Accounting news: Accounting & Business

UK news

EU bears down on audit firms

The European Commission is reported to be preparing far reaching proposals for the reform of the statutory audit function. This is expected to include the separation of audit and consultancy practices and mandated audit rotation. ACCA said it would not comment on the likely proposals until they are published. But John Davies, ACCA’s head of technical, said: “We…. fully endorse the Commission’s goal of improving audit quality and accept that integral to that goal must be to address issues relating to independence, objectivity and professional scepticism. In pursuing these ambitions, however, we believe it is important to ensure that we do not resort to inflexible and bureaucratic measures which risk creating practical problems within the corporate sector and which could even prove counter-productive in terms of their effects on audit quality.” FEE – the Federation of European Accountants – said that the debate must focus on audit quality, rather than the structure of the market.

Material sustainability ‘must be reported’

A group of major investors has called on companies to disclose and integrate material sustainability information into their annual report and accounts, or explain why they are unable do so. The group, led by Aviva, is calling for an international policy framework to promote transparency and accountability. The initiative is supported by ACCA and leading institutional investors representing global assets under management of $1.6 trillion. Paul Abberley, chief executive of Aviva Investors London, said: “Progressive companies around the world have come to understand that long term-value is enhanced by embedding long-term sustainability into their business strategy and by fully disclosing their progress to investors.” ACCA chief executive Helen Brand added: “Placing a concern for sustainability at the heart of their business strategies, and integrating that concern into their key processes, including reporting, are pre-requisite steps if the corporate sector is to fulfil its potential to shape the world of tomorrow.”

KPMG’s Peat becomes Deloitte’s NED

Former KPMG partner Sir Michael Peat has joined Deloitte as an independent non-executive. Sir Michael’s great grandfather was a founder of Peat Marwick, one of KPMG’s forerunner firms. For the last 20 years, Sir Michael has advised the Queen and Prince Charles and is credited with modernizing the Royal Household’s financial management. He helped to establish The Prince’s Accounting for Sustainability Project.

PwC reports 10% growth

Global revenues for PwC grew by over 10% in the year ending June, led by a jump of 38% in revenues in the Australasia region. Total worldwide revenues were $29.2bn, reflecting the largest increase since 2008. Advisory revenues grew by 20%, tax by 8% and assurance by 7%. Regions reporting significant growth included South and Central America, where revenues rose 23%; the Middle East and Africa, 20%; and Asia, 14%. Modest growth rates were recorded in North America, at 10%; Central and Eastern Europe, 7%; and Western Europe, 4%.

E&Y grows 8%

UK turnover at Ernst & Young rose by 8% to £1.465bn in the year ending June. The best performing practice was advisory, where revenues jumped 20% to £370m, followed by assurance, which grew by 10% to £444m. Revenues in the tax practice increased 3%, while turnover in transaction advisory fell by 2%. Average profit per partner rose slightly. Global revenues were up by 8% in the year, to $22.9bn. E&Y said that it leads the profession in diversity, with women comprising 30% of the firm’s leadership team in the UK.

Deloitte revenues rise 7%

Deloitte’s UK revenues grew by 7% to £2.1bn in the year ending May. Profits were down by 9%, reflecting, says the firm, increased investment in its people: staff numbers were up by 8% and partners by 4%. Revenues in the audit practice rose by 4%; in the tax practice by 5%; in consulting by 13%; and in corporate finance by 11% – the result of the acquisition during the year of Drivers Jonas. Global revenues were also significantly up: they rose by 8.4%, with growth reported in the Americas and the Asia Pacific regions, as well as Europe, the Middle East and Africa.

KPMG to review UBS crisis

KPMG has been engaged by the FSA and the Swiss Financial Market Supervisory Authority to investigate the $2.3bn unauthorized trading losses suffered by UBS, through its Global Synthetic Equity trades on its London desk. The investigation will examine the trading details and the control failures that permitted the activity and then failed to detect it. The trader has been charged by UK authorities with fraud through abuse of position. UBS’s Group CEO, Oswald J. Grübel, has resigned, and has been replaced by Sergio P. Ermotti on an interim basis. Two heads of global equities for the bank have resigned.

Auditors with governance skills ‘in demand’

Auditors with corporate governance knowledge and skills are in increasing demand because of tougher new banking regulation proposals, reports Badenoch and Clark in its latest Professional Talent Spotlight. Auditors are now expected to provide advice on regulatory compliance, while helping clients reduce the costs of doing business. There is also higher demand for accountants to work in project-specific roles, as companies divide performance targets into discrete project specifications.

