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The accountant - autumn 2019

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  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    In my first address as President of the Institute, I had highlighted five core pillars that shall characterise the MIA’s strategy in the coming years. 
    Going forward, in every address I will highlight the key initiatives within the domain of each of these five pillars.  We are determined to execute our programme with resilience and we would like to ensure we are accountable to you, as our members, in respect of the achievement of the Institute’s strategic objectives.   

    1.    MIA as a home to all qualified professional accountants
    Our market has changed drastically in the last few years.  One of the key changes is the presence of a significant number of expatriate accountants practising their profession in Malta.  Expatriate accountants are extremely important for our local profession and help us address the supply side challenge that we are facing on a day-to-day basis, apart from sharing skills and experience.  The Institute must take cognisance of this reality and will be widening its membership base by introducing an international affiliate programme.  The objective of this programme will be to enrol and involve within the Institute expatriate professional accountants practising as accountants in Malta, who would have qualified as accountants through a route such as overseas university degrees, which would not constitute one of the three routes typically utilised in Malta to attain qualification.  We look forward to reaching out to the expatriate community and to involving these colleagues within the structures of the Institute, including its committees.  We strongly urge these accountants to contribute to the MIA and would like them to assist the Institute in achieving our objectives. 
    2.    Elevating quality and raising standards within our profession
    As you all know by now, the much awaited fifth round mutual evaluation report on Malta adopted by the MONEYVAL Committee has been published.  Our profession is mentioned in a number of areas within the report.  Clearly there are lessons to be learnt and, whilst we remain confident on the overall quality of the profession, it is quite obvious that certain improvements need to be registered - and quite fast.   We are proud to be one of the principal gateways to businesses that choose Malta; but this role entails significant responsibilities and implies that we have to do the right thing for the jurisdiction all the time, sometimes even by turning down work and foregoing potential income streams.  We are part of the first line of defence, and must take decisions based also on the overall benefits to the market place, rather than solely by reference to individual or monetary objectives.  Our profession is the elite – but we need to live up to this reputation by being selective in what business we accept to service and by ensuring that the quality of our work is top quality all the time.  We must never relax on our key professional principles: 
    a) we need to understand the economic rationale underlying the business or transactions of our clients or companies with whom we are employed;
    b) we need to focus on substance of arrangements or transactions and not simply form –we frequently hear or use the expression ‘substance over form’;
    c) onboarding of clients and engagements requires rigour and critical analysis – it should never be deemed a fait accompli no matter how easy it seems;
    d) risk management and compliance are an intrinsic part of the day-to-day behaviour of a professional accountant – it should never be construed simply as a burden or cost;
    e) if something does not make sense, we should stop, think and take the necessary actions – if we are acting to the best of our professional skills and abilities we should not worry about the consequences as our profession will protect individuals doing the right thing.
    I expect our profession to live up to these principles, elevate the quality of behaviour in the marketplace and take all corrective measures necessary to keep on demonstrating the quality of professional accountants.  In the coming weeks the Institute will be organising a high-profile event, inviting regulators and bankers, to discuss the findings of the report and other matters impacting our profession. I understand that we all have professional pride and that sometimes we struggle to understand why our profession is the recipient of adverse feedback, considering the hard work and overall conscientious effort to act professionally by most accountants, which I personally witness on a daily basis.  But we need to embrace this debate on the overall quality of the profession with a positive approach – we will come out of this phase as a stronger profession demonstrating maturity and openness to feedback.
    3.    Enhancing the education and qualification process
    We have continued our discussions with relevant stakeholders and plan to increase our efforts in this area.  We would like to see all three routes to qualification in Malta being enhanced to take cognisance of today’s realities and expectations in the marketplace.  Our interaction with the Accountancy Board is extremely important to us and we will continue to work with our profession’s regulator.
    4.    Fostering collegiality and comradeship among accountants
    5.      Striving to make the Institute’s voice heard, loud and clear
    Currently the Institute is addressing a number of national or regulatory matters which will potentially have a significant impact on our profession.  The Proposed Legal Profession (Advocates) Regulation Act is a key development in this respect.  As an Institute we support this proposed legislation as the proposals will elevate the regulation of the legal profession.  However, there are a number of proposed measures which will potentially have an impact on the services we provide as a profession and on our profession in general.  It seems that the proposed legislation will define the restricted services which members of designated professions (other than the legal profession), including accountants and auditors, can provide in respect of legal and regulatory requirements.  Furthermore, it seems that, amongst other measures, the extent of ownership and management of legal firms by members of designated professions will be severely restricted, and that a professional would not be able to be a partner in a legal firm and in an accountancy or audit firm simultaneously.  We must continue to assess the impact of these proposals on our profession, but also respect and understand the origin of such proposals.   
    Our profession respects the legal profession tremendously; we have worked together as two professions side by side to make our marketplace successful. I believe our national success is also partly due to this great collaboration between our two professions.  We must treasure this relationship and mutual respect.  But each profession clearly has to defend the respective interests of its members and my responsibility is to defend the interests of the members of the MIA.  Rest assured that I will serve the interests of all members, not just those hailing from bigger or mid-tier firms.   We will work for your interests, but we also want to do the right thing and place public interest above everything else.  We need to defend our interests with utmost respect to the legal profession and also keeping in mind that the quality within both professions, not just ours, needs to be safeguarded to secure a strong marketplace. 
    The MFSA has published a Consultation Document entitled Raising the Bar for Company Service Providers proposing a number of significant changes to the manner in which CSPs are authorised and regulated, impacting their business model.   As an Institute we will be establishing a forum to review these proposals in detail and to contribute with our feedback.  I urge you strongly to participate and share your feedback.  This is a very important opportunity not only to participate in regulation-setting as a profession, but also to demonstrate how serious and mature our profession is.
    It is through such processes that, as a profession, we will demonstrate collegiality and comradeship. The MIA leads the profession on these matters and strives to defend our members’ interests vigorously and relentlessly. But, in the process, we must always uphold the best interests of the entire profession, public interest and the overall quality in the market-place.  Our profession will be successful in the future only if our marketplace is successful and considered robust.
    Changing tack, we are taking a number of steps to enhance the financial strength and future viability of the Institute.  You will have noticed that, amongst a number of steps, we have decided to cease certain tuition operations within AIM Academy.  We believe that our setting up this activity has served the marketplace well, but we also think that times have changed and that the Institute should focus on other matters, considering the number of learning providers which are now active.  It was a tough decision, but we represent our members within the Institute to take tough decisions as well.  I will provide a more detailed update on our initiatives in this and other related areas within the next address.
    On a softer note, the Institute has organised a football tournament with the objective of raising funds for Beating Hearts Malta.  It was a great event which was very well attended.  I thank all those who attended and contributed to the organisation of this event.  We will endeavour to increase our efforts in this area with your help and support; to continue demonstrating what great and generous individuals, accountants are. 


