Courses for June 2009 session

Sergiy Giryainov

I have enjoyed the courses, especially the tutor. The information that he gave was in clear and simple form; he showed how it is useful to separate the main part from the total volume. He tried his best.

Olga Koval

Aero-Charter Airlines" Ltd

 All themes were given in sufficient vol. I have only one suggestion about initial to be read out for 3 month before the exams to have more time spending on practical part of the courses.

Svitlana Zhela

LLC Raiffeisen Leasing Aval

I'm impressed about the courses. The only one I have in my suggestions is to be done the dictionary of terms and expressions (from English to Russian).

30 July 2009

Global accountancy body has developed tax principles for 21st century

Tax systems have to be more open, transparent, and should also provide incentives for investment in new cleaner technologies – says new policy paper of ACCA (Association of Chartered Certified Accountants). At the same time, It remains to be seen whether potential adoption of the Tax Code will help to bring the Ukrainian tax system in conformity with global standards.

New ACCA policy paper called Tax principles: from Adam Smith to Barack Obama offers 12 new tenets of taxation, a clear explanation of what makes an efficient and just tax system. It builds on Adam Smith’s canon in the Wealth of Nations which said that tax should be equal, certain, convenient and efficient.

Natalya Vovchuk, Head of ACCA Ukraine, Baltic, Caucasus states says: “Translated to the modern era and its economic complexities, it is a challenge to apply the rules of even the greatest thinkers to contemporary tax systems. Central to our policy paper is the need for governments around the world to ensure their tax systems are truly accountable – that people understand why they are paying taxes.

Chas Roy-Chowdhury, head of taxation at ACCA, says: “Legislation also needs to be clear – no more stealth taxes, no more unexplained tax hikes. Regimes need to be user friendly for business and individuals alike. Volume of legislation needs to be kept to a minimum too, especially to help over burdened small businesses and entrepreneurs. Behaviours can also be managed through taxation – and in our paper we talk about the need for Governments to use tax policy as an instrument of positive change for sustainability.”

The top five highlights of the 12 tenets are:

• Tax Simplification and stability - Legislation should be as simple and straightforward to understand and to comply with as possible. Globally, companies spend almost two months per year complying with tax regulations – 15 days for corporate income taxes, 21 days for labour taxes and contributions and 21 days for consumption taxes.
• Avoidance / Evasion – There is a division between tax avoidance – which is legal, and tax evasion which is not. Convoluted tax planning schemes are the same as extremely complex financial products which have had such a disastrous effect on the banking system. Tax law must be clear and certain to ensure actions which may generate short-term financial advantage at the cost of long term value are not supported.
• Efficiency – Tax systems should be efficient for governments so they can secure revenues, prevent tax leakage and the development of a black economy. Systems should also be efficient for taxpayers so they can comply with requirements. Efficiencies are also needed for small businesses to reduce red tape as they face five times the administrative burden per employee than larger firms.
• Tax Competitiveness - Globalisation of business means that countries need to ensure tax rates are competitive and regimes user-friendly. The danger with competition lies in very low rates, where offshore tax havens or flat tax systems can lead to inward investment being lured between countries and which can undermine agreed international financial regulation initiatives. ACCA supports the principle that nations are free to determine their tax affairs within the context of a global competitive environment, but governments must be wary of causing retaliatory action and trade wars by drastic business tax cuts.
• Green taxes - Tax to change behaviour - The concept of ‘tax shifting’ by increasing carbon taxes on fossil fuels, but reducing them for payroll, income or corporate taxes should be promoted. Governments must use tax policy as an instrument of positive change by providing incentives for investment in new cleaner technologies across a wide range of industries. When combined with tax reductions, green taxes should be seen as a positive step rather than a threat to taxpayers.

Mr Roy-Chowdhury concludes: “Taxation is a dynamic economic and social tool and must inevitably change in nature as national economies and business sectors develop. Green taxes for example were unheard of 20 years ago. Yet there are still some enduring maxims from Smith’s day whose relevance is undiminished.”

