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What inspired you to start your own practice? Seven years in my training firm (Garland McDonald) cultivated my love for practice. After a brief spell in the motor trade and another year in lending with the state bank ICC, I decided to make a move. With no clients things could only improve. I relished being master of my own destiny and wanted to offer clients top class service. What are your goals for the next five years, professionally? I have committed to working as a consultant with McInerney Saunders providing business advisory services to their clients. Typically I'll be dealing with growth and profit, business succession and devising appropriate management structures for business going through change. I also act as an external influence at board meetings of family-owned businesses and hold non-executive directorships for foreign businesses with subsidiary operations in Ireland. My goal is to develop a portfolio of business advisory engagements and non-executive directorships that allows me to add value to these clients within my reduced work time.   What are your goals for the next five years, personally? I plan to spend more time with my wife Susan who has, unselfishly, given me the time to devote to my career to date. And, after my busy year as captain at the Sutton Golf Club, I plan to spend more time travelling in Ireland with Susan to see more of this wonderful country and its magnificent golf courses. What has been the defining moment of your career? I believe that there are events that propel one into action. The single market propelled me into action to establish professional relationships with accounting firms within Europe. We became an international associate for the UK200 Group of Chartered Accountants and this in turn led us to membership in IAPA International. This was an important part of our firm's development. Our response to the financial crash saw us as one of sixteen firms on the NAMA insolvency panel. Insolvency work gained on the back of that helped us cope with the loss of other advisory work that dried up in the wake of the crisis. Responding to challenges helped us to grow and develop. What do you do to relax? I play golf but I'm not sure that this is relaxing! It is a different challenge, one that I enjoy but I feel I'm always 'working' at my game. I really enjoy taking time out for coffee and a chat, meeting Susan for lunch and tipping about without having to do anything. Mostly, however, I enjoy being busy! What do you think makes a great managing partner? With the benefit of hindsight I would say someone who: Loves whet they do and leads by example; Inspires others by their work commitment  and standards; Listens to others; Is committed to making continuous improvement in what the firm does; Will tackle difficult situations; Does what they say they will do;  Accepts responsibility when something goes wrong; Challenges others to achieve higher levels of personal and professional performance; and Delegates effectively and grows their team's capabilities.   

May 20, 2017
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During his recent visit to Ireland, EU Chief Negotiator Michel Barnier took the opportunity to ask the Irish for ideas as to how to manage the Irish border, for customs purposes, after Brexit.  It has been accepted, according to the statements of the relevant political authorities, that there will be no “borders of the past” (Theresa May) or no “visible hard border” (Irish Government’s position paper) and that the negotiations will have the “aim of avoiding a hard border” (EU’s negotiating position). 80% of customs duties currently collected by Irish Revenue are sent to Brussels. This is a major differentiating point from, say, income tax or corporation tax where all the tax collected by Revenue remains with the Irish Exchequer. However, if it is the case that a national revenue authority leaves customs duties uncollected, the national exchequer can be, according to EU law, placed on the hook to pay Brussels the value of the uncollected customs tax. It’s rather like the PAYE system where an employer collects income tax/social insurance payments on behalf of Revenue and, if the employer makes a mistake, they can be made liable.  As can be seen from the foregoing, there is a yawning gap between political aspirations and legal obligations. The EU’s negotiating position envisages that gap being filled with “flexible and imaginative solutions”. So here goes… In Princeton University, in Princeton, New Jersey, exams are not supervised. Instead, each student writes the following on his/her exam paper: “I pledge my honor that I have not violated the honor code during this examination.” The Irish border is c. 500km in length and there are c. 300 crossing points. While Princeton University has voluntarily chosen to do away with invigilators in each exam hall, it is the case that customs posts cannot be stationed at each crossing point on the Irish border. Therefore, there seems little option but to insist that each trader, instead, complies with the tax equivalent of a honour code, backed up with the making of returns, record keeping requirements, cross checking, intelligence, audits and appropriate sanctions for breaking the rules. This is the usual system for most taxes.  In the modern era, the concept of Stazi-like, static customs posts along the Irish border would be – compared to the cost of same – a waste of resources in circumstances where the committed smuggler would be in a position to utilise any one of several hundred other, unmanned, Checkpoint Cathals to get their goods from A to B. Every Irish person who has ever gotten off a plane at Dublin airport which originated outside the EU is familiar with the customs equivalent of the Princeton honor code. Each time a person walks through the ‘Nothing to Declare’ channel at the airport, he/she makes (legally) a declaration that, having regard to the thousands of pages of EU customs law, they are not a smuggler. Indeed, when a person gets off any international flight at the airport, the person is also, legally, making a declaration in respect of excisable goods (e.g. cigarettes and alcohol). The Irish and UK Revenue authorities work together to combat cross-border VAT and excise duty evasion. There is no reason (with appropriate and minor changes to EU Customs law together with information sharing protocols, as already takes place on the Sweden/Norway Border) why such co-operation cannot continue in the field of customs and so that Ireland’s legal obligations to Brussels to detect customs evasion can be married with the widespread political will for a soft border.  It’s not for this author to suggest likely candidates for Revenue customs scrutiny. However, it might be the case that a particular eye might need to be kept on the newly incorporated (and, hopefully, not aptly named) “The Brexit Smuggling Company Ltd” (CRO No. 601040, created on 27th March 2017) whose registered office is situated in Cork city. Up the Rebels.  Eoin O’Shea FCA is a practising barrister, specialising in commercial and tax law.

