February 2012

Transcription

February 2012

FEBRUARY 2012
contents
9
NEWS (latest)
3 From the CE’s desk
4 Quiz – 1970s
Letters
5 Obituary – Sir Henare Ngata FCA
Condolences
6 Fit for the Future 3 implementation
underway
On the cover:
Richard Austin on his yacht
Fiddlestix, P22.
NZICA members will notice a
number of changes to governance and
operations this year, after the vote
in November to accept rule changes
proposed during Fit for the Future 3
7 In memoriam
EDITOR Aaron Watson ([email protected])
ASSISTANT EDITOR Jennifer Black
DESIGN, PHOTOGRAPHY
David Geard
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NZICA recently purchased two
artworks by Canterbury artists
as a permanent tribute to those
members who lost their lives in the
Christchurch earthquake, and those
members who lost loved ones
8 The future with Betty Budget
People like to hypothesise about how
changes in the name of progress will
affect modern life
9 BMW heads off competition
Journal staff member David Geard
put some of BMW’s top vehicles to
the test at Pukekohe Park Raceway
10 New Year Honours
Congratulations to the NZICA
members recognised in New Year
Honours
12 Third place in big race
Hilary Wicks CA had hoped to finish
in the top 10 of her age group at the
Ironman World Championships in
Kona, Hawaii, but she exceeded her
expectations when she crossed the
finish line in third place
13 IR developing SPFR rules
Special purpose financial statements
guideline developments
14 The lease challenge
When negotiating the terms of the
lease for a new premises both the
landlord and the tenant need to be
wary of the many weaknesses in the
standard commercial lease
16 Business interruption insurance
Many Christchurch business owners
face the end of their business
interruption insurance period in
February
18 New Admissions
Congratulations to our people on the
rise
19 Ask Uncle Tom
Death, sports, disclaimers, liens and
the Almighty’s galactic problem
7
NEWS (NZICA)
22 Helmsman
New NZICA President Richard
Austin FCA explains his key goals for
2012, his approach to the Presidency
and his love of sailing to Journal
editor Aaron Watson
The Chartered Accountants Journal is the
official magazine of the New Zealand Institute
of Chartered Accountants.
CHARTERED ACCOUNTANTS JOURNAL FEBRUARY 2012
1
FEBRUARY 2012
contents
28 The management accountant:
focus on performance
Management accounting has
long been described as a practice
that analyses and communicates
information in a manner that creates
(or protects) value, but that leaves
many questions unanswered
30 Unequal pay
SHELF LIFE
69 New library catalogue for new
Women continue to earn less than
men, and the reasons why are not
always easy to explain
NEWS (latest)
32 Insolvency decision affects
year
42
70 What's new in the library
creditors
A recent insolvency legal decision is
good news for employees and Inland
Revenue but bad news for secured
creditors
35 Holding banks accountable
How socially responsible are the
mortgage lending practices employed
by NZ lenders and mortgage brokers
after the GFC?
38 ACC experience rating
ACC levies may now be based on the
claims history of your business
41 NGOs in Samoa: assessing
accountability
Samoa’s oral tradition of
accountability poses challenges for
non-Samoan auditors
42 From Somalia to secondments
Former refugee Ahmed Sofe CA is
currently on his second international
secondment and living a vastly
different life from the one he and his
family fled
44 Software feature
2012: the year of the cloud
NZICA has just upgraded its library
catalogue system so members can now
do more, and access more information
COLUMNISTS
53 Record fine for PwC UK
The UK’s Accountancy and Actuarial
Disciplinary Board has handed down
a record fine
54 New Year, new rate cut?
Another rate cut is likely in Australia
at a time when unemployment is up,
the housing market is weak and retail
spending is sluggish
56 Election 2011: winners and losers
The final results of Election 2011 have
been confirmed and there were some
clear winners and losers
58 Price relativity
People like to feel they are getting a
good price
60 Tax burdens across the US
A guide for NZ businesses
contemplating a US presence
64 Subordinated debt has payout
72 Gems in the library
INSTITUTE
74 Notices of Decisions of the
Disciplinary Tribunal
PRIVILEGE PARTNERS
76 Privilege Partner News
77 Hot Deals
INSTITUTE
78 Classifieds
OPINION
80 IFRSing in the USA
Slow but steady progress is being
made on the adoption of IFRS in the
US
81 Serving shareholders
New Zealand Institute of Chartered
Accountants Chief Executive Terry
McLaughlin FCA identifies top of
mind issues for directors in 2012
risks
Subordinate bonds offering tempting
yields, but investors risk being sent to
the back of the queue if the issuer runs
out of money
66 Image Matters
Tania Gullery CA, senior accountant,
Active Chartered Accountants, Lower
Hutt, gets a makeover
38
66
2
LATEST
From the CE’s desk
IN THE COURSE of
preparing an article on
the challenges facing
directors in 2012, I had
the opportunity to
canvas the views of
senior directors who are
also NZICA members.
They have driven home to me that there
are key areas of focus that all organisations
must work on if they are to be successful
for shareholders and relevant to their
customers (see the article on page 81).
People are one of the key priorities they
identified – both the people who work with
you and the customers (or members, in
NZICA’s case) who rely on you. People must
be a focus if an organisation is to survive
during a financial downturn.
The world economy was another
key issue. Maintaining an awareness of
developments in the global, as well as the
local economy, and devising a strategic plan
to protect and grow the balance sheet is a
major challenge for all business leaders in
2012.
Add to those the complexities of evolving
social and political arrangements in the
Western world, exemplified by the ongoing
debates in Europe about how governments
should respond to a perceived failure of
financial markets, and you have a recipe for
a busy and thoughtful year ahead.
What does this mean for NZICA as a
professional body? For us it is going to be
a year of delivery. That is around further
embedding the proposals members voted
for as part of Fit for the Future 3. It is
about bringing our strategy to life and
rolling out products and services that the
membership wants and needs. It is also
about ensuring we continue to attract top
quality people into the profession. In that,
the collaboration with the ICAA will play a
big role. We must ensure the new transTasman Chartered Accountants Programme
launches seamlessly in 2013. Associated
with that is implementing key elements
of our shared ICT platform to ensure a
new Learning Management System is
operational.
I promised I would spend more time in
Auckland and I have begun the year with a
series of meetings with Auckland SIG Group
chairs and other members. I’ll be ensuring
that the programme of staying in touch
with our key constituency remains a priority.
Finally, in this first Journal of 2012, I
would like to wish you all a happy and
prosperous year.
Terry McLaughlin FCA
NZICA Chief Executive
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3
LETTERS
QUIZZICAL CORNER
Compiled by Papa Snazzy
THE 1970s
1. The Watergate scandal led to the
resignation of which US President
in 1974?
2. Which swimmer set seven world
records at the 1972 Summer
Olympics in Munich, Germany?
3. Who opened the Sydney Opera
House?
4. Martin Cooper demonstrated
the first hand-held mobile phone
in 1973. What company was he
representing?
5. The 1974 “Rumble in the Jungle”
fight between Mohammad Ali and
George Foreman was hosted by
which African country?
6. The 1977 disco era song I Feel Love
led to a revolutionary change in
club music sound. Which female
star was the song by?
7. In what year did Margaret Thatcher
become the first female Prime
Minister of the United Kingdom?
8. One Flew over the Cuckoo’s Nest
won the 1975 Best Picture Oscar.
Who played the main character?
9. In January of 1973 the Australian
government banned the export of
which animal skin?
10. Which New Zealand mudlark won
the 1976 Melbourne Cup?
1. Richard Nixon 2. Mark Spitz
3. Queen Elizabeth II 4. Motorola
5. Zaire or Democratic Republic of the
Congo 6. Donna Summer 7. 1979
8. Jack Nicholson 9. Kangaroo
10. Van Der Hum
ANSWERS
SCORES
1-3 As bad as carless days
4-7 Cents, and it’s a pint of milk circa 1975
8-10 Still lower than late 70s mortgage rates
4
Fear of decimalisation
Image manipulation
I thought readers might be amused
by the attached letter written by Arnold
Nordmeyer, author of the infamous “black
budget”. It was sent to my uncle who
passed away earlier this year.
Diane Robinson CA, Auckland
Ever since the Image Matters segment
has appeared in the Journal it has irritated
me as there is a little less honesty than
could or should be the case.
The “before” images are always black
and white photos, generally with the
subject having an unsmiling pose. In
the “after” photos the situation is very
different, including being taken from
more flattering angles. I must agree
the makeovers show just what can be
achieved with professional input and
they provide a valuable contribution to
the Journal.
As chartered accountants we have
an ethic of not distorting reality, yet
this is what the photos seem to do. It
could of course all be a bit tongue in
cheek and mimicking the approach
used in the wider magazine market.
Ray Skinner CA, Auckland
PS. Perhaps the articles could
demonstrate the clothing has been
sourced form organic cottons and
ethically sourced!! Also that the
make-up and hair products do not
contain a myriad of chemicals
which are actually quite harmful!
LATEST
Unfaltering devotion to land and people
By John Jones
THE SON OF Sir Apirana
Ngata, the most
charismatic Maori leader
of the last century, Sir
Henare Ngata FCA
made his mark on
Maoridom in his own
right with his work on the development of
Maori land throughout the district.
After being educated at Te Aute College
and Victoria University, Sir Henare, like most
of his generation, was thrust into World War
2 and spent four years as a prisoner after the
fall of Greece.
His return to Gisborne and his young wife
Lorna, whom he had married only months
before sailing overseas, saw him launch a
career of dedication and service.
The first Maori accountant at a time when
there were few Maori businessmen, he
started his own business and clients beat a
path to his door.
But it was in the area of land
development that Sir Henare has left an
indelible mark on this district. [Gisborne.]
Although holding large areas of land, Maori
farmers were unable to get the finance
needed to develop their properties.
Appointed to the board of the Mangatu
Incorporation in 1959, he served as its
chairman for 13 years. As well as the highly
successful Mangatu Blocks, he chaired a
number of other incorporations.
His devotion to the land never faltered.
He played a large part in the decision of the
Tairawhiti Development Taskforce to make
unproductive Maori land the target of its
first major regional initiative.
An officer in C Company of 28 (Maori)
Battalion, he retained a keen interest in the
welfare of his fellow veterans.
Sir Henare was knighted in 1982.
A quietly spoken and extremely dignified
man, he was an authority on many things
Maori including the all-important Treaty of
Waitangi and the later foreshore and seabed
issue.
At the death of Sir Apirana Ngata one
editorial writer was moved to say that a
great kauri had fallen in the path of Maori
development. Another kauri now falls with
the passing of his son
This article was published with the
permission of The Gisborne Herald, where it
appeared on 12 December 2011. Sir Henare
died on 11 December 2011 at the age of 93.
FMA and SFO sign MOU
THE FINANCIAL MARKETS Authority (FMA)
and the Serious Fraud Office (SFO) have
signed a Memorandum of Understanding
(MOU) to enhance their already close
working relationship.
The initiative, announced by FMA Chief
Executive Sean Hughes and SFO Chief
Executive Adam Feeley, provides a framework
within which the organisations can coordinate their activities, exchange information
and share expertise and resources. The FMA and SFO share an objective
of improving confidence in New Zealand's
financial markets. Greater co-ordination
between them will enable efficient allocation
of their investigation and prosecution
resources.
FMA and the SFO have already shared
resource and intelligence on a number of
finance company investigations, including
Dominion Finance, Belgrave Finance, and
Hanover Finance. The FMA is supporting the
SFO's case against five individuals involved
with the affairs of South Canterbury Finance.
CONDOLENCES
The New Zealand Institute of
Chartered Accountants extends its
sincere condolences to the families
of:
Ernest (Dick) Dixon Anderson CA
(Honorary Retired) of Mosgiel, who had
been a member of NZICA since 4 March
1954.
David Bennett CA of Palmerston
North, who had been a member of
NZICA since 14 March 1983.
Jeffery Knapp CA (Honorary Retired)
of Auckland, who had been a member
of NZICA since 15 June 1954.
Andrew Lander Mouldey CA
(Honorary Retired) of Christchurch, who
had been a member of NZICA since 30
April 1947.
Sir Henare Kohere Ngata FCA
(Honorary Retired) of Gisborne, who had
been a member of NZICA since 21 June
1949.
Robert Leyton Reeder CA (Honorary
Retired) of Auckland, who had been a
member of NZICA since 17 April 1951.
5
LATEST
F4F3 implementation underway
NZICA MEMBERS WILL notice a number of
changes to governance and operations this
year, after the vote in November to accept
rule changes proposed during Fit for the
Future 3 (F4F3). This is the third phase of
NZICA’s four-phase review of governance
and operations which began in 2008.
NZICA’s products and services will
increasingly be targeted to members’
sectors/industries/career stages. There will
be an increased focus on online delivery and
the accessibility of courses.
At a local level, Branch Committees will
become Local Leadership Teams (LLTs) by
31 March. LLTs will advise NZICA about
local member needs, helping to improve the
relevance of and access to NZICA’s products
and services. The inaugural LLT Chairs have
been confirmed and are in place until the
end of this year.
LLT Chairs
Michael Prasad CA..................... Auckland
Shiralee McLean CA................. Northland
Leanne Milligan CA........ Waikato – BoP
Jim Campbell CA...........................Gisborne
Chris Denby CA.......................Hawkes Bay
Jason Driscole CA.....................Manawatu
Andrew Johnston CA.............Wellington
Doug Campbell CA..............Marlborough
Murray Harrington CA......... Canterbury
Bob King AT.............................................. Otago
John Schol CA...............................Southland
Tim Kirby CA....................................... Sydney
John Nilsen CA..............................................UK
Peter Fromont CA..................... Melbourne
Members will vote in March for the
remaining LLT representatives. LLTs are
expected to reflect the makeup of the
membership in each area. You will receive
information on the voting process in March.
In addition, new LLTs may be established in
areas that are currently not serviced locally
by NZICA, and where there is demand for
this among NZICA members. New LLTs
could spring up during 2012 which will a
positive change for members in areas that
have not benefited from local NZICA service
delivery to date.
NZICA Council elections will move
from a branch to a regional electoral
college model this year, with changes to
councillor numbers in some areas. The
Council represents members' interests and
sets NZICA's long-term strategic direction,
together with the Board. The changes
will improve proportional representation
and ensure all members have a vote for a
Councillor. Members will effect this change
personally when they vote for councillors
prior to the 2012 AGM.
In addition to these significant changes
there will be reviews of the National
Conference, establishment of Regional
Forums to complement this, and moves
to ensure members get the maximum
benefit from the Special Interest Group
(SIG) network. The conference and forums
will become key collaborative and learning
events for members. SIGs will be reviewed
to see if improvements can be made to the
technology and knowledge sharing between
regions.
F4F3 proposals were developed and
approved during 2011, focusing on the way
NZICA looks after its members, delivers
products and services and engages with
members. It has also looked at aspects of
NZICA local operations and structure, to
improve NZICA responsiveness to member
needs and improve the reach, relevance and
access to NZICA products and services.
To find our more about F4F3 please see
the detailed information on nzica.com.
2012
Deanne MacDonald CA.............Taranaki
Peter Redpath CA.................... Whanganui
PROFESSIONAL DEVELOPMENT
TRAINING FOR ACCOUNTANTS
FACE TO FACE
ONLINE
Our courses
are NZICA
approved.
WEBINARS
Course information at www.taxtraining.co.nz or 0800 DHA TAX
6
ERBURY 2
1
NT
01
In memoriam
Daybreak by Julia Drake (left); NZICA President
Richard Austin FCA unveils Kelvin McMillan's Market
Day in Cathedral Square (above).
NZICA RECENTLY PURCHASED two artworks by
Canterbury artists as a permanent tribute to those
members who lost their lives in the Christchurch
earthquake, and those members who lost loved ones.
The paintings were unveiled in a small private
ceremony in December at the Christchurch office. The
event was attended by members’ families who had
travelled from as far as Australia. Immediate Past
President Ross Jackson FCA and President Richard
Austin FCA also attended.
In the brief but moving ceremony, Jackson extended
heartfelt condolences to the families and talked of the
resilience of the Canterbury people in a year that we
will never forget.
Austin, there not only in a professional capacity but
also as a member who has lost a loved one, thanked
NZICA on behalf of the families and commended the
organisation on its humility and humanity. Austin, who
helped select the paintings for the memorial, said the
two were chosen as “they showed Christchurch as it
was before the earthquake”.
“They hark back to what we had and what we have
lost. They are also a reminder of what we need to try
and rebuild,” he said.
The first artwork is an original watercolour, Market
day at Cathedral Square, by Kelvin McMillan. It depicts
a bright busy day in the Square.
“This painting was a bit of an experiment,”
NZICA remembers those members who lost
their lives on 22 February 2011
“They hark
back to what
we had and
what we had
lost. They
are also a
reminder of
what we need
to try and
rebuild”
Carey Bird
Helen Chambers
Philip McDonald
Blair O’Connor
Deborah Roberts
Emma Shaharudin
NZIC also offers its condolences to those
members who lost loved ones.
McMillan told the reception. “I had to hide the
Clarendon towers and office blocks which dominated
the skyline while trying to bring to the fore the lovely
Post Office, stalls and vibrancy of the square. The
difficulty was how to do a painting without making it
look like a colourful fruit bowl. I think I have achieved
this.”
The second piece is limited edition print, Daybreak,
by Julia Drake. This complements the first piece –
being the view you would have if you turned around
from Kelvin’s painting and looked the other way in
Cathedral Square.
Both these pieces are housed in NZICA’s new
Christchurch office. NZICA is committed to the
rebuild of Christchurch and to providing ongoing and
innovative initiatives that support the members in the
Canterbury region.
7
CA
LATEST
The future with Betty Budget
People like to hypothesise about how changes
in the name of progress will affect modern life.
IN THE 1950s a regular forward-looking Journal
column was written by a woman who went by the
pseudonym “Betty Budget”. In one column, “Betty”
mused on education.
“February is a month when almost everyone gives
some thought to education. Many parents have
children starting a new school, stinging their savings
account with the expense of uniforms. Employers too,
are engaging staff from the ‘just left schoolers’ about
this time, and are wondering what the teachings of
modern education will reveal in the way of calibre
and character,” she wrote.
“Twenty years from now these same young men
and women will be saying, tst tst! When I first started
work things were different... and so it goes on with
each generation until one wonders what type of
education will be given our great-grandchildren.
“Let’s drop in on a secondary school in the year
2057.”
She first describes a woodwork class, where a
teacher stands in front of a towering machine while
explaining to a group of boys the manner in which
the timber is fed in.
“The instructor and class then move to the rear
of the machine where, after a few minutes a neat
but unusual object, which appears to have been cut,
shaped, sanded, glued and pressed together, is lifted
from the rollers.”
8
“Is he dead?”
a pupil pauses
to ask. “Yes,” is
the terse reply.
“Careless when
splitting the
atom.”
In the English class, she writes, we overhear a
discussion about the word hammer. According to
one boy, it is a thing used by athletes at the Olympic
Games. Another says it is part of a piano which
strikes the strings and produces sound. The rest of
the class appear quite blank so the master explains
that it was a tool with a wooden handle and a steel
head, which men frequently used in the making of
furniture, houses and many other articles, joining
wood together with metal spikes called nails.
The teacher, we read, gives a blackboard
illustration in which the class is interested but
somewhat amused. A student asks, was this an
article from the Stone Age?
Replying that the hammer was used until the
end of the twentieth century, the master tells of the
backwardness of the people of that period and how
it took three or four days to fly from New Zealand to
England or America. No one had been to the moon
or Mars. Men were only beginning to explore the
Antarctic and they had no power to irrigate places
like the Sahara, which at that time, was a desert
almost uninhabited.
Budget Betty then turns her attention to the
commercial class, which is having a lesson at the
filing cabinet. The teacher places the letter or
document on a tray, presses the file number on the
keyboard and the paper disappears into its cabinet by
means of a robot. Another group is being instructed
in the use of a “seeing eye” with which the misfiled
documents can be traced.
The teacher speaks to a group in another room
by means of a portable television set, or “creepy
peepy”.
Finally Budget Betty hypothesises about a science
class, where a boy is being carried out on a stretcher.
“Is he dead?” a pupil pauses to ask. “Yes,” is the
terse reply. “Careless when splitting the atom. Third
former of course. We are just taking him over to the
clinic. Hope they’ll be able to bring him back in time
for the inter-school cricket on Tuesday. We need all
the barrackers we can muster.”
Well, some of Betty’s projections have not been
so far off, the creepy peepy being the most accurate,
although thankfully another name was given that
contraption. And we are still a good 40 off Betty’s
future, so with a bit of luck, returning hapless
students from the dead may come yet become
possible.
ALEXANDRA JOHNSON is a freelance Wellington writer.
BMW heads off competition
Journal staff member David Geard put some of BMWs top vehicles to the test at
Pukekohe Park Raceway.
I RECENTLY JOINED a dozen or so NZICA members at
Pukekohe Park Raceway for a BMW Head to Head
experience. This half-day event is made up of two
workshops designed to showcase the BMW 335i, and
compare this vehicle with equivalent models from
competitors Mercedes and Audi. There were also
three diesel BMW models to test drive.
After a briefing from the BMW representatives
we paired up and got behind the first wheel, ready
to drive around a course testing the vehicles’
speeds and special features. I was looking forward
to finding out the differences between the various
manufacturers.
I tried out the Audi A4G2 first. While it did handle
well, there was a lag in the throttle. We were
informed this is an intentional design feature which I
found surprising.
Next up was the BMW 335, my personal favourite.
Everything about this car was stunning, from the
interior, the exterior and the handling, through to
the full throttle roar. The power this vehicle has was
probably the most astonishing aspect – it really
kicked you in the pants.
It was interesting to go from the BMW 335 to
the BMW 1X, the off-road family wagon (my Subaru
Legacy just can’t compare). While the styles of the
cars were at different ends of the spectrum, both
were roomy and comfortable.
Everything
about this car
was stunning,
from the
interior, the
exterior and
the handling,
through to the
full throttle
roar
BMW's Mike
Eady briefs
participants
before they
headout to the
track and, above,
the 335i being
taken through
the course.
For me the Mercedes Benz C280 was the worst of
the bunch. It was uncomfortable for my 6’6” frame
as there was no headroom. I also found this vehicle
rolled when going around corners and the lack of
power was disappointing after the 335.
The workshop also showcased BMWs run flat
tyres. This technology means in the event of a flat
tyre the car will tell you, but the performance won’t
be hindered, so you can continue driving on a flat
tyre for a number of kilometres until you can get it
serviced.
Want to put the latest BMW through its paces?
The next head to head competition is now open for
entries. NZICA and BMW are offering 30 members
spots in BMW’s Head to Head driving experience
on 8 March at Pukekhoe Park Raceway in Auckland.
To be in to win, visit nzica.com/headtohead. Entries
close 24 February 2012.
9
LATEST
New Year Honours
Brian Coulter ACA (Retired) of
Wellington
Queen’s Service Medal (QSM)
Congratulations to the NZICA members
recognised in New Year Honours.
Hinerangi Raumati CA of Manukau
MNZM - Member New Zealand Order of Merit for
services to business and Maori.
Hinerangi Raumati CA has significant experience in
investment and financial management. Her current roles
include director of Te Ohu Kai Moana Portfolio Management
Services Limited, director on the Te Ohu Kai Moana Board,
Board Member of Public Trust and Chair of the Nga Miro Health Trust. She
is also Chair of Parininihi ki Waitotara Incorporation. Raumati was CFO
of Tainui Group Holdings Limited from 2002 to 2009 and was previously
Deputy Chair and Chair of the Investment Committee of Trust Waikato. She is
currently Executive Director of Operations for Te Wananga o Aotearoa. She has
whakapapa links to Ngati Mutunga and Waikato.
Raumati says the award is recognition of the significant contribution Maori
are making to New Zealand business today. She says she is proud of all of the
work she has done.
“My time at Tainui was a significant period of growth which was incredibly
exciting. However, the turnaround of the fortunes of Parininihi ki Waitotara
Incorporation has been incredible with record profits achieved in 2011
($11m).”
Christopher Carson CA of Upper Hutt
Queen’s Service Medal (QSM) for services to the state.
Chris Carson CA has extensive experience in financial
management and accounting in the public sector, particularly
in senior positions. He has been the Chief Financial Officer
at the Government Communications Security Bureau since
2000. Carson was the project manager for Pipitea House, a new $120 million
government communications security bureau head office. The building was
designed to co-locate a number of New Zealand intelligence agencies and
facilitate a more effective exchange of information. He also managed a smaller
project to build a records archival facility costing $2.5 million. He responded to
news of the award with “some amazement” together with feeling both proud
and humbled.
“I believe the QSM was also recognition of all the staff at the GCSB who
contributed to the building project.”
Of his achievements, Carson says the completion of the Pipitea House
project makes him most proud. “This was a huge undertaking that started in
early 2006 and finally came to fruition with the official opening of the building
by Prime Minister John Key in 2011.”
Carson has also provided financial management advice and services to a
number of not-for–profit organisations over the past 25 years.
10
for services to rugby.
