LEADING A BREAKTHROUGH YEAR FOR ACCOUNTANTS PLUS - The Hong ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Plus:
Brexit
How businesses are preparing
for the potential scenarios
Drones in audit
How firms are scaling the use of
the technology in auditing
Wine connoisseurs
CPA members share their
passion for wine
Issue 2 / Volume 15 / February 2019
LEADING President
Patrick Law
will lead the
profession
A through some
major changes
BREAKTHROUGH
YEAR
FOR
ACCOUNTANTS
PLUS
HK$70.00
President’s aplus
message
“We have many major changes
ahead of us this year, including
the new Qualification
Programme, recruitment of
a new chief executive and
registrar and beginning the
Seventh Long Range Plan.”
Dear members,
Kung Hei Fat Choi! I wish you and area, and I expect the importance of transfer of responsibility for the
your families good health, happiness our relationships with our colleagues regulation of auditors of listed com-
and fortune in this year of the across the border to continue to grow, panies from the Institute to the FRC.
pig. The pig is an auspicious year, especially in light of the central The Financial Reporting Council
symbolizing luck, wealth and good government releasing the long- (Amendment) Bill 2018 was passed
fortune. Feng shui masters expect awaited Greater Bay Area blueprint, by the Legislative Council at the
that this year of the earth pig will be which cements Hong Kong’s role end of January, and gazetted mid-
particularly auspicious and I hope as an international financial centre February. We will be working with
they are correct! and seeks to expand our role in asset the government and FRC to ensure
The Institute kicked this management and risk management. the outstanding issues are resolved
auspicious year off with our annual After the plan was released, before the new regulatory regime
spring cocktail event, welcoming I attended an event hosted by becomes effective. This develop-
over 300 guests including the Carrie Lam, the Hong Kong Chief ment caps over 10 years of work by
Council and members of the Executive, with representatives from the Institute, and will help to main-
Institute’s various committees governments and professional bodies tain Hong Kong’s competitiveness
and working groups, as well as across the region, where the plan was as a global financial market.
special guests from government and discussed in detail. I am confident I took part in the 10km
business, to celebrate the year of the that our members’ skills in Hong Chairman Cup at the Standard
pig and prepare for the vital work Kong and the other Greater Bay Area Chartered Marathon Hong Kong
over the year ahead to prepare the cities will play an important role in 2019. I enjoyed representing the
Institute for the future. the success of the project. profession against other bodies
We have many major changes We talk a lot about how new (and racing many ex-Institute
ahead of us this year, including the technologies will change the way we presidents!) and even ran a better
new Qualification Programme, do business, without seeing many time than last year. It was good
recruitment of a new chief executive results in practice. That’s why I to meet so many successful CPA
and registrar and beginning the found this month’s article on drones runners after my race, and welcome
Seventh Long Range Plan. You can and their use in audit particularly them into the Institute’s tent
read about my views on these and interesting. Accounting Plus will after their hard races. If you’ve
other issues in my interview with require us to be able to use new ever thought about putting on
A Plus this month, which can be technologies like drones, and it’s your running shoes, getting out
found on page 18. interesting to think how we can use of the office and racing, I would
On Valentine’s Day we organized them in our own work. You can find encourage you to go for it. Exercise
a special evening in Guangzhou for the article on page 26. is a good way to maintain work-life
our members and guests from local Another major development in balance, and I find that hitting the
government, regulators, professional Hong Kong this year is the expan- trails or Bowen Road helps me to
organizations and firms. This annual sion in the powers of the Financial clear my mind of distractions and
event is one of our key events in the Reporting Council (FRC), and the reduce stress.
Patrick Law
President
February 2019 1
Contents
Issue 2 / Volume 15 / February 2019
26
Ready for
take off
With PwC having
completed the world’s
first audit using a
drone, what are the
opportunities and
challenges that large-
scale deployment
would create?
01 18 Leadership:
Patrick Law
Recently-elected Institute
44
NEWS President on his plans for SOURCE
the year ahead, and how
01 President’s message Accountants Plus can prepare 44 China’s new IIT regime:
for the future of work Improvements for
04 Institute news residents, headaches for
25 How to non-residents
07 Accounting news Agnes Lo, Founder and Chief n overview on how the
A
Trainer of Solution Bulb Training Mainland’s Individual Income
Consultancy Company, on what Tax Reform could affect
10 to do before, during and after
networking for the most benefit
residents and non-residents
echWatch 196
48 T
FEATURES 26 Ready for take off
How the use of drones could
10 Bracing for Brexit change the way audits are done
A look at how a no-deal Brexit
could affect businesses and 32 Success ingredient:
employment in Britain, and the Alan Lee
possible implications for The Chief Financial Officer of
Hong Kong Oliver’s Real Food in Sydney
on running a unique restaurant
17 Thought leadership: franchise
Harjeet Baura and
Ali Tse 38 Great minds drink alike
T he Financial Services Four Institute members share
Consulting Leader and the why wine is more than just a
Director of Financial Services beverage
Tax (Transfer Pricing) at PwC
Hong Kong on workplace gender
preconceptions
32
Food for
About our name
A Plus stands for excellence,
a reference to our top-notch
accountant members who are success
thought ingredients in business and in society.
It is also the quality that we strive for in
this magazine — going an extra mile to
Chief Financial reach beyond Grade A.
