News

Saab Chiefs Under Fire

Fri, 24 May 2013 22:06:59 +0100

They used to be the leaders of one of the largest car companies in the world. Karl-Gustav Lindstrom was at one point the Chief Financial Officer, Jan-Aake Jonsson was the Chief Executive and their general counsel, Kristina Geers were all arrested this week. They were initially brought in for questioning, suspected of attempting to complicate tax controls during the years of 2010 and 2011. Essentially, they are accused of accounting fraud for financial gain. The SECA, Swedish Economic Crime Authority is taking these charges seriously.

In fact, if they are found guilty they could each serve a sentence in prison of six months to forty eight months. Kristina Geers’ retained attorney has pled not guilty on behalf of his client. The attorney for the Chief Executive refused to comment on the case and the CFO’s attorney could not be reached for a statement. Geer’s attorney expressed outrage at the way the case is being handled by the SECA and Olof Sahlgren, the chief prosecutor in the case.

Sahlgren states that the case is all about three people who were trying to manipulate the numbers and fraudulently reduce the taxes and fees that were owed by the company. Details are scarce as to any amounts that the three may have pilfered from Saab for their own personal benefit. As the case progresses, more information will become available.

The Saab company was owned by Spyker, a Ductch car maker during the time that this fraud allegedly took place. Spyker bought the business from General Motors in 2010 in the midst of GM’s financial crisis that led to a US Government bailout of the unions. The financial instability of Saab continued throughout the leadership of these three officers and the company declared bankruptcy in December of 2011.

It wasn’t too long after these events that the National Electric Vehicle Sweden purchased Saab with plans to manufacture electric vehicles under Saab’s name. The NEVS is, contrary to its name, based in Hong Kong. To date, these Saab electric cars are yet to roll off of the assembly lines. There is no word on how this latest development will affect the plans of the NEVS.

ACCA Responds to IAASB Paper

Fri, 24 May 2013 22:05:16 +0100

Part of the efforts of the Association of Chartered Certified Accountants involves the attempt to standardize the accounting rules across the countries of the European Union. Standardized rules would make it easier for investors or auditors reading financial statements from one country to compare them over against the statements from their country and not be concerned about differences in accounting for revenues or liabilities that would inaccurately portray the true financial health of a company.

The International Auditing and Assurance Standards Board, or IAASB published a letter last week entitled, “A Framework for Audit Quality”. The letter was meant to get everyone in the auditing or accounting profession on the same page in relation to audit quality. The letter makes it clear that in the attempt to achieve a quality audit that it isn’t always about the quality of the auditor. At times, pressure from stakeholders, or others can affect the quality of the audit through various means.

Improving audit quality is about making it easy for investors in other nations to draw conclusions about the companies’ financial position. So while it is about investors, it isn’t just investors that are benefited by a quality audit. And it isn’t just investors that are harmed by an audit that is less than ‘quality’. Some investors represent accounts that handle retirement and investment funds of thousands of people.

The audit irregularities of the ENRON scandal affected both the investors and the innocents that had money placed into the trust of investors. Everyday people lost significant percentages of their retirement account because of the less than accurate audit that was performed by the same people who were trying to hide the company’s losses and financial problems.

This letter spelled out what the IAASB calls a ‘framework’ the chief role of which is a communication to companies and users of audit reports. With quality audits, for profit and non-profit organizations, there is more confidence in both the public and private sectors regarding the position of the organization they are investigating. Several of the new regulations are perfectly sensible. Some of them are concerned with sustainable environments and a lot of non-financial information that some object to providing.

EFRAG Survey on Accounting Standards Changes

Fri, 24 May 2013 22:02:44 +0100

With all of the sweeping changes taking place in Europe with the new standards that have been proposed and drafted by the International Accounting Standards Board there are a number of issues that have caused a slight bit of concern. Coordinating the standards between currency conversions and the various accounting regulations is difficult enough, but when some of the countries have been handling accounting for assets, leases, and the recognition of certain financial information one way, it’s difficult to embrace a radical change in these rules.

This week, the EFRAG, or European Financial Reporting Advisory Group met with the accounting standards boards of France, Italy, Germany and the United Kingdom to plan a field test of some of these new proposals. Specifically this test in in regard to the recognition of liabilities and right-of-use assets in accounting for leases. The edict in these new standards is called the ED/2013/6. Some of the subtle changes are in the discounting of the asset through depreciation and the recognition of revenues from a lease.

