International Accounting Bulletin: Мировой обзор 2016 по регионам
Волатильность стала фактом жизни для бухгалтеров, однако масштаб событий, произошедших в Северной Америке, Европе, на Ближнем Востоке и в Азии за последние двенадцать месяцев, выделил региональные проблемы ― и возможности ― для аудиторских компаний, сообщает Пол Голден (Paul Golden). // Комментарии генерального директора Energy Consulting Виктории Саламатиной.
Volatility is a fact of life for those who operate in the accounting profession, but the sheer scale of events in North America, Europe, the Middle East and Asia over the last 12 months has underlined the geographical challenges ― and opportunities ― facing accounting firms, Paul Golden reports. // Comments by Energy Consulting CEO Victoria Salamatina
The results of the EU referendum in June 2016 sent shockways across the professional services sector and beyond. Alliott partner Colin Farmer told IAB that the firm had experienced fee pressure from clients who had seen cash flow suffer as a result of the weaker pound, although its China desk experienced an increase in the number of enquiries from Chinese investors.
“What we need to do is keep confidence strong and to encourage investment in people, education and training so that UK businesses can step up to the level of output, while remaining competitive, that the new regime will require.”
The UK government’s digital tax plans also have implications to accountants, although the overall impact on the profession is expected to be positive. Clients are already seeing benefits – immediate access to client records from any location allow a much more dynamic business relationship, new tools dramatically reduce data entry time and new ways to produce and provide reports create cost savings for key value added services such as management accounts, say Baker Tilly UK member firm MHA Macintyre Hudson’s partner Rakesh Shaunak.
“However, we need to be mindful that after the transitional period the increased automation in accounting and tax is likely to significantly reduce the need for process driven services,” he adds. “We must therefore focus our strategy on providing value added specialist advisory services and consultancy.”
On the other side of Europe, meanwhile, Turkish accounting forms spent much of 2016 dealing with the fallout from the failed coup. Companies were downsizing and imposing strict saving measures and while accounting firms were affected last year, the impact will be felt more widely in 2017 when annual service are being negotiated, suggested Selim Ozutez, a partner at Alliott Group member firm ICS.
All over the world, clients’ needs are changing and areas in which Baker Tilly International is growing will reflect that, explains chief operating officer Ben Lloyd. “Pending changes to auditor rotation rules across the EU and other countries and the ongoing competitiveness of the audit market globally continue to pose opportunities and challenges for our European member firms.”
He observes that the continuing globalization has created an environment where international capability is paramount to many of the clients and prospective clients of member firms.
According to John Sim, CEO PKF International, the network has seen growth in a wide range of services across many markets, margins continue to be squeezed in the key economic centers. “Secondary markets are proving to be relatively more attractive,” he observes. “One significant area across the board has been in the wealth management space with the ‘Future of Choice’ product developed by our Australian firm leading the way.”
The US continues to be an attractive market for foreign investment, despite having one of the highest corporate tax rates in the industrialized world. However, Jason Booth, principal at HLB International member firm Green Hasson Janks, notes that significant tax legislative changes can be expected over the 2017/2018 given the political changes on Capitol Hill.
“Without getting into the specifics, given the Republican control of the House and Senate it is likely that you will see an overall decrease in US tax rates, both at the individual and corporate levels,” he says. “This should continue to entice foreign investment in the US provided the economic growth sustains.”
There is also an ongoing conversation about repatriation and worldwide verses territorial tax regimes. “If the US changes to a territory tax regime and/or provides for tax relief on repatriation of earnings, it is likely that you will see significant cash repatriated,” adds Booth. “The question then becomes how will these US based multinational companies use such cash – dividend out to shareholders, invest domestically, pay down debt, etc.”
Kon Yin Tong, managing partner of Singapore based HLB International member firm Foo Kon Tan notes that the strengthening of the US dollar pays a pivotal role in the surging prices of imports and US dollar denominated commodities in the emerging markets, which does not bode well for emerging markets generally.
On the other hand, a strong dollar makes US dollar more expensive to foreign importers, who may switch to countries with relatively cheaper sources and import from the emerging markets as the US becomes less competitive.
“The appreciating dollar has additional consequences,” he explains. “It has induced international investors to initiate a foreign capital flight from emerging markets by selling their financial assets and repatriating cash. With capital flowing back to the US, assets prices will fall and global economic growth will decline if these cash flows are not recycled to stimulate lucrative global trade and investments.”
Tong says emerging markets must respond to this capital flight by increasing interest rates to incentivise capital to remain in the markets. Consequently, business owners are out at risk of increased costs of borrowing, in addition to increased costs of import like oil that are denominated in US dollars.
Rising anti-globalisation sentiment around the world and the perceived lack of political will in the US to push the global trade agenda harder – or worse, become more protectionist – mean that open and export dependent economies like Singapore will be hardest hit.
