AB – news – March 2011
UK news
ACCA calls for iXBRL deferral [lead with photo]
ACCA is lobbying for a delay in the introduction in the use of the iXBRL software format for the filing of accounts for all UK companies. ACCA and five other accountancy bodies – the Association of Accounting Technicians, the Association of Taxation Technicians, the Chartered Institute of Taxation, the ICAEW’s Tax Faculty and the Institute of Chartered Accountants of Scotland – have written to David Gauke MP, Exchequer Secretary to the Treasury, to say that software difficulties have not been fully overcome. These make it unrealistic to proceed with transition arrangements starting this year, which would particularly disadvantage small firms and their agents. Chas Roy-Chowdhury, head of taxation at ACCA, says: “If HMRC continues with its 1 April deadline, it will impose a significant business cost on a large number of firms which will dilute, if not destroy, the message that iXBRL should be a positive long-term step for UK businesses.”
Women partners promoted [lead with photo and fast facts]
Deloitte and PwC have pledged to increase the proportion of women amongst their senior partners. David Sproul, Deloitte’s new chief executive, says that 28% of senior positions on the firm’s executive will be held by women and that it will double the number of women on its board. The announcement coincided with the publication of Deloitte’s report, The Gender Dividend: Making the Business Case for Investing in Women, which argues that the influence of women within a business affects its competitiveness. Heather Hancock, managing partner at Deloitte, said: “Investments in women can yield a significant ‘gender dividend’ both from women as workers and as consumers.” PwC has also committed to increasing its number of women partners, rising from the current 14% to perhaps 20%. Eventually, says PwC chairman Ian Powell, the firm aspires to having 40% to 50% of partners who are either women, or from under-represented groups, such as ethnic minorities.
FAST FACTS – the glass ceiling
£479,593 – average salary for a female FD at a FTSE 250 company
£717,769 – average salary for a male FD at a FTSE 250 company
Fraud costs UK £38bn
The UK economy lost over £38bn last year from fraud, says the National Fraud Authority. The biggest loser was the public sector, which had £21bn defrauded. Businesses lost £12bn, individuals £4bn and charities £1.3bn. The NFA says the higher cost to the public sector reflects, in part, a more reliable methodology for the calculation of fraud loss. Financial services is the business sector suffering the highest losses, with a 14% increase in online banking fraud.
A new standard for the treatment of impaired financial assets has been proposed jointly by the IASB and the FASB. They suggest that accounts use an expected loss model, providing a forward-looking assessment of likely credit losses. This would replace the incurred loss model, which requires evidence of a loss through a trigger event before impairment can be recorded.
FRRP warns on risks
Companies have been told by the Financial Reporting Review Panel to improve their risk reporting practices. At present, directors’ reports are frequently not identifying clearly the risks and uncertainties facing their businesses, as required by the Companies Act 2006, says the FRRP. Too often, reports provide a long list of ‘principal risks and uncertainties’, without stating which represent the biggest threats to the company. Risk disclosures should be matched by an explanation of how the directors are managing these.
Bribery Act delayed
Implementation of the Bribery Act has been delayed and will not be implemented in April as planned. A Ministry of Justice spokesman explains: “We are working on the guidance to make it practical and comprehensive for business. We will come forward with further details in due course. When the guidance is published it will be followed by a three month notice period before implementation of the Act.” The decision was welcomed by Andrew Leck, head of ACCA UK, who said that businesses need more time to prepare and that government must resolve some of the law’s uncertainties.
Companies will be more limited in their capacity to offset on their balance sheets financial assets and liabilities held with the same third parties under proposals agreed by the IASB and FASB. At present, the IASB and FASB use different approaches to the use of ‘netting’, or offsetting of financial positions. The boards propose that offsetting should apply only when the right of set-off is enforceable at all times, including in default and bankruptcy, and the ability to exercise this right is unconditional. The proposals would amend IFRSs and US GAAP and eliminate several industry-specific netting practices.
IAASB considers disclosures
The International Auditing and Assurance Standards Board has published a discussion paper considering the principal issues in the auditing of reporting disclosures and how those disclosures are used. IAASB chairman Professor Arnold Schilder said there is now more use of qualitative, forward-looking, disclosures and these are increasingly important to investors – but this raises issues about how these should be audited. A second paper was published by the IAASB on audit quality, to stimulate a wider debate.