Brian Coulter ACA is a life
member of Marist Saint Pats
(MSP) rugby club. He has been involved with the
club for more than 45 years, as a player (and
Wellington rep) and as a Jubilee-Cup winning
coach and chairman. He currently heads the club's
Rugby Subcommittee and remains in the thick
of MSP's day-to-day operations. His professional
career includes 30 years in corporate finance and
several years working within the government
sector. Coulter says he was surprised to receive the
award, given the number of people who volunteer
in rugby, other sports and the community. He
says he is proud to have had some influence on
peoples’ sporting careers and life in general.
Kerrin Marshall FCA of Napier
Queen’s Service Medal (QSM)
for services to pipe bands.
Kerrin Marshall FCA has been
involved with pipe bands for five
decades, after starting to learn
the bagpipes at the age of 10.
“My parents and grandfather, who was born
in Scotland, paid for lessons and for the set of
bagpipes that I still play.”
He says he is humbled to receive the QSM and
could not have done so without the support of a
number of other people.
Marshall has been heavily involved in
competitive pipe bands and is part of the Drones
and Sticks Pipe Band which focuses on community
parades (more than 40 a year) and teaching young
people piping and drumming. He has led the
organisation of two national pipe band contests in
Napier and in 2009 was appointed to the position
of National Contest Supervisor for the Royal NZ
Pipe Band Association.
Coulter began working at the Eastern Institute
of Technology (EIT) in 1980 as a tutor. After a
number of years as Head of School he became
Finance & Resources Manager which subsequently
became Corporate Services Director.
Marshall says he was surprised to receive the
award.
“I’m surprised that something I enjoy and am
passionate about was worthy of such
recognition.”
Robert Ting CA of
Wellington
Queen’s Service
Medal (QSM) for
services to the
Chinese community.
Robert Ting CA says his award should
be dedicated to the foresight of his
grandfather who, 80 years ago, was
founding president of an organisation
to help Chinese immigrants from the
Zengcheng district of Southern China.
Ting is currently Treasurer of this
organisation, the Tung Jung Association
of New Zealand.
His involvement with the Chinese
community includes member and
former Treasurer of Wellington Chinese
Sports & Cultural Centre, past Treasurer
of New Zealand Chinese Association
and honorary auditor of both the
New Zealand Chinese Association and
Wellington Chinese Association. He
has also been a member of the Lions
Club of Newlands for 22 years and is
a Past President. He has held various
management accounting positions,
including eight years with Dulux New
Zealand Limited and 16 years with the
Natural Gas Corporation. He currently
works part time as accounting consultant
to the California Home & Garden Limited
in Miramar and Lower Hutt. Ting says
he is flattered to receive the award
and is conscious of the many hours of
unrewarded community service provided
by others. He says his most satisfying
moment was seeing the Wellington
Chinese Sports & Cultural Centre stadium
building freeholded after many years of
fundraising activities.
The accountants' one day business and tax update Conference
Event details
Thursday 8 March 2012
Waipuna Hotel and Conference Centre, Mt
Wellington, Auckland
The fourth annual Accountants’ one-day
business and tax update will be held on 8
March 2012, boasting a number of high-calibre
business leaders and experts presenting on a
range of technical topics and business issues.
Listen to key updates and expert insight on the
economy, tax, financial reporting, technology,
employment law and leadership. The day will
conclude with a special presentation from
psychologist Nigel Latta, who will be speaking
about the psychology of success.
Following the presentations you're also
invited to stay for a glass of wine while
networking with your peers.
Highlights
• Differentiating your brand to drive
commercial performance – Jason Paris,
Telecom
• General tax update – Geof Nightingale
FCA, Partner, PwC
• Key issues and developments in financial
reporting – Denise Hodgkins FCA, National
Technical Partner, Deloitte
• Economic update – Brian Gaynor, Milford
Asset Management
• Big internet, big business issues – Donald
Clark, Principal, 1through8 ltd.
• Employment law and legislative update –
Anthony Drake, Partner, Kensington Swan
• New portfolio rules for FIFs – Stephen
Rutherford CA, Assistant Tax Director,
NZICA
• What is required for leadership in the
future? – Angela Neighbours, ilume
• The tax status on company administration
costs – Jo Doolan CA, Director Tax, Ernst &
Young
• The psychology of success – Nigel Latta,
Clinical Psychologist
Find out more at nzica.com/Training-andevents
BRIEFCASE
New Technical Services Team member
Zowie Murray CA, an audit and assurance
specialist, has joined the NZICA Technical
Services Team. Murray has spent five years
in public practice. She started her career
with a “Big Four” firm in the UK working
on assurance engagements, and gained the
ICAEW Audit Qualification, along with her CA.
She immigrated to New Zealand in February
2010 with her husband. Prior to taking this
role at NZICA, she was an audit manager for
a mid-tier firm in Christchurch. She is looking
forward to helping improve audit quality in
small to medium practices. Zowie will join
John Hodge, Michael Fraser, Lucy Hickman
and Nadia McCartin in NZICA’s new Technical
Services Team providing public policy
advocacy, technical assistance to members
and helping with product development and
professional development. For queries on
audit and assurance, financial accounting,
and management accounting please contact
the Technical Services Team on
[email protected].
International tax on IR website
Inland Revenue has reviewed the information
its website provides people about their
international tax obligations. People with
international tax obligations can be people
who: are coming to or leaving New Zealand,
temporarily or permanently; live in New
Zealand and have overseas income; live
overseas and have income derived from a
source in New Zealand; have a business with
international activities, trade or investments.
The new look website has information on:
tax residency and status rules; business tax
obligations where the business operates
internationally; non-resident contractors
and entertainers tax rules; New Zealand tax
residents with overseas interests; overseas
residents with New Zealand interests; and
tax obligations for people coming to or
leaving New Zealand. Also available are
IR’s top 10 facts about international tax,
which reflect common misunderstandings
or misconceptions about international tax
issues. ird.govt.nz
11
LATEST
Hillary Wicks (centre) at the
prizegiving ceremony
Third place in big race
HILARY WICKS CA HAD hoped to finish in the
top 10 of her age group at the Ironman World
Championships in Kona, Hawaii, but she exceeded
her expectations when she crossed the finish line in
third place.
Wicks beat her nearest rival in the 30-34 age
group by just 10 seconds, after nearly 10 hours and
225 kilometres of swimming, cycling and running.
She says pure adrenalin got her through at the end
when she heard spectators shouting that she was
being closely trailed by another competitor.
“I just thought: there is no way, at this stage, that
anyone is getting that third place off me.”
The chartered accountant, who works for Skipper
“I just thought:
there is no way,
at this stage,
that anyone
is getting that
third place off
me.”
Lay and Associates in Papakura, says her day went
perfectly to plan. The only mistake she feels she made
was to let the enthusiastic crowd support, including
a small group of family and friends along the first 15
km of the run, lift her pace to a speed she felt was
too fast.
She says the swim was the toughest part of the
day, with 1,600 athletes jostling for position and
strong tidal currents.
During the 180km bike ride Wicks focussed on her
heart rate and ensuring she was drinking and eating
enough to complete the final leg – a marathon run in
temperatures that topped 38 degrees Celsius.
“I knew the race was all going to be about pacing
and nutrition and because it’s so hot you have to be
careful not to dehydrate,” she says.
Skipper Lay partner Greg Lay says the company is
proud of Wicks’ achievements.
“Her talent, training, tenacity and attention to
detail are all things which led to her success in Kona
and are also present in her work life, which make this
impressive athlete a very impressive accountant as
well.”
Wicks is set to compete in Ironman New Zealand
in March and hopes to qualify for the Ironman World
Championships again, and return to Kona later this
year.
The Ironman World Championships attracts 1800
professional and age-group athletes who have
qualified through a number of Ironman events
around the world. It involves a 3.8km swim, a 180km
cycle and a 42km run.
2012 Public Sector Conference
Speakers
Discover what lies ahead.
Event details
1-2 March 2011, InterContinental
Wellington
A networking dinner will be held after the
first day's sessions .
Designed specifically for those working
in the public sector, the Public Sector
Conference will equip you with the
knowledge and insight to make smart
decisions in a challenging environment. It
12
is also an excellent opportunity to network
with others working in central and local
government.
The conference will address three key
topics: smarter decision-making and service
delivery; achieving value-for-money; and
leading change in challenging times.
This is a not-to-be-missed, bi-annual
event for anyone working in or with public
sector organisations.
A range of respected New Zealand senior
public servants will address delegates.
These include:
• Hon Bill English, Deputy Prime Minister
and Minister of Finance
• Robert Russell, Commissioner of Inland
Revenue
• Brian Roche CA, Chief Executive, New
Zealand Post Group
• Lyn Provost FCA, Controller and AuditorGeneral
See the full programme at
nzica.com/publicsectorconference
BRIEFCASE
New grant for Canterbury businesses
IR developing SPFR rules
IN SEPTEMBER 2011 Cabinet decisions
were made about financial reporting. In
particular, non-large companies that do not
separately have reporting obligations will
no longer have to prepare general purpose
financial statements.
Given the advent of IFRS, the compliance
cost savings, especially for medium-sized
companies, are potentially large.
However, companies will still have
a statutory obligation to prepare at
a minimum special purpose financial
statements for the purposes of the
assessment and collection of tax. In this
context, Inland Revenue is probably the
largest user of financial statements in the
country.
The requirements will be set by way of
secondary legislation (such as an Order in
Council), which in turn will be mandated
by amendments to the Tax Administration
Act. These requirements will be minimum
requirements and taxpayers will be able to
prepare to a higher standard so long as the
minimum information is presented.
Separately, there is a question as to
whether all businesses above a certain
size should be explicitly obliged to prepare
financial statements. Inland Revenue
believes that almost all relevant businesses
currently prepare financial statements so
that this would be the formalisation of an
existing process.
The process for setting the requirements,
and the requirements themselves, will be
developed using the generic tax policy
process consultation model. It is proposed
that all relevant legislation will be passed
and operational matters implemented by
mid-2013.
This Inland Revenue project is running
in parallel with NZICA’s guideline-setting
process and a lot of the objectives and
outcomes of these projects will be similar,
although the different perspectives mean
they are unlikely to totally align.
While it is early days yet, it seems to
us that compliance with the Institute’s
guidelines, when they are developed, is
likely to also mean that Inland Revenue’s
minimum requirements have also been met
or can be easily met.
Therefore, while these are standalone
projects with similar but different
objectives, there are a number of points
of commonality and opportunities to
keep things simple that encourage both
organisations to work together.
JIM GORDON CA is a Policy Manager in the Policy
Advice Division and Stephen Casey CA is a
Principal Analyst with Strategic Compliance Risk.
They are both involved in formulating Inland
Revenue’s response to government’s project on
financial reporting requirements for companies.
Also they have been invited to join the NZICA
Working Group on SPFR as Inland Revenue
representatives.
A new grant of up to $750, the Independent
Advice for Small Business grant, has been
developed by the Red Cross, with assistance
from Recover Canterbury. It aims to help small
and family-run businesses access professional
legal and accounting advice on business
recovery from the effects of earthquakes on
their businesses. The New Zealand Red Cross
2011 Earthquake Commission has been
established to oversee the disbursement of the
more than $73 million donated to the New
Zealand Red Cross 2011 Earthquake Appeal.
This funding is available to any business
with fewer than 10 employees that has been
negatively impacted by the earthquakes and has
a genuine need for financial assistance in order
to access professional advice. This grant could
be an ideal opportunity for clients who are
having difficulty paying their fees or are facing
financial hardship to access extra funding.
Applications for the Independent Advice for
Small Business grant are available through
Recover Canterbury. recovercanterbury.co.nz
IFAC calls for nominations for 2013
The International Federation of Accountants
(IFAC), the global organisation for the
accountancy profession, has called for
nominations for IFAC boards and committees
in 2013. For the first time, all vacancies on
the public interest activity standard-setting
boards are open for nominations by the
public – a move towards greater transparency
when filling available positions.“The calibre
of the volunteer members on our boards and
committees is what makes these groups so
effective. That is why seeking high-quality
nominations is at the core of our nominations
processes,” says IFAC President Göran
Tidström. “We aim to attract a wide variety of
high-quality nominations, to ensure that we
have a rich pool from which to find the right
candidate for each position. We thank our
member bodies and the public in advance for
the thoughtful and valuable nominations we
anticipate receiving this year.” All applications
should be submitted before March 15, 2012
electronically via IFAC’s nominations database.
See ifac.org for more information.
13
01
2
The lease challenge
NT
ERBURY 2
LATEST
CA
Questions around leases remain problematic
for many Christchurch businesses and
landlords.
CHRISTCHURCH IS LITTERED with businesses popping
up in garages, homes and in new locations across
town while damaged buildings, insurance and the
cordoned off red zone have created a headache for
many small businesses looking to trade.
The New Zealand Institute of Chartered
Accounants (NZICA) and New Zealand Law Society
(NZLS) have been working closely together to assist
businesses navigate the challenges faced as a result.
These issues, while highly pertinent to Christchurch
businesses, also highlight lessons for businesses all
around New Zealand.
Leasing is one such challenge that businesses
face.
Immediately after the February earthquake,
businesses had to move quickly to obtain alternative
premises and the real estate industry did a fantastic
job of getting tenants into alternative premises in an
emergency situation. But now businesses looking to
move have more time to carefully choose premises
and they should do so.
Safety of the alternative premises is of the utmost
14
When
negotiating the
terms of the
lease for new
premises both
the landlord
and the tenant
need to be wary
of the many
weaknesses in
the standard
commercial
lease
importance so business owners
should ensure they get an engineer to
thoroughly check them. As building
standards were tightened in May
2011, many buildings that were
deemed ok prior may now fall short.
If a tenant is not careful they may
end up leasing an earthquake-prone
building. This is obviously not ideal
and unless there is something special
in the lease dealing with the issue
there is little a tenant can do until the
landlord is required by law to upgrade
the building.
Where the use of the premises
is being changed, for example a
residential building being converted
into an office, this can trigger a
Building Act requirement to strengthen
the building to the new building standard or
something reasonably close to it.
When negotiating the terms of the lease for new
premises both the landlord and the tenant need to
be wary of the many weaknesses in the standard
commercial lease.
Jeff Kenny, member of the NZICA & NZLS focus
group and Commercial Property Lawyer says:
“We can learn a lot from overseas experience.
Following the terrorist attacks in London and New
York weaknesses were exposed in their leases. The
property industry responded with new provisions
which were more appropriate for both landlords and
tenants.
“Given the issues that we are faced with in
Canterbury and the rest of New Zealand we need to
do the same. For example, the uncertainty around
whether a lease has terminated can be avoided by
simply putting a time limit on the period during
which a tenant cannot use the premises if they are
damaged or cordoned off. This in turn should be
discussed with each party’s insurance broker and
taken account of when arranging insurance as is
now done overseas.”
Where the status of damaged buildings is still
unclear the landlords need to be careful to liaise
with their insurer. This, unfortunately, can tie the
landlord’s hands when dealing with tenants.
Most tenants will have moved to alternate
premises and will not want to be faced with the
possibility of paying two rents. This can easily
BRIEFCASE
happen where a tenant has moved from
a relatively undamaged building within a
cordon or from a building which didn’t take
a long time to fix, or the lease termination
provisions weren’t automatic and gave
the landlord discretion about whether to
terminate the lease or not.
Landlords, on the other hand, will be
looking to maximise their investment
and make sure they do not agree to
anything which could cause problems with
the insurer or bank. In some cases it is
uneconomic or undesirable for the landlord
to repair the building.
Some landlords are also faced with the
prospect of pursuing an unwilling tenant.
Where this happens the landlord will
often be better to claim on their business
interruption (BI) insurance for loss of rents
and be free to redevelop the site in future.
Insurance remains a big issue but
things are beginning to move faster with
interim insurance payments being made
on account of business interruption and
material damage claims. However there
are quite a few things that landlords and
tenants need to be careful about. These
include insurance provisions in leases,
business insurance indemnity periods
coming to an end, material damage claims
and lack of new insurance policies.
For many business owners the BI
insurance period will run out in February.
Given that interim insurance payments
have been made, often with no identified
split between BI and material damage
claims, there will need to be a washup
for a large number of claims. Where
businesses have not received their material
damage payments and have not yet moved
out to new premises, they may be moving
too late to have their moving costs covered
under their BI policy because the move will
be after the insurance indemnity period
expires. Business owners should discuss
that issue with their advisor.
For some business owners and landlords
who have made material damage claims
there was an election time limit on 31
January 2012 for tax depreciation rollover
relief. Business owners and landlords
should talk to their tax advisors and ensure
that the proper election is made where it
is needed.
The availability of insurance will
hopefully improve over time but it is
possible that a landlord may not be able to
insure a particular building against certain
risks. Standard leases assume insurance
will always be available, but parties should
cater for the possibility that this may not be
the case.
Typically the landlord purchases the
insurance and passes on the premium cost
to the tenant. Insurance premiums have
rocketed and excesses have dramatically
increased. It is sometimes possible to get
further insurance for the excess but this can
be expensive.
Kenny explains: “All this creates risks
and significant costs for both the landlord
and tenant. Both parties should look to
understand these risks and costs and look
to fairly apportion them under the terms
of the lease. For example a landlord and
tenant may agree that the tenant will meet
a share of the excess in return for a lower
premium.”
“However landlords need to be wary
because the Property Law Act has some
clauses which can cause problems
recovering excesses from tenants.
Unfortunately, the standard leases in NZ
do not deal with these issues very well so
special provisions are required.”
These are just some of the leasing
issues that businesses need to be aware
of. Usually they wouldn’t matter too much
but given the current environment they are
extremely important and will remain so into
the future. When rebuilding gets into full
swing, further issues will become important
and both landlords and tenants should
get good advice from their professional
advisers, both accountants and lawyers, on
how to manage these before signing on the
dotted line.
ANNE NEWMAN is a communications specialist
working for NZICA in Christchurch.
Woodhouse new whip
List MP Michael Woodhouse CA has been
appointed senior whip of the National Party. From
Dunedin, Woodhouse is an NZICA member and
a member of both the Institute of Management
and the Institute of Directors.
Tax stats online
Inland Revenue’s annual tax statistics were
updated in December at ird.govt.nz. The statistics
now cover the fiscal years from July 2001 to June
2010, and the customer statistics are available
for April 2001 to March 2011. This is the third
year that Inland Revenue has made tax statistics
available online, giving the public access to a
wide range of data about tax revenue and social
entitlements.
New IFA board member
The Institute of Financial Advisers (IFA) has
announced the appointment of independent
director Jeremy Bendall CA to the Board.
Bendall is Managing Director of Bendall
Advisory, a niche consulting practice which
provides strategic planning, strategic selling,
risk governance, performance measurement,
facilitation and governance reform services
to clients in New Zealand. He has gained
extensive experience in the financial and
professional service sectors, through his work
with financial institutions, time as a partner
with KPMG and various leadership and
educational support roles with professional
bodies across New Zealand. Bendall also has
significant experience in the not-for-profit
sector, having been a director of Tennis NZ for
eight years and deputy chair since 2009.
Chief executive of Queenstown airport
Scott Paterson ACA has been appointed
Queenstown Airport’s new chief executive.
He has experience in chief executive and
senior management roles in Australian and
New Zealand seaports, including four years
as chief executive of Port of Portland in
Victoria, Australia. Before his time in Australia,
Paterson was general manager of logistics at
the Ports of Auckland for four years. He will
take up the position on 1 March.
CHARTERED ACCOUNTANTS JOURNAL FEBRUARY 2012 15
01
2
Business interruption insurance
NT
ERBURY 2
LATEST
CA
Many Christchurch business owners face the
end of their business interruption insurance in
February.
BUSINESS INTERRUPTION INSURANCE (BI) has been on
the agenda of most business conversations in Canterbury
over the past 10 months. More people than ever before
are now experts on the subject.
However, there is still a lot of uncertainty. And this
uncertainty is likely to intensify at the end of February
when indemnity periods come to an end.
Warren Johnstone CA, member of New Zealand
Institute of Chartered Accountants (NZICA), says the
uncertainty is slowly being removed and Cantabrians can
now see a clearer picture for Christchurch.
“BI insurance is still the number one issue for smalland medium-sized businesses, closely followed by cash
flow and leasing issues. However things are beginning
to move faster with interim insurance payments being
paid out on business interruption and material damage
claims.”
There is still confusion in the market however with
some business owners thinking that BI insurance is
triggered by the fact there was an earthquake. It’s not.
The trigger is actually physical damage to the business
(or under some policies, a lack of access) and the
resultant adverse impact on financial performance.
16
Business
owners and
landlords
should talk
to their
accountant and
ensure that the
proper election
is made where
it is needed
It is also important to know how BI payments are
calculated. This can be complicated as it is based on
the financial performance of the business “but for” the
damage which needs to be predicted. Loss adjustors and
ultimately the insurance company need a clear picture
of the business had the event not happened. So having
good records of your businesses’ previous trading history
and compiling them so they can be easily understood is
helpful. This is where having an accountant in place that
knows your business is vital. It is also very important to
understand how adjustments should be made under the
BI policy.
When making a claim there is often scope for
argument about what adjustments should be made.
Following the Christchurch earthquake we have all heard
about adjustments for “depopulation” and so forth.
What adjustments should be made should be looked at
for each claim and particular business. In other words,
each claim should be assessed on its own merits and
this can result in adjustments both up and down. An
obvious example would be a damaged bar in Merivale.
It’s highly unlikely that this would be adjusted down
for depopulation. If anything, it would be adjusted up
because the Merivale area is now so busy.
To help maximise the insurance payout it is a very
good idea to get advice from your accountant, and to
give the insurer clear supporting information as to why
adjustments should or should not be made. While small
businesses may worry about the cost of employing an
accountant to help them with their claim it will save
them time and frustration in the long run.
Small business owner Jill Elliot of The Sauce Kitchen
said: “If it wasn’t for our accountant our insurance claim
wouldn’t have been so easy to navigate. He was able
to present the insurance claim in a way that worked, he
understood the whole process and had experience of
what other businesses were going through. He was able
to put our business forward in the best possible light. We
wouldn’t have survived the repercussions of earthquake
without his knowledge and support.”
The cost of getting assistance is often covered by a
BI policy so business owners would be advised to take
advantage of this.
For many business owners the BI insurance period
will run out in February. Given that interim insurance
payments have been made, often with no identified split
between BI and material damage claims, there will need
to be decision made on the parameters of a large number
of claims. Loss adjustors will be busy. So business owners
should try and get their claim information in as soon
as they can. Also, ensure the information is
presented as clearly as possible, to make the
payout process faster.
Where businesses have not received
material damage payments and have not
yet moved out to new premises, they may be
moving too late to have their moving costs
covered under their BI policy because the
move will be after the insurance indemnity
period expires. Business owners should
discuss that issue with their advisor.
For some business owners and landlords
who have made material damage claims
there was an election time limit on 31
January 2012 for tax depreciation rollover
relief. Business owners and landlords should
talk to their accountant and ensure that the
proper election is made where it is needed.
“We need to get insurance claims settled
so the rebuild can start,” says Johnstone.
“We also need the insurance companies to
make insurance available again so investors
can start projects with confidence. The city
will not be able to attract the people we
need to rebuild Christchurch if they cannot
purchase insurance, so this is a critical
issue. If delays arise, more people and more
money will leave Christchurch, slowing our
recovery.”
While insurance is a hot topic for
Cantabrians, businesses all around New
Zealand should review their insurance and
understand it. NZICA recommends that
businesses that are prepared are more likely
to survive a crisis.
Be prepared for the unexpected. Consider
the impact of a major event and how
your business would react. This is not only
about having good insurance in place
but also good IT backups and a strategy
around communication, in short a basic
disaster recovery plan. Having the support
of professional advisors is also vital in
navigating the road to recovery, especially
when it comes to insurance.
ANNE NEWMAN is a communications specialist
working for NZICA in Christchurch.
BRIEFCASE
IESBA Code of Ethics
The International Ethics Standards Board for
Accountants (IESBA) is proposing changes to
its Code of Ethics for Professional Accountants
(the IESBA Code). It aims to provide additional
guidance to professional accountants in
business and in public practice concerning
conflicts of interest, and to make revisions
to provide more comprehensive guidance in
identifying, evaluating, and managing conflicts
of interest. Ken Dakdduk, IESBA Chair, says the
proposed changes will provide more specific
requirements and guidance for a professional
accountant in applying the conceptual
framework when identifying, evaluating, and
managing conflicts of interest. This includes
a clearer description of what is meant under
the IESBA Code by the term “conflict of
interest”. To access the exposure draft and
submit a comment, visit the IESBA website at
ethicsboard.org.
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xfina
nce.c
o.nz
e.co.
nz
17
NEW ADMISSIONS
CONGRATULATIONS TO OUR PEOPLE
ON THE RISE.
The following admissions to NZICA’s Chartered
Accountants, Associate Chartered Accountants and
Accounting Technicians Colleges, and Certificates
of Public Practice have been confirmed.
