The global body for professional accountants

This month’s stories include the release of the International Integrated Reporting Framework, the rise of Islamic finance in Africa and a new era in tax cooperation

Reporting Milestone

The International Integrated Reporting Framework has been released, representing an important milestone in the market-led evolution of corporate reporting. The release follows successful trials of integrated reporting (IR) in more than 25 countries and a three-month consultation that generated over 350 responses from all regions in the world, with the vast majority demonstrating strong support for IR. Professor Mervyn King, chairman of the International Integrated Reporting Council, said: ‘We have been taken aback by the degree to which mainstream businesses and investors have been willing to participate in creating this framework and embarking on their own IR journey.’ ACCA chief executive Helen Brand said: ‘Ultimately, I hope that IR will restore trust in business – reporting models have been criticised in the past, but now is the time for change.’ Global adoption will begin this year, using practical examples of how IR has been used by businesses to demonstrate value creation.

PwC buys Booz

PwC has agreed to acquire leading global consultancy business Booz & Co. The firms have not revealed the agreed price, but it is rumoured to be US$1bn. Dennis Nally, chairman of PwC International, said the merger ‘would give CEOs the opportunity to work with a global consulting team that could provide services from strategy development right through to execution’.

KPMG unveils Capital

KPMG has launched its first global investment fund, KPMG Capital. The fund will focus on data and analytics businesses, making acquisitions and forming partnerships. Mark Toon, CEO of KPMG Capital and global lead for KPMG’s data and analytics practice, said: ‘With more data produced and stored in the last two years than in the rest of human history, many businesses are looking for strategic and practical solutions to manage the volume, velocity and variety of this data revolution. KPMG Capital will enable us to develop or acquire opportunities in data and analytics quickly.’ The fund will be managed in London.

wto agreement

Streamlined customs procedures are the centrepiece of a world trade deal that the International Chamber of Commerce predicts will cut shipping costs by 10% to 15% – US$1 trillion annually – and generate 21 million jobs globally. Under the World Trade Organisation (WTO) agreement, unnecessary paperwork will be eliminated and customs officials in emerging economies will receive training. In addition, developing countries will be given improved access to advanced nations to sell cotton products and, in limited circumstances, preferential access to richer countries’ service markets. The agreement will only be implemented after a consensus agreement has been reached between all the WTO member states.

OECD reporting move

The Organisation for Economic Co-operation and Development (OECD) is considering the issues associated with country-by-country reporting in what could be a precursor to its support for the principle. The move follows the endorsement earlier last year by the G20 of the OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS). The OECD is now assessing what transfer pricing documentation would be required, the accounting requirements and what other information would be needed to produce a template for country-by-country reporting.

mergers on the rise

Within five years there will be just two or three truly global networks of accountancy firms because of the accelerating pace of consolidation, says BDO. It made the prediction as it announced its first global results following its UK merger with PKF. BDO completed other mergers in national territories, including with PKF firms in Australia and New Zealand. The enlarged BDO reported turnover of US$6.45bn in the year to September, a 7.3% rise over the previous year.

GT wins IFRS audit

Grant Thornton has been appointed as auditor of the IFRS Foundation, following a competitive tender. Seven firms tendered for the contract, previously held by BDO, which continues to provide the Foundation with corporate tax services in the UK and the US.

Deloitte under fire

African nations have lost hundreds of millions of dollars in tax revenues because of tax avoidance advice provided by Deloitte, claims ActionAid. It says that a Deloitte report suggested that companies structure businesses in Mauritius to reduce tax liabilities in other African countries, including Mozambique – one of the world’s poorest nations. Deloitte responded: ‘It is wrong to describe applying double tax treaties, such as the treaty between Mauritius and Mozambique, as tax avoidance... Any discussion of tax treaties by tax professionals would typically be around the technical and administrative aspects of the treaties and not an expression of favour of any particular country at the expense of any other country.’

Islamic growth

Islamic banking is on the rise in Africa and could generate billions of dollars of investment into badly needed energy and other infrastructure projects in the continent, the 2nd Annual Islamic Banking Summit Africa has been told. The conference attracted more than 350 participants. With around 400 million Muslims in Africa, the continent is seen by many bankers in the Middle East as highly suited for investment via Islamic bonds, or sukuk. Nigeria, Senegal, Gambia and Sudan have all recently issued sukuk bonds. Other countries, including South Africa, Kenya, Morocco and Tunisia, are expected to do the same.

EY, KPMG nordic deal

EY and KPMG are to merge their operations in Denmark. The joint new company will use EY’s name, operating 
as part of the EY Nordic organisation. The two businesses will remain separate until they are given regulatory approval to merge. Erik Mamelund, regional managing »
partner for EY Nordics said that the proposed merger ‘builds on both EY and KPMG’s strong capabilities’, but that the firms could not say more pending regulatory consideration.

