Issue 2 volume 9 February 2013

PLUS• Making the most of compliance• How to keep key employees • Mandarin Oriental CFO Stuart Dickie

THE POWEROF LOVE

HK$70.00

Prominent CPA couplesbalance work, life andthe demands of marriage

Raising our global profile

Last month we held a very success-ful event in Hong Kong with the IFRS Foundation Trustees. It was attended by top leaders from government, the

accounting profession and business – both from Hong Kong and overseas – who discussed the future of global financial reporting. A high level meeting of such calibre underpins the Institute’s pivotal role in the world of standard setting. The use of accounting standards involves many stake-holders, and I was glad to see so many of them come to exchange their views.

Financial Secretary John Tsang said at the meeting that IFRS has long been associated with global financial stability. And with the rapid diver-sification of business and integration of compa-nies across different borders, a robust financial reporting regime has become a prerequisite for the healthy development of the global economy.

As Hong Kong was one of the first jurisdictions to adopt international accounting standards in 2005, it has always been the aspiration of the Institute to have a single set of high quality and universally accepted financial reporting stan-dards. To achieve this, we fully support the work of the International Accounting Standards Board, the independent standard-setting arm of the IFRS Foundation. The IASB follows a thorough, open and transparent due process, which includes pub-lishing discussion papers and exposure drafts for public comment on new and amended standards.

Also on the international front, we recently received an invitation from the International Fed-eration of Accountants to make nominations for its standard-setting boards and other committees in 2014. Increasing our influence on international issues by representation is a strategic aim in our next long-range plan. The IFAC vacancies present a good opportunity for us to pursue this strategy. I believe nominations from Asia Pacific are particu-larly welcome as this part of the world continues its rise in economic and political clout.

Back in Hong Kong, with the diligent support of our nomination committee, the Council has fi-nalized the structure and composition of the 37

boards, committees, panels and working groups for 2013. As a core part of the Institute, commit-tees work closely with the Council and the man-agement – teamwork that assures our success in everything we aim to do. For this, I would like to express my deepest gratitude again to those who voluntarily contribute their time and expertise. If you are one of them, please come and join the spring cocktail in early March, which is specially organized to welcome you on board.

Again with the great help of the nomination committee, the Council has now completed its composition after co-opting Jennifer Cheung (di-rector, corporate sector group, global banking, HSBC) and Vivian Sun (principal consultant, Vivi-anSUN Consultancy). The nomination committee met all seven candidates and shortlisted three, who then each made a presentation to the whole Council. During the review, we took into consid-eration criteria such as the sector they work in, their areas of expertise, their profile and standing in the community, their level of participation in the Institute’s work, the balance and succession of the Council’s composition and the stage they are at in their career.

To let you know more about your Council mem-bers, A Plus will talk to each of them starting this issue, to see what things are closest to their heart as a member of the governing body and how they are going to deliver added value to you.

Lastly, you may have already noticed from the e-circular that we have kicked off celebrations for the Institute’s 40th anniversary with a specially designed icon and tagline: Accounting for Hong Kong since 1973 (「計」往開來四十年). In the e-cir-cular, we will present little fun facts about the pro-fession’s history each week. Meanwhile, in A Plus we will soon be running a series of features to commemorate the occasion. We’ve put together a 40th anniversary task force, so watch this space for more exciting celebratory activities to come.

It’s the start of another lunar new year, so let us make resolutions for a fulfilling year ahead in both our professional and personal lives. Happy Chinese New Year and Kung Hei Fat Choy!

“ It has always been the aspiration of the Institute to have a single set of high quality and universally accepted financial reporting standards.”

Dear members,

Susanna ChiuPresident

President’s message

February 2013 1

2 February 2013

56 Business travel Honnus Cheung chronicles the captivating charms of Melbourne

58 After hours Aloysius Tse on wine; Jemelyn Yadao on watches

60 Let’s get fiscal Nury Vittachi sends the wrong message

14 From burden to benefit Craig Stephen finds out how compliance can actually help a

company's stakeholders, customers and bottom line

18 Meet the Council The Institute’s president, vice-presidents and immediate past president present their visions for the Institute’s future

22 Crunching the numbers Accounting technology is rapidly changing. George W. Russell reports on new developments in hardware and software

28 Success ingredient Robin Lynam profiles Stuart Dickie, CFO of Mandarin Oriental, amid the iconic surroundings of the company’s flagship hotel

34 Keeping talent George W. Russell finds out how accounting firms can hold on

to their key talent and nurture younger recruits

38 Love actually Jemelyn Yadao meets four Institute member couples who have

stood together through good times as well as tough decisions

01 President’s message04 Institute news06 International news10 Greater China news

REGULARS

44 China finance Liu Yuting looks at enterprise financial management innovations

46 Forensic accounting Katy Wong explains how data analytics can fight against fraud

48 TechWatch 123 The latest standards and technical developments

50 Tech Q&A Your questions about standards answered

54 People on the move The latest professional appointments from around the region

55 Events A guide to forthcoming courses, workshops and member activities

28

REGULARS

SOURCE

LIFESTYLE

SOURCE

ISSUE 02 VOLUME 09 FEBRUARY 2013 CONTENTS

FEATURES

President: Susanna Chiu

Email: president@hkicpa.org.hk

Vice Presidents: Clement Chan, Mabel Chan

Chief Executive and Registrar: Raphael DingEmail: ce@hkicpa.org.hk

Deputy Director of Communications: Stella To

Editorial Advisers: Daniel Lin, Clement Chan, K.M. Wong

Editorial Manager: John So

Editorial Coordinator: Maggie Tam

OFFICE ADDRESS:37/F, Wu Chung House,213 Queen’s Road East,Wanchai, Hong KongTel: +852-2287-7228 Fax: +852-2865-6603

MEMBER AND STUDENT SERVICES COUNTER:27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong

WEBSITE: www.hkicpa.org.hkEMAIL: hkicpa@hkicpa.org.hk

M&L

Editor: George W. Russell

Managing Editor: Gerry HoEmail: gerry.ho@mandl.asia

Copy Editors: Jemelyn Yadao

Contributors: Robin Lynam, Craig Stephen

Production Manager: Jasmine Hu

Design Manager: Jennifer Chung

Editorial Assistant: Lucid Wong

EDITORIAL OFFICE:2/F, Wang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong

ADVERTISING ENQUIRIES:Advertising Director: Derek TsangEmail: derek.tsang@mandl.asiaTel: +852-2656-2676

A PLUS is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine.

© Hong Kong Institute of Certified Public Accountants February 2013. Print run: 5,870 copiesSubscription: HK$760 for 12 issues per year.See www.hkicpa.org.hk/aplus for details.

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About our name: A PLUS stands for excellence, a reference to our top-notch accountant members who are success ingredients in business and in society. It is also the quality that we strive for in this magazine — going an extra mile to reach beyond grade A.

4 February 2013

NEWSTHE INSTITUTE

Institute makes submissionon Hong Kong’s budgetIn its 2013-14 budget proposals, the Institute called on the government to offer more help to families and to increase the city’s inter-national competitiveness. According to the Institute’s submission, one of the main con-cerns of the city’s taxpayers is keeping up with rising costs.

The proposal suggests a range of mea-sures to help families and individuals, includ-ing widening the marginal tax bands from HK$40,000 to HK$50,000, increasing child allowances from HK$63,000 to HK$70,000, allowing deductions for voluntary Mandatory Provident Fund contributions with an annual cap of HK$60,000 and allowing deductions for private healthcare insurance premiums with an annual cap of HK$12,000.

The Institute also advocated offering a rent-al payment deduction as an alternative to the home loan interest deduction, adjusting the price thresholds of different stamp duty rates in line with property price inflation, providing a waiver on property rates of up to HK$2,500 per quarter and introducing an electricity sub-sidy of HK$1,800 for the coming year.

Disciplinary findingAu Ping-lam, CPA (Practising)Complaint: Failed or neglected to observe, maintain or otherwise apply Hong Kong Fi-nancial Reporting Standard for Private Enti-ties and Hong Kong Standard on Auditing 500 Audit Evidence during the audit of the finan-cial statements of a private company in Hong Kong for the year ended 31 March 2010. Au ad-mitted the complaints.

Decision: Au was reprimanded. He was ordered to pay the Institute a penalty of HK$46,000 and costs of the disciplinary proceedings amounting to HK$59,882.

Details of the disciplinary findings are available at the Institute’s website: www.hkicpa.org.hk.

ObituaryThe Institute notes with regret the passing of Lee Yim-wan, Penny, Ng Yin-ping and Wu Ying-Keung, Frank.

Along with the IFRS Foundation Trustees, who were in town to hold a meeting, the Hong Kong Institute of CPAs last month co-hosted an evening devoted to the future of financial reporting.

The first event was a press conference featuring Michel Prada, chairman of the IFRS Foundation Trustees, Hans Hoogervorst, chairman of the Interna-tional Accounting Standards Board, Ronald Arculli, an IFRS Foundation trustee representing Hong Kong, and Clement Chan, vice-president of the Institute and a managing director of BDO.

Prada described Hong Kong as an “extremely important” venue for the trustee meetings because of its full adoption and full support of IFRS. He said the two-day visit included discussions about strategy, funding, the establishment of the Accounting Standards Advisory Forum and the operations of the IFRS Asia-Oce-ania office in Tokyo.

Hoogervorst said the Asia-Pacific region was vital to the future of financial reporting. “It’s the happening place to be in terms of economic development and the avid adoption of our standards.”

He said he remained optimistic that the United States – the last major holdout on IFRS – would eventually adopt the single set of international standards. How-ever, he added, convergence with IFRS must pave the way. “We cannot have this bilateral relationship with the FASB. We are a mature full-grown organization with 100 members and they have to come first.”

The IASB chairman said he expected IFRS to enter a “period of calm” follow-ing the issuance of a standard on revenue recognition, which would occur very soon. A leasing standard is in the process of exposure.

The press conference was followed by an evening of discussion on “The fu-ture of global financial reporting.”

Hong Kong’s financial secretary, John Tsang, welcomed delegates by noting that IFRS has long been associated with global financial stability. “However, the financial tsunami and related events of recent years have highlighted the diffi-culties of aligning different financial systems in our era of globalization,” he said.

With the rapid diversification of business and integration of companies across different borders, a robust financial reporting regime has become a pre-requisite for the healthy development of the global economy, Tsang noted.

“To strengthen the regulatory framework for auditors, we are working with the Institute and the Financial Reporting Council on ways to further enhance the independence of Hong Kong’s auditor oversight regime,” Tsang said.

Arthur Yuen, deputy chief executive of the Hong Kong Monetary Authority, gave the keynote address, “The importance of IFRSs in promoting a healthy eco-nomic environment.”

Yuen noted the increased risk aversion of investors since the global financial crisis began five years ago. “That was partly due to the insufficient and inconsis-tent disclosure of financial risk information by financial institutions,” he said.

IFRS Foundation Trustees get together in Hong KongHeavyweights from business, government and the profession take stock of financial reporting agenda

February 2013 5

A PLUS

From left: James Riley, Carlson Tong, Hans Hoogervorst, Clement Chan and Jennifer Hughes (moderator from the Financial Times)

“Standardizing financial reporting stan-dards at the global level can help investors to compare financial information across insti-tutions and across jurisdictions.”

The speeches were followed by a thought-provoking panel discussion on the subject of financial reporting in which Hoogervorst and Chan joined Carlson Tong, chairman of the Securities and Futures Commission and an Institute past vice-president, and James Riley, group finance director of Jardine Matheson Holdings and an Institute fellow.

Financial reporting must benefit all stake-holders, Tong told the panel. He said finan-cial statements had become more difficult to decipher. “I’ve been an accountant for 37 years and now I have no idea which page to turn to. We have to ask ourselves, what are accounts for?”

Tong noted that global accounting stan-

dards were far more uniform than any oth-er comparable international regime, such as the supervision of the world’s financial institutions.

Riley echoed the IASB viewpoint, say-ing he would prefer the U.S. to join IFRS, but added that he was concerned that con-vergence had meant the IASB had become too accommodating of the American model. “I’m worried that reaching a settlement with the U.S. would mean ticking 10,000 boxes,” he said. “The drift has been too much to-wards a compliance requirement approach.”

Hoogervorst acknowledged that increas-ing regulatory burdens were making audi-tors more risk-averse, meaning that financial statements were clogged with unnecessary disclosures, hampering effective interpreta-tions of corporate results. “We are actively engaging with auditors on how we can help

them use their judgment more,” he said.The panel also discussed increasingly

complex auditors’ opinions. “As an auditor, I would like to give a very simple audit opin-ion based on the work that was done,” Chan said. “However, [it is not possible] given the different requirements that regulators im-pose, whether in different parts of the world or in different cases.”

Chan added that he would like to see more communication between auditors and their regulators.

The panel emphasized that the future of financial reporting would involve accounts that were more intelligible to the various stakeholders, given the wider investment community. “Financial statements are im-portant to anyone who entrusts their money to someone else,” said Hoogervorst. “Our au-dience is society at large.”

NEWSINTERNATIONAL

6 February 2013

Google announced a jump in annual revenues after a strong fourth-quarter performance.

The world’s largest Internet search engine company earned a net profit of US$2.89 billion in the final three months of last year, up 6.7 percent from the year earlier.

The company reported fourth-quarter revenue of US$14.42 billion, up 36 percent from the same period the year before.

“We ended 2012 with a strong quarter,” said Larry Page, Google’s cofounder and chief executive. “We hit US$50 billion in revenues for the first time last year – not a bad achievement in just a decade and a half.”

According to analysts, the company benefited from busi-ness growth in international markets. “Business looked really strong, especially from a profit-ability perspective. They really

grew their margins in the core business,” Sameet Sinha, an ana-lyst at B. Riley Caris, told Reuters. “Most of that strength seems to be coming from international markets which grew revenues quite substantially: up 23 percent year over year, versus the 15 per-cent growth in the third quarter.”

The revenue results pleased investors who had been con-cerned about a decline in digital ad sales following the increasing

Apple’s shares slide 12 percenton poor results

Shares in Apple fell 12 percent in a day as the technology company reported disappointing Mac and iPhone 5 sales. About US$50 billion was wiped off Apple’s market value on 24 January after it posted its slowest profit growth since 2003.

Results from its first fiscal quarter caused Apple’s shares to fall to US$450, before recovering some of its losses, raising concerns over the company’s smartphone growth prospects. The shares had hit a high of US$702 in September 2012.

The released figures also indicated that profits had remained the same from a year earlier at US$13.1 billion, while revenue was US$54.5 billion, an increase of 18 percent from a year ago.

Analysts had expected revenues of about US$55 billion.

Cameron calls for global crackdownon tax avoidance by businessesBritish PM warns against aggressively complex arrangements

Google’s annual revenue hits US$50 billion in fourth-quarter surge

AFP

The British prime minister, David Cameron, called for global action on tax avoidance in his keynote speech at the World Economic Forum in Davos, Switzerland, last month. Cameron told world leaders that as the head of the G8 group of the largest economies this year, the United Kingdom would continue to focus on corpo-rate revenue dodgers.

“Any businesses who think that they can carry on dodging that fair share or that they can keep on selling to the U.K. and setting up ever-more complex tax arrangements abroad to squeeze their tax bill right down – well, they need to wake up and smell the coffee because the public who buy from them have had enough,” he said, adding that some forms of tax avoidance have become “so aggressive.”

The speech comes after a British parliamentary commit-

tee questioned executives from multinationals such as Amazon, Google and Starbucks in Novem-ber 2012 for paying little U.K. tax. Last year, Starbucks said it would voluntarily make tax payments of £20 million over the next two years after a Reuters investigation found that the company had not paid British corporation tax in the previous three years.

popularity of smaller screened smartphones.

Google executives told ana-lysts in a conference call that the company had focused on improv-ing the average cost-per-click, a metric which indicates the price advertisers pay Google.

The fourth-quarter figures include Motorola Mobility, which Google acquired in May 2012. The subsidiary had an operating loss of US$353 million during the quarter.

Cameron’s “smell the coffee” reference was widely regarded as a dig at Starbucks in particular, upsetting the American-owned beverage chain. “The PM is singling the business out for cheap shots,” the Daily Telegraph quoted an unnamed company source as saying.

The House of Commons pub-lic accounts committee said last month it would hold a hearing at which senior tax specialists from PricewaterhouseCoopers, Ernst and Young, KPMG and Deloitte would answer questions over their roles in assisting big compa-nies to minimize their tax bills.

E&Y’s Mark Otty, managing partner for Europe, Middle East and Africa, told the Telegraph that companies have an “obligation” to their investors to pay the lowest tax possible. “The only way you can resolve this issue is through a legal code,” he said.

AFP

David Cameron

India’s finance minister, Palaniappan Chidambaram, is confident that a US$2.6 billion dispute between the country’s tax office and Vodafone, the larg-est corporate investor in India, will be resolved as talks between the two sides continued.

The stand-off relates to Vodafone’s US$10.9 billion acquisition of Hong Kong-based Hutchison Whampoa’s India mobile business in 2007.

“ I’m confident we will resolve [the Vodafone] issue,” Chidambaram told the Financial Times.

In January 2012, India’s Supreme Court ruled that Voda-fone, the British telecoms group, was not liable to pay any tax aris-ing out of the acquisition.

However, the Indian govern-ment reopened the case by amending tax laws to enable it to make retrospective tax claims.

February 2013 7

India expectsresolution toVodafone row

BP to make US$4.5 billion payout in criminal settlement for spill

A judge in the United States approved an agreement by BP, the British oil giant, to pay US$4 billion in a record criminal settle-ment related to the fatal Deepwa-ter Horizon disaster in 2010.

