation of *Monuments with preservation, conservative and *No corresponding FRS. FRS 16 PPE applies. monuments education objectives (P203). *Separate row in balance sheet (P205).

*Disclose analysis/narrative, costs, and accounting policy (P214).

*If omitted from balance sheet, disclosure of reason for omission (P208).

Investment in *Measured at cost less impairment (P244). *Carrying value of investments is measuredfinancial assets by FRS 39 categories at amortised cost or *Shall not be measured at fair value (P244). fair value: held-to-maturity; available-for- sale; loans and receivables. Fair value *To disclose market value for quoted investments (P249). changes to profit or loss or other comprehensive income. *To disclose detailed information about investment if it is more than 20% of carrying value of charity’s total assets (P250). . Investment in *At cost less impairment (P244). *Associates and JV – equity method used.subsidiaries, associates and *For quoted subsidiaries, charities to disclose the *Proportionate consolidated allowed forjoint ventures market value (P249). JV (disallowed under new FRS 111). (JVs) *Associates and JV – equity method used (P533 – P557).

54 Technical

SG_T_charity.indd 54 16/04/2012 14:48

As ACCA’s governing body, Council plays a pivotal role in ACCA affairs.

* It ensures that ACCA operates in the public interest and delivers the objectives stated in its Royal Charter.

* Council sets ACCA’s overall direction through regular approval of strategy.

* It acts as a link between members and the professional body, and leads the organisation in the interests of both.

* It is accountable both to members and the public interest.

* It acts for all members and future members (today’s students).

* It provides leadership of ACCA and stewardship of its resources.

Council develops policy for ACCA as a whole and Council members are volunteer custodians acting for the well-being of the whole organisation. Whatever their geographical or sectoral bases, Council members do not represent particular areas or functions

and are elected by the membership as a whole.

ACCA members of all ages and backgrounds are encouraged to stand for election to Council. Long-term or technical experience is valuable, but so is the proven ability to participate actively in strategic decision-making. Council experience as such is not necessary. However, an understanding of good governance is essential, and personal and professional integrity must be of the highest order.

Specifically, ACCA expects members to bring the following skills and attributes to Council:

*an ability to take a strategic and analytical approach to issues and to see the big picture;

*an understanding of the business and the marketplace;

*communication and networking skills;

*an ability to interact with peers and respect the views of others;

*decision-making abilities;

*an ability to act as ambassadors in

many different environments;

*planning and time management; and

*a willingness to learn and develop.Nominations are now invited for

election to Council at the 2012 AGM. Candidates must be nominated by at least 10 other members in good standing. Candidates should supply a head and shoulders photo and an election statement of up to 180 words, which should not include references to email addresses or websites. Candidates are also required to sign declarations of their willingness to comply with, and be bound by, the code of practice for Council members.

Further information on the Council election process, including pro forma of nomination forms, may be obtained by writing to the Secretary at 29 Lincoln’s Inn Fields, London WC2A 3EE, by faxing +44 (0)20 7059 5561, or by emailing michael.sleigh@accaglobal.com (please put ‘Council Elections’ in the subject box).

Elections to Council

ACCA 55

SG_A_Council.indd 55 16/04/2012 11:04

In 2011, the International Accounting Standards Board (IASB) issued a number of new and revised international financial reporting standards (IFRS) and exposure drafts, some of which will become effective as early as January 2013. Last year, the Singapore Exchange (SGX) also issued guidance on sustainability reporting, encouraging listed companies in Singapore to include environmental, social and governance issues in their annual reports.

The implementation of these new standards is likely to have a significant impact on companies, not only with respect to the numbers appearing in their annual reports, but also on various processes, systems and resources, and perhaps even changes to their business model, Darryl Wee, country head of ACCA Singapore told an ACCA-Deloitte joint forum, held at the Mandarin Orchard hotel in March.

Yet, many companies appear unprepared for these changes, possibly because they have not fully appreciated the impact they will have on their businesses. ‘I believe people may have underestimated the impact of these changes. They think it’s only going to change a few numbers here and there, a bit of disclosure, a bit of presentation. But the way some of these changes are going to happen, in particular, once the exposure drafts on revenue and leases become standards, they are likely going to change key metrics,’ he said. ‘I think a lot of people may have not fully digested the changes and their implications, maybe because of lack of resources or budget,’ he added.

