Singapore to have own accountancy qualification. Why?

who says accountants are boring?

What will be happening in 2011?

Singapore will soon have its own post-university professional accountancy qualification.

The Pro-Tem Singapore Accountancy Council is currently developing the programme with the Institute of Certified Public Accountants of Singapore (ICPAS) in consultation with accounting bodies in the UK, Australia and the Association of Chartered Certified Accountants.

Why is described as “post-university… qualification”?

The certification process will be open to GRADUATES from non-accountancy backgrounds and foreign students. Theoretically a history graduate could go through a “bar exam” before being officially conferred the title of being a “qualified accountant”. [ACCA has done that for me and probably for majority of the accountants in Singapore ie. allows an Economics graduate to become a trained accountant which is internationally recognised.]

Why are we doing this?

Firstly, this is supposed to help Singapore to achieve a leading global accountancy hub status in Asia Pacific by 2020.

In the words of Second Finance Minister Lim Hwee Hua, she said accountancy professionals here and in the region will have an avenue to develop their careers by obtaining credentials that are globally recognised. [Singapore should become the top of mind place to get an accounting qualification that would be recognised by countries in the region.]

She said: "The objective is to develop accounting professionals who are not just deep problem solvers in the core area of accountancy. We also want our accountancy professionals to be equipped with the skills to interact with other specialists and understand technical issues from a wide range of disciplines and functional areas."

Secondly, the Pro-Tem Singapore Accountancy Council is also looking into alternative niche areas for accountants here to specialise in instead of just focusing on the traditional areas of auditing, accounting and tax.

"We've already formed a committee to look at the different specialisation pathways in terms of risk management, for instance, development of CFOs (Chief Financial Officers), internal audit, valuation, taxation. These will be the specialisation, so called qualifications, that we can look at," said Bobby Chin, chairman of Pro-Tem Singapore Accountancy Council.

Other areas of specialisation such as management accounting or forensic accounting may be introduced later.

Singapore wants to achieve the status of being a talent hub where “travellers from universe can land in Singapore and seek the necessary talents to perform whatever tasks needed”. Remember Han Solo in Star Wars? So if you are looking for a pilot to fly a interglactic spaceship or people to value a tree or to perform due diligence on a nuclear plant acquisition, we should have them here.

Source - http://www.channelnewsasia.com/ / Jonathan Peeris

Exposure Draft on Deferred Tax

Current practice
Companies must state if they intend to rent out or sell the property in future. Appropriate taxes are then applied ie. 17% deferred tax on rental income or 0% on capital gains from disposal of properties.

Proposed change
The respective country's capital gains tax would be applied to all properties.

Assessed impacts

• Since Singapore has no capital gains tax, past and future deferred tax provision would not be necessary before the end of 2010. 
• Net asset values of property firms could go up by 5 to 8% as per Mr Choo Eng Beng, PwC. Share price of property firms could subsequently go up too due to higher valuation.

Can I have a Partnership with one Partner?

Dear friends,

Consider ths situation.

You started a partnership with a friend and you named it "Ah Kow & Partners". For some reasons, your friend decided to leave the partnership and you continue to run the "partnership" singularly and without a change in business name. Is this acceptable by law?

The Court of Appeal ruled as follows in Orix Capital vs Chor Pee and Partners:-
a) Requested the Law Society to be more transparent about law firms and partners operating which each firm given existing rules within legal profession forbid firms from using names that are misleading and;
b) Chor Pee and Partners was found to be not liable for the debt of $263,000 to Orix Capital as the contract was deemed to have been signed by an individual ie. Lim Chor Pee and NOT by the partnership.

I am wondering why registration of law firms is not under the jurisdiction of ACRA ie. just like any other business entities in Singapore. Please note that the above could be peculiar ony to law firms and not those partnerships under the ambit of ACRA. (I am speculating here. Can someone correct me if I am wrong.)

Bottomline - You cannot have a partnership of one person. But who should make sure this happen?

ACCA Conference 2010 - Cheong Pui Yuen

Pui Yuen's mentor

Mr Cheong Pui Yuen presented an interesting and honest paper entitled "Transforming the Public Accounting Profession - A Practitioner's Perspective".

