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Transaction services at Smith & Williamson is headed by Philip Quigley. He discusses his role in this TV show.
I head up transaction services, that covers financial due diligence, reporting accountant and valuation services, which is not my particular area. We have a team based in London and in Bristol and Southampton. And we generally cover the marketplace in terms of those services.
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Record keeping should be done thoroughly from the start. In this TV show Smith & Willamson's Chris Springett discusses property ownership and case law.
Recent case law in the area it really does highlight just the importance of record keeping.
I mean for us in the profession it’s something that obviously we discuss with clients quite carefully to make sure that all the documents are there.
But recent case law where people haven’t been able to prove that they’re using the property as a residence, that alone, it’s their main residence and so entitled to the relief.
Yeah, the case law has been very much based on the fact that these individuals couldn’t produce the evidence.
So even things such as making sure that you’re retaining gas bills and electricity bills to more useful or even more interesting uses of maximising the relief such as making sure your post from the tax authority goes to that address.
So then they can’t claim that you weren’t living there if that’s where they’re writing to you at.
And it’s these sort of matters that, you know, if we can get talking to clients early when they perhaps get their second property or where they’re perhaps looking to expand their property ownership, that we can start from day one, rather than trying to prove something after the fact.
Record keeping is just one of the varied subjects broached during Inside Finance TV's interviews.
The first step is to work with an organisation like Smith & Williamson to really understand your needs and requirements around FRS 102.
So this is when we would bring our people to talk to you and your key finance function people just to get a sense of what needs to be done.
From that we would put together a bespoke proposal that addresses the key things that are going to be important to your organisation as you move forward with designing the solution and assessing the options and implementing the changes.
We’ve developed a really client friendly simple way of looking at FRS 102 and how to implement it. It’s a simple four phased approach.
We start off phase one, which is assessing the options. So we look at what the potential impact of FRS 102 is for your organisation, we do a readiness assessment, an impact assessment, look at some of the accounting options and the tax treatment.
And we look at whether your organisation from a resource point of view is ready to implement and execute the changes. So phase one is all about understanding.
Phase two is designing the solution. So this is when we work with our clients to put the programme of activity together, the project management, the governance, the resource requirements, the training, the communication with the variety of stakeholders within your organisation.
So this is all about having the plan and the model and the framework to implement FRS 102, which leads us on to phase three, which is all about implementing the changes. So this is working with you, bringing the resource to make sure that everything that has been designed and that we said we need to do actually happens, working with your organisation, with the people in your organisation to implement every aspect of the FRS 102 requirements.
And then finally phase four is around assuring the outcomes. So this is to give you independent and objective assurance that what is being done is accurate and correct, reporting to the board and reporting to other stakeholders about what has been done, providing that assurance around the outcomes of FRS 102.
My role is as a partner in Smith & Williamson Southampton office. So I’m involved in corporate audits, other assurance work, largely in corporate, social housing and the charity sector.The size and range of businesses, for our corporate clients it’s anything with a turn ... any companies with a turnover from say 5 million up to about 100 million in a full range of sectors, some retail and technology, a lot of businesses with international interests. Then on the not for profit side, we look after a lot of housing associations, looking after registered providers of social housing with anything from 100 bed spaces up to 25,000 houses for rent in the social housing sector. And then as well as that we look after a number of charities as well.
At one level straightforward, but there’s a lot of detail to be aware of and companies can miss any one of those things, and we’re there to catch them and make sure they’re compliant with everything that needs to be looked at.
Simply, I don’t think they are. I think most organisations are aware of it.
The standard itself is a pretty weighty tome, it’s very complex and is difficult to understand.
And so inevitably I think, most organisations recognise they need to do something but haven’t really explored the full impact and effect it will have on both them as an individual, but the finance team that they’re part of and the organisation that they’re part of.
So people, I don’t think have really yet grasped the potential impact of what this could mean.
Where we have reported a profit in the past, it might now appear as a loss, may have significant assets, they might be reduced.
Now, every stakeholder needs to understand that and it might go the other way round, you might have reported a loss that now appears as a profit. But every stakeholder needs to know that because if you’re a banker looking to lend money to a company, they’ll need to understand why it’s different.