Accountants ‘job pessimistic’

Accountants are pessimistic about their job prospects during the recession, a survey by accountancy recruitment specialists Marks Sattin concludes. On a scale going from plus 10 to minus 10, accountants scored minus 6 when asked about their confidence in the future jobs market. This is despite pay for corporate finance MDs rising by 90% in the last year and salaries for Big Four audit partners rising 20%.

Technology ‘outstripping audit capacity’

Technology is outstripping the capacity of audit to monitor its application, according to the latest Audit Benchmarking Survey from risk management consultancy Protiviti. Risks caused by IT weaknesses are generally given too little attention, particularly in small companies, reports the survey. Nearly 80% of companies in the Europe, Middle East and Africa region have not evaluated and assessed their IT governance process. Internal audits often do not include an annual IT risk assessment, nor do many internal audit functions have the skills and capabilities to conduct an assessment.

Integrated reporting ‘eases access to capital markets’

Treasury tackles Manufactured Overseas Dividends

The Treasury is introducing legislation – effective from 15 September – to block a newly disclosed tax avoidance scheme involving Manufactured Overseas Dividends (MODs). Use of MODs could have enabled financial services companies to offset or claim repayment of UK income tax that was never paid, potentially leading to significant losses of tax receipts.

Deloitte partner joins FSA panel

Deloitte partner Russell Collins has been appointed chairman of the Financial Services Practitioner Panel. He has served on the panel for five years and succeeds Iain Cornish, who has stood down as panel chair as he is leaving his position as chief executive of the Yorkshire Building Society. The Panel provides a professional financial services perspective to the work of the Financial Services Authority.

Baker Tilly quits as Citizens Advice auditor

Baker Tilly has resigned as auditor to Citizens Advice, apparently over a disagreement on the treatment of pensions liabilities. According to media reports, Citizens Advice’s pension liabilities have nearly doubled in the last five years to £36.5m. Its treasurer Mike Weaver has also resigned. Baker Tilly, which specializes in audits in the charity sector, declined to comment. Citizens Advice did not respond to a request for a comment.

Faber and Faber FD murdered

David Tebbutt, Faber & Faber’s finance director, has been murdered while on holiday in Kenya. His wife, Judith, was kidnapped in the same raid and is thought to have been taken to neighbouring Somalia. David had been Faber & Faber finance director for nine years and was previously managing director at the Harvill Press and before that finance director at Routledge for six and a half years.

Action called against cash for scrap

Baker Tilly has called on the Government to take action against the cash trade in stolen copper as a means of reducing the theft of wire and other metal objects and the related loss in tax revenues. Thefts of copper wires from overhead electric power lines on the rail network are causing extensive travel disruptions. Baker Tilly says that cash payments to scrap metal suppliers – often thieves who have stolen wiring – is running at £1bn a year. Former Cabinet minister Lord Faulkner has made a similar proposal.

KPMG receives working families citation

KPMG has been ranked in the top 10 employers for working families, in an award by the Working Families lobby. Accenture was also in the top 10, but KPMG was the only accountancy firm in the list. Michelle Quest, KPMG’s UK head of people, said: “KPMG understands that most people need and want to combine successful careers with caring for family and friends and we have put a number of policies and procedures in place in order to create a working culture which makes this possible.”

New PwC public sector leader

Paul Cleal is PwC’s new government and public sector leader. Departing leader Jon Sibson has become Dean at the University of Greenwich’s Business School. Cleal has a background in government and public sector, but has worked in PwC’s corporate finance practice since 1996. He became a partner in 2001 and was a member of PwC’s executive board from 2006 to 2008 and since then has served on the firm’s advisory practice leadership team.

RoW news

Aviva report – material sustainability must be in reports

EU bears down on audit firms

French audit quality attacked

The quality of auditing of French banks has been criticized by Stephen Haddrill, chief executive of the UK’s Financial Reporting Council. “I don’t see strong auditing going on there,” he said in an interview with the Financial Times. Haddrill was pointing out that the rumoured European Commission proposals for audit reform were similar to existing practice in France. He suggested that auditors of banks in France had permitted clients to make unrealistically small write-downs of Greek sovereign debt.

