Federal Election 2010 – Alex Malley on Sky’s Election Special tonight
On Saturday 21 August some 14 million people will be making their way to the polling booths to elect a new government. The current polls indicate it is a very close contest at present. But almost anything can happen tomorrow. Regardless of the outcome, CPA Australia’s priorities for the next three years will remain largely in accord with our election priorities.
And tonight at 7.30 pm AEST CPA Australia’s CEO Alex Malley will be discussing the Federal Election and business priorities on Sky’s Election Special, so keep an eye out for this broadcast.
Happy voting – make sure you make your vote count, and as always, smooth sailing.
Federal Election 2010 – The government’s response to CPA Australia’s letter
The election countdown continues, with now less than a week until we elect a new government. This week CPA Australia received a reply to the letter from our CEO Alex Malley to the government inquiring about their policies and positions on a number of issues of concern to our members. The letter has now been posted on our Federal Election 2010 web page. To see the full reply go here.
Smooth sailing.
Federal Election 2010 – Coalition responds to CPA Australia
There’s now less than two weeks till we elect a new government. And this week CPA Australia received a reply to the letter we sent to the Coalition inquiring about their policies and positions on a number of issues of concern to members and the profession. To see the full reply go here.
Achieving financial success
On a non-election matter, CPA Australia also recently released a new guide for small business, Achieving Financial Success. The guide, which is a joint initiative of CPA Australia and the Victorian Government, aims to increase the financial skills and knowledge of small businesses by covering in some depth the key practices that small businesses should adopt to ensure good financial management.
The guide was first released last year under the title ‘Financial Survival Guide’. This version has been redeveloped with a focus on the economic recovery.
I hope some of you take the time to check both of these items out and please let us know what you think.
Smooth sailing
Federal Election 2010 - member poll results now live
Many of you may have actually taken part in CPA Australia’s Federal Election 2010 poll over the last week or so, and our thanks to all those who did take the time to participate. The poll is now closed, and this week the poll results are available as promised.
The poll asked three questions; the first on important economic issues, the second on tax reform priorities, and the third on future government spending.
Regarding the question on what are the most important issues facing the economy in the next three years, the poll results show that reducing duplication and inefficiencies in the Commonwealth/state tax system, investing in major infrastructure and cutting business red tape are among the key issues that should be addressed by future governments.
It also showed that CPAs want to see the Budget returned to surplus, and more measures to ensure adequate levels of retirement savings.
On the question of tax reform priorities, a new personal tax regime similar to that proposed by the Henry review was seen as the priority, slightly ahead of state tax reform and then the issues with much lower support, such as reducing the company tax rate, R&D changes, increasing the GST (no surprise here) and ‘don’t know’.
The third poll question was on possible government spending options in the future. The area where the most poll participants thought the government should spend more was to invest in a more efficient and user friendly public transport to reduce commuter time, provide a viable option to car travel and to encourage increased worker participation and productivity.
Given the ongoing public transport problems being experienced in many capital cities, who could disagree with this finding? Unfortunately this is another area - like Federal/ State tax reform - that requires State input and not something that, at the end of the day, a Federal Government has much control over.
To access the poll results go to the CPA Australia’s Federal Election 2010 page.
Smooth sailing.
CPA Australia’s Federal election priorities
This week CPA Australia’s Federal Election 2010 page went live. CPA Australia’s Federal election priorities have now been released and are available on this site also.
These include policies on fiscal responsibility, governance and accountability in government, tax reform, infrastructure, education, business regulation, access to adequate retirement savings, skilled migration, sustainability and climate change, tax agents services regime and the future of financial advice reforms.
You’ll also find informative links about who is saying what, including links to the major political parties and their policy announcements.
Also the Election 2010 poll is still open. And the poll results will be published in the coming days. And these should be very interesting.
In the meantime, smooth sailing.
What’s caretaker mode? (And take our Federal election poll)
When governments call elections, they immediately go into what’s known as caretaker mode. So on 19 July 2010 the Australian Government went into caretaker mode with an election to be held on 21 August 2010.
And also during this time information on websites maintained by Government departments is published under special caretaker conventions circulated by the Department of the Prime Minister and Cabinet, and generally consultations on policy matters are put on hold momentarily.
But there’s no caretaker mode at CPA Australia. Our organisation continues as always working to advance the interests of our members and the accounting profession.
The Federal election provides another opportunity for members to advise us of their views via a short member poll.
What we want to know is what’s most important for you in the next three years? A price on carbon emissions for business, and if so when? Tax reform post the Henry Report, and if so what specific measures? Greater investment in our education sector? Better roads, rail and port systems? Other?
Please consider and let us know. To participate in the poll, go here.
Smooth sailing.
Fair value accounting, its decision usefulness and cost
Yesterday I met with Dr Ann Tarca from the University of Western Australia regarding accounting research Ann and some of her colleagues are undertaking this year on fair value accounting. This research is sponsored by a CPA Australia research grant (I’ll come back the research grants shortly).
Dr Tarca’s research will consider issues such as whether accounting standard setters ‘get it right’ when they require the use of fair value measurements in companies’ financial statements, do fair value measurements improve the relevance of accounting information or does the subjectivity and cost of preparing the information outweigh its usefulness, and when should fair value measurement be used, for what assets, and in what circumstances?
The research requires input from both users and prepares of financial statements globally, with views being collected through an on-line survey. To participate or to obtain further information, please email Dr Tarca at Ann.Tarca@uwa.edu.au
Now back to the research grants - since 2005 CPA Australia has provided over $700,000 in research funds to academic projects of relevance to the accounting profession. And in 2009 CPA Australia overhauled and relaunched its research grant program – now known as the Global Research Grants Perspectives Program.
The key changes from that overhaul were to:
- open up the field of prospective applicants – anyone can now apply
- remove the cap on funding per project
- provide greater guidance on areas of current interest to CPA Australia – these include but are not limited to the following topics in 2010/2011 - global economic challenges, sustainability, business reporting, and governance.
Applications for funding for this year close 31 August.
Smooth sailing.
Breakthrough in the minerals tax stoush
The Australian government has today announced a breakthrough in the ongoing stoush with Australian miners over the proposed minerals tax. The RSPT is out, and instead there will be:
- a new Minerals Resource Rent Tax (MRRT) regime applying to iron ore and coal in Australia, and
- extending the current Petroleum Resource Rent Tax (PRRT) regime to all Australian onshore and offshore oil and gas projects, including the North West Shelf.
So instead of applying to all mining activities, the Government will focus the resource tax reforms on Australia’s our biggest and most profitable commodities: iron ore, coal, oil and gas.
Since the beginning of the mining boom, prices for iron ore have increased by over 400 per cent and prices for black coal have increased over 200 per cent.
The exclusion of other commodities reduces the number of affected companies from 2,500 to around 320, most of whom would not expected to pay significant amounts of RSPT anyway.
For full details of what had been announced, see the government’s media release.
Smooth sailing.
Good Practice Checklist for Small Business
To coincide with the end of the 2010 financial year in Australia, CPA Australia has released its latest version of the “Good Practice Checklist for Small Business“. This checklist has been designed by members working in SMEs to prompt small business on the actions they should consider implementing (if not already) to assist them in managing the challenges of the current economic environment and to provide a framework upon which they can build future success.
With the effects of the Australian government stimulus package having all but ‘flowed through’ the economy, rising interest rates and concerns about the international outlook (driven mainly by concerns about the state of public finances of a number of European governments), it remains wise for many businesses to remain focused primarily on improving their cash flow. Businesses should however also be looking to improve their profitability and take advantage of opportunities as they emerge. For example, business could use their improved cash position to make acquisitions of capital equipment to meet expected increases in demand. However, with uncertainties in the current economic environment playing on the minds of many business owners and managers, many businesses will be looking to expand their capacity incrementally, such as by hiring casual labour rather than full-time employees.
Also impacting the strategic environment is continued tight lending conditions imposed by banks, which CPA Australia believe will become the new normal. In other words, the days of easy credit are over for the foreseeable future and hence business will have to adapt. This does not necessarily mean not proceeding with large scale investments, but it does mean that businesses will have to take more time securing finance for such projects, and may have to put up more of their own money.
Also a critical change for Australian businesses is the start of new industrial relations legislation earlier this year and the commencement of so-called modern awards from 1 July 2010.
Smooth sailing.
Inspector General’s review of the ATO’s Change Program
Earlier this week CPA Australia lodged a submission to the current Inspector General’s Review into the ATO’s Change Program (PDF).
The review emanated from a series of system problems that were being encountered by the ATO, many of which resulting in problems for taxpayers and their advisers.
Its important to understand that the ATO’s Change Program is of a scale unprecedented for the tax office, and long overdue. It is replacing some 180 processing and other specialised systems that date back many years. And it is to be expected that there will be teething problems. Some problems may be ongoing. Or a batch will be fixed, and others may take their place. Welcome to the world of technology, business, politics and taxation.
So while we are empathetic to the difficulties being encountered and wish the tax office well in its endeavours, this has not been of much help to the many tax agents who on a daily basis are required to engage with the ATO’s systems.
CPA Australia’s submission (PDF) outlines many of the real life examples provided to us by members of the difficulties they have been experiencing. These include cash-flow problems but also lost productivity, damage to client relationships and low staff morale given some of the significant reverse work flow caused by many of the recent system bugs.
In many cases CPA Australia has been able to help get these problems addressed by the tax office.
And to their credit the ATO kept practitioners appraised via regular updates over recent months.
Two major improvements that practitioners and their clients would really benefit from out of the inquiry are that the teething problems will be sorted out expeditiously. And secondly – and perhaps the one harder to achieve - is a more appropriate compensation mechanism to be available where a tax agent and/ or their client has incurred an economic loss as a consequence of systemic or in this case - system - problems.
Smooth sailing.
