PQ magazine December 2019
Top ACCA exam tips inside
www.pqmagazine.com / www.pqjobs.co.uk
Time to go green How sustainable cost accounting can tackle global warming
BREAKING THE CLASS CEILING The accountancy profession needs to act now if it wants to change the perception that it remains an elite occupation only open to the privileged few. New research from CABA, the charity supporting the wellbeing of chartered accountants, has identified a belief that a ‘class ceiling’ exists within the industry. More than half (53%) of accountants in the study believe that “accountancy will always be considered an elite profession”. On top of this, 40% of respondents said that individuals from disadvantaged backgrounds were not able to progress as well within the profession as those from more affluent circumstances. This view is also more prevalent among a younger audience, with 54% of 18 to 34-year-old respondents saying they felt this is the case, compared with 25% of those over 55. CABA’s Kelly Feehan said: “The
belief that accountancy is an elite profession, particularly among the younger generation, is an issue that
needs to be addressed for the profession to remain competitive.” She is worried that the perception
of a ‘class ceiling’ within the field could potentially be damaging to the reputation of the industry. CABA has been joined by the TUC, which is now calling for legal measures to tackle ‘class’ discrimination at work. It has said professional firms need to report the gaps in the pay between workers from different social backgrounds. Graduates from wealthier families are twice as likely to start on a higher salary than their working class peers, it stressed. The TUC also warned of indirect forms of discrimination, such as the use of unpaid interns as a gateway into jobs. Private school is also a factor here. Graduates who went to private school are still twice as likely than those who went to state school to be earning above £30,000 (18% compared with 9%). The TUC pointed to the government’s own social mobility Continued on page 6
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comment PQ
CONTENTS News 06Diversity plea Much more
needs to be done, says FRC
08CIMA exams Pass rates dip 09Audit Profession ‘needs to attract brightest people’
10ACCA exams What went well last time – and what didn’t
12Tech news Our digital update Features, etc 04Mind your Ps&Qs I want my watch in the exam hall; an Irish tie-up that’s just pale and stale; and the best of PQ’s social media 14Study advice Tips to help you retain your knowledge
15Awards 2020 Enter our awards now – the clock is ticking!
16Mental wellbeing Advice on how to study well and maintain your equilibrium
17Sustainability Why we need climate change accounting
18ACCA examiners’ reports Those in the know explain what you’re doing well and what really needs improvement
20ACCA exam tips Our experts predict what going to come up
22CIPFA spotlight The syllabus is changing – and here’s why
23CIMA spotlight How to approach re-sitting an exam
24The Troubleshooter Our man tackles the CIMA P2 exam
December 2019 26Your career The choices facing newly qualified AAT students 27Going green ACCA is working for a more sustainable future 28ICAEW update News from the recent One Young World event 29Careers Life at Thrings LLP; latest facts and figures from the FRC; and our book club review 30Fun stuff – and our giveaways The columnists Robert Bruce Why US and UK regulators are on different paths 6 Prem Sikka Professional education is not serving the profession 8 Zoe Robinson A picture paints a thousand words during revision 10 Mike Day Accountants can never take security too seriously 12 Subscribe to PQ magazine It’s FREE – go to www.pqmagazine.com DECEMBER 2019 ISSUE Total Distribution
30,007 Publisher’s statement: We send both a paper and digital issue to a controlled database each month. The above figure is the combined total of issues sent out this month. Free to subscribers who fulfil our terms of control Annual subscription: £35 (£50 overseas)
We are here for you… Need exam tips – tick. Need to compare accountancy body pass rates – tick. Need real news about accountancy – tick. Yes, here’s your latest PQ magazine, with news and views you just can’t get anywhere else. Both our cover story and lead on page 6 show that the accountancy profession needs to do more when it comes to equality of opportunity. The belief seems to be that the profession is just plain elitist, and still too ‘pale and stale’ at the top. The FRC even seems to ridicule the firms for advising large corporations on their diversity and inclusion, but not doing enough themselves. We have ACCA December exam tips and examiner feedback in this issue, and also have those September exam results. There are the latest CIMA exam results inside, too. The new 2019 syllabus is now live and we seem to have lots going on in this area. Vale Financial Training, for instance, will be offering CIMA for the first time in January 2020. And we have a great offer with HTFT play (on page 11). Interestingly, CIMA’s Paul Turner also reveals that scaled results won’t be available for a few months, until more extensive data is collected. In the meantime, CIMA exam sitters will just get a pass or a fail (for more see page 23). We have a fascinating piece from Professor Richard Murphy, a world leader in his field. He is arguing that the adoption of sustainable cost accounting is vital if we are to tackle the global climate emergency (page 17). He is one of the key speakers at our ‘Accountants will Save the Planet’ conference on 21 November. There is still time to sign up if you want to come along – go to accountants-will-save-the planet.eventbrite.co.uk. Frankly, you’d be mad to miss this top-notch event on one of the most – if not the most – important issue facing us all. Finally, if you are an ACCA PM student sitting in December you may want to sign up to our PM revision nights. We have joined forces with the Training Place of Excellence to offer two nights that just might make the difference between a pass and a fail – and all for just £20! Graham Hambly, PQ magazine editor (graham@pqaccountant.com)
PQ email graham@pqaccountant.com
HAVE YOUR SAY No time for change Seriously, are the accountancy bodies really going to ban watches from the exam hall? I know most computers now have the time displayed, but I take great comfort from my watch, especially when I am feeling the pressure of the exam. I have a little ritual. I sit myself down and then take off my watch and ring, and place them on the table together. I must be a ‘visual’ person as I use the movement of the hands to help me check I am keeping to time. And are you really telling me that invigilators can’t tell the difference between a traditional watch and one that has internet
connections? True, it may mean that the invigilators might need to move around a bit, but they should be invigilating – it’s what the job is! Cheats will always try to get around the rules. I sometimes
think if they spent as much time revising for the exams as they do to find ways to cheat it would have just been easier to do the studying! Joanna Hughes, by email The editor says: I do have some sympathy with you Joanna, but I also feel a bit sorry for the invigilators. It is almost impossible to tell if some watches are hitech ones that connect to the internet. I am sure you wouldn’t like to be questioned at such a stressful time, no matter how fair that invigilator was trying to be. I think a ban would just help prevent any unnecessary problems.
social media ROUND-UP What do you do when your beloved calculator finally goes to calculator heaven after 19 years? This was one of our favourite threads on UK (Only) ACCA Distance Learning Students Facebook group this month. The PQ in question wondered if anyone else had a crazy attachment to their calculator? Kris explained that his calculator had died after 22 years, while another member said hers had been going strong since her uni
Our star letter writer wins one of our fantastic ‘I love tax’ t-shirts! Feedback failings I’m one of those 54% that failed the CIMA operational case study in August. I worked hard for that exam and even attended revision classes. I failed by five marks and was so disappointed. I wish I had more feedback than what CIMA offer. It’s so off putting now going into my repeat exam next week with a different case – the previous case is still in my head. I’m terrified that I’m going to fail again. If you find out anything about why the pass rate was so low I’d love to hear it! Sinead, by email
days. And Julie got hers in secondary school. She also still used a dinosaur fountain pen she got when she was seven! Donna said her first calculator from her first-ever accountancy job died recently and she still can’t bring herself to throw it away. “It’s just dead and in my top drawer at my current work.” Meanwhile, Marina felt that she is convinced hers brings her luck: “I have had it since 2013 and never failed an exam.” We had fun on Twitter with ‘Umbrellagate’. Training Link’s Lauren Beary was sitting in a meeting with us when she was tracked down by AAT. She had run off with their umbrella and they needed it back – well, it was raining hard out there! We’ve got the proof she had said item – and yes, she is in a pub!
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Male and pale I was disappointed but not surprised to see your photograph of those involved in the Chartered Accountants Ireland/UiPath tie-up (PQ November, page 12). Nine white men, with not a single female
or BAME face to be seen! There’s plenty of people within the accountancy sector who talk a good game, but we’re still a long
way away from being an equal opportunities profession. Paula Smith-White, by email The editor says: With all due respect to those in our photo we tend to agree, Paula. But we can’t change the facts of this particular example – it is what it is.
ARGA can? I agree with Prem Sikka’s views (PQ November ’19) on the Thomas Cook debacle and the FRC’s complicity in it. So will the new ARGA regime change anything? I’m not holding my breath… Name supplied, by email
PQ Magazine Unit 3a, Kingfisher Heights, 2 Bramwell Way, Royal Docks, London E16 2GQ | Phone: 020 7216 6444 | Email: graham@pqmagazine.com Website: www.pqmagazine.com | Editor/publisher: Graham Hambly graham@pqmagazine.com | Associate editor: Adam Riches | Art editor: Tim Parker | Contributors: Robert Bruce, Prem Sikka, Zoe Robinson, Mike Day, Tony Kelly, Phil Gammon, Edward Netherton | Subscriptions: subscriptions@pqmagazine.com | Origination and print services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email admin@pqmagazine.com
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ROBERT BRUCE Regulators taking different paths
There have always been significant cultural differences between corporate regulators in the US and the UK. And it looks as though the divide is rapidly widening. In the UK, new leaders are in place as the old Financial Reporting Council, kept relatively toothless by successive governments, morphs into ARGA, the Audit, Reporting and Governance Authority. Chaos at the heart of the UK government has meant that ARGA has yet to fully take shape, but the signs from the recent unveiling of the updated Stewardship Code are promising. A “world-leading benchmark”, it said. Meanwhile, the venerable US regulator, the Securities and Exchange Commission, is descending into chaos. It hugely successful whistle-blowing scheme is being eaten away lest whistleblowers do actually, well, blow whistles. Not a well-loved activity under the current US President. In the eight years since the SEC upped its game on whistleblowing it has raked in $1.7bn in sanctions from fraudsters and paid out over $325m in awards to whistleblowers. At the same time. the key commissioners who oversee the body, the PCAOB, which regulates the auditing profession, are being replaced. Instead of those keen to take a hard line, appointees who don’t think much of the idea of regulation in the first place are being placed on the Board and the Commission. Arthur Levitt, who chaired the SEC for eight tumultuous years until 2001, said that “independence and credibility” is going out the window. The very idea of regulation is being discredited. Robert Bruce is an award-winning writer on accountancy for The Times
Action needed on diversity The accountancy profession needs to take rapid action to address the diversity gap at senior levels, says the Financial Reporting Council. The vast majority of partner level roles remain in the hands of the ‘pale and male’, and the FRC believes the profession is lagging behind the rest of business when it comes to the diversity of senior management. There is concern too that just one in three UK audit and accountancy firms collect diversity data for their workforce. The FRC emphasised it was also ‘ironic’ that accountancy firms are advising large corporations on their diversity and inclusion strategies
Thompson: time for action
while not doing enough to maximize their own pipeline of future talent and promote women, BAME and disabled employees to the top level of management. The latest stats from the FRC show women make up 46% of manager level roles at audit and
accountancy firms, but just 17% of women rise to partner level. A similar trend can be seen at smaller firms with fewer than 200 staff, where 52% of manager level roles are held by women but just 11% of women hold partner level roles. The FRC said it was encouraging that the industry has a strong pipeline of future talent with women making up 37% of professional body membership, up from 35% in 2014. FRC CEO Sir Jon Thompson stressed: “The business case for improved diversity has been made and now it’s time for the audit and accountancy profession to take further positive action.”