In November 2012, BP said it would pay the amount to the U.S. Department of Justice and pleaded guilty to 14 criminal charges, including those related to the deaths of 11 workers.

Luke Keller, a vice-president

of BP America, apologized to a federal court in New Orleans and the families of the dead, for its role in the accident. “Our guilty plea makes clear, BP understands and acknowledges its role in that tragedy, and … BP apologizes to all those injured and especially to the families of the lost loved ones,” he said. “BP is also sorry for the harm to the environment that resulted from the spill.”

The company has been selling

assets worth billions to raise mon-ey to settle all claims, reported BBC News. BP is expected to make a final payment of US$860 mil-lion into the US$20 billion Gulf of Mexico compensation fund by the end of the year.

The criminal settlement, before federal judge Sarah Vance, includes payments of nearly US$2.4 billion to be paid to the National Fish and Wildlife Foundation and US$350 million

to the National Academy of Sci-ences over a period of five years. BP will also pay US$525 million to the Securities and Exchange Commission over three years.

Other companies involved in the spill include rig owner Transocean and Halliburton, which provided cementing services.

The disaster emitted more than 200 million gallons (757 million litres) of oil into the sea.

Spain falls deeper into recession amid spending cuts, record joblessRajoy plans stimulus measures to offset weakening data

AFP

Spain’s economic output fell by 1.8 percent from a year earlier, according to data from the National Statistics Institute, indicating that the country’s recession had deepened in the fourth quarter.

Gross domestic product fell 0.7 percent in the last three months of 2012 from the previous quarter, its steepest contraction in a year as govern-ment spending cuts and rising unemployment hit households.

“These sharp falls [in GDP] leave a tough scenario for the first two quarters of this year. The question is how market improvements can soften the falls, but it’s still too early to tell,” Citigroup strategist José Luis Martínez told Reuters.

On 30 January, the Spanish prime minister, Mariano Rajoy, responded to the weak data by telling parliament he was

planning a package of stimulus measures, but vowed that Spain would stick to planned budget cuts. The package includes tax breaks for entrepreneurs.

The data also revealed that unemployment reached 26 percent of the workforce at the end of Rajoy’s first year in power, the highest rate since the

country returned to democracy in 1975.

Spain’s economy fell into its second recession since 2009 at the end of 2011 because of the fallout from a burst property bubble.

The government expects the economy to grow again before the end of 2013. Economy min-ister Luis de Guindos said that “the Spanish economy is able to grow in the second half of this year,” in a press conference at the World Economic Forum held in Switzerland last month.

The government has pledged to lower the public deficit from the equivalent of 9.4 percent of annual gross domestic product in 2011 to 6.3 percent in 2012, 4.5 percent in 2013 and 2.8 percent in 2014. But analysts say reaching those targets will be difficult in a period of declining economic activity.

AFP

Mariano Rajoy

8 February 2013

Hans Hoogervorst, the chairman of the International Accounting Standards Board, has warned the United States that its continued delays in moving to International Financial Reporting Standards will probably cost more than the eventual switch.

The U.S. also risks losing much of its influence over global standard setting by not being a driving force for IFRS, Hoogervorst told securities analysts at a conference in New York on 10 January.

Hoogervorst said investors are bearing huge costs for the process of trying to compare and contrast the financial performance of companies around the world using different standards. Those costs “are probably a lot bigger than the one-time conversion cost that an economy has to make when it converts” to IFRS, he said.

The U.S. Securities and Exchange Commission has considered a move to IFRS for some years, but recently appeared to cool on the idea of making the change. SEC staff disappointed global rule-setters last year by issuing a final report on a switch to IFRS with no recommendation.

Support for a switch has waned amid concerns about the costs and worries that IFRS allows more management judgment than highly detailed U.S. accounting rules. “I don’t see any signs of any imminent decisions in Washington,” Hoogervorst said.

In November, the IASB proposed a new 12-member Accounting Standards Advisory Forum, expected to become an important source of input to international rules. Membership on the board requires a commitment to a single set of global accounting standards, which would leave out the U.S.

Indian firms split overproposal to cap auditsIndian accounting firms are divided over a clause in the Companies Bill that would cap the number of companies that can be audited by a single firm at 20. Big Four firms, which audit 55 percent of Indian public companies, want the scope of the provision to be restricted to public companies, while small and mid-tier firms favour the cap to be applied to all clients, India’s Business Standard newspaper reported. The lower house of parliament has passed the bill, while the upper house is likely to take up the bill for passage in the next session, which begins next month.

Schroders gives KPMGmandate to audit booksAsset manager Schroders has selected KPMG as its new auditor, ending a relationship with PricewaterhouseCoopers that lasted more than 50 years. Schroders paid PwC £3.1 mil-lion for audit and audit-related work plus an-other £1.6 million for unrelated work in 2011. KPMG won the mandate after a tender process that started last year.

Australian, NZ bodieslaunch joint programmeThe Institute of Chartered Accountants in Aus-tralia and the New Zealand Institute of Char-tered Accountants are set to launch their joint Chartered Accountants Programme this month, the ICAA’s monthly magazine reported. The new programme consists of five modules of learning materials that are almost all common to both countries and a single set of require-ments for mentored practical experience.

Accounting graduatesare sought after in U.S.An employment survey in the United States last month showed that 68 percent of the most re-cent accounting majors received job offers — the highest percentage of any major nationwide. The National Association of Colleges and Em-ployers report stated that the unemployment rate for accountants stood at just 4.1 percent at the end of 2012, the Salt Lake City Deseret News reported.

Auditors face legal action over alleged failure to scrutinize troubled loansThe United States Securities and Exchange Commission charged two KPMG employees with failing to uncover problems at a bank that later failed.

It is the first time the commission has taken action against auditors in a case related to the global financial crisis.

The two KPMG auditors, John J. Aesoph and Darren M. Bennett, failed to adequately scrutinize bad-loan reserves at TierOne Bank in Nebraska, the SEC said in an administrative proceeding. The action could result in the two auditors losing their right to audit public companies.

TierOne hid millions of dollars in losses on troubled loans made during the height of the financial crisis before the bank eventually failed in 2010, according to the commission, which filed suit against three TierOne executives last year.

The SEC case against the auditors, more than four years after the crisis, revives lingering questions about whether auditors did enough to prevent questionable practices and whether authorities have done enough to hold them to account.

KPMG does not face any action in the TierOne case.

U.S. delays on IFRS to be expensive, says Hoogervorst

Washington faces sidelining in future

NEWSINTERNATIONAL

10 February 2013

NEWSGREATER CHINA

China showed signs of an eco-nomic rebound in the last three months of 2012, despite gross domestic product finishing at a 13-year low. GDP grew by 7.8 percent last year, down from 9.3 percent in 2011 and the lowest annual rate since 1999.

However, with a pick-up in the fourth quarter showing year-on-year growth of 7.9 percent from 7.4 percent in the previous quarter, analysts believe a stron-ger performance is inevitable in 2013. “The overall national economic performance [has been] stabilized,” Ma Jiantang, commissioner for China’s Na-tional Bureau of Statistics, told reporters.

The rebound, which breaks a streak of seven consecutive weaker quarters, was driven by state investment in infrastruc-ture projects and efforts to get consumers and companies to

spend, BBC News reported. The data were released as China’s newly installed leaders prepare to take charge of the country.

“It is obvious that the slow-down in the Chinese economy has halted for the moment,” Fra-ser Howie, managing director of fund manager CLSA in Singapore and co-author of the 2011 book Red Capitalism, told BBC News.

Howie cautioned that the improvement will not be drastic,

adding that “one has to be mind-ful that any recovery will be limited in its scope, not least be-cause of the various headwinds that China is facing.”

China’s economy will grow 8.5 percent this year with domestic demand driving the expansion, Shanghai Daily re-ported last month, citing a Bank of Communications forecast.

The new leaders, who take charge next month, will have to find the right balance between trying to prevent the formation of a property bubble and keeping a healthy growth rate going, ac-cording to Howie.

The slowdown in annual growth last year came as China had to deal with weakness in the global economy, particularly its key export markets of the United States and the European Union, and as the government took mea-sures to cool the property market.

Shares in China Vanke, the coun-try’s biggest property developer by market value, rose sharply after the company announced plans to move its foreign currency B-shares to Hong Kong from Shenzhen.

Vanke announced on 18 January that it will convert its Shenzhen-listed B-shares to Hong Kong-listed H-shares fol-lowing the successful migration of shipping container company China International Marine

Containers Group’s B-shares to Hong Kong in December 2012. Vanke will maintain its yuan-denominated A-share listing.

After the announcement, both Vanke’s yuan-denominated A-shares and its Hong Kong dollar B-shares surged by 10 percent, their highest prices in more than three years. The A-shares hit the top of the trading limit and closed at 11.13 yuan on the Shenzhen exchange while its B-shares

jumped to HK$13.75. If approved, the move of its

foreign currency B-shares to Hong Kong will widen Vanke’s access to global investors, giving the company entry to an ex-change where the daily trading value is more than 100 times higher, Bloomberg reported. “The move will help Vanke access more resources in the long run,” Jinsong Du, a property analyst at Credit Suisse, told Bloomberg.

Huawei, the Chinese telecoms equipment manufacturer, said that its net profit grew 33 percent to 15.4 billion yuan last year, in line with its forecast earlier last month.

The company, which has been trying to tap into the smart-phone market, said it made huge breakthroughs in selling the devices in Japan, North America, Europe and other markets in 2012.

Revenue last year increased by 8 percent to 220.2 billion yuan, the company added. For 2013, the firm expects its overall revenue to grow between 10 and 12 percent.

Despite the improvement, “smartphone penetration is still way too low and there is a lot of room for growth,” BBC News quoted Cathy Meng, Huawei’s chief financial officer and daughter of company founder Ren Zhengfei, as saying.

Huawei recently pledged to start publishing more detailed financial information in order to dispel increased scrutiny by foreign governments.

The company, along with rival ZTE, poses a national secu-rity threat to the United States, a U.S. congressional investigation concluded last year.

Meanwhile, security con-cerns about Huawei’s links to the People’s Liberation Army led the Australian government to ban it from tendering for its national broadband network.

Huawei profit rises in line with forecasts

Economic rebound emerges despite 13-year low for GDP growthCautious analysts warn of slow improvement amid “headwinds”

China Vanke’s shares soar on Hong Kong plan

Ma Jiantang

AFP

February 2013 11

The founder of Alibaba, the Mainland’s biggest e-commerce company, will step down as the firm’s chief executive.

“Alibaba’s young people have better, more brilliant dreams than mine, and they are more capable of building a future that belongs to them,” Jack Ma, who founded the company 14 years ago, said in a letter to employees. He added that “the Internet belongs to the young people.”

Just days before the announcement was made, it was revealed that Alibaba was breaking up its business into 25 units, led by different executives, to be more agile in responding to the market.

Ma said he would appoint a successor and act only as an executive chairman from 10 May.

Analysts believe that the next chief executive will need to ensure a smooth transition in the business model in order to be successful.

“The biggest challenge a new chief executive officer faces is making sure the new business units can effectively coordinate among themselves,” Yang Xiao, a Beijing-based analyst with research firm Analysys International, told BBC News.

Alibaba is the parent company of Alibaba.com, an online marketplace for small businesses, Taobao, a shopping website, and Alipay, an online payment service.

A record number of Chinese com-panies have pulled out of stock markets in the United States suggesting that they see fewer advantages in a U.S. listing.

In 2012, 27 China-based companies with U.S. listings announced plans to go private, up from 16 in 2011, according to investment bank Roth Capital Partners, Reuters reported.

Also, about 50 mainly small Chinese companies deregistered last year with the U.S. Securi-ties and Exchange Commission, ending their requirements for going public. This is up from about 40 in 2011 and the most since around 1994.

Experts cite the U.S. govern-ment investigations of financial reports and low share prices

as diminishing many Chinese companies’ chances of raising new money in the U.S.

“There’s very little in the way of new capital flows to those companies, their valuations are low and they’re encountering significant headwinds in terms of

regulatory oversight,” James Felt-man, a senior managing director at Mesirow Financial Consulting in Chicago, told Reuters.

Last month, a Hong Kong ar-bitration panel ruled that China MediaExpress Holdings, which obtained a U.S. stock listing without an initial public offering by buying a listed company, was a fraudulent enterprise, award-ing US$77 million in damages to Starr International, a firm run by Maurice “Hank” Greenberg, the former chief executive officer of American International Group.

Greenberg sued the company as well as its auditor Deloitte Touche Tohmatsu in Delaware in 2011, claiming Starr was fraudulently induced into in-vesting in the Chinese company.

Alibaba founder set to quit as CEO

FDI drops for the first time in three years

Foreign direct investment flows into China fell last year – the first decline since 2009 – as the economy grew at its slowest pace in 13 years.

Last year, total FDI into China stood at US$111.7 billion, 3.7 percent lower than 2011, according to data released last month by the Ministry of Commerce. Outbound Chinese direct investment, however, grew 28.6 percent from a year earlier to a record US$77.2 billion.

Analysts say that the drop in foreign investment is the result of China’s overall slowing growth

and Europe’s ongoing debt crisis, Bloomberg reported.

It is also spurred by China losing its competitive edge as a low-cost manufacturing base, making other investment destinations more attractive.

“For 20 years China has been the major recipient of foreign direct investment in the developing world but rising costs from higher wages and currency appreciation are seeing multinationals look to expand elsewhere,” Trinh Nguyen, an economist at HSBC in Hong Kong, wrote in a recent report.

“India, Indonesia and Vietnam stand to benefit most as they have large labour forces and strong domestic markets.”

Despite companies shifting to other countries, in a survey of about 300 members of the American Chamber of Commerce in China, 58 percent of respondents said that the Mainland remains in their top three investment priorities, up from 47 percent in 2011. However, only 20 percent said China was their top investment priority, compared with 31 percent the year before.

Companies ditch U.S. listings in wake of investigations, share price slumpsMarkets closer to home offer better valuations, fewer headaches

Maurice “Hank” Greenberg

AFP

12 February 2013

NEWSGREATER CHINA

Auditors asked to enhanceIPO due-diligence methodsThe China Securities Regulatory Commission encouraged auditors to step up their approach to due diligence in an effort to restore confi-dence in the Mainland’s new stock market listings. Bankers who attended a meeting with the regulator on 8 January said auditors were asked to use more behavioural analysis when assessing potential IPO candidates, in-cluding techniques used in the United States. “A senior CSRC official mentioned the [U.S.] Federal Bureau of Investigation’s people-read-ing technique in particular as an example,” a banker told the International Finance Review.

Mainland IPOs to pick upthis year, PwC forecastsThe number of initial public offerings in Chi-na’s A-share market is expected to rebound, PricewaterhouseCoopers forecast last month. “PwC is expecting 200 IPOs to raise 130 bil-lion to 150 billion yuan in 2013 by listing on the Shanghai and Shenzhen stock markets,” Frank Lyn, managing partner of PwC China, said at a press conference in Beijing. The fore-cast compares to 155 IPOs listed in 2012, with total funds raised at 108.3 billion yuan.

Audit authority recoversembezzled housing fundsThe National Audit Office, China’s top auditing authority, announced that 2.96 billion yuan embezzled from affordable-housing funds in 2011 had been recovered. According to a re-port by the auditing authority, its audit work has cancelled about 7,000 households’ rights to benefit from the housing.

Central bank balance sheet shrinks for first timeData from the People’s Bank of China indi-cated that its balance sheet, which expanded eightfold from 2002 to 2011, shrank for the first time last year, the People’s Daily re-ported last month. It showed that the central bank’s assets totalled nearly 29 trillion yuan at the end of November 2012, nearly 514.7 bil-lion yuan less than the amount at the end of January 2012.

Caterpillar, the world’s largest manufacturer of tractors and excavators, an-nounced it had discovered accounting misconduct at a Chinese company it had acquired in June last year.

This led to Caterpillar, which paid about US$700 million for ERA Mining Ma-chinery, writing down more than half its expected earnings for the last quarter of 2012.

On 18 January, the manufacturer announced in a statement that an inves-tigation of ERA and its subsidiary, Zhengzhou Siwei Mechanical & Electrical Equipment Manufacturing Company, which provides equipment for the mining industry, found “deliberate, multi-year, coordinated accounting misconduct.” As a result, Caterpillar said it would take a non-cash goodwill impairment charge of US$580 million, or 87 cents per share, in the quarter.

It also stated that the probe “determined several Siwei senior managers engaged in deliberate misconduct beginning several years prior to Caterpillar’s acquisition of Siwei.” Caterpillar replaced these senior managers and said that “the actions carried out by these individuals are offensive and completely unac-ceptable.” The company found discrepancies in November 2012 between the inventory in Siwei’s books and its actual inventory.

Caterpillar’s shares fell by 1.5 percent after news of the fraud broke out.

Caterpillar grapples with accounting scandal over Chinese subsidiary

Deloitte opposes request by SEC to resume audit caseFirm claims regulator contributed to impasse

Deloitte has asked a judge in the United States to reject a Securities and Exchange Commission case forcing the firm to hand over work papers from its audit of Longtop Financial Technologies, an allegedly fraudulent Chinese company.

Deloitte had previously resisted handing over the accounting documents, citing Chinese secrecy laws.

Last month the U.S. regulator requested that the federal court case, which began in May 2011, be reopened following a six-month hiatus when negotiations between the SEC and the Chinese Securities Regulatory Commission failed to reach a solution.

Deloitte’s lawyers filed papers saying that the case should be postponed pending the outcome of the SEC’s recent administrative proceedings against five accounting firms, including Deloitte, as part of an investigation into alleged accounting fraud at nine U.S.-listed Chinese companies.

