power of love - Hong Kong Institute of Certified Public Accountants

Issue 2 volume 9 February 2013
THE
POWER
OF LOVE
Prominent CPA couples
balance work, life and
the demands of marriage
HK$70.00
PLUS
• Making the most of compliance
• How to keep key employees
• Mandarin Oriental CFO Stuart Dickie

CE
ISSUE 02 VOLUME 09 FEBRUARY 2013
REGULARS
01 President’s message
04 Institute news
06 International news
10 Greater China news
FEATURES
14 From burden to benefit
Craig Stephen finds out how compliance can actually help a
company's stakeholders, customers and bottom line
18 Meet the Council
The Institute’s president, vice-presidents and immediate past
president present their visions for the Institute’s future
22 Crunching the numbers
Accounting technology is rapidly changing. George W. Russell
reports on new developments in hardware and software
28 Success ingredient
Robin Lynam profiles Stuart Dickie, CFO of Mandarin Oriental,
amid the iconic surroundings of the company’s flagship hotel
34 Keeping talent
George W. Russell finds out how accounting firms can hold on
to their key talent and nurture younger recruits
38 Love actually
Jemelyn Yadao meets four Institute member couples who have
stood together through good times as well as tough decisions
SOURCE
44 China finance
Liu Yuting looks at enterprise financial management innovations
46 Forensic accounting
Katy Wong explains how data analytics can fight against fraud
48 TechWatch 123
The latest standards and technical developments
50 Tech Q&A
Your questions about standards answered
54 People on the move
The latest professional appointments from around the region
55 Events
A guide to forthcoming courses, workshops and member activities
LIFESTYLE
56 Business travel
Honnus Cheung chronicles the captivating charms of Melbourne
58 After hours
Aloysius Tse on wine; Jemelyn Yadao on watches
60 Let’s get fiscal
Nury Vittachi sends the wrong message
2 February 2013
CONTENTS
28

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Institute makes submission
on Hong Kong’s budget
In its 2013-14 budget proposals, the Institute
called on the government to offer more help
to families and to increase the city’s international
competitiveness. According to the
Institute’s submission, one of the main concerns
of the city’s taxpayers is keeping up
with rising costs.
The proposal suggests a range of measures
to help families and individuals, including
widening the marginal tax bands from
HK$40,000 to HK$50,000, increasing child
allowances from HK$63,000 to HK$70,000,
allowing deductions for voluntary Mandatory
Provident Fund contributions with an annual
cap of HK$60,000 and allowing deductions
for private healthcare insurance premiums
with an annual cap of HK$12,000.
The Institute also advocated offering a rental
payment deduction as an alternative to the
home loan interest deduction, adjusting the
price thresholds of different stamp duty rates
in line with property price inflation, providing
a waiver on property rates of up to HK$2,500
per quarter and introducing an electricity subsidy
of HK$1,800 for the coming year.
Disciplinary finding
Au Ping-lam, CPA (Practising)
Complaint: Failed or neglected to observe,
maintain or otherwise apply Hong Kong Financial
Reporting Standard for Private Entities
and Hong Kong Standard on Auditing 500
Audit Evidence during the audit of the financial
statements of a private company in Hong
Kong for the year ended 31 March 2010. Au admitted
the complaints.
Decision: Au was reprimanded. He was
ordered to pay the Institute a penalty of
HK$46,000 and costs of the disciplinary
proceedings amounting to HK$59,882.
Details of the disciplinary findings are available
at the Institute’s website: www.hkicpa.org.hk.
Obituary
The Institute notes with regret the passing
of Lee Yim-wan, Penny, Ng Yin-ping and Wu
Ying-Keung, Frank.
4 February 2013
NEWS
THE INSTITUTE
IFRS Foundation Trustees
get together in Hong Kong
Heavyweights from business, government and the
profession take stock of financial reporting agenda
Along with the IFRS Foundation Trustees, who were in town to hold a meeting,
the Hong Kong Institute of CPAs last month co-hosted an evening devoted to the
future of financial reporting.
The first event was a press conference featuring Michel Prada, chairman
of the IFRS Foundation Trustees, Hans Hoogervorst, chairman of the International
Accounting Standards Board, Ronald Arculli, an IFRS Foundation trustee
representing Hong Kong, and Clement Chan, vice-president of the Institute and
a managing director of BDO.
Prada described Hong Kong as an “extremely important” venue for the trustee
meetings because of its full adoption and full support of IFRS. He said the twoday
visit included discussions about strategy, funding, the establishment of the
Accounting Standards Advisory Forum and the operations of the IFRS Asia-Oceania
office in Tokyo.
Hoogervorst said the Asia-Pacific region was vital to the future of financial
reporting. “It’s the happening place to be in terms of economic development and
the avid adoption of our standards.”
He said he remained optimistic that the United States – the last major holdout
on IFRS – would eventually adopt the single set of international standards. However,
he added, convergence with IFRS must pave the way. “We cannot have this
bilateral relationship with the FASB. We are a mature full-grown organization
with 100 members and they have to come first.”
The IASB chairman said he expected IFRS to enter a “period of calm” following
the issuance of a standard on revenue recognition, which would occur very
soon. A leasing standard is in the process of exposure.
The press conference was followed by an evening of discussion on “The future
of global financial reporting.”
Hong Kong’s financial secretary, John Tsang, welcomed delegates by noting
that IFRS has long been associated with global financial stability. “However, the
financial tsunami and related events of recent years have highlighted the difficulties
of aligning different financial systems in our era of globalization,” he said.
With the rapid diversification of business and integration of companies
across different borders, a robust financial reporting regime has become a prerequisite
for the healthy development of the global economy, Tsang noted.
“To strengthen the regulatory framework for auditors, we are working with
the Institute and the Financial Reporting Council on ways to further enhance
the independence of Hong Kong’s auditor oversight regime,” Tsang said.
Arthur Yuen, deputy chief executive of the Hong Kong Monetary Authority,
gave the keynote address, “The importance of IFRSs in promoting a healthy economic
environment.”
Yuen noted the increased risk aversion of investors since the global financial
crisis began five years ago. “That was partly due to the insufficient and inconsistent
disclosure of financial risk information by financial institutions,” he said.

From left: James Riley, Carlson Tong, Hans Hoogervorst, Clement Chan
and Jennifer Hughes (moderator from the Financial Times)
“Standardizing financial reporting standards
at the global level can help investors to
compare financial information across institutions
and across jurisdictions.”
The speeches were followed by a thoughtprovoking
panel discussion on the subject
of financial reporting in which Hoogervorst
and Chan joined Carlson Tong, chairman of
the Securities and Futures Commission and
an Institute past vice-president, and James
Riley, group finance director of Jardine
Matheson Holdings and an Institute fellow.
Financial reporting must benefit all stakeholders,
Tong told the panel. He said financial
statements had become more difficult
to decipher. “I’ve been an accountant for 37
years and now I have no idea which page to
turn to. We have to ask ourselves, what are
accounts for?”
Tong noted that global accounting stan-
dards were far more uniform than any other
comparable international regime, such
as the supervision of the world’s financial
institutions.
Riley echoed the IASB viewpoint, saying
he would prefer the U.S. to join IFRS,
but added that he was concerned that convergence
had meant the IASB had become
too accommodating of the American model.
“I’m worried that reaching a settlement with
the U.S. would mean ticking 10,000 boxes,”
he said. “The drift has been too much towards
a compliance requirement approach.”
Hoogervorst acknowledged that increasing
regulatory burdens were making auditors
more risk-averse, meaning that financial
statements were clogged with unnecessary
disclosures, hampering effective interpretations
of corporate results. “We are actively
engaging with auditors on how we can help
A PLUS
them use their judgment more,” he said.
The panel also discussed increasingly
complex auditors’ opinions. “As an auditor, I
would like to give a very simple audit opinion
based on the work that was done,” Chan
said. “However, [it is not possible] given the
different requirements that regulators impose,
whether in different parts of the world
or in different cases.”
Chan added that he would like to see
more communication between auditors and
their regulators.
The panel emphasized that the future of
financial reporting would involve accounts
that were more intelligible to the various
stakeholders, given the wider investment
community. “Financial statements are important
to anyone who entrusts their money
to someone else,” said Hoogervorst. “Our audience
is society at large.”
February 2013 5

NEWS
INTERNATIONAL
Cameron calls for global crackdown
on tax avoidance by businesses
British PM warns against aggressively complex arrangements
The British prime minister, David
Cameron, called for global action
on tax avoidance in his keynote
speech at the World Economic
Forum in Davos, Switzerland,
last month. Cameron told world
leaders that as the head of the G8
group of the largest economies
this year, the United Kingdom
would continue to focus on corporate
revenue dodgers.
“Any businesses who think
that they can carry on dodging
that fair share or that they can
keep on selling to the U.K. and
setting up ever-more complex tax
arrangements abroad to squeeze
their tax bill right down – well,
they need to wake up and smell
the coffee because the public who
buy from them have had enough,”
he said, adding that some forms
of tax avoidance have become “so
aggressive.”
The speech comes after a
British parliamentary commit-
Google announced a jump in
annual revenues after a strong
fourth-quarter performance.
The world’s largest Internet
search engine company earned
a net profit of US$2.89 billion
in the final three months of last
year, up 6.7 percent from the year
earlier.
The company reported fourthquarter
revenue of US$14.42
billion, up 36 percent from the
same period the year before.
6 February 2013
“We ended 2012 with a
strong quarter,” said Larry Page,
Google’s cofounder and chief
executive. “We hit US$50 billion
in revenues for the first time last
year – not a bad achievement in
just a decade and a half.”
According to analysts, the
company benefited from business
growth in international
markets. “Business looked really
strong, especially from a profitability
perspective. They really
AFP
David Cameron
tee questioned executives from
multinationals such as Amazon,
Google and Starbucks in November
2012 for paying little U.K. tax.
Last year, Starbucks said it would
voluntarily make tax payments
of £20 million over the next two
years after a Reuters investigation
found that the company had not
paid British corporation tax in the
previous three years.
Cameron’s “smell the coffee”
reference was widely regarded as
a dig at Starbucks in particular,
upsetting the American-owned
beverage chain. “The PM is
singling the business out for
cheap shots,” the Daily Telegraph
quoted an unnamed company
source as saying.
The House of Commons public
accounts committee said last
month it would hold a hearing at
which senior tax specialists from
PricewaterhouseCoopers, Ernst
and Young, KPMG and Deloitte
would answer questions over
their roles in assisting big companies
to minimize their tax bills.
E&Y’s Mark Otty, managing
partner for Europe, Middle East
and Africa, told the Telegraph that
companies have an “obligation”
to their investors to pay the
lowest tax possible. “The only
way you can resolve this issue is
through a legal code,” he said.
grew their margins in the core
business,” Sameet Sinha, an analyst
at B. Riley Caris, told Reuters.
“Most of that strength seems to
be coming from international
markets which grew revenues
quite substantially: up 23 percent
year over year, versus the 15 percent
growth in the third quarter.”
The revenue results pleased
investors who had been concerned
about a decline in digital
ad sales following the increasing
Apple’s shares
slide 12 percent
on poor results
Shares in Apple fell 12 percent in
a day as the technology company
reported disappointing Mac and
iPhone 5 sales. About US$50
billion was wiped off Apple’s
market value on 24 January
after it posted its slowest profit
growth since 2003.
Results from its first fiscal
quarter caused Apple’s shares
to fall to US$450, before
recovering some of its losses,
raising concerns over the
company’s smartphone growth
prospects. The shares had hit a
high of US$702 in September
2012.
The released figures also
indicated that profits had
remained the same from a year
earlier at US$13.1 billion, while
revenue was US$54.5 billion,
an increase of 18 percent from a
year ago.
Analysts had expected
revenues of about US$55 billion.
Google’s annual revenue hits US$50 billion in fourth-quarter surge
AFP
popularity of smaller screened
smartphones.
Google executives told analysts
in a conference call that the
company had focused on improving
the average cost-per-click, a
metric which indicates the price
advertisers pay Google.
The fourth-quarter figures
include Motorola Mobility, which
Google acquired in May 2012. The
subsidiary had an operating loss of
US$353 million during the quarter.

Spain falls deeper into recession
amid spending cuts, record jobless
Rajoy plans stimulus measures to offset weakening data
Spain’s economic output fell by
1.8 percent from a year earlier,
according to data from the
National Statistics Institute,
indicating that the country’s
recession had deepened in the
fourth quarter.
Gross domestic product
fell 0.7 percent in the last
three months of 2012 from the
previous quarter, its steepest
contraction in a year as government
spending cuts and rising
unemployment hit households.
“These sharp falls [in GDP]
leave a tough scenario for the
first two quarters of this year.
The question is how market
improvements can soften the
falls, but it’s still too early to
tell,” Citigroup strategist José
Luis Martínez told Reuters.
On 30 January, the Spanish
prime minister, Mariano Rajoy,
responded to the weak data
by telling parliament he was
India expects
resolution to
Vodafone row
India’s finance minister,
Palaniappan Chidambaram, is
confident that a US$2.6 billion
dispute between the country’s
tax office and Vodafone, the largest
corporate investor in India,
will be resolved as talks between
the two sides continued.
The stand-off relates to
Vodafone’s US$10.9 billion
acquisition of Hong Kong-based
Hutchison Whampoa’s India
mobile business in 2007.
“ I’m confident we will
resolve [the Vodafone] issue,”
Chidambaram told the Financial
Times.
In January 2012, India’s
Supreme Court ruled that Vodafone,
the British telecoms group,
was not liable to pay any tax arising
out of the acquisition.
However, the Indian government
reopened the case by
amending tax laws to enable it to
make retrospective tax claims.
BP to make US$4.5 billion payout in criminal settlement for spill
A judge in the United States
approved an agreement by BP,
the British oil giant, to pay US$4
billion in a record criminal settlement
related to the fatal Deepwater
Horizon disaster in 2010.
In November 2012, BP said
it would pay the amount to the
U.S. Department of Justice and
pleaded guilty to 14 criminal
charges, including those related
to the deaths of 11 workers.
Luke Keller, a vice-president
AFP
AFP
Mariano Rajoy
planning a package of stimulus
measures, but vowed that Spain
would stick to planned budget
cuts. The package includes tax
breaks for entrepreneurs.
The data also revealed that
unemployment reached 26
percent of the workforce at
the end of Rajoy’s first year in
power, the highest rate since the
of BP America, apologized to a
federal court in New Orleans and
the families of the dead, for its
role in the accident. “Our guilty
plea makes clear, BP understands
and acknowledges its role in that
tragedy, and … BP apologizes to
all those injured and especially
to the families of the lost loved
ones,” he said. “BP is also sorry for
the harm to the environment that
resulted from the spill.”
The company has been selling
country returned to democracy
in 1975.
Spain’s economy fell into its
second recession since 2009 at
the end of 2011 because of the
fallout from a burst property
bubble.
The government expects the
economy to grow again before
the end of 2013. Economy minister
Luis de Guindos said that
“the Spanish economy is able to
grow in the second half of this
year,” in a press conference at
the World Economic Forum held
in Switzerland last month.
The government has pledged
to lower the public deficit from
the equivalent of 9.4 percent of
annual gross domestic product
in 2011 to 6.3 percent in 2012,
4.5 percent in 2013 and 2.8
percent in 2014. But analysts say
reaching those targets will be
difficult in a period of declining
economic activity.
assets worth billions to raise money
to settle all claims, reported
BBC News. BP is expected to make
a final payment of US$860 million
into the US$20 billion Gulf
of Mexico compensation fund by
the end of the year.
The criminal settlement,
before federal judge Sarah
Vance, includes payments of
nearly US$2.4 billion to be paid
to the National Fish and Wildlife
Foundation and US$350 million
to the National Academy of Sciences
over a period of five years.
BP will also pay US$525 million
to the Securities and Exchange
Commission over three years.
Other companies involved
in the spill include rig owner
Transocean and Halliburton,
which provided cementing
services.
The disaster emitted more
than 200 million gallons (757
million litres) of oil into the sea.
February 2013 7

