NQ magazine, July 2014

THE VOICE OF ALL NQs

ETHICS IN BUSINESS

There are ethical mountains to

climb, says LSBF’s Dr Steve Priddy

CPD SPOTLIGHT

What your accountancy body

expects of you

Contact usemail:

[email protected]: @pqmagazinefacebook: pqmag.com

call: 020 7216 6444

JULY 2014

HOW TO BUILD EFFECTIVE

RELATIONSHIPSPage 8

CPI EXAM UPDATEYou can now sit

the CPI exams in December – so why not make it the best

Christmas ever?Page 14

ETHICAL DILEMMAS

WOULD YOU TURN A BLIND EYE TO CORRUPTION IN YOUR

PLACE OF WORK OR WOULD YOU STAND UP AND BE

COUNTED? P10

P12

P22

CHANGING THE FINANCE FUNCTION

What’s best: Big Bang or gentle evolution?

P18ALL THE

NEWS YOU NEED

And a whole lot more Pages 4

and 7

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PQ jobs pqjobs.co.uk

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COMMENT

Maintaining competenceNow you are qualified you might have thought it was time to kick back your heels for bit. But don’t forget you will need to keep up-to-date, and that means CPD. How much you have to do and how structured it is depends on which body you qualified with.The ACCA says you

have to complete 40 relevant hours a year. CIPFA says you are required to undertake a minimum of 120 hours of activity over three years (so that’s 40 hours as well).

CIMA and the ICAEW take a less prescriptive approach – it is down to you to decide what is relevant to your individual development needs. But what you all have to do is fill out annual statements. This is vital, because each year a number of members will be randomly selected and asked to ‘share’ their evidence of CPD activity. We have a round-up on page 18 and you can benchmark your body against the rest.

As with many issues of NQ we have a lot about ethics. Regular correspondent Dr Steve Priddy discusses corporate ethics on page 12, and there is an ethical dilemma for you to take a look at too (page 10). The CCAB has produced a whole series of these and it is well worth looking at their website. They have also recently got involved in the anti-money laundering debate. Accountants obviously have a big role to play here and the legislation isn’t working as well as the CCAB would like!

I am not sure if you know, but the ACCA has been running a global campaign – the Smart Finance Function. We have an article in this issue about change management.

Finally, we recently met up with an old friend – Graham McDonald. He was a worried man. He said none of the accountants he taught seemed to understand how much they needed to save to have a comfortable life after they retire. Even though they were accountants! So he has written an informative piece about pension provision (page 20).Graham Hambly, Editor ([email protected])

EDITOR’S COMMENTS

NUMBER CRUNCHING

the record number of newly promoted PwC equity partners P753

the average salary for accountants before any bonus P4

£66,795

number of CPD units a year that are required of every qualified ACCA member P18

40 units

the ideal target level you should have as a pension income. You will need £398,790.73 of savings! P20

£40,000

the percentage of NQs who said that money was the top priority for them when looking for a new job

P4

31%

NEWS

4 NQ Magazine July 2014

True and fairThe Financial Reporting Council (FRC) has stressed that the presentation of a ‘true and fair’ view remains a fundamental requirement of financial reporting.

In October 2013, the Department for Business, Innovation & Skills (BIS) and the FRC confirmed that the current legal framework requires companies to present a true and fair view. Consistent with this, FRC has published an updated statement on the application of the true and fair view. The new statement reflects developments in UK GAAP, and the now finalised European audit legislation.

Acceptable methods of depreciationThe IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than consumption of the economic benefits embodied in the asset. To this end it has published amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets.

The IASB also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances.

Non-fi nancials rule for EU

All EU large firms will have to disclose a host of non-financial information in their annual reports under new rules. Gender diversity, corporate social responsibility, anti-corruption measures and environmental impact will all have to be ‘revealed’. The FRC’s Stephen Haddrill described the new non-disclosure requirements as a positive move for investors, complementing the FRC’s work on UK guidance on the strategic report.

Sex traffi cking accountant Kunal Chaudhary, a privately educated and seemingly respectable senior manager at Deloitte in Manchester, had a dark secret. He led a double life trafficking European sex workers into the UK.

Although he denied any wrongdoing, Chaudhary was found guilty at Croydon Crown Court and sentenced to five years in prison for his involvement in a criminal ring based in London.

He was convicted of conspiracy to traffic persons into the UK for sexual exploitation, conspiracy to control prostitution and concealing criminal property.