Deloitte also argued that the SEC’s issue is partly of their own making. “The SEC has long been aware that the CSRC forbids China-based audit firms to produce audit work papers directly to the SEC, and yet the SEC chose to allow China-based companies to sell securities in the United States despite those restrictions,” the firm said in the papers it filed.

14 February 2013

Compliance

New legislation and standards have increased the compliance burden on companies. But not all

executives are in despair, as new frameworks can be good for management, shareholders and the market.

Craig Stephen reports

Illustrations by Harry Harrison

February 2013 15

H ong Kong executives had at least one extra resolu-tion on their minds on New Year’s Day. That was the day the Securi-

ties and Futures (Amendment) Ordinance 2012, requiring any inside information that comes to their knowledge to be dis-closed, came into effect.

Failure to make timely disclosures of in-side information – defined as specific news that if generally known to persons likely to deal in the listed securities would materially affect the price – could attract a fine of up to HK$8 million among other penalties.

The new rule is the latest in a series of legislative moves designed to increase trans-parency in Hong Kong’s markets. However, for many companies the new regulations are part of an increasing burden on doing busi-ness. A recent raft of legislation – amending laws governing short selling, trade descrip-tions, data privacy, competition and over-the-counter derivatives, to name a few – com-bined with new accounting standards and tougher extraterritorial financial regulations have made many executives and accountants cry “enough.”

The growing burden is a worldwide phenomenon: According to a recent global KPMG survey of corporate general counsel, the increasing volume and complexity of regulations was rated as the greatest risk to corporations over the next five years.

But rather than panic, some companies are choosing to accentuate the positive and focus on how a more tightly regulated envi-ronment can be good for business. As much as the elephant in the room might seem unnecessary and to be taking up valu-able space, with the right training it can also be put to useful work.

“The vast majority of compliance measures deliver a benefit,” says John MacPherson, who manages compli-ance issues for Sinclair Knight Merz, a British

civil engineering company. “They can be en-suring safety, setting a benchmark for prod-uct quality, putting a price on environmen-tal impacts, protecting the consumer from bad business practices or providing a fairer deal for stakeholders, investors and wider society.”

Constructing a cultureFinancial reporting standards are a prime example of an extra burden being worthwhile, says William Lim, technical partner for HKFRS and IFRS at Deloitte in Hong Kong and a Hong Kong Institute of CPAs member.

“It means companies are easier to anal-yse, which gives them better access to in-ternational capital,” Lim says. “This gives a competitive advantage to Hong Kong’s capi-tal markets. It makes our job more difficult but this just means we have to structure ap-propriately so we have standards specialists in place.”

Proper implementation of systems to meet obligations does not just help companies avoid new regulatory pitfalls, but also serves to raise performance. “It can change the culture of a company for the better,” says Paul Phenix, who heads the technical department at Baker Tilly in Hong Kong and is also an Institute member. He cites recent changes to the Hong Kong stock exchange corporate governance

code as an example.One of the changes to the code calls for a

robust whistle-blowing protection regime. This, says Phenix, helps make a company more open to listening to employees about performance problems that can be fixed, which leads to raising the company’s value.

Compliance objectives can strengthen a company’s governance from the bottom up, he says, adding that the rules covering the release of inside information can surpris-ingly have the greatest impact on relatively low-level employees, such as accounting clerks or goods vehicle drivers with access to important information.

Advisers try to stress the upside of com-pliance-mandated change. “We approach from both a compliance aspect and what we call a commercial benefits character,” says Hugh Gozzard, an enterprise risk services principal at Deloitte in Hong Kong and an Institute member.

“We try to engage clients and explain the benefits,” he adds. “They need to take a broader view and not just say ‘This is hor-rible.’ If there are costs associated to put in controls, there are also gains to be made from the avoidance of reputational damage, sanctions or unpleasant publicity.”

Making the most of itTo be sure, not all new rules have an upside. In many cases, they impose requirements that regulators see as necessary. One exam-ple is the Foreign Account Tax Compliance Act, known as FATCA, enacted by the Unit-ed States in 2010, which requires non-U.S. banks to disclose details of accounts held by

U.S. citizens.“In the tax field, regulatory require-

ments continue to increase, with FATCA being perhaps the most

extreme example, as the U.S. has imposed its tax enforcement standards

on banks worldwide,” says Scott Michel, a partner at Caplin & Drysdale, a law firm

in Washington. “FATCA is

Compliance

16 February 2013

the law and [there is] really no choice but to try to make the best of it.”

Another example of compliance imposed from outside Hong Kong is the decision by the G-20 group of major world economies to regulate over-the-counter derivatives by centralizing their clearing, reporting and trading through electronic platforms. The Hong Kong Monetary Authority, along with its counterparts in Singapore and Austra-lia, has largely adopted the new derivatives rules, but while noting the regulatory bur-den imposed on companies.

Michael Go, executive director of MMADX, a derivatives trading platform in Austra-lia, agrees that there could be practical and economic difficulties moving derivatives to an electronic platform. However, he adds, “there are also benefits for the market in pooling liquidity [and] efficiencies from im-provements to risk management.”

Data privacy is another prime example of an evolving regulatory area as many juris-dictions change and update rules.

Hong Kong’s amended Personal Data

(Privacy) Ordinance came into effect in October 2012. Maximum fines for violating the ordinance will rise from HK$50,000 to HK$1 million. Meanwhile, a draft bill before the European parliament could see a com-pany fined 2 percent of its global revenue for data privacy violations.

“Companies need to know what per-sonal, customer, intellectual or financial information they are keeping,” says Antho-ny Crampton, a risk consulting director at KPMG China in Hong Kong. “What data do you have? How is it classified? Where is it? How secure is it? Is access to your data ap-propriately controlled?”

Bearing the costThere is no doubt that meeting new obliga-tions bears a cost and the benefits need to be analysed. Simon Riley, director of the Institute’s standard setting department, says the Institute recently hosted, with the International Accounting Standards Board, a roundtable meeting to study implementa-tion of the segment reporting standard.

“Concerns were understandably raised about the costs and benefits of requiring certain disclosures,” Riley says of the round-table, which was attended by financial state-ment preparers, auditors, academia, regula-tors, investors and other users of financial statements.

“We know these concerns exist not only in Hong Kong, but also internationally, and we welcome the efforts of the IASB to ex-amine the concepts underlying disclosure requirements as part of the continual effort to arrive at financial reports that are both relevant and useful and balance up the com-pliance costs in their preparation.”

Hans Hoogervorst, chairman of the IASB, points out that although the cost of convergence with IFRS can be high, it is out-weighed by the longer-term benefits. “There is a one-time cost and that cost is real, but it is nothing compared to the cost of lack of investment because you haven’t adopted a global standard,” he told a press conference at an IFRS Foundation Trustees event hosted by the Institute last month.

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Local regulators agree, saying that one-off costs are offset by continuing savings. “Standardizing reporting standards, for example, reduces the costs of preparing fi-nancial statements,” Arthur Yuen, deputy chief executive of the Hong Kong Monetary Authority, said at the same event.

Value in transparencyJim Woods, China risk, control and assurance practice leader at PricewaterhouseCoopers and an Institute member, believes now is “crunch time,” when the current landscape of new rules and standards means compa-nies must improve controls. Rather than despairing, Woods urges companies to em-phasize the upside. “It will give you a com-petitive edge,” he says.

Meeting new obligations, Woods adds, can deliver much greater transparency for investors and other stakeholders, which can have direct benefits for a company’s stock price. “The common complaint from listed companies is their share price is too low be-

cause investors don’t understand their busi-ness,” he says. “That is why there is value in transparency.”

To help seek and understand that value, Andy Cheung, chief financial officer of The Link Real Estate Investment Trust and an In-stitute member, says his company is always looking ahead to the prospect of new rules and laws. “We always try to be ahead of the ball game,” he says.

For example, Link REIT began producing sustainability reports two years ago. “This gives us a sense of how the organization as a whole is working,” says Cheung. “Using key performance indicators, we can see gaps for improvements internally as well as giving us a good global benchmark against our peers.”

Cheung says proper preparation is the key to building effective compliance frame-works that don’t impact the bottom line. He says Link REIT’s professional management teams work closely with external consul-tants to assess any regulatory risks. “Once it is known, we assess how it will impact the

business from a financial point of view, from operations, and develop a policy. This is re-ported and discussed at board level.

“Good reporting is more than just about more financial disclosure and controls,” Cheung adds. “Over the years we have im-proved the quality of our disclosure to ca-ter for a much broader readership such as stakeholders in the community. This means using less jargon, plain English, as well as more charts and diagrams.”

Ultimately, being prepared for compli-ance requires a strategic or longer term per-spective. “Companies should be introduc-ing clearer policies or additional approvals and reviews to their processes,” explains Luis Hui, head of compliance at Siemens China in Beijing and an Institute member.

“Although this does not show up im-mediately on the profit and loss as a gain, this commitment to instilling and building sustainability into their businesses, like upgraded infrastructure, will reap future benefits.”

Members are our biggest assetKicking off a series in which Council members meet with our readers, Institute president Susanna Chiu outlines her vision of the needs of the profession

I t has been 18 years since I first started my service at the Institute, initially as a volunteer member on one of the com-

mittees. Since then, it has been a wonder-ful journey that has blessed me with many friendships and valuable experiences.

Now that I have been given the honour of leading the Institute as president, I will dedi-cate myself to working with the Council and management to set our organization in good stead as we celebrate our 40th year. I’m com-mitted to building an even stronger Institute and CPA brand to serve members and the Hong Kong public in the years to come.

Many have asked me what plans there are for my year as president. There are many, including continuing the good work of the immediate past president, Keith Pog-son, and his predecessors. We will also start new initiatives, such as the sixth long-range plan. But if I had to choose a theme, it would be “diversity,” because it encompasses our many plans and also represents the diverse profile and needs of our membership.

We have more than 35,000 members of all ages. We have one of the most gender-equal professions – with 49 percent women and 51 percent men – and a young member-ship, with more than 45 percent of members under the age of 40. Practising members make up 23 percent, while 77 percent of our members are professional accountants in business and others. Diversity is an issue close to my heart, and I am sure the Institute will continue recognizing this and provid-ing services that aren’t just administrative, but that deliver added value to our members and engage them in a meaningful way.

For our members working in practice, au-ditor liability reform is a pressing concern. There is a need to objectively examine the current regulatory and liability landscape and look at how the Institute as the profes-sion’s leader can manage the transition smoothly in collaboration with the govern-ment and other stakeholders.

Meanwhile, as a professional accountant in business for more than 16 years, I can see the challenges of members in this field including the support they need in daily work and expanding the breadth and depth of their career horizon. As CPAs, we are prominent global business executives and advisers, contributing to the development of business and finance in Hong Kong and around the world. Our members are multi-skilled and doing multi-disciplinary work, and this requires us to evolve our thinking as a profession and the positioning of our CPA brand.

We must continue to examine and im-prove the services the Institute provides to all

members throughout their careers as CPAs. These include education and extending the mobility and influence of our CPA designa-tion in the Mainland and internationally.

I have been actively engaging members to participate in the Institute’s social and recreational activities throughout the past few years. I encourage you to take part as there is good value in it. The camaraderie, mutual support and pride of being a CPA – and working together as a profession to achieve things that we couldn’t do alone – are important parts of being a member of the Institute.

The fast-changing world will no doubt present new challenges to our profession.

18 February 2013

Council members

Meet the Council

Susanna ChiuPresident

“We will continue achieving sustainable success for our profession, our Institute and all our members.”

February 2013 19

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But by working together – and focusing on members – I am confident that with the col-lective skills, experience and commitment of our Council and management, we will continue achieving sustainable success for our profession, our Institute and all our members.

Susanna Chiu is also a director of Li & Fung Development (China).

Staying on top and in frontClement Chan, Institute vice-president, looks at the profession’s regulatory reform challenges

The Hong Kong government and the Financial Reporting Council are looking at potential reforms of

the audit regulatory framework to put Hong Kong in line with global norms and eligible for membership of the International Forum of Independent Audit Regulators. It is an important step towards maintaining Hong Kong’s position as an international finan-cial centre.

At this pivotal time, the accounting profession should take the opportunity to look at other related developments, such as professional liability reform, in order to provide a balanced and fair environment for the profession to grow. Otherwise a

profession skewed towards heavy regulation would face stifled long-term development and fail to attract young talent.

With this in mind, the Institute has combined the regulatory reform working group and the professional liability reform working group this year to form the new audit professional reform working group, making our efforts more cohesive. As the chairman of this new group, it is my role to support the Institute in steering the reform in the right direction, which is of prime im-portance to the prospects of the accounting and audit profession in Hong Kong.

Furthermore, it will be paramount in ensuring our city maintains its position as a world financial centre – one that contin-ues to attract quality multinational compa-nies to our capital markets and continues to evolve into the principal offshore clearing centre for the renminbi trade.

Hong Kong’s status as a front-runner in helping to devise and adopt International Financial Reporting Standards is vital. Since joining the Council in 2006, I have been particularly focusing on accounting and financial reporting standards. In the past few years, the Institute has managed to grow significantly in its stature as a stan-dard-setter for Asia. It is important for the Institute – and the city’s CPAs – to build on this strong foundation and carry on being one of the leading jurisdictions and voices when it comes to shaping the present and future of IFRS.

It is also imperative for the Institute to be viewed as an organization that truly rep-resents the voices of accountants in Hong Kong. The demography of the Institute is changing rapidly, with younger members replacing relatively senior members as the bulk of the membership. This change brings many challenges to the Institute in how to maintain and increase its relevance and awareness among younger members. This is hard work but worthwhile to do.

All the while, the Institute must ensure it balances its two core roles: representing the best interests of the profession and the best interests of the public.

Clement Chan is also a managing director of BDO.

Clement ChanVice-president

“Hong Kong’s status as a front-runner in helping to devise and adopt International Financial Reporting Standards is vital.”

20 February 2013

Council members

Creating a strong messageInstitute vice-president Mabel Chan urges better communications with members, stakeholders and the public

The Institute’s membership is grow-ing rapidly – it has risen by about 1,800 members annually in recent

years – and that’s a growing community that we need to represent. It is important that we provide a supportive environment for mem-bers’ professional development.

Accounting remains one of the most popular and respected professions in Hong Kong. At the same time, accountants are seeking better positions and we need to make sure they have the necessary skill sets to perform their jobs. We need to help equip members better so they can excel.

The membership is not only growing, but also its demographics are changing. We have far more women and younger members join-ing us. How do we meet their needs? We have to listen to women’s voices and younger voices. We must hold forums where they can offer their views and have more detailed discus-sions about their expectations and aspirations.

It is not easy for an organization with such a diverse membership to remain re-sponsive and inclusive, but we must achieve this. We have accountants in practice, ac-countants in business, accountants in gov-ernment. We represent every business sector in Hong Kong.

While it is important to make our mem-bers heard and feel involved, it is equally vi-tal to make sure our communications’ reach extends to every stakeholder. We need to let the public know more about what we do, how we support the city and the country and how we contribute to business and the economy.

People generally don’t understand what accountants do. They might know we un-dertake audits and advise on tax, and per-haps some people know we are involved in initial public offerings. But we do a lot they don’t know about. We need to enhance our public communications and better relate to the public so they can understand and ap-preciate our role.

The Institute needs to enhance its rela-tionship with members in small- and medi-um-sized practices and help create more op-portunities for SMPs both in Hong Kong and

in the Mainland through cooperation with the Ministry of Finance and Chinese Institute of CPAs. Our SMP leadership panel should engage in dialogue with its peers in inter-national accounting bodies to cooperate on strategies to further develop our SMPs.

Many of our members are either working in China or travelling between Hong Kong and the Mainland. Some even commute daily. We need to be able to engage with these members to improve our capabilities on the Mainland and forge better links with Mainland businesses and institutions.

We need to also deepen relationships with both the Hong Kong and the Central govern-ments and further our communications with stock exchanges both here and on the Main-land, the Securities and Futures Commission and other regulatory authorities in Hong Kong, China and internationally.

This is particularly important, given that the Institute’s own regulatory role is about to change with the transfer of some respon-sibilities to the Financial Reporting Coun-cil. This is a process that we must manage smoothly with an efficient mechanism.

Finally, Hong Kong must maintain its

“It is not easy for an organization with such a diverse membership to remain responsive and inclusive, but we must achieve this.”

Mabel ChanVice-president

February 2013 21

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status as a global leader in the accounting profession and the financial and commercial world at large. Our members should be made aware of Hong Kong’s status and be proud to be part of this Institute.

Mabel Chan is also the founding partner of Mabel Chan & Co.

Building a new futureImmediate past president Keith Pogson says the Institute must proactively help shape the world of the profession

I t was a great honour to serve as the Institute’s president last year – a chal-lenging, politically charged year full of

difficult choices.

My time as a Council member and as presi-dent has given me an interesting perspective of our Institute and our profession.

While the Council strives to represent the diverse views of all members, at times – in order to move forward – it has been nec-essary to do the right thing by the majority of members.

Understanding what the majority wants is vital, and that means listening to all views, objectively studying the pros and cons of all proposals and executing the ones that are right for our profession.

I’m very excited about the sixth long-range plan that we started last year. It isn’t just an opportunity to refocus the Intitute on the needs of our members; it also makes adjustments to our services to take into ac-count how our membership is becoming

younger and our world, more political and regulated.

Most importantly, it sets out how we as CPAs can become an even more integral part of the fabric of society and a force for good.

Now that these goals have all been laid down, it is time to work out the nitty gritty of execution and balance the financial chal-lenge of wanting to achieve more while recog-nizing that money is limited. Delivering value for money to members is always a priority.

Our profession is changing rapidly – because of technology, politics, regulations and the expectations of society – and it is an increasingly complex environment in which to work and prosper. I believe the Institute must support members in this changing world by helping them develop new skills to replace those that have become less relevant.