New standards on carbon emissions
A new standard for the auditing and assurance of disclosures on carbon emissions has been proposed by the IAASB. “The monetary value of carbon trading transactions around the world is in the billions and continuing to increase exponentially,” says Professor Arnold Schilder, IAASB chairman. “This has led to a strong and growing need for mechanisms to enhance the reliability of the underlying information used in these transactions—and this proposed standard is an important part of fulfilling that need. Disclosure of emissions information is also increasingly being required by regulation or presented on a voluntary basis to inform investors, consumers, and others.”
Mazars’14% growth
Mazars has reported a 14.3% rise in turnover for 2009/10, to €884m. The firm’s tax advice operations have grown by a third; advice to owner managed businesses rose by 17%; auditing and related activities increased by 10%; while the group’s law firm, Marccus Partners, reported stable turnover. The Africa and Middle East region reported the largest rise in turnover, at 26.3%; the Latin America region grew by 25%; Asia Pacific by 24.8%; and Europe by 2.8%.
FRC and FSA increase co-operation
The FRC and FSA have agreed to improve co-operation and information exchange, under a memorandum of understanding signed by the two bodies. This follows increased dialogue in place since 2005 and adopts principles spelt out in a joint discussion paper on the audit of financial institutions published last year. The FRC’s Audit Inspection Unit will now work more closely with the FSA, enabling the two regulators to improve their oversight of audits of authorized firms.
Modest rise in partner recruitment
There is a modest increase in partner recruitment by accountancy firms, says Twenty Recruitment. It also found salary levels across the top 20 firms remained stable in 2010 and expects the situation to continue in 2011, with salary increases unlikely to exceed 2%. Andrew Williams, senior consultant at Twenty’s Professional Services Division, says that “most Top 20 firms have no particular pressure on them to implement increases in base pay”. “What we do expect is that packages will continue to be weighted more towards the bonus element,” he added.
Companies House imposes electronic filing
Almost all returns to Companies House, and new company incorporations, will have to be conducted electronically by March 2013. The move to digital filing will reduce costs, errors and frauds, while improving security and efficiency, says Companies House. It will also allow Companies House to offer a wider range of information services, including the provision of data for analysis and benchmarking. Companies House says that customers can expect to benefit from significant cost savings from lower fees.
KPMG wins NHS London contract
KPMG’s Partnership for Commissioning division has won a contract with NHS London, supporting in that region the move to GP commissioning from April 2013. Partnership for Commissioning brings together the National Association of Primary Care, Healthskills, Primary Care Commissioning, United Health UK and Morgan Cole, to provide support services to help GPs develop key skills they will need as future commissioners, including in financial management, contract management and engaging with local councils and other stakeholders.
UK business failures fall 18%
Business insolvencies fell last year for the first time in two years. According to Experian’s ‘Insolvency Index’, 1.04% of businesses (19,946) failed last year – down from 1.25% (24,209) in 2009. The rate of business failures declined steadily from March last year. Experian said that companies in the South of England have shown more resilience than those in the North, while larger companies performed better than small firms. The strongest sector was the oil industry, while the weakest was food retailing.
Offshore fines from HMRC
Tax evaders hiding money offshore face penalties of up to 200% of the value of the money shielded, HMRC has warned. Penalties for hiding money offshore to evade liabilities for income tax or capital gains tax will rise substantially from 6 April. The scale of any penalty will be linked to the extent of co-operation by the jurisdiction in which the funds are concealed, with increased penalties for under-declared income and gains from territories which do not automatically share tax information with the UK. The Government has allocated £900m to detect and prosecute those evading tax through offshore havens.
CEO confidence restored
CEOs’ confidence in the global economy has returned to nearly pre-crisis levels, according to PWC’s latest Annual Global CEO Survey. Half of 1,201 CEOs polled said they are “very confident” of growth this year – compared to just 31% at the same point in 2010. The level of optimism matches that of 2008, prior to the economic crisis. Some 94% of CEOs are confident of growth over the next three years. CEOs in Europe were the least confident – with the exception of Germany and Austria, where confidence was high.
