Know your tax reliefs and be a start-up’s best pal Posted 07/22/2016 by Michael Steed & filed under Tax. Our job as accountants and tax advisers is to explain often-complex rules to our clients. The current focus on Entrepreneurs’ Relief (ER), and tax-relief schemes such as the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), is very topical. Start-up rates are rising and returns on savings are derisory, so clients want to know what tax breaks are available, and the finer (and sometimes confusing) details that are sure to come up. When it comes to ER and tax-relief schemes, our advice can be very valuable. ER and Investors’ Relief ER’s function is simple: to reward entrepreneurs, via the tax system, on the sale of their business. Instead of paying the main rates of capital gains tax (CGT) on their gains (18% and 28% up to April 2016), they can enjoy a lower rate of 10%. The main conditions are that the entrepreneur must have had the business for at least a year, be an officer or employee of the company, and hold at least 5% of the ordinary share capital (with those shares giving the individual at least 5% of the voting rights). ER has been a great help in the traditional incorporation of a business, a task undertaken by many AAT members. For example, Fred the plumber, incorporating into Fred Ltd, could sell his internally generated goodwill to his own newly formed company and pay the 10% ER tax rate in exchange for a nice tax-free director’s loan. We lost this in the Autumn Statement 2014. From that point, internally generated goodwill would no longer qualify for ER, so the main rates then applied. To some extent, this situation has been ameliorated by the reduction in the main rates of CGT from April 2016 (to 10% and 18%) and a partial U-turn on the restrictions (in the Finance Act 2015) in the Budget 2016 (and backdated). One surprising about-turn in the Budget was the chancellor’s announcement that he would provide another form of ER for unconnected ‘business angels’ who invest in unlisted trading companies: Investors’ Relief (IR). The new rules for IR, which apply to investors who are not allowed to be officers or employees, enable them to have the 10% CGT rate as long as those shares are subscribed for on or after 17 March 2016, and are held continuously for three years. As with ER, there will be a £10m lifetime limit for the relief, and this is in addition to the £10m ER allowance for directors and employees. I’m pleased that the chancellor has introduced this variant of ER. It offers more choice to entrepreneurs and investors who are considering start-ups and who are seeking tax breaks – great news for us and our clients. EIS and SEIS The EIS offers investors both an incometax relief (30% of the value of the shares subscribed for in a small, higher-risk trading company) against their tax liability in the year of investment and an exemption from CGT if the shares are held for three years. The maximum investment per person is £1m. However, an individual investor cannot be ‘connected’ with the qualifying EIS company. They are connected if they hold more than 30% of the shares, voting rights or assets in a winding up (directly or indirectly). Individuals can also be connected if they are paid as an employee or a director, but that can include an unpaid director, such as a business angel. Another option is the SEIS, designed to help small, early-stage trading companies raise equity finance by offering tax reliefs to individual investors who purchase new shares in those companies. It complements the EIS, but offers an even higher income-tax relief (50%). If you have received income-tax relief on the cost of the shares, and the shares are sold after they have been held for at least three years, any gain is free from CGT. The maximum annual investment in an SEIS company is £100,000, but it can be topped up with EIS later. The restrictions on working and being paid are similar to those of the main EIS relief. You can’t have a “substantial interest” in the company (more than 30% of the shares for the investor and family) and you can’t be an employee, although, strangely, you can be a director. So the rules of these schemes can be odd, but, for the most part, the reliefs are incredibly valuable for small-business and start-up clients. This is what reliefs are meant to do, and it’s nice to be able to get away from the negative public opinion on tax dodging, and to do something positive. Investors’ Relief in brief Investors may qualify for the 10% CGT rate The rate applies to shares issued from 17 March 2016 There is a £10m lifetime limit for the relief
5 tips from a recovering people pleaser Posted 07/21/2016 by Jen Smith & filed under Career. This recovering people pleaser has realised lately that I’ve spent too many years of my life trying to please everyone else and putting myself second. Perhaps you can relate? You automatically say yes, even if you want to say no You believe that if you do the right thing you will be ‘accepted’ You say “sorry” when no apology is necessary You constantly do more than your fair share You stay awake at night worrying if you offended or upset someone You replay conversations in your mind and wonder “If I just did this differently” or “If I hadn’t said it in that way” You worry that one day you will be “found out” and people will discover you are unworthy, unskilled and untalented Any head-nodding whilst reading would indicate you’re a people pleaser. There’s nothing wrong with wanting to be a kind and helpful person, but when it gets to the point where your own happiness comes second to someone else, it’s time to make a change. I’ve discovered first hand that getting off the ‘people pleasing wagon’ is a lot harder than I expected. I’m still figuring it out. Just a little while I almost changed our whole wedding plan to please one person. That one person wasn’t my fiance – the only other person aside from myself I should be thinking about pleasing. I caught myself quick, but my habits and patterns of trying to keep everyone happy are still working their way out of my system. Here are five tips I can share right now as a recovering people pleaser. Get clear on what you want It’s time to be 100 per cent selfish and figure out exactly what you want in your life – at work, at home and in your relationships and friendships. When I took the time to map out exactly what I wanted for myself and how I wanted my life to look, it was easier to stay on track and not get sidetracked by someone else’s stronger vision. Clarity in the vision for your future will give you the strength to say no to things and people who stop that vision coming to life. Play with saying no People pleasers tend to say yes a lot, usually without thinking first. It’s our default, and it takes some work to break. I started out by saying no to really small things I didn’t want to do. I played with it and even if I didn’t say it to a person directly I’d say “no” out loud to myself just to get the feel for it. Over time, I found I was more comfortable saying no, and was able to do so for bigger and bigger things. Consider the consequences This tip helped me hugely, and came from one of my mentors who said, “no one truly benefits from you trying to please people. Firstly, you don’t benefit. Secondly, the other person or people don’t really benefit because although they might feel like they’re getting what they want, it’s not a genuine exchange. Third, and finally, who in your life are you teaching people pleasing to? Your nieces, nephews and goddaughter? They pick up on your actions.” This was a big wake up call for me and helped me consider the consequences of trying to please everyone. Do they deserve you? My particular type of people pleasing usually centred around wanting people to like me. I made a list of the people who I wanted to like me but thought didn’t and I asked myself, “why do they deserve me?”. What I found was that a lot of the people I was worrying about liking me, or trying to please, actually weren’t very nice people or didn’t deserve my attention or friendship. It’s a bit like chasing the bad boys when you’re growing up – you know they’re no good for you and aren’t likely to fall for you but that’s the appeal. The chase is thrilling and gives you a weird kind of high. When I gave that up and focused on the people who do deserve my love and attention, things got much better. Take it one step at a time I call myself a ‘recovering people pleaser’ because I still haven’t got it all figured out. The instance around my wedding proved that to me. But what I’m finding is, I’m getting there slowly. Habits can be hard to break and it’s ok if I don’t do it all at once. Start somewhere, and take your time. I’m pretty sure I’ll eventually feel like I’ve left my people-pleasing ways behind for good, and not have to think about it anymore but for now, I’m reassured that I’m going in the right direction. If you’ve managed to completely recover from being a people pleaser, and have more tips and advice for those of us still on the journey, please comment below.