May 20, 2017
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The International Accounting Standards Board (IASB) has issued IFRS 17 Insurance Contracts. This new international standard is meant to help investors better understand insurers’ risk exposure, profitability and financial position. IFRS 17 replaces IFRS 4, which was brought in as an interim Standard in 2004. IFRS 4 has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches. As a consequence, it is difficult for investors to compare and contrast the financial performance of otherwise similar companies. The Financial Stability Board noted in September 2015 the importance of the Board completing the project to replace IFRS 4 with a new Standard. IASB says the IFRS 17 solves the comparison problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner. Insurance obligations will be accounted for using current values instead of historical cost. This will be updated regularly, providing more useful information to users of financial statements. Hans Hoogervorst, IASB Chairman, “The insurance industry plays a vital role in the global economy; high-quality information to market participants on how insurers perform financially is therefore extremely important. IFRS 17 replaces the current myriad of accounting approaches with a single approach that will provide investors and others with comparable and updated information.” IFRS 17 has an effective date of 1 January 2021 but companies can apply it earlier.

May 20, 2017
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The global ransomware cyber-attack on 12 May affected at least 250,000 computers across circa 150 countries by exploiting known vulnerabilities in older versions of Microsoft Windows operating systems. The fact that the attackers targeted mostly hospitals and government agencies may bring some misplaced comfort to the owners of Irish SMEs. The cyber-criminals took aim at large public entities so they clearly have no interest in the operations of mid-sized, Irish entities, right? Wrong. If cybercrime is a new family of crime, then ransomware is the latest terrifying addition to the clan. Barracuda, a leading technology security provider, see ransomware as the number one IT security challenge facing organisations in 2017. In real terms, the reported incidence of ransomware attacks increased by approximately 300% between 2015 and 2016. So, what exactly is ransomware? Put simply, it is a subset of malware which the criminals use to locate and encrypt your most critical data. They then offer to provide a key to unlock your data if a ransom is paid within a specified time frame. It’s a very simple business model. The FBI has indicated that over $200 million was paid in such ransoms in Q1 of 2016 alone, and this is probably only a fraction of a larger sum due to the understandable under-reporting of the crime. In an age where business is becoming increasingly dependent on technology, the likely disruption to customers, the potential financial cost, the possible reputational damage and the regulatory ramifications of a potential data breach (GDPR is on its way!) arising from such an attack has sparked a significant increase in information security spend by many organisations as they seek to defend themselves in the face of ever increasing cybercrime. Hence, we are locked in a new race where resourceful public and private entities try to stay one step ahead of the faceless cybercriminals who reinvest the ransoms paid to stage their next attack. In such a scenario, small and medium businesses who do not have the technical or financial resources to protect themselves, as effectively as their larger peers, become an easy, accessible target for those engaged in what is the scalable, profitable and borderless ransomware business. So, how does an Irish SME protect itself from becoming the next victim of ransomware? Here’s an eight-step checklist which SMEs can adopt to mitigate the risks posed by cybercrime: Keep software updated, since updates often include security patches. Last’s week’s attack, in common with almost all such instances, exploited known vulnerabilities; Educate all staff, on a recurring basis, regarding the risks and how to protect themselves and the business. Many cybercrimes