At the end of last year, ACCA and Deloitte conducted a survey of companies listed on the SGX to gather information on the impact of the IFRS/FRS changes and SGX guidelines would have on their entities. ‘In particular, we were interested in the state of readiness of listed companies in implementing the changes, and their overall assessment of the impact of these changes,’ said Wee.

Much more to doThe majority of respondents indicated that, while they felt ready for the changes in terms of work process, they may not be so well prepared for the changes required to IT systems, human resources and business model or strategy. Overall, the survey showed that companies were generally lukewarm about the upcoming changes as they already face various challenges within their organisations, including a lack of organisational motivation and budget constraints. While this was true for the implementation of the new or revised IFRS/FRS, it was even more so with the adoption of sustainability reporting, with 63% of respondent not expecting to include the consideration and performance of environmental, social and governance issues in their 2011–12 annual reports.

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore, said he was surprised by some of the results from the survey. ‘For example, companies did not mention a concern about the revenue recognition exposure draft. The proposed change could have an impact on the revenues of a company, when a company recognises revenues, what amount it recognises etc. The proposed changes could have a pervasive impact. For the respondents to have not specifically commented that this exposure draft will have a significant impact goes back to my point that they may not have necessarily fully understood the impact it will have,’ he said.

The proposed change on revenue recognition from contracts could affect how companies recognise revenue and over which period of time, hence affecting companies’ profitability on a comparative basis, Barmaky noted.

IFRS 10, effective on 1 January 2013, will also in effect change the definition of ‘control’, making it tighter but also making it a bit more based on judgment and, as a result, ‘one would expect to see more and more companies consolidating other entities’, hence bringing on more assets and liabilities on their balance sheets than before, as well as debt, he explained.

He also drew attention to the exposure draft on leases, which proposes that companies can no longer treat leases as off balance sheet items, except for short-term leases. This is something else that has an ‘another pervasive impact on the numbers, because there is no longer a concept of operating or finance lease’. He added: ‘What that means for most lessees is that they will have to bring more obligations and assets on their books. Previously, you could have operating leases to keep your balance sheet very light. Now it won’t be possible and the impact could be quite significant. This would mean that you have more borrowings on your balance sheet, which has an impact on debt covenants and key ratios.’

While these changes could have a significant impact on a company’s financial statements, Barmaky believes it is possible that companies have not considered the impact of these as they are still at an exposure draft stage. The requirements ultimately may change once these drafts become standards.

ACCA56

MAJOR IMPACT

* The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.

* Respondents estimated the costs of preparation as less than S$1m. However, Shariq Barmaky, assurance and advisory partner at Deloitte Singapore, said this should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding the impacts.

* The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.

* The majority of respondents relied to a significant extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

*SURVEY HIGHLIGHTS

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* *

The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.

* Respondents estimated the costs of preparation as

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The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less than 12 months to prepare for the changes. The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less than 12 months to prepare for the changes. The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less than 12 months to prepare for the changes.Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less

Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less The majority of respondents (77%) have allocated less

Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less

Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less

Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less The majority of respondents (77%) have allocated less

Respondents estimated the costs of preparation as

The majority of respondents (77%) have allocated less The majority of respondents (77%) have allocated less The majority of respondents (77%) have allocated less

* * * * Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as * Respondents estimated the costs of preparation as less than S$1m. However,

* Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, Respondents estimated the costs of preparation as less than S$1m. However, less than S$1m. However, Shariq Barmaky, assurance Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as less than S$1m. However, Shariq Barmaky, assurance Respondents estimated the costs of preparation as less than S$1m. However, Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance Respondents estimated the costs of preparation as

Shariq Barmaky, assurance less than S$1m. However, and advisory partner at Deloitte Singapore,and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

less than S$1m. However, and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

less than S$1m. However, and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

less than S$1m. However, and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

less than S$1m. However, and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

less than S$1m. However, and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

less than S$1m. However, Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore,should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance said this

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore, said this should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance and advisory partner at Deloitte Singapore, said this should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance said this

should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance said this

Shariq Barmaky, assurance said this

should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance said this

should be taken with a ‘pinch of salt’, as he felt

Shariq Barmaky, assurance said this

Shariq Barmaky, assurance Shariq Barmaky, assurance said this

Shariq Barmaky, assurance said this

should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding should be taken with a ‘pinch of salt’, as he felt respondents gave a figure without fully understanding respondents gave a figure without fully understanding respondents gave a figure without fully understanding respondents gave a figure without fully understanding

* * the impacts.

