by John McCarthy Consulting Ltd. | Mar 27, 2020 | Blog, News
Many accountants and their staff are on a steep learning curve discovering what it’s like to work from home.
I started working from home (WFH) eleven years ago, which seems like a lifetime ago now. It took some getting used to, from IT issues to challenges around time management and work/life balance.
For those of you who are adjusting to WFH for the first time, here are some concrete tips that have served me well over the years.
- Get up early – Clear your head and get ready for the day; get outside for exercise; have a healthy breakfast; limit caffeine intake;
- Start on time – Don’t dawdle. Get dressed for business. Start as you would if you were in the office. Pyjamas don’t generally instil alertness;
- Take proper breaks during the day in the fresh air (this replaces the chats at the coffee station/water cooler) – maintain your physical distance;
- Take a proper lunch break – don’t eat at your desk, like you probably did at the office;
- Children – for those juggling childcare/home-schooling responsibilities, parents can take turns alternating between three-hour time slots for working/child supervision;
- Before you stop for the day, prioritise a to do list of the next day’s tasks and split them between urgent, important and less urgent, less important;
- Stop on time – close the laptop, go for a walk out of the house to mimic the journey from home that you used to do and make a proper break with your working day.
Thanks to my reliable Brother printer/copier/scanner, I have eliminated practically all paper-based client data. Scanning makes it much faster to locate client and research documentation and speeds overall response efficiency when juggling technical questions.
Data is now securely stored in encrypted hard drives and on two separate secure cloud storage portals. All laptops are also encrypted.
The main types of technology that help make my work-life a lot easier include:
- Business IT Solutions (BITS) which are headquartered in Kilkenny, but with offices in Dublin and Carlow. They have many accountancy firms as clients and have provided me with a very reliable technology back-up service. It includes reliable remote online support. I have been using BITS since August 2017 and would highly recommend them.
- Sharefile is a very reliable file sharing site. I initially chose it to cope with the GDPR in early 2018, but now it’s coming into its own, for sharing reports and documents with clients on a secure cloud storage location based in Dublin. I also use it for sharing training materials with course delegates which they may save to their laptops.
- More online meetings are happening now and Zoom seems to be the most popular product. I have used it successfully and its share price is certainly sky rocketing.
We will be publishing more COVID-19 assistance tips for our readers next week. Watch our regular Practice Makes Perfect blog on Tuesday March 31st.
by John McCarthy Consulting Ltd. | Mar 10, 2020 | Blog, News
According to the Financial Action Task Force (FATF), digital payments are growing at an estimated 12.7% annually and are forecast to reach 726 billion transactions annually by 2020. Within the next two years, an estimated 60% of world GDP will be digitalised.
As we mentioned in last week’s blog, the FATF recently issued a guidance paper on digital identity. It focuses on the identification of individuals (natural persons) and does not cover the identification of legal persons.
For the FATF, the growth in digital financial transactions requires a better understanding of how individuals are being identified and verified in the world of digital financial services. Digital identity (ID) technologies are evolving rapidly, giving rise to a variety of digital ID systems.
Proof of official identity generally depends on some form of government-provided or issued registration, documentation or certification. Examples include a birth certificate, identity card or digital ID credential) that constitutes evidence of core identifiers or attributes (e.g., name, date and place of birth) for establishing and verifying official identity. The guidance is trying to develop methodologies of making these methods more foolproof and secure on a worldwide basis.
In order to keep our publications as up to date as possible we have just published an update to our popular AML Policies Controls & Procedures Manual, which is now available to purchase for €150+VAT on our website at this link.
The Manual contains everything you need to successfully implement the requirements of the Criminal Justice (Money Laundering and Terrorist Financing) Acts, 2010 to 2018 and the Register of Beneficial Ownership.
Comes with a, free of charge, Excel spreadsheet called the ‘AML Control Sheet’ which firms may use to give a ‘helicopter’ view of progress made with keeping client AML data up to date.
by John McCarthy Consulting Ltd. | Feb 27, 2020 | Blog, News
We have just published an update to the AML Policies Controls & Procedures Manual last week, which is available to purchase now on our website. Our latest February 2020 edition includes the following updated items:
- Pronouncement by the FATF arising from their Public Consultation on FATF Draft Guidance on Digital Identity (discussed at the FATF plenary meeting in Paris from 19-21 February 2020)
- The latest developments on the RBO register since June 2019
- Further guidance on carrying out electronic searches and the validity of sourcing electronic data for client identity purposes.
