Maria McHugh shares how she set boundaries, shed the notion that she “can do it all”, and that achieving a successful career while prioritising family is possible with the right mindset and support Growing up, I had a keen interest in business and enterprise. Because of this, I completed a BSc in Finance at University College Cork, and, after considering career options, I felt that becoming a Chartered Accountant was the best fit for me and a good start to my business career.  This, however, wasn’t without its challenges. Coming back after a break Like many women, I had to make a decision about having children and consider how my career would be impacted.  Between 2014 and 2021, my husband and I had three children, and during that time, we decided that I would be a full-time stay-at-home mum because of a lack of childcare availability.  This unplanned, seven-year break in my career had a much bigger impact on me mentally than I ever would have thought. I felt that I had lost my professional self. I didn’t realise how important that identity was to me.  I watched as my peers’ careers progressed and felt left behind.  After seven years at home, I started to consider what returning to work would look like; frankly, it was terrifying.  I suffered from post-natal depression after my second baby, and it left me with low confidence and self-belief. Thankfully, earlier in my career, I met Karin Lanigan in Member Services at Chartered Accountants Ireland, and I always remembered her openness and honesty.  Personal priorities While I wanted my career back on track, it was also important that I continue to be available for my children. I lost my mum at 13 years old, so it has always been especially important to me to be at home for my children. I had to consider what type of professional role I wanted and how to balance my work and home life.  I felt passionate about helping start-ups, sole traders and being involved in local enterprises. Having completed the Chartered Accountants Ireland Diploma in Tax in 2018, opening my accountancy and tax practice seemed the best fit for me and the family.  I was excited by the prospect, but I was also incredibly overwhelmed, daunted, and the self-doubt and fear were crippling.  I had three small children, was moving from Dublin back to my native Dungarvan, and was now opening my own practice. It seemed insurmountable. Karin guided me in breaking the tasks into manageable steps and helped me see that this was achievable. Professional Standards and Practice Consulting were also very supportive, and I was delighted that so much support was offered by Chartered Accountants Ireland.  While on my journey back into the workplace, I was really heartened by all the supports that were available through the Institute, and I hope these only grow and extend to more women.  In some ways, I think women put themselves under too much pressure with the social narrative that “we can do it all”. I think we are our own worst critics, and we can each have an expectation for ourselves that we should be doing everything, and when we don’t, we think we are failing.   This perception is false and needs to change. It is OK to choose to stay at home with young children, and that  decision should not feel detrimental to our career or be something we need to explain or justify.  For me, it is all about balance, and this is personal to every family. We are all just doing our best to have a career in whatever way possible to suit our family life.  Setting boundaries Since I started my business, I have always had the mindset that I am going at my own pace.  The aim of having my own practice was that I could balance both my career and my family life but I recognised early on that working in my practice full time was just not going to work for my family. As a result, I learned how to say no. I created boundaries around my work schedule, especially during school holidays, and I don’t apologise  for it.  I sometimes think that women feel they need to be singularly career-orientated and driven to succeed to be taken seriously or that admitting the kids come first is a weakness. I don’t agree at all.  At the start of the summer, I announced on social media that I was taking a step back from work for the school summer holidays. The support from peers and clients was fantastic. People told me that my being upfront about the summer break was refreshing and inspired other parents to do the same.  It’s like anything – if you don’t see it being done, you don’t realise you can do it. This doesn’t mean that I am not career-driven or don’t have aspirations for my own business. But this is a marathon, not a sprint, and I will do it in my own time. Building your tribe Networking is vital to sole practitioners for promoting themselves and, more importantly, building solid support. When I started my practice, I had no colleagues to bounce ideas off or to ask questions. I feel strongly that this kind of support is important for my personal development, so I reached out to a fellow mum in practice from my PwC days and asked how she would feel about coming together to set up a small group.  We now have a core group of four accountants (also mums) in practice. We support each other, answer technical questions and get opinions on issues we come across. This group has been vital to growing my confidence and has shown me that there are others also dealing with the same problems. In my experience, the most important qualities for women in business are self-belief and self-confidence.  I am a great champion of women and our abilities but I have struggled with self-confidence in the last few years. When left unchecked, this self-doubt can be very limiting.  I would love to see the topic of low self-confidence as ways to manage it spoken about more. My self-confidence has grown over time, but it is something I work on and still struggle with to this day.  The more it is discussed, the more women will realise, like me, that they are not alone in this mental battle.  I am also very lucky to be a member of the 2023 Chamber of the Year, Dungarvan and West Waterford Chamber. Through this membership I have found another group of like-minded women on their own business journey. We support each other, attend events together and help each other when we can.  Finding your tribe in business is so important and having that sense of community and support from different groups has had a positive impact on my own business and personal development. Maria McHugh is Founder Owner of McHugh Accounting and Consultancy