  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    The Malta Institute of Accountants (MIA) welcomed 256 new members during an official ceremony at the Malta Conference Centre on October 24. The new members have acquired their ACCA qualification or ACA qualification or the University of Malta degree. 

    Addressing the ceremony, the Institute President Mr Fabio Axisa congratulated the New Members on their success and encouraged them to keep improving the level of standards of the Accounting profession. Moreover, the MIA CEO Ms Maria Cauchi Delia said that the Institute promotes a culture of community engagement among professionals and urged new members to “make an impact on the community, to challenge problems and contribute actively to their solution.” 
    The New Members’ Ceremony was attended by several distinguished guests, including ACCA Director of Professional Education, Mr Reza Ali; ACCA Head of Western Europe, Mr Abdul Goff ar; University of Malta Dean of the Faculty of Economics, Management & Accountancy, Prof. Frank Bezzina and ICAEW Head of Cyprus and Greece, Ms Christiana Diola. MIA Council members and former presidents were also among the special guests. In his address, Mr Ali welcomed the new members to “great profession” citing research showing that Accountancy has a history of more than six millennia. Meanwhile, Ms Diola said that the young professionals are crucial to Malta’s future, as Malta continues to grow into a financial centre.

    Prof. Frank Bezzina encouraged new members to become ‘change agents’ who can improve the reputation of the profession by “standing tall and serving clients better.” He reminded the audience that the value that Accountants bring to society, goes beyond their core services. During the Ceremony, six new members were awarded individual awards for their achievements:


    • Julija Daubaraite received the Malta Overall Performance September 2018 ACCA Top Affiliate Award
    • Christopher Bugeja received the Malta Overall Performance December 2018 ACCA Top Affiliate Award
    • Joseph Falzon received the Malta Overall Performance March 2019 ACCA Top Affiliate Award
    • Dinah Lee Delceppo received the Malta Overall Performance June 2019 ACCA Top Affiliate Award
    • Janice Camilleri was the recipient of the Best University of Malta Accountancy Student Award 2019
    • Kostas Karagiannis received the ACA Best Student 2019 Award



    Institute member Mr Christopher Cardona was awarded the Kevin Mahoney Award for Altruism for his selfless support to a colleague who was going through a difficult ti me. The annual prize recognises professionals who distinguish themselves for altruism in the community.
    Following the ceremony, a reception was held for the new Members and their guests.

    Conferences attended by the MIA Team
    2019 World Standard Setters Conference
    Every year, the IFRS Foundation organises the World Standard Setters Conference which brings together professionals from different jurisdictions to discuss the IFRS outlook for the following months, including the current exposure draft s and the upcoming consultations.
    There were 160 delegates and observers from 70 diff erent jurisdictions at this year’s World Standard Setters Conference, that took place this October 2019 in London, UK. The Malta Institute of Accountants (MIA) was represented by Ms Pauline Micallef (MIA Technical Strategy Manager). The theme of this year’s conference was the preparation of the imminent consultations being issued in 2020.
    Participants were encouraged to increase awareness among professionals of the online resources found on the IFRS Foundation website. The website includes different agenda decisions on various topics and current changes. Another item on the agenda was a discussion on the exposure draft  for the primary financial statements that is expected this December 2019. The accounting treatment of goodwill and impairment was also included: a complicated subject that poses a risk of misreporting and interpretation. Hence, how we can meet the needs of users, that is the need of correct financial information. How important is the value of goodwill on the Balance sheet?
    The MIA representative participated in the IFRS Taxonomy breakout session. IFRS Taxonomy is the electronic submission of the financial statements that gives a very efficient way of comparing data and also gathering them. The other breakout session attended by the MIA was about disclosure initiatives. Typically, preparers of financial statements tend to go through a checklist simply to get disclosures done rather than make disclosures to add value. Hence, the board has identified that this information is not relevant and better disclosures are required in order to add value to the users of financial statements.
    It was also noted that professionals worldwide need to “work together” and take part in consultations by giving feedback required on ti me and by supporting the implementation of changes in the respective regions.

    Accountancy Europe Members’ Engagement Day
    The MIA attended the Accountancy Europe members assembly held on the 2nd of October and was represented by CEO, Ms Maria Cauchi Delia. This was the first members’ engagement day organised by Accountancy Europe attended by 120 professionals representing various accountancy bodies within the EU. Several areas were discussed, and many speakers highlighted the current challenges being faced by Accountants and Auditors on a daily basis.
    It was highlighted that the EU is putting pressure to move towards sustainable finance. The definition of growth needs to be widened to include ESG criteria. The problems faced in this area go beyond the environment, and better reliable corporate information is required to sustain finances.
    Each jurisdiction must follow a certain criterion when it comes to tax advice, in order to counteract tax avoidance and tax evasion. An interesting discussion was included in terms of Taxation and Ethics, that is: Where is the ethical bar on tax services? Should there be relevant ethical guidance specifically to control tax advisors and Accountants? The working group suggested several ways on how to mitigate this through the code.
    There is a current debate on the responsibility of the auditor on an audit engagement. The existing auditor expectation gap; that is the gap between what the general public expects the auditor’s role to be and what the auditor’s role actually is. The attendees shared different views on how this gap can be narrowed in the future and how the role of the auditor can eventually be extended through digitisation improvements and data analytics.
    There is a common drive by different bodies to involve young members and to engage them in order to be able to contribute to the Accounting profession. Young members are the future of the profession and, as change is inevitably taking place, we need young member’s energy to be able to maintain these changes.

  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    Introduction – Importance of Small businesses to the Maltese Economy
    The importance of Small Businesses to the Maltese Economy is clearly outlined in the Policy note “SMEs’ contribution to the Maltese economy and future prospects”, issued by the Central Bank of Malta in October 2018[1]