PwC partners social enterprises
PwC has become an approved provider for welfare-to-work contracts in the South West, operating as a partner with the Social Enterprise Coalition, Tomorrow’s People, Manpower, the Newcastle College Group and Wipro. Together they have been awarded a place on the Delivery Partners framework, from which operators of individual welfare-to-work contracts will be chosen. PwC is also an approved provider in the London area, in partnership with Skills Training UK. “This is new territory for professional services firms and signals a shift in public and private sector boundaries and ‘Big Society’ moving from theory to practice,” said Marcus Robinson, a PwC partner.
RoW news
US review of financial crisis [lead with photo and fast facts]
The global financial crisis was avoidable and the result of human action and inaction, the US Financial Crisis Inquiry Commission, set-up by Congress, has concluded. The committee of inquiry decided that “despite the expressed view of many on Wall Street and in Washington that the crisis could not have been foreseen or avoided, there were warning signs,” but these were ignored or discounted. Examples of reckless practice that led to the breakdown of the financial system included the explosion in sub-prime property lending; predatory lending practices; unsustainable rises in housing prices; dramatic increases in household debt; exponential growth in trading firms’ activities; the unregulated trading in derivatives; and the use of short-term ‘repo’ lending. There were widespread failures in regulation and supervision and in firms’ corporate governance and risk management, said the inquiry. There was also a collapse in accountability and ethics in the financial services sector.
FAST FACTS
$3trn – the amount of debt held by the financial sector in 1978
$36trn – the amount of debt held by the financial sector in 2007
100% + – the real terms increase in debt held by the financial sector in 30 years
Afghan bank loses $900m [lead with photo]
Afghanistan’s Kabul Bank may have lost $900m through fraud and mismanagement, according to a report in the New York Times. As the bank is used to process many foreign aid payments and for the Afghan security forces, any disruption in the bank’s activities could cause serious problems both for the Afghan government and to the United States military operations in the country. The Kabul bank is part-owned by the brother of the Afghan President, Hamid Karzai. The New York Times reports that the Kabul Bank lost substantial sums through property investments in Dubai, which lost much of their value. Official US government communications published by WikiLeaks revealed that the Federal government had concerns for several years about the way the bank was run. The New York Times said that the International Monetary Fund has suspended payments into Afghanistan until the situation regarding the future of the Kabul Bank becomes clearer.
New impairment standard
A new standard for the treatment of impaired financial assets has been proposed jointly by the IASB and the FASB. They suggest that accounts use an expected loss model, providing a forward-looking assessment of likely credit losses. This would replace the use of the incurred loss model, which requires evidence of a loss through a trigger event, before impairment can be recorded.
IAASB considers disclosures
The International Auditing and Assurance Standards Board has published a discussion paper considering the principal issues in the auditing of reporting disclosures and how those disclosures are used. IAASB chairman Professor Arnold Schilder said there is now more use of qualitative, forward-looking, disclosures and these are increasingly important to investors – but this raises issues about how these should be audited. A second paper was published by the IAASB on audit quality, to stimulate a wider debate.
New standard on carbon emissions
A new standard for the auditing and assurance of disclosures on carbon emissions has been proposed by the IAASB. “The monetary value of carbon trading transactions around the world is in the billions and continuing to increase exponentially,” says Professor Arnold Schilder, IAASB chairman. “This has led to a strong and growing need for mechanisms to enhance the reliability of the underlying information used in these transactions—and this proposed standard is an important part of fulfilling that need. Disclosure of emissions information is also increasingly being required by regulation or presented on a voluntary basis to inform investors, consumers, and others.”
Mazars’14% growth
Mazars has reported a 14.3% rise in turnover for 2009/10, to €884m. The firm’s tax advice operations have grown by a third; advice to owner managed businesses rose by 17%; auditing and related activities increased by 10%; while the group’s law firm, Marccus Partners, reported stable turnover. The Africa and Middle East region reported the largest rise in turnover, at 26.3%; the Latin America region grew by 25%; Asia Pacific by 24.8%; and Europe by 2.8%.
Moody’s reviews ratings of US states to consider unfunded pensions liabilities
Moody’s is reviewing the ratings of American states with unfunded pensions liabilities and has warned about the worsening fiscal outlook for some states. Illinois has just been given a negative outlook for its general obligation bonds, while having its A1 rating affirmed. Moody’s said the state suffers from a chronic structural imbalance, including through unfunded pensions liabilities. There has been an increase in the sale of credit default swaps, insuring against states’ defaulting on bond repayments.