Resource Super Profits Tax (RSPT) v.2
The now very public stoush on the proposed Australian RSPT continued to play out this week, and is likely to go on for some time. As I mentioned in my last blog post, the decision on whether Australia has a Resource Super Profits Tax (RSPT) is really a matter for the resources industry and the government. However most Australians would probably concur that a broader tax on Australia’s natural resources makes a lot of sense. In fact in one of the many CPA Australia submissions to the Henry Tax Review (HTR) the organisation proposed that it as appropriate that Australia’s current resource tax arrangements be reviewed, taking into account what is happening in other jurisdictions such as profits based royalties imposed at lower/ more flexible rates.
The key issues that need to be addressed are whether a RSPT (or equivalent) can be developed and implemented without grinding economic activity to a halt both now and in the future.
So is it likely we will soon see a RSPT v.2? What is currently being considered is whether it will apply to current projects as well as new projects, whether there is a more acceptable definition of a super profit than what has been announced (e.g. one that would cut in at some a higher rate), the government underwriting of losses, and whether 40% an appropriate RSPT rate, or should it be something less?
Although there are a few variables, the actual room to move does not seem that great. There is little point in bringing in a new tax with all its associated compliance issues for the industry if the tax’s application is so narrow and/ or rate has been lowered so much that it collects little or no extra tax.
If an appropriate deal cannot be sorted out, what are the other options for reform in Australia? As the Treasurer said when the HTR was released, other proposed tax measures hinge on the RSPT getting over the line so-to-speak. This is simply because without the RSPT’s proposed new revenue stream, many other measures aimed at improving our international competitiveness and encouraging greater productivity are unaffordable. That is of course, unless Australia took the fiscally irresponsible path some other countries have taken of running up ever-increasing debts. And we’ve witnessed the end result of that type of approach to managing a country’s financial affairs almost daily recently. One not to be recommended either in business or politics.
One key point of the HTR that seems to have been either lost or completely ignored by many commentators is that the HTR was never about collecting less tax. In fact given the challenges the Australian economy faces over the decades to come, more tax revenue will be required. Given these ‘known knowns’, the HTR’s approach was to consider tax and transfers while maintaining the overall tax take at around 30% of GDP (CPA Australia submitted that the target should be less than 30%). So without a new tax on natural resources, it looks like we will soon be back at the tax reform drawing board.
Smooth sailing.
The Resource Super Profits Tax (RSPT)
The decision on whether Australia has a Resource Super Profits Tax (RSPT) is a matter for the resources industry and the government. Core design elements such as application, retrospectivity, the definition of what a super profit is, and the rate of the RSPT will need to be resolved by them. But given the significance of the outcome to the Australian economy, and as strategic business managers of scarce resources, the accounting profession has an important role to play regarding the proposed RSPT also.
If the proposed RSPT is introduced, it is important that it has been appropriately designed and this is where we expect CPA Australia will be able to make an important contribution. Also the accounting profession will certainly have a key role to play in both implementation and ongoing compliance should it be introduced, so best not to leave the design to others.
To this end CPA Australia recently met with the RSPT Panel at one of its many consultative forums to provide some initial thoughts regarding the architecture of the proposed RSPT. We expect these thoughts will be factored in to the Review Panel’s Issues Paper due for release in July 2010.
If you have a stake in the RSPT and haven’t done so already, its not too late to attend a public consultative hearing – see the Consultation Calendar.
For a copy of the RSPT 40 page paper see here
For more information on the Henry Tax Report more generally see our dedicated web page.
Smooth sailing!
Death of the individual tax return? Or, going bananas?
‘The report of my death is an exaggeration’, 1897, Mark Twain, New York Times, May.
Recent reports of the death of the individual tax return – also colloquially know as the ‘I return’ - have been exaggerated. However doubtless it will have many tax agents, especially those who rely heavily or exclusively on individual tax return preparation for their income, to be decidedly nervous. So whilst the I return may live on, the question arises as to what the impact will be on those tax agents whose incomes rely extensively on completing I returns.
If the relevant legislation is ever passed, and this is no certainty, from 1 July 2012 individuals will be able to choose a standard deduction of $500 for work related expenses (WREs) including the cost of managing their tax affairs. Based on the current (2009) TaxPack version of the I return, we’re talking about labels D1 – D6 inclusive, and D9.
We note the old WRE limit of $300 without receipts/ substantiation has been in since the 1980’s and never indexed. However the old $300 limit did not include the cost of managing your tax affairs, which could easily be another $200+ per annum – so in year one most taxpayers are not likely to get any pecuniary benefit from the proposed standard deduction. So there appears little incentive to choose it. And even if they do, they will still need to complete the rest of the I return – for example, all the income labels, plus interest and dividend deductions, donations, gifts, prior year losses, business income, trust distributions, private health details, Medicare, dependants, education tax refund, baby bonus etc, etc.
Further, if they do choose the standard deduction, it’s a small bananas increase really. This is because most taxpayers pay tax at the rate of 30% or less, so on a 30% income tax rate the new deduction will only give them $60 extra per annum without any substantiation.
The choice factor is important – as many taxpayers will have deductions that exceed the proposed standard amount. For example, currently the average deduction for taxpayers from WREs is around $2000 per annum.
The real sting as far as tax agents are concerned however may come at the end of the 2013-14 financial year, as the non-substantiated amount for work related expenses plus the cost of managing your tax affairs goes to $1000 from 1 July 2013. But whether this results in either some individuals ceasing to use a tax agent (and how many) or alternatively some individuals not seeking to engage one to assist them with their tax affairs (and how many) remains unknown at this point.
Its unlikely that the I return will ever be scrapped. And in fact CPA Australia is a champion of retaining the I return or its equivalent. For example, in its evidence to one of its many meetings with the Henry Review Committee, CPA Australia went to some lengths to make the point that elimination of the I return should not be an objective of reform, as the I return is at the core of the effective administration of Australia’s income tax system.
Amongst other things, it is the mechanism that draws together all income and expenses and keeps the individual engaged with the revenue authorities on an annual basis. This is a key factor - and one often overlooked by many of those calling for ‘simplification’ - in having a robust income tax system.
The necessity to complete an individual tax return also an enabler that encourages an annual financial health check-up where the client and adviser can discuss future business, investment and tax strategies.
Arguably those who call the loudest for the abolition of individual returns will also be those with the least to lose. It’s a bit like the bright spark who quipped around the time the GST was introduced in Australia that it should only apply to bananas – as they didn’t eat bananas.
CPA Australia supports simplification, including pre-populating returns and also the proposed standard deduction initiative to make compliance easier for taxpayers. But as regards the I return, there remain very good reasons for keeping it, for a while longer at least. And at the risk of being labelled rent seekers there may be a case for compensation for many tax agents should they be ultimately scrapped altogether.
For more information on last week’s Federal Budget please see our dedicated web page.
Smooth sailing!
Federal Budget 2010-11
All eyes were on Canberra earlier this week, with the Federal Budget handed down by the Federal Treasurer on 2 May 2010. For an exposé of how CPA Australia saw it please see our Federal Budget web page. Here you’ll find content including a video of our CEO Alex Malley providing his views of the budget.
Also see CPA Australia’s media release which amongst other things outlines our organisation’s view that as the private sector – small business in particular – will be the key driver of economic growth it would’ve been preferable that some measures announced (or re-announced because they were previously announced the day the Henry Tax Report was released) that are intended for introduction further down the track, to have been introduced from 1 July 2010. These measures include the reduction in company tax for small businesses and the small business asset write-off.
And also check out Federal Budget Presentation (PDF) which you can download and use.
Smooth sailing!
Henry Tax Report released
As expected, the Government yesterday released the much awaited Henry Tax Report as well as their ‘first wave’ response. The Report is to be commended on its breadth, and will serve us well for the future. It now forms the information base from which future tax reform will be ultimately developed and implemented for many years to come. The government suggests 10+ years; I suggest make that 20+ if the Asprey Report (1975) experience is any guide.
The government’s response on the other hand has been greeted as being at the lower end of moderate, or in other words, underwhelming. But expectations have certainly been high. However by only announcing what it did the government is demonstrating its fiscally responsible credentials - a fully costed proposed start to a 10+ year reform agenda.
And the Treasurer said from the outset it was never proposed to have a big bang approach to reform, even though some may have liked to see such an approach.
In what may be an election year, the door is still open for further tax change proposals. And don’t forget that the Federal Budget which is to be handed down next Tuesday will also have at least news of further L-A-W tax cuts for individuals from 1 July 2010.
For more information see CPA Australia’s initial response to the government’s first wave response.
Smooth sailing!
How to eat an elephant
A long time ago, long before we were getting worried about carbon emissions, I completed a leadership management course where one of the lessons was about how to eat an elephant – the answer – piece by piece. Trying to digest a whole elephant in one sitting will only give you indigestion, if not worse. The Henry Report will be a bit like this metaphorical elephant - so we will be trying not to digest it all at once, and suggest you don’t try to either (but watch for our forthcoming Professional Development that will be advertised on our Henry Tax Review webpage).
In my last blogpost I gave a heads up on what we expect to see in the report. I now want to provide some thoughts on one thing we do not expect to be in the report - the GST (which was ruled out by the government), and why I think this is quite ok in the circumstances.
My argument is basically as follows. If the GST had been part of the recent root and branch tax and transfer review it would’ve become the centre of a political slanging match, therefore risking derailing the whole Henry Committee Review process. Therefore it was both strategic and appropriate for the government to leave the GST out of this review.
Also, the fact that it was not included the review does not mean the rate or base cannot ever be changed. This could be done at some point in the future with the States agreement - perhaps under the ‘never let a serious crisis go to waste’ approach to policy making.
So if it was increased at some point in the future, what might such a change look like? Basic food in? The GST rate up to 12.5% or even 15%? An increase 12.5% does not provide much extra revenue to ‘retire’ a lot of other taxes. However an increase to 15%, ruling out any reduction in consumption such an increase may cause, could enable all or most inefficient state taxes to be removed. Alternatively, some combination of an increased GST and/or pay-roll/land taxes redesign could also ‘do the job’.
For the record CPA Australia is not recommending any change to the GST at the moment, but note that some others seem to be prepared to go down this path without any work being done on the possible economic implications, let alone the issue of compensation for lower income earners. Both of these issues would need to be worked through to enable an informed decision to be made. And this in itself is another elephant.
