Accountancy news – November 2010: Accounting & Business

Accounting & Business – November 2010

UK News

Ending off-balance sheet leasing ‘will hit charities’

Charities have joined the property sector in attacking proposals from the IASB to reform lease accounting, saying these will impose disproportionate costs and divert resources from charitable objectives. Bob Humphreys, finance director at Oxfam, said: “Oxfam has a portfolio of 700 shops. The sheer number of properties we operate, combined with an annual churn of around 20%, makes deciding what lease term is ‘more likely than not to occur’ on each property a huge and potentially very inaccurate job. The new standard assumes lessees have precise percentage probabilities and indices of future lease increases, which is just not living in the real world…. The premise that an operating leases is akin to a financing transaction would also drive the requirement to compute a notional interest charge on the lease liability. This would mean introducing borrowings and interest into the balance sheet of a charitable organisation which has neither: an unnecessary confusion for users of our accounts.”

FAST FACTS

£100bn – lease liabilities of top 50 FTSE companies

$1.25bn – lease liabilities in US to go onto balance sheets

700 – number of leases held by Oxfam that would have to be reviewed

Brand to address World Congress

ACCA chief executive Helen Brand is to address the World Congress of Accountants, taking place in Kuala Lumpur from November 8. Ms Brand will consider how the role of accountants will change in the next decade and what opportunities this provides for the profession. The conference, which is held every four years, is being organised for the International Federation of Accountants by the Malaysian Institute of Accountants: the theme this year is ‘accountants: sustaining value creation’. IFAC’s Director of Governance and Operations, Alta Prinsloo, said the congress would discuss the challenges faced by accountants, including the increased need for high-quality international standards, corporate governance, risk management and control, and the potential over-regulation of SMEs. “Sustainable practices need to extend beyond traditional ways of building strategies, monitoring performance and reporting of value,” she said. “This makes the WCOA essential for all professional accountants, their employers and customers.” Around 6,000 delegates are expected to attend.

HMRC admits ‘tax gap’ is widening

The ‘tax gap’ – the difference between the amount that should be collected and that which actually is – has increased, HMRC has admitted. HMRC estimates the total tax gap for the 2008/9 year to be £42bn – up from £40bn in 2007/8. The largest elements of this are under-collected VAT, representing £15.2bn, and inaccurate self-assessment returns, which cost an estimated £6.6bn. Other significant tax losses arise from inaccurate employer PAYE returns (costing £3.1bn), tax avoidance by large corporations (£2.9bn) and corporation tax underpayment by SMEs (£2.6bn) and large companies (£1.2bn).

Horwath Clark Whitehill changes name

Horwath Clark Whitehill has changed its name to Crowe Clark Whitehill. The firm is one of the top 20 in the UK and part of the global top 10 network Crowe Horwath International. The new name reflects a strengthened association with the international network, while retaining a link to its UK history. The firm is already widely known as Clark Whitehill in the City. There is no change in the ownership structure.

IASB finalises transaction disclosures

The IASB has finalised IFRS7, concerning disclosures regarding financial instruments. The standard is aimed at improving disclosures related to securitisations and other transfer transactions of financial assets. Requirements include details on the risks that are retained by the entity transferring the assets. Additional disclosures are required where a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. IFRS7 broadly aligns IFRSs with US GAAP. The US Securities and Exchange Commission is introducing additional measures to tackle ‘window dressing’ around financial year ends.

PwC rebrands

PricewaterhouseCoopers has rebranded itself as PwC and will no longer use the longer name. As part of the new branding, the firm will market itself only using the lower case initials, ‘pwc’. The legal name of the firm is unchanged, but use just of the initials is intended to improve consistency in the way the partnership is presented globally and by all its national firms. “Underlying the visual elements is what the PwC brand really stands for – how we are viewed by our clients, our people and our stakeholders,” said Dennis Nally, chairman of PwC International.

Auditors investigated

The Accountancy and Actuarial Discipline Board has begun investigating PwC and Ernst & Young over their audits of JP Morgan Securities and Lehman Brothers. The investigations will examine whether the firms properly discharged their functions regarding the companies’ compliance with the Financial Service Authority’s client asset rules. JP Morgan was fined £33m by the FSA in June for failing to separate clients’ funds from its own: the same failure was found at Lehman Brothers in the UK, after the bank collapsed.