FASB changes policy on fair value
The FASB has proposed the use of a ‘mixed measurement model’ for the valuation of financial instruments, bringing it into line with the IASB. Last year the FASB proposed that most financial instruments would use fair value, but it now suggests that ‘plain vanilla’ financial instruments be reported at amortized cost. Instruments affected would be those “where the entity has a relationship with the borrower and the purpose is to be repaid with the collection of interest and fees”, says FASB chairman Leslie Seidman.
EC and PCAOB improve co-operation
The European Commission and the US Public Company Accounting Oversight Board have moved closer to agreeing mutual co-operation of accounting regulation and inspection. The Commission now recognises PCAOB and nine other national audit regulators as having equivalent standing with Europe’s. A PCAOB spokeswoman responded: “While the PCAOB certainly has no objection to other regulators relying on its oversight of registered firms, the PCAOB has long maintained that foreign audit regulators are welcome to come to the United States to inspect U.S. firms that are within their regulatory jurisdiction and that the PCAOB stands ready to assist them to the extent of its authority if they so desire.”
Egypt downgraded
Egyptian sovereign debt, and that of the country’s main banks, has been downgraded by Moody’s, following the protests against the government of President Mubarak. Five Egyptian banks – National Bank of Egypt, Banque Misr, Banque du Caire, Commercial International Bank and Bank of Alexandria – were all downgraded and under review for further downgrades. The National Bank of Egypt was downgraded by two notches to Ba1/NP from Baa2/P-2. Egypt’s sovereign rating was downgraded to Ba2 (negative outlook) from Ba1 (stable outlook). Egypt’s banks, cash machines and many retailers stayed closed for days during the street demonstrations. Credit Agricole said the crisis cost Egypt $310m a day.
US finance workers get itchy feet
Almost half of accountants and other finance workers in the US are likely to move jobs this year, according to a survey conducted for the Mergis Group, a specialist accountancy recruitment agency. The poll found a 6% increase in the last quarter in accountants’ confidence that they can find another job. The number intending to move jobs rose from 30% to 44% in the same three months.
Russia translates IPSAS
International Public Sector Accounting Standards (IPSAS) are being translated into Russian and will be published for access by Russia’s public sector accountants. The project is being led by the Institute of Budget Solutions in co-operation with BDO. When the IPSAS are published in Russian a consultation process will begin regarding their implementation and use.
New board mooted for private companies GAAP
The standard setting process for the accounts of private companies in the US should be reformed, says the Financial Accounting Foundation Board of Trustees. A new board, overseen by the FAF, should be formed, which would focus on making exceptions and modifications to U.S. GAAP for private companies that better respond to the needs of the private company sector. The report also recommends clear criteria for the way in which standards are set and amended, to provide a better understood basis for how exceptions to standards are arrived at. But the report does not go so far as to suggest a separate GAAP for private companies.
PwC steps up Middle East recruitment
PwC plans to recruit an extra 250 people in the Middle East in the first half of this year, as part of its strategy for doubling revenues in the region. The firm predicts that developing countries will become much more important in terms of global profits in the next few years, accounting for 40% of revenues within five years, up from 20% at present. The strongest growth had been predicted to be in Saudi Arabia, Jordan and Egypt – but that was before the anti-government movement in Cairo threatened to bring down the president.
Small firms excused Russian audits
Small firms operating in Russia have been exempted from a statutory requirement to have their accounts audited. From the beginning of this year, a higher threshold has been adopted for the statutory requirement for an audit. The new threshold for revenue is 400 million Rubles – $1.67m – eight times higher than the previous threshold, or 60 million Rubles – $0.67m – in assets, which is three times higher than the previous limit.
Law makers need tax advice
Law-makers need to be given clear expert advice on the likely impact of new legislation on tax reliefs before they agree them, Ireland’s Labour Party finance spokeswoman Joan Burton told the Dail, the country’s parliament, shortly before it was dissolved for the country’s general election. Burton complained that politicians had previously agreed tax legislation without fully understanding what they were agreeing to, or what the effects were likely to be. She said that some tax schemes could only be understood by tax specialist lawyers and accountants.