This test is specifically geared to help accounting professionals in each of the four participating countries to understand the terms and conditions of lease arrangements in use and the implications of the guidance set forth in ED/2013/6. The organizers of this ‘test’ are looking to find out if these changes create operational or implementation problems. Through this test, they hope to learn what effort it would take to apply these changes on an EU wide scale.

This test begins with a survey. For accounting experts or companies wanting to participate in this ‘test’, it will be necessary for them to contact either the European Financial Reporting Advisory Group through their website or their national accounting standards-setters. They will send you a copy of the questionnaire to be completed. On June 3^rd the initial questionnaire will be available. The due date for returning them will be July 31, 2013. If you have any questions about this test, or want to have some input into the overall process of adopting common standards, you are advised to read the press release on the EFRAG website.

New Auditor for Cancer Support Bradford and Airedale

Fri, 24 May 2013 21:59:04 +0100

The UK based charity, Cancer Support Bradford and Airedale has been in existence for a quarter of a century helping people who have been diagnosed with cancer and their family members. The center helps people with emotional support, counseling and will help give advice on financial matters and transportation. The support groups and classes help people in need realize that they are not alone in the struggle against cancer and that others are going through exactly what they are.

The Cancer Support Bradford and Airedale center has announced a change in auditors. Watson Buckle of Bradford will handle the audit and advisory needs of the charity to ensure that the donations being given are used effectively. Approval from auditors for a charity gives confidence to donors that the funds they are providing are going to help people and not necessarily to administration costs or wasted on senseless promotions asking for more donations.

The Director of the Center, Linda Howard made the decision to engage Watson Buckle to help give the Center the boost in confidence for donors so that the 3,500 people they help every year might grow in numbers. The managing partner at Watson Buckle, Susan Sedgwick is delighted to be able to help local charities and organizations with their accounting and auditing needs.

This news comes on the heels of two other announcements that Watson Buckle has hired a new audit manager. Gillian Corcoran was promoted from her position as an audit senior to audit manager. She has been with the firm for five years when the partners decided to expand their auditing services. Corcoran’s position is a new one within the firm as she will co-ordinate this expansion of services. Her old position of audit senior was taken over by Sarah Middleton who is from the Thomas Coombs and Son firm in Skipton. Middleton is AAT-qualified and expects to complete her ACCA training later this year.

IFRS Briefing Published

Sat, 18 May 2013 21:43:36 +0100

The International Financial Reporting Standards Board has published their ‘layman’ version of the new 2013 Standards that they have been working on for several years. The full title of the report is the ‘International Financial Reporting Standards (IFRSs) – A Briefing for Chief Executives, Audit Committees with Boards of Directors – 2013’. Since much of the language of the report is for the purpose of communicating to the non-accountant world, the IFRS releases a simple to understand briefing that contains the summaries of the new standards. This briefing is geared to corporate CEO’s, investors, members of audit committees that are not auditors, directors and those who want to learn of the implications for businesses when they are implementing the new standards.

Many of those individuals do not speak “accountant” and reading through the massive volume of new standards in full form could turn out to be frustrating and confusing to those without the finance background. (The summary report is close to 100 pages, so that should give you an idea of the size of the full version.) This new report includes amendments that were added to the Standards in late 2012 concerning an investment entity and the exceptions to the consolidation requirements that are in International Financial Reporting Standard number 10.

You can view this report in the subscriber area of the IASB website if you have subscribed to the eIFRS website. If you have not subscribed, don’t worry, it’s available for purchase as well. Click on the link to find the report. http://eifrs.ifrs.org/eifrs/Menu. A subscription to the IASB includes access to all publications from both the IFRS and the IASB (International Accounting Standards Board) and includes a printed copy of the publications, a CD Rom of the publications and a downloadable version as well. The subscription costs £475.00 for a twelve month period. If you do not have access to the internet and would still like to subscribe to the IFRS website, you can call their customer service at 44 0 20 7332 2730. To purchase the report, visit the International Financial Reporting Standard’s web store. http://shop.ifrs.org/ProductCatalog/Product.aspx?ID=1747 One copy of this report is priced at £21.00.

