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How to measure fair value
The IASB’s IFRS 13 standard offers guidance for determining exactly what constitutes
the fair value of an asset or liability, and how entities should go about measuring it
The International Accounting
Standards Board (IASB) has recently
completed a joint project with the
Financial Accounting Standards Board
(FASB) on fair value measurement.
The result is IFRS 13, Fair Value
Measurement. The standard defines
fair value, establishes a framework for
measuring it, and requires significant
disclosures relating to it.
The IASB wanted to enhance
disclosures for fair value so that users
could better assess the valuation
techniques and inputs used to measure
it. There are no new requirements in
IFRS 13 about when fair value
accounting is required – the IASB is
relying on guidance on fair value
measurements in existing standards.
Although IFRS 13 moves International
Financial Reporting Standards (IFRS)
and US GAAP closer on how to
measure fair value, differences remain
about when fair value measurements
are required and the recognition of
gains or losses on initial recognition.
The guidance in IFRS 13 does not
apply to transactions dealt with by
certain standards (such as share-based
payment transactions in IFRS 2,
Share-based Payment, and leasing
transactions in IAS 17, Leases) nor to
measurements that are similar to fair
value but are not fair value (such as net
realisable value calculations in IAS 2,
RW_AP_T_HoltCPD.indd 52
Inventories, or value in use calculations
in IAS 36, Impairment of Assets).
IFRS 13 applies therefore to fair
value measurements that are required
or permitted by those standards not
scoped out by IFRS 13. It replaces the
inconsistent guidance found in various
IFRSs with a single source of guidance
on measurement of fair value, and has
an effective date of 1 January 2013.
The standard is applied prospectively
and can be adopted early.
The exit price
Fair value has a different meaning
depending on the context and usage.
The IASB’s definition of fair value is:
the price that would be received to sell
an asset or paid to transfer a liability in
an orderly transaction between market
participants at the measurement date.
In other words, it is an exit price.
Fair value is focused on the
assumptions of the marketplace and is
not entity-specific. It therefore takes
into account any assumptions about
risk. It is measured using the same
assumptions and taking into account
the same characteristics of the asset
or liability as market participants
would. Such characteristics include the
condition and location of the asset and
any restrictions on its sale or use.
The basic principles thus remain
similar to current IFRS, but if an entity
did not use these principles before
IFRS 13, it could result in significant
change. For example, if an entity’s view
of fair value did not take into account
the highest and best use of the asset
when revaluing its property, plant and
equipment, then IFRS 13 could result
in a higher fair value.
It is not a relevant argument in the
valuation process for the entity to insist
that prices are too low relative to its
own valuation of the asset and that it
would be unwilling to sell at such low
prices. The prices to be used are
those in ‘an orderly transaction’ – one
that assumes exposure to the market
for a period before the date of
measurement to allow for normal
marketing activities and to ensure that
it is not a forced transaction.
If the transaction is not ‘orderly’
there will not have been enough time to
create competition, and potential
buyers may reduce the price that they
are willing to pay. Similarly, if a seller
is forced to accept a price in a short
period of time, then the price may not
be representative.
However, it does not follow that a
market with few transactions is not an
orderly one. If there has been
competitive price tension, and
sufficient time and information about
the asset, then the market may return
a fair value for the asset.
14/09/2011 15:20
Unit of account
The unit of account to be employed for
measuring fair value is not specified
by IFRS 13, but is determined by the
individual standard. A ‘unit of account’
is the single asset or liability or a group
of assets or liabilities.
The characteristic of an asset or
liability must be distinguished from a
characteristic arising from the holding
of an asset or liability by an entity. An
example is where an entity has to sell a
large block of shares at a discount to
the market price. This discount is a
characteristic of holding the asset
rather than of the asset itself and
should not be taken into account when
fair-valuing the asset.
of activity for the asset or liability that
can be accessed by the entity. The
most advantageous market is the one
that maximises the amount that would
be received for the asset or paid to
extinguish the liability after transport
and transaction costs. Often these
markets would be the same.
Sensibly, an entity does not have to
carry out an exhaustive search to
identify either market but should take
into account all available information.
Although transaction costs are taken
into account when identifying the most
advantageous market, the fair value is
not after adjustment for transaction
costs because these costs are a
characteristic of the transaction, not
Which market?
Fair value measurement assumes
that the transaction to sell the
asset or transfer the liability takes
place in the principal market for the
asset or liability or, in the absence
of a principal market, in the most
advantageous market for the asset or
liability. The principal market is the
one with the greatest volume and level
RW_AP_T_HoltCPD.indd 53
the asset or liability. If location is a
factor, then the market price is
adjusted for the costs incurred to
transport the asset to that market.