* The main impact on financial instruments was seen to the impacts. the impacts.

* The main impact on financial instruments was seen to the impacts. The main impact on financial instruments was seen to the impacts. The main impact on financial instruments was seen to the impacts. the impacts. The main impact on financial instruments was seen to the impacts. The main impact on financial instruments was seen to the impacts. The main impact on financial instruments was seen to the impacts. the impacts. The main impact on financial instruments was seen to the impacts. The main impact on financial instruments was seen to the impacts. The main impact on financial instruments was seen to the impacts. The main impact on financial instruments was seen to the impacts. The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to The main impact on financial instruments was seen to * * * The main impact on financial instruments was seen to arise from issues relating to impairment assessments, arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments,

* The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities. arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities. arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities. arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities. arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities.

The main impact on financial instruments was seen to arise from issues relating to impairment assessments, The main impact on financial instruments was seen to arise from issues relating to impairment assessments, arise from issues relating to impairment assessments, followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.followed by the classification of assets and liabilities. The majority was neutral regarding hedge accounting.

* * * The majority was neutral regarding hedge accounting.

* The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant * The majority of respondents relied to a significant extent on their external auditors and professional

* The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional The majority of respondents relied to a significant extent on their external auditors and professional

The majority was neutral regarding hedge accounting.The majority of respondents relied to a significant The majority of respondents relied to a significant The majority of respondents relied to a significant extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

extent on their external auditors and professional accounting bodies to provide them with updates on IFRS and FRS.

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SG_A_forum.indd 56 13/04/2012 11:10

Help neededWee pointed out that the results suggested businesses are likely to need assistance from accountancy firms, professional accountancy bodies, and other experts in a variety of areas, including for the provision of training and updates.

‘The path to establishing truly global reporting standards is an arduous journey which we undertake because in the long run, the benefits will outweigh the costs,’ he told delegates.

‘As a global body, ACCA fully supports the establishment and operation of a global set of reporting standards. To be realistic however, we are aware that we can approach our destination only with incremental advances. The continued growth and acceptance of IFRS across the world will depend very much on how well companies are able to understand and implement IFRS in a way that is ultimately beneficial to businesses as a whole,’ Wee added.

With the economy entering a phase of slower growth and volume of transaction decrease, the downturn may be a

good opportunity to engage accounting and finance staff to develop their understanding of appropriate skills in implementing the draft standard.

Barmaky said it was important for companies to start looking at the impact of the changes in IFRS/FRS on their own businesses now and not wait until their first quarter of reporting. ‘Waiting until the last minute is not a good strategy,’ he said. ‘I feel we have a collective responsibility, whether it is auditors or organisations like ACCA, to inform people of the changes and provide explanations of the requirements of the new IFRS/FRS so that they can then assess the impact on their business.’

Sonia Kolesnikov-Jessop, journalist

The report, Impact of New/Revised IFRS/FRS on Singapore Listed Companies, can be found at www2.accaglobal.com/documents/ifrs_frs.pdf

Help needed good opportunity to engage accounting and finance staff to

01 From left: Cheong Yew Meng, group

financial controller/head, corporate finance and planning, Rotary Engineering; Chong Chou Yuen, group CFO, Tuan Sing Holdings; Chiew Chun Wee, head of policy for Asia Pacific, ACCA; Shariq

Barmaky, assurance and advisory partner, Deloitte Singapore; Philip Tan Tee Yong, lead independent director and chairman of the audit committee, Aztech Group; Rajesh Shroff, vice president of corporate affairs, Olam International

SG_A_forum.indd 57 13/04/2012 11:10

The world is undergoing a period of profound transformation driven by global political, economic and technological shifts. Taken together, these forces suggest that the role and expectations of the accountant of tomorrow and the industry they inhabit could be radically different from the profession today. So how can the profession prepare for an uncertain future when we all feel there is already a full agenda dealing with today’s challenges?