CA COLLEGE
Ashby, Jack................................... Wellington
Ashford, Robert Darcy Neil.............. Auckland
Bahadur, Salesh Chand.................... Auckland
Bartlett, Michelle........................... Wellington
Bill, Michael Lindsay............................ Sydney
Boivin, Andrew John........................ Auckland
Cabrera, Joselito Enriquez.............. Wellington
Crossman, Melanie........................ Wellington
Currie, Michael George............... Waikato/BoP
Downey, Gary Gerard....................Canterbury
Farman, Almane Roy........................ Auckland
Huston, Oliver Thomas................... Wellington
Johnson, Nicholas........................... Auckland
Kalapu, Faasalalau........................ Wellington
Kidd, Nathan Alexander..Coastal Bay of Plenty
Kumar, Anish................................... Auckland
Kumar, Vivek......................Brisbane, Australia
Little, Eve Cornelia.......................... Northland
Liu, Li............................................Canterbury
Malhotra, Anshul............................. Auckland
Marambos, Pavlos.......................... Southland
Martin, Samuel..............................Canterbury
McCollum, Kurt............................... Auckland
McGlinchey, Michael Joseph Savage.... Wellington
McKenzie, Yuliya.............................. Auckland
McKeown, Peter David................... Wellington
Messerschmidt, Carl Paul............... Wellington
Mussa, Sharifah Nazir Mohummad.. Auckland
Nally, Amy..................................... Wellington
O'Brien, Hailey Anne..................... Wellington
Robson, Venita Andrea............... Waikato/BoP
Rogers, Matthew........................... Wellington
Sims, Rebekah Leah....................... Wellington
Sofe, Ahmed Abdirehman.............. Wellington
Spencer, Lucy-Jane......................... Wellington
Swami, Amit.................................... Auckland
Tee, Irene........................................ Auckland
Wishnowsky, Aaron....................... Wellington
Xia, Weihua................................... Manawatu
Yip, Susie Ying Yee........................... Auckland
ACA COLLEGE
Atkinson, Nicole Robyn................ Whanganui
Brokenshire, David.........................Canterbury
Collins, Nadia Pearl Anne................ Southland
Garg, Seema................................... Auckland
18
Li, WenTao.................................... Wellington
Mitchell, Janina Jezefa................Bay of Plenty
Newson, Karen Francis................... Northland
Patel, Iqbal...................................... Auckland
Rowbotham, Roseanne Mary......... Wellington
Solomona, Matthew Tomokino..... Bay of Plenty
Ting, Christopher Lee Duen.............. Auckland
Van Turnhout, Sharon Anne....................... UK
Walton-Hannay, Mathew Paul......... Auckland
Yang, Jing.....................................Canterbury
AT COLLEGE
Bayne, Bronwyn Nadine.................. Southland
PUBLIC PRACTICE
Atkinson, Andree Louise.................. Auckland
Barnett, Ross David.................... Waikato/BoP
Chong, Yee Ken............................... Auckland
Cross, Jamie Alan........................... Southland
Daud, Minaxi Ben............................ Auckland
De Wit, Christopher Michael.......... Wellington
Drake, Donna Diane.................... Hawkes Bay
Flaherty, Kay Elizabeth................Marlborough
Floyd, Tracey Caroline...................... Auckland
Goh, Yin Leng................................ Wellington
Griffiths, David Jeremy Verity.......... Wellington
Hunt, Daniel Jonathan..................... Auckland
Jesudason, Hector Jeveendran......... Auckland
Judge, Murray Eric........................... Auckland
June, Darryl Wayne........................ Manawatu
Kincaid, Haylee Anne...................... Southland
Laugesen, Catherine Vera............ Hawkes Bay
Loughnan, Richard..................... Waikato/BoP
Lowe, Daniel Roger......................... Auckland
Lu, Wan-Wei.................................Canterbury
MacDonald, Amanda Jane............... Auckland
Mackie, Sheryl Grace................... Hawkes Bay
Mohamed, Mohamed Hussien Hassan...Auckland
Mundy, Steven James................. Waikato/BoP
Stewart, Michael Douglas..............Canterbury
Tagi, Eli Elisara Saina....................... Auckland
Thibaud, Brian Leon........................ Auckland
Vollebregt, Stephanus Johannus.... Waikato/BoP
Williams, Angela.......................... Hawkes Bay
Wolken, Raymond George............. Wellington
Yan, Guojing................................... Auckland
Zhong, Liang................................. Wellington
MOVING UP
BRONWYN BAYNE AT
Accounts Officer, Southland
Building Society (SBS), Invercargill
What does your role entail?
SBS is a registered bank and I am
the accounts officer in the finance
team.
How long have you been with SBS?
Five years.
Why did you choose accounting as
a career?
I have a natural ability with
numbers and problem solving and
this has always been an area in
which I’ve enjoyed working. I have
tried many other jobs, but always
missed the challenge of getting
something to balance/reconcile.
What has been most rewarding?
Working with eight CAs in a
corporate sector environment as
part of a team that is willing to
share knowledge and help each
other. Also, the management team
at SBS has within its charter "our
people make the difference" and
this culture flows from the top
down. It’s also good being able
to study part-time and see the
teaching applied in real life rather
than in a textbook exercise.
How did you spend Christmas?
I had a quiet Christmas with my
parents – the usual turkey and
all the trimmings, and catching
up with other family members
throughout the day.
Did you take time off for a holiday?
I worked through the break
with only the stat days off, but I
managed to get away to Alexandra
for a week where I borrowed my
parents caravan, did a bit more
of the Central Otago Rail Trail,
checked out a few of the region’s
vineyards, turned off the cellphone
and relaxed.
Have you made any New Year’s
resolutions?
Yes, I hope to get the garden under
control and plant a vegetable
garden.
What are you hoping to achieve in
2012?
To live more, love more and laugh
more, and not take things too
seriously – and possibly complete
another business studies paper.
NEWS
business
bastard has put my name in there. I’m not
quite sure what I’ll do if it does pop up, but
I suppose I’ll have to go to the funeral if only
to pad out the numbers.
Still on the subject of death, have you
noticed how many newspapers include
the Births, Deaths and Marriage notices in
the Sports section? Now I can understand
how the births might qualify for inclusion
there, although I must say that the related
sporting event was clearly some months
prior, so the reporting is a little out of date.
With marriages these days, the sporting
events probably started long before the
actual marriage, but I suppose they could be
regarded as ongoing sporting activities. But
as for death, really, it takes a macabre sense
of humour to see them qualifying as sporting
events.
I’VE BEEN ASKED quite often whether a
Ask Uncle Tom
Death, sports, disclaimers, liens and the
Almighty’s galactic problem.
F
or
by TOM DAVIES FCA
those of you with the leisure
time to read NZICA’s annual
report (okay, so I had some spare
time) there’s some interesting
stuff in there regarding member
statistics.
The membership continues its
steady growth, but in the area of
female membership the growth
track shows a welcome increase
over the past five years from 37% to 41%
of total membership. Another trend which is
also interesting is the average age of members.
Although the average age in years is not
provided, it is clear from the movements in
the age brackets that the average must be
increasing. Maybe it’s because we are now
living (and working) longer.
This doesn’t stop me scanning the death
notices each morning, just making sure no
This doesn’t
stop me
scanning
the death
notices each
morning, just
making sure
no bastard
has put my
name in
there
member who prepares accounts which
are then audited should include the usual
compilation report and disclaimer or
whether this was inappropriate where the
accounts were audited.
There are different views held on this
subject, but my thoughts, for what they are
worth, is that the compilation report and
disclaimer generally should be included.
The compilation firm and the auditor have
different functions. The auditor describes
(very briefly) in the audit report the work
carried out and the different responsibilities
of the entity’s directors and the auditor.
The compilation report describes, equally
briefly, the compilation firm’s involvement
and, usually, a disclaimer of liability. By
including both reports, the auditor’s and
the compiler’s, a reader of the accounts
then knows the individual firms’ different
involvements.
As regards liability, just because the
accounts have been audited does not mean
that the compiling firm is thereby excluded
from any claim against it. You don’t have
to strain the mental faculties too much to
imagine situations where both the auditor
and the compiling firm could be sued over
a mistake in the accounts, or situations
where one or other of them could be on the
wrong end of a writ. That is a strong case
for including the disclaimer.
NEWS
business
So my view is that the compilation
report, including a disclaimer
of liability, should in all cases
accompany the accounts presented
by the compiling firm to the client.
Whether it should remain attached
to the audited accounts which are
circulated to the shareholders should
depend on how those accounts are
produced. If they are circulated on
the compiling firm’s letterhead, or
that firm can in some other way be
clearly linked to the production of
the accounts, then I believe the firm
should require that the compilation
report and disclaimer remain
attached to the circulated accounts
to continue that protection. If the
circulated accounts are presented
to shareholders in a manner which
does not show the compiling
firm’s involvement with them then
I believe the compilation report
and disclaimer can be dispensed
with at that stage. The compiling
firm’s position is still protected by
the attachment of the compilation
report and disclaimer when it
delivered the accounts to the client.
I’VE MENTIONED THE use of possessory liens on occasions but recently
a new twist to this subject arose –
can you exercise a possessory lien
when the fees have been settled by
the use of feeSmart?
For those not familiar with
feeSmart, this is a financing
arrangement whereby clients can
have their fees paid directly to their
accountant by feeSmart and then
reimburse feeSmart with regular
payments over the next 12 months.
If the client defaults then feeSmart
has recourse back to the accountant.
The issue arose because a
practitioner who had had his fees
settled in this manner learned that
the client was moving to another
accountant. The practitioner still
held the records and had strong
reservations about the client’s
ability to maintain the payments to
20
feeSmart, and anticipated having to
regurgitate some of the fees back
to feeSmart under the recourse
arrangement. He wanted to know
if he could retain the records by
way of a lien against the possible
(probable) exercise of the recourse.
We tossed it around, and came
to the conclusion that he could
not exercise a lien as he had been
paid. The recourse was only a
contingency. However, if a demand
under the recourse clause was made
and he still held the records, then
that would be different as then
the practitioner had a valid claim
against the ex-client.
LAST YEAR SAW some bizarre issues
dealt with by Professional Support,
but that’s what makes the job so
interesting.
For instance, there was the client
who took advantage of a member
guaranteeing to complete accounts
and returns by a certain date with
a return trip for two to Australia
if he failed. The client deliberately
kept back vital information so the
accounts could not be completed
by the guaranteed date, and then
wished to complain that the
practitioner had refused to provide
the promised air fare.
Then there was the usual bunch
of practitioners pulling their hair
out trying to deal with competing/
opposing demands of clients going
through marital bust ups. I truly
think the happiest practitioners are
those whose clients are all celibates.
One of the more interesting ones
was where the marital discord
arose at a party attended by the
practitioner and his wife as well as
by a client and his wife. It was one
of those parties where the fun and
games involved identifying various
appendages of the attendees who
were otherwise hidden (settle, settle).
The difficulty arose when one party
identified too eagerly and too readily
the wrong appendage, and it was
irretrievably downhill from there.
For final mention are the squabbles
that arise on the transfer of clients
when the “losing” practitioner
is overly sore about it all, and
gets difficult over transferring the
records, leaving the clients in the
middle wondering what on earth is
going on.
I had hoped that the Almighty
would give me a smoother year on
this lot but it seems that the Almighty
was not acting to full potential in
2011. Not too surprising I suppose.
He not only has his flock on Earth
to worry over, but astronomers
have now identified another planet,
Kepler 22b, to join Gliese 581d and
HD 85512b, all of which probably
have other flocks requiring pastoral
care.
Apart from their names, which
do nothing to promote galactic
tourism, Kepler 22b’s main catch
is that it’s 600 light years away.
The question to be considered is
whether Einstein’s immutable laws
apply to the Almighty, especially
the one about the impossibility of
travelling faster than the speed of
light. Can’t think why they shouldn’t
which means that, with all these
new exoplanets popping up, it’s
not surprising that the Almighty is
feeling a little stretched covering this
rather extended parish.
I can imagine him putting his
head round the door and saying to
Gabriel: “Get your wings in here –
tell one of those cherubs to pack me
a bag. I better get out to Kepler 22b
and check on things. I’ll be gone for
1200 years.
“Oh, and take a letter to Satan.
From God the Almighty, the Ever
Merciful, usual titles – you got a guy
Einstein down there. Sixth Circle
I think. In for a rap for making
unauthorised immutable laws. Do
me a favour and I’ll owe you. Turn
up the heat a notch!”
Tom Davies is Director – Professional
Support at NZICA.
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Interest rate is current as at 20th January 2012 and is based on a 5.00% p.a interest rate on a Choices Everyday home loan and is subject to change at Westpac’s discretion. You must be a current member of NZICA
to be eligible for this special rate. Westpac’s current home loan lending criteria and terms and conditions apply. An establishment fee may apply. A Low Equity fee may apply. An additional fee or higher interest rate
may apply to loans if the application is accepted but does not meet standard lending criteria. Westpac New Zealand Limited.
WES0492 NZICA_200x217_V10.indd 1
9/01/12 10:54 AM
PEOPLE
profile
Richard Austin enjoys
the Queen Charlotte
Sound on his yacht
Fiddlestix.
22
PEOPLE
profile
Helmsman
New NZICA President Richard Austin FCA explains his key goals for
2012, his approach to the Presidency, and his love of sailing to Journal
Editor Aaron Watson.
Y
by AARON WATSON
ou
can learn a lot about
Richard Austin FCA from
his approach to sailing.
Sailing is a family hobby.
Austin’s father got him into it,
and his brother has raced around
the world.
“I’m not excessively competitive,” he says. But he notices how
fast we are going relative to the
other boats on the water that day. (His yacht,
Fiddlestix, passed a few quite comfortably.)
The yacht is tidy, clean and well maintained.
And he takes pleasure in the whole experience.
From ensuring his two dogs, Cosmo and
Minty, stay seaworthy (although the doggy
lifejackets weren’t needed on a calm day) to
making sure we take the right track and keep
the sails trimmed to best advantage.
“The thing about sailing is that the journey
is part of the intention, as much as the
destination. In a power boat, it is often all
about the destination,” Austin says.
“I really enjoy planning trips. Working out
where to go and how to get there.”
The new NZICA President takes his hobbies
seriously. He has trained in coastal navigation
and is not totally reliant on technology to get
him to where he is going.
He has navigated the “easy” waters of
the Marlborough Sounds and the more
The thing
about sailing
is that the
journey is
part of the
intention, as
much as the
destination
treacherous currents and whirlpools of French
Pass.
It is clear he loves the area.
“The native bush comes right down to the
waterline. There are not many places in New
Zealand where you can say that. If you are in
a little bay overnight, you wake up to native
birdsong,” he says with a smile.
As we sail past Allports Island, Austin recalls
spending three days alone there as a young
man – a survival test as part of an Outward
Bound course.
“It is a long time to be by yourself – you do a
lot of thinking. I discovered I was comfortable
doing things on my own – I guess a lot of
people find that they aren’t.”
It’s a poignant comment coming from a
recent widower. Austin’s wife Susan Selway
was a victim of the 22 February Christchurch
earthquake.
Her memory is a presence throughout the
interview. This is his first jaunt on the yacht
since her unexpected death, and Austin is
honest and open about the memories it holds
for him.
“February last year was Susan’s birthday.
We came here with friends, we had a bach
and stayed here for three days. That was just
before the earthquake.”
While he does not shy away from the topic,
it is clear there is much more that he could say.
23
PEOPLE
profile
“It’s the first time I have been out like this.
I’m feeling good about being on the boat
again.
“Although I lost Susan, I know she would
have been proud of me. I am delighted to be
able to undertake the role of President.”
IF YOU TOLD the young Richard Austin he
would become President of the New Zealand
Institute of Chartered Accountants he would
have laughed at you.
Simply joining the profession was something
of an afterthought.
“When I left school I wasn’t sure what I
wanted to do. I remember driving through
an industrial suburb of Christchurch and
wondering, who looks after all the businesses?
They must need an accountant and someone
to advise them – that could be just the job.”
He studied accountancy extramurally
through Massey while working in the trustee
industry. During that time he also got married
and had children – his two sons from that first
marriage are still resident in Christchurch – a
route into accountancy he admits was more of
a marathon than a sprint.
“No matter how hard it got, the attitude I
took was that if I found it tough then other
people would be finding it tough. They are
probably going to want to slacken off – so if I
go a bit harder then I should pass.
“When I start something, I like to complete
it. Well.”
He joined the Canterbury Westland branch
committee in the mid-1990s and found he
enjoyed the role.
“I felt I could see what a lot of the frustrations
from members were. I believe that if you are
advocating change then it is incumbent on you
to try to change, rather than just talk about it.
I became branch chair then a councillor and
was nominated on to the original Fit for the
Future steering committee.”
FIT FOR THE FUTURE 3 (F4F3) is one of
his priorities as President. The successful
implementation of the organisational changes
voted for by members in November will be
critical for the Institute, he says.
“We must get the foundations embedded
properly. That will be a huge determinant of
the success of the programme.
24
The attitude
I took was
that if I
found it
tough then
other people
would be
finding it
tough. They
are probably
going to
want to
slacken off
– so if I go a
bit harder
“So far we have done a really good job in
terms of the proposals. It was great to see
democracy at work with the changes that
were made after feedback from members. The
organisation did listen.”
Fit for the Future three will see Branch
Committees
transformed
into
Local
Leadership Teams, a regional electoral college
model introduced for councillor elections
and a renewed focus on sectoral targeting of
NZICA products and services (see nzica.com)
for details).
Austin says that having the changes
embedded and the implementation phase
underway will be one of his personal key
performance indicators for his year in the
Presidency.
In this respect, he will be carrying on
the work of his predecessors Ross Jackson
FCA, who made consultation with members
around F4F3 one of his priorities in 2011,
Dinu Harry FCA, who focussed strongly on
embedding the governance structure that
came out of F4F2 in 2010, and Linda Turner
FCA who kicked the F4F review process off
in 2009.
“Each President is only there for one year,
so there is only so much incremental change
you can be part of,” Austin says.
As the Institute has changed, the role of
the President has changed. Before the F4F2
governance review, the President was the
leader of the membership and the voice of the
members through Council, as well as chairing
the Executive Committee.
“Prior to having a Board, the role of the
President encompassed everything. Now, the
role of Council and therefore the President is
more defined.”
With an elected Board in place, the
President plays an important role linking the
“member voice” with Board, Council and
with management, Austin says.
“All this interaction hopefully provides an
outcome that is bigger than the sum of its
parts.”
But other aspects of the role remain
unchanged.
Meeting
new
members,
recognising the work of older members,
awarding Fellowships – these are important
functions for members and the organisation.
“It’s a very enjoyable part of the role. You
get to meet real people who are the fabric of
the Institute.”
The earthquake reinforced for him the
importance of people, he says.
“NZICA does not have a lot of fixed assets.
Our biggest assets are people.”
Austin says one of the challenges for NZICA
is that the membership comes in “batches of
one”.
“And there are 33,000 members. They all
see the Institute as an amorphous mass. Our
challenge is to recognise that the members
are individuals and ensure that they perceive
they are getting value from membership of the
organisation.”
The President is also the “face” of the
Institute to the world.
“That’s a key part of the role. It is
important that people see the President, the
Board and the chief executive in alignment of
vision, see a focus on quality, and that they
gain an understanding of the role the Institute
has to play in the New Zealand economy.
I’m looking forward to the opportunity to
contribute to that.
“Another aspect, and one of the big
priorities, is the collaboration with the
Institute of Chartered Accountants in
Australia. Having a strong relationship with
my Australian counterpart is important in
supporting the Chair and CE in their work.”
A second priority for Austin is strengthening
the communication between the membership
and the Institute. Council will play a greater,
and key, role in this, he says.
“I’d like the councillors to be able to look
back at 2012 and say that it was a really
good year because we had strong leadership
and good communication. I have said that
at the first Council meeting I want feedback
on how much and what sort of information
councillors want from me.
“I want to introduce into Council a session
on the issues that are affecting members.
What is happening in the public sector, in
the corporate sector and in public practice
That will be an agenda item to help deliver
relevance to the member base.
It will
help councillors be more connected to the
membership and provide a forum to discuss
issues in a constructive way. We need to
understand the key issues, and address them.
“People can accept decisions, even if
they don’t like them, if they have had the
opportunity to contribute and consensus is
achieved.”
As President, you face both inward and
outward, he says.
“It
presents
some
really
good
opportunities. When I’m facing the Institute,
a part of that is the staff – and remembering
that everyone is there for the membership.
A third priority is to ensure NZICA
contributes to New Zealand’s economic
strength in a difficult time for the world
economy.
“This is going to be a difficult, challenging
year. Our members have a responsibility
and opportunity to get their clients through
it, and make the difficult decisions.”
And NZICA in turn has a role in
supporting members to support their clients
Top: Minty and Cosmo
enjoy the sailors’ life
Above: Richard Austin –
“I really enjoy planning
trips. Working out
where to go and how to
get there”
25
PEOPLE
profile
“even if just through CPD”, Austin says.
“The Institute needs to be aware and
responsive. It needs to know what the issues
are and to ensure support and training is
available. A lot of clients will look to their
CA for advice as things tighten up.”
WHEN IT COMES to advising clients, Austin
takes a member’s perspective as easily as
that of President.
As a director of financial advisers Strategic
Wealth Management Group he will be on
the front lines of the economic recovery.
“The risks of investing are higher and
returns are harder to gain. You really have
to be focussed on understanding the risks
and how to manage them. Then finding
ways to make positive returns.”
Austin comes to the role having spent
a large part of his career in the trustee
industry, during which he realised he had an
interest in investing.
“I was also the CEO of the Canterbury
Community Trust which was a large
shareholder in Trustbank NZ. Following
the sale to Westpac we had $400m in cash
which I managed personally for a year while
we established our investment strategy.
“My biggest influences while Chief
Investment Officer at Gould Holdings
were George Gould and Kevin Arscott. We
managed a lot of private equity investments.
Buying, selling, merging… That was a
fantastic learning experience.
“Through that period I also had a number
of private clients who I provided investment
advice to. I realised that providing a highlevel professional service was a good
business opportunity, and that’s the way it
played out.”
He takes a client-focussed approach at
Strategic Wealth Management, working
closely with business partner Steve Mander.
“We are developing a very strong
company with high quality clients – I try to
have a strong relationship with them all so
they tend to hear from me a lot. The role is
not only about looking after clients but also
about keeping up with the markets, interest
rate movements, equity market movements,
economic trends… every day you need to
be keeping abreast, reading. On top of that,
you have your clients.”
26
NZICA does
not have a
lot of fixed
assets. Our
biggest
assets are
people
Adding the responsibilities of the NZICA
President to that busy working life could be
potentially problematic. But a year as Vice
President has taught Austin key lessons.
“You have to pace yourself. It is important
to choose carefully which events you attend
if you are to get the maximum benefit from
your time. And I know that members are
very interested in meeting the President,
particularly the new members. It’s important
to remember the dignity of the office.
“The other bit is trying to get good at
delegation. The role of councillors is part of
that.”
On a personal level, he wants to really
enjoy the role.
“If you enjoy something then you give it a
lot of energy and hopefully do well.
“Another personal goal is to ensure there is
a balance in my life. The role is a demanding
one, particularly when you add it to your
day-to-day work life.
“I’ve always been involved in sport at
some level and I want to keep doing that.
The challenge is to find the time to get out
and do it. Everyone talks about getting fit –
I’d like to actually do it.”
He hopes to continue to do a bit of masters
rowing, and has bought a road bike, which
he talks about in the same vein as sailing.
“It’s not about racing. It’s about some long
roads and good scenery and enjoying being
out there.”
With NZICA increasingly focused
on strategic issues – “trying to be more
proactive than reactive,” Austin says – he
reiterates that the success of the President
in aligning the Institute with member needs,
and in embedding the Fit For the Future
programme, will be the remain his key
performance indicators.
“There are differing views among members.
But the Institute has to change with the times
if it is to stay relevant. My job is to make sure
that the change is appropriate, understood
by members, and accepted by members.
“At NZICA, everyone I have dealt with
has a mandate to do their best for members.
Having said that, I think you have more high
calibre staff on board now than ever before. I
can’t speak highly enough of the staff at both
national and branch level. My role is to face
both ways, and keep those groups working
together.”
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NZICA JOURNAL FEBRUARY 2012
27
NEWS
business
The management
accountant: focus on
performance
A balanced scorecard approach can
help management accountants achieve
performance improvements across their
organisations.
M
by MICHAEL FRASER
anagement
accounting has long been
described as a practice that
analyses and communicates information in a
manner that creates (or protects) value. Such a
description leaves many questions unanswered
and creates many more. Two central, interrelated
questions that arise are: how is this value created
and how is it measured?
Paul Anderson, CA, General Manager for
Corporate Services for Christchurch City Council
(CCC), has some answers. A recent finalist for the Ernst and
Young 2011 Public Sector CFO of the Year, Anderson has also had
recognition from Harvard University for the implementation of the
balanced scorecard.
Anderson has managed the Corporate Services Group since
2007 and is responsible for delivering shared services across
Christchurch City Council. These services include finance, planning
and performance, information technology, property, procurement
and asset management. He is also responsible for leading the
implementation of a performance framework. It was the success of this
performance framework that helped the council to respond to more
recent challenges of an emergency and rebuilding of Christchurch.
