Dispatch (UK/ROW version)
| by Paul Gosling 13 Jul 2007 Topic: News |
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Vice President Al Gore to address ACCA event in Hong Kong Vice President Al Gore, the world’s best known campaigner on environmental issues, is to speak at a major event organised by ACCA in Hong Kong in August. The 45th Vice President of the United States, whose documentary, An Inconvenient Truth, won an Oscar for Best Documentary Feature at this year’s Annual Academy Awards, will be speaking on the linkages between climate change, ethics and sustainability to an audience of leading businesspeople and politicians from Hong Kong SAR, Mainland China and across the Asia Pacific region. The exclusive event is taking place in Hong Kong’s Conrad Hotel on 9 August and is the highlight of a series of global events organised by ACCA throughout 2007 which focus on professionalism and ethics. Allen Blewitt, ACCA’s chief executive, said: ‘We are delighted that Vice President Gore has agreed to work with ACCA to highlight the importance of ethical and sustainable businesses at a time when serious business leaders are focusing on global issues like climate change. ACCA has been campaigning for over 15 years for organisations to measure and manage their activities, thereby ensuring more sustainable businesses. To have Vice President Gore, the world’s leading environmental champion, speaking at our event reinforces our commitment to this critical issue.’ GAAP requirement to be lifted for non-US companies The US Securities and Exchange Commission (SEC) has voted unanimously to propose permitting non-US companies to file their accounts according to International Financial Reporting Standards (IFRS) without the necessity of the accounts subsequently being reconciled to US GAAP. The proposal will now be open to public consultation for 75 days after which a further positive vote will be required before the rule can be made effective, in which case it is expected that the rule would be implemented with companies filing in accordance with full IFRS by 2009. The proposal may be regarded as perhaps the most significant step by the SEC in response to concern in the US that it remains an attractive jurisdiction for international companies to be listed, as corporates in an increasingly competitive global marketplace give careful consideration to the most beneficial exchanges on which to list. In the wake of the Sarbanes-Oxley Act, and with both the London and Hong Kong stock exchanges enjoying a boom period, the SEC must strike a balance between accessibility to international investment and ensuring the appropriate degree of protection for US investors. ACCA has welcomed the development and said that it will respond to the SEC within the consultation period. The International Accounting Standards Board (IASB) has also welcomed the decision. The SEC emphasised that the proposal applies only to those companies filing financial statements according to full IFRS. Sir David Tweedie, IASB’s chairman, said of the SEC decision: ‘The SEC’s proposal shows its recognition of the tangible benefits of a single set of financial reporting standards used in the world’s integrating capital markets, and the relevance of the continuing IASB-FASB convergence process to the economies of the US and the rest of the world. If approved, the rule will eventually reduce significantly the barriers to capital flows between countries using full IFRS and the United States. We appreciate the SEC’s continued support of our work. Our ultimate aim at the IASB is to have a single set of accounting standards used worldwide. The SEC’s proposal is an important step in achieving that goal, but much work remains to be done.’ Sarbanes-Oxley Act compliance has been made simpler and cheaper following revised guidance on its application, the US Securities and Exchange Commission (SEC) has claimed. New interpretative guidance from the SEC is aimed at enabling listed companies to strengthen internal controls, but at a lower cost. Section 404 of the Act has been strongly criticised for adding costs to the audit and internal control functions of US listed companies, causing many dual listed companies to delist from the US. There has been anger in the US at the perceived boost for London and its stock exchange and AIM exchange as a result. In future, internal controls should be less concerned about processes and more focused on actual risks of material financial misstatements. The SEC believes that the guidance will provide managers with greater clarity and certainty over what is expected to achieve compliance. ‘Congress never intended that the 404 process should become inflexible, burdensome and wasteful,’ said the SEC’s chairman, Christopher Cox. ‘The objective of Section 404 is to provide meaningful disclosure to investors about the effectiveness of a company’s internal controls systems, without creating unnecessary compliance burdens or wasting shareholder resources. ‘With the Commission’s new interpretive guidance for management on the evaluation and assessment of its internal controls over financial reporting, companies of all sizes will be able to scale and tailor their evaluation procedures according to the facts and circumstances. And investors will benefit from reduced compliance costs.’ The SEC says that the new guidance will particularly benefit smaller companies, which will find they have more flexibility in applying the rules, which should now be more relevant to them. The guidance has been developed jointly with the Public Company Accounting Oversight Board (PCAOB), and aligns with revised Section 404-based accounting standards adopted by the PCAOB in parallel with the guidance. John Davies, ACCA’s head of business law, gave a cautious welcome to the moves, pointing out that a recent survey showed that 70% of US chief financial officers oppose Sarbanes-Oxley and, particularly, Section 404. ‘Whatever Sarbanes-Oxley set out to achieve, it seems to have been an over-reaction,’ said Davies. ‘I think [the new guidance] means that the SEC is trying to steer companies to carry out 404 checks on a more focused basis. Whether in practice this makes very much difference is pretty debatable. If you do concentrate on addressing material misstatements does it mean you should go softly on immaterial misstatements?’ The new guidance and standards are intended to be in place in time for 2007 audits. The former Inland Revenue’s poor contracting skills contributed to HM Revenue & Customs’ (HMRC) IT bill rising threefold – from a projected £283m to an actual £850m per year – according to a report from the House of Commons Public Accounts Committee (PAC). The current contractor, CapGemini, can now expect to earn a profit over 10 years of £1.1bn. The previous contractors, Accenture and EDS, were replaced, leading the Inland Revenue to spend £52m towards bidders’ costs to promote competition when the main IT infrastructure was put out to recontracting. ‘Any department doing this in future must show there is no other cost effective way of securing competition,’ said Edward Leigh MP, the PAC’s chairman. The committee accepted that the recontracting process was ‘successful’, though it was ‘hard to find a justification’ for such a large contribution towards bidders’ costs. ‘The department could also have been sharper in its negotiations,’ explained Leigh. ‘The actual costs of transition were agreed after the contract was awarded and competitive tension had vanished – and the costs even included a profit margin for the successful bidder. In addition, part of the costs of transition related to NIRS2 [National Insurance Reporting System 2], where the original supplier, Accenture, carried on as a subcontractor. ‘The department should have foreseen that its demand for IT services could vary significantly and determined how this might affect its contractor’s prices and profit margins. These will have to be rigorously benchmarked in future to make sure the prices fairly reflect the actual volume of work being carried out.’ HMRC’s main IT infrastructure contract is called ASPIRE – Acquiring Strategic Partners for the Inland Revenue – and replaced separate contracts with EDS for IT infrastructure and Accenture for NIRS2. The change to new suppliers was the first of this scale in the public sector, and the PAC expects departments to learn from the Inland Revenue’s failures in any future comparable process. partners indicted over tax shelters Four current and former Ernst & Young partners have pleaded not guilty in the US District Court in Manhattan, following indictments for conspiracy in the promotion of allegedly abusive tax shelters. Robert Coplan, Ernst & Young’s former director for wealth planning, Martin Nissenbaum, leader of the personal income tax and retirement planning practice, Richard Shapiro, a tax partner, and Brian Vaughn, a former tax partner, were all charged in relation to a former tax planning unit in the firm called VIPER – Value Ideas Produce Extraordinary Results. The action against senior Ernst & Young staff is the latest instalment in the largest ever investigation into alleged tax frauds in the US. Two years ago KPMG settled an action by paying US$456m, but 14 of its former staff still face trial for alleged criminal offences. Ernst & Young’s current and former partners are accused of devising and promoting tax shelter transactions, based on false information, allowing eight wealthy individual clients to evade tax of several million dollars each. Three of the accused – Coplan, Nissenbaum and Shapiro – are charged with evading personal taxes through the use of a tax shelter. In a statement, Ernst & Young said: ‘The individuals who were indicted are two former partners and two partners who have been on administrative leave. They were part of a small group within the firm, disbanded years ago, that was responsible for developing the transactions in question. None of the individuals was part of the firm’s management. ‘Ernst & Young has co-operated with the Government from the beginning of its investigation. We have voluntarily made many changes and enhancements to our tax practice. We have also made other changes to our tax practice pursuant to our 2003 agreement with the [Inland Revenue Service], which the IRS Commissioner called a “model for agreements with practitioners”.’ Standards governing the sale of Individual Voluntary Arrangements (IVAs) that are supported by banks and debt advisers looked likely to be agreed, following a meeting between the two sectors. A meeting convened by the British Bankers’ Association (BAA) brought together about 150 lenders and insolvency practitioners. This followed complaints by banks and building societies that misselling IVAs has led to increased levels of debt defaults and serious losses for lenders. Debt advisers, including some accountancy firms, have strongly defended the responsible use of IVAs. An IVA forum, consisting of both sectors, has now been formed and has agreed a framework for industry standards. The focus of these standards will be to agree a structure for the levying of advisers’ fees (though not the size of fees), how to improve debtors’ understanding of IVAs and other debt solutions, and standardise ways in which assets held in property can be drawn on to pay off creditors. Following the meeting, Eric Leenders, the BBA’s executive director, said: ‘The IVA forum was positive and constructive. It gave lenders and the debt industry an opportunity to discuss the draft protocol proposals we have been working towards. All that is left is the fine detail to be thrashed out and agreed. We hope the full set of standards will be in place by the end of the year. Everyone agreed the importance of making sure people in severe financial trouble get the right advice for them. This is crucial in helping people to work their way out of their money worries.’ It was also agreed that improved literature will be produced over the next six months to raise understanding of IVAs. In particular, clients of debt advisers will be given other options relevant to their circumstances and clearer guidance on the consequences of entering into IVAs. It is intended that a new information pack will be available for distribution by spring 2008. However, there remains tension between the banks and the debt advisers. James Falla, managing director of the adviser firm Thomas Charles, responded: ‘If creditors do not allow the IVA solution on the grounds that the fees which the lenders are charged are too high, then this would preclude thousands from taking up the solution which is truly right for them.’ He added: ‘If agreement can be reached on reduced fee levels, this will clearly be good news for the banks. However, such a move must go hand-in-hand with robust standards from the banking sector regarding IVA acceptance criteria.’ in brief... FRRP proposes early warnings
Arctic Systems goes to Lords
New leaders of KPMG and Deloitte
PwC ‘number one for graduates’
HMRC concedes
Industrial spying investigation
US and UK regulators co-operate
Online councils ‘exposed to fraud risk’
IFA fees liberalised after EU intervention
‘Foreign nationals targeted by HMRC’ | |