Transcript
Page 1: NQ magazine, April 2016•

THE VOICE OF ALL NQs

CYBER

SECURITY

Self-interest rather than regulation is the

way forward, says report

SALARY

CHECKER

Are you being paid what you should

be?

Contact us

email:

[email protected]

twitter: @pqmagazine

facebook: pqmagazine.com

call: 020 7216 6444

April 2016

TAX

SIMPLIFICATION WHY TWO TAXES

SHOULD BE MERGED

INTO ONE

Page 14

TOP CAT WE SPOKE TO SHARON

HARRIS, WHO WAS

RECENTLY NAMED PQ

MAGAZINE’S NQ OF THE

YEARP18

P17

P10

P8

What are the pros and cons of using a recruitment consultant to fi nd your next role?

YOUR CAREER

ETHICAL DILEMMA

What should you do when your boss wants you to write

a biased report?

Page 12

ALL THE NEWS YOU NEED

and a whole lot more

Pages 5 and 7

Page 2: NQ magazine, April 2016•

workingbettertogether

T +44 (0)20 8408 9999 E [email protected] www.walkerdendle.co.uk

redefining financial recruitment

Finance Manager

Middlesex

£60,000 – £65,000 + benefits

•Responsibilityforleadershipofthemanagement

accountingfunctionof3

•Preparationandreviewofmonthlymanagement

accountspack

•Drivingforwardbusinesspartneringacrossthebusiness;

improvingstakeholderrelationships

•Improvementofsystemsandprocessestoensuresmooth

deliveryofreportingtimetable

•QualifiedCIMA,ACCAorequivalent

•StrongunderstandingofIFRSandUKGAAP

•Provenpeoplemanagementskillswithpreviousline

managementexperience

Financial Analyst

Surrey

£55,000 + benefits

•Preparationofconsolidatedfinancialreportandregional

results

•Identifyingandjustifyingvariancesandanomaliesto

forecast

•Offeringtechnicaladvicetoregionalfinanceteamswith

emphasisonP&Landbalancesheet

•Assistintheintegrationofacquisitionsintothefinancial

reportingsystem

•QualifiedACA/ACCAorequivalent

•SoundunderstandingofIFRSandgroupaccounting

•HighlyproficientonMSoffice,HFManadvantage

•Excellentanalyticalandcommunicationskills

Page 3: NQ magazine, April 2016•

COMMENT

Leasing is the big story

We are again shining the light on leases this month. We know, that is two issues in a row now, but we honestly believe this is big news! The new standard, IFRS 16 Leases, replaces accounting standards introduced more than 30 years ago and considered no longer fit for purpose.

What is being proposed is a major revision to the way companies account for leases. And there are a lot of leases out there. It has been estimated that listed companies alone

have US$3.3trn of them, of which 85% do not appear on the balance sheet. How can investors and others get a truly accurate picture of a company’s lease assets and liabilities? In industries such as aviation, shipping and retail leases are a key component in how they operate.

IASB chair Hans Hoogervorst says that when IFRS 16 becomes effective in 2019 it will result in a substantial change to many companies’ balance sheets. All leases will be recognised as assets and liabilities by lessees, better reflected the underlying economics (read Hoogervorst’s thoughts on page 22).

Before you get there you should read about Sharon Harris, our NQ of the Year. The first thing she did when she qualified was burst into tears from the relief. It’s OK, once she had recovered the rest of the day was spent with a big smile on her face! See page 18 for more.

We have a great, honest piece by Walker Dendle’s Phillippa Lusty about why you should use recruitment consultants (page 8). We believe that using one is a bit of a no-brainer. It is how the market works, so use it to your advantage. It is, after all, a free service. With the help of Hays we also produce an NQ salary checker – you won’t find this anywhere else!

Graham Hambly, Editor ([email protected])

EDITOR’S COMMENTS

NUMBER CRUNCHING

Number of NHS finance

professionals who feel valued by the public and patients P5

5%

and rising – the number of self-

employed workers in the UK P14

4.7m

Percentage of large companies

to have reported some form of security breach P16

81%

The total amount of leases held by listed companies P22

US$3.3trn

Average salary for NQ working in the corporate sector, according to the Hays salary checker P10

£39,942

Page 4: NQ magazine, April 2016•
Page 5: NQ magazine, April 2016•

5

NEWS

NQ Magazine April 2016

New CPD Centre for

all ACCA members ACCA members now have exclusive access to a range of

continuing professional development (CPD) courses through

a new online CPD Centre provided by BPP Professional

Development.

The new CPD centre is a dual-branded platform that both

parties hope will deliver a smooth booking process, making

online CPD course purchases easier. On offer are 150

high-quality courses and learning packages that have been

specifically designed to fit around the schedules of busy

business and finance professionals.

To celebrate the launch of the new site, BPP is offering

ACCA members 20% off their entire online catalogue until

30 April. You will need to use the code ‘ACCA2016’ at the

checkout to redeem the offer.

¢ Deloitte publishes socio-economic data

In an effort to dismiss some of the myths about social

mobility Deloitte has become one of the largest UK

employers to publish data on the socio-economic and

educational background of its partners and staff.