are predicated on anticipating or influencing user behaviour; Force the use of strong passwords, which are regularly updated, for all applications, not just key applications such as banking or invoicing; Use up-to-date security solutions including anti-virus, firewalls, intrusion detection, and threat detection. Figures published by Osterman Research Inc. show that three sources combine to account for some 83% of all ransomware malware entering organisations being email (31%), email attachments (28%) and websites/web applications excluding email (24%); Never click on links to banking sites in emails or texts. If in doubt, call the bank directly; Treat mobile devices the same way you would treat computers; they are equally, if not more, vulnerable to attack; Ensure your files are backed up regularly and reliably. You may lose data at any time not only as a result of crime; and Get professional, external advice to improve your security. Conducting a risk assessment is a sensible first step. You cannot eradicate the risk of falling foul of a cyber attack but let’s all work to make it more difficult for the bad guys. Terry McAdam FCA is the Consulting Partner in RSM Ireland.

May 20, 2017
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While global fintech investment decreased from €3.8 billion in Q4’16 to €2.8 billion in Q4’17, fintech investment in Europe grew in the first quarter of 2017 with €806 million invested across 89 deals, according to the latest quarterly report on fintech investment from KPMG. The global report, published in over 152 countries, says Ireland is gaining prominence internationally with numerous initiatives focused on showcasing the country as an alternative to London. In terms of volume, venture financing is now seeming to oscillate around early 2014 or full-year 2013 levels, having fallen from the peaks of 2015. VC investment, however, remains on the historically high end at €2 billion. Fintech venture activity in Europe has fluctuated at a historically higher level for several quarters now, yet thanks to several huge rounds, Q1’17’s total of capital invested soared to €548 million, the highest tally in years.   Anna Scally, partner at KPMG said, “The beginning of 2017 saw a number of mature fintech companies announce expansion plans here, including the client lifecycle management company, Fenego. Ireland has also successfully attracted a number of fintechs to set up regional offices here, including Kabbage, and we hope to see further growth as Ireland continues to market its ability to be a bridge to both the UK and Europe.   In addition, the deadline for implementing Payment Services Directive 2 (PSD2) is now fast approaching and as we move through 2017, new fintech business models will almost certainly evolve to make the most of open data and to capitalise on new opportunities." You can read KPMG’s full report here.

May 20, 2017
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The FRC has issued a paper inviting stakeholder comments on proposed revisions to Practice Note 11: The audit of charities in the United Kingdom. The Practice Note has been revised to reflect the updated regulatory landscape, the implementation of FRS 102 and a new Charities SORP, and the implementation of revised ISAs (UK) in 2016.  Charities have been the subject of extensive press, public and Parliamentary interest recently. The FRC says this revision of the Practice Note seeks to incorporate "lessons learned", particularly with respect to going concern and the auditor’s responsibility to report to charity regulators. The changes are summarised in the Invitation to Comment document. The FRC says the proposed changes will help ensure that the Practice Note will continue to support the delivery of high quality audit for charities. Subject to stakeholder comments, the FRC will issue a final version of the revised Practice Note later in 2017. The FRC welcomes comments on all aspects of the revised Practice Note by 5pm, Friday, 25 August 2017. Comments are invited in writing and should be sent to Kate Acott at aat@frc.org.uk. The changes are summarised in the Invitation to Comment document and you can read Practice Note 11: The audit of charities in the United Kingdom here.

May 20, 2017