Officer of Oliver’s
Real Food, Alan
Lee, on the world of President Patrick Law
organic fast food in Vice Presidents Johnson Kong, Lam Chi Yuen, Nelson
Australia Acting Registrar Jonathan Ng
Editorial Manager Paul Smith
Editorial Coordinator Maggie Tam
Office Address
37/F, Wu Chung House, 213 Queen’s Road East,
Wanchai, Hong Kong
Tel: (852) 2287-7228 Fax: (852) 2865-6603
Member and Student Services Counter
27/F, Wu Chung House, 213 Queen’s Road East,
Wanchai, Hong Kong
Website: www.hkicpa.org.hk
52
Email: hkicpa@hkicpa.org.hk
AFTER HOURS
ooks
52 B
Eat Their Lunch: Winning
Customers Away From Editor Gerry Ho
Email: gerry.ho@mandl.asia
Your Competition reviewed
and interview with author Copy Editor Jemelyn Yadao
Anthony Iannarino Editorial Assistant Jeremy Chan
Contributors Nicky Burridge, Michelle Perry,
54 L
ife and everything George W. Russell
From the annual Art Basel art
exhibition, to FIA Formula E,
to the Pet Shop Boys live in Editorial Office
Hong Kong G/F, Bangkok Bank Building, 18 Bonham Strand West,
Sheung Wan, Hong Kong
et’s get fiscal
56 L ADVERTISING ENQUIRIES
Advertising Director Derek Tsang
Dictionary definitions still Email: derektsang@mandl.asia
can’t keep up with us, says Tel: (852) 2164-8901
Nury Vittachi A Plus is the official magazine of the Hong Kong Institute of
Certified Public Accountants. The Institute retains copyright in
all material published in the magazine. No part of this magazine
may be reproduced without the permission of the Institute. The
views expressed in the magazine are not necessarily shared
by the Institute or the publisher. The Institute, the publisher
and authors accept no responsibilities for loss resulting from
any person acting, or refraining from acting, because of views
expressed or advertisements appearing in the magazine.
© Hong Kong Institute of Certified Public Accountants
February 2019. Print run: 7,250 copies
Book review The digital version is distributed to all 43,573 members,
18,371 students of the Institute and 2,358 business
stakeholders every month.
News
Institute news
Institute news
Accounting news
Institute calls for deeper review
of Hong Kong’s tax system amid
challenging outlook
The Institute highlighted the need for In addition, the Institute notes that of a dynamic business sector, with new
a broader review of Hong Kong’s tax Hong Kong faces a number of local and business models, a comprehensive review
system as it is becoming increasingly external challenges and uncertainties, of the tax system is called for, in order to
complex and losing its competitive edge, including the Mainland’s economic slow- ensure that Hong Kong can maintain its
in its recommendations for the 2019-20 down, the ongoing United States-Hong competitive edge in the long term.”
Budget, which was announced on Kong trade war, and continuing high The Institute believes Hong Kong
27 February. property prices. should also review the existing
The budget proposals, titled Rising “The Financial Secretary Paul Chan preferential treatments and tax
to Challenges and Staying Competitive, has indicated his preference for driving incentives in its tax legislation to
focuses on tax policies and measures on economic development through specific ensure that they are achieving the
the revenue side of the budget. tax policy measures instead of lower- objective of maintaining Hong
It notes that a low rate and simple ing the general profits tax rate. Various Kong’s competitiveness in the global
system used to be Hong Kong’s competi- incentives will be used to promote the marketplace, and are cost effective.
tive edge, however many jurisdictions development of different industries, It adds that the coverage and exper-
have reduced corporate tax rates in recent which will make Hong Kong’s tax system tise of the Tax Policy Unit should be
years and moved towards an increased more and more complex,” said KK So, expanded to take up more strategic tax
emphasis on indirect taxation. Hong Chairman of the Institute’s Taxation issues that could help support Hong
Kong’s profits tax rate of 16.5 percent, Faculty Executive Committee. “With the Kong’s economic development and
therefore, may no longer be as attractive international tax developments that are competitiveness. “The government’s tax
as it was to foreign investors. also affecting Hong Kong and the needs policy unit has successfully completed
President Patrick Law (centre), Vice-Presidents Johnson Kong and Nelson Lam (left and right of centre), senior management
and guests at the Guangzhou cocktail reception
4 February 2019
aplus
Council celebrates new year at the spring cocktail
its initial tasks of helping implement regulators joined the Institute’s Council from all race categories are welcome to
the two-tier tax system and the super- and committee members in celebration of attend the post-marathon drinks to be
deductions for research and development the year of the pig at the spring cocktail held soon where trophies will be pre-
(R&D), proposed by Chief Executive reception on 15 February. sented to those with outstanding results.
Carrie Lam. It should now expand its Submit your race time and stay tuned for
scope of work and expertise to consider Guangzhou cocktail reception event details.
more fundamental issues, such as look- The Institute welcomed over 100 guests
ing into tax policies needed to support to its annual Guangzhou spring cock- U.S.-China trade war –
Hong Kong’s long-term economic tail at the Sheraton Hotel on 14 Febru- a closer look
growth and infrastructure development,” ary. The evening offered members the A lunch seminar on 12 March will feature
said So. opportunity to meet the Institute’s new a panel of three highly experienced foren-
The Institute estimates that the leadership team of President Patrick sic accounting and legal practitioners who
fiscal surplus for 2018-19 will reach Law, and Vice-Presidents Johnson Kong will explore the trade measures imposed
HK$50 billion at the end of March, and and Nelson Lam; and members of the by the United States government against
the fiscal reserves will increase to over Institute’s senior management. Guests Mainland China, and the sanctions
HK$1.15 trillion. These figures are from the Mainland government, regula- compliance issues for businesses. They
similar to the government’s budgeted tory authorities, professional organiza- will discuss the background of the trade
position. tions, universities and professional firms dispute, impact on business operations, as
The submission also includes recom- attended the reception. well as tips on managing export control.
mendations on tax support for R&D and Interested participants should enrol on
for rental deductions, as well as measures Hong Kong marathon the Institute’s website by 8 March.
to improve roadside air quality and to Around 350 CPA runners participated in
mitigate the impact of economic pres- the Standard Chartered Hong Kong Mar- Hong Kong and global
sures on the community. The proposals athon 2019 on 17 February. The Insti- pronouncements comparison
are available to read online on the tute’s President Patrick Law, Council The Institute has published a comparison
Institute’s website. member Ken Li, and four past presidents table showing differences between Hong
ran in the 10km race of the Corporate Kong and international quality control,
Spring cocktail Challenge Chairman Cup, and 12 elite auditing, review, other assurance, and
Three hundred guests from the Hong CPA runners represented the Institute in related services pronouncements, as at
Kong Special Administrative Region and the Corporate Challenge Marathon Cup 31 December 2018. The table is available
the central governments, businesses, and in all three race categories. CPA runners on the Institute’s website.
February 2019 5
News
Institute
Disciplinary findings financial reporting, ensuring its financial integrity and
overseeing and supervising all financial information of the
Pan-China (H.K.) CPA Limited, Fung Pui Cheung, CPA group.