Recent European heatwaves have highlighted the impact climate change has on society and the economy. Susan Rossney explores the challenges facing Irish businesses when taking steps to tackle the crisis Recent severe heatwaves in continental Europe have shown how the effects of global warming are coming ever closer to home. Forced migration, drought, forest fires and biodiversity loss are some of the many ways climate change will impact Irish society.  Its impact on the economy will be acute, affecting everything from the health and wellness of employees to the cost of raw materials, scarcity of resources and supply chain disruption.  Ireland and climate change Climate change poses risks to humans, nature and Ireland as a nation.  Ireland is legally bound to meet ambitious national and international climate targets. According to the Climate Change Advisory Council (CCAC), an independent advisory body, Ireland will not meet the climate targets it has set for itself in the first and second carbon budget periods. The Environmental Protection Agency’s (EPA) provisional estimates on 2022 greenhouse gas emissions show that Ireland already used 47 percent of the carbon budget for 2021–2025 in the past two years.  An annual reduction of 12.4 percent is now required for each of the remaining years if Ireland is to stay within budget.  However, as emissions fell only 1.9 percent in 2022, this has been described as “extremely challenging” by the EPA.  It is clear that action is required across all sectors of the economy and society, including: Mitigation: reducing activity that causes climate change, like burning fossil fuels (coal, oil and gas); and Adaptation: making changes to deal with the effects of climate change, from operational changes to cope with rising summer temperatures or winter flooding to factoring in the risk of developing stranded assets and increased carbon tax liabilities. Ireland’s perception of climate change According to Climate Change in the Irish Mind, EPA research conducted in 2021, most Irish citizens share a desire for action on the climate crisis.  However, other EPA research has found that our emissions of greenhouse gases (GHGs) continue to rise.  Environmental Indicators Ireland 2022, published by the Central Statistics Office (CSO), shows that Ireland’s 2022 emissions were 11 percent higher than in 1990.  Enterprises contributed an estimated 12.7 percent to Ireland’s overall emissions in 2018, according to the Climate Action Plan 2023. Although this is less than the contributions of other sectors, there remains a need for Ireland’s enterprises to take action to reduce their emissions.  However, a 2022 national survey of 380 SMEs and larger enterprises across industry and service sectors by Microsoft and University College Cork found that Irish businesses are underprepared to make the necessary changes to transition to a net zero future. According to the study, 86 percent have no commitments or targets to decarbonise.  Barriers to action  In the face of evidence of climate change – and Ireland’s willingness to take action – what is preventing Irish businesses from responding to the crisis?  As an issue, climate change is complicated, abstract and overwhelming. Multiple interdependent factors cause it, and it is nearly impossible to avoid contributing to it in our daily lives. Buying products, driving a car or taking a flight for a foreign family holiday (full disclosure: I’m just back from one) all add to the overall problem. The solutions to the climate crisis are also interdependent and complicated. The positive changes we can make as individuals can feel insignificant, especially compared with large countries’ continued pollution.  The European Commission’s Annual Report on European SMEs 2021/22 – SMEs and environmental sustainability identified access to finance, limited expertise and skills, and regulatory and administrative barriers among the challenges facing SMEs in particular. Businesses that want to take climate action often have limited time, cash flow, resources and support (both financial and non-financial) to take action.  Knowledge is also a barrier. Many professionals qualified at a time when climate change was not identified as a business risk. They now find themselves having to skill up mid-career in an area that is famous for changing frequently.  Finally, many citizens and businesses are still struggling with crises related to COVID-19, inflationary pressure, supply chain disruption and high energy costs. Staying afloat is a crisis in itself.  Firms, particularly SMEs, focusing on the practicalities of running a business, paying staff and grappling with cash flow and costs are more likely to see climate action as the responsibility of governments or, at the very least, large corporations rather than them.  On top of that, climate discussions are often politicised. They are regularly reduced to a ‘them vs us’ polarised debate in mainstream media rather than discussing how everyone can work together to deliver solutions.  