PwC global income rises

PwC has reported slightly increased income for the year ending June 2010. Revenues rose globally to $26.6bn, up 1.5%. Western Europe was the largest trading area for PwC, generating revenues of $11bn. The next largest regions were North America ($9bn), Asia ($3bn) and Australasia/Pacific ($1bn). Assurance was the largest practice area, with revenues of $13bn, followed by tax at $7bn and advisory at $6bn. Deloitte responded to the figures by claiming that it had now become the largest firm globally, with revenues in the period a mere $9m higher. Ernst & Young announced that its combined global revenues for the year were $21.3bn, down slightly from last year.

Conceptual framework moves forward

The IASB and the Financial Accounting Standards Board have completed the first phase of their joint project to produce a conceptual framework for International Financial Reporting Standards and US GAAP. This is intended to produce a sound foundation for future accounting standards that are principles-based, internally consistent and internationally converged and build on existing IASB and FASB frameworks. The IASB has revised portions of its existing framework, while the FASB has issued ‘Concepts Statement 8’ to replace ‘Concepts Statements 1 and 2’.

NAO to audit BBC books

The National Audit Office is to have full access to the BBC’s books for the first time, following an agreement reached between the BBC Trust and culture secretary Jeremy Hunt. The NAO will have access to BBC contracts with third parties, but will not be allowed to question the BBC’s editorial policies. The BBC Trust confirmed it would allow the NAO to view confidential contracts that reveal ‘talent pay’. A formal agreement between the NAO and the BBC is being drawn up.

PwC criticised for Keydata ‘conflict of interest’

PwC is “hopelessly conflicted” in its role as administrator of the collapsed investment firm Keydata, claimed the company’s founder, Stewart Ford. PwC was accused by Ford of being compromised as a potential target for litigation as auditor of SLS Capital and Lifemark, in which Keydata invested. Ford called for a Financial Reporting Council investigation. PwC rejected the claim, saying that that the audits and administration were conducted by different PwC legal entities that are robustly separated. It added that legal investigations are being conducted into the collapse of Keydata, which it did not wish to prejudice.

Deloitte moves to UK

Deloitte has updated its legal structure to become a UK private company, Deloitte Touche Tohmatsu Ltd. It was previously a ‘verein’ based in Switzerland. The change in structure does not involve any staff moving from Switzerland to London. A spokesman for Deloitte said it had “outgrown” the previous structure, which had been designed when the business was much smaller, and that change would create “a stronger and more flexible global organization”.

Wolseley moves to Switzerland

Building supplies group Wolseley is moving out of the UK. The Wolseley Group is to be restructured as New Wolesley, which will still be listed on the London Stock Exchange but incorporated in Jersey and with tax residence in Switzerland. The group said the change would “provide more certainty in its taxation position”, but would not affect the UK subsidiary. An investigation by the Financial Times concluded that the UK will lose about £500m a year as a result of some hedge funds relocating from London to Switzerland to reduce tax liabilities and increase certainty in tax treatment.

New ISO standard on brand valuation

A standard for the valuation of brands has been published by the International Organization for Standardization. ISO 10668 is intended to provide a reliable and consistent method for valuing brands, dealing with related financial, behavioural and legal aspects of the values. It specifies the requirements for procedures and methods of monetary brand value measurement; a framework for brand valuation, including objectives, bases of valuation, approaches to valuation, methods of valuation and sourcing of quality data and assumptions; and the methods for reporting the results of such valuations.

HMRC investigates HSBC accounts

Information on about 1,500 UK holders of HSBC offshore accounts has been stolen and provided to HMRC. The details are now being used by HSBC as part of a tax evasion enquiry. Baker Tilly reports that some clients have been issued with notices of Code of Practice 9 investigations, indicating they are suspected of having committed serious tax fraud. It believes that some of these will be among the 150,000 people drawn under the new 50% higher rate income tax.

Bribery Act consultation begins

The Ministry of Justice has begun consulting UK companies about implementation of the Bribery Act, which is now to come into force in April next year. The Bribery Act introduces a corporate offence of failure to prevent bribery by employees working for a business and creates one of the most stringent corruption control environments anywhere in the world. The MoJ said that the consultation process, which closes on 8 November, will shape guidance on the procedures that companies should put in place to prevent bribery.