He attempted to outline some ideas of how we (as an auditng entity, as a member of the public accountants, as customers/clients to audit firms and as accountancy body like ACCA) can respond to the impending changes as highlighted in the CDAS report.

As an auditing entity, you may to seriously think about the following:-
a) expanding scope of services offered;
b) consider gaining scale by working together in local and regional markets
c) explore increasing its capital base given the relax rules governing ownership
d) scenario planning with different audit exemption threshold ie. what if the threshold is increased current $5m to $10m etc
e) scenario planning with increased costs from higher quality expectation (and possibly with limited price increase)

As for customers/clients of auditing entities, Mr Cheong advised as follows:-
a) expect higher service quality;
b) pay a fair fees for service rendered;
c) don't encourage fees cutting;
d) work with progressive/quality audit entities;
e) and lastly and very checkily he said, "pls don't take away our resources unnecessarily".

For accountancy bodies like ACCA, he opined that it should continue to step up its profile, collaborate with other entities from government, trade, other accountancy bodies etc etc. He stressed that it is very important for ACCA to differentiate itself so as to give a reason for its members to continue renewal of their membership.

ACCA Conference 2010 - Tim Hird, Robert Half International

Dear friends,

Tim Hird presented his findings of a joint ACCA/Robert Half research entitled "Talent and Skills in Finance & Accounting Survey 2010 - Uncovering the Challenges".

May I highlight some of his main points:-

Skills that are lacking in finance & accounts related staff are:-
a) management and leadership skills;
b) interpersonal skills / ability to work within a team and;
c) communications skills.

For employers, the top three retention strategies for staff are:-
a) improve salary package;
b) offer promotion or better career development and;
c) offer flexible hours / work from home.

I understand that the full report will be released by end of month.

Burger King vs Sinar Mas/Golden Agri over green issues

In today's Sunday Times, I read that Burger King cancelled its contract to buy palm oil from Sinar Mas Agro Resources and Technology (SMART). This is said to be a move to protest over Sinar Mas not adopting sustainable farming practices and destroying rainforests in generating the palm oil.

This is a timely reminder of the importance of "Green Reporting"/sustaintability reporting and SGX's recent issuance of guidelines (ie. non manadatory) on disclosure of social and environmental aspects of business.

Boards and management of companies are slowly and surely being made accountable to all stakeholders. Many years ago, they were said to be only responsible to shareholders for financial results. Now given emphasis on sustainable reporting, management are now being queried on how they achieve those results and the impact they have on the communities within which they operate in.

While I personally hope for such information to be made available on a statutory basis, I am however happy that SGX has taken the first move to "encourage" such reporting.

Bursa Malaysia is ahead of SGX when it legislated (ie. by law) that such reports be made compulsory back in 2007!!! According to ACCA survey as reported by Darryl Wee, CEO of ACCA Singapore, 49 companies in Malaysia generated sustainability reports in eight years. In comparison, Singapore lagged behind with only 21 companies.

P/S - SMART operates all palm oil plantations for Golden Agri Resources, a company listed in Singapore Exchange.

Proposed changes to Accounting for Leases

it pours and pours

What is the proposed change?
For lessees, FASB and IASB believe that all lease contracts should be treated in a manner similar to the treatment of finance leases. Thus removing the existing requirement for lessees to differentiate leases as finance or operating leases.

Why the proposed change?

1. Firstly, current rules which determine lease classification may result in similar transactions reported very differently, leading to lack of comparability and significant amounts of off balance-sheet finance not being recognised.
2. Secondly, the right obtained by the lessee in a lease contract is the right to use the leased asset during the lease term. This right meets the definition of an asset. The lessee incurs an obligation to pay rentals in a lease contract, and that this obligation meets the definition of a liability. ("Right of Use" model)
   

Details of proposed change for LESSEE under "Right of Use model"

• Leases would be measured at cost initially ie.the present value of the lease payments, including initial direct costs incurred by the lessee.
  
• Present values would be calculated using the lessee's incremental borrowing rate as the discount rate.
• Expense to lessee would be interest expense on instalments paid. (Existing treatment is rental expense.)
  

Possible consequences

For the lessees, interest expense would thus be higher in the early years of a lease (compared with the current straight-line treatment for rent expense) ==> impact on accounting ratios / loan covenants / profitability / credit ratings and other external measures of financial

For the lessors, a significant chunk of their business could disappear overnight if the lessees decide to buy the assets themselves instead trying to rent.