Threats and opportunities  For businesses, climate change presents both threats and opportunities.  Threats The threats have been categorised as physical risks (both ‘acute’ and ‘chronic’) and transitional risks.  Opportunities  Taking action on the climate crisis enables businesses to restore lost ecosystems, improve air quality, community health and well-being, and avail of the opportunity to make a lasting positive impact. There are additional advantages to consider: Reduced costs – the Sustainable Energy Authority of Ireland (SEAI) estimates that the average SME can save up to 30 percent on its energy bill by becoming more energy efficient (improved heating and lighting, lower maintenance of electric vehicles, efficient water and materials management and using recycled materials with a lower climate impact all contribute to lower costs);  Reduced reliance on exposure to fluctuating oil and gas prices from switching from fossil fuels (coal, oil and gas) to renewable energy sources; Reduced exposure to carbon tax, which is increasing €7.50 per tonne to €100 per tonne in 2030; Access to grants, allowances and tax reliefs; Improved access to capital and finance from investors and lending looking to ‘green’ their portfolios; and A competitive edge in attracting talent, clients and customers. Steps to climate action Businesses looking to take action on the climate crisis can take several steps: Build your knowledge. There are many resources out there, several provided by the Government and Chartered Accountants Ireland. Begin measuring emissions with tools like the Government’s Climate Toolkit for Business.  Consider an internal energy audit to find ways of reducing your carbon footprint. SEAI maintains a list of registered energy auditors and offers SMEs a €2,000 voucher towards the audit cost. Consider setting up an internal environment and climate impact team to devise a decarbonisation plan.  See also the Sustainability Glossary in the Sustainability Centre of the Chartered Accountants Ireland website.  For more, see www.charteredaccountants.ie/sustainability-centre/sustainability-home Susan Rossney is Sustainability Officer at Chartered Accountants Ireland Reporting and climate change The Corporate Sustainability Reporting Directive (CSRD) is an EU Directive requiring certain companies to disclose information on sustainability-related impacts. It proposes significant changes to how entities report on their business’s environmental, social and governance (ESG) impacts. These changes will affect many enterprises – directly and indirectly.  Businesses ‘in scope’ of the CSRD are required to consider their supply chain when reporting on sustainability matters. This will mean that companies not in scope that form part of a supply chain may be asked to provide climate-related information by companies in scope. Small companies should prepare for this and have a mechanism to measure and disclose their carbon emissions. For more on the CSRD, see the Chartered Accountants Ireland Technical Hub. Dee Moran is Professional Accountancy Lead at Chartered Accountants Ireland  

Michael Diviney and Níall Fitzgerald explore the ethical challenges arising from artificial intelligence (AI), particularly ‘narrow’ AI, and highlight the importance of ethics and professional competence in its deployment Earlier this year, artificial intelligence (AI) industry leaders, leading researchers and influencers signed a succinct statement and warning: “Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.” Was this a publicity stunt? Well, probably not, as the generative AI ChatGPT was already the fastest-adopted application in history.  Was this an over-the-top, alarmist statement by a group possibly trying to steal a march on self-regulation of a rapidly emerging technology and growing industry?  Again, this is unlikely if one considers the warnings of pioneer thinkers like Nick Bostrom, Max Tegmark, Stephen Hawking and Astronomer Royal Martin Rees. They concur that there is an existential threat to humankind if human-level or ‘general’ AI is developed and the ‘singularity’ is reached when AI surpasses human intelligence.  Autonomous weapons and targeting are a clear risk, but more broadly, unless we can ensure that the goals of a future superintelligence are aligned and remain aligned with our goals, we may be considered superfluous and dispensable by that superintelligence.  As well as the extinction threat, general AI presents other potential ethical challenges.  For example, if AI attains subjective consciousness and is capable of suffering, does it then acquire rights? Do we have the right to interfere with these, including the right to attempt to switch it off and end its digital life?  Will AI become a legal entity and have property rights? After all, much of our economy is owned by companies, another form of artificial ‘person’. Ethical challenges from ‘narrow’ AI Until general AI is here, however – and there is informed scepticism about its possibility – the AI tools currently in use are weak or ‘narrow’ AI. They are designed to perform a specific task or a group of related tasks and rely on algorithms to process data on which they have been trained.  Narrow AI presents various ethical challenges:  Unfairness arising from bias and opacity (e.g. AI used in the initial screening of job candidates include a gender bias based on historical data – in the past more men were hired); The right to privacy (AI trained with data without the consent of the data subjects); Threats to physical safety (e.g. self-driving vehicles); Intellectual property and moral rights, plagiarism and passing-off issues in the use of generative AI like ChatGPT and Bard; and Threats to human dignity from the hollowing out of work and loss of purpose. Regulation vs. ethics Such issues arising from the use of AI, particularly related to personal data, mean that regulation is inevitable.  