If you’re a shareholder looking to maximise return when you come to sell your business you need to understand what it is that’s different about the financial reporting standards so you can explain that to would be buyers who are not just flicking through thinking, you know, why does this look so different to what I might have expected in the past from a set of accounts for a company.
We’re telling our clients that this is a revolution in UK accounting.
And it will fundamentally change the appearance of company accounts. It’s all about convergence with international standards bringing the UK accounting practices into line with international standards.
And although it has been a long time coming, even when we get there the new UK converged standard, there will still be some pretty significant differences with International Financial Reporting Standards.
I think it will vary depending on the type of organisation you are.
The complexity will depend on how complex an organisation you are yourself, how many subsidiaries you have, you know, whether you’ve recently done any mergers or acquisitions. So it will depend from organisation to organisation. The key thing is to really understand what the potential impact may be.
And that has to start somewhere, so one of the things we look at is, and we talk about is a readiness assessment which looks at how ready you are as an organisation to implement the changes associated with FRS 102, whether you have the right volume of resource to do that, whether you have the right type of resource in terms of the technical ability and actually indeed whether you have the time and the focus to really invest what is required to ensure a seamless and efficient implementation.
They should seek greater transparency around the pay that directors get, make it clear where performance levels have been achieved or haven’t been achieved and what the impact on that is on directors remuneration packages.
I think they also need to be careful about exit payments, so where a director is departing, making sure that they’re not rewarding someone for failure. So I think they need to be much more open and clear about these points. I think they need to simplify directors’ remuneration packages as well.
Often there are many components to directors’ remuneration, so unless you can carefully add up all the elements it can be quite difficult to get an overall feel for just how much one individual is getting.
And I think some simplicity in structuring remuneration packages would be very beneficial.
I think there’s a combination of things. The first thing you’ve got to do unfortunately is invest some time in getting to understand what FRS 102 is all about.
And it may be the easiest route is to talk to us and we’ll give you the overview.
You then need to do a more forensic examination to go into individual accounts account codes and understand precisely what the repercussions will be.
Then you’ve got to map out in quite some detail, exactly how you’re going to move from where you are at the moment to where you need to be in the future and then finally you’ll need a process that gives you assurance that you’ve picked everything up and that what you’ve done works.
The implementation of FRS 102 is probably the largest single change to an accounting framework for the majority of companies in a generation. Not only that, it will also impact on profitability of businesses, the way their accounts looks and because of the impacts on tax, it means that there will be proper real money effects as well.
The way that tax is accounted for in the UK, is that the tax payments often, under many situations follow the accounting rules. When the accounting rules change, therefore the amount of tax you have to pay also changes. This means that when you dot the new FRS 102, you will be paying more or possibly less tax, depending on the effect that it has on your profit and loss.
I think people have heard about it. They heard it’s coming, lots of people haven’t really understood the impact it’s going to have on their accounts. And lots of people don’t realise that it’s going to have that real money effect that we were talking about. It is a huge change and the devil is in the detail.
When you throw out all the current accounting standards and replace them with one, that is going to have a huge effect.
The transition date for a December year end is effectively 31st of December 2013.
So to the extent that there are these options that you can deal with earlier, you really need to give now a clear picture before that date.
And that will be quite challenging if you’re starting now.
It’s going to be a drain on resources.
It’s going to be a drain on resources for finance directors and finance teams, there’s absolutely no doubt about that.
In terms of the changes, whilst they are mostly taking effect or will have to be adopted by 30th of December … sorry, 31st of December 2015 year end, there will be a transition date and you will have to prepare comparatives.
That brings it forward effectively to the 31st of December 2013, which as we know isn’t that far off.
Well, it’s very fundamental because although a lot of the terminology is similar, in practice it’s a bit like learning a language and having completely new grammar.
There’s a whole series of series of changes which are quite fundamental, some of which could mean that the financial statements look completely different, profitable businesses suddenly look loss making and vice versa. But there’s a whole stream of things that previously you did not even have to recognise in the financial statement which you now will need to recognise, particularly financial instruments.Well primarily because UK GAAP is on its own. And the world is moving in an IFRS - International Financial Reporting Standards direction. And the thought process is, that if everybody in the whole world applies broadly a consistent accounting framework then there’ll be spinoff benefits, so that investors in Thailand can invest in England or any other country.