Monetary Authority of Singapore (MAS) posted a record net loss of $10.9 billion for the year ended March 31, 2011

I am naturally curious to read on for the cause of the massive loss and that being the 2nd loss in the last 40 years. Here are the info that I reaped STRICTLY from the articles from Business Times and Straits Times on Friday last.

Numbers as published:-

• Total loss - $10.9 billions
• Investment gains before adjusting for exchange rate revaluation - $12.3 billions.
• SGD up against USD by 10% for year ended March 31, 2011.
• SGD up against Euro by 5%.
• Given the stronger SGD, domestic oil prices up by only 10% as compared to 20% on a global basis.
• MAS manages $299.8 billions in assets as at year ended March 31, 2011 with foreign financial assets representing $287.7 billions ie. 96%!!!!

Here are the various key points discussed:-

1. Headline in BT attributed the massive loss to strong SGD. (Edgar - Thus exchange rate is said to be responsible for $23.2 billions reversal upon valuation of various balance sheet items.)
2. 'With recovery in asset markets over the past two years, MAS' portfolio, excluding exchange rate effects, has more than recovered from effects of the global financial crisis,' Mr Menon said. The loss is hence the result of 'a reporting convention' as per Mr Menon. If MAS reported its financial results in foreign currencies such as the US dollar or SDRs, as some central banks do, it would reflect a 'healthy profit', he noted. (Edgar - I presume he is trying to assure us that the loss is mainly due to a valuation exercise as there is no actual cashflow involved. Are you also telling us that if our reference currency is based on any other weaker currency other than SGD, we would be happy with our performance?) 
3. But is it not a fact that Singapore's purchasing power has declined by $10.9 billions? Mr Menon said no as the INTERNATIONAL purchasing power of our reserves is unaffected by the strength of Singapore dollars. I guess he is trying to say the $287 billions worth of foreign currencies would still buy Singapore the same amount of goods and services.
4. So what have the stronger SGD and $10.9 billions loss bought for Singapore? MAS has essentially shielded the domestic economy from even higher inflationary pressures as the stronger SGD effectively halved the impact of higher oil and food prices.

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.

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.

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.

Lack of professional scepticism = "boh chap"?

golfing or auditing?

At ACRA's annual Public Accountants Conference on Aug 19, 2009, ACRA presented their findings on public accountants as follows:-

On the larger audit firms ie. auditors of public interest companies lack 'professional scepticism' while experienced audit partners often take a hands-off approach on actual audit (Edgar's cheeky remark - Partners take a hands-on approach on golf?)

What do you mean by "lack of professional scepticism"? ACRA noted the following:-

• the larger audit firms have generally failed to assess related-party transactions, management assumptions and forecasts, and the risk of fraud or misstatements.
• junior audit staff doing most of the key audit work.

As to the smaller accounting outfits, they struggle to maintain audit quality with a very very competitive fees environment. Some faults noted are:-

• some small outfits still do not search for unrecorded liabilities and do not perform work to test foreign currency translation.
• increasing demands of the audit environment coupled with difficulty to attract quality audit staff and resources to provide adequate supervision.

Punishments done to date

• Since 2004, seven public accountants have had their professional practice licences suspended or cancelled by ACRA as reported by Ow Fook Chuen, deputy CEO of ACRA.

• Less severe cases have been dealt with by way of reprimand, mandatory peer review requirement and regulatory course.

I have the opportunity of meeting a few fellow members undergoing "remedial classes" in the last 2 weeks. One has told me of their uncertain fate even after attending their 3-day programme.

Any idea to resolve?
Ms Penelope Phoon, Singapore Country Head, ACCA provided some directions. She said the "anomaly in audit fee levels and the volume of work are therefore locked in a vicious cycle that increases the propensity of firms to overlook critical matters and lose their professional scepticism occasionally".

One of the keys to breaking this vicious cycle is to understand in a clear way why companies in are paying much lower fees for, many would argue, comparatively higher quality audits.

Do you have any other ideas?