EU launches Trojan war

The European Union has declared war on cyber fraud, calling for stronger defences and penalties for convicted fraudsters. Millions of pounds are being stolen globally by computer hackers installing ‘Trojan’ viruses on computers, it has emerged. One alleged organised crime gang consisting of 70 East Europeans has been charged with distributing the ‘Zeus Trojan’ to withdraw $3m from bank accounts in the United States. Another gang of 11 people of Eastern European origin were arrested in the UK, charged with making fraudulent banking transactions – estimated at £6m – through the use of Trojan viruses.

Electronic payments go missing

Large numbers of electronic payments are going adrift, because commercial customers are failing to properly reference their account information when making payments, the Payments Council has warned. The failings are costing businesses – and the HRMC – millions of pounds a year to resolve. The Payments Council advises people and firms making electronic payments to always insert the correct payment reference and to ensure they use the correct sort code and account number when paying a bill online or over the phone.

RoW News

Brand to address World Congress

Dubai returns to market

Investors have indicated their growing confidence in Dubai’s resurgence, with an over-subscription for bonds issued by the state-backed Emaar Properties group. Total demand was in excess of $3bn for an offering of $450m of convertible bonds. The offer was fully subscribed within an hour of launch. Mohamed Alabbar, Chairman of Emaar, said: “The successful outcome of this offering of convertible bonds, despite the challenges faced by global financial markets, is an important step in Emaar‘s continued focus on its growth strategy through revenue diversification.” While Emaar focuses on property development in Dubai and the Gulf States, it operates globally and is one of the world’s largest real estate companies by market capitalisation. The placement follows nearly a year of crisis in the Dubai property market, after Dubai World appeared to be on the brink of collapse. The tourism and other markets in Dubai are also recovering quickly.

FAST FACTS

$25bn – Dubai World debts

$110bn – Dubai property sector debts

$65bn – Value of Emaar Properties investments – excluding Dubai

PwC global income rises

PwC has reported slightly increased income for the year ending June 2010. Revenues rose globally to $26.6bn, up by 1.5%. Western Europe was the largest trading area for PwC, generating revenues of $11bn. The next largest regions were North America ($9bn), Asia ($3bn) and Australasia/Pacific ($1bn). Assurance was the largest practice area, with revenues of $13bn, followed by tax at $7bn and advisory at $6bn. Deloitte responded to the figures by claiming that it had now become the largest firm globally, with revenues in the period a mere $9m higher. Ernst & Young announced that its combined global revenues for the year were $21.3bn, down slightly from last year.

PwC rebrands

Conceptual framework moves forward

The IASB and the US Financial Accounting Standards Board have completed the first phase of their joint project to produce a conceptual framework for International Financial Reporting Standards and US GAAP. This is intended to produce a sound foundation for future accounting standards that are principles-based, internally consistent and internationally converged and build on existing IASB and FASB frameworks. The IASB has revised portions of its existing framework, while the FASB has issued ‘Concepts Statement 8’ to replace ‘Concepts Statements 1 and 2’.

EU launches Trojan war

Russia advised on regulating accountants

Indian and Russian finance ministers have met to discuss mutual co-operation and how Russia can learn from India in regulating accounting bodies. Shri R Bandyopadhyay of India’s Ministry of Corporate Affairs and Russian deputy minister of finance Sergei Shatalov considered how the two countries could assist each other in meeting tougher expectations regarding corporate practices, especially within financial institutions, as members of the G20 most advanced economies. India’s finance ministry said that Bandyopadhyay told his counterpart of the approach taken in regulating accountancy bodies, improving investor education, developing a corporate governance framework and administering anti-trust laws.

Public debt ‘highest in EU’

European Union member states are running the world’s highest deficits, according to an ‘international public debt review’ conducted by the Eversheds law firm. The review recommends the adoption of constitutional ‘debt brakes’ to prevent governments running excessive fiscal deficits. Average public debt in the EU is now above 75% – well in excess of the 60% limit self-imposed by the EU. Of the 18 EU countries analysed by Eversheds, 16 will make substantial public spending cuts in the next year. This contrasts with 75% of non-EU countries that were reviewed, which intend to increase public spending.

IASB finalises transaction disclosures

SEC acts on ‘window dressing’

US companies will be prevented from ‘balance sheet window dressing’ under measures agreed by the Securities and Exchange Commission. Companies will be required to provide more information about all-year borrowing, not just loans outstanding at year end. The move is intended to protect investors from organizations misrepresenting their financial situation through short-term borrowing that covers their end of year positions. “Investors would be better able to evaluate the company’s ongoing liquidity and leverage risks,” said SEC Chairman Mary L. Schapiro.

