This Financial Controller will be sat in prison rather than in a £140m apartment…

What’s the link between a Financial Controller, a £140 million apartment in London and prison?

Ross Smith, the former Financial Controller of property developer Candy and Candy will have plenty of time to contemplate the link as he is currently in prison serving a sentence for stealing nearly £100,000 from his employers.

As the Financial Controller of the Property Developer Candy and Candy, Mr Smith was able to access funds that clients had deposited with the company to pay for improvements on a number of luxury properties in the UK.

One of these properties for example was at the prestigious “One Hyde Park” Development in London.

Now, One Hyde Park isn’t your average property development.

It contains over 80 properties and the “cheapest” one starts at £20 million.

The UK’s most expensive property – a 6 bedroom apartment – was sold there for the staggering sum of £140 million!

Even though Candy and Candy had some of the best properties in the world on their books it’s fair to say that their internal controls weren’t up to the same standard.

Mr Smith simply created false invoices to redirect funds into his personal bank account. He actually got away with the fraud for a number of years until it was spotted as part of a routine check.

Going back to One Hyde Park though and if anyone is interested there is currently an apartment for sale there.

Full details are on the Estate Agents website and the good news is that it’s a lot cheaper than the £140 million that the penthouse went for.

This one is on the market for a mere £65,000,000.

Now, before you all go and rush out and buy this property it’s worth remembering that the average property price in the UK at the moment is just under £250,000. So, instead of buying the one apartment why don’t you spend your £65 million on 260 “average” properties instead…

What have James Bond and accountants got in common?

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James Bond – fast cars, fast women and saving the world. It’s all in a day’s work for 007.

A lot of the readers of this blog are accountants and as accountants we all know from personal experience that driving fast cars, entertaining fast women and saving the world can be a very tiring business.

So, what better way to unwind at the end of the day than with a drink of Mr Bond’s famous “shaken, not stirred” vodka martini?

Mr Bond has been drinking his vodka martinis (shaken, not stirred) since the Dr No film was released 50 years ago.

Anyone that goes to see the latest Bond movie Skyfall that was released last week though won’t see him drinking the famous “007 drink” but instead will see him drinking a nice cool Heineken beer.

We’ve highlighted before how good Heineken are at guerrilla marketing and the latest Bond movie is a great example of product placement.

Product placement is where a company’s products are “placed” into films and TV shows. They aren’t explicitly advertised but rather it’s a more discrete promotion where people “subconsciously” see the product.

Heineken no doubt paid a significant amount of money to have their product in the hands of the legendary spy and I have to say that it works well.

After all, a quick meeting in the office today amongst the male members of the team came to the conclusion that the photo above of bond girl Berenice Marlohe holding a bottle of Heineken beer was one of the finest examples of post-modern contemporary photographic artwork.

One final thing though and now that you’ve driven your fast car, entertained a fast woman and saved the world today, before you settle down tonight in front of the TV with your slippers and you reach for your Heineken beer, remember that a bottle of beer doesn’t react well to being shaken or stirred…

Selling a hotel that you don’t own – what could possibly go wrong?

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One of the general duties of company directors is to exercise reasonable skill, care and diligence.

Three directors by the name of Robin Reichelt, Stephen Nathan and John Gibbs were clearly not exercising any of these attributes though.

Whilst on the face of it their plan to reclaim VAT on the purchase of a hotel sounded ok, in reality there were a number of things which didn’t quite work or to put it more bluntly, a couple of things which were completely illegal.

The background to the situation was that one of their group companies sold a lease to a central London hotel to another of their group companies.

The company that “sold” the hotel went into liquidation after selling it and the company that bought the hotel then submitted a claim for a refund of over £200,000 of related VAT.

The whole thing was completely illegal however as not only did they not pay the VAT in the first place (so had nothing to claim back) but the hotel didn’t even belong to the group company that had claimed it had sold it!

So, in summary they claimed to have sold a hotel that they didn’t even own to another group company and claimed back VAT that had never been paid. What could possibly go wrong??

Well, they will have several years in jail to contemplate what went wrong and to plan their next great money making idea…

Guess who’s going to Myanmar?

Such is the spread of large accounting companies around the world that there are very few countries left where you can’t find an office of one of the Big 4 or mid tier companies.

Myanmar in Asia was until recently one of the few countries that hadn’t had the pleasure of international accounting companies being present.

Things are changing though and the people of Myanmar (also known as Burma) will shortly be seeing the KPMG logo on offices as KPMG has just announced that they will be the first Big 4 company to open up offices in Myanmar.

According to KPMG, Myanmar is widely seen as the “next economic frontier” in Asia and recent easing of international sanctions against the country has “sparked a great deal of interest from investors globally”.

Kaisri Nuengsigkapian, CEO of KPMG in Thailand has led the initiative to extend operations to Myanmar and says that “Myanmar is the second largest country in Southeast Asia, and literally at the center of opportunity in the region. Investors are flocking to the country and are excited about the possibilities they are finding.”

Initially the company will be offering Tax and Advisory services with the plan being that Audit services will follow later (presumably not to audit the tax advice given by their colleagues though…)

So, congratulations to KPMG for being the first and how long will it be before the others join them?

By the way, the photo above shows Taung Kalat in Myanmar and is not a photo of KPMG’s new offices.

Who was taking the biggest risk?

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Ok, so he jumped from a height of 39 km (24 miles) and he’s travelled faster than the speed of sound but surely Red Bull was taking more of a risk than Felix Baumgartner.

If you were like me and were one of the millions around the world who last night watched the inspirational (or some would say mad) Austrian break world records by parachuting from the edge of space then I think the risk was surely with Felix.

As I watched it I was so impressed. Not only by the bravery of Felix but also the technology that allowed people around the world to watch live footage from the edge of space.

If you look at some business concepts around the event though there are a couple that spring to mind.

First of all, whilst it turned out to be a huge success for the sponsors Red Bull, if there had been some problems for poor Felix and he didn’t make it back to earth in one piece the negative publicity would have been pretty bad (admittedly not as bad a feeling for Red Bull compared to what Felix would have felt but still pretty bad none the less).

The business risk of undertaking such a stunt by Red Bull would no doubt have been reviewed in detail and numerous precautions put in place. One simple precaution was that the live footage was in fact with a 20 second delay so that in the unfortunate event of something going dramatically wrong, the live feed could be cut before millions around the world saw Felix explode into thousands of small pieces live on TV.

Red Bull is an energy drink that has a brand image of “speed and adventure” and have sponsored numerous events such as aerobatic flying and extreme mountain biking. This was their most ambitious event yet though and its success has been reported as being equivalent to £100 million of advertising spend.

In other words, the publicity that Red Bull got from the event was equivalent to them spending £100 million on advertising.

The second business issue that occurred to me was that I saw the event live on YouTube and I wasn’t the only one. A record number of 8 million viewers saw the event live on YouTube.

Is this going to be the way forward for viewing live events?

Will more and more events be shown live on YouTube and will more and more people watch things on YouTube?

If you’re working in the strategy department of a TV company for example then you should definitely be reviewing the rise of importance of sites such as YouTube.

On the subject of YouTube I’m delighted that we’ve recently put some free ACCA, CIMA and FIA courses onto YouTube at www.youtube.com/theexpgroup

One thing for certain though is that we will never get anywhere near the number of YouTube views that Red Bull’s historic event received but then again making our videos wasn’t quite as dangerous…

What type of fine do you get for cheating?

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McLaren are one of the top Formula One motor racing teams. They are not only experts at ensuring cars are driven fast around racing circuits but they are also experts at ensuring that £34m fines are tax deductible…

Back in 2007 McLaren were fined £34 million pounds because it “had possessed and in some way used proprietary information belonging to Ferrari, and had thereby breached the rules of the FIA’s International Sporting Code to which McLaren was contractually bound”.

Or to put it another way, they had cheated by photocopying an 800 page technical document belonging to Ferrari that detailed the designs of the 2007 Ferrari cars.

Formula One’s governing body, the Federation Internationale de L’Automobile (FIA), weren’t happy about McLaren taking this approach and ordered McLaren to pay a £34m fine which they duly did.

The interesting thing though is that in their UK company tax return McLaren claimed a tax deduction for the fine.

In the UK as well as most countries around the world, fines are not tax deductible. This means that the expense does not reduce the level of profits on which tax is calculated.

McLaren argued though that this particular fine was tax deductible (i.e. the expense could be used to reduce the level of profits on which tax was applied). They said that it wasn’t a statutory fine for breaking the law (which would be non tax deductible) but instead was a fine imposed by their governing body and as such was a genuine business expense incurred in their trade which should be tax deductible.

The UK tax authorities understandably didn’t agree with this viewpoint and the argument went to an independent tax tribunal who surprisingly agreed with McLaren and said that the fine was tax deductible.

A surprising decision and there’s no truth in the rumour that the head of the independent tax tribunal is currently driving around in a McLaren…

What have Louboutin shoes and Cadbury chocolate got in common?