International Accounting Standards and Audit Quality

Sat, 18 May 2013 21:40:39 +0100

The International Accounting/Auditing Standards Board, or IAASB has spent the last several years attempting to coordinate the accounting standards between the different nations. With different nations using several different currencies and having different rules for accounting it makes reading audit reports difficult for potential investors in those different nations. This week, John Davies, head of the Association of Chartered Certified Accountants, or ACCA, commented on the consultation paper written by IAASB.

The paper detailed IAASB plans for a framework concerning a standard for all nations’ accounting practices. Davies said that the Framework gives tax preparers, auditors, stakeholders and others a more accurate understanding of the quality of audits. The IAASB wrote in the framework paper about audit quality and sub-standard audits are not always about the quality of the auditor.

While the purpose of the framework is primarily for communication to auditors, Davies says that the success of the framework will be judged by the improvements in audit quality. A quality audit report helps increase potential investors’ confidence which boosts the available capital for companies to use for expansion and growth.

Davies says that the Framework should adopt the perspective of those who are shareholders who make important decisions based sometimes solely on the audit report. Issues like the mandatory rotation of auditors between companies to prevent potential conflicts of interest from developing. The Enron scandal in the US came about because the auditors of the company producing the report had developed a relationship with the corporate officers.

Millions of shareholders lost money when the Enron scandal was exposed. Investors lost confidence in the company and the whole scandal resulted in new laws concerning audits and auditing. These new laws were codified in the Sarbanes-Oxley Act. The IAASB has a goal of making sure that the Framework should reassure investors against something like the Enron scandal from occurring again.

The most controversial portion of the IAASB Framework is the inclusion of non-financial information in the company’s audit report. This information includes data on the diversity of the employees, company projects to maintain a sustainable environment and more that has to do with social issues than financial. What is finally passed as the acceptable global standards remains to be seen.

FASB Survey Due May 30th, 2013

Wed, 15 May 2013 20:30:57 +0100

It’s that time of year again. The time when the Financial Accounting Standards Advisory Council seeks input into the decisions they make that affect accounting policy for all. Changes are coming to the FASB agenda and they are seeking input by stakeholders to help shape the direction of those changes. They are asking stakeholders to prioritize the active FASB projects in order of importance. There is also a chance to add some projects that are not on the agenda or re-enact those that have been removed for one reason or the other. As FASB is the board that makes decisions regarding accounting policy in the United States it is in the best interest of all who make their living abiding by these policies to have at least some input into this future agenda.

One of the key elements of a future agenda is the effort to co-ordinate the FASB standards to the IASB (International Accounting Standards Board) standards. Unfortunately, this is excluded from the FASB request for input. Other projects that FASB has excluded from this agenda survey are those that are expected to be completed by the third quarter of 2013 or that are expected to be completed in less than a year.

For those that object to the IASB and FASB convergence, they are informed that the direction of IASB standards in the United States will remain as they are but they are asked to consider what result a convergence will have on the GAAP (Generally Accepted Accounting Principles) in the US and whether an improvement to GAAP will be better than implementing the IFRS’s (International Financial Reporting Standards). If you would like to fill out one of these surveys, you can choose either the short-form or the full-form. It’s due by May 30^th, so make sure you get it in time.

If you have questions about what each project means, at the end of the survey there is an appendix with descriptions and detailed information on each project and references to the IASB projects. Some of these include general hedge and Macro-hedge accounting.

Long Form Link: https://www.fafsurveys.org/se.ashx?s=4CA36E926D80F092

Short Form Link: https://www.fafsurveys.org/se.ashx?s=4CA36E924F5DBCB7

Accountant In The Clink

Wed, 15 May 2013 20:28:33 +0100

Ronald Moncrieff used to be a successful accountant, today he is a convicted felon. An investigation by Her Majesty’s Revenue and Customs discovered that he had be regularly claiming fraudulent expenses worth a whopping 153,000 pounds. It seems that Moncrieff was claiming expenses on his tax returns as well as those of his wife and his son. It wasn’t enough to claim simple expenses though, he also claimed expenses for hiring subcontractors when he had never hired any.

During a raid in October of 2012, the investigators discovered documentation proving that he had overstated expenses and understated his income so that he could reduce his tax liability. He will spend the next 18 months in prison. He pled guilty to filing false tax returns. On top of the expenses he was ordered to pay back he has been ordered to pay another 18,000 pounds in interest. He’s paid 65,000 of the total amount he owes and Revenue & Customs is in the process of confiscating his assets to pay the rest.