Recognising the need to help accountants explore these long-term drivers of change, ACCA has started the Accountancy Futures Academy. Its mission is to provide a radar to highlight the trends, driving forces and ideas that could shape the future global business and accountancy landscape.

The first output from the academy is a consultation with members of ACCA’s global forums. The objective is to identify the drivers of change that accountants should be thinking about to prepare them for future challenges. This article looks at some of the emerging findings from the study being coordinated by Fast Future Research.

The changing economic landscape is seen as central to any exploration of the future of business. We are in the middle of a period of deep economic uncertainty. For accountants, this puts the spotlight on our risk and resilience plans – how are we factoring in the potential collapse of key parts of the economic infrastructure in individual markets or globally?

Increasing influenceWhile mature economies focus on surviving and navigating the current turbulence, emerging economies are growing, particularly the BRIC nations. It is clear that the BRICs will have an increasingly influential say in how

global economic systems are shaped and governed. These countries are presenting global accountancy firms with opportunities, in terms of markets to expand into, but also challenges as a potential source of future rivals. Could we see multinationals transferring their accounting business to firms from the BRIC economies?

Political power can be expected to follow financial power, with both China and India having more of a say on the evolution of the key institutions of global governance. This could give both countries the platform to set the rules and agenda for the new so-called Asian century. This could have far-reaching implications for how the global accountancy profession evolves in future, especially with regards to the definition and adoption of uniform global accounting standards. Could these standards come to reflect Eastern rather than Western practices?

Population shiftsDemographic shifts are reshaping the make-up of the global population. By 2050, the Asia Pacific region will have grown by more than the populations of Europe and North America combined, with Europe itself expected to shrink by around the size of Germany. Global life expectancy is projected to continue increasing and enforced retirement ages abandoned. This raises questions about how we effectively manage and provide career opportunities for multiple generations in the workforce.

The business of business is also undergoing fundamental change – with new business models offering the potential to transform our notions of risk and value. Firms are increasingly opting to switch from ownership of fixed assets to renting the services provided by those assets – cloud computing is one such example. The

risks of new product development and new venture creation are also being transformed by crowd-sourcing models such as Kickstarter.com, which enable entrepreneurs and innovators to raise the necessary financial commitments from the customer before embarking on the project. Sales approaches such as aggregated buying and the auction model are increasingly being used by businesses to sell their offerings. How will accounting practices and risk assessments need to change to take account of a rapidly changing set of business models with often unpredictable revenue streams?

The financial crisis has highlighted the need for businesses to construct ‘living wills’ to facilitate an orderly unravelling of their affairs in case of insolvency. Accountants can play a key role here, but how deeply will the finance function need to be embedded

Tomorrow’s worldACCA’s Accountancy Futures Academy is exploring the future role of accountants. It will be radically different, say academy chairman Ng Boon Yew and futurist Rohit Talwar

Chairs of ACCA’s 10 global forums met for a Global Forums Symposium in March in London to discuss the issues that will be confronting the accountancy profession over the coming months and years.

A presentation based on the research described in this article provided a basis for lively discussions on a wide range of topics including global economic uncertainty, audit, complexity, regulation, adding value, principles, sustainability, investors and reporting, the public sector and fraud.

The forums aim to further thinking on current and future issues in a number of specific areas, as well look at the challenges and opportunities facing the accountancy profession generally.

*GOING IN FOR THE SKILL *FORUM SYMPOSIUM

58 ACCA global forums

SG_INT_A_future.indd 58 16/04/2012 14:47

Accountants must learn to plan for and think in terms of multiple possible scenarios. An emerging competence is developing the agility and processes to cope with ever-shorter business cycles. Accountants also need to become adept at navigating and tackling operational and regulatory complexity and the rising number of non-financial indices used to measure value. The need to play a bigger role in business decision-making and the globalised nature of work mean accountants seeking international opportunities will have to expand their strategic, language and cultural skillsets. The backlash from the financial crisis, combined with greater moves towards environmental sustainability, will also result in growing regulatory requirements for accountants to act as public interest watchdogs.

FOR MORE ON THE ACCOUNTANCY FUTURES ACADEMY GO TO

www.accaglobal.com/globalforums

FOR MORE ON THE ACCOUNTANCY FUTURES ACADEMY GO TO

*GOING IN FOR THE SKILL

in the transactions, products and pricing models of the organisation to appreciate the scale and detail of what needs to be unravelled?