FRS102: Business combinations and goodwill Posted 07/20/2016 by Steve Collings & filed under Financial accounting and reporting. FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland deals with business combinations in Section 19 Business Combinations and Goodwill. This article explores some of the main considerations that AAT Licensed Accountants and members should consider where business combinations under the new reporting regimes are concerned. A business may enter into a ‘business combination’ by acquiring a subsidiary. The Glossary to FRS 102 defines a ‘business combination’ as: ‘The bringing together of separate entities or businesses into one reporting entity.’ When an acquirer (a parent) acquires a target (a subsidiary), the parent may acquire it in whole or in part. In other words the parent might acquire 100% of the net assets of the subsidiary, or it could acquire a controlling stake (i.e. more than 50% but less than 100%). Section 19 in FRS 102 outlines the accounting for a business combination and any associated goodwill which might arise following an acquisition of a subsidiary. An important point to emphasise where the definition of a business combination is concerned is that it is the bringing together of separate entities or ‘businesses’ into one reporting entity. Sometimes it may not be clear as to whether an investee is a business and is often a situation which may need further analysis because of the inherent differences in accounting for an asset purchase and a business combination. The Glossary to FRS 102 defines a ‘business’ as: ‘An integrated set of activities and assets conducted and managed for the purpose of providing: (a) a return to investors; or (b) lower costs or other economic benefits directly and proportionately to policyholders or participants. A business generally consists of inputs, processes applied to those inputs, and resulting outputs that are, or will be, used to generate revenues. If goodwill is present in a transferred set of activities and assets, the transferred set shall be presumed to be a business.’ The example above was pretty straightforward in that it was clear that a business was in existence. However, it might not always be so conclusive and hence further analysis may well be needed. Concept of ‘control’ When a business combination takes place, one party obtains control of another party (or parties). Control is usually evidenced by the parent acquiring more than 50% of the net assets of the subsidiary. However, this is not always the case and control may be obtained with a holding of less than 51% if the parent can, for example: cast the majority of the votes at the meeting of the board of directors; appoint or remove the majority of the members of the board of directors; govern the financial and operating policies of the entity under statute or agreement; or hold power over more than 50% of the voting rights by virtue of agreement with other investors. It is important, therefore, to consider the wider picture (i.e. the substance of the arrangement) to establish whether control has, or has not, been obtained where the ownership interest is less than 51%. The purchase method Section 19 uses the ‘purchase method’ to account for business combinations. This method used to be called the ‘acquisition method’ in previous UK GAAP and is applied to all business combinations except: group reconstructions which are accounted for using the merger accounting method; and public benefit entity combinations which are in substance a gift or which are a merger and hence are accounted for in accordance with Section 34 Specialised Activities. There are three steps in applying the purchase method: identify an acquirer; measure the cost of the business combination; and allocate, at the acquisition date, the cost of the business combination to the assets acquired and liabilities and provisions for contingent liabilities assumed. Identify an acquirer The acquirer in a business combination is the party which obtains control of the other entity (or entities). For the purpose of Section 19 the term ‘control’ is the power to govern the financial and operating policies of an entity or business so as to obtain benefits from its activities. Quite often it is clear which party is the acquirer in a business combination. However, if a complex group structure exists it may not be as apparent. In light of this, paragraph 19.10 of FRS 102 offers examples of three indicators that an acquirer exists (note – emboldened words are defined in the Glossary to FRS 102): If the fair value of one of the combining entities is significantly greater than that of the other combining entity, the entity with the greater fair value is likely to be the acquirer. If the business combination is effected through an exchange of voting ordinary equity instruments for cash or other assets, the entity giving up cash or other assets is likely to be the acquirer. If the business combination results in management of one of the combining entities being able to dominate the selection of the management team of the resulting combined entity, the entity whose management is able so to dominate is likely to be the acquirer. Cost of a business combination The cost of the business combination is measured as the total of: (a) the fair values at the date of acquisition of: assets given; liabilities incurred or assumed; and equity instruments granted; plus (b) any costs which are directly attributable to the business combination. If control is achieved in stages (also referred to as a ‘piecemeal acquisition’ or a ‘step acquisition’) then the cost of the business combination is the total of the fair value of assets given, liabilities assumed and equity instruments issued by the acquirer at the date of each transaction in the series. In a business combination it is not necessarily just cash that changes hands in exchange for ownership interest, consideration can also include: property, plant and equipment; another business; shares (including preference shares); and contingent consideration. Where any adjustments to the cost of the business combination are not recognised at the date of acquisition, but then become probable and can be measured reliably, the additional consideration is treated as an adjustment to the cost of the combination. Allocating the cost of the business combination to the assets acquired and the liabilities and contingent liabilities assumed The cost of the business combination is then allocated to the acquiree’s identifiable assets and liabilities and contingent liabilities (those contingent liabilities which satisfy the recognition criteria) at their fair values at the date of acquisition. However, care must be taken here because Section 19 refers to other areas of FRS 102 where different provisions apply to certain assets and liabilities, notably: A deferred tax asset or liability arising from the assets acquired and liabilities assumed is recognised and measured in accordance with Section 29 Income Tax. A liability (or, where applicable, an asset) in respect of an acquiree’s employee benefit arrangements is recognised and measured in accordance with Section 28 Employee Benefits. Share-based payment transactions are recognised and measured in accordance with Section 26 Share-based Payment. Paragraph 19.15 requires the acquirer to separately recognise the acquiree’s identifiable assets, liabilities and contingent liabilities at the date of acquisition but only where they satisfy the following criteria at that date: In the case of an asset other than an intangible asset, it is probable that any associated future economic benefits will flow to the acquirer, and its fair value can be measured reliably. In the case of a liability other than a contingent liability, it is probable that an outflow of resources will be required to settle the obligation, and its fair value can be measured reliably. In the case of an intangible asset or a contingent liability, its fair value can be measured reliably. In the consolidated financial statements, the acquiree’s profits or losses after the date of acquisition are included based on the cost of the business combination to the acquirer. Identifying the date of acquisition Section 19 requires the purchase method to be applied to a business combination from the date of acquisition. The date of acquisition is the date on which control passes to the acquirer and is often ascertainable in the sale and purchase agreement. However, this is not always the case, particularly in a complicated business combination. Where difficulties are encountered there is no ‘one-size-fits-all’ approach and the definition of ‘control’ must be applied to the specific facts and circumstances, which will invariably require a degree of judgement. Complications in ascertaining the date of acquisition can arise where: the sale and