US women under-represented in management

Women in the United States are making slow progress in being promoted into management, according to a report by the Government Accountability Office. In 2000, 39% of management positions in the US were held by women; seven years later, the latest period for which figures are available, this rose to 40%. Women hold 49% of all jobs in the workforce: a percentage that has remained constant in recent years. Pay differentials are closing much more rapidly than managerial representation: women’s average pay was 62% of that of men in 1979 and this increased to 80% by last year.

Delphi treasurer settles

The former treasurer at Delphi Corp, John Blahnik, has settled accounting fraud charges with the US Securities and Exchange Commission. Under the settlement, Blahnik has paid $100,000, consisting of $50,000 for disgorgement and interest, plus $50,000 as a civil penalty. Blahnik is also prohibited from a serving as an officer or director of a public company for five years. The SEC alleged that Blahnik was involved in three fraudulent schemes at auto parts supplier Delphi, filing false and misleading financial statements.

Bond proceeds held as cash

Microsoft and other giant US businesses are raising billions of dollars on corporate bonds at very low interest rates, but are not investing the proceeds, according to an investigation by the New York Times. The report claims that the corporations are taking advantage of the low interest environment to raise low cost funds while they can, but do not intend to use the proceeds for investment until the economy improves. Microsoft is using some of the money to buy back shares.

‘Ireland’s low tax days are over’

Ireland will be unable to retain its low 12.5% corporation tax rate, European Union economic affairs commissioner Olli Rehn has warned. “It is a fact of life that after what has happened, Ireland will not continue as a low tax country, but it will rather become a normal tax country in the European context,” he said. The commissioner was talking while speculating whether the Irish Government would need to be rescued by the EU and the International Monetary Fund. Ireland has now had to take over the country’s largest retail bank, the Allied Irish Bank, and increased the estimated cost of its total banking bail-out to a possible €50bn.

Commission proposes new finance taxes

The European Commission has detailed proposals for the taxation of the financial sector. The Commission has given its backing to a global Financial Transactions Tax as a percentage of all transactions, the proceeds of which could be applied for international development or to combat climate change. Within the EU, the Commission proposes a Financial Activities Tax – levied on profits and remuneration – which, said the Commission, would generate significant revenues and help to ensure greater stability of financial markets, without posing undue risk to EU competitiveness.

PCAOB acts on overseas auditors

The US Public Company Accounting Oversight Board is attempting to extend its global reach, having expressed concern that it cannot properly regulate auditors registered in some overseas jurisdictions, including most EU countries. All pending and new applications for registrations with PCAOB from auditors in these jurisdictions will involve firms being asked to state whether a PCAOB inspection would be permitted by local law. Where a firm advises that inspection would not be allowed, PCAOB will consider whether registration would be consistent with PCAOB’s responsibilities under the Sarbanes-Oxley Act.

Corporate weakness ‘must spur reforms’

Economic recovery will be held back by ongoing corporate balance sheet recovery, concludes the latest Quarterly Report on the Euro Area. As a policy response, EU member states should commit to fast growth-enhancing reforms, says the report. Recommended measures include further reform of the financial sector; structural reforms to the operations of the labour and product markets; and faster progress on opening-up the EU’s energy and services markets.

‘$550bn of bad loans not written down’

Banks have yet to write-down around $550bn of bad loans, according to an assessment by the International Monetary Fund. The IMF calculates that $1.7trn has been written down so far. It reports that banks are now making steady progress with recapitalising their balance sheets, with tier one capital ratios rising globally to over 10% by the end of last year. It expects the gradual strengthening of banks’ balance sheets to continue.

Politics

FRC supports merger with UKLA

The Financial Reporting Council is backing proposals to incorporate the UK Listing Authority functions of the Financial Services Authority. Baroness Hogg, chairman of the FRC, said: “It’s a very good fit in that a lot of [the UKLA’s] work has synergies with the work of the FRRP. The FRRP is looking at accounts and, in a way, what companies put to markets in their prospectuses, the follow on is what happens in their accounts a year or two later.” But the London Stock Exchange wants the UKLA to operate within the new Consumer Protection and Markets Authority, which partially replaces the FSA. Lucy Leroy, Head of Primary Market Regulation at London Stock Exchange, said: “The current government proposals to move the UKLA, the securities regulator, into the FRC – splitting responsibility for primary and secondary listing – we believe would durably and severely damage the competitiveness of London’s financial markets.”