(Practising) and Wong Ho Yuen, Gary, CPA (Practising) As a result of fraud perpetrated by other members
of the senior management, the group’s audited financial
Complaint: Failure or neglect by Pan-China and Fung to statements for the years 2000 to 2004 contained
observe, maintain or otherwise apply Hong Kong Standard materially false information about sales, projects,
on Auditing (HKSA) 620 Using the Work of an Auditor’s bank deposits and bank loans of certain subsidiaries in
Expert, HKSA 500 Audit Evidence and HKSA 230 Audit Mainland China. The Market Misconduct Tribunal started
Documentation. Failure or neglect by Fung and Wong to proceedings in 2014 in relation to the identified accounting
carry out their work with professional competence and fraud.
due care in relation to the identified non-compliance areas. The tribunal’s proceedings revealed that at the time
Pan-China was also guilty of professional misconduct as of the fraud, Mok tried to remove himself from any
a result of its systemic failure to comply with professional responsibility for the subsidiaries’ activities. He accepted
standards. a limitation of his role as financial controller to only
Pan-China issued an unmodified auditor’s opinion on carrying out financial reporting at group level, and entered
the financial statements of a Hong Kong listed company, into a self-imposed compromise with the directors that
China Yunnan Tin Minerals Group Company Limited (now potentially damaged the financial integrity of the group.
known as GT Group Holdings Limited) for the year ended Mok failed to implement the recommendations of the
31 December 2010. Fung was the engagement director group’s auditor to address their concerns about the finance
and Wong was the engagement quality control reviewer of department’s inability to maintain appropriate financial
the audit. supervision and control over the group subsidiaries. In the
The Institute received a referral from the Financial circumstances, the subsidiaries were given free rein over
Reporting Council (FRC) about irregularities in the audit an extended period, working under the management of
of the financial statements. The respondents failed to directors complicit in the accounting fraud.
perform adequate audit procedures and prepare adequate The tribunal found Mok negligent in relation to the
audit documentation in respect of the carrying amounts financial statements and, therefore, culpable of market
of mining rights and goodwill, which were material assets misconduct. It issued sanctions against Mok in 2017 and
included in the financial statements. recommended referring the findings to the Institute. After
considering the information available, the Institute lodged
Decisions and reasons: All the respondents were a complaint under section 34(1A) of the Professional
reprimanded. The Disciplinary Committee ordered Pan- Accountants Ordinance.
China, Fung and Wong to pay penalties of HK$250,000, Mok admitted the complaint. The Disciplinary
HK$50,000 and HK$50,000 respectively. In addition, the Committee found that Mok failed to carry out his
respondents were ordered to pay costs of the disciplinary professional work with a proper regard for the technical
proceedings and the FRC totalling HK$124,914.10. and professional standards expected of him as a CPA, and
When making its decision, the committee took into to conduct himself in a manner consistent with the good
account the particulars of the breaches committed in reputation of the profession and Institute. The committee
this case, the parties’ submissions, and the respondents’ further found that Mok was guilty of dishonourable
conduct throughout the proceedings and their personal conduct.
circumstances.
Decisions and reasons: The committee ordered that the
Mok Wing Kai, Henry, CPA (practising) name of Mok be removed from the register of CPAs for
six months with effect from 19 February. In addition, Mok
Complaint: Failure or neglect to observe, maintain or was reprimanded and ordered to pay costs of the Institute
otherwise apply paragraphs 2 and 4 of Statement 1.200 of HK$56,494. The committee noted the case involved a
Professional Ethics Explanatory Foreword and being guilty serious breach of professional standards over an extended
of dishonourable conduct. period, and the incidence of fraud in a listed company
Mok was the company secretary and financial had a great impact on public interest and damage to the
controller of Greencool Technology Holdings Limited, profession’s reputation. In mitigation, the committee noted
which was formerly listed in Hong Kong. He was also a the respondent’s early admission to the complaint and his
“qualified accountant” of the group under the GEM listing cooperative attitude in the proceedings.
rules applicable at the time. The group conducted its
commercial activities through various subsidiaries in Details of the disciplinary findings and are available at the
Mainland China. Mok’s responsibilities covered the group’s Institute’s website: www.hkicpa.org.hk.
6 February 2019
News aplus
Accounting
Financial Reporting
Council (Amendment)
Bill gazetted
The Hong Kong government gazetted the Financial Reporting Council
(Amendment) Ordinance 2019 on 15 February, enabling the Financial Reporting
Council (FRC) to become an independent oversight body that regulates auditors
of listed companies. The development comes after a decade of work by the
Institute and the government, and brings Hong Kong’s regulatory regime for
auditors of listed entities in line with international standards and practices. It
will also enable Hong Kong to be eligible for joining the International Forum of
Independent Audit Regulators. As part of the new audit regime, the Institute will
continue to perform the statutory functions of registration, setting requirements
for continuing professional development, and also setting standards on
professional ethics, auditing and assurance in respect of relevant auditors, subject
to oversight by the FRC. The date the FRC will take over is yet to be confirmed.
“The Amendment Ordinance enhances the existing regulatory regime for
auditors of listed entities, allowing it to be independent from the audit profession,
thereby providing better protection to investors. This is crucial to strengthening
Hong Kong’s status as an international financial centre and capital market. We
are working closely with relevant parties on the preparations for implementing the
new regulatory regime as soon as practicable,” said a government spokesperson.
Illustration by Harry Harrison
February 2019 7
News
Accounting
Beijing unveils Greater Bay Area blueprint
The central government of China published its
long-anticipated document setting out its Greater A world of numbers
Bay Area development plan to integrate Hong
Kong and 10 cities around the Pearl River Delta.
The 11-chapter document, released this month,
confirms that Hong Kong, Macau, Shenzhen and
Guangzhou would be the four key cities and the
core engines for driving growth in nearby regions.