A spokesman for Deloitte said: “Kunal Chaudhary is a former employee of the firm. The police have made it clear that these terrible offences were not in any way connected with his employment at Deloitte. As soon as the charges were confirmed he was suspended without pay and following his conviction he was dismissed without notice."

Pay on the upAccountancy pay is on the up, increasing by an infl ation-busting 4.6% over the past year. The average salary grew from £64,022 in 2012/13 to £66,795 in 2013/14. On top of this, some 53% of accountants received a bonus of, on average, 17.5% of their salary. This brings total remuneration to £78,465, up from £75,034 last year.

This is the fourth consecutive year of strong pay growth for UK accountants. It is not surprising then that 46% of accountants said they were satisfied with their salary. Some 79% of accountants now feel secure in their role and 66% are expecting more in their pay packet in the coming year. That said, some 39% of those surveyed revealed they would be actively looking for a move elsewhere.● One in seven NQs rate their work-life balance as the top priority when choosing which firm to work for, says new research elsewhere.For most NQs (31%), however, it is money that is their top priority. Next up it is career progression, with work-life balance coming in third.

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NEWS

7NQ Magazine July 2014

New partners unveiled at the Big 4 accountants

Nice one Eric! Fraserburgh accountant Eric John (pictured middle) has won the Young Accountant of the Year award at the Scottish Accountancy Awards. After graduating from Robert Gordon University in 2006 with a BA (Hons) in Accountancy and Finance he started his accountancy career with Shell as an internal audit assistant. Eric later moved to Aberdeen accountancy firm Hall Morrice. In December 2011, John joined north-east accountants Leiper and Summers, attracting a significant number of new clients to the firm. The clients, mostly located across Aberdeen, Peterhead and Fraserburgh, cover several industries including the oil and gas sectors and new business start-ups. ● Watch out for the launch of PQ magazine’s (our sister magazine) awards in the next issue. We will be looking for our new NQ of the Year – and it could be you!

Shining the light on good governanceThe financial and sovereign debt crisis and constant stream of governance failures in the public sector have highlighted continuing problems with nepotism, inefficiency, corruption and poor financial management.

In an effort to encourage more effective public sector governance, IFAC and CIPFA have got together to produce the ‘International Framework: Good Governance in the Public Sector’.

The framework encourages better governance and managed public sector entities by improving how they set and achieve their intended outcomes.

The two believe enhanced stakeholder engagement, robust scrutiny and oversight of those charged with primary responsibility for determining an entity’s strategic direction, operations, and accountability leads to more effective interventions and better outcomes for the public at large.

CIPFA’s Ian Ball said: “Public sector governance must focus explicitly on sustainable economic, social and environmental outcomes, and this publication is unprecedented in highlighting the central role that outcomes and the public interest should play in the processes and structures of public sector governance.”

INTERNATIONAL FRAMEWORK: GOOD GOVERNANCE IN THE PUBLIC SECTOR

PwC has announced it is promoting a record 53 new equity partners – 20% more than last year, reflecting the more buoyant economy and its plans for sustainable growth.The firm points out that

the new partner group is drawn from a diverse range of backgrounds with more women and individuals from ethnic minorities moving into senior positions.

Some 40% of the new partners are women, a threefold increase on the number promoted last year, with eight of them working flexibly. PwC now has more women equity partners than any other professional services firm, with 148 female equity partners in the UK, plus three in its legal arm.

Some 20% are also from a culturally diverse background, and one new partner joined PwC as a school leaver.

UK chairman Ian Powell said: “Increasing the diversity of the leadership in the business has been a top priority since I was elected in 2008. It was clear that we could only deliver our growth plans if we were a diverse and inclusive business. Since then we have introduced a range of talent management programmes that help people achieve their potential, including board level mentoring schemes, women’s leadership programmes and ‘Open Mind’ diversity training.”

At the same time, Deloitte announced it has promoted 65 new partners. This is the largest number of partner promotions in the past 10 years. Some 20% of the new partners are female (13 of 65). Deloitte has also set some ambitious targets of 25% female partners by 2020 and 30% by 2030.

Accountancy giant EY ‘unveiled’ 675 new global partners. That is an increase year-on-year of 33%. In Europe, Middle East, India and Asia region some 237 partners were appointed. Worldwide, women made up 26% of new partners.

PwC’s Ian Powell


PEOPLE

Building effective, real relationshipsWe take an ‘NQ’ look at the recently published CIMA report ‘Tomorrow’s relationships: Unlocking value’

Unlocking the value in relationships is key to an

organisation’s success. But how do you close the gap between what is said and what is done, to build relationships that are resilient and robust, and ensure lasting success?