Market participants must be
independent of each other and
knowledgeable, and able and willing to
enter into transactions.
IFRS 13 sets out a valuation
approach that refers to a broad range
of techniques. These techniques are
threefold: the market, income and cost
approaches. When measuring fair
value, the entity is required to
maximise the use of observable inputs
and minimise the use of unobservable
inputs. To this end, the standard
introduces a fair value hierarchy, which
prioritises the inputs into the fair value
measurement process
Fair value measurements are
categorised into a three-level hierarchy,
based on the type of inputs to the
valuation techniques used, as follows.
Input hierarchy
Level 1 inputs are unadjusted quoted
prices in active markets for items
identical to the asset or liability being
measured. As with current IFRS, if
there is a quoted price in an active
market, an entity uses that price
without adjustment when measuring
fair value. An example of this would be
prices quoted on a stock exchange. The
entity needs to be able to access the
market at the measurement date.
Active markets are ones where
transactions take place with sufficient
frequency and volume for pricing
information to be provided. An
alternative method may be used where
it is expedient, and the standard sets
out criteria where this may be
applicable. For example, it may be that
14/09/2011 15:21
the price quoted in an active market
does not represent fair value at the
measurement date, a situation which
may occur when a significant event
such as a business reorganisation or
combination takes place after the close
of the market.
Determining whether a fair value
measurement is a level 2 or level 3
input depends on whether the inputs
are observable or unobservable, and on
their significance.
Level 2 inputs are inputs other than
quoted prices in level 1 that are
observable for that asset or liability.
They are quoted assets or liabilities for
similar items in active markets or
supported by market data – for
example, interest rates, credit spreads
or yield curves. Adjustments may be
needed to level 2 inputs, and if these
are significant, the fair value may need
to be classified as level 3.
Level 3 inputs are unobservable
inputs, which should be
used as a minimum. Where situations
occur when relevant inputs are not
observable, they must be developed to
reflect the assumptions that market
participants would use when
determining an appropriate price for
the asset or liability.
The entity should maximise the use
of relevant observable inputs and
minimise the use of unobservable
RW_AP_T_HoltCPD.indd 54
ones. The general principle of using an
exit price remains and IFRS 13 does
not preclude an entity from using its
own data. For example, cashflow
forecasts may be used to value an
entity that is not listed. Each fair value
measurement is categorised on the
basis of the lowest level input that is
significant to it.
Valuation concepts
IFRS 13 also sets out certain valuation
concepts to assist in the determination
of fair value. For non-financial assets
only, fair value is decided based on the
highest and best use of the asset as
determined by a market participant.
The fair value of a liability or the
entity’s own equity assumes it is
transferred to a market participant on
the measurement date. Often there is
no observable market to provide
pricing information and the highest
and best use is not applicable. The fair
value is then based on the perspective
of a market participant who holds the
identical instrument as an asset. If
there is no corresponding asset, a
valuation technique is used, as is the
case with a decommissioning activity.
The fair value of a liability reflects
the non-performance risk based on the
entity’s own credit standing plus any
compensation for risk and profit
margin a market participant might
units on the web
require to undertake the activity.
Transaction price is not always the best
indicator of fair value at recognition
because entry and exit prices are
conceptually different.
The guidance includes enhanced
disclosure requirements that could
result in more work for reporting
entities. Required disclosures include:
information about the hierarchy
level into which fair value
measurements fall;
transfers between levels 1 and 2;
methods and inputs to the fair value
measurements and changes in
valuation techniques; and
additional disclosures for level 3
measurements that include a
reconciliation of opening and
closing balances, and quantitative
information about unobservable
inputs and assumptions used.
This article is merely a snapshot of a
standard that will require a significant
amount of work by entities simply to
understand the nature of the principles
and concepts involved.
Graham Holt is an examiner for
ACCA and executive head of the
accounting and finance division at
Manchester Metropolitan University
Business School
14/09/2011 15:21
Masters of the universe?
In the past, a masters degree put you ahead of the competition when it came to career progression – and it
didn’t do your salary any harm either – but are MBAs worth the expense in these straightened times?
Throughout the 1990s and early into
this millennium, a masters degree
used to be the cherry on the cake as
far as your career was concerned. It
would put you ahead of the crowd and
give you a commercial advantage in a
world where companies were fighting
for the best talent and willing to pay
for quality employees.