Comparing to what extent Ukrainian tax realities correlate with modern global principles, Alexander Cherinko, Manager, Tax and Legal Department, Deloitte & Touche, comments:

“While comparing the current Ukrainian tax system with the principles of tax system in 21st century, presented in ACCA policy paper, I would single out the lack of transparency and stability as the most crucial discrepancies. Currently taxation in Ukraine is administered by way of a significant number of laws and other legislative acts. Existing tax laws often contain ambiguous and unclear provisions, which either do not provide a precise treatment or allow several potential treatments to be applied.

The situation is clearly not improved by frequent and incoherent changes being introduced to the legislation, often by laws that should not impact the tax system in the first place. Just recently we have witnessed another alarming trend with the government trying to amend particular aspects of VAT taxation, which only Ukrainian Parliament is empowered to do. It remains to be seen whether potential adoption of the Tax Code will help to bring the Ukrainian tax system in conformity with the standards of the developed nations”.

The policy paper Tax principles: from Adam Smith to Barack Obama is available online>>>

5 June 2009

Accounting of water resources is critically important – says global accountancy body

Neglecting water management could cost as much as neglecting carbon reporting, says ACCA (Association of Chartered Certified Accountants). WWF (World Wide Fund for Nature) and ACCA team up to bring the critical issue of water footprinting reporting and water to the attention of businesses worldwide.

Carbon accounting and reporting of carbon footprint (total amount of greenhouse gas emissions caused by human activities – like manufacturing a certain product) are essential for reducing global carbon emissions.

Water issues need to be given equal attention, says ACCA in its discussion paper Water: the next carbon? The report is based on a recent ACCA event on Water Footprinting. Dr Dave Tickner, head of freshwater programmes at WWF UK, who was one of the speakers at the event, says:

“Ensuring water security is one of the greatest challenges facing the world in the 21st century. The sustainable supply of water to all users, including businesses, underpins economic growth, poverty reduction, food and energy security and adaptation to the effects of climate change. Wise management of this critical natural resource is therefore in all of our interests. WWF believes that companies, as major users of water, could play a key role in promoting better water management.”

Calculating a water footprint and disclosing information on this and how the impact is being managed form one element of the drive towards sustainable water use, ACCA discussion paper states. According to Water Footprint Network (www.waterfootprint.org), the water footprint of 1 cup of coffee is 140 liters of water, and it takes 16000 liters of water to produce 1 kg of beef.

The paper summarises the outcomes and discussion points of the event, which include:

• water as a key business risk
• water footprinting methodologies
• public-private partnerships
• corporate water management and how it can be achieved
• mainstream investor interest in water

WWF UK and ACCA have recently signed a Memorandum of Understanding to work together on ACCA’s UK Awards for Sustainability Reporting 2009 research, which will be assessing the standard of UK disclosures on water use and management.

Vicky McAllister, sustainability advisor at ACCA says:

“We are very pleased to be working with WWF UK on this issue. Businesses around the world should be addressing and reporting on the importance of water resources and management in their operations as well as upstream and downstream activities, one element of which is calculating the water footprint.”

Natalya Vovchuk, Head of ACCA Ukraine, Baltic and Caucasus States, says:

“Water management and water footprint reporting issues are specifically important in Ukraine because of the often obsolete and highly resource-consuming post-Soviet industrial facilities. The situation is getting worse due to dilapidating water supply and treatment systems. According to recent figures announced by Ukrainian Institute of Water Management And Ecological Problems, about 60% of drinking water is lost in obsolete water supply pipes. Issues of water management and water footprint reporting should become the part of public debate, and adequate practices are to be implemented by businesses throughout the country.”

The full report ‘Water, the next carbon?’ is available here:
http://www.accaglobal.com/documents/WaterFootprinting.pdf

Further information on ACCA’s work on sustainability can be found at: www.accaglobal.com/sustainability

Stats on water footprinting:
According to www.waterfootprint.org,
• it takes 140 litres of water to produce one cup of coffee. That is enough water to sustain one person for up to 3 months.
• in the USA the average water footprint is 2500 m3/cap/yr. In China the average water footprint is 700 m3/cap/yr.
• In Ukraine, the average footprint is 1316 m3/cap/yr, while the global average water footprint is 1243 m3/cap/yr.

According to www.waterwise.org.uk:
• About 65 percent of the water that we consume is in our food.
• A tomato has about 13 litres of water embedded in it;
• an apple has about 70 litres;
• a pint of beer about 170 litres;
• a glass of milk about 200 litres;
• a hamburger about 2400 litres.
• It takes about 136 drops of water to produce one drop of tea, and about 1100 drops of water to produce one drop of coffee.