Source - Accounting and Business Singapore 06/2010

F1, F2 and F3 Changes due in Dec 2011 Exams

orange juice from Bali

There will be changes to almost all exam papers effective Dec 2011 exams.

That would mean you have 2 paper-based tries based on current exam format left before the change.

So what are the changes due for F1, F2 and F3?
In short, the exam format will change from a pure multiple choice question (MCQ) format to a combination of MCQ and short questions basis format.

Paper F1, Accounting in Business
Section A - 16 x one-mark short objective test and 30 x two-mark short test questions.
Section B - 6 x four-mark longer version objective questions with one taken from each objective test questions of the six sections of the syllabus.

Paper F2, Management Accounting
Section A - 35 x two-mark short objective test questions
Section B - 3 x 10-mark longer version objective test questions – one taken from each of the budgeting, standard costing and performance measurement sections of the syllabus.

Paper F3, Financial Accounting
Section A - 35 x two-mark short objective test questions
Section B - 2 x 15 mark longer version objective test questions with one question based on group accounts and the other on preparation of financial statements (which may include an element of interpretation of accounts)
[Edgar says it looks like old topics will be re-introduced to the syllabus.]

Source - ACCA

After ACCA and CPA, how to get CoC?

It was the first initiative announced by ACRA in April 2010. It is the introduction of the colour-coded compliance rating and issuance of the Certificate of Compliance.

How to get the Certificate of Compliance?
First get the GREEN tick. Green tick will be given only when a company complies with ALL of the following requirements as enunciated in the Companies Act, Cap.50 ie.

1. Hold its AGM once in every calendar year and not more than 15 months
after the last preceding AGM (section 175). For a new company, the period is 18 months after date of incorporation.

2. Provide the members/shareholders with the financial statements that is not more than 6 months old at the date of the meeting. For a public listed company the financial statements must not be more than 4 months old at the date of the meeting.

3. File its AR within 1 month from the date of the AGM (section 197).

Once your company gets the GREEN tick, you pay $5 for a copy of Certificate of Compliance. Failing to comply, you will get the RED cross. All the GREEN ticks and RED crosses will be displayed next to your business entities' name for all to see in the free Directory of Business Entities.

What can I do with the Certificate of Compliance?
1. Show to banker to demonstrate that your company is behaving and ask for a discount on the interest costs.

2. Attached it to your resume as you present yourself to the next prospective employer as the key person in keeping the company neat and tidy.

3. Attached it to your performance appraisal as you discuss for a bonus.

4. Show to auditor. Try asking discount on ground that ACRA is certifying compliance already. No audit work is necessary there.

5. The auditors too can use the CoC to check on their prospects first before accepting appointment.

Good morning to you. Cheers

FASB and IASB to delay their marriage?

view from an office in Jakarta

Yes, there will be a delay of 6 months from the original date of June 30, 2011.

This is despite the fact that their family members from the G-20 group of industrial and emerging countries have been pushing them to stick to the original date since FASB and IASB announced their engagement in 2006.

So why the delay?

1. Firstly, FASB cannot keep up the pace preparing for their marriage.

To meet the deadline, FASB and IASB would have to release about 10 proposals in the next two months and rushing through the due process of public comment, blah blah blah, reconsideration by the respective board and adoption.

2. Both FASB and IASB want their marriage only after aligning major areas of the accounting rules, such as revenue recognition, leases, financial instrument accounting and financial statement presentation.

3. FASB is 38 years old now but it has never worked so hard before in its life to get ready for the marriage. FASB has never released more than three or four proposals at a time for public comment.

4. FASB and IASB's preparation were distracted by the financial crisis in 2008 and 2009. Both were forced to activate more resources to make changes to accounting rules related to the financial crisis. FASB dedicated one third of its 60 professional staff members during the crisis. IASB has a slightly smaller staff than the FASB.

ACRA - Changes to note

my lunch place in Jakarta

Dear friends,

The Accounting and Corporate Regulatory Authority (ACRA) has announced that it will be implementing several initiatives as an impetus for locally incorporated companies to comply with corporate regulatory requirements as well as to acknowledge companies who have made the effort to comply.