Indian firms split over
proposal to cap audits
Indian accounting firms are divided over a
clause in the Companies Bill that would cap
the number of companies that can be audited
by a single firm at 20. Big Four firms, which
audit 55 percent of Indian public companies,
want the scope of the provision to be restricted
to public companies, while small and mid-tier
firms favour the cap to be applied to all clients,
India’s Business Standard newspaper reported.
The lower house of parliament has passed the
bill, while the upper house is likely to take up
the bill for passage in the next session, which
begins next month.
Schroders gives KPMG
mandate to audit books
Asset manager Schroders has selected KPMG
as its new auditor, ending a relationship with
PricewaterhouseCoopers that lasted more
than 50 years. Schroders paid PwC £3.1 million
for audit and audit-related work plus another
£1.6 million for unrelated work in 2011.
KPMG won the mandate after a tender process
that started last year.
Australian, NZ bodies
launch joint programme
The Institute of Chartered Accountants in Australia
and the New Zealand Institute of Chartered
Accountants are set to launch their joint
Chartered Accountants Programme this month,
the ICAA’s monthly magazine reported. The
new programme consists of five modules of
learning materials that are almost all common
to both countries and a single set of requirements
for mentored practical experience.
Accounting graduates
are sought after in U.S.
An employment survey in the United States last
month showed that 68 percent of the most recent
accounting majors received job offers — the
highest percentage of any major nationwide.
The National Association of Colleges and Employers
report stated that the unemployment
rate for accountants stood at just 4.1 percent at
the end of 2012, the Salt Lake City Deseret News
reported.
8 February 2013
NEWS
INTERNATIONAL
U.S. delays on IFRS to be
expensive, says Hoogervorst
Washington faces sidelining in future
Hans Hoogervorst, the chairman of the International Accounting Standards
Board, has warned the United States that its continued delays in moving to
International Financial Reporting Standards will probably cost more than the
eventual switch.
The U.S. also risks losing much of its influence over global standard setting
by not being a driving force for IFRS, Hoogervorst told securities analysts at a
conference in New York on 10 January.
Hoogervorst said investors are bearing huge costs for the process of trying to
compare and contrast the financial performance of companies around the world
using different standards. Those costs “are probably a lot bigger than the one-time
conversion cost that an economy has to make when it converts” to IFRS, he said.
The U.S. Securities and Exchange Commission has considered a move to IFRS
for some years, but recently appeared to cool on the idea of making the change.
SEC staff disappointed global rule-setters last year by issuing a final report on a
switch to IFRS with no recommendation.
Support for a switch has waned amid concerns about the costs and worries
that IFRS allows more management judgment than highly detailed U.S.
accounting rules. “I don’t see any signs of any imminent decisions in Washington,”
Hoogervorst said.
In November, the IASB proposed a new 12-member Accounting Standards
Advisory Forum, expected to become an important source of input to
international rules. Membership on the board requires a commitment to a single
set of global accounting standards, which would leave out the U.S.
Auditors face legal action over alleged
failure to scrutinize troubled loans
The United States Securities and Exchange Commission charged two KPMG
employees with failing to uncover problems at a bank that later failed.
It is the first time the commission has taken action against auditors in a case
related to the global financial crisis.
The two KPMG auditors, John J. Aesoph and Darren M. Bennett, failed to
adequately scrutinize bad-loan reserves at TierOne Bank in Nebraska, the SEC said
in an administrative proceeding. The action could result in the two auditors losing
their right to audit public companies.
TierOne hid millions of dollars in losses on troubled loans made during the
height of the financial crisis before the bank eventually failed in 2010, according to
the commission, which filed suit against three TierOne executives last year.
The SEC case against the auditors, more than four years after the crisis, revives
lingering questions about whether auditors did enough to prevent questionable
practices and whether authorities have done enough to hold them to account.
KPMG does not face any action in the TierOne case.

NEWS
GREATER CHINA
Economic rebound emerges despite
13-year low for GDP growth
Cautious analysts warn of slow improvement amid “headwinds”
China showed signs of an economic
rebound in the last three
months of 2012, despite gross
domestic product finishing at
a 13-year low. GDP grew by 7.8
percent last year, down from 9.3
percent in 2011 and the lowest
annual rate since 1999.
However, with a pick-up in
the fourth quarter showing yearon-year
growth of 7.9 percent
from 7.4 percent in the previous
quarter, analysts believe a stronger
performance is inevitable
in 2013. “The overall national
economic performance [has
been] stabilized,” Ma Jiantang,
commissioner for China’s National
Bureau of Statistics, told
reporters.
The rebound, which breaks
a streak of seven consecutive
weaker quarters, was driven by
state investment in infrastructure
projects and efforts to get
consumers and companies to
Shares in China Vanke, the country’s
biggest property developer
by market value, rose sharply after
the company announced plans to
move its foreign currency B-shares
to Hong Kong from Shenzhen.
Vanke announced on 18
January that it will convert its
Shenzhen-listed B-shares to
Hong Kong-listed H-shares following
the successful migration
of shipping container company
China International Marine
10 February 2013
Ma Jiantang
spend, BBC News reported. The
data were released as China’s
newly installed leaders prepare
to take charge of the country.
“It is obvious that the slowdown
in the Chinese economy
has halted for the moment,” Fraser
Howie, managing director of
fund manager CLSA in Singapore
and co-author of the 2011 book
Red Capitalism, told BBC News.
Howie cautioned that the
improvement will not be drastic,
Containers Group’s B-shares to
Hong Kong in December 2012.
Vanke will maintain its yuandenominated
A-share listing.
After the announcement, both
Vanke’s yuan-denominated Ashares
and its Hong Kong dollar
B-shares surged by 10 percent,
their highest prices in more than
three years. The A-shares hit the
top of the trading limit and closed
at 11.13 yuan on the Shenzhen
exchange while its B-shares
adding that “one has to be mindful
that any recovery will be
limited in its scope, not least because
of the various headwinds
that China is facing.”
China’s economy will grow
8.5 percent this year with
domestic demand driving the
expansion, Shanghai Daily reported
last month, citing a Bank
of Communications forecast.
The new leaders, who take
charge next month, will have to
find the right balance between
trying to prevent the formation
of a property bubble and keeping
a healthy growth rate going, according
to Howie.
The slowdown in annual
growth last year came as China
had to deal with weakness in the
global economy, particularly its
key export markets of the United
States and the European Union,
and as the government took measures
to cool the property market.
China Vanke’s shares soar on Hong Kong plan
AFP
jumped to HK$13.75.
If approved, the move of its
foreign currency B-shares to
Hong Kong will widen Vanke’s
access to global investors, giving
the company entry to an exchange
where the daily trading
value is more than 100 times
higher, Bloomberg reported.
“The move will help Vanke access
more resources in the long run,”
Jinsong Du, a property analyst at
Credit Suisse, told Bloomberg.
Huawei profit
rises in line
with forecasts
Huawei, the Chinese telecoms
equipment manufacturer,
said that its net profit grew 33
percent to 15.4 billion yuan last
year, in line with its forecast
earlier last month.
The company, which has
been trying to tap into the smartphone
market, said it made huge
breakthroughs in selling the
devices in Japan, North America,
Europe and other markets in
2012.
Revenue last year increased
by 8 percent to 220.2 billion
yuan, the company added. For
2013, the firm expects its overall
revenue to grow between 10 and
12 percent.
Despite the improvement,
“smartphone penetration is still
way too low and there is a lot
of room for growth,” BBC News
quoted Cathy Meng, Huawei’s
chief financial officer and
daughter of company founder
Ren Zhengfei, as saying.
Huawei recently pledged to
start publishing more detailed
financial information in order
to dispel increased scrutiny by
foreign governments.
The company, along with
rival ZTE, poses a national security
threat to the United States, a
U.S. congressional investigation
concluded last year.
Meanwhile, security concerns
about Huawei’s links to the
People’s Liberation Army led the
Australian government to ban it
from tendering for its national
broadband network.

Companies ditch U.S. listings in wake
of investigations, share price slumps
Markets closer to home offer better valuations, fewer headaches
A record number of Chinese companies
have pulled out of stock
markets in the United States
suggesting that they see fewer
advantages in a U.S. listing.
In 2012, 27 China-based
companies with U.S. listings
announced plans to go private,
up from 16 in 2011, according to
investment bank Roth Capital
Partners, Reuters reported.
Also, about 50 mainly small
Chinese companies deregistered
last year with the U.S. Securities
and Exchange Commission,
ending their requirements for
going public. This is up from
about 40 in 2011 and the most
since around 1994.
Experts cite the U.S. government
investigations of financial
reports and low share prices
Maurice “Hank” Greenberg
as diminishing many Chinese
companies’ chances of raising
new money in the U.S.
“There’s very little in the way
of new capital flows to those
companies, their valuations are
low and they’re encountering
significant headwinds in terms of
FDI drops for the first time in three years
Foreign direct investment flows
into China fell last year – the
first decline since 2009 – as the
economy grew at its slowest pace
in 13 years.
Last year, total FDI into
China stood at US$111.7 billion,
3.7 percent lower than 2011,
according to data released
last month by the Ministry of
Commerce. Outbound Chinese
direct investment, however, grew
28.6 percent from a year earlier to
a record US$77.2 billion.
Analysts say that the drop in
foreign investment is the result of
China’s overall slowing growth
AFP
and Europe’s ongoing debt crisis,
Bloomberg reported.
It is also spurred by China
losing its competitive edge
as a low-cost manufacturing
base, making other investment
destinations more attractive.
“For 20 years China has
been the major recipient of
foreign direct investment in
the developing world but rising
costs from higher wages and
currency appreciation are seeing
multinationals look to expand
elsewhere,” Trinh Nguyen, an
economist at HSBC in Hong
Kong, wrote in a recent report.
regulatory oversight,” James Feltman,
a senior managing director
at Mesirow Financial Consulting
in Chicago, told Reuters.
Last month, a Hong Kong arbitration
panel ruled that China
MediaExpress Holdings, which
obtained a U.S. stock listing
without an initial public offering
by buying a listed company, was
a fraudulent enterprise, awarding
US$77 million in damages to
Starr International, a firm run by
Maurice “Hank” Greenberg, the
former chief executive officer of
American International Group.
Greenberg sued the company
as well as its auditor Deloitte
Touche Tohmatsu in Delaware
in 2011, claiming Starr was
fraudulently induced into investing
in the Chinese company.
“India, Indonesia and Vietnam
stand to benefit most as they
have large labour forces and
strong domestic markets.”
Despite companies shifting
to other countries, in a survey
of about 300 members of
the American Chamber of
Commerce in China, 58 percent
of respondents said that the
Mainland remains in their top
three investment priorities,
up from 47 percent in 2011.
However, only 20 percent said
China was their top investment
priority, compared with 31
percent the year before.
Alibaba founder
set to quit as
CEO
The founder of Alibaba, the
Mainland’s biggest e-commerce
company, will step down as the
firm’s chief executive.
“Alibaba’s young people have
better, more brilliant dreams
than mine, and they are more
capable of building a future
that belongs to them,” Jack
Ma, who founded the company
14 years ago, said in a letter to
employees. He added that “the
Internet belongs to the young
people.”
Just days before the
announcement was made, it
was revealed that Alibaba was
breaking up its business into 25
units, led by different executives,
to be more agile in responding to
the market.
Ma said he would appoint
a successor and act only as an
executive chairman from 10 May.
Analysts believe that the
next chief executive will need
to ensure a smooth transition in
the business model in order to be
successful.
“The biggest challenge a new
chief executive officer faces is
making sure the new business
units can effectively coordinate
among themselves,” Yang
Xiao, a Beijing-based analyst
with research firm Analysys
International, told BBC News.
Alibaba is the parent
company of Alibaba.com, an
online marketplace for small
businesses, Taobao, a shopping
website, and Alipay, an online
payment service.
February 2013 11

Auditors asked to enhance
IPO due-diligence methods
The China Securities Regulatory Commission
encouraged auditors to step up their approach
to due diligence in an effort to restore confidence
in the Mainland’s new stock market
listings. Bankers who attended a meeting
with the regulator on 8 January said auditors
were asked to use more behavioural analysis
when assessing potential IPO candidates, including
techniques used in the United States.
“A senior CSRC official mentioned the [U.S.]
Federal Bureau of Investigation’s people-reading
technique in particular as an example,” a
banker told the International Finance Review.
Mainland IPOs to pick up
this year, PwC forecasts
The number of initial public offerings in China’s
A-share market is expected to rebound,
PricewaterhouseCoopers forecast last month.
“PwC is expecting 200 IPOs to raise 130 billion
to 150 billion yuan in 2013 by listing on
the Shanghai and Shenzhen stock markets,”
Frank Lyn, managing partner of PwC China,
said at a press conference in Beijing. The forecast
compares to 155 IPOs listed in 2012, with
total funds raised at 108.3 billion yuan.
Audit authority recovers
embezzled housing funds
The National Audit Office, China’s top auditing
authority, announced that 2.96 billion yuan
embezzled from affordable-housing funds in
2011 had been recovered. According to a report
by the auditing authority, its audit work
has cancelled about 7,000 households’ rights
to benefit from the housing.
Central bank balance sheet
shrinks for first time
Data from the People’s Bank of China indicated
that its balance sheet, which expanded
eightfold from 2002 to 2011, shrank for the
first time last year, the People’s Daily reported
last month. It showed that the central
bank’s assets totalled nearly 29 trillion yuan
at the end of November 2012, nearly 514.7 billion
yuan less than the amount at the end of
January 2012.
12 February 2013
NEWS
GREATER CHINA
Deloitte opposes request by
SEC to resume audit case
Firm claims regulator contributed to impasse
Deloitte has asked a judge in the United States to reject a Securities and
Exchange Commission case forcing the firm to hand over work papers from
its audit of Longtop Financial Technologies, an allegedly fraudulent Chinese
company.
Deloitte had previously resisted handing over the accounting documents,
citing Chinese secrecy laws.
Last month the U.S. regulator requested that the federal court case, which
began in May 2011, be reopened following a six-month hiatus when negotiations
between the SEC and the Chinese Securities Regulatory Commission failed to
reach a solution.
Deloitte’s lawyers filed papers saying that the case should be postponed
pending the outcome of the SEC’s recent administrative proceedings against
five accounting firms, including Deloitte, as part of an investigation into alleged
accounting fraud at nine U.S.-listed Chinese companies.
Deloitte also argued that the SEC’s issue is partly of their own making. “The
SEC has long been aware that the CSRC forbids China-based audit firms to
produce audit work papers directly to the SEC, and yet the SEC chose to allow
China-based companies to sell securities in the United States despite those
restrictions,” the firm said in the papers it filed.
Caterpillar grapples with accounting
scandal over Chinese subsidiary
Caterpillar, the world’s largest manufacturer of tractors and excavators, announced
it had discovered accounting misconduct at a Chinese company it had
acquired in June last year.
This led to Caterpillar, which paid about US$700 million for ERA Mining Machinery,
writing down more than half its expected earnings for the last quarter
of 2012.
On 18 January, the manufacturer announced in a statement that an investigation
of ERA and its subsidiary, Zhengzhou Siwei Mechanical & Electrical
Equipment Manufacturing Company, which provides equipment for the mining
industry, found “deliberate, multi-year, coordinated accounting misconduct.” As
a result, Caterpillar said it would take a non-cash goodwill impairment charge of
US$580 million, or 87 cents per share, in the quarter.
It also stated that the probe “determined several Siwei senior managers
engaged in deliberate misconduct beginning several years prior to Caterpillar’s
acquisition of Siwei.” Caterpillar replaced these senior managers and said that
“the actions carried out by these individuals are offensive and completely unacceptable.”
The company found discrepancies in November 2012 between the
inventory in Siwei’s books and its actual inventory.
Caterpillar’s shares fell by 1.5 percent after news of the fraud broke out.