We can see this, for example, with the EU’s landmark AI Act, due to apply by the end of 2025, which aims to regulate AI’s potential to cause harm and to hold companies accountable for how their systems are used. However, as Professor Pat Barker explained at a recent Consultative Committee of Accountancy Bodies (CCAB) webinar, until such laws are in place, and in the absence of clear rules, ethics are required for deciding on the right way to use AI.  Even when the regulation is in place, there are likely to be cases and dilemmas that it has not anticipated or about which it is unclear. Legal compliance should not be assumed to have all the ethical issues covered, and as AI is evolving so quickly, new ethical issues and choices will inevitably emerge.  Ethics involves the application of a decision-making framework to a dilemma or choice about the right thing to do. While such a framework or philosophy can reflect one’s values, it must also be objective, considered, universalisable and not just based on an instinctual response or what may be expedient. Established ethics frameworks include: the consequentialist or utilitarian approach – in the case of AI, does it maximise benefits for the greatest number of people?; and the deontological approach, which is based on first principles, such as the inalienable rights of the individual (an underlying philosophy of the EU’s AI Act). (The Institute’s Ethics Quick Reference Guide, found on the charteredaccountants.ie website, outlines five steps to prepare for ethical dilemmas and decision-making.)  A practical approach While such philosophical approaches are effective for questions like “Should we do this?” and “Is it good for society”, as Reid Blackman argues in Harvard Business Review, businesses and professionals may need a more practical approach, asking: “Given that we are going to [use AI], how can we do it without making ourselves vulnerable to ethical risks?”  Clear protocols, policies, due diligence and an emphasis on ethical risk management and mitigation are required, for example responsible AI clauses in agreements with suppliers. In this respect, accountants have an arguably competitive advantage in being members of a profession; they can access and apply an existing ethical framework, which is evolving and adapting as the technology, its opportunities and challenges change.  The Code of Ethics The International Ethics Standards Board for Accountants (IESBA) recently revised the Code of Ethics for Professional Accountants (Code) to reflect the impact of technology, including AI, on the profession. The Chartered Accountants Ireland Code of Ethics will ultimately reflect these revisions.  IESBA has identified the two types of AI likely to have the most impact on the ethical behaviour of accountants:  Assisted intelligence or robotic process automation (RPA) in which machines carry out tasks previously done by humans, who continue to make decisions; and  Augmented intelligence, which involves collaboration between human and machine in decision-making. The revisions also include guidance on how accountants might address the risks presented by AI to ethical behaviour and decision-making in performing their role and responsibilities.  Professional competence and due care The Code requires an accountant to ensure they have an appropriate level of understanding relevant to their role and responsibilities and the work they undertake. The revisions acknowledge that the accountant’s role is evolving and that many of the activities they undertake can be impacted by AI.  The degree of competency required in relation to AI will be commensurate with the extent of an accountant’s use of and/or reliance on it. While programming AI may be beyond the competency of many accountants, they have the skill set to:  identify and articulate the problem the AI is being used to solve;  understand the type, source and integrity of the data required; and assess the utility and reasonableness of the output.  This makes accountants well placed to advise on aspects of the use of AI. The Code provides some examples of risks and considerations to be managed by professional accountants using AI, including: The data available might not be sufficient for the effective use of the AI tool. The accountant needs to consider the appropriateness of the source data (e.g. relevance, completeness and integrity) and other inputs, such as the decisions and assumptions being used as inputs by the AI. This includes identifying any underlying bias so that it can be addressed in final decision-making. The AI might not be appropriate for the purpose for which the organisation intends to use it. Is it the right tool for the job and designed for that particular purpose? Are users of the AI tool authorised and trained in its correct use within the organisation’s control framework? (One chief technology officer has suggested not only considering the capabilities of the AI tool but also its limitations to be better aware of the risks of something going wrong or where its use may not be appropriate.) The accountant may not have the ability, or have access to an expert with that ability, to understand and explain the AI and its appropriate use.  If the AI has been appropriately tested and evaluated for the purpose intended. The controls relating to the source data and the AI’s design, implementation and use, including user access. So, how does the accountant apply their skills and expertise in this context?  