PwC reports 10% growth

Deloitte revenues rise 8%

Deloitte’s worldwide revenues increased by 8.4% in the year ending May, with growth reported in all three of its major regions – the Americas, Asia Pacific and in Europe, the Middle East and Africa. Aggregate global member firms revenues rose to $28.8bn in the year, with the strongest growth reported in Asia Pacific and the Americas, led by higher demand from developing markets. Deloitte predicts that it will grow its workforce by 35% by 2015, to 250,000 worldwide. Some 49,000 people were hired by Deloitte in the 2011 year. The best performing practices were financial advisory, which grew 15.1%, and consulting, where revenues rose 14.9%.

E&Y revenues up 8%

Ernst & Young’s global revenues rose by 7.6% to $22.9bn in the year ending June. Turnover in all practice areas grew, with advisory up 17.5%; transaction advisory up 7.7%; tax by 6.0%; and assurance rising 5.0%. Growth was achieved organically, with acquisitions accounting for less than 0.5% of turnover. New audit mandates achieved in the year include Fiat, PSA Peugeot Citroën, Enel and Assicurazioni Generali. Significant growth was achieved in developing markets, where Brazil grew by 26%; India 22%; Africa 19%; and China 18%.

High audit fees linked to low corporate performance

High audit fees are a warning sign of declining corporate performance, according to a study in the journal Auditing: A Journal of Practice & Theory. The study, by Jonathan D. Stanley of Auburn University, reported a strong relationship between the increased size of audit fees and weakening operating performance for a period as long as five years afterwards. “If a company’s auditing costs are substantially higher than those of competitors of roughly the same size, that should be a reason for investor caution,” wrote Stanley.

Technology ‘outstripping audit capacity’

Technology is outstripping the capacity of audit to monitor its application, according to the latest Audit Benchmarking Survey from risk management consultancy Protiviti. Risks caused by IT weaknesses are generally given too little attention, particularly in small companies, reports the survey. Nearly 80% of companies in the Europe, Middle East and Africa region, and in Asia Pacific, have not evaluated and assessed their IT governance process. Internal audits often do not include an annual IT risk assessment, nor do many internal audit functions have the skills and capabilities to conduct an assessment.

KPMG to review UBS crisis

KPMG has been engaged by the UK’s Financial Services Authority and the Swiss Financial Market Supervisory Authority to investigate the $2.3bn unauthorized trading losses suffered by UBS, through its Global Synthetic Equity trades. The investigation will examine the trading details and the control failures that permitted the activity and then failed to detect it. The trader has been charged by UK authorities with fraud through abuse of position. UBS’s Group CEO, Oswald J. Grübel, has resigned, and has been replaced by Sergio P. Ermotti on an interim basis. Two heads of global equities for the bank have also resigned.

NAMA challenges audit quality

The chairman of Ireland’s National Asset Management Agency (NAMA) has criticized auditors for their role in the Irish banking crisis. Frank Daly referred to auditors’ “failure to draw attention to the risky lending practices being adopted by Irish banks”. He added that “the audit profession needs to have a fundamental review of its role in the context of what has happened.” Ireland’s Tanaiste (deputy prime minister) Eamon Gilmore, also said that questions had to be asked as to why the big audit firms signed-off accounts of banks that collapsed soon after.

Ogawa becomes Deloitte Vice Chairman

Deloitte has announced that Yoichiro Ogawa has been elected to the global board as vice chairman. Steve Almond, the chairman, said: “Ogawa-san’s appointment as vice chairman recognizes both the increasing importance of the Asia Pacific region to our network and his qualities as a world-class leader.” Ogawa has been with Deloitte Japan for 30 years, occupying various leadership positions in Japan and the United States.

KPMG acquires Optimum

KPMG has agreed to acquire the consultancy firm Optimum Solutions to boost the firm’s technology advice capacity. Optimum is based in San Francisco and provides management consultancy and implementation support for organizations using Oracle’s enterprise software. Financial terms were not disclosed.

Deloitte sued over mortgage lender audits

Deloitte is being sued for $7.6bn by a trustee overseeing the bankruptcy of Taylor, Bean & Whitaker Mortgage Corp, a mortgage lender. The trustee, Neil Luria, alleges that Deloitte, as auditor, should have prevented the lender’s former chairman Lee Farkas from conducting a fraud that led to its collapse. Taylor Bean had been one of the US’s 12 largest mortgage lenders. Deloitte did not respond to a request for a comment.