As always I’m interested in your thoughts, so why not drop me a line?
Smooth sailing!
Henry member poll
With the Henry Tax Report imminent, please consider participating in our short survey.
The survey is open until Friday 30 April 2010 or until the Report is released, whichever comes first.
Smooth sailing.
Henry Tax Report – what can we expect?
As we continue our ‘Henry countdown’, I thought I’d share with you some of the important issues expected to be canvassed in the upcoming Henry Report:
- lower taxes on capital income (including interest) and also a more consistent treatment of different forms of saving
- imputation system expected to be retained
- lower company tax rate but timing uncertain due to budgetary constraints
- some possible changes to the taxing of super with perhaps more assistance being targeted to lower income earners
- reduction in effective marginal tax rates (EMTRs) via rationalisation of social security benefits
- some further developments in respect to the taxing of MITs
- further reforms to state taxes could be on the agenda
- possible introduction of a new onshore resource rent tax (RRT) in lieu of existing state royalty regimes
- some changes to existing excise arrangements particularly in respect to alcohol
- possible consideration of road user charges and/or congestion taxes
- property taxes such as duties, land tax and negative gearing may be addressed
- a federal take-over of pay-roll tax could also be proposed to minimise business compliance costs, and
- the report may also argue for better incentives for people wanting to be self-employed.
We are hoping, of course, that all this amounts to a better tax system rather than a higher tax burden and we shall be looking to see that the PM has kept his promise to ensure that the current tax/GDP ratio is not increased.
Smooth sailing!
Health reform v/s tax reform – it’s all in the timing
Given the Prime Minister’s current preoccupation with finalising his major health reform plans with the states, it seems likely that the release of the Henry Tax Report will be delayed at least until this occurs.
As the next major COAG meeting on health will occur on 19 April, this suggests that we may not see the tax report until sometime between then and Budget day. The guessing game as to when it may be released also needs to factor in the G20 Finance Minister’s meeting in Washington on 22- 23 April, so it would seem unlikely that the report would be released while the Federal Treasurer was out of the country. But then again who really knows?
It is also important to bear in mind that the government’s preliminary response to the report’s major proposals or recommendations are expected to be released at the same time, and this is probably the major factor bearing on the timing of the final release of the report, particularly since 2010 is likely to be an election year.
In the meantime, the waiting game continues…
Smooth sailing.
The imminent Henry Review – likes and dislikes
Last posting I mentioned the imminent release of the Henry Review Report. This brought about two important questions from readers; what would we really like to see, and what would we really dislike to see? Regarding the first question the answer lies buried in CPA Australia’s submissions, but the following is an attempt to summarise our key points – we would we really like to see the following:
- incentives for small business and ‘having a go’ as small business is the ‘engine room’ of the economy
- simplification
- reduction in compliance costs
- addressing effective marginal tax rates to encourage worker participation, but recognising they are probably impossible to eliminate while retaining means tests
- keep total tax to GDP ratio maintained at around 30-31% because of the challenges identified in the Intergenerational Reports (IGR 1-3), etc – the government has a commitment to maintaining the federal tax to GDP ratio at the same level as it was under the Howard Government (ie. 23%), and
- further progress on the major reforms – esp Commonwealth State tax policy, law and administration matters.
What would CPA Australia really not like to see in the Henry Report? Again, this is evident from our submissions, but in a nutshell it could perhaps be best summarised as follows:
- no change
- failure to address genuine ‘reform’ opportunities
- measures that impact adversely on business, particularly SMEs (which remain the engine room of the economy)
- an increase in the overall level of taxation and/or increase in compliance costs for taxpayers, and
- greater reliance by the states on Commonwealth grants.
The release of the final report is imminent, so watch this space as for the forthcoming dates for our proposed Henry Review member education roll-out.
And in the meantime, smooth sailing.
Australia’s Future Tax System
In the next little while the Australian Government will release the much awaited Henry Tax Review Report on Australia’s Future Tax System. The review was established by the Australian Government in 2008 ‘to examine Australia’s tax and transfer system, including state taxes, and make recommendations to position Australia to deal with the demographic, social, economic and environmental challenges of the 21st century’. The Federal Treasurer recently advised that the report including the government’s response, would be released prior to the Federal Budget, which will be handed down on the 2nd Tuesday in May again this year, so the report cannot be far away now.
So what do we know about it already? Well, the Report went to the Government on 24 December 2009, it is 1000 pages long or thereabouts and it is intended to be a 10 plus year plan rather than a quick fix.
We also know that there will be winners and losers. This is inevitable in change of this type.
The real test is whether the report can withstand the political cherry picking of options contained in that report that is likely to take place in what is likely to be an election year.
CPA Australia will continue to monitor this topic closely in 2010. And watch for the forthcoming dates for our proposed Henry Review member educational roll-out in the coming months.
Further information:
The review’s terms of reference
CPA Australia’s first submission
CPA Australia’s second submission
Smooth sailing!
Economic recovery – and what’s the next big thing?
One of the many things I like to do in my spare time is read. I’m currently looking at a book called Economic Transformations by Messrs Lipsey, Carlow and Bekar (2010). Some of this is quite new to me, while some of it takes me back to my student days as an economics undergraduate, which was a fair while ago now - a fact that I was reminded of in the last few weeks when my eldest daughter started 1st year university. Back to the book - it contains some fascinating stuff, and is also a good read (for something that looks and sounds like a textbook – 4 authors!). For example, in Chapter 5 they present a table on transforming general purpose technologies (GPTs).
The GPTs start around 9000 - 8000 BC with the domestication of plants, followed by the domestication of animals and a suite of other profound GPTs since those times, such as invention of the water wheel, the three masted sailing ship, the railroad, electricity, the automobile, the computer, the internet and so on. In the 21st century they nominate nanotechnology as the proposed next big thing. Perhaps this is just what is needed to help lead all countries out of recession and fix their respective debt problems.
Economic Transformations does not of course provide the silver bullet to the recent global economic woes (and certainly that is not its purpose). But it does provide relevant food for thought as governments, businesses and their advisers all try to navigate an appropriate economic pathway further into the 21st century.
GFC now behind us
It is also comforting to note though that Australia at least is now officially through the worst of the GFC - see the recent speech by the Secretary to the Australian Treasury, where Dr Henry observed that ‘It is fair to say that the global financial crisis itself is now behind us. While there is a risk of further adverse shocks in global financial markets, the period of extreme dislocation has now passed.’
Malaysian GST Update
There’s an old saying that a week is a long time in politics – this certainly seems to be the case in respect of the proposed GST for Malaysia. The Government has now decided defer the second reading of the GST Bill pending further public feedback.
From what we’ve observed in the press, there has been quite a bit of misinformation on the impact of the GST and in particular about how it would push up the cost of living for all Malaysians. In fact the opposite appears to be the case. According the chairman of the tax review panel at the ministry of finance Datuk Kamariah Hussain, the GST is expected to reduce the average consumer price index (CPI) by 0.1% because the proposed GST rate of 4% would be lower than the current sales and services tax rate of 10%.
So it seems appropriate that they take their time to address the uncertainties in the public domain on this important tax change before proceeding.
We’ll keep you posted of developments.
Smooth sailing!
CPA Australia’s Malaysian GST web page goes live
A couple of posts back I mentioned the proposed Malaysian GST – since then we’ve created a dedicated Malaysian GST web page that will keep those interested up to date with developments in this space.
Content available to date includes two short MS Powerpoint presentations that you can view online, or even download and share with your business colleagues, some fact sheets on issues such as tips on how to get your business GST ready, what is a business, what is a supply, gst free supplies, GST exempt supplies, links to current news articles, and our current GST Information Session member offer.
Speaking of GST Information sessions – if you’re interested in this topic coming to an area near you, keep an eye our for the e-flyers that will be sent in the Malaysian Division in the near future.
Or please consider dropping either Terry Hia or Shuh Yee Wong a line at either terry dot hia at cpaaustralia.com.au or shuhyee dot wong at cpaaustralia.com.au
Smooth sailing!
Doing something about red tape and compliance costs - Standard Business Reporting
The start date for an important Commonwealth Government initiative aimed at avoiding duplication and reducing compliance costs is rapidly approaching. On 1 July Standard Business Reporting (SBR) will be available to businesses with the objective of reducing the business-to-government reporting burden and reducing the cost of lodgment with both Commonwealth and State agencies. This will include using business software to automatically pre-fill forms and providing an electronic interface to government agencies directly from accounting software. In the process of developing SBR, unnecessary and duplicated information has been removed from government forms.
CPA Australia this week hosted a meeting of the SBR Business Advisory Forum (BAF) which provides input into SBR design, consultation, marketing and strategy implementation. CPA Australia is a member of the BAF which also includes representatives from industry groups and other professional associations. I encourage all members in public practice and business to check out SBR.
Watch for more on this in future posts.
Business Outlook Conference – don’t miss out!
Last week our President Richard Petty wrote about CPA Australia’s Business Outlook Conference which is to be held in Melbourne Australia on 25 March 2010.
The Conference is an exclusive forum for top-level executives to learn, connect and share ideas on a range of globally-focused strategic business topics. The speaker list is impressive, including the Hon. Peter Costello, Professor Neil Warren, Chaly Mah, Chris Richardson, Robert Gottliebson and Alan Kohler.
If you haven’t already registered for the Conference, its not to late, but places are filling quickly. See here for details on how to register, and I look forward to meeting with some of you at the Conference.
That’s all for now, and til next time, as always, smooth sailing.
A GST for Malaysia in 2011
In this month’s INTHEBLACK magazine you’ll see, amongst other things, a piece by our Senior Tax Counsel Garry Addison regarding a proposed Malaysian GST from mid 2011. Similarly to Australia, where it took a few attempts to get a GST over the line, Malaysia has been down this path before, but in the past has decided the timing to introduce such a tax was not opportune. However, it is now firmly back on the agenda (perhaps as a matter of necessity hastened by the recent GFC), with the Bill to be debated in the Malaysian Parliament later this month.