Compliance
New legislation and standards have increased
the compliance burden on companies. But not all
executives are in despair, as new frameworks can be
good for management, shareholders and the market.
Craig Stephen reports
14 February 2013
Illustrations by Harry Harrison

Hong Kong executives had
at least one extra resolution
on their minds on
New Year’s Day. That
was the day the Securities
and Futures (Amendment) Ordinance
2012, requiring any inside information
that comes to their knowledge to be disclosed,
came into effect.
Failure to make timely disclosures of inside
information – defined as specific news
that if generally known to persons likely to
deal in the listed securities would materially
affect the price – could attract a fine of up to
HK$8 million among other penalties.
The new rule is the latest in a series of
legislative moves designed to increase transparency
in Hong Kong’s markets. However,
for many companies the new regulations are
part of an increasing burden on doing business.
A recent raft of legislation – amending
laws governing short selling, trade descriptions,
data privacy, competition and overthe-counter
derivatives, to name a few – combined
with new accounting standards and
tougher extraterritorial financial regulations
have made many executives and accountants
cry “enough.”
The growing burden is a worldwide
phenomenon: According to a recent global
KPMG survey of corporate general counsel,
the increasing volume and complexity of
regulations was rated as the greatest risk to
corporations over the next five years.
But rather than panic, some companies
are choosing to accentuate the positive and
focus on how a more tightly regulated environment
can be good for business. As much
as the elephant in the room might seem
unnecessary and to be taking up valuable
space, with the right training it
can also be put to useful work.
“The vast majority of
compliance measures
deliver a benefit,” says
John MacPherson,
who manages compliance
issues for Sinclair
Knight Merz, a British
civil engineering company. “They can be ensuring
safety, setting a benchmark for product
quality, putting a price on environmental
impacts, protecting the consumer from
bad business practices or providing a fairer
deal for stakeholders, investors and wider
society.”
Constructing a culture
Financial reporting standards are a
prime example of an extra burden being
worthwhile, says William Lim, technical
partner for HKFRS and IFRS at Deloitte in
Hong Kong and a Hong Kong Institute of
CPAs member.
“It means companies are easier to analyse,
which gives them better access to international
capital,” Lim says. “This gives a
competitive advantage to Hong Kong’s capital
markets. It makes our job more difficult
but this just means we have to structure appropriately
so we have standards specialists
in place.”
Proper implementation of systems to meet
obligations does not just help companies
avoid new regulatory pitfalls, but also serves
to raise performance. “It can change the
culture of a company for the better,” says Paul
Phenix, who heads the technical department
at Baker Tilly in Hong Kong and is also an
Institute member. He cites recent changes to
the Hong Kong stock exchange
corporate governance
code as an example.
One of the changes to the code calls for a
robust whistle-blowing protection regime.
This, says Phenix, helps make a company
more open to listening to employees about
performance problems that can be fixed,
which leads to raising the company’s value.
Compliance objectives can strengthen a
company’s governance from the bottom up,
he says, adding that the rules covering the
release of inside information can surprisingly
have the greatest impact on relatively
low-level employees, such as accounting
clerks or goods vehicle drivers with access to
important information.
Advisers try to stress the upside of compliance-mandated
change. “We approach
from both a compliance aspect and what we
call a commercial benefits character,” says
Hugh Gozzard, an enterprise risk services
principal at Deloitte in Hong Kong and an
Institute member.
“We try to engage clients and explain
the benefits,” he adds. “They need to take
a broader view and not just say ‘This is horrible.’
If there are costs associated to put in
controls, there are also gains to be made
from the avoidance of reputational damage,
sanctions or unpleasant publicity.”
Making the most of it
To be sure, not all new rules have an upside.
In many cases, they impose requirements
that regulators see as necessary. One example
is the Foreign Account Tax Compliance
Act, known as FATCA, enacted by the United
States in 2010, which requires non-U.S.
banks to disclose details of accounts held by
U.S. citizens.
“In the tax field, regulatory requirements
continue to increase, with
FATCA being perhaps the most
extreme example, as the
U.S. has imposed its tax
enforcement standards
on banks worldwide,”
says Scott Michel, a partner at
Caplin & Drysdale, a law firm
in Washington. “FATCA is
February 2013 15

Compliance
the law and [there is] really no choice but to
try to make the best of it.”
Another example of compliance imposed
from outside Hong Kong is the decision by
the G-20 group of major world economies
to regulate over-the-counter derivatives by
centralizing their clearing, reporting and
trading through electronic platforms. The
Hong Kong Monetary Authority, along with
its counterparts in Singapore and Australia,
has largely adopted the new derivatives
rules, but while noting the regulatory burden
imposed on companies.
Michael Go, executive director of MMADX,
a derivatives trading platform in Australia,
agrees that there could be practical and
economic difficulties moving derivatives to
an electronic platform. However, he adds,
“there are also benefits for the market in
pooling liquidity [and] efficiencies from improvements
to risk management.”
Data privacy is another prime example of
an evolving regulatory area as many jurisdictions
change and update rules.
Hong Kong’s amended Personal Data
16 February 2013
(Privacy) Ordinance came into effect in
October 2012. Maximum fines for violating
the ordinance will rise from HK$50,000 to
HK$1 million. Meanwhile, a draft bill before
the European parliament could see a company
fined 2 percent of its global revenue for
data privacy violations.
“Companies need to know what personal,
customer, intellectual or financial
information they are keeping,” says Anthony
Crampton, a risk consulting director at
KPMG China in Hong Kong. “What data do
you have? How is it classified? Where is it?
How secure is it? Is access to your data appropriately
controlled?”
Bearing the cost
There is no doubt that meeting new obligations
bears a cost and the benefits need to
be analysed. Simon Riley, director of the
Institute’s standard setting department,
says the Institute recently hosted, with the
International Accounting Standards Board,
a roundtable meeting to study implementation
of the segment reporting standard.
“Concerns were understandably raised
about the costs and benefits of requiring
certain disclosures,” Riley says of the roundtable,
which was attended by financial statement
preparers, auditors, academia, regulators,
investors and other users of financial
statements.
“We know these concerns exist not only
in Hong Kong, but also internationally, and
we welcome the efforts of the IASB to examine
the concepts underlying disclosure
requirements as part of the continual effort
to arrive at financial reports that are both
relevant and useful and balance up the compliance
costs in their preparation.”
Hans Hoogervorst, chairman of the
IASB, points out that although the cost of
convergence with IFRS can be high, it is outweighed
by the longer-term benefits. “There
is a one-time cost and that cost is real, but
it is nothing compared to the cost of lack of
investment because you haven’t adopted a
global standard,” he told a press conference
at an IFRS Foundation Trustees event hosted
by the Institute last month.

Local regulators agree, saying that oneoff
costs are offset by continuing savings.
“Standardizing reporting standards, for
example, reduces the costs of preparing financial
statements,” Arthur Yuen, deputy
chief executive of the Hong Kong Monetary
Authority, said at the same event.
Value in transparency
Jim Woods, China risk, control and assurance
practice leader at PricewaterhouseCoopers
and an Institute member, believes now is
“crunch time,” when the current landscape
of new rules and standards means companies
must improve controls. Rather than
despairing, Woods urges companies to emphasize
the upside. “It will give you a competitive
edge,” he says.
Meeting new obligations, Woods adds,
can deliver much greater transparency for
investors and other stakeholders, which can
have direct benefits for a company’s stock
price. “The common complaint from listed
companies is their share price is too low be-
cause investors don’t understand their business,”
he says. “That is why there is value in
transparency.”
To help seek and understand that value,
Andy Cheung, chief financial officer of The
Link Real Estate Investment Trust and an Institute
member, says his company is always
looking ahead to the prospect of new rules
and laws. “We always try to be ahead of the
ball game,” he says.
For example, Link REIT began producing
sustainability reports two years ago. “This
gives us a sense of how the organization as a
whole is working,” says Cheung. “Using key
performance indicators, we can see gaps for
improvements internally as well as giving us
a good global benchmark against our peers.”
Cheung says proper preparation is the
key to building effective compliance frameworks
that don’t impact the bottom line. He
says Link REIT’s professional management
teams work closely with external consultants
to assess any regulatory risks. “Once it
is known, we assess how it will impact the
A PLUS
business from a financial point of view, from
operations, and develop a policy. This is reported
and discussed at board level.
“Good reporting is more than just about
more financial disclosure and controls,”
Cheung adds. “Over the years we have improved
the quality of our disclosure to cater
for a much broader readership such as
stakeholders in the community. This means
using less jargon, plain English, as well as
more charts and diagrams.”
Ultimately, being prepared for compliance
requires a strategic or longer term perspective.
“Companies should be introducing
clearer policies or additional approvals
and reviews to their processes,” explains
Luis Hui, head of compliance at Siemens
China in Beijing and an Institute member.
“Although this does not show up immediately
on the profit and loss as a gain,
this commitment to instilling and building
sustainability into their businesses, like
upgraded infrastructure, will reap future
benefits.”
February 2013 17

Council members
Meet the Council
Members are our
biggest asset
Kicking off a series in which Council
members meet with our readers,
Institute president Susanna Chiu outlines
her vision of the needs of the profession
It has been 18 years since I first started
my service at the Institute, initially as a
volunteer member on one of the committees.
Since then, it has been a wonderful
journey that has blessed me with many
friendships and valuable experiences.
Now that I have been given the honour of
leading the Institute as president, I will dedicate
myself to working with the Council and
management to set our organization in good
stead as we celebrate our 40th year. I’m committed
to building an even stronger Institute
and CPA brand to serve members and the
Hong Kong public in the years to come.
Many have asked me what plans there
are for my year as president. There are
many, including continuing the good work
of the immediate past president, Keith Pogson,
and his predecessors. We will also start
new initiatives, such as the sixth long-range
plan. But if I had to choose a theme, it would
be “diversity,” because it encompasses our
many plans and also represents the diverse
profile and needs of our membership.
We have more than 35,000 members of
all ages. We have one of the most genderequal
professions – with 49 percent women
and 51 percent men – and a young membership,
with more than 45 percent of members
under the age of 40. Practising members
make up 23 percent, while 77 percent of
our members are professional accountants
in business and others. Diversity is an issue
close to my heart, and I am sure the Institute
will continue recognizing this and providing
services that aren’t just administrative,
but that deliver added value to our members
and engage them in a meaningful way.
For our members working in practice, auditor
liability reform is a pressing concern.
There is a need to objectively examine the
current regulatory and liability landscape
and look at how the Institute as the profession’s
leader can manage the transition
smoothly in collaboration with the government
and other stakeholders.
18 February 2013
Meanwhile, as a professional accountant
in business for more than 16 years, I can
see the challenges of members in this field
including the support they need in daily
work and expanding the breadth and depth
of their career horizon. As CPAs, we are
prominent global business executives and
advisers, contributing to the development
of business and finance in Hong Kong and
around the world. Our members are multiskilled
and doing multi-disciplinary work,
and this requires us to evolve our thinking
as a profession and the positioning of our
CPA brand.
We must continue to examine and improve
the services the Institute provides to all
“We will continue
achieving
sustainable
success for our
profession, our
Institute and all
our members.”
Susanna Chiu
President
members throughout their careers as CPAs.
These include education and extending the
mobility and influence of our CPA designation
in the Mainland and internationally.
I have been actively engaging members
to participate in the Institute’s social and
recreational activities throughout the past
few years. I encourage you to take part as
there is good value in it. The camaraderie,
mutual support and pride of being a CPA
– and working together as a profession to
achieve things that we couldn’t do alone –
are important parts of being a member of
the Institute.
The fast-changing world will no doubt
present new challenges to our profession.

But by working together – and focusing on
members – I am confident that with the collective
skills, experience and commitment
of our Council and management, we will
continue achieving sustainable success for
our profession, our Institute and all our
members.
Susanna Chiu is also a director of Li & Fung
Development (China).
Staying on top and in front
Clement Chan, Institute vice-president,
looks at the profession’s regulatory reform
challenges
The Hong Kong government and
the Financial Reporting Council
are looking at potential reforms of
the audit regulatory framework to put Hong
Kong in line with global norms and eligible
for membership of the International Forum
of Independent Audit Regulators. It is an
important step towards maintaining Hong
Kong’s position as an international financial
centre.
At this pivotal time, the accounting
profession should take the opportunity to
look at other related developments, such
as professional liability reform, in order to
provide a balanced and fair environment
for the profession to grow. Otherwise a
“Hong Kong’s
status as a frontrunner
in helping
to devise and
adopt International
Financial Reporting
Standards is vital.”
Clement Chan
Vice-president
A PLUS
profession skewed towards heavy regulation
would face stifled long-term development
and fail to attract young talent.
With this in mind, the Institute has
combined the regulatory reform working
group and the professional liability reform
working group this year to form the new
audit professional reform working group,
making our efforts more cohesive. As the
chairman of this new group, it is my role to
support the Institute in steering the reform
in the right direction, which is of prime importance
to the prospects of the accounting
and audit profession in Hong Kong.
Furthermore, it will be paramount in
ensuring our city maintains its position as
a world financial centre – one that continues
to attract quality multinational companies
to our capital markets and continues to
evolve into the principal offshore clearing
centre for the renminbi trade.
Hong Kong’s status as a front-runner in
helping to devise and adopt International
Financial Reporting Standards is vital.
Since joining the Council in 2006, I have
been particularly focusing on accounting
and financial reporting standards. In the
past few years, the Institute has managed
to grow significantly in its stature as a standard-setter
for Asia. It is important for the
Institute – and the city’s CPAs – to build on
this strong foundation and carry on being
one of the leading jurisdictions and voices
when it comes to shaping the present and
future of IFRS.
It is also imperative for the Institute to
be viewed as an organization that truly represents
the voices of accountants in Hong
Kong. The demography of the Institute is
changing rapidly, with younger members
replacing relatively senior members as the
bulk of the membership. This change brings
many challenges to the Institute in how to
maintain and increase its relevance and
awareness among younger members. This
is hard work but worthwhile to do.
All the while, the Institute must ensure
it balances its two core roles: representing
the best interests of the profession and the
best interests of the public.
Clement Chan is also a managing director
of BDO.
February 2013 19

Council members
“It is not easy for an
organization with such
a diverse membership
to remain responsive
and inclusive, but we
must achieve this.”
Mabel Chan
Vice-president
Creating a strong message
Institute vice-president Mabel Chan
urges better communications with
members, stakeholders and the public
The Institute’s membership is growing
rapidly – it has risen by about
1,800 members annually in recent
years – and that’s a growing community that
we need to represent. It is important that we
provide a supportive environment for members’
professional development.
Accounting remains one of the most
popular and respected professions in Hong
Kong. At the same time, accountants are
seeking better positions and we need to
make sure they have the necessary skill sets
to perform their jobs. We need to help equip
members better so they can excel.
The membership is not only growing, but
also its demographics are changing. We have
far more women and younger members joining
us. How do we meet their needs? We have
to listen to women’s voices and younger voices.
We must hold forums where they can offer
their views and have more detailed discussions
about their expectations and aspirations.
20 February 2013
It is not easy for an organization with
such a diverse membership to remain responsive
and inclusive, but we must achieve
this. We have accountants in practice, accountants
in business, accountants in government.
We represent every business sector
in Hong Kong.
While it is important to make our members
heard and feel involved, it is equally vital
to make sure our communications’ reach
extends to every stakeholder. We need to let
the public know more about what we do, how
we support the city and the country and how
we contribute to business and the economy.
People generally don’t understand what
accountants do. They might know we undertake
audits and advise on tax, and perhaps
some people know we are involved in
initial public offerings. But we do a lot they
don’t know about. We need to enhance our
public communications and better relate to
the public so they can understand and appreciate
our role.
The Institute needs to enhance its relationship
with members in small- and medium-sized
practices and help create more opportunities
for SMPs both in Hong Kong and
in the Mainland through cooperation with
the Ministry of Finance and Chinese Institute
of CPAs. Our SMP leadership panel should
engage in dialogue with its peers in international
accounting bodies to cooperate on
strategies to further develop our SMPs.
Many of our members are either working
in China or travelling between Hong Kong
and the Mainland. Some even commute
daily. We need to be able to engage with
these members to improve our capabilities
on the Mainland and forge better links with
Mainland businesses and institutions.
We need to also deepen relationships with
both the Hong Kong and the Central governments
and further our communications with
stock exchanges both here and on the Mainland,
the Securities and Futures Commission
and other regulatory authorities in Hong
Kong, China and internationally.
This is particularly important, given that
the Institute’s own regulatory role is about
to change with the transfer of some responsibilities
to the Financial Reporting Council.
This is a process that we must manage
smoothly with an efficient mechanism.
Finally, Hong Kong must maintain its