The judge who sentenced him to the year and a half of prison time told Moncrieff that he cannot lay blame at the feet of anyone other than himself. Unfortunately, Mr. Moncrieff is not alone. His belief that because he is a professional chartered accountant that he could successfully hide the fraud was incorrect. In his case, he also used the names of members of his family to help him conceal his crimes from the government.

And while the knowledge of tax law and accounting could conceivably account for a motivation to defraud the government, the truth is that in accounting there are always records. Bank records of deposits, items purchased, and in order for a fraudster to succeed, he or she must always have at least some idea of the true revenues and expenses of his business. It’s necessary to keep such records so as to adequately be able to explain or hide those transactions. That is why it is unusual for investigators to come up empty when searching for documentation proving fraud has occurred.

ACCA has Warned that the Going Concern Proposal Might Put Smaller Companies in Trouble

Sat, 11 May 2013 03:22:32 +0100

The Association Of Chartered Certified Accountants has warned that although the implementation of ‘going concern’ assessment and report is necessary for all company accounts, some parts of the FRC’s ‘going concern’ proposal draft guide might turn out to be too difficult for smaller companies to implement.

Paul Moxey, the head of corporate governance and risk management is ACCA, mentioned in a statement that the going concern philosophy is very important for both small and large companies. However, while talking about the proposal published by the Financial Reporting Council (FRC), he said that the newly formed draft was developed mainly keeping in mind the larger companies that have dedicated risk management and audit teams in place. The proposal assumes that the smaller companies also have such specialized resources which is misdirected and might create problems for those companies while implementing the ‘going concern’ philosophy.

According to Moxey, the interest of shareholders in going concern reporting is the knowledge of the actual financial health of the company. The reports will enable them to know whether the company will be properly functional in near future or not. In order to meet their requirements, the ACCA suggests a clearly laid out set of principles that are to be practiced by all businesses while some additional guidance must be introduced for bigger businesses guiding them to follow the UK Corporate Governance Code and apply the going concern principles.

ACCA adds that ever since the recession and the banking crisis of recent times, all stakeholders and shareholders have become aware of financial risks and risk managements systems. Hence it is critical to make the going concern guidelines as simple as possible.

Paul Moxey opined that while most of the recommendations made by Sherman Panel were acceptable and praiseworthy, the draft guideline proposed by FRC lacked in preciseness and kept open windows for multiple interpretations which can lead shareholders to a misguided sense of safety.

He also said that the complexity of the guidance might provide a chance for negligent companies to bail themselves out in case of a failure to comply with the reporting. There must be uniform and a clearly specified set of laws to prevent such occurrences.

IFRS Foundation Announces Appointments and Reappointments to the Interpretations Committee

Fri, 10 May 2013 19:23:24 +0100

In a press release published on 9^th May, The IFRS Foundation Trustees have announced the news of several appointments to the Interpretations Committee of the Foundation (IFRIC). The news revealed that Dr Martin Schloemer, Tony de Bell and Reinhard Dotzlaw will be appointed as new members of the committee. They replace departing members Guido Fladt, Andrew Vials, Bernd Hacker and Margaret Smith. Feilong Li has been reappointed for a second term in the committee.

Additionally, in an effort to increase the number of accountancy firms within IFRIC membership, the Trustees have appointed Andrew Buchanan and Andrew Watchman to a single rotating seat of 3 year term. All the new appointees will begin serving in their new roles 1^st July, 2013 onwards. Feilong Li’s current term with IFRIC ends in June and he will also begin his 2^nd term on 1^st July. The terms of all new appointees to the IFRIC are renewable once. Andrew Watchman will join the rotating seat on 1^st July as well. After his 3-year term, Andrew Buchanan will take over his role on 1^st July, 2016.

All the new members well known global figures in the financial reporting realm and are expected to enrich the committee with their valuable presence. Reinhard Dotzlaw represents Canada in the Global IFRS panel of KPMG, Mr de Bell is one of the members of the Global Accounting Consulting Services Leadership Team in UK with PricewaterhouseCoopers and Dr Martin Shloemer Heads the department of Accounting Principles and Policies at Bayer AG’s Germany office. Mr Watchman is the Executive Director of International Financial Reporting at the United Kingdom branch of Grant Thornton and Mr Andrew Buchanan is the Global head of IFRS in BDO.