He received international recognition with a Harvard Business School
Award. Christchurch City Council adopted the balanced scorecard
in 2007 and has since completely overhauled its planning and
management practices.
Revisiting the balanced scorecard
A key characteristic of the balanced scorecard is the systemsperspective adopted to performance management. The inclusion of
non-financial information provides a forward-looking perspective for
those managing performance in a manner that supplements historical
financial information. The coupling of non-financial and financial
data in a manner that links short-term action to the organisation’s
strategic plan is one of the strongest features of the balanced
28
scorecard. This means managers in any given
organisation do not have to rely solely on
short-term financial measures as indicators
of performance. In contrast to a short–term
view, the balanced scorecard facilitates four
key processes.
• The first process is translating the vision.
This aims to express a vision or strategy as
an integrated set of objectives.
• The second process is communicating and
linking. It facilitates the communication
of strategy from individual objectives
to departmental and organisational
objectives.
• The third process is business planning. This
integrates both financial and non-financial
elements into one plan. Those tasked with
leading organisations frequently find it
difficult to integrate diverse initiatives
into strategic goals. However, when a set
of balanced scorecard measures serves as
the basis for prioritising and allocating
resources, the ability to co-ordinate
initiatives that link into long-term strategic
initiatives becomes more direct.
• The fourth process is feedback and learning.
This provides the platform for collecting
feedback as it relates to short-term results
from customers, internal business processes,
and learning and growth.
Christchurch City Council: the
“strategic spine”
In deciding to implement the balanced
scorecard at the council, consideration was
given to what constitutes value, and how it
would be measured. The council recognises
that performance objectives have multiple
dimensions. For example, a financial objective
with a “green” rating might indicate positive
position in isolation. However, if this is coupled
with a customer-service failure then the
overall result is regarded as poor. This holistic
overview facilitates managerial alignment to
strategy. Anderson suggests that:
“For a municipal authority, value is
about more than adhering to budget, it is
also about delivering quality services”.
(Palladium Executing Strategy Hall of
Fame, 2011, p.17)
Anderson and his team decided that
the balanced scorecard might provide the
opportunity to weigh the dual requirements of
budgetary targets and service delivery. In the
years from 2007 to 2009 Anderson
and his team worked with the wider
council to make balanced scorecards
for every level. This meant that
the strategic objectives set by the
executive management team cascaded
down to an individual level.
Specialist software and processes,
The Enterprise Project Management
System (EPMS), were developed to
capture the 1,000-plus infrastructure
projects (eg, roads, wastewater, parks)
that the CCC delivers each year.
The responsibility for this software
and associated processes is shared
across the planning, IT, finance, and
project delivery arms of the council.
This allowed for each task within a
broader initiative or project to have
an assigned owner and the associated
performance data reflected on their
individual performance plan.
The tracking of performance
objectives, metrics and targets to
initiatives and individuals also
involved the use of a system dubbed
Horizon. This system sought to
automatically update activity as it
related to specified targets and was
accessible across the council. Horizon
also provided input into individual
performance plans with balanced
scorecard (non)achievement recorded
along with the individual’s evaluative
criteria.
35% to 54%. Line of sight from
the organisation’s strategy to its
operations is now clear. During the
same period, the Council has posted
financial surpluses of $2.9 million
in 2007/08, $1.8 million is 2008/09
and $6.3 million in 2010/11. It is this
kind of performance that Anderson
believes positions the council well to
respond to the challenges the city has
been faced with.
Additional Resources
The results from the council clearly
indicate that implementing the
balanced scorecard was a worthwhile
activity. If you would like to know
more here are two books Anderson
and Ryan recommend:
• Creelman, J and Marr, B (2011)
More with Less: Maximizing Value
in the Public Sector, Palgrave
Macmillan, United Kingdom. This
book sets out the Christchurch City
Council experience in greater detail.
• Marr, B (2010) The Intelligent
Company: Five Steps to Success
with Evidence-Based Management,
John Wiley & Sons, United
Kingdom.
In addition to the above, keep an
eye out for CPD courses in 2012
that provide more guidance on
the balanced scorecard and other
management accounting tools.
The results
The results can be considered
within the council and outside the
council. Outside of the council,
recognition has come in the form of
an award from the institution where
the idea of the balanced scorecard
was conceived, Harvard Business
School. The Harvard Business School
balanced scorecard Hall of Fame
award honours organisations that
have achieved excellence though the
balanced scorecard.
Within the council the results
are obvious. The council is now
delivering 91% of its services targets,
up from 65% a few years ago, and
staff engagement has increased from
References
• Robert S Kaplan and David P
Norton, Using the Balanced
Scorecard
as
a
Strategic
Management System, Harvard
Business Review (January-February
1996): 76.
• Palladium Executing Strategy Hall
of Fame (2011) Strategy Execution
Champions:
The
Palladium
Balanced Scorecard Hall of Fame
Report 2011, Harvard Business
Publishing.
Michael Fraser is the management
accounting specialist in NZICA's
Technical Services Team.
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NEWS
business
a country’s economy.
Goldman Sachs
calculated that closing the US pay gap
could increase the GDP by more than 9%.
In Australia, Prime Minister Julia Gillard
recently announced a plan to increase the
wages of more than 150,000 community
service workers (some of Australia’s lowest
paid workers, the vast majority of whom are
women) – an initiative of up to $2 billion
AUD.
Explanations for the pay gap?
Unequal pay
Women continue to earn less than men,
and the reasons why are not always easy
to explain.
by SUZY MORRISSEY CA
A
s
part of the remuneration survey conducted each year
by NZICA, information is collected about geography,
years of experience and type of employer, as well as
gender. Differences in pay based on some of these
factors are expected and understood. A difference in pay
between the genders, however, is less easily explained.
In 2011, the pay gap between men and women surveyed
by NZICA was 27.6% (compared to 28.9% in 2010).
This compares to a 9.6% pay gap nationally, across all
paid employment (source: New Zealand Income Survey)
which had reduced from 10.6% in 2010. Such a large pay gap in our
profession deserves some critical review and this article will outline
some work that has already been undertaken as well as considering
some broader gender representation and remuneration issues.
International setting
We often look at our closest neighbours for comparisons but,
unfortunately, the Institute of Chartered Accountants in Australia
(ICAA) does not produce a remuneration survey and although salary
reports are produced by the major recruitment agencies, they do not
provide information by gender. However, we do know that globally,
NZ performs reasonably well. The average OECD pay gap is 18%.
Interestingly, in these difficult days post-GFC, it has been suggested
that fixing the gender pay gap could provide a significant boost to
30
There are some explanations for the pay
gap between men and women, the most
obvious of which is the greater proportion
of women that undertake paid work in a
part-time capacity. This is particularly true
of accountants and the increase in workplace flexibility over recent years is to be
celebrated. Of course, as accountants we
also recognise that it makes good financial
sense to support and retain staff in whom
much time and money has been invested.
Flexible work arrangements (including
remote working as well as variable hours)
are a great way of achieving this.
Other possible explanations for the pay
gap include the suggestion that women don’t
ask for enough pay. They will often accept
the offered salary rather than negotiate when
starting a job and that they are less likely
than men to ask for a pay rise or a promotion
during their career. Blaming the victim is not
generally a progressive approach but perhaps
we can encourage ourselves and others to
hold these “difficult” conversations.
The final often heard argument is about
women’s lack of experience, usually as a
result of taking time out of their career to
raise their children. Few would argue that
these women have developed their skills in
multi-tasking, flexibility and adaptability –
all key requirements for our careers. Could
these skills be more favourably viewed by
employers, especially when considering pay
and promotion opportunities?
Could workplace flexibility provide a
solution?
Each year since 2002, there have been more
female than male accounting graduates and
there are now significantly more women
under 45 in the profession than men, along
with a high number of male accountants
who are over 50. As we know, the
number of women partners and
associates is very low with many
women leaving the profession or
working part-time for a number of
years while they raise their family
and not progressing to partnership.
Combined with some key skills
shortages,
these
demographic
challenges prompted research to
be undertaken on flexible work
practices within the accounting
sector by the Ministry of Women's
Affairs in 2010 (with the support
of
the
Equal
Employment
Opportunities Trust and NZICA).
Flexible working was proposed as a
solution to the challenges faced by
the profession along with five key
benefits that it would provide to the
employer. Although the pay gap was
not directly covered, implementing
flexible work arrangements and
improving the retention of female
accountants would have the result of
increasing the average remuneration
of the female members of the
profession.
Could legislation also assist?
Although
there
are
some
explanations and potential solutions
for the pay gap, it remains difficult
to accept, particularly since the
legislative framework for equal pay
in NZ has been in place for many
years.
In
1960,
the
Government
Service Equal Pay Act was passed,
eliminating separate male and female
pay scales in the Public Service.
This was followed in 1972 by the
Equal Pay Act, which extended pay
equity coverage to the private sector.
Therefore, it would appear further
legislation specifically on pay may
not be appropriate. However, it
may be that the amount of workplace flexibility made available to
accountants could be improved
through
legislation.
Perhaps
legislative change to address female
under-representation in other areas
would also help?
The number of women on
company boards has received a lot of
attention in recent years and a range
of initiatives has been launched
at home and overseas. Currently,
women make up 9.32% of directors
of NZX companies (45 women hold
58 out of the 622 directorships). The
NZ Institute of Directors launched
its “Mentoring for Diversity”
programme last December and the
NZX has proposed legislation that
would require listed companies to
state the number of women they
employ in senior roles. This follows
the broader rules introduced by
the Australian Securities Exchange
(which come into effect for ASX
listed companies this year) that
require disclosure of the number
of women employed, the number
in senior management and the
number on the board. These rules
are likely to be responsible for
the increased number of female
appointments seen in 2011, resulting
in women now holding 13.5% of
ASX directorships (there are 140
women holding 199 board positions
according to the Australian Institute
of Company Directors). In Europe,
some countries have quotas for
female board members of large
companies. Perhaps a quota should
be considered for NZX companies?
The other area of female underrepresentation which concerns many
is the lack of women in politics. Of
course we know that NZ led the way
for women’s rights by becoming the
first country to grant women the vote
in 1893. We have a good proportion
of female MPs compared to some
countries, although the number was
reduced at the last general election
for the first time since MMP was
introduced (and is now 38 MPs or
31.4%). Around the world, women
represent an average 18.4% of
government reducing to 18.1% in
Asia. The figure is much higher in the
Nordic countries at 41.4% (source
for all: Inter Parliamentary Union).
Is it a coincidence that Scandinavia
The potential financial course
of a career of a new female
accountant today.
• As a graduate, a woman’s starting
salary will be on average 6% lower
than that of her male counterparts.
• After five years, this gap could
have increased to 17% (source for
both: Ministry of Women’s Affairs
study – Analysis of Graduate
Income Data 2002 – 2007,
Management and Commerce
graduates).
• A few years later, she may start
wondering whether she will reach
a six-figure salary. According to
the 2001 census data, only 3% of
female accountants were earning
$100,000 or more compared to
20% of male accountants (the
accounting profession had the
largest gender variance at this
salary level).
• When deciding whether to aim for
partnership, will she have many
female role models and will her
employer provide flexible work
arrangements if she decides to
have a family as well?
is known for its excellent parental
leave and childcare facilities, as well
other social benefit schemes?
Hope for the future
One of the key reasons for the pay
gap is the lower number of women
who stay in the profession (and reach
its higher levels) compared to men.
As we have seen, work is underway
to reduce this gap by providing more
workplace flexibility. This will help
women to stay in the work force for
longer as they juggle their family
and their career. Hopefully this will
result in more female associates and
partners in due course. There is a
saying “you can’t be what you can’t
see” so let’s hope the future contains
more women earning the same as
men for the same work, along with
more women in key roles in politics,
boards and CA firms.
Suzy Morrissey CA is a Committee
Member of the Wellington Women’s
Special Interest Group. Contact
[email protected] for more
information on the SIG
NEWS
business
Insolvency decision
affects creditors
A recent insolvency legal decision is
good news for employees and Inland
Revenue but bad news for secured
creditors.
I
by JONATHAN BARRETT CA
n
August 2011 the High Court issued an important decision,
potentially altering the outcome of many insolvencies for
preferential and secured creditors.
In Burns v Commissioner of Inland Revenue, the Court
considered the widely argued question: What is an account
receivable? This followed an earlier decision (re Northshore
Taverns, 2008) in which the High Court decided that “accounts
receivable” amounted to “book debts” only. This might sound like
an academic point, but it is very important in determining which
creditors receive distributions from the various sources of funds
realised in a receivership or liquidation.
The decision has positive implications for employees and the IR as
preferential creditors, and negative implications for General Security
Agreement (GSA) holders and guarantors. This will include not only
banks and finance companies, but also private lenders including investors,
directors, spouses and family members.
distribution of funds from the insolvent estate,
except where the assets comprise “accounts
receivable” or “inventory”, in which case the
proceeds must first be used to pay preferential
claims, ahead of the GSA holder. These
preferential claims mainly comprise employee
debts for wages, holiday pay and redundancy
pay, and amounts owing to IR for GST and
PAYE.
While inventory is relatively easy to assess,
there are many assets that could potentially be
considered accounts receivable. Whether these
assets are categorised as accounts receivable
or not can have a major impact on the
returns to secured and preferential creditors.
In many cases, these items are the only assets
and therefore the interests of preferential and
secured creditors are directly in competition,
with one or other of these groups potentially
standing to recover nothing.
The PPSA defines an account receivable as
“a monetary obligation... whether or not that
obligation has been earned by performance”.
In most cases it is easy to determine whether
an asset is an “account receivable” within that
definition. There is no question that routine
trade debtors, properly invoiced and appearing
in the company’s accounts as a trade debt, fit
the definition. This had already been confirmed
in the earlier High Court decision. Where
problems arise is in situations where money is
due to a company for some other reason.
The Burns v IRD decision considered this
definition in the context of such items as:
• council bond refunds
• amounts refundable following overpayments
• amounts held for the company in a lawyer’s
trust account.
These, and similar items, have in the past
proven difficult to categorise for distribution
purposes and therefore entitlement to the
proceeds of these assets has been potentially
contestable.
The decision in Burns v CIR
The legal issue
The seventh schedule to the Companies Act 1993 sets out the order in
which receivers and liquidators must pay preferential claims. This relies
on definitions in the Personal Property Securities Act 1999 (PPSA). The
current wording took effect from 2002 but the meaning of some of the
definitions is still being debated in insolvency circles.
The seventh schedule provides that, where a creditor holds a GSA
over a company’s assets, they rank ahead of most other creditors in the
32
The Burns decision stated that a broad
interpretation should be applied to the phrase
“account receivable”. It held that bond refunds,
refunds of overpayments and amounts held
for the company in a lawyer’s trust account
all fitted the definition of accounts receivable
and were therefore available to preferential
creditors. The decision thus clarifies the
position regarding a range of assets which
were previously seen by practitioners and their
lawyers as a “grey area”.
The decision also resolved the question
about the point at which a debt is classed as
an “account receivable”. Is it at the date of
liquidation, or could it also refer to amounts
which only become due after liquidation or
receivership? The Court confirmed that the
wording only refers to amounts due at the date
of liquidation, and therefore only these amounts
will be payable to preferential creditors. This
is unsurprising, as otherwise many anomalies
would arise.
For instance, if a liquidator trades on for a
short period and sells inventory purchased after
liquidation on credit, or sells a company’s plant
and gives the buyer 30 days to pay, should the
amounts due suddenly become payable to the
preferential creditors? The High Court has said
no; the asset type is tested and determined as it
exists at the date of appointment.
Implications for preferential and
secured creditors
This decision will clearly not be welcomed by
banks, finance companies and other parties
who lend against GSA security (for instance,
private individuals including investors,
directors, and their spouses, friends and family
members). It will, however, be welcomed by IR
and employees, who will see themselves pushed
to the front of the queue in cases where they
might otherwise have ranked behind a GSA
holder.
For our part, there remains the question of
which other assets the definition could capture.
It is very
important in
determining
which
creditors
receive
distributions
from the
various
sources
of funds
realised in a
receivership
We are concerned that the two decisions have
not provided total clarity about which assets
may constitute an account receivable. Instead,
there is the potential for the definition to
capture even more assets.
We understand the case will be appealed in
mid-2012, but for now it is the precedent and
we must follow it. There may well be other
cases on this issue, as there unfortunately
remain some unanswered questions.
This decision should be brought to the
attention of GSA holders, and also to guarantors
under those GSAs. It means there are likely to be
less proceeds available to secured creditors and
consequently there is a greater likelihood that
they will be pursuing other repayment rights
and remedies. The decision, and consequent
expectations of loan collectability, will also
impact on the holding values of loans in the
financial accounts of secured lenders.
References
Burns vs Commissioner of Inland Revenue, High
Court of New Zealand, 10 August 2011.
Can be downloaded at mvp.co.nz
Jonathan Barrett CA is an Associate at McDonald
Vague, an Auckland and Hamilton based specialist
insolvency and business recovery firm handling
assignments throughout New Zealand.
[email protected]
DISCLAIMER
This article is intended to provide general information
and should not be construed as legal advice. Parties
who require clarification on issues raised in this
article should take their own legal advice.
NEWS
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34
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NEWS
Holding banks accountable
How socially responsible are
the mortgage lending practices
employed by NZ lenders and
mortgage brokers after the GFC?
by GARTH SIMPSON PROV CA, THOMAS KERN and NICHOLAS MCGUIGAN PROV CA
H
ave
you ever considered how
responsibly our banks
are managing our money? The
detrimental effects irresponsible
consumer mortgage lending
can cause have been shown
in the aftermath of the recent
global financial crisis (GFC).
Irresponsible consumer lending,
practised mainly in the US,
in combination with the risk transfer to
investors worldwide by means of mortgage
securitisation, is widely seen as one of the
major triggers of the crisis. The flow-on
effects prompted the 2008-2010 recession in
NZ with far-reaching economic and social
impacts not only for the financial industry
itself, but also for other businesses, local
communities and individuals, in brief for NZ
society as a whole.
How socially responsible are the mortgage
lending practices employed by NZ lenders
Consumer
mortgage
lending in
NZ tends to
be conducted
in a
transparent
manner
business
and mortgage brokers after the GFC?
The authors undertook an exploratory
investigation into this matter through the
administration of a questionnaire sent to a
sample of nine registered banks (hereafter
referred to as lending institutions) and 300
mortgage brokers operating within NZ. The
questionnaire was based on a conceptual
framework for responsible mortgage lending
created by the authors from derived literature
and previous research as illustrated in figure
1 (Association of Danish Mortgage Banks,
2010; Australian Securities & Investments
Commission, 2011; British Bankers’
Association, Building Societies Association,
and The UK Cards Association, 2011;
European Commission 2009; Richards,
Palmer and Bogdanova, 2008; Royal
Institution of Chartered Surveyors, 2009).
The European Commission (2009) defines
responsible lending in a public consultation
paper as follows.
“Responsible lending means that
credit products are appropriate for
consumers’ needs and are tailored
to their ability to repay. This may
be obtained through having an
appropriate framework in place
to ensure that all lenders and
intermediaries act in a fair, honest and
professional manner, before, during
and after the lending transaction”
(European Commission, 2009, p3).
It is noteworthy that responsible mortgage
lending excludes per definitionem subprime
mortgages1, which became infamous in the
GFC, as they do not meet the requirement
of an adequate loan amount (Association of
Danish Mortgage Banks, 2010).
The Study
It was decided to focus on registered banks
rather than “second-” or “third-tier”
lenders2 as banks write a majority proportion
of issued consumer mortgages in NZ. A
sample of nine major lending institutions
was established from the 20 registered banks
operating in NZ, determined on the volume
of issued consumer mortgages. Based on the
importance of mortgage brokers acting as
intermediaries between borrower and lender,
the study was extended to their inclusion. A
sample of 300 mortgage brokers was selected
NEWS
business
using random number generation
from the list of 538 registered
mortgage brokers found on the
New Zealand Mortgage Brokers
Association’s (NZMBA) website.
Figure 1: Responsible Mortgage Lending Conceptual Framework
What constitutes responsible
mortgage lending principles?
The two groups of respondents were
provided an opportunity to discuss
how they perceive responsible
mortgage lending. This enabled
them to express the practices
and disclosure requirements they
believe are essential to responsible
mortgage lending. Table 1 provides
an overview of prominent responses.
Interestingly,
although
the
responses covered all of the
three main characteristics of the
framework, they did not cover
explicitly all of their subcategories.
Missing subcategories included
the required absence of misleading
incentives and the need to abolish
subprime lending in its entirety.
The respondents discussed a
characteristic not found within
the literature-derived framework,
the need for enhanced continuous
professional development within the
financial industry itself.
Measured against the
conceptual framework
Consumer mortgage lending in
NZ tends to be conducted in a
transparent
manner.
Lending
institutions seem to have procedures
in place to ensure that all relevant
consumer information is provided
and sufficiently verified to assess
a consumer’s actual economic
position. Mortgage terms and
conditions are adequately explained
to consumers and they are provided
with or are easily able to access for
themselves information regarding
future impact scenarios.
Consumer
mortgage
lending
appears to be conducted in a
reasonably fair manner with
lending institutions committed to
responsible advertising of their
36
mortgage products. Teaser rates3 are
currently not utilised in NZ, with
discounted rates only being applied
in order to remain competitive
within the industry.
Volume-driven
incentives
do
exist. However, they were reported
to be on the decline due to current
economic conditions and tightening
of lending criteria. An encouraging
area documented by respondents
was the implementation of qualitybased incentives for mortgage
brokers, focusing on the quality of
the applicant and the completion of
full and verified applications. There
seems to be a genuine commitment
by lending institutions to improve
the level of financial literacy of
potential borrowers in order to
enhance the understanding of the
contracts they enter into, while
concurrently helping them to better
manage their financial matters in
general. Enhanced financial literacy
can in turn assist in reducing
mortgage default rates in the future
and support responsible mortgage
lending.
Regarding
adequacy,
it
is
evident that the number of “nonconforming” loans has decreased
since the GFC, due largely to a decline
in the “second-” and “third-tier”
lending market, the increase in the
scrutiny of affordability assessments
and the overall tightening of lending
standards. However, what presented
a concern was an irresponsible
attitude towards “non-conforming”
lending held by approximately half
of the mortgage broker respondents,
who stated that they would assist
their clients to source such finance
if available. Also of concern is that
adequate insurance protection as a
means of risk mitigation does not
appear to be a common requirement
by NZ lending institutions.
Conclusion
The findings illustrate that consumer
mortgage lending in NZ is currently
being carried out in a reasonably
responsible manner, with the GFC
acting as a catalyst for awareness
and important changes towards more
responsible lending practices.
Garth Simpson Prov CA, Audit
Analyst, Deloitte, Christchurch, New
Zealand. Thomas Kern, Researcher,
Department of Accounting and
Corporate Governance, Macquarie
University, NSW 2019, Sydney,
Australia. Nicholas McGuigan Prov CA,
Researcher, Department of Accounting
and Corporate Governance, Macquarie
University, NSW 2019, Sydney, Australia
1A mortgage is classified as subprime
if the borrower is assessed to be of
high risk of default due to having
a poor credit history, low level of
income or other reasons that increase
the likelihood that they will default
(Bernanke, 2007).
2As defined by the NZ Ministry of
Consumer Affairs, registered banks
are considered as “first-tier” lenders
whereas building societies and credit
unions are considered as “secondtier” lenders and finance companies as
“third-tier” lenders (Colmar Brunton
Social Research Agency, 2011).
3A teaser rate is an initial interest rate
offered on a mortgage product that is
significantly below market rate, it is
used to entice consumers to choose a
particular mortgage product and will
increase to full indexed rate after an
initial time period.
Table 1: Respondent Perceived Responsible Mortgage Lending Principles
Framework Characteristics
Transparency
Fairness
Adequacy
Clear and complete
information
communicated to both
lender and borrower.
Abiding by all applicable
acts with duty of care
and privacy.
Listen to the borrowers’
needs.
Accurate information
of the client’s financial
position.
That you are always
honest with the clients
and the lenders.
Loans that the clients
can prove they can
afford.
Review past credit
history to ascertain how
they have managed prior
credit and repayments.
Doing what is best for
client without thought of
what is in it for me.
Consideration to overall
circumstances and
ability to manage in
adversity.
Asking for more detailed
information than
in the past to make
more informed credit
decisions.
No conflict of interest.
Requiring adequate
deposit.
Explaining the
implications of the
lender and mortgage to
clients.
Know what you are
talking about.
Lending with reasonable
security, for example,
85% loan to value ratio.
Customer is aware of
the fees, rates and any
penalties that may apply.
Help improve
stakeholders’ financial
literacy and capability.
Protecting the lending
institution from bad debt
or possible loss should
the client default.
No hidden fees or
charges.
Keep educated and
informed.
Supporting borrowers
facing financial
difficulty.
NEWS
business
The experience rating system is applied by the
ACC through:
• the experience rating programme
• the no claims discount programme.