For a start, ACRA will focus on the preparation of the annual financial statements, the holding of Annual General Meeting (AGM) and the filing of the Annual Returns (AR). The initiatives are as follows:-

a) Launch of "Colour-coded Compliance rating". This is a rating system that recognises companies with a good record for holding its AGM on time, tabling and filing up-to-date financial statements and Annual Returns for the year in question with a positive compliance rating (in the form of a green tick) which makes them eligible for a Certificate of Compliance; while those which were non-compliant in their filing would be given a negative rating (in the form of a red cross). The compliance rating record and other relevant information for all locally incorporated companies will be reflected on ACRA’s free online Directory of Registered Entities for inspection by the public.

b) Issuance of "End of Financial Year Reminder" to provide an earlier alert to companies of the requirement to table up-to-date financial statements and to hold AGM timely with our new End of Financial Year (FY) Reminder, and

c) "Shortening of the Extension of Time" which will reduce the maximum allowable period for extension of time to hold AGM from 3 months to 2 months.

My comments

• The rating system (just like for the hawker stalls) - What are the purposes? Firstly, of course to encourage compliance. Secondly, could the rating be used to guide your corporate customers' and suppliers' decision as to whether to deal with your company? For hawker stalls, would a C-rating discourages people from patronising your stall? We will wait and see the effect of this.

• The reminder system to comply - In my opinion, this is the most useful aspect if implemented properly. ACRA should introduce even easier ways for companies to comply by simplifying further the filing processes.

I am looking forward to that.

(Announcement copied from ICPAS's email to members for your information.)

Misnomer between FRS12 and FRS40?

a new hotel taking shape

The second part of Tan Eng Juan/Tan Kai Guan's article on Accounting for Deferred Tax in Sep/Oct2009 Singapore Accountant touched on the following areas:-

What if disposal of investment properties "attracts a badge of trade" ==> Consequently, gain/loss from such transactions would be subject to tax. Both professors got no issue with that.

The two professors are however unhappy with when such entities SHOULD have started accounting for deferred tax on these properties. They posit that:-
a) deferred tax should have been provided for when FRS12 was adopted in year 2001 and;
b) accounting for deferred tax should not started only year 2007 ie. the year FRS40 was adopted.

Why?

1. SAS12 to FRS12 effected on April 1, 2001
Assuming gain on disposal is taxable, SAS12, in the past, said deferred tax has to be provided for IF the timing differences affect P&Ls.
But now FRS12 said we must provide for deferred tax on ALL temporary differences, regardless or not they affect P&Ls.

2. FRS25 to FRS40 effected on January 1, 2007
Under the extinct FRS25, revaluation surplus is taken to reserve (ie. never to P&L).
Under the currently in force FRS40, fair value gain is taken to P&L.

The simple point is that while FRS12 has been in force about 6 years earlier than FRS40, have most companies been accounting for deferred tax as tax expense in P&L since 2001? The two professors seem to imply that most did not. During those 6-7 years, deferred tax on revaluation of investment property will be debited to "revaluation reserve" (instead of P&L).

Impact? - Profit figures are overstated over those years while the overall value of shareholders' equity remain neutral.

Director fined for lodging false data

Who did it? CSI team, pls check for finger prints and DNA.

Dear Staff of Corporate Secretarial firms, directors-wannabes and of course, Directors of companies,

Please be informed that a local director was recently fined $21,000 for changing the addresses of foreign directors to a local address, with full knowledge that the information is false.

Why did she, Ragini Dhanvantray of Rivkin Consultancy, do that for?
She is currently the local director of companies with foreign directors.
The Companies Act stipulates that every company must have at least one director ordinarily resident in Singapore.
Perhaps (I speculate here, without basis) she is thinking of quitting as local director of these companies as these foreign directors/shareholders may have gone missing and have not be meeting their obligations to her and the companies.
She came up with the idea of changing the addresses of these foreign directors and subsequently follow with her resignation as director.

Points to ponder

1. How were these false information found out?
2. As the Companies Act is currently under review, should the relevant authority/committee consider possible improvement to the stipulation for a local director and specify the roles and responsibilities of these directors? Less will come forward to offer themselves as local directors if these directors are constantly hauled to Court, ACRA, IRAS, creditors, customers, employees etc etc to answer queries on companies abandoned by these foreign shareholders cum directors. If less are willing to come forward, what are implications to Singapore as a business hub?