“We as CPAs can become an
even more integral part of
the fabric of society and a
force for good.”
Keith Pogson
Immediate past president
status as a global leader in the accounting
profession and the financial and commercial
world at large. Our members should be made
aware of Hong Kong’s status and be proud to
be part of this Institute.
Mabel Chan is also the founding partner of
Mabel Chan & Co.
Building a new future
Immediate past president Keith Pogson
says the Institute must proactively help
shape the world of the profession
It was a great honour to serve as the
Institute’s president last year – a challenging,
politically charged year full of
difficult choices.
My time as a Council member and as president
has given me an interesting perspective
of our Institute and our profession.
While the Council strives to represent
the diverse views of all members, at times
– in order to move forward – it has been necessary
to do the right thing by the majority
of members.
Understanding what the majority wants
is vital, and that means listening to all
views, objectively studying the pros and
cons of all proposals and executing the ones
that are right for our profession.
I’m very excited about the sixth longrange
plan that we started last year. It isn’t
just an opportunity to refocus the Intitute
on the needs of our members; it also makes
adjustments to our services to take into account
how our membership is becoming
A PLUS
younger and our world, more political and
regulated.
Most importantly, it sets out how we as
CPAs can become an even more integral part
of the fabric of society and a force for good.
Now that these goals have all been laid
down, it is time to work out the nitty gritty
of execution and balance the financial challenge
of wanting to achieve more while recognizing
that money is limited. Delivering value
for money to members is always a priority.
Our profession is changing rapidly –
because of technology, politics, regulations
and the expectations of society – and it is
an increasingly complex environment in
which to work and prosper. I believe the
Institute must support members in this
changing world by helping them develop
new skills to replace those that have become
less relevant.
To be an accountant used to mean being
an auditor or bookkeeper, but now the roles
of many of our members are far more diverse
and specialized at the same time.
The Institute must provide members
with not only the support they need to flourish
in the historical roles that are the origins
of our profession, but also equip them with
new skills that are needed to maintain our
profession’s importance and growth.
It will be hard work, but necessary
and rewarding. From what I got from the
many face-to-face meetings last year with
different sectors of membership, I see there
is a need for the Institute to build more
skills-based training programmes that
proactively support all members while
sensitively recognizing their different levels
of development and practical needs.
Ultimately, the Institute must be a voice
for the good of the profession. Many of us
have been very fortunate, with great careers
and experiences behind and ahead of
us. But there are many in society – indeed
some in our profession – who haven’t been
so lucky. In the long-range plan we have
looked at ways in which we can contribute
and give back, as well as proactively shape
the world around us.
I invite you to be part of that journey.
Keith Pogson is also managing partner,
financial services (Asia Pacific), of Ernst &
Young.
February 2013 21

Technology
CRUNCHING THE
NUMBERS
As the accounting profession
becomes more youthful,
its members are keener
to adopt new technology.
George W. Russell explores
recent advances
Jason Blumer, who runs BlumerCPAs,
an accounting firm
in the United States, is a keen
technology fan – what the
high-tech industry calls an
early adopter. In 2009, he set his staff three
goals: end the use of paper, close down the
firm’s bricks-and-mortar offices and migrate
all services to the computing “cloud.”
By the end of last year, he achieved all
his aspirations. And Blumer isn’t worried
that traditional customers might be put off
by his ground-breaking methods. “After doing
this, we have found there is a particular
type of customer who wants to be served
this way,” he tells A Plus from his home in
Greenville, South Carolina.
22 February 2013
“Using technology is no longer a differentiator
for the right customer,” Blumer
observes. “The more tech-friendly and techsavvy
customers actually expect you to deliver
your services now with technology.”
Blumer believes his principles can be
adopted in almost any jurisdiction, but the
Hong Kong accounting profession appears
to be a long way from activating such revolutionary
ideas.
However, as the Hong Kong Institute of
CPAs membership becomes more youthful
and technologically sophisticated, it is inevitable
that technology is set to dramatically
change the way members work.
The technology industry aims its accounting-related
software at two principal
3
4
Illustrations by Alan Ho
categories of buyers: businesses and CPA
firms. For businesses, software helps automate
cash flows, streamline invoicing and
billing and helps maintain compliance.
Accounting software automates data entry,
measurement and recognition, and financial
report disclosure and presentation.
Modern software can incorporate enhanced
displays, such as three-dimensional modelling,
and a networking environment where
users can annotate data, discuss and question
issues, and solve problems in real time.
For accounting firms, Institute members
say technology has benefited in two separate
ways: by improving the firm’s internal processes
and creating external opportunities
with clients.

4
“Firstly, technology has helped transform
how we conduct our business, how we
document, review and access audit working
papers,” says Kenneth Wong, a partner in
the risk and controls practice at PricewaterhouseCoopers
in Hong Kong and an Institute
member. “In addition, technology has also
opened doors to enable us to develop new
service areas, such as management consulting,
forensic accounting and regulatory
compliance,” adds Wong, who is also a member
of the Institute’s IT interest group.
Benefits of automation
Technology providers are already aware of
the emerging changes. “The increasingly
popular adoption of tablets and smartphones
5
3
7
for mobile computing makes working-onthe-go
a real possibility for accountants,”
says Adrian Ang, an assistant sales manager
in Hong Kong for Sage, a U.S. company that
has been selling software to accountants and
their clients for more than 30 years.
Sage sells business management software
and industry-specific accounting programs.
Recently it has been offering its enterprise
resource planning software as iOS
and Android applications. “We work to assist
CPAs to automate and improve productivity,”
says Ang.
Other vendors such as Flexsystem, a
25-year-old Hong Kong-based accounting
software company, says they try to automate
as much as possible of the full reporting cycle,
5
freeing CPAs for more important tasks.
“CPAs should no longer be involved too
much on data entry, data validation and reconciliation
nor drill too much into the technical
areas of information technology,” says
Ashley Clarke, the company’s chief operating
officer.
Flexsystem also focuses on expense management
and other human resources-related
issues and financial performance management.
Clarke says the company’s new
challenge is to offer CPA firms analysis of
data of their internal operations at “a more
granular level.”
“Technology should be viewed as a facilitator
to bring information – not data – to
both the financial and non-financial users
February 2013 23

who need it, when they need it and for it to
be accessed as appropriate from any device,”
adds Clarke, who says his company has
signed up more than 1,500 clients in China.
Another fast-moving company is Xero in
New Zealand, which has attracted investment
from Peter Thiel, a German-American
financier who founded PayPal, the online finance
company, and who was an early backer
of the Facebook social network.
Xero stresses the user-friendliness of its
cloud-based software compared with that
of competitors and offers a range of “singleclick”
report templates, such as for profit and
loss, balance sheet, management reports
and taxes for a range of jurisdictions.
Rod Drury, a cofounder of Xero, based
in Havelock North, New Zealand, says the
accounting profession is “fundamentally
retooling” itself to adapt to technological
change. Modern software, he says, has created
a continuous relationship between accountants
and their clients, instead of a oncea-year
interaction based on the tax year.
Another growing brand is Auditflow, a
cloud-based auditing software developer in
Southport, Australia, that plans to launch in
Hong Kong this year.
Large accounting firms tend to develop
their own auditing software. PwC, for ex-
ample, uses its proprietary Aura suite developed
in the U.S. Auditflow offers jurisdiction-specific
auditing software to smaller
firms that is updated online to account for
any changes in regulations.
“Our software assists auditors to perform
fully compliant engagements for their
clients in a timely and cost effective manner,
and provides practice workflow management
of the assignments and staff,” says
cofounder Rich Neal.
The lagging innovation in the Asia-
Pacific region hasn’t stopped technology
consultants setting up shop in Hong Kong.
Lisa Gotlieb, a New Zealand Institute of
Chartered Accountants member, moved to
Hong Kong to establish Lisa Gotlieb Enterprises,
which contracts accounting services
to small businesses in the city.
Her services include setting up software,
including Xero, and training for small business
clients, as well as improving office
procedures such as simplifying paper flow,
minimizing waste and streamlining access
to data.
“Technology has allowed information to
be shared easily across different business locations,
as well as allowing easily traceable
links between internal documents, creating
structure and a clear picture and story
of what the accountants are telling us about
the business,” Gotlieb says.
Half century of computing
It is nearly 50 years since accounting first
embraced the computer age. “Accounting
was first automated to a significant degree
when IBM introduced the System/360 in
April 1964,” says Chris Westland, an American
Institute of CPAs member and a former
visiting scholar at Hong Kong University of
Science and Technology.
This was the first accounting-specific
computer and had been among the most expensive
products ever developed by the company
up to that time, says Westland, now
professor of information and decision sciences
at the University of Illinois in Chicago.
The immediate effects of this computerization
were dramatic. Within a decade, accounting
departments at Fortune 500 companies
in the U.S. were staffed at only about
a tenth of the levels they had been in 1964.
The next era of accounting technology
began with the commercial release of DOSbased
computers in 1981, followed by the
introduction of the ground-breaking Lotus
1-2-3 spreadsheet software two years later
and the first Windows operating system in
1985. The same year Microsoft wrote the
February 2013 25

Excel program originally for Apple’s Macintosh
computer.
Technology advocates forecast that the
latest era will be based on cloud computing
– the provision of products and services
through a shared distribution network.
“Cloud accounting is absolutely turning the
industry on its head,” says Drury at Xero.
“It’s the third generation of technology.”
Cloud platforms are changing how companies
store and allocate data and has led
to another rising trend – software-as-a-service,
known as SaaS, in which enterprises
rent software applications and server space
from providers to save on upfront costs.
Westland says small- and medium-sized
practitioners in particular should be leveraging
the power of technology. “Optical character
recognition, pattern recognition, statistical,
business analytics and data manipulation
tools now exist that allow small firms to be as
effective as the Big Four in all but the largest
of corporate operations,” he says.
“Auditing is no longer a profession that
needs to throw masses of junior auditors at
an audit. It can be effectively – and perhaps
more effectively – undertaken by small, interlinked
teams of specialists under the supervision
of an audit manager.”
What the future holds
Technology professionals predict further
advances. Clarke at Flexsystem, for example,
foresees faster processors, more bandwidth
and increased compression as drivers
of accounting technology.
“Social networking in a controlled environment
will be the norm and will allow
for a new level of quicker problem-solving
across operating entities,” he adds.
Meanwhile, cloud computing will continue
to evolve, he says. “It will be knocking
down geographic boundaries and allowing,
for example, heightened levels of corporate
governance through the ability for
checks and balances to be initiated across
borders.”
Technology providers continue to stress
cost savings from the cloud. “By consolidating
servers from various locations in a traditional
IT environment, accounting firms
can regain tighter control and monitor their
IT expenditure, and align IT expenses with
business growth to maximize utilization of
limited resources,” says Derek Yiu, general
manager of business solutions and services
at Fujitsu Hong Kong, which sells scanners
and data storage to CPA firms.
However, accounting remains a conser-
vative profession and there is
still some resistance to technological
innovation. “Many
CPA firms [in the U.S.] are still mired in the
mostly manual audit methods that were
used 30 years ago when archival records
were maintained on paper,” Westland
notes.
One barrier to change is often that CPAs
become too bogged down in daily operational
details. “They won’t make the change
that will free up their time,” says Clarke,
adding that the global financial crisis exacerbated
this issue, given the increasing
regulatory burden.
However, as younger recruits embrace
technology, barriers are likely to fall away.
“Like most international accounting firms,
we recruit university graduates and those
from a younger generation are much more
receptive to new technology than, say, people
like me,” Wong at PwC acknowledges.
Vendors are already seeing change.
“We find CPAs tech-savvy,” says Drury at
Xero. “They already know document management
– they’re already on Dropbox and
Google Docs. Often a young partner is a
technology evangelist educating the rest of
the firm.”
February 2013 27

Success ingredient
Stuart Dickie, CFO,
Mandarin Oriental Hotel Group
Photography by Joan Boivin
The Year of the Snake
is a big one for the
Mandarin Oriental
Hotel Group. The
company’s first hotel,
the Mandarin
Oriental Hong Kong,
opened in 1963 and thus turns 50 this year.
Coincidentally, so does Stuart Dickie, the
group’s chief financial officer.
Dickie, a Hong Kong Institute of CPAs
fellow, joined the group in 2000 as director
of corporate finance from the company’s
auditors – then as now, Pricewaterhouse-
Coopers – where he was a senior manager
from 1994 to 2000. He became CFO and a
director of the hotel group on 1 April 2010,
but is clearly no April fool in his financial
decision-making.
He heads a team of 28 people, not
counting the individual finance teams at
each hotel. Supporting Edouard Ettedgui,
the group chief executive officer, Dickie
is involved in many aspects of the overall
running of the business, including corporate
governance. “The CEO and I are the only two
day-to-day directors on the public company
28 February 2013
board, and we spend a lot of time preparing
for quarterly board meetings and the audit
committee, held twice a year.
“We also present our results at the halfyear
and year-end to the stock market in a formal
presentation, followed by questions and
answers with the analysts and press. This
event is held at the Mandarin Oriental Hong
Kong hotel and is extremely well attended
due to the genuine interest in town in us as a
Hong Kong-grown global brand,” he says.
The Mandarin Oriental name has been an
iconic presence on the Hong Kong skyline –
despite many buildings since exceeding its
height and grandeur – for half a century. Although
Mandarin Oriental built much of its

The iconic Mandarin Oriental Hong Kong
turns 50 this year. Robin Lynam looks at
the hospitality group’s recipe for success
with its CFO
February 2013 29

Success ingredient
reputation on looking after business travellers,
Dickie says that its focus is shifting to
providing leisure experiences.
“Today it’s probably 40 percent to 45 percent
leisure business across the group. Ten
years ago it would have been 30 percent to
35 percent, which might not sound like a big
difference, but in our industry it represents a
sea change. We focus a lot on spas and food
and beverage. We have more Michelin stars
than any other hotel group in the world. It’s a
very deliberate policy,” he says.
Since taking over as CEO in 1998, Ettedgui
has pushed the group’s image as a luxury
brand hard through initiatives like the celebrity
“Fan” advertising campaign, and Dickie,
as CFO, says that it is not always easy to walk a
line between maintaining the group’s elevated
standards and reining in costs.
“Not all costs act in a linear fashion when
compared to changes in revenue,” he notes.
“Hotel employees still deserve a salary increment
annually even if the outlook in a particular
market in any one year is for a reduction
in revenue year on year. It is a matter of balance
– on the one hand, not permitting costs
to escalate out of control, and on the other
hand being fair, and also providing sufficient
funds to be re-invested in maintaining
the asset.
“Similarly at the corporate level, we have
to balance the needs of individual departments
who want to provide sufficient support
to the hotels, against the risk of ‘cost
creep’ for the group overall,” he observes.
Although its hotels have been regarded as
standard setters in Asia since the mid-1960s,
the Mandarin Oriental brand has gone genuinely
global during his time with the group.
A major programme of expansion began
while Dickie was at PwC with the appointment
of Ettedgui.
“At that time we had about a dozen hotels
within Asia with a very good reputation, but
were not particularly well known around
the globe,” says Dickie. “We have 25 hotels
today, and in 14 of those we have an ownership
stake; in some cases 100 percent, in
others only 25 percent. Eleven are owned
by other people. With our growth pipeline
we’re going up to 45 hotels over the next five
years, and all of those hotels at the moment
are pure management contracts.”
Last month, the group opened a new hotel
in Guangzhou, to be followed by openings
in Shanghai’s Pudong in the second
quarter of 2013, Beijing by mid-2014 and
30 February 2013
“One thing I very much enjoyed, even
before joining the group, was the great
welcome, the service, and the smiles of
the staff, which in my view is what it’s all
about in the hospitality industry.”
Chengdu in 2015. “Capturing the growing
Mainland China market is an important part
of our growth strategy,” says Dickie. “Mainland
China is the group’s second largest customer
base, representing over 13 percent of
the room nights sold globally. To cater to the
growing demand from the China market,
we have introduced a Mandarin-language
version of our new website and we are partnering
with Chinese celebrity ‘fans’ in our

global advertising campaigns.”
One of Dickie’s earliest exposures to the
distinctive hospitality style of Asian hotels
was a stay at the Mandarin Oriental in Singapore
when he was at PwC. “One thing I
very much enjoyed, even before joining the
group, was the great welcome, the service,
and the smiles of the staff, which in my view
is what it’s all about in the hospitality industry,”
he observes.
It was probably a welcome change from
his experiences of British hotel service standards
(the Mandarin Oriental Hyde Park
did not open until six years after he moved
to Hong Kong). British born, Dickie earned a
bachelor of arts honours degree in business
studies from Sheffield Hallam University in
northern England, graduating in 1985.
In 1988 he became an associate member
of the Institute of Chartered Accountants in
England and Wales, and a fellow of the Hong
Kong Institute of CPAs in 1998.
He worked as an audit manager for a
medium-sized accounting firm in the City
of London, which, he says, gave him broadbased
experience of many aspects of his cli-
A PLUS
ents’ businesses. “I worked on auditing and
tax advisory for a number of different businesses
including stock jobbers prior to the
‘Big Bang,’ stockbrokers, lawyers, insurance
companies and banks, as well as sole traders
including a butcher, a baker – but not a candlestick
maker – and other retailers.
“I audited a racetrack – Epsom, where
they have the Derby every year – a nightclub
and various pubs, and also worked on music
publishers, and companies in the light
manufacturing and agricultural sectors. Oh,
and not forgetting, an oil company. It was a
wonderful foundation for being able to assimilate
a wide array of information quickly
later on in my career,” he recalls.
Wanting to see more of the world, Dickie
applied for a position at what was then Coopers
& Lybrand in Hong Kong, where he
acted as audit manager for a range of companies,
including AT&T, Philip Morris and,
after the merger with Price Waterhouse, a
number of members of the Jardine Group,
including Hongkong Land, Colliers Jardine,
Gammon Construction and Mandarin
Oriental.
Dickie reached a career turning point
when he worked on the due diligence aspects
of Mandarin Oriental’s acquisition
of the Monte Carlo-based Rafael Group in
2000. “I got to know the management team
well and I also really liked the culture of the
company. It was an exciting time for Mandarin
Oriental. They were embarking on a
focused strategy of growth, leveraging the
strength of their brand, which although well
known within Asia was not well known in
other parts of the world at the time.”
He learned the hotel business fast, working
on asset disposals as well as acquisitions,
re-financings, investor relations, tax strategy
and group treasury activities. “We made
some record disposals,” Dickie recalls. “For
example, our disposal of a part share of Mandarin
Oriental, New York, in February 2007
to Dubai World was sold at a record price of
US$1.4 million per key, the highest price per
room for a hotel in the United States at the
time. I believe this record still stands today
given that the U.S. is not yet fully recovered
from the global financial crisis.”
In 2007 he was also responsible for negotiating
a US$450 million seven-year loan
from a syndicate of over 20 banks, secured
on the group’s two wholly owned Hong
Kong hotels – the Mandarin Oriental and
The Excelsior. “The loan has, as it is still in
February 2013 31