In the foreword of ‘Tomorrow’s relationships: Unlocking value’ the authors of the report stress that leaders will often use that old adage that our people are our greatest asset. But only too often you then see evidence that suggests the opposite is true!

The environment we all work in is becoming ever more complex, competitive and connected. In many businesses old hierarchies of command and control have given way to flatter, more organic structures built on networks of relationships and influence.

Value is created as much outside an organisation as within – through collaboration and integrated value chains that cross-organisational boundaries.

Creating effective internal as well as external relationships is important. The CIMA report explains that the two are inevitably intertwined. Society is not something that exists ‘outside’ of the organisation.

It also has to be understood that with the ever-changing environment also comes greater risk. But you have to ask yourself, are your relationships ‘current’?

There are, say the authors, four keys aspects of creating effective

relationships:● Identifying key relationships.● Tuning in to relationships?● Measuring the effectiveness of

relationships.● Reporting on the effectiveness of

relationships.

Identify the key relationshipsYou must ask yourself the question ‘what are our key relationships?’ The most common answer will be ‘the public’ (customers), business, NGOs, employees and suppliers. There are obviously differences by sector and geographical territories, but there is a danger that these relationships are treated homogeneously and many will have different short and long-term aims. In an increasing connected world relationships can also change quickly and in effect become ‘more demanding’.

It may help you if you map your key relationships.

The report sponsors say that a step change is needed in how organisations think and act when it comes to relationships. Departments need to identify the important relationships and translate this value into information relevant for effective management and decision-making. That means moving beyond stakeholder management and engagement, and take a relational view.

There is a difference between good relationships and effective ones! Neither is satisfaction a good measure of whether a relationship is an effective one. Relationships, then, are all

about creating an environment in which everyone can thrive. We are talking behaviour here. Treating the other party in the relationship as a means to one’s own ends is not the route to building an effective relationship, and such a short-term view is ultimately destructive in the long-term.

Embedding a relationship approach starts at the top, says the report. Senior managers need to set the tone. Relationships must also be discussed on a regular basis by the senior management team. Important relationships must then be fostered to ensure long-term success. How these relationships are monitored, measured and reported on is another key role for the board.

● ‘Tomorrow’s relationships: Unlocking value’ is a collaborative report from CIMA, the CIPD, KPMG and Linklaters.

NQ

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ETHICAL DILEMMA

Suspicious minds

How would you react if you had a suspicion of false accounting?


ETHICAL DILEMMA

Your considerations ● Identify relevant facts: You are aware that some of the

company’s customers are overpaying their accounts with the company and receiving repayments in cash. If credit notes are issued to the customers in respect of the retrospective discounts, these could be concealed by the customers, who can then understate their profits. Although there are quite legitimate benefits to your employer, you and the sales director have reasonable suspicions that the customers concerned are false accounting.

● Identify affected parties: These include you, the sales director, some of the company’s customers, the tax authority and, to a lesser extent, other stakeholders in the company.

● Who should be involved in the resolution: You, the sales director and maybe other board members should be involved in the discussions.

Are there other trusted colleagues with whom you can discuss your position?

Possible course of actionAs you are currently unfamiliar with the procedures of your new employer, you should try to establish the extent of the issue. You might achieve this by reviewing the sales ledger accounts that have shown credit balances in recent months that have subsequently been cleared by cash refunds. If your understanding is correct, these accounts will relate to some of the company’s major customers.

Having established the facts, you should discuss the issue with the sales director and then, if necessary, the other board members. In each case, you should prepare for the meeting and try to propose an acceptable solution to overcome any resistance that you may encounter. Your professional body may be able to help. You should advise the directors of the opportunity for fraud that you have noticed regarding the cash refunds, and that the company could suffer adverse consequences if it is allowed to continue.

You could also explain to the directors the ethical code of your professional body, and that you cannot simply ignore the situation.

If you feel the need to resign in order to disassociate yourself from the unethical practices of the company and its major customers, then you should seek legal advice on your employment and whistleblowing rights and responsibilities (subject to the rules and guidance of your professional body) and any protection you might seek from legislation.

You should document, in detail, the steps that you take in resolving your dilemma, in case your ethical judgement is challenged in the future.

● Thanks to the CCAB for this article. More ethical case studies are available at www.ccab.org.uk

Y ou are a recently qualified accountant and have accepted a job as financial controller for a well-established family business, which

supplies equipment to photographers, both by mail order and from its warehouse outlet. Its customers range from enthusiastic amateurs through to part-time professionals and owners of busy studios.