Anticipated to raise an additional RM 1.4 billion per annum, it is also proposed to replace the current sales and services tax (SST). The rate is expected to be 4 per cent but this is not actually articulated in the Bill (along with many other important details).
As Garry notes in his article, the proposed Malaysian GST:
‘is likely to be a pioneer in how the GST will impact Islamic financial services. We understand that some other relevant jurisdictions (e.g. UAE, Pakistan) are also planning the introduction of GST/VAT systems. Australia has also recently considered the taxation of Islamic financial services in the context of developing a suitable framework for enhancing Australia’s role as a regional financial services hub. A Malaysian GST law which adequately and fairly addresses the impact of GST on such services could thus become a useful reference tool for a number of other countries with an interest in this area’.
Keep an eye out on the CPA Australia website for the forthcoming professional development sessions that will be on offer in the Malaysian Division on getting ‘GST ready’.
Further information
• Goods and Services Tax Bill 2009
• INTHEBLACK Magazine, March 2010
Smooth sailing!
What do the 2010 Intergenerational Report, economic recovery and high performing workplaces have in common?
If you take a look at the recently released Intergenerational Report (IGRIII) you’ll see much of Australia’s future economic success hinges on what has become known as the three Ps – productivity, participation and population (which is also the general thesis of IGRII). All three Ps are important to maintaining our standard of living in the future and it will not be sufficient to have the second and third Ps increasing if the first P – productivity - is not increased. So what measures can be introduced and steps taken to increase productivity? Part of the answer to this question may lie in a two year project recently launched by the Federal Government examining high performing workplaces, and Australian firms are now being invited to get involved.
The Department of Education, Employment and Workplace Relations has commissioned the Society for Knowledge Economics to undertake a study into the Leadership, Culture and Management practices of High Performing Workplaces in the services industry in Australia. The project is a key element of the Federal Government’s “Workplace of the Future” agenda that was the subject of a forum hosted by the Deputy Prime Minister, the Hon Julia Gillard MP, in July 2009. Our President Professor Richard Petty is a member of the project’s high profile Steering Committee, and recently observed that
“the outputs from this project are likely to offer new insights for Chief Financial Officers and CPA Australia members to help them in leading their organisations to be even higher performing. Proper management control systems are critical to lifting innovation and productivity”.
CPA Australia is also providing further assistance as a member of the research team working party. We will keep members up to date on news of this project and its findings over the next two years.
The project has two phases, the first (free) is a simple diagnostic phase that obtains information about your firm’s leadership, culture and management practices. The information will provide you with an indication of your firm’s performance. Appropriately all firm information is kept 100% confidential as per the University Ethics Clearance rules and not shared with anyone except the participants.
The second stage for those who are selected to take part will involve participants working with a top tier consulting organisation and the UNSW research team over a period of twelve months to implement a series of strategies designed to lift firm performance (this will involve a small nominal fee). Participants and their top management team will have the opportunity to work side by side with the other firms, implementing the high performing workplace strategies.
Dr Christina Boedker, from the School of Accounting at the University of New South Wales, is leading a cross-disciplinary research team from UNSW and other leading institutions (ANU, Macquarie University, and Copenhagen Business School). She says
“By working with us you get insights into your performance in a way that’s not available by other means. In addition to helping you understand the role of management control systems in lifting innovation and productivity in your organisation, the research will be used to develop recommendations for government policy, professional associations, educational curricula and, of course, to inform the art and practice of business management and measurement in Australia”.
Australian companies, big and small, from the services industry can become involved by contacting the Society for Knowledge Economics on 02 9431 8644 or visit their website and fill in the registration form. But note that places are limited. By participating in the project, you will gain insights into your performance and others not available through any other source.
Not only will you find out how you and your company are travelling, you may also get valuable insights into how to lift productivity, and in turn help address Australia’s future economic challenges arising from our ageing population.
Smooth sailing!
CPA Australia’s thought leadership on fiscal directions for Australia - 2010/2011 and beyond
In my last post I mentioned our organisation’s 2010/2011 pre-budget submission that was lodged recently with the Australian Government. This is a budget that will be framed against the background of Australia coming through the biggest global recession in living memory. The Australian economy has emerged from this situation with lower growth and slightly increased unemployment, but also in a stronger position than any other developed nation. However, the Federal Government also now has a significant budget deficit by and large as a consequence of the fiscal stimulus measures implemented by them over the last year or so.
So while the Australian economy has weathered the economic storm relatively well to date, there is no room for complacency in economic fiscal policy, and no time to waste in a very competitive global economy. Many challenges lie ahead that have economic implications not only for our members and the accounting profession, but for all Australian businesses and investors, and their future prosperity.
Accordingly our submission makes a number of recommendations on matters that CPA Australia considers will encourage both private consumption and investment in 2010 - 2011. These measures are important given that many of the recent fiscal stimulus measures will have already washed through the economy, and while some must be pursued, others should now start to be withdrawn to reduce crowding out and also to ameliorate impacts on the current budget deficit.
We also made recommendations on other key issues including, superannuation, climate change policy, sustainability, government agency funding, not-for profit regulation and funding Australia’s future infrastructure projects.
If you haven’t already done so, check out our pre budget submission.
And while you’re at it, see our CEO Alex Malley’s comments on the budget and reversing the super contributions caps.
And of course and let us know your thoughts!
Smooth sailing
The IMF, the global economy and 2010
Well I’m back from my annual leave, the family’s surfboards have been put back in the shed rafters until Easter, the dependants are either heading back to school or preparing for uni, and the global economy has been rolling on. There’s been a plethora of interesting economic, business and social data and information since my last blog, for example most recently the Australian Government’s Intergenerational Report, CPA Australia’s pre budget submission and also the IMF’s World Economic Outlook. Given the nature of blogs, I do not intend to comment on all of these in this entry – I shall focus on the last one – the IMF’s report.
The IMF’s latest projections show that a global recovery is under way, however at varying speeds, reflecting different initial conditions, external shocks and policy responses.
The differences in the speed of recovery is most keenly felt between advanced economies, with growth for 2010 projected to be 2.1%, and emerging and developing economies, where growth for 2010 is projected to be 6%. In fact, the IMF states that key emerging economies in Asia are leading the global recovery.
Overall, the IMF projects that world output for 2010 is likely to increase by 3.9% (an increase of 0.8% from the October 2009 projection of 3.1%). The global recovery to date has been driven by the ‘extraordinary amount of policy stimulus’ (being highly expansionary monetary policy, in other words record low interest rates, and the expansion of central bank balance sheets, expansionary fiscal policy and public support of the financial sector).
Until private-demand takes hold however, the sustainability of the global recovery remains questionable, particularly if the financial positions of some governments continues to deteriorate. This is a point not lost on CPA Australia, and forms part of our thinking in the preparation of many of the recommendations in our 2010/ 2011 pre budget submission. So expect to see some volatility in economic projections in 2010 and in share markets.
The IMF therefore recommends that the fiscal stimulus that various governments have planned for 2010 should be fully delivered and it suggests that many central banks can afford to maintain interest rates at emergency settings. However, at the same time, governments and central banks need to develop credible strategies to unwind public support of the economy. When such exit policies are implemented should, according to the IMF, be based on private-demand becoming self-sustaining.
For countries that are already enjoying a relatively robust rebound, the tightening of monetary policy (raising interest rates) will happen earlier and faster – consider Australia’s last three consecutive interest rate rises – but also note no change by the RBA yesterday. Interestingly, the IMF did not make a specific comment about whether such countries should also tighten their fiscal policy.
In relation to the strength of the banking sector, the IMF warns that ‘there remains a pressing need to continue repairing the financial sector’.
CPA Australia believes that the Australian Government should now start to shift the focus of its stimulus towards projects that provide long-term economic benefit to the nation and assist to improve Australia’s productivity. In particular, we favour a shift in focus to major economic infrastructure projects, such as road, rail and ports, and this is reflected in the recommendations in CPA Australia’s 2010/2011 pre-budget submission.
Smooth sailing!
Financial management of not-for-profit organisations
As we all know, many investors were caught out during the GFC investment-wise, and those caught out also included some in the so-called not-for-profit (NFP) sector. Actually the name NFP is a bit misleading, as many of these enterprises work to make a profit to enable them to fund their principal charitable or educational activities. The main difference for NFPs is the objective is not to maximise shareholder returns.
CPA Australia has recently has created a new guide — Financial Management of Not-for-profit organisations — to help small not-for-profit organisations understand how their financial position can play a key role in the successful provision of NFP services.
The publication is essentially a re-work of an earlier CPA Australia publication developed with the Victorian Government titled the Financial Survival Guide for Small Business, but modified for the not-for-profit sector. Not-for-profit (NFP) organisations are an essential part of every community and understanding an organisation’s financial position is vital to the successful provision of NFP services.
Given it is aimed at small NFPs, I’m not expecting it will be that useful to, say the Red Cross. But I hope you find it an interesting read. And if so, share it with your colleagues. If not, please let us know.
This is my final blog for 2009. Over the next two weeks I’ll be catching a few waves down at the beach with my family. I wish you all a happy and restful festive season and a prosperous new year — and may we all ride a wave of economic recovery in 2010.
Smooth sailing!
The GFC, and (re)calibrating in 2010
In my last post I wrote about the impact of the fiscal stimulus lump sums and their positive impact on ameliorating the impact of the GFC and job losses in Australia. But now we need to make a decision about the rest of the fiscal stimulus measures in helping the Australian Government frame its 2010-2011 Federal Budget.
In our most recent Federal Budget submission, amongst other things, we suggested bringing the proposed personal tax cuts forward as a possible appropriate means to help stimulate the economy. And this was the view we took to the Senate Inquiry into the fiscal stimulus measures earlier this year also. However, since then there are signs that the worst of the GFC is behind Australia at least, and also for many other countries in our region. And the size of the Australian deficit is also a concern to many.