Success ingredient
32 January 2013
place, record low pricing of 0.28 percent
from the borrower’s perspective. Given that
loans have [been] re-priced upwards since
the onset of the global financial crisis, I am
not sure what pricing we would achieve today,”
says Dickie.
That crisis has also affected the group’s
expansion plans. “Before that we were looking
at greenfield sites and at building resorts
in various places. Now we’ve got the same
number of opportunities, but many of them
are for existing hotels that have struggled
since the financial crisis under another
brand or operator,” he explains.
Dickie says that at any one time he is looking
at the financial aspects of 30 to 40 possible
properties or locations for Mandarin Ori-

At any one time he is looking at... 30 to 40
possible properties or locations for
Mandarin Oriental hotels, but that from
those only about two or three are likely to
come to fruition.
ental hotels, but that from those only about
two or three are likely to come to fruition.
His extensive travel schedule means he
does get to experience some of that Mandarin
Oriental luxury. When travelling on
business he likes to use the spas to recover
from jet lag, and he uses the group’s food and
beverage outlets – Michelin-starred or oth-
erwise – for business entertaining.
The job sounds glamorous, but Dickie
points out that while leisure travellers can
relax and enjoy their surroundings, often he
is checking into a room for just a couple of
hours either side of a business appointment
before catching a plane to another city.
He is content with his lot, however. Dickie
A PLUS
claims not to get preferential treatment
when making bookings. If the Mandarin
Grill is full he has to reschedule his lunch. “I
am treated very well when I travel, and the
hotels, of course, know that I am coming, but
I can see how well other people are treated
as well. Before I worked for the group I always
had a very good experience with the
hotels, so there is that consistency.”
He also stays in Mandarin Oriental hotels
on holiday, and says his wife and three
children are “fans” – but he gets a bill when
he checks out, just like everybody else. “You
might call it a busman’s holiday, but it’s very
nice. We pay, but we get fantastic service,
and if a Mandarin is there, why would I give
the money to anyone else?”
February 2013 33

Human resources
KEEPING
With multinational corporations moving into China and Mainland companies
boosting finance units, skilled Institute members are being poached.
George W. Russell asks how accounting firms can hold on to their key staff
Hiring a new employee requires
significant investment.
Each worker has
to be recruited, trained
and deployed. And as
Mazars found recently, even relatively low
level employees are worth keeping. Eunice
Kwok, practising director in charge
of human resources at Mazars in
Hong Kong, tells of one junior staff
member who had not yet qualified
as a CPA but wanted
to take 12 months off
work to volunteer
with a charitable
group overseas.
Many firms
34 February 2013
would have declined to accommodate such
a request, given the status of the employee.
Mazars, however, saw a longer-term benefit.
“He was a talented junior... and we decided
to keep his job open for him and allow him
the one year sabbatical,” says Kwok, a Hong
Kong Institute of CPAs member.
While not every employee at every firm
can expect that kind of understanding,
Mazars, like many middle-tier accounting
firms, tries hard to keep its accounting professionals.
“Retaining talent is a key issue at
Mazars,” says Kwok.
The continuing economic crunch worldwide
has meant that hiring and keeping
skilled CPAs is a priority, while first-rate assurance
and risk specialists have never been
in higher demand. “Competition is fierce for
The continuing economic
crunch worldwide has
meant that hiring and
keeping skilled CPAs is
a priority.
top talent,” Kwok adds.
Keeping hold of talent is a global challenge.
A 2012 study by the Washingtonbased
nonprofit human resources organization
WorldAtWork showed that a majority of
senior managers in the United States identified
retention of key talent as their most
pressing human resources concern.
According to survey results released in
December 2012 by Towers Watson,
a human resources consultancy,
79 percent of Asia-Pacific employers
encounter difficulties
holding on to critical-skill employees
and 73 percent struggle to
keep workers with high potential.
The Big Four in Hong Kong
are finding that talent leak-

TALENT
age of more senior staff in particular is an
increasing worry. “We do sometimes lose
managers to our clients and to large corporates,”
says Margaret So, director of human
resources at KPMG China and a member of
the Institute.
That corporate demand has been driven
in part by a recent trend among multinational
companies – including Air France,
Caterpillar, General Motors Company,
McDonald’s Corporation and Nokia
Corporation – to move their Asia-
Pacific headquarters to the Mainland
from elsewhere in the region.
“Hong Kong’s skilled finance
professionals are interested in
such opportunities and are willing
to relocate to China’s cities,”
says Edmund Cheung, associate director of
accounting and finance appointments at
Hudson, a recruitment company, adding
that Hong Kong is less of a regional hub than
it was in the past.
Big Four firms report senior staff quitting
in recent months to take positions at large
financial institutions like Agricultural Bank
of China and China Construction Bank,
as well as at Mainland companies such as
Shenzhen-listed Huawei and Hong Konglisted
Lenovo and ZTE.
“Chinese enterprises, especially listed
companies, have a stronger financial background
and better market prospects than
was previously the case,” says Alexa Chow,
managing director of Centaline Human Resources
Consultants.
Demand has been driven in
part by a recent trend among
multinational companies
to move their Asia-Pacific
headquarters to the Mainland.
Preserving the best
To be sure, the recession – as well as fears of a
growth downturn in China – has reduced job
hopping by junior staff in Hong Kong. “Candidates
in the finance and accounting field
are [now] fairly cautious in changing jobs,”
noted Cheung at Hudson.
The continuing crunch was underscored
late last year when PricewaterhouseCoopers
imposed
eight days of unpaid leave
on its Hong Kong employees,
citing the need to
cut costs. PwC said
in a statement in
October that
it would be
Illustrations by Alan Ho
February 2013 35

Human resources
36 February 2013
HELPING YOUNG MEMBERS
TO SEE THE PATH
Junior employees are more likely to jump ship than their more
experienced colleagues, say accounting firms. “The issue of job
hopping is in general more serious at the junior to mid-level,”
says Chris Wong, staff partner at RSM Nelson Wheeler and a
Hong Kong Institute of CPAs member.
The major motivation, for accountants starting out their
careers, tends to be money. “Salary may be more of a concern
for junior level staff as they may not be so clear about their future
career and therefore will evaluate a job more by salary and not
the career prospects that it may bring,” says Kelvin Kwong, staff
partner at Grant Thornton and an Institute member.
Apart from money, working environment weighs on the
minds of junior staff, say human resources professionals
both in Hong Kong and abroad. “Many younger professionals
place significant value on personal time and flexible work
arrangements,” says Dan Griffiths, chairman of the American
Institute of CPAs young professionals committee.
With this in mind, firms such as BDO Hong Kong offers
its employees flexible working arrangements. The BDO Flex
programme enables staff to take temporary breaks from work
for personal reasons. “It is unique not only among the CPA firms
but also among employers in Hong Kong,” says Angela Wong,
BDO’s human resources director.
Ultimately though, keeping employees loyal to a firm
involves helping them to set and reach clear and meaningful
career goals. “Once they have qualified, we review their
desires and needs and try to provide a career path that suits
them both personally and professionally,” says Eunice Kwok,
practising director in charge of human resources at Mazars and
an Institute member. “We see it as our duty to encourage staff
development by presenting them with two things: training and
challenge.”
Kwong urges firms to mentor their junior staff. “Having a
mentoring programme helps motivate and retain our people,”
he says. “Mentors play a very important role as they closely
monitor the progress of an individual employee.”
Says Wong at BDO: “On a number of occasions, many of
our young colleagues have expressed their appreciation and
gratitude to their superiors for the attentive and professional
coaching and care they received.”

“avoiding... headcount reductions.”
Nevertheless, junior accountants are still
more likely to job hop than their senior counterparts,
and the churn rate in accounting remains
high compared with other professions.
“Candidates at the manager grade and below
tend to change roles relatively frequently
in Hong Kong – typically every two or three
years,” says Louisa Yeung, a managing director
for recruitment company Michael Page
and an Institute member.
Key managers often leave to pursue more
challenging and lucrative opportunities in the
commercial world. “Of those people who are
currently in audit firms, for example, I think
most of them want to go in-house [in the commercial
field],” says Carol Cheung, financial
services manager at recruitment company
Robert Walters and an Institute member.
If you can prevent them from being lured
into the corporate world, the more senior finance
professionals become, the longer they
typically stay in a role. Adds Cheung: “At the
controller or director level, four or five plus
years is fairly typical. This is largely because
at this level, finance staff are more focused
on strategy development and implementation,
which runs in longer cycles than work at
a junior level.”
Keeping things interesting
With the battle for talent more competitive
than ever, accounting firms are keen to find
new ways to hold on to staff. While granting a
year off to volunteer abroad can help engender
loyalty, most employers find accountants
are soothed by more conventional benefits,
according to human resources professionals.
“We ensure our staff are compensated
competitively for the passion they put into
their work,” says Kwok at Mazars. “We also
offer paternity leave, examination and study
leave, additional daily allowance during
overseas business trips, time off in lieu for
overtime work and medical packages.”
Most firms emphasize the importance
of morale by running work-life balance pro-
grammes. “We have a social committee organized
by our staff and financially supported
by the firm,” says Chris Wong, a staff partner
at RSM Nelson Wheeler in charge of human
resources issues and an Institute member.
“The social committee on average holds four
to six recreational and social activities and
events each year.”
Larger firms help to build employee loyalty
and spirit through integrated employee
networks such as MyLife@KPMG, which
incorporates social media. “We have a lot
of programmes for our people,” says So at
KPMG. “There are a lot of one-day events,
a family fun day and a range of workshops,
from wine tasting to all sorts of sports.”
Extra-curricular activities such as these
are of benefit, but at the end of the day those
who oversee human resources in firms say
working life is what most employees worry
about most. “Our firm culture offers a good
and friendly working environment,” says
Wong. “We are an organization that is very
collaborative and we encourage team spirit.”
While accountants can still be lured away
by the prospect of higher salaries, they are
not the only drawcards. “In the past, some
employers held on to staff only by increasing
monetary rewards,” says Cheung at Hudson.
“Nowadays, non-monetary rewards are increasingly
important.”
Such non-cash perks can include greater
autonomy, as well as personal and professional
development opportunities. “They can help
make one employer significantly more attractive
than another when it comes to recruiting
a candidate with multiple offers,” he says.
Providing mentoring can also help staff
realize the opportunities available to them.
In most firms, it’s the role of partners to identify
and nurture potential leaders of the future.
“Our partners are the talent spotters,”
says Kwok at Mazars. “Key managers are
mentored by senior partners from different
Mazars offices across Asia and from different
working disciplines.”
Then, offering additional training and ed-
ucation to these rising stars is an effective way
to keep them, say human resources professionals.
“Companies should help employees
gain greater knowledge about their position
and level by offering education courses – both
technical and leadership – relevant to them so
they can excel in their job,” says Mandi Fields,
recruiting and retention coordinator at the
Pannell Kerr Forster of Texas firm in Houston
and an American Institute of CPAs member.
Some Hong Kong firms encourage the
acquisition of degrees, such as a master’s
in business administration. “They will
subsidize an MBA course and once you’ve
finished you’re bound to stay for a certain
number of years or if you leave you have to
pay back the company,” says Angel Lam, the
commerce and finance division manager at
Robert Walters.
Other firms make a case-by-case evaluation,
depending on the type of qualification
being sought. “We encourage professional
qualifications with coaching and examination
leave,” says So at KPMG. “An MBA might
not be so important but it would depend on
individual circumstances.”
Ultimately, keeping employees interested
and challenged prevents them from looking
at opportunities elsewhere. “Job rotation
is key,” says Cheung at Robert Walters. That
means a finance manager should be given an
opportunity to work in treasury, internal audit
or financial planning and analysis. “It’s a
good way to hold on to staff.”
Even the best staff can mess up occasionally,
human resources experts warn, and
constant critical evaluation is not the way to
keep them. “I feel employers should also recognize
employees’ achievements throughout
the year and mainly focus on the things they
are doing right versus only focusing on the
things they can improve upon,” says Fields.
Firms are likely to need a mix of pay and
perks to keep staff happy. Exactly what mix is
required varies from employee to employee.
As Cheung at Hudson puts it: “To retain talent
is an art.”
February 2013 37

Valentine’s Day
L VE
Being married to another accountant can bring joy, through the pleasure
of shared interests, and anxiety, through time spent apart on business
trips. Jemelyn Yadao talks to high-profile CPA couples about how they
celebrate togetherness and shun heartache
Judy Tsui still
remembers the
long, blue dress
she wore one
evening to the
Captain’s Bar at
the Mandarin
Oriental hotel
in 1972. It was
at the meet-up
with friends that a persistent young man approached
her – leading to an old-fashioned
tale of boy chasing girl.
“He took me home and then insisted
I take his number... I told him: ‘No, I don’t
want your number because I won’t call
you’,” recalls Tsui, professor and vice-president
for international and executive educa-
38 February 2013
tion at the Hong Kong Polytechnic University
and a member of the Hong Kong Institute
of CPAs.
But with just a few, written words, the
young man eventually softened up the then
uninterested Judy Lam. “He sent me a card
with his number, saying: ‘I’m very much
in [like] with you.’ He was not being frivolous
by saying ‘I’m in love with you,’ which
would scare me away... It was very charming
and real.”
Three years later, Lam married the
young man, Andrew Tsui, who went on to
become chairman of executive search firm
Korn/Ferry International Hong Kong and
also an Institute member. They now have
three grown children.
With the many demands of the profes-
sion, maintaining a relationship with another
accountant can be difficult. However,
couples with hectic careers, like the Tsuis,
are proof that CPAs can sometimes make
ideal partners.
Judy Tsui says her husband has been
especially understanding several times in
their marriage. In 1986, she flew to the United
Kingdom to study for a master’s degree
for one year at the London School of Economics,
leaving behind her family, including
their oldest daughter. “Andrew was very
supportive, together with my in-laws and
my parents. They just said: ‘Go, we will take
care of everything’.”
The strength of their relationship was
put to the test again in 1990 when a third
child was on the way and, simultaneously,

Judy and Andrew Tsui
she pursued a doctorate at the Chinese University
of Hong Kong for four years. “Everyone
was saying: ‘Judy you’re very lucky.
Your husband is so supportive. Anybody
else would have resented you for doing your
master’s in the first place and then doing
your doctorate on a part-time basis and also
having a full-time career’.”
Andrew Tsui has found his wife equally
supportive during periods of change. After
working in financial services for 10 years, he
faced the difficult choice of whether to stay
in the sector or move on to consultancy. “I
was struggling [to decide],” he recalls. “Ten
years later, I was thinking about changing
[career] – and that’s major decision time – so
I really appreciated Judy’s support and tolerance
in helping me make these major life
and career choices.”
With teaching assignments and academic
conference meetings in China, the United
States and Europe, Judy Tsui works longer
hours than her husband. Despite this, he says
that, with effort, they still manage to make
things work. “[If] both of us are not terribly
busy at the same time... If Judy goes on an
overseas trip, sometimes I try to meet up with
her somewhere – that helps. And, when we
want to relax, we go hiking, play golf and we
also go dancing quite a bit.”
Most importantly, Judy Tsui adds, both
of their priorities are the same.
“We both love our children dearly, and
we do everything for them in terms of giving
them the best, without being tiger mum and
tiger dad.”
Different paths
Sabrina Ho’s husband was different from
the boys she grew up with in Hong Kong.
“They were mainly bookworms, while he is
very smart – without being smug – humble
and athletic at the same time,” recalls Ho,
director of accounts at international law
firm Stephenson Harwood and an Institute
member.
“You could say I was very attracted by his
brain at first, until I saw him coming out of
the swimming pool,” she laughs.
She first met Chew Fook-aun, who is now
chairman of Lai Fung Holdings and deputy
chairman of Lai Sun Group, in 1981 while
they were both studying at the London
School of Economics. They now have a son,
aged 15.
February 2013 39