EC supports Tobin Tax

The European Commission has proposed a Financial Transaction Tax to raise additional revenues for the EU and to compensate member states for bailing-out banks. The rate would be 0.01% on derivative transactions and 0.1% on other financial transactions. The tax could raise €57bn across the EU and create a negative GDP impact of 0.5%, said the Commission. “There is a strong consensus within Europe and internationally that the financial sector should contribute more fairly given the costs of dealing with the crisis and the current under-taxation of the sector,” said the Commission.

Irish Nationwide CEO’s ‘expenses’ challenged

Expenses claimed by and paid to former Irish Nationwide Building Society chief executive Michael Fingleton have been challenged. Fingleton has been told to hand back €88,000 of expenses, which included €12,180 for dental work and nearly €50,000 for membership and spending at a top golf resort and hotel. The collapsed Irish Nationwide has been merged with the failed Anglo Irish Bank, which has demanded the repayment of the expenses, plus another €1m paid to Fingleton as a bonus a year before the society collapsed.

Global IPO activity collapses

IPO activity globally fell 57% in the third quarter of 2011, according to analysis by Ernst & Young. Only three deals in the third quarter raised over $1bn and a total of 284 deals raised $28.5bn. In the second quarter there had been 383 IPOs, worth $65.6bn. This represented a fall of 57% in capital raising and 26% drop in number of IPOs. Using data from Dealogic, E&Y said that 22 IPOs had been postponed and another 49 withdrawn in the quarter.

Egypt considers IMF rescue

Egypt’s Finance Minister Hazem el-Beblawi has conceded that the country might be forced to seek aid from the International Monetary Fund. The country has been hit by a large withdrawal of foreign currency, following the deposing of former dictator Hosni Mubarak. Foreign currency reserves have fallen from $31.5bn in January, when Mubarak was still in power, to $19.9bn in September. Tourism income and foreign direct investment have fallen substantially since the revolution.

Justice Department considers SEC role in Madoff

The US Department of Justice is to consider the role of the SEC Inspector General, David Becker, in the SEC’s Madoff investigation. Becker was a beneficiary of an estate that had an investment in Madoff accounts, but was cleared by the SEC to be involved in its investigation on the grounds that there was no direct conflict of interest. The SEC and Becker say that he did nothing wrong.

Politics

BIS calls for simpler company reporting

The Department for Business, Innovation and Skills has begun consulting on proposals to simplify companies’ narrative reporting obligations. Under the proposals, companies would be required to publish a Strategic Report providing information on financial results, the business model used, strategy, risks, remuneration and key environmental and social issues. Information would also be required on the link between the performance of a company and top executives earnings, including disclosures where remuneration committees have approved bonuses although performance targets have not been met.

IFS backs tax simplification

The UK’s tax system requires radical reform, according to a wide-ranging review published by the Institute for Fiscal Studies. The Mirrlees Review concluded that the current system is inefficient, over-complex and frequently unfair. Reforms should address these points, but also improve economic output, argues the review. “In the UK, poor tax design contributes to an inefficient housing market, distortionary taxation of financial services, excessive reliance on debt finance, employment levels lower than they need be and distorted and inefficient savings and investment decisions,” says the IFS. The review offers principles and detailed proposals for change.

EC backs Tobin Tax

The European Commission has proposed a Financial Transaction Tax to raise additional revenues for the EU and to compensate member states for bailing-out banks. The rate would be 0.01% on derivatives transactions and 0.1% on other financial transactions. The Commission predicts the tax could raise €57bn and create a negative GDP impact of 0.5%. “There is a strong consensus within Europe and internationally that the financial sector should contribute more fairly given the costs of dealing with the crisis and the current under-taxation of the sector,” said the Commission. The original transaction tax proposal was put forward by economist James Tobin to discourage short-term financial transactions of no social value, with the proceeds going to the IMF and the World Bank.

Tax gap shows ‘missed opportunity’

The tax gap – the difference between what should have been paid in tax and what was actually collected by HMRC – fell by £4bn to £35bn last year, reports HMRC. But the union representing senior HMRC staff, the Association of Revenue and Customs, said the figure could be cut further if HMRC focused more on tax collection and less on staffing cuts. ARC President Graham Black said: “HMRC is being cut by 15%, and the ‘extra’ resources are simply being re-deployed from other work. And senior tax professionals – those who can deal with the well-advised wealthy or the major multi-nationals – are reducing in number over the next few years.”