Whilst wearing Louboutin shoes and eating Cadbury chocolate would probably represent a pretty good night out for lots of women around the world, they are two very different products.

Louboutin shoes are top of the range designer ladies shoes that can cost well in excess of £1,000. They are worn by female auditors undertaking inventory counts in dusty warehouses some of the most famous (and wealthiest) women in the world.

Cadbury on the other hand are a UK company that has been producing chocolate bars since 1824.

So, what have they got in common?

The answer is colour and both companies have managed to get a trademark for the distinctive colour that is used in their products.

Most major companies will have trademarks on their name or logo but having a trademark on a colour is pretty unusual.

Louboutin shoes have a distinctive red sole and a couple of years ago they were successful in trade marking these red soles.

Cadbury has just been successful in registering its right to use their distinctive colour purple on their chocolate packaging. It wasn’t an easy process though as they first registered their right to use the colour purple back in 2004.

After they applied for the trademark 8 years ago, Nestle, a major competitor to Cadbury argued against the registration by Cadbury and the matter went to court.

The court case was finally settled this week with the judge deciding in favour of Cadbury.

This means that Cadbury are now the only company in the world that can have chocolate wrappers with the colour purple. Well, to be precise, they are the only company in the world that can have the Pantone 2685c purple colour on their chocolate wrappers.

Now, I’m an accountant and not an artist or designer but I do wonder just how different the Cadbury trademarked Pantone 2685c purple is from Pantone 2684, 2686, 2687…

Did Ernst & Young get it wrong?

I think that Ernst & Young (EY) are a great company but if I’m honest I think they are missing something.

I know a lot of people that work at EY and overall they seem to be both pretty switched on and very professional but I think they’ve got something seriously wrong.

For several years now there has been a financial crisis in most countries around the world. The term “recession” has been in all the papers and on the TV.

Companies around the world have been cutting back on staff and their sales are down.

But what about EY?

Surely they should also be following suit with a reduction in sales and staff cuts?

Well the impressive news is that they have just released their latest annual results and they appear to have got it completely “wrong”.

Their combined global revenue for the year ended 30 June 2012 grew by nearly 8% to US$ 24.4 billion (personally speaking I always feel that billions look far more impressive when written with all the zeros so US$ 24,400,000,000)

All of their service lines showed good growth (Assurance revenues were up 4.1%, Tax 7.0%, Transactions 9.4% and Advisory 16.2%).

Jim Turley, Global Chairman and CEO of EY said that “we are pleased that our business showed good results, the best since 2008, in the midst of what has been several years of uncertainty.”

In terms of regional growth then the emerging BRIC nations did particularly well with Brazil growing 17.5%, India 19.8%, Africa 10.2%, China 11.8% and the CIS 15.6%.

In the UK the growth was 11% and this was the highest level of growth in 6 years. Over 1,200 new jobs were created by EY in the UK last year and Steve Varley, UK Chairman and Managing Partner of EY appears to be committed to making EY in the UK a diverse and inclusive employer.

He said “Continuing to lead on gender diversity among the Big Four is something I am very passionate about – 28% of our UK leadership team and 18% of our partners are female. I know we can do more and I know we need to move forward so that we focus not just on gender, but also on the ethnic diversity of our people and partners.

So we have been bold, setting an aspirational goal that at least 30% of all our new UK partners are women and at least 10% are BME (black, minority ethnic) by 2015. We’re clearly not there yet and aspirations alone won’t drive change, but we believe diversity and inclusiveness is a business imperative.”

So, in summary there’s a global recession on and yet EY have increased sales in all their service lines, their global revenue has increased by nearly 8%, they’ve recruited significant numbers of people and are committed to a diverse workforce going forward.

Somehow I don’t think that EY have got it wrong…

No need to pay tax. Just get a private plane…

It’s human nature that most people would probably prefer to pay less tax. To be honest though taxes need to be paid as without them the government wouldn’t be able to pay for, for example hospitals, schools, the police, infrastructure such as roads and if you’re in Italy then if taxes weren’t paid there wouldn’t be any private planes, parties and yachts for tax collectors.

Hang on a moment. What did that last sentence say?

“Private planes, parties and yachts”.

Yes, that’s right as earlier this week Italian police arrested Giuseppe Saggese, the head of Tributi Italia (Italy Taxes) and he has been accused of stealing some pretty significant amounts of money.

Tributi Italia is an agency based in Genoa that collects taxes for 400 town councils in Italy and as head of the agency Mr Saggese was no doubt earning a pretty good salary.

Unfortunately for the town councils (and in fact, unfortunately for Mr Saggese now that he’s been arrested) it looks like he was tempted to increase his “remuneration” from the job by some illegal methods.

Together with four colleagues Mr Saggese is accused of arranging for some of the taxes to be paid into the other bank accounts rather than the bank accounts of the town councils. The money was then used to pay for private planes, yachts, expensive cars and extravagant parties.

Even after Mr Saggese no doubt attended some pretty impressive parties on some private yachts this wasn’t enough to satisfy him as he is also alleged to have taken Euro 20 million in cash for his own use.

As I said at the start, it’s probably human nature to prefer to pay less tax and I should imagine that the residents of Genoa in Italy will be especially upset knowing that their taxes were spent on private planes and parties rather than hospitals and schools.

Is this the best or worst resignation letter ever?

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Here’s an interesting question. If you resign from your job, what should your resignation letter look like?

Should it be simple, brief and straight to the point or should it be sent to the whole office and include various accusations about your boss including a certain, how shall we say it but, adult liaison in a meeting room with a colleague?

Well if your name is Kieran Allen then the second option appears to be the correct answer.

Mr Allen used to work for MEC, one of the leading media agencies in London. Yesterday he resigned and his resignation letter contains some pretty juicy accusations.

Now whilst this isn’t the first resignation letter that contains some juicy accusations it is the first resignation letter with juicy accusations that has gone viral on the Internet and as a result has been seen by millions around the world.

To avoid a knock at the door from some lawyers, I’ll keep the manager’s name anonymous (although if anyone wants to see the full letter then a simple search on the Internet will reveal it!) but Mr Allen claimed that he left MEC after 2 1/2 years of “loyal service” because of the treatment he received from his manager.

Mr Allen claimed he was forced to take time off work due to stress after being overloaded with work by the manager and he claimed the manager made him feel like a complete outsider on his return.

We’ve all been overloaded with work at some stage or other so this is initial claim isn’t that exciting.

The more interesting accusations though were when he claimed in his letter that the manager “regularly made sexist and other bigoted remarks” and “took a female colleague out for a drink on the day he interviewed her, then took her back to the MEC offices that night and had sexual relations with her in the meeting room on the 3rd floor”.

Mr Allen then went on to say that all of these allegations were “common knowledge throughout the team”.

Some people will applaud Mr Allen for his resignation letter whilst others (no doubt including his manager) will say that he should have kept his issues to himself.

Either way there are some serious lessons to be learnt from all of this. For example, it’s probably advisable to make sure you knock on the door of the meeting room on the 3rd floor at MEC before opening it…

Who do the Big 4 want to win the US election?

It hardly seems like 4 years ago that President Barak Obama became America’s 44th president but here we are with just a few weeks to go before the next US election takes place.

Whilst there will be plenty of arguments for and against each candidate over the next couple of months I came across an interesting website which summarises the political donations made by companies in America.

The website opensecrets.org was created by the Center for Responsive Politics which tracks money in politics.

After quickly using the search function on the site it was straightforward to identify the amount of money that the Big 4 have donated to the election campaigns for President Obama and his Republican opponent Mitt Romney.

The donations as at the time of writing are:

Donations made to Barack Obama / Mitt Romney by the Big 4:

Deloitte (Obama: $291,056; Romney: $286,110)

Ernst & Young (Obama: $38,350; Romney: $158,925)

KPMG (Obama: $24,498; Romney: $67,250)

PwC (Obama: $55,033; Romney: $266,650)

Total (Obama: $408,937; Romney: $778,935)

I’ll leave it up to you to perform your own analytical review on the above figures and to decide who the Big 4 appear to want to win the next US election and of course it’s probably got nothing to do with Barack Obama’s plan to increase the marginal rate of tax on high earners and Mitt Romney’s proposal to reduce taxes for high earners…

Surely all consultants can do this?

So what exactly does a consultant do? A lot of you may know somebody who is a consultant and the chances are that some of you are in fact a consultant yourself.

Now, I’m only guessing here but my feeling is that most of the consultants you know cannot do what Port of Antwerp consultant Gerrit Wellens from Belgium is capable of doing.

It just goes to show that looks can be deceiving as, without being too harsh on the consultancy profession, 48-year-old Mr Wellens has a classic look of a consultant about him. Surprisingly though he didn’t bring his briefcase with him when he appeared on the Belgian TV programme Belgium’s Got Talent.

Instead, as the video below shows he produced something which is probably not seen that often in a consultant’s office.

This stage is all yours Mr Wellens…

Should this former Deloitte accountant become a doctor?