This time then, and as part of our organisation’s Federal Budget submission it is likely we will be considering proposing that some of the government’s fiscal stimulus measures are, to borrow a phrase recently seemingly popularised by US President Barack Obama – ‘calibrated’ back/down.
This is but one of the issues CPA Australia will be turning its collective minds to that should be addressed in our 2010/2011 Federal budget submission, and as always we are seeking your input as well. Other topics under consideration will include the proposed carbon pollution reduction scheme and the role of ‘green’ technology post-Copenhagen, environmental, social and governance issues, issues identified in the forthcoming intergenerational report (IGR III), and tax and super policy issues that should not wait for government’s response to either the Henry Review, or the Cooper Review.
If you have any comments please send them to policy.research@cpaaustralia.com.au by Friday 18 December, 2009. All comments gratefully received – but note, all may not get up on the day.
Smooth sailing!
Fiscal stimuli, and throwing money from helicopters
Were the fiscal stimulus lump-sum payments the Australian and other governments made to households to fight the affects of the Global Financial Crisis a waste of taxpayer resources, and similar to Milton Friedman’s often quoted analogy of throwing money out of a helicopter?
The answer, according to research published by the Reserve Bank of Australia titled Estimating Marginal Propensities to Consume in Australia using Micro Data [PDF] on the 2nd of December 2009, is a ‘qualified no’. That is, while a proportion of lump-sum payments were spent to stimulate the economy, the research shows that a permanent tax cut may have resulted in a greater proportion of that money being spent, creating greater stimulus for the economy.
The paper does not model how Australian households spent (or otherwise treated) their lump sum received earlier this year and late last year, nor how they spent the tax cuts many received in July. The research instead models the effects of tax cuts over 2005 to 2007 and two specific lump-sum transfers – the Baby Bonus and the Carer Bonus. Having stated this, the publication still serves as a valuable piece of research that policy makers should consider before they consider future options to stimulate the economy.
The research can be read as stating that if the intention of a government is to increase consumption, then permanent tax cuts are a better policy option because a greater proportion of the cut is likely to be spent. Having stated that, the research reaffirmed the long held view that lower income households spend more of their tax cuts and lump-sum payments, hence governments should get ‘greater bang for their buck’ if tax cuts and/or lump sum payments are directed to lower income households. The research also showed that where households are especially concerned about maintaining their income, they are more likely to save any tax cuts or lump-sum payment.
As the paper says in its conclusion, the results need to be interpreted with a degree of caution, however overall, the marginal propensity to consume from a lump-sum payment such as the Baby Bonus (which is given at a time a high expenditure, particularly for families having their first child) is lower than the marginal propensity to consume from permanent tax cuts (which are perceived to be persistent).
While the research does not criticise the lump-sum payments made by the Australian Government, the paper does support the recommendation CPA Australia made to the Government in February 2009 [PDF] and in our 2009-10 pre-budget submission [PDF], which was that the Government considers either a partial or full bring-forward of the proposed 1 July 2009 and 1 July 2010 tax cuts. This recommendation was valid in the economic environment of early 2009, but less relevant now (unless conditions dramatically change for the worse and there is a second GFC wave – but no-one is suggesting this as a possibility.)
Smooth sailing!
Revenue recognition, live presentation by April Pitman
April Pitman, Project Manager, International Accounting Standards Board
CPA Australia, the Institute of Chartered Accountants in Australia, and the National Institute of Accountants were delighted to welcome April Pitman Project Manager, the IASB to present a comprehensive update of the project to develop a new joint standard for revenue recognition. (including where the project is going and specific application issues). This presentation was live streamed on Tuesday 2nd December and the recorded video is available for you to view below.
Background
The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board are undertaking a project to develop a new joint standard for revenue recognition. In IFRSs, the new standard will replace the existing standards on revenue recognition, IAS 11 Construction Contracts and IAS 18 Revenue.
On 19 December 2008 the Boards published for public comment a discussion paper Preliminary Views on Revenue Recognition in Contracts with Customers.
In the discussion paper, the Boards propose a single revenue recognition model that can be applied consistently across a range of industries and geographical regions. Applying the underlying principle proposed by the Boards, an entity would recognise revenue when it satisfies its performance obligations in a contract by transferring goods and services to a customer. That principle is similar to many existing requirements. However, the Boards think that clarifying that principle and applying it consistently to all contracts with customers will improve the comparability and understandability of revenue for users of financial statements.
After the storm increased surveillance on the horizon
Parliamentary Joint Committee on Corporations and Financial Services Inquiry into financial products and services in Australia
The Great Crash of 2008 had many victims both in the corporate world and mum and dad investors alike. One such corporate victim was Storm Financial and many of its clients were ‘typical’ mums and dads, the majority of whom it seems all invested in similar products. Storm Financial’s spectacular failure resulted in a Parliamentary Inquiry that tabled its report yesterday.
The Inquiry made eleven recommendations, and the ‘rules of good blogging’ do not permit me to comment on all of them here. However, I will note the second recommendation, as CPA Australia was concerned that there was anecdotal evidence to suggest that while ASIC has statutory powers to act it did not seem to take action or intervene early enough in certain cases, the Storm episode being a prime example. So in the interests of investor protection we certainly welcome the recommendation that the government ensure ASIC is appropriately resourced to perform effective risk-based surveillance of the advice provided by licensees and their authorised representatives, and that they should also conduct financial advice shadow shopping exercises annually.
It is now up to the government to determine which ones should be adopted, if any. But expect some action here. Minister Bowen has in fact indicated that the recommendations would be considered as part of the current Cooper Review of Superannuation, although it should be noted the Cooper Review is not due to report to the government until 30 June next year, so while there may be action, it may not come any time soon.
Smooth sailing.
The Great Crash of 2008 and lessons for the future
‘An author should choose his subjects with discretion and care, with special attention to history that will repeat itself.’ J. K. Galbraith, 1994.
Dear bloggers, I recently purchased a copy of Ross Garnaut’s latest book The Great Crash of 2008. Besides being both an informative and interesting read about the events leading up to both the great crash and the subsequent global economic fallout (or the ‘Great Recession’ in Garnaut’s words), it reminded me of a story about the late J K Galbraith and a book written by him in the 1950s of a similar name - The Great Crash 1929.
While awaiting a flight at La Guardia airport around the same time the book was first published, and not long after he had made the bestseller lists, Galbraith stopped by a small bookshop to see if his publication was on display in the front window. When he saw it was not, he went into the store, on the premise of ‘ostensibly browsing’. He was sought out by the woman behind the counter and asked if he was looking for something special, to which he replied, somewhat embarrassed, that he was looking for a book by an author with a name ‘something like Galbraith’, and titled The Great Crash. He was told firmly by the woman behind the counter ‘that isn’t a book you could sell in an airport’.
The lesson from this, Galbraith says in The World Economy Since The Wars (1994) is to ‘be aware of the need for care as to a title even when the selection seems to be the most direct and plausible sort.’
I recommend the Great Crash of 2008 to you, and if you can make the time, you could do worse than delve back into the works of Galbraith (and many others!) over the recent decades. You’ll discover that in economics as well as life itself history has a habit of repeating.
Smooth sailing!
The connection between Tiger Woods and CPA Australia
It’s been a great week in Melbourne this week. Tiger Woods is in town, and yesterday he played the first round of the Australian Masters at Kingston Heath to card a 6 under par for the day. And yes, I was lucky enough to be there to see him do it. As I — along with thousands of others — followed Tiger around the course during the morning, I made a number of observations about his approach to his craft. And I reflected on how his approach could be related to CPA Australia’s vision to make the CPA designation ‘the global professional accountancy designation for strategic business leaders‘, and what this actually requires.
Tiger Woods imbues many of the qualities we should aspire to ourselves either on a personal level or as part of our professional careers, and also aspire to in business. These attributes include a highly strategic approach to his craft, an instantly internationally recognised brand, the capacity to ‘deliver the goods’ time and time again, and a truly professional approach both on and off the field — to be the best you can be. The epitome of global excellence in his field.
For Tiger, success has not come overnight. He’s been working on it since he was two. And he still practices –- over and over again, to hone his well developed skills and keep himself at the top of the game.
In a global economy, in both the tough times and in the good, competition has never been as fierce. To enable our organisation to achieve this vision, we have embarked on an ambitious change program, based on building the brand, introducing world class and globally competitive entry pathways, and improving member knowledge to enhance member careers. And we’ll keep working until we get to where we want to be.
What are you doing about ensuring you’re at the top of your game, and what can we all learn from Tiger Woods in this regard?
Smooth sailing! (or should it be ‘smooth swinging’ this week?)
Positive signs, but economies still fragile
A work colleague asked me earlier today if I had concluded that the global economic crisis was over, as I hadn’t posted anything on my blog site about it for a few days. Now arguably if the crisis was over I might be short of a few words momentarily, as after what business and investors have been though in the last two years I for one would be stunned into silence if global economies were all back on a so-called even keel so soon. But I wouldn’t be stunned into silence for long. Is it over - alas I think not. In the context of the Asian region though we are seeing some positive signs - for example, see the recent IMF report, but whether any of this is enduring remains to be seen.
And is the worst over for Australia? Maybe, with a lot of luck, as well as some assistance from the China and India economies, and their demand for our mining resources. I say our mining resources using the word ‘our’ in the broadest possible sense – as these are the assets of all Australians, but more on this point another time. Back to the Australian economy. It’s important to note the government is still predicting increasing unemployment for Australia in 2010. This has the risk of negatively impacting the economy in a number of ways yet to be seen. And it’s also in 2010 when we’ll see how well the economy is faring after most of the consumer fiscal stimulus measures, as well as the business investment concessions for business assets have largely washed through. And, we’ll also get an idea on whether the government’s fiscal stimulus spending is being replaced by the all-important private investment.
So, while the IMF may be warning governments not to unnecessarily overstimulate their economies (as if they need any warning), the Reserve Bank tinkers with interest rates which is the equivalent of applying an economic hand-brake, the Australian Government Treasurer remains committed to not withdrawing the infrastructure spending, and private investment is yet to get a real giddy-up – no, my friends, I for one will not be declaring the global economic crisis over.