The customers’ payment methods reflect their diversity. There are credit card transactions and customers with 30-day credit business accounts. There is also a surprisingly large number of customers who collect their goods from the warehouse and pay in cash. You are told that cash payment probably reflects the nature of the customers’ own receipts, as some photographers will often be paid in cash for weekend wedding assignments.

In your first week at the company, the sales director (the principal shareholder’s son) brings to you a cheque in settlement of the account of a major customer. He explains that the cheque (which appears to clear the amount due) is in fact an overpayment, as the balance showing on the sales ledger is before allowing bulk discount (which is calculated retrospectively). The sales director shows you his calculations and the agreement as authorised by the board.

The sales director states that the customer’s managing director has come to collect the discount in cash. He says that this is not an unusual occurrence for some of the company’s better customers. It helps to maintain a good relationship with those customers, which leads to purchasing loyalty. Another benefit of this arrangement is that it gives the sales director regular face-to-face meetings with the senior staff of those customers. It also reduces the high charges that the bank makes for handling cash.

You ask the sales director why the customers prefer to receive a refund in cash, rather than simply pay the net amount needed to settle the account. He replies, with a smile, that it is not for him to question their motives.

Key fundamental principles ● Integrity: You and the sales director have suspicions

about the motives of some customers who regularly overpay the company and receive refunds in cash. Are you acting with integrity if you do not question those motives?

● Objectivity: Being new to the company, you are likely to feel intimidated by the directors, who are all members of the same family. Can you ensure that the intimidation threat does not adversely affect your ability to make ethical decisions?

● Confidentiality: You should consider whether you have a responsibility to discuss the practices of the company and its major customers with third parties, once all other reasonable steps have been taken.

● Professional behaviour: You must comply with relevant laws and regulations and not assist others to act illegally or unethically. You must not do anything that may discredit you or the accountancy profession.

NQ


ETHICS

Ten refl ections on ethics in business today

Dr Steve Priddy puts the ethical dimension of work into perspective – although business does, he admits, have an ethical mountain to climb


ETHICS

NQ

Ten refl ections on ethics in business today

A fter over 35 years in business and fi nance I have fi nally reached the point where I am teaching ethics and decision making in business. What follows are

some refl ections on where we fi nd ourselves today.

1. Too many people are pre conventional ethical reasonersThe academic literature suggests we are a mix of pre conventional, conventional and post conventional ethical reasoners. Pre conventional reasoning latches on to an external authority and seeks to obey rules. Typical statements from this level of reasoning are ‘I was only obeying the rules’, or ‘If I don’t do it someone else will’. The best of ethical reasoning looks to principles such as truth and justice in making decisions. Organisations with post conventional ethical leaders have all sorts of good things going for them. We need more.

2. Ethics is not the same as corporate social responsibilityThis is fortunate, for if you spoke to the managers and owners of the four million or so corporations in the UK that do not trumpet CSR strategies you would fi nd that most of them play by the rules of the game, offer decent terms and conditions of employment to their staff, pay their taxes on time and seek to make good products.

3. Mindfulness is an essential ingredient of ethical ldershipWhat I try to get my students to do is to put themselves in the shoes of others and to understand the painfully limited conditions in which actual decision-making is conducted in business. Whatever the situation there will always be unintended consequences to decisions. All we can do is do our best to be as mindful as possible of those consequences.

4. Ethics is inextricably linked to beliefThere is no science to ethics, it is fascinatingly woven into us and we are all different.

5. We should not confuse situational context with ethical relativismThere is a lot of loose thinking about the ‘relativism’ of ethics around the world. Very often people who take this stance accidentally or deliberately confuse specifi c situations with differential ethical values. For example, bribery may be more prevalent in one country than another. This does not mean that bribery is an ethical standard to be celebrated around the world. In my view humanity has ethical universals – it is simply that we have not yet uncovered them all.

6. Decision making in business usually has an ethical dimensionYou can all think of many examples – strategic or operational, managerial or non managerial, private or public sector – where this is the case, so I do not need to tell you!

7. Prospect Theory is a useful lens through which to view ethical dilemmasIf you have not met Daniel Kahneman’s thinking yet, you are in for a treat. Kahneman shows us very uncomfortably that we are actually wired as optimists as a species, and that while we are risk averse when we are in the money, we become risk seekers when things start to go wrong. Understanding that perspective will always aid your decision making in business.