    “Official data suggests that the contribution of Maltese business economy SMEs was close to half of total value added, which is significantly higher than the proportion of total value added that is generated by SMEs in the EU (which is around two-fifths). Official statistics suggest that SMEs accounted for the lion’s share of growth observed recently in Malta. If one excludes Malta’s non-business economy sector, growth in value added was still more than double the increase observed in the EU economy as a whole. This difference in growth was due to Maltese SMEs, as larger business economy firms grew at a slower pace than their counterparts in the EU. In fact, Maltese SMEs in the business economy sector generated nearly two thirds of all growth in value added and half of the rise in employment. This is a healthy development as growing dependence on many SMEs is making the Maltese economy less susceptible to idiosyncratic shocks.”
    External difficulties faced by Small Businesses in Malta
    The policy note mentions that for Maltese SMEs “the three largest major obstacles were skilled staff availability, uncertainty about the future and the availability of an adequate transport infrastructure.”
    While Malta has been going through a period of high economic growth a lot of Maltese SMEs are experiencing that they have reached their capacity limit with their present complement of employees. Hence, they needed to rely on foreign workers to keep growing the business. This is however leading to a new set of problems both at a macro and micro level. Many times, SMEs find themselves facing a high turnover in foreign workers and spiralling costs with regards recruitment and training. Many Maltese SMEs realise, now more than ever, the importance of staff retention, even at the cost of offering more flexibility at the place of work which is still less costly than recruiting new staff.
    Maltese SMEs are also facing the challenges and extra costs that the limitations of Malta’s infrastructure bring with it. Traffic has a cost for such SMEs as it ends up creating costly inefficiencies. While efforts on a national basis to improve such infrastructure are being made, there are efforts that Maltese SMEs could do to help the situation. These include flexibility on working times and the introduction of teleworking, coupled with privately organised carpooling or transport to and from the office.
    Achieving the needed financing in the most cost-effective way is always a challenge for SMEs. The recent economically buoyant years in Malta may have reduced the need for external funding, but this does not mean that access to SME financing has lost its importance. Bank financing remains the most important type of financing for SMEs, with banks fulfilling the role of risk management as part of the financing process. In this context, when certain securities are requested from bank financing, institutions like the Malta Development bank could play a role in aiding the achievement of such financing.
    However, there are several cases of SMEs that have reached a particular size which could make them access financing from capital markets. Malta has the SME specific Prospects MTF market which is serving the role for such SMEs to access capital markets whilst reaching a higher level of corporate governance in their business.
    Common Internal difficulties faced by Small Businesses in Malta
    Usually, Maltese SMEs are family businesses with involving different family members. Some of the challenges that these businesses face include:
    Complete lack of Corporate Governance:
    Many SMEs lack proper and formal structures whereby decisions are taken in a structured environment of checks and balances. Many critical and strategic decisions are taken on the fly by whoever feels entitled to take such a decision within the company, without proper debate or analysis on such decisions.
    No external consultant:
    Small Businesses would benefit from the services of an experienced, external business consultant. Such consultant would make sure that adequate structures are implemented and that a level of corporate discipline is maintained.  
    Lack of Strategic Thinking & Comfort Zones:
    Many times, people leading small businesses get involved in the daily operations and rarely, if ever, have time to focus on future planning and the strategic direction they would like to implement in their business. Many SMEs find themselves happily operating in a comfort zone, only to be negatively surprised when external factors re-shape the market they operate in without them even realising.
    Lack of Training:
    Family members may be promoted to leading positions without proper training of how business is to be managed and how to deal with the different stakeholders involved in the business.
    No clear control and reporting mechanism:
    Many SMEs lose control of the most basic things that any business needs. These include basic reporting mechanisms, updated management and audited accounts, credit management and performance management of their employees. This usually leads to companies hitting a brick wall, with many times, cashflow issues being the first signal of all the underlying problems.
    Problem with employee turnover:
    With a lack of corporate culture, many employees find themselves having to work within the confines of the work culture imposed by the owner of leader of the SME. Moreover, due to their nature SMEs cannot always offer improving prospects for career advancement for their employees. With regards family owned SMEs, employees usually find themselves out-manoeuvred by family members who progress in the business due to the simple fact that they are family members and not on the merits of their abilities.
    Lack of Succession planning:
    In the case of family owned SMEs, it is usually the case that no proper succession plan has been established. This creates a lot of tension between the old guard which feels it should continue leading and the new guard which feels that the time is ripe to start changing things in the business. Conflicts usually arise that can be very damaging to the business.
    Marketing, Market Positioning & Competitive Analysis seem superfluous:
    Many SMEs think that spending money on market research, marketing their business and positioning it strategically in the market, whilst analysing what competition is doing, is all wasted money. The realisation that this was false economy normally is made when it is too late to make amends. With technology effecting any business venture, some fail to realise that there are very cost-effective channels today to reach your present and future customers in an effective way.
    [1] https://www.centralbankmalta.org/file.aspx?f=72222

    Silvan Mifsud holds a degree in Banking & Finance from the University of Malta and an MBA from the University of Reading, specialising in Corporate Finance and Business Leadership. Silvan has been involved in many sectors of the economy holding various managerial and Director roles.  Silvan is presently working as a Director for Advisory Services at EMCS.
  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    Transforming the finance function to be at the heart of decision making
    Understanding how professional accountants will continue to be relevant in a future shaped by digital transformation and broader perspectives of value creation has been my focus over recent years as chair of the Professional Accountants in Business (PAIB) Committee of The International Federation of Accountants (IFAC), which involves the Malta Institute of Accountants, represented by Stephen Muscat.

    Our work culminated in A Vision for the CFO and Finance Function: From Accounting for the Balance Sheet to Accounting for the Business and Value Creation, which sets out the future desired state for an effective finance function; and CFO and Finance Function Roles for the Next Decade, which looks at the roles that will enable finance and accounting professionals to remain integral to their organizations.
    To develop this future-fit series, we have interacted with various business and finance function leaders on exciting change journeys with a common destination – at the heart of decision making.
    Finance and accounting teams can no longer survive as a back-office function and others in the business are demanding more from their finance and accounting colleagues. But transforming finance functions to be at the heart of decision making and value creation is challenging and cannot be achieved overnight. While many have made strides toward greater efficiency and reduced costs, they often struggle to transform the finance function into a business-facing function that supports and enables decision making across the organization.
    Fewer people are needed to support transactional and reporting tasks. More focus is now needed on areas of opportunity, such as leveraging data and planning a path to long-term value creation through transformed business models.
    The challenge for finance and accounting professionals is that the financials only tell part of the value creation story. Value is created and destroyed beyond the balance sheet. Strategic and operational factors, often intangible and difficult to monetize, make up much of total enterprise market value. Drivers of future cash flow that represent key areas of opportunity and risk are varied and include factors such as governance and culture, social license to operate and brand reputation, innovation and intellectual property, talent and human capital, data, operational excellence and quality business processes, and customer and supplier relationships.
    Understanding and communicating only the 20 per cent or so of value that is represented on the balance sheet is not a path to continued relevance.
    In today’s digital world, the CFO and finance function need to help navigate, measure and communicate what matters to long-term success while meeting expectations from investors and boards for short-term performance. This involves analysing and interpreting information related to all areas of value creation and helping to understand and deal with trade-offs. It also involves providing an objective view (“the sanity test”) in significant decisions and proposals.
    To move the finance function from a transactional, reporting and compliance focus to one that guides and enables decisions across an organization requires four enablers of change: a customer focus; the right mix of talent and skills; mindset; and being digital and data-driven.
    To deliver useful insights to its internal customers, the finance function must be outward looking with a clear understanding of its internal customer needs at board, management and operating levels.
    It is also important to understand external customers and their experiences and interaction with the organisation. How value is delivered to customers influences the finance function contribution in terms of information and insights, business case evaluations, back-end processes and systems.
    Digital and Data-Driven
    Digitalisation and technology are reshaping the transactional and reporting environment and taking out cost as headcount reduces. Recent research from the McKinsey Global Institute shows that 40 percent of finance activities can be fully automated, and another 17 percent can be mostly automated.
    However, an efficient finance organisation is not enough. To drive growth and value, it needs to enable interconnected and digital end-to-end business processes and systems. It also needs to invest in digital tools to help the organisation to enhance customer value and competitiveness in the marketplace.
    Talent and Skills
    Developing a workforce that can deliver value-added roles involves learning and development strategies that enable finance and accounting professionals to deliver business partner and specialist roles. Both big picture thinkers and specialist expertise are needed.
    Growth and Change Mindset
    Involves establishing a culture that encourages behaviours and actions to embrace growth, change and innovation based on continuous improvement, challenging existing practices, agility through experimentation and iteration, curiosity and exploration.
    These enablers are essential to the finance function being agile, integrated and customer-led and one that can deliver:
    • Actionable insights to support strategic and operational planning and decisions.
    • Performance analysis to steer the organisation toward achieving objectives, targets and long-term profitability, as well as to ensure alignment between strategy, planning and delivery.
    • Enterprise risk management to manage uncertainty, opportunities, and risks in the context of business objectives and the external environment.
    • Effective communication and storytelling on all aspects of an organisation’s business model and value creation.
    • Trust and confidence in the governance of the organisation, and in quality of data, processes, systems and reporting through adequate control and security.
    • Integrity and professionalism to encourage ethical behaviour and decision making throughout an organization to ensure sustainable value creation.
    To support you have a meaningful discussion on how and where to develop your finance function, we have also developed an accompanying assessment tool. This will help your board and management to review how far the finance function has progressed to business partnership.
    The next stage of our journey involves working with IFAC’s International Panel on Accountancy Education to further understand and identify the skills, future career pathways and learning and education needed to support future-ready professional accountants.

