In Brief

Bollywood bonus

KPMG in India is leading an initiative to set up a venture capital fund worth between $40m to $50m to save Bollywood from the final curtain.

The Big Four firm is working towards bringing together the leading film personalities, corporate bodies, financial institutions, prospective producers and distributors to create a fund exclusively for the Bollywood industry.

There's nothing like making a song and dance about finance.

Audit rotation proposals tightened

The engagement period for audit partners should be cut from seven years to five, the ICAEW agreed at its council meeting in early October. While the council voted in favour of adopting EU proposals on auditor independence as best practice from 1 November 2002, it bowed to pressure from the government on the issue of rotation. The EU recommendation allows a rotation period of seven years for audit engagement partners and key audit principals, with non-return period of two years. However, both the Treasury Select Committee and the DTI Coordinating Group have called for the rotation period to be reduced to five years for audit engagement partners.

ICAEW auditor independence guidance. See p 132

Insurance regulators sue Deloitte

Pennsylvania's Insurance Department is suing Deloitte & Touche for allegedly inflating the financial statements of collapsed insurer, Reliance Insurance Company, by $1bn, and producing misleading reports. The lawsuit claims that in 2000, Reliance executives and directors 'stripped nearly $200m in cash from Reliance in the form of dividends, purported tax payments and loans'.

DTI publishes accountancy review

The government has published its consultation paper on the regulation of the accountancy and auditing professions, highlighting the major issues it wants to tackle, including whether the professions should continue to set their own ethical standards or whether there should be stronger independent oversight or intervention; whether the Accountancy Foundation should focus on the company auditor rather than on the regulation of accountants in general; and how the Foundation should be structured and funded.

New executive director - finance at ACCA

ACCA has appointed Christopher Cornthwaite as its new executive director - finance. He takes over from Ross Midgley. Cornthwaite has spent most of his career in the maritime industry, working for the Blue Star Line for more than seven years and then as financial controller - regions for P&O Nedlloyd Ltd.

A stress-free breakfast?

An invitation arrives for a presentation entitled 'Dealing positively with stress at work' given by high-flying accountancy training consultancy BPP.

The presentation, we are told 'will cover all aspects of stress and stress related problems. This will include the social context, causes of stress in the workplace and working with people towards a positive outcome'.

Which of us could not benefit from that? But hold on. Don't think you can just casually turn up and drop in.

The time? Breakfast will be served at 7.45am sharp, giving you half an hour to wolf down your bacon and egg before an 8.15am start with a prompt finish at 9.30am. Not too early for you, surely!

Oh, and 'please note that places are strictly limited and by invitation only' so send back that reply card 'as soon as possible'.

How are you feeling now? Let's guess - stressed out?

The etiquette of economic catastrophe

There has been considerable speculation (sees pp 7 and 89) about the likelihood of deflation taking Britain or Europe or the world in its murky clasp.

Faced by the threat of impending economic doom, you may well ask a single salient question: what is the government going to do about it? The answer, reassuringly, is absolutely nothing.

When the UK government's apparent chief executive Gordon Brown became chancellor, his first act was to pass responsibility for economic management to the Bank of England. In the event of national economic performance slipping by 1% either side of target, Bank of England governor Sir Eddie George must act. The action must be to write to Gordon Brown to explain why this slippage has occurred. So if the agreed target was 1% growth and the economy missed by 1% we would have reached the threshold for deflation.

In that event etiquette demands that Sir Eddie writes to explain himself. The policy does not, apparently, demand that the chancellor writes back.

The joy of January

January is always the month when the kickback from Christmas takes its toll. After all the jollity, the bills must be settled. As Britain experiences the stark horror of winter, January is the month when motors struggle to start and the will to trudge into work begins to ebb. The accountancy profession has another reason to be cheerful this coming New Year. It is going to be met by an avalanche. An avalanche of reports - that is.

January 2003 will see the publication of - among others - the DTI's long-awaited final post-Enron accounting and audit issues report. If that were not enough, the Financial Reporting Council will be offering its view on an update on the Combined Code. In the US, the rules and regulations for Sarbanes-Oxley must be implemented.

Back in the UK, Derek Higgs will be commenting on the future role of non-executive directors and the Financial Reporting Review Panel will be expounding on how it will become more proactive.

There are more but we thought we would just whet your appetite.

Softworld hysteria

Who would have thought that accounting software could incite boybands type audience hysteria? When the ICAEW's technical director Paul Booth launched his new survey IT usage in Accountancy Practices at Softworld Accounting & Finance show last month, some 150 people tried to cram into the tiny auditorium to hear his revelations about the staggering software failure rates of over 30%.

The excitement got too much for one of lucky attendees who had found a spot right in front of centre stage. She only just managed to exit the auditorium before she fainted in full view of the gathered crowd. After due medical attention her eagerness to not miss any of the action took the overhand, and she rejoined the thrilling world of accounting software.

Rewriting history?

Anyone holding their breath for the publication of the definitive history of the International Accounting Standards Committee, which was due to coincide with the World Congress of Accountants in Hong Kong this month, will be sorely disappointed. Publication has been put back to the middle of next year.

Rumours have been circulating that many of the protagonists, who include almost all the past senior officeholders, were unhappy with the first draft, which was finished on schedule in August. But there has not been enough time to gather all the comments and revise the text.