8. Can a corporation ‘behave ethically’?Only when it is suffused with staff, from board of directors down, who are mindful and predominantly post conventional in their ethical thinking. You will know such organisations when you come across them.

9. Is there an ethical mountain to climb in business?Frankly, yes. The Edelman Trust Index, which has tracked these issues for years, fi nds that trust in business needs to be transformed if it is to rise above current very low levels. This low level of trust is not only evident in the fi nancial services sector, it is endemic.

10. Accountants are not bad at ethics; financial services seem to have lost the plotMy profession has remained reasonably well trusted in the three decades-plus that I have been working but let us not be complacent. Financial services has by contrast plummeted. The once important bank manager, partner to business, has all but disappeared in some communities. Still, the Banking Standards Commission under the leadership of Sir Richard Lambert at least provides all in the sector with the opportunity to transform their ethical mindset.Let us wholeheartedly support them in that!

● Dr Steve Priddy is Head of Research at the London School of Business & Finance (LSBF)


The best Christmas present ever!

INSOLVENCY

14


The best Christmas present ever!

INSOLVENCY

Don’t forget, you can you now sit the CPI exam in December as well as June. So what are you waiting for?

There are certain things you expect to see in December – sparkly baubles, animated donkeys appearing for no apparent reason behind a

cardboard flap with a ‘13’ on the front, and revolting relatives arriving with a big appetite and a six-pack of Stella on the 23rd.

Others you know will happen in June – such as hungry people at sundown, revellers in trainers standing around in the quagmire at Glastonbury waiting for five old blokes to come on, and weird bearded folk dancing around sticks at Stonehenge.

That is just how life is. And life for the Insolvency Practitioners Association (dodgy segue, but work with me) was always very clear before 2013. One cracking exam in June and that was the lot of CPI (Certificate of Practitioners in Insolvency) students until the following June.

How things have changed; there are now two sittings of the CPI exam, one in June and one in December, and people are already viewing the latter as a real opportunity. The sitting is new enough to have missed many a radar, so firms need to be reminded of its existence, along with its attendant flexibility. However, insolvency students have also missed the boat due to a lack of awareness… so here it is loud and clear. You can now begin your studies for this utterly relevant and practical exam in July and be qualified before Christmas.

The question is, why would you? The fact is that insolvency may not be of the moment, but it is of our age. Businesses have found themselves restructuring and re-gearing in recent, harsh times and will emerge leaner, smarter and more ready for a promising next 10 years (if repeated financial cycles are to be heeded). Insolvency is about so much more than insolvency. It is about business, commercial awareness and resurgence. What financial professional wouldn’t want a piece of that?

The IPA’s exam has come of age in a competitive environment and is fit for purpose. The syllabus covers

all areas of recovery and insolvency, backed by numbers, questions and the need for a practical approach to answering exam questions.

The sitting is ideal for students who didn’t quite make the (pass) mark in June and whose thumbs would have been twiddled beyond endurance waiting for the next sitting. Now they can start studies again whilst emerging from the grieving process and make the greatest use of their notes, summaries and memory of facts and application.

It is an entirely sensible move by the IPA, who are committed to their members and student members, and determined to offer flexible convenience at the centre of their exam business plan. You do not need to want a career in insolvency to explore the area and add a notch to your CV, and if you wish to find out more about any of the available options, you can email Maria Weemes at [email protected]. Or call us here at Neil Taylor Insolvency, as we are running courses for the December sitting, headlining them with our ground-breaking, exam-busting full-colour materials, and full-on Learning Mentor support. We back this with a total online lecture, tests and exercises service, several broad smiles and a freebie or two. What’s not to want?So, get your skates on for the December sitting of the CPI (sorry, but it was inevitable ever since the spurious reference to Stella in the first paragraph).

● Thanks to Neil Taylor Insolvency for this article

Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas Christmas

NQ


GOING IT ALONE

‘Compliance girl’ set for a new direction

Heather Miller has a bright idea to keep her business ticking over during the sluggish summer months


GOING IT ALONE

NQ

How is it the end of June already? Half way through the year and month 5 of AbleTax… and I’m hanging on in there! I’m pleased to say that I’m lasting longer than the England squad in the World Cup. I’m out of the group stages, shall we say.

Why do I think that is? Well, unlike Mr Hodgson, I’m not adverse to rolling with the punches and taking a few risks. Not least with my original business plan. It seems to me that to survive in the already saturated tax industry the best thing to do would be to figure out where exactly you fit into it all.