    Charles Tilley became chair of the IFAC Professional Accountants in Business (PAIB) Committee in January 2014, after being nominated by the Chartered Institute of Management Accountants (CIMA). He is a former member of the IFAC Board and chaired the IFAC Business Reporting Project from 2008 to 2011 and the UK Treasury Best Practice Panel from 2006 to 2007.
  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    Businesses compete not only when they are selling but also when they are getting paid. Very often, especially in business-to-business trade, our customers do not owe money only to our firm but also to other suppliers. Hence, our firms may be one of many suppliers chasing money from the same customer. This means that we are actually competing with other suppliers to get paid requiring us to gain and sustain a competitive advantage just like when we are selling our goods and services to them – we need to convince our customers to prefer us over other suppliers not only when we sell our products and services, but when it comes to payment of invoices, too.

    We are all aware that late payments can negatively affect our cash flow. If cash flow is the lifeblood of every business organisation, issuing proper invoices is the recipe that keeps the blood fl owing within the business.
    Unfortunately, one can identify several mistakes when suppliers issue invoices to their customers which result in late payment, increasing the cost of managing our Accounts Receivable. Correct invoicing is, therefore, critical that to ensure prompt payment by customers.
    But is there any particular art or science in issuing an effective invoice? The answer is, yes.
    Simply put, the invoice is the document used by suppliers requesting payment for the goods and services sold to customers; an important task in the business transaction for every organisation. Customers will not pay unless served with a correct and properly scripted invoice and suppliers should give the necessary attention to how the invoice is draft ed while following the invoicing process to ensure sound cash inflow.
    Lacking an efficient and accurate invoicing process triggers complaints and disputes between supplier and customer because customers cannot be expected to pay invoices, they believe to be incorrect. Oft en, suppliers send incorrect or improper invoices because they may not be well aware of what an invoice is, what it should consist of, and when to send it to customers.
    What is an invoice?
    An invoice is simply a supplier’s request for payment for the goods and/or services purchased by a customer.
    The main and sole scope of an invoice is to facilitate the payment for the goods sold or for the services rendered.
    Therefore, an invoice should be a straightforward document requesting payment from customers, without advertising clutters or any other unnecessary details and information written or printed on it.
    Good credit management practices suggest that suppliers should facilitate timely payments by serving customers with invoices that are simple to read and understand, that accurately describe the products and services purchased by the customer, include all the necessary information and are served to customers promptly.
    Efficient Collection is all about timing – the sooner you ask for money, the sooner you get paid.
    Figure 1. shows the four key elements of an effective invoicing and invoicing process - TACU.

    Timeliness is important. An invoice should be sent immediately following a sale. A customer can only pay when an invoice is received. Therefore, sending invoices promptly results in more efficient payments. Invoices should also be properly dated.
    Accurately written invoices minimise disputes and complaints between the supplier and the customer and customers are not expected to pay if they have a dispute. Exact quantities, good description of goods and services purchased, prices and any discounts should be quantified accurately.
    A complete invoice showing all the required details, including payment terms and conditions of sale, help the payment process to run smoothly. Customers will not pay if an invoice is incomplete and will request such invoices to be amended as appropriate by the suppliers, leading to late payment.
    Customers should understand fully what is written on the invoice. Easy and simple to understand invoices help customers reconcile the goods and services received and payment will be made accordingly.
    Figure 2. illustrates how an invoice should be written keeping the four key TACU elements in mind for better effectiveness.
    What should an invoice consist of?

    The Monthly Statement
    Following the invoice, it is always commendable to send monthly statements to customers. Monthly statements serve to remind credit customers to pay their dues according to the agreed terms and inform them of the amount owed to the supplier. Monthly statements should be clear, accurate and understandable and they should refer to previous invoices.
    It is helpful to indicate the age of the debt status, such as Current, 30 days overdue, 60 days overdue, 90 days overdue as shown in the figure 3. below.
    What should a Monthly Statement consist of?

    Josef Busuttil is the Director General of MACM - Malta Association of Credit Management and President of FECMA - Federation of European Credit Management Associations.He obtained his MBA from Henley Management College, a Member of the Chartered Institute of Marketing (UK), and Fellow of the Chartered Institute of Credit Management (UK).Josef contributed to and delivered a number of intuitive credit management workshops and presentations organised by highly reputable international organisations and business schools. He is a regular contributor of business articles to international business press.

    MACMMalta Association of Credit Management The Malta Associati on of Credit Management (MACM) is a notfor-profi t organisati on, providing a central nati onal organisati on for the promoti on and protecti on of all credit interest pertaining to Maltese businesses. MACM represents the credit profession across all economic sectors. It is a centre of experti se for all matt ers relati ng to credit management in Malta. MACM off ers a range of services to the local creditors, including, credit management informati on systems, credit management education, training, conferences, seminars, and lobbying acti viti es. It is the CICM (UK) accredited Training Centre for Malta. MACM is a member of the Federati on of European Credit Management Associati ons – FECMA. MACM is the distributor of Graydon Internati onal Credit Reports in Malta.

  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    The global financial crisis of the last two decades not only challenged the regulatory and operative framework of the financial services regulation and supervision, but also highlighted the importance of financial consumer protection. Since the Great Depression of over eighty years ago, the banking system continued to witness a series of weaknesses caused by various factors. In fact, the support given to banks by EU in recent years was equivalent to an estimated third of its economic output.