It is expected that accountants will use many of the established skills for which the profession is known to assess the input and interpret the output of an AI tool, including interpersonal, communication and organisational skills, but also technical knowledge relevant to the activity they are performing, whether it is an accounting, tax, auditing, compliance, strategic or operational business decision that is being made.  Data and confidentiality According to the Code, when an accountant receives or acquires confidential information, their duty of confidentiality begins. AI requires data, usually lots of it, with which it is trained. It also requires decisions by individuals in relation to how the AI should work (programming), when it should be used, how its use should be controlled, etc.  The use of confidential information with AI presents several confidentiality challenges for accountants. The Code includes several considerations for accountants in this regard, including: Obtaining authorisation from the source (e.g. clients or customers) for the use of confidential information, whether anonymised or otherwise, for purposes other than those for which it was provided. This includes whether the information can be used for training AI tools.  Considering controls to safeguard confidentiality, including anonymising data, encryption and access controls, and security policies to protect against data leaks.  Ensuring controls are in place for the coding and updating of the AI used in the organisation. Outdated code, bugs and irregular updates to the software can pose a security risk. Reviewing the security certification of the AI tool and ensuring it is up to date can offer some comfort.  Many data breaches result from human error, e.g. inputting confidential information into an open-access web-based application is a confidentiality breach if that information is saved, stored and later used by that application. Staff need to be trained in the correct use and purpose of AI applications and the safeguarding of confidential information. Dealing with complexity The Code acknowledges that technology, including AI, can help manage complexity.  AI tools can be particularly useful for performing complex analysis or financial modelling to inform decision-making or alerting the accountant to any developments or changes that require a re-assessment of a situation. In doing so, vast amounts of data are collected and used by AI, and the ability to check and verify the integrity of the data introduces another level of complexity.  The Code makes frequent reference to “relevancy” in relation to the analysis of information, scenarios, variables, relationships, etc., and highlights the importance of ensuring that data is relevant to the problem or issue being addressed. IESBA was mindful, when revising the Code, that there are various conceivable ways AI tools can be designed and developed to use and interpret data.  For example, objectivity can be challenged when faced with the complexity of divergent views supported by data, making it difficult to come to a decision. AI can present additional complexity for accountants, but the considerations set out in the Code are useful reminders of the essential skills necessary to manage complexity. Changing how we work As well as its hugely beneficial applications in, for example, healthcare and science, AI is proving to be transformative as a source of business value.  With a range of significant new tools launched daily, from personal effectiveness to analysis and process optimisation, AI is changing how we work. These are powerful tools, but with power comes responsibility. For the professional accountant, certain skills will be brought to the fore, including adaptability, change and risk management, and leadership amidst rapidly evolving work practices and business models. Accountants are well placed to provide these skills and support the responsible and ethical use of AI.  Rather than fearing being replaced by AI, accountants can prepare to meet expectations to provide added value and be at the helm of using AI tools for finance, management, strategic decision-making and other opportunities. Michael Diviney is Executive Head of Thought Leadership at Chartered Accountants Ireland Níall Fitzgerald is Head of Ethics and Governance at Chartered Accountants Ireland

Governments may opt for more quantitative easing to prevent global inflation from turning into a recession, writes Cormac Lucey Speaking about the Republic’s budgetary position in 1979, Charles Haughey famously declared that “as a community, we are living beyond our means”. But his remarks might just as well be applied today to Western world democracies.  An article in a June issue of The Economist proclaimed that “Fiscal policy in the rich world is mind-bogglingly reckless”. Global fiscal policy is unsuited to today’s economic circumstances. “High inflation and low unemployment mean the world needs tight policy, not loose,” it said.  Last month, the Department of Finance’s chief economist indicated that between 2019–2070, annual age-related expenditure is projected to increase from 21.4 to 31.5 percent of Irish national output. With a projected 2023 modified gross national income of €284 billion this year, that rise would cost €28.4 billion today. That’s over €10,000 annually for every person working, more than the budgetary damage done by the financial crash 15 years ago and roughly equal to one-third of total budgeted tax revenues this year.  The situation in the UK isn’t much better.  A report on “Fiscal Risks and Sustainability” from the Office for Budget Responsibility in July, projected an increase in primary spending between 2022–23 and 2072–73 of 8.6 percent of UK GDP. That’s equivalent to roughly £2.2 trillion in terms of today’s GDP, or around £6,000 annually per person working. Faced with inexorable spending pressures on one hand and political resistance to tax rises on the other, there is a structural risk that our political leaders will opt for greater borrowing as the way out.  