Smooth sailing!
Navigating the financial challenges ahead
The IMF’s recent Global Financial Stability Report [PDF] — Navigating the Financial Challenges Ahead strikes a chord on a few fronts with some of us — not only because the paper’s sub-title has a nautical reference the same as CPA Australia’s ‘navigating the storm GFC site’, but mainly because many of the issues it discusses are in accord with our thinking on the appropriate way forward as outlined in our recent submission to the Senate Inquiry on the fiscal stimulus measures, and which I previously blogged.
While we are keen to ensure public debt is retired, one of the key tricks will be when to begin the withdrawal of public support for the economy, and at what speed. This will largely depend on when private and business consumption resumes its position as the driver of economic growth. In Australia at least, the central bank has begun the process of returning monetary policy to a more normal setting with its 25 basis point increase in its cash rate.
I hope you can make time to have a look for yourselves. But if not, please read the following high level insight from the IMF’s report:
- Systemic risks have been substantially reduced following unprecedented policy actions and there are some signs of improvement in the real economy.
- There is growing confidence that the global economy has turned the corner.
- There are risks as long as banks remain under strain and households and financial institutions need to reduce leverage.
- There are issues around the financing burden of fiscal stimulus, possibly crowding out the private sector and the sustainability of public sector finances.
- The challenge of appropriately disengaging public support to avoid either sparking a secondary crisis through premature withdrawal or endangering monetary and fiscal credibility through a belated exit, and that complacency now becomes a risk - banking system problems could go unresolved, and much-needed regulatory reforms may be delayed or diluted. The IMF believes policymakers should promptly provide a plan for the future regulatory framework that mitigates the build-up of systemic risks, grounds expectations, and underpins confidence, thereby contributing to sustained economic growth.
And — of course — smooth sailing!
Will the GFC be positive for Australia’s financial services hub aspirations?
The GFC may inadvertently provide some further impetus to the Australian government’s objective of making Australia a global financial services hub. Our economy’s resilience to the world economic downturn has probably got many around the globe wondering what Australia’s secret has been in this regard. And, coupled with a range of other initiatives, offshore investors may now be more encouraged to see Australia as a destination for investment.
The government’s objective will also no doubt been enhanced by today’s release of the Austrade-prepared: Australia. A Global Financial Services Centre, Benchmark Report 2009.
Further, the Australian Government has also put in place measures to wind back our withholding tax rates on offshore investments which were the amongst the highest, if not the actual highest in the world. These initiatives should all help improve our internationally competitive position and our attractiveness as a global financial services centre.
And there may be more to come also, either out of some of the Board of Taxation’s recent work on Managed Investment Trusts (MITs), or as part of the outcomes from the Henry Review of Taxes Report due in the coming months, or both.
Now apparently we’re not trying to knock off London or New York as the top global financial services hubs. But Minister Bowen said that the government’s objective is certainly to compete in our region with some of our good friends and neighbours — namely Hong Kong, Singapore, Malaysia and also India and China. And that is not to say we wouldn’t like to attract investment from, say the US and/ or European pension funds as well — I’m sure we would.
The Austrade report covers a lot of things — the strength of our economy, liquid markets, our highly skilled workforce, our advanced infrastructure and our stable environment and quality of life. It also outlines a number of interesting and key financial facts and figures — for example, at page 34 there is a section on salaries for those in the financial services sector, many of whom are CPAs.
So will Australia’s resilience (and perhaps the weakness of others) to the GFC in a global economy be a helping hand for Australia’s financial services sector? It certainly will not do any harm.
Smooth sailing!
When it comes to fiscal stimulus, how much is too much?
A few weeks ago the government agreed to another inquiry into the government’s fiscal stimulus measures. Our organisation has been an advocate of fiscal stimulus measures as an essential economic tool to combat the economic slowdown following the GFC for some time, and we confirmed this last year in our pre-budget submission [PDF], which stated …
“It was only some 12 months ago that, as a nation, we were considering policy options to, among other things, address the risk of inflation. However, circumstances changed considerably in that period, with inflation being all but eliminated as a major threat to the economy. Instead, the global financial crisis and the collateral economic fallout now arguably present the greatest risk to both the Australian economy, as well as all other economies around the world. Many economies are now either in negative growth or recession. To help ensure Australia’s economy does not follow this pathway, it is expected that the government may need to implement further stimulus measures in the short term“.
Not only did we support the government’s approach at the time, we also suggested they consider bringing forward personal tax cuts proposed to kick in from 1 July 2009 if necessary.
Given that at that time, and as we are now largely in uncharted economic waters, it was pleasing to see support for our position from the International Monetary Fund (IMF) who released Staff Position Note shortly after our pre-budget submission titled ‘Fiscal Policy for the Crisis’ [PDF], supporting government spending to help ameliorate the impact of the GFC on slowing economies around the world, and including cutting taxes if necessary.
CPA Australia also reiterated its position regarding appropriate fiscal stimulus measures in the Senate Inquiry on similar in February 2009. And we now have had the opportunity to consider more fully our support for the fiscal stimulus package by way of the current inquiry.
It is not possible for us to really determine how much fiscal stimulus is too much and whether it has been spent on all the right things. But the evidence that the fiscal stimulus measures have assisted the Australian economy in remaining one of the best if not the best performing economy in the world over the last two quarters and lends a lot of weight to support the government’s initiatives in this regard.
As strategic business leaders and advisers, we are very interested in return on investment (ROI) as a useful indicator as to how to and where additional investment in the economy should be allocated. As the government’s fiscal stimulus spend is really an investment in the economy, jobs, productivity and the future, we are interested in the ultimate ROI and how long it will be before we return to surplus. This remains to be seen.
Take a look at CPA Australia’s latest submission [PDF], and let us know your thoughts.
Smooth sailing.
Survey shows how small business in the Asia Pacific is weathering the economic storm
Earlier today CPA Australia President Professor Richard Petty launched CPA Australia’s latest survey of small businesses. For the first time, the small business survey was conducted in Hong Kong, Malaysia and Singapore, as well as Australia. The survey provides an interesting comparison on how small businesses in those markets are managing through the global recession.
The survey draws a comparison across the four markets on:
- Growth expectations of small businesses
- Employment expectations of small businesses
- Access to finance by small business
- Business management practices of small businesses
The results indicate that while there exists a general expectation that conditions will improve, this sentiment is qualified in that many small business operators appear hesitant when it comes to obtaining extra funding or employing more staff. Businesses in Malaysia in particular, and to a lesser extent, Singapore were the most positive about their growth expectations over the next few years.
What also emerges is a correlation between business practice and business confidence, with businesses that have good management processes tending to be more optimistic about their growth prospects. On this measure, Australian small businesses generally lag noticeably behind their counterparts in the other markets.
Other key survey findings include:
- Small business operators in Malaysia have the highest level of growth expectation and intentions of increasing staff numbers and borrowing to fund growth over the next 12 months.
- Singaporean small businesses expect to grow using mainly existing resources.
- The small business sector will not be a source of employment growth nor a source of unemployment in Australia in the near future.
- Hong Kong small business operators are meticulous in their business management processes but remain conservative with growth.
Key recommendations emerging from the survey include:
- Focused support from governments on the small business sector will be important to achieving sustainable economic recovery. Such support includes continuing regulatory reform.
- There is further scope for governments to support small business through information and education campaigns on the topic of financial management.
- Small business should begin planning for the recovery.
- Given the changing economic circumstances, all small businesses would benefit from seeking advice from suitably qualified professionals.
For further information, download the complete Asia-Pacific small business survey 2009 [PDF].
Smooth sailing.
Teleworking - will recent economic events change the way we do business?
Some of you may have seen a recent CPA Australia report titled Impact of Telework on work practices in the accounting profession. It makes interesting reading for those that are considering introducing teleworking and those that already undertaking teleworking.
While the survey was taken from the view of the CPA Australia members as employees, for those considering adopting teleworking as part of a strategy to reduce costs in response to the global financial crisis or to hold on to skilled and valuable staff, the report gives some interesting insights into what they need to consider as part of the move to teleworking.
Here’s a quick overview.
Some interesting statistics
The survey reveals some interesting statistics:
- Teleworking made no difference in the quality of work of 58% of teleworkers.
- Teleworking was an important consideration for 58% of teleworkers to stay with their current employers.
- Only 36% of non-teleworkers indicated that they would like to telework.
- Teleworking on average only saves 2.4 hours of travel time a week for teleworkers.
- Teleworkers are more likely to use a dedicated office space to undertake their telework activity, and if they do have a dedicated workspace, they are more likely to undertake telework activity on a daily or weekly basis.
- The most used teleworking technologies are telephone (including mobile phone), 56%, broadband internet connection (48%) and wireless broadband internet connection (38%).
What you should consider before introducing teleworking
The survey points out the following issues businesses should consider before introducing teleworking:
- Whether the kind of jobs that are being considered for teleworking can be done by individuals.
- The need to provide IT support and infrastructure to facilitate effective telework.
- Whether the employee has a dedicated office space at home to telework.
- Have a telework policy and make sure staff are aware of it.
The impacts of teleworking
The survey also shows how teleworking can impact on professional and personal lives of teleworkers. In particular, there are strongly positive outcomes for teleworkers in terms of:
- Ability to be contacted
- Number of different work tasks undertaken
- Getting things done
- Collaboration
- Flexibility in scheduling work
- Capacity to work.
Telework was however seen by teleworkers as having a negative impact on:
- Workload (increased workload because of the teleworkers increased availability)
- The time it takes to get things done
- Costs relating to telework.
For other impacts such as time with family and friends and work related stress, the response was mixed suggesting that the impact of telework on individuals is context driven.
In conclusion, teleworkers reported more job autonomy, greater organisational commitment, less intention to leave their current organisation but also more family/work conflict (as CPA teleworkers tend to work more hours per week than non-teleworkers). The benefits of teleworking can therefore be described as mixed as they are dependant on the individual circumstances of employees.