31 April 2009

Global Accounting Body: G20 Summit Paid Not Enough Attention to Hedge Funds, Toxic Assets and Environment

Publishing its overview of the outcomes of the G20 summit held on 2 April 2009, ACCA (the Association of Chartered Certified Accountants) is concerned that the meeting missed clarification of key issues, especially regarding regulation of hedge funds and toxic assets.

Helen Brand, ACCA’s Chief Executive, says: “The G20 resulted in largely positive reactions from business leaders around the world. There were strong messages about global co-ordination and regulation. But there was no firm plan announced to deal with the billions of dollars of toxic assets clogging up the global banking system, although leaders did agree that there should be a global common approach to tackling them. And probably because it is such a complex issue, details about the regulation of hedge funds were missing.

“While we welcome the establishment of the Financial Stability Board, we do not yet know how it will work. It is crucial that reforms regarding the way the financial services sector is regulated forestall future crises, rather than simply focussing on past failings. We need a system where sound regulation, supervision and good corporate governance reinforce each other.”

ACCA is also disappointed that there was very little mention of the environment, or of measures involving investment in a low-carbon economy. Ms Brand adds: “ACCA believes that the twin crunches of climate and finance have lead to a unique and incredible opportunity to re-build global markets with systems sympathetic to climate change, that value societal and environmental costs and that are sustainable in the truest sense. It was a missed opportunity by the summit leaders not to place sustainability central to its plans.”

The G20 also promised that the International Monetary Fund will be asked to take a stronger role in supervising the world financial system. Ms Brand says: “As a global organisation, we are delighted that noises are being made that the power base of the IMF and the World Bank will be redistributed, although there is a deadline of 2011. Qualified candidates from any part of the world should be able to apply for these important positions.”

On a final positive note, Helen Brand concludes: “ACCA was particularly delighted that the G20 communiqué called on accounting standard setters – the International Accounting Standards Board and the Financial Accounting Standards Board – to work urgently on a single set of high-quality global accounting standards. ACCA has long favoured the principles-based International Financial Reporting Standards (IFRS).”

29 April 2009

Business leaders expect tough challenges to 2014 – and forecast a need for more highly skilled accountants

Businesses will find it tougher to raise finance, be less likely to give credit and will place greater demands on qualified accountants in five years’ time as a result of the current global economic downturn, new research by ACCA (the Association of Chartered Certified Accountants) has shown.

An increased focus on risk management means that accountants will need to demonstrate complex business and managerial skills, claims the survey of 750 business executives across eight countries.

ACCA and research company the BPRI Group asked chief financial officers, partners and senior accountants in Europe, Africa and Asia how business will have changed in five years’ time as a result of the global economic downturn; what demand they saw for qualified accountants in 2014 and what skills will be in demand.

The resulting report, Accountancy: The future outlook shows that Chief Financial Officers, partners and senior accountants around the world are very concerned about the future financial stability of clients and customers, with 87% believing that businesses will be cautious in giving credit. They expect the sub-prime mortgage crisis and the ensuing global economic downturn will have far-reaching repercussions, with 84% believing business will be more wary of risk taking and 76% strongly believing that raising funds will be more difficult as a result.

Nearly 70% believe that executive pay and bonuses will be much more closely aligned to long-term performance as a result of the current situation, with the same percentage also believing that complex funding will be more common. If raising finance is more difficult, the report suggests that accountants will need to be more resourceful in coming up with solutions.

Globally, 63% of respondents expected to see an increase in demand for accountants, not only because they saw an upturn in business, but also because many felt accountants were essential for business to deal with a long term tougher trading climate.

The research also uncovers a growing global expectation that accountants will fill relatively complex roles – with financial professionals being expected to have skills in enterprise risk management, strategic scenario planning and improving use of data. At the same time, basic accounting skills, such as financial audit, financial narrative reports and budget planning which will be in demand in many emerging economies will be taken for granted in many others - with accountants expected to have the full range of skills. Where basic skills are not outsourced, senior business people take it as a ‘given’ that those accounting activities will form part of the qualified accountant’s ‘technical toolkit’.