purchase agreement states that control is transferred on a date that is not the date on which the sale completes; control is passed subject to regulatory approval and/or shareholder approval; other conditions have to be satisfied after the date of completion prior to control passing; or where the transaction is not subject to a sale and purchase agreement and hence there is no closing date for the transaction. Incomplete accounting at the year-/period-end Business combinations can take a long time to complete and it may be the case that a combination is incomplete by the year-/period-end. When this is the case, the acquirer must recognise a best estimate for the amounts for which the accounting is not complete. Within 12 months after the date of acquisition, a retrospective adjustment must be made to the provisional amounts recognised to take account of the new information obtained (i.e. actual values). Beyond this 12-month time limit, any adjustments to the initial accounting for a business combination should only be recognised in order to correct a material error and the provisions in Section 10 Accounting Policies, Estimates and Errors should be applied where this is the case. Contingent liabilities Paragraph 19.15(c) says that the acquirer must recognise a separate provision for contingent liabilities of the acquiree, but only if the fair value of contingent liabilities can be measured reliably. Where fair value cannot be reliably measured: (a) there is a resulting effect on the amount recognised as goodwill (or, where applicable, negative goodwill); and (b) the acquirer should instead disclose the information concerning that contingent liability as required by Section 21 Provisions and Contingencies. Where contingent liabilities meet the recognition criteria, the acquirer measures them separately at the higher of: (a) the amount that would be recognised in accordance with Section 21; and (b) the amount initially recognised less any amounts previously recognised as revenue in accordance with Section 23 Revenue. Goodwill Goodwill is basically the difference between the net assets acquired and the consideration paid for those net assets. Positive goodwill is amortised on a systematic basis over its useful economic life. (Note: goodwill always has a finite useful life under FRS 102). Where management of an entity are unable to make a reliable estimate of the useful life of goodwill, the life must not exceed five years. In addition, management must also review the value of goodwill to assess if there are any indicators of impairment. If this is the case, the provisions in Section 27 Impairment of Assets are triggered. Negative goodwill Negative goodwill arises in a bargain purchase (i.e. where the consideration is less than the net assets acquired). This can usually arise in a distressed sale where the shareholders want a quick way out of the business. There are three steps to follow where negative goodwill arises: Reassess the identification and measurement of the acquiree’s assets, liabilities and provisions for contingent liabilities and the measurement of the cost of the combination. This is to ensure that everything has been captured for the purpose of the goodwill calculation (i.e. assets, liabilities and contingent liabilities are complete and the cost is complete). Following this reassessment, if negative goodwill is still arising, recognise and separately disclose the resulting excess on the face of the balance sheet as at the date of acquisition, immediately below goodwill, and followed by a subtotal of the net amount of goodwill and the excess. Recognise subsequently the excess up to the fair value of non-monetary assets acquired in profit or loss in the periods in which the non-monetary assets are recovered. Any excess exceeding the fair value of non-monetary assets acquired is recognised in profit or loss in the periods expected to be benefited. Conclusion Section 19 of FRS 102 is very comprehensive and this article has considered some of the main features of the section. Where a business combination (including a group reconstruction) arises, then the provisions in that particular section should be complied with. It should also be noted that goodwill can never have an indefinite life under FRS 102 and therefore where companies have not amortised goodwill due to indefinite useful lives under outgoing GAAP, then accounting practices will have to change on transition to comply with the standard’s requirements. For more articles on financial accounting, reporting and more, visit our CPD resources by clicking the image below
Basic maths skills for accountants including mark-ups and margins Posted 07/19/2016 by Gareth John & filed under Foundation Certificate, Study tips. There are a few common maths hurdles that budding accountants can trip up on. First Intuition tutor Gareth John provides some useful tips to avoid these mistakes. Calculating averages When businesses are dealing with large volumes of production involving large amounts of resource and costs, it is useful to be able to break these down into averages. This allows us to consider things on a smaller scale. For example, if we produced 100,000 units using 200,000 kg of material then the average amount of material per unit would be 200,000 kg/100,000 units = 2 kg per unit. This can be useful for: Helping to plan resource requirements. If we are going to produce 2,000 units next week then we need to purchase around 4,000 kg of materials. Identifying unit production costs. If material costs £5 per kg then the total material cost per unit would be £10. Setting prices. Once we have worked out the average costs for making a unit we can add a margin to set a profitable price. The main thing to be careful about when calculating averages is that you divide the two figures ‘the right way around’. A common mistake is to divide them ‘the wrong way around’ i.e. working out 100,000/200,000 = 0.5 kg per unit rather than the correct 2 kg per unit. Have a go at these examples: Gohere Railways provide meals for their passengers. They made a total of 1,000,000 meals using a total quantity of 250,000 kg of ingredients. What is the average usage of materials per meal? Runup Ltd spent £210,000 on 700,000 kg of materials. What is the average cost per kg of their purchases? Walkdown Ltd made 200,000 units in 40,000 labour hours. What was the average time taken to make each unit? Strollaway plc paid staff £428,750 for 35,000 hours of work. What was the average wage rate per hour? Percentage changes Percentages are a useful way to look at how figures are changing, perhaps over time. If I tell you that the price of a car has changed from £13,500 in year 1 to £14,850 in year 2, then we can see that the price has risen between the two years, but it is not immediately clear by how much. Using percentages (‘per cent’ means ‘parts of a hundred’) can make this much clearer. To work out the increase as a percentage we can first work out the increase in pounds. £14,850 – £13,500 = £1,350. We normally work out percentage changes based on the starting figure, so in this case we would work it out as £1,350/£13,500 x 100 = 10%. Another way to work this out is to calculate £14,850/ £13,500 which gives 1.1 which is ‘1 + the percentage increase as a decimal’ or ‘1 + 0.1’ or ‘1 + 10%’. As ever make sure you divide the two figures ‘the right way around’ with the starting figure at the bottom. Have a go at these examples: A cost has increased from £80 to £100. What is the percentage increase in the cost? A cost had fallen from £150 to £120. What is the percentage decrease in the cost? A price has risen from £18 to £20. What is the percentage increase in the price? The interest rate on our bank loan is increased from 10% to 13%. What is the percentage increase in the interest rate? Using margin and mark up information The relationship between costs and prices is a critical one in any business as it determines the profit (or loss) that is made. Margin is short for ‘margin on sales’ so the profit element is shown as a percentage of the sales value. Mark-up is short for ‘mark-up on cost’ so the profit element is shown as a percentage of the cost. Here are some examples: If the sales price is set at £190 and the company has a target profit margin of 40% what is the maximum target cost that they can afford to incur? If a company has a target profit margin of 25% and spends £150 producing a unit what must the selling price be set at? If the sales price is set at £190 and the company uses a mark-up of 40% what is the production cost of the product? If a company spends £150 producing a unit and sets the price to give a mark-up of 25% what will the selling price be? Once you have had a go at the examples in this article you can watch me talk through my answers. You may encounter some of these calculations when using the incomplete records technique. To access your eLearning tools click the image below and login