Mr Robert Glauber, the Chairperson of the Nominating Committee of the Trustees mentioned in a statement that he welcomes Tony de Bell, Martin Schloemer, Reinhard Dotzlaw and Andrew Watchman in the committee and eagerly looks forward to Andrew Buchanan’s appointment in future. He has thanked Bernd Hacker, Andrew Vials and Peggy Smith for their invaluable contribution to the committee. He also added that he is delighted to have Feilong Li serving a second term and mentioned that the experience of the new members’ will surely help the committee in achieving its goals.

Socializing a Free Market Europe through Accounting Standards-Part Two

Fri, 26 Apr 2013 21:48:29 +0100

In the previous article, we looked at the efforts of the IASB to use a socialist bent mentality to unite all accounting standards together under one umbrella. They are doing this through the newly published, ED/2013/5 “Regulatory Deferral Accounts” section of their larger group of standards. Let’s look at what it means. First what is a deferral account in accounting standards? It is an account in either the assets or liabilities side of the balance sheet where the value in the account is deferred to a later date.

Previous GAAP regulations allowed these values to be deferred to later dates because of the nature of these accounts. For example, there are intangible assets (assets with no real monetary value) that nonetheless represent something ‘like’ a monetary value for the company. Goodwill is one such account that increases the value of the assets column by an assessed amount based solely on a company’s positive reputation or name recognition. Another example is deferred debt or ‘contingencies’. If for example there is an active lawsuit against the company but a judgment has not been rendered, the ‘contingency’ would represent a possible liability in the future the company would have to pay.

This new standard permits the company to continue to use the previous GAAP accounting policies to recognize deferral account balances. But it requires that the company present any of these deferral account balances as separate line items in the statement of financial position and as separate line items in the profit and loss statement. This may artificially make the company appear stronger or weaker than it is in actuality depending on the individual circumstances.

This ED/2013/5 also requires that the companies in those nations that haven’t adopted the IFRS’s yet to adopt the whole of IFRS. Other major changes to the accounting standards of this interim measure include Income taxes, Impairment of Assets and Non-Current Assets Held for Sale and Discontinued Operations. As of right now, these amounts are included in the balance sheet to account for those assets that are still in the company’s possession, but no longer working. Disposal of assets prior to the depreciation schedule could result in negative tax effects on the company. When these items are removed from the asset column, it could mean a more negative financial statement that could impact the decision of investors to risk their money investing in the company.

To Be Continued…

Socializing a Free Market Europe through Accounting Standards-Part One

Fri, 26 Apr 2013 21:38:16 +0100

Europe faced a long uphill battle in 2002 when the Euro was introduced as the new currency that was meant to supplant the many currencies in use in the multiple nations. Ideally, it would have made trade easier, in reality it has brought its share of trouble with it. Each nation had their own currency, their own laws and their own methods and regulations governing accounting standards. Some of these standards were contradictory to the standards in other nations planning on using the Euro. The introduction of the IASB, or International Accounting Standards Board was for the purpose of bringing all the accounting standards of these European nations under one set of standards. While many of these have yet to be accepted or adopted the recent publication of the IASB’s ED/2013/5 is set in place.

Entitled the “Regulatory Deferral Accounts”, this publication is meant to allow those European countries which have not as yet accepted the IFRS’s to adopt an interim set of standards if they meet certain criteria. Many have not done so because of the socialist-bent on some of these regulations and laws which will interfere in what remains in those nations that are mostly free-market economies. These criteria include the requirement of a rate regulator. In other words, there has to be an individual or agency not associated with a company, most likely a government run agency, who will restrict the price that company can charge customers for goods or services. No longer will companies in nations under the IFRS be able to decide what to charge for their products without putting the matter before a government official.

While the IFRS states that the prices it will allow through regulation will ensure the company will receive their allowable costs of goods and services, there is still an intervention of an extreme nature that amounts to dictating to a company the amount of profit they can make. Only if these nations undertake this radical step will they be allowed to use this interim standard. What this doesn’t take into account is the desire of a company to not only recoup their costs, but to make a profit from the products and services they sell. The free market economies that still exist, and thrive, in Europe will falter and fail under these new standards. So what does this interim standard mean then?

To Be Continued...