It says the framework for the bay area should be
defined by 2022, and realized by 2035. It also
includes goals and directions to push the develop-
ment forward, such as improving infrastructural
connectivity and quality of life, building a globally
competitive commerce and industrial system,
protecting the environment, and energy security,
208
as well as supporting the Belt and Road Initiative. The total number of companies
that went public in Hong Kong
last year, according to the South
HKEX to buy Shenzhen-based FinTech company China Morning Post. Together they
Hong Kong Exchanges and Clearing (HKEX) has signed a letter to buy a 51 percent stake raised HK$286 billion in funds,
in Shenzhen Ronghui Tongjin Technology, as part of its efforts to upgrade its technology more than double the amount from
capabilities, the South China Morning Post reported this month. Ronghui Tongjin is a the previous year, helping the city
subsidiary of Shanghai-listed Shenzhen Kingdom Sci-Tech, and specializes in financial overtake New York and Shanghai
exchanges, regulation technologies and data applications. “Technology capacities will be as the world’s initial public offering
an important element for the HKEX to compete with other stock exchanges,” said law- capital.
maker Christopher Cheung Wah-fung, who represents the financial services constituency
in the Legislative Council. Brokers believe the deal, which is expected to be completed in
the second quarter, will enable HKEX to become a depository and settlement company.
US$678
BDO officially fifth-largest firm in U.K.
BDO is now the fifth-largest accounting firm in the United
Kingdom after it completed its merger with Moore Stephens
billion
earlier this month. The merger gives BDO a combined The value of Mainland China’s
workforce of 5,000 staff members and 350 partners work- merger and acquisition activity
ing across the U.K. The firm is expected deliver revenues in 2018. Chinese outbound M&A
of £590 million, more than Grant Thornton. “This merger activity fell for the third straight year
in 2018, dropping to less than half
is one of growth and creates a new force in the market,
of the peak level recorded in 2016,
enabling us to challenge our existing competition and
according to a PwC Hong
deliver an increasingly impressive range of services to help Kong report.
our people and clients succeed,” said Simon Gallagher,
former managing partner of Moore Stephens and now Head
30%
of Advisory at BDO.
U.S. delays tariff hike on Chinese imports
United States President Donald Trump said the U.S. would delay an increase in tariffs on The revenue growth rate that
KPMG’s global legal branch
US$200 billion of Chinese goods originally scheduled for 1 March. In a tweet, Trump said
reported in 2018. This is reportedly
there had been “substantial progress in our trade talks with China on important struc-
a result of a surge in multinational
tural issues including intellectual property protection, technology transfer, agriculture, organizations demanding legal
services, currency, and many other issues.” He also said that if Washington and Beijing services. In January, the firm’s legal
made additional progress, his administration would plan for a new summit with China’s services network opened a new law
President Xi Jinping, at the U.S. president’s Mar-a-Lago resort in Florida to conclude an firm in Hong Kong called
agreement. Stocks in China and Hong Kong rose in early trading on 25 February follow- SF Lawyers.
ing the news.
8 February 2019aplus
Norman Chan
Gucci owner faces €1.4 billion tax claim S
weden, Estonia jointly probe Swedbank
Kering S.A., the French luxury goods group (and owner of The financial supervisory authorities of Estonia and Sweden opened
Gucci), owes €1.4 billion (HK$12.5 billion) to Italy in back taxes, a joint investigation in response to a media report linking Swedbank
according to the conclusions of a government audit. The probe to a Baltic money-laundering scandal involving Danske Bank,
scrutinized the business practices of Kering’s Swiss subsidiary, the watchdogs said on 21 February. A television documentary on
Luxury Goods International, from 2011 through to 2017. Italian Sweden’s public broadcaster SVT alleged at least 40 billion Swedish
tax authorities opened an investigation into the subsidiary in 2017 krona (US$4.3 billion) had been transferred between accounts
for allegedly avoiding tax on earnings generated elsewhere. The at Swedbank and Danske in the Baltics between 2007 and 2015.
probe was largely centered on Gucci, Kering’s biggest revenue Danske is being investigated in five countries over US$226 billion
driver, Reuters reported. Kering said it contests the findings in payments found to have flowed through its Estonian branch from
of the audit, and that the company does not have the necessary Russia, former Soviet states and elsewhere. Swedbank appointed
information to record an accounting provision for any potential bill EY to carry out an external investigation into the allegations, and the
for back taxes or penalties. results will be reported to the bank by the end of March.
Kraft Heinz accounting investigated by SEC H
KMA chief executive to retire
Food giant Kraft Heinz announced that it received a subpoena in Norman Chan will retire as the Hong Kong Monetary Authority’s
October last year from the United States’ Securities and Exchange (HKMA) chief executive at the end of September upon the expiry
Commission (SEC) in relation to its accounting policies. The of his contract, the Hong Kong government announced this month.
SEC’s probe focuses on the company’s “accounting, policies, Financial Secretary Paul Chan will head a selection panel to identify
procedures and internal controls” in procurement. Kraft Heinz his successor. “Norman has been leading the HKMA since 2009 and
revealed the investigation in its annual results for 2018. In response has worked tirelessly over the years to strengthen the city’s monetary
to the document request, the company launched an internal and banking systems and promote Hong Kong’s position as an inter-
investigation into its procurement practices, and increased the costs national financial centre in Asia. I respect his wish and decision to
of its products sold by US$25 million as a result. “We should have retire upon completion of his second term as Chief Executive of the
recorded the US$25 million in prior periods, which we booked in HKMA,” the secretary said. Norman Chan, aged 64, joined the gov-
Q4 2018,” the company said in a conference call. It also said it was ernment as an administrative officer in 1976, and was appointed as
fully cooperating with the SEC. an executive director of the HKMA when it was established in 1993.
February 2019 9International business
Brexit
BRACING FOR
BREXIT
10 February 2019aplus
Brexit – a ticking time bomb or a chance to
spread one’s wings? With Britain scheduled
to leave the European Union on 29 March,
Michelle Perry looks at how businesses are
preparing for potential scenarios, including
a disruptive “no-deal” one
Illustrations by Gianfranco Bonadies
A
lmost three years have So, the current situation has ground such as a disorderly exit, compared
passed since a slim to a deadlock. to their larger counterparts. The
majority of Britons Carolyn Fairbairn, Director- flipside, however, is they often
voted to exit the European Union General of the Confederation of have greater flexibility to adapt.