    A Deposit Guarantee Scheme (DGS) has the specific task of protecting less financially sophisticated small depositors from the risk of losses they might incur when a member bank fails. Due to the close bond existing between banks in a financial system, a DGS provides the mechanism which enables depositors to have quick and immediate access to their funds even in the event of a bank’s failure. By participating in this financial system safety net, a DGS helps to keep the financial stability in stressful conditions under control by preventing depositors from engaging in a bank run. In addition to the DGS function to maintain public confidence in the banking system, banks’ risk levels need to be assessed both by a strong prudential supervisory activity through an appropriate regulatory framework and sound accounting and financial reporting regimes.
    Credibility is fundamental for a DGS to contribute successfully to the financial system stability. The DGS needs to be adequately designed, correctly implemented and properly understood by the public. A deposit guarantee system has to be able to withstand a systemic crisis by itself or capable of dealing with only a limited number of simultaneous bank failures.
    Despite the increased standardisation and coverage in DGSs, there is strong evidence that they may have failed to act as a “line of defence” during periods of crisis, leading to several amendments and proposals in reaction to financial crisis. The way that governments and central banks have responded to the financial crisis in recent decades - through bail-out of failing banks - indicates that DGSs failed in their objective. EU legislation already ensures that all deposits up to €100,000 are protected, through their national deposit guarantee scheme (DGS) in case of a bank failure. However, national DGS can be vulnerable to large local shocks.
    For this reason, a European Deposit Insurance Scheme (EDIS) was developed to provide a stronger and more uniform degree of insurance cover for all retail depositors in the Banking Union, ensuring the level of depositor confidence in a bank does not have to depend on the bank’s location.
    In 2012, the European Council agreed on a roadmap for completing Economic and Monetary Union (EMU) based on deeper integration and mutual support. Completing the Banking Union is an indispensable step to a full and deep EMU while reinforcing financial stability in the EU. The first pillar of the Banking Union consists of a common framework for supervision of banks to be implemented by the Single Supervisory Mechanism (SSM); the second pillar consists of a common framework for bank resolution to be implemented by the Single Resolution Mechanism (SRM). These two pillars have already been put in place. A third pillar, the EU-deposit insurance scheme, is still required and needs to be put in effect now. In contrast to the situation in 2012, the European banking industry is on a much more solid footing with more stringent capital and liquidity rules and a centralised supervision and resolution in place.
    On 24 November 2015, the EU legislative proposal for a European Deposit Insurance Scheme (EDIS) was introduced to further strengthen financial stability and depositors’ trust whilst reducing the dependency of the financial institutions on national governments in times of crisis.  The institutional framework for the EU deposit guarantee schemes consists of three main elements (i) the Directive (DGSD), (ii) the national legislations and rules, and (iii) the network of cooperation and information sharing between schemes and supervisory authorities.
    The setting up of the EDIS addressed the problems for large cross-borders exposures through banks’ branches and subsidiaries. This helps to remove competitive distortions, deal with administrative burdens, avoid branch/subsidiaries’ consumers confusion and, most importantly, preserve the internal market for retail banking.  Given that the premise of a Banking Union breaking the vicious circle between the sovereigns and the banks, a common system is an important element.
    The European Deposit Insurance Scheme is being rolled out in three stages, deployed gradually through to its full implementation in 2024:
    • Reinsurance stage (from 2017 to 2020): national deposit guarantee funds will only be able to access European funds when they have used up their own funds. Funds requested must be justified and in response to a possible moral risk. Additionally, the deployment of the funds will be closely monitored.
    • Co-insurance stage (2020 to 2024): during this stage, the national funds will not be obliged to exhaust their own resources before accessing European system funds. The European system will be responsible for part of the costs from the moment that money has to be returned to deposit holders. The contribution rate will start at 20% and increase gradually over the following four years.
    • Full insurance (2024 onwards): the participation rate in the European Deposit Insurance System is expected to reach 100% at this date, after which the single resolution fund will have been fully established.
    During the first stage, national DGSs were requested to exhaust national funds before making use of European funds (although with a limit). From the second stage of the process, then, risks will be genuinely mutualised as payments are shared from the first cent. European funds are, therefore, used without the requirement for national funds to be used first.
    Once EDIS goes into effect, banks will be compared to other EU-wide banks based on a deposits and risks profile. In this case, a local bank might have to pay more under EDIS than it did under its national DGS. This could lead to more discussions and slow down a smooth implementation of EDIS.
    While the creation of the EDIS introduces fundamental advantages, such as improved credibility, simplified pay-outs and failure resolution and reduction of moral hazard, it could also lead to disadvantages such as:
    • international supervising authorities as a requirement. The creation of a cross-border deposit insurance scheme is inconceivable before an international supervising institution and regulation are implemented.
    •  political obstacles if specific country problems hinder the establishment of such a project.
    • fund management/investment policy may also exist in connection with the management of a large pan-European deposit insurance fund.
    • administrative and operative complexities (IT systems, controls mechanisms) needed to run the scheme.
    A national DGS is obliged to inform the EDIS if there is the possibility of a bank failure.  Should compensation to depositors be necessary, EDIS would have 24 hours to decide the amount of funding to be provided on its part immediately.  In the case of a systemic bank failure where the EDIS fund would not be sufficient to cover all compensations required, pro-rata funding would be provided.
    Article 12 of the DGS Directive, which allows borrowing between DGSs, may be considered as a step towards a common EU-wide fund.  The Directive allows for borrowing between funds on a voluntary basis and on condition that this does not exceed 0.5% of covered deposits of the borrowing DGS, and subject to repayment within five years. Article 14 titled “Cooperation within the Union” covers the problem of treatment of depositors at branches set up by credit institutions in another Member State (MS).  The home MS of the bank will have the financial responsibility of the branch, but any compensation payment will take place through the DGS in the host member state, acting as a ‘single point of contact’ on behalf of the DGS in the home member state.
    Unlike the supervision of significant banks and resolution required by the Single Supervisory Mechanism (SSM), EU depositor protection remains, to date, decentralised.  The crucial issue for DGSs remains the link with resolutions, particularly in the event of a cross-border banking crisis. Article 11 of the DGS Directive allows member states to use its funds for resolution as a last measure to prevent bank failures when conditions imposed on the credit institution are met.  There is a possibility that different decisions could be taken by the Member States, according to their financial stability concerns, in cases where cross-border banks face financial difficulties.
    The EDIS dossier was also discussed during Malta’s EU Presidency in 2017 where Malta’s stance on the EDIS proposal emerged very close to that of the EU Parliament: prioritising the achievement of risk reduction while limiting risk mutualisation.
    Extensive debate is still needed to bring the EDIS in line with the EU’s planned reforms on financial supervision.  Work on the draft proposal to align EDIS with all the requirements of the 2016 roadmap is ongoing; progress, however, has been slow following disagreement between member states that are ready to implement EDIS immediately and those that want significant conditions on the introduction of EDIS. The gradual implementation of EDIS should be linked to the progress made on the other parts of the Banking Union and to the progress made in addressing legacy risks.
    Currently, the discussions are still ongoing at Working Party level. In time, we will know if the DGSs would need to be revised again to ensure achievement of their role in coping with a systemic banking crisis.  This is especially relevant in view of the 2024 target transition period, by which year it is expected that the DGS and resolutions fund may not have been fully funded. Only time will tell if the EDIS proposals being made now will become a reality or remain a myth.
    This disclaimer informs readers that the views, thoughts, and opinions expressed in the text belong solely to the authors, and not necessarily to the author’s employer, organization, committee or other group or individual.