Do you have any experiences of teleworking? Is it proving to be a viable strategy for navigating your way through the global financial crisis?
Smooth sailing!
Death knell for agribusiness?
While the Australian economy may have dodged a ‘GFC bullet’, agribusiness managed investment schemes (MIS) may not be so fortunate.
Yesterday the Parliamentary Joint Committee on Corporations and Financial Services (PJC) tabled its report [PDF] on the Inquiry into aspects of agribusiness managed investment schemes.
Some 80 odd pages in length, the report makes only three recommendations, with many issues being deferred for further consideration and probable inclusion in the other PJC’s broader current inquiry into financial services, due to report later this year.
One of the PJC’s recommendations was that the government consider investigating and modelling the effects of quarantining losses from non-forestry agribusiness MIS investments, so that these losses can only be offset against future income from the same MIS. Such a review would be welcome. But I can’t help but wonder if this recommendation is based on the misapprehension that the pooled investments under the spotlight get some kind of special or concessional treatment not available to other businesses or primary producers. They don’t. And to implement a measure that scrapped deductions in the year in which they were incurred would effectively be the death knell for many agribusiness projects in Australia.
This might be a good thing in some cases, as I haven’t met too many people over the years who have made a lot of money out of investing in agribusiness MIS. But there is much more at stake here. The government needs to carefully consider it’s next steps in relation to agribusiness MIS in line with not only consumer protection, but also the broader policy objectives of Australian investment, productivity and jobs.
It was also disappointing the PJC has not pursued CPA Australia’s recommendation that — as there is insufficient publicly available data on the past performance of agribusiness MIS to inform investors — ASIC (or another government body) should research and publish this information; see p56 para. 4.33 of the report. This would enable the market (i.e. consumers/ potential investors) to make better informed investment decisions.
Now that would be a review that we would fully support.
Smooth sailing!
Tips for Not-for-Profit entities in tough times
While it seems that the worst of the global recession may be over for many, there will still be sections of the global economy that will continue to experience difficulty. One such sector is the not-for-profit sector because difficulty to fund raise will remain (as many businesses and individuals will remain circumscribed in their giving to not-for-profits), and the demand for the services of many not for profits will remain high as unemployment in many countries sees little sign of reducing in the near future. We have therefore developed a new toolkit to help not-for-profit entities manage through these times.
For those that are involved in the management of not-for-profits (as either employees or volunteers), I encourage you to have a look at these tips.
Also don’t forget our upcoming Congress, it’s a great opportunity to connect and learn. For further details see the CPA Congress website.
Smooth sailing!
Business investment trends in Australia
Last week the Australian Bureau of Statistics (ABS) released figures showing that new capital expenditure by Australian private companies increased by 3.3 percent over the June quarter and expenditure on equipment, plant and machinery rose by 5.3 percent over the same period (both figures are seasonally adjusted). However, expenditure on equipment, plant and machinery is down by 7.1 percent for the 12 months to June 2009.
It is not surprising that expenditure on equipment, plant and machinery picked up in the June 2009 quarter as this is the quarter that the law introducing a business investment incentive passed the Australian parliament (even though the law came into effect in December 2008) and many would be seeking to take advantage of the concession before year end. In fact CPA Australia encouraged businesses to consider this as a possible appropriate year end tax planning strategy.
The ABS also noted the increase in investment in equipment, plant and machinery was relatively strong in small business – again this is not surprising given that the investment incentive is skewed towards small business. These assumptions are backed by the observation from the ABS, which stated ‘Communication with businesses indicated that this increase was stimulated by the Federal Government’s investment allowance scheme incentives.’
In relation to projected private capital expenditure, the ABS is predicting that the trend in total new capital expenditure by private business is to return to growth in the next 12 months – and that the trend is for relatively strong growth. This projected growth, according to the ABS will mainly come from the expenditure on buildings and structures, where ABS projections predict a dip in expenditure in the September quarter, before a rise to the end of the 2009-10 financial year. This rise will be concentrated in mining. On the other hand, projections for expenditure on equipment, plant and machinery to June 2010 indicate near term growth before a decline from the beginning of January 2010. Again, this is understandable given that the investment incentive expires at the end of this year.
Smooth sailing!
Prime Minister supports CPA Congress 2009
Unless you’ve been tucked away on some remote desert island - perhaps waiting for the GFC storm to pass by – you probably know that each year the month of October marks the annual congress season for CPA Australia. And this year we have been fortunate to receive the support of the Prime Minister the Honorourable Kevin Rudd MP to help launch proceedings by way of a Message from the Prime Minister. The message touches on many of the things we’ve been blogging about for some time, for example – Australian businesses like many around the globe are facing exceptional economic and business challenges, and while Australia has shown a lot of resilience (see my previous blog), recovery is expected to be slow, and unemployment still expected to rise. The PM’s message also talks of the need for Australians to work smarter and harder, and touches on many themes you will find in various forthcoming Congress sessions. CPA Australia undertakes a significant consultative agenda with government, politicians and others on behalf of members and the profession on an ongoing basis. And we do not always see eye to eye on all issues, but at the end of the day, our professional, business and economic interests are more often than not closely aligned. And we very much appreciate the Prime Minister’s message of support and well-wishes for the forthcoming Congress season.
I hope to see many of you at this years Congress, and as always, smooth sailing!
View the full message from the Prime Minister on your state’s CPA Congress page:
Economic recovery and the future Australian tax system
The Australian economy is showing remarkable resilience. And the stock market is showing even more positive signs. Will it be the ‘Nike swoosh’ recovery trend on the graphs? Or the ‘double dip’ ‘big W’? Or something else? I’m not in the business of giving these types of forecasts. But over the last few months, it is clear there has been a lot of value in the markets. However, I also note that those investors that decided to ‘sit it out’ for a while are still getting around 4% ROR on government secured term deposits, which of course is always preferable to taking a loss. But what of the future of investing? What if we lose our imputation credits? What would that mean to many Australian’s retirement savings strategies? In our recent submission on the Henry Tax Review’s second consultation paper, we indicated that CPA Australia was very supportive of the current dividend imputation system and that we did not see a compelling case for a move away from it at this stage. We particularly noted the significant importance of the existing imputation regime for the retirement income strategies of older Australians including self-funded retirees.
We were, therefore, pleased to note that in a recent speech Dr. Henry took the opportunity to provide an insight into the Review Panel’s thinking on Australia’s company tax arrangements, including the imputation system.
While noting Treasury’s earlier concerns as to how dividend imputation could become less relevant in an increasingly globalised economy and the fact that Australia and New Zealand are now the only two OECD countries with such a system, Henry said that he did not now think the time has yet come for dividend imputation to be abandoned.
He noted in this regard the significant benefits arising from dividend imputation including particularly for SMES and the fact that it encourages Australian companies to pay Australian tax.
That said though, it seems likely that Treasury will continue to look in the medium term for alternative means of accessing the benefits of imputation that are better attuned to the needs of a global economy including Australia’s reliance on foreign capital.
Further information on the above and the Henry Review generally are available from the Treasury website.
I’m interested in your thoughts - why not drop me a line and let me know?
Smooth sailing!
GFC-led state tax reform?
It was reported earlier this week that the Australian states are now getting excited about state tax reform. While it is encouraging to see the states at last supporting reform, arguably they have little choice as their revenues are facing a steep decline as a consequence of the current economic downturn. CPA Australia has been calling for ‘root and branch’ reform of state taxes for a number of years, both via regular submissions to state governments and the Commonwealth and also in conjunction with other business organisations such as the Business Coalition for Tax Reform.
CPA Australia’s submissions over recent years have considered reforming the inefficient and narrow-based transaction duties on property transfers and insurance policies which should either be eliminated as soon as possible or phased-out over a specified period. Motor vehicle duties could be replaced with taxes more closely related to vehicle usage such as road user charges or congestion type levies.
Not all state taxes are inefficient and there is a strong case, in the absence of any increase in the GST, for retaining existing payroll and land taxes particularly if they can be reformed by widening the respective tax bases to enable the existing rates to be reduced. This is not a popular option with everyone because it is sometimes seen (somewhat erroneously?) as a tax on jobs.
There would still be significant costs involved in this exercise but a possible way to balance the budget could be to give the states access to the personal income tax base subject to specific terms and conditions set by the Commonwealth. This is a form of tax sharing common in other comparable jurisdictions such as Canada.
These changes could also pave the way for a move to a truly national tax system with one administrator rather than the existing eight state revenue offices and the ATO.
It has been suggested recently that the Henry Tax Review places a significant priority on state tax reform which, if true, is welcome news since the current review provides an ideal opportunity for major and long overdue reform in this important area, effectively following on from the earlier changes to state taxes in the context of the introduction of the GST in 2000.
Take a look at our most recent submission [PDF] on state tax reform, and let us know your thoughts.
Smooth sailing!
The GFC and tax time
Earlier this week, the Australian Tax Office released its 2009-2010 Compliance Program.
In what is now an annual event, the Compliance Program provides an excellent high level overview of where the tax office intends to focus its resources regarding service and enforcement activities in respect of taxpayers and the tax laws. It includes details about individuals, micro businesses, SMEs, NFPs, super funds and right up to and including very large businesses and international transactions.
So what does this have to do with the GFC you wonder? Well, precisely this – in times of financial hardship such as that experienced around the world since October 2007, government tax revenues inevitably start to drop as everyone starts to tighten their belts. And while some of the drop in tax revenues is directly attributable to lower sales activity in domestic and worldwide markets there are other factors at work. For example the tax office advises that in times of financial stress the propensity for taxpayers to start to ‘cut a few corners’, or perhaps more correctly, engage in illegal activities such as under reporting cash takings or inflating deductible expenditure claims. Or perhaps it is as straightforward as getting behind in their tax payments during the year.
Against this background of potential client/ taxpayer behaviour, it would pay all taxpayers and tax agents to be mindful of both their obligations and the Tax Office’s hit lists for 2009-2010 in their tax return preparation activities in the coming season. And it will be a fine balancing act for the tax office – how to collect the taxes outstanding, without putting taxpayers out of business in tough economic times; and also in circumstances where government expectations for tax revenues will be high as they seek to wind back the significant budget deficit over the coming years.