A sample of 1,000 staff shows 43% of Deloitte

employees attended a non-selective state school, 16%

an academically selective grammar school and 20% an

independent school. The data also revealed 51% were the

first in their family to go to university, while 9% received

free school meals.

¢ Women earn £17,000 less

New research has shown that women in accountancy earn

£17,000 less than men. Total remuneration for women

in accountancy stands at an average of £67,680, while

men earn £84,970. Men also did better when it comes to

bonuses. The average bonus for men was equal to 18.2%

of their basic salary; it was 13.9% for women. The only

good news, if there is any, is that the gender pay gap is

shrinking.

¢ Aspiring to reach the top? No thanks!

European countries are lagging behind developing

countries when it comes to female ambition in the

workplace, according to the Hays Global Gender Diversity

Report 2016. Just 11% of women in the UK believe they

need to reach the most senior levels, MD or CEO, in order

to feel successful in their careers, compared with 14%

of men. This compares with 28% of women in Malaysia,

22% in Colombia and 18% in the UAE. In contrast, British

women are much more satisfied in reaching mid/senior

level roles. Almost four in 10 women in the UK (36%) say

they would need to reach director level to feel successful.

IN BRIEF

Feeling valued? NotNHS fi nance workers Just 5% of NHS finance professionals feel valued by the

public and patients, says a new briefing survey from the

Healthcare Financial Management Association (HFMA).

Luckily, faint praise is not what motivates accountants

for working in the NHS. The latest ‘NHS Finance Function

in 2015: England’ report found that for well over two-thirds

(71%) of respondents it is public sector values that keeps

them going. Improving patient care is a motivation for 60%

of those surveyed.

Finance professionals working in the NHS also feel their

departments provide real value for money – well, 89% think

so.

Despite the challenges of grappling with tight financial

statements and trying to add value to patient care, some

two-thirds of accountants say they would like to spend the

rest of their career working for it.

In all, 16,211 finance professionals are currently working

in the NHS, a 3% rise on 2013 figures.

The survey worryingly revealed that there is still a large

imbalance between the number of women working in finance

roles and those in the top jobs. Some 62% of finance staff

are female, but only 26 % of FDs are women.

Sharon Harris (right) of Agchem Project Consulting recently

picked up her NQ of the Year trophy from Lisa Dendle of

Walker Dendle at the PQ magazine Awards. Harris said: “If

I had told my 16-year-old self that, at the age of 52, I would

be a chartered accountant with an honours degree I think

I would have asked them what they had been drinking.” In

the past 12 months Sharon has been accepted as a CIMA

member and gained the ACMA, CGMA designation. She

also received a fi rst class honours degree from Manchester

Metropolitan University in Sustainable Performance

Management.

•Read all about her on page 18.

Page 6: NQ magazine, April 2016•

Drive yourcareer withpqjobs.co.uk

PQ jobs pqjobs.co.uk

Page 7: NQ magazine, April 2016•

7

NEWS

NQ Magazine April 2016

Preparing for the futureThe CFO of the future may need to bring much more

multidisciplinary skill set to the job, according to ‘Finance

2020: closer than you think’, a new report from Robert Half.

The report says the fi nance function faces what is possibly

the biggest era of transformation in its history. Process

automation, corporate digitisation and the ongoing need to

protect assets while managing costs are conspiring to bring

even more pressure on fi nance professionals.

For many CFOs the priority is to meet regulatory

compliance mandates, but in the long-term it is to keep pace

with changing technology.

So, what were perceived to be the most important skills

to develop over the next fi ve years? Greater knowledge of

fi nancial software packages was seen as the biggest technical

skill that needs to be mastered (cited by 45% of CFOs).

Leadership, communication and commercial acumen were

seen as the soft skills fi nance professionals need to develop.

The traditional

audit process is

not delivering

enough, claims

the ACCA’s head

of audit and

assurance, Andrew

Gambier.

Following

a series of

roundtable

discussions

he said that

in developed

countries there

were strong views

that while the audit

and assurance

process was important, it was neither timely nor offered

insights as to where businesses could have done better.

He said that in countries where audit is still being

developed it was valued far higher than in countries where it

has been long established.

Gambier said that investors had said they want real insights

into how a company could have addressed risk better and

where they could have maximized profi ts.

Gambier went on: “While the traditional approach might

reassure regulators and company bosses, its usefulness to

investors is shrinking all the time, prompting questions over

its future. Business leaders expect information in real time,

so why do we expect investors to wait months for the audit

reports?”

He felt that auditors need to look at how they can use

technology to deliver high quality audits in a more effi cient

and timely manner.

• For more read the ACCA report ‘The Future of Audit’.

First management accounting standard BSI, the British Standards Institution, has published PAS 1919

– the world’s fi rst management accounting standard. The guide,

sponsored by CIMA, is designed as a best-practice guide to

management accounting, defi ning what ‘good’ looks like.

The PAS provides a framework to support decision-making

and supports improved performance. It sets out four outcome-

based management accounting principles:

• Communication provides insight that is infl uential –

encouraging insightful communication that drives better

decisions across an organisation.

• Information is relevant – reviewing past, present and forward-

looking performance management information.

• Impact on value is analysed – understanding an

organisation’s strategy and business model.

• Stewardship builds trust – balancing short-term commercial

interests against long-term value for stakeholders.