To be an accountant used to mean being an auditor or bookkeeper, but now the roles of many of our members are far more diverse and specialized at the same time.

The Institute must provide members with not only the support they need to flour-ish in the historical roles that are the origins of our profession, but also equip them with new skills that are needed to maintain our profession’s importance and growth.

It will be hard work, but necessary and rewarding. From what I got from the many face-to-face meetings last year with different sectors of membership, I see there is a need for the Institute to build more skills-based training programmes that proactively support all members while sensitively recognizing their different levels of development and practical needs.

Ultimately, the Institute must be a voice for the good of the profession. Many of us have been very fortunate, with great ca-reers and experiences behind and ahead of us. But there are many in society – indeed some in our profession – who haven’t been so lucky. In the long-range plan we have looked at ways in which we can contribute and give back, as well as proactively shape the world around us.

I invite you to be part of that journey.

Keith Pogson is also managing partner, financial services (Asia Pacific), of Ernst & Young.

Keith PogsonImmediate past president

“We as CPAs can become an even more integral part of the fabric of society and a force for good.”

22 February 2013

Technology

J ason Blumer, who runs Blu-merCPAs, an accounting firm in the United States, is a keen technology fan – what the high-tech industry calls an

early adopter. In 2009, he set his staff three goals: end the use of paper, close down the firm’s bricks-and-mortar offices and mi-grate all services to the computing “cloud.”

By the end of last year, he achieved all his aspirations. And Blumer isn’t worried that traditional customers might be put off by his ground-breaking methods. “After do-ing this, we have found there is a particular type of customer who wants to be served this way,” he tells A Plus from his home in Greenville, South Carolina.

“Using technology is no longer a dif-ferentiator for the right customer,” Blumer observes. “The more tech-friendly and tech-savvy customers actually expect you to de-liver your services now with technology.”

Blumer believes his principles can be adopted in almost any jurisdiction, but the Hong Kong accounting profession appears to be a long way from activating such revo-lutionary ideas.

However, as the Hong Kong Institute of CPAs membership becomes more youthful and technologically sophisticated, it is inevi-table that technology is set to dramatically change the way members work.

The technology industry aims its ac-counting-related software at two principal

categories of buyers: businesses and CPA firms. For businesses, software helps auto-mate cash flows, streamline invoicing and billing and helps maintain compliance.

Accounting software automates data en-try, measurement and recognition, and fi-nancial report disclosure and presentation. Modern software can incorporate enhanced displays, such as three-dimensional model-ling, and a networking environment where users can annotate data, discuss and ques-tion issues, and solve problems in real time.

For accounting firms, Institute members say technology has benefited in two separate ways: by improving the firm’s internal pro-cesses and creating external opportunities with clients.

Illustrations by Alan Ho

CRUNCHING THE NUMBERSAs the accounting profession becomes more youthful, its members are keener to adopt new technology. George W. Russell explores recent advances

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February 2013 23

“Firstly, technology has helped trans-form how we conduct our business, how we document, review and access audit working papers,” says Kenneth Wong, a partner in the risk and controls practice at Pricewater-houseCoopers in Hong Kong and an Institute member. “In addition, technology has also opened doors to enable us to develop new service areas, such as management con-sulting, forensic accounting and regulatory compliance,” adds Wong, who is also a mem-ber of the Institute’s IT interest group.

Benefits of automationTechnology providers are already aware of the emerging changes. “The increasingly popular adoption of tablets and smartphones

for mobile computing makes working-on-the-go a real possibility for accountants,” says Adrian Ang, an assistant sales manager in Hong Kong for Sage, a U.S. company that has been selling software to accountants and their clients for more than 30 years.

Sage sells business management soft-ware  and industry-specific accounting pro-grams. Recently it has been offering its en-terprise resource planning software as iOS and Android applications. “We work to assist CPAs to automate and improve productivity,” says Ang.

Other vendors such as Flexsystem, a 25-year-old Hong Kong-based accounting software company, says they try to automate as much as possible of the full reporting cycle,

freeing CPAs for more important tasks. “CPAs should no longer be involved too

much on data entry, data validation and rec-onciliation nor drill too much into the tech-nical areas of information technology,” says Ashley Clarke, the company’s chief operat-ing officer.

Flexsystem also focuses on expense man-agement and other human resources-relat-ed issues and financial performance man-agement. Clarke says the company’s new challenge is to offer CPA firms analysis of data of their internal operations at “a more granular level.”

“Technology should be viewed as a fa-cilitator to bring information – not data – to both the financial and non-financial users

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February 2013 25

who need it, when they need it and for it to be accessed as appropriate from any de-vice,” adds Clarke, who says his company has signed up more than 1,500 clients in China.

Another fast-moving company is Xero in New Zealand, which has attracted invest-ment from Peter Thiel, a German-American financier who founded PayPal, the online fi-nance company, and who was an early back-er of the Facebook social network.

Xero stresses the user-friendliness of its cloud-based software compared with that of competitors and offers a range of “single-click” report templates, such as for profit and loss, balance sheet, management reports and taxes for a range of jurisdictions.

Rod Drury, a cofounder of Xero, based in Havelock North, New Zealand, says the accounting profession is “fundamentally retooling” itself to adapt to technological change. Modern software, he says, has cre-ated a continuous relationship between ac-countants and their clients, instead of a once-a-year interaction based on the tax year.

Another growing brand is Auditflow, a cloud-based auditing software developer in Southport, Australia, that plans to launch in Hong Kong this year.

Large accounting firms tend to develop their own auditing software. PwC, for ex-

ample, uses its proprietary Aura suite devel-oped in the U.S. Auditflow offers jurisdic-tion-specific auditing software to smaller firms that is updated online to account for any changes in regulations.

“Our software assists auditors to per-form fully compliant engagements for their clients in a timely and cost effective man-ner, and provides practice workflow man-agement of the assignments and staff,” says cofounder Rich Neal.

The lagging innovation in the Asia-Pacific region hasn’t stopped technology consultants setting up shop in Hong Kong. Lisa Gotlieb, a New Zealand Institute of Chartered Accountants member, moved to Hong Kong to establish Lisa Gotlieb Enter-prises, which contracts accounting services to small businesses in the city.

Her services include setting up software, including Xero, and training for small busi-ness clients, as well as improving office procedures such as simplifying paper flow, minimizing waste and streamlining access to data.

“Technology has allowed information to be shared easily across different business lo-cations, as well as allowing easily traceable links between internal documents, creat-ing structure and a clear picture and story

of what the accountants are telling us about the business,” Gotlieb says.

Half century of computingIt is nearly 50 years since accounting first embraced the computer age. “Accounting was first automated to a significant degree when IBM introduced the System/360 in April 1964,” says Chris Westland, an Ameri-can Institute of CPAs member and a former visiting scholar at Hong Kong University of Science and Technology.

This was the first accounting-specific computer and had been among the most ex-pensive products ever developed by the com-pany up to that time, says Westland, now professor of information and decision sci-ences at the University of Illinois in Chicago.

The immediate effects of this computer-ization were dramatic. Within a decade, ac-counting departments at Fortune 500 com-panies in the U.S. were staffed at only about a tenth of the levels they had been in 1964.

The next era of accounting technology began with the commercial release of DOS-based computers in 1981, followed by the introduction of the ground-breaking Lotus 1-2-3 spreadsheet software two years later and the first Windows operating system in 1985. The same year Microsoft wrote the

Excel program originally for Apple’s Macin-tosh computer.

Technology advocates forecast that the latest era will be based on cloud comput-ing – the provision of products and services through a shared distribution network. “Cloud accounting is absolutely turning the industry on its head,” says Drury at Xero. “It’s the third generation of technology.”

Cloud platforms are changing how com-panies store and allocate data and has led to another rising trend – software-as-a-ser-vice, known as SaaS, in which enterprises rent software applications and server space from providers to save on upfront costs.

Westland says small- and medium-sized practitioners in particular should be leverag-ing the power of technology. “Optical charac-ter recognition, pattern recognition, statisti-cal, business analytics and data manipulation tools now exist that allow small firms to be as effective as the Big Four in all but the largest of corporate operations,” he says.

“Auditing is no longer a profession that needs to throw masses of junior auditors at an audit. It can be effectively – and perhaps more effectively – undertaken by small, in-terlinked teams of specialists under the su-pervision of an audit manager.”

What the future holdsTechnology professionals predict further advances. Clarke at Flexsystem, for exam-ple, foresees faster processors, more band-width and increased compression as drivers of accounting technology.

“Social networking in a controlled en-vironment will be the norm and will allow for a new level of quicker problem-solving across operating entities,” he adds.

Meanwhile, cloud computing will con-tinue to evolve, he says. “It will be knocking down geographic boundaries and allow-ing, for example, heightened levels of cor-porate governance through the ability for checks and balances to be initiated across borders.”

Technology providers continue to stress cost savings from the cloud. “By consolidat-ing servers from various locations in a tra-ditional IT environment, accounting firms can regain tighter control and monitor their IT expenditure, and align IT expenses with business growth to maximize utilization of limited resources,” says Derek Yiu, general manager of business solutions and services at Fujitsu Hong Kong, which sells scanners and data storage to CPA firms.

However, accounting remains a conser-

vative profession and there is still some resistance to tech-

nological innovation. “Many CPA firms [in the U.S.] are still mired in the mostly manual audit methods that were used 30 years ago when archival records were maintained on paper,” Westland notes.

One barrier to change is often that CPAs become too bogged down in daily opera-tional details. “They won’t make the change that will free up their time,” says Clarke, adding that the global financial crisis ex-acerbated this issue, given the increasing regulatory burden.

However, as younger recruits embrace technology, barriers are likely to fall away. “Like most international accounting firms, we recruit university graduates and those from a younger generation are much more receptive to new technology than, say, peo-ple like me,” Wong at PwC acknowledges.

Vendors are already seeing change. “We find CPAs tech-savvy,” says Drury at Xero. “They already know document man-agement – they’re already on Dropbox and Google Docs. Often a young partner is a technology evangelist educating the rest of the firm.”

February 2013 27

Photography by Joan Boivin

28 February 2013

Stuart Dickie, CFO,Mandarin Oriental Hotel Group

Success ingredient

T he Year of the Snake is a big one for the Mandarin Oriental Hotel Group. The company’s first ho-tel, the Mandarin Oriental Hong Kong,

opened in 1963 and thus turns 50 this year. Coincidentally, so does Stuart Dickie, the group’s chief financial officer.

Dickie, a Hong Kong Institute of CPAs fellow, joined the group in 2000 as direc-tor of corporate finance from the company’s auditors – then as now, Pricewaterhouse-Coopers – where he was a senior manager from 1994 to 2000. He became CFO and a director of the hotel group on 1 April 2010, but is clearly no April fool in his financial decision-making.

He heads a team of 28 people, not counting the individual finance teams at each hotel. Supporting Edouard Ettedgui, the group chief executive officer, Dickie is involved in many aspects of the overall running of the business, including corporate governance. “The CEO and I are the only two day-to-day directors on the public company

board, and we spend a lot of time preparing for quarterly board meetings and the audit committee, held twice a year.

“We also present our results at the half-year and year-end to the stock market in a for-mal presentation, followed by questions and answers with the analysts and press. This event is held at the Mandarin Oriental Hong

Kong hotel and is extremely well attended due to the genuine interest in town in us as a Hong Kong-grown global brand,” he says.

The Mandarin Oriental name has been an iconic presence on the Hong Kong skyline – despite many buildings since exceeding its height and grandeur – for half a century. Al-though Mandarin Oriental built much of its

February 2013 29

The iconic Mandarin Oriental Hong Kong turns 50 this year. Robin Lynam looks at the hospitality group’s recipe for success with its CFO

Success ingredient

reputation on looking after business travel-lers, Dickie says that its focus is shifting to providing leisure experiences.

“Today it’s probably 40 percent to 45 per-cent leisure business across the group. Ten years ago it would have been 30 percent to 35 percent, which might not sound like a big difference, but in our industry it represents a sea change. We focus a lot on spas and food and beverage. We have more Michelin stars than any other hotel group in the world. It’s a very deliberate policy,” he says.

Since taking over as CEO in 1998, Ettedgui has pushed the group’s image as a luxury brand hard through initiatives like the celeb-rity “Fan” advertising campaign, and Dickie, as CFO, says that it is not always easy to walk a line between maintaining the group’s elevat-ed standards and reining in costs.

“Not all costs act in a linear fashion when compared to changes in revenue,” he notes. “Hotel employees still deserve a salary incre-ment annually even if the outlook in a partic-ular market in any one year is for a reduction in revenue year on year. It is a matter of bal-ance – on the one hand, not permitting costs to escalate out of control, and on the other hand being fair, and also providing suffi-cient funds to be re-invested in maintaining the asset.

“Similarly at the corporate level, we have to balance the needs of individual depart-ments who want to provide sufficient sup-port to the hotels, against the risk of ‘cost creep’ for the group overall,” he observes.

Although its hotels have been regarded as standard setters in Asia since the mid-1960s, the Mandarin Oriental brand has gone genu-inely global during his time with the group. A major programme of expansion began while Dickie was at PwC with the appoint-ment of Ettedgui.

“At that time we had about a dozen hotels within Asia with a very good reputation, but were not particularly well known around the globe,” says Dickie. “We have 25 hotels today, and in 14 of those we have an own-ership stake; in some cases 100 percent, in others only 25 percent. Eleven are owned by other people. With our growth pipeline we’re going up to 45 hotels over the next five years, and all of those hotels at the moment are pure management contracts.”

Last month, the group opened a new ho-tel in Guangzhou, to be followed by open-ings in Shanghai’s Pudong in the second quarter of 2013, Beijing by mid-2014 and

Chengdu in 2015. “Capturing the growing Mainland China market is an important part of our growth strategy,” says Dickie. “Main-land China is the group’s second largest cus-tomer base, representing over 13 percent of

the room nights sold globally. To cater to the growing demand from the China market, we have introduced a Mandarin-language version of our new website and we are part-nering with Chinese celebrity ‘fans’ in our

“One thing I very much enjoyed, even before joining the group, was the great welcome, the service, and the smiles of the staff, which in my view is what it’s all about in the hospitality industry.”

30 February 2013

Success ingredient

February 2013 31

A PLUS

global advertising campaigns.”One of Dickie’s earliest exposures to the

distinctive hospitality style of Asian hotels was a stay at the Mandarin Oriental in Sin-gapore when he was at PwC. “One thing I very much enjoyed, even before joining the group, was the great welcome, the service, and the smiles of the staff, which in my view is what it’s all about in the hospitality indus-try,” he observes.

It was probably a welcome change from his experiences of British hotel service stan-dards (the Mandarin Oriental Hyde Park

did not open until six years after he moved to Hong Kong). British born, Dickie earned a bachelor of arts honours degree in business studies from Sheffield Hallam University in northern England, graduating in 1985.

In 1988 he became an associate member of the Institute of Chartered Accountants in England and Wales, and a fellow of the Hong Kong Institute of CPAs in 1998.

He worked as an audit manager for a medium-sized accounting firm in the City of London, which, he says, gave him broad-based experience of many aspects of his cli-

ents’ businesses. “I worked on auditing and tax advisory for a number of different busi-nesses including stock jobbers prior to the ‘Big Bang,’ stockbrokers, lawyers, insurance companies and banks, as well as sole traders including a butcher, a baker – but not a can-dlestick maker – and other retailers.

“I audited a racetrack – Epsom, where they have the Derby every year – a nightclub and various pubs, and also worked on mu-sic publishers, and companies in the light manufacturing and agricultural sectors. Oh, and not forgetting, an oil company. It was a wonderful foundation for being able to as-similate a wide array of information quickly later on in my career,” he recalls.

Wanting to see more of the world, Dickie applied for a position at what was then Coo-pers & Lybrand in Hong Kong, where he acted as audit manager for a range of com-panies, including AT&T, Philip Morris and, after the merger with Price Waterhouse, a number of members of the Jardine Group, including Hongkong Land, Colliers Jar-dine, Gammon Construction and Mandarin Oriental.

Dickie reached a career turning point when he worked on the due diligence as-pects of Mandarin Oriental’s acquisition of the Monte Carlo-based Rafael Group in 2000. “I got to know the management team well and I also really liked the culture of the company. It was an exciting time for Man-darin Oriental. They were embarking on a focused strategy of growth, leveraging the strength of their brand, which although well known within Asia was not well known in other parts of the world at the time.”

He learned the hotel business fast, work-ing on asset disposals as well as acquisitions, re-financings, investor relations, tax strat-egy and group treasury activities. “We made some record disposals,” Dickie recalls. “For example, our disposal of a part share of Man-darin Oriental, New York, in February 2007 to Dubai World was sold at a record price of US$1.4 million per key, the highest price per room for a hotel in the United States at the time. I believe this record still stands today given that the U.S. is not yet fully recovered from the global financial crisis.”

In 2007 he was also responsible for ne-gotiating a US$450 million seven-year loan from a syndicate of over 20 banks, secured on the group’s two wholly owned Hong Kong hotels – the Mandarin Oriental and The Excelsior. “The loan has, as it is still in

32 January 2013

Success ingredient

place, record low pricing of 0.28 percent from the borrower’s perspective. Given that loans have [been] re-priced upwards since the onset of the global financial crisis, I am not sure what pricing we would achieve to-day,” says Dickie.

That crisis has also affected the group’s expansion plans. “Before that we were look-ing at greenfield sites and at building resorts in various places. Now we’ve got the same number of opportunities, but many of them are for existing hotels that have struggled since the financial crisis under another brand or operator,” he explains.

Dickie says that at any one time he is look-ing at the financial aspects of 30 to 40 possi-ble properties or locations for Mandarin Ori-

ental hotels, but that from those only about two or three are likely to come to fruition.