The growing complexity of business and the need for integration are placing greater demands on information technology. IT has revolutionised the

workplace – digitising workflows and assets, and creating new opportunities with people generating real-world fortunes from buying and selling virtual assets in online environments such as Second Life. Advances in artificial intelligence could lead to further automation of accounting functions.

Further down the road, technological advances could mean we download core accounting data directly into our brains. The core question is whether the roadmap for accounting systems development will be flexible enough to cope with a range of possible business scenarios.

Taken collectively, all these drivers suggest we are now entering a period of fundamental change for the global economy, for the general world of business and, as a result, for the accountancy profession.

Ng Boon Yew FCCA is chairman of ACCA’s Accountancy Futures Academy and executive chairman of Raffles Campus. Rohit Talwar is a global futurist and founder and CEO of Fast Future Research.

59

SG_INT_A_future.indd 59 16/04/2012 14:47

TO ADVERTISE CALL THE SALES TEAM ON +44 (0)207 902 1210

ABSGCAREERS.indd 2 16/04/2012 16:47

TO APPLY FOR ANY OF THE POSITIONS BELOW PLEASE VISIT WWW.ACCACAREERS.COM

FINANCIAL RISK MANAGEMENT

We invite highly motivated and dynamic professionals with relevant experience to join our Financial Risk Management practice. You will have the opportunity to be part of the team to advise clients from both the financial and non-financial services industries on managing their Financial Risk.

SINGAPORE | REF: KPMGSG09

Fund ComplianCe

This role requires a degree in Banking and Finance or an accountancy degree or post graduate qualification (CPA etc). The ideal candidate will come from a Fund Services Business where you have been a Manager in Fund compliance role. Ability to write macros and rule logic, knowledge of SQL and data mapping will be an advantage.

SinaGpoRe | ReF: SaYu–003

Financial accountant

This financial accountant will need to possess strong knowledge in full spectrum of accounting (AP/AR/GL) and knowledge in SAP or Hyperion. This position will expose the incumbent in working with traders to review and reconcile the PnL statements.

SinGaPoRE | REF: FH 1204423

RepoRting AnAlyst

The function of this role is to consolidate the reporting of APAC countries in preparation of submission to the global team. The holder will be the contact point for APAC and will be involved in the month end closing, variance analysis and ensure accurate and timely submission.

singApoRe | Ref: AC/JC18971

Audit technicAl MAnAger

Minimum 5 years of relevant experience in CPA firms or in a similar position gained in a vibrant professional/ academic environment. Abreast with the latest technical and accounting standards around the world. Good Command of English with excellent written, verbal communication and inter-personal skills.

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Accounts ExEcutivE

Reporting to the AP Accountant, you will be looking after full spectrum of AP. They have a shared service center outside of Singapore, so will NOT be looking after the manual data entry. Instead, you will be managing the banking reconciliation, expenditure analysis and overseeing the entire process.

sinGAPoRE | REf: H1227570

“ACCA Careers gives me the latest and most varied range of job opportunities from all the major organisations and recruitment firms, along with great tips and advice to help me push my career forward.”

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OVER 22,000 ACCA MEMBERS AND STuDENTS HAVE REgISTERED THEIR CVS ON ACCA CAREERSEveryday on ACCA Careers on average we have....l 150 new candidates registerl 11,352 page viewsl 44 new jobs postedl 253 job applications

Employers we are already working with include Shell, PWC, Deloitte, KPMG and BBC.

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To provide full financial control and management services to the management and programme teams within Suas and thereby support the delivery and expansion of the organisation’s educational mission.

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Monitise, the mobile money experts, have created one of the most extensive and successful mobile banking and payments services in the world; a market capitalization of circa £170m and aggressive plans for further growth.

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To advertise with ACCA Careers there are 2 options, using our online self-service you can post a job right now at accacareers.com or you can contact our dedicated account management team on +44 (0)20 7902 1210

ABSGCAREERS.indd 3 16/04/2012 16:48

Learning opportunities have been brought together within each CPD subject heading

All professionals recognise the importance of developing their skills and keeping abreast of developments. CPD helps you not only to maintain competence but also demonstrate to employers your ability to progress and take on new responsibilities. ACCA wants members to maintain the highest professional standards because their skills, judgment and integrity can add value to organisations, economies and society at large.