    Jessica Friggieri LL.D MA Laws
    Jessica Friggieri is a Lawyer graduated from the University of Malta. She is former Lawyer of the Malta Depositor and Investor Compensation Schemes, and now Legal Analyst for the Financial Crime Compliance Unit. Also, Secretary of the Malta Protection and Compensation Fund.

    John Sammut MA Fin Serv, MA Risk, BA (Hons) Accty ACIB, CPA
    John Sammut is a certified public accountant, graduated from the University of Malta and presently works as Head - Internal Audit at the Malta Financial Services Authority. He carried out a thesis title “A Study of the Role and Sustainability of the Depositor Guarantee Scheme in the EU and Malta.”
  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    There are a number of factors that may kill and grow a business; however, some failures follow similar routes. Both Nokia and Kodak experienced a major turmoil because they failed to understand the changing customer demands. Although this is not the only underlying cause in the collapse of Thomas Cook, analysts are saying that one of the major reasons for its downfall is the management’s hesitation in addressing technological changes allowing travellers to book their holidays online rather than buying packages from the local travel agent.

    Thomas Cook started off as a family business and grew into a large corporation over the years. It has been in business for the last 178 years, selling the “holiday experience” to families. Their slogan “Don’t just book it, Thomas Cook it” communicated that holiday packages took care of everything from flights and accommodation to excursions and meals, targeting middle class travellers. Over the years Thomas Cook grew exponentially through a number of mergers and acquisitions offering diversified services and growth opportunities.
    Many business analysts are speculating the reasons for Thomas Cook’s collapse, stemming from a series of internal and external events.
    The Internal Context
    Several management decisions have negatively impacted the business, including the lack of change management and unstable restructuring plans that took long to be implemented, lack of innovation, the shift into the digital age, inefficiencies in capacity management and overall mismanagement of the company’s profits and assets.
    During the last two years top management such as the Chief Financial Officer (CFO) changed three times, the last of whom revealing that there had been too many “exceptional items” recorded in the past few years. These items included payments to directors and meeting bank liabilities, which posed a threat and raised questions on the going concern of the company.
    At the end of the 20th century, the airline business was founded through a series of mergers and acquisitions. These acquisitions were funded through debt, hence the additional financial pressure. The company’s debt accumulated over ten years following a series of rapid decisions. In order to sustain this level of debt, “it had to sell three million holidays a year just to cover its interest payments.” (Holton & Faulconbridge, 2019)
    In May 2019 the audit committee approved an impairment of £1.1bn on the goodwill that was acquired during the merger with MyTravel in 2007. Although this write down only affects the balance sheet, it put pressure on the company’s reputation and raised concern in the capital market where investors were reluctant to continue financing.
    The External Context
    We are living in a time when people are more inclined to travel than before, so how come demand for Thomas Cook decreased?
    The demand for holidays is increasing, however demand for packages is not the same thing. With the rise of the internet and low-cost airlines, Thomas Cook’s bottom line continued to struggle. Although package holidays are attractive, customers are still very price elastic, thus highly sensitive to price (Prescott & Gillett, 2019). Holidaymakers prefer to make their own travel arrangements online where it tends to be cheaper than visit the local travel agent.
    Management failed to listen to what travellers were demanding and persisted with the outdated strategy of opening more high street stores in different locations worldwide. The running expenses of these shops was expensive and maintaining these costs together with the other sunk costs from the airline, was making Thomas Cook vulnerable for adverse demand fluctuations.
    In peak seasons, all airlines struggle with air traffic control challenges, whereas during low-peak seasons they struggle to manage the idle capacity of their resources, mainly the aircrafts. Therefore, if one season goes bust, there might be a significant impact on the cashflow of the business. This seasonal variation continued to defeat Thomas Cook and it always was a Winter’s tale for Thomas Cook which needed additional financing during the low season. On the other hand, in 2018 UK travellers were highly impacted by the Europe-wide heatwave that continued to discourage holidaymakers.
    Several political issues also affected the demand for holidays in general. The Turkish coup attempt in 2016 and the recent Brexit saga have cause Europeans, especially the Brits to postpone holidays to a later, clearer period. This market uncertainty added pressure on the costs of the airline, due to the fact that currency fluctuation affects fuel prices and other material sunk costs. Thomas Cook was buying its fuel in USD, which was being varied in comparison with the Sterling.
    Now what?
    Now there are 20,000 unemployed personnel, 600,000 affected travellers seeking compensation, a liquidation process and a series of unanswered questions.
    Among stranded travellers the question is mainly whether the EU Package Travel Directive of 2015 will be able to cover for all their repatriation costs. This directive provides refunds to travellers who book holiday packages in case a company becomes insolvent. Nevertheless, how will this affect customers who only booked flights? Is the fund enough to cover for all expenses incurred? How will this affect the future of such fund?
    Other questions are now being raised on the onus of the auditors in such cases. Have the auditors reported this as a going concern on time? There have been discussions, even at EU level, on the auditor expectation gap: the gap between what is expected of the auditor as perceived by the public versus the actual responsibility of the auditor in terms of detecting going concern risk.
    The Thomas Cook lesson will undoubtedly find its place in business textbooks, together with other business failures. In order to sustain your business and make it to the top of the stock exchange, management must respond to change efficiently and listen to the ongoing changing market needs. This holds even if it means the original strategy driver needs changing, because change is inevitable and failure to listen and act fast will be the beginning of a business’s demise.
    Prescott, K & Gillett, F (2019) Thomas Cook: The much-loved travel brand with humble roots [Accessed 22 Oct 2019 https://www.bbc.com/news/business-49789073]
    Holton, K & Faulconbridge, G (2019) Thomas Cook collapses: Why and what happens now? [Accessed 22 Oct 2019 https://www.reuters.com/article/us-thomas-cook-grp-investment-

    Pauline Micallef is an ACCA Qualified Accountant and acquired her MBA from the University of Reading – Henley Business School. She has recently joined the Malta Institute of Accountants as the Technical Strategy Manager heading the Technical Department. She comes from industry with an experience of 10 years at Teva Pharmaceuticals, the largest generic pharmaceutical company in the world.