CIMA in the Vale Vale Financial Training is launching CIMA courses in Oxfordshire from January 2020. Both weekend and weekday classroom courses will be on offer. And, as they say in their adverts, there is now “no need to travel to Reading or London to study CIMA”. Vale Financial Training was the brainchild of Liz Hulls and Jo Tuffil, who set up the college in 2011 when the local FE college closed its doors to ACCA courses. Their ACCA cohort this year has included two global prizewinners for the highest worldwide mark in PM and APM. They also offer AAT courses. For more visit www.valefinancialtraining.com
Liz Hulls and Jo Tuffil
Breaking the class ceiling Continued from page 1 commission, which said even when those from working class backgrounds do enter professional jobs they earn on average 17% less than more privileged colleagues. Those from better off backgrounds are almost 80% more likely to be in a professional job than their working class peers.
It is not all bad news. PwC has been ranked the top UK employer in the Social Mobility Employer Index 2019. Created by the Social Mobility Foundation, the index ranks Britain’s employers on the actions they have take to ensure they are accessing and progressing talent from all class backgrounds. PwC was ranked number one for
all AFM sitters. He will answer any question on the AFM syllabus in the lead up to the December sitting. You need register before 19 November by sending a WhatsApp message to +44 (0)7593 644 380, stating your first name and country. Then send your questions on Wednesday 20 November, between 7am and 2pm (UK time).
resources. LDNx is offering two free mocks for each of the 2019 syllabus objective papers. In all there are 120 questions to practice on, with the answer after every question. At the end there is even feedback on whether you would have passed. And, if you like what you see there is an opportunity to buy more questions, for the very reasonable price of £10! • PQ magazine has joined forces with LDNx to allow our readers the chance to get access to one free mock course, using the PQMAG
the work it has undertaken to enable those from lower socioeconomic backgrounds to succeed. Measures taken by the firm include increasing the variety of routes for people of all backgrounds into the firm, engaging with a wide range of schools and universities across the country and, specifically, providing both employment and schools outreach in Bradford – a government-identified social mobility Opportunity Area.
In brief ACCA PM revision classes PQ magazine has joined forces with award-winning London college the Training Place of Excellence to offer two evenings of PM revision for just £20! The ACCA’s PM paper pass rates for the last two sitting were 38% and 41% so we know candidates need all the help they can get. Check out how to sign up on page 22. AFM answers are free Top tutor Sunil Bhandri is offering a fantastic free service to 6
Your free CIMA resources CIMA students looking for new revision support should check out LDNx for some great free
discount code. Check out www.ldnx.co.uk New FM code CIPFA has launched a Financial Management Code in an effort to drive improvement in financial management across UK councils. Local government minister Luke Hall said: “Not only is robust financial management essential to running public services well, taxpayers rightfully expect their councils to use their hardearned money wisely, too.” PQ Magazine December 2019
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PQ news
PREM SIKKA Professional education is not best serving the profession The accounting and auditing failures at BHS, Carillion, Thomas Cook and Patisserie Valerie should encourage scrutiny of professional education. The typical defence offered by audit firms to Parliament has been that they followed the rules. It is as though accountants were mere automatons who don’t think about consequences. Bad habits are acquired during professional education, where the emphasis is on learning official rules. There is little discussion of accounting thought and ideas. Whatever happened to intellectual development? Too many accountants wait for some politburo to give them an official answer. Officially mandated mantras about auditor independence, objectivity, true and fair and serving the public interest are constantly repeated. The belief is that if something is incessantly repeated, and students are forced to regurgitate it, it would somehow assume an aura of truth. No evidence is called for. It is hard to recall any instance when auditors have been independent, since their appointment and fees are dependent upon company directors. It is rare for any auditor to bite the hand that feeds it. Auditors serve the interests of shareholders and that can’t be equated with serving society. At large listed companies shareholders have a shortterm interest; they are speculators and traders. So accounting practices are devoted to serving the interests of speculators. Is that ethical? Reform of accounting education is a necessary step in restoring the credibility of accountancy. Prem Sikka is Emeritus Professor of Accounting at the University of Essex
CIMA pass rates dip A big dip in the CIMA operation case study pass rates – just before the introduction of the new syllabus – is the big news from the latest set of CIMA results. Just 46% of August sitters managed a pass, compared with 60% in November 2018. So what was the reason for the slump? Were August students a ‘poor set of candidates’ (that has been said to us before), were they poorly taught, or were the scenarios unfair? Well, the results issued on the website provide no indication for the slump.
Meanwhile, the management and strategic case study pass rates looked healthy at 64%. Again, both pass rates were down on the May 2019 case study results. Meanwhile, the pass rate for first time E1 sitters also dipped. In June 2018 the first time pass rate was 81%. The current pass rate is 78%. More worryingly are the P1 pass rates. The overall pass rate has dropped from 71% the to 65% this time around. The overall exam pass rate for P1 was just 47%, down from the last set of stats. Students are now CIMA CASE STUDY – PASS RATES wondering why there are Aug 19 May 19 Feb 19 Nov 18 such massive differences in Operational 46% 59% 57% 60% the pass rates at each level. Management 64% 70% 61% 57% One PQ asked us: “How Strategic 64% 65% 58% 60% can there be pass rates of
CIMA OT pass rates Overall First time Total E1 85% 78% 76% P1 65% 50% 47% F1 83% 76% 73% E2 95% 88% 87% P2 71% 54% 49% F2 73% 54% 51% E3 84% 74% 71% P3 76% 59% 54% F3 77% 60% 55% 78% and 50% at the first OT level?” Other readers are just confused about the results. One said: “Can someone explain how the exam pass rate for P1 can be 47%, the overall exam rate be 65%, and the first time pass rate be 50%? Is it me or are CIMA trying to confuse me?”
Avado to stop teaching ACCA
Don’t pollute your results! Exposure to polluted air on the day of the exams lowers students’ marks, says new research. The study of 2,400 central London university students sitting 10,000 papers found high pollution levels equals a drop in scores. When pollution levels breached World Health Organization limits (that’s PM10 – 50 micrograms per cubic metre) students scored 2% fewer marks than those in halls in cleaner areas. Sefi Roth, from the London School of Economics, carried out the research, and said you should limit your outdoor activity on polluted days and even take less polluted routes to the exam venue.
Following the December 2019 exam sitting, AVADO Learning Ltd will no longer be offering the ACCA qualification. Any ACCA learning currently under way for the December 2019 exam period is not affected by this change, and AVADO will continue to offer the AAT qualification. AVADO are committed to supporting ACCA learners through the transition in their learning journey. ACCA apprentices and students with extended packages will be transferred to other training providers, and should already have been contacted by AVADO directly. If you have any questions about the impact on your studies contact the AVADO Student Success team on +44 0203 893 5405 or online at www.avadolearning.com/enquiryform/
Tax watch Tackling global avoidance New tax rules aimed at making global firms pay corporation tax in the jurisdiction they ‘do business’ have been published by the Organisation for Economic Co-operation and Development (OECD). The proposals would scrap the centuryold tax rules and provide governments with the power to tax the big technology companies, such as Apple, Facebook and Google, who have been accused of mass tax avoidance. The OECD 8
proposal – now open to public consultation – would re-allocate some profits and corresponding taxing rights to countries and jurisdictions where multinational enterprises have their markets. The OECD said that it would ensure the multinationals conducting significant business in places where they do not have a physical presence are taxed, with the new rules stating where tax should be paid and on what portion of profits they should be taxed. OCED secretary-general Angel Gurria
said: “We’re making real progress to address the tax challenges arising from digitalization of the economy, and to continue advancing toward a concensusbased solution to overhaul the rules-based international system by 2020.” VAT on obesity Increasing VAT on junk foods that are high in salt, sugar or fat is just one of the key recommendations from the outgoing chief medical officer,
Dame Sally Davies, to help tackle the scourge of obesity. In a new report she says the government must not shy away from regulation. The report explains: “…the playing field is not level – it is too easy to make money from selling unhealthy food and too hard to make money from selling healthy food.” Dame Sally wants the sugar tax programme, already placed on soft drinks, to be extended to cereals, yogurts and cakes if 2021 targets to reduce obesity are not met. PQ Magazine December 2019
news PQ
It’s compulsory – so get over it! ACCA APM exam sitters still seem to be caught out by the fact that section B of the exam is compulsory, says the September Examiner’s report. The examiner explained that there is a feeling among markers that PQs sitting this paper have not prepared to answer questions across the whole syllabus! The first step to passing APM is to have a good grasp of the basic knowledge, and for September many students struggled with value chain analysis (Q1) and risk and uncertainty (Q3). When it came to the AAA exams candidates were accused of merely listing points without applying their knowledge to the scenario. The examiner felt there is a lack of basic double entry skills, with candidates often confusing assets with liabilities, or assuming that if assets are overstated profit must be understated. • Check out our more detailed look at AA, PM and FM examiner reports on page 18.
Lying accountant convicted Chartered accountant Badal Arun Hindocha, who told his internet date that he was dying of stomach cancer so he could swindle £4,300 from her, has received a suspended prison sentence. Hindocha told Tina Mistry he needed the money because he had missed work to attend hospital appointments, messaging her: “If I don’t solve this problem, I’m dead.” After he received the money he tried to break contact with Mistry, but was caught when he went back
onto the same internet dating website where they first met. The defendant admitted fraud at Croydon Crown Court and was sentenced to nine months in prison, suspended for 18 months. Hindocha (pictured) was also ordered to pay Mistry £6,000 in compensation. In his defence, his lawyer Imran Khan told the court that the money had been used to install a downstairs toilet at his disabled parents’ home.
Audit ‘needs to attract brightest people’ The audit profession adds real value to society and needs to be a career that attracts the brightest and best, explained Sir Donald Brydon in his first public meeting since starting his review of the audit profession. He told a recent conference hosted by the ICAEW: “The whole trust in our corporate sector depends on people believing the information they are given and you [auditors] have a unique position to call out when that information is not in accordance with reality. What
Where are the auditors?
could be a higher purpose than the purpose that audit serves?” Sir Donald said he was worried that too much blame was being pinned on auditors for the recent high-profile corporate failures. He was troubled that in the current mood there is a “shotgun aimed at auditors every time there’s a corporate problem”. Sir Donald felt it is not auditors that cause companies to fail – it is the result of the actions of directors.