“Unlike its neighbours in south east Asia, has not much of a domestic economy or demand to speak of, in contrast to the Philippines and Indonesia,” he adds. “Emerging markets may additionally have to rely on additional foreign direct investment sourced elsewhere (for example, China) to keep driving output or rely on governments to pump-prime economies and increase local spending. Indonesia with its vast natural resources and recovery in commodity prices should be better in 2017.”
However, Kreston International director of quality and professional standards, Andrew Collier, presents an optimistic outlook for the region, suggesting that Asia Pacific will continue to be the main source of growth.
“India continues to be a challenge due to the restrictions on firms trading under network names,” he says. “A relaxation in this area would enable network members to be more clearly identified and assist in the consolidation of firms, which would help build capacity in the market to handle the largest audits. The strength of the US dollar has impacted on the growth figures presented in many countries and camouflaged strong local growth. In many countries it is difficult to identify and recruit strong good quality firms that are not already part of a network.”
In some mature markets succession issues are driving practice merges at a local level and this can have a negative impact on network coverage or lead to a reshuffle of network membership as gaps are covered, adds Collier. “Political uncertainty continues to restrict developments in a number of other areas such as Venezuela in Latin America, which makes access difficult and discourages investment.”
With the UAE becoming one of the fastest growing hotspots in the region, the country is leading the region in the growth of the theme-based entertainment industry – with new theme parks on the rise and existing ones set to improve, the revenue from the sector is expected to reach $837m be 2019 according to Euromonitor.
The opening of two massive new theme park projects this year – the IMG World of Adventure and the Dubai Parks and Resorts – means Dubai is well-positioned to attract an increasing number of visitors, Ranganathan Ramachandran, director of Inpact member firm Ethics Plus Dubai.
“As per current trends, the UAE’s existing and new generation theme parks will attract up to 19 million visitors by 2020,” he observes. “The country is also expected to become a key playground for theme park innovations, using cutting edge technology and tapping niche areas like virtual reality.”
E-commerce is shaping up to be a megatrend that will affect the future of business in the Middle East and GCC countries. While the Middle East e-commerce market is currently valued at around $4.9bn, this is expected to more than double to $10bn by 2018.
The UAE is expected to have at least half the market share within the GCC countries, owing to it having the highest levels of internet penetration and computer ownership, explains Ramachandran. “Mobile commerce is also shaping up to be very significant in the region – two thirds of all shoppers in Saudi Arabia used a smartphone while making their latest purchase. While almost 79% of the population use a smartphone in Saudi Arabia, the percentage of the UAE population using smartphones is around 91%.”
Having recognised that e-commerce is still in its infancy in the region, several large projects have been announced in this space, which may also mark the beginning of consolidation. It has also been noted that some of the larger retail players such as Al Tayer Group are in pursuit of growing markets, increasingly focusing on online sales channels. Luxury branches such as Burberry, Dolce & Gabbana and even Sephora Middle East have already launched Arabic language sites.
The main topic of discussion for international investors in Russia remains risk management, specifically dealing with sanctions and compliance. International investors increasingly understand that the sanctions will not go away and companies doing business in Russia need to adjust to this.
That is the view of Energy Consulting (HLB International member firm) CEO Victoria Salamatina, who says the result is stricter controls, better risk management, more compliance and rapid responses to any signs of wrongdoing.
“This is difficult for international companies, as their Russian employees and leadership might interpret situations differently. Combined with the tendency for international companies to have fewer expats in Russia, these signals are often defuses and not clearly dealt with.”
International investors are very much aware of this risk and are continuously improving systems, risk management and compliance, she continues.
If this is enough remains to be seen – the longer the sanctions are in place and the economic situation does not really improve and the more pressure the headquarters is putting on the local leadership team to perform, the more risk this will lead to non-compliant behavior.”
Salamatina highlights three key audit-related issues facing businesses in Russia. Firstly, the Ministry of Finance of Russia has approved IAS, which are mandatory to be applied by Russian auditors on auditing contracts signed after 1 January 2017. Secondly, membership requirements for self-regulated organisations (SRO) of auditors instead of licensing – any SRO of auditors must now include not less than 2,000 auditing organisations or not less than 10,000 auditors. Thirdly, the Ministry of Finance of Russia can be overruled by the Bank of Russia (the central bank) in regulating auditing business.
“This creates certain financial obligations to customers. As long as all banks (and also insurance companies, pension funds and listing companies) are subject to statutory audit by strengthened requirements, it seems logical that their auditors move under control of the same state regulator. Therefore, auditing companies in Russia are facing stricter legislation requirements and more attention to the quality of their work.”
Russia is updating its legislation on transfer pricing and is still evolving the legislative basis for measures to fulfill BEPS, she concludes.
“Russia businesses have also faced a significant issue of wider interpretation of the ‘unjustified tax benefit’ notion, which means not only artificially inflated expenditure using different schemes and shell companies, but also obligations on a taxpayer to fulfill taxes due that arise for subcontractors or even sub-subcontractors. This trend caused expert discussion around the necessity of a legislative settlement.”