Audit must now evolve or die

Threat of court over new UK sugar tax Soft drinks manufacturers look set to take Chancellor George

Osborne to the European court over his ‘discriminatory’ sugar

tax.

The new tax put forward in the recent Budget may never

see the light of day, as Coca-Cola and other drink makers put

together a legal challenge to the proposals.

The soft drinks manufactures look set to argue in the

European courts that the tax, due to levied from 2018, is

discriminatory because it will not hit other beverages with high

sugar content.

This is not an idle threat. There have been successful

challenges to similar tax moves in Denmark and Finland. Last

year, the European Court of Justice also blocked Scotland’s

plan to enforce minimum alcohol pricing.

Chancellor Osborne was hoping the 24p a litre tax on high

sugar products would help raise £520m a year.

Many fruit juices and smoothies contain more sugar than

the traditional cans of fi zz, and should be included in the new

sugar tax, according to some experts. “It’s a no-brainer to

include fruit juices and smoothies in the levy,” says University

of Liverpool’s Simon Capewell.

Among the drinks that would be exempt, for example, is a

Krispy Kreme Strawberry Kreme milkshake, which contains

21.8g of sugar per 100g. That is double the amount of

sugar found in Coke (10.6g per 100ml). A McDonald’s large

strawberry milkshake contains 74g of sugar, 50g of which

is added. That’s 12 teaspoons of sugar and is 160% of your

recommended (aged 11 and over) daily dose.

Andrew Gambier

Page 8: NQ magazine, April 2016•

8 NQ Magazine April 2016

YOUR CAREER

And the hunt begins: you’re on the market and the

time is ripe to take the next step along the path

of your financial career. Perhaps your current

employer can’t give you the opportunities you need to

progress, or perhaps it is just time for a change. You have

a clear picture of what you are looking for in terms of

remuneration, location and role – now it’s just about finding

that perfect job. So do you go to a recruitment consultant?

Reasons not to

Bad press: In the world of recruitment, a common myth

about consultants is that they are shallow, pushy salesmen

Phillippa Lusty outlines the

pros and cons of using a

recruitment consultant from

both the individual’s and the

company’s perspective

and women just

looking to make a

quick buck. Unfortunately,

in some cases this may be true,

but on the flip side a good recruitment

consultancy relies heavily on its reputation

and by building positive, long-standing working

relationships with clients and candidates alike.

Fees: Clients looking to fill a vacancy have to remember

that, like your company, a consultancy is a commercial

business and works speculatively. It will invest on your

behalf on advertising, job boards and mail shots, taking a

risk with you too: no placement, no fee.

Going direct: With the rise of in-house recruiters, online

job boards and professional networking sites that seem to

cut out the middle man, are recruitment agencies becoming

obsolete? The nature of the business is changing, but in this

chaotic world of apparently endless opportunity the role of a

recruitment consultancy is as valuable as ever. Here’s why…

Why use a recruitment consultant?

Page 9: NQ magazine, April 2016•

9NQ Magazine April 2016

YOUR CAREER

Why use recruitment

consultants?

Experts in their field: Recruitment

consultants are career ‘match-makers’ who

specialise in their own niche in regards to sector

and location. They are therefore great advisers who

have their fingers on the pulse; it is their job to know their

market.

Remove the stress: Whether you are looking for a job or

looking for someone to fill a job, let’s face it: changing jobs

is a big deal. It’s an emotional decision and as a mediator

between candidate and client, a consultant both presents

and represents you: they handle objections from both sides

and keep all parties in the loop during the whole process.

Confidentiality: Client or candidate, finding or filling a

role is a very sensitive topic and not one that you always

want broadcast for all to see for many reasons. The danger

of going direct comes with its own hazards and word always

gets around.

Time vs. outcome: Finding a new role or new candidate

is a long, time consuming process and can become the

bane of your life. Recruiters are problem solvers who cut out

the legwork by presenting a shortlist of roles or candidates

that are matched to your specific criteria.

From the candidate’s perspective

Saving time and money: We all know the pain of endlessly

filling out extensive applications forms and not even

receiving an acknowledgment, let alone a rejection letter. A

consultant’s services are free and they bring the jobs to you.

More access to competitive opportunities: Consultants

have strong networks and relationships with their clients,

and will have access to non-advertised roles through

connections with key people in their industry.

Support and advice: From CV and interview help, to

sharing knowledge of the client, to giving feedback, to

negotiating a better remuneration packages on your behalf.

From the client’s perspective

Time vs. money: Finding the right candidate can be like

finding a needle in a haystack and filtering through a sea of

applicants can be highly time-inefficient for a business.

Don’t underappreciate their service: They may only

present a small shortlist, but in delivering this to your desk

they will have trawled their networks, sieved through and

screened countless applications, interviewed candidates

and checked references to provide you with just the cream

of the crop. The bottom line is that time equals money and

the fee is a small price to pay for the time and effort they

save you.

Wider resources: Rather than relying on the keen

applicants who crowd your mailbox, recruiters have access

to people who will not be in your network. This casts your

net wider and brings in a better source of candidates.

What can you do?

Don’t just sign up to any and every recruitment consultancy

you come across. Do your homework and pick the right

recruiters – ones that specialise in your field and want to get

a deeper understanding of your needs.