Who are your opponents? I know I should probably use the more friendly word ‘competitors’, but opponents makes me feel motivated, kind of like I’m involved in a sort of tax Hunger Games. Who might be able to help you? And, crucially, how flexible can you be when it becomes clear you need to change plan?

These are exactly the questions I’ve come up against in the last month or two. Back in January, when AbleTax was a mere twinkle in my eye, I dreamed of a streamlined, cloud-based tax return operation. Minimal tax advisory work, virtually no client meetings, it was fresh, modern approach that would allow me to get the job done at a sensible cost.Well. I suppose I should start by saying that, in the main, that’s what AbleTax has managed to do. So that’s good. However, there’s a pretty key issue with relying on tax returns as the foundation of your business, particularly when you launch that business in February. Put simply, no one really gives a stuff about doing them until July at the earliest. So, after the initial thrill of signing the client up, sending out a letter of engagement, and setting up a little client folder in DropBox... nothing happens. Your client disappears, goes to work, has a few beers, perhaps pops off on holiday. See you in December (January?) for the mad scramble!In the meantime, you have to find a way to make some cash because, as appealing as it is to dream of the massive dividend you’ll pay out to yourself in February having just steamrollered through 100 returns at £400 each, it’s highly likely that your electricity will have been cut off by then.

And this is where flexibility pays off. I have come to realise that advisory work, be it directly for a client or accountant, or indeed in the form of an article for a trade magazine, is the prop that all tax businesses need to keep things afloat.

Month 5, June 2014


CPD

THE REQUIREMENTSSo how much CPD do you actually need to do now you are an NQ? Here’s what your body says!

ACCA As an ACCA member you are required to participate in ACCA’s CPD programme from 1 January of the year following admittance to membership.

No matter what CPD route you follow you need to submit a CPD declaration by 1 January each year or you risk being removed from membership. Any learning activity can count as CPD as long as it is relevant to your current role or future career aspirations.

CPD examples:● E-learning (this could be webinars, courses, podcasts,

or online articles).

● Learning at work.● Face-to-face courses.● Working on committees/panels/discussion groups.● Undertaking research.● Additional qualifications.● Coaching and mentoring.● Networking.● Publications & technical articles.You are required to complete 40 relevant units of CPD a

year (1 hour of learning or development = 1 unit of CPD).Of these 21 units need to be verified and 19 can be non-verified.


CPD

NQ

A learning activity is verifiable if you can answer ‘yes’ to the following three questions:

● Was the learning activity relevant to your career or future career aspiration?

● Can you explain how you will apply the learning in the workplace?

● Can you provide evidence that the learning took place?

If you have undertaken general learning that is not related to a specific outcome, or is difficult to corroborate, it is likely to be non-verifiable CPD.

CIMA CIMA doesn’t prescribe specific activities or number of units or hours. Instead CIMA’s policy gives you the freedom to choose how you are going to develop so that you only complete activities that are directly relevant to your role and to your individual development needs. This approach, says CIMA, reflects the diversity of the membership and their unique position as financially astute business leaders.

All members are required to record their professional development. As a minimum these records need to cover the last three years and need to follow the six steps of the CIMA professional development cycle.

You can use CIMA’s CPD planner to record your progress.CPD is not simply about attending courses. Any activity

that helps you meet your development goals could count as CPD, including:

● Work-based learning.● Project work.● Academic and professional qualifications.● Internal and external training course.● Conferences and events.● Reading technical reports and journals.● Online learning.● Coaching and mentoring.● Research.● Secondments.● Observations and feedback.● Discussion forums.

The range of options available means that you can choose activities that suit your individual learning style, budget and personal preferences.

CIMA’s professional development cycle

1 Define current and desired roles recognising expectations of employers and others.

2 Assess development needs to establish knowledge or skill gaps.

3&4 Design and act – choose and undertake development activities that meet your development needs.

5 Reflect upon and document the outcome of each development activity.

6 Evaluate progress against the objectives set at the beginning of the year. Any outstanding development can be carried over into the next cycle.

CIPFAParticipation in CIPFA’s CPD scheme is mandatory for all CIPFA qualifieds.

Its definition of CPD reads like this: “A systematic and planned approach to the maintenance, enhancement and development of knowledge, skills and expertise that continues throughout a professional’s career and is to the mutual benefit of the individual, employer, the profession and society as a whole.”

Two levels of participation are available. Level 1 is the minimum requirement and Level 2 is the best practice level.

The following documents need to be completed:Level 1 ● Learning & Development Record (Level 1).● Portfolio of Evidence.Level 2● Learning & Development Plan (Level 2).● Learning & Development Record (Level 2).● Portfolio of Evidence.