Big Four audits ‘generate value from small companies’

Acquired companies audited by a Big Four firm generate more value for the buyers than do targets using smaller audit firms, according to research by Cass Business School and three other universities. Bidders demonstrate greater trust in Big Four audits, which are used to reveal opportunities for synergies, suggests the research. “Investor gains and bidder returns were higher in particular when the target was harder to value and there was a greater need for more accurate financial information,” said Andrey Golubov of Cass. “For example, in takeovers involving young firms, firms with more volatile stock or companies operating in unrelated industries, information from Big Four accountants was clearly more trusted by the stock market.”

Public sector

Mazards backs Audit Commission mutual

The employee-owned mutual emerging from the Audit Commission to bid for public sector local audit work has been launched as DA Partnership. It is backed by Mazars, which will provide commercial support and access to its technical capacity. The joint leaders of the firm during the bidding process will be Gareth Davies, the managing director-designate, and Mike Attenborough-Cox. Davies has taken leave from his role as head of the audit practice at the Commission to develop the firm, while Attenborough-Cox is public services partner at Mazars. The new firm says it will offer itself as a provider of quality audit services backed by “unrivalled” public expertise, access to a range of advisory services from DA and Mazars and value for money. The Audit Commission expects to award local audit contracts in February 2012 for a start date of October 2012.

Scotland’s auditor general retires

Scotland’s auditor general, Robert Black, is to retire early next year. Black has led Audit Scotland since it was formed in February 2000. He was previously controller of audit and chief executive with the Accounts Commission and before that had been chief executive of Tayside Regional Council and Stirling District. “With the support and involvement of the Parliament and in particular the Public Audit Committee, we have created in Scotland an effective regime for scrutinising public spending, but at the same time this regime is also designed to help and support improvement across the public sector,” said Black.

Financial services

IFRS 9 ‘to force provisions rise’

Provisions for bad debts will rise under IFRS 9, according to banks surveyed by Ernst & Young. Increased provisions will affect their regulatory capital positions and reduce their lending capacity, suggested the 10 European banks questioned by E&Y. Provisions on some loan portfolios may have to double. The banks were chosen because they are furthest ahead in planning and modelling for the impact of amendments related to loan loss provisioning arising from IFRS 9, the proposed accounting standard for financial instruments. Marcel van Loo, EMEIA banking and capital markets leader at Ernst & Young, commented: “It is primarily the larger banks across Europe that have started to engage with this issue, but we would encourage all banks to look closely at the impact this will have on their business model and the pricing of their products…..It is the resulting impact on bank’s regulatory capital, which will create the biggest problem for banks.”

Towry fined for misleading reporting

Towry Investment Management has been fined £494,900 for providing incorrect information to the FSA and for breaching client money rules. Towry told the FSA it was fully compliant with new obligations on the treatment of client assets. But the FSA found that the firm had failed to ensure its statement to the FSA was fully considered. In fact, the firm was not compliant, which became clear when the FSA visited the firm to check the treatment of client money. The FSA concluded that client money could have been at risk because of poor record keeping if Towry had become insolvent.

Corporate

ABI issues executive pay guidelines

The Association of British Insurers has warned companies to act carefully when deciding on executive remuneration. Key principles outlined in an ABI report include appropriate reward for exceptional performance; no payment for failure; that excessive and undeserved remuneration undermines efficiency, damages reputation and is not aligned with shareholder interests; and that companies should not engage in ‘crude benchmarking’ to justify increases in remuneration. In its role as the leading representative body of UK institutional investors, the ABI stresses that non-executives should be engaged in determining appropriate remuneration. A second guidance report encourages board diversity, including through the appointment of women to boards, succession planning for all senior management and board evaluation. Otto Thoresen, the ABI’s director general, said: “Effective boardrooms should be the powerhouse of the UK economy. The board effectiveness report and long standing remuneration guidelines represent UK best practice.”

Mouchel reports £4.3m accounting error

Public sector outsourcing specialist Mouchel has issued a profit warning after discovering an actuarial error on pensions’ liabilities on a legacy local government contract that will cost the company £4.3m. Chief executive Richard Cuthbert responded by resigning. Recently appointed finance director Rod Harris conducted a review of existing contracts, leading to additional provisions of £4m. The company may now have to either issue a rights issue or be sold. No one was available at Mouchel to comment. Ralph Baxter, CEO of data management and spreadsheet specialist ClusterSeven, suggested the accounting failure resulted from a failure in spreadsheet-based data and warned that similar errors in spreadsheets were commonplace across business.