(EU). But as the days pass by it British Industry, which represents More importantly though, it’s
is becoming less and less clear around 190,000 businesses costly and difficult for organiza-
exactly how the United Kingdom covering around a third of the tions to make contingency plans
will leave the EU and disentangle private sector workforce, recently because they don’t know what
itself from a 40+ year union. With warned of the dangers of a they are planning for. There are,
just weeks before the official no-deal Brexit. “The economic however, some things that all
exit date on 29 March – and an consequences would be profound, businesses should do. They involve
exit agreement agreed between widespread and lasting. The scenario planning based on the
governments – terms still have International Monetary Fund has threats and opportunities of the
not been approved. The British warned that over the long-run, GDP myriad possible outcomes, review-
government and parliament have could be 5 to 8 percent lower than ing supply chains as well as those
found little common ground on in a no-Brexit scenario.” of suppliers, and ensuring alternate
which to agree an exit strategy that Of the most recent parliamen- funding is available in the event of
would also suit the 27 EU nations. tary Brexit votes, Fairbairn said: an increase in costs.
For foreign observers, this result “The never-ending parliamentary “One of the first things, if you
must seem incoherent given that process limps on, while the eco- are an export or import business,
Britain has typically been viewed nomic impact of no- deal planning is to review your supply chain and
a reliable, practical and diplomatic accelerates.” Some companies are see how it will be affected if there’s
nation. For British business and still scrambling to put contingency no deal. It’s difficult because busi-
overseas businesses trading with plans in place for 30 March, the day nesses don’t know the outcome, but
the U.K., the ongoing uncertainty after the U.K. leaves the EU, while it won’t hurt to have a contingency
weighs heavily. It has stalled others such as the U.K.’s financial plan,” says Rebecca Wilkinson,
investment plans and stymied services sector began planning a Corporate Tax Director at account-
economic growth. long time ago. But contingency ing firm Menzies.
Most British members of plans need to be sufficiently The outcome of scenario plan-
parliament want to avoid a no-deal flexible to cope with the possible ning may, for some, result in an
exit, considered as the worst-case outcomes. organization having to open opera-
scenario for business and the tions elsewhere to mitigate the
wider economy. But there is also Should I stay or risk of leaving the EU, especially
not a majority in favour of the should I go? if your clients are based in the EU.
Withdrawal Agreement that Prime Due to their size, small- and Companies will need a clear strat-
Minister Theresa May brokered medium-sized enterprises are more egy and funding already in place to
with EU leaders in December 2018 exposed to the risks of leaving the achieve this. Some companies are
which was defeated in parliament EU because they have less capacity exploring the option to move opera-
by a historic margin on 15 January. and resources to respond to events tions to the Republic of Ireland or
February 2019 11International business
Brexit
mainland Europe in the event of Europe, so that whatever happens an EU member, British financial
a no-deal, or a deal where tariffs we will always be able to service services firms can “passport” or sell
would rise. Larger companies may those clients,” says John Gracey, their services to customers in the
already have multiple overseas TAM’s Chief Financial Officer other 27 EU countries from a base
locations and can therefore redeploy and a Hong Kong Institute of CPAs in the U.K. But without a transition
resources and staff more easily to member. “We are in a good position period, which would result from a
suit their needs. to be ready come March if there’s no-deal Brexit, firms in Britain need
One example of such a strategy a no-deal Brexit to operate within to open new EU offices to continue
can be found with TAM Asset Europe with our own European- serving EU customers.
Management, a London-based regulated entity.” “If there’s no Brexit agreement
boutique investment manager. TAM then U.K. firms will lose their
has set up a second office in Spain “The economic passporting rights. Organizations are
to be able to continue operating in preparing for the worst-case scenario
Europe on behalf of its European-
consequences and are moving offices and people
based clients should there be a would be profound, to EU nations. The main concern is
disorderly exit from the EU. whether banks can continue to serve
“We have a number of clients widespread and their clients in the EU whatever the
whose pensions we manage who outcome,” says Chi Hong Li, an
are based in Europe – Spain, Malta
lasting.” Institute member who works for a
and Cyprus. For us, it was always The U.K.’s financial services financial institution in London as
important that we didn’t lose the sector began cutting jobs in London’s a manager. “In general, financial
opportunity to service those clients. financial district and establishing institutions in the U.K. need to
We made a decision over a year new offices or redeploying staff to reassess their existing operating
ago to set up a new entity based in existing EU offices early on. As model and work out a plan including
12 February 2019aplus
“If there’s no Brexit agreement
then U.K. firms will lose their
passporting rights. Organizations
are preparing for the worst-case
scenario and are moving offices
and people to EU nations.”
staff, resources, governance etc. to Although manufacturers forecast share of the workforce looking for
serve clients after Brexit.” growth over the coming year, work and unable to find it remains
Another strategy companies confidence remains at a low ebb. at its lowest for over 40 years,
are employing is to shore up Manufacturing will therefore be helped by a record number of job
cash reserves. Santander, one entering 2019 on a less than ideal vacancies,” said Office for National
of the biggest business lenders footing with Brexit uncertainty Statistics’ Head of Labour Market,
in the country, said in January having intensified considerably,” David Freeman.
its manufacturing clients were said Rob Dobson, Director at IHS
building up cash reserves and Markit. Brexit-ready Hong Kong?
delaying capital expenditures in The world is watching Britain
order to keep cash in the business. Available skills over Brexit, with the decision
“It’s clear based on the research Access to different workforce skills having a far reaching impact on
that companies, large and small, will also be heavily impacted. global politics, economies and
are resisting making any capital Directors should know what financial markets. Earlier this
investments because of Brexit. the make-up of their employees month, Japanese carmaker Nissan
Financial directors are likely to be and skills base are in order to confirmed that its new SUV model
advising boards to retain cash in the know who to recruit. One in five X-Trail, originally planned to be
business because of the potential for small business employers rely on built in its Sunderland factory in
increased costs,” says Tej Parikh, skills and labour from the EU, the U.K., will be made in Japan.
Senior Economist at the Institute of according to the Federation of Small Its Europe division chairman
Directors in London. Businesses. Employers won’t be said Brexit uncertainty had
Manufacturers also ramped up able to count on EU nationals as played a part in the decision and
their stockpiling of raw materials much as in the past once the U.K. that continued uncertainty is not
in December in preparation leaves the EU. helping businesses to plan for the
for a potential no-deal Brexit, The U.K.’s planned exit is future, according to British online
according to a survey from IHS already having an impact. The newspaper The Independent.