At Level 2 members are also expected to reflect on their CPD activities and consider how they intend to use the knowledge and skills gained.

Documents do not need to be submitted to CIPFA unless requested to do so.

A CIPFA CPD year is any 12-month periods, eg January to December or April to March. And, participants are required to undertake a minimum of 120 hours of activities over a three-year period, with a minimum 20 hours of verifiable activities in any one-year.

Annually all members are required to confirm participation in the scheme by completing an Annual Members’ Statement, located on ‘My CIPFA’.

A number of members will then be randomly selected and asked to ‘share’ evident of their CPD activities.

ICAEW The ICAEW recommends that its NQs take the following approach to their CPD requirements: reflect, act, impact, and declare.

That means first considering your development needs and how you can meet them. Then create a plan of action.

Unlike other professional bodies the ICAEW does not dictate how much CPD members must do. There are no set hours or points to attain. You simply need to complete as much development activity as you feel is required to remain competent in your role.

The following activities, if relevant to your role, could count as CPD:

● Technical reading.● Learning at work.● Meeting with experts.● Conferences.● Courses and seminars.● Online learning.● Workshops with your peers.● Reading magazines, newspapers and journals.● Registering for updates and email alerts.

Each year you must declare your compliance by making a CPD declaration between 1 November and 31 January. You do this online at icaew.com/declare. Failure to make your declaration may result in disciplinary action.


PENSION PROVISION

Table 1: Total savings required to achieve four target levels of income

Desired Retirement Income

£15,000 £20,000 £30,000 £40,000

less State Pension £8,000 £8,000 £8,000 £8,000

Income Required from Saving

£7,000 £12,000 £22,000 £32,000

Total savings required

£87,235.47 £149,546.52 £274,168.63 £398,790.73

The sooner you start, the easier it gets. Table 2 shows the monthly amounts you need to save to achieve these different levels of income starting at ages 25, 30, 35 and 40.

Table 2: Monthly saving needed to achieve desired retirement income starting at ages 25 – 40

Target Income Savings start at age

£15,000 £20,000 £30,000 £40,000

25 £43.05 £73.80 £135.30 £196.79

30 £57.17 £98.00 £179.66 £261.33

35 £76.79 £131.63 £241.33 £351.02

40 £104.82 £179.69 £329.43 £479.17

To achieve a real return of 5% you are going to need to invest in some risky assets; bank savings will only earn around half of your required return. What follows does not constitute investment advice but please do consider the following options facing you.

Nowhere to runYou are going to get old – so how can you achieve a ‘comfort’ pension level? Graham McDonald answers an age-old question

A recent study by NEST (The National Employment Savings Trust) has suggested that a basic ‘comfort’ level of income in retirement is £15,000 a year;

though at that level around one third of pensioners struggle to meet their energy and grocery bills each month. The same survey suggests overall ‘satisfaction with life’ rises by 7% for each additional £5,000 of income up to £40,000, at which point further increases in income do not significantly add to satisfaction.

Your state pension will give you around £8,000 of income, so you will need to build up a saving pot to provide the rest. Table 1 shows the amount you need to have saved by retirement in order to generate retirement income of between £15,000 and £40,000

For simplicity, the following calculations will be based on real income and real returns so we can ignore the impact of inflation. I will also assume constant real returns of 5%, a retirement age of 70 and life expectancy of 90.


Research suggests that transaction costs and other expenses add another 2% to the cost paid by the investor in an active fund. The percentage of assets under management is also misleading; it’s how much of the return they take each year that impacts on how much wealth you will accumulate – see Table 3

Warren Buffett – the great active investor – tells Mrs Buffett to invest her money in tracker funds; when you look the impact of the higher costs of active management, you can easily see why.

Which index to track?The FTSE 100 is an index measuring the change in value of the 100 largest companies listed on the London Stock Exchange. With an objective of long-term growth it is not a good index to track; you are following the companies that have already grown to be the largest. You would expect better returns over time from the All-share index where your portfolio will still be invested in these large ‘blue-chip’ firms but also be able to benefit from the growth of the younger firms that will grow to be the 100 largest in the future.

In summary: invest in a tracker fund so you keep more of the growth and start saving as soon as you can to get your wealth compounding as much as possible.