Experience rating programme
ACC experience rating
ACC levies may now be based on the
claims history of your business.
by STEPHEN RUTHERFORD CA and HERMINE BANKS
A
n
experience rating system that
modifies the standard Accident
Compensation
Corporation
(ACC) work levy payable by a
business, based on its prior claims
history, was introduced in April
by the Accident Compensation
(Experience Rating) Regulations
2011 as part of the ACC’s
strategic direction to be more
“businesslike”.
Experience rating aims to further align the
ACC levies payable by a business to its safety
record thereby creating financial incentives for
businesses to improve their workplace health
and safety.
This means that when compared to other
businesses in the same industry, those businesses
with better than average safety records receive
a discount, while a loading will apply to those
with worse than average safety records. This is a
change to the historic practice, which uniformly
applied levy rates across industry categories
regardless of the safety record of a business.
38
A no claims
discount or
high claims
loading
adjustment
of 10%,
or a nil
adjustment
could apply
The experience rating programme applies
to businesses that have paid levies totalling
$10,000 or more in each year of the relevant
“experience period”. The “experience period”
refers to the first three of the four tax years
prior to the levy year for which the experience
rating is calculated. For example, the experience
period for the 2011-12 levy year (ie 1 April
2011-31 March 2012) will be the period 1 April
2007-31 March 2010.
The ACC will apply a maximum discount
or loading of 50% on the business’ ACC Work
levy rate depending on its workplace safety
record. The total discount or loading has two
components.
• Experience rating modification: This
modification is based on a business’ workplace
safety record which depends on the duration
of weekly compensation claims, the number
of claims with medical costs over $500; and
any fatal claims in the experience period. This
component accounts for the majority (up to
35%) of the loading or discount.
• Industry size modification: This modification
is based on a business’ performance compared
to that of its peers, ie the claim histories
during the experience period of businesses
of a similar size in similar industries are
compared against each other. This accounts
for up to 15% of the loading or discount.
No claims discount programme
The no claims discount programme applies
to businesses that have paid levies totalling
less than $10,000 in any of the years of the
experience period, ie could be one or more of
the years in the experience period.
Depending on the duration of weekly
compensation claims or any fatal claims during
the experience period, a no claims discount or
high claims loading adjustment of 10%, or a nil
adjustment could apply.
Who does experience rating apply to?
Experience rating applies to all employers
(except those who participate in the ACC
Accredited Employer Programme), selfemployed persons and non-PAYE shareholder
employees who pay levies to cover
work related injuries.
Businesses and self-employed people
that have less than the minimum liable
earnings in any year in the experience
period, and those that have not been
invoiced for an ACC levy for each year
of the experience period will not be
impacted by the rating provisions. The
levies of these entities will continue to
be calculated as previously.
The minimum liable earnings that
apply to all levy payers for each of
the years of the experience period
are outlined in the Regulations. For
example, the threshold is $19,760 for
the year commencing 1 April 2007 and
ending 31 March 2008.
If your business is part of a group
as defined by Regulations, the above
applies to the group and not the
individual businesses that form that
group.
Experience rating grouping
The
grouping
definitions
for
experience rating purposes refer to the
“associated persons” definitions under
the income tax legislation. Commonly
owned or controlled businesses are
grouped together using these rules and
consequently are treated as one levy
payer for experience rating purposes
and allocated an overall group
experience rating.
The businesses that may be grouped
by the ACC for experience rating
purposes include:
• two companies with common voting
or market value interests of 50% or
more, or common control by other
means
• a company and a person other than
a company with common voting or
market value interests of 25% or
more
• a partnership and a partner in the
partnership
• trustees of trusts with a common
settlor or the trustee and settlor of a
trust
• persons associated under the
tripartite relationship test in the
income tax legislation.
table 1
Experience rating
Levy risk
group
3yr levy
paid
Weighting
Individual
experience
rating
modification
Weighted
average
Company A
$350,000
0.70
+10%
+7%
Company B
$150,000
0.30
-5%
-1.50%
$500,000
1.00
+5.50%
Business group weighted average experience rating modification
Levy risk
group
3yr levy
paid
Weighting
Industry
size
modification
+5.50%
Weighted
average
Company A
$350,000
0.70
+10%
+7%
Company B
$150,000
0.30
-5%
-1.50%
$500,000
1.00
+5.50%
Business group weighted average industry size modification
+5.50%
Experience rating programme modification for the business group
+11.00%
The associated persons rules based
on personal relationships (such as
those relating to two relatives, trustees
and beneficiaries, or settlors and
beneficiaries) are disregarded for the
purposes of the experience grouping
rules.
If, as a consequence of the grouping
rules, a business is deemed to be in
two or more experience rating groups,
the tiebreaker will be the group that
has the greatest influence over the
business’ workplace safety or exerts
the greatest management or other
control over the business’ workplace.
Experience rating grouping – the
work levy (ie whether a discount or
loading will be applied) will depend
on the safety risk profile of other
members of the experience rating
group. Table 1 illustrates how this
should work in practice.
Example A
Company A is a forestry logging
company incorporated in, and
carrying on, business in New Zealand
that owns 100% of the voting interests
in Company B. Company B which is
also incorporated in, and carrying on,
business in New Zealand carries out
the administrative functions of the
business.
nuts and bolts
ACC first calculates the experience
rating modification and industry
size modification (see above for a
description of how this is calculated)
for a levy year for each individual
business in an experience rating group.
The individual modifications of
all members of the group are then
aggregated on a weighted average
basis (corresponding to the portion
of total levies paid by the individual
business in the experience period)
to give an overall experience rating
programme levy modification. As
such, the adjustment to a business’
Forestry logging
Company A
100%
Administrative
Company B
As Company A and Company B
have common voting interests of 100%
(being the 100% voting interests held
in Company B by Company A) they
are grouped together for experience
rating purposes.
A very simplistic example of the
effect the grouping rules may have on
NEWS
business
experience rating and consequently
the levy payable by each member of
the group for the 2011-12 levy year is
summarised below.
Essentially Company A’s and
Company B’s claims information
during the experience period is used
to generate an experience rating
modification for the group.
Experience rating grouping –
other points to note
If a business is transferred or undergoes
a restructure, the transfer rules in the
Regulations ensure that the claims
history of a workplace is retained by
that workplace despite the transfer
or restructure. The key transfer rules
contained in the Regulations are:
• if a business is transferred as a going
concern, the experience rating will
be allocated to the transferee
• if a business is not transferred as a
going concern, the experience rating
will be retained by the transferor
• if a business is amalgamated, the
experience rating is allocated to the
resulting amalgamated company
• if a business leaves a group and
continues to operate, the experience
rating will go with the leaving
company
• if a business ceases to operate, the
experience rating will not disappear
but will stay with the group.
Note these provisions do not
apply if the transfer, amalgamation
or cessation occurred before 1 April
2011. The Regulations also contain an
anti-avoidance provision that mirrors
the anti-avoidance provisions of the
income tax legislation, and allows the
ACC to disregard an arrangement that
has the purpose or effect of avoiding
the grouping rules or the transfer
rules. “Arrangement” has the same
meaning as that given to the term
under the income tax legislation.
Experience rating grouping –
application of the rules
Experience rating will be proactively
proposed by the ACC and verified
40
with those involved. The modified
levy rates, including the information
used to calculate those rates, will be
included in the ACC’s invoices for
the relevant levy year.
As noted above, the modified
rates will be calculated based on the
levies paid and claims made by a
business in the relevant experience
period (being the first three of the
four tax years prior to the levy year
for which the experience rating is
calculated). As also noted above,
for the 2011-12 levy year (1 April
2011-31 March 2012) the modified
rate will be based on the experience
period 1 April 2007-31 March
2010.
The purpose of the experience
rating grouping rules as discussed
above is to group businesses that
have common control/ownership
of a workplace and assess them as a
single business. The ACC considers
that this grouping process results in
the financial effects of workplace
safety becoming more evident to
all members of the group, thereby
encouraging improved workplace
health and safety practices across
the board.
Although the use of the associated
persons rules for grouping purposes
means the potential ambit of the
rules is far reaching, it appears
that in practice the ACC has not
applied many of the rules. For
example, NZICA understands that
approximately 98% of grouping
has been imposed by the ACC on
the basis of common corporate
ownership of 50% or more, while
the other grouping rules have only
been applied two or three times.
The Regulations also state that
the ACC “may” (as opposed to
“will”) group taxpayers if the
requirements of the applicable
associated persons test is met.
In our experience, however, it
appears that, despite this wording,
the ACC may be dogmatically
applying the grouping rules in
certain
circumstances,
unless
a taxpayer can convince them
otherwise.
For example, the grouping of
associated corporate entities is
predominantly based on information
obtained by the ACC from the New
Zealand Companies Office Register.
In NZICA’s view, such an approach
does not acknowledge that although
businesses may be commonly owned
on paper it does not necessarily
follow that they exert influence or
control over the day to day running
including the safety practices, of
each other.
One area where the ACC has
taken a pragmatic approach and
acknowledged
that
common
ownership does not necessarily
mean common control is in relation
to overseas parents of New Zealand
companies. ACC has advised that
it does not group companies on the
basis of common overseas ownership
as it may be impractical to trace such
ownership or expect an overseas
parent to have a positive influence on
the health and safety practices of its
New Zealand subsidiaries. As such,
it is unlikely that sister subsidiaries
with a common overseas parent will
be grouped together for experience
rating purposes.
Canterbury earthquake relief
The Regulations allow for the
exclusion of claims resulting from
an adverse event from a business’
experience rating calculation. The
Minister for ACC has declared
the February earthquake and all
aftershocks in Canterbury to be an
“adverse event” and consequently
any resulting work-related personal
injury claims (unless the employer
has materially contributed to the
injury) will not affect a business’
experience rating for levy years
beginning 1 April 2011 and after.
Stephen Rutherford CA is Assistant
Tax Director and NZICA, Hermine
Banks is on secondment to NZICA
from Ernst & Young.
NGOs in Samoa: assessing
accountability
Samoa’s oral tradition of accountability
poses challenges for non-Samoan
auditors.
T
by AGNES MASOE and PROFESSOR KEITH HOOPER CA
he
oral traditions and culture of Samoa may pose
problems for auditors trained to expect Western forms
of accountability.
There are many different definitions of accountability,
but for the purpose of this article we will follow Fishman’s
(2007) definition of accountability as:
The process by which assets devoted to charitable
purpose are put to their proper purpose and
information about their use is made available to the
public or to state authorities. (p. 13)
What is a proper purpose may be difficult for auditors of NGOs to
assess. This is especially true for New Zealand auditors working in
Samoa, where spending may demand reciprocating for an ava ceremony
or ava feiloaiga. An ava ceremony or ava feiloaiga is an event in which
a village or a group formally welcomes visitors or another group. It also
represents an act of recognition and acknowledgement by the village of
the commencement of the work. The ceremony is conducted by village
matais, or chiefs, for the visitors. The visitors, for example project
managers, reciprocate during the ceremony, usually with monetary gifts.
In Samoa, charitable expenditures require prior acknowledgment
or a welcoming ceremony. Work cannot proceed in a village without
first following certain acceptance customs. The expenditure associated
with these welcoming ceremonies is necessary but hardly advances the
function for which the money was donated.
One problem with NGOs is the absence of an effective measurement
of performance in a sector where effective
expenditure outcomes are the focus of
operations. What counts as effective
expenditure in terms of outcomes is difficult to
determine.
A second, but linked, problem relates to the
absence of written records and the prevalence
and preference for the oral tradition of
accountability.
External donors need to see their donations
put to a proper purpose. They require
transparent accountability in the form of
standardised written forms, duly audited
according to certain principles. Why do they
want these structured forms of accountability?
Because accountability is seen as important for
the charities sector to maintain the confidence
and financial support of the public.
The challenge is to continue to build donors’
trust when it is not obvious that all the money
earmarked to a project can be properly
accounted for. How persuasive are explanations
of culturally relevant expenditures to overseas
donors? How acceptable are vague renderings
of oral accountability without documentary
support? Consider the following example.
A women’s committee group is registered as
an NGO. The committee is a group of women
in Samoan villages, established to advocate
for women and to act in the best interests of
the wider community. When hosting a formal
event in the village, the committee will usually
insist a uniform be worn by all women who
participate. The committee will then acquire
a collection of funds, either from an existing
pool or from the members themselves, for
this particular event. A portion of the money
collected is allocated towards acquiring the
uniforms.
Typically a group of approximately five
women will travel to Apia, the capital of
Samoa, in search of a uniform conforming to a
Samoan traditional outfit known as a puletasi.
This requires many yards of floral material,
zippers and other accessories. At the time of
purchase, these women would agree on, among
other minor details, the costs of the materials
for puletasis. Other funds would have been
consumed in their travel.
Upon the committee’s return to the village,
a meeting is called for all members to collect
their materials. At this time the committee will
verbally give an account on the use of funds
Continued on p75 >
PEOPLE
careering
From Somalia to secondments
Former refugee Ahmed Sofe CA is currently on his second
international secondment and living a vastly different life from the
one he and his family fled.
by JENNIFER BLACK
A
hmed
Sofe CA’s first experience of schooling was
in a refugee camp in Ethiopia in the 1990s.
Right now he is part-way through a secondment with
Ernst & Young to Eindhoven in the Netherlands,
proving the theory he lives by – if you dream big,
anything is possible.
Born in Somalia, Sofe was four when his father was
killed in the civil war. At the time Sofe’s mother was
pregnant with her fifth son. She moved the family
to Ethiopia and they eventually emmigrated to New
Zealand in 1999, dreaming of a better life.
Sofe, now 27, no longer identifies himself as a refugee, but as
42
a former refugee. He says the refugee
experience has shaped the way he looks at
life. A New Zealand citizen, he sometimes
feels alienated by the way former refugees
are referred to in the media.
Sofe’s mother tongue is Somali, and
while he can also read and write Arabic,
he had no knowledge of English when he
arrived in New Zealand as a 14 year old.
“I was excited about going to a first
world country – that my mother would
get health care and that we would get
education, better living standards, better
health care and my brothers would have
more opportunities.”
He attended Wellington High School,
where his favourite subject was science.
“It’s fascinating, seeing how things
work.”
Sofe had hoped to study medicine, but
in year 11 there were two factors that
determined his future career path.
“Mum was in hospital to get shrapnel
removed from her leg from an old
gunshot wound. I experienced the work
environment for doctors – their work
conditions and being surrounded by sick
people.”
This experience made studying medicine
less appealing.
At the same time he was falling behind
his year group and was unable to take year
11 science. This meant he had a gap in his
schedule, so he decided to try accounting.
“I was thinking about economics or
accounting, as I was interested in opening
my own business one day. When I look
back now I think I made a good decision
that has opened up a lot of doors for me.”
But he confesses maths is not one of his
strengths.
“People think accountants are number
crunchers but we are not, we’re logical
thinkers. You only need basic maths as an
accountant, but it is advantageous to have
a more mathematical background.”
He says one of the things he enjoys most
about his role is the decision making aspect.
“The solutions you come up with for two
similar scenarios will be different based on
the factors and circumstances.”
He believes accounting is an art.
“There are lots of right answers, not
one single right answer – it depends on
the angle from which you are considering
something.”
Sofe completed his bachelor of
accountancy in 2007 with an A average,
and his bachelor of business studies, with
honours in accounting, in 2009.
He says the biggest challenge was doing
this work in English.
“That first year was quite difficult
because I lacked a robust background in
English. I found it challenging reading the
textbooks.”
People think
accountants
are number
crunchers
but we are
not, we’re
logical
thinkers
He became a CA to maximise his potential.
“And because of the opportunities the
CA qualification offers – both locally and
internationally – and it’s credibility and
prestige.”
Throughout his studies he dreamed of
working for one of the Big 4 firms.
“When I was at university it was a big
thing – the belief was if you make it to
the Big 4 you’re considered to be a very
successful accountant.”
This perception was shared by students
and staff, he says.
“In a sense it is true because there is huge
competition and it’s a tedious selection
process, and once in there the opportunities
are quite diverse. There are diverse clients
and opportunities for overseas transfers.”
Sofe has always considered himself a role
model for his brothers, and has inspired one
of them to start on the pathway to chartered
accountancy.
Another brother is a carpenter, another
is a student at Massey University studying
a Bachelor of Business Studies, and the
youngest is still at high school but plans to
study medicine.
After the challenges Sofe has had, he
believes there is nothing difficult in this
world.
“You are the determining force as to
whether things are difficult or easy.”
He says it is becoming more common
for former refugees to gain professional
qualifications, and the Somalian community
celebrates their success.
He is heavily involved in the Somalian
community in Wellington and Treasurer of
the Wellington Somali Council.
His advice for other refugees or even
immigrants who have a big dream, like he
did: “Always think that the sky is your limit.
Don’t let stereotypes stop you or blur your
focus. Remember that the opportunity you
have now lots of people would never get,
especially where I come from.”
In January Sofe left for a three-month
secondment to the Netherlands where he
continues to work as an auditor. In June
he will depart on another secondment, this
time a two-year trip to London, where he
has previously worked for Ernst & Young.
He plans to return to the Asia Pacific region
permanently.
43
NEWS
software update
Three trends in accounting
Technology is an asset that can help accountants move with the times.
Technology is an asset
Where chartered accountants have previously
viewed technology through a “cost” lens, it is
increasingly recognised as a vital asset rather
than a necessary overhead.
Chartered accountants are increasingly
advocates for their organisations to keep up
with technology.
In purchasing terms, the finance function
has an increasing role to play in aligning
technology decisions with an organisation’s
strategic goals. This remains true from
large corporates to small- and mediumsized practices – where the finance team is
often in charge of business reporting and
intelligence.
This means accountants must keep up
to date with developments in technology
and ensure they understand how a lack
of technology, or purchasing the wrong
technology, can impact the ability of an
organisation to deliver on its strategic goals.
Lesson: Define your requirements, and
talk to your vendors. The vendors know
what their systems can do, and will ensure
you get the right solution based on your
organisation’s needs.
Cloud changes the game
The continuing growth of cloud computing, or
software as a service, will lead to compliance
changes.
Even the New Zealand government is getting
in on the act, having announced a proposal
to implement cloud computing technology
across 32 government departments. A
business case will be presented to ministers
in April.
Meanwhile, Inland Revenue (IR) has
identified the growth of cloud computing
as an area that raises challenges for
traditional compliance arrangements. IR
says some businesses may be breaching their
obligations to keep financial information on
hand due to cloud storage. Under the Tax
Administration Act 1994 any person who
44
carries on any business or any other activity
for the purpose of deriving assessable
income in New Zealand, must keep sufficient
records in New Zealand, in the English
language, to enable IR to readily ascertain
information about their tax affairs.
In some circumstances IR will grant
permission for records to be stored outside
New Zealand, and IR has indicated it
will review the requirements to reflect the
industry shift towards cloud computing.
Lesson: The cloud is here to stay.
The accountant as business adviser
New technology will enable accountants to
offer new, and more timely, services to clients.
New Zealand’s SMEs increasingly look to
their chartered accountants for business
advice and information beyond the
traditional annual tax return.
CAs are no longer viewed as primarily a
“compliance” requirement, but are expected
to deliver value to their clients through
timely and relevant business reports.
With the increasing sophistication and
customisation of software solutions, it is
now possible for CAs to offer integrated
banking updates across a range of bank
accounts, monthly reports that bring
together inventory information with
workflow
projections
and
accounts
receivable data. This can be delivered to a
mobile phone or computer on a monthly
basis (or as required).
Many companies don’t use technology
to its best advantage. They look to their
professional advisers for innovative ways
to make the most of new information
technology opportunities. They also need
expert advice when interpreting the masses
of data that it is now possible to accumulate
and review.
Lesson: Ask your clients what they need,
and help them find a solution by integrating
your reporting capabilities with sound
strategic advice.
Top tips for cloud
computing
1.Make a plan
before you start
Work out what
you want to
achieve from
cloud computing.
Think about the
type of data you’re
planning to put
in the cloud, and
what you’ll use
it for. When you
know the business’
needs you’ll be
addressing it
will help you to
work out the type
of services you
require.
2.Take things one
step at a time
Go slowly and
ensure everything
performs as it
should, before
sending everything
to the cloud.
3.Factor in cloud
security
Security concerns
have often been
a big barrier to
cloud adoption, so
consider layers of
security. Consider
encrypting data
and also using
firewalls and
proxies.
4.Do it your way
Cloud computing
provides
businesses with
more choice about
how to use and
run IT and service
providers can
help clients find a
solution that really
works for them.
5.Keep an eye on the
budget
While cloud
computing can be
excellent for some
small businesses,
it’s not a one-sizefits-all solution, so
get a professional
assessment done
to work out what
you need and see
if cloud computing
meets those needs.
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45
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and support from the SmartPayroll
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fast. I can’t recommend this system
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enough.”
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about Smart Payroll. It's another
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just 'get'. It's easy, robust and it
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the system pays the IRD, pays
the staff member, emails the staff
member the pay slip and files the
return to the IRD. We no longer offer
payroll to the vast majority of our
clients because this is cheaper and
they'll save time and they'll have
better control and understanding
of another of their crucial business
systems.”
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51
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52
CHARTERED ACCOUNTANTS
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GRAHAM HAMBLY IN THE UK
Record fine for PwC UK
The UK’s Accountancy and Actuarial
Disciplinary Board has handed down a record
fine.
P
wC’s UK ARM has been fined a record £1.4m and severely
reprimanded by the Accountancy and Actuarial Disciplinary
Board (AADB) over its failure to report to the Financial
Services Authority that JP Morgan Securities was not properly
ringfencing clients’ money.
During 2002 and 2008 clients’ money was mixed in with the
bank’s own cash. There was no loss to customers, but PwC admitted that its
inaction meant it had fallen short of the standards reasonably to be expected
of members and member firms.
In particular PwC accepted that it did not carry out its professional work
in relation to these reports with due skill, care and diligence, and with proper
regard for the applicable technical and professional standards expected of
it. As a consequence PwC wrongly reported to the FSA that JP Morgan
Securities had maintained systems adequate to enable it to comply with the
Client Money Rules throughout the relevant period.
The Tribunal found that PwC had committed misconduct in respect of
each allegation in the disciplinary complaint before it. In fact the Tribunal
said it was “very serious” and therefore imposed a severe reprimand on PwC.
The £1.4m fine was reduced from £2m for cooperation and other mitigation,
with PwC paying the AADB’s costs in investigating and prosecuting the case.
The new code working
The UK’s Financial Reporting Council (FRC) has revealed that there has been
a high level of take up in the provisions of its new Corporate Governance
Code. For example, some 80% of FTSE 350 boards have put all their
directors up for annual re-election, demonstrating, says the FRC, the value of
code in promoting behavioural change in the boardroom.
Some 230 asset managers, asset owners and service providers have also
signed up to the Stewardship Code in its first year.
FRC chairman Baroness Hogg believes the UK is moving in the right
direction. She says: “Our comply or explain model encourages the changes in
behaviour and governance practice that helps to underpin confidence in the
UK’s capital markets.”
CIPFA going global
CIPFA, the UK public sector accountancy body, and the Institute of
Chartered Accountants of Sri Lanka (ICASL) have agreed to work together
to transform the support available to Sri Lankan public finance professionals.
A memorandum of understanding was recently signed in Berlin and the
new partnership will now develop a joint qualification and membership
arrangements. This new partnership is the first outward sign of CIPFA’s new
international prospectus Fixing the Foundations in action. The institute wants
to bring international public sector bodies together to restore confidence in
countries’ management of public finances and to improve standards.
CIPFA believes the time is now
right for a step-change in financial
management in governments. And,
a key component in this philosophy
is making the CIPFA qualification
much more readily available
globally.
CIMA salary guide
So, what is the UK average salary
for a CIMA qualified accountant?
Currently it is £52,357 basic, with
a bonus at £4,814, says a survey
CIMA conducted of all its members.
The survey also reveals salaries
rise fairly steeply with continued
experience, and there is a clear
change at six to nine years postqualifying. That is when the big
money is going to kick in – the
average salary for CIMAs with 10
years experience is £92,000.
Hidden among the stats is the fact
that CIMA women can still expect
lower salaries when compared to
their male counterparts. The average
female salary in 2011 was £47,826,
some £16,500 less than their male
counterpart.
The survey also found that the hours
management accountants spend at
the office are becoming longer. Some
one in eight CIMAs work between 51
and 60 hours a week. Another 42%
work between 41 and 50 hours.
Website of the month
The ICAEW has set up a website,
trueandfair.org.uk, that describes
the processes that auditors go
through to give their opinion on
companies’ financial reports for nonaccountants. The new site also has an
interactive section where questions
can be posted and answers will be
provided. The ICAEW is claiming,
and who are we to disagree, that
the website is intended to provide
unbiased, objective information in
layman’s language to help improve
the understanding of audit.
Graham Hambly is a British journalist
and editor of PQ magazine.
53
PETER SWITZER IN AUSTRALIA
New Year, new rate cut?
Another rate cut is likely in Australia at a
time when unemployment is up, the housing
market is weak and retail spending is sluggish.