Calls for external audit of EU
The European Union should move to a system of external audit, former European Commission chief accountant, and now MEP for the United Kingdom Independence Party, Marta Andreasen has suggested. She argued that the European Court of Auditors is unable to exercise sufficient influence, or improve weak practices. Andreasen’s comments followed criticisms made by Maarten Engwirda, a Dutch auditor and former member of the European Court of Auditors, who said that auditors are intimidated into reducing the scale of criticisms of the way EU money is spent.
Politics
US review of financial crisis
The global financial crisis was avoidable and the result of human action and inaction, the US Financial Crisis Inquiry Commission, set-up by Congress, has concluded. The committee of inquiry decided that “despite the expressed view of many on Wall Street and in Washington that the crisis could not have been foreseen or avoided, there were warning signs,” but these were ignored or discounted. Examples of reckless practice that led to the breakdown of the financial system included the explosion in sub-prime property lending; predatory lending practices; unsustainable rises in housing prices; dramatic increases in household debt; exponential growth in trading firms’ activities; the unregulated trading in derivatives; and the use of short-term ‘repo’ lending. There were widespread failures in regulation and supervision and in firms’ corporate governance and risk management, said the inquiry. There was also a collapse in accountability and ethics in the financial services sector.
The effect of accounting standards
Accounting standards setters should improve the way they develop and implement standards, according to recommendations from the ASB and the European Financial Reporting Advisory Group. More attention should be paid to the likely impact of new standards. The aim of the recommendations is to increase transparency, accountability and the credibility of the standard setting process, thereby helping to deliver improved financial reporting. After consultation, the proposals will be forward for consideration to the IASB.
Big Four are ‘anti-competitive’
Leading politicians from the two main parties are challenging the market dominance of the Big Four firms. Former City minister in the last government, Lord Myners, told the House of Lords committee in the audit market that the position of the Big Four might need to be referred to the Office of Fair Trading, if the firms were unable to increase competition through a system of self-regulation. Leading Conservatives also raised questions about the level of audit competition. Ed Davey, a business minister, told the Lords’ committee that the Government was willing to consider stronger regulation to increase competition, but this was not its preferred route. Lord Brittan, a trade minister under Margaret Thatcher and later a European trade commissioner, complained in a speech of “restrictive practices” in the accountancy profession, which might be dismantled through a more effective single market in the EU.
Calls for external audit of EU
The European Union should move to a system of external audit, former European Commission chief accountant, and now MEP for the United Kingdom Independence Party, Marta Andreasen has suggested. She argued that the European Court of Auditors is unable to exercise sufficient influence, or improve weak practices. Andreasen’s comments followed criticisms made by Maarten Engwirda, a Dutch auditor and former member of the European Court of Auditors, who said that auditors are intimidated into reducing the scale of criticisms of the way EU money is spent.
Law makers need tax advice
Law-makers need to be given clear expert advice on the likely impact of new legislation on tax reliefs before they agree them, Ireland’s Labour Party finance spokeswoman Joan Burton told the Dail, the country’s parliament, shortly before it was dissolved for the country’s general election. Burton complained that politicians had previously agreed tax legislation without fully understanding what they were agreeing to, or what the effects were likely to be. She said that some tax schemes could only be understood by tax specialist lawyers and accountants.
Public sector
Treasury says all civil servants need finance skills
All senior civil servants should have strong financial skills, the Treasury has argued in a report, ‘Managing Taxpayers’ Money Wisely’. The report pledges a commitment that “the government will require all senior civil servants to demonstrate a reasonable level of financial competency”. “Financial skills are essential for all strategic decisions,” explains the report. “Every public service function has a financial aspect which deserves proper assessment and resolution. Financial management should be at the heart of every business decision. It is not enough for departments to work through finance professionals, important as that is. In future, all senior civil servants must demonstrate a minimum level of capability with financial information and concepts so that they can make responsible corporate decisions in their organisations. Finance is as much about forward looking decisions as it is about accounting for current and past performance.”