His extensive travel schedule means he does get to experience some of that Man-darin Oriental luxury. When travelling on business he likes to use the spas to recover from jet lag, and he uses the group’s food and beverage outlets – Michelin-starred or oth-

erwise – for business entertaining.The job sounds glamorous, but Dickie

points out that while leisure travellers can relax and enjoy their surroundings, often he is checking into a room for just a couple of hours either side of a business appointment before catching a plane to another city.

He is content with his lot, however. Dickie

claims not to get preferential treatment when making bookings. If the Mandarin Grill is full he has to reschedule his lunch. “I am treated very well when I travel, and the hotels, of course, know that I am coming, but I can see how well other people are treated as well. Before I worked for the group I al-ways had a very good experience with the hotels, so there is that consistency.”

He also stays in Mandarin Oriental ho-tels on holiday, and says his wife and three children are “fans” – but he gets a bill when he checks out, just like everybody else. “You might call it a busman’s holiday, but it’s very nice. We pay, but we get fantastic service, and if a Mandarin is there, why would I give the money to anyone else?”

At any one time he is looking at... 30 to 40 possible properties or locations forMandarin Oriental hotels, but that from those only about two or three are likely to come to fruition.

February 2013 33

A PLUS

34 February 2013

Human resources

With multinational corporations moving into China and Mainland companies boosting finance units, skilled Institute members are being poached. George W. Russell asks how accounting firms can hold on to their key staff

KEEPING H iring a new employee re-

quires significant invest-ment. Each worker has to be recruited, trained and deployed. And as

Mazars found recently, even relatively low level employees are worth keeping. Eu-

nice Kwok, practising director in charge of human resources at Mazars in

Hong Kong, tells of one junior staff member who had not yet quali-

fied as a CPA but wanted to take 12 months off

work to volunteer with a charitable

group overseas. Many firms

would have declined to accommodate such a request, given the status of the employee. Mazars, however, saw a longer-term benefit. “He was a talented junior... and we decided to keep his job open for him and allow him the one year sabbatical,” says Kwok, a Hong Kong Institute of CPAs member.

While not every employee at every firm can expect that kind of understanding, Mazars, like many middle-tier accounting firms, tries hard to keep its accounting pro-fessionals. “Retaining talent is a key issue at Mazars,” says Kwok.

The continuing economic crunch world-wide has meant that hiring and keeping skilled CPAs is a priority, while first-rate as-surance and risk specialists have never been in higher demand. “Competition is fierce for

top talent,” Kwok adds.Keeping hold of talent is a global chal-

lenge. A 2012 study by the Washington-based nonprofit human resources organiza-tion WorldAtWork showed that a majority of senior managers in the United States iden-tified retention of key talent as their most pressing human resources concern.

According to survey results released in December 2012 by Towers Watson, a human resources consultancy, 79 percent of Asia-Pacific em-ployers encounter difficulties holding on to critical-skill em-ployees and 73 percent struggle to keep workers with high potential.

The Big Four in Hong Kong are finding that talent leak-

The continuing economic crunch worldwide has meant that hiring and keeping skilled CPAs is a priority.

February 2013 35

TALENTage of more senior staff in particular is an increasing worry. “We do sometimes lose managers to our clients and to large corpo-rates,” says Margaret So, director of human resources at KPMG China and a member of the Institute.

That corporate demand has been driven in part by a recent trend among multina-tional companies – including Air France,

Caterpillar, General Motors Company, McDonald’s Corporation and Nokia

Corporation – to move their Asia-Pacific headquarters to the Main-land from elsewhere in the region.

“Hong Kong’s skilled finance professionals are interested in such opportunities and are will-

ing to relocate to China’s cities,”

says Edmund Cheung, associate director of accounting and finance appointments at Hudson, a recruitment company, adding that Hong Kong is less of a regional hub than it was in the past.

Big Four firms report senior staff quitting in recent months to take positions at large financial institutions like Agricultural Bank of China and China Construction Bank, as well as at Mainland companies such as Shenzhen-listed Huawei and Hong Kong-listed Lenovo and ZTE.

“Chinese enterprises, especially listed companies, have a stronger financial back-ground and better market prospects than was previously the case,” says Alexa Chow, managing director of Centaline Human Re-sources Consultants.

Preserving the best To be sure, the recession – as well as fears of a growth downturn in China – has reduced job hopping by junior staff in Hong Kong. “Can-didates in the finance and accounting field are [now] fairly cautious in changing jobs,” noted Cheung at Hudson.

The continuing crunch was under-scored late last year when Price-waterhouseCoopers imposed eight days of unpaid leave on its Hong Kong employ-ees, citing the need to cut costs. PwC said in a statement in October that it would be

Illustrations by Alan Ho

Demand has been driven in part by a recent trend among multinational companies to move their Asia-Pacific headquarters to the Mainland.

Human resources

HELPING YOUNG MEMBERS TO SEE THE PATHJunior employees are more likely to jump ship than their more experienced colleagues, say accounting firms. “The issue of job hopping is in general more serious at the junior to mid-level,” says Chris Wong, staff partner at RSM Nelson Wheeler and a Hong Kong Institute of CPAs member.

The major motivation, for accountants starting out their careers, tends to be money. “Salary may be more of a concern for junior level staff as they may not be so clear about their future career and therefore will evaluate a job more by salary and not the career prospects that it may bring,” says Kelvin Kwong, staff partner at Grant Thornton and an Institute member.

Apart from money, working environment weighs on the minds of junior staff, say human resources professionals both in Hong Kong and abroad. “Many younger professionals place significant value on personal time and flexible work arrangements,” says Dan Griffiths, chairman of the American Institute of CPAs young professionals committee.

With this in mind, firms such as BDO Hong Kong offers its employees flexible working arrangements. The BDO Flex programme enables staff to take temporary breaks from work

for personal reasons. “It is unique not only among the CPA firms but also among employers in Hong Kong,” says Angela Wong, BDO’s human resources director.

Ultimately though, keeping employees loyal to a firm involves helping them to set and reach clear and meaningful career goals. “Once they have qualified, we review their desires and needs and try to provide a career path that suits them both personally and professionally,” says Eunice Kwok, practising director in charge of human resources at Mazars and an Institute member. “We see it as our duty to encourage staff development by presenting them with two things: training and challenge.”

Kwong urges firms to mentor their junior staff. “Having a mentoring programme helps motivate and retain our people,” he says. “Mentors play a very important role as they closely monitor the progress of an individual employee.”

Says Wong at BDO: “On a number of occasions, many of our young colleagues have expressed their appreciation and gratitude to their superiors for the attentive and professional coaching and care they received.”

36 February 2013

February 2013 37

“avoiding... headcount reductions.”Nevertheless, junior accountants are still

more likely to job hop than their senior coun-terparts, and the churn rate in accounting re-mains high compared with other professions. “Candidates at the manager grade and below tend to change roles relatively frequently in Hong Kong – typically every two or three years,” says Louisa Yeung, a managing direc-tor for recruitment company Michael Page and an Institute member.

Key managers often leave to pursue more challenging and lucrative opportunities in the commercial world. “Of those people who are currently in audit firms, for example, I think most of them want to go in-house [in the com-mercial field],” says Carol Cheung, financial services manager at recruitment company Robert Walters and an Institute member.

If you can prevent them from being lured into the corporate world, the more senior fi-nance professionals become, the longer they typically stay in a role. Adds Cheung: “At the controller or director level, four or five plus years is fairly typical. This is largely because at this level, finance staff are more focused on strategy development and implementa-tion, which runs in longer cycles than work at a junior level.”

Keeping things interestingWith the battle for talent more competitive than ever, accounting firms are keen to find new ways to hold on to staff. While granting a year off to volunteer abroad can help engen-der loyalty, most employers find accountants are soothed by more conventional benefits, according to human resources professionals.

“We ensure our staff are compensated competitively for the passion they put into their work,” says Kwok at Mazars. “We also offer paternity leave, examination and study leave, additional daily allowance during overseas business trips, time off in lieu for overtime work and medical packages.”

Most firms emphasize the importance of morale by running work-life balance pro-

grammes. “We have a social committee orga-nized by our staff and financially supported by the firm,” says Chris Wong, a staff partner at RSM Nelson Wheeler in charge of human resources issues and an Institute member. “The social committee on average holds four to six recreational and social activities and events each year.”

Larger firms help to build employee loy-alty and spirit through integrated employee networks such as MyLife@KPMG, which incorporates social media. “We have a lot of programmes for our people,” says So at KPMG. “There are a lot of one-day events, a family fun day and a range of workshops, from wine tasting to all sorts of sports.”

Extra-curricular activities such as these are of benefit, but at the end of the day those who oversee human resources in firms say working life is what most employees worry about most. “Our firm culture offers a good and friendly working environment,” says Wong. “We are an organization that is very collaborative and we encourage team spirit.”

While accountants can still be lured away by the prospect of higher salaries, they are not the only drawcards. “In the past, some employers held on to staff only by increasing monetary rewards,” says Cheung at Hudson. “Nowadays, non-monetary rewards are in-creasingly important.”

Such non-cash perks can include greater autonomy, as well as personal and profession-al development opportunities. “They can help make one employer significantly more attrac-tive than another when it comes to recruiting a candidate with multiple offers,” he says.

Providing mentoring can also help staff realize the opportunities available to them. In most firms, it’s the role of partners to iden-tify and nurture potential leaders of the fu-ture. “Our partners are the talent spotters,” says Kwok at Mazars. “Key managers are mentored by senior partners from different Mazars offices across Asia and from different working disciplines.”

Then, offering additional training and ed-

ucation to these rising stars is an effective way to keep them, say human resources profes-sionals. “Companies should help employees gain greater knowledge about their position and level by offering education courses – both technical and leadership – relevant to them so they can excel in their job,” says Mandi Fields, recruiting and retention coordinator at the Pannell Kerr Forster of Texas firm in Houston and an American Institute of CPAs member.

Some Hong Kong firms encourage the acquisition of degrees, such as a master’s in business administration. “They will subsidize an MBA course and once you’ve finished you’re bound to stay for a certain number of years or if you leave you have to pay back the company,” says Angel Lam, the commerce and finance division manager at Robert Walters.

Other firms make a case-by-case evalua-tion, depending on the type of qualification being sought. “We encourage professional qualifications with coaching and examina-tion leave,” says So at KPMG. “An MBA might not be so important but it would depend on individual circumstances.”

Ultimately, keeping employees interest-ed and challenged prevents them from look-ing at opportunities elsewhere. “Job rotation is key,” says Cheung at Robert Walters. That means a finance manager should be given an opportunity to work in treasury, internal au-dit or financial planning and analysis. “It’s a good way to hold on to staff.”

Even the best staff can mess up occasion-ally, human resources experts warn, and constant critical evaluation is not the way to keep them. “I feel employers should also rec-ognize employees’ achievements throughout the year and mainly focus on the things they are doing right versus only focusing on the things they can improve upon,” says Fields.

Firms are likely to need a mix of pay and perks to keep staff happy. Exactly what mix is required varies from employee to employee. As Cheung at Hudson puts it: “To retain tal-ent is an art.”

L VE

38 February 2013

Valentine’s Day

J udy Tsui still remembers the long, blue dress she wore one evening to the Captain’s Bar at the Mandarin Oriental hotel in 1972. It was at the meet-up

with friends that a persistent young man ap-proached her – leading to an old-fashioned tale of boy chasing girl.

“He took me home and then insisted I take his number... I told him: ‘No, I don’t want your number because I won’t call you’,” recalls Tsui, professor and vice-presi-dent for international and executive educa-

tion at the Hong Kong Polytechnic Universi-ty and a member of the Hong Kong Institute of CPAs.

But with just a few, written words, the young man eventually softened up the then uninterested Judy Lam. “He sent me a card with his number, saying: ‘I’m very much in [like] with you.’ He was not being frivo-lous by saying ‘I’m in love with you,’ which would scare me away... It was very charm-ing and real.”

Three years later, Lam married the young man, Andrew Tsui, who went on to become chairman of executive search firm Korn/Ferry International Hong Kong and also an Institute member. They now have three grown children.

With the many demands of the profes-

sion, maintaining a relationship with an-other accountant can be difficult. However, couples with hectic careers, like the Tsuis, are proof that CPAs can sometimes make ideal partners.

Judy Tsui says her husband has been especially understanding several times in their marriage. In 1986, she flew to the Unit-ed Kingdom to study for a master’s degree for one year at the London School of Eco-nomics, leaving behind her family, includ-ing their oldest daughter. “Andrew was very supportive, together with my in-laws and my parents. They just said: ‘Go, we will take care of everything’.”

The strength of their relationship was put to the test again in 1990 when a third child was on the way and, simultaneously,

Being married to another accountant can bring joy, through the pleasure of shared interests, and anxiety, through time spent apart on business trips. Jemelyn Yadao talks to high-profile CPA couples about how they

celebrate togetherness and shun heartache

February 2013 39

she pursued a doctorate at the Chinese Uni-versity of Hong Kong for four years. “Ev-eryone was saying: ‘Judy you’re very lucky. Your husband is so supportive. Anybody else would have resented you for doing your master’s in the first place and then doing your doctorate on a part-time basis and also having a full-time career’.”

Andrew Tsui has found his wife equally supportive during periods of change. After working in financial services for 10 years, he faced the difficult choice of whether to stay in the sector or move on to consultancy. “I was struggling [to decide],” he recalls. “Ten years later, I was thinking about changing [career] – and that’s major decision time – so I really appreciated Judy’s support and tol-erance in helping me make these major life

and career choices.”With teaching assignments and academic

conference meetings in China, the United States and Europe, Judy Tsui works longer hours than her husband. Despite this, he says that, with effort, they still manage to make things work. “[If] both of us are not terribly busy at the same time... If Judy goes on an overseas trip, sometimes I try to meet up with her somewhere – that helps. And, when we want to relax, we go hiking, play golf and we also go dancing quite a bit.”

Most importantly, Judy Tsui adds, both of their priorities are the same.

“We both love our children dearly, and we do everything for them in terms of giving them the best, without being tiger mum and tiger dad.”

Different pathsSabrina Ho’s husband was different from the boys she grew up with in Hong Kong. “They were mainly bookworms, while he is very smart – without being smug – humble and athletic at the same time,” recalls Ho, director of accounts at international law firm Stephenson Harwood and an Institute member.

“You could say I was very attracted by his brain at first, until I saw him coming out of the swimming pool,” she laughs.

She first met Chew Fook-aun, who is now chairman of Lai Fung Holdings and deputy chairman of Lai Sun Group, in 1981 while they were both studying at the London School of Economics. They now have a son, aged 15.

Judy and Andrew Tsui

40 February 2013

With the couple working in different in-dustries, Chew and Ho never bring work matters home. “I deal with lawyers but I also deal with a different set of professionals, mainly investment bankers, corporate bank-ers, analysts and fund managers so that side is very different from the professional firm side,” says Chew, who is also a former vice-president of the Institute.

“I wouldn’t know about his line of busi-ness and I don’t want to pry into that either because we deal with sensitive issues at work, and unless it’s a general issue we nev-er talk about work,” says Ho.

Being married to another accountant means an understanding that sometimes work has to come first.

“We know what the job entails, and it makes it easier for us to understand why we

don’t come home at a certain time or why we have to change our holidays to fit our work schedule,” says Ho.

Her husband agrees. “If I say I’ve got my year-end result or I’ve got my annual reports, that’s something we both under-stand,” says Chew.

But like any couple, sometimes bumping heads is inevitable. “He is a financial news junkie... It was a Sunday, I tried to cuddle up to him and he said: ‘Don’t come between me and my Financial Times’,” laughs Ho.

Like other career-driven couples work-ing in Hong Kong, Chew and Ho have grown accustomed to the limited face-to-face time they have Mondays to Fridays.

Weekends, however, are usually re-served for the family. “We’ve established such an easy and comfortable rhythm over

the years. We talk during the day, whether for checking things on the home front, or maybe it’s just asking him, ‘What time are you coming to pick me up after work?’ ”

Competing campsOn top of long working hours, Eddy and Nel-lie Fong had to deal with another thing keep-ing them apart: professional rivalry.

“Working in competitive firms when you are young is easy but working in competi-tive firms when you are both partners is dif-ficult,” recalls Eddy Fong, chairman of the Open University of Hong Kong, former chair-man of the Securities and Futures Commis-sion and a retired PricewaterhouseCoopers partner. His wife, before retirement, was a partner at Arthur Andersen, one of the then Big Five accounting firms.

Chew Fook-aun and Sabrina Ho

Valentine’s Day

February 2013 41

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He recalls deciding whether or not his wife should accompany him to certain func-tions. “Of course private life is private life – we treat ourselves as husband and wife – but in terms of socializing and entertaining cli-ents, I hardly ever appeared at Nellie’s firm’s functions and she hardly ever appeared at my firm’s functions.”

Working in different “camps,” he says, wasn’t easy. “But we managed quite well... I think basically you rely on your professional integrity. So that’s a very unusual aspect of our relationship,” he adds.

The couple ended up working for the same firm because of a completely unex-pected turn of events. In 2002, the Enron collapse led to the extinction of Arthur An-dersen and PwC acquired many Andersen employees. It meant Eddy Fong saw his wife

more than usual until he retired in 2003. “I was so pleased to see Andersen joining PwC,” he says. “For one year we were actu-ally working in the same firm.”

The couple has been very understand-ing of each other, realizing that both their respective careers meant a lot of travelling, and sometimes even temporary relocation. While at Andersen, Nellie Fong volunteered to go to the Mainland to head the firm’s Chi-na practice. For a woman, she says, having her husband’s full support during times like these was crucial.