T
HE NEW YEAR ACROSS the ditch has started without any great
fanfare. It looks like there’s a wait-and-see game being played
by the main players — the Gillard Labor Government and the
Reserve Bank of Australia.
Annual economic growth to the September quarter last year
was 2.5%. The end-result has been an easing of interest rates
— 0.25% cuts in both November and December — as retail laboured and the
unemployment rate rose from 5.2% to 5.3% in November.
“In the first 11 months of 2011 just 44,700 jobs have been created – marking
the worst result for a similar period in 15 years, and well below the 366,600 jobs
created in the first 11 months of 2010,” said CommSec’s economist, Savanth
Sebastian. “There are clear signs that Aussie businesses are reigning in hiring.
Jobs growth is now going backwards adding to data showing sluggish retail
spending, a weak housing market and lacklustre activity in manufacturing,
services and construction sectors.”
Creating jobs should be a high priority of a Labor Government and so with
employment barely growing and having recorded a weak annual growth rate
of just 0.4% — the poorest in 27 months — it isn’t a good sign with the Gillard
team’s rating with voters around 30%.
“And even if you collate all the jobs created over the first 11 months of
2011, it totals a paltry 44,700 jobs, marking the weakest result for a similar
period in 15 years and a far cry from the 366,600 jobs created in the first 11
months of 2010,” Sebastian pointed out.
So it is not surprising that a growing chorus of economists are saying that
54
another rate cut is likely at the first
meeting of the Reserve Bank on the
first Tuesday in February.
I suspect there is a good chance
that this will happen but it is likely
to be the last unless poor European
decisions over debt and deficits leads
to more stock market sell-offs.
On the subject of interest rates,
both the Reserve Bank and the
Federal Government look set to be
on a collision course with the major
banks, whose bosses are starting to
plead poor mouth, which could see
them refuse to pass on any future
interest rate cut in full.
The seemingly endless weeks of
poor decisions and inconclusive
meetings coming out of the European
Union has resulted in increasingly
higher interest rates for sovereign
bonds for most member countries
and the pressure on bank balance
sheets of customers who might
default has pushed up the cost of
funds for banks such as ours which
rely on external funding for about
half of their local loans.
Leading the charge against the
RBA and the home loan borrowers
of Australia, who have grown up
expecting that banks play follow the
leader with the Reserve Bank, is the
ANZ’s chief executive, Mike Smith.
In January his bank started setting
and announcing what the home
loan rate would be on a monthly
basis. Smith says he is going it alone,
independent of the RBA and his
rivals.
“The change in the RBA's official
cash rate is one factor we assess when
looking at funding costs,” Smith has
argued. “However, the price we pay
for customer deposits, and for the
domestic and international wholesale
funding that we rely on in order to
continue to lend, are much more
important considerations.”
If and when the RBA next cuts, there
will be an enormous focus on what
Smith and ANZ do and it will put
the focus on just how competitive our
big four banks are in particular. And
while the Reserve Bank is unlikely to
say anything publicly, you can bet the
Prime Minister and her trusty world
champion Treasurer, Wayne Swan,
will be champing at the bit to get into
some good old bank bashing to raise
their popularity ratings.
This
year
the
Government
introduces its carbon tax in July but
ensnaring government ploy.
While on taxes, some time this year
we will see the introduction of Julia
Gillard’s mining tax. The first mining
tax mooted ran ahead of former-PM
Kevin Rudd being shown the door by
his own team, but this new version
of the bill was passed in November
in the lower house and now goes to
used to deliver a company tax rate
cut, infrastructure spending and
an increase in the superannuation
guarantee rate from nine to 12%
Does this sound like electoral
sweeteners to you?
So this sets the scene with the
Opposition leader, Tony Abbott,
being accused by some as being “Mr
Creating jobs should be a high priority of a Labor Government and
so with employment barely growing and having recorded a weak
annual growth rate of just 0.4 per cent — the poorest in 27 months
— it isn’t a good sign with the Gillard team’s rating with voters
around 30%.
the tax cuts are projected by Treasury
to make lower income Aussies better
off. In fact, those earning less than
$80,000 will get a tax cut and low
income Aussies will get welfare
payments to make them happier
with the carbon tax. This is clearly
an electoral sweetener and in fact the
welfare payments will come in May
or June, actually before the carbon
tax and tax cuts begin!
That’s either a caring or a vote
the Senate which is controlled by the
Greens party.
Called the Minerals Resource Rent
Tax Bill 2011, three global miners —
BHP Billiton, Rio Tinto and Xstrata
will pay about 80% of the expected
tax revenue but smaller miners are
livid over the 20% they will have to
pay.
It will be a 30% tax rate and is
expected to generate about $12
billion to 2013-14. This will be
HAVE A CLIENT
IN FINANCIAL
TROUBLE?
No” and so it will be up to him to
maintain his party’s election-winning
lead, which is in stark contrast to
his personal popularity. Fortunately
for him, his rival, Julia Gillard is as
popular as a bucket of prawn shells
left out in the sun.
Let the fun and games begin for
2012.
Peter Switzer is a business and financial
commentator.
Talk to the business
recovery and
insolvency experts
at McDonald Vague.
0800 303 034
www.mvp.co.nz
• Liquidations
• Receiverships
• Compromises
• Crisis Management
55
NEIL MILLER ON POLITICS
Election 2011:
winners and losers
The final results of Election 2011 have been
confirmed and there were some clear winners
and losers.
O
N 20 FEBRUARY 2012, members of New Zealand’s 50th
parliament were sworn in.
After the traditional speech from the throne and a rather
desultory debate, parliament quickly adjourned for six weeks.
It is a peculiarity of the New Zealand system that each new
parliament usually begins with an extended holiday.
The real politics will start when the House resumes on February 7 with
the opposition looking to land some blows on the National Party and their
coalition allies in the Act, United Future and Maori parties.
Winners
A strong election result meant the National Party could again form the
government. The popularity of Prime Minister John Key was their key electoral
weapon, supported by a well-organised if cautious campaign run by Steven
Joyce.
National will be particularly delighted with the big party vote swings in
Wellington and Christchurch, picking up the former Labour stronghold of
Christchurch Central in the closest of races and holding onto Auckland Central
and Waitakere against determined Labour challenges.
The Prime Minister has taken the opportunity to promote new faces into
Cabinet and to boost the rankings of high-performing ministers such as Hekia
Parata and Steven Joyce. Key seems determined to ensure National rejuvenates
even though this may involve making some tough calls about veteran Ministers
who do not want to go.
A record number of Green Party MPs were elected to Parliament in 2011,
56
including the country’s first deaf
parliamentarian. The Greens did
well to increase their caucus size and
to successfully bed in their youthful
leadership team. All of the original
Green MPs have now left parliament
so the generational torch has truly
been passed.
However, the Greens will be
disappointed they did not do even
better as their final results, once
again, did not live up to their poll
ratings. They continue to operate
outside of Cabinet and, at some
point, will probably need to be part
of a government in order to effect
significant changes. In 2012, the
biggest challenge will be keeping
their support up as Labour looks to
win back their traditional voters.
Defying the odds and the
conventional wisdom, Winston
Peters has returned to parliament,
bringing in a sizeable if unpredictable
caucus. Peters expertly used the
scandal around the “Tea Tapes” to
accelerate his otherwise anaemic
election campaign. In typical fashion,
he utterly denies this, implausibly
claiming the “Tea Tapes” actually
cost his party votes.
Most of the New Zealand First
MPs will be relatively unknown to the
New Zealand public though Andrew
Williams has been a controversial
figure in political circles. The
flamboyant Brendan Horan and
outspoken Richard Prosser may well
generate some unwanted headlines in
the coming year.
For Labour, the big winner was the
hard-working and affable Damien
O’Connor who regained his beloved
West Coast-Tasman seat. He was
the only Labour MP to win an
electorate seat off National despite
the party having high hopes for
taking Auckland Central and New
Plymouth.
Losers
Labour recorded its worst election
result since 1928 and Phil Goff and
Annette King quickly stepped down
in a dignified manner. Relative
newcomers David Shearer and
Grant Robertson, with a combined
five
years
of
parliamentary
experience, have taken the reins as
Labour looks to rebuild its caucus
and party. The 2011 election
battered Labour, but it survived.
The challenges for this term include
dropping the policies of the past,
reconnecting with voters and
promoting new faces, most likely
David Parker and Jacinda Ardern.
Andrew Little has endured a
disappointing start to his muchheralded political career, failing
to win New Plymouth and not
featuring seriously in the leadership
discussions. David Cunliffe will
also be disappointed to have lost
both his bid to be leader and then
the prestigious Finance portfolio.
2011 may well be the year the
Act brand was trashed forever.
After an extraordinary coup, Don
Brash boldly predicted 10-15%
for the party. In reality, it barely
scraped past 1% on election day.
The National voters of Epsom
duly ticked John Banks but will
be loath to do so again unless Act
understated the popularity of
National. To claim that National
was at 32.6% on the eve of an
election where they polled 47%
should be a sackable offence.
The Horizon poll was utterly discredited. The
poll consistently overstated the popularity of
the Act, Conservative and New Zealand First
parties and hysterically understated the
popularity of National
can dramatically improve. No one
associated with Act can take any
credit from a year where the right
got everything wrong.
Finally, as predicted in this
column, the Horizon poll was
discredited. The poll consistently
overstated the popularity of the Act,
Conservative and New Zealand
First parties and hysterically
The Conservative Party leader
Colin Craig should also be ashamed
of touting a dodgy poll he claimed
showed him ahead in Rodney. He
was thrashed by more than 11,000
votes.
Neil Miller is a Wellington writer and
contributor to National Radio’s The
Panel.
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NZICA/G/TT
57
JOHN HAYLOCK ON PUBLIC PRACTICE SECTOR
When this was tested with 100
people, 68% said they would
choose the $59 option and 32%
the $125 option. This mix would
have generated $8,012 from the
100 customers:
• Online + back library @ $59 x 68
customers = $4,102 in revenue
• Print edition + online + back
library @ $125 x 32 customers =
$4,000 revenue
In the second trial there were
three options:
1.The online version plus access to
the back library for $59 per year
2.The print edition only for $125
3.The print edition plus the online
version and access to the back
library for $125 per year
Price relativity
People like to feel they are getting a good price.
P
RICE RELATIVITY IS a very interesting concept that has the
potential to help accountants keep more clients and earn
more money.
It is a concept that was recently brought to my attention
in a fascinating You Tube clip by UK-based professional
services pricing expert Mark Wickersham.
In the clip Wickersham quotes research from Dan Ariely’s book
Predictably Irrational. Ariely is a behavioural economist who suggests
most people assess whether a price for a product or service represents good
value by comparing it to something else. Customers can compare prices for
related goods or services within a business as we do at the supermarket or
they can compare prices between businesses as we do when moving from
shop to shop to find the right item of clothing. This process of comparing
prices to help make decisions is price relativity.
Wickersham quotes an example from Ariely of the potential of price
relativity in his You Tube clip.
A magazine with both hard copy and online editions carried out trials of
two mixes of subscription options.
In the first trial there was two options:
1.The online version plus access to the back library for $59 per year
2.The print edition plus the online version and access to the back library
for $125 per year
58
The only difference was the
availability of the option to choose
the print edition by itself in the
second trial. Yet the results were
dramatically different.
When this mix of three options
was tested with another 100 people
only 16% now said they would
choose the $59 option while 84%
said they would choose the all
inclusive $125 option.
No-one chose the $125 print
edition only option. This was not
surprising because it looks like
poor value compared to the other
$125 option which included both
the print and online editions and
access to the back library. However,
including this print-only option
for $125 made the all-inclusive
$125 option look like great value
and significantly increased the
proportion who chose it.
This second mix of options would
have generated $11,444 from the
100 customers. That’s an increase
of nearly 43% simply by adding
in an option that nobody chose
because of its relative poor value:
• Online + back library @ $59 x 16
customers = $944 in revenue
• Print edition @ $125 x 0
customers = $0
• Print edition + online + back
library @ $125 x 84 customers =
$10,500 revenue
What are the implications for
accountants?
The first key point is to give your
clients pricing options. Most clients
find it quite difficult to assess
whether the services they receive
from accountants are good value.
It’s not like buying petrol where the
price is advertised on a sign outside
every service station.
A business owner generally
doesn’t
know
how
their
accountancy fees compare to the
fees charged by other accountants.
This can tempt business owners to
shop around to compare prices.
Presenting your clients with
pricing options will encourage
your clients to choose between
your options rather than going
and getting prices from another
accountant to compare you with.
The second key point is that you
can influence which options are
chosen by varying the apparent
value of each option. Our natural
inclination is to give options that
By understanding
and applying the
principles of price
relativity you can
help more clients
choose the option
that gives them the
greatest value
present equal value, eg a cheaper
service that has less included and
a more expensive service that has
more included. As suggested by
the magazine example you should
perhaps instead give three options:
• a cheaper option with less
included
• a more expensive option with a
bit more included
• a more expensive option with
even more included
By giving a second higher priced
option of lesser perceived value
you’ll probably find more clients
choose the more expensive services
that give them more value. That’s
because it is now easy to assess that
the more expensive option with
even more included is great value.
By understanding and applying
the principles of price relativity you
can help more clients choose the
option that gives them the greatest
value and helps you produce more
income.
John Haylock is Practice Performance
Manager at BankLink. john.haylock@
banklink.co.nz
59
ASHLEY BURROWES IN THE UNITED STATES
Tax burdens across the US
The most obvious example is taxation. Although the Federal government
imposes the largest taxes, the 50 states and thousands of local jurisdictions
also impose a host of non-trivial taxes.3 These include income taxes, property
taxes, payroll taxes, severance taxes on natural resource, and sales taxes.
The relative importance of the type of taxes on businesses is estimated in
table 1.
Companies can easily become ensnared in the Byzantine web of different
taxes imposed by the many governments touched by (or seeking to touch)
cross-border transactions. Not only can many different levels of government
be involved, but also many different kinds of taxes: some jurisdictions rely
more heavily on income taxes; others on sales or property taxes.
Adding complexity, even the same kinds of taxes can differ across borders.
For example, the definition of taxable income at the Federal level usually
is different from that used by the many States which impose income taxes.
Differences among definitions often are subtle, yet important. Indeed, the
various tax rules have only one thing in common: they are seldom easy to
understand or permanent, because they are created at different times and
thus reflect changing government policies.5
taxes on goods sold to consumers.
The rates usually are fairly
uniform throughout a state, but can
vary significantly between counties
and cities. Forty-one states have
income taxes on earnings sourced
to the jurisdiction; so do a limited
number of cities. All states have
property taxes (rates), which vary
greatly between states, and to a
lesser but still significant extent,
within states, in their effective tax
rates.
Table 2 estimates effective tax
rates on businesses for each state.
This was computed by dividing the
total taxes paid by businesses in a
state by total income for businesses
operating in the state.
Table 3 shows how sales tax
rates vary across the USA. Sales
taxes are typically imposed on the
gross receipts of retailers which
sell tangible personal property in
a jurisdiction in which the retailer
has a physical presence. (This
has allowed web-based retailers –
notably Amazon.com – to ignore
these taxes in most of the USA.)6
Businesses generally can, and
do, bill customers for sales taxes,
and thus are not directly burdened
by the tax. However, the costs of
reporting to tax agencies can be
quite significant.7
(a)
Three states levy mandatory,
statewide, local add-on sales
taxes at the state level: California
(1%), Utah (1.25%), and
Virginia (1%). We include these
in their state sales tax.
(b)
Hawaii, New Mexico, South
Dakota, and Wyoming have
broad sales taxes that also apply
to many services. These states'
rates are not directly comparable
to other states' rates.
(c)Due to data limitations, table
does not include sales taxes in
local resort areas in Montana.
DIFFERING BURDENS OF TAXES ACROSS THE US
KEY ASPECTS OF VARIOUS TAXES
Tax rates vary dramatically across state and local taxing units. The US does
not have a national Value Added Tax. However, of the 50 states, 45 have sales
Business income taxes
There is a plethora of taxes applicable to
businesses as a guide for NZ businesses
contemplating a US presence.
G
IVEN THE NOVEMBER ratification of “The Trans-Pacific
Partnership” at the Asia Pacific Economic Cooperation
summit in Hawaii, it may be the time for New Zealand firms
to consider setting up new operations in the US.
Where best to set up operations in the US is a complex
decision1, sometimes dominated by the reason for operating
in America, a massive consumer market still, notwithstanding high
unemployment and growing numbers of impoverished residents. If the need
is to be close to certain limited resources – physically closer to certain major
customers (eg refineries), pools of specialised labour (eg Silicon Valley),
creative industries (eg Hollywood-Burbank), governmental decision makers
(eg Washington DC) intermodal transportation hubs (eg Los Angeles) – the
decision is made.
If there is more flexibility, however, it should be remembered that the US is
very big place, composed of very different locations, with different business
environments. Although many US business practices (and laws) have become
more uniform since World War II, entrepreneurs typically face a multitude of
governments – ranging from cities to states, counties to metropolitan rapid
transit districts – which impose a myriad of different regulations on a wide
variety of activities.2
MORE THAN 50 DIFFERENT TAX REGIMES
60
Most states tax the income of
corporations and similar business entities. Forty-five
states tax corporate net income directly. Michigan
imposes a Single Business Tax based on economic value
added. Texas assesses a franchise tax based on net
worth. Washington levies a Business and Occupations
Tax based on gross receipts.
To calculate these taxes, most jurisdictions
“piggyback” on taxpayers’ compliance with the Federal
corporate income law.
Piggybacking on Federal income is done in three steps.
First, the taxpayer starts with Federal net income. (Many
state require that the Federal income tax return, or key
portions of it, be attached to the state return.) Second,
the taxpayer makes some state-specific adjustments.
Finally, the state tax rates, and any state tax credits, are
applied. In contrast to Federal rates ranging from 15%
the US is very big place,
composed of very different
locations, with different
business environments
to 39%, state rates range from 6% to 12%.
Significant differences between Federal and state tax
rules nevertheless exist, even for piggybacking states.
One major set of differences comes from the special
economic incentives. These are usually targeted for
economically depressed areas, or for industries which a
state is trying to subsidise. Such incentives are usually
specified by state or local statute, and often provide a
panoply of benefits to investments generating employment
in these areas. They range from reduced sales taxes for
plant, property, and equipment to investment tax credits
and accelerated depreciation on the same. Sometimes
there are employment tax credits which greatly reduce
the after-tax cost even of new minimum wage employees,
or special treatment for start-up costs or losses.
More, and more favourable, benefits usually are
specified for special enterprise zones. Often modelled on
Federal law, these programmes usually provide special
and higher levels of tax incentives and other benefits for
businesses established in designated depressed areas.9
Income tax
The owners of unincorporated business also are subject
to income taxes in more than 40 states.
Income generally is sourced where it is earned. For
example, it is usual for rents to be sourced to the state
where the property is physically located, and royalties to
the state where the underlying intangible is being used.
Table 14 Incidence of business taxes by state
Type of tax
No of states
% of total taxes
Property tax – real
49
41.58%
Property tax – personal
41
11.07%
Property tax – other
41
6.02%
Alcoholic beverage licence
47
0.25%
Amusement licence
34
0.19%
Corporation licence
48
3.05%
Motor vehicle licence
49
7.44%
Public utility licence
31
.030%
Corporation income tax
45
19.71%
Severance tax
33
4.00%
Document and stock transfer 30
1.89%
Taxes on non-employee comp
15
0.16%
Unemployment insurance
49
4.33%
Total100.00%
(We have excluded sales taxes because these mostly fall on
consumers of goods sold at retail.)
Table 2 Effective tax rates on business income by state
State
Effective tax rates Ranking
on business income
Alabama 12.45%
40
Arizona 25.70%
7
Arkansas 9.96%
45
California 15.97%
30
Colorado 14.47%
34
Connecticut 21.26%
11
Delaware 32.92%
3
DC & Maryland 14.44%
36
Florida 20.92%
13
Georgia 13.98%
37
Hawaii 7.84%
46
Idaho 7.22%
47
Illinois 21.19%
12
Indiana 18.76%
18
Iowa 10.24%
44
Kansas 14.71%
32
Kentucky 21.30%
10
Louisiana 21.46%
9
Maine
19.30%16
Massachusetts 16.26%
29
Michigan 39.74%
2
Minnesota 17.74%
20
Mississippi 16.82%
25
Missouri 14.47%
35
Montana 19.09%
17
Nebraska 6.63%
48
Nevada 10.69%
43
New Hampshire 25.82%
6
New Jersey 23.24%
8
New Mexico 16.86%
24
New York 26.84%
5
North Carolina 12.01%
41
North Dakota 11.14%
42
Ohio 15.60%
31
Oklahoma 16.62%
26
Oregon 16.28%
28
Pennsylvania 17.03%
23
Rhode Island 18.47%
19
South Carolina 19.72%
15
South Dakota 4.22%
49
Tennessee 14.62%
33
Texas 17.65%
21
Utah 12.63%
39
Vermont 16.61%
27
Virginia 13.91%
38
Washington 19.83%
14
West Virginia 26.89%
4
Wisconsin 17.50%
22
Wyoming 42.63%
1
61
Services are typically sourced to where they are
rendered, and multistate business operations are
divided among the states involved using some averaging
convention.10
Sales and use taxes
As shown above, almost all states tax consumers on
the retail purchase of personal property intended for
in-state use or consumption. Sales taxes apply to instate retail purchases; use taxes apply to out-of-state
retail purchases. Tax rates are set at the state level, but
counties and cities may add on a small tax of their own.
Five states do not have a statewide sales tax: Alaska,
Delaware, Montana, New Hampshire and Oregon. Four
of these five (all but Alaska) do not allow local sales
taxes, either.
Among states that do collect a statewide tax, the five
with the lowest average combined rates are Hawaii
(4.35%), Maine (5%), Virginia (5%), Wyoming (5.34%),
and Wisconsin (5.43%). The five highest combined rates
are Tennessee (9.43%), Arizona (9.12%), Louisiana
(8.84%), Washington (8.79%) and Oklahoma (8.66%).11
The sales tax is imposed directly upon the consumer;
however, vendors must collect the taxes from the
consumer and remit them to the appropriate state. The
tax is merely a percentage of the purchase price.
The use tax is imposed and collected in a similar
manner. The notable difference is that the vendor is
an out-of-state and may not have a legally enforceable
obligation to collect and remit the use tax. The existence
of a legal obligation depends on the extent of the vendor’s
contact with the consumer’s state.
States levy a use tax so as to not disadvantage instate vendors. The use tax discourages a state’s residents
from making purchases in another state in order to
avoid the sales tax. In addition, both in-state and outof-state vendors incur similar tax related collection and
remittance costs.
Many purchases, however, are exempt from sales/use
taxes. Purchases of property used in the production of
inventory are commonly exempt. Such purchases include
packaging, ingredients in the final product and equipment
(or parts thereof) used to make the product. This prevents
double taxation when the product is resold to consumers.
Rates (property taxes)
Taxes are usually assessed on both real estate and personal
property. However, in some states, only real estate is
taxed. Taxes are based on the value of the property at a
specific assessment date or point in time. Property owners
are liable for payment of the tax.
States directly assess some real estate, but local
governments, typically counties, assess most real estate
taxes.
62
Table 38 State and local general sales tax rates as of July 1,
2011
State
State tax Average local
Combined Rank
rate
tax rate
rate
Alabama
4.00% 4.64%
8.64%6
Alaska
None 1.74%
1.74%46
Arizona
6.60% 2.52%
9.12%2
Arkansas
6.00% 2.50%
8.50%7
California (a)
7.25%
0.88%
8.13%
12
Colorado
2.90% 4.58%
7.48%15
Connecticut 6.35% None
6.35%31
Delaware
None None
None47
Florida
6.00% 0.65%
6.65%29
Georgia
4.00% 2.87%
6.87%23
Hawaii (b)
4.00%
0.35%
4.35%
45
Idaho
6.00% 0.02%
6.02%35
Illinois
6.25% 2.02%
8.27%9
Indiana
7.00% None
7.00%21
Iowa
6.00% 0.81%
6.81%25
Kansas
6.30% 1.96%
8.26%10
Kentucky
6.00% None
6.00%36
Louisiana
4.00% 4.84%
8.84%3
Maine
5.00% None
5.00%43
Maryland
6.00% None
6.00%36
Massachusetts6.25%
None
6.25% 33
Michigan
6.00% None
6.00%36
Minnesota 6.875% 0.30%
7.18%17
Mississippi 7.00% 0.003%
7.00%20
Missouri
4.225% 3.45%
7.67%14
Montana (c)
None
None
None
47
Nebraska
5.50% 1.27%
6.77%27
Nevada
6.85% 1.08%
7.93%13
New Hampshire
None
None
None
47
New Jersey
7.00%
0.03%
7.03%
19
New Mexico (b)
5.125%
2.11%
7.23%
16
New York
4.00%
4.48%
8.48%
8
North Carolina
4.75%
2.10%
6.85%
24
North Dakota
5.00%
1.38%
6.38%
30
Ohio
5.50% 1.28%
6.78%26
Oklahoma
4.50% 4.16%
8.66%5
Oregon
None None
None47
Pennsylvania 6.00% 0.34%
6.34%32
Rhode Island
7.00%
None
7.00%
21
South Carolina
6.00%
1.14%
7.14%
18
South Dakota (b) 4.00%
1.81%
5.81%
40
Tennessee 7.00% 2.43%
9.43%1
Texas
6.25% 1.89%
8.14%11
Utah (a)
5.95%
0.73%
6.68%
28
Vermont
6.00% 0.14%
6.14%34
Virginia (a)
5.00%
None
5.00%
43
Washington 6.50% 2.29%
8.79%4
West Virginia
6.00%
None
6.00%
36
Wisconsin
5.00% 0.43%
5.43%41
Wyoming (b)
4.00%
1.34%
5.34%
42
D.C.