SGX proposing local auditor and governance adviser

Singapore Exchange CEO Hsieh Fu Hua in a speech at the annual Invest Fair on last Saturday proposed the following regulatory changes:-

1. Companies with foreign operations audited by an overseas accounting firm may need a joint sign-off by a local auditor;
   
2. New listings may need to hire governance advisers for two years after their initial public offering (IPOs).

The costs of listing and costs of maintaining a listing status in Singapore for an entity with foreign operations have just gone up.

The devil will be in executing the above changes.

Some issues of the top of my head would be:-

• Local auditor signing off would also be in a position to decide which foreign auditor to appoint?
• Will this eventually lead to local auditor taking over the audit of foreign operations as well?
• What is the level of responsibility of local auditor signing off?
• What are the responsibilities of governance advisers? Is he or she a board level personnel? Can a staff hired to do internal control duties be designated a governance adviser?
• Actually who is a qualified governance adviser? Lawyers or accountants?
  

I would like to hear SGX proposing some control and maintenance measures to be done by them. I really hope SGX is not attempting to propose measures that would eventually "outsource" their control function to local auditors and governance advisers at the expense of the listed entities.

Will this happen to Accountants too?

What is the issue about?
The case involves lawyer Bachoo Mohan Singh, 61, who was convicted two years ago of helping to file a false claim - an offence which carried a mandatory jail term.

Having failed in his appeal to the High Court (which usually is the end of legal route), he took an unusual route of getting the Registrar to have his case heard by the Court of Appeal (Singapore's highest court). On what ground, you may ask.

The hearing will allow the three-judge Court to consider this issue of concern to the legal community here, ie. the extent to which lawyers are responsible for verifying claims made by their clients which may turn to be false subsequently.

What is the current practice? Lawyers take most statements given to them by clients based on good faith, and assume them to be true.

The Court's view on the case could put both lawyers and their clients on notice.

Edgar, what has this piece of news got to do with Accountants and Auditors? Try replacing "lawyer" with "accountant / auditor" in the above paragraphs, do we wish to be in the same position as Mr Singh? As a tax agent, we could be filing GST returns based on client's information.

The ruling is due soon. I just hope the Court will not seek "refuge" under the "reasonable man rule".

Airocean's directors in Court

What is the case about?
The indepedent directors of Airocean have been charged for breach of duty when they are alleged to have given misleading announcements over the nature and details of investigation of Mr Thomas Tay, the former CEO of Airocean by Corrupt Practices Investigation Bureau (CPIB).

Ms Lorraine Tay, the Vice President of SGX's issuer regulation unit and the team leader in charge of Airocean's compliance issues, was queried by Mr Davinder Singh, Senior Counsel, acting for one of the independent directors in the early proceedings.

Lorraine said SGX was informed by MAS then that the announcements may not be accurate and that MAS was unable to disclose why. Mr Singh queried whether this was informed to the directors.

• What information did SGX have at that point in time?

• What were the precise circumstances leading to SGX to conclude that the announcements then at that point in time were misleading

• And whether the same information was conveyed or made available to the directors?

• And when the directors became aware of the information, did the directors, to the best of their abilities, attempt to rectify any "misannouncements" made earlier to the investing public?

SGX's position - Announcements must always be the responsibility of the directors.

MAS's role with CPIB and MAS's role with SGX - Beyond my realm of understanding at the moment.

CPIB's role - To investigate any wrongdoing. But could they be expected to tell the whole world who and what they are investigating and may end up compromising their investigation?

Let us await for more news on this case.

Reference - BT, Aug. 15, 2009

Liquidator and her independence

Background
Singapore-based Fustar Chemicals Pte Ltd owes FCL (Hong Kong) a debt of $614,560.71. Mr Ng Cheong Ling owns FCL (Hong Kong) while Mdm Wong Ser Wan owns the Singapore entity.

The Singapore firm came under voluntary liquidation in 2004, mired by a matrimonial dispute between them. Mdm Wong appointed Ms Ong Soo Hwa to be the liquidator.

Ms Ong rejected the existence the debt on the basis of absence of primary documents even though secondary documents such as audit confirmations and "qualified" audited accounts were submitted.

The dispute went to court.