Since the financial crisis, however,
the exorbitant salaries commanded by
those with an MBA are no longer
guaranteed and, indeed, with spending
cuts still impacting businesses of all
sizes and university fees set to rise
RW_UK_CAR_mba.indd 55
from 2012, even the significance of a
degree is changing.
So what is the value of an MBA in
2011? Is there still a reason to spend
thousands of pounds of your or your
employer’s money to get a further
qualification, when simply getting your
job done well is arguably the safest way
to make sure you keep it? Or is it even
more vital now to ensure you have the
skills to make you as employable as
possible, even if that means taking
time out of the office?
‘Increasingly in a period of economic
uncertainty and high unemployment,
candidates need to ensure they
position themselves in a way which
makes them stand out from the crowd,’
believes Claire McCartney, adviser,
resourcing and talent planning at the
Chartered Institute of Personnel &
Development (CIPD).
The CIPD’s annual Resourcing and
Talent Planning research earlier this
year found a rise in recruitment
difficulties, despite increased numbers
in the labour market. ‘Higher
qualifications, and in particular MBAs,
which provide candidates with greater
business and management awareness,
16/09/2011 15:09
Commercial finance
manager, Matalan
are often seen as desirable by potential
employers, but they need to be coupled
with work and business experience to
gain the attention of prospective
employers,’ adds McCartney.
Professor Michael Luger from
Manchester Business School agrees
that when market conditions are tough,
individuals and companies have to
work harder to be successful, and so
individuals who improve their skills and
qualifications are more likely to stand
out in the competitive job market.
‘Good MBA programmes have
adapted to include a higher level of
practical content, allowing students to
apply theory to address real business
challenges,’ he says. ‘Our Global
(part-time) MBA has a specific finance
pathway and many of the electives are
designed in partnership with the
banking, finance and investment
industries, and leading professional
bodies, such as ACCA. So industry and
professional bodies are tightly
integrated with the design of the MBA.’
MBA-holders and, indeed, holders of
an MSc qualification in finance,
generally move up the salary scale in
their companies faster than others.
Figures show that Manchester Business
School’s full-time MBA recipients
realised a 111% increase in salaries
three years after graduation when
compared to their pre-MBA salaries
(source: 2011 Financial Times rankings).
‘It is not just about the salary though,’
says Luger. ‘We have designed our MBA
to be a transformative experience for our
students; challenging them in ways that
build more confidence.’
KPMG encourages employees to go
for MBAs ‘100%’ according to Iain
McLaughlin, head of recruitment. Job
candidates with a masters degree have
an immediate advantage, he says.
‘They have spent time understanding
the business environment, have a level
of engagement and have used real-life
situations and case studies to further
their career.’
RW_UK_CAR_mba.indd 56
Professional bodies also realise the
continuing relevance of an MBA. ACCA
has been working with Oxford Brookes
University to produce a blendedlearning global MBA programme,
designed for ACCA members with a
minimum of three years’ professional
or managerial work experience.
The make-up of the average MBA
student has also changed. ‘In the past,
the average age of students enrolling
with an ACCA Qualification was 37,’
says Luger. ‘We are now seeing more
young finance professionals enrolling
on the programme across the globe,
bringing the average age down to 33.
‘Although students are getting younger
on the accelerated finance pathway, the
seniority of their roles continues to be
high, with many already at managerial or
director level,’ adds Luger.
What it costs
The cost of an MBA varies dramatically.
A degree from the University of
Hertfordshire with no fee reduction
costs £12,500, while a full MBA from
the London Business School costs
£53,900. Most institutions offer
reductions in certain circumstances, or
scholarships. At Manchester, ACCAqualified students are exempt from
certain finance courses and can enrol
on the Finance Accelerated programme
which can be completed in two and a
half years at a discounted £21,000.
‘It does become a harder decision as
the financial squeeze increases and,
whether a student has [financial]
employer support will focus the mind
on whether it is the right move to
make. It’s time-intensive and costintensive,’ says McLaughlin. ‘What is
really key though, in deciding whether
someone should consider an MBA, are
their motivators,’ he adds. ‘There is a
big difference between doing an MBA
for the sake of it, and doing it because
it will actually enhance your career.’
Beth Holmes, journalist
‘As a commercial accountant, I
am heavily involved in the support
of the operational aspect of
Matalan’s business. The key driver
for taking the MBA was to gain a
more holistic understanding of the
business and how it impacts the
whole of an organisation.
‘This understanding has come not
only from the course material, but
also from my fellow professionals on
the programme. Interacting and
sharing the learning experience with
executives from outside the finance
sector has been extremely beneficial.
‘By taking the MBA, my ambitions
to grow within the firm have been
recognised, and I am increasingly
involved in strategic decisions. This
has allowed me to take my learning
and put it into day-to-day practice,
improving the way I operate.’