Cable reviews corporate governance

The Government is to conduct a comprehensive review of corporate governance practices and the damage caused by ‘economic short termism’, business secretary Vince Cable has announced. The review will consider which factors drive market short-termism; whether boards set-out long-term objectives with sufficient clarity; how shareholders can become more engaged in determining a company’s future direction; whether shareholders have sufficient opportunity to vote on takeover bids; and whether target boards sufficiently consider whether bids represent long-term value for shareholders. Vince Cable said: “We will look at the economic impact of takeovers, shareholder responsibility, corporate incentives and pay– all the factors that can help us build a framework founded on long-term economic logic.”

‘IAS 39 caused financial crisis’

IAS 39 – and the UK’s FRS 26 equivalent – caused the financial crisis because they prevented companies adequately provisioning for bad and doubtful debts, says Tim Bush, a member of the Accounting Standards Board’s Urgent Issues Task Force. In an open letter to the ASB, Bush argues that FRS 26 breaches company law by forcing companies to overstate profits – itself a criminal offence – and leading to the payment of dividends that were unaffordable. The companies did not have the capital the accounts reported and in some cases they had ceased to become going concerns. Bush wrote: “The accounts were unreliable for capitalism to function properly as they did not show the capital.”

PwC appoints non-execs

PwC has appointed five non-executives on its board in its response to the new governance code for audit firms. Dame Karen Dunnell, Sir Ian Gibson, Professor Andrew Hamilton, Sir Richard Lapthorne and Paul Skinner will sit on PwC’s newly constituted Public Interest Body in the UK, which also includes the senior partner, Ian Powell, and the chairman of the supervisory board, Gerry Lagerberg. Dame Karen was national statistician and chief executive at the Office of National Statistics; Sir Ian is chairman of Wm Morrison Supermarkets and Trinity Mirror; Professor Hamilton is Vice Chancellor of the University of Oxford; Sir Richard is Chairman of Cable & Wireless Communications; and Paul Skinner is chairman of Infrastructure UK.

PCAOB acts on overseas auditors

The US Public Company Accounting Oversight Board is attempting to extend its global reach, having expressed concern that it cannot properly regulate auditors registered in some overseas jurisdictions, including the UK. All pending and new applications for registrations with PCAOB from auditors in the UK and other affected jurisdictions will involve firms being asked to state whether a PCAOB inspection would be permitted by local law. Where a firm advises that inspection would not be allowed, PCAOB will consider whether registration would be consistent with PCAOB’s responsibilities under the Sarbanes-Oxley Act.

Public Sector

Euro public sector reporting ‘inconsistent’

Accounting standards in the public sector in Europe have not converged sufficiently, leading to inconsistent financial reporting practices, Ernst & Young has warned. Many European countries continue to prepare accounts in accordance with local business rules, rather than to International Public Sector Accounting Standards (IPSAS), concluded the study of 19 European jurisdictions. Just over half have adopted accruals accounting, but a third do not intend to move away from cash accounting. Philippe Peuch-Lestrade, Global Government and Public Sector Leader at Ernst & Young, said: “A single accrual method is not yet being adopted and IPSAS remains more of an aspiration than a feasible destination. The global financial crisis would seem to be a ‘teachable moment’ for focusing the attention of leadership on the advantages of accrual accounting generally, but public finance directors do not seem to have considered the advantages of adopting a single set of accrual standards.”

Financial Services

Basel III ‘will damage property sector’

Basel III regulations will limit banks’ capacity to lend for property purchases, a prominent real estate lawyer has warned. Paul Hastings of law firm Conor Downey said the requirement on banks to increase tier 1 capital from a minimum of 2% to 4.5% will discourage them from entering into securitisation transactions. Reducing exposure to the property sector is one of only three means at their disposal to meet the capitalisation requirements: the others are to increase higher levels of long term capital, or to raise higher levels of deposits. But, said Downey, for many banks, reducing their exposure to the property sector was the only option that is realistic. Similar concerns have been expressed in the UK mortgage lending market. Ray Boulger, of John Charcol brokers, said: “The tougher capital adequacy requirements will reduce banks’ ability to lend on an ongoing basis and increase the cost of what they do lend, both of which factors will reduce new economic activity and hence result in tax revenues growing more slowly.”