  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    Who are you and where do you come from? What are your qualifications?
    I am Marian, a cheeky designer who came from Venezuela to live in this lovely country in the summer of 2017. I graduated in 2016 with a bachelor’s degree in Integral Design; now I started qualifications to specialise more into the Digital Marketing world.

    I know you are wondering “Why Malta?”, (this is the most common question I get) so, Malta is a growing and productive country full of opportunities for young professionals and, at 24, all I wanted to do was grow up professionally. After two years, I am still here and feel that I have made the right choice. At the moment my country is not in its best times, especially if you want to develop a professional career; when I think of that and of all the things I have been through, I feel truly grateful for all the opportunities that Malta, and also the MIA, have given me.
    What is your role at the MIA?
    I am the face behind every MIA’s communication channel, I am MIA’s Design and Communications Executive. I participate in the creation of designs and marketing strategies to increase and promote value by the Institute to its members through all the digital media.
    What motivates you to do your job effectively?
    My main motivation is the passion I feel for design since I love what I do. So, I always have this feeling of constant self-improvement, I constantly perceive everything in a positive way, and I see negativity as an opportunity to be better.
    What does the Accounting Profession mean to you?
    If you had asked me this questions two years ago I would not have known what to say, but I have been surrounded by accountants during the past years, and today I can honestly say that I really admire the constant effort that accountants are required to make in order to cover the requirements of every business. They put everything in order so it can keep up with changes over time, and that is just admirable.
    Sometimes I can relate it with my industry because, just like in the digital world, accountants must be under constant training and up-to-date with everything related to the changing financial world. This might be challenging, because there is a lot to cover (I know this because I am the one promoting the CPE events and conferences), but I know that being passionate about their job, drives them to give the best and, for this, I really appreciate the profession’s efforts.
    What is your life motto?
    It is from a song actually, and I have it tattooed: “there’s no need to complicate because our time is short”. I think life is too short not to do what you love; surround yourself with things and people that inspire you and make you feel happy; life might bring some hard times, but there’s always something awesome coming after that.
    What do you like to do in your free time?
    I spend most of my time with my dog; I love nature; I paint and sometimes I like to write about life; I enjoy travelling; I am a cinema and music lover, and I also like videogames; I am a geek! A chic one, though.
    How do you contribute to the MIA’s mission?
    Apart from the job duties I do on a daily basis, I put my efforts on spreading happiness and joy among my colleagues. We have become a very close team and I am constantly making jokes and telling fun stories. Sometimes I just say my favourite Maltese words just to make them laugh, because let’s face it: Maltese people are the best and the MIA will always have a special place in my heart.
  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    The FIAU Annual Report for 2018 reported that the number of Suspicious Transaction Reports by subject persons that year stood at 1679. This means that the number of reports more than doubled since 2017, when it was 778. A closer analysis reveals that credit institutions reported 724 (in 2017 they reported 398), while remote gaming reported 700 (in 2017 they reported 218). This means that 85% of total reports are originating from two sectors. Credit institutions remain in pole position of the list of subject persons that file STRs.

    Filing a Suspicious Transaction Report can be quite a challenging task for a Money Laundering Reporting Officer (MLRO). Regulation 15 (3) of the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) states that a subject person shall file a report ‘as soon as is reasonably practicable, but not later than five working days from when the knowledge or suspicion first arose’.
    The question that arises is: When does the five-day window start?
    Let us consider this hypothetical case. A notary publishes a contract of sale of property. Six months later he notices that on the day of the contract, the seller had a court freezing order. Is the five-day period triggered on the date when Notary becomes aware of the freezing order – that is six months after publication of contract - or from the date of publication of the deed? To answer this question, I am making reference to a penalty applied by the FIAU on a subject person on 18th May 2018. The FIAU commented as follows:
    ‘The Company failed to submit a suspicious transaction report (STR) to the FIAU even though, on the basis of the information it held in its possession together with publicly information, it had reasonable grounds to suspect that the transactions and/or its clients may be linked to proceeds of crime, money laundering or the funding of terrorism’.
    A fine was imposed by the FIAU.
    The case clearly shows that publicly available information was seemingly ignored by the subject person. Such public information was sufficient to raise suspicion. This means that even when an internal report is not filed, the subject person would still be liable. In other words, the MLRO claiming that he/she was unable to lodge a report because no internal report was received is no defence.
    Evidently, the subject person must have robust structures in place to be able to detect any signs of suspicious activity at the very early stages in order for a report to be filed within the regulatory time frame. A welcome initiative in the new FIAU Implementing Procedures is that the designated employee, in the absence of the MLRO, can now file an STR. The designated employee must be approved by the MLRO and can effectively take the role of a substitute MLRO. Consider a situation where a designated employee is not appointed, and an internal report is filed to the MLRO who happens to be on a two week vacation. Can the subject person safely argue that the five day window will only start after the return of the MLRO? This would hardly be the case. The new responsibility of a designated employee is intended to provide the necessary mechanism for subject persons to ensure that reports are filed in a timely manner.
    Needless to say, the MLRO and the designated employee should consult each other in their leave planning.

    Victor Rizzo is a co-founder and director of Inscope Limited, an AML-CFT software development company.
  • 10 Dec 2019 12:00 | Deleted user
    The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
    Kevin Dancey, CEO of IFAC, welcomed all the participants and started by thanking Charles Tilley, the outgoing chair for his valid contribution since he took over the chair in 2014, outlining what was achieved since then.

    Kevin said that the emphasis was on the future of accountants and the need to invest in education and devise the correct skill set for future accountants. The future will create a huge demand for value added services for accountants to take a lead on, such as technology.
    Leveraging and Assessing the value of Data

    Presentation by Herman Heyns, CEO of Anmut Datactivism:
    Mr Heyns explained the importance and value of data to a business. He quoted Peter Ducker who said, “you can’t manage what you cannot measure”. He also spoke about the increase in intangible assets that the value of data was creating for businesses, as well as the non-accountability of such data. Companies were not doing enough on data management, even going as far as spending huge amounts with little success. Data has become an increasingly valuable asset: it powers the new economy.
    Mr Heyns explained that over the last 10 years Anmut have surveyed large organisations and found that 97% acknowledged that the measurement of their business data was a problem. It is important to not just delegate this to the IT Department, but to take a strategic point of view at it. Businesses need to look at their data and create a value and portfolio for their different data types, such as that which can be shared, that which needs protection, and so on. It is crucial to apply management discipline where data is concerned. Furthermore, data needs to be treated as a strategic asset.
    Valuing data will result in informed and better investment decisions. The value or cost of such data is not normally seen on balance sheets, but it is important for the valuation of businesses, for instance, when Microsoft bought LinkedIn, the data LinkedIn had was considered an important element in the amount Microsoft paid for its acquisition.
    Mr Heyns elaborated that the CFO has the responsibility to take on the role for data management since s/he is seen as the custodian, increasing the importance and relevance of the accountant’s function. The CFO has the critical role to point out the value of this data asset to the business, how to improve on it, and how to invest in it. This is not a technology investment but a business investment.
    During the discussion, a point was raised regarding investment in the finance team for the the necessary skills to step into this role, and the importance of analytical skills.
    Integrated Value Creation