Smooth sailing!
IFAC G20 Summit update and ‘smooth sailing’
‘Not that the story need be long, but it will take a long while to make it short‘ – Henry David Thoreau (1817-1862)
In my last post, I talked about CPA Australia’s recent joint participation and presentation to the IFAC G20 Accountancy Summit in London. Subsequently IFAC released a media statement that outlined, amongst other things, the following Summit participants’ conclusions:
- governments and regulators need to quickly step up initiatives to promote convergence to global accountancy and auditing standards.
- the public interest would best be served by a single set of high-quality, principles-based financial reporting and auditing standards for listed and public interest entities.
- the importance of having balanced views in the standard-setting process and ensuring that there is no undue influence from any one stakeholder group.
- the need for the International Accounting Standards Board to have a robust governance structure that will ensure its effectiveness and independence.governments to follow the same high standards of financial reporting as their private sector counterparts and to adopt International Public Sector Accounting Standards.
- World Bank Chief Financial Management Officer Tony Hegarty also announced that the World Bank and IFAC will work together to develop a new initiative to deepen cooperation in this area which was also supported by summit participants.
There were many other recommendations also about SMEs, sustainability and environmental issues and corporate governance. These recommendations will form part of a submission to the G20 to be sent prior to their meeting in September 2009.
On another subject, people are now asking me where did the idea for my blog sign-off ‘smooth sailing’ come from? The idea really came from the combination of three thoughts:
One – our GFC site carries the title ‘Navigate your way through the crisis’ and features a picture from behind a wooden ship’s wheel, with the ship forging ahead in to what may well be uncharted waters. And in the context of the GFC and collateral damage these waters certainly are uncharted.
Secondly, business and business advisers, governments and many other stakeholders may all metaphorically have their hand somewhere on the ship’s wheel trying to steer us well away from the economic storm and tempest that we have been experiencing since October 2007, and into calmer economic waters. This is no easy task. Some might argue that this is part of the problem, especially if the hands are all pulling in opposite directions at the same time!
Thirdly, I really felt it needed something catchy and not just ‘see ya’ or ‘au revoir’ or something else. Regardless of what sign-off is used, it is important to note the end of the economic storm is not clearly in sight, at least for the short term. As a consequence of massive fiscal stimulus packages and falling government revenues, most economies now face huge deficits that will need to be serviced and ultimately repaid. This inevitably means there is more economic pain or stormy economic times to come, consistent with some government’s current warnings.
So for these reasons, I think the objective of smooth sailing is both meaningful and appropriate. So until next time – smooth sailing to you all.
GFC and the IFAC G-20 Summit
One of the key finance and business issues to emanate from the GFC and subsequent ‘great recession’ is how to ensure it does not happen again. With this in mind CPA Australia made representations at the International Federation of Accountants (IFAC) G-20 Summit in London on Friday. The object of the Summit was to ‘obtain the perspectives of accountancy institutes on how the profession can best contribute to strengthening the global financial system’.
The IFAC Summit provides a very opportune forum for CPA Australia to advance its thoughts on in this regard, and in a joint presentation to the Summit, Professional Standards General Manager Denis Pratt, in the context of the summit objectives, made the following recommendations:
- that IFAC examine experience with international auditing standards to facilitate global convergence and high quality financial reporting
- IFAC should position itself as important player in the gathering of information to contribute to international co-ordination of regulatory frameworks
- IFAC should undertake modelling of good corporate conduct informed by relevant international frameworks and a thorough understanding of ethical and risk behaviours to promote the alignment of corporate behaviour to reasonable social expectations
- IFAC develop strategies to operationalise their commitment to the development of high quality standards and
- consideration of the place of the Lecce Framework in IFAC messaging.
Why not have a look at the joint presentation (MS PowerPoint, 166kb) and drop either Denis or Dr Mark Shying from our Professional Standards team a line on your thoughts? Comment below and I’ll forward it on.
Smooth sailing!
Agribusiness and the GFC
“For every complex problem there is an answer that is clear, simple and wrong “
- (H.L. Mencken)
The recent collapses of Timbercorp and Great Southern in Australia raise a lot of very complex questions, and earlier today CPA Australia gave evidence to the Australian Parliament’s Inquiry into Managed Investment Schemes which is considering what went wrong and why. This followed our earlier submission to the inquiry. For example, were their respective failures caused by the global financial crisis and subsequent economic slowdown and credit crunch? Very possible, particularly when many of the products on offer were not destined to produce income for 10+ years. In situations such as these you either need very deep pockets or a very friendly banker – or both. And the availability of credit to business generally during the GFC has been problematic of course. But I think it will emerge that there were many other factors at work also that certainly did not assist either entity’s prospects of survival. Some of these will no doubt include the drought, fluctuating commodity prices, their business models and also the general downturn in product sales. Agriculture and agribusiness is risky business at the best of times, and CPA Australia has had a guidance note alerting to that effect in the public domain since 2007.
We wish the Parliamentary committee luck with its inquiry – they certainly will need it as there are a lot of competing issues at stake other than the future of the MIS industry, for example – investors – past, present and future, the various agribusiness industries, our export markets, and non-MIS primary producers. And there is no clear cut solution, to me at least. Post me a comment and let me know your thoughts on this topic.
Smooth sailing!
Podcast: Auditing and financial reporting in times of economic uncertainty
In my last post, I mentioned that my colleague Gary Pflugrath was about to release a podcast on the topic of auditing and financial reporting in times of economic uncertainty.
You can now download his podcast interview [mp3, 9mb] with Valerie Clifford, Partner at PwC. Using the recent AUASB Bulletin as a point of reference, she discusses and provides examples from her own experience, of many important matters for companies, directors and auditors to consider in reporting and auditing.
Let us know what you think by leaving a comment.
My recent reading: auditing and going concern articles published by AUASB
I was recently discussing the global financial crisis (as one does) with one of my colleagues, Gary Pflugrath. You might even know Gary, as he is CPA Australia’s top man on auditing and assurance policy and regulatory issues. He brought to my attention two recently released publications that, although they’ve been created in part as a response to the GFC, no doubt have much broader application. The first one is titled Auditing Considerations in an Uncertain Economic Environment. Released by the AUASB, this publication is primarily focused on providing useful guidance for auditors when conducting audits of financial reports in times of economic uncertainty. But it also provides information for reporting entities. Watch for Gary’s forthcoming podcast on this topic also.
The second one is a joint AUASB and AICD product titled Going Concern issues in financial reporting: a guide for companies and directors. This publication “explains the concept of going concern and assists company directors in performing and reporting on their going concern assessment”.
Why not check them both out. And let Gary and I know what you think of them.
Smooth sailing!
World Bank and OECD updates
CPA Australia’s corporate plan 2009 -2011 sets out its vision - for CPA Australia to be the global professional accountancy designation for strategic business leaders. And while this is our organisation’s goal, how does it relate to your own career aspirations? Assuming there is some symmetry between the two goals for many of you, how will you be able to fulfill the goal of being a strategic business leader if you are not keeping up with world economic developments? The following may be of some assistance or at least get you thinking.
The last few days has seen the release of reports from both the World Bank , Global Development Finance - Charting a Global Recovery and the OECD with their latest Economic Outlook. The release of these two reports closely follow last weeks IMF report timing-wise. And while the reports actual forecast numbers may differ, their messages are substantially the same. That is, that economic conditions for 2009/2010 will remain difficult, with global economic recovery some time off, and slow when it does arrive. The World Bank actually says the ‘timing and strength of the economic recovery remain highly uncertain’, while the OECD is slightly less negative, suggesting ‘the bottom of the recession is likely to be reached only in the second half of the current year’.
On a brighter note, however, all the reports acknowledge that the various government stimulus packages have played their role in ensuring things have not been much worse. In fact, comparatively speaking, Australia’s own economic story is a good one. The OECD concludes that it is the best performing country in the OECD with the smallest contraction of all countries in the OECD. However this does not mean Australia’s future is without some pain, including rising unemployment.
The accounting profession and providing strategic business leadership is based on information, and making informed decisions, and, perhaps even more so in tough economic times, this includes brushing up on the available global economic data. I encourage you all to keep up to date in this regard. The real trick will be to not get stuck in the detail. Consider the bigger picture, the trends and try to identify the opportunities the recovery may offer you or your business.
On a slightly different note, watch out this week for the July 2009 edition of INTHEBLACK magazine. It includes a very interesting piece on developing a ‘killer resume’ – a very handy skill to have in tough economic times.
Smooth sailing!
Getting through tough economic times
Regardless of where you are situated in the world, there is no doubt many of you will be seeing or even be experiencing first hand some of the impacts of the global economic crisis. And although things can always be better, and the fact that there are some positive signs from time to time, it is expected that the pain for some will continue for some time. For example, in Australia, many economists are still predicting unemployment of 7.5 – 8.5% by the end of 2010.
The latest World Economic Outlook (PDF) issued by the IMF predicts that the global economy will contract by 1.3 percent this year (however the rate of contraction will ease from the second quarter onwards). The latest Global Employment Trends – Update (PDF) issued by the International Labour Organization, predicts global unemployment could increase by between 29 million to 59 million in 2009 (compared to 2007) – this corresponds to a global unemployment rate of between 6.5 to 7.4 per cent (in 2007, the global unemployment rate was estimated to be 5.7 per cent).
As part of our organisation’s response to the global financial crisis and the subsequent economic slowdown, we have put our staff and member committees to work and developed a series of publications and tips that may help assist you on getting through these tough economic times.
These short products are available for download:
- Top tips for recession-proofing your business
- Tips for CFOs
- Tips for management accountants
- And one of my personal favourites - Tips for the accidental corporate treasurer
As strategic business leaders CPAs have the opportunity to play an important role in ensuring businesses make it through these tough economic times. In this regard CPAs are part of the solution, and certainly not part of the problem.
Help us play our part, and join the conversation here on our blog.
Smooth sailing!