6.00%
-
6.00%-
In contrast, states directly assess most personal
property. Most states do not tax intangible personal
property. Valuation methods, tax rates and assessment
dates vary by state.
Other taxes
While the majority of state tax collections are from
income, sales and use, and property taxes, other taxes
significantly affect businesses and transactions. For
example, share taxes are usually levied on corporations
for the right to exist as a corporation, or for the right
to do business in the state. States base capital stock
taxes on a corporation’s net book value, which includes
capital, surplus and retained earnings. Licence taxes are
often imposed for the right to conduct certain businesses
or professions. These taxes are intended not only to
raise revenue but also to regulate certain businesses and
professions. State and local governments both impose
these taxes.
States usually impose transfer taxes on changes
of property ownership; the tax is imposed upon the
transferor. For example, some states impose a transfer
tax on the transfer or sale of stock or securities, typically
exempting initial public offerings from the tax. Other
states impose a tax upon the transfer or sale of real
estate at the time of recording or transfer. States impose
excise taxes on the consumption of regulated goods and
services, such as gasoline and air travel.
States fairly commonly assess severance taxes on the
removal of natural resources, such as timber, minerals
and petroleum. The tax is based on the value of the
extracted resources, and is a major source of state
funding in Texas and Wyoming, as well as Alaska.
States levy payroll, disability and unemployment taxes
on both employers and employees. States also levy motor
fuel taxes, telecommunications taxes, tourism taxes,
value added taxes, commercial rent taxes, and highway
use taxes.
Table 4 Five states with the highest tax burden for a
family of three
Tax
burden
rank
Tax burden
percentage
of income
Average
tax
burden
Average
income
Connecticut
1
20.70%
$10,348
$50,000
Pennsylvania
2
13.70%
$6,859
$50,000
Maryland
3
11.60%
$5,797
$50,000
Michigan
4
11.40%
$5,722
$50,000
Iowa
5
11.30%
$5,649
$50,000
State
Table 5 Five states with the lowest tax burden for a
family of three
State
North Dakota
Tax
burden
rank
Tax burden
percentage
of income
Average
tax
burden
Average
income
46
5.70%
$2,838
$50,000
Montana
47
5.60%
$2,794
$50,000
South Dakota
48
5.20%
$2,588
$50,000
Florida
49
4.90%
$2,445
$50,000
Alaska
50
4.40%
$2,355
$50,000
KEY WEBSITES
Fortunately, states and many other interested groups
maintain websites containing key tax information. Taxing
agencies commonly post their own pronouncements,
rules, regulations, statutes and the other official
documents which make up the basic rules of state and
local taxation.
CONCLUSION
New Zealand firms considering setting up new operations
in the US can face a bewildering array of state and local
regulations. This is typified by the US system of state and
local taxation.
The Holy Roman Empire was neither holy nor Roman
nor an empire; state and local taxation of business in
the US is not much of a system, either. Negotiating this
system is no mean task.
As shown above, this is particularly important when
selecting the location for a prospective US operation.
1 Moore, ML, BM Steece and CW Swenson. 1987. An analysis
of the impact of state income tax rates and bases on foreign
investment. The Accounting Review (October): 671-685.
2 Karayan J & CW Swenson. 2006. Strategic Business Tax
Planning.
3 An excellent analysis of the dynamics can be found in Padgitt,
K. 2011. State Business Tax Climate Index (Eighth Edition).
Background Paper No. 60. This is one of many reports
published by the U. S. Federation of Tax Administrators at
taxadmin.org.
4Swenson, et al. 2003. State & Local Tax Planning.
5 PricewaterhouseCoopers. 2011. SALT [state and local tax]
Trends.
6 Karayan J. 2009. “Fundamental limits on state and local
taxes: US constitutional law” in State and Local Taxation
(Lexis/Nexis Matthew Bender).
7 PricewaterhouseCoopers. 2011. Paying Taxes: The Compliance Burden.
8 Source: Drenkard, S. 2011. Ranking state and local sales
taxes. Tax Foundation Fiscal Fact No. 284. This is another
of many reports published by the US Federation of Tax
Administrators.
9 Ibid., note v
10Lease, TL, CW Swenson and M Williams. 2001. Effects of
Unitary Versus Non-Unitary State Income Taxes on Interstate
Resource Allocation: Some Analytical and Simulation
Results. Journal of the American Taxation Association, Vol.
23, No. 1, Spring.
11Ibid., note ix
John Karayan has co-authored several tax books. Ashley
Burrowes FCA (NZ) is a director of the chartered accountants
association in the USA (ACAUS) and is a member of the
California CPA society.
PETER ISAAC ON BANKING
Subordinated debt has
payout risks
Subordinate bonds offer tempting yields, but
investors risk being sent to the back of the
queue if the issuer runs out of money.
C
HARTERED ACCOUNTANTS IN public practice might find it
worthwhile to apply some follow through questions if they
discover their clients are about to acquire, or have already
acquired, subordinated bonds issued by trading banks.
Such bonds will offer a tempting yield of several percent more
than the banks’ own blackboard rate. This return, when blended
with such well-known and reliable names, seems to add up to an absolutely safe
investment. Except for one thing – the existence of the word “subordinate”.
Of all the words relating to risk, “subordinate” is the one that is most likely to
confuse members of the public. It means that those in possession of subordinate
bonds go to the back of the queue, or close to it, if the issuer runs out of cash.
The matter came to prominence last year when holders of Bank of Ireland
subordinated bonds were offered just 20p in the pound, with worse to come if
they didn’t accept. It was the holders of bank-issued subordinated debt who took
the hit, or in banking speak, the haircut.
One of the reasons the investing public tends to be in the dark about the nature
of subordinated debt is that these bonds are one of the main sources of bank
finance. Not wishing to cast any doubt on the trading banks for fear of generating
any uncertainty about their viability, there is a tendency among commentators to
steer clear of subordinated bonds.
Also, regulators like to see banks issuing this subordinated debt on the grounds
that bond holders will take an especially keen eye on what the bank is doing
because they know that if there is a problem, they stand to be amongst the worst
hit. Trading bank subordinated debt is thus viewed by regulators as creating more
watchdogs.
Subordinated debt is sometimes known as junior debt. This is in the context of
there being senior debt, the debt much closer to the head of any payout queue.
In the property world especially subordinated debt is often termed mezzanine or
high risk debt.
Holders of subordinated trading bank bonds almost always view them as gilt
edged and indeed they are justified in doing so by the strong performance of the
Australian-owned trading banks in the climate of current Northern hemispherecentered credit bust.
The United States and European roll call of bank failures reminds us, however,
that banks have capital structures that make them by their very nature especially
prone to failure. Banks tend to have relatively little equity when compared to
other mercantilist enterprises. They receive most of their capital funding from
debt.
Worse still, much of the debt is in the form of accounts which are payable on
demand at par and are readily transferable by the account holder to third parties.
A high percentage of bank assets are in the form of relatively illiquid commercial
loans. It is a potentially dangerous mix of highly liquid liabilities and illiquid
assets. Trading banks by definition must break the golden rule of money, the one
64
about the danger of borrowing short
and lending long.
Such liabilities make banks
especially vulnerable to liquidity
crises.
It is not really fair to claim that
members of the public or lay people
in general are the only ones to have
a rosy view of banks in regard to
permanence. As recently as 2005 the
Basel Accords were focused on ways
of reducing the mandatory liquidity of
banks in order to give them more cash
in hand. Now the Basel Accords are
dedicated to doing quite the opposite
by insisting that banks build up their
floats.
Banks need to
raise more money
from the public,
and offering
subordinated debt
is an ideal way to
raise it
Banks need to raise more money
from the public, and offering
subordinated debt is an ideal way to
raise it from the people who know them
best – their customers. Subordinated
debt for trading banks is in many
ways preferable to raising money
wholesale on the global market. Also,
it sure beats interbank borrowing, the
vulnerability of which was one of the
most shocking outcomes of the bust
that started in 2007.
And yet the lesson of the ensuing
bailouts reveals that even in modern
times, no institution, however
embedded in the fabric of the society
in which it operates, can ever be
said to be utterly invulnerable to the
unexpected. This is why chartered
accountants need to explain precisely
where holders of subordinated debt
stand in any payout queue.
Peter Isaac is a financial journalist and
author.
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65
Image matters
PEOPLE JUDGE OUR PROFESSIONALISM BY THE WAY WE LOOK
Marlena Neilson has worked
for Annah Stretton since May
2010, establishing herself
as an important cog in the
fashion wheel. Each season
Annah Stretton creates a
collection unlike the last –
100% New Zealand made
garments with provocative
undertones and a hint of
luxury which are also very
wearable.
Sharyn Butters is a mobile hair
and makeup artist with more
than 20 years’ experience.
She has worked extensively
in the television industry and
her artistic talent and wealth
of experience means she
provides world-class hair and
makeup artistry for special
occasions, weddings, balls and
photography.
sharynbutters.co.nz
Weeg Chan is a stylist
at Shape Hair Design
in Wellington city. His
international hairdressing
career spans more than
20 years. Shape is one of
New Zealand’s top salons,
specialising in providing
hairstyling and colour services
to professional consumers.
shape.co.nz
STYLISTS’ TIPS
A
Tania Gullery CA,
Senior accountant, Active Chartered Accountants, Lower Hutt
Tania Gullery CA was nominated for a makeover
by colleague Francine Pawson CA, who wants to
see her friend in “new clothes and something other
than sensible work shoes”.
Tania agrees she’d like to look more stylish,
fashionable and presentable, describing her look as
“pretty conservative”.
“I tend to wear a lot of the same style of clothes
all the time. Due to my size (6-8) it’s hard to find
clothes that fit well and look good. Knowing what
clothes make me look taller – I’m five foot – would
also be good.”
Tania was also keen to get a more modern
hairstyle, having worn her hair the same way for as
long as she can remember.
“One of my colleagues advised me that I still had
the same hair cut as when we were at polytechnic
together, so a few more than 10 years.”
She has had the same makeup routine for about
three years, involving foundation, eye shadow,
mascara and lipstick.
“I tend to use soft colours – I alternate between
light blue and mauve eyeshadow, depending on
what I’m wearing, and pink lipstick. I tend to stick
to the tried and tested. I would like a change and
advice on what suits my skin tone.”
Tania loves her new look and says the outfit is
“refreshing and modern”. She’s pleased with
Marlena’s tips to help make her look taller.
“I no longer have to be swamped by my clothes.”
Tania before her Image Matters makeover.
66
CLOTHING: Marlena wanted to give Tania’s appearance
a lift with colour, show off her shape and elongate her
frame, and chose a dress that does all three. She used
bright colours to create a fun, colourful yet corporate
look.
“Many women are looking for corporate dressing that
also reflects their personality. Introducing a print in bright
colours with some playful accessories is a great way to
do this.”
But prints come with a warning.
“If they are too big or too bold they will ‘wear you’
instead of the other way around, making you appear
shorter and seem to fade into the background.
“When choosing prints, hold them in front of your face
and look in the mirror. Does the print stand out or does
your face dominate? If it’s your face that still dominates,
then that print is fine for you.”
She says Tania needs to wear fitted dresses, tailored
jackets and tops that pinch in at the waist.
“Tania has a very small frame and needs to watch her
hem lengths or she could quickly become very frumpy.”
She recommends Tania’s hemlines are either just above,
on, or just below the knee.
Marlena used accessories to bring the outfit together
and highlight Tania’s best features with a silver Obi belt
creating definition and shape. A long string of pearls
attracts the light, draws attention to Tania’s smile and
makes her look taller.
MAKEUP: Sharyn created an everyday, soft, corporate look
for Tania, appropriate for the workplace. She selected
warm tones to complement the caramel highlights in
Tania’s hair. Eyeshadows in shades of gold and bronze
have been used, along with a warm-toned lipstick. Sharyn
used a kohl eyeliner and mascara to emphasise Tania’s
eyes. Her tips for Tania for the future are to always wear
some concealer, mascara and either a little bit of lipstick,
or a coloured lip gloss.
Wella System
Professional
Volumize
Shampoo
RRP $34
Wella System
Professional
Volumize Leave-in
Conditioner RRP
RRP $34
Scope Kitty Jacket $260
HAIR: As Tania has very fine hair, Weeg gave her a chic
layered bob and a long fringe that complements her face
shape and is easy to maintain. To add warmth to her
look, he lightened her hair colour to a rich medium brown
with finely weaved highlights.
Weeg recommends Tania use Wella System Professional
Volumize Shampoo and Wella System Professional
Volumize Leave-in Conditioner. The Wella System
Professional Volumize range is designed specifically for
fine hair as it strengthens hair and adds light longlasting volume whilst gently cleansing and nourishing. To
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Do you know an Image
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Please send a full-length
photo and details to:
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Public Sector Conference
Adrian
11 NZICA erifiable CPD
hours
HEAR FROM
2012
PUBLIC SECTOR
CONFERENCE
1–2 March, InterContinental Wellington
Hon Bill English – Deputy Prime Minister and Minister of Finance
Robert Russell – Commissioner of Inland Revenue
Brian Roche CA – Chief Executive, New Zealand Post Group
Lyn Provost FCA – Controller and Auditor-General
Doug McKay – Chief Executive, Auckland Council
As well as representatives from
Christchurch City Council, The Treasury,
Counties Manukau District Health Board and more
TRANSFORMATIONAL CHANGE
Discover the vision and future
value of the Public Sector
68
REGISTER NOW
nzica.com/publicsectorconference or call 0800 4 NZICA
Register online using promo code JPS010212
and go into the draw to win an iPad
INSTITUTE
shelf life
New library catalogue for new year
NZICA has just upgraded its library catalogue system so members can
now do more, and access more information.
Melissa Clarkson,
How does this affect the Informed Professional
Library Team Leader
Bulletin?
What is being upgraded?
This used to sit on NZICA’s website as a long list. The new
system makes it easier for members to request items
directly, rather than having to send an email to library
staff requesting material.
The library is moving from its current
system, DB text works, to a system
called Koha. Koha is an open-source library software
system, free to all libraries around the world and growing
in popularity.
How will Koha make it quicker for members to
access information in the future?
Why did you need to change systems?
The back end of the old system was very manual and
time consuming. Koha is automated which means not
only can we now serve members faster, but they can
access more information independently. We now have
a number of functions that members expect of a library
catalogue system nowadays – we’ve moved with the
times.
What can members do now that they couldn’t
There are more searches and functions that members can
now carry out independently. Also, they will be able to
help themselves by seeing the items they have already
read. For example, if there’s an article a member wants
to view again, and they know they read it about six
months ago, they can go through their records to find
out more about this rather than needing to ask a staff
member to help. Also, because systems and processes are
automated, instead of it taking five minutes (literally!) to
issue a book, it now takes 30 seconds.
do before?
There are a number of new functions.
• The search function is more refined so results will be
based on relevance.
• Members can check the availability of an item, see
what items they currently have out on loan, and
reserve or renew items online.
• Members can see what items they have checked out
in the past.
• They can view the covers of certain books.
• Members can create reading lists for themselves –
items they are interested in that they can request one
at a time in the future.
• Members can comment on an item and give it a star
rating, similar to what you can do on websites like
Amazon. This will help other members make informed
reading choices based on recommendations.
Will there be more developments as time goes by?
Absolutely – Koha is always evolving so if there is a
development prompted by another library, for example
an iPhone or Android app, all libraries that use Koha will
eventually get access to that new technology for their
members.
Library staff will be happy about that – what kinds
Library webinar
What is it?
A free webinar to
give NZICA members
who haven’t yet
attended a webinar
a chance to sample
this technology. The
webinar will also
provide information
about the online
library catalogue
upgrade and give
users some new
search skills.
When?
15 February, 10-11am
Who is it for?
All NZICA members.
Members can log in
to the webinar from
anywhere in NZ or
overseas.
How do I register?
At events.nzica.com
of projects does this mean they will be able to
spend time on in the future?
While staff will still be available for any queries, they
are looking forward to spending some time working on
services that will add more value for members, such as
more training for members on how to find information.
How do members access the new system?
The same way as before, by going to nzica.com/library.
They do need to log in, so they can be identified as a
user and receive their personalised profile which includes
information like their current loan items.
How can members find out more about how to
use Koha?
There’s a free webinar on 15 February to teach members
about the new library catalogue system.
What do members do if they encounter difficulties?
Simply contact library staff who can then help sort things
out. We’re excited about these changes and are looking
forward to hearing feedback from members.
69
INSTITUTE
shelf life
What’s new in the library
Business Information Librarian Kamala Bain takes a look at what’s
new on the library shelves.
Here is a selection of new items available from the library. To request, please contact Library and Information Services, email
[email protected] or phone 04 474 7882, citing the item’s identification number.
The new articulate
financial statement fraud; fraud committed by
Learn marketing
executive: look, act
employees, vendors and customers; and e-business
with social media in
and sound like a
fraud. Each chapter includes study exercises such
7 days, by Linda
leader, by Granville N
as discussion questions, case studies and internet
Coles, Wrightbooks,
Toogood, McGraw-Hill,
assignments.
2011
2010
ID No: 34529
Provides an introductory
Discusses tools and techniques
BUSINESS AND MANAGEMENT
guide to using Facebook,
LinkedIn, Twitter and
for effective public speaking.
Focuses on speech preparation, delivery, after-speech
Human Resources Management
YouTube to promote your business. Discusses
communication such as Q&A sessions, and media
Payroll: a practical
the basics of building profile pages, developing
interviews.
guide to New Zealand
appropriate content and online etiquette.
ID No: 34483
payroll
administration, by
Explains how to develop a simple marketing plan
and measure the results of your efforts.
David Jenkins, et al.,
FINANCIAL MODELLING
ID No: 34633
CCH, 2011
Financial simulation
modeling in Excel: a
Explains the essential
step-by-step guide, by
components of all pay office functions and
The natural
Keith A Allman, et al.,
procedures. Topics include setting up payroll systems,
presenter: turning
John Wiley & Sons,
payroll administration and tax issues. Updated in
conversations into
2011
light of the Income Tax Act 2007, changes to the
presentations, by
Discusses the theory and
Employment Relations Act 2000 and the Holidays
COMMUNICATIONS
Barry Brophy, New
practice of financial simulation modelling in Excel.
Act 2003, and other recent legislative developments.
Zealand Institute of
Provides a step-by-step guide to creating multiple,
ID No: 34652
Chartered
smaller models as opposed to a single unified model.
Accountants (NZICA), 2011
ID No: 34634
Argues that everyone has the ability to speak
Leadership
The anywhere leader:
confidently in public by harnessing their
natural conversation skills. Provides a short
but comprehensive guide to many aspects of
Fraud examination, by
succeed in any
public speaking, including: how to structure
W Steve Albrecht, et al.,
business
your material; using visual aids; incorporating
South-Western
environment, by Mike
analogies, examples, demonstrations and stories
Cengage Learning,
Thompson, Jossey-
into your talk; controlling your nerves; using
2012
Bass, 2011
your voice and body language effectively; and
Discusses a variety of topics
Explains the author's concept
bridging the gap between your knowledge and
70
how to lead and
Fraud and Forensic Accounting
on detecting, investigating
of an “Anywhere Leader”, or a person who is able
that of the audience.
and preventing fraud. Covers both traditional fraud
to lead through uncertainty and disruption in any
ID No: 34735
detection methods and the use of technology to
environment. Outlines the qualities required to be
proactively detect fraud. Describes the various
an ”Anywhere Leader” and how these qualities can
elements in a fraud investigation, and outlines
be developed.
different types of fraud such as management or
ID No: 34635
Financial Statements
FEATURED BOOK
HBR's 10 must reads
statements and cashflow statements. Includes
Financial statement analysis: a
case studies of fraudulent reporting and
practitioner's guide, by Martin
describes the ways in which earnings can be
Fridson and Fernando Alvarez, John
exaggerated or fabricated. Provides tips for
Wiley & Sons, 2011
maximising the accuracy of forecasts and
Outlines the analytical framework needed
a structured approach to credit and equity
to scrutinise financial statements. Discusses
evaluation.
the interpretation of balance sheets, income
ID No: 34579
What you need to
Management Accounting
on leadership, by
Practical lean
know about project
Daniel Goleman, Peter
accounting: a proven
management, by
F Drucker, John P
system for
Fergus O'Connell,
Kotter, et al. Harvard
measuring and
Capstone, 2011
Business Review,
managing the lean
Provides a short introduction
2011
enterprise, by Brain
to the principles and
Contains 10 selected articles
Maskell, et al., CRC
practices of project
on leadership from the Harvard Business Review.
Press, 2012
management. Covers goal setting, estimating,
Includes writings on emotional intelligence, the
Describes how to transform a traditional
resource supply and demand, managing risk and
difference between management and leadership,
accounting system into one that supports a lean
expectations, and tracking and status reporting.
change management, dealing with adversity and
enterprise. Includes worked examples and case
Includes chapters on managing multiple projects
discovering your authentic leadership.
studies.
and maintaining a work/life balance.
ID No: 34653
ID No: 34460
ID No: 34645
TouchPoints:
Project Management
Strategy
creating powerful
Project management
Good strategy bad
leadership
metrics, KPIs, and
strategy: the
connections in the
dashboards: a guide
difference and why it
smallest of
to measuring and
matters, by Richard P
moments, by Douglas
monitoring project
Rumelt, Crown
Conant and Mette
performance, by
Business, 2011
Harold Kerzner, John
Discusses the author's
Norgaard, Jossey-Bass, 2011
Suggests that leaders should view interruptions
Wiley & Sons, 2011
to their working day such as meetings, emails
Asserts that a lack of meaningful metrics is the
and bad company strategy. Argues that "good
and hallway conversations as opportunities to
single most important reason why many projects
strategy" is a specific and coherent response to
build their influence and deliver better results.
fail. Describes metrics and key performance
obstacles, while "bad strategy" often consists of
Describes how to get the most benefit out of
indicators (KPIs), and explains the difference
buzzwords, motivational slogans and financial
these interactions through inquiry, reflection and
between the two. Discusses value-driven metrics
goals. Explores nine sources of power which the
practice. Draws on examples from the author's
and performance indicators, and how to identify
author believes are fundamental to good strategy,
tenure as CEO of Campbell Soup Company.
and measure them. Describes how to use
and suggests a number of techniques for changing
ID No: 34644
dashboards effectively to present metrics and
your thinking style that can result in better
KPIs to project stakeholders, including design tips
strategy. Includes case studies from business, non-
and real-life examples.
profit and military organisations.
ID No: 34565
ID No: 34693
distinction between good
A more comprehensive list of new items can be found in The Informed
Professional – Latest Articles and Publications, which is published monthly to the
Library section of the Institute’s website – nzica.com/library
71
INSTITUTE
shelf life
Gems in the Library
During a tidy up of the Library collection over the Christmas break, the
library team came across some gems in the collection that may be of
interest to you.
To request any of these items or a specific subject search, contact Library and Information Services. Email: [email protected],
or phone 04-474 7882, citing the item’s identification number or your topic of interest.
Accounting Firms
The e-myth
The innovation
accountant: why most
secrets of Steve
accounting practices
Jobs: insanely
risk management for foreign exchange
and interest rates, plus checklists for CFO
priorities, performance measurement and
due diligence.
don't work and what
different principles
to do about it, by
ID No: 34234
for breakthrough
Michael E Gerber and
success, by Carmine
M Darren Root, John
Gallo, McGraw-Hill,
Wiley & Sons, Inc. 2011
Beyond performance:
2011
how great
Provides advice for accountants in small
and medium-sized practices on how to
grow and improve your practice. Focuses
on subjects such as how to shift from
tactical thinking to strategic thinking,
becoming a successful accountant-manager
entrepreneur, and implementing innovative
systems.
ID No: 33879
Fraud and Forensic Accounting
Innovation
Presents seven principles of innovation
based on Steve Jobs’ (Apple CEO’s)
approach to business. Aims to help readers
learn how to match and beat powerful
competitors, develop or reinvent products,
and attract loyal customers. Based on
interviews with successful CEOs, managers,
entrepreneurs, consultants and others,
in order to discover the core of Jobs’
innovative philosophies.