Valentine’s Day
With the couple working in different industries,
Chew and Ho never bring work
matters home. “I deal with lawyers but I also
deal with a different set of professionals,
mainly investment bankers, corporate bankers,
analysts and fund managers so that side
is very different from the professional firm
side,” says Chew, who is also a former vicepresident
of the Institute.
“I wouldn’t know about his line of business
and I don’t want to pry into that either
because we deal with sensitive issues at
work, and unless it’s a general issue we never
talk about work,” says Ho.
Being married to another accountant
means an understanding that sometimes
work has to come first.
“We know what the job entails, and it
makes it easier for us to understand why we
40 February 2013
don’t come home at a certain time or why we
have to change our holidays to fit our work
schedule,” says Ho.
Her husband agrees. “If I say I’ve got
my year-end result or I’ve got my annual
reports, that’s something we both understand,”
says Chew.
But like any couple, sometimes bumping
heads is inevitable. “He is a financial news
junkie... It was a Sunday, I tried to cuddle up
to him and he said: ‘Don’t come between me
and my Financial Times’,” laughs Ho.
Like other career-driven couples working
in Hong Kong, Chew and Ho have grown
accustomed to the limited face-to-face time
they have Mondays to Fridays.
Weekends, however, are usually reserved
for the family. “We’ve established
such an easy and comfortable rhythm over
the years. We talk during the day, whether
for checking things on the home front, or
maybe it’s just asking him, ‘What time are
you coming to pick me up after work?’ ”
Competing camps
On top of long working hours, Eddy and Nellie
Fong had to deal with another thing keeping
them apart: professional rivalry.
“Working in competitive firms when you
are young is easy but working in competitive
firms when you are both partners is difficult,”
recalls Eddy Fong, chairman of the
Open University of Hong Kong, former chairman
of the Securities and Futures Commission
and a retired PricewaterhouseCoopers
partner. His wife, before retirement, was a
partner at Arthur Andersen, one of the then
Big Five accounting firms.
Chew Fook-aun and Sabrina Ho

He recalls deciding whether or not his
wife should accompany him to certain functions.
“Of course private life is private life –
we treat ourselves as husband and wife – but
in terms of socializing and entertaining clients,
I hardly ever appeared at Nellie’s firm’s
functions and she hardly ever appeared at
my firm’s functions.”
Working in different “camps,” he says,
wasn’t easy. “But we managed quite well... I
think basically you rely on your professional
integrity. So that’s a very unusual aspect of
our relationship,” he adds.
The couple ended up working for the
same firm because of a completely unexpected
turn of events. In 2002, the Enron
collapse led to the extinction of Arthur Andersen
and PwC acquired many Andersen
employees. It meant Eddy Fong saw his wife
more than usual until he retired in 2003.
“I was so pleased to see Andersen joining
PwC,” he says. “For one year we were actually
working in the same firm.”
The couple has been very understanding
of each other, realizing that both their
respective careers meant a lot of travelling,
and sometimes even temporary relocation.
While at Andersen, Nellie Fong volunteered
to go to the Mainland to head the firm’s China
practice. For a woman, she says, having
her husband’s full support during times like
these was crucial.
Even after their vibrant accounting careers,
the couple has kept busy by being heavily
involved in public community service, positions
that have led them to, once again, work
in the same office. “We maintain a private
office and our secretary continues to manage
A PLUS
our busy schedules,” says Nellie Fong, who is
a former LegCo and ExCo member and known
for her charity work.
Like many CPAs, the couple has accumulated
enough experience during their careers
to help them pursue meaningful roles
in retirement. “To be able to put such talent
to use after retirement for the good of the
community is probably most rewarding for
a person,” Nellie adds.
For 38 years, they have stayed happily
married by working together both in
and outside the office. “She has her strong
points, I have my strong points so you just
have to compromise all the time,” says Eddy
Fong. “It’s no different if you are an accountant
or not – it applies to all.”
Having a secure income to provide for
the family, including their daughter, as well
Nellie and Eddy Fong
February 2013 41

Valentine’s Day
Florence and Simon Yip
as the financial savvy to save up for their
future is one of the many perks of being
married to another CPA, Eddy Fong says.
“You understand each other better, and
you share the same experience. Accountants
probably think alike in many ways, although
I don’t think I agree with her all the
time,” he laughs.
Partners in pressure
Not only does Simon Yip understand his
wife’s daily work life and the challenges
that come with it, he also knows her colleagues
very well.
“I actually introduced those people to
her. In fact, it made her life more manageable
in a practical sense,” says Yip, recalling
how his wife joined his former firm after
the fall of Arthur Andersen. At the time, he
had gone on to set up his own firm, Simon
K.Y. Yip & Co.
42 February 2013
Yip had previously worked for Coopers &
Lybrand, now PwC, where his wife Florence
Yip currently works as a tax partner.
“I’ve known a lot of her colleagues for
more than 20 years,” he says.
The couple, both Institute members,
are parents to two children and have been
unfazed by each other’s hectic lifestyles for
more than 32 years. “There’s no use trying
to be hard on each other, because the work
itself is hard enough already. It’s part of our
day-to-day routine, and you have to respect
that,” Simon Yip says.
He and his wife have mastered balancing
a busy work life with quality time together.
As well as movie nights and family
vacations, they make an effort to go on
holiday without the kids, now aged 21 and
17. “A few nights ago we discussed about
when Florence is going to visit our son who
is studying in the U.K. I said: ‘I’ll come, but
why don’t we go a few days earlier so that
we can spend some time together’.”
When Simon Yip decided to set up his
own practice in 1992, his wife played an
integral part in helping him face the new
challenge.
“I supported him,” she says. “I knew
it was going to be hard because he used
to work for a big firm where everything is
catered for including pens and paper. But
with any start-up, the resources will be
limited. He needed to deal with all sorts of
things,” she says. “He’s done well.”
Back in their university days, Simon Yip
had been playing the role of the supportive
other-half long before the two were an
item. “I was able to help her with her homework,
because I was one year her senior,” he
remembers.
“That way, I would have more free time,”
Florence recalls.

Forensic accounting
Winning the battle against fraud
Katy Wong explains how whistle-blowing mechanisms and data
analytics are allowing companies to step up the fight against fraudsters
Two issues at the top of the
corporate agenda are governance
and cost reduction. One
way in which these two issues
intersect is around fraud and the ability of
an organization to protect its bottom line
through an effective anti-fraud programme.
While there is evidence that fraud is on the
rise, the good news is that with whistleblower
reporting mechanisms and modern
forensic data analytic techniques, organizations
can prevent and detect fraud more
effectively than ever before.
There are organizations that treat a
certain degree of fraud loss as an acceptable
cost of doing business. However, in
the current competitive environment, it is
something which companies can no longer
choose to ignore. While executives are
under immense pressure to reduce cost and
demonstrate good governance, fraud cases
keep being uncovered, with many leading to
reputational fallout. Often an organization
ends up with a fall in its stock price, a hefty
bill from its lawyers and a significant diversion
of senior management time.
Fraud requires carefully planned deceit.
Perpetrators of fraud will deliberately use all
possible means to conceal the true nature of
their activities, making it extremely difficult
to concisely quantify or measure the impact
of fraud for organizations and the economy
as a whole. In a survey conducted in early
2012, the Association of Certified Fraud
Examiners estimated that approximately
5percent of a typical organization’s annual
revenue, or a median of US$140,000, is lost
due to occupational fraud. By applying the
2011 gross world product, this figure translates
to a potential annual fraud loss of more
than US$3.5 trillion.
This is not only a wake-up call for executives,
but something that other stakeholders
are increasingly concerned about. Under the
Hong Kong stock exchange’s corporate gov-
46 February 2013
ernance rules and code provisions, issuers
are required to maintain sound and effective
internal controls to safeguard shareholders’
investment and the issuer’s assets. In effect,
this means that an organization should have
a robust risk management framework and
compliance programme in place that are
proportionate to its size and able to address
an array of risks faced by the organization,
including the risk of fraud.
Key ingredients of a successful anti-fraud
programme
Managing the risk of fraud is about achieving
three core objectives:
· Preventing instances of fraud and misconduct
from occurring in the first place;
· Detecting instances when they do occur;
and
· Responding appropriately and take corrective
action when instances arise.
The key to a successful anti-fraud
programme is reinforcing the first line of
defence – fraud prevention – by setting a
proper tone at the top; this usually entails
improving both top-down and bottom-up
communications within the organization.
Developing healthy two-way communication
channels between management
and employees is no easy task. For smaller
companies, it is easy to let emotions dictate
business decisions. This may end up creating
unhealthy, or in some situations even
hostile, work relationships. For larger businesses,
this may also create or perpetuate
information silos.
This is why an organization should have
a clear and concise set of practical policies
and procedures supported by open and
honest communication channels that are
available to everyone. As a better practice,
an organization should consider the effectiveness
of the following aspects:
· Board and audit committee functions
· Internal audit and compliance functions
· Executive and line management functions
· Fraud and misconduct risk assessment
· Codes of conduct
· Communication and training
· Employee and third-party due diligence
· Other process-specific fraud controls (e.g.
procurement, cash)
Hotline and whistle-blower mechanisms
The majority of fraud cases are detected via
a tip. That is why a hotline or whistle-blower
mechanism helps not only in detecting,
but also deterring, instances of fraud and
misconduct.
With the Dodd-Frank Act in the United
States providing incentives to whistle-blowers,
we expect to see even more employees
coming forward to report on allegations of
fraud and misconduct globally. This change
in mindset is further propelled by the increased
mobility of employees. Social media
and other emerging forms of communication
are also leading people to become more
outspoken and forthcoming.
One of the Hong Kong stock exchange’s
recommendations is that “the audit committee
should establish a whistle-blowing
policy and system for employees and those
who deal with the issuer (e.g. customers and
suppliers) to raise concerns, in confidence,
with the audit committee about possible
improprieties in any matter related to the
issuer.”
As a better practice, a whistle-blower
policy or system should include the following:
· Confidentiality
· Anonymity
· Toll-free service
· 24/7 availability
· International availability
· “Real time” assistance
· Prominent communications
· Data management procedures
· Qualified operators

· Emergency notification protocols
· Classification of concerns
· Audit committee notification
· Follow-up on non-retaliation
· Disclosure protocols
Unless an employee is reassured about
all these factors, they may lack the confidence
to pick up the phone at a critical
moment.
Other practical considerations have
no definitive answers. The following are
examples of considerations that need to be
resolved based on the unique circumstances
of each organization:
· Which department typically oversees the
hotline?
· What types of hotline metrics do companies
typically monitor and/or share with
the board?
· Should a hotline be administered in-house
or outsourced?
· Should the hotline be made available to
third parties?
· What are the potential drawbacks to email
or voicemail-based hotlines?
· How should hotline reports be maintained
and tracked?
Forensic data analysis
Technology has been advancing at an
enormous pace in the last couple of decades
and we have seen fraudsters use increasingly
sophisticated techniques to commit acts of
impropriety. However, forensic investigators
have caught up and are now armed with
more powerful tools that can deal with complex
issues where it would not have been
possible 20 years ago.
Data analytics is the process of analysing
and drawing insights or conclusions from
data. By applying analytical and forensic
techniques, organizations can conduct
systematic and consistent analysis across all
the available data. The chances of uncovering
unknown or hidden trends and patterns
are increasing, while there is less reliance
on manual sample checking and hence less
likelihood of human error.
Forensic data analytics techniques can
also be applied by embedding a series of algorithms
and data scripts into an organization’s
data systems as part of its continuous auditing
and monitoring processes and controls to
identify potential red flags.
Forensic data analytics can help in
detecting fraud and financial misstatement
by implementing a series of automated
routines, including but not limited to:
· Transactions with missing user IDs
· Duplicated transactions
· Transactions with missing descriptions
· Transactions posted during holidays or
after hours
· About round transactions
· Journal entries with unusually large
number of line items
· Same side correction entries
· Expense reversals just over/under monetary
threshold for approval
· Out-of-balance journal entries
· Backposted revenue
· Unauthorized user activity
The four most common processes where
fraud is committed relate to revenue, procurement,
payroll and travel and entertainment.
Below are what forensic data analysis
routines can be implemented to help detect
fraud in each area.
Revenue
Examples of fraud and misconduct risks:
· Window dressing or income smoothing
· Duplicate invoicing
· Undisclosed related party transactions
· Fictitious transactions
Examples of forensic data analysis routines:
· Match journal entry dates against invoice
dates
· Analyse reversal entries
· Compare sales recognition, invoice and
payment dates
· Analyse sales booked right before and
after quarter end
Procurement
Examples of fraud and misconduct risks:
· Collusion (e.g. invoices below approval
limits, discounts earned but refused)
· Duplicate invoices or purchase orders
· Ghost vendors
· Under-delivery of goods or services
· Falsified volume or pricing
Examples of forensic data analysis routines:
· Analyse transactions by vendor, period
and amount
· Check for duplicate transactions
· Match supplier contact details against
supplier data file
· Match accounts payable data against
purchase orders
A PLUS
Payroll
Examples of fraud and misconduct risks:
· Employees acting as vendors
· Falsified overtime
· Ghost employees
· Improper bonuses or incentive
compensation
· Payments after termination
Examples of forensic data analysis routines:
· Match employee information against
HR contact details (e.g. contact person,
address, telephone number, etc.)
· Check for duplicate employees/bank
account numbers
· Compare last payment date against
termination date
Travel and entertainment
Examples of fraud and misconduct risks:
· Bribery
· Duplicate expenses
· Splitting of expenses to circumvent
approval levels
· Reimbursement of personal expenses
· Inflated expenses (e.g. mileage, per diem
allowances)
· Mischaracterized expenses
Examples of forensic data analysis routines:
· Apply keyword search terms on transactional
data
· Check for duplicate transactions
· Analyse transactions by user, period and
amount
· Check for transactions with missing
descriptions
Conclusion
The financial crisis has put fighting fraud
on the corporate agenda and provided additional
ammunition for those tasked with
leading the fight.
While the true cost of fraud will always
be hard to measure, new analytic techniques
mean that conducting systematic or
widespread fraud in an organization is an
increasingly risky proposition. At the same
time, the awareness and willingness to
speak out against fraud is also on the rise.
If organizations create the open climate for
their employees to report malfeasance, this
can be the most powerful weapon of all.
Katy Wong is partner, forensics, at KPMG China.
February 2013 47