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One of the key attributes of finance and business people should be ethical behaviour. Note that I say “should be” as not everyone seems to agree with this approach.

Former Deloitte UK employee Nahied Kabir seems to have a slightly different view of what is acceptable in terms of ethical behavior.

Here’s a quick multiple choice question for you to see how ethical you are compared to Mr. Kabir.

Question – You’re struggling a bit with your professional exams and your employer’s policy is that if you don’t pass your exam within 2 attempts you’ll lose your job. Do you:

a) Focus your efforts on passing your exams. Or,

b) Focus your efforts on forging two doctor’s certificate.

Now, in my opinion (and hopefully in your opinion as well!) the correct answer is (b) (a).

Alas for former Deloitte employee Mr. Kabir he chose option (b).

In summary, Mr. Kabir failed an exam twice and at a meeting to discuss terminating his employment contract with Deloitte he produced a forged doctor’s note.

Deloitte let him sit the exam again and he passed this time. He then had a further 3 exams to sit and you guessed it he failed all 3.

At the next meeting to discuss things with Deloitte he claimed that he failed due to the ill health of his mother. He then produced a second forged doctor’s note from another doctor claiming his mother was suffering from ill health.

Proving that as well as being a pretty rubbish accountant he was also pretty bad at forging letters, the forged letter from the second doctor was exactly the same as the forged letter from the first doctor with the exception of only 4 words!

It’s probably no surprise to you that Mr. Kabir is now no longer working with Deloitte and the accounting body he was sitting his exams with (ICAEW) have published their report on the disciplinary action they took against him.

Again, it’s probably no surprise that he was “declared unfit to become a member of ICAEW”.

There’s no news yet whether Mr. Kabir is planning a successful career as a bank note forger…

Would you prefer to read it or watch it?

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Marie Claire is one of the leading women’s magazines in the world. It was first published 75 years ago in France and now has various editions around the world.

Although I must admit that I haven’t read a copy in detail I’m told by some of the ladies in the office that it’s a good mix of fashion, beauty and health.

Next month’s issue though is going to have something which has never been seen before in a UK women’s magazine.

Now, I’m not talking about a woman’s magazine writing about the latest football results or the new Range Rover car that has just been released. No, instead I’m talking about a pretty innovative advert.

On pages 34 and 35 of next month’s magazine there will be a 45 second video advert. Yes, that’s right – a 45 second video will be embedded into the pages of the magazine so that when the relevant pages are opened the video will start to play.

Very impressive.

The video advert is produced using technology by US company Americhip and will be for a perfume by luxury fashion house Dolce & Gabbana and reportedly will feature two models posing near a coastal scene.

There’s a constant challenge for advertisers to identify eye catching adverts and this video advert embedded within the magazine will certainly be eye catching.

It will also no doubt be very expensive and the cost of including the video advert has not been disclosed. Interestingly the company that will be paying for the advert is Proctor & Gamble as they are the company that produces the perfume under license from Dolce & Gabbana.

Oh and before you all rush out to buy the magazine it’s worth checking that your copy includes the advert as due to cost reasons not all copies will have the advert in it. If you are lucky enough to get hold of a copy with the video in then it will no doubt be a good read or should I say a good watch.

Would you be happy if you won an Olympic medal and this happened?

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Did you know that if you win a medal at the Olympics then you will be taxed on it?

The above statement isn’t true for residents of every country but if you’re an American then unfortunately for you it’s true.

So you’ve spent years training to perfect your sport. The big Olympic day arrives and you are successful and win a medal. Surely, this is the pinnacle of any sportsman’s career?

If an American athlete is successful at the Olympics then it is also good news for the American tax authorities as under US tax laws anybody that wins an Olympic medal has to add the value of that medal to their taxable income.

This in itself raises an interesting question as to what is the “value” of an Olympic medal as I’m sure most successful Olympians consider their medal to be priceless.

According to information released by the organisation Americans for Tax Reform though “at today’s commodity prices, the value of a gold medal is about $675. A silver medal is worth about $385 while a bronze medal is worth under $5” (although personally I doubt Usain Bolt would sell his 100m gold medal for $675…).

The US Olympic committee also award cash prizes to successful medallists ($25,000 for gold, $15,000 silver and $10,000 for bronze).

Adding the value of the medal to the cash prize and then applying the 35% top rate of income tax in the US gives a tax bill per Olympic medal of:

Gold medal – $8,986
Silver medal – $5,385
Bronze medal – $3,502

As at the time of writing the US team had 34 gold, 22 silver and 25 bronze medals. This would give the US tax authorities over $500,000 of tax revenue.

So if you’re a successful American Olympic medallist then first of all many congratulations on your sporting success and secondly, don’t forget to settle your tax bill…

Is this the best advert at the Olympics?

So the Olympics are well and truly underway and whilst a lot of the athletes have been inspirational in terms of their performance there have also been some inspirational performances by businesses.

There are a number of official Olympic sponsors (for example, McDonald’s, Coca-Cola, BMW and Visa). These companies have paid the Olympic authorities big amounts of money to be official sponsors.

LOCOG (the London Organising Committee of the Olympic and Paralympic Games) have been particularly vigilant in terms of monitoring for any unauthorised use of the Olympic name or Olympic logo by companies which are not official Olympic sponsors. For example, they have swiftly taken action against any company that has illegally used the Olympic name in advertising.

Irish bookmaker Paddy Power has got a reputation for, how can I put it but controversial or cheeky advertising.

A few days before the start of the Olympics, Paddy Power sponsored an egg and spoon race (a children’s race where children run whilst trying to balance an egg on a spoon).

This egg and spoon race took place in a small French town. The nice thing though was that this small French town was called London and as a result Paddy Power designed their latest poster advertising campaign with the following text:

“Official sponsor of the largest athletics event in London this year! Ahem, London France that is).”

LOCOG instructed their lawyers to get the posters removed but Paddy Power’s lawyers successfully pointed out that they had not broken any law and the posters remained in place.

A great example of gorilla marketing and a gold medal performance by Paddy Power.

Will we ever see true global accounting rules?

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Anyone that works within the international arena of accounting will be aware of the discussions over the years about the convergence between IFRS (International Financial Reporting Standards) and US GAAP (US Generally Accepted Accounting Principles).

Whilst there are similarities between the two sets of accounting rules, importantly there are also differences.

The majority of the G20 (in effect, the 20 largest economies in the world) already use IFRS but over in America they are pretty attached to the US GAAP rules.

The IASB (International Accounting Standards Board) has been working closely over the years with its US counterpart, the FASB (Financial Accounting Standards Board) to minimise the difference between the two sets of rules.

Following an announcement last week by the US Securities and Exchange Commission which failed to include a clear action plan about adopting international accounting rules, it looks like the IFRS supporters may be losing a bit of patience.

Michael Prada, the chairman of the trustees that oversee the IASB was critical of this lack of an action plan and was quoted as saying:

“While recognising the right of the SEC to determine the method and timing for incorporation of IFRSs in the United States, we regret that the staff report is not accompanied by a recommended action plan for the SEC. Given the achievements of the convergence programme inspired by repeated calls of the G20 for global accounting standards, a clear action plan would be welcome.

For the benefit of both US and international stakeholders, the Trustees look forward to the SEC resolving the continued uncertainty regarding the US’s commitment to global accounting standards.”

Or to put it in less diplomatic wording, “for goodness sake can you please get on with it”.

In summary it looks like there’s not going to be true global accounting standards in the immediate future.

One thing for sure though is that IFRSs seemed to be going from strength to strength. In the words of Hans Hoogervorst, the Chairman of the IASB:

“IFRSs have already achieved critical mass as international standards and with more than two thirds of the G20 now on board, the momentum behind them becoming global accounting standards is irreversible. We are confident in our mission to achieve a single set of high quality global accounting standards and we continue to work to serve investors and other users of IFRSs across the world.”

So all that hard work in learning the various IFRSs in your professional exams looks like it will be worth it.

ACCA or CIMA – who’s in the driving seat?

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ACCA and CIMA are both great professional qualifications which are respected and admired around the world. I came across a surprising fact recently though which I bet the majority of ACCA and CIMA members and students never knew.

Nissan Motor Co. Ltd is one of the world’s leading car manufacturers and a couple of months ago over in Japan they launched a new car.

Quoting some of Nissan’s promotional material about the car, some of the key features include:

– Styling expressing a premium class image

– Hybrid system with optimally balanced driving and environmental performance

– Spacious and comfortable rear seats

As the picture shows it’s a handsome looking car and I’d personally be more than happy to drive it around.

What about Helen Brand (the Chief Executive of ACCA) or Charles Tilley (the Chief Executive of CIMA) though?

Do you think they would be happy to be seen driving the car?

Well, my guess is that one of them will be happier than the other as the name of the new Nissan car is none other than the Nissan Cima.

Yes, that’s right – one of the leading car manufacturers in the world has just launched the Cima car.