Strategy & Planning –
Hewlett Packard UK
‘An MBA has helped me to see past
the numbers. It has given me new
tools to use in my daily business
challenges, such as marketing,
company market differentiation,
game theory, people engagement
and management, and creating and
implementing effective strategy.
‘The ability to engage in debate with
other MBA candidates who come from
a variety of different cultures and
business experiences also gives you a
live business environment that cannot
be replicated easily. These debates
can give all students the opportunity
to experience the competitive and
fast-paced environment that today’s
executives are faced with.
‘These are the new tools and
learning experiences that I believe
will be the catalyst for making
a more valuable contribution to
both my organisation and my
career progression.’
16/09/2011 16:45
LTE.indd 1
09/09/2011 16:35
Are you ready to submit your
CPD declaration?
You may have completed more hours towards your continuing professional development
than you realise. Our guide offers advice on how best to check your status
Remember, no matter what your
learning activity is, if you can
answer ‘yes’ to the three questions
below you can record the activity as
verifiable CPD:
Was the learning activity relevant to
your career?
Can you explain how you will apply
the learning in the workplace?
Can you provide evidence that you
undertook the learning activity?
You do not need to present evidence
of your learning activity with your
declaration; however, you do need to
keep it for three years, in case you’re
selected for a CPD review.
It’s a common misconception that
CPD can be gained only by attending
face-to-face courses, conferences
and seminars and that it cannot be
verifiable unless you have a certificate
of attendance for the learning you
have done. As a result, many members
rush to attend a course at this time of
the year, often leading to overbooked
lectures and seminars, and frustration
as the learning you need for your
development might not be easily
available. It’s worth taking time to
identify other learning that you may
have completed without knowing that
it could contribute to your CPD.
So much more to CPD
Although structured learning is the
one learning option most members
associate with CPD, many find that
the activities they regularly undertake
at work to maintain their professional
skills and knowledge mean they are
exceeding ACCA’s CPD requirement of
40 units per year.
Take 10 minutes to review some of
the work activity you have undertaken
this year where you learned something
to benefit your career, and you may be
surprised at how much of the CPD
requirement you have already achieved.
Examples of this may be:
undertaking research;
RW_UK_CAR_realise.indd 58
on working and project
* participating
an ACCA workplace mentor to
* being
an ACCA student or affiliate;
* keeping up to date with current and
future trends in your area of
preparing for presentations;
taking on new duties; and
acting as a coach or mentor, or
being coached or mentored yourself.
If you can demonstrate that the
activity has helped you develop new
skills and knowledge that are relevant
to your development, it can be counted
towards your CPD requirement.
Verifiable CPD explained
You will be able to count your
learning activity towards your
verifiable CPD activities if you can
provide evidence that the activity
has occurred. ACCA’s CPD evidence
policy is very flexible and can
include notes from such things as
meetings or screenshots from online
learning modules.
Annual declaration
Every member is required to make a
CPD declaration on an annual basis.
This process is straightforward and
can be made online via your myACCA
e-business account as soon as you have
fulfilled your CPD requirement. Or you
can complete the paper declaration
form, which will be sent to you with
your annual membership subscription
notification in November.
Either way, you will need to make
your 2011 declaration by 1 January
2012. So, if you have already
completed your CPD, we recommend
you make your declaration now.
Act now
For more on submitting your CPD
declaration, and for achieving your
CPD requirement for 2011, visit
15/09/2011 16:27
Training: your shout
ACCA is constantly monitoring how best to assist its members in developing their skills to help them in
their careers. A recent worldwide survey highlights where we should concentrate our efforts
ACCA is committed to providing
members with CPD opportunities that
help to develop skills and support
career progression. This involves
constantly reviewing and developing
the range of resources available to
ensure that members have a wide
range of options to choose from.
Part of this process is to identify the
training needs of our members. The
training needs analysis (TNA) survey is
a key element of our research. This
year, 5,634 members from 115
countries completed the survey. The
results will determine what products,
services and activities ACCA offers.
Technical skills
ACCA members continue to require
training on a broad range of technical
skills. Despite the differences in
economic conditions, there is a clear
global consistency about the top five
technical topics that members require,
and these have not changed much in
the past few years.
Financial reporting has once
again been identified as the most
desired technical subject. It is closely
followed by financial management,
risk management, taxation and
corporate finance.
Members rank the five most
important technical topics in which
they would like further development as
shown in the panel immediately below.