    Presentation by Simon Theeuwes, Senior Manager, Corporate Treasury, Schiphol Group
    Mr Theeuwes introduced his organisation which has the management of Schiphol airport as one of its main businesses. He highlighted the key figures for the group (destinations, number of travellers, tonnes of cargo, revenue, etc.) as well as the sustainability of the group (sustainable aviation, circular economy, energy positive and well-being).
    Mr Theeuwes said that Schiphol Group’s vision for Integrated Thinking for 2050 is holistic and centres around creating long-term value with clear objectives for improved quality of life, quality of network and quality of service. This resulted in the implementation of KPIs with Top Performance indicators, including employee promoter score, on-time airline performance, safety index, CO2 emissions, and reputation score from residents.
    The Integrated Reporting Must Haves that Schiphol identified include:
    •  Stakeholder dialogue
    • Materiality Analysis
    • Value Creation Model
    • Multidisciplinary teams and integration across departments
    • Clear reporting processes
    • Commitment from CEO/CFO and Management Board
    This, Mr Theeuwes explained, will result in balanced reporting, transparency, and reliability.
    Stathis Gould, Deputy Director of IFAC then presented IFAC’s Integrated Value Creation mode, highlighting the different elements of defining, creating, delivering, and sustaining this value.
    A debate arose when one of the members quoted an intervention during a round table with top USA CEOs that “profit was not the ultimate objective”. The majority of participants endorsed the statement. This underlines integrated value creation that encompasses other areas of importance and relevance, apart from profit.
    A workshop on the roles of board and management for value creation followed, discussing the information needed to fulfil their roles. Members spoke about strategies that management needs to recommend and discuss with the board, including any resources required. The board needs to define what value creation is for the organisation, and in terms of information this typically includes industry data, company data, bench marking analysis, any and tailored information required, as well as risks to the value. This information would be common to both board and management, with just the level of detail being different between the two.
    Metrics and Methodologies for Long-Term Investor Decision-Making

    Presentation by Sarah Williamson from FCLT Global (Focusing Capital on the Long Term, a non-profit organisation).
    FCLT have come up with a document, identifying 17 pre-financial metrics (traditionally known as non-financial indicators) targeted at investors, using quantitative methods. These metrics must be material (to investors), assurable (by auditors), uniformly defined, consistently calculated, and universally applicable (across countries, sectors and contexts).
    These criteria have been grouped into:
    • Talent
    • Governance
    • Innovation
    • Capital allocation
    • Environmental footprint
    A selection of pre-financial dashboard metrics was shown as an example, including:

    Three Lines of Defence Model

    Institute of Internal Auditors
    This session was held by the PAIBC to give feedback to the Institute of Internal Auditors (IAA) on the Three Lines of Defence Model that had been discussed in the previous meeting. This model was created to assist the internal audit function in their line of duty, highlighting the different steps, and tools needed for an effective internal audit.

    Professional Ethics 

    IFAC PAIBC Discussion re IESBA Draft
    A discussion of the IESBA Exposure Draft on the Role and Mindset Expected of Professional Accountants took place. Laura Leka (IFAC PAIBC Technical Manager) outlined the exchange between IESBA and IFAC where the former confirmed that, while the draft is actually reserved for auditors, it still needed to describe the mindset and behavioural characteristics of all professional accountants.
    The key proposed changes that were up for consultation were:
    • Highlight the wide-ranging role of Professional Accountants because of their skills and values;
    •  Highlight the relationship between compliance with the Code and Professional Accountants’ responsibility to act in the public interest.
    • Increase the robustness of the Fundamental Principles, of integrity objectivity, and professional behaviour.
    • Introduce the concept of determination to act appropriately in difficult situations.
    • Require all Professional Accountants to have an inquiring mind when applying the Conceptual Framework.
    • Emphasise the importance of being aware of bias and having the right organisational structure.
    Small and Medium Sized Entities

    A Presentation by Jonathan Shaw, FD of Deltex Medical Group , Mark Farrar, CEO of the Association of Accounting Technicians (AAT), and Iftikhar Taj from the Pakistan association of accountants (and IFAC PAIBC Member)
    Mr Shaw gave an introduction of the company and overview of the finance function. He spoke about the issues regarding the finance function in a small business, the accounting and business software, and the small team of finance people in the business. Mr Shaw discussed the challenges of working for a small business, mainly around costs reduction, consultancy fees, and the reality of being “alone” since the company is small and there no other senior accountant with whom to discuss issues.
    Mr Farrar explained what his role at AAT was and the function of the association. He gave an overview of the AAT members who are evenly employed in large as well as SME organisations, as well as mix of commercial, public practice and public service entities. Mr Farrar explained the importance of accounting technicians within the accountancy profession as a major support to Professional Accountants in Business.
    Mr Taj then spoke about the role of PAIBs working in SME and family-owned businesses in Pakistan, which make up about 5 million businesses. The Pakistan Accountants Association was involved in a push to introduce Corporate Governance in Family Owned Businesses (FOBs), including training for family business owners in the role of Directors.
    Accountants’ and Businesses’ Contribution to the Sustainable Development Goals

    Presentation by Paul Druckman, Chair of the World Benchmarking Alliance

    Mr Druckman spoke about sustainability and the issues facing the world today, from a business and accountancy point of view. He also mentioned the initiatives being taken by companies to make a better profit as against just making a profit, as well as the future of corporate reporting, promoting brevity, comprehensibility and usefulness in corporate reporting.
    Mr Druckman quoted the famous English broadcaster and natural historian, who said “Anyone who believes in indefinite growth on a physically finite plant is either mad, or an economist”, suggesting that accountants should be included along with economists.
    The World Benchmarking Alliance came up with seven Transformation and development goals (benchmarks), namely:
    • Social
    • Agriculture and Food System
    • Decarbonisation and Energy
    • Circular
    • Digital
    • Urban
    • Financial System

    On a final note Mr Druckman urged Accountants to take the lead and transform into Creation of Chief Value Officers (CVO), stating that a good CFO has to be a good CVO.

    Stephen L. Muscat is a Fellow of the Malta Institute of Accountants (MIA), and a Certified Public Accountant (CPA). He is also the Chairman of the Professional Accountants in Business (PAIB) Committee of the MIA, as well as a member of the PAIB Committee of IFAC, the International Federation of Accountants. Mr Muscat is the Chief Financial Officer and Company Secretary of Liquigas Malta Limited, operating in the energy market in Malta, a company he joined in 2009 after fourteen years working within the Manufacturing Industry in Malta. Mr Muscat is currently also the Deputy President of the Malta Employers’ Association, a position he has held for the last six years, following that of Honorary Secretary and Honorary Treasurer.

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