Make a difference Represent students in your area Join your local ICAEW student committee. Be the voice for students in your area and organise an annual programme of events. To find out more email Mauro.Lucrino@icaew.com
PQ Magazine December 2019
9
PQ news
ZOE ROBINSON A picture paints a thousand words
There was an interesting poll recently that asked accountancy students what method of study they found the most effective: reading, preparing notes, answering exam questions or listening and drawing pictures (eg mind maps). It was a close call, but making notes, reading and answering questions were the most popular; drawing pictures was ranked towards the bottom. In fairness, it didn’t explore the type of note making and the term drawing pictures may have sounded overly simplistic. Yet drawing an image next to text is one of the most powerful methods of encoding information. In 1971, Allan Paivio discovered that our brains can process information from two independent although interacting channels, visual and verbal, at the same time. In fact, you learn faster and make fewer errors when using visual and verbal together, as opposed to either one on its own. Please don’t confuse this with learning styles and the often wrongly cited comment that someone is a visual learner. This is about how our brain encodes information, not a preference for one over the other. In practice, this means students should continue to use all of the above methods. But perhaps, when making notes, think about what image will best support the narrative. An example might be sketching a timeline to show how tax is carried both forwards and backwards, or drawing a picture of a bond showing the coupon rate and contrasting with the yield. Zoe Robinson is Learning and Programmes Director at Kaplan Financial
Are you one of the 36%? For this September’s ACCA exam sitters ‘36’ was the (not so) magic number, with the AAA, AFM and ATX exams all coming in with a pass rate of 36%. The other Strategic Professional option paper, APM, was lagging behind on 31%, despite the fact that sitters told us this exam was “so much easier than the last two exams”. The big surprise will be the jump in the advanced audit paper to that 36%. You have to go back to December 2015 to find a higher pass rate (it was 39% then). Those sitting advanced tax will, however, be disappointed. It had a pass rate of 43% in June, but it has dipped this time around. The Applied Skills audit paper also had a 36% pass rate, the
lowest of the applied papers. And the Performance Management pass rate stayed low, on 41% this September. Meanwhile, the highest pass rate was achieved by LW sitters – at 85%.
ACCA SEPTEMBER 2019 PASS RATES: AB 80%; MA 63%; FA 69%; LW 85%; PM 41%; TX 51%; FR 46%; AA 36%; FM 50%; SBL 49%; SBR 52%; AAA 36%; AFM 36%; APM 31%; ATX 36%
CIMA updates its Code of Ethics CIMA has ‘refreshed’ its Code of Ethics to help today’s “finance professional deal with the ethics and independence challenges in the modern digital world”. Updates include new material emphasising the importance of capturing and understanding relevant facts and circumstances
when exercising professional judgement. There are also revised provisions on offering and accepting inducements, including gifts, hospitality and entertainment. CIMA’s Andrew Harding (left) explained that management accountants have a responsibility to act ethically, foster ethical management processes,
Play with HTFT Move over Netflix: top tuition provider HTFT Partnership has introduced a new streaming service for CIMA PQs – HTFT Play! Students will be able to catch up with their studies, stream topic recordings, and test their exam readiness with the new innovative service. On offer are purpose built exam-style practice assessments (Proficency 1 and Proficiency 2), and
Suspicious activity BBC Panorma recently accused EY of covering up evidence of smuggling and money laundering by a major organised crime gang. The story involves selling gold bars to the Kaloti refinery in Dubai. Both EY and Kaloti have denied any wrongdoing. Lead auditor for EY in Dubai in 2013, Amjad Rihan, told the programme makers that he wanted to report the suspicious activity at the time. But he claimed that his bosses reportedly watered down reports and told him not to tell the authorities. This means that EY did not only fail to report the crime, it could be accused of covering it up, too. 10
How do you make your ACCA study and revision more palatable?
In all, 99,000 students sat 123,000 exams this time. A further 51,269 exams were taken on demand between 1 July and 30 September 2019 – a 9% increase in exams year-on-year. ACCA said the pass rates for the SBR exam (52%) was the highest so far. It also pointed to the improved AAA results, saying it has enhanced its support for this exam. In all some 3,646 PQs completed their final exams to become ACCA affiliates.
and have a duty to act in the public interest. He stressed the revised code is now more transparent about when CIMA will take action to enforce breaches. The revised code comes into force on 1 January 2020. For more information about the updated CIMA Code of Ethics, and to access resources, go to https:// www.cimaglobal.com/Professional/ Ethics
topic Boxsets: a series of bite-sized topic recordings covering the whole syllabus. HTFT Partnership’s James Taylor said: “We are really excited about HTFT play and the flexibility it offers. The ability to stream a Boxset of recordings or test your exam readiness with our Proficiency assessments, really puts the student in control”. Both the OTs and case study exams are covered. For more go to www.htftpartnership.co.uk/ courses/cima/htftplay/ or check out our giveaway on the opposite page.
Increasing market share The Big 4 accountancy firms have tightened their grip on the UK audit market, according to new research from the FRC. Its report shows they increased their combined ‘total fee income’ by 4.7% to £10.95bn and ‘audit fees income’ by 1.7% to £2.1bn. By contrast, total fee income at non-Big 4 public interest entity audit firms fell by 8.1% and audit fee income fell by 6.3%. The Big 4 now audit all FTSE 100 companies, up from 96 in the previous year. Slow progress A new report shows the UK is making little progress on improving gender diversity in the boardroom. The Deloitte study found UK boards now have less than a quarter of female
members (22.7%), compared with 20.3% when the study was last published in 2017. Women hold just 16.9% of board seats globally. It was also discovered that firms with female chairs or CEOs have almost twice as many women director as those led by men. Where did it go? Some 23% of the people in the UK spend more than half their income on the day it is paid into their account says new research from KPMG. Perhaps unsurprisingly, over half (52%) of people in the UK are forced to source extra cash to see them through to their next payday, with most turning to credit cards (21%), overdrafts (13%) and borrowing from their partner (12%). PQ Magazine December 2019
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PQ tech news
MIKE DAY Staying secure in a digital world
My role includes meeting accountants in practice on a regular basis and a topic that is (rightly) always on the agenda is security. In this age of the Cloud, I often start the conversation by reiterating that staying secure is our collective priority. Of course, software vendors have a core responsibility. But I have sadly come across statements like “I buy things using my credit card on the public wi-fi at the station all the time” and “yes, but this two-step authentication makes it harder for us to share passwords across the practice”. So for each software innovation like biometric touch ID fingerprints on your mobile phone app, through to geo-location to identify the exact site of recent login activity, there is a corresponding dose of applied common sense. And as boring as it may seem, the good old-fashioned advice about passwords is as important today as it ever was; change them every three months, use a different password for each login (as much of a pain as that can be), don’t reuse passwords and use alphanumeric with special characters like @ or &. It’s a personal choice, but I spend £2.50 on a password manager, as a different password for each login just makes me feel better about life. And it’s recommended that any data passed between your company and the Cloud is encrypted. You can do this through a virtual private network (VPN), which ensures all users benefit from a standard level of encryption and they are often inexpensive and easy to implement. Mike Day, Director, UK Education Sector, Xero
Sustainability is a game! A new game, called Accounting Bissim, has been launched by a group of academics to encourage accountancy students to think about sustainability when making business decisions. De Montfort University’s Darren Sparkes, along with Matt Davies and Lisa Weaver, have developed the game. In a business simulation students act as the board of directors running a robot manufacturing business in a competitive marketplace, making decisions and analysing results. They can make decisions on a range of sustainability issues such as choosing ethical suppliers, cutting waste, reducing CO2 emissions and power usage, eliminating water pollution, and even the level of pay
and training of their staff. The winning team is the one that is judged to have left the business in the best position for the future, by creating a long-term sustainable
business rather than concentrating on short-term profits. The game was recently a finalist at the Finance for the Future awards.
NatWest pilots biometric credit card The first biometric fingerprint credit card created by a UK bank has been issued by NatWest. The bank is piloting the new technology with 150 customers, in partnership with Mastercard and Gemalto. The bank has previously piloted biometric debit cards, but this is the first time credit cards have been issued. The cards will offer
contactless payments using fingerprint verification for transactions up to £100, an increase on the current £30 limit. As well as retaining contactless functionality, the fully integrated card can be used as normal in ATMs and for online shopping. Customers can register their cards in the comfort of their own homes using a plastic sleeve.
Once a digital fingerprint is locked onto a card, it cannot be changed. The user’s biometric data never leaves the card, is never shared with the merchant or bank, and no fingerprints are stored in the cloud. NatWest’s Georgina Bulkeley, said: “This is the biggest development in card technology in recent years and not having to enter a PIN not only increases security but makes it easier for our customers when paying for goods or services.”
Executive is scammed by boss’ fake voice Cyber scammers have managed to part a top UK energy executive with £200,000 of his company’s money – and they did it using artificial intelligence that mimicked his boss’ voice! The criminals managed to trick
the unnamed executive into transferring money to an Hungarian bank, following a phone call that appeared to come from his boss at the German parent company. This is the first reported case of the use of deep fake technology.
The scam only broke down when the executive received a third call from the fake boss while he was on the phone to the real one. Europol’s Philipp Amann said that similar frauds may have happened but gone undetected.
Tech briefs Finance app banks £2m A new app that automatically cancels subscriptions when the free trial period comes to an end has been launched in the UK. Free Trial Surfing, which already has 10,000 users in the US, uses Visa cards in partnership with a major bank to stop people getting stung by unexpected charges. API streaming first Companies House has launched a new streaming application programme interface 12
(API), designed to help users access of real-time information about companies in a quick and easy way. The streaming API, a government first, allows users to tap into specific ‘stream’ data from the register and immediately know about updates. The service pushes
information to users as it changes, through a constantly running connection. There are four different types of information customers can access currently: • Company information. • Filing history. • Charges (mortgages). • Insolvency cases. Drone stays grounded West Sussex County Council got into trouble recently for spending £36,000 on a drone that has not been flown once for official
use. The drone was bought 18 months ago, but after paying £20,850 for the drone and training 15 operators it is still waiting for its first job. The issue is that the council needs permission from the Civil Aviation Authority to fly a drone within 150 metres of a congested area or within 50 metres of people and property. PQ Magazine December 2019
Accountants will save the planet! Thursday 21 November 2019 The Business School, London South Bank University, SE1 0AA Our packed one-day conference is focused on green accounting issues. Hear from renowned experts. Network with other professionals. Join the discussion. • Is it time for everyone to declare a climate emergency?
If you’re interest e green ac d in counting issues, t his is to be mis not sed!
• How can we maximize non-renewable resources as accountants? • Is it time to get tough with accountants over money laundering? • The moral tax maze: good v evil Plus a stream dedicated to developing your career. Keynote speech from author and Professor Jill Atkins
Limited tickets available: accountants-save-the-planet.eventbrite.co.uk
Winner of Innovation in Accountancy PQ Awards 2019
PQ study advice
Engage your brain Engaging with your study content is key. But if you find things are going in one ear and out the other, try these techniques, says
I
t used to be thought that people have distinct learning styles, but in recent years it has been suggested that a combination of various approaches is beneficial for everyone. What is essential is that you actively engage with content. We’ve all been wowed by a fact in the past, only to forget it moments later – this is because your brain hasn’t digested the information correctly, so it hasn’t been filed away in your memory. Here are some tried, tested and truly effective
techniques that can help you not only retain information, but also put it to good use. 1. Make notes when listening to lectures. The physical process of taking notes reinforces the information that your brain is taking in. You can refer to your notes later when using other study techniques – such as creating mind maps or condensing information into flash cards for revision. 2. Don’t just sit and watch a video – stop and start it, to digest small bits of information, and
make sure you try out the calculations you see on screen for yourself. Write out answers to questions – this helps your brain condense information into useful summaries. 3. Answer every question. Don’t be disheartened if you come to a question in a practice paper but don’t know the answer. Attempting to answer – even if you expect to get it wrong – is a great way to fire up your brain cells. It’s a foolproof method of studying and you may surprise yourself with how well you do. If you don’t get it right, take the time to understand where you went wrong – and make a note of it – so you can try again. 4. Engage with your peers. If you’re stuck, there’s no harm in asking for help – whether that’s from your classmates (who you may find are struggling with the same question), tutors or colleagues. Often when we need help, explaining the problem to someone else helps our brain understand the context of the issue, so you may even end up answering your own question. Of course, if there’s no one around, you can always go online – a quick Google search can lead you to a myriad of online groups and forums who most likely will be discussing similar questions, practice tests and exams. 5. Become the teacher. A great way to test your own knowledge is to explain what you’ve learnt to someone else. Explaining out loud helps your brain order information in a useful way. It doesn’t matter who you talk to – friends, family or even the dog! PQ • Cath Littler is the Head of L&D (Accounting) at Mindful Education
A leading qualification for a changing world Our Ethics and Professional Skills Module focuses on developing the complete range of ethical and professional skills employers told us they need. Taught via real-world business situations, you will cover ethics and professionalism, personal effectiveness, scepticism, leadership, communication and interpersonal skills. Although you are not required to complete if you have already taken the current Professional Ethics Module, it will give you the ideal grounding to start your Strategic Professional Exams so you may choose to sit this module as well.