And keep in contact. A recruiter should be keeping in

regular contact with you, but this shouldn’t stop you from

picking up the phone and giving them a call. A relationship

is a two-way street after all!

● Phillippa Lusty is a recruitment consultant at

Walker Dendle

NQ

Page 10: NQ magazine, April 2016•

10 NQ Magazine April 2016

SALARY SURVEY

Are you getting paid what youshould be?

Typical Range £

North West £36,000 33,000-38,000

North East £38,000 35,000-42,000

Yorkshire & Humber £34,000 33,000-38,000

West Midlands £33,000 30,000-38,000

East Midlands £33,000 28,000-36,000

East of England £39,000 34,600-41,600

London £45,000 43,000-50,000

South West England £38,000 28,000-40,000

South East England £40,000 35,000-42,000

Scotland £32,000 30,000-35,000

Northern Ireland £30,000 30,000-36,000

Wales £32,000 28,000-36,000

National Average: £35,833

Typical Range £

North West £40,000 36,000-45,000

North East £40,000 35,000-42,000

Yorkshire & Humber £37,000 35,000-40,000

West Midlands £40,000 36,000-42,000

East Midlands £40,000 36,000-43,000

East of England £45,300 38,300-49,300

London £48,000 45,000-55,000

South West England £40,000 35,000-42,000

South East England £45,000 40,000-50,000

Scotland £37,000 35,000-40,000

Northern Ireland £31,000 28,000-33,000

Wales £36,000 30,000-38,000

National Average: £39,942

NEWLY QUALIFIED Corporate

SMEs

Page 11: NQ magazine, April 2016•

11NQ Magazine April 2016

SALARY SURVEY

Are you getting paid what you Here’s our latest region-by-region salary checker, with

fi gures kindly provided by Hays Accountancy and Finance

NQ

Typical Range £

North West £45,000 40,000-50,000

North East £44,000 40,000-50,000

Yorkshire & Humber £42,000 40,000-45,000

West Midlands £43,000 38,000-50,000

East Midlands £43,000 38,000-48,000

East of England £45,300 40,000-49,300

London £55,000 50,000-60,000

South West England £40,000 38,000-45,000

South East England £55,000 45,000-60,000

Scotland £40,000 37,000-42,000

Northern Ireland £35,000 32,000-38,000

Wales £40,000 36,000-45,000

National Average: £43,932

Typical Range £

North West £42,000 36,000-47,000

North East £38,000 38,000-45,000

Yorkshire & Humber £36,000 35,000-40,000

West Midlands £38,000 33,000-42,000

East Midlands £37,000 30,000-40,000

East of England £42,300 36,600-45,300

London £50,000 45,000-55,000

South West England £40,000 30,000-45,000

South East England £48,000 40,000-52,000

Scotland £33,000 32,000-36,000

Northern Ireland £33,000 29,000-36,000

Wales £35,000 32,000-40,000

National Average: £39,358

UP TO TWO YEARS QUALIFIED Corporate

SMEs

Page 12: NQ magazine, April 2016•

12 NQ Magazine April 2016

ETHICAL DILEMMA

Page 13: NQ magazine, April 2016•

13NQ Magazine April 2016

ETHICAL DILEMMA

Working with limited resources and to tight deadlines, you’re

expected to produce a report that might be used to justify

redundancies at your fi rm. What should you do?

resources available, because the

work could not be relied upon. You

could ask for more time to complete

the work to the required standard,

or ask for the work to be outsourced.

This would have the added benefit of

enhanced objectivity.

Clarifying the process

The process of clarifying the

intended use of the information and

expressing your concerns regarding

its reliability is likely to enhance your

credibility. You could suggest that

your line manager discuss the issue

with the president or other members

of the board, as appropriate.

If your line manager is

unsympathetic to your concerns,

you should not allow yourself to be

associated with information that may

be misleading. You should consider

the most appropriate way in which

to make your concerns known to

the board. This may be through the

president or the company secretary.

If after exploring all these routes

of communication you still find

yourself under unreasonable time

pressure you may have to make

clear your refusal to conduct the

work, and possibly resign from the

company.

You should document, in detail,

the steps that you take in resolving

your dilemma, in case your ethical

judgement is challenged in the

future.

NQ

Outline of the case

You are a qualified accountant.

You have been asked by your line

manager to complete a costing

exercise with a very short deadline

and limited resources. You think

that the president of the company

is planning to use this information

to restructure the company,

including making some of your

close colleagues redundant. You are

worried that your work cannot be

robust enough to be used for such

a big business decision, but your

line manager is putting you under a

lot of pressure to complete the work

quickly.

Key fundamental principles

Objectivity: Could you maintain an

unbiased stance throughout, in view

of your close relationships with your

colleagues?

Professional competence and due

care: Can you realistically produce a

costing, with the time and resources

available, without compromising the

standard of your work?

Confidentiality: Given the

sensitivity of the situation you should

maintain discretion and not share

your concerns with other staff who

may not be aware of the president’s

intentions.

Considerations

Identify relevant facts: The company

is considering restructuring, and the

president needs to have the most

up-to-date and complete financial

information to inform any decisions.

As a professional accountant, you

must ensure that any financial

information you provide is robust.