123
TechWatch
The latest standards and
technical developments
Members’ handbook
Handbook updates
Update no. 123 includes updates on Investment
Entities (amendments to HKFRS 10 Consolidated
Financial Statements, HKFRS 12 Disclosure
of Interests in Other Entities and HKAS 27 (2011)
Separate Financial Statements).
The Investment Entities amendments
apply to a particular class of business that
qualifies as an “investment entity.” This term
refers to an entity whose business purpose is
to invest funds solely for returns from capital
appreciation, investment income or both.
An investment entity must also evaluate
the performance of its investments on a
fair value basis. Such entities could include
private equity organizations, venture capital
organizations, pension funds, sovereign
wealth funds and other investment funds.
Under HKFRS 10, reporting entities were
required to consolidate all investees that
they control (i.e. all subsidiaries). Preparers
and users of financial statements have suggested
that consolidating the subsidiaries of
investment entities does not result in useful
information for investors. Rather, reporting
all investments, including investments in
subsidiaries, at fair value provides the most
useful and relevant information.
In response to this, the amendments
provide an exception to the consolidation
requirements in HKFRS 10 and require
investment entities to measure particular
subsidiaries at fair value through profit or
loss, rather than consolidate them. The
amendments also set out disclosure requirements
for investment entities.
The amendments are effective from 1
January 2014 with early adoption permitted
in order to allow investment entities to apply
the amendments at the same time they first
apply the rest of HKFRS 10.
Update no. 124 contains improvement
changes to HKSIR 400 and HKSAs.
48 February 2013
In June 2012, the IAASB published the
2012 edition of the Handbook of International
Quality Control, Auditing, Review, Other
Assurance, and Related Services Pronouncements
and made editorial and formatting
changes in finalizing it. Changes have been
made to the corresponding Hong Kong
pronouncements.
HKSRE 2400 (revised) conforms with
ISRE 2400 (revised) issued by the IAASB in
September 2012. HKSRE 2400 (revised) aims
to enhance the quality and consistency of
engagements to review historical financial
statements, through revised requirements
and guidance addressing the responsibilities,
work effort and reporting considerations of
practitioners undertaking such engagements.
HKSRE 2400 (revised) is effective for reviews
of financial statements for periods ending on
or after 31 December.
HKSIR 400 is revised to reflect the
improvement changes made to paragraph
56 and the illustrative examples. There is no
change to the principles in the standard. The
revisions made are effective upon issuance.
Financial reporting
IASB exposure draft: Classification and
Measurement: Limited Amendments to
IFRS 9
The Institute has issued an invitation to comment
on the IASB exposure draft Classification
and Measurement: Limited Amendments
to IFRS 9, with comments requested by 28
February. The proposals form part of a wider
project to reform accounting for financial
instruments and are part of the classification
and measurement phase of that project.
The IASB published new classification
and measurement requirements for financial
assets in 2009 and for financial liabilities
in 2010. However, in January 2012 the IASB
decided to consider limited amendments in
order to: clarify a narrow range of application
questions; reduce key differences with the
United States Financial Accounting Standards
Board’s tentative classification and measurement
model to achieve increased comparability
internationally in the accounting for
financial instruments; and take into account
the interaction between the classification
and measurement of financial assets and the
accounting for insurance contract liabilities.
In publishing the exposure draft, the IASB
sought to minimize changes to the requirements
in IFRS 9 Financial Instruments and
ensure the proposed amendments are consistent
with the business model-driven classification
structure in IFRS 9. The draft proposes
the introduction of a “fair value through
other comprehensive income” measurement
category for debt instruments that would be
based on an entity’s business model.
IASB exposure draft: Clarification of Acceptable
Methods of Depreciation and
Amortization
The Institute is seeking comment on the IASB
exposure draft Clarification of Acceptable
Methods of Depreciation and Amortization
(proposed amendments to IAS 16 and IAS
38), with comments requested by 1 March.
IAS 16 Property, Plant and Equipment and
IAS 38 Intangible Assets both establish the
principle for the basis of depreciation and
amortization as being the expected pattern
of consumption of the future economic
benefits of an asset.
The objective of the proposed amendments
is to ensure that preparers do not
use revenue-based methods to calculate
charges for the depreciation or amortization
of items of property, plant and equipment
or intangible assets. This is because a
revenue-based method reflects a pattern
of economic benefits being generated from
the asset, rather than the expected pattern
of consumption of the future economic
benefits embodied in the asset.

IASB exposure draft: Sale or Contribution
of Assets between an Investor
and its Associate or Joint Venture
The Institute has issued an invitation to
comment on the IASB exposure draft
Sale or Contribution of Assets between
an Investor and its Associate or Joint
Venture (proposed amendments to IFRS 10
and IAS 28), with comments requested by
18 March.
The objective of the proposed amendment
is to address an acknowledged inconsistency
between the requirements in IFRS 10
Consolidated Financial Statements and those
in IAS 28 (2011) Investments in Associates
and Joint Ventures in dealing with the sale or
contribution of a subsidiary.
The main consequence of the proposed
amendment will be that a full gain or loss
would be recognized on the loss of control
of a business (whether it is housed in a subsidiary
or not), including cases in which the
investor retains joint control of, or significant
influence over, the investee.
IVSC discussion paper: Valuations in the
Extractive Industries
The Institute submitted comments on the
IVSC discussion paper Valuations in the
Extractive Industries.
The Institute believes the IVSC should
produce a combined standard and guidance.
Although there were some differences
between the classification of reserves and
resources between mining and oil and gas
operations, the Institute believes the underlying
techniques used for the valuation were
relatively consistent, subject to a standard
identifying specific considerations and factors
that would need to be taken into account
when performing valuations for mining and
for oil and gas assets.
The Institute agrees the project should extend
to other assets employed in the industry
and to entire businesses in the sector.
IFRS Foundation proposal to establish accounting
standards advisory forum
The Institute made a submission on the
IFRS Foundation’s invitation to comment
on the proposal to establish an accounting
standards advisory forum.
The Institute supported in principle the
foundation’s move to formalize and rationalize
the relationship between the IASB and
national standard-setters onto a more logistically
sustainable and compact basis.
The Institute believed there would be a
significant mutual benefit for both the IASB
and for standard-setters, such as the Institute,
to be more fully and directly engaged
with each other having the proposal put into
operation.
Audit and assurance
Invitation to comment on HKSAE 3420
exposure draft
The Institute has issued an invitation to
comment on the exposure draft HKSAE 3420
Assurance Engagements to Report on
the Compilation of Pro Forma Financial
Information Included in a Prospectus, with
comments requested by 19 February.
The exposure draft deals with reasonable
assurance engagements undertaken by
a practitioner to report on the responsible
party’s compilation of pro forma financial
information included in a prospectus.
It explains that a compilation of pro forma
financial information involves the responsible
party gathering, classifying, summarizing
and presenting financial information that
A PLUS
illustrates the impact of a significant event or
transaction on unadjusted financial information
of the entity as if the event had occurred
or the transaction had been undertaken at
the selected date.
The proposed standard describes the
steps involved in this process as including:
(a) Identifying the source of the unadjusted
financial information to be used in compiling
the pro forma financial information
and extracting the unadjusted financial
information from that source;
(b) Making pro forma adjustments to the
unadjusted financial information for the
purpose for which the pro forma financial
information is presented; and
(c) Presenting the resulting pro forma
financial information with accompanying
disclosures.
Ethics
Institute comments on IESBA
exposure draft
The Institute submitted comments to the
IESBA on its exposure draft Responding to a
Suspected Illegal Act.
The Institute acknowledged that it was of
paramount importance for the accounting
profession to accept the responsibility to act
in the public interest and that a professional
accountant’s responsibility was therefore
not exclusively to satisfy the needs of an
individual client or employer.
However, the Institute had substantial
concerns on whether the proposals would
result in the imposition of fair and equitable
requirements to professional accountants,
especially in the absence of adequate statutory
protection for whistle-blowers.
Please refer to the full version of TechWatch 123,
available as a PDF on the Institute’s website:
www.hkicpa.org.hk
February 2013 49

Tech Q&A
The Institute has recently issued an invitation to comment on the IASB
exposure draft Classification and Measurement: Limited Amendments to
IFRS 9. Could you provide details of the proposed requirements?
The proposals form part of a wider
project to replace IAS 39/HKAS 39
Financial Instruments: Recognition
and Measurement with IFRS 9/HKFRS 9
Financial Instruments.
The extant version of IFRS 9/HKFRS 9 has
two measurement categories for financial
assets. The standard requires assets to be
50 February 2013
measured either at fair value through profit
or loss, or at amortized cost on the basis of
the asset’s cash flows and how an entity
manages its financial assets. Unlike
IAS 39/HKAS 39, IFRS 9/HKFRS 9 provides
structure to classification in an effort
to improve information.
IFRS 9/HKFRS 9 uses a single
approach to determine whether a financial
asset is measured at amortized cost or fair
value, replacing the many different rules in
IAS 39/HKAS 39. The approach in IFRS 9/
HKFRS 9 is based on how an entity manages
its financial instruments (its business
model) and the contractual cash flow
characteristics of the financial assets.
A financial asset shall be measured at
amortized cost if both of the following conditions
are met:
• The asset is held within a business
model whose objective is to hold assets
in order to collect contractual cash flows;
and
• The contractual terms give rise on specified
dates to cash flows that are solely
payments of principal and interest on the
principal amount outstanding.
If either criterion is not met, the financial
asset should be measured at fair value
through profit or loss.
In relation to financial liabilities, IFRS 9/
HKFRS 9 unchanged almost all the accounting
requirements in IAS 39/HKAS 39
for financial liabilities with the following
exception: Changes in value attributable to
changes in an issuer’s own credit risk for
non-derivative financial liabilities measured
at fair value will now be presented in the
other comprehensive income section of the
income statement, rather than within profit
or loss.
In order to address specific application
issues that have arisen in practice since the
issuance of IFRS 9/HKFRS 9; to take into
account the interaction of the classification
and measurement model for financial assets
with the IASB’s insurance contracts project;
and to reduce differences with the FASB's
classification and measurement model,
the exposure draft proposes limited scope
amendments to IFRS 9/HKFRS 9 as follows:
• Introduce a “fair value through other
comprehensive income” measurement
category for qualifying debt instruments;
• Eliminate the phased approach to the
early application of IFRS 9/HKFRS 9,
except for the requirements related to
own credit;
• Clarify a narrow range of application
questions, such as the amount/frequency
of sales that would be consistent
with a “hold to collect” business model
and how to assess the asset’s contractual
cash flows in particular circumstances.

The most significant proposal is the introduction
of a third measurement category for
qualifying debt instruments. That is, vanilla
debt instruments that are managed both in
order to collect contractual cash flows and
for sale would be measured at fair value
through other comprehensive income. This
new category would capture, for example,
those circumstances in which an entity is
seeking to maximize its return from a combination
of collecting contractual cash flows
and realizing value appreciation.
For such a business model, performance
will be affected by both contractual cash
flows and the realization of fair value.
Amortized cost information reflects the decision
to hold the assets to collect contractual
cash flows unless, and until, they are sold
in order to achieve the objective of the business
model. Fair value information reflects
the cash flows that would be realized if, and
when, they were sold.
The fair value through other comprehensive
income measurement category
should result in a fair value carrying amount
in the statement of financial position and
amortized cost information being provided
in profit or loss. Accordingly, the exposure
draft proposes that for financial assets
mandatorily measured at fair value through
other comprehensive income:
• Interest income should be recognized in
profit or loss using the effective interest
method that is already applied to financial
assets measured at amortized cost in
IFRS 9/HKFRS 9;
• Impairment should be recognized in
profit or loss using the same credit
impairment methodology as for financial
assets measured at amortized cost; and
• The cumulative fair value gain or loss recognized
in other comprehensive income
should be reclassified (“recycled”) from
equity to profit or loss as a reclassification
adjustment when these financial
assets are derecognized (when it is sold
or matures).
Moreover, the proposals would also
change the requirements for the early
application of IFRS 9/HKFRS 9 before its
mandatory effective date. In general, the
proposals would not allow parts or phases
of IFRS 9/HKFRS 9 to be applied in isolation
after IFRS 9/HKFRS 9 is complete (except
for the own credit requirements for financial
liabilities measured under the fair value
option). In other words, if an entity decides
to early apply IFRS 9/HKFRS 9 after it is
completed, all phases of IFRS 9/HKFRS 9
must be applied from the same date. This is
proposed to improve comparability for users
of financial statements.
In summary, the classification principles in
IFRS 9/HKFRS 9, which are preserved in the
proposed amendments, are designed to better
reflect the underlying economic decisions
made by management. The creation of the fair
value through other comprehensive income
category provides information about fair value
in the statement of financial position and
about contractual cash flows in profit or loss.
The Institute's financial reporting
standards committee is deliberating on the
proposals and will be preparing a submission
to the IASB. In this connection, the
Institute welcomes comments on all matters
addressed in the exposure draft. Please provide
your comments to Simon Riley, director
of standard setting, by 28 February.
Send your questions and comments to
commentletters@hkicpa.org.hk. The standard setting
team will answer these questions in accordance
with its policy, posted on the Institute’s website.
February 2013 51

People on the move
The latest professional appointments from around the region
RSM Nelson Wheeler
Lester Kwong
Principal, audit and
assurance services
Kwong is experienced in auditing
listed companies and capital
market work in Hong Kong and overseas.
He has extensive experience with companies
specializing in infrastructure construction,
engineering, entertainment, licensing of software,
biotechnology, forestry, animal nutrition
and livestock.
54 February 2013
Eliza Ng
Partner, audit and
assurance services
Ng has more than 15 years of audit
and assurance experience.
She has extensive experience in audit, initial
public offerings and mergers and acquisitions
of listed and multinational companies operating
in a variety of industries, including retailing,
chemical products, printing and packaging,
construction and engineering, real estate,
transport, information technology, telecommunication,
advertising, pharmaceutical and
health care, hospitality, catering and entertainment.
Frankie Li
Principal, audit and
assurance services
Li is experienced in providing
audit and assurance services
to listed and private companies operating
in a variety of industries, including property
development, golf clubs, hotels, mining and
manufacturing.
Email your announcements to Lucid Wong at
lucid.wong@mandl.asia

Events
Your guide to courses, workshops and member activities
Accounting and related
knowledge
Creating and managing
effective budgets will examine
what the budgeting process involves, help
participants develop more realistic and
effective budgets and teach them how to
use budgets as an effective performance
monitoring and measurement tool.
CPD hours: 3
Language: English
Date: 25 February
Time: 6:30 – 9:30 p.m.
Audit and assurance
Co-organized with the Securities and
Futures Commission, the joint
seminar on the audit of
licensed corporations will
discuss areas of concern over applying
Practice Note 820 and highlight the
impact of the auditing standards issued.
CPD hours: 2
Language: English
Date: 4 February
Time: 6:30 – 8:30 p.m.
Audit quality: measurement
and implications to reported
earnings will explore the consequences
of audit failure cases and discuss factors
that influence audit quality and how audit
quality can be measured.
CPD hours: 1.5
Language: English
Date: 28 February
Time: 6:30 – 8:00 p.m.
Business and professional
knowledge
Land tenure system in Hong
Kong will look at the present situation
and the system’s historical background. The
special characteristics of the system in the
New Territories will also be discussed.
CPD hours: 1.5
Language: English
Date: 6 February
Time: 6:30 – 8:00 p.m.
Business finance
Mastering impairment testing
will discuss the impairment related risks
expected to increase in this financial year
and the impact this has on a company’s
financial statements.
CPD hours: 1.5
Language: English
Date: 21 February
Time: 6:30 – 8:00 p.m.
Business management
What are the risks and opportunities
in managing suppliers in
China? will cover the pitfalls and advantages
in managing Chinese suppliers. The
speaker will assess economic data based on
1,000 interviews with Chinese manufacturers
in the consumer electronics industry
conducted over the past three years.
CPD hours: 3
Language: English
Date: 28 February
Time: 6:30 – 9:30 p.m.
Financial accounting and
reporting
Practical issues in adopting
HKFRSs for 2012 financial
statements will highlight the new and
amended International Financial Reporting
Standards and Hong Kong Financial
Reporting Standards, including HKFRS 10, 11,
12 and 13.
CPD hours: 3
Language: English
Date: 20 February
Time: 6:30 – 9:30 p.m.
Financial reporting seminar on
convertible bonds valuation will
provide an introduction to convertible bonds
and cover the interaction between accounting
treatment and valuation methodology
using case studies.
CPD hours: 1.5
Language: English
Date: 26 February
Time: 7:00 – 8:30 p.m.
Visit the Institute’s website for other programmes and
to enrol and pay online: www.hkicpa.org.hk
February 2013 55

Lacking Sydney’s spectacular harbour,
Australia’s second city has
had to strive harder to establish
itself as a destination. Less brash
or trivial than sybaritic Sydneysiders, Melbourne
residents pride themselves on their
work ethic, peaceable multicultural identity
and ability to appreciate the sensory arts.
Melbourne, the capital of the state of Victoria,
was founded in the 1830s and its oldest
surviving complete building dates only from
1849. However, the city boasts a wealth of
beautiful late Victorian-era architecture in its
city fringes and inner suburbs.
The 19th century gold rush and the wool
56 February 2013
Business travel
Marvellous Melbourne
Travelzoo Asia Pacific CFO and Institute member Honnus Cheung seeks culture,
cuisine and calm in Australia’s second-largest city
trade brought riches to the city and created a
wealthy merchant and farming class. A number
of historic mansions, such as Como and
Rippon Lea, are managed by the National
Trust and open to the public.
The city struggled for decades to develop a
central leisure and meeting space before opening
the love-it-or-hate-it Federation Square in
2002. While the jagged, asymmetrical architecture
is not to everyone’s taste, the square
is home to some of the country’s finest arts
spaces, such as the Sir Ian Potter Centre and
the Australian Centre for the Moving Image.
The city has numerous museums and galleries,
including the National Gallery of Victo-
ria, one of the oldest collections in Australia.
The work of local luminaries such as Emily
Kam Ngwarray, Frederick McCubbin and
Tom Roberts is featured alongside that of international
masters such as Louise Bourgeois,
El Greco, Damien Hirst, Man Ray, Auguste
Rodin, J.M.W. Turner and Wu Zhen.
Meanwhile, the State Library of Victoria
features an exhibition on culinary history until
28 March, while the Immigration Museum
showcases Dublin photographer David Monahan’s
images of recent arrivals from Ireland
amid the eurozone debt crisis.
Retail shopping in the central business district
is concentrated along Collins Street, with