To register for this module visit: future.accaglobal.com/epsm
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PQ Magazine December 2019
Awards 2020 PQ
TIME TO NOMINATE
Do you know someone who deserves one of our coveted PQ awards? Then nominate them now!
Current NQ of the Year Sophie Medwell
AWARDS CATEGORIES
• • • • • • •
PQ OF THE YEAR NQ OF THE YEAR DISTANCE LEARNING STUDENT OF THE YEAR STUDENT BODY OF THE YEAR APPRENTICE OF THE YEAR ACCOUNTANCY BODY ACCOUNTANCY COLLEGE – PUBLIC SECTOR
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ACCOUNTANCY COLLEGE – PRIVATE SECTOR
• • • • • • • • • •
ONLINE COLLEGE LECTURER – PUBLIC SECTOR LECTURER – PRIVATE SECTOR STUDY RESOURCE INNOVATION IN ACCOUNTANCY BEST USE OF SOCIAL MEDIA TRAINING MANAGER/MENTOR ACCOUNTANCY TEAM ACCOUNTANCY PERSONALITY EDITOR’S SPECIAL AWARD
T
he PQ awards nomination deadline might be in late December, but it will be Christmas before you know it, and you could find you have missed the chance to attend the best accountancy awards ceremony in town! Come on, surely you have a favourite tutor or top mentor who deserves to be walking down the red carpet on our awards night? All we need is 250 words on why you/your nominee should win at the PQ magazine awards 2020. Remember, there is nothing wrong with nominating your team (Accountancy Team of the Year) or even yourself (PQ of the Year) – now is not the time to be shy. The PQ awards really are a unique opportunity to celebrate all that’s good about the accountancy profession.
Our awards are totally independent – our judges make sure of that. They sieve through every entry before shortlisting the five finalists in every category. You can download the nomination form at www.pqmagazine.com. Just click on the ‘pq awards’ bar on the home page. Or just email us your entry direct – to awards@pqmagazine.com. But please make it crystal clear which category you are entering. You can also post your entry to The Editor, PQ magazine, Unit 3a Kingfisher Heights, 2 Bramwell way, Royal Docks, London E16 2GQ. Those 250 words are the key to success. You can also add supporting material to help your entry, although please don’t go too overboard here. Less is more in many cases! Finally, do remember that the deadline for nominations is Friday 20 December 2019. PQ
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PQ Magazine December 2019
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PQ study advice
Get on with it! Pantelis C. Fouli has some advice for students on mental wellbeing and how to study
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et’s think backwards. The idea is to start with the ultimate goal (in your case to qualify as an ACCA) and then figure out the steps you need to take to get there. We could tackle this challenge from many angles, but I would like to focus on two – better nutrition and less screen time. Technology and sugar are two things I feel our culture pours into our kids almost without limits. This applies to us as well. The brain uses more energy than any other organ in the human body and glucose (sugar) is its primary source of fuel. But what happens when the brain is exposed to an excessive amount of sugars? Too much sugar impairs both our cognitive skills and our self-control. For many people having a little sugar stimulates a craving for more. Sugar has drug-like effects in the reward centre of the brain. Wholegrain foods (carbohydrates) will stave off hunger. Examples include porridge and
wholemeal bread. Combine a starchy carbohydrate (oatmeal) with a protein (eggs) and that will help keep blood sugar levels balanced, which is essential for mood and concentration for your studies. Mental wellbeing In any area of life we need to protect our mental wellbeing. Again, we could tackle this from many different angles, but I want to focus on one: technology, or more specifically, less of it. I recently read a book called ‘24/6: The Power of Unplugging One Day a Week’, by Tiffany Shlain. In the book she explores how turning off our screens one day a week can work wonders for your brain, body, and soul. We start off with the best intentions with our revision programme. We attempt to build structure around our studies, but somewhere along the line we lose focus – and one of the biggest reasons is the smartphone. It’s a given that we should not have our smartphones close by if we are in a study
session. We will not go into that, but if we do make time to disconnect one day of the week, is this a radical act of protection against the always-on, always-available world? Just do it I am privileged enough to coach students in my free time – via LinkedIn direct message and then email (it’s my way of giving back). The first question I am nearly always asked is, how did you find time to study? Here is the secret, this is a BIG one. The secret is simple: just study. They see I am an early riser via my LinkedIn posts; again they ask the question, how do you manage to get up consistently early each day? Simple: I just get up. Just get up, start that revision. The situation will never be perfect. People tend to overthink and philosophise about every single scenario – they do that to avoid the inevitable. (You can connect with me via LinkedIn – www.linkedin.com/in/ pantelisfouli – but please mention in the personal message that you are an ACCA student.) My favourite quote is from one of the most decorated Navy Seals alive. It is: “Discipline equals freedom”. You need to set the rules for your life in order to make it possible to keep disciplined, day in day out. To stay committed to your studies, your classes, whether online or in class. This will eventually give you the freedom to do what you have always wanted – and that it to be a ACCA qualified. PQ • Pantelis C. Fouli is ACCA qualified and an ACCA Advocate and Student Mentor
It’s what we call
digital first Give your career the ultimate flying start with the business qualification that takes you where you want to go. Register now at accaglobal.com/pq
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PQ Magazine December 2019
sustainability PQ
We need climate change
accounting now Richard Murphy argues that sustainable cost accounting is vital if we are to tackle the global climate emergency
I
t is very welcome that Mark Carney has, as director of the Bank of England, acknowledged that $20 trillion (£16 trillion) of the world’s financial assets might be at risk from climate change. It is also good that he has said “disclosure by companies of the risks posed by climate change to their business was key to a smooth transition to a zero-carbon world as it enabled investors to back winners”. Despite this, however, the world’s accounting standards setters have not, as yet, tackled this issue. That task has instead fallen to the Mark Carney-led Bank of International Settlements-promoted Task Force on Climate-related Financial Disclosures (TCFD), who have suggested “voluntary, consistent climate-related financial disclosures that would be useful to investors, lenders, and insurance underwriters in understanding material risks”. I direct the Corporate Accountability Network (CAN), which thinks that this approach inadequate. That’s because this issue is too important to be considered outside the framework for financial accounting, which the TCFD necessarily does; too significant to be voluntary; and of interest to a much wider range of stakeholders than the TCFD approach addresses. Why the climate change reporting needs of civil society, regulators and governments are, for example, ignored by the TCFD, is incomprehensible to us. As a result the Corporate Accountability Network thinks that a different approach is required.
Sustainable cost accounting The Corporate Accountability Network suggests that we need a mandatory approach to climate change accounting. It calls this approach sustainable cost accounting (SCA). To achieve this goal sustainable cost accounting would have to be an accounting standard that all large companies would, ideally, have to comply with, but it could be introduced by countries in isolation if they so wished. The essence of sustainable cost accounting is simple. It would require PQ Magazine December 2019
that every large business prepare a plan to show how it will manage the consequences of climate change. This plan would have to state how it might become net carbon-neutral by a specified date, both within its own business and within its supply chain. That plan would have to be specific as to what the business must do to achieve this goal, or alternatively state that this is not yet known. A precautionary principle would apply: in other words, the plan could only rely on those technologies now known to exist and that have been proven to work. In addition, the plan would have to show where the impact of the changes would arise geographically: it would be unacceptable to solve the problem in some countries and not others, or to export carbon risk to developing countries. That plan would then have to be costed. The requirement of sustainable cost accounting would then be that the full cost of the change to being net-zero carbon emitter should be provided for in the accounts of the companies to which sustainable cost accounting would apply at the time that it was adopted, which could be by 2022 if sufficient urgency was applied to this task. If this provision resulted in a company being shown to be insolvent then the company would have then have to show how their solvency might be restored. This could, for example, be by raising new money for investment in the company, but they would have to convince their auditors that this was
Richard Murphy is: • Professor of Practice in International Political Economy, City, University of London • Visiting Professor, Anglia Ruskin University Global Sustainability Institute • Director, Corporate Accountability Network • Co-Founder, The Green New Deal Come here Richard speak at our ‘Accountants will save the planet’ conference in London on 21 November. See page 13 for details
possible. We stress: we think that all the sustainable cost accounting data would require financial audit since the intention is to include it in financial statements. And, if a company could not show how it could fund the cost of the transition, or it could not estimate the cost of completing that process, or it concluded that it simply could not make the transition, then we suggested that it would have to be declared ‘carbon insolvent’. This would not mean that it was financially bankrupt. But it would make clear that the company was not going to survive into the era that we are going to have to live in. As a result an orderly winding up of its affairs would be required, and carbon insolvency administrators would have to be appointed to achieve that goal. Benefits of sustainable cost accounting Sustainable cost accounting will achieve four goals. It will bring the biggest issue facing companies today into financial reporting. As such it will make clear which businesses can and cannot survive into an era of sustainability. It will as a result redirect capital to those best able to use it. And by providing data geographically it will enable all the stakeholders of a business to plan their future relationships with the companies with which they engage. Sustainable cost accounting is the accounting for the climate crisis that we now need. There is no other issue more important in accounting. PQ • Richard Murphy FCA 17
PQ ACCA exams
YOUR REPORT CARD We take a good look at the Examiner’s Reports for the Applied Skills papers with the worst pass rates for the September and June 2019 exams. These reports are a very valuable resource that you really should be reading Financial Management (FM) SEPTEMBER PASS RATE – 50% The two questions picked out from section A were the dividend growth model and interest rate risk. When it comes to section B, the examiner keeps reiterating that if you are asked to select two correct statements then they need to see two – there is no partial marking! There also seems to be a problem with number entry. The examiner says: “If a number is being requested in millions, there will be an ‘m’ after the number entry box. If a candidate puts a full answer of say 13,000,000 in the box rather than 13, this will be marked as incorrect.” The examiner is concerned about the number of candidates who are unable to correctly calculate the cost effects of introducing accounts receivable factoring or offering an early settlement discount. Please note that offering an early settlement discount will not increase the cash operating cycle! When it comes to business finance there is a worry that some sitters use cum dividend share prices in the dividend growth model, rather than ex dividend prices. The FM examiner says students struggle with the uses and limitations of the valuation models, rather than applying the models to produce valuation. Derivatives is another area where students are “not strong”. For section C, candidates at the September diet were presented with questions drawn mainly from the June questions (see right) and the following: • The nature, elements and importance of working capital. • Adjusting for risk and uncertainty in investment appraisal. • Sources of finance and their relative costs. • Capital structure theories and practical considerations. •Finance for small & medium sized entities (SMEs).