The food of love: how festivals support local communities Posted 07/19/2016 by Mark Blayney Stuart & filed under News. The rise of festivals across the UK has been phenomenal over the last 30 years. As well as major music festivals Glastonbury, Leeds and Reading, there are hundreds of smaller ones, with live music events generating £2.2bn for the UK economy, according to an Oxford Economics study for Visit Britain. £1.3bn is spent annually on tickets, accommodation and transport and a further £914m is spent on food, drink and other purchases. Some 135,000 people attended Glastonbury in 2015 and the Edinburgh Festival Fringe featured over 50,000 performances of 3,314 shows. Festivals have a positive social and economic effect on their local communities. So how does the host town benefit from festivals? Peter Florence is Director of the Hay Festival, arguably the most famous literary festival in the world. Founded in 1988, Hay has expanded internationally, with satellite events now taking place in Mexico, India, Spain and Kenya. Florence’s softly-spoken manner belies his exceptional position of power in the festival world – a position he uses both to enhance and support the local community. ‘The biggest social benefit is that kids living rurally have the same expectations of excellence as anyone in London or New York,’ he says. ‘They see Hay as somewhere that welcomes the world.’ Florence argues that Hay ‘was always a profoundly local enterprise. Everyone who works here lives here. ‘The festival benefits the community both as a whole and at individual level.’ A lad got into the RSC and was interviewed in the Hereford Times about what made him want to be an actor. He said, “my mum took me to see Arthur Miller at the festival when I was nine and that was it for me.” ‘ And more broadly, ‘every sixth former who cites Hay in their personal statement on their UCAS form validates the whole project. Everyone who shares a book they love, or engages with a new idea makes it all worthwhile.’ Economically, the impact of such a huge festival on a small town can hardly be over-estimated. The event IMPACTS Economic Calculator indicates that the total spectator spend in the local economy is in the region of £21.4m. With the festival’s large catchment area – 48% of attendees live more than two hours’ driving from Hay – considerable sums pump into the local economy in terms of accommodation and food and drink. 40% of attendees stayed in paid-for accommodation, for an average of 3.8 nights. (The festival further benefits the town by its duration – 2016’s lasted 10 days). And the average amount spent on accommodation was £54.40 per person per night (£40 median). Hay is at capacity at festival time; many residents rent their own houses out over the 10 days, so it’s not just local businesses that are helped. Bars, restaurants, cafes and local businesses all benefit too. The average amount spent per day on non-accommodation items was £77.10 (£55 median). There are challenges to running festivals. This year’s Soundwave music festival is the most recent example of a festival that has had to cancel and refund pre-paid tickets, blaming poor sales, and Isle of Wight Festival director John Giddings claimed in 2011 that the festival market is ‘saturated’. But as Peter Florence points out, if you support the community, the community will help in return. This was noted during the foot and mouth outbreak in 2001. ‘We thought we would have to cancel, but the local Young Farmers Club came to us and said – our farms are shut. If the festival goes down too then Hay is finished.’ Instead, the farmers ‘operated the carwashes and shoe mats so that everyone who came went away clean and uncontaminated. At that point the festival became something owned by the whole community.’ Placing the community at the heart An example of an arts and music festival with notable community benefits is Made in Roath, an event established seven years ago in the arts quarter of Cardiff. With a sustainable ethos, Made in Roath’s distinguishing factor is that, despite growing year-on-year, it remains entirely free – enabling it to reach out to those parts of the community not normally reached by arts events. Co-Director Helen Clifford explains that the economic and social benefits to the community are intertwined. ‘We work directly with local businesses – placing artists in them, and highlighting their value to communities.’ By associating with the festival, the businesses increase their visibility ‘and that in turn feeds back to the community – those businesses are owned and run by local people.’ A key example is how the festival supported a local pub at risk of closure. ‘We had use of the empty spaces without charge, so we programmed two years’ worth of projects. An artist now has a studio there. It’s become an arts hub in its own right. And that’s a great example of how keeping dialogue open can have really positive effects.’ From simple beginnings as a project established by three friends, ‘this year we will produce 5,000 brochures and programmes, our Twitter and Facebook figures are extraordinary and we have some 20,000 unique visits to the website. It shows how the whole community gets behind this every year.’ Was the local community always supportive, or did they need to be encouraged to take part? ‘People want to live here as a result of the festival,’ Clifford says. ‘It’s helped make the area culturally lively.’ Because the festival works with schools, churches and mosques, it has a key role in social cohesion that succeeds because it is fun and creative. ‘The level of people wanting to get involved has built up because of the trust we have in Roath.’ For the future, ‘it’s fundamental that we remain a free festival and we’ll do our utmost to protect that.’ Clifford argues against ‘volunteer fatigue’ setting in, saying ‘we are resourceful and we have the community behind us.’ What will change, she thinks, is Made in Roath may become ‘an arts collective with a festival as part of its programme – we are already working on community projects all year round.’ And Clifford’s desire is that the festival does not outgrow itself. ‘I want it to stay relatively small, but to diversify. It should never evolve into something where people don’t feel they can join in. This festival is for everyone; that’s it’s uniqueness.’ New approaches for festivals A brand-new festival is the Abergavenny Writing Festival, drawing authors from different disciplines – poetry, journalism, speech-writing and comedy. As a start-up in the industry, sponsorship is a key way for businesses to generate goodwill, build awareness of the brand and target potential customers from a well-identified demographic – all for a comparatively fast and low cost-base. Director Lucie Parkin is full of warmth for the way both local businesses and residents supported the endeavour. ‘A local estate agent came on board as a sponsor and the team really got involved. I generated quite a lot of local press coverage about the festival and was always keen to namecheck our sponsor, which they found beneficial.’ Parkin points to the positive way the community embraced the festival from the start, and its success quickly confirmed her plans to run it again next year. ‘I’ve been contacted by the Rotary Club and more venues and schools who want to find ways to get involved. Shops, cafes and other local businesses were very happy to display our posters and cards.’ Most of the writers themselves were local, and other ways the income was poured back into the local community was by using ‘a local designer to create logo and artwork and local printers for postcards, posters and programmes.’ For the future, Parkin wants ‘to work with more schools – in year one it was only practical to reach out to one, but another primary school has already been in contact to say they’d like to be involved next year. I’d also like to engage with care homes.’ This involves in generating more funds. ‘We’ll be applying for Arts Council and other funding for 2017 and trying to get more commercial sponsors on board.’ Festivals in the UK – facts and figures Glastonbury began the day after Jimi Hendrix died in 1970. The festival now has over 100 stages across five days. The first literary festival in the UK was in 1949 in Cheltenham; this is still going strong. Ilkley followed in 1973 and then Edinburgh a decade later. The past five years have also seen a great increase in food festivals, with vegan and street food events now alongside established festivals like Aldeburgh and Ludlow. The ‘Edinburgh Festival’ is actually a series of unconnected festivals including the Edinburgh Festival Fringe and the Edinburgh International Festival; together, they make up the largest annual cultural festival in the world.