This Manual contains everything you need to successfully implement the requirements of the Criminal Justice (Money Laundering and Terrorist Financing) Acts, 2010 to 2018 which became law on 26 November 2018 and the Register of Beneficial Ownership which came into effect on 22 June 2019.
This Manual comes with a, free of charge, Excel spreadsheet called the ‘AML Control Sheet’ which firms may use to give a ‘helicopter’ view of progress made with keeping client AML data up to date.
The Manual includes eleven Appendices with templates/guidance on how to implement the legislation efficiently. It retails for only €150+VAT and may be downloaded, ready to use, in Word format.
by John McCarthy Consulting Ltd. | Feb 25, 2020 | Blog, News
Many accountants and auditors are working hard this week to assist primary and post-primary schools around Ireland meet the 28 February 2020 deadline set by the Financial Support Services Unit (FSSU) for the filing of schools’ annual financial statements.
The Education Act, 1998 (the Act) is the relevant legislation that governs this area but it’s out of line with the latest thinking on accounting and legal language used in the Companies Act, 2014 in Ireland.
When compared to this later legislation, The Education Act is found to be inadequate in at least these three areas:
- The Act speaks about ‘all proper and usual accounts’ instead of ‘adequate accounting records’ used in the Companies Act, 2014;
- The Act, is vague about whether the financial statements should give a ‘true and fair view’, which, clearly, they should;
- The Act does not specify precisely the financial reporting framework that ought to be best applied to school accounting, which is now FRS 102, (The Financial Reporting Standard Applicable in the UK and the Republic of Ireland).
This single financial reporting standard applies to the financial statements of entities that are not applying EU-adopted IFRS, FRS 101 or FRS 105. It came into being in 2015, and Section 1A of that Standard came into being in January 2017, well after the Education Act was written. FRS 102 replaced the earlier version of Irish Generally Accepted Accounting Practice (GAAP), to which the Act refers, which had been in place for about 45 years.
New International Audit Standards (ISAs) were enacted for Ireland in June 2016 and the Act does not refer to these either.
Interim solution for Accountants / Auditors
Clearly the Education Act, 1998 needs a refresh from an accounting and audit perspective. In the meantime, these deficiencies are causing a technical difficulty for reporting accountants and auditors in helping schools meet the February deadline.
In an effort to help reporting accountants with this work, we have created a set of four templates, which address the inadequacies of the Act and clarify state how best to achieve a true and fair view in the midst of these inadequacies, through greater disclosure etc.
The templates are:
- Audit assignment engagement letter template under FRS 102
- Audit assignment representation letter template under FRS 102
- Audit exempt compilation assignment engagement letter template under FRS 102
- Audit exempt compilation assignment representation letter template under FRS 102
They templates are available for purchase on our website here for €50 each and may be downloaded immediately as Word templates for easy adaptation.
Have you prepared an AML Business-Wide Risk Assessment which is required if you have an AML Inspection visit? There is a template available and a webinar on how to prepare it. Both of these help firms comply with the latest requirements of Section 30A of the Criminal Justice (Money Laundering and Terrorist Financing) Acts, 2010 to 2018.
For many other webinar topics including Investment Property Accounting, FRS 105, Common Errors in FRS 102 Accounting and the latest on FRS 105 and company law, visit our online webinar training website.
by John McCarthy Consulting Ltd. | Feb 17, 2020 | Blog, News
One of the most common types of lease incentive is where a landlord allows a business tenant a period of time rent free, often at the commencement of the lease. This is to incentivise the tenant to occupy the premises.
Typically, FRS 102 spreads the implicit gain (to the lessee) and the cost (to the landlord), arising from this rent free period, on a straight-line basis over the lease term and therefore as a reduction to the overall lease expense (FRS 102.20.15A). The treatment was different in old GAAP. The rent free period is known as a ‘lease incentive’ (as defined in the glossary of FRS 102).
Requirements
With any lease, it must be determined whether it is a finance lease or operating lease – the guidance for this assessment is detailed in FRS 102.20.5.