Investment firms’ insolvency regime strengthened

A new regime to handle insolvencies of investment firms has been proposed by the Government. Clearer objectives will be imposed on administrators to maximize returns of client assets and to creditors, while improving engagement with regulators. Lord Sassoon, the Commercial Secretary to the Treasury, said: “It is crucial to reduce the impact of an investment firm failure on the stability of the UK financial systems. The proposed new special administration regime will provide administrators with clarity and direction to manage a firm’s winding up in a way that is both less expensive and less disruptive.”

Practice

Small audit firms under fire from AIU

Small audit firms too often produce audits that “require significant improvements”, said the Audit Inspection Unit in its report for 2009/10. Particular weaknesses occur in the audit evidence obtained in relation to material balances in financial statements. Audits of multi-national groups conducted by small firms require significant improvements “in most cases”, it added, though most small firm audits of investment trusts were acceptable or good. The big four firms were praised for having taken notice of previous criticisms and have addressed failings. However, the AIU said that despite the quality of the firms’ policies and procedures, the number of major firms’ audits assessed by the AIU as requiring significant improvement remains too high. It added that the firms are not always applying their procedures consistently on all aspects of individual audits, or applying sufficient professional scepticism in relation to key audit judgments.

Post Office insures accountants

The Post Office is targeting accountancy firms with a new bespoke insurance policy for the sector. Duncan Caesar Gordon, head of Post Office Business Insurance said: “We are keen to extend the range of business services we offer accountancy firms and are pleased to be able to now offer a great value insurance service which is tailored to meet their individual business needs.” The policy covers normal business theft, damage and employee liability risks, but, said the Post Office, also offers accountancy firms flexibility to choose elements of the policy best suited to their professional needs and risks. The policy can be obtained through any Post Office branch, by phone or online.

Enterprise

SMEs improve credit control

The late payment impact on SMEs has reduced substantially, research from electronic payments processing company Bacs has found. The number of companies badly affected by late payments fell by 20% in the first six months of this year. Bacs believes the improved situation reflects companies’ greater efforts to collect debts. Mike Hutchinson, head of marketing at Bacs, said: “It’s extremely heartening to see that there are now many companies making great strides to help themselves beat the late payments cycle, by sharpening up their billing and credit control procedures.” However, while the number of companies badly affected has been cut, the total debt outstanding to SMEs has risen significantly – suggesting that late payments are becoming concentrated on companies with weaker credit control functions. There remain 769,000 companies affected by late payments, which are now owed an average of £32,000 each – compared to £25,000 a year ago.

11% of accounts rejected by Companies House

Companies House has warned that a large number of accounts are currently being rejected because of simple errors or omissions. It warns that the impact on companies and partnerships “can be severe”, leading to automatic late filing penalties being imposed where the accounts are submitted close to deadline. In the year to date, 11.1% of accounts have been rejected. The most common reasons were incorrect statements to the accounts; the account period ending duplicating that of accounts previously filed; signatory names being missed on the balance sheet; audit exemption statements being absent or incorrect; errors with the accounting reference date; and the omission of a balance sheet signature.

Corporate

‘Compliance fatigue’ hits corporates

Corporates’ ability to report to stakeholders is undermined by ‘compliance fatigue’, says a PwC report, Insight or Fatigue?. Many top 350 companies fail to communicate to investors’ satisfaction. Annual reports often do not provide any value to investors; reporting processes are compartmentalised; and there are weaknesses in the links between key performance indicators and corporate strategy and incentives. David Phillips, head of corporate reporting at PwC, said that ‘compliance fatigue’ was the result of “successive waves of ad hoc legislation, regulation and governance requirements”. He added: “With annual reports running to many hundreds of pages, the point has come where, if companies reported less, they would actually provide more insight and understanding. The challenge is to determine how we can streamline reporting and balance market relevance with regulatory compliance.”

HSBC corporate shake-up

HSBC’s finance director, Douglas Flint, is to become chairman of the global bank as part of a wide-ranging shake-up of senior positions. Existing chairman Stephen Green becomes a UK government trade minister in January. Reports suggest that Hong Kong-based chief executive Michael Geoghegan expected to become chairman when Green stepped down and resigned when disappointed. Stuart Gulliver, head of HSBC’s investment banking division, becomes chief executive. His appointment follows the recent promotion of Barclays’ investment banking head, Bob Diamond, also into the role of his bank’s chief executive. HSBC’s new group finance director is Iain Mackay, who has worked for the former PriceWaterhouse and Thomson McLintock, KMG firms. Douglas Flint is a former KPMG partner and has served on the ASB and on the IASB’s Standards Advisory Council.