Decision

The High Court agreed with Ms Ong's decision not to admit the debt. The Court of Appeal, led by Justice VK Rajah, disagrees and overturns the earlier decision on the following grounds:-

1. "weight should be given to the fact that the accounts in question have been audited' and there was no evidence to conclude that the audited accounts may be inaccurate or incorrect."
2. "It must be obvious to anyone with accounting background that the doubtfulness about the collectibility of a debt by a creditor has no effect on a legal obligation to make payment by the debtor"
   

Justice VK Rajah expressed stern words on Ms. Ong's performance as a liquidator.

• "A liquidator must not only act independently, but be seen to be independent." She is seen to be biased in favour of her appointers.
  

• Though the accounts were qualified by auditors, the debts are still part of the audited accounts of the company as the accounts were approved by the directors and shareholders at annual shareholders' meetings.

As punishment, The Court of Appeal told Ms Ong that she can only get her fees after all the creditors have been paid.

ACRA, Van der Horst Energy and FRS102

a quiet pavillion

What happened?
The Accounting and Corporate Regulatory Authority (ACRA) has requested Catalist-listed Van der Horst Energy (VDHE) to restate its financial statements for fiscal 2008 on grounds that options granted to two executive directors should have been treated as an equity-settled share-based payment under a financial reporting standard (FRS).

ACRA confirmed that this is the first time it has directed a listed company to restate its financial statements under such circumstances.

What is the rule?
FRS102 ruled that every company that granted stock options have to account for them as a business expense in its income statement, instead of merely just having to mention them as a note in the annual report.

What is the implication?
After taking the fair value of the share options of $5.7 million as business expense, VDHE would now report a pre-tax loss of $2.83 million, instead of the pre-tax profit of $2.87 million that were earlier stated.

ACRA was not prepared to sit back and accept the auditor's qualification of the accounts on the basis of non-compliance with FRS102. ACRA has now ruled for restatement of the financial statements.

ACCA Graduation - May 23, 2009

Linda, great to see you..

top guns for the various subjects

Welcome to the World!

Another 195 affiliates have completed the rigorous ACCA curriculum. Congratulations.

Women in Accounting & Finance Survey 2009

On Thursday last, I was invited to attend, in my humble capacity as a Local ACCA Executive Council member, the presentation of the survey results of women in accounting and finance roles. The survey was commissioned jointly by ACCA and Robert Half Singapore.

Based on the responses of 721 women, the following are some key findings:-

1. Are women ambitious? Yes, particularly for the younger women but the more matured ones are more likely to stay with their current employers.

2. 64% of respondents said they did not attend any leadership course at all in 2008.

3. What women see themselves doing better than men? The respondents highlighted 3 areas - attention to details, dealing with people issues, communication skills.

4. Women's top three desired work benefits:- flexi hours, better maternity benefits and thirdly, more annual leaves. 53% said they are willing to take pay cut for more flexi hours.

5. What are the priority areas for women?
Work/life balance came out as top priority for 59%. Surprisingly for me, the younger women are the ones that value this more than the matured counterpart.

MOM's position on Company Stamp Part II

lingzhi

To be fair, I am presenting MOM's response received today on Company Stamp for your consideration.

MOM said,
"Our requirement to have company stamp endorsing our documents reduces the likelihood of unauthorised transactions or applications by a third party. Such cases do happen and companies become invariably implicated or inconvenienced due to fraudulent transactions.

While there is no legal requirement for companies to have a company stamp, such a requirement will safeguard the interests of our customers such as yourself. We will also accept alternative means of authorisation such as an official company letter in lieu of a company stamp endorsement." Unquote.

Questions for your consideration.

1. What is a Company Stamp?
2. Can anyone make a Company Stamp?
3. How much to make a Company Stamp?
4. How does a Company Stamp protect your company if it is not legally binding to use a Company Stamp in official documents and contracts?
5. Is it different from Company Seal?

1. What is a Company Letterhead?
2. What are the statutory information that must be found on a letterhead?
3. How to make Company Letterheads? Must I ask the printer to print or can I print them using my printer?
4. When is a letterhead a letterhead and when is it not a letterhead?

If the primary objective is to prevent false or fraudulent applications and transactions, you verify the person that is making the application / transaction by checking the identity card/passport.

I don't think a Company Stamp or Company Letterhead can prevent a fraudulent application/transaction.