Assuming the lease is an operating lease (i.e. it does not transfer substantially all the risks and rewards incidental to ownership to the lessee), the lease payments must be recognised on a straight line basis over the lease term in accordance with FRS 102.20.15.
Exceptions to the straight line basis apply where another systematic basis is representative of the time pattern of the user’s benefit or the payments to the lessor are structured to increase in line with expected general inflation to compensate the lessor for their expected inflationary cost increases. These situations are not especially common.
There are other types of lease incentives which include; the landlord paying the cost of fitting out the tenant’s premises and/or paying the tenant’s legal fees associated with the lease agreement.
Example
A lessee enters a new ten year lease to rent a property. The first six months are rent free, and rent of €7,500 is payable quarterly thereafter.
In line with the above requirements, the lease payments will be recognised on a straight line basis over the lease term and the rent free period will be spread over the lease term as a reduction to the lease expense.
Lease expense
The total lease expense is:
€7,500 per quarter x 38 quarters = €285,000
The annual lease expense is therefore:
€285,000 / 10 years = €28,500 per year
Accounting entries
The accounting entries will therefore be as follows.
| Year 1 |
Dr P&L expense (as above) |
€28,500 |
|
|
Cr Cash (2 x €7,500) |
|
€15,000 |
|
Cr Accrual |
|
€13,500 |
| Years 2-10 |
Dr P&L expense (as above) |
€28,500 |
|
|
Cr Cash (4 x €7,500) |
|
€30,000 |
|
Dr Accrual |
€1,500 |
|
To purchase our latest June 2019 AML Manual for only €150+VAT click here and the accompanying AML webinar for €45 on the latest 2018 AML legislation click here.For more practical advice and examples on FRS 102 and the Triennial Review Amendments see our webinar here called FRS 102 – the New Regime from 1 January 2019.
The webinar will look at:
- Directors’ loans – ‘small’ entities, relaxation of some of the amortisation requirements;
- Intangibles in a business combination;
- Investment property rented within a group;
- Classification of certain financial instruments;
- Definition of financial institution; and the
- Reconciliation of net debt in statement of cash flows.
See also our new letter of representation for an audit client using IFRS – published on our website February 2020.
by John McCarthy Consulting Ltd. | Feb 8, 2020 | Blog, News
As we highlighted last week there is a newly revised and restructured Code of Ethics coming soon for accountants in Ireland, expected to be effective from the 1st of March 2020.
Sometimes accountants realise they have a conflict of interest due to lack of foresight or pre-planning. An example could be trying to sort out a dispute between two clients of the same accountant. The new Code seeks to address this with more guidance.
Conflicts of Interest
The sections on conflicts of interest in the new code have been completely replaced and split into two sections, 210 and 310, covering ‘business’ and ‘public practice’ respectively.
These sections have been revised and the guidance on ‘how to apply the conflicts of interest requirements’ has been enhanced.
The new section maintains the requirement for all parties to be notified of the conflict and obtain their explicit written consent, but also:
- Gives examples of the types of conflict of interest;
- Makes explicit reference to the ‘RITP’ test – the Reasonable and Informed Third Party test (which was only hinted at in the past). The definition of ‘RIPT’:
- The reasonable and informed third party is someone ‘who weighs all the relevant facts and circumstances that the accountant knows, or could reasonably be expected to know, at the time the conclusions are made. The reasonable and informed third party does not need to be an accountant, but would possess the relevant knowledge and experience to understand and evaluate the appropriateness of the accountant’s conclusions in an impartial manner.’ – (from 120.5 A4 in the proposed new Code of Ethics)
- Sections 210/310 also provide additional discussion of matters such as conflict identification processes, safeguards, types of disclosure and consent, and when work can be taken on without disclosure and consent.
A helpful flowchart to aid the decision-making process regarding conflicts of interest is available at this link (courtesy of the ICAEW helpsheet from December 2019).
Watch our website for the forthcoming webinar on the new rules.
See our latest additions to the website store which are the AML Business-Wide Risk Assessment Word template and a webinar on how to prepare it. Both of these help firms comply with the latest requirements of Section 30A of the Criminal Justice (Money Laundering and Terrorist Financing) Acts, 2010 to 2018, effective from 26 November 2018.
For other webinar topics including Investment Property Accounting, FRS 105, Common Errors in FRS 102 Accounting and the latest on FRS 105 and company law, visit our online webinar training website.