Ministry of Justice accounting practices condemned by PAC
Accounting practices in the Ministry of Justice have been strongly criticised by the House of Commons Public Accounts Committee. Chair of the committee Margaret Hodge said: “It is simply not acceptable that, after two years’ work, the Ministry still does not fully understand the cost of its staff activities in its largest executive agency. This is indicative of the poor state of financial management in this ministry. So is the fact that it was the only government department to miss the deadline for producing its accounts for 2009-10.” She said the MoJ would be unable to protect frontline services from funding cuts unless it understood the cost and value of those services.
Financial services
Barclays fined for breach of client account separation rules
Barclays Capital has been fined £1.12m for breaching rules on the separation of client money. Between 2001 and 2009, Barclays Capital failed to fully segregate client money maturing from its sterling money market deposits. The client monies were segregated overnight, but matured into a proprietary bank account and were mixed on a daily basis with Barclays Capital’s own funds, typically for between five and seven hours within each trading day. Under the FSA’s client money rules, firms must keep client money separate from the firm’s money in segregated accounts with trust status. The ring-fencing of proprietory and client monies is regarded as essential to protect clients from a firm’s insolvency. The average daily amount of client money which was not segregated increased from £6m in 2002 to £387m in 2009 and at one point reached £752m. Had the firm become insolvent within the five to seven hours each day in which the funds were unsegregated, this client money would have been at risk of loss.
Tax receipts fall 13%
Financial services firms paid £53.4bn in tax in the UK in 2009/10 – down 13% from the 2008/9 year, according to analysis conducted by PwC for the City of London Corporation. But while its contribution fell by £8bn, it was still responsible for 11.2% of total tax paid to the UK exchequer. Payments fell for both corporation tax and employment taxes. The figures exclude any additional contributions received as a result of the new 50% top rate tax, the proceeds of which will be felt in the 2010/11 year. The City of London Corporation predicts that the higher rate tax will mean that the sector will again rises in importance as a tax contributor.
Corporate
JJB fined for lack of disclosure
JJB Sports has been fined £455,000 by the FSA for failing to disclose to the market the true cost of two acquisitions. The FSA concluded that JJB’s failure led to a false market in the company’s shares for over nine months. During that time, JJB made several market announcements that did not correct the lack of disclosure. The acquisitions were in December 2007 of the retail chain the Original She Company and in May 2008 of Qubefootwear Ltd. JJB’s original announcement regarding Original Shoe stated that it paid £5m in cash, without stating that it paid an additional £10m for in-store stock. And JJB’s announcement regarding Qube stated that it paid £1, without disclosing that JJB also settled Qube’s overdraft at a cost of £6.47m. In both cases the cost of the acquisition was inside information and should therefore have been disclosed to the market as soon as possible.
Healthcare Locums hits accounting problems
The shares of Healthcare Locums have been suspended from trading on the AIM, following the disclosure of “serious accounting irregularities” at the company. In a statement, the company said: “The board has strong reason to believe that the financial performance of HCL for the year to 31 December 2010 will be materially below market expectations.” Pending the result of an investigation into the irregularities, both the Executive Vice Chairman, Kate Bleasdale, and the Chief Financial Officer, Diane Jarvis, have been suspended. It is reported that the problems relate to the acquisition of Redwood Health, whose accounts have not been signed-off by auditor Haines Watts.
Practice
Investment advisors to need professional qualification
Investment advisors must be professional qualified, holding a Statement of Professional Standing (SPS), from January 2013, the Financial Services Authority has announced. The qualification will be obligatory for all people giving retail investment advice. Advisors will have to maintain their professional knowledge, completing at least 35 hours of Continuing Professional Development each year, including 21 hours of structured training. The CPD will have to focus on demonstrable change to improve advisers’ skills and knowledge. The SPS will be awarded only by FSA accredited bodies that act in the public interest and that develop the investment advice profession; provide effective verification services; have appropriate systems and controls in place; and co-operate with the FSA on an ongoing basis. The FSA is overseeing the introduction of the Retail Distribution Review (RDR) from January 2013, from which time the FSA will monitor the competence and qualifications of all investment advisors.
Johnston Carmichael’s new chairman
Andrew Shepherd has been appointed as chairman of the largest independent Scottish accountancy firm, Johnston Carmichael, which is an ACCA firm. Shepherd has been managing partner of the firm’s Edinburgh office and succeeds James Campbell. The firm has 10 offices across Scotland and over 420 staff. Johnston Carmichael also announced that it is recruiting additional advisors to expand its operations. Shepherd has been with the firm since 1994, having been a corporate tax specialist with one of the large international practices. At Johnston Carmichael, he has become a specialist in advising family businesses, professional services and landed estates. Campbell stepped down as part of an agreed succession plan and continues as a partner.