Markit and the Chartered Institute latest official statistics from the Hong Kong businesses are If no deal is made,
of Procurement and Supply U.K. Office for National Statistics also not immune to the impact projections show
(CIPS), released last month. The published in November 2018 of Brexit. Some remain positive, that by 2030, Britain
IHS Markit/CIPS manufacturing showed that net migration from the such as Hong Kong conglomerate would be 9.3 percent
purchasing managers’ index (PMI) EU to the U.K. fell to a six-year low CK Hutchison Holdings. “The smaller in gross
rose to 54.2 in December from and that total immigration was at impacts of Brexit negotiation domestic product
53.6 in November. “The trend in the lowest level since 2014. remain unknown and could affect terms, housing
production volumes remained While the future is uncertain, the economic environment of the prices could sink
lacklustre despite the safety employers are shoring up their U.K. As the group’s investments by 30 percent and
stock-building, with the latest workforce, and the latest U.K. in the U.K. are businesses which the pound could
survey consistent with a mild employment figures revealed that focus on utilities and essential fall against the U.S.
decrease in the official measure of the number of people in work has consumer goods and services, dollar to US$1.10,
manufacturing output over the final reached a record high of 32.54 we believe these impacts will according to The
quarter. Uncertainties regarding million. “The number of people be manageable and the key New York Times.
Brexit disruption on supply chains working grew again, with the share fundamentals of the group will
and the exchange rate are also of the population in work now the remain solid,” a spokesman for the
weighing on business confidence. highest on record. Meanwhile, the company told A Plus.
February 2019 13International business
Brexit
However, some Hong Kong busi-
nesses are watching developments
“The impacts of invoicing currency from British
pounds to U.S. dollars, change their
anxiously. “In general, our clients Brexit negotiation shipping hub from the U.K. to an
are most concerned about the cur- EU member country, and should set
rency risk of the depreciated pound remain unknown up an internal Brexit task force or
sterling, the potential increase of and could affect steering group to manage short-term
customs duties, the potential delay and long-term strategic plans for
in custom declaration and clearance the economic any scenario, says Wong.
in the case of a “no-deal scenario,” There are also opportunities to
the depreciation of the value of
environment of prepare for. “It is expected that there
existing U.K. investments, and the the U.K.” will be increasing demand from the
possible withdrawals of invest- U.K. to use Hong Kong as a hub for
ments or change and termination of declining trading business with the trading in the Asia-Pacific region
projects, which negatively impact U.K., as the consumers may switch to compensate their loss of EU
the recruitment and retention of to local goods when the prices of markets due to increase in customs
staff,” says Andy Wong, Initial imported products increase due to duties after Brexit,” says Wong.
Public Offering (IPO) Leader and weak GBP. Also, there may be pos- He adds that as Brexit leads to the
Partner of Assurance and Business sible disruption to the supply chains depreciation of GBP, Mainland
Advisory Services, at ShineWing of the business.” Chinese outbound investments
HK CPA Limited and an Institute To gear up for the potential may seek Hong Kong instead of the
member. “Our clients attach great Brexit scenarios, Hong Kong busi- U.K. for fundraising in the capital
attention to the possibility of a nesses might have to change their market. “To prepare for this, our
Business Brexit Checklist to apply these to imports from or exports to the EU?
To help some businesses, the British Chamber of • Potential delays at U.K./EU border
Commerce (BCC) designed the Business Brexit Checklist, The potential of customs checks to cause delays
outlining key areas of operations that may be impacted at the border will depend on how new policies are
after the United Kingdom’s departure from the EU. implemented in practice: customs checks are typically
Indeed, the BCC suggests all companies – not just those risk-based rather than universal. As yet there no
directly and immediately affected such as importers details on how enforcement might be executed in
and exporters – should have undertaken a Brexit “health practice.
check,” and a broader test of existing business plans.
• Tariffs on U.K.-EU trade
• W
orkforce and future skills needs Do you know the HS codes (international classification
What percentage of your U.K. workforce is from the system) for your products? Do you know the EU Most-
EU.27? Do your staff know the next steps to take to Favoured Nation (MFN) tariff that is applicable for
register as an EU citizen working in the U.K.? What can your product? If the U.K. and the EU do not reach an
you do to help retain skills and labour? agreement that removes all tariffs, what would the
impact of the MFN tariff be on your cost base?
• Future staffing requirements
What will be your skills and labour needs over the next • VAT registration in the EU
few years? Will you need to hire someone from outside Do you know which country would be best suited to
the U.K.? What steps will you need to take to hire them? support your supply chain to EU customers/suppliers?
Could different arrangements (remote working) be Do you have access to bank guarantees required by
feasible for your business? Fiscal Representatives? Does your business model
allow enough margin to absorb the increased costs
• U.K./EU customs checks these new processes will bring?
What customs procedures do you comply with for trade
with non-EU markets? Are you ready, if the need arises, For the full checklist visit: www.britishchambers.org.uk
14 February 2019aplus
clients should have a comprehensive their overseas expansion plans. common law framework – for
analysis on the future trends and Now that the asset manager has a companies seeking to access the
layouts of their businesses accord- Spanish office it is already starting Asia-Pacific region.
ing to certain Brexit scenarios, and to think about the growth oppor- “In addition, the Hong Kong
establish an effective and efficient tunities available to the business. IPO market, which has emerged as
mechanism for the allocation of “Brexit has speeded us along the one of the top global IPO markets
people to work out the scenarios at line of expanding into Europe. in recent years, will be seen as a
business level and the utilization of Whereas we could have expanded key gateway for U.K. companies
other resources.” from the U.K., the fact that we may seeking access to international
now not be able to do that has put markets, triggering enormous
Brighter prospects the focus on having a European investment and more free trade ties
For some companies the entity in Spain that is regulated in Hong Kong” he says.
opportunity to investigate new and can operate in Europe and be Relocation and expansion deci-
markets overseas is a boon. For passported throughout Europe,” sions represent significant costs for
others it could also be a chance says Gracey. “We see Brexit as an businesses, but if the calculations
to sell up or seek new investors. opportunity.” add up then organizations must
British assets are more attractive Wong is optimistic about the move quickly. Although the U.K.’s
with sterling so low, and therefore prospects Brexit holds for business exit from EU continues to be a mov-
much cheaper for foreign investors opportunities between Britain and ing target both in content and time-
who in their turn may be looking for Hong Kong. “The U.K. is keen to frame, businesses need certainty,
an opportunity in the U.K. explore opportunities with the non- and certainty is something that
For Gracey at TAM, the EU partners and Hong Kong main- accountants are always good
prospect of a no-deal Brexit tains its strategic advantages – free at providing based on robust
forced TAM to bring forward trade policy and a well-established financial calculations.