72
advantage, by Scott
Keller and Colin Price,
John Wiley & Sons,
Inc. 2011
Bragg, John Wiley &
ID No: 34368
Leadership
The new CFO
Recounts the story of Harry Markopolos,
the independent financial fraud investigator
who blew the whistle on Bernard Madoff's
$65 billion Ponzi scheme.
financial leadership
ultimate competitive
manual, by Steven M
ID No: 33914
Wiley & Sons, Inc. 2010
ID No: 34058
organizations build
Describes the authors' five-step approach
to achieving and sustaining organisational
excellence. Discusses how to maintain
a balanced focus on both short-term
and long-term results. Considers the
role of senior leaders in organisational
transformation and how to transform an
organisation which is already performing
well. Written by two directors of McKinsey
& Company.
No one would listen: a true financial
thriller, by Harry Markopolos, John
Organisational Effectiveness
Sons, Inc. 2011
Discusses best practice
for Chief Financial
Officers (CFOs) to improve efficiency,
mitigate risks and maintain their
organisations’ competitive edge. Considers
a variety of topics including the first days
on the job, divisional consolidations and
splits, corporate restructuring, and strategic
decision-making on financial, tax, and
information technology issues. Includes
new chapters on investor relations and
Leadership without excuses: how
to create accountability and high
performance (instead of just talking
about it) by Jeff Grimshaw and Gregg
Baron, McGraw-Hill, 2010
Divides employees into three groups –
Saints, who are always accountable, Sinners,
who are never accountable, and Saveables who sometimes make good choices,
sometimes not. Advocates how good
leaders put an end to Save-ables’ excuses,
and through good communication and clear
consequences, convert them into Saints.
a negative impact and how to improve your
personal relationships.
ID No: 33880
ID No: 33696
arm readers with a greater understanding
of what works, and what doesn’t, when
developing strategy.
ID No: 34136
The Toyota way to
Strategy
continuous
Innovative corporate performance
improvement: linking
management: five key principles to
Family trusts 101, by
strategy with
accelerate results, by Bob Paladino,
Janet Xuccoa,
operational
John Wiley & Sons, Inc. 2011
Cheshire Publishing
excellence to achieve
Analyses the corporate performance
management (CPM) practices of a diverse
range of award-winning companies.
Discusses five key principles that underpin
successful CPM.
Ltd, 2010
superior
performance, by Jeffrey K Liker and
James K Franz, McGraw-Hill, 2011
Uses the Toyota company as a backdrop
for discussing continuous improvement
and process improvement. Discusses what
continuous improvement is and introduces
concepts such as "lean" processes and
the plan-do-check-adjust (PDCA) approach
to problem solving. Discusses the type of
culture required to achieve continuous
improvement and presents a series of
detailed case studies of continuous
improvement involving real-life companies.
ID No: 34238
Psychology
59 seconds: think a little change
a lot, by Richard Wiseman, Alfred A
Knopf, 2009
Presents scientific advice and research on
how to improve your life by being more
effective, decisive, engaged and creative.
Includes advice on how to give the perfect
interview, how to detect when someone is
lying to you, why positive thinking can have
Trusts
The lords of strategy:
Provides a guide to
forming, maintaining
and shutting down a
trust. Discusses the transferral of assets
into a trust, the responsibilities and rights
of trustees, financial statements and tax
returns.
the secret
ID No: 33567
ID No: 33941
intellectual history
of the new corporate
For these articles, books and other
world, by Walter
new items in the library this month
Kiechel III, Harvard
subscribe to the Informed Professional
Business Press, 2010
Bulletin by email: [email protected]
Tells the story of
four men – Bruce Henderson, Bill Bain,
Fred Gluck and Michael Porter – who
“turbocharged” business in the 60s by
inventing the concept of corporate strategy
as we still know it today. Reveals how the
world’s most influential consulting firms
came into being, and provides insight into
how companies have responded to the
stresses of the current economy. Aims to
73
INSTITUTE
news
Notice of decisions of the Disciplinary Tribunal
(MEMBER SUSPENDED)
At a hearing of the Disciplinary
Tribunal of the New Zealand
Institute of Chartered Accountants
held in private on 15 December 2011
the Disciplinary Tribunal considered
an ex-parte application from the
Professional Conduct Committee
under Rule 21.11 of the Rules of the
Accountants
for
the
interim
suspension from membership of
the Institute of Robert Philip Bell a
Chartered Accountant of Putaruru.
Reasons
The member’s practice companies as
well as their two predecessor practice
companies having been liquidated by
reason of non-payment of GST, the
Tribunal is satisfied that it is in the
public interest that he be suspended
pending further investigation.
Orders of the Disciplinary Tribunal:
(a)
Pursuant to Rule 21.20 (a)
of the Rules of the New
Zealand Institute of Chartered
Accountants, the Disciplinary
Tribunal ordered that Robert
Philip Bell be suspended from
membership of the Institute until
further order of the Disciplinary
Tribunal upon the grounds that it
is satisfied that it is necessary and
desirable to do so having regard
to the interests of the public and
the financial interests of any
person.
(b)
Pursuant to Rule 21.20 (b)
Tribunal ordered that after 14
days have elapsed notice of
the suspension be published in
the South Waikato News, the
Chartered Accountants Journal
74
and on the Institute’s website
with mention of the member’s
name and locality.
R J O Hoare
Chairman
Accountants
15 December 2011
(Member guilty of breaching the
Institute’s Rules and Code of
Ethics)
held in public on 15 December
2011, Ian David Paul Hamilton a
Suspended Chartered Accountant of
Ashburton pleaded guilty to charges
under the New Zealand Institute of
Chartered Accountants Act 1996
and the Rules made thereunder
relating to breaching the Institute’s
Rules and Code of Ethics.
The Disciplinary Tribunal ordered
that the member’s name be removed
from the Institute’s register of
members, that he refund $4,746.98
to the complainant and that he pay
to the Institute the sum of $12,000
in respect of costs and expenses.
No decision other than the
direction as to publicity shall take
effect while the member remains
entitled to appeal or while any
such appeal by the member awaits
determination by the Appeals
Council.
The
Disciplinary
Tribunal’s
full decision can be found on the
Institute’s website at nzica.com/dt.
R J O Hoare
Chairman
Accountants
15 December 2011
(MEMBER SUSPENDED)
held in private on 15 December
2011 the Disciplinary Tribunal
considered an ex-parte application
from the Professional Conduct
Committee under Rule 21.11 of the
Rules of the New Zealand Institute
of Chartered Accountants for the
interim suspension from membership
of the Institute of Shaan Winiata
Stevens a Chartered Accountant of
Wellington.
Reasons
The member has admitted criminal
offending, been convicted of a large
number of serious offences and
has been sentenced to 10 months
home detention. He is continuing
to describe himself as a Chartered
Accountant on his website. It is in
the interests of the public and his
clients that he be suspended from
membership of the Institute.
(a)Pursuant to Rule 21.20 (a) of the
of Chartered Accountants, the
Disciplinary Tribunal ordered
that Shaan Winiata Stevens be
suspended from membership of
the Institute until further order of
the Disciplinary Tribunal upon
the grounds that it is satisfied
that it is necessary and desirable
to do so having regard to the
interests of the public and the
financial interests of any person
in particular his clients.
(b)
Pursuant to Rule 21.20 (b)
Tribunal ordered that after 14
days have elapsed notice of the
suspension be published in the
Dominion Post, the Chartered
Accountants Journal and on the
Institute’s website with mention
of the member’s name and
locality.
R J O Hoare
Chairman
Accountants
15 December 2011
MEMBER SUSPENDED
held in private on 15 December 2011
the Disciplinary Tribunal considered
an ex-parte application from the
Professional Conduct Committee
under Rule 21.11 of the Rules of the
Accountants
for
the
interim
suspension from membership of the
(a)Pursuant to Rule 21.20 (a) of the
Disciplinary Tribunal ordered
that Vincent Chi Yin Tam be
suspended from membership of
the Institute until further order
of the Disciplinary Tribunal upon
the grounds that it is satisfied that
it is necessary and desirable to do
so having regard to the interests
of the public and the financial
interests of any person.
(b)Pursuant to Rule 21.20 (b) of the
Disciplinary Tribunal ordered that
after 14 days have elapsed notice
of the suspension be published
in the New Zealand Herald, the
Chartered Accountants Journal
and on the Institute’s website with
mention of the member’s name
and locality.
R J O Hoare
Chairman
Accountants
15 December 2011
are regarded by overseas donors as
inappropriate use of project funds. The
cost of reciprocal gifts offered in these
ceremonies may vary between $1,000
and $10,000. This is due to factors
which may include the manner in
which these ceremonies are conducted,
the population size, social capital of
the village and also the social status of
this particular village, and its chiefs, in
Samoan society.
Usually, these gifts are paid for
out of funds allocated to the project
in question. Such gift giving may
raise the issue of accountability for
many NGOs operating in Samoa.
Moreover, it often happens that
donors reject such expenditures. The
rationale is that donors have provided
the organisation with funds that
are intended specifically for projectrelated costs, and that none of it
should have been consumed in any
gifting.
This poses a major challenge for
NGOs in Samoa. The result is some
indecision as to whether NGOs in
Samoa should or should not disclose
expenditures on such ceremonies
and traditional gifts. Because of the
question of legitimacy, such funds
consumed in these ceremonies may
not be disclosed. External overseas
stakeholders often see such gifts as
acts of corruption.
Auditors from New Zealand are
frequent visitors to Samoa. From
these illustrations it may be seen that
New Zealand auditors may have
problems assessing the effectiveness of
ceremonial expenditure. When is it a
necessity and how much is sufficient?
How much could be considered
simply an extravagant indulgence
by the officials of the NGO? Again
with regard to accountability, to what
extent can oral accounting substitute
record-keeping? These can be difficult
questions for New Zealand auditors
to adjudicate.
Institute of Vincent Chi Yin Tam a
Chartered Accountant of Auckland.
Reasons
The concerns raised are significant
and are raised after an investigation
by an experienced investigator who
offered the member the opportunity
to provide an explanation, which
he was unable or unwilling to
do. Filing returns with Inland
Revenue at variance to the returns
provided to the client is extremely
significant. Further, substantial sums
of money remain unaccounted for.
Having regard to the nature of the
allegations, the Tribunal is satisfied
it is desirable in both the interests of
the public and his clients that he be
suspended.
Continued from p41
consumed in acquiring the uniform,
including any travel costs. In this
way, a form of culturally acceptable
transparency
and
accountability
takes place instead of detailed
documentation.
Another example relates to spending
on traditional ceremonies or gifts. Ava
ceremonies are necessary in Samoa
before projects are executed in villages.
As some of the donations that NGOs
in Samoa supervise involve projects for
villages such as building a school or a
church hall, an ava feiloaiga ceremony
is often required. This ceremony is
necessary because in Samoan culture,
no group or party enters or just walks
into a village and conducts work
without consulting the village chiefs or
the village members first.
The issue here is not the ava
ceremony in itself, but the cost of
reciprocating an equivalent monetary
gift. And often, expenditures related
to reciprocating an ava ceremony
75
Privilege Partner News
Find a new home inside your phone
Westpac, in conjunction with Realestate.co.nz, have released Realestate for both
iphone and android phones - it’s the house hunting way of the future, giving you
everything you need at your fingertips when buying a house. If you have an iphone
or android phone you can view properties for sale in your desired area, see which
are having open homes when you’re out and about, rank in real time features of the
properties you view, and add notes or additional photos to the listing. There is also
an automated repayment calculator and map tags of your closest Westpac branch,
Mobile Mortgage Manager or ATM, so you can get in touch with us as soon as possible
to help with home buying advice. For more info on this great new application, check
out the app store, or follow the links from Westpac.co.nz or Realestate.co.nz.
For more information on what Westpac can offer you or your firm, visit
www.nzica.com/privileges/westpac or call the dedicated team on 0800 694 229
(0800 NZICA W).
New year, new logo for Accuro
Accuro has kicked started the new year with a fresh new design for 2012. Accuro
is latin for ‘Taking Care’, a term captured within the new logo. Accuro prides itself
on taking care of its members by offering low premiums, comprehensive cover and
personal service which are now emphasised through this new look.
As an NZICA member Accuro will take care of you further by offering a 10% discount
on its standard premiums for SmartCare.
Whatever stage of life you’re at Accuro has a plan to suit your unique circumstances.
Protecting your family has never been easier. After all, Accuro has been taking care of
New Zealanders for over 40 years.
To find out more about Accuro Health Insurance plans and premiums, and to get an
instant quote, visit nzica.com/privileges/accuro or call 0800 222 876
Bundles of happy clients
Bundling client fees is becoming increasingly
popular among accountants according to
Hamish Edwards, co-founder of Xero. In his
latest blog Hamish says agreeing a fixed fee
base gives clients total certainty as to what
they’re paying for. “Every accountant I have
ever spoken to who has done this says their
clients love it” comments Hamish.
So how do you do it?
1. Create your bundles (tailored selections
of services), along with your terms of
agreement and a proposal document.
2. When you complete end-of-year reports,
decide which bundle would best suit
each client and create a recommendation
proposal.
3. At your year-end meeting with your client,
present the bundle and explain why this
is the best option for them. Discuss how
this new service works – and take the
opportunity to present your other service
offerings and alternative bundle options.
You can read more of Hamish’s blogs at
blog/xero.com.
Xero offers NZICA Members an exclusive
20% discount on Partner Certification and
Re-certification Classroom courses. Visit
nzica.com/privileges/xero to find out more.
Hot Deals
KEA SPECIAL for nzica members
book your Kea campervan or motorhome!
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CLASSIFIEDS
Prominent mid tier firm offers exciting
career opportunity in Business
Advisory Services, for a senior
Manager with CA partnership
aspirations.
Successful candidates will have
current Manager level experience in
Big 4 or mid tier CA firm in NZ, and
demonstrate skills in team leadership
and in working directly with clients.
Independent Share
Valuations
Affordable fixed price share valuations for
private companies ~ business transfers,
restructuring, succession and relationship
transactions.
Chartered Accountant’s opinion
Agreed fee ~ on time.
Expert witness and peer review also
available.
Contact us now:
Our DHA tax webinar on 21 Feb
will cover all major issues as you
go into the end of the financial
year. Only $70+GST.
Written applications with CV attached
should be forwarded to:
B608 NZICA,
P O Box 11-342, Wellington.
PKF ROSS MELVILLE AUDIT
LOCUM SERVICES
You have a challenge. We have
a solution. Experienced Public
Practice Certificate Holders
available to help. We would
come with Professional Indemnity
Insurance in place.
We will come to your place
wherever that maybe in New
Zealand. Contact us today for a
discussion to find out how we can
help you.
Email us at [email protected]
with your contact details and
we will call you to start working
through a solution for you.
DAVID WOOTTON
FRASERS
DISPUTE RESOLUTION
SERVICES
QUICK & COST EFFECTIVE
Contracts • Business • Real Estate
Matrimonial • Estate • Trusts
Contact John Isaac
Mediator & Arbitrator
AAMINZ, LEADR accredited Panel Mediator,
Diploma in Dispute Resolution
Qualified Accountant, B.Com, AREINZ
Telephone:
09 528 9599 (24/7)
Email:
[email protected]
Improve your KPI’s
• Fixed cost per assignment
• On time on budget
• Better cashflow
• Improved return for business
owners
CONNECT ACCOUNTING LTD
www.connectaccounting.co.nz
Phone 0800 89 13 70
CONNECT ACCOUNTING
78
www.taxtraining.co.nz
DANIEL HUNT
CLIENT FEES
FOR SALE
Approx $100,000
Office Available
In Hamilton
Confidential Reply:
B610 NZICA,
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MEDIATION ARBITRATION
A C C O U N TA N T S
Outsourcing for NZ
Accounting Practices
MAXIMISE TAX
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FOR YOU & YOUR
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Chartered Accountancy
PARTNERSHIP OPPORTUNITY
AUCKLAND CITY
BUSINESS ADVISORY SERVICES
We specialise in the
smooth transition of
placing Accountants
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their continued career
development.
If you have a vacancy
to fill or you are just
looking for that next stage in your
career then we can help you.
For roles in CA firms
(BAS, Audit, Tax, CF):
Kathy Glass, 09 528 9865
e-mail [email protected]
www.kgrecruitment.co.nz
KG Recruitment Ltd
KG RECRUITMENT
PROGRESSIVE ACCOUNTANTS
IT BUSINESSES WANTED
Your client may be software
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• To exit their business
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MERCURY IT
CLASSIFIEDS
Attractive Partnership Opportunity
Southern South Island Rural Practice
Best Practice Small
Audit Programme
Will your ‘not for profit’ audits stand the scrutiny of Practice
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Our audit package for ‘not for profit’ clubs and societies has
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A full set of procedures, workshops, letters and reports is
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All enquiries to Karen Morgan at
[email protected] or
www.shandthomson.co.nz
102 Clyde Street, P O Box 2, Balclutha
P: 03 4180020
F: 03 4180026
MALLOCH MCCLEAN GORE LTD
SHAND THOMPSON
Fees / Practice for Sale
Bay of Plenty
AuditAssistant
takingauditefficiencytothenextlevel
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New online version
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consultancy role
Confidential replies to:
Viv Brownrigg
A senior position which will transition to an equity partnership
role in 2013.
This is an opportunity to join a long established successful
and profitable practice.
The region is progressive with outstanding and accessible
sporting and recreational facilities available.
The practice specialises in providing a wide range of
services to a substantial client base that is predominantly
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A strong background and knowledge of farming and farm
accounting is essential.
The successful candidate will be highly motivated,a real
people person with good communication skills,and a desire
to add value to our business.
We operate from modern spacious offices with excellent
support staff.
Confidential replies to B609, NZICA,
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OngoinginputbyNZauditfirms
IncorporatesISA(NZ)standards
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Visitourwebsiteforafreeevaluation
VIV BROWNRIGG
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AUDIT ASSIST
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NZ and 4,000 worldwide
To book classified advertising space please contact
Rosie Payne
[email protected]
09-917 5931
BUSINESS APPRAISALS
Accounting Practice Wanted
East or South Auckland
Looking to retire or sell your practice
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Do you want peace of mind that your
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I am a CA with 16 years experience in
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STEVE YOUNG
79
NEWS
opinion
IFRSing in the USA
Slow but steady progress is being made
on the adoption of IFRS in the US.
T
by MARK HUCKLESBY FCA
he
Securities and Exchange Commission (SEC) in the
United States is probably the world’s most powerful
and influential regulator. So it is surprising that, after
almost two years, it has still not made a final determination
on whether, when, and how to incorporate International
Financial Reporting Standards (IFRS) into the US financial
reporting system.
The accounting profession across the world had thought
that perhaps the SEC would make an announcement at the
2011 AICPA National Conference on Current SEC and
(Public Company Assurance Oversight Board) PCAOB Developments
(Conference), held in Washington, DC.
In its 2010 Commission Statement in Support of Convergence and
Global Accounting Standards, the SEC directed its staff to develop
and execute a work plan to enhance the public’s understanding of
the Commission’s purpose and its transparency in evaluating IFRS.
Execution of the work plan, along with completion of the convergence
projects between the FASB and the IASB, was supposed to position the
Commission to make a determination in 2011 on whether to incorporate
IFRS into the financial reporting system for US issuers.
We are now in 2012, and the SEC is still finalising its analysis as
outlined in the work plan. The SEC commissioners have not yet been
presented a final report, and most frustratingly, the SEC has not even
begun to publicly debate the issue.
Anecdotal evidence indicates it has made significant progress in its
analysis under the work plan, especially with the release of a number of
SEC staff papers in the past year. The first, in May 2011, outlined the
“condorsement” approach, and two others, both released in November
2011, that compared the differences between US GAAP and IFRS. They
also analysed the use of IFRS in practice around the world.
But many items still remain open, chief among them being a review
of the governance structure of the International Accounting Standards
Board (IASB). The delay appears to stem from SEC staff waiting for
the Trustees and the Monitoring Board of the IASB to complete their
independent reviews of the IASB’s governance and strategy before
finalising its work in this area.
Even so, based on the vast amount of information the SEC staff has
gathered and analysed through its work on other areas of the Work
Plan, many believe that the Commission now has sufficient information
at this point to draw a conclusion regarding the adoption of IFRS in
the US.
However, SEC Chief Accountant James Kroeke indicated at the
Conference that “the staff will need a measure of a few additional
80
months time to produce a final report”.
“At the same time,” he added, “the staff is
in the process of developing an approach for
Commission consideration.”
The SEC has stated all along that it plans
to take the time necessary to ensure that
appropriate consideration is given to each
of the issues outlined in the Work Plan. It
continues to proceed with caution in its
analysis of incorporating IFRS in the US,
perhaps to ensure the continued protection
of the investing public and capital markets.
As a result, there’s still no final decision
on incorporating IFRS, although many
constituents have publicly expressed strong
support for the development of a single set of
high-quality accounting standards.
The patience of the IASB and its constituents
now appears to be growing thin. There also
appears to be waning interest in continuing
convergence efforts between the IASB and the
Financial Accounting Standards Board (FASB)
beyond completion of the priority projects
on revenue recognition, leases, financial
instruments, and insurance. Perhaps this is
because the IASB and the FASB have been
working at converging their standards for
almost 10 years now.
Although future convergence projects
between the FASB and the IASB may be
in question, some believe that completion
of converged accounting standards for the
priority projects is sufficient evidence for the
SEC to move forward on the IFRS question.
However, on a positive note, Kroeker said he
was encouraged at the potential prospects of
IFRS incorporation “particularly as I consider
and reflect on the input received on the May
staff paper exploring a potential incorporation
approach”. Responses to that staff paper
generally support the SEC’s commitment to
a single set of global accounting standards
and the basic premise for incorporation of
IFRS into the US financial reporting system
through the “condorsement” approach, which
attempts to marry the best of the endorsement
and convergence approaches.
Now is the time for the SEC to make a
decision and to stop such indecisiveness.
Mark Hucklesby FCA is National Technical
Director, Grant Thornton New Zealand.
Mark Hucklesby FCA is National Technical
Director, Grant Thornton New Zealand.
Serving shareholders
Accountants Chief Executive Terry
McLaughlin FCA identifies top of mind
issues for directors in 2012.
H
by TERRY MCLAUGHLIN FCA
aving
canvassed the views of a number of NZICA
members who are also senior directors, it
is clear that directors need to have their minds on the
economy in 2012.
Directors must form a view about the likely progress
of the New Zealand economy over the next 12 months,
and when a recovery might kick in. This means keeping
abreast of developments not just in the local economy
but in the world economy, and assessing the potential for
fallout from Europe and/or a slow recovery in the US.
A director’s first concern must always be the strength of the balance
sheet.
If the world economy grows weaker, debt may become very expensive,
exchange rates may fluctuate dramatically and the capital markets may
slow for months. In such circumstances, directors need to be confident
that their companies have a good relationship with their bankers, for
example, and that their financial position is sustainable.
NZICA members revealed a number of other issues that they expect
to confront in their roles as directors this year, including staffing
concerns, the difficulty of putting into place growth strategies and
dealing with a changing political and social environment.
Protect your people
Directors must have regard to elements of risk within the company, but
one risk that is often overlooked in difficult economic circumstances is
the potential loss of key staff. There is an assumption that staff will stay
put in tough times, but this is not necessarily the case.
A prudent business will look to bolster its resources – which may
mean a prudent competitor will approach your good people. You need
to be comfortable that your people are stable.
When thinking about your people, include your customers. If your
customers get into financial difficulty then they won’t be able to pay
you – so it is vital to make sure your business is alert to the quality of
the customer base.
Review growth opportunities
Most organisations are already operating prudent, conservative
strategies. At some point, the prediction of slow growth becomes a selffulfilling prophecy. However, serving your shareholders means growing
production and making investments – things you do when you are
optimistic but which can be incredibly hard
in difficult times.
For CAs who are directors, this presents
the challenge of thinking outside of our
compliance and regulatory training.
Like other directors, we must develop
an understanding of the business and the
industry the company is in. What CA training
ensures is process discipline. We have IFRS
knowledge and good governance skills and
when this is combined with business acumen
it is invaluable to a Board.
Developments in compliance
To say directors must focus on the business
environment is not to suggest compliance and
regulatory issues will no longer arise.
Regulators are reacting to a changed
world financial environment. Keep abreast of
regulatory change, particularly if you operate
in the international market.
At home, for example, the Financial
Markets Authority has started looking closely
at alternative profit measures, particularly
normalised earnings. They are expected to
release guidelines on what should, or should
not, be acceptable in terms of reporting profit
in the financial statements. A director with
chartered accountancy skills can blend an
understanding of the issues this raises with
knowledge of the business and play a valuable
part in that discussion.
Wider considerations
Lastly, the times are changing. The global
financial crisis undermined faith in the
economic system and it is in that context that
the Occupy Wall Street movement managed
to gain traction at a global level.
There is a growing problem for
governments in securing an income for a large
disenfranchised group. This will potentially
lead to a sustained challenge to the current
economic model around the world.
There is a sense in which we may be at a
crossroads, as we were in the 1980s when free
market philosophies changed the game.
Directors should take an interest in such
issues and ensure their organisations are
positioned to thrive in a changing social
and political environment, as well as in a
challenging economic environment.
Terry McLaughlin FCA is CEO of NZICA.
82

February 2012

Transcription

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