JUNE PASS RATE – 46% The examiner felt the performance in June was generally satisfactory. Summer candidates were well prepared in the subjects that feature regularly, such as performing a discounted cash flow appraisal of an investment project. However, they seemed less prepared when it came to determining working capital needs and funding strategies and estimating the cost of capital. In section B, one question that caused a problem asked candidates to identify the effects on the company of changing the working capital financing policy from aggressive to matching. Students were unable to correctly forecast a quick ratio for a company, because they did not factor sales revenue growth into their revised receivables figure. A number of sitters also struggled with the question on portfolio theory and its relationship with the capital asset pricing model. Portfolio diversification does not reduce systematic risk! The examiner wanted future candidates to note that if a question asks for the market value of loan notes, but not the total value, then the answer must be given as the market value for one nominal unit of the loan notes. FM candidates are not strong on questions featuring derivatives. In June there was a question on testing the characteristics of options and future contracts. The section C questions in this diet were drawn mainly from the following areas: • Management of inventories, accounts receivables, accounts payable and cash. • Determining working capital needs and funding strategies. • Investment appraisal techniques. • Allowing for inflation and taxation in DCF. • Specific investment decisions. • Sources of and raising business finance. • Estimating the cost of capital.
Audit & Assurance (AA) SEPTEMBER PASS RATE – 36% The examiner is pleased that almost all candidates attempted all 15 questions across the three OT cases. Section A in the September 2019 exam included, but was not limited to, questions on the following areas: • Professional ethics and the application of ACCA’s Code of Ethics & Conduct. • Substantive procedures, including bank and cash, share capital and inventory. • Audit finalisation & review. • Auditor’s reports. The examiner said that for section A it is imperative that you ensure your knowledge of the IASs, relevant financial accounting and important areas of the syllabus such as auditor’s reports. Questions may test specific details of examinable documents including IASs, the code of ethics and CG code. The September report reiterates the points made in June, that candidates can’t clearly explain the implications of deficiencies (see below). Similarly, a general knowledge of substantive procedures doesn’t help if you can’t tailor your answer to specific issues. JUNE PASS RATE – 39% As with previous sessions large numbers of AA candidates did not explain how each issue can impact on the audit risk, and therefore were not awarded the second 0.5 mark! To explain audit risk, the examiner said you MUST (it was put in bold in the report) state the specific area of the financial statements impacted with an assertion (eg cut off, valuation, etc), or a reference to under/over/misstated, or a reference to inherent, control or detection risk. Internal control questions remain highly examinable and performance in June 2019 was mixed. In common with previous sittings many candidates did not clearly explain the implication of the deficiencies. The examiner said: “It is important that the explanation fully details the impact to the company.” There is also a call for PQs to strive to understand substantive procedures. Just learning a generic list of tests will not translate to exam success. In this session there was also a question focusing on key audit matters (KAM). Performance here was ‘very disappointing’. In particular, a number of candidates demonstrated a lack of understanding of the appropriate use of an emphasis of matter paragraph. Other candidates just focused on materiality and modified auditor’s reports. 18
PQ Magazine December 2019
ACCA exams PQ Performance Management (PM) SEPTEMBER PASS RATE – 41% The examiner says that exam technique is an important aspect of success in this exam. Never answer the question that you want rather than the one you are given. In section B, the range of topics covered in the September 2019 exams were: • Life-cycle costing. • Pricing. • Variance analysis. • Throughput accounting. • Short-term decisions. Candidates were presented with questions drawn mainly from the areas of: • Transfer pricing. • Limiting factor analysis. • Performance measurement. • Cost volume profit (CVP) analysis. • Budgeting. Transfer pricing remains unpopular with sitters, says the examiner. Take a look at Portable Garage Company (March/June 2018) sample questions for help. While candidates seem well prepared on budgeting, the examiner would like to see an ability to discuss the beyond budgeting approach. JUNE PASS RATE – 38% The PM examiner knows that transfer pricing questions are never popular candidates. And while PQs seem able to calculate the very basic transfer price for one division, as soon as they have to calculate something that involves splitting out a total overhead cost into its fixed and variable components they seem stumped!
Many students also seem confused when asked to calculate and discuss a suitable transfer price. Some June sitters seemed to panic over the short-term decisions question, and did not even try to look for the easy marks – the examiner said there were plenty of these. When it comes to the balanced scorecard candidates need to understand the difference between a goal and a measure. A goal is an objective and should begin with the word ‘to’. If you are asked to explain the advantages and disadvantages of a performance measure then the examining team wants to see an explanation, not bullet points. Finally, for budgeting you must be ready to discuss the budgeting approach in relation to the organisation in question. Try to avoid a list of generic points. Topics covered in section B of the June 2019 exam were: • Cost volume profit analysis. • Activity based costing. • Target costing. • Variance analysis. • Decision making under risk and uncertainty. • Budgeting. For section C, candidates were presented with questions drawn mainly from the areas of: • Transfer pricing. • Short-term decisions. • Variance analysis. • Performance measurement. • Divisional; performance measurement. • Budgeting.
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PQ Magazine December 2019
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PQ ACCA December tips
Our friends at BPP provide their ACCA exam tips for December 2019 PM For sections A and B it’s simple – study everything! All areas of the syllabus can be tested here. For section C, make sure you study budgetary systems, planning and operation variances, mix and yield variance and evaluation of the company performance (whole and divisional). Don’t forget you are sitting a PM exam, so be prepared to evaluate some performance. You are strongly advised to plan your answers to section C questions properly, before you start typing. Always make reference to the scenario in your answer – it’s where the marks are. The exam will be about 40% calculation and 60% discussion, meaning you won’t pass just with the numbers – interpretation and application are crucial, especially in section C. TX In section A, expect at least a couple of the OTs to be devoted to the administration of income tax and corporation tax. Make sure you are comfortable with these questions. Other topics you should know well must include: • Due dates for the payment of income tax (payments on account). • Due dates for the payment of corporation tax (instalments for large companies). • Filing dates for the income tax and corporation tax returns. • Penalties and interest for late payments. Other subjects likely to come up are: • VAT rules on registration, impairment loss (bad debt) relief, and the SME schemes relating to cash accounting, annual accounting and flatrate schemes. • Inheritance tax due on lifetime transfers both in the donor’s life and on death. • Statutory residence tests for individuals. • Identification of groups of companies for corporation tax loss reliefs and gains. • Trading loss reliefs for both companies and sole traders. Section B questions will be similar to those in section A. In section C, you will be faced with longer, constructed response questions with scenarios and much more open requirements. At least 50% of your revision time has to be spent answering the section C questions in the practice and revision kit, to build up your confidence and speed. To maximise your marks here:
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• Remember to learn your income tax and corporation tax pro formas. • Calculations that require no more than two or three entries on your calculator can be included on the face of your pro formas (eg time apportioning a salary). Calculations that are more complex (eg company car benefits) need separate workings that are properly referenced (W1, W2, etc) and have a heading. • Actually attempt the narrative parts of the requirement – aim for as many sentences as there are marks, with each sentence containing a technical point. Keep your paragraphs to no more than three sentences. • In both numerical and narrative answers leave plenty of the space on the page. So in pro formas leave a gap between each line (you may need to add something in). Show working DOWN the page, rather than ACROSS the page – it makes them easier to mark. In narrative answers leave a line or two between each paragraph, in case you remember something later in the exam. Well-spaced answers are also easier to mark. We know the two longest questions will focus on income tax and corporation tax. These are likely to include the following: • Employment benefits. • Property income. • Relief for pension contributions. • Adjustments to profit to arrive at trading income for both companies and sole traders – in past sittings we have seen a number of questions in which you have to correct errors in computations included in the scenario. • Capital allowance computations.
FR The 15 two-mark OT questions will test the syllabus and should include several on consolidation and interpretation of financial statements. Expect a few questions on non-core areas (eg inflation, specialised entities). There are two 20-mark questions, one covering interpretations and the other preparation of financial statements. One question is likely to be in the context of a single company and one in the context of a group, so you could have a single company interpretation and a groups preparation, or vice versa. Accounts prep questions may include extracts or standalone calculations, or full statements of profit or loss and other comprehensive income, and/or statement of financial position. Both questions will cover the accounting for items from other areas of the syllabus. They may include a short separate part with a statement of changes in equity, a statement of cash flows extract, earnings per share calculation, or linked written topic. Any consolidation questions would include one subsidiary and often an associate, with adjustments – eg fair values, deferred/ contingent consideration, PUP on inventories/PPE, intragroup trading and balances, or goods/cash in transit. A single entity question could be preparation from a trial balance or restatement of given financial statements, with the usual adjustments for depreciation, revaluation and current/ deferred tax (including deferred tax on revaluations); plus a mixture of adjustments on other syllabus areas, such as leases, substance over form issues, financial instruments (change in fair value or amortised cost), share issues, government grants, inventory valuation, revenue recognition, or construction contracts. AA There are three mini-case style scenario based questions, each with five two-mark questions based on the scenario (total 30 marks). Each mini-case question will test single topic areas of the syllabus, and so will either test syllabus area A, B, C, D or E. Expect questions in section A to focus on syllabus areas A and E. All three questions in section B will be broken down into sub requirements and be scenario based. The majority of marks in each question will test syllabus areas B, C and/or D. Area expected in Q16 to 18 include: • Audit planning. • Audit risk (identification and explanation of audit risks from a scenario and explanation of
PQ Magazine December 2019
ACCA December tips PQ the auditor’s response to each risk). • Internal audit. • Internal controls (identification and explanation of deficiencies in internal control and the recommendation of suitable internal controls or description of tests and controls). • Audit procedures (both substantive procedures and tests of control). You should always think about how you will present your answer – try to use a tabular format in your solutions where relevant. Also pay attention to the verbs. For example, ‘explain’ requires a sentence and will score one mark if properly explained, whereas the verb ‘list’ simply requires you to list out information with no further explanation, and this will score 0.5 mark per point. FM Section A is 15 MCQ/OT test questions worth two marks each. Questions will often be knowledge based and will balance out the questions in section B and C, to make sure that all aspects of the syllabus are examined. A good number of these questions will test your understanding of financial management and objectives (ratio analysis, the concept of shareholder wealth), as well as the economic environment and financial institutions topics (financial intermediation, fiscal and monetary policies). The efficient market hypothesis is likely to be tested here, too. Commonly tested areas in section B are working capital management (the operating cycle, the impact of a change in credit period, or accepting a factor’s offer); business or security valuations (methods of valuation); and financial risk management (currency risk and interest rate risk). The two 20-mark questions in section C will focus mainly on syllabus sections C, D and E. Section C is working capital management, section D is investment appraisal and is likely to feature NPV with inflation and tax. Section E is business finance; either an evaluation of financing options (interest coverage and gearing rations are likely to be important here), or a cost of capital and analysis. • For your SBR and SBL exam tips go to the ACCA Study Zone at www.pqmagazine.com AFM High priority areas for your revision should be section B (advanced investment appraisal) and section E (treasury and advanced risk management techniques). In section A, questions are often based on core syllabus areas such as project appraisal (domestic or overseas), business valuations and business/financial reorganisations. These areas often include cost of capital calculations. Risk management may also feature in a number of different ways – eg value at risk, real options, hedging, and risk mapping. Q2 and Q3 tips: • Risk management (currency or interest rate). • Dividend policy and general financing issues. • Real options. For the 50-mark question the examiner has said he does not plan his exams by referring to past exams. PQ Magazine December 2019
APM Q1 in section A will focus on a range of issues, from syllabus section A (strategic planning and control), section C (performance measurement systems and design), and section D (strategic performance measurement). In recent exams Q1 has often required linking a business’s mission to its performance objectives using the concept of CSFs and KPIs. You may well also have a critique and recommend improvements to performance reports and the balanced scorecard could well be tested in this context. The assessment of performance is also likely to be tested and this could easily include benchmarking as a theme. Financial performance measures (ROCE/ RI/EVA, etc) are also likely you be commonly examined in Q1, but don’t neglect non-financial issues from syllabus section D, such as management and reward systems. One of the section B questions will come from syllabus section E (performance evaluation and corporate failure). Commonly tested areas in section B include quality management; information reporting (eg big data, lean information); the application of strategic models (such as PEST, Porter’s 5 forces, the value chain); HR frameworks (eg reward and appraisal systems); risk management; and environmental management accounting.