Identify affected parties: Key

affected parties are you, your line

manager, the president and anyone

else who may use the results of the

costing exercise. Other stakeholders

in the company may also be

affected, including those employees

who might suffer redundancy.

Who should be involved in the

resolution? Is there anyone else

in the company with whom you

can raise your concerns? Is there

a senior finance officer who could

advise you, or another member

of the board with whom you can

discuss your dilemma? Should you

approach the president directly?

Possible course of action

You think that the president of

the company is planning to use

the information you produce to

restructure the company. As a

professional accountant you have a

duty to make your line manager and

other users of the information aware

of the limitations in the scope of your

work. With this in mind, you should

attempt to obtain certainty regarding

the use of the information.

You should arrange a meeting

with your line manager and explain

that you are unwilling to do the work

to the deadline requested, with the

Page 14: NQ magazine, April 2016•

14 NQ Magazine April 2016

TAX SIMPLIFICATION

Bringing National Insurance

Contributions (NICs) and

Income Tax (IT) closer

together would create a simpler and

fairer system for businesses and

taxpayers, says the Office of Tax

Simplification (OTS).

The OTS has published the findings

of a detailed review into bringing the

two payroll taxes closer together to

create a simpler and more modern

system. It recommends a seven-stage

programme to closer alignment to

achieve a system more aligned to

current and future working patterns,

but cautions that the impacts need

to be carefully understood and

considered.

Angela Knight, OTS Chair, felt most

people don’t know what the National

Insurance Contributions they pay gives

them in benefits, with the system

giving different outcomes for the

employee, the self-employed and those

with more than one job. And employers

– who are the collectors of income

tax and national insurance – find the

current system for NICs complex.

She said: “As the structure of

the UK economy moves rapidly

towards scenarios often referred to as

‘uberisation’, the ‘sharing economy’ or

the ‘gig economy’, these different ways

of working are with us, are expected to

accelerate and so the current system is

simply out of date.”

Inevitably, Knight said some will

gain and others will lose from any

change. By highlighting both the need

for reform and by shining a light on

those difficult areas now, the OTS

intends this review to trigger a full and

The Offi ce of Tax Simplifi cation believes two taxes can

become one! Here we explain how – and why

informed debate about the impacts,

how the changes could be made,

how the challenges can be addressed

and the timetables required, to make

change as seamless as possible and

to provide a system that is fit for the

future.

The OTS review sets out seven key

steps to more closely align NICs with

IT, but stresses the need for more work

to be done on the proposed changes

to properly assess the considerable

potential impacts of change.

John Whiting,

OTS Tax Director,

said: “We found

near-universal

support for reform

to the NICs system

with many seeing

alignment as a

simple and obvious

step. The potential gains in easier

administration, proper transparency

and greater understanding are clear.”

However, he was mindful that the

impact of change will be considerable.

Whiting explained millions of people

would pay more in NICs, but millions

would also pay less. Some paying more

would gain contributory benefits but

all these impacts need to be carefully

worked through and thought about.

More work is needed and so is a

proper, informed debate about the

considerable implications.”

The OTS’s seven key stages to closer

alignment are:

● Move to an annual, cumulative and

aggregated assessment period for

employee NICs as happens with PAYE

and income tax. This could mean many

people paying more NICs and many

paying less NICs.

● Base employers’ NICs on whole

payroll costs. This would be easier to

understand and reduce distortions from

fragmented hours.

● More closely align the NICs position

for the UK’s 4.7m, and rising, self-

employed with that of employees. This

would remove complexity and could

potentially deliver more benefits.

● Critically review the contributory

principle, but first increase

understanding of what it really does –

and doesn’t – do; for example, finding

people who believe that NICs pays for

the NHS and that they need to have a

full contributions record to qualify for

NHS treatment is worrying.

● Align the definition of earnings for

IT and NICs and the reliefs available

for IT and NICs to make it more equal

for employees and cut the burden

of managing the differences for

employers.

● In the same way, bring taxable

benefits in kind fully into NICs to

remove the distortions in the NICs

treatment of non-cash pay.

● Harmonise the rules governing the

management of IT and NICs, and their

administration, including setting up

a method so that any changes can

operate automatically for both taxes,

to make it easier for employers and

HMRC to administer the system and

reduce unnecessary differences.

The OTS review concludes there

would need to be a well-signposted

path to this major reform, with clear

explanations to ensure all groups were

well aware of the implications. NQ

John Whiting

Page 15: NQ magazine, April 2016•

15NQ Magazine April 2016

TAX SIMPLIFICATION

Page 16: NQ magazine, April 2016•

16 NQ Magazine April 2016

SECURITY REPORT

A new report from ACCA

claims self-interest rather

than regulation is the future

of cybersecurity because technology

is evolving at such a rate that any

legislation would be out of date before

it is signed in to law.

ÔConstant Forward Motion: The

evolving phenomenon of cybersecurity

regulation and the race to keep

upÕ examines the growing threat

to businesses and the problems

lawmakers have because of the fast

pace of technological evolution.

Cybersecurity falls broadly into

two parts Ð preventing attacks and

defending against attacks that

can and do happen. The most

comprehensive theft prevention deals

with the cause rather than the effect.