How Spidey let $60m (£45m) slip through his web Posted 07/15/2016 by Mark Rowland & filed under News. The story of Spiderman. Turn off the Dark is a textbook example of the dangers of hubris. A musical with a score by U2, and a Tony Award-winning theatre director at the helm, the perception was that it couldn’t be anything other than a huge hit. It ended up being the most expensive flop in theatre history, losing upwards of $60m (£45m), according to New York Magazine. The production’s running costs exceeded $1m (£750, 000) a week, but the perception among the show’s producers was that it would inevitably make that money back. “There was always this perception that the show was going to be a massive hit – how could it not be?” says the show’s co-writer Glen Berger, who wrote a book, Song of Spider-Man, about his experiences on the show. “When you look at who was on it and all the material, the discussion was never: ‘What happens if it closes in two months?’ The discussion was always: ‘How soon can we get three more productions up?’” A web of woes The musical’s inception dates back to 2002, when theatre producer Tony Adams signed up with Marvel to create the musical off the back of the first Spider-Man movie. Adams first enlisted U2’s Bono and The Edge to write the music for the show, then Julie Taymor, who was celebrating multi-million-dollar success with The Lion King musical. Playwright Berger was hired to write the musical along with Taymor. Speaking to the podcast Geek’s Guide to the Galaxy, he explained that the early days of the project were incredibly optimistic: “When we were together, we were so very focused and excited about the material, and we wanted to come up with something beautiful… it was conceived out of naive idealism and there was a lot of high spirits early on.” The problems really started when Adams died of a stroke in 2005. His business partner, entertainment lawyer David Garfinkle, decided to produce the show by himself, despite having no direct theatre production experience. As a result, his approach was very hands-off, and the budget started to skyrocket. Delaying the inevitable Numerous delays and problems ran up costs, according to The Edge, of $31.3m (£23.5m). Production was delayed in 2009, with the producers citing “an unexpected cash-flow problem”. Previews were suspended as the production scrabbled for additional investors. Bono and The Edge brought in Michael Cohl, best known as a rock promoter for U2 and the Rolling Stones, as the new lead producer of the show. By this point, costs had risen to $50m (£38m), and, in an interview with The New York Times, Cohl said this would grow by at least $10m (£7.5m) by the time all expenses were accounted for. But Cohl wasn’t necessarily the best choice for a show that was already racking up excessive costs. His approach to production was ‘more is more’, which, along with Taymor’s ambitious vision for the show, was destined to push costs skywards. Set to fail The complex technical requirements led to problems that resulted in a number of injuries on set. Two injuries were caused by a ramp that failed to lower in time for ‘Spider-Man’ to land a backflip. The actor playing Arachne was concussed by a piece of the set and was off the show for three weeks. One of the stuntmen fell 30 feet, sustaining several injuries. “Our set was so involved and so complicated and so expensive that we had to install it at the Foxwoods Theatre, and we couldn’t break it down out of town and bring it into New York. We had to do everything there in New York, so, instead of going out with our pants round our ankles out of town and slowly pulling our pants up, we had to do it all under the hot glare of New York City,” says Berger. By the time the musical entered its final preview phase in summer 2011, the production had been shut down six times, and Taymor had been fired from the project. According to Berger, she just could not accept that the project was doomed: “When the time came, when it really did seem that the writing was on the wall, I think, for certain people, it was very hard to read that writing. It was very hard to get it into [their head] that actually this show has maybe three weeks of life in it.” The production eventually ran for two years, but it didn’t make enough to recoup its costs. For Berger, it was a gruelling ordeal that is painful to revisit: “It was less of a musical for me and more of a life event that I’m sure I’ll be chewing on for some time.”
For AAT, it’s more than just business in Botswana Posted 07/14/2016 by AAT Comment & filed under AAT news. Nelsen Mandela once said: “Education is the most powerful weapon which you can use to change the world.” At Botswana Student Network (BSN), this is something we strongly believe in. BSN is an information sharing platform that advocates for better education in Botswana. It is a movement driven by young people, who share ideas, opportunities and experiences to ensure the betterment of the entire student community in Botswana. AAT and BSN have signed a memorandum of understanding to help students ensure they have the soft skills employers want. This is the first partnership between a student network and AAT in Botswana. AAT in Botswana is widely recognised. It is the most common form of professional certification, so the activities proposed by AAT are extremely relevant to the vast majority of our student community. This partnership not only advances our objectives, but also gives the students we serve a chance to get an international and professional view of issues of employability. It is BSN’s goal to empower those who are less privileged and give them access to opportunities to improve their education and career prospects. We target students from junior and senior secondary schools (both private and public), colleges and tertiary institutions around Botswana. We bring them all together, so they can benefit and learn from each other. This aligns with AAT’s objectives to make financial skills and work opportunities accessible to all. We also give students access to government bodies and private companies in the development of academic excellence, leadership, career opportunities and social responsibility. It is a great honour to be in partnership with such a highly esteemed organisation that represents so much of Botswana’s student population. It is also a great relief to know that, for AAT, its involvement is about more than just business in Botswana. Words and photo: Elizabeth Baitumetse, Chairperson of the national executive committee of BSN.