When ACCA made CPD mandatory in 2005 there were many misconceptions, in particular that it meant attending face-to-face courses. This has changed as members have gained CPD through e-learning, acting as workplace mentors or learning at work – undertaking tasks for the first time, consulting an expert about a workplace or client issue, etc.

There is still a place for attending seminars and conferences and reading articles, but it is now widely recognised that individuals are looking for greater variety and blended learning solutions. In an age when information is immediately accessible, everyone wants access to learning at a time and place that is convenient for them.

The revamped CPD section of the ACCA website at www.accaglobal.com/cpd offers one-stop access to articles, e-learning, podcasts, online seminars, research and qualifications from partner organisations, and contains over 160 e-learning modules. You will find details of face-to-face courses on your local ACCA office site. Learning opportunities have been put under subject headings to make it easy to view the range of information available. You will also find details of how to meet your CPD requirements.

We hope the new resource will meet the demand for more accessible CPD. This is just the first step in improving

members’ experience of the website when looking for CPD and further improvements will appear this year.

The demand for e-learning has increased as professionals have become time-poor but also because the quality of e-learning has improved.

ACCA’s research has confirmed there is no decrease in quality with technology-enhanced learning and assessment compared with physical, classroom and paper-based learning and assessment.

Interviewees for the research included Richard Pollard, PwC’s global development leader, who said: ‘On an average day there might be facts I need to know and skills or techniques of which I need a reminder. I want that now. I don’t want it three months ago when I was at a training centre, and I can’t remember what I was learning.

I certainly don’t want it in six months’ time when I’ve been booked to go on a classroom session.’

Online learning and assessment technologies offer sophisticated ways to interact with learning content. You can fast-forward to more demanding modules, and pinpoint and address areas of weakness much more quickly.

Remember, learning will be considered verifiable if it is:

*relevant to your career

*you can demonstrate how you have applied it

*you can prove it took place – eg copies of course materials, notes from learning, contact details of a third party who can substantiate activity completion, a certificate of course/assessment completion.

For more information, go to www.accaglobal.com/cpd

Website revamp showcases CPDLooking for skills development opportunities on the ACCA website has been made even easier, as Ros Leah, ACCA’s head of professional development, explains

62 ACCA

SG_INT_A_CPD.indd 62 16/04/2012 16:30

[Divining the business landscape of the future is a tricky art, but ACCA’s global forums can help, says president Dean Westcott

Landscape painting

Near the back of this edition you will find an article from ACCA’s new Accountancy Futures Academy, which looks at what will shape the professional landscape of the future and what we need to do to ensure we and our businesses are prepared.

It is critical that an organisation like ACCA has a means of bringing together expert opinion to provide a long-range forecast of the business climate, and the academy, along with the other global forums, has a vital role to play in highlighting the key trends along with the driving forces and ideas that will shape our profession.

We can make some educated guesses about the future. We know that there is a shift in economic influence from west to east and from north to south. Technological advances could result in core accounting functions being automated, meaning that accountants will need to be well placed to offer more analysis and judgment on the information which is produced.

The first symposium for all global forum chairs, which took place in London recently, addressed the pressing challenges and opportunities facing us. Forum chairs said that the profession needs to restore public trust and confidence, as well as avoid being so overwhelmed by the need for regulatory compliance that it loses the ability to contribute to business performance.

These challenges show the way to opportunities. In the corporate sector, for example, there is an opportunity to redefine the role of the finance professional, with accountants having the potential to take a lead role in areas such as risk management and corporate governance.

By drawing on ACCA’s longstanding core values, the global forums will make major contributions to a number of debates and will not only reflect on but influence policy and remind the public, businesses and government of the enduring value that accounting professionals bring to the table.

Articulating this value is not easy when the profession is under stress. It will mean challenging the forces which are pushing accountants towards over-emphasis on compliance. But I am sure that the forums will help us meet this challenge and will support us in setting out how much public value we bring to the table.