Apprehending attackers is the role

of law enforcement, and the often

unusual nature of the offences allows

for a new range of strategies: either

through direct action against individual

perpetrators, or wider actions to disrupt

their business model.

The stats are alarming: 81% of

large companies have reported some

form of security breach, costing each

large organisation on average between

£600,000 and £1.5m,

and attacks on SMEs

are increasing.

Reported cases

Ð and remember

most cases will not

be reported Ð show

2,460,000 instances

of computer misuse

and 404,000 of

unauthorised

access to personal

information. The

cost of fraud for

UK businesses

is around 3% of

total business

expenditure.

For many businesses there are

obvious risks such as disruption of

supplies, sales and the loss of cash.

But two other areas stand out such

as the potential legal action from

individuals and companies for loss

of their data by a business, and

reputational damage, which can spell

the end of a business.

There have been many instances

over the past five years or so of how

much reputational damage a data

breach can cause to a large firm or a

public service. Customers and potential

customers are likely to think very

carefully about their involvement with

a company if they have had a data

breach. We all want to know that our

personal data is secure and that it

is protected Ð whether it is our bank

details or our medical records.

In this respect, organsiations have

to take the lead. They need to be aware

of the value of the data they hold, the

value in protecting it, and the damage

that can be done if they fail to do so.

Looking after your own

Self-interest not regulation

needs to drive cybersecurity,

says Jason Piper

Page 17: NQ magazine, April 2016•

17NQ Magazine April 2016

tills and card readers for future use,

without the need for any direct internet

involvement. As the hardware we use

continues to evolve rapidly, so will the

available attack vectors – a further

problem for legislators trying to keep

up with possible offences.

Employees are also major threat to

a company’s cybersecurity. It is likely

that in every data breach an employee

will be involved whether directly or

indirectly and whether knowingly or

unwittingly. Employee involvement in

data breaches demonstrates the need

for increased knowledge and awareness

amongst all in the company. And it is

for this reason that everyone has a role

to play in the protection of data.

They also have a role to play in

whistleblowing when they think an

internal data breach is likely. Managing

the risk is clearly important. And this is

where the accountancy profession can

add real value because we are adept at

managing risk. We have to be vigilant

against cyber security – in our personal

lives and also at work.

● Jason Piper, Senior Manager,

Tax and Business Law, ACCA

SECURITY REPORT

NQ

Because of the nature of

cybersecurity, authorities and

governments would be best placed

using their resources to raise

awareness among businesses,

and to put resources in to creating

mechanisms to catch perpetrators of

cybercrime.

Data is being used in all sorts

of ways – for example to predict

purchasing and money transfer

patterns – and criminals can use this

information to commit fraud. As a basic

rule of thumb, if there is value in the

data to a criminal then there is value in

protecting it and because data is digital

it can be replicated over and over

again, potentially before the business is

even aware.

The big question for authorities is,

how do you regulate? Is it better to

prescribe hard law or soft law? Both

have advantages and disadvantages

but ultimately the problem that

lawmakers have is that anything they

pass into law is likely to be archaic very

quickly and they could spend the whole

time ‘running to catch up’.

The same can be said of insurance.

Mandatory insurance now would force

insurers to offer cover without the

information necessary to be able to set

premiums. Insurance is a growing area

in the field of cybersecurity but it is an

extremely complex job for underwriters

to value data and set suitable

premiums. Insurance can however,

act as an awareness raiser in a similar

way to soft laws – if you can insurance

against the loss of data then its security

needs to be taken seriously.

Large organisations can play an

important role in cybersecurity. Most

criminals will look to go after the

weakest link in the supply chain as a

point to access data. This will usually

be the smaller businesses, as they

have fewer resources. The larger

companies in the chain can support

the small ones by providing guidance

and expertise. This would be of benefit

to the whole chain, as once a criminal

has access to one area they will be able

to infiltrate the entire chain – causing

more damage, both financially and

reputational.

The report also looks at other threats

to cybersecurity and how technology

means that data thefts don’t always

have to involve the internet. Physical

devices can be used to collect

information from ATM cards, electronic

Page 18: NQ magazine, April 2016•

18 NQ Magazine April 2016

NQ OF THE YEAR

When did you know you wanted to be a chartered

management accountant?

Not until I joined my current company and was inspired by a

friend who was studying ACCA. However, I hate personal tax

so decided to do CIMA instead. Also, CIMA was more relevant

for my current job as there is a strong focus on interpreting

data for management accounts and KPIs.

How did you find the CIMA exams?

I felt very much like a guinea pig as I was in one of the

first groups to have to switch over and study using the new

syllabus and objective test exams. It was quite shocking the

lack of information from CIMA prior to roll out and the lack of

practice questions in the early days. However, I understand

that things have now improved.

Sharon Harris was recently named NQ of the Year by our sister

magazine, PQ. We caught up with her to fi nd out what makes

her tick

Driving ambition

‘Shocked, relieved and proud’ was how Sharon describes her feelings on becoming qualifi ed

WHAT SHARON

LIKES…

• What are you reading?

The End of Oil: On the Edge

of a Perilous New World by

Paul Roberts

• Last CD bought:

Coldplay’s A Head Full of

Dreams

• Favourite TV show?