Financial reporting
Financial management
Risk management
Corporate finance
*respondents seeking further
RW_CN_CAR_TNA.indd 59
Learning methods
There are variations in the top five
subjects for each sector, which reflects
the differences in the type of work
members do. For example, taxation
consistently features as first choice
for further development among
members engaged in public practice
while financial management is the most
popular choice by public and corporate
sector respondents.
Business skills
As far as business skills are concerned,
the top five topics that members would
like further development in have not
changed since last year. Leadership
remains the number one area and
features in the top five for each sector.
Analysis, strategic business skills,
communications and negotiation all
feature in the top five globally.
Members rank the five most
important business skills in which they
would like further development as
shown in the panel immediately below.
Leadership skills
Analysis skills
Strategic business skills
Communication skills
Negotiation skills
*respondents seeking further
For the first time, e-learning was
identified as the top learning method
when it comes to developing business
and technical skills, with a rise of 16%.
This reinforces ACCA’s commitment
to help members source excellent
e-learning resources. We want to
increase the number of such services.
Second place is occupied by
face-to-face training courses and third
place by reading books/publications.
On-the-job training is still a popular
method of professional development
despite a 12% decrease compared with
last year. More employers are offering
members in-house face-to-face training
courses. This method remains a form
of professional development that is
valued by members.
The future
We are constantly working to improve
and develop products, services and
activities offered to members to
help with professional development
and support career progression. As
members identified e-learning as the
number one method for professional
development training we are working
to increase the amount of e-learning
that is on offer. Through partnerships
with the top CPD providers, we
are able to provide ACCA members
with the best products and services in
the marketplace.
Ultimately, we aim to provide
members with CPD opportunities
across a wide range of topics, using a
variety of learning methods, to ensure
they have a choice of training to suit
their development needs. We will
continue to ask members about their
training needs so we always
understand the skills they require to
progress in their careers and improve
their employability.
15/09/2011 12:13
Exam questions
ACCA’s Aude Leonetti, programme director, answers some of your
queries about e-assessment
In June we announced our vision
to provide future exams through an
innovative programme of e-assessment.
This generated a lot of interest from
members and I wanted to answer some
of the questions we’ve received.
in a simulated environment. Other
accounting bodies do this but we
are looking to find the best solution
for more complex and demanding
scenarios that will maintain the high
reputation of our qualification.
What is e-assessment?
Is there a timetable showing
which papers will be available
and when?
E-assessment is a long-term plan to
evolve the current computer-based
exams that we already offer at ACCA
to a more extensive programme where
all of our papers will be available
through e-assessment.
There are two key drivers for ACCA
working towards this extension.
The first is being able to offer greater
choice in exam sittings, moving away
from the two that we currently have to a
more flexible offering.
The second relates to the way we
will be able to ask questions with an
e-assessment model. We will embed
the different applications that finance
professionals use in the workplace into
exams, making our assessments more
aligned to the workplace tasks that
students are expected to undertake,
thus making them more workplaceready. This will ensure a continued
demand for the ACCA Qualification.
Will the exams be mostly
multiple choice?
Not at all. We are looking at more
sophisticated modes of assessment
that can assess work-ready skills,
particularly in the higher-level exams
that need higher-order question
types and will include, for example,
spreadsheet-based applications with
report-writing facilities.
How can you assess something
like consolidated accounts in
an e-assessment environment?
We are investigating how to build
up a set of consolidated accounts
RW_UK_A_Aude.indd 61
This is a long-term vision and we will
be working over the coming months
and years to ensure we launch a
programme that meets the demands
of the market. We will be refining
our plan in close consultation with
employers, regulators and learning
providers to design the best solution.
All papers will be fully tested before
being launched, not only to make
sure that the technology is secure
and robust, but also to ensure that all
exams are of the same high standard
as current paper-based exams and
meet regulatory standards.
We will be making more
announcements about the schedule as
we develop the programme.
What about countries with
insufficient infrastructure to
support e-assessment?
We are working very closely with
our network of national offices to
anticipate their ability to adopt
e-assessment. While we anticipate
that we will be able to offer a global
solution in the long term, we will have
exceptions arrangements to deal with
cases where the infrastructure doesn’t
yet allow full e-assessment.
Will students be required to
attend an exam centre?
Yes, they will. Candidates will still
be sitting their exams at invigilated
centres to ensure the integrity of the
exam process.
With e-assessment we can
actually enhance security checks. For
example, we are looking at how
to use technology to verify who
students are before they sit an exam.
Security will always be one of our
key priorities.
How will you ensure that
the reputation of the ACCA
Qualification is maintained?