Dean Westcott, ACCA president and interim CFO, West Essex Clinical Commissioning Group, UK

63ACCA

SG_INT_A_pres.indd 63 17/04/2012 12:35

MEMBERS GIVE BACK TO FAMILIES IN NEEDFood parcels were delivered directly to the homes of 600 needy families in the Bukit Merah area on 17 March 2012, thanks to S$10,000 raised by the ACCA Gives Back charity project.

MP for Tanjong Pagar GRC, Indranee Rajah, graced the event as guest of honour. More than 80 members and friends delivered the parcels to the families, who were identified by the Tanglin-Cairnhill grassroots organisations. FairPrice also gave S$2,200 in vouchers.

MP for Tanjong Pagar GRC, Indranee Rajah (second from left) and president of ACCA Singapore, Kaka Singh (left), give household items to a family

At the recent ACCA Accountants for Business forum, industry experts unanimously agreed that investing in talent is key to driving business success, as the right people bring

diverse skills, knowledge, experiences and capabilities to the workplace.

Some 100 delegates – mainly human resource and finance professionals – attended the forum, held at the

Mandarin Orchard hotel on 16 March 2012. Industry experts also revealed innovative ways to engage with staff and how to help them achieve a good work-life balance.

Panellists from left: Stephen Tjoa, executive director of people, performance and culture; KPMG Advisory, Ramlee Bin Buang, executive vice president and group CFO; Cerebos Pacific, Astik Ranade, head of human capital operations and technology solutions for Asia Pacific, Mercer; Alice Tan Guong Khim, group director of corporate services, Land Transport Authority; and moderator Tony Osude, head of global relationships and services, ACCA

MEMBERS HONOURED WITH 25TH ANNIVERSARY LETTERSACCA president Dean Westcott and immediate past president Mark Gold joined members at the recent Members’ Appreciation Evening on 16 March 2012.

Anniversary letters were presented to a number of members who had reached 25 years of membership – they would normally have received these in the post. ACCA Singapore congratulates its members and thanks all of them for their continuing support.

Dean Westcott, president of ACCA (third from left), and Darryl Wee, country head of ACCA Singapore (centre), with anniversary letter recipients

FORUM HEARS THAT TALENT IS KEY TO GROWTH

ACCA news64

SG_A_news.indd 64 13/04/2012 11:11

Let us all volunteer

The global financial crisis has led to some questions about the role of the accountant in protecting the public interest. The challenging conditions of the global economy have highlighted the increasingly important role that accountants have to play in maintaining and creating value for businesses. In part, to address the challenges, the standard-setting bodies issued new, revised and amended financial reporting standards.

The crisis also focused attention on the evolution of audit in order to meet the changing needs of stakeholders. The key to the debate on the roles of accountants and auditors in business has been on the needs of all stakeholders and how businesses can develop a more effective approach to the identification and mitigation of risks, supporting business performance with an emphasis on long-term reward.

We may say well and good for businesses. But what about the charity sector, particularly in Singapore? Not too long ago Singapore had a crisis in the charity sector. In response, the authorities focused on how charities should be more transparent, effectively communicating how donations have been spent. As a result, there is now the new and enhanced Code of Governance for Charities and Institutions of a Public Character and the Charities Accounting Standard.

Accountants are also assisting the sector. When Gerard Ee headed a large charity after it suffered a scandal, help was at hand from Ng Boon Yew, chairman of the charity’s audit committee and a past ACCA Council member. Ee champions social service issues and rights in Singapore and is the son of Dr Ee Peng Liang, a past president of ACCA Singapore, who was fondly known as ‘Mr Charity’. The chairman of the Charity Council is accountant Fang Ai Lian. Another accountant who has done a lot for charity is Philip Tan, who volunteers for the Yellow Ribbon Project. In the 2011 National Day Rally Speech he was recognised for his Dining Behind Bars project.

Only recently, the ACCA Gives Back charity project, initiated by the ACCA Social Subcommittee, raised S$10,000 through the donations of ACCA members and friends. This is turn led to food parcels being given to 600 needy families (see page 64).

So, as ACCA members we can volunteer in many ways. As accountants, we can help charities make good decisions as we understand how to use the data presented to us to evaluate past and current programmes. We can donate money but more importantly, our time. I was part of the recent food parcel distribution and it was inspiring to see members participating in such a worthy cause. Events such as this are not only opportunities for members to get to know one another, but also getting together to contribute to society. Let us all continue to do well in our business and give back to society.