FRS 102 and leasing Posted 07/14/2016 by Steve Collings & filed under Financial accounting and reporting. Leases have always posed a problem for the accountancy profession because of their subjective nature and the ability to manipulate leasing transactions to achieve a desired outcome (commonly referred to as ‘off balance sheet finance’). FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland brings about some notable changes to the way in which lease transactions are accounted for; although the concept of ‘operating’ and ‘finance’ leases remains. Leasing is dealt with in Section 20 Leases. At the outset this particular section confirms that it does not deal with the following types of leasing transactions: Finance and operating leases Section 20 still determines the classification of a lease in much the same way as SSAP 21 Accounting for leases and hire purchase contracts. The overarching principle in the determination of whether a lease is a financing lease or an operating lease is considered in light of the substance of the arrangement – in other words looking at who bears the risks and rewards of ownership of the asset subjected to the lease. When, substantially, all the risks and rewards incidental to ownership of the asset are transferred from the lessor to the lessee, this will give rise to a finance lease. The asset will appear on the company’s balance sheet together with a corresponding finance lease creditor. This is because, in substance, the lessee has acquired an asset that has been financed through a leasing transaction. Where the risks and rewards of ownership of the asset remain with the lessor, the lease is classified as an operating lease and rentals are charged to profit or loss as they arise. This is the same accounting treatment as we see currently in SSAP 21 and the FRSSE (effective January 2015). The Guidance Notes to SSAP 21 and the definition of a finance lease in the Glossary to the FRSSE contain a 90% ‘bright line test’ whereby should the present value of the minimum lease payments that the lessee is required to pay equate to 90% or more of the fair value of the leased asset, this will give rise to a finance lease. However, Section 20 does not contain a 90% bright line test; instead it offers five examples of situations that individually, or in combination, would normally lead to a lease being classified as a finance lease, and a further three indicators of situations that individually, or collectively, would also lead to a lease being classified as a finance lease. The first five are: The lease transfers ownership of the asset to the lessee by the end of the lease term. The lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable and for it to be reasonably certain, at the inception of the lease, that the option will be exercised. The lease term is for the major part of the economic life of the asset even if title is not transferred. At the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset. The leased assets are of such a specialised nature that only the lessee can use them without major modifications. It is to be noted that the fourth indicator refers to the term ‘substantially all’. This is the term that has essentially replaced the 90% test contained in SSAP 21, hence more judgement is needed on the part of the accountant to determine a level for ‘substantially all’. The three additional indicators of situations which could also lead to classification of a lease as a finance lease are as follows: If the lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the lessee. Gains or losses from the fluctuation in the residual value of the leased asset accrue to the lessee (e.g. in the form of a rent rebate equalling most of the sales proceeds at the end of the lease). The lessee has the ability to continue the lease for a secondary period at a rent that is substantially lower than market rent. It is important to understand that the situations above are not exhaustive and this is reflected in the wording in paragraph 20.7 which confirms that all of the above situations are not always conclusive. The key to determining the correct lease classification will all depend on whether the risks and rewards of ownership have transferred to the lessee or remain with the lessor at the inception of the lease. Paragraph 20.8 says that lease classification is made at the inception of the lease and the classification is not changed during the term of the lease (i.e. from operating to finance or vice versa) unless the lessee and the lessor agree to a change in the provisions of the lease (other than simply renewing the lease). Where such provisions are changed, the lease classification is then re-evaluated. Determining amounts in a finance lease Once a lease has been determined as a finance lease, on initial recognition Section 20 would require a lessee to recognise its rights of use of that asset as an asset at amount equivalent to the fair value of the leased asset or, if lower, the present value of the minimum lease payments which are determined at the start of the lease. Where an entity incurs costs which are directly attributable in negotiating and arranging a lease, these costs are added to the amount recognised as an asset. Subsequent measurement – finance leases After initial recognition, paragraph 20.11 to FRS 102 requires a lessee to split the minimum lease payments between the capital element and the interest element. This is currently done in SSAP 21 and the FRSSE and hence should be familiar to AAT members. However, the reduction in the outstanding liability is calculated using the effective interest method. The effective interest method is a method of calculating the amortised cost of either a financial asset or a financial liability (or a group of financial assets and liabilities) and therefore allocating the interest component of the lease payments over the relevant period. Under the effective interest method: the amortised cost of the finance lease liability is the present value of future payments discounted at the effective interest rate; and the interest expense in a period is equivalent to the carrying amount of the liability at the beginning of a period multiplied by the effective interest rate for the period. For the purposes of this calculation, the effective interest rate is the rate that exactly discounts the future payments through the expected life of the lease. The above formula gives an effective interest rate of 10% and this is the rate which exactly discounts the future cash flows through the expected life of the lease. The 10% rate of interest is used to charge the profit and loss account with the interest expense and the lease can be profiled as follows: Depreciation of the leased asset The lessee must depreciate the leased asset over the shorter of the lease term and its useful economic life and at the end of each period assess whether an asset leased under a finance lease is impaired. There is no change to how depreciation of assets under a finance lease works from the provisions in SSAP 21. Operating leases Operating leases will essentially follow the same accounting treatment as SSAP 21 and the FRSSE and the lessee will recognise payments under an operating lease (excluding costs for services such as insurance and maintenance) as an expense over the lease term on a straight-line basis, unless: another systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis; or the payments to the lessor are structured to increase in line with expected general inflation (based on published indexes or statistics) to compensate for the lessor’s expected inflationary cost increases. However, if payments to the lessor vary because of factors other than general inflation, then this condition is not met. If a lessee receives a lease incentive, this is accounted for as a reduction to the expense over the term of the lease on a straight-line basis, unless another systematic basis is representative of the time pattern of the lessee’s benefit from the use of the leased asset. This is slightly different than in UITF 28 Operating lease incentives. Where a lessee receives a lease incentive, these are usually recognised in profit or loss up to the point at which the rentals revert to market rate (for example after the first periodic rent review) and hence the lease incentive would be written off up to the point of the first review. Under FRS 102 the lease incentive is written off over the lease term, regardless of any break-clauses which might apply. There is also an optional exemption available in paragraph 35.10(p) which allows an entity on transition to either continue accounting for lease incentives under outgoing UK GAAP, or restate to FRS 102. There could be an added tax incentive to restating because the operating lease charge in profit or loss would essentially be higher under FRS 102 principles because the lease incentive is being written off over a longer period. Lessor accounting – finance leases Lessors recognise assets which are subject to finance leases in their balance sheet as a debtor at an amount which is equal to the net investment