The USA may be the forerunner in this regard.  It began running enormous budget deficits under President Trump even though the US economy was operating at near full capacity. It has continued this practice under President Biden. There has been no discernible political cost to be paid by either administration. And, as the issuer of the world’s largest reserve currency, it has seen precious little economic cost so far.  Fiscal dominance is shorthand for the fiscal needs of the central government dominating monetary policy set by central banks and occurs when central banks create fresh money (via quantitative easing) to prop up the prices of government debt securities and , thereby, contain the consequent interest rates.  Between 2009–2021, the share of their government’s issued debt held by central banks grew by about 15 percent in the USA and around 30 percent in the UK and the Eurozone. In essence, central banks were able to do something inflationary (create a lot of fresh money) because external circumstances were already very deflationary.  A justification can always be found: economies must be sustained through the financial crisis; we must not let a pandemic morph into a depression. The political cost was negligible. We can, therefore, expect more of the same in the future when fiscal push comes to monetary shove.  The constraint on fiscal dominance will not be rules or laws governing what is right or wrong but expedience: what can policymakers get away with?  The practical constraints will be financial market reactions and any inflationary effects of monetary loosening. But there may not be any noticeable market reaction: the Bank of Japan owns an estimated 45 percent of all Japanese government debt without any allergic market reaction.  The key question is whether inflationary pressures are stoked by aggressive fiscal dominance. The return of inflation explains why monetary restriction has replaced monetary exuberance.  But once inflation is out of the way, expect fiscal dominance (and more money-printing) to resume. That would be bullish for real assets (such as property and commodities) and bearish for paper assets.   Cormac Lucey is an economic commentator and lecturer at Chartered Accountants Ireland

Accountancy Ireland sits down with Carol Phelan, CFO of Dalata Hotel Group. From her journey at one of the Big Four to private equity, Phelan shares her insights into the business side of the hospitality industry and Dalata’s people-centric approach to success A lifelong interest in business took Carol Phelan on a career path that has seen her work in a Big Four firm, an Irish private equity house and, ultimately, become CFO of Dalata Hotel Group – Ireland’s largest hotel operator. Speaking to Accountancy Ireland  in Dalata’s new state-of-the-art headquarters in Sandyford in south Dublin, Phelan explains how she grew up on a farm in County Laois and was always interested in business.   “At school, I gravitated towards business success stories, particularly Irish ones. I was always strong with numbers – they made sense to me, but it wasn’t just about balancing the books. It’s what people are doing with the business. I did a broad Business degree at the University of Limerick. I specialised in accounting and finance and did a Master’s in Accounting. I knew it was a qualification that would stand to me whatever I did.” Her undergraduate degree included an internship component, and in a forerunner of her future career, it took her to work in a hotel in France for nine months. “I got to work with numbers in a real business and found I could bring some skill to that.” After college, she joined KPMG and qualified as a Chartered Accountant.  “I wanted to develop my skills and build my professional and business network,” she says. “I worked in the financial services and transaction services divisions. That allowed me to work with companies doing deals and making strategic acquisitions. I was able to go into businesses of different sizes in various sectors and work with leading advisors. I enjoyed my time with KPMG.” She also learned something about herself. “I realised I didn’t want to be an advisor. I wanted to be the one making the decisions and living with them.” Moving on from the Big Four Phelan joined private equity house Ion Equity in 2007, just before the global financial crash hit. It could hardly have been a more challenging time for that sector.  “It took me out of my comfort zone,” she says with no little understatement. “It was about going in, putting deals together, and putting money behind them. It was also about helping finance teams in investee companies deal with the challenges presented by the crash.” Given her qualifications and experience, she was often asked why she didn’t go to one of the major international private equity firms. “I wanted to be where the leadership was,” she explains. “I wanted to be close to the decisions. No matter how small a role I had, I wanted to be part of the decision making.” Her next move saw her join Dalata in 2014.  “I wanted to get into the finance function of a large Irish company,” Phelan explains. “The Dalata opportunity came up, and it ticked all the boxes. The people leading the company shared my values – ambition, a desire to grow and challenge oneself, and always wanting to do better. Dalata has that in spades.  “The company has always been led by people very concerned about building a business that works for everyone and not just about generating higher numbers and profits. They want a business that creates opportunities for everybody. I knew the people in Dalata before I joined, so I knew it was all true.” The company was on the cusp of significant change when she joined. “It was just after the IPO. All the structures had to be built to accommodate it. I was able to use my skills for that. It was great to have that challenge.” A people-centric business The culture of the business is very important to Phelan.  “Hospitality is a very people-centric business. It’s about more than numbers and the bottom line. That sits well with me and my background. Dalata has always said it wants people with ambition: ambition to grow and develop themselves but to bring others with them, as well.” Dalata places great store by training and development, with over 113,00 training courses completed by its staff in 2022.  “The company is growing and ambitious. I can’t tell you the opportunities that will exist in three years, but we will put everything behind people who want to grow and develop.  “People who joined the company in 2015 are now working in roles that didn’t exist back then. We give people support to get the experience and skills and take on those roles. We opened seven hotels in 2022, and the majority of the leadership teams in them is made up of people developed in Dalata. That creates opportunities for those following behind them.”  Career mobility is also important. “You can join the finance team here, but who knows where you will end up. We have operations people who ended up in finance and operations people who started in finance. You can’t pigeonhole people. As a major plc, we also have all the finance strands here so someone can build a full suite of experience.” There is a need to look beyond functional skills, she adds. “You can develop skills for a role in finance, but it has never been just about the numbers. I can tell by sitting across the table from someone if targets will be met without looking at numbers on a page. We all have that ability if we work on it.” The people-centric approach delivers real business benefits. “We see ourselves as an employer of choice. That’s very important in the hospitality industry. We are not as challenged as others in the industry regarding recruitment. We are now back at 2019 job vacancy rates. We will always have several vacancies. That’s the nature of the business.” “The only way was up” She was appointed Group CFO on 1 July 2021. “The only way was up, having been shut down for most of the previous two years [during the pandemic],” she says with a smile. “It was easy coming in after that. Anyone can look like a hero in those circumstances.” Looking back on COVID-19, she believes it showed Dalata at its best.  “We never panicked. We stood back and said it would resolve itself. That was based on a genuine belief that science would get there. That was our underlying expectation, and we had to be ready when we came out the other side. We looked at it through a longer lens. Everyone stepped in to do whatever needed to be done. Our bottom line was to protect our people. They represent our biggest asset. The accounting standards haven’t figured out a way to measure the strategic value of people yet, but we know what it is.” The aim was to keep people employed during COVID-19.  “Our focus was on everyone doing the right things in the right ways to keep people on. That’s the Dalata way of doing things. We ensured all our people had full access to the Dalata Online Academy. Even at home, they could continue to grow and develop.” The operations software platform also proved its worth. “We use it in the hotels for people management, rostering, onboarding, as a communications tool, and for pushing out video updates,” Phelan explains. “We have a lot of young people in the industry, and the ability to access information over the phone is so important to them, particularly when they can’t get together physically. We ensured people remained connected to the business even when apart.” That approach was extended to customers, landlords, suppliers, bankers and other stakeholders.  “We gave refunds to customers when they asked for them. We never even considered not paying rent. All our decisions were taken with a view to the long term. That will stand to us in the future.” Growth Having delivered record profits in 2022, there will be no let-up in the growth and development of Dalata Hotel Group, Phelan says.  “We now have 52 hotels in Ireland, the UK and continental Europe, and another five in the pipeline in London, Brighton, Manchester and Dublin. Forty percent of our rooms are in Dublin, 40 percent in the UK, and the balance is in regional Ireland and continental Europe.  “We have great ambitions for continental Europe, but our priority growth focus is the UK. There is a gap in the four-star hotel market, and we are in a great position to fill it. Dalata is a very ambitious company. The focus is always on what’s next. I love that attitude. But there is strong discipline. There will never be trophy assets in Dalata. Everything must make sense for the broader business and deliver a return for our shareholders.”  She concludes by pointing out that her own role reflects the core values of Dalata.  “I am an executive director and sit on the board as well as leading the finance team. I must be able to contribute to Dalata strategically, not just in my own expert area. Board members need to be able to challenge each other. We may approach it from slightly different angles, but it’s important to hear everyone’s views. That’s the Dalata culture overall. People are encouraged to bring their individuality to work. Everyone is encouraged to have a voice and to speak up. Who we are and where we’ve come from shapes that. We all bring different perspectives to the debate.”