RW sections
Practice
BDO’s new Mexican firm
BDO has appointed Castillo Miranda y Compania as its new member firm in Mexico. The firm has 320 partners and staff, working from four offices in Mexico City, Aguascalientes, Guadalajara and Monterrey, plus another eight associated offices. It was established in 1943. Fee income for last year was MXN223m, €13.1m. The firm specializes in audit, tax advice and consultancy. The CEO and managing partner is Carlos Garza y Rodriguez, who joined the firm in 1981 and was appointed CEO in 2002. Jeremy Newman, CEO of BDO International Limited, said: “Our Latin American region posted significant growth last year and the addition of such a strongly performing firm can only help to enhance this level of progress. I have no doubt that BDO Mexico will work effectively with the other firms in North, Central and Latin America to deliver the best possible professional advice to clients right across the continent and globally.”
Begbies Traynor rebrands network
Begbies Traynor’s international network has been rebranded and renamed as BTG Global Network. Practices in some countries began calling themselves BTG several months ago. The renaming resolves the confusion of some national practices calling themselves BTG and others BTN. The firm, which specialises in insolvency work and is quoted on the AIM exchange in London, issued a profits warning in December, because the number of businesses going bust fell. Since then, Begbies Traynor has warned that insolvencies appear to be again on the increase. The company’s share value has performed at an inverse relationship with the general health of the economy – reaching a high in 2008, when they traded at more than twice their current level.
Corporate
Plans advance for common CT base
The European Commission is finalising proposals backed by the German and French governments for a single consolidated Corporation Tax base. This would still allow individual EU member states to levy different rates of corporation tax, but, if approved, would mean that all countries would calculate corporation tax liabilities in the same way. They might, though, still be permitted to use their existing, differing, methods of assessing liabilities. Corporations would then be given the option of whether to be taxed according to the single consolidated corporation tax base, or member states’ own methods of assessment. Where the consolidated base was used, corporations would then be taxed according to the proportion of their businesses conducted in different member states. The idea is backed by lobby group Business Europe, which says it would reduce administrative costs, double taxation and disputes over tax liabilities. But a report produced by Ernst & Young for the Irish government concluded that it would increase compliance costs by 13%.
CEO confidence restored
CEOs’ confidence in the global economy has returned to nearly pre-crisis levels, according to PWC’s latest Annual Global CEO Survey. Half of 1,201 CEOs polled said they are “very confident” of growth this year – compared to just 31% at the same point in 2010. The level of optimism matches that of 2008, prior to the economic crisis. Some 94% of CEOs are confident of growth over the next three years. CEOs in Europe were the least confident – with the exception of Germany and Austria, where confidence was high.
Financial services.
Russian banks improve disclosures
Russia’s Central Bank has imposed stronger disclosure requirements on the country’s banks, requiring them to provide detailed monthly information on their exposure to consumer credit card lending, mortgages and other credit portfolios. The new obligations will make it easier for the Central Bank to be aware of exposure by retail banks to different types of lending risks. Several banks have had to respond by changing internal accounting practices, in order to compile the new returns. In a separate move, the Central Bank is also forcing banks to improve the transparency of their disclosures on their holding of securities. The Central Bank is concerned that banks may have manipulated their holdings of securities to artificially boost their declared capitalisations. As a result, the Central Bank is developing new requirements for the accounting of financial securities. The particular target is the use of so-called ‘mirror promissory notes’ that are shown on banks’ accounts, but have no real value or purpose.
Balance sheet netting
Companies will be more limited in their capacity to offset on their balance sheets financial assets and liabilities held with the same third parties under proposals agreed by the IASB and FASB. At present, the IASB and FASB use different approaches to the use of ‘netting’, or offsetting of financial positions. The boards propose that offsetting should apply only when the right of set-off is enforceable at all times, including in default and bankruptcy, and the ability to exercise this right is unconditional. The proposals would amend IFRSs and US GAAP and eliminate several industry-specific netting practices.