liquidation; and purchase of own shares. • A business transformation scenario question, such as selling a sole trader business, incorporation or, in a corporate context, the sale of shares versus the sale of trade and assets. Other common types of question/calculation to expect are: • Reviewing a pre-prepared computation to spot, explain and correct errors. • Calculations such as tax saved through an action, after-tax proceeds, the value of a post-tax inheritance, net spendable income or the net of tax cost of something. Don’t forget that across the scenarios we will typically expect to see VAT marks available – partial exemption, land and buildings, transfer of going concern, capital goods scheme, overseas VAT and registration/group registration are frequently examined. There will also likely be marks for stamp duty points if you remember to think about it in your planning. Finally, don’t forget basic administration points are likely to be examined – when we need to pay tax, when we file a return and what of either of those are late?
AAA There should be no surprises here. We know that section A will comprise a case study worth 50 marks, set at the planning stage of the audit, for a single company, a group of companies or potentially several audit clients. You will be ATX provided with detailed information, which will The first question in section A will be for 35 vary between exams, but it is likely to include marks, the second will be for 25 marks. One of extracts of financial information, strategic, these will focus on personal tax issues, while the operational and other relevant information for a other will focus on corporate tax issues. In Q1, client business, as well as extracts from audit there will be four professional working papers, which could skills marks up for grabs, and include the results of analytical in section A there will be procedures. five marks on ethics. Four professional marks will Section B comprises of be available in section A, so two compulsory think structure, layout and 20-mark questions. These clarity here. In section B, one will be in more succinct, question will always note form style. predominantly come from Topics/scenarios you can syllabus section E, and expect to see are: consequently candidates • Personal income tax should always be prepared to scenarios that could involve: answer a question relating to investing in a pension; completion, review and These tips should investing in EIS, SEIS or reporting. There are a number only be used in conjunction VCTs; share schemes; with proper study. We cannot of formats this question could employment income, possibly guarantee that these topics adopt, including (but not limited with termination payments; a to) the assessment of going will appear in the actual personal service company; concern, the impact of exam as we have not seen property income; or a the exam papers. Examiners subsequent events, evaluating takeover. identified misstatements and are not predictable so it is • Unincorporated business – any corresponding effects on vital that all core syllabus particularly including loss the auditor’s report. Candidates areas are revised fully. reliefs, partnerships or basis may also be asked to critique period rules. an auditor’s report, or a report • A question focusing on overseas issues – this that is to be provided to management or those could be income tax, capital gains tax, charged with governance. inheritance tax or a corporate scenario. The other section B question can be drawn • Capital gains tax versus inheritance tax from any other syllabus section including A, B, including availability of reliefs. C, D and F. Syllabus section G, on current • Corporate scenarios – these are likely to focus issues, is unlikely to form the basis of any in more depth on intangibles; research and question on its own, but instead will be development; losses; and corporate groups or incorporated into the case study or either of the consortia. section B questions depending on question • Special corporate scenarios such as content and the topical issues. PQ
HEALTH WARNING
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PQ CIPFA spotlight
Embracing the future Jayne Owen explains how the CIPFA qualification is being update to tackle a fresh set of challenges
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t has been a particularly turbulent few years. From Brexit to austerity, climate change and rapid technological advancement – changes have been thrown at finance and accountancy professionals from all directions. But rather than seeing these developments as a hindrance, we should view them as an opportunity to modernise, protect the environment and make the public sector fit for the future. As the world continues to evolve, the accountancy profession and CIPFA must adapt to keep up. This starts with the education and training of the next generation of finance professionals. We must deliver a better service to our students and their sponsors if we are going to empower them to deliver a better service to citizens and society. Rising to this challenge, CIPFA has launched CIPFA 2020, an exciting project to revise our professional curriculum. In the months ahead our professional accountancy qualification will be reviewed completely, to guarantee that we are providing the best training for tomorrow’s public finance leaders. In order to do this we are consulting with employers as well as other stakeholders to understand the primary needs of the profession as it moves forward. The expertise of CIPFA members and staff will also be captured and included. There are four phases of the project, and we are currently in the first – completing the research that will inform the qualification’s development. Research is being carried out through surveys, interviews and roundtable discussions
to gather as much input as possible. After the research phase is completed the process of developing the new curriculum will begin, and then the syllabus and coursework soon after. It is customary to review curriculums and teaching practice every five years, but CIPFA 2020 is particularly well-timed, for multiple reasons. Since the last refresh in 2015 we have endured further austerity and are coming out the other side more resilient than ever before. This should be reflected in our teaching methods. In addition to the rapid social and political changes taking place around us, it is also important to keep up with the fast-paced technological advancements. Technology is an important enabler, especially for the accounting profession. According to reports earlier this year from AAT, the majority of accountants think basic accountancy practices will be fully automated within five years. This progress must be reflected in our curriculum, to make our professional qualification more
distinctive and forward-looking. We recognise the need to incorporate these new technologies into our qualification. In turn, we can teach our students how they can use these tools to solve industry problems and lead to greater ingenuity in the sector as a whole. These changes may bring some challenges, but also opportunities to move the accountancy profession forward in profound ways. Taking advantage of these developments will only bring us closer to greater efficiency and modernisation. With the CIPFA 2020 project, we will be on the front line of this new accountancy landscape. What will the future look like? It is difficult to say. But the most important thing that we can do is ensure that our professional qualification best prepares our students for what’s to come. PQ • Jayne Owen, Chair of the Student and Members Board, CIPFA
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PQ Magazine December 2019
CIMA spotlight PQ
Paul Turner explains how you can bounce back from failure
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he CIMA professional qualification has been updated with our current and future students in mind. It now includes all the digital skills a finance professional needs to face the challenges of a digitalised future. Students were able to sit operational test exams on the new CIMA professional qualification from 4 November 2019. Case study exams based on the old syllabus were available until the end of November 2019. To access your results log into your MYCIMA account, if you’ve taken an exam based on the new syllabus you will immediately see your grade: pass or fail. Scaled results won’t be available for a few months as they’re produced from extensive data sets developed over time. So, until more students sit exams on the new syllabus, we won’t have the data levels needed to generate robust results. Instead we will calculate your results using a rigorous assessment industry standard methodology. You’ll be given sectional feedback telling you if you were ‘proficient’ and scored above the boundary needed to demonstrate competence in a particular topic or, ‘not proficient’ meaning you didn’t score enough to show you’re competent in a particular area.
Results as a scaled score If you didn’t pass you’ll be told how close you came to passing as in: ‘pass’, ‘marginal fail’ – you missed the pass mark by 5% – or ‘fail’. Students who sat their exams before 3 November 2019 will still be able to log into their MYCIMA account and see their results as a scaled score. If you haven’t been successful it’s important to take a little time to reflect and be mindful about the things that you did answer correctly – focusing on the positives will help you achieve your goals in the long run. Assess your performance by running a SWOT (strengths, weaknesses, opportunities and threats) analysis with the relevant blueprint in hand, this will help you understand the areas you hold the most knowledge about, the areas you need to improve, and which parts of the
PQ Magazine December 2019
Steps to take if
you need to resit
syllabus you may not have taken enough time over. You should pay special attention to the subject areas, where your results showed you were not proficient, these should be the topics you focus on. This is because a resit exam is an entirely new exam, you will answer different questions and so need to treat it as you did first time around. Also, be sure to revisit your personal study plan on planner.cimaglobal.com, use it to guide you but, also to see if there is any correlation between the plan you’d developed and the areas that you didn’t pass. Sit practice exam questions under timed conditions and be sure to stick to the timings to make sure you can show all of the information you have learnt in a sufficient manner. It may also be prudent to re-check your approach for answering each question; for the operational test, on average you’ll have 90 seconds to answer each question. It’s worth bearing
in mind you will need more time for some of the questions and less for others, so it’s important to double check how long you feel you need for the multiple choice questions versus the number entry questions, for example. Not passing your exams can be frustrating but I assure you it’s just a barrier you will overcome. How you deal with this challenge will dictate how successful you are in your resits. As mentioned above, taking time to reflect and focusing on the parts of the syllabus which you need to improve your competency is the best tactic. And if you didn’t fail your exam by too much, don’t wait too long to book your re-sit – we’ve carried out research that shows students who retake their exam within three or four weeks of the original sitting have a 90% chance of passing. PQ • Paul Turner, Regional Vice President, UK & Ireland, Association of International Certified Professional Accountants
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PQ CIMA P2 exam
A responsible centre Dr Philip E Dunn explains the important concept of responsibility accounting, with use of an example
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he CIMA syllabus P2 Advanced Management Accounting, under the heading ‘Managing and controlling the performance of organisational units’, includes analysing the performance of responsibility centres and preparing reports. This short article is intended as an introduction to this topic area and you will need to study this in much more depth as you prepare for the P2 examination. Many businesses have some form of divisional structure. If it is to be a workable and efficient structure each will have its own performance criteria. The accountant is therefore given the task of measuring how well or otherwise a division has been in meeting any such criteria. A number of bases can be used and are referred to as KPIs – key performance indicators – and may include profit margin comparisons, ROI (return on investment), RI (residual income) and a similar concept termed EVA (economic value added*). Whichever is chosen, it is essential that costs and asset valuations are adjusted so that ‘like with like’ comparisons can be made. There are numerous examples of divisionalised structures and one such company, Croda International, comprises the following global market sectors: personal care, life sciences, performance technologies and industrial chemicals. Their chairman stated in recent times that “we have a clear and differentiated strategy to deliver growth across our sectors and this focus on growth is supported by continued innovation and capital investment”. Two examples of KPIs used within Croda and applied to each sector are % operating profit to group sales and %NPP to group sales. NPP is profit attributable to new products, and is clearly a measure of innovation and Balanced Scorecard approach.