in the lease. The ‘net investment in the lease’ is the gross investment in the lease, but discounted at the interest rate implicit in the lease. The ‘gross investment in the lease’ is the total of: the minimum lease payments receivable by the lessor under the finance lease; and any unguaranteed residual value accruing to the lessor. Finance income is recognised in profit or loss based on a pattern that reflects a constant periodic rate of return on the lessor’s net investment in the finance lease. Manufacturer or dealer lessors Where lessors are manufacturers or dealers, a finance lease can give rise to two types of income: a profit or loss resulting from an outright sale of the asset; and finance income over the period of the lease. Revenue recognised at the outset of a lease by a manufacturer or dealer lessor is the fair value of the asset. However, if the present value of the minimum lease payments accruing to the lessor (calculated using market rates of interest) is lower than the fair value of the asset, this is used as the revenue figure. The cost of sale recognised at the outset of a lease is the cost (or carrying amount if different) of the leased asset less the present value of the unguaranteed residual value. The difference between the revenue and the cost of sale is the selling profit. However, where a manufacturer or dealer lessor enters into an operating lease, it will not recognise any profit on sale because it is not the equivalent of a sale. Lessor accounting – operating leases Assets which are subject to operating leases are recognised in the lessor’s balance sheet depending on the nature of the asset and income arising from the lease is recognised in the lessor’s profit and loss account on a straight-line basis over the life of the lease. There are two exceptions to the straight-line basis of income recognition, which apply to when: another systematic basis is representative of the time pattern of the lessee’s benefit from the leased asset, even if the receipt of payments is not on that basis; or the payments to the lessor are structured to increase in line with expected general inflation (based on published indexes or statistics) to compensate for the lessor’s expected inflationary cost increases. If payments to the lessor vary according to factors other than inflation, then this condition will not be met. Costs associated with operating leases from the standpoint of the lessor are dealt with as follows: Cost of lease incentives These are recognised as a reduction to the income recognised over the lease term on a straight-line basis unless another systematic basis is representative of the time pattern over which the lessor’s benefit from the leased asset is diminished. Costs Costs incurred with earning the lease income (paragraph 20.26 of FRS 102 cites depreciation as such a cost) are recognised as expenses and the depreciation policy of such assets will be consistent with the lessor’s normal depreciation policy for similar assets. Incidental costs of negotiating and arranging the operating lease These are added to the cost of the leased asset and recognised as an expense in profit or loss over the life of the lease on the same basis as lease income. Disclosures – finance leases (lessee’s financial statements – full FRS 102) Paragraph 20.13 says that a lessee shall make the following disclosures for finance leases: For each class of asset, the net carrying amount at the end of the reporting period. The total of future minimum lease payments at the end of the reporting period, for each of the following periods – not later than one year, later than one year and not later than five years; and later than five years. A general description of the lessee’s significant leasing arrangements including, for example, information about contingent rent, renewal or purchase options and escalation clauses, subleases and restrictions imposed by lease arrangements. Also the requirements for disclosure concerning assets in accordance with Section 17 Property, Plant and Equipment and Section 27 Impairment of Assets also applies to lessees for assets leased under finance leases. Disclosures – operating leases (lessee’s financial statements – full FRS 102) Paragraph 20.16 requires the following disclosures for operating leases: The total of future minimum lease payments under non-cancellable operating leases for each of the following periods – not later than one year, later than one year and not later than five years; and later than five years. Lease payments recognised as an expense. Disclosures – finance leases (lessor’s financial statements – full FRS 102) Paragraph 20.23 requires the following disclosures for finance leases in a lessor’s financial statements: A reconciliation between the gross investment in the lease at the end of the reporting period, and at the present value of minimum lease payments receivable at the end of the reporting period. In addition, a lessor shall disclose the gross investment in the lease and the present value of the minimum lease payments receivable at the end of the reporting period, for each of the following periods – not later than one year, later than one year and not later than five years and later than five years. Unearned finance income. The unguaranteed residual values accruing to the benefit of the lessor. The accumulated allowance for uncollectible minimum lease payments receivable. Contingent rents recognised as income in the period. A general description of the lessor’s significant leasing arrangements, including, for example, information about contingent rent, renewal or purchase options and escalation clauses, subleases and restrictions imposed by lease arrangements. Disclosures – operating leases (lessor’s financial statements – full FRS 102) Paragraph 20.30 requires the following disclosures for operating leases in the lessor’s financial statements: The future minimum lease payments under non-cancellable operating leases for each of the following periods – not later than one year, later than one year and not later than five years and later than five years. Total contingent rents recognised as income. A general description of the lessor’s significant leasing arrangements, including, for example, information about contingent rent, renewal or purchase options, escalation clauses and restrictions imposed by lease arrangements. In addition, paragraph 20.31 requires disclosures about assets in accordance with Section 17 Property, Plant and Equipment and Section 27 Impairment of Assets for assets provided under operating leases. Disclosures for small companies under FRS 102 Section 1A The legally required disclosures for lessees in respect of operating leases under FRS 102 Section 1A are as follows: The total of future minimum lease payments under non-cancellable operating leases for each of the following periods – not later than one year, later than one year and not later than five years and later than five years. Lease payments recognised as an expense. Disclosures for micro-entities under FRS 105 A micro-entity shall determine the amount of any financial commitments, guarantees and contingencies not recognised in the balance sheet arising from operating leases and disclose that amount within the total amount of financial commitments, guarantees and contingencies. For more articles on financial accounting, reporting and more, visit our CPD resources by clicking the image below
Entrepreneurs are the emerging stars in Botswana’s growing economy Posted 07/13/2016 by AAT Comment & filed under Run your business. As Botswana aims to diversify its economy to reduce a dependence on diamonds, a growing number of local business people are blazing a trail for others, but a lack of financial know-how could trip them up caution global entrepreneurship experts. Pinkie Setlalekgosi is a mother and grandmother as well as an employer of 168 people. She is one of Botswana’s top female entrepreneurs, seen as a trailblazer for other women trying to make it in male-dominated industries across the country. The co-founder and director of Sprint Couriers, one of the country’s leading courier companies knows what it takes to be an entrepreneur. “There are no short cuts to success, you have to work hard to realise your dream,” she said in a recent interview. Together with her partner, Michelle Gabriel, she started the company about 10 years ago in a coffee shop. For almost a year, they didn’t draw salaries and almost threw in the towel, but their perseverance has paid off. Sprint Couriers now operates in Zimbabwe, Zambia and South Africa as well as in Botswana. There are many entrepreneurs like Setlalekgosi in Botswana – a country with the second highest score in the world for Total Entrepreneurial Activity (TEA) – measured by the Global Entrepreneurship Monitor (GEM) as the percentage of adults who have started a business in the past three months. Botswana scored 35%, not far behind the top scorer Senegal at 39%. The average for the sample, which included 60 countries, was 21%. Entrepreneurship is actively encouraged in Botswana, a country wanting to diversify