Previous page: Melbourne Cricket Ground
This page (from top): Federation Square opened in
2002 amid controversy over its design; the Yarra River
flows through Melbourne; Shrine of Remembrance;
sunrise viewed from Williamstown
its high-end designer brands, and slightly more
down-to-earth Bourke Street. Swanston Street
and the smaller streets running off it include
many bargain stores.
Melbourne is the birthplace of Australian
Rules football, a unique code combining elements
of rugby and association football. The 2013 Australian
Football League season kicks off next
month and top teams Carlton and Richmond
meet at the iconic Melbourne Cricket Ground on
28 March.
Most visitors tend to concentrate their time
on the grid-patterned central business district,
but the layout hides myriad alleys, including
Hardware Street, Mitre Lane and Bank Place,
that are worthy of exploration for their eateries,
clubs and obscure boutiques.
In addition, the vibrant inner suburbs, such
as Brunswick, Carlton, Collingwood, Fitzroy and
Richmond should not be ignored. Chapel Street
in South Yarra possesses many of the city’s trendier
and more unusual fashion boutiques.
Williamstown is a picturesque seaside suburb
that stands out from the rest of the mostly poorer
western suburbs, although long-ignored neighbourhoods
such as Footscray, Yarraville and
Moonee Ponds have been brought to life in part
by waves of immigration from Asia and, more recently,
Africa and South America.
Lygon Street in Carlton – close to the University
of Melbourne’s main campus – boasts dozens
of street dining options, especially for Italian
and other Mediterranean food, while Bridge
Road in Richmond offers every imaginable Asia-
Pacific cuisine.
Indeed, the city is known for its culinary quality
and diversity: Its British colonial origins have
been subsumed by continental European, then
Asian immigration. Melbourne, like the rest of
Australia, prides itself on its fresh, locally caught
seafood while fruit and vegetables arrive daily
from the market gardens of its hinterland.
Victoria is a leading producer of lamb and
beef, and world-class wine is grown in the Yarra
Valley as well as the nearby Grampian and Goulburn
Valley districts. Real ale pubs include the
Baden Powell Hotel in Collingwood.
Unique Australian foods have emerged. Melbourne
culinary specialties include fish-and-chip
shop delicacies such as egg roll inspired Chiko
rolls and the dim sim – a fried or steamed cabbage
dumpling largely unrecognizable to most Chinese
consumers.
Where to eat
• Albert Street Food and Wine Foodie
heaven on a foodie strip. 382 Sydney
Road, Brunswick. 8354-6600.
• Cumulus Inc Avant-garde dining.
45 Flinders Lane, City. 9650-1445.
• Flower Drum Highly rated Cantonese
with local twists. 7 Market Lane, City.
9662-3655.
• Pellegrini’s Espresso Bar An Italian
coffee institution. 66 Bourke Street,
City. 9662-1885.
• Vue de Monde Modern takes on
classic dishes. 55th floor, Rialto,
525 Collins Street, City. 9691-3888.
Where to stay
• Adelphi Hotel Trendy boutique in old
warehouse. 187 Flinders Lane, City.
8080-8888.
• Crown Promenade Stylish hotel
in casino complex. 8 Whiteman
Street, Southbank. 9292-6688.
• InterContinental Melbourne The
Rialto Five-star central chic.
495 Collins Street, City.
9620-9111.
• The Como Melbourne Luxury digs
amid shoppers’ paradise. 630 Chapel
Street, South Yarra. 9825-2222.
• The Hotel Windsor Colonial-era
glamour. 111 Spring Street, City.
9633-6000.
What to see
• Federation Square The city’s cultural
and social hub. Swanston Street, City.
9655-1900.
• Melbourne Cricket Ground Site of
winter AFL football matches.
Brunton Avenue, East Melbourne.
9657-8888.
• Melbourne River Cruises Scenic
views of city and suburbs. Vault 11,
Banana Alley, City. 9654-9599.
• Shrine of Remembrance Stately
war memorial in the King’s Domain.
Birdwood Avenue, City. 9661-8100.
• Sir Colin MacKenzie Fauna Park
Native animals in visitor-friendly
setting. Badger Creek Road, Healesville.
5957-2800.
February 2013 57

Celebrating Cognac
The after-dinner tipple
has become a staple drink
over the lunar new year
holiday, writes Aloysius Tse
While brandy is produced in
many countries from many
different types of grape, and
even other fruits, the most notable is those
produced near the town of Cognac, between
Poitiers and Bordeaux, in western France.
Cognac, usually served as an after-dinner
drink, has caught on in China over the past
few decades. High-end Cognac shipments to
China rose 21.7 percent in volume last year
and 34 percent in retail value in 2011, according
to investment research firm Sanford C.
Bernstein & Co. Given its celebratory reputation,
Cognac consumption spikes during
the lunar new year period, with that week
accounting for up to 30 percent of annual sales.
While there are a large number of Cognac
producers, the world market is dominated by
only a few companies, such as Pernod Ricard,
which launched its Martell Cordon Bleu XO
Cognac in 2005 especially for the Mainland
market. Its rivals include Beam (the Courvoisier
brand), Camus La Grande Marque
(Camus), LVMH Moët Hennessy Louis Vuitton
(Hennessy) and Rémy Cointreau (Rémy
Martin).
For a distilled brandy to bear the name of
Cognac, its production methods must meet
certain legal requirements. In particular, it
must be made from specified grapes, especially
Ugni Blanc, locally known as Saint-
Émilion and widely known by its Italian
name of Trebbiano.
The Ugni Blanc vines grown for Cognac
production cover many thousands of hectares
in the Charente and Charente-Maritime
départements of France. Other common grape
varieties used are Colombard and hybrids of
Folle Blanche. These give Cognac its distinctive
aromas of honeysuckle, vanilla, fruit and
caramel.
58 February 2013
After hours
Salvatore Calabrese, a London club owner, prepares to open a bottle of Clos de Griffier Vieux Cognac from
1788 in October 2012 during an attempt to make the world’s most expensive cocktail, which also included
Kummel liqueur, orange Curaçao and Angostura bitters.
Buyers can be confused by the various
quality ratings displayed on the labels of
Cognac bottles. In fact, these are no more
than an indication of the length of time which
the brandy has been aged in barrels.
Cognac is traditionally created by blending
double distilled white wine spirits of different
ages and crus and it is very rare for it
to carry any vintage designation. However,
by law, the distillation process must be completed
no later than 31 March of the year following
the vintage. Unlike wine, brandy does
not age in bottles.
According to the Bureau National Interprofessionel
du Cognac, which is responsible
for overseeing the production of Cognac in
France, the three official quality grades are:
• VS (Very Special), which refers to a blend
in which the youngest brandy has been
stored for at least two years in wooden
casks. These Cognacs are sometimes designated
“three star.”
• VSOP (Very Special Old Pale), which refers
to a blend in which the youngest brandy has
been stored for at least four years in casks.
• XO (Extra Old) refers to a blend in which
the youngest brandy is stored for at least
six years (10 years after 2016) and often
longer than 20 years.
There are other unofficial designations
such as Napoleon (often taken as a grade
equal to an XO), Extra (normally aged longer
than an XO) and Hors d’Age, a designation the
bureau refers to as XO equivalent but that is in
practice aged much longer.
There are different views on how to serve
Cognac. Most drinkers would agree that a
Cognac has to be drunk at hand temperature.
Another common belief is that it should be
served in a tulip-shaped wine glass, but a low
spherical wine glass is also acceptable.
Cognac has an initial aroma and then
swirling the liquid emits subtler secondary
hints. This should be repeated until the
full complement of the bouquet has been
experienced.
The liquid should be then sipped, first
experienced at the front of the mouth for the
primary bitter and sweet tastes, before allowing
the finishing “feel” to be appreciated further
back against the palate.
Whether you want to drink your Cognac
neat with ice or water, or warm by your hand
to bring out the aroma characteristics – or
even during dinner with a soft drink like
Coca-Cola – is all very personal.
The important thing is that Cognac as
an after-dinner drink needs to be appreciated
slowly and leisurely. This is the reason
why there has been a trend for wine bars
to serve fine Cognac together with quality
cigars. Cognac also goes well with coffee
and chocolates.
Aloysius Tse is chairman of Bacchus Fine
Wines Group and a past president of the Hong
Kong Institute of CPAs.

Slithering seconds
In the spirit of the lunar new year,
several luxury watchmakers have
unveiled snake-themed timepieces.
Jemelyn Yadao looks at some of the
slinky offerings
Contrary to its fearful reputation, it is
said in the Chinese zodiac that the
snake possesses great wisdom. Of
the 12 astrological animals, the slithering
reptile is also known to be the most refined
and collected. These ancient Chinese philosophies
have this year become a strong source
of inspiration for many luxury watchmakers.
In welcoming the Year of the Snake this
month, watch brands have rolled out several
timepieces in which the character, form and
beauty of the snake is at the core of the watch
design.
Like other occasions worth commemorating,
the lunar new year has also provided
brands the perfect opportunity to create
statement pieces in limited numbers. Vacheron
Constantin’s Métiers d’art collection,
for example, has this year launched
The Legend of Chinese Zodiac
series, starting with two models
inspired by the Year of the Snake
with a limited production run of
only 12 each.
These limited editions
feature an engraved snake
in the centre of the face
that not only conforms
with traditional Chinese
iconography but adds elegance
to the piece. The visual
appeal of the gold-enamelled
dial is enhanced thanks to the
“grand feu” technique, characterized
by firing the enamel at a
high temperature of up to 1,300
degrees Celsius. Adding to the overall
design, the watch features four
windows neatly arranged around
the central dial motif revealing the
hour, minute, second and the day.
Piaget
Dancer watch
The Swiss watchmaker,
which has a relationship
with China that dates
back to 1845, will continue
the Chinese Zodiac series
next year.
Piaget, meanwhile, offers a
range of watches that also celebrate
the lunar new year and
feature the 12 Chinese signs of the
zodiac. On its ultra-thin 38 mm
Dancer watch, the snake symbol
motif, set with a ruby eye and 73
brilliant-cut diamonds on its body,
gleams against a black onyx background.
In keeping with the watch’s
simple yet timeless style, the bezel
is delicately set with 36 brilliant-cut diamonds
and the bracelet is in white gold.
The brand has also recently
released another year of the snakeinspired
number. The Altiplano
38 mm enamel watch features an
image of a curling snake brought
to life by the cloisonné enamelling
technique, which consists
of creating hollows to form
a motif and marking out the
shape with gold wire. The
enamel is placed in each of
the hollows and fired. The dial
is further enhanced by a bezel set
with 78 brilliant-cut diamonds.
Bulgari’s Serpenti collection pays
homage to the coiling snake. The reptile
has long been an integral part of
the Italian jeweller’s designs, even
outside snake years. The collection
includes a quartz jewellery watch
featuring an 18-karat pink gold case
set with round diamonds and a black
Vacheron Constantin
Métiers d’art
The Legend of Chinese
Zodiac
sapphire dial. The pink
gold bracelet with black
enamel and decorative
diamonds double wraps
around the wrist in a serpentine
manner.
Some watchmakers are
already familiar with turning to
creatures of myth and legend for
inspiration. Just before the end of
2012, Richard Mille honoured the
Year of the Dragon by creating RM
057 Dragon-Jackie Chan, a limited
edition watch of 36 pieces in collaboration
with the action star. Available
in red gold or white gold, the timepiece
has a hand-engraved red or
white gold Chinese dragon entwined around
the movement.
This year, the brand has released a snake
version, the RM 026 Tourbillon, which is
inspired by its not-so-feminine ladies’ watch,
the RM 019 Tourbillon.
The RM 026 is adorned with a ruby-anddiamond-encrusted
white gold snake and an
emerald-and-diamond encrusted white gold
snake with a coral tongue. Both snakes writhe
within the manual-winding tourbillon movement
while helping to hold the movement
intact. With plates featuring onyx and highgrade
titanium finishing, the femininity of the
glittering snakes blends with robust sophistication.
It is all housed within a tonneaushaped
case set with 18-karat white gold
gems. The watch also sports a power reserve
of 48 hours and torque limitation to prevent
accidental overwinding.
With the intricate detail and craftsmanship
that goes into creating these timepieces,
both the usually wicked creature and watch
itself are transformed into works of art.
February 2013 59

Beware of emails beginning “Dear”
followed by a big space, followed
by your name, followed by another
space, followed by a comma. It means you’ve
been mail merged.
I wrote 73 emails once, all saying almost
the same thing. It took a whole day. That’s because
I have a disease called mail merge fear.
Many people have this disease. While there
are many frightening things about computers
(such as the error messages which say:
“Windows has detected that your keyboard
is unresponsive. Press any key to continue”),
mail merge can be the scariest of all.
It’s a program designed to personally address
a letter or email to everyone on your
list with a single click. But every time I’ve
done it, something’s gone horribly wrong. I
can tell because I get 50 instant replies saying:
“Er, I think your computer has a virus.”
But I must admit that despite the stress involved,
the curious thing is that both systems
(getting it right and screwing it up) work
equally well at getting people to my book
launches or whatever.
Still, mail merge is a risky tool for big
firms. Case in point: Given the restrictions on
advertising, a group of financial professionals
decided to grow their business by sending
individually addressed letters to a list of bluechip
companies. Of course, this sort of marketing
generally has a low level of response,
so an expensive consultant was hired to prepare
a long list of prospects.
The firm took the list and roped in an intern
to do the tedious bit: run the mail merge
operation, print the letters and stuff the en-
60 February 2013
Let’s get fiscal
Get your daily dose of Nury’s humour at www.mrjam.org
Mail merge sales surge
Misaddressed letters can grow your
business, says Nury Vittachi
velopes. The youngster clicked the box on the
Excel spreadsheet to sort the addresses into
alphabetical order. But he’d only highlighted
one column. So all the names changed positions,
but the addresses didn’t. He then sent
out hundreds of letters, each one bearing one
company’s name but a completely different
company’s address. Disaster loomed.
Let me just take a break from this thrilling
tale to highlight a side issue. You might think
that the intern was not left-brained. Magazine
quizzes tend to divide people into those
who are good at numbers, who they call leftbrained,
and those who are good at creative
thinking, referred to as right-brained.
Accountants have to be good at both sides
at once. For proof of this, consider the three
trainee auditors who took a break from statistics
exam revision to do some archery. The
first shot his arrow 10 cm left of the bull’s
eye. The second shot his arrow 10 cm right
of the bull’s eye. The third put down his bow
and said: “Averaging out the scores, I’d say
we were bang on target.” See? Good at numbers
AND creative.
But back to our mail merge tale (apparently
a true story). The company that sent
out the letter received a vast number of replies.
It was by far the most successful junk
mail, er, I mean direct marketing campaign
they had ever run.
CFO recipients could not resist taking a
peek at what they thought was private correspondence
intended for different corporations.
People in suits are nosy. So most of the
targets actually read the marketing material
and new business developed as a result.
“ It’s a program
designed to
personally address
a letter or email to
everyone on your
list with a single
click. But every
time I’ve done it,
something’s gone
horribly wrong.”
I’m not exactly sure what the moral of
this tale is. It’s not exactly “think outside
the box.” It’s more like: “The Lord moves in
mysterious ways his wonders to perform.”
Or even, “If you’re going to screw up, screw
up big time and cross your fingers that something
unexpectedly good will result.”
I’ve never seen this advice in any business
book. But it works for me. And if you
get an email from me addressed to someone
you’ve never heard of, come to my book
launch anyway.
Nury Vittachi is a bestselling author, columnist, lecturer and
TV host. He wrote the Institute’s first two storybooks, May
Moon and the Secrets of the CPAs and May Moon Rescues the
World Economy. A third, May Moon’s Book of Choices, was
published in 2012.