Divisional structures It has been said that divisional structures added a new dimension by introducing performance responsibility to divisional or sector management. Thus responsibility centres provide the basis of one such approach. A responsibility centre was once defined by CIMA as “a segment of the organisation where an individual manager is held responsible for the segments performance”. Within organisations there are said to be three types of responsibility centre: cost or expense centre, profit centre and investment centre. These have been defined by CIMA as: cost or expense centre – “a location, function or items of equipment in respect of which controls may be ascertained and related to cost units for control purposes”. Other pertinent CIMA definitions include: Profit Centre: “a segment of the business entity by which both revenues are received and expenditures are caused or controlled. Such revenues and expenditure being used to evaluate segmental performance.” Investment Centre: “a profit centre in which inputs are measured in terms of expenses and outputs are measured in terms of revenues, and in which assets employed are also measured. The excess of revenues over expenditure are measured in relation to the assets employed.” Together they form the basis for responsibility accounting “that segregates revenues and costs into areas of personal responsibility in order to assess attained performance by persons to whom authority has been assigned”. Thus it can be applied to all levels, to group, division, sector or product. In the case of an expense centre it is essential that costs are those that fall within the manager’s span of control. Profit responsibility performance can be reflected in KPIs relating profit to turnover. However, performance may be subject to the fairness of apportioned costs and transfer prices. Investment responsibility performance can be judged on the basis of ROI, residual income and eonomic value added* (excess of earnings over the cost of capital). Earnings when calculating RI is expressed as profit before tax and EVA profit after tax. Cost of capital being expressed as the weighted average cost of debt and equity. 24
Example of a series of KPIs Davenport Artist Supplies is a division and an investment centre of Crescent Art Plc that applies the principle of responsibility accounting within its divisions and its summary results for 2018 showed: £m Revenue 75.00 Costs 45.00 Operating Profit 30.00 £m Divisional Investment 125.00 (termed as capital employed: total assets less current liabilities). ROI – return on investment (£30m/£125m) x100/1 = 24% Operating profit to revenue (£30m/£75m) x 100/1 = 40% Cost of capital 15% (weighted average cost of debt and equity) RI Residual Income/EVA Economic Value Added* This is the excess of earnings over the cost of capital. RI uses the measure profit before tax for which divisional management is responsible, whereas EVA* considers profit after tax and thus the surplus value created. RI EVA* £m £m Operating profit 30.00 24.00 (after tax) Cost of capital: £125m x 15% 18.75 18.75 RI/EVA* 11.25 5.25 RI/EVA* Index 1.6 1.28 This shows that the division is generating value over and above its cost of capital. Some companies would use this measure to arrive at investment decisions and performance measurement analysis, and also to reward divisional managers and employees. As mentioned in my opening paragraph this overview of the topic area is simply a start to encourage further in depth reading and hopefully associating it with experiences from your workplace or one with which you are familiar. PQ • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books * Economic Value Added was trademarked by Stern Stewart, a New York consultancy group, and was defined in a publication ‘The Quest for Value – The EVA Management Guide’. PQ Magazine December 2019
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PQ career choices
Paths to glory Liz Hulls explains what qualification choices you have going forward
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ou’re about to finish your AAT qualification, or graduate from university, or are simply contemplating starting out in your accounting career. Your next choice is to select from an initially overwhelming selection of acronyms: ACA, ACCA, CIMA, CIPFA (and others). You’ve spoken to other accountants and your manager at work to find that the only qualification that they recommend is, of course, their own! Unless you secure a training contract with one of the Big 4 accountancy firms your most likely choice will be between ACCA (Associate of Chartered Certified Accountants) or CIMA (Chartered Institute of Management Accountants). Each is a well-respected professional qualification that will boost your earning potential and be highly regarded in the UK and overseas job markets. So how do you make that choice? 1. Career path: It is always difficult at an early stage in your career to imagine where you see yourself in five years’ time. If you can currently only envisage working in business or industry, then CIMA is more likely to be the qualification
for you. If you would prefer the flexibility of being able to work in industry or practice, or maybe even as a self-employed accountant, ACCA might be more suitable. 2. Study route: Both qualifications will involve passing many tough exams. Launching in November 2019, the new CIMA syllabus will comprise 16 exams (depending on exemptions), three of which are case studies. While the case studies can only be sat quarterly, the remaining 13 exams are on demand, giving you greater flexibility about when to study. ACCA has 13 exams (depending on exemptions) which, from June 2020, will all be
computerised. With the exception of the first four papers, these exams can only be sat quarterly, giving structure to your study, but offering slightly less flexibility. 3. What will I study? The CIMA qualification offers modules such as ‘Project and Relationship Management’ or ‘Risk Management’, with the emphasis on managing performance. The new syllabus embraces how the digital world affects finance with management and financial accounting forming core parts. You will find both management and financial accounting modules within the ACCA qualification and more technical aspects of accountancy. Unlike CIMA, your exams will include both Audit and Assurance and Taxation modules which offer the potential to specialise in the future. It is a difficult choice. “I wanted to be able to add value to the existing figures with meaningful analysis and new ideas,” said CIMA qualified Sam Humphreys, financial controller at Oxfordshire E-commerce. Whereas Jack Strudley, a financial accountant at Oxford Sciences Innovation plc felt that “ACCA would give me the opportunity to become a more versatile professional with exposure to all aspects of accounting”. Whichever qualification route you eventually choose, you will be embarking on a challenging path, but the financial and personal rewards will be immense. PQ • Liz Hulls, Director and Tutor, Vale Financial Training
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Amanda Healey-Browne, Head of Instructional Design and Development, Kaplan
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PQ Magazine December 2019
sustainability PQ
Doing the right thing When it comes to ensuring a sustainable future we’re all in it together, says Jimmy Greer
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oday, consumers and governments are sharpening their focus on ethical and sustainability issues. Buying habits are changing. Regulations are tightening. And businesses are under increasing scrutiny about their impact on society from the media, consumers, governments and their own employees. Digital advances such as the use of AI have introduced new ethical complexities to the evolving business world – and businesses should identify and manage these to survive. The profession must be ready to lead the ethical debate on all this change, and use its leading knowledge in ethical issues, combined with a wider view of business success that covers financial, ethical, digital, and sustainability issues. ACCA is at the leading edge of this change, working with our partners to equip our students and members with the right tools, skills and knowledge to succeed. Ethics and professionalism is essentially about doing the right thing. Now, the urgency is steadily intensifying to make good decisions to address the world’s climate emergency. Record rainfall, longer droughts and destruction from hurricanes are just a few of the weather patterns that are having a devastating impact on the world. Climate Week was held in New York in late September alongside the United Nations Climate Summit, and at the start of the week at a joint event co-hosted with IFAC, called ‘creating value in a climate emergency’, ACCA launched a new report called Social and Environmental Value Creation. This report calls for more concerted action to deal with the challenges of social and environmental value creation. It examines the role of business in environmental, social and governance (ESG) issues which are under increasing scrutiny from investors and society more widely. It also assesses the current state of corporate disclosures on key social and environmental issues in different regions around the world and outlines five disclosure and decision-making approaches that can support business to create inclusive and sustainable
ACCA is a key sponsor of our ‘Accountants will save the planet’ conference in London on 21 November. See page 13 for details of how to sign up value for society over the long term. Its publication comes at a time when businesses are being called on to meet increasing requirements from governments for better social and environmental performance, and respond more proactively to greater demands for more precise environmental, social and governance disclosures from investors. Business is now operating in a volatile environmental landscape in crisis and escalating social problems. Taken together, these provide businesses around the world with a range of relevant approaches to engage with. For professional accountants and finance teams, their involvement in these activities is essential. There’s just 10 years left to achieve 17 UN Sustainable Development Goals by 2030, which are becoming better understood by governments, business, investors and civil society as tools to improve economies’ inclusivity and sustainable prosperity. Governments and regulators are asking businesses to better manage their social and environmental impacts to support sustainable prosperity creation. Citizens are asking their governments to do more to protect the environment and resolve societal issues. Customers are also asking business and finance to do this. New products and services must be both socially and environmental aware if they are to succeed. Professional accountants and finance teams
can support social and environmental value creation in many ways with their existing skillset and by reaching out across their own organisations. By interacting with wider stakeholders on complex challenges, they will be able to speed up the urgently needed transition to a more socially just and environmental aware future for the global economy. The report says that the global economy is entering a new era where social and environmental issues are strategic to all activities undertaken by business. It also sets out that the challenges are immense, complex and urgent. But it has also shown how value creation can be realised with the use of existing tools and processes that build on established foundations. They require a shift in values and mindsets by business and a new set of skills for finance teams. And if supported with a better institutional infrastructure, it is likely that managing to exist with the changes to the planet caused by climate change and providing socially just and sustainable livelihoods to current and future generations will be within reach. The level of engagement with these issues by business and finance will determine the quality of life for people and other species. A choice has to be made, and perhaps now is the time more than ever when the ethical, sustainable choice has to be made decisively. Now is the time to be ‘doing the right thing’. PQ • Jimmy Greer is Head of Sustainability, Professional Insights at ACCA
Award-winning AAT courses and apprenticeships Flexible learning to suit your lifestyle mindful-education.co.uk/students PQ Magazine December 2019
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PQ ICAEW spotlight
ONE YOUNG WORLD London was the host city for this year’s Chartered Accountants Worldwide event. Here’s some of the highlights
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ne Young World, held in London from 22-25 October, saw over 2,000 of the brightest young talent from every country and sector convene to accelerate positive change. Chartered Accountants Worldwide had 19 ambassadors representing the accounting profession at the summit, including six ambassadors from ICAEW (see box). The delegates had a busy week, starting with a dinner at Chartered Accountants’ Hall with Michael Izza, ICAEW Chief Executive and Chartered Accountants Worldwide Chairman, on Monday 21 October. Tuesday, officially the first day of the summit, allowed the ambassadors to receive their credentials before heading off to the opening ceremony at the Royal Albert Hall. This was a celebration with cultural entertainment, keynote speeches from global figures and the Flag Bearing Ceremony featuring delegates representing over 190 countries. The celebration saw guests such as Her Royal Highness The Duchess of Sussex, Meghan Markle, and a performance from Jay Sean. Mayor of London Sadiq Khan declared London ‘open’ as he welcomed delegates to the capital. The opening ceremony was followed by dinner at the Natural History Museum. The following day, the panel and keynote speeches began. The summit focused on poverty alleviation, education, peaceful futures, planetary health and media freedom. Michael Izza introduced the keynote address on planetary health. In his speech, Izza focused on chartered accountants as problemsolvers. He said: “Finance professionals and chartered accountants are problemsolvers, and what bigger problem do we
World class: back row (L-R) Michael Izza, Luke Fletcher, Alec James, Fiona Wilkinson (ICAEW President) Front row (L-R) Marie Kubo, Onneile Maripe, Jackie Crane, Pearlyn Lau face than the climate crisis?”, adding that “the accountancy profession can and must play a unique role”. On the Wednesday evening ICAEW hosted a community dinner at Chartered Accountants’ Hall. The theme was the UN sustainability development goals. which saw 17 ICAEW members from a range of sectors invited to discuss how they were influencing change in their organisations. Representatives included WaterAid, BMW and KPMG. Thursday included a plenary session on poverty alleviation, posing the question: ‘Can innovation solve economic inequality?’ Luke Fletcher, a partner at Stewart & Co, said: “We heard some remarkable stories from some very courageous and brave people from across the globe.” One such issue – orphanage tourism – was highlighted by J.K Rowling, President of children’s charity Lumos. Speaking on the topic she called on students not to volunteer at orphanages as emerging evidence shows it drives family separation and child trafficking.