Even after their vibrant accounting ca-reers, the couple has kept busy by being heav-ily involved in public community service, posi-tions that have led them to, once again, work in the same office. “We maintain a private office and our secretary continues to manage

our busy schedules,” says Nellie Fong, who is a former LegCo and ExCo member and known for her charity work.

Like many CPAs, the couple has accumu-lated enough experience during their ca-reers to help them pursue meaningful roles in retirement. “To be able to put such talent to use after retirement for the good of the community is probably most rewarding for a person,” Nellie adds.

For 38 years, they have stayed hap-pily married by working together both in and outside the office. “She has her strong points, I have my strong points so you just have to compromise all the time,” says Eddy Fong. “It’s no different if you are an accoun-tant or not – it applies to all.”

Having a secure income to provide for the family, including their daughter, as well

Nellie and Eddy Fong

Valentine’s Day

42 February 2013

as the financial savvy to save up for their future is one of the many perks of being married to another CPA, Eddy Fong says. “You understand each other better, and you share the same experience. Accoun-tants probably think alike in many ways, al-though I don’t think I agree with her all the time,” he laughs.

Partners in pressureNot only does Simon Yip understand his wife’s daily work life and the challenges that come with it, he also knows her col-leagues very well.

“I actually introduced those people to her. In fact, it made her life more manage-able in a practical sense,” says Yip, recalling how his wife joined his former firm after the fall of Arthur Andersen. At the time, he had gone on to set up his own firm, Simon K.Y. Yip & Co.

Yip had previously worked for Coopers & Lybrand, now PwC, where his wife Florence Yip currently works as a tax partner.

“I’ve known a lot of her colleagues for more than 20 years,” he says.

The couple, both Institute members, are parents to two children and have been unfazed by each other’s hectic lifestyles for more than 32 years. “There’s no use trying to be hard on each other, because the work itself is hard enough already. It’s part of our day-to-day routine, and you have to respect that,” Simon Yip says.

He and his wife have mastered balanc-ing a busy work life with quality time to-gether. As well as movie nights and fam-ily vacations, they make an effort to go on holiday without the kids, now aged 21 and 17. “A few nights ago we discussed about when Florence is going to visit our son who is studying in the U.K. I said: ‘I’ll come, but

why don’t we go a few days earlier so that we can spend some time together’.”

When Simon Yip decided to set up his own practice in 1992, his wife played an integral part in helping him face the new challenge.

“I supported him,” she says. “I knew it was going to be hard because he used to work for a big firm where everything is catered for including pens and paper. But with any start-up, the resources will be limited. He needed to deal with all sorts of things,” she says. “He’s done well.”

Back in their university days, Simon Yip had been playing the role of the support-ive other-half long before the two were an item. “I was able to help her with her home-work, because I was one year her senior,” he remembers.

“That way, I would have more free time,” Florence recalls.

Florence and Simon Yip

國際化背景下企業財務管理創新研究Liu Yuting examines the innovative developments in enterprise financial management within an international context

財政部企業司司長 劉玉廷

財務管理是現代企業管理的核心，也是國家財政的重要組成部分。在市場經濟條件下，加快研究和推進現

代企業財務管理創新，對中國企業而言十分必要，因為傳統的企業財務管理已經不適應現代企業發展要求。正如一些總會計師所說，在激烈的市場競爭和國際化背景下，企業要生存和發展，創新財務管理模式已成為當務之急。國外跨國公司500強企業很多成為「百年老店」，除技術創新外，主要就靠產融結合、資本運作等不斷創新的現代企業財務管理。

我國企業財務管理的簡要回顧計劃經濟時期，國營企業一統天下，輔之為集體企業。當時稱國營企業而不是國有企業，國營指國家經營，企業不是經營主體，相當於一個生產單位，沒有法人概念，產供銷統一，盈利全部上交，虧損財政彌補，每年財政預算安排大部分用於企業固定資產投資和更新改造。這一時期，企業的財務管理主要表現為落實國家計劃，加強資金、成本、費用和盈虧管理，要求固定資金、流動資金、專項資金專款專用；成本費用要求年年降低，費用開支要求完全按照國家統一的財務制度執行；企業盈利甚至包括固定資產折舊費用要求上交財政，虧損由財政彌補。

90年代初，鄧小平同志南巡講話和十四屆三中全會召開，確定了社會主義市場經濟體制，開始建立股票市場，實行現代企業制度。財政部制定發佈了《企業財務通則》、《企業會計準則》和分行業的財務、會計制度。這一時期，企業的財務管理從內部向外部拓展，表現為籌資、投資、運營和資金退出的管理。籌資不限於銀行借款，還包括改制上市從股票市場籌資，需要計算籌資成本；投資不限內部固定資產投資，拓展為對外投資，要求進行可行性研究及投資效益論證；資本運營要求管理現金流，防止資金鏈斷裂及財務風險；資金退出不僅限於歸還借款，

還要設計投資分紅方案等。學界開始引入西方企業財務管理學科，計算資金的現值和終值等，企業財務管理學科同時納入我國註冊會計師和會計職稱考試體系。

新時期國際化背景下的財務管理進入新世紀，以加入WTO為標誌，我國成為世貿組織成員。隨著五年過渡期結束，企業、金融等經濟領域的大門全方位打開，中央實施「引進來」、「走出去」戰略，企業進入國際化時代。截至目前，中國企業已佔據世界500強超過10%的席位，企業財務管理已經或正在向著更高層次轉型。新時期的企業財務管理，至少涵蓋以下內容：

一、產權結構的合理性產權多元化是現代企業或跨國公司治理結構的核心，只有這樣，才能形成有效的企業內部約束機制。國有及國有控股企業是我國基本經濟制度的重要體現，這是毫不動搖的，但要引入非公投資者。非公雖然不控股但會關注其投資回報，從出資人利益出發，關注和支持企業發展，約束企業分配不公、盲目投資和職務消費等。民營企業成為「百年老店」，同樣需要產權多元化，全資的「家族式」不可能持久，山西喬家大院等早已證明這一事實。國有或民營控股不是越大越好，國外跨國公司控股很多低於50%，其他股東分散佔股，完全能夠實現控制。我國企業的大股東控股比重過高，不僅「一股獨大」而且「一股過大」，「一股過大」事實上成為國有獨資企業。股票發行條例為什麽規定至少要求五個股東？核心是股權多元化，加強內部約束，如果國有企業改制上市，大股東佔比過高，僅拿出很小部分股權在其他股東之間分配，這與建立股票市場的初衷是相悖的。因此，現代企業財務管理應當將產權結構的合理性作為重要內容加以推進。產權多元化還有助於盤活企業股權資產，深化國有企業改革。目前國有股權不能盤活，淨資產收益率

（投資回報率）全國平均已降低到3%，這種情況應當引起關注和重視。

二 、 財務高管人員的地位和作用改革開放初期，我國借鑒前蘇聯經驗，頒佈《會計法》和《總會計師條例》，建立了總會計師制度（上市公司稱為財務總監）。目前，我國總會計師或財務總監屬於企業管理層高管，但多數未進入董事會決策層，難以參與公司發展戰略以及融資、投資、併購重組等重大決策。國外跨國公司的首席執行官（CEO）和首席財務官（CFO）必須是進入決策層的，地位和作用高於首席運營官（COO）和其他副總。很多央企總會計師或財務總監反映，中國的會計準則實現了國際趨同，但財務高管人員沒有實現國際接軌，難以和國外跨國公司CFO對話，因為我國企業總會計師或財務總監的職責範圍比國外CFO相差甚遠，我國總會計師或財務總監的職責側重於會計。構建我國現代企業財務管理模式，一定要將財務高管人員的地位和作用納入其中，首席財務官制度可以先試點，在尚未推開之前，應當推動財務高管人員進入公司決策層；同時要加快推進財務高管人員的知識更新，全面提升其財務管理能力。國外的首席財務官是參與制定並實施公司發展戰略、有效開展產融結合和資本運作的高手。

三 、 產融結合能力產融結合不是指企業轉型去搞金融、炒股票，因為金融本質上不會直接創造財富而是社會財富的重新分配，企業炒股賺錢必然是建立在眾多股民或其他投資者賠錢的基礎上。發展虛擬經濟歸根到底是為實體經濟服務的，真正意義上的產融結合，是指從企業立場出發，研究現代企業如何有效利用股票、債券、私募基金、期貨等資本市場，為企業技術創新和轉型升級服務。產融結合屬於複雜的系統工程，構成新時期國際化背景下企業財務管理的重要組成部分，也是財務高

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44 February 2013

管人員或CFO的必備能力。我國目前的總會計師或財務總監很多對產融結合缺乏系統的理解和應用。比如，如何有效利用股票市場推動改制上市或整體上市，實現股權多元化，建立現代企業制度；如何有效利用多種債券市場籌資，解決發展所需的資金來源並降低財務費用，而且債券（可轉換債券）和股票在一定條件下可以相互轉換；如何利用私募股權基金特別是國家引導的私募股權基金進行重大項目投資，包括國內戰略性投資和海外併購等，到期退出不影響企業的股權多元化結構；如何有效利用期貨市場鎖定不斷上漲的原材料成本，這種方式降低成本的幅度遠遠超過傳統方式；開展資產證券化業務能將長期拖欠的債權資產盤活，這在歐美日等國家非常流行，但我國目前尚未開展，相關方面對此還比較生疏。可見，加快推進企業產融結合，提升產融結合能力，已成為當前和未來加強現代企業財務管理的關鍵要素。

四 、 全面預算管理水平全面預算管理是現代企業財務管理的基礎性工作。全面預算的範圍和內容廣泛，涉及企業財務、經營、對外投融資以及併購等全部過程。目前雖然很多企業已經或正在推行，但真正規範運作落到實處的不多，迫切需要加大企業財務管理力度。鄧小平同志當年在南巡講話時曾經說過，「資本主義有計劃，社會主義有市場」。國外發達市場經濟

國家不僅宏觀產業結構佈局具有合理性，跨國公司的全面預算管理也是非常嚴格和科學的。我國企業的全面預算管理主觀隨意性較大，亟待通過構建現代企業財務管理模式，推動實現真正意義上的全面預算管理。

五 、 財務信息化程度財務信息化的範圍比會計信息化大得多而且重要。我國大型企業的會計信息化主要體現在合併報表等領域。經過多年努力，一個若干層級的企業集團如中石油等，通過軟件系統將最基層的數據層層匯總合併，形成以會計準則為基礎的集團合併報表，大大提高了報告的準確性和工作效率。財務信息化不同於會計信息化，應當涵蓋現代企業財務管理的全部內容。財務信息化是手段，目的是推動現代企業財務管理能力評估制度建設。

加快構建新時期企業財務管理模式通過我國不同時期企業財務管理總結分析，梳理了國際化背景下現代企業財務管理的內涵和關鍵要素。為加快推動新時期我國企業財務管理水平和國際競爭力，需要採用市場化方式，引入資產評估機構等第三方專業機構，構建現代企業財務管理模式。這是一個不斷發展的過程，不可能一蹴而就。當前需要建立起一套基本標準，形成一種機制，明確企業加強財務管理的方向和目標並開始啟動，隨著經濟社會發展，以後年度不斷

這是一個不斷發展的過程，不可能一蹴而就。當前需要建立起一套基本標準，形成一種機制，明確企業加強財務管理的方向和目標並開始啟動，隨著經濟社會發展，以後年度不斷加以完善。

加以完善。財政部領導十分重視相關機制建設，2011年財政部建立了境外企業財務巡查制度，今年正式啟動了境外企業財務巡查工作，財政部辦公廳安排政府購買服務專項資金，通過招標方式，委托資產評估機構，赴東南亞有關國家進行了實地巡查。通過境外巡查，了解了中央「走出去」戰略取得的成就，「走出去」戰略未來轉型的客觀必要性，以及財政政策的調整趨向。構建新時期企業財務管理模式同樣是一種重要的制度建設，更具有現實和長遠意義。西藏財政廳在這方面已經有了成功實踐，走在全國的前列，積累了一定的經驗。西藏能做到的，相信其他地區和企業也一定能做到。

目前，財政部已經草擬了《企業財務管理能力評估暫行辦法（討論稿）》，其基本思路是，將新時期國際背景下的企業財務管理內涵和關鍵要素細化為指標體系，盡可能通俗易懂，便於操作。中國資產評估協會正在組織專家起草企業財務管理能力評估指引，管理辦法和指引下發後，由企業委托資產評估機構開展評估並出具評估報告，將其作為財政支持企業的重要參考。

Liu Yuting is director general of the Ministry of Finance’s state equity and corporate finance department.

February 2013 45

T wo issues at the top of the corporate agenda are govern-ance and cost reduction. One way in which these two issues

intersect is around fraud and the ability of an organization to protect its bottom line through an effective anti-fraud programme. While there is evidence that fraud is on the rise, the good news is that with whistle-blower reporting mechanisms and modern forensic data analytic techniques, organiza-tions can prevent and detect fraud more effectively than ever before.

There are organizations that treat a certain degree of fraud loss as an accept-able cost of doing business. However, in the current competitive environment, it is something which companies can no longer choose to ignore. While executives are under immense pressure to reduce cost and demonstrate good governance, fraud cases keep being uncovered, with many leading to reputational fallout. Often an organization ends up with a fall in its stock price, a hefty bill from its lawyers and a significant diver-sion of senior management time.

Fraud requires carefully planned deceit. Perpetrators of fraud will deliberately use all possible means to conceal the true nature of their activities, making it extremely difficult to concisely quantify or measure the impact of fraud for organizations and the economy as a whole. In a survey conducted in early 2012, the Association of Certified Fraud Examiners estimated that approximately 5percent of a typical organization’s annual revenue, or a median of US$140,000, is lost due to occupational fraud. By applying the 2011 gross world product, this figure trans-lates to a potential annual fraud loss of more than US$3.5 trillion.

This is not only a wake-up call for execu-tives, but something that other stakeholders are increasingly concerned about. Under the Hong Kong stock exchange’s corporate gov-

ernance rules and code provisions, issuers are required to maintain sound and effective internal controls to safeguard shareholders’ investment and the issuer’s assets. In effect, this means that an organization should have a robust risk management framework and compliance programme in place that are proportionate to its size and able to address an array of risks faced by the organization, including the risk of fraud.

Key ingredients of a successful anti-fraud programmeManaging the risk of fraud is about achieving three core objectives:· Preventing instances of fraud and mis-

conduct from occurring in the first place;· Detecting instances when they do occur;

and· Responding appropriately and take cor-

rective action when instances arise.

The key to a successful anti-fraud programme is reinforcing the first line of defence – fraud prevention – by setting a proper tone at the top; this usually entails improving both top-down and bottom-up communications within the organization.

Developing healthy two-way commu-nication channels between management and employees is no easy task. For smaller companies, it is easy to let emotions dictate business decisions. This may end up creat-ing unhealthy, or in some situations even hostile, work relationships. For larger busi-nesses, this may also create or perpetuate information silos.

This is why an organization should have a clear and concise set of practical policies and procedures supported by open and honest communication channels that are available to everyone. As a better practice, an organization should consider the effec-tiveness of the following aspects:· Board and audit committee functions

· Internal audit and compliance functions· Executive and line management functions· Fraud and misconduct risk assessment· Codes of conduct· Communication and training· Employee and third-party due diligence· Other process-specific fraud controls (e.g.

procurement, cash)

Hotline and whistle-blower mechanismsThe majority of fraud cases are detected via a tip. That is why a hotline or whistle-blower mechanism helps not only in detecting, but also deterring, instances of fraud and misconduct.

With the Dodd-Frank Act in the United States providing incentives to whistle-blow-ers, we expect to see even more employees coming forward to report on allegations of fraud and misconduct globally. This change in mindset is further propelled by the in-creased mobility of employees. Social media and other emerging forms of communication are also leading people to become more outspoken and forthcoming.

One of the Hong Kong stock exchange’s recommendations is that “the audit com-mittee should establish a whistle-blowing policy and system for employees and those who deal with the issuer (e.g. customers and suppliers) to raise concerns, in confidence, with the audit committee about possible improprieties in any matter related to the issuer.”

As a better practice, a whistle-blower policy or system should include the following:· Confidentiality· Anonymity· Toll-free service· 24/7 availability· International availability· “Real time” assistance· Prominent communications· Data management procedures· Qualified operators

Winning the battle against fraudKaty Wong explains how whistle-blowing mechanisms and data analytics are allowing companies to step up the fight against fraudsters

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February 2013 47

· Emergency notification protocols· Classification of concerns· Audit committee notification· Follow-up on non-retaliation· Disclosure protocols

Unless an employee is reassured about all these factors, they may lack the con-fidence to pick up the phone at a critical moment.

Other practical considerations have no definitive answers. The following are examples of considerations that need to be resolved based on the unique circumstances of each organization:· Which department typically oversees the

hotline?· What types of hotline metrics do compa-

nies typically monitor and/or share with the board?

· Should a hotline be administered in-house or outsourced?

· Should the hotline be made available to third parties?

· What are the potential drawbacks to email or voicemail-based hotlines?

· How should hotline reports be maintained and tracked?

Forensic data analysisTechnology has been advancing at an enormous pace in the last couple of decades and we have seen fraudsters use increasingly sophisticated techniques to commit acts of impropriety. However, forensic investigators have caught up and are now armed with more powerful tools that can deal with com-plex issues where it would not have been possible 20 years ago.

Data analytics is the process of analysing and drawing insights or conclusions from data. By applying analytical and forensic techniques, organizations can conduct systematic and consistent analysis across all the available data. The chances of uncover-ing unknown or hidden trends and patterns are increasing, while there is less reliance on manual sample checking and hence less likelihood of human error.

Forensic data analytics techniques can also be applied by embedding a series of algo-rithms and data scripts into an organization’s data systems as part of its continuous audit-ing and monitoring processes and controls to identify potential red flags.