GT expands

Grant Thornton is expanding in Japan, Italy, Paraguay, Bangladesh and Ethiopia, following a series of mergers and acquisitions. In Japan, it merged with Kasumigaseki Audit Corporation, formerly part of Baker Tilly Japan, and in Italy, Ria Grant Thornton merged with Prauditing Srl, formerly part of the Moore Stephens network. Grant Thornton Paraguay doubled in size by merging with a local former Baker Tilly member firm, while a joint venture with Howlader, Yunus & Co created a new office in Bangladesh. GT firms in Oman and Yemen merged with Ethiopia’s AW Thomas to create a firm in Ethiopia.

Africa adopts IPSAS

The African Union has adopted International Public Sector Accounting Standards (IPSAS), beginning with the 2013 financial year, and has begun training staff. Expected benefits include improved accountability, a clearer overview of the organisation’s activities and performance, greater transparency of use of donors’ resources, greater credibility, improved programme management and harmonisation of financial reporting.

PwC invests in CEE

PwC is investing $60m in the Central and Eastern Europe region over the next three years. Funds will be provided by PwC UK to attract leading talent from elsewhere and to pay for secondments of specialist partners and directors from across PwC’s global network. Michael Kubena, CEO of PwC CEE, explained: ‘As our markets mature, our clients are demanding more from us and we will need 
to bring more to the table 
if we want to retain and build on our number one market position.’

Bribery warning

The OECD has warned Russia, Belgium and New Zealand to do more to tackle bribery and corruption. Russia has yet to fully implement the OECD’s Anti-Bribery Convention, despite adopting it in April 2012. In a separate OECD report, Belgium was told that it has devoted ‘a flagrant lack of resources’ to the enforcement of anti-bribery laws. Meanwhile, New Zealand has been told not to be complacent and increase its efforts to detect, investigate and prosecute foreign bribery.

india is top investment option

India has overtaken China as the most attractive investment destination, according to a report by EY, with the sharp depreciation in the rupee and opening up of new sectors to foreign players boosting the South Asian nation’s allure. Companies are most likely to invest in India, followed by Brazil in second place, then China, Canada and the US, according to EY’s ninth bi-annual Capital Confidence Barometer.

The billionaire skyline

Hong Kong has come in second in a list of cities with the most billionaires (75), behind New York, with 96. Moscow followed with 74. Three Chinese cities ranked in the top 20: Beijing in seventh place (with 26 billionaires); Shanghai in 16th (19); and Shenzhen in 19th (16). Hong Kong has 75 US-dollar billionaires who reside and primarily conduct their business there.

The average billionaire has four homes worth nearly US$20m each, an art collection worth US$14m and is most likely to live in Europe, the inaugural Wealth-X and UBS Billionaire Census 2013 shows. ‘There’s really no such thing as an ‘average’ billionaire, but as we look at numbers, the average billionaire has a net worth of US$3bn, cash equivalents of US$545m, an average of 2.1 children, is 63 years of age and possesses luxury assets and personal holdings of US$136m,’ said Mykolas Rambus, chief executive of Wealth-X.

‘New era’ in global tax cooperation

International efforts to combat tax evasion and avoidance have received a boost as two more jurisdictions join the 60-plus countries that have already agreed on tax cooperation. Liechtenstein and San Marino became the 62nd and 63rd signatories to the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters at the sixth global forum on transparency and exchange of information for tax purposes, held in Jakarta, Indonesia. Support for central transparency and information exchange objectives is increasing rapidly; the number of jurisdictions that have signed or are covered by the convention has almost doubled since the fifth global forum in Cape Town in October 2012.

At each forum, a key topic of discussion is the move by tax authorities worldwide from bilateral to multilateral cooperation, and from exchange of information on request to automatic exchange. The convention provides a comprehensive multilateral framework for such cooperation and complements other initiatives, such as the standardised multilateral automatic exchange model being developed by the OECD and its G20 partners. The OECD believes its convention is the ideal instrument to swiftly implement automatic exchange, and to do so with a wide range of partners.

In Jakarta, Dr Muhammad Chatib Basri, Indonesia’s minister of finance, congratulated all forum members on the progress to date: ‘At a time where most economies are extremely fragile, having so many jurisdictions working together and agreeing on very sensitive outcomes to improve international tax cooperation is key and extremely positive. I have no doubt that this is the kick-off to a new era in the global tax environment.’

Compiled by Paul Gosling

Last updated: 13 Jan 2014