Start-ups looking to grow have a range of options but carefully considering accounting standards is one way to reduce complexity, write Wuraola Raheem and Paddy McGhee For many Irish high-growth start-ups, the early years are consumed by the cash burn of developing a new product, followed by the cost of growing the market. The nuances of accounting standards are often a secondary consideration.  However, not being aware of some of the accounting standards considerations can have a negative impact on investor confidence and regulatory compliance. Here are nine areas of complexity that often arise for high-growth companies at the start of their journey. IFRS or FRS 102? If an organisation has an international shareholder base and international customers and suppliers, should it use IFRS?  While IFRS is a complete standard recognised globally, its measurement and valuation criteria, together with its disclosure requirements, are burdensome for a small company.  FRS 102 was written with small companies in mind, and in most cases, for a growing company, it will work as well as IFRS.  The decision to move to IFRS will be better taken when the company matures. For example, if a firm acquires other businesses along the way, the requirements for assessing the purchase price allocation are more onerous under IFRS than FRS 102.  Similarly, disclosure requirements are more onerous under IFRS. Revenue recognition There are very few modern businesses for which revenue recognition arises when the invoice is issued. Many companies provide multiple services and warranties, give a right of return or provide a service over a period of time or – increasingly in the tech sector – based on consumption.  This will give rise to the possibility of accrued revenue in which the service is provided in advance of billing or deferred revenue if billing has occurred, but the service or good has not been fully delivered. IFRS, US GAAP and FRS 102 are mainly consistent in their treatment of when revenue is recognised. Many growing companies enter into tailored contracts in order to make those first few sales often giving rise to additional free services or warranties that may lead to revenue deferrals.  Many other firms enter into agreements with large platform companies to sell their products or services, and the lines between marketing and delivery costs and net revenue can become blurred. Accounting for venture capital As companies begin to raise equity, the type of financing used is often not ordinary shares. Common forms of investing include: convertible loan notes; preferential loan notes; preference shares; and shares with a liquidation preference. Today, few investments are in the form of a loan or equity as investors look to protect their investment by having some form of preference. There is often a level of negotiation in these, so funding instruments will almost always have some individual nuances. The impact is that some convertible instruments include a hybrid instrument that needs to be assessed or, in other instances, while something may be called a ‘share’, if it has a fixed return, it may be accounted for as debt. Many companies also overlook the fact that the direct costs of raising equity are recognised in equity, or direct costs relating to debt are capitalised and amortised using an effective interest rate method. It’s not to say that many costs leading up to a finance raise are expensed, such as due diligence fees. Share-based payments There has been much valid criticism in Ireland that share-based remuneration has not received more tax concessions. For a young company, a popular route to attract staff is to offer share options, reducing the cash outlay.  In theory, share options are provided in lieu of a cash salary. Because of this, accounting standards require the intrinsic value of share options at the date they are issued to be recognised as an expense over the service period. Depending on the perceived volatility of the shares and the rights attached to them, this can result in a sizeable non-cash charge to the income statement and one that often does not appear in management accounts. Investing in cloud infrastructure The treatment of expenditure linking a business to cloud-based software has recently been a hot topic for large companies.  The reason for this is that IFRS accounting standard setters recently reminded companies that where they invest in linkages to a cloud-based infrastructure, the related costs should be expensed rather than capitalised on the basis that the firms do not own or control the cloud-based software. This meant that several multi-million Euro enterprise resource planning (ERP) implementation projects were expensed rather than capitalised.  It is easy to see the frustration that some reporters faced as they will receive the benefit of those costs over several years. With many companies reliant on cloud-based infrastructure, it can be a shock to learn that not all the related costs meet the criteria for capitalisation. Capitalised development expenditure “Our enterprise value is €XX million so how come we cannot recognise that value on our balance sheet?” is a common question, followed by: “Given we have spent €XX million on product development, can we capitalise that?” Accounting standards are very detailed on what can be capitalised and what is expensed. Generally, costs relating to internally generated brands, start-up costs, training activities, research, advertising and internally generated goodwill are expensed. The one area in which companies may capitalise costs is where such costs relate to the development of a product or process that can be shown to bring future economic benefit.  There are, however, concise rules on what may be capitalised. While costs can be, it does not mean such costs meet the criteria for claiming research and development (R&D) tax credits.  While the costs can be closely aligned, they are not mutually inclusive. International expansion Given the size of Ireland’s indigenous market, most companies look to international expansion early on. Initially, companies need to assess how they will expand: Do they use foreign subsidiaries to make sales? Is a foreign subsidiary used for providing services to the parent company in sales and marketing, local maintenance or R&D? Regardless of the role played by the foreign subsidiary, from a tax perspective, the share of the taxable profit each country will get will need to be determined. This is where the concept of transfer pricing comes in, and companies need to determine where the profit would reside if the various companies were unrelated. Increasingly with foreign expansion, companies have to deal with employee taxes for foreign employees or employees who move to a new market to help set up a presence. Consolidation requirement As companies grow, they reach a stage where there is a requirement to prepare consolidated statutory financial statements. At a basic level, if a company is defined as a small company under Irish law, it is not required to prepare consolidated accounts. The requirement for consolidated accounts kicks in when a company exceeds two of the following criteria two years in a row: Third-party turnover of €20 million; Gross assets of €10 million; and/or 250 employees. Given the relatively high-level criteria for employee numbers, companies generally meet the requirement when they reach the turnover limit. Other regulatory requirements Irish company law and accounting requirements are generally well legislated for, ensuring that small companies are not overly regulated.  Having reached the consolidation requirement at €20 million turnover, a private company’s next legislative bar is the requirement to have a directors’ compliance statement if it reaches €25 million turnover. Having reached a consolidated turnover of €50 million, a company is required to put an audit committee in place or explain why one is not required. Wuraola Raheem is Audit Manager in Consumer Technology Business at Deloitte Paddy McGhee is Audit Manager in Consumer Technology Business at Deloitte