We know that members are very
proud of their ACCA Qualification,
and maintaining its standard is of
paramount importance to us. As is
the case now, we will work very closely
with relevant regulatory bodies in the
planning and implementation stages
of any new exams to ensure that we
offer rigorous assessments that test
our students to the highest standards
in the global accountancy profession.
We will ensure that the quality and
integrity of our qualifications are
upheld and that the value of the ACCA
brand is maintained.
I hope this gives some insight into how
we see the programme developing and
also reassurance that maintaining the
esteem in which our qualification is
held is our highest priority.
We firmly believe that our vision will
help to ensure the relevance of, and
high demand for, the ACCA
Qualification in the future, and we will
continue to update you.
13/09/2011 15:03
Neil Stevenson introduces ACCA’s 10 new global forums, set up to grapple with current
technical challenges and to identify emerging issues affecting professional accountants
o one
today can
ignore the
impact of
global forces on all
our professional
and business
lives. International
policymakers and
standard setters
create regimes
that are increasingly implemented all
around the world. National economies
are highly interdependent, with crossborder trade and investment flows
the norm. An appreciation of these
powerful forces lies at the heart of
ACCA’s creation of 10 new global
forums to bring together influential
business and professional leaders
from markets around the world.
Alongside increased international
representation, the forums’ agendas
will also become more international
in outlook in line with members’
concerns. While the forums build on
the work of ACCA’s previous highlyvalued technical committees, they will
have an expanded outlook. Members
will be encouraged to pursue ‘blue-sky’
thinking to identify emerging issues.
Their structure will also give greater
flexibility in responding to emerging
issues by allowing forum experts to
support ACCA’s Research and Insights
programme of research, publications,
events and collaboration.
We will invest in promoting the work
of the forums through publications and
other channels, including the ACCA
website. We anticipate the forums and
their chairs developing an international
public profile, simultaneously
reinforcing ACCA’s reputation and
influence as the leading global body for
professional accountants. We intend
to draw on a wide range of experts,
including employers.
Responding to national developments
will remain a priority, however, and we
will continue to pursue a local agenda
where that is appropriate, especially
in areas such as tax, regulation and
SME matters.
The creation of the forums is a
visionary development for ACCA,
confirming our position as a global
organisation that can lead debates
on the international stage, expressing
views based on global analysis. In this
way, ACCA can act as a champion of
our profession, striving to support the
creation of business and public value
in international markets. By developing
a global framework of many experts
across different specialist areas, ACCA
will draw on expertise from across the
spectrum to provide a truly informed
and integrated perspective.
Neil Stevenson is ACCA executive
director – brand
Chair, Accountants for Business Global Forum
Through its Accountants for Business Research and Insights programme, ACCA is setting out an
agenda for business that puts sound financial management at its heart, highlighting the ways in
which accountants put themselves at the core of business life and a successful economy.
Leading global organisations are represented in this forum. Their creative input, first-hand
market intelligence and focused discussion enable ACCA to explore the interaction between people,
professionalism and performance. The themes for 2011–12 include diversity in business, the balance between risk and
reward, the emergence of the e-professional, and the continued move towards global outsourcing and shared services.
Acting as a business-focused think-tank, the forum will ensure that ACCA is able to penetrate the complex issues affecting
business, and ensure that our research and insights continue to add value to business, and provide leading-edge analysis of
the issues that matter in finance.
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15/09/2011 14:38
ACCA’s global forums will respond to the issues facing the accountancy profession in a time of rapid global change
Chair, Accountancy Futures Academy
The Accountancy Futures programme provides ACCA with powerful visions of the future, in response
to emerging challenges in a range of issues. This venture will provide creative inputs into ACCA’s
future research and insights. The Accountancy Futures Academy provides a forward-looking radar in
the global business and policy spheres, and for the latest reforms facing the world of finance.
This group of thinkers, academics, business leaders and commentators will ensure that ACCA
has access to a network of innovative experts who can help it to stay at the cutting edge. It will foster fresh thinking and
innovative discussions, identifying the barriers and facilitators of tomorrow’s successes, and the potential strategies to
enable business and finance to navigate the choppy waters that lie ahead.
On topics such as the future of audit and global standards, the rapid changes in corporate governance and reporting,
access to finance for businesses and environmental accounting, it will enable ACCA to develop credible positions.
Chair, Global Forum for Governance, Risk and Performance
The forum will identify issues concerning governance, risk and performance (GRP), and will help
to demonstrate how good governance and risk management practices can enhance business
performance and success. It will take a particular interest in how GRP can enhance public value and
in the role of the accountant in making measurable contributions to public good.