February 2019 15RELEVANCE
Read the latest issue now by visiting
www.hkicpa.org.hk/aplus
PLUS EASE
Experience A Plus in a
totally different way with
the new online version
optimized for mobile users.
Revamped with a simple
and refined layout, you can
now seamlessly browse
through articles to keep up
with the developments
impacting the profession.
Whether you are waiting
for the train on the way to work
or in the taxi, catch up anytime
with the Institute, accounting
and business news.
Narrow down your search to specific
articles by using the topics function to sift
through categories, such as China, SMPs
or technology
Bookmark articles of interest and read
them later
Easily access past issues of the magazine
by using the archive functionThought leadership aplus
Harjeet Baura and Ali Tse
Harjeet Baura, Financial Services
Consulting Leader, and Ali Tse,
Director, Financial Services Tax
(Transfer Pricing) at PwC Hong
Kong, test common preconceptions
about gender in the workplace
What are the obstacles to women’s
advancement in Hong Kong’s
financial services sector?
T
he importance of diversity and organization’s culture, and by engaging as a top-three priority in driving their
inclusion in the workplace smaller working communities to define diversity and inclusion agenda.
has grown in recent years. A their own diversity and inclusion goals.
representative workforce is important One example of a group promoting Men are paid more than
not only for corporate governance and supporting gender diversity is the women
but for society as a whole. This is Male Allies Initiative in Hong Kong. All the companies we surveyed have
particularly true for the role of women, Encouraging smaller groups of middle processes to ensure there is no pay
who are under-represented in leadership managers to implement change is disparity between male and female staff.
positions in Hong Kong relative to another way of ensuring that a change However, the Women’s Commission
most other Asia-Pacific economies. in mindset is achieved throughout the reports a pay gap of 22 percent in Hong
The Women’s Foundation (TWF), a organization. Kong across all sectors. And there is
non-profit organization dedicated to a strong perception of a pay gap that
improving the lives of women and girls There are fewer women needs to be overcome: 72 percent of
in Hong Kong reported that women than men in senior positions senior female employees feel that senior
in Hong Kong occupy 29 percent of because women leave work to women do not earn as much as senior
management positions (compared to start families men.
38 percent in Malaysia) and just 13.8 We found that lack of career
percent of directorships of Hang Seng progression and opportunities are the Promoting diversity and
Index-listed companies. main reason for women leaving work. inclusion
While women make up 52 percent Among other measures in the report, The main conclusion that we draw
of entry-level positions in Hong Kong’s we recommend that companies create from this report is that when it comes to
financial services sector, this falls to strategic networking opportunities diversity and inclusion, it is not enough
33 percent at senior management level for women to open up otherwise for organizations to set the tone from
and just 21 percent at board level. To private networks. There should also be the top. They also need to engage line
understand what is going on behind sponsorship (in addition to mentoring) managers and middle management, as
these numbers, PwC conducted a survey programmes to support the progression this will create a sustainable shift in
on gender diversity in the financial of female staff. the organization’s culture. In addition,
services sector, with the support of leaders need to actively listen and
TWF, and Women Chief Executives Succession plans and acknowledge the obstacles women
Hong Kong, a group of female financial leadership programmes are face around career advancement. Only
services leaders committed to achieving important for female retention then can organizations put in place
greater gender balance. We looked at and progression into senior effective measures to prevent them from
five common preconceptions about roles losing female talent. These measures
gender in the workplace, and then tested This was supported by our research: can include flexible working policies,
these against our survey data. This then 67 percent of senior women strongly sponsorship opportunities for women
informed a series of recommendations agree that early identification and and addressing perceptions relating to
for employers in the sector. These are: management of female talent is unequal pay.
important. The organizations that we surveyed
Diversity recruitment are already leaders in best practice and
measures are needed Flexible working policies will are influential in driving behavioural
to increase female help improve gender balance change in their customer base. But the
representation in senior roles Such policies are considered essential diversity and inclusion agenda needs to
Rather than specific diversity to enable both men and women to be adopted by a much broader range of
recruitment measures, we found that meet family responsibilities and other companies to ensure that Hong Kong
greater impact can be achieved through commitments. Over 70 percent of the keeps pace with other international
driving diversity and inclusion across an companies we surveyed ranked this financial centres.
February 2019 17Leadership profile
Patrick Law
Audit reform, the new
Qualification Programme,
the Greater Bay Area,
and other opportunities
beyond Hong Kong – the
profession faces a year
of big changes and new
possibilities. Patrick
Law, the Institute’s new
President, tells A Plus
how he will be leading
members through them,
while helping them
thrive in their role as
Accountants Plus
Photography by Theodore Kaye
A
t the Institute’s Career Forum in
2017, Patrick Law expected to
share with the university students
about the profession as a speaker, but at
a career forum advisory panel meeting
beforehand he found himself reassuring
their professors. “They asked: ‘will the
number of graduates recruited by the
accounting firms be reduced?’ after I
suggested that audit innovation and the use
of new technologies should be a key topic
at the forum,” recalls Law, who was then
convenor of the panel.
“In the past, some people thought
computers would have a negative impact
MASTER
on the profession. But what we’ve seen in
recent years is that even though computers
help with the tedious work, we actually
need more people in accounting – people
with different types of skills to do different
types of work.”
OF
Sharing the message that the profession
remains relevant amid an ever-changing
business world, and is always learning and
improving, is what Law will continue to do
this year as the Institute’s President.
Law, Deputy Assurance Leader at
CHANGE
EY Hong Kong and Macau, will also
be working to ensure that members get
the most out of the Institute’s services
and be prepared to meet the demands of
their clients and employers in the age of
Accounting Plus. He believes that the
Institute must be as communicative as
18 February 2019aplus
Patrick Law studied
electrical and
electronic engineering
at university in the
United Kingdom
before deciding to
pursue a career in
accounting. He has
worked in assurance
and business advisory
at EY since 1993.
February 2019 19Leadership profile
Patrick Law
the Institute is of course one
of Law’s focuses this year.