Currently The Night

Manager

• When did you last laugh

out loud? At Michael

McIntyre’s Happy and

Glorious show

• How do you chill?

Listening to music and

reading

Page 19: NQ magazine, April 2016•

19

NQ OF THE YEAR

NQ Magazine April 2016

What did you feel like once you had finally qualified?

Shocked, relieved and very proud.

What was the first thing you did when you found out

you had passed?

Burst into tears from the relief that I had qualified. Then I

spent the rest of the day smiling.

Do you have plans for any more study?

I’m considering doing an MSc in Strategic Business

Management with Manchester Metropolitan University, but

the next course doesn’t start until September so I’m enjoying

the break from study and research.

You are now our NQ of the Year – how did it go down at

work?

They were thrilled for me and very proud of my achievements

(see http://www.apc.eu.com/apcs-sharon-harris-wins-

industry-award).

How did you enjoy the PQ Awards night?

I had a lovely time at the awards and even if I hadn’t have

won I would have still had a great night out. Accountants are

definitely not boring!

You work for Agchem Project Consulting as its finance

& operations manager. What is a typical day like?

There is never a typical day at APC and I am still growing

into the role with guidance and support from the managing

director and the other directors/board members. APC

is an expanding business, so I’m currently dealing with

the creation of a subsidiary company in Hungary (far too

much paperwork!), as well as keeping on top of my normal

accounting responsibilities.

We understand you went back to university to study a

degree in sustainable performance management. What

lessons have you learnt from your BA (Hons)?

Don’t try to do this course while studying for your CIMA

finals and holding down a full-time job – it’s far too stressful!

However, the main lesson was that I still have a lot to learn,

especially when it comes to sustainability and strategic

management decision making.

Where do you see yourself in five years’ time?

Still with APC as a director and full board member.

We know all accountants are interesting, so what do

you do to ensure you are?

Outside work I am Treasurer of Solent and District Land Rover

Club (www.sadlrc.co.uk), so I tend to spend weekends driving

around the countryside – when the Land Rover doesn’t need

fixing!

In her spare time Sharon is Treasurer of Solent and District Land Rover Club

NQ

Page 20: NQ magazine, April 2016•

20 NQ Magazine April 2016

CORPORATE SURVEY

Decisions, decisions…Tony Manwaring outlines the fi ndings of a recent survey into

decision making within the organisation

At its heart, management

accounting is about decisions.

For most management

accountants this means providing the

information and analysis to inform

choices. For those who have made it

to the top, it means making strategic

decisions themselves.

This is why CIMA and our

colleagues in the American Institute

of Certified Public Accountants

recently commissioned a report into

the state of decision-making. We

surveyed 300 leaders in blue chip

companies worldwide – from EY to

the US Army – and conducted in-

depth interviews with nine of these,

to ascertain how big decisions are

made, what works well, and what

could be improved. The result is

‘Joining the Dots: decision making

for a new era’, which can be

downloaded from the CGMA

website.

We discovered five common

mistakes in decision-making. Put

together, they form a convincing

case for arguing that the biggest

companies are not necessarily the

best decision-makers. But it wasn’t

all bad news. We uncovered a

minority of organisations – which we

referred to as “integrated thinkers”

– who are far better able to make

the right decisions and achieve great

outcomes even in times of disruption

and uncertainty.

The first problem we found was

that some organisations are too

rigid to act quickly. Nearly a third

(29%) of respondents said that

organisational silos and bureaucracy

are creating coordination problems.

Some 72% reported that at least

one strategic initiative has failed

in the past three years because of

delays in decision-making. Too many

large organisations, it seems, suffer

from diseconomies of scale – their

size may give them clout, but it

has cost them agility. This needn’t

be the case. Many of the world’s

largest companies remain agile. The

solution, we would argue, is the

management accountant’s mandate

to cut through siloes and consider

data from across the business.

A second problem was lack

of trust within organisations

themselves. Nearly two-thirds

(65%) of respondents reported

there was moderate or significant

room for improving trust between

leaders and employees; 70% said

the same about collaboration. This

has a knock-on effect on decision-

making – lack of trust prevents the

sharing of information and insight

that is crucial for the best decisions

to be made. Again, solutions to this

problem exist: we argue that greater

transparency, and empowering

colleagues further down the chain,

can overcome barriers caused by lack

of trust.

Thirdly, many respondents

reported that the metrics and rewards

they use to measure and motivate

their business were poor. A third

(34%) say their company’s incentive

and bonus structures are hindering

their ability to generate value for

the short, medium and long term.

The same proportion report they find

it challenging to select the right

combination of metrics to measure

business performance. We would urge

businesses and the public sector to

look beyond traditional accounting

figures to other measures, such as

intangible assets, to help solve this

problem.

The fourth problem is the sheer

amount of data available in today’s

world. An overwhelming 80% of

respondents admitted that their

organisation had used flawed

information to make a strategic

decision at least once in the past

three years. One-third (32%) say

big data has made things worse,

not better. Clearly “information is

relevant” – the second management

accounting principle – is something

that not all organisations have yet got

to grips with.

Finally, some senior leaders do

not have the skills to make effective

decisions, and need to develop new

abilities. Just 28% of respondents

felt their organisation was effective

at enabling senior leaders to learn

from the outcomes of decisions.