The forum will focus on the for-profit private sector and GRP in those larger corporations and
financial services institutions that have a significant impact on wider society. It will also work closely with other forums.
A key underlying theme will be the nature and value of money, and how we record and report financial transactions.
Successful businesses that build long-term value are vital for economies, individuals and society. Good governance is about
managing risk to ensure sustainable and long-term business goals are not sacrificed to short-term financial performance.
The forum will interest itself in the drivers of business and financial behaviour, and the interaction between governance
and risk management, performance measures, regulation and, not least, corporate culture.
Chair, Global Forum for Corporate Reporting
The forum will provide input into financial reporting standard-setting, in particular the development
of appropriate IFRSs. It will identify, evaluate and champion enhanced reporting that brings value to
investors. With a wider focus on corporate reporting trends, it will also look at issues such as integrated
reporting, which aims to bring together strategy, governance, financial reporting and sustainability
reporting to give the overall strategic view. This supports businesses in taking more sustainable
decisions – financially as well as environmentally – and enables stakeholders to assess an organisation’s performance.
We will be debating the International Accounting Standards Board’s standard-setting agenda covering the next three
years, which should reflect much less emphasis on the financial crisis and more on convergence with US GAAP. There is
unfinished business with financial instruments, revenue, leasing and insurance accounting. Beyond that, there will be issues
from recent IFRS adopters in Asia Pacific and elsewhere.
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15/09/2011 14:39
Forum chairs met last month at ACCA’s headquarters to discuss the challenges facing the profession
Chair, Global Forum for Audit and Assurance
‘The status quo is not an option for the auditing world,’ European commissioner Michel Barnier has
warned. His proposals will be published shortly and will no doubt highlight two huge movements
in the tectonic plates of the audit world: investors are demanding much more from the auditors of
companies listed on securities markets, while smaller companies in jurisdictions where audit is long
established are increasingly being exempted from statutory audit.
These contrary movements provide huge opportunities for the development of innovative assurance services. Audit
practitioners can provide smaller companies with compilation and review services and larger entities with assurance on new
areas associated with financial statements, such as corporate governance disclosures.
ACCA will continue to play a leading role in the development of audit and assurance services and fit-for-purpose standards
to meet these market demands. It will also continue to champion the value of audit in the face of challenges old and new.
Chair, Global Forum for Sustainability
ACCA has played a leading role in relating sustainability to the profession – perhaps most notably
through its creation of awards for social and sustainability reporting – positioning accountants as
key in the identification, measurement and reporting of the non-financial results and effects of the
organisations for which they work or provide advice.
There are increasing expectations from a range of stakeholders for transparency, and the costs of
losing public trust and the licence to operate can be catastrophic. It is essential for organisations of all kinds to
identify and manage the business and strategic risks that may lie outside the accountant’s traditional habitat.
The social effects of business activities are subject to ever more demanding regulation. At the same time, corporate
reporting has become overwhelming for producers and consumers alike. The International Integrated Reporting Committee
is therefore attempting to define a new approach to communicating the consequences of business activities in a new way,
and the Global Reporting Initiative has recently unveiled the latest generation (G4) of sustainability reporting guidelines.
Chair, Global Forum for Business Law
The global financial crisis has caused many people to think differently about what drives business
behaviour and whether the law has yet found the right balance between encouraging entrepreneurial
initiative and providing protection for stakeholders and the public interest. The question of how best
to achieve that balance is set to be a key feature on the agenda of governments and regulators.
ACCA is instinctively in favour of business activity and will always support measures to encourage
investment, expansion, employment and trade. At the same time, our mission is to work in the public interest, and to
advocate measures and conduct that reflect that. It is increasingly clear that there is no conflict between the concepts of
enterprise and the public interest, and that long-term and sustainable business success depends on businesses recognising
the self-interest of planning and operating in ways that respect the public interest and the concerns of stakeholders.
ACCA looks forward to offering a strong and distinctive contribution to the debates on business law issues.
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Left: David Hawley, Deloitte’s director of public policy, outlined some of the key issues for 2012 at last month’s gathering
Chair, Global Forum for the Public Sector
The landscape for delivering public services is rapidly changing. In the aftermath of the financial crisis
and with government expenditure accounting for more than a third of most national GDPs, we must
focus on promoting effective public financial management and sound stewardship of public funds.
We will prioritise those areas that matter to employers, members and stakeholders such as
governments, standard setters and audit institutions. Our focus will be on building reputation and
influence in public financial management reporting and budgeting, responding to changes in audit and regulation, and
promoting the accountability and transparency of public funds. Equally, we will respond to the challenges faced in securing
the long-term sustainability of public funds, as well as the impact of the environment and climate change on resources and
the role of the accountant.