● Graham McDonald is CFA Programme Director at LSBF

PENSION PROVISION

‘Active’ or ‘passive’ management?Most investors do not have the time to build and then monitor a portfolio of 30 to 40 individual assets which you need to spread your risks sufficiently. Your choice then is to invest in a Collective Investment Scheme run by an active fund manager – who will attempt to beat the market – or a passive “tracker” fund manager who will invest across the market and achieve the average market return. All of the evidence suggests that tracker funds generate superior net-of-fees returns.

An active manager will charge usually 3% of assets under management each year compared to a tracker fund that will charge around 1%. That doesn’t sound like a big difference but it hides two vital details. These fees are what the fund managers pay themselves; they exclude transaction costs which are incurred by active, but not tracker, funds.

Table 3: The impact of fees on £1,000 portfolio earning a 6% real return

Tracker fund Active fund

Manager fees 1.00% 3.00%

Other costs 0.50% 2.00%

All-in cost 1.50% 5.00%

Return before fees £60 £60

All-in Cost £15 £50

Net return £45 £10

Net return to investor % 4.50% 1.00%

NQ

Nowhere to run


CHANGE MANAGEMENT

Changing face of fi nance: big bang or evolution?

W ith ongoing pressures on the CFO to drive the efficiency and effectiveness of the finance function, finance transformation continues to

be a significant priority for many finance chiefs. Yet the importance of effective change management continues to be underplayed.

ACCA’s Finance Transformation Advisory board, a think tank that explores the issues around outsourcing and finance transformation, has recently added their views to the transformation debate in a new report called ‘Transformation Challenges in Finance’.

In this report, senior finance leaders representing some of the world’s leading brands such as Accenture, Deloitte, Glaxosmithkline, Pearson, Shell and Unisys have shared their insights on the principles of successful change management in today’s finance enterprise.

We know that effective change management capability is an essential ingredient for finance transformation success, but of course in complex large enterprises it’s very difficult to master. Getting the right sponsorship, effective stakeholder management, deploying the right resources and keeping the transformation on the “corporate radar” are all change management essentials.

Deborah Kops, Managing Principal of Sourcing Change and co-chair of the board, contributed to the report by saying: “One of the biggest challenges for finance leaders is acknowledging that there’s no set of regulations for change. Mastering what is often considered the ‘soft stuff’ is key to transformation success. It’s generally not comfortable for a profession that lives by rules.”

For this report, we posed a series of questions to these panellists. Can finance change successfully in a vacuum? What drives the enterprise to accept a new model for the finance functions? Should change evolve slowly, or should there be a big bang? And who is the most likely to succeed at making change happen?

The questions elicited many responses, which we distilled into a top ten of how to transform. These are the board’s views of what they saw as the 10 key change management principles for finance leaders seeking to successfully transform their finance organisations:

1Establishing the vision: it’s critical to spend time conveying the transformation vision and goal.

2Buy in: the importance of CEO and senior management support and sponsorship of the programme.

3Communication: the need for constant communication on what is changing and the rationale for change.

4Preparation: ensuring finance teams are bought in and committed to the change, and having an effective plan to manage the change process.

A new report from the ACCA can help you re-focus your organisation, says Jamie Lyon

1TRANSFORMATION CHALLENGES IN FINANCE

Transformation challenges in finance

Accountants for Business


CHANGE MANAGEMENT

5Resources: access to adequate programme resources at each critical stage of the transformation process, from developing strategy to achieving ‘business as usual’ acceptance.

6Patience: accepting that large finance transformation initiatives can be revolutionary and evolutionary, with most change processes taking longer than expected.

7Organisation redesign: remembering that redesign and use of finance shared services or outsourcing necessitates change in the retained finance function too – the imperative of changing the finance enterprise in its entirety.

8Maintaining middle management: successful change management is key to retaining the middle layer of finance management that is critical to core processes. Yet all too often, middle managers’ numbers are aggressively reduced to justify a business case for shared services and outsourcing, or they are lost in the shuffle.

9Alignment between capability and ambition: often finance leaders overstretch themselves to realise a vision that is way beyond their, or their enterprise’s, ability to achieve. Being realistic about the organisation’s change potential is essential.

10Working within the culture: those who implement complex, multi-scope, multi-geography finance transformation programmes, particularly in business-line-led organisations, will experience the greatest change challenges. Gauging the type of change the culture will allow is an imperative.

As part of ACCA’s global campaign, the Smart Finance Function, this Transformation Challenges in Finance report is available at http://www.accaglobal.com/smart. I believe it is a valuable resource that reveals tried, tested and effective techniques for changing finance.

● Jamie Lyon, head of corporate sector, ACCA

NQ

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