Nissan has not produced a car aimed at accountants in Japan but instead the Cima car name is derived from the Spanish for “summit”.

It raises an interesting question though – does this mean that there’s no need to study for your exams to become a CIMA member as all you’ll need to do is to buy a Cima car and then you can add Cima (driver) to your CV?

Oh, and one final thing but I don’t think there’s any truth to the rumours that ACCA are currently in discussions with Toyota to produce a new car called the Toyota Acca.

Tennis star’s balls fall out of his shorts…

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Adidas and Puma are two of the top sportswear brands in the world.

Interestingly though they were actually started by two brothers.

In the 1920s in Germany, brothers Adolf and Rudolf Dassler set up a shoe making business but soon fell out with each other and went their separate ways.

Adolf (Adi) Dassler kept the original company but renamed it Adidas (named after his first name and part of his surname) whilst Rudolf left and set up Puma.

Since the split there has been intense rivalry between the two companies and over the years there have been some famous examples of both of them trying to outdo the other in terms of publicity.

For example, back in the 1970s at the start of the 1970 World Cup final, arguably the world’s best ever footballer famously stopped the referee with a last minute request to tie his shoelaces just before the kickoff. The result was that millions of TV viewers saw Pele tie up his Puma football boots.

An early example of “guerrilla marketing” and priceless publicity for Puma.

More recently there was some rather unusual publicity for Adidas.

At the recent Wimbledon tennis Championship in London, the unlucky losing finalist Andy Murray had a few problems with his shorts.

Adidas pay a significant sum to Murray to sponsor him and in return he wears Adidas tennis gear, including Adidas shorts.

In his Wimbledon match against fellow Adidas sponsored tennis player Marcos Baghdatis, he lost two points after a tennis ball fell out of his Adidas shorts mid-point (Murray puts one tennis ball in his pocket whilst taking his first serve in case he needs to take a second serve).

Luckily for Murray he went on to win his match against Baghdatis but for Adidas it could have been an embarrassing problem had he lost because of the design of their shorts.

Adidas reportedly said that the error in the depth of the pockets was due to the shorts being handmade.

There’s a saying that there’s no such thing as bad publicity and to be honest this has probably turned out ok for Adidas.

More people are probably now aware that Adidas sponsor Murray and they will no doubt change the design of the pockets so there’s no danger of the public seeing one of Murray’s balls popping out of his shorts in the future.

Are you paid peanuts or do you get a fair salary?

How would you feel if you were doing exactly the same job as the person next to you but he or she was being paid more than you?

My guess is that you wouldn’t be feeling too happy as the principles of fairness and equality would clearly be broken.

It also raises the discussion of discrimination if one person doing the same job as another is paid less.

The video below however shows that it’s not just humans who get upset if someone else is paid more for doing the same job.

The video shows a researcher getting some Capuchin monkeys to each undertake the same job (handing the researcher a rock) but the rewards given are different. One of the monkeys gets a slice of cucumber whilst the other gets a tasty grape.

Now, how would you feel if your colleague was given a tasty grape whilst you were given the cucumber?

Well, the monkey wasn’t too happy…

Will this tablet give you a headache?

Has your computer ever frozen on you? Of course it has but don’t worry, it even happens to the experts.

We’ve all heard of Microsoft and their arch rival Apple.

Although they are often classified together, up until this week there was a major difference between them.

Apple is mainly a hardware company (think iPods, iPads and Mac computers) whilst Microsoft is a software company (think Windows operating systems and Microsoft office software).

It may have come as a bit of a surprise therefore that last week saw the announcement that Microsoft would soon be selling their own tablet computers. At a launch in LA, Microsoft showed their upcoming tablet which goes by the name of mPad (actually, I made that last bit up about the name mPad as it is in fact called “Surface” but personally I prefer mPad).

As a strategic business move this is quite risky. Using their software in their own hardware will have obvious advantages in terms of the potential to win some of the market share from Apple but do they risk upsetting some of their major customers?

OEM’s (Original Equipment Manufacturers) such as Hewlett-Packard and Acer use the Windows operating system in their PCs.

Putting it another way, companies like Hewlett-Packard and Acer have a supplier (Microsoft) who has now suddenly become a competitor.

Are they going to be happy paying a supplier who is now directly competing with them?

Maybe the question is irrelevant though as after all, what other operating system could they use?

The other interesting thing was that the launch was very “Apple like” with the presentation being very slick.

Well, I say very slick but there was one moment when Microsoft boss Steve Sinofsky had just explained to the audience how users could “browse smoothly” when you guessed it, the device froze.

The video below shows Mr Sinofsky in action when the new tablet froze at the opening presentation.

You don’t have to be good at drawing…

In today’s tough economic climate more and more companies are looking at barter arrangements.

A barter arrangement is where goods or services are exchanged by two parties without any cash being transacted. You could argue that a less technical term for barter is simply “swapping”.

A hotel in Sweden has just launched an extremely unusual form of bartering.

The Clarion Hotel in Stockholm are offering free hotel accommodation for one night in exchange for a piece of art created by an artist.

Now this artwork doesn’t have to be by anyone famous such as Picasso. No, it can be by anyone including a middle aged accountant who writes rubbish blogs.

Yes, anyone can classify themselves as an artist and exchange a rubbish drawing piece of minimalistic artwork for a free night’s accommodation at a very nice hotel.

The only requirement is that the artwork is A4 sized and ownership of the piece of art is transferred to the hotel. Oh, and to prevent anyone sketching 365 pictures and then expecting to stay free of charge for a whole year, the maximum number of free nights in exchange for artwork is two.

All in all, a great idea by the hotel and I hope it’s a success.

Good and bad news for PwC…

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If you work for one of the top firms of accountants in the world and you’re an audit partner it must be [a refreshing change/really annoying – delete as appropriate] when you yourself are audited.

Well in the UK this has just happened for some of the major accounting companies.

The Professional Oversight Board is one of the bodies that works towards improving the quality of audit work and audit firms. They have just published their 2011/12 inspection reports and there were some interesting findings.

Their public report on their inspection of PwC for example commented on a number of items including PwC’s “audit transformation programme”.

The POB said that

“During the year, the firm launched its Audit Transformation programme, the stated objective of which is to enable audit teams to focus on key judgment areas, standardise the firm’s approach and improve audit quality. However, the guides issued to date under the programme appear to focus on improving audit efficiency by reducing audit hours.”

The Report then went on to say that

“The programme also includes increasing the use of the firm’s off-shoring capability, now through two overseas centres, one in India and the other in Poland. Work performed in 2011 by these centres accounted for about 4% of the firm’s core audit hours and is expected to increase to 6% in 2012.”

The POB work was quite thorough as they also looked at PwC’s “staff performance evaluation” forms where interestingly they found that “approximately a quarter of the appraisal forms and objectives for the following year were signed off after the due date.”

The good news for PwC was that the vast majority of the 14 audits that were examined by the POB were either performed to a “good standard” or an “acceptable overall standard”.

Unfortunately for them though there was one audit which was singled out as requiring “significant improvement”.

In case any of you are interested in reading the reports on PwC and some of the other major accounting companies, they can all be found here.

Somehow though I don’t think the partner responsible for the “significant improvement required audit” will be showing all his friends a copy of the report.

Are you strong enough to buy this?

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Now let me think. Drinking lots of beer and running as hard as you can into a metal vending machine. What could possibly go wrong?

In today’s competitive business environment it’s normally the case that companies want to make it as easy as possible for their customers to buy their products.

Over in Argentina though a beer company has taken an unusual (but in my opinion a brilliant) approach to selling beer.

In fact, if you’re talking in strategic exam business terminology, an unusual approach to the outbound logistics found within Michael Porter’s value chain.

Salta beer has designed a vending machine for all the rugby fans out there.

In order to get your can of beer dispensed from the vending machine you put your money in and then you have to body slam into the vending machine as hard as you can.

The nice twist to this is that there is a meter on the vending machine which is similar to the “hammer strength tests” that used to be found at old carnivals and fairgrounds. In other words, the beer will only be dispensed if you can run into the machine with a hard enough force and reach the “strength meter”.

It’s been designed to appeal to rugby fans who are used to seeing rugby players tackling their opponents.

The machine can be seen in action below and the next time you are sat down in a quiet Argentinean bar enjoying a relaxed drink lookout for the big guy behind you taking a long run-up and heading with his shoulder down towards the vending machine…

Would a chocolate bar motivate you to…

It’s a great feeling in the office when you’re working hard in a team and you achieve a good result.

Whether it’s delivering on a project, winning a new client or deciding on the location of the Christmas party that will take place in six months time, achieving a good result can result in some great feelings.

As well as the intrinsic rewards (i.e. feel good factors!), there can also be extrinsic rewards such as bonuses when things go well.

Torbay Hospital in the UK recently won a prestigious award. The hospital was chosen as the “acute healthcare organisation of the year”.

20 of the hospital’s senior staff celebrated the achievement at the awards in London but there were in fact 4,000 staff who worked for the hospital. Management decided to reward these other people in a way that may certainly be memorable for them, but possibly in the wrong way!