The forum will work towards adding public value to debates, changes and developments over the coming years.
Chair, Global Forum for SMEs
The forum will allow the views and experiences of SMEs to be represented from a global perspective.
It will address a gap in thinking where policymakers often approach the SME agenda from a regional
or national perspective and so fail to find common ground.
ACCA’s forum will be working to establish and communicate that common ground by looking at
what governments, policymakers and professionals around the world can do to ensure a level playing
field where small businesses can thrive and grow. This will include looking at best practice for a proportionate regulatory
framework; access to external finance that ensures growth and investment opportunities are exploited; and appropriate
business support where the limited resources of smaller businesses would otherwise present an insurmountable barrier.
Policymakers in different jurisdictions have much to learn from one another and can benefit from proven best practices. It
is our role to contribute to this learning process, and the forum’s wide membership representation in terms of geographical
and professional background will provide a platform for the global exchange of ideas and solutions.
Chair, Global Forum for Taxation
Taxation policy is fundamental to the way governments fund what they do and balance tax
rises against spending cuts. The drive towards simplification and the focus on green taxes and
globalisation may force us to think again about what taxes do and how they should be administered.
Green taxes are one possibility, but there is no consensus on whether they should be levied on
producers or consumers, the revenues ring-fenced or put into the general tax pot.
Increasingly, businesses and their financial activities cross borders. Consumers, too, can buy across national boundaries.
Faced with such global activities, should national governments act together or follow their own course? Will this mean a
greater shift to taxing consumption or financial transactions, or some other mechanism?
We favour changes that make the tax system simpler and more certain, remove regulatory burdens and make it easier to
do business. Clearly it is not all about taxation. Access to talent, capital, efficient cost structures and stability matter, too.
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ACCA news
Exam success
Papers sat by 196,000; finals sat by 6,000;
pass rates strong in F5, F7,F8 and P1
62 Forum focus
Introducing ACCA’s
10 new global forums,
created to deal with the
challenges of the future
61 E-assessment
ACCA’s programme
director answers your
RW_A_backpage.indd 66
Clare Minchington
Demand for the ACCA Qualification has remained
high during tough economic times as the results
from the examinations in June reveal. Some
196,000 students sat papers, with more than 6,000
successfully completing their final exams. A further
2,978 students completed the Certified Accounting
Technician (CAT) exams.
At the Fundamentals level, pass rates were
particularly pleasing for the tax and law papers.
Students continue to find papers F5, Performance
Management; F7, Financial Reporting; and F8, Audit
and Assurance, challenging. At the Professional
level the pass rate remained strong in paper P1,
Governance, Risk and Ethics, which tests students’
professional judgment. This was the first session to
place a greater emphasis on risk assessment and
risk management within the exam.
The results for optional papers P4, Advanced
Financial Management; P5, Advanced Performance
Management; and P7, Advanced Audit and Assurance,
were disappointing. Generally, those students failing
were not able to apply their technical knowledge
to real-life practical scenarios. ACCA is working on
support packages.
Clare Minchington, ACCA executive director –
learning and products, said: ‘We congratulate
those who have succeeded in their exams – and
we are delighted to see that more than 6,000 have
completed their examinations.
‘We look forward to examining our new suite of
awards, Foundations in Accountancy, which replaces
the existing CAT qualification from December 2011.
Foundations in Accountancy offers students a choice
of awards at different levels and the availability of
more computer-based exams.’
Health finance expert Dean Westcott
FCCA (pictured right) was due to
take the reins as ACCA president
on 15 September, as Accounting
and Business went to press. In an
interview on page 32, he talks about
the critical role that accountants play
in the current challenging economic
climate. His first president’s column
is on page 41. Westcott takes over
from Mark Gold FCCA of London
practice Silver (pictured left), who
had a highly successful presidency.
Professor Barry Cooper FCCA,
head of the School of Accounting,
Economics and Finance at Deakin
University, Melbourne, steps up
to deputy president, while health
sector management consultant
Martin Turner FCCA becomes
vice president.
ACCA is calling for US issuers to
immediately be given the option to
prepare financial statements using
International Financial Reporting
Standards (IFRS), in line with
foreign issuers.
Responding to a US Securities and
Exchange Commission staff paper,
ACCA said that having an extended
period for the convergence of IFRS with
US generally accepted accounting
principles would be detrimental to the
consistency of the treatment of US
companies and foreign private issuers
already reporting under IFRS. Page 24.
16/09/2011 12:12
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