The previous chief execu-
tive, Raphael Ding, left the
Institute at the end of June
last year after serving out his
contract. The Council has set
up a search committee to work
with a recruitment agency
to find a replacement. “We
have scheduled a meeting
this month and we have some
candidates on hand. I think
the quality of these candidates
is quite good. So I hope we
can get a new CE sometime
this year,” says Law.
Without a chief execu-
tive, the Institute’s next
long range plan, its seventh,
cannot begin, he says. “We
are moving on from the Sixth
Long Range Plan and need to
start the Seventh Long Range
Plan as soon as possible. The
plan has already been deve-
loped, but for the final nitty
gritty details to be agreed we
need the new chief executive
to be on board.”
The membership fee
waiver for 2019 for members
whose names were on the
register at 31 December 2017,
and reduced fees for most
continuing professional deve-
lopment (CPD) courses are
helping members to become
Accountants Plus. “We will
review the Institute’s reserves
possible about how it is supporting some members since he began serving situation this year to determine an
members. “We have a large number on the Institute’s Council in 2014. “I appropriate level for a 2020 fee waiver
of members – over 43,000 – and have met a lot of members and they and see whether further things can be
are a regulatory body as well as a have told me what they want. I also done,” says Law.
membership body, so transparency understand that we have a wide range He points out that the Institute regu-
and effective communication are very of members in different groups – larly reviews its reserves, and that two
important for us,” he says. Publishing professional accountants in business, partial membership fee waivers have
abridged Council meetings minutes for professional accountants in practice, been introduced in the last four years.
members to read was a key development young members, small and medium “We regularly review the funding
last year to improving transparency, he practitioners etc. I always take the time needs of the Institute and how much is
adds. “Communicating with members is to listen to their voices so that I can needed for future plans. If there’s no
important as it allows us to understand bring it back to the Institute.” immediately identifiable need for the
their needs and see how we can enhance funds, we should redistribute them to
and widen our services to them, and Responding to change members,” he says.
also help them remain competitive.” Following on from last year’s extra- Concerning polling members for
Law is looking forward to building ordinary general meeting, getting a the election of president and vice-
on conversations he has had with new chief executive and registrar for presidents, a task force is examining
20 February 2019aplus
the feasibility of a “one member one more detailed framework that was success. “The importance of
vote” poll. “We have to really spend announced this month will lead Mainland China in the international
time to think about it,” says Law. to clearer roles to be played by the arena continues to grow,” he says.
“We studied the voting mechanisms ‘9+2’ cities and how they will link “Of course, we see a slowdown in the
of eight other professional bodies with each other. With that, we will business operations of some Chinese
and all of them are different. have a clearer picture of how to companies, but with the GBA and
These are mainly membership position our members.” Belt and Road Initiative, the business
bodies, whereas the Institute is Building productive opportunities for our members will
both a regulator and a membership relationships with accounting remain very strong in the future.”
body.” Given that only the Council bodies across the border is crucial
can elect the president and vice- to helping members capture the Staying ahead
presidents under the Professional business opportunities, he notes. Law has seen the profession go
Accountants Ordinance, the “We have formed a strategic through a series of significant
legislation will need to be amended, alliance with Guangdong and changes to get to where it is now,
he adds. Macau CPAs to provide a platform with CPAs going from being
Other factors, such as the com- for our members and CPAs in “number crunchers” to forward-
position of the Council, also need to Macau and Guangdong. They can thinkers. “I can still remember my
be considered. “With the proportion communicate with each other when first big task when I was a trainee.
of practising and non-practising collaboration opportunities arise,” I was given a very bulky stack of
council members, should it still be he explains. print-outs and I was asked to check
seven and seven? With presidents the casting of the totals on all of
and vice-presidents, is a one-year “A lot of companies them for the client. You can imagine
term really enough? There’s a lot of how long that took!” he recalls.
moving parts, so it takes time.”
and enterprises in “With the development of audit
Hong Kong’s audit environment the GBA will need innovation, our members can focus
for some practising members will more on analytical work, playing
change drastically this year, with the the services of our around with data to get high-value
Financial Reporting Council (FRC) people because our interpretations that help them offer
taking regulatory responsibility for meaningful advice to clients. That’s
the auditors of listed companies. members are familiar all part of Accounting Plus.”
With the amendment bill having with the international Members can’t afford to be
been gazetted on 15 February, there complacent, he says. “Technology
are still some outstanding issues business practices advancements will continue.
to resolve before the FRC can take and cultures.” Members need to be conversant with
over, says Law. “The remaining part FinTech (including blockchain), The Seventh
would be the sanctioning measures With the unique skills and robotics. They have to keep Long Range
– the details and guidelines. Going and experiences of members, learning, otherwise they will be out Plan responds to
forward, the FRC, the government recognized by clients and of date very soon,” says Law. “On the the three main
and the Institute will carry on governments, Law is optimistic other hand, this is what makes our challenges that
looking into this part. Certain about the vast business profession interesting and exciting.” the profession
activities of the Institute, including opportunities the GBA provides Helping the next generation faces, says
professional development and for Hong Kong firms. “A lot of of the profession remain up-to- Patrick Law:
registration, will be overseen by companies and enterprises in the date and dynamic will be the new 1. The impact
the FRC, so details on how this will GBA will need the services of our Qualification Programme (QP), of changes in
be done would also be discussed,” people because our members are which rolls out in the third quarter technology and
Law explains. “We will work familiar with the international of this year. “It will equip students the business
closely with the government and business practices and cultures, with the skills needed to use and and regulatory
the FRC to ensure these changes so they can help enterprises that embrace new technologies and meet environment;
are implemented smoothly with as want to go out, and they can the requirements of employers and 2. Attracting and
little interruption to the profession provide a wide range of services, clients in the age of Accounting developing the
as possible.” from mergers and acquisitions to Plus. Other than the traditional areas best talent; and
international tax advisory.” of audit, taxation and accounting, 3. Maintaining the
Greater opportunities Despite all eyes being focused students of the new QP will need a unique position of
The Greater Bay Area (GBA) will on the evolving United States- wider range of knowledge and skills, the Institute.
also have a huge impact on the China trade war, he believes that including soft skills like teamwork
Hong Kong profession this year, the Mainland will continue to play and presenting, for them to be
he says. “I’m optimistic that the a major role in members’ career successful.”
February 2019 21You can also read