RoW

Corporate

US companies warn against lawsuit disclosures

Proposals from the Financial Accounting Standards Board to force US companies to disclose the potential costs of settling lawsuits have been widely attacked. Bank of America, Citigroup, Coca Cola and Google are among 140 of the largest US corporations to protest against the intended move. The companies argue that disclosing the cost of settling lawsuits is revealing their hand and will increase the cost of settlement when litigants know the amount set aside. They also fear that understating the potential cost of legal actions could leave corporations open to further legal cases. The cost of settling cases even where corporations expect to win would have to be revealed. Companies would also have to disclose potential legal actions resulting from latest research findings in scientific journals – thereby possibly encouraging lawyers to initiate lawsuits.

HSBC corporate shake-up

HSBC’s finance director, Douglas Flint, is to become chairman of the global bank as part of a wide-ranging shake-up of senior positions. Existing chairman Stephen Green becomes a UK government trade minister in January. Reports suggest that existing Hong Kong-based chief executive Michael Geoghegan expected to become chairman when Green stepped down and resigned when disappointed. Stuart Gulliver, head of HSBC’s investment banking division, becomes chief executive. His appointment follows the recent promotion of Barclays’ investment banking head, Bob Diamond, into the role of is bank’s chief executive. HSBC’s new group finance director is Iain Mackay, who has worked for the former PriceWaterhouse and Thomson McLintock, KMG firms. Douglas Flint is a former KPMG partner and has served on the UK’s Accounting Standards Board and on the IASB’s Standards Advisory Council.

Practice

PCAOB reveals audit problems

Auditing standards have been negatively affected by the recession, according to a report from the Public Company Accounting Oversight Board. PCAOB inspectors identified instances where auditors appeared not to have complied with PCAOB auditing standards in connection with audit areas that were significantly affected by the economic crisis. These included fair value measurements, impairment of goodwill, indefinite-lived intangible assets, other long-lived assets, allowance for loan losses, off-balance sheet structures, revenue recognition, inventory and income taxes. PCAOB concluded that the deficiencies identified by inspectors in their reviews of audits suggest that firms should focus on making improvements to their quality control systems. “These inspection observations underscore the need for auditors to be diligent in assessing and responding to emerging areas of risk when economic and business conditions change,” said PCAOB Acting Chairman, Daniel L. Goelzer.

Auditors ‘benefit from interpersonal skills’

Internal auditors who are well liked and able to present arguments coherently are more influential than those who are rude and muddled are the unsurprising findings of an academic study. Despite the obvious conclusions, the study – Internal Auditors’ Use of Accounting Information, Arguments and Interpersonal Skills in a Corporate Governance setting, by Professors Kirsten Fanning of the Villanova School of Business and David Piercey of the University of Massachusetts – won the Outstanding Emerging Scholars Award at the American Accounting Association’s Accounting Behavior & Organizations Research Conference. Observations were drawn from mock examples of presentations of case studies. These demonstrated that a persuasive internal auditor is more influential than is a colleague who has weaker personal skills but a stronger base of evidence.

Enterprise

African women entrepreneurs ‘need examples’

Young African women are being encouraged to set-up businesses and to become more influential in society. But they are held back by the lack of visible role models, says Ogo Ogbata, a Nigerian entrepreneur and author of ‘Egg-Larva-Pupa-Woman’. Fronting a campaign to improve the position of women at senior levels of society, Ogbata says that the theme of her novel is personal liberation and the potential for advancement. “Through my book and the inspiring and educative events I deliver, I am sending a message loud and clear that young women across the world, even in the developing countries and ethnic minority communities, have the ability to achieve against all odds,” she says. Ogbata is a respected conference speaker on enterprise and is leading an ‘Inspiring Women in Business’ campaign this month. It coincides with Nigeria’s 50^th anniversary of independence.

Irish firms begin paying bills quicker

A rare optimistic sign has emerged from Ireland’s beleaguered economy with the news that firms are beginning to pay their bills quicker. Businesses in the Irish Republic paid their bills on average 26 days late in the first half of this year, compared to 28 days late in the second half of 2009. Late payment has been worsening since the third quarter of last year and there are worries that the most recent figures from credit reference agency Experian may be a blip: late payments rose again in the second quarter of this year compared to the first quarter.

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