The survey is part of a series of research and commentary aimed at understanding the impact of the global economic conditions on the accountancy profession, with the aim of helping finance professionals to add value to clients and customers. Details of the research are available on www.accaglobal.com/economy, ACCA’s dedicated site which looks at the current global economic conditions.

ACCA Chief Executive Helen Brand said: “The results of our research show that the current global economic downturn is expected to have a significant impact on global business for the foreseeable future, and will create challenges and opportunities for our profession. We are committed to continue working with business to ensure ACCA qualified accountants can add considerable value to business by accessing finance, identifying drivers of value and profitability and driving down costs.”

Head of ACCA Ukraine, Baltic, Caucasus States Nataliya Vovchuk said: “It is important to remind that according to the Global Competitiveness index of 2008 (prepared by World Economic Forum), Ukraine is on 43rd place by higher education and training (Russian is on 46 place). At the same time, by labour market efficiency Russia is on 27 place, while Ukraine – on 54. There is a misbalance, inadequacy between educational system and labour market. Gaining ACCA qualification by professionals of Ukraine and the region has positive impact on structural changes on labour market, as it implies acquiring skills adequate to the needs of current business environment.”

17 March 2009

IASB should not abandon fair value accounting under political pressure, says global body
ACCA paper argues that 'mark to market' regime did not cause the banking crisis

A new policy paper from ACCA (the Association of Chartered Certified
Accountants) defends principles-based accounting methods, and calls for fair value to remain a key part of future global accounting standards.

Fair value has come in for more scrutiny and criticism recently than any accounting issue since inflation accounting in the 1970's, after banks and financial institutions placed some of the blame for the current crisis on so-called 'mark-to-market' valuation methods.

ACCA's paper points out that the scale of political disquiet may suggest that fair value affects more businesses than is actually the case in practice.

ACCA argues that the International Accounting Standards Board
(IASB) should use the financial turmoil to establish a definitive conceptual framework for financial reporting, with fair value remaining a significant part of the mix.

Richard Aitken-Davies, ACCA President, says, "ACCA supports the concept of fair value and does not believe it was a contributor to the credit crisis.
The fact that fair value is the only realistic method of accounting for derivatives and getting them on the balance sheet is evidence enough of its worth"

"The crisis has shown the urgent need for clarification of what accounts can and cannot do so that realistic expectations of different stakeholders can be met.
But the IASB should never again be put in the position of having to abandon due process under political pressure."

The paper says the global financial crisis poses many questions for standard-setters, but any watering down of fair value risks spelling the demise of the roadmap towards convergence between International Financial Reporting Standards and US accounting standards. Global standards, which allow easier comparability of markets for investors will be of even more importance as the world economy recovers.

ACCA's Position
• Fair value accounting has significant advantages, but current
• illiquid markets have highlighted problems of attributing reliable values to financial instruments and derivatives
• Therefore IFRS should continue to employ a mixture of cost and
• current value measurement bases - overall ACCA see no case for the extension of the use of fair values in accounting standards at present, particularly in areas where markets are non-existent
• Historical cost could also be disclosed in the accounts if fair
• value is being used so that users can make up their own mind on the stated values of assets
• Accounts are intended to inform shareholders on the affairs of
• the company, not to provide a financial stability tool for regulators

Ukrainian ACCA members comment on the issues of fair value and economic crisis in Ukraine:

Andrey Tsymbal, ACCA member, Partner, KPMG in Ukraine:

Many benefits and complexities of fair value accounting of financial instruments and assets, as stated in ACCA publication, are, without doubt, relevant for Ukraine as well. For instance, issues of defining fair value of realty and obligations of many emitters are extremely difficult, as currently very few deals are being carried out with these instruments, and market is not liquid. But some aspects, described in ACCA publication, are not very relevant for Ukraine, for instance, complexity of fair value accounting of derivatives and obligations, as this practice is not widespread here. The more pressing issue, connected with fair value, for Ukrainian banks is definition of necessary amount of reserve for depreciation of credits by IFRS, taking into account economic crisis and significant devaluation of national currency.