Whilst the 20 senior staff enjoyed a great time at the awards in London, the rest of the team were all given a voucher.

Now let’s just think about this for a moment. The organisation you work for has just won a prestigious award. You’ve been working hard to contribute to this. You receive a voucher as a reward.

So what voucher would you have been happy with?

Well, the excitement was no doubt building for the 4,000 workers when they realised they were getting a voucher but alas for them when they saw the voucher it was for a chocolate Kit Kat bar.

Yes, after the hospital won the prestigious award the team members were given a voucher to buy a chocolate bar with a value of 60p.

Now, I’m never one to turn down a free chocolate bar but I’m not sure that a 60p Kit Kat bar is a suitably motivating reward.

Then again, if they offered two chocolate bars…

It doesn’t matter how good your answer is, if the markers can’t……

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It doesn’t matter how good your answer is, if the markers can’t read your handwriting you won’t get the marks. It’s as simple as that.

As well as having the requisite technical knowledge students must have the necessary exam technique to ensure a pass. One of the more common complaints from markers is that sometimes the handwriting on exam scripts is so bad that they simply cannot read the answers. If they cannot read the answers then they cannot give you any marks.

Whilst it’s probably a bit late now to radically change your handwriting style, there are some simple steps you can take to make your script more readable. An easy one is to leave a gap between each paragraph. This breaks up the text on the page so that it doesn’t look too cluttered and will be easier for the marker to read.

Another point is to practice writing answers under exam conditions. Some of the papers are “written style” papers rather than a numerical one so you must get used to writing under exam conditions. The last time you probably wrote for 3 hours was at the last exam session! Everybody tends to use computers more and more these days and it’s relatively unusual to be writing significant amounts by hand. Practice writing answers under exam conditions and then give your answer to a friend or family member and see if they can understand it!

This was brought home to me the other day when I was talking to my niece. When I mentioned that as a child I used to write notes to fellow students and pass them around the class, she looked at me as though I was a dinosaur. Nowadays they don’t handwrite them but instead send phone text messages to their fellow students. Writing by hand will soon become a thing of the past…

Should you stop being an accountant?

So, you’re working hard to get a professional qualification. But is finance and business the area you should be in? Will there still be a need for finance professionals in the future?

These are all good questions but my personal view is that I think there will be a need for finance professionals going forward. Individuals will always be needed to analyse, interpret and advise on financial areas.

What about other occupations? What about taxi drivers for example?

Taxi drivers have been around for many years. Starting with the horse and carriage and now moving up to date with the latest cars and limousines, taxi drivers are a common sight in most towns and cities.

The drive in a London black cab for example is in my opinion a mixture between a personal “Disney style ride” through the sights of London combined with having a driver who knows more about everything than all the websites on the Internet (at least if the driver of the taxi I was in this morning is anything to go by…).

Had I had the opportunity this morning to get a word in edgeways there would have been an interesting discussion about whether taxi drivers will be needed in the future though.

The state of Nevada in America has just approved America’s first self driven vehicle licence. Wow, let’s just slow down a moment and review that last comment.

Yes, Nevada changed its laws to allow self-driven cars in March and Google have been testing a Toyota Prius which has been modified to enable it to be driven without a driver.

This is not science fiction, this is reality.

The car has already driven nearly 150,000 miles by itself but during these journeys it did have a driver sat ready to take action if needed.

However, Nevada is the first state in America to register cars that can drive without a driver and the first driverless journey has now actually taken place.

The car uses video cameras, radar sensors and a laser range finder to find its way around.

This is all clever stuff and as a result if you are just starting out in your career and are planning to be a taxi or limousine driver, will you actually be needed in 10, 20 or 30 years?

That’s a good question but one thing is for sure and that is in the back of your driverless taxi in 10, 20 or 30 years I’m sure there will be an accountant on his way to a meeting…

Exam tips released but don’t crash like this guy…

Obtaining a professional qualification is a tough but ultimately rewarding journey.

It’s important to appreciate that whilst your studying before the exam is the key part of your journey, it’s also vital that you keep calm during the exam and focus on good exam technique.

We’ve just released our CIMA exam tips (the ACCA tips will follow at the end of this month) and whilst only the examiner knows what’s in the exams, our tips highlight areas that we would pay close attention to if we were sitting the exams.

One individual though who no doubt had prepared for his moment in some depth unfortunately lost control at a key moment and the result is shown in the video below.

The person involved was no doubt feeling confident sat in his £150,000 Lamborghinis Gallardo sports car but at the crucial moment he blew it big time.

Nobody was hurt in the incident apart from the driver’s pride and using the exam analogy, remember to stay calm and focussed during the exam no matter how exciting your journey to the exam has been. You don’t want to end up feeling like the guy in the video.

Here are our CIMA exam tips (follow the link to the paper you’re interested in and the exam tips are at the bottom right of the page).

Are Manchester City just copying Manchester United?

Manchester City may have won the Premier league yesterday and beaten Manchester United into second place but are they simply copying the red team of Manchester?

Manchester United shirts are currently made by Nike whilst Manchester City shirts are made by Umbro.

Umbro also sponsored the England kit and the brand has been around for many years. In fact its first major football kit was made for Manchester City back in 1934.

Manchester City though recently announced that next season their shirts would be Nike shirts rather than Umbro shirts. Was this a case of Nike paying lots of money to take the shirt deal away from Umbro?

No, in fact it was a clever strategic move by Nike as Nike in fact own Umbro.

The Umbro company (and brand) was purchased by Nike in 2008 so why the change from Umbro to Nike next season?

Well, Umbro is well known in the UK but doesn’t have the global recognition that Nike does. Now that Manchester City are becoming more globally attractive (i.e. because they are now winning trophies) Nike has decided to roll out the big Nike brand and its associated global footprint. As a result from next season the globally recognised football club will have their kit made by the globally recognised sportswear brand. A nice fit in more ways than one.

So, both Manchester clubs are now wearing Nike shirts. Is this a sign of things to come and will we see a combined Manchester team which is managed by Sir Alex Mancini and the games take place at the City of Trafford Stadium?

Somehow, I just don’t think that’s going to happen…

Apple users are (probably) liars…

Earlier this year we blogged about the CEO of Yahoo telling a lie on his CV. Whilst a number of you no doubt thought this was very bad, here’s a nice ethical question for you – have you lied recently?

My guess is that you have. Now before you get all righteous about it I think that you probably did it without even thinking.

Wow, this is pretty worrying isn’t it? A lot of you are studying for professional exams and if I’m here saying that you have lied without thinking about it then what does that mean for your profession going forward?

Terms and conditions (or T&Cs) are essential for companies which are operating on the Internet. For example, they clarify the relationship between the user and the supplier and make it clear what it provided. In reality, the chances are that they also limit the liability of the provider!

As well as having some great products, Apple also has a pretty significant set of T&Cs.

The consumer watchdog organisation “Which”, has recently released a report which criticises the length of some T&Cs.

For any of you that have loaded the Apple iTunes software onto your computer then in theory you should have read their terms and conditions. After all, you had to tick that you agreed with them.

The T&Cs of Apple iTunes reaches a staggering 19,972 words. To put this into perspective, there are more words in the Apple iTunes Terms & Conditions than there are in Shakespeare’s famous play Macbeth (if you’re interested, a mere 18,110 words).

For those of you that are fans of Shakespeare you may prefer Hamlet to Macbeth. If you’re interested, Hamlet has a total word count of 30,066.

If you’ve ever used PayPal then you would have agreed with their terms and conditions. If you had in fact read their terms and conditions then it would have taken you more time than it would have taken you to read Hamlet as the PayPal T&Cs have a phenomenal 36,275 words – 6,209 words more than Hamlet…

Is it embarrassing to be an accountant?

What’s your CV like? Now I’m not talking about what you’ve actually done. No, I’m talking about a more basic issue here.

Namely, is it factually correct?

We’ve all stretched the truth a little bit on our CV’s (or to put a more positive spin on it, we all tend to emphasise our strong points).

If you’re the CEO of the powerhouse that is Yahoo, what do you think your CV looks like?

According to Yahoo investor Dan Loeb there is a pretty major error in the CV of Scott Thompson, Yahoo’s CEO.

Mr Loeb pointed out that Mr Thompson’s official company biography and the filings with the Securities and Exchange Commission noted that he held degrees in both accounting and computer science.

After a pretty “rudimentary Google search” Mr Loeb pointed out that the computer science degree was pure fiction and Yahoo’s CEO did not in fact have a computer science degree.

As at the time of writing this blog entry, Mr Thompson has apologised for the false CV but has not made any explanation as to why he lied. He also still has his job as CEO of Yahoo.

This raises some interesting questions.

For example, was it just a simple case of him being embarrassed that he held an accounting degree and the only reason he said he had a computer science degree was to hide this embarrassment?