We were repeatedly reminded that you have no lesser responsibilities as a local director or a nominee director. A director is a director! Oxymoronic?

Accounting for Deferred Tax - A Mispractice

chingay 2010 colours

Tan Eng Juan and Tan Kai Guan, two Associate Professors from NTU wrote a very interesting article on "Accounting for Deferred Tax on Investment Property in Sep/Oct2009 Student Accountant.

Their paper argued that we should NOT provide for deferred tax on investment property if the gain on disposal of those properties is NOT taxable. If gain on disposal is a badge of trade ie. such gains are thus taxable, then deferred tax should be accounted for.

Their supporting arguments in favour of their position:-

a) FRS12 said deferred tax should only be accounted for if and only if "it is probable that recovery or settlement of that carrying amount will make future tax payments larger (smaller) ..." ==> In the absence of capital gains tax in Singapore and if the profit/loss on disposal has no tax implication, then why are we wasting time accounting for deferred tax?

b) If fair value adjustment to asset values have no tax implications on disposal, then why are we accounting for deferred tax? We should NOT account for deferred tax for reason that the fair value adjustments are reflected in P&L and thus affect the current profitability and thus tax expense.

c) Even if higher fair value is due expected higher rental for its properties, there is still NO basis to account for deferred tax on the higher fair value. Why?
As the higher rental income for each future period would be subject to income tax and thus higher tax expense for that future period, there is thus no basis to subject changes in fair value to deferred tax.

If both these professors are correct, what are the implications for entities that had been accounting for deferred tax all these years on non-taxable gains even if they were to be realised in the future?

Position available soon - IASB Chairmanship

wish you a roaring new year

I understand the current IASB chairman, Sir David Tweedie will stand down in June 2011 upon expiry of his contract. Headhunters have been activated to look for a successor. I am thinking about applying for the position. What are requirements of the job?

Sir Tweedie has spent a decade in transforming an obscure committee into a board whose rules are effectively law in over 120 countries, including the European Union. If I were successful in getting the job, I must be able to deliver at least another 120 countries within the same time frame. I am sure it will be one of many thousands KPIs. What are other possible things in store for me?

I will need to be a skilled diplomat and yet comfortable debating the intricacies of financial reporting with technical experts.

Diplomacy is necessary as you attempt to cajole acceptance of IASB rules that may not fit the respective circumstances of each member country.

I must always remember to express my gratitude to European Union for giving IASB the kick start it needed.

I must be able to appease the Americans of their fear of surrendering regulatory control over financial reporting issues to Europe and the rest of the world. [Just like why they are keeping United Nations in New York?]

Besides Europe and US, I must be able to give the remaining stakeholders in form of Asia, with rising economic powers, a voice in the making of the rules.

I must be nimble to be able to "siam" the pots, pans and shoes that could be thrown at myself if the world faces another financial crisis in the future and blame IASB for it. Just like what they did to "Fair Value".

I had the pleasure of meeting him once from about 20 feets away. He gave such an entertaining speech fully peppered with typical British jokes ie. subtle yet effective. I will always remember the newspaper-in-the-highland-of-Scotland joke. Tell you when I see you.

In short, Stig Enevoldsen, chairman of the European Financial Reporting Advisory Group (EFRAG) said, 'If you look at requirements for the new chairman, the only thing that is not included is that he should be able to walk on water.'

So assuming if Edgar can do all the above and can walk on water, he will definitely get the job entitled "Accounting Ayatollah" or "Accounting Czar"....

OECD wants country-by-country tax reporting

after 10.15pm

Impacts of such a move:-
It would shake up how multinationationals present their accounts.
It aims to cut back tax avoidance and transfer pricing in developing countries.

Organisation for Economic Cooperation and Development (OECD) will present guidelines that could force MNCs to reveal profits and tax paid/payable in every country they operate in.

The MNCs are worried that the transparency will provide civil groups, citizens and governments of such countries in which the MNCs have operated / are operating in, may have been short changed in tax revenue.

As they are just guidelines for the moment, OECD is pushing IASB to formalise it.