Friday concluded the 10th annual One Young World summit, with continued conversations on the future of education and peace. Highlights from the day included a keynote address from Sir Richard Branson on global leadership and a candid conversation with Ronan Dunne, group CEO of Verizon and ICAEW member, who explored the future of education in a world of endless technological development. The closing ceremony marked the end of an incredible week, handing over to representatives from Munich, where the summit will be held in 2020. PQ • Thanks to the ICAEW for this article
MEET THE AMBASSADORS
To find out more go to: icaew.com/ charteredstar
Jackie Crane – Tax Technical Senior, PKF Francis Clark – Truro, Cornwall Luke Fletcher – Partner, Stewart & Co, Surrey, UK Onneile Maripe – Accountant, Sesiro Insurance Company, Gaborone, Botswana Alec James – Audit Associate, Buzzacott – London Marie Kubo – Saffery Champness, London, UK Pearlyn Lau – Assurance Associate, PwC, Singapore
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PQ Magazine December 2019
careers PQ
Transformers
in disguise The role of the Chief Financial Officer has changed forever, says a new report from Sage. The primary role of the finance leaders is no longer in financial reporting! CFOs are now polymaths, driving strategy and making technology decisions that affect the whole organisation. The ‘Sage CFO 3.0 – digital transformation beyond financial management’ report reveals a significant evolution in the CFO’s job function. It says that to be successful today’s top finance professionals need to become a ‘ninja of numbers’ in digital transformation, data analytics, cyber security and financial accounting! The study revealed nine in 10 CFOs believe their financial role has expanded and shifted ‘significantly’ in the past five years. Digital transformation is now a prime responsibility for 60% of them. There is a big fly in the ointment – two-thirds of CFOs (64%) say they are still unable to make data-driven decision to drive business change. Almost half (42%) are also spending as much time collecting and preparing data as they are analysing it. This is limiting the overall productivity of the finance function. For many, this also means they rely on experience and intuition rather than the overwhelming weight of data they have at their disposal. Sabby Gill, Sage’s UK managing director, said: “CFOs are expected to be visionaries, using data to make intelligent decisions in order to drive digital transformation in their organisation. For this to become a reality, it has to be easier for leaders to act upon data at speed.” Interestingly, the report also highlights the fact that organisations must not overlook the cultural impact of new technology. While eight in 10 respondents believe automation has improved business productivity, six in 10 are worried about the extent to which their own roles will be automated in the future. The vast majority (93%) believed that technology has to be carefully selected to align with the culture of an organisation. • The report coincides with the launch of Sage Intacct, its cloud financial management platform for UK customers. PQ Magazine December 2019
Life at Thrings LLP Chloe Scott, 24, is a legal cashier based in Swindon, and has worked for the company for six months. She is studying for a Diploma in Legal Finance, and her claim to fame is that she won the ILFM Stuart Hattersley Award 2019 What time does your alarm clock go off on a working day? 6am, I like to go to the gym in the mornings so can relax in the evenings. What’s the first thing you do when you get to your desk? Try to remember what I changed my password to! What’s on your desk? Not a lot, I prefer to keep a clear desk with only essentials in sight – pen pot, calculator. Now my award, too. What’s the best thing about where you work? We do a lot of social events, such as monthly takeaway lunches – varying from Domino’s pizza to fish and chips – along with a quiz, summer BBQs and a Christmas party. Where’s your favourite place to go for lunch? A pizza place
called Franco Manca, a must-try for pizza lovers, the dough is incredible. What (or who) can you see when you sit at your desk? Other members of the finance team – our offices are open plan. How many hours a week do you spend in meetings? One hour, for a monthly team meeting. What time do you leave the office? Usually 5pm or just after. How do you relax? I like hanging out with friends, either going out for food or somewhere in the countryside to explore. What’s your favourite tipple? Raspberry Mojitos. How often do you take work home? Only studying, which is always done at home. What is your favourite TV
show? Game of Thrones, I own most seasons on DVD and have watched them numerous times. Summer or winter? Summer – I enjoy being outside, travelling to new places and just enjoying the sunshine. Pub or club? Pub. Who is your hero? Greta Thunberg. If you had a time machine, where would you go? The future, to see what happens to our planet and if gender equality ever happens. If you hadn’t chosen accountancy, where might you be right now? I did mainly humanity subjects at school so maybe somewhere in publishing or the National Trust, which I still hope to work for one day.
What is trending in accountancy? The number of women becoming ACCA students continues to reach record levels, according to new figures from the Financial Reporting Council. The FRC’s latest ‘Key Facts and Trends in the Accountancy Profession’ report shows the ACCA’s female students worldwide now number 58% of the total. You can add to this the fact that 47% of ACCA members are female. Next best of the big accountancy bodies is CIMA, where 49% of its student intake are women. One body appears to be going backwards – ICAS. In 2017, 44% of its student body were female. In 2018 this slipped to a lowly 40%. However, when it comes to membership figures
the ICAEW comes bottom of the pile – just 29% of its members are female. At least this is 1% up on the 2015 figure, which has been a static 28% for the past three years. CIPFA’s female intake is a healthy 48%–49% for the past five years. Unfortunately, this has not translated into an increase in membership numbers – they have hovered around 32%–33%. Accountancy students are getting younger, too. In 2018 some 39% of students from the seven accountancy bodies in the study were under the age of 25, compared with 31% in 2014. ICAEW, CAI and ICAS have the highest percentage of students aged 34 or under at 97%, 88% and 89% respectively. In comparison, CIPFA have the largest proportion of students aged 35 and over, at 42%.
The PQ Book Club: books you should read Thank You For Disrupting by Jean-Marie Dru (Wiley, £21.99) The content of this book is perfectly summed up by its subtitle: ‘The disruptive business philosophies of the world’s great entrepreneurs’. The author puts the spotlight on 25 of the most (in)famous modern entrepreneurs, including the usual suspects: Steve Jobs, Sergey Brin and Larry Page, Arianna Huffington and Jeff Bezos, et al. But the focus is on the ideas that made their companies so disruptive, rather than their personalities, drive
and ambition. This is what makes JeanMarie Dru’s book different – he recognises that entrepreneurs are wildly original thinkers. So he extracts their core business principles and philosophy – the creative thinking that made them successful. We really like the fact that each of the 20 chapters is short, concise and to the point – chapters are generally between six and 12 pages long, meaning this book is easy to read and the ideas easy to digest. Most readers will never start a
billion-pound company, but they can easily pick up a few clever principles and original ideas from this book that could sharpen their views on their business and improve their leadership style. PQ rating 5/5 Anyone interested in the wider business world is sure to find this a fascinating and insightful read that focuses on the ‘big ideas’ that have changed all our lives. 29
PQ got a story, funny or serious, you want to share? Email graham@pqmagazine.com
WHERE’S GRAHAM?
DOWNTON ACCOUNTANT
The ACCA sent out a big thank-you to 11,799 people from 172 countries for coming together to help it create a unique artwork. It was all part of the ACCA’s networking and connections campaign. PQ magazine got onboard, and editor Graham Hambly made it onto the art work! See if you can spot him. 'Where’s Graham’ is, however, a very poor alternative to Where’s Wally!
Lady Fiona, the 8th Countess of Carnarvon, ran a clothes brand before taking over at Highclere Castle (for those not in the know, that’s the setting for Downton Abbey). What many don’t know is that when she left St Andrews University she became an accountant before marrying the lord of the manor. It was a toss-up between law and accountancy, apparently. “My thinking was that each was a discipline that I could take wherever I was living in the world,” she said. Lady Fiona (pictured) admits she struggled with accountancy, as she has more of an English and history bent. That said, she still relies on her training, as she says: “Sales are vanity; profit is sanity.”
PAX FAG TAX
Three successive profit warnings can often prove a knockout blow for UK quoted companies and their CEO, according to new analysis. An EY study found that one in 10 companies, which issued three or more profit warnings in a year go bust within a year. A trio of warnings close together also meant the end of the road for a quarter of CEOs and a fifth of finance chiefs, the survey found.
DON’T BE SHRILL!
Jeremy Paxman wants the government to tax cigarettes even more to fund an antilitter campaign, and he has accused the environment department of being “utterly useless” for its failure to prevent us turning into a “giant rubbish dump”. He says a 0.5p levy on each cigarette will help fund a £155m campaign to show the harm litter does to animals. Research shows that this type of advertising helps change the behaviour of men aged between 16 and 25 - these are the chief litter droppers, apparently.
When you speak, try not to be too shrill and be brief were just some of the suggestions in a presentation given to female executives at EY at the height of the MeToo movement. The Huffington Post US recently
ran the extensive story after an attendee gave them the full 55-page presentation. Among the other ‘suggestions’ were to not flaunt your body (so no short skirts) or have broken or bitten nails!
A forgery crisis has beset the global trade in gold after $50m worth of fake bars were discovered in bank vaults. In the past three years over 1,000 counterfeit bars (1kg) have been uncovered. Although this is a small proportion of annual output the fakes are getting increasingly sophisticated. Bankers say the fake bars (which can be made of high-quality gold) are being brought to the market by warlords and drug gangs to launder smuggled or illegal gold.
’ WEV E
WARNING IN TRIPLICATE
In a push to achieve its £100m in savings KPMG is reportedly considering closing its Mayfair private members’ club. The firm pays around £4.6m to rent the property in Grosvenor Street, London, which has a rooftop terrace, restaurant and meeting rooms. KPMG said it was ‘resetting’ its cost base across the firm in a project dubbed Project Zebra.
GOT THE L OT
Mind games
Colour me wild
We have not one but two great MindGames books to give away to three lucky readers this month. The first is all numbers and logic puzzles, the other is word puzzles and conundrums. With this prize you will be able to test your powers of logic and mental ability direct from the pages of The Times newspaper. To be in with a chance to win this draw simply email your name and address to giveaways@pqmagazine.com. Just head up the email ‘MindGames’ and we will do the rest.
Are you looking for a new and unique colouring experience? Then look no further! In this fun colour-by-numbers book, amazing creatures – from an old tortoise to a ferocious lion – are waiting to be discovered. Again, we have three copies to giveaway. Send your name and postal address to be entered into our lucky dip. Head up your email ‘Colour me wild’ and send it to giveaways@pqmagazine.com
Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries must be received by Friday 13 December. The main draw will take place on Monday 16 December 2019.
TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM 30
PQ Magazine December 2019
MAKING LIFE SIMPLE
CREATING THE RIGHT ENVIRONMENT FOR YOU
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