Perhaps a more serious question to ask though is whether an individual who has lied on his CV is suitable to lead such a prestigious quoted company such as Yahoo?

It’s not clear at this stage whether Mr Thompson will retain his job as CEO of Yahoo. My view though is that even if he loses his job his up to date CV will say that he left Yahoo as he had “grown out of the position and wanted new challenges”…

What would you prefer – cheap drugs or new drugs?

Whilst the answer would to a certain extent depend on your personal situation, it’s one of the challenges currently facing the pharmaceutical industry.

The major pharmaceutical companies all have significant research and development (R&D) expenses. It’s been estimated that to get a new medicine onto the market from scratch it costs over £1 billion on average.

That’s a lot of R&D and importantly for the drugs companies, it’s a lot of expenses that need to be recovered.

So how do they recover their R&D expenses?

Well, their hope is that they have various “blockbuster drugs” that will treat or cure some of the more common medical problems and will generate significant amounts of revenue.

The challenge for these drug companies though is that if they spend a significant amount on R&D to discover a drug which is going to enable them to recover these R&D expenses (plus generate a profit), they will be a bit disappointed if other drug companies develop cheap versions of these drugs once they’ve been discovered.

In other words, these other companies won’t have the significant R&D expenses and instead will just copy the newly discovered drugs and get the revenue in.

The pharmaceutical industry tries to get around this problem by providing a 10 to 15 year “patent period” after discovery of the drug whereby other companies cannot copy it.

The giant pharmaceutical company Pfizer has a blockbuster drug called Lipitor (it helps reduce cholesterol) and this is about to come out of its patented protection. The drug was first invented in the 1980s and since then it has reportedly generated more than $125 billion of revenue for Pfizer.

Whilst this has been an extremely successful drug for Pfizer (it accounted for 15% of their revenue last year) things are going to change dramatically in the near future.

As soon as the patent protection period ends next week for the drug, other drug companies will make cheap (but still effective) copies of the drug and it is estimated that the price will fall by 85%.

This in itself highlights an interesting ethical discussion surrounding pharmaceutical companies.

Namely, should they be able to enjoy the benefit of a patent protection to enable them to keep prices high so that they can put money back into R&D or are they making significant profits by pricing the drugs out of the reach of a lot of people around the world?

I’d love to invite you to lunch but…

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Have you ever been to lunch with a colleague?

My guess is that unless (a) you work by yourself, (b) nobody likes you , or (c) you have a serious body odour problem then the chances are that you have had lunch with a colleague.

Now let me guess. What did you talk about over lunch?

Was it by any chance “work”?

Yes, we all do it. If we go out for lunch with a colleague then a lot of the time we’ll probably end up talking about work. Now, this could be the latest racy gossip about Mr X and Mrs Y but the chances are it may well just be about some project you are currently working on.

So is this a problem that you are talking about work over lunch?

Tech giant Apple seem to think that there could be some issues over talking about work whilst eating your lunch. They have just announced plans to open a restaurant which is reserved solely for employees.

This isn’t an on-site canteen or cafe. No, it is a two-storey building that will be located several streets away from Apple’s headquarters in Cupertino, California.

Apple already run a restaurant called Caffe Mac but this restaurant is open to non-Apple employees as well as Apple employees. An obvious concern of this is that if all the Apple people are chatting away about projects they are working on such as the iPhone 28 then who knows if Mr Samsung, Mrs HTC or Miss Nokia are sitting at the next table pretending to read a newspaper.

The new “Apple only” restaurant will be a separate stand-alone restaurant exclusively for Apple employees who will be free to talk as loud as they like about the latest project they are working on.

I wonder though whether the waiters and waitresses will be using Samsung or HTC phones…

Should a PwC partner blame the junior staff?

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If something goes wrong on an audit, whose fault is it? Is it the partner’s fault or the junior member of staff’s fault?

Over in Australia, the Sydney Morning Herald newspaper has provided some interesting commentary on a legal case that is currently taking place concerning an audit undertaken by PricewaterhouseCoopers (PwC).

The background to the case is that shareholders in a company called Centro are claiming that PwC misled and deceived them by failing to properly disclose that the Centro group had billions of dollars of short-term debt that needed to be refinanced in 2006 – 2007.

The lead PwC partner on the audit, a gentleman by the name of Stephen Cougle, is facing a bit of a grilling in court at the moment.

Under cross-examination yesterday in the Australian Federal Court, Mr Cougle denied trying to “bury” one of the errors by putting it in the small print notes at the back of the accounts.

According to reports, he said “when one of his PwC colleagues told him in late August that a $1.1 billion bridging loan had been wrongly classified as a long-term debt in the unaudited, preliminary accounts, he suggested Centro might need to disclose it publicly. When Centro declined this idea, he decided one option was to point to the discrepancy in a note to the final accounts”

According to Mr Cougle though he did not try to “bury it”.

Whether or not it was satisfactorily disclosed will be a decision for the court and that decision is not expected until the end of May

However, one thing for sure is that a number of the junior PwC staff members who were on the audit are probably not currently the best of friends with Mr Cougle.

Despite being the lead partner on the audit, he has already “declined to accept any responsibility for the accounting debacle” and has “blamed junior staff.”

Now blaming junior staff for an error in the accounts that you signed off on is in itself an interesting point to debate. After all, there is a well-known saying that you “can delegate work but you can’t delegate responsibility”.

The outcome of this case will be very interesting for auditors around the world. Not least for guidance on who is the best person to blame if there is an error on your audit…

Which is more important to you – the first or last bag?

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It never ceases to amaze me. You’re at an airport, you check-in and then wave goodbye to your luggage. When you arrive at your destination you expect your luggage to arrive on the luggage carousel at the same time you.

I met an old friend last week who was telling me about a situation he faced a few years ago when working on a project at an airport.

The aim of the project was to improve the business process of unloading the bags from the plane and getting them onto the luggage carousel.

This is something we take for granted but the logistics involved are not always that simple and passengers can quickly get frustrated if they don’t get their luggage within a few minutes.

One of the Key Performance Indicators (KPI’s) in place to measure the efficiency of the process was the time it took to get the first piece of luggage from the plane to the luggage carousel.

Now whilst this may sound like a sensible KPI, it was also used to determine the bonus that the luggage handlers would get (the quicker the luggage was delivered the higher the bonus).

Unfortunately for the management of the airport it was also open to abuse.

It may seem obvious now but what was happening was that the baggage handlers were getting the fittest member of their team to literally grab a bag from the hold of the plane and run to the carousel so that the time between landing and the “first luggage on the carousel” was minimal.

Meanwhile, all of the remaining pieces of luggage would be unloaded at a much slower pace.

The end result was happy baggage handlers but unhappy passengers!

Needless to say management soon identified this and the KPI was changed so that it was now the time taken to unload the last bag rather than the first bag that was important.

Would Michael Porter sleep in this bed?

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Michael Porter is arguably the world’s most famous management theorist. His theories such as the 5 forces model and Value Chain Analysis are key parts of the syllabus for several ACCA and CIMA papers.

His generic strategy approach of “differentiation” and “cost leadership” has been around for a number of years and whilst there is a clear argument that a significant proportion of companies are nowadays trying to combine both approaches by aiming to differentiate the product or service whilst at the same time focusing on cost reduction, there is one particular segment of the hotel market that almost certainly has to differentiate to survive.

The boutique hotel segment inherently struggles to compete with the big national and international chains of hotels on the cost leadership approach (these bigger hotel chains will have significant economies of scale for example).

Instead, they will need to be “different” in terms of for example location or “friendliness”.

When it comes to differentiation, the aptly named Jumbo Stay Hotel will be hard to beat for people that are keen on airlines.

Located on a disused runway at Stockholm Arlanda airport, the Hotel is in fact an old Jumbo jet that that has been converted into a luxury hotel. The Jumbo Jet hotel has 27 bedrooms with 76 beds but the best room has to be cockpit which has now been made into a luxury suite with panoramic views of the airport.

The upper deck of the plane which used to house business class passengers is now a cafe serving fresh food and drinks.

We’ve blogged before about Ryan Air’s cost leadership approach to their flights and it’s nice to see a differentiation approach to another part of the airline industry.

Is this the new face of Ernst & Young?

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I guess we’ve all done it at some time or another.

We’ve woken up one morning and due to too much work (or too much drink…) you look in the mirror and think “oh dear” (or some similar but slightly stronger words).

Well step forward Mr Ed Moyse and Mr Ross Harper who when they looked in the mirror recently saw the Ernst & Young logo staring back at them.

Now this wasn’t a drunken night out at an EY party that went wrong. No, it was a deliberate move.

The two entrepreneurial university students were thinking of ways to reduce the student debt that they had built up when they came up with the idea of using their faces as mobile advertising screens.

They set up their website – buymyface.com – and are selling their “advertising board” faces for one year.

One of their first clients was EY who paid them to display the EY logo on their faces during a skiing trip to the Alps so that EY could advertise to potential new recruits.

The idea seems to have caught on and according to their website as of today they have raised £34,000 from selling their unusual advertising boards.