Robert J Kirsch, professor and chair of the department of accounting at Southern Connecticut State University's business school, and Chris Nobes, PricewaterhouseCoopers professor of accounting at Reading University, were sponsored by the International Accounting Standards Board - the successor body to the IASC - to write the book to coincide with the congress. Back in February, Nobes told Accountancy that although sponsored by the IASB, he expected it to be a 'no holds barred tale'. 'I expect there to be interesting technical, political and cultural controversy within it,' he said at the time.

Nobes said that because of his close involvement with the IASC (he was one of the two UK representatives on the board of the old IASC) Kirsch is going to make the final editorial decisions. 'There's no reason why one needs a history quickly,' he added.

David Cairns, secretary-general of the IASC between 1985 and 1994, said: 'I believe the history - warts and all - should be told, but the authors have got more work to do on it. A lot of the academic information on the IASC is significantly incomplete and often inaccurate. It's important that we get a true and fair history.'

Sir David Tweedie, IASB chairman, maintained that: 'We want a good product, not a quick product. The problem is that we gave the authors too tight a deadline. It's our fault not theirs.'

Divorce disclosure

Closely guarded financial secrets at Ernst & Young have been revealed in the new chief's divorce proceedings.

A 45-page opinion by a Superior Court judge at the divorce proceedings of Richard S Bobrow, E&Y global chief executive, gives details of the firm's internal finances that would almost certainly be of interest to the other Big Four firms.

Disclosures include how the firm valued its consulting practice at $4.75bn before selling it to Cap Gemini, the French IT group, for $11.3bn in an all share deal in May 2000.

Jan Bobrow was last month awarded 60% of the couple's net worth, which was estimated at $24.5m. Mr Bobrow had originally offered her a $1m settlement when the divorce was first set in motion back in 2000.

Mrs Bobrow reportedly had no idea what her husband was earning and was given a budget of $5,000 a month to raise their four children. It wasn't until she raided his home office that she realised he made $2.75m in 2000 and $3.13m last year.

E&Y revenues grew 2.7% to $10.1bn for the fiscal year to June, 2002. The judge valued the firm at $5.53bn.

The disclosures and valuation techniques would almost certainly be of interest to other spouses in divorce proceedings where the couple's interests include an interest in a private partnership.

Marconi millionaires

Marconi's finance director Steve Hare is one of the three executives set to share in a £2m bonus over a finance deal that strips shareholders of nearly all of their shares. The 41-year-old chartered accountant will get £562,500 in May 2003, while chief executive Mike Parton and chief operating officer Mike Donovan stand to make £787,500 and £600,000 respectively. The bonuses represent a year-and a half of salary and are tied to a successful completion of Marconi's financial rescue deal to take place in spring 2003. Nevertheless, all three executives have already been paid half of the total bonus. The rescue deal pays off its creditors - owed some £5bn - by giving them 99.5% of the company, leaving existing shareholders with only 0.5%. Shareholders were not given a right to vote about the deal, even though they lost nearly all of their Marconi investment when its share price went from £12.50 to be trading for pennies.

Facilitator with purpose

Robert Hodgkinson has taken up his new role as technical director of the ICAEW. A former Andersen partner, he is chairman of the ICAEW steering group on prospective financial information developing best practice guidance on changes in expectations, profit forecast and estimates of future funding requirements. He has also led FEE's initiative on the adoption of international accounting standards by 2005. He sees his role as ICAEW's senior spokesperson on technical affairs as 'a facilitator with a purpose'.

Correction: Rudy Markham

In our FTSE 100 Finance Director Remuneration Survey on p 19 of last month's Accountancy we incorrectly stated that Rudy Markham, FD of Unilever, received remuneration of £1.748m last year. The correct figure is £1.087m (  1.748m), making Markham the seventh-best paid FD in our survey, rather than the best paid. We also used an incorrect picture. Our apologies to Mr Markham.

UK bankruptcies at three-year high

UK business failure this quarter reached its highest level since the end of the recession in 1994, with more companies likely to bite the dust in the coming months as a result of consumer slowdown. A Dun & Bradstreet survey revealed that this year's failure rate is 7% higher than in 2001. 33,000 UK businesses have failed so far this year and larger companies appear to have been hit hardest.

British tax law challenged by ECJ

In the case of Dutch company Bosal Holdings, the advocate general has ruled against a Dutch tax law that only allows a tax deduction for the interest cost of financing a subsidiary if that subsidiary has a source of income in the Netherlands. Should the European Court uphold this ruling, tax advantages granted to the UK parent of a group of UK resident companies will have to be extended to a UK parent of EU resident companies, regardless of how the subsidiary is taxed.

Banks want better merger reporting

Bank analysts are sceptical about the accuracy of corporate announcements on the benefits of mergers. Deloitte & Touche interviewed 25 London-based equity bank analysts for a survey to measure the factors that affect the success of a merger or acquisition. The majority (71%) would like to see stricter reporting requirements, with disclosures such as proforma accounts for one year following the transaction, tracking of merger benefits and greater detail on acquisition and integration costs.

Attack on ICAEW practice monitoring

The ICAEW's proposed practice assurance scheme met strong criticism at October's council meeting - despite winning approval for further consultation. The scheme was described as 'discriminatory' by council member Rob Bryant as he felt it would only really affect small firms. Harry Pearce expressed concern that the institute was creating 'a multi-headed bureaucratic nightmare' and appealed for the scheme to check only on firms where there were obvious problems.

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