Kaka Singh is president of ACCA Singapore

[Creating value for businesses is important, says Kaka Singh, but the charity sector needs the help of members just as much

ACCA 65

SG_A_pres.indd 65 16/04/2012 14:46

65 Kaka SinghDon’t overlook charities, says the ACCA Singapore president

64 NewsBusiness forum talks talent

63 Dean WestcottACCA’s global forums have a vital role to play, says the ACCA president

62 CPDThe ACCA website now has a new, improved, CPD section

58 Global forumsACCA’s Accountancy Futures Academy

56 Setting standardsJoint forum addresses IFRS changes

55 CouncilElection time is coming

Inside ACCA

Council’s first scheduled meeting of 2012 took place on Saturday 10 March. The guest presenter was Katrina Wingfield, chairman of the ACCA Regulatory Board, who presented its annual report for 2011.

The Regulatory Board was established after the AGM in May 2008 and brings together all of ACCA’s arrangements for regulation and discipline in a single entity. It stands at arm’s length from Council and the majority of its members are lay individuals.

The report of the Board for 2011 covered the third full calendar year of its operation. It focused on a successful regulatory event organised in October 2011, at which Sir Ian Kennedy was guest speaker, and the establishment by the Board of an Overview of Regulatory Procedures Working Party. Council was pleased to note that the report overall underscored the Board’s commitment to continuous improvement in regulation and was reassured that, going forward, the Board would continue to provide proactive oversight of ACCA’s disciplinary and regulatory processes.

A number of other issues were considered in Council’s formal sessions:

* Council met in discussion groups to debate the competitive landscape in the global profession and ACCA’s response to it.

* Council considered the regular report of chief executive Helen Brand. This covered ACCA’s performance, as well as a review of its strategic development and developments in the wider profession.

* On a recommendation from the Resource Oversight Committee, Council approved the

proposed budget for the organisation for 2012–13. Following a recommendation from a group of standing committee chairmen, Council also approved achievement measure targets put in place to track ACCA’s strategic performance in 2012–13.

* At the request of the Regulatory Board, Council considered its policy with regard to ACCA students who hold AAT practising certificates. Council agreed to maintain its current policy to recognise only professional-level, IFAC member body-issued practising certificates and not to introduce any dispensation for AAT practising certificate holders.

* Under the terms of membership regulation 3(f), Council agreed to invite into ACCA membership four senior accountants from Indonesia – Rosita Uli Sinaga, Ahmadi Hadibroto, Irhoan Tanudiredja and Langgeng Subur.

* Council was pleased to approve the signing of a renewed Mutual Recognition Agreement with the Malaysian Institute of Certified Public Accountants.

* Council confirmed Anthony Harbinson as its preferred nominee for vice president 2012–13. (The formal elections for ACCA’s officers will take place at the annual Council meeting immediately following the AGM on 20 September 2012.)

Council’s next meeting will be in June 2012, when it will meet in Nairobi, Kenya as part of the biennial series of meetings held in ACCA’s key international markets.

Council highlights

TRAINEE CHANGES The trainee development matrix (TDM) for ACCA students has been overhauled.

The tool, used by trainees to plan and record their achievement of Practical Experience Requirements (PER), has been renamed My Experience. It will remain accessible via myACCA, and a reminder pop-up will prompt trainees to update their own experience status regularly. They no longer have to provide an annual PER return.

TDM exemptions have been renamed Performance Objectives Exemptions, and the former HKICPA TDM exemption for trainees in Hong Kong is now the HKICPA Performance Objective Exemption. Trainees are still required to use My Experience to claim the exemption and record the number of months’ work experience gained. It remains important that employers support trainees to achieve their PER, as well as their exams and ethics module, by arranging a workplace mentor. ACCA-approved employers who have approved exemptions for their trainees must remind them they are still required to use My Experience to track their progress.

Acting as a workplace mentor can be included towards Continuing Professional Development.More at www.accaglobal.com/en/student/experience.html

Nairobi: next meeting

66 ACCA news

SG_A_backpage.indd 66 17/04/2012 12:35

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• Showcase of best-practice approaches by leading global organisations• A look at the finance transformation journey and evolution of the shared service model• Facilitated discussions and debate around specific SSO issues.

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