Their going rate for a day’s advertising on their faces has also increased since they started their business.  They are now charging £600 for a day’s advertising.

EY seem to be so impressed with them that they have now become the main sponsor of the website.

Does this mean that at some stage in the future your accountants “uniform” of dark suit and white shirt will be accompanied by the corporate logo painted on your face?

Does it matter if your food is hot or cold?

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Now I’m not talking about the nutritional benefits of food. No, I’m talking about the cost to you of purchasing food.

The recent tax budget in the UK has caused a bit of a debate.

The background to matters is that, as is the case in a lot of countries, when food is sold in the UK it is zero rated for VAT purposes. In other words, there is no VAT charged on it.

The exception to this is any food which is sold as a “supply in the course of catering”. This means that whilst “food” bought at a supermarket does not have VAT added to it, food bought at a restaurant or at a takeaway does have VAT applied to it as it is a “supply in the course of catering”. The adding of the VAT to the cost obviously makes it more expensive to the individual customer.

So far it’s all fairly clear with in general terms, food having VAT added to it if it is to be consumed immediately whilst food purchased to eat later doesn’t have VAT added to it.

There have however been certain types of food which have had a somewhat “confused” existence.

“Pasties” for example are in effect meat and vegetable filled types of pie which originate from the south-west part of England. People would often buy pasties from bakeries just as they had been baked and the question was whether these items were food to be taken home to be eaten later (VAT zero rated) or food that was to be consumed immediately (VAT standard rated).

To date, the treatment has been one of zero rating but in the recent budget the government announced a proposal that any food sold above the ambient air temperature would be liable to VAT at the standard rate.

This would mean that if people bought a pasty that had just been cooked they would have to pay the VAT even if they were going to eat it several hours later at home after it had cooled down.

Whilst the additional tax revenue that would be generated by this approach would be relatively small, the amount of publicity that this is getting in the UK is significant.

The tax authorities issued a consultative document on budget day called “VAT: addressing borderline anomalies” and within this was the topic of hot take away food.

Because it’s a consultative document it’s not actually law at the moment. Instead, people can comment on the issue prior to it becoming law and there may well be some changes.

The closing date for comments on this is 4 May 2012 and no doubt there will be lots of pasty lovers closely watching the outcome.

Hello and goodbye to the CEO of Deloitte Netherlands…

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It’s been a mixed year for Piet Hein Meeter the (former) chief executive of Deloitte in the Netherlands.

It started well for him as he was appointed as the new CEO of the Dutch operations of Deloitte on the 1st of January this year.

However within a few months his fortunes have changed dramatically.

Deloitte recently announced that Mr Meeter had resigned from his position due to “infringement of independence rules which surfaced following a routine internal compliance review arranged by Deloitte”.

The background to this is all about auditor independence.

In order for auditors to be able to do their job of “checking the books” of clients they have to be independent. After all, if an auditor is not independent from the company he is checking then there’s a risk that he or she may give a biased or incorrect opinion on matters.

In the case of Mr Meeter it seems that he had shareholdings in some of the clients of Deloitte Netherlands and hence broke independence rules (i.e. he headed up an audit company that checked the accounts of a company which he part owned).

It does seem rather strange that Mr Meeter held these shares as it’s a fundamental independence issue for senior staff and partners within accounting firms not to hold shares in clients.

It may well have been a simple but extreme case of oversight by him as there was no evidence of him benefiting from his shareholding and position (the investigation by Deloitte pointed out that “Meeter had no involvement in any of the audits of the applicable companies and that Deloitte’s independence as audit firm of these clients has not been impacted).

Deloitte quite rightly acted quickly though to avoid any potential problems and Mr Meeter is now no longer with Deloitte.

We wish his successor, Mr Peter Bommel, the best of luck in his new role.

Mr Bommel is currently the interim CEO of Deloitte Netherlands and no doubt has recently reviewed his personal investments very carefully to ensure that there is no repeat of Mr Meeter’s error.

Not the best way to start a presentation…

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The IT guys I’ve met in my career have all been very nice people. Admittedly they all seem to be slightly mad and do tend to talk in a strange language with lots of mentions of “coding this and coding that”.

To be fair though they all probably think I’m slightly mad when I talk to fellow finance people in my strange language about “SOCI this and SOFP that”.

If you talk to your IT colleagues though one thing that they tend to take very seriously is the level of security.

Now whilst there are lots of higher level security precautions present such as firewalls and anti-virus programmes there are also some more simple precautions that you should take.

Memory sticks (or USB or flash drives as they are sometime known) can all contain confidential documents and most memory sticks are not password protected.

It pays to double check what’s on the memory stick you’re carrying around with you in case it contains confidential documents and you lose it.

In a similar vein it’s always worth checking what other files are on your flash drive if you’re about to make a presentation.

Unfortunately for Father Martin McVeigh, a Catholic priest in Northern Ireland, he didn’t check what other files were on the flash drive he was going to use when he recently did a presentation to some parents of children at a local primary school.

According to media reports, whilst loading up his presentation for the parents, Father McVeigh inadvertently showed a slideshow of indecent pornographic images onto a screen.

The x-rated slideshow was on the memory stick that Father McVeigh had put into the computer to load up his intended presentation.

Father McVeigh was understandably a bit shocked at seeing the naked pictures on the screen (although to be fair probably not as shocked as the parents in the audience were) and according to the BBC website he was “visibly shaken” and “bolted out of the room”.

He later stated that he didn’t know how the images got onto the memory stick.

And the morale of the story?

Well, I guess that IT security is not just the higher level technical areas but also the more simple areas such as making sure you know what else is on your memory stick…

Everyone’s present but the class is empty…

KPIs (Key Performance Indicators) are ways of measuring Critical Success Factors in a business (Critical Success Factors are in effect items which an organisation has to get right in order to survive).

Could a t-shirt be part of a KPI though?

It’s not just commercial companies that need to focus on KPIs. Not for profit organisations should also be using them.

Schools are good examples of where KPIs should be used. Measures such as classroom utilisation and exam success should be monitored.

There’s also the subject of looking at the percentage of students that decide to take unauthorised absence from school (or to use a quant old English term, they decide to “bunk off school” and miss lessons).

A city in Brazil has just identified a novel approach to let parents know if their children are missing classes.

Approximately 20,000 students in the Brazilian city of Vitoria de Conquista have just started wearing T-shirts with a built in chip. This chip links with a receiver in class and if the student isn’t where he or she should be a message is sent to the parents to let them know the student isn’t in class.

This sounds very much like a high tech version of “clocking on and clocking off” which can be found at certain workplaces around the world where workers have to record their arrival and departure times.

Only time will tell if the chip enabled t-shirts will be a success and the relevant KPIs for the schools will improve.

Personally I somehow think that some entrepreneurial school-kid may start charging a fee for looking after t-shirts in class. He may well be found sitting in the classroom with a big pile of t-shirts next to him but no classmates…

How much paid holiday should you get?
Here’s an interesting question – if you were asked whether you wanted more paid holiday or not, what would you say?
The standard amount of paid holiday in most European countries is 4 weeks.
Over in Switzerland though there was a national referendum recently which amongst other things asked people to vote on increasing the minimum amount of paid holidays from 4 weeks to 6 weeks a year.
Now, let’s just pause there and think about this.
Be honest. If somebody said to you “Do you want 6 weeks paid holiday instead of 4?” what would you say?
My feeling is that there may be a fair few of you out there who would vote for the 6 weeks holiday.
Now holidays are important and are needed to enable people to “wind down” and “recharge their batteries” after working hard but businesses in Switzerland warned against increasing the holiday entitlement.
They mentioned that having more weeks of paid vacation would in effect increase the labour costs for businesses (they would be paying the same amount as before but for lower productivity).
This increased labour cost could put the economy at risk. Putting it another way, an increase to 6 weeks paid holiday could result in people losing their jobs and having in effect a 52 week “unpaid holiday”.
The votes were counted and two-thirds of the voters rejected the proposal to increase the amount of holiday and the minimum stays at 4 weeks.
Now go and grab two colleagues and ask them if they would want an extra 2 weeks holiday.
If you’re in Switzerland then only one of the three of you will be saying yes.

How much paid holiday should you get?

Here’s an interesting question – if you were asked whether you wanted more paid holiday or not, what would you say?

The standard amount of paid holiday in most European countries is 4 weeks.

Over in Switzerland though there was a national referendum recently which amongst other things asked people to vote on increasing the minimum amount of paid holidays from 4 weeks to 6 weeks a year.

Now, let’s just pause there and think about this.

Be honest. If somebody said to you “Do you want 6 weeks paid holiday instead of 4?” what would you say?

My feeling is that there may be a fair few of you out there who would vote for the 6 weeks holiday.

Now holidays are important and are needed to enable people to “wind down” and “recharge their batteries” after working hard but businesses in Switzerland warned against increasing the holiday entitlement.