Practice

New drive against immigration fraud

The Audit Commission’s National Fraud Initiative is being extended to work with the UK Border Agency to tackle fraud by illegal immigrants. The objective is to prevent people without a right to stay in the UK being able to access financial services by enabling banks and other lenders to automatically check whether a potential client has the right to live or work in the UK. In return for providing ‘real time’ information to lenders, financial institutions will provide the UK Border Agency with information on where illegal working and employment is taking place. The Audit Commission says the extension to its existing National Fraud Initiative will also make it more difficult for organised foreign criminal gangs to defraud banks by making bogus credit applications. The Commission intends to extend the use of ‘real time’ information sharing over the coming months.

What SMEs really, really want

Accountants should be more easily available, operate on fixed fees and provide more advice, according to small firms’ proprietors surveyed by online accounting provider E-conomic. Some 38% of the business owners who responded said they want easier access to their accountants. Over a quarter of respondents – 27% – said they would like more general business advice and 16% asked for fixed fees. E-conomic argues that its business model, which enables clients to access services online, will grow in popularity. Anders Bjornsbo, UK managing director, said: “A system where you can be looking at the same screen as your clients without having a face to face meeting has to be the future!”

RoW sectors

Practice

Big Four audits ‘generate value from small companies’

Acquired companies audited by Big Four firms generate more value for buyers than do targets using smaller firms of auditors, according to research by Cass Business School and three other universities. Bidders demonstrate greater trust in Big Four audits, which are used to reveal the opportunities for synergies, suggests the research. “Investor gains and bidder returns were higher in particular when the target was harder to value and there was a greater need for more accurate financial information,” said Andrey Golubov of Cass. “For example, in takeovers involving young firms, firms with more volatile stock or companies operating in unrelated industries, information from Big Four accountants was clearly more trusted by the stock market….. These gains are reflected in the stock price reaction to deal announcements as well as in improvements to the long-term operating performance.”

E&Y faces new Anglo Irish probe

Ernst & Young has been referred to the Chartered Accountants’ Regulatory Board’s Disciplinary Panel, after the CARB’s Complaints Committee found a prima facie case against the firm regarding its audit of the failed Anglo Irish Bank. The report of the CARB’s Special Investigator, John Purcell, concluded there was a failure by E&Y as the bank’s auditor to detect the scale of loans to former chairman Sean FitzPatrick and the failure of the bank to report loans to another director, William McAteer. The report also found a case against E&Y regarding the bank’s failure to properly report its systematic refinancing over year end and complex transactions with Irish Life & Permanent. E&Y did not respond to a request for a comment.

Corporate

Integrated reporting ‘eases access to capital markets’

Integrated reporting represents an opportunity for corporations to achieve a competitive advantage in accessing capital markets, according to a discussion paper published by KPMG. The report concludes that CFOs, CEOs and boards can potentially benefit from the adoption of integrated reporting practices. David Matthews, a KPMG partner and a member of its International Integrated Reporting Committee working group, which produced the paper, said: “Progressive companies should get actively involved in the discussion around Integrated Reporting. It will not all be plain sailing – innovation never is, and is not for the uncommitted. However, the prize for those that get it right is capital at a reasonable cost through a better relationship with investors and the capital markets….. Providing strategic and forward looking information about the performance and prospects of the company is a powerful way to convince the capital markets of the worthiness of investing in a company.”

US companies to disclose offshore cash

Major US corporations are being required by the Securities and Exchange Commission to disclose their overseas cash holdings, according to the Financial Times. The SEC is reported to have written to several companies, including Dow Chemical and Caterpillar, to tell investors the value of offshore cash hordes. US companies pay tax at up to 3% on overseas income that is returned to the US. Google is reported to have transferred some of its overseas profits to its Bermuda subsidiary, potentially avoiding tax on those profits. Other major corporations have acted similarly. No one at the SEC was available to comment.

Financial services

IFRS 9 ‘to force provisions rise’

Banks ‘to dispose of loan portfolios’

Banks are positioned to dispose of billions of euros’ worth of distressed loan portfolios, according to the second Global Debt Sales report from KPMG’s Portfolio Solutions Group. The report concludes that the market for portfolios has thawed, with private equity funds, pension funds, insurance companies and traditional buyers of distressed debt all entering the market. David Sayer, head of banking at KPMG, said: “This feels like the start of the reshaping of the European banking market – with the emergence of ‘shadow banks’ such that the market will begin to look more like the US market with credit intermediation being spread beyond the banks.”

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