Only 35% of organisations rate their

senior leadership’s openness to input

and challenge as highly effective.

The solution is to invest in skills, and

new learning and review processes.

While the report revealed many

issues there was good news, too.

A small but relatively homogenous

group of respondents managed to

navigate choppy waters and take

Page 21: NQ magazine, April 2016•

21NQ Magazine April 2016

CORPORATE SURVEY

NQ

consistently excellent decisions.

They are characterised by a

disproportionate focus on the areas

within the Global Management

Accounting Principles – they

communicate in a way that is

influential; they choose the most

relevant information; they analyse

the impact of their decisions before

they take them; and they prioritise

being long-term stewards of their

organisation.

For newly qualified accountants

board-level decision-making can

seem distant. But many of the

required skills are the same as those

management accountants practice

day-to-day. Management accountants

have a mandate to look beyond the

usual numbers, and consider factors

such as trust, metrics, and where

their data comes from. Continuing

to hone these skills can help you

become an ‘integrated thinker’, and

can hasten your journey towards the

top of your organisation.

● Tony Manwaring is Executive

Director, External Affairs at CIMA

Page 22: NQ magazine, April 2016•

NQ Magazine April 2016

significant long-term operating lease

commitments on their stores and yet

had deceptively lean balance sheets.

In fact, their off-balance sheet lease

liabilities were up to 66 times greater

than their reported debt. Clearly, the

accounting does not reflect economic

reality.

To compensate for this ‘missing

information’, many investors use

various techniques to add operating

leases back onto the balance sheet.

However these adjustments are often

rough calculations, which may be way

off the mark.

Moreover, not all investors are

able to do this ‘add-back’ and the

prevalence of operating leases

LEASE ACCOUNTING

Shining the light on leasesHans Hoogervorst says there will be

substantial changes to many companies’

balance sheets when IFRS 16 comes

into effect in 2019

Leasing is a common form of

finance for many businesses,

especially in sectors like the

airline industry, retail, and shipping.

At the moment, listed companies

around the world have around US$3.3

trillion worth of leases. Under current

accounting requirements, over 85% of

these leases are labeled as ‘operating

leases’ and are not recorded on the

balance sheet.

Despite being off-balance sheet,

there can be no doubt that operating

leases create real liabilities. During

the financial crisis, some major retail

chains went bankrupt because they

were unable to adjust quickly to

the new economic reality. They had Hans Hoogervorst

22

Page 23: NQ magazine, April 2016•

NQ Magazine April 2016

NQ

indicates that companies are aware

of that. In some cases companies go

to great pains to structure their lease

obligations so that they remain off-

balance sheet, probably to look better

in the eyes of the unwitting investor.

Finally, the current accounting for

leases leads to a lack of comparability.

An airline that leases most of its

airplane fleet looks very different from

its competitor that borrows to buy

most of its fleet, even when in reality

their financing obligations may be very

similar. There is no level playing field

between these companies.

To address these problems, the

International Accounting Standards

Board, which sets the IFRS Standards

for financial reporting around the world,

has issued a new standard on lease

accounting, IFRS 16.

When IFRS 16 becomes effective

in 2019, it will result in a substantial

change to many companies’ balance

sheets. All leases will be recognised as

assets and liabilities by lessees, better

reflecting the underlying economics.

This change is expected to affect

roughly half of all listed companies

and will not be popular with everyone.

Accounting changes are often

controversial and can be met with

warnings of adverse economic effects,

defaults on debt covenants, and costs

of system changes. The IASB has

looked at all these possible risks very

carefully and has concluded that the

risks and costs are manageable.

First of all, IFRS 16 will not put

the leasing industry out of business.

Leases will remain attractive as a

flexible source of finance. It will remain

appealing to companies to lease assets

so that they do not bear the risks of

owning them. While the cosmetic

accounting benefits of leasing will

disappear, the real business benefits

of leasing will not change as a result of

the new standard.

Secondly, we think it highly unlikely

that the improved visibility of lease

obligations will lead to significant

effects in terms of the cost of borrowing

and debt covenants. The majority of

credit providers and rating agencies

already take lease obligations into

account when evaluating a company’s

ability to pay its bills, albeit often in

an imprecise manner. Moreover, many

debt covenants are unaffected by

changes in accounting requirements.

We do not deny that there will be

costs involved in updating systems

to implement IFRS 16. But we have

done our best to keep these costs to

a minimum. For example, we are not

requiring companies to put short term

and small ticket leases on the balance

sheet. This should be especially

beneficial for smaller companies.

In sum, we expect the benefits of

IFRS 16 to greatly outweigh its costs.

The new visibility of all leases will

lead to better informed investment

decisions by investors, and to more

balanced lease-versus-buy decisions

by management. IFRS 16 will lead

to improved capital allocation, which

should be beneficial for economic

growth.

• Hans Hoogervorst is the chairman

of the International Accounting

Standards Board (IASB), the standard-

setting body of the International

Financial Reporting Standards )IFRS)

Foundation.

LEASE ACCOUNTING

23

Page 24: NQ magazine, April 2016•

I need to findpqjobs.co.uk now!

PQ jobs pqjobs.co.uk

Your jobs board


Top Related