its economy and reduce a dependency on diamonds. For 2016, the International Monetary Fund (IMF) estimated a 3.7% increase in growth for Botswana, significantly higher than neighbouring countries Zimbabwe and South Africa. Numerous government initiatives and programmes exist that are aimed at job creation and promoting entrepreneurship. With a high unemployment rate sitting at around 19%, there is growing awareness of the benefits of entrepreneurship, which include income generation, economic stimulation and opportunities for collaboration. But, according to the GEM study, while Botswana has a highly entrepreneurial population and many positive supporting framework conditions, not all of the businesses created manage to survive to maturity. In addition, the data clearly shows that entrepreneurial businesses in Botswana are less likely to be innovative than businesses operating in more advanced economies. The net result of this is that they are neither generating enough jobs nor creating new markets and products that will benefit the country. Nearly half or more of entrepreneurs in Botswana operate wholesale or retail businesses whereas in more developed economies entrepreneurs are drawn more to opportunities in information and communications, financial, professional, health, education and other services industries. According to Mike Herrington, Executive Director of GEM, more specialist support needs to be directed at entrepreneurs in less developed economies to help right these imbalances. He cites making it easier for new businesses to register and operate by reducing the amount of regulations and ensuring that people have better training – particularly around financial skills – as key. Targeted financial training has definitely played a key role in the success of local entrepreneur Tony Mautsu. At the age of 23, Mautsu founded Social Light, a media management company that specialises in social media marketing, working across platforms like Facebook, LinkedIn, Youtube and Twitter. Trained as an accountant, he might have thought he was leaving the world of numbers behind him when he started a media business, but he says financial skills are vital to any entrepreneur who wants to make it in the tough world of business. “Hiring the right accounting staff is an essential ingredient for any successful business,” says Mark Farrar, Chief Executive of AAT. “But it is also essential that the entrepreneur themselves has a good grasp of the numbers so that they can spot the red flags before they become a major threat to the business.” “It takes a lot of courage to venture into business,” says Mautsu, who started out running his business from a mobile phone. Now a well-known name in Botswana’s social media circles, Mautsu sees a bright future for himself and other entrepreneurs. “Entrepreneurship is very important to our country. A lot of people are now waking up to the harsh reality of unemployment after graduation and are starting businesses,” says Mautsu. According to GEM, 60% of people in Botswana have indicated that they want to start a business in the next three years. They are also rated highly when it comes to not fearing failure – with the country featuring amongst the most confident entrepreneurs of all the nations surveyed for the report. The Botswana government is also credited as being one of the countries in Africa with the least bureaucracy and red tape, meaning that entrepreneurs have less of an uphill battle when establishing businesses and getting companies off the ground. “I believe that we are yet to see a lot of global leaders rise from Botswana,” says Mautsu. “In my opinion, Botswana is positioned geographically and otherwise as the future place to do great business. Botswana, just like anywhere in the world, is not without its challenges but entrepreneurs here are learning and making great strides within our borders as well as outside of it.” It is a view also held by Sprint Courier’s Setlalekgosi. “Business is easy,” she says. “It’s how you manage it that matters. Financial management is important.” Photo: AAT Achievement Awards 2015 in Botswana.
Work experience: what AAT students say Posted 07/12/2016 by Neil Johnson & filed under Job hunting. An essential part of gaining AAT membership is work experience: proving you’ve applied the knowledge you’ve gained from the qualification in a practical setting. Your work experience, which can be paid or voluntary, enables you to be able to prove the technical and personal effectiveness competencies required to gain the MAAT letters after your name. But how valuable to AAT students is this process, and how do you make the most of it? For AAT student Emma Whitmell work experience is extremely valuable. “I’m the sort of person who needs to ‘do’ a task in order to fully understand it. Learning the theory is great, but it comes together in my head when I can see the practical applications.” Emma is currently in full-time employment with Tharsus Vision in Newcastle, working on the sales and purchase ledger, with day-release to study AAT. “I feel as though studying my AAT and subsequently passing exams is helping me grow my confidence at work, as finance is a field I have no previous experience in.” Jack McNeil, who completed his AAT qualifications in 2013 and is now one year from becoming a chartered accountant studying ACA, also appreciated the chance to put into practice what he was learning. “During my time studying for the AAT qualifications I was working within the Accounts and Business Advisory team at RSM. This gave me the opportunity to put into practice the skills being taught during classes on a daily basis, understanding how concepts and techniques taught are applied at work.” AAT student Rana Muhammad Zubair, who works as a payroll technician for ITV having completed a six-week internship with the media company, says that he has put to use almost everything he has learnt, not only now that he’s secured employment with ITV, but the intern experience was a valuable foot in the door. “Being an intern at ITV was exciting; I was working in a great team which increased my knowledge of payroll related information. I learnt to deal with employees concerns about their wages, and the importance of following rules from HMRC regarding student finance and tax. “From this I was able to get a part-time job in the payroll department taking on responsibility for incoming enquiries from employees and finding solutions to their problems. This ties in perfectly with my studies at college as they both have similarities, which helps me to progress, whether it’s in assessments or assignments at work.” Making the most of it Being an intern or fully employed in a junior role can be nerve-wracking; new people, unfamiliar culture and a lot to learn. Emma suggests making friends is key to surviving the day-to-day and to building a professional network. “More often than not, you’ll be spending eight hours a day with the same group of people, so talk to them, learn about them, see if you have any similar interests, attend any social events. “Emotional support is as important as anything else, and to be part of a team who are genuinely pleased to hear you’ve passed another exam is wonderful. Having friends within the office you can chat to if you need a short break from work is great, and you never know when your paths may cross in the future; seeing a friendly face in a new job would really help those first-day nerves.” Furthermore, learn from and accept your mistakes, says Emma. “Mistakes happen and are made by everyone, even the most experienced members of the team. Don’t shy away from them, own up, evaluate what you did and how it could have been improved, and use that evaluation for future processes. There’s nothing wrong with making errors as long as they’re used as part of the learning process.” Jack McNeil’s top work experience tips What three tips would you give to AAT students on choosing the right work experience? 1. Ensure it’s something that you’re interested in: Although seemingly obvious, it’s important to ensure you are working for a company/industry/discipline that you find interesting in order to make the most of the opportunity. 2. Ensure you’ll be able to apply the technical knowledge and skills you’ll learn during classes: This not only allows you to see how concepts are applied in real situations, but also to practice certain skills and approaches to issues, furthering your understanding. 3. Be forward thinking: Whether or not you have a set goal in mind, it is important to ensure the job is going to provide you with opportunities to learn, grow and further your career. What three tips would you give on making the most of work experience? 1. Ask as many questions as possible. Don’t be afraid to ask for help and feedback – it’s a lot more effective than sitting in silence. 2. Take on as much relevant work experience. This will help you learn on the job, which I personally found beneficial when sitting assessments. 3. Attend as many technical and update courses as possible to ensure your knowledge is kept up to date and relevant.