They mentioned that having more weeks of paid vacation would in effect increase the labour costs for businesses (they would be paying the same amount as before but for lower productivity).

This increased labour cost could put the economy at risk. Putting it another way, an increase to 6 weeks paid holiday could result in people losing their jobs and having in effect a 52 week “unpaid holiday”.

The votes were counted and two-thirds of the voters rejected the proposal to increase the amount of holiday and the minimum stays at 4 weeks.

Now go and grab two colleagues and ask them if they would want an extra 2 weeks holiday.

If you’re in Switzerland then only one of the three of you will be saying yes.

Not the best day in the office for this lady…

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Winning the lottery is a life changing experience.

The recent Euromillions lottery had a first prize of £38 million.

In a lot of companies, groups of individuals get together to form a syndicate and they combine their money and enter into a lottery.

The idea is that by combining your money you have more entries and you’re more likely to win. To be honest though anyone with a basic understanding of maths will realise that the chances of winning are still infinitesimally small.

When colleagues from an organisation set up such a syndicate to enter the lottery it’s advisable to have a written record of what was agreed (for example what happens if someone is away and can’t pay their share of the lottery money).

A group of 13 bus drivers working for the Stagecoach company in the UK formed a lottery syndicate and agreed to put in £2 per week to enter the lottery.

Six months ago one of the syndicate, a lady by the name of Miss Loveday (or Miss Unlucky as she will soon no doubt become known) decided to withdraw from the syndicate as she reportedly couldn’t afford to pay the £2 to enter each week.

Fast forward to last week and the winning lottery numbers matched those chosen by the syndicate.

Their winnings? A rather pleasant £38 million which works out at over £3 million each.

Having withdrawn from the office syndicate 6 months ago Miss Loveday doesn’t get anything from the lottery win.

Now, we’ve all had bad days at the office but finding out that you’re not an instant multi millionaire because you stopped paying your weekly £2 entry fee 6 months ago probably ranks up there as being “a really bad day at the office”.

One of the winning drivers wasn’t overly sympathetic about her plight though as he was reported as saying “You’ve got to be in it to win it”.

The one piece of good news for the unlucky Miss Loveday is that she doesn’t have to listen to any of the winners celebrating their win as all of them resigned immediately from their £17,000 a year jobs and didn’t bother going into work the day after winning…

Do you want to become Lady Gaga’s Accountant?

We get a weekly report on the phrases that people are searching for when they visit our website.

As well as the search terms that would be expected on our site such as “ACCA courses” or “CIMA courses” there are also some more unusual ones.

One recent such unusual search term was “How do I become Lady Gaga’s accountant?”

Now this is a good question but unfortunately if you’re the person that’s hoping to become Lady Gaga’s accountant then sorry but we don’t quite know the answer to that one.

What is interesting about the music industry though is that things are changing for the top artists around the world.

Music trade magazine Billboard has just published their annual list of the top revenue generating music acts in the US.

The top 10 includes some of the newer artists such as Taylor Swift (No. 1 with $35.7m) and Adele (No. 10 with $13.1m) but it also includes some of the more experienced artists such as U2 (No. 2 with $35.1m) and Bon Jovi (No. 7 with $15.8m).

These are pretty impressive amounts of income especially when you consider that they only represent the US income sources and also do not include revenue from sponsorships or merchandise sales.

The income profile of top music acts has changed over recent years though.

Whereas a decade ago the dominant proportion of income would have come from sales of CDs the big earner for most of the artists nowadays is concert and touring revenue.

U2 are the kings of making money from tours and their recently completed “360° Tour” which ran from 2009 to 2011 grossed an incredible $736 million and over 7 million people saw them in concert on the tour.

Back to the person that searched for how to become Lady Gaga’s accountant though and it remains to be seen whether the person searching for the answer was an individual student or a business development partner at a firm of accountants…

(here are your free ACCA and CIMA online courses)

Would a pizza encourage you to get a vasectomy…

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Companies often offer incentives to encourage people to sign up for their products or services.

BOGOF is a term that’s well known in marketing circles.

It stands for “Buy One Get One Free” and as the phrase implies it is a sales promotion encouraging people to buy a product or service. If they pay for one they’ll get the other one free.

In a somewhat unusual approach to promoting a particular service, a doctor in Massachusetts in America is currently offering a free pizza with every vasectomy.

Now, call me old fashioned but the decision as to whether or not you get a vasectomy should in my opinion be driven by other factors other than the offer of a free Spicy Meat Feast Deep Pan Pizza.

Evan Cohen, the manager of Urology Associates who are offering the promotion was quoted as saying that March is the most popular month for vasectomy operations.

Apparently the Spring weather offers a more comfortable recovery period than other months and also for sports lovers March has what is known as “March Madness” when the NCAA’s college basketball tournament takes place. This tournament features 68 basketball games on television throughout the day and evening for most of March.

So, there you go. Who needs a BOGOF promotion as what better incentive can there be to have a vasectomy done that sitting at home with your feet up watching basketball and eating a free pizza??

The TV commercial by Urology Associates advertising the free pizza offer is below.

Fast food or slow drinks?

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What price should you charge for your products?

As any professional business qualification student knows, there are several different pricing strategies that can be used when setting the price for your product.

vodkaYou could for example base it on the internal factors of how much it costs you to produce (cost plus pricing) or you could use external factors such as how much a customer is willing to pay for it (perceived value pricing).

So if you owned a cafe what pricing strategy would you use?

Well over in Moscow in Russia a new cafe has taken an unusual approach to pricing.

The trendy Babochki Anticafé does not charge for food and drink. Instead the customers are charged according to the time they spend at the cafe.

Customers pay one ruble and 50 kopecks for each minute they spend at the cafe. This works out at approximately £2 per hour.

Now this got the accountant in me thinking as I must admit that I am partial to the occasional social drink and there are some very good Russian vodkas out there.

A pleasant evening spent drinking some of the top (and very expensive) Russian vodkas at £2 per hour seems like a good deal (even allowing for the charge for the time when I fall asleep in the cafe at the end of the evening)

Alas for anybody thinking of grabbing a drinking bargain the refreshments are limited to tea, coffee and deserts.

Still, it’s certainly a novel approach to pricing food and drink and we wish the Anticafé well.

How would you start the biggest advertising agency in the world?

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What have the Olympics, The European Football Championships and the American presidential elections got in common?

Well, if you’re WPP, the world’s largest advertising and marketing group then they are all hopefully going to make it a bumper year for profits.

The WPP Group make a fascinating case study.

On Thursday they released their results for 2011 and they were pretty spectacular.

Pre tax profits in 2011 were 18% higher than the previous year and broke the £1 billion mark for the first time. Revenue also increased by a healthy 5% to exceed the £10 billion level.

2012 is also expected to be a good year for them as “high spending advertising events” such as the Olympics and the US presidential race are all taking place this year. 2013 could be more of a challenge for the company though as there aren’t any of these big spend events on the horizon.

So, WPP are the largest advertising group in the world in terms of revenue and they’ve got an interesting history.

The name WPP originates from “Wire and Plastic Products” which was a UK manufacturer of wire baskets and was nothing to do with advertising.

Back in the 1980s a gentleman by the name of Martin Sorrel (now Sir Martin Sorrel,) who was previously the Finance Director of advertising agency Saatchi & Saatchi, was looking for a listed company to use as a vehicle through which to build a worldwide marketing services company.

He invested in the “Wire and Plastics Products” company but had no intention of owning a wire basket manufacturing company.

No, instead he used it as a vehicle to buy up companies in the advertising field to create a global powerhouse in terms of advertising groups

As the picture above shows, there are numerous brands within the current WPP group and these include some of the world’s largest firms in the areas of advertising such as JWT, Ogilvy Group and Young & Rubicam.

So, there you go. Buy a company that makes wire baskets and you could end up running the largest advertising agency group in the world.

CIMA and AICPA. Who made the first move?

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Life can be difficult if you’re a man. You fall in love and decide to get married. The challenge is that you have to ask the love of your life to get married and what happens if she says no?

It’s a leap year this year and today is the 29th February. This means that today is the day where tradition says that ladies can ask men if they would marry them.

Ignoring jokes about there being no men on the streets today as they are all hiding, what has all this got to do with the world of finance?

Well, what about CIMA and AICPA?

They have recently announced a joint venture or if we’re feeling romantic let’s call it a marriage.

They have launched the Chartered Global Management Accountant (CGMA) designation and I have to say that I think it makes a great joint venture marriage. They are both leading professional bodies and the marriage will increase the recognition of management accounting worldwide.

Further details of the marriage can be found at the CGMA website but with all this talk of wedding proposals it got me thinking about who made the first move in the relationship between CIMA and AICPA?

Who proposed to whom? Was it love at first sight? Was it a case of “I like you, do you like me?”

Whatever was the story behind the first signs of romance between the two bodies it was certainly more successful than the poor guy below.

Now, let me think. What can be more romantic than proposing in a shopping mall with your friend strumming away on his guitar…

Has pwc just made a