Yulia Studynska, Assurance Partner and Leader of the Global Financial Services Industry Group with Ernst & Young:

“There is a number of advantages to fair value accounting and one of them is proper recognition of loans issued by Ukrainian banks under lower then market rates. In absence of fair value, the fact of issuing such loans will not be obvious for the users of financial statements and thus, the shareholders might not become aware of this fact. I support ACCA’s position on a need to enhance disclosures on fair values and models and inputs used. Also, provision of historical cost information will give users an opportunity to make their own decision on the value they want to consider.”

Sergey Kulyk, ACCA, Partner, Audit/CIP, Deloitte & Touche USC:

«In Ukraine where stock market remained underdeveloped and number of quoted at stock exchange financial instruments was insignificant, a use of fair value accounting was limited to certain industries only (e.g. valuation of investment properties by real estate companies, biological assets by agricultural companies). Under these circumstances, the use of cost based approach (less potential impairment loss) was very extensive even in financial statements of Ukrainian banks and industrial enterprises. Thus, in my opinion, primary reasons for financial crisis in Ukraine were dependence on world economy and specific of macroeconomic situation in the country».

Fair value Accounting
Fair value accounting requires companies to mark their financial instruments at market prices, and can reflect bad news somewhat unmercifully. For example, if current price is much lower than the original cost, than large write-downs can appear on balance sheets.
These apparent losses can lead to a lack of confidence, especially if there is no 'market' to provide a value at all.

However, calls for its suspension are seen by ACCA as attempts to sweep the problems under the carpet. ACCA believes that more now needs to be done to underpin the credibility of fair value before the concept is further extended.

Advantages of fair value accounting:
• More transparent
• Provides clarity for shareholders
• Accounts for derivatives properly
• Provides additional information
• Financial reports less subject to 'earnings management'

For a wider discussion the financial crisis and how best to resolve it, see ACCA's earlier paper, Climbing out of the Credit Crunch, published in October 2008: http://www.accaglobal.com/pdfs/credit_crunch.pdf.

5 February 2009

ACCA study exposes weaknesses in coaching and mentoring

Few organisations are currently seeking to embed a coaching culture across their businesses

Global research from ACCA (the Association of Chartered Certified Accountants) suggests coaching and mentoring is being poorly practised across the finance profession, revealing a lack of understanding of good practice and ultimately leading to poor returns on training investment.

Key findings of the report, called “The Coaching and Mentoring Revolution – is it working?” surveyed 700 ACCA members across 170 countries, reveal that although most organisations believe in coaching and mentoring, it is an aspiration – not a reality. Few organisations are currently seeking to embed a coaching culture across their businesses:
1. 85% of respondents believed it would be beneficial to use coaches but over 60% of organisations do not use accredited internal or external coaches to develop the competencies of finance professionals.

2. 85% of respondents deemed it beneficial to implement a coaching culture but lack of buy in from senior management remains a challenge for the establishment of coaching practices in many organisations.

3. Although many employers include coaching as a style of leadership in their management training programmes, it is not seen as a compulsory requirement.
The report confirms that coaching practices tend to be restricted to senior management only, and suggests that the profession would benefit from wider adoption at all levels of management. It also advises that better understanding of cost benefit of coaching and mentoring practices would aid buy-in.

Nataliya Vovchuk, Head of ACCA Ukraine, Baltic, Caucasus States, says: “Even in these lean times, organisations are struggling to maximise their return on investment in their people. Though coaching and mentoring practices continue to evolve and good practices exist at some of the larger global organisations, there is a lack of understanding of good practice more generally across the profession.”

Jamie Lyon, co-author of the report at ACCA, says: “We see very clearly that the establishment of coaching and mentoring practices across the profession is an aspiration rather than a reality for most organisations. Coaching and mentoring is incredibly powerful but unfortunately in many cases these benefits are not materialising because the practices are not being utilised as widely as they could be.”

Nicki Hickson of Ernst & Young says, “When Richard King, Ernst & Young Managing Partner UK and Ireland, talks openly about his own coaching programme and the need for “Emotional Intelligence” in all leaders and professionals, that’s when the firm knows we are serious about coaching and mentoring.”

Tony Osude concludes, “These are harsh economic times and budgets will be trimmed. Everyone wants the biggest bang for their buck and coaching gives you that. We think there are a number of actions organisations can take to improve the coaching process – wider adoption and training of more finance professionals as accredited coaches would be beneficial, at middle and senior management level. Having a good mentor is often key to successful career development.”