Forensic data analytics can help in detecting fraud and financial misstatement

by implementing a series of automated routines, including but not limited to:· Transactions with missing user IDs· Duplicated transactions· Transactions with missing descriptions· Transactions posted during holidays or

after hours· About round transactions· Journal entries with unusually large

number of line items· Same side correction entries· Expense reversals just over/under mon-

etary threshold for approval· Out-of-balance journal entries· Backposted revenue· Unauthorized user activity

The four most common processes where fraud is committed relate to revenue, procure-ment, payroll and travel and entertainment. Below are what forensic data analysis routines can be implemented to help detect fraud in each area.

RevenueExamples of fraud and misconduct risks:· Window dressing or income smoothing· Duplicate invoicing· Undisclosed related party transactions· Fictitious transactions

Examples of forensic data analysis routines:· Match journal entry dates against invoice

dates· Analyse reversal entries· Compare sales recognition, invoice and

payment dates· Analyse sales booked right before and

after quarter end

ProcurementExamples of fraud and misconduct risks:· Collusion (e.g. invoices below approval

limits, discounts earned but refused)· Duplicate invoices or purchase orders· Ghost vendors· Under-delivery of goods or services· Falsified volume or pricing

Examples of forensic data analysis routines:· Analyse transactions by vendor, period

and amount· Check for duplicate transactions· Match supplier contact details against

supplier data file· Match accounts payable data against

purchase orders

PayrollExamples of fraud and misconduct risks:· Employees acting as vendors· Falsified overtime· Ghost employees· Improper bonuses or incentive

compensation· Payments after termination

Examples of forensic data analysis routines:· Match employee information against

HR contact details (e.g. contact person, address, telephone number, etc.)

· Check for duplicate employees/bank account numbers

· Compare last payment date against termination date

Travel and entertainmentExamples of fraud and misconduct risks:· Bribery· Duplicate expenses· Splitting of expenses to circumvent approval levels· Reimbursement of personal expenses· Inflated expenses (e.g. mileage, per diem

allowances)· Mischaracterized expenses

Examples of forensic data analysis routines:· Apply keyword search terms on transac-

tional data· Check for duplicate transactions· Analyse transactions by user, period and

amount· Check for transactions with missing

descriptions

ConclusionThe financial crisis has put fighting fraud on the corporate agenda and provided ad-ditional ammunition for those tasked with leading the fight.

While the true cost of fraud will always be hard to measure, new analytic tech-niques mean that conducting systematic or widespread fraud in an organization is an increasingly risky proposition. At the same time, the awareness and willingness to speak out against fraud is also on the rise. If organizations create the open climate for their employees to report malfeasance, this can be the most powerful weapon of all.

Katy Wong is partner, forensics, at KPMG China.

Members’ handbook

Handbook updatesUpdate no. 123 includes updates on Investment Entities (amendments to HKFRS 10 Consolidat-ed Financial Statements, HKFRS 12 Disclosure of Interests in Other Entities and HKAS 27 (2011) Separate Financial Statements).

The Investment Entities amendments apply to a particular class of business that qualifies as an “investment entity.” This term refers to an entity whose business purpose is to invest funds solely for returns from capital appreciation, investment income or both.

An investment entity must also evaluate the performance of its investments on a fair value basis. Such entities could include private equity organizations, venture capital organizations, pension funds, sovereign wealth funds and other investment funds.

Under HKFRS 10, reporting entities were required to consolidate all investees that they control (i.e. all subsidiaries). Preparers and users of financial statements have sug-gested that consolidating the subsidiaries of investment entities does not result in useful information for investors. Rather, reporting all investments, including investments in subsidiaries, at fair value provides the most useful and relevant information. In response to this, the amendments provide an exception to the consolidation requirements in HKFRS 10 and require investment entities to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them. The amendments also set out disclosure require-ments for investment entities. The amendments are effective from 1 January 2014 with early adoption permitted in order to allow investment entities to apply the amendments at the same time they first apply the rest of HKFRS 10.

Update no. 124 contains improvement changes to HKSIR 400 and HKSAs.

In June 2012, the IAASB published the 2012 edition of the Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronounce-ments and made editorial and formatting changes in finalizing it. Changes have been made to the corresponding Hong Kong pronouncements.

HKSRE 2400 (revised) conforms with ISRE 2400 (revised) issued by the IAASB in September 2012. HKSRE 2400 (revised) aims to enhance the quality and consistency of engagements to review historical financial statements, through revised requirements and guidance addressing the responsibilities, work effort and reporting considerations of practitioners undertaking such engagements. HKSRE 2400 (revised) is effective for reviews of financial statements for periods ending on or after 31 December. HKSIR 400 is revised to reflect the improvement changes made to paragraph 56 and the illustrative examples. There is no change to the principles in the standard. The revisions made are effective upon issuance.

Financial reporting

IASB exposure draft: Classification and Measurement: Limited Amendments to IFRS 9The Institute has issued an invitation to com-ment on the IASB exposure draft Classifica-tion and Measurement: Limited Amendments to IFRS 9, with comments requested by 28 February. The proposals form part of a wider project to reform accounting for financial instruments and are part of the classification and measurement phase of that project.

The IASB published new classification and measurement requirements for financial assets in 2009 and for financial liabilities in 2010. However, in January 2012 the IASB decided to consider limited amendments in order to: clarify a narrow range of application

questions; reduce key differences with the United States Financial Accounting Standards Board’s tentative classification and measure-ment model to achieve increased compa-rability internationally in the accounting for financial instruments; and take into account the interaction between the classification and measurement of financial assets and the accounting for insurance contract liabilities.

In publishing the exposure draft, the IASB sought to minimize changes to the require-ments in IFRS 9 Financial Instruments and ensure the proposed amendments are consis-tent with the business model-driven classifi-cation structure in IFRS 9. The draft proposes the introduction of a “fair value through other comprehensive income” measurement category for debt instruments that would be based on an entity’s business model.

IASB exposure draft: Clarification of Ac-ceptable Methods of Depreciation and AmortizationThe Institute is seeking comment on the IASB exposure draft Clarification of Acceptable Methods of Depreciation and Amortization (proposed amendments to IAS 16 and IAS 38), with comments requested by 1 March.

IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets both establish the principle for the basis of depreciation and amortization as being the expected pattern of consumption of the future economic benefits of an asset.

The objective of the proposed amend-ments is to ensure that preparers do not use revenue-based methods to calculate charges for the depreciation or amortization of items of property, plant and equipment or intangible assets. This is because a revenue-based method reflects a pattern of economic benefits being generated from the asset, rather than the expected pattern of consumption of the future economic benefits embodied in the asset.

123The latest standards and technical developments

TechWatch

48 February 2013

A PLUS

IASB exposure draft: Sale or Contribu-tion of Assets between an Investor and its Associate or Joint VentureThe Institute has issued an invitation to comment on the IASB exposure draft Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (proposed amendments to IFRS 10 and IAS 28), with comments requested by 18 March.

The objective of the proposed amend-ment is to address an acknowledged incon-sistency between the requirements in IFRS 10 Consolidated Financial Statements and those in IAS 28 (2011) Investments in Associates and Joint Ventures in dealing with the sale or contribution of a subsidiary.

The main consequence of the proposed amendment will be that a full gain or loss would be recognized on the loss of control of a business (whether it is housed in a sub-sidiary or not), including cases in which the investor retains joint control of, or significant influence over, the investee.

IVSC discussion paper: Valuations in the Extractive IndustriesThe Institute submitted comments on the IVSC discussion paper Valuations in the Extractive Industries. The Institute believes the IVSC should produce a combined standard and guid-ance. Although there were some differences between the classification of reserves and resources between mining and oil and gas operations, the Institute believes the underly-ing techniques used for the valuation were relatively consistent, subject to a standard identifying specific considerations and fac-tors that would need to be taken into account when performing valuations for mining and for oil and gas assets. The Institute agrees the project should ex-tend to other assets employed in the industry and to entire businesses in the sector.

IFRS Foundation proposal to establish ac-counting standards advisory forumThe Institute made a submission on the IFRS Foundation’s invitation to comment on the proposal to establish an accounting standards advisory forum. The Institute supported in principle the foundation’s move to formalize and rational-ize the relationship between the IASB and national standard-setters onto a more logisti-cally sustainable and compact basis.

The Institute believed there would be a significant mutual benefit for both the IASB and for standard-setters, such as the Insti-tute, to be more fully and directly engaged with each other having the proposal put into operation.

Audit and assurance

Invitation to comment on HKSAE 3420 exposure draftThe Institute has issued an invitation to comment on the exposure draft HKSAE 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, with comments requested by 19 February. The exposure draft deals with reason-able assurance engagements undertaken by a practitioner to report on the responsible party’s compilation of pro forma financial information included in a prospectus. It explains that a compilation of pro forma financial information involves the respon-sible party gathering, classifying, summariz-ing and presenting financial information that

illustrates the impact of a significant event or transaction on unadjusted financial informa-tion of the entity as if the event had occurred or the transaction had been undertaken at the selected date. The proposed standard describes the steps involved in this process as including:(a) Identifying the source of the unadjusted

financial information to be used in com-piling the pro forma financial information and extracting the unadjusted financial information from that source;

(b) Making pro forma adjustments to the unadjusted financial information for the purpose for which the pro forma financial information is presented; and

(c) Presenting the resulting pro forma financial information with accompanying disclosures.

Ethics

Institute comments on IESBA exposure draftThe Institute submitted comments to the IESBA on its exposure draft Responding to a Suspected Illegal Act. The Institute acknowledged that it was of paramount importance for the accounting profession to accept the responsibility to act in the public interest and that a professional accountant’s responsibility was therefore not exclusively to satisfy the needs of an individual client or employer.

However, the Institute had substantial concerns on whether the proposals would result in the imposition of fair and equitable requirements to professional accountants, especially in the absence of adequate statu-tory protection for whistle-blowers.

February 2013 49

Please refer to the full version of TechWatch 123, available as a PDF on the Institute’s website: www.hkicpa.org.hk

T he proposals form part of a wider project to replace IAS 39/HKAS 39 Financial Instruments: Recognition

and Measurement with IFRS 9/HKFRS 9 Financial Instruments.

The extant version of IFRS 9/HKFRS 9 has two measurement categories for financial assets. The standard requires assets to be

measured either at fair value through profit or loss, or at amortized cost on the basis of the asset’s cash flows and how an entity manages its financial assets. Unlike IAS 39/HKAS 39, IFRS 9/HKFRS 9 provides structure to classification in an effort to improve information.

IFRS 9/HKFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the many different rules in IAS 39/HKAS 39. The approach in IFRS 9/HKFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets.

A financial asset shall be measured at amortized cost if both of the following condi-tions are met:• Theassetisheldwithinabusiness

model whose objective is to hold assets in order to collect contractual cash flows; and

• Thecontractualtermsgiveriseonspeci-fied dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

If either criterion is not met, the financial asset should be measured at fair value through profit or loss.

In relation to financial liabilities, IFRS 9/HKFRS 9 unchanged almost all the ac-counting requirements in IAS 39/HKAS 39 for financial liabilities with the following exception: Changes in value attributable to

changes in an issuer’s own credit risk for non-derivative financial liabilities measured at fair value will now be presented in the other comprehensive income section of the income statement, rather than within profit or loss.

In order to address specific application issues that have arisen in practice since the issuance of IFRS 9/HKFRS 9; to take into account the interaction of the classification and measurement model for financial assets with the IASB’s insurance contracts project; and to reduce differences with the FASB's classification and measurement model, the exposure draft proposes limited scope amendments to IFRS 9/HKFRS 9 as follows:• Introducea“fairvaluethroughother

comprehensive income” measurement category for qualifying debt instruments;

• Eliminatethephasedapproachtotheearly application of IFRS 9/HKFRS 9, except for the requirements related to own credit;

• Clarifyanarrowrangeofapplicationquestions, such as the amount/fre-quency of sales that would be consistent witha“holdtocollect”businessmodeland how to assess the asset’s contractual cash flows in particular circumstances.

Tech Q&AThe Institute has recently issued an invitation to comment on the IASB exposure draft Classification and Measurement: Limited Amendments to IFRS 9. Could you provide details of the proposed requirements?

50 February 2013

Send your questions and comments tocommentletters@hkicpa.org.hk. The standard setting team will answer these questions in accordance with its policy, posted on the Institute’s website.

The most significant proposal is the intro-duction of a third measurement category for qualifying debt instruments. That is, vanilla debt instruments that are managed both in order to collect contractual cash flows and for sale would be measured at fair value through other comprehensive income. This new category would capture, for example, those circumstances in which an entity is seeking to maximize its return from a combi-nation of collecting contractual cash flows and realizing value appreciation.

For such a business model, performance will be affected by both contractual cash flows and the realization of fair value.Amortized cost information reflects the deci-sion to hold the assets to collect contractual cash flows unless, and until, they are sold in order to achieve the objective of the busi-ness model. Fair value information reflects the cash flows that would be realized if, and when, they were sold.

The fair value through other compre-hensive income measurement category should result in a fair value carrying amount in the statement of financial position and amortized cost information being provided in profit or loss. Accordingly, the exposure draft proposes that for financial assets mandatorily measured at fair value through other comprehensive income:• Interestincomeshouldberecognizedin

profit or loss using the effective interest method that is already applied to finan-cial assets measured at amortized cost in IFRS 9/HKFRS 9;

• Impairmentshouldberecognizedinprofit or loss using the same credit impairment methodology as for financial assets measured at amortized cost; and

• Thecumulativefairvaluegainorlossrec-ognized in other comprehensive income shouldbereclassified(“recycled”)fromequity to profit or loss as a reclassifica-tion adjustment when these financial assets are derecognized (when it is sold or matures).

Moreover, the proposals would also change the requirements for the early application of IFRS 9/HKFRS 9 before its mandatory effective date. In general, the proposals would not allow parts or phases of IFRS 9/HKFRS 9 to be applied in isolation after IFRS 9/HKFRS 9 is complete (except for the own credit requirements for financial liabilities measured under the fair value option). In other words, if an entity decides to early apply IFRS 9/HKFRS 9 after it is completed, all phases of IFRS 9/HKFRS 9 must be applied from the same date. This is proposed to improve comparability for users of financial statements. In summary, the classification principles in IFRS 9/HKFRS 9, which are preserved in the proposed amendments, are designed to bet-ter reflect the underlying economic decisions made by management. The creation of the fair value through other comprehensive income category provides information about fair value in the statement of financial position and about contractual cash flows in profit or loss.

The Institute's financial reporting standards committee is deliberating on the proposals and will be preparing a submis-sion to the IASB. In this connection, the Institute welcomes comments on all matters addressed in the exposure draft. Please pro-vide your comments to Simon Riley, director of standard setting, by 28 February.

February 2013 51

Eliza NgPartner, audit andassurance servicesNg has more than 15 years of au-dit and assurance experience.

She has extensive experience in audit, initial public offerings and mergers and acquisitions of listed and multinational companies operat-ing in a variety of industries, including retail-ing, chemical products, printing and packag-ing, construction and engineering, real estate, transport, information technology, telecom-munication, advertising, pharmaceutical and health care, hospitality, catering and enter-tainment.

Email your announcements to Lucid Wong at lucid.wong@mandl.asia

RSM Nelson Wheeler

Lester KwongPrincipal, audit andassurance servicesKwong is experienced in audit-ing listed companies and capi-

tal market work in Hong Kong and overseas. He has extensive experience with companies specializing in infrastructure construction, engineering, entertainment, licensing of soft-ware, biotechnology, forestry, animal nutri-tion and livestock.

Frankie LiPrincipal, audit andassurance servicesLi is experienced in providing audit and assurance services

to listed and private companies operating in a variety of industries, including property development, golf clubs, hotels, mining and manufacturing.

People on the moveThe latest professional appointments from around the region

54 February 2013

Your guide to courses, workshops and member activities

Visit the Institute’s website for other programmes and to enrol and pay online: www.hkicpa.org.hk

Accounting and related knowledge

Creating and managing effective budgets will examine what the budgeting process involves, help participants develop more realistic and effective budgets and teach them how to use budgets as an effective performance monitoring and measurement tool.CPD hours: 3Language: EnglishDate: 25 FebruaryTime: 6:30 – 9:30 p.m.

Audit and assurance

Co-organized with the Securities and Futures Commission, the joint seminar on the audit of licensed corporations will discuss areas of concern over applying Practice Note 820 and highlight the impact of the auditing standards issued.CPD hours: 2Language: EnglishDate: 4 FebruaryTime: 6:30 – 8:30 p.m.

Audit quality: measurement and implications to reported earnings will explore the consequences of audit failure cases and discuss factors that influence audit quality and how audit quality can be measured.CPD hours: 1.5Language: EnglishDate: 28 FebruaryTime: 6:30 – 8:00 p.m.

Business and professional knowledge

Land tenure system in Hong Kong will look at the present situation and the system’s historical background. The special characteristics of the system in the New Territories will also be discussed.CPD hours: 1.5Language: EnglishDate: 6 FebruaryTime: 6:30 – 8:00 p.m.

Business finance

Mastering impairment testing will discuss the impairment related risks expected to increase in this financial year and the impact this has on a company’s financial statements.CPD hours: 1.5Language: EnglishDate: 21 FebruaryTime: 6:30 – 8:00 p.m.

Business management

What are the risks and opportu-nities in managing suppliers in China? will cover the pitfalls and advan-tages in managing Chinese suppliers. The speaker will assess economic data based on 1,000 interviews with Chinese manufactur-ers in the consumer electronics industry conducted over the past three years.CPD hours: 3Language: EnglishDate: 28 FebruaryTime: 6:30 – 9:30 p.m.

Financial accounting and reporting

Practical issues in adopting HKFRSs for 2012 financial statements will highlight the new and amended International Financial Reporting Standards and Hong Kong Financial Reporting Standards, including HKFRS 10, 11, 12 and 13.CPD hours: 3Language: EnglishDate: 20 FebruaryTime: 6:30 – 9:30 p.m.

Financial reporting seminar on convertible bonds valuation will provide an introduction to convertible bonds and cover the interaction between account-ing treatment and valuation methodology using case studies.CPD hours: 1.5Language: EnglishDate: 26 FebruaryTime: 7:00 – 8:30 p.m.

February 2013 55

Events

56 February 2013

L acking Sydney’s spectacular har-bour, Australia’s second city has had to strive harder to establish itself as a destination. Less brash

or trivial than sybaritic Sydneysiders, Mel-bourne residents pride themselves on their work ethic, peaceable multicultural identity and ability to appreciate the sensory arts.

Melbourne, the capital of the state of Vic-toria, was founded in the 1830s and its oldest surviving complete building dates only from 1849. However, the city boasts a wealth of beautiful late Victorian-era architecture in its city fringes and inner suburbs.

The 19th century gold rush and the wool

trade brought riches to the city and created a wealthy merchant and farming class. A num-ber of historic mansions, such as Como and Rippon Lea, are managed by the National Trust and open to the public.

The city struggled for decades to develop a central leisure and meeting space before open-ing the love-it-or-hate-it Federation Square in 2002. While the jagged, asymmetrical archi-tecture is not to everyone’s taste, the square is home to some of the country’s finest arts spaces, such as the Sir Ian Potter Centre and the Australian Centre for the Moving Image.

The city has numerous museums and gal-leries, including the National Gallery of Victo-

ria, one of the oldest collections in Australia. The work of local luminaries such as Em-ily Kam Ngwarray, Frederick McCubbin and Tom Roberts is featured alongside that of in-ternational masters such as Louise Bourgeois, El Greco, Damien Hirst, Man Ray, Auguste Rodin, J.M.W. Turner and Wu Zhen.

Meanwhile, the State Library of Victoria features an exhibition on culinary history un-til 28 March, while the Immigration Museum showcases Dublin photographer David Mona-han’s images of recent arrivals from Ireland amid the eurozone debt crisis.

Retail shopping in the central business dis-trict is concentrated along Collins Street, with

Marvellous MelbourneTravelzoo Asia Pacific CFO and Institute member Honnus Cheung seeks culture, cuisine and calm in Australia’s second-largest city

Business travel

Where to eat• Albert Street Food and Wine Foodie

heaven on a foodie strip. 382 Sydney Road, Brunswick. 8354-6600.

• Cumulus Inc Avant-garde dining. 45 Flinders Lane, City. 9650-1445.• Flower Drum Highly rated Cantonese

with local twists. 7 Market Lane, City. 9662-3655.

• Pellegrini’s Espresso Bar An Italian coffee institution. 66 Bourke Street, City. 9662-1885.

• Vue de Monde Modern takes on classic dishes. 55th floor, Rialto,

525 Collins Street, City. 9691-3888.

Where to stay• Adelphi Hotel Trendy boutique in old

warehouse. 187 Flinders Lane, City. 8080-8888.

• Crown Promenade Stylish hotel in casino complex. 8 Whiteman Street, Southbank. 9292-6688.

• InterContinental Melbourne The Rialto Five-star central chic.

495 Collins Street, City. 9620-9111.• The Como Melbourne Luxury digs

amid shoppers’ paradise. 630 Chapel Street, South Yarra. 9825-2222.

• The Hotel Windsor Colonial-era glamour. 111 Spring Street, City.

9633-6000.

What to see • Federation Square The city’s cultural

and social hub. Swanston Street, City. 9655-1900.

• Melbourne Cricket Ground Site of winter AFL football matches.

Brunton Avenue, East Melbourne. 9657-8888.• Melbourne River Cruises Scenic

views of city and suburbs. Vault 11, Banana Alley, City. 9654-9599.

• Shrine of Remembrance Stately war memorial in the King’s Domain. Birdwood Avenue, City. 9661-8100.

• Sir Colin MacKenzie Fauna Park Native animals in visitor-friendly setting. Badger Creek Road, Healesville. 5957-2800.

February 2013 57

Business travel

its high-end designer brands, and slightly more down-to-earth Bourke Street. Swanston Street and the smaller streets running off it include many bargain stores.

Melbourne is the birthplace of Australian Rules football, a unique code combining elements of rugby and association football. The 2013 Aus-tralian Football League season kicks off next month and top teams Carlton and Richmond meet at the iconic Melbourne Cricket Ground on 28 March.

Most visitors tend to concentrate their time on the grid-patterned central business district, but the layout hides myriad alleys, including Hardware Street, Mitre Lane and Bank Place, that are worthy of exploration for their eateries, clubs and obscure boutiques.

In addition, the vibrant inner suburbs, such as Brunswick, Carlton, Collingwood, Fitzroy and Richmond should not be ignored. Chapel Street in South Yarra possesses many of the city’s trend-ier and more unusual fashion boutiques.

Williamstown is a picturesque seaside suburb that stands out from the rest of the mostly poorer western suburbs, although long-ignored neigh-bourhoods such as Footscray, Yarraville and Moonee Ponds have been brought to life in part by waves of immigration from Asia and, more re-cently, Africa and South America.

Lygon Street in Carlton – close to the Univer-sity of Melbourne’s main campus – boasts dozens of street dining options, especially for Italian and other Mediterranean food, while Bridge Road in Richmond offers every imaginable Asia-Pacific cuisine.

Indeed, the city is known for its culinary qual-ity and diversity: Its British colonial origins have been subsumed by continental European, then Asian immigration. Melbourne, like the rest of Australia, prides itself on its fresh, locally caught seafood while fruit and vegetables arrive daily from the market gardens of its hinterland.

Victoria is a leading producer of lamb and beef, and world-class wine is grown in the Yarra Valley as well as the nearby Grampian and Goul-burn Valley districts. Real ale pubs include the Baden Powell Hotel in Collingwood.

Unique Australian foods have emerged. Mel-bourne culinary specialties include fish-and-chip shop delicacies such as egg roll inspired Chiko rolls and the dim sim – a fried or steamed cabbage dumpling largely unrecognizable to most Chinese consumers.

Previous page: Melbourne Cricket GroundThis page (from top): Federation Square opened in 2002 amid controversy over its design; the Yarra River flows through Melbourne; Shrine of Remembrance; sunrise viewed from Williamstown

58 February 2013

Celebrating Cognac

The after-dinner tipple has become a staple drink over the lunar new year holiday, writes Aloysius Tse

W hile brandy is produced in many countries from many different types of grape, and

even other fruits, the most notable is those produced near the town of Cognac, between Poitiers and Bordeaux, in western France.

Cognac, usually served as an after-dinner drink, has caught on in China over the past few decades. High-end Cognac shipments to China rose 21.7 percent in volume last year and 34 percent in retail value in 2011, accord-ing to investment research firm Sanford C. Bernstein & Co. Given its celebratory repu-tation, Cognac consumption spikes during the lunar new year period, with that week accounting for up to 30 percent of annual sales.

While there are a large number of Cognac producers, the world market is dominated by only a few companies, such as Pernod Ricard, which launched its Martell Cordon Bleu XO Cognac in 2005 especially for the Mainland market. Its rivals include Beam (the Cour-voisier brand), Camus La Grande Marque (Camus), LVMH Moët Hennessy Louis Vuit-ton (Hennessy) and Rémy Cointreau (Rémy Martin).

For a distilled brandy to bear the name of Cognac, its production methods must meet certain legal requirements. In particular, it must be made from specified grapes, espe-cially Ugni Blanc, locally known as Saint-Émilion and widely known by its Italian name of Trebbiano.

The Ugni Blanc vines grown for Cognac production cover many thousands of hect-ares in the Charente and Charente-Maritime départements of France. Other common grape varieties used are Colombard and hybrids of Folle Blanche. These give Cognac its distinc-tive aromas of honeysuckle, vanilla, fruit and caramel.

After hours

Buyers can be confused by the various quality ratings displayed on the labels of Cognac bottles. In fact, these are no more than an indication of the length of time which the brandy has been aged in barrels.

Cognac is traditionally created by blend-ing double distilled white wine spirits of dif-ferent ages and crus and it is very rare for it to carry any vintage designation. However, by law, the distillation process must be com-pleted no later than 31 March of the year fol-lowing the vintage. Unlike wine, brandy does not age in bottles.

According to the Bureau National Inter-professionel du Cognac, which is responsible for overseeing the production of Cognac in France, the three official quality grades are:• VS (Very Special), which refers to a blend

in which the youngest brandy has been stored for at least two years in wooden casks. These Cognacs are sometimes des-ignated “three star.”

• VSOP (Very Special Old Pale), which refers to a blend in which the youngest brandy has been stored for at least four years in casks.

• XO (Extra Old) refers to a blend in which the youngest brandy is stored for at least six years (10 years after 2016) and often longer than 20 years.

There are other unofficial designations such as Napoleon (often taken as a grade equal to an XO), Extra (normally aged longer than an XO) and Hors d’Age, a designation the

bureau refers to as XO equivalent but that is in practice aged much longer.

There are different views on how to serve Cognac. Most drinkers would agree that a Cognac has to be drunk at hand temperature. Another common belief is that it should be served in a tulip-shaped wine glass, but a low spherical wine glass is also acceptable.

Cognac has an initial aroma and then swirling the liquid emits subtler secondary hints. This should be repeated until the full complement of the bouquet has been experienced.

The liquid should be then sipped, first experienced at the front of the mouth for the primary bitter and sweet tastes, before allow-ing the finishing “feel” to be appreciated fur-ther back against the palate.

Whether you want to drink your Cognac neat with ice or water, or warm by your hand to bring out the aroma characteristics – or even during dinner with a soft drink like Coca-Cola – is all very personal.

The important thing is that Cognac as an after-dinner drink needs to be appreci-ated slowly and leisurely. This is the reason why there has been a trend for wine bars to serve fine Cognac together with quality cigars. Cognac also goes well with coffee and chocolates.

Aloysius Tse is chairman of Bacchus Fine Wines Group and a past president of the Hong Kong Institute of CPAs.

Salvatore Calabrese, a London club owner, prepares to open a bottle of Clos de Griffier Vieux Cognac from 1788 in October 2012 during an attempt to make the world’s most expensive cocktail, which also included Kummel liqueur, orange Curaçao and Angostura bitters.

February 2013 59

Slithering seconds

In the spirit of the lunar new year, several luxury watchmakers have unveiled snake-themed timepieces. Jemelyn Yadao looks at some of the slinky offerings

Af

The Swiss watchmaker, which has a relationship with China that dates back to 1845, will continue the Chinese Zodiac series next year.

Piaget, meanwhile, offers a range of watches that also cel-ebrate the lunar new year and feature the 12 Chinese signs of the zodiac. On its ultra-thin 38 mm Dancer watch, the snake symbol motif, set with a ruby eye and 73 brilliant-cut diamonds on its body, gleams against a black onyx back-ground. In keeping with the watch’s simple yet timeless style, the bezel is delicately set with 36 brilliant-cut dia-

monds and the bracelet is in white gold.The brand has also recently

released another year of the snake-inspired number. The Altiplano 38 mm enamel watch features an

image of a curling snake brought to life by the cloisonné enamel-

ling technique, which consists of creating hollows to form a motif and marking out the shape with gold wire. The

enamel is placed in each of the hollows and fired. The dial

is further enhanced by a bezel set with 78 brilliant-cut diamonds.

Bulgari’s Serpenti collection pays homage to the coiling snake. The rep-tile has long been an integral part of the Italian jeweller’s designs, even outside snake years. The collection includes a quartz jewellery watch

featuring an 18-karat pink gold case set with round diamonds and a black

C ontrary to its fearful reputation, it is said in the Chinese zodiac that the snake possesses great wisdom. Of

the 12 astrological animals, the slithering reptile is also known to be the most refined and collected. These ancient Chinese philos-ophies have this year become a strong source of inspiration for many luxury watchmakers.

In welcoming the Year of the Snake this month, watch brands have rolled out several timepieces in which the character, form and beauty of the snake is at the core of the watch design.

Like other occasions worth commemo-rating, the lunar new year has also provided brands the perfect opportunity to create statement pieces in limited numbers. Vach-eron Constantin’s Métiers d’art collection, for example, has this year launched The Legend of Chinese Zodiac series, starting with two models inspired by the Year of the Snake with a limited production run of only 12 each.

These limited editions feature an engraved snake in the centre of the face that not only conforms with traditional Chinese iconography but adds ele-gance to the piece. The visual appeal of the gold-enamelled dial is enhanced thanks to the “grand feu” technique, charac-terized by firing the enamel at a high temperature of up to 1,300 degrees Celsius. Adding to the over-all design, the watch features four windows neatly arranged around the central dial motif revealing the hour, minute, second and the day.

sapphire dial. The pink gold bracelet with black enamel and decorative

diamonds double wraps around the wrist in a serpen-

tine manner. Some watchmakers are

already familiar with turning to creatures of myth and legend for

inspiration. Just before the end of 2012, Richard Mille honoured the Year of the Dragon by creating RM 057 Dragon-Jackie Chan, a limited

edition watch of 36 pieces in collabo-ration with the action star. Available in red gold or white gold, the time-piece has a hand-engraved red or

white gold Chinese dragon entwined around the movement.

This year, the brand has released a snake version, the RM 026 Tourbillon, which is inspired by its not-so-feminine ladies’ watch, the RM 019 Tourbillon.

The RM 026 is adorned with a ruby-and-diamond-encrusted white gold snake and an emerald-and-diamond encrusted white gold snake with a coral tongue. Both snakes writhe within the manual-winding tourbillon move-ment while helping to hold the movement intact. With plates featuring onyx and high-grade titanium finishing, the femininity of the glittering snakes blends with robust sophis-tication. It is all housed within a tonneau-shaped case set with 18-karat white gold gems. The watch also sports a power reserve of 48 hours and torque limitation to prevent accidental overwinding.

With the intricate detail and craftsman-ship that goes into creating these timepieces, both the usually wicked creature and watch itself are transformed into works of art.

PiagetDancer watch

Vacheron Constantin Métiers d’art

The Legend of Chinese Zodiac

60 February 2013

B eware of emails beginning “Dear” followed by a big space, followed by your name, followed by another

space, followed by a comma. It means you’ve been mail merged.

I wrote 73 emails once, all saying almost the same thing. It took a whole day. That’s be-cause I have a disease called mail merge fear. Many people have this disease. While there are many frightening things about comput-ers (such as the error messages which say: “Windows has detected that your keyboard is unresponsive. Press any key to continue”), mail merge can be the scariest of all.

It’s a program designed to personally ad-dress a letter or email to everyone on your list with a single click. But every time I’ve done it, something’s gone horribly wrong. I can tell because I get 50 instant replies say-ing: “Er, I think your computer has a virus.”

But I must admit that despite the stress in-volved, the curious thing is that both systems (getting it right and screwing it up) work equally well at getting people to my book launches or whatever.

Still, mail merge is a risky tool for big firms. Case in point: Given the restrictions on advertising, a group of financial profession-als decided to grow their business by sending individually addressed letters to a list of blue-chip companies. Of course, this sort of mar-keting generally has a low level of response, so an expensive consultant was hired to pre-pare a long list of prospects.

The firm took the list and roped in an in-tern to do the tedious bit: run the mail merge operation, print the letters and stuff the en-

velopes. The youngster clicked the box on the Excel spreadsheet to sort the addresses into alphabetical order. But he’d only highlighted one column. So all the names changed posi-tions, but the addresses didn’t. He then sent out hundreds of letters, each one bearing one company’s name but a completely different company’s address. Disaster loomed.

Let me just take a break from this thrilling tale to highlight a side issue. You might think that the intern was not left-brained. Maga-zine quizzes tend to divide people into those who are good at numbers, who they call left-brained, and those who are good at creative thinking, referred to as right-brained.

Accountants have to be good at both sides at once. For proof of this, consider the three trainee auditors who took a break from sta-tistics exam revision to do some archery. The first shot his arrow 10 cm left of the bull’s eye. The second shot his arrow 10 cm right of the bull’s eye. The third put down his bow and said: “Averaging out the scores, I’d say we were bang on target.” See? Good at num-bers AND creative.

But back to our mail merge tale (appar-ently a true story). The company that sent out the letter received a vast number of re-plies. It was by far the most successful junk mail, er, I mean direct marketing campaign they had ever run.

CFO recipients could not resist taking a peek at what they thought was private cor-respondence intended for different corpora-tions. People in suits are nosy. So most of the targets actually read the marketing material and new business developed as a result.

I’m not exactly sure what the moral of this tale is. It’s not exactly “think outside the box.” It’s more like: “The Lord moves in mysterious ways his wonders to perform.” Or even, “If you’re going to screw up, screw up big time and cross your fingers that some-thing unexpectedly good will result.”

I’ve never seen this advice in any busi-ness book. But it works for me. And if you get an email from me addressed to some-one you’ve never heard of, come to my book launch anyway.

Nury Vittachi is a bestselling author, columnist, lecturer and TV host. He wrote the Institute’s first two storybooks, May Moon and the Secrets of the CPAs and May Moon Rescues the World Economy. A third, May Moon’s Book of Choices, was published in 2012.

Get your daily dose of Nury’s humour at www.mrjam.org

Let’s get fiscal

Mail merge sales surgeMisaddressed letters can grow your business, says Nury Vittachi

“ It’s a program designed to personally address a letter or email to everyone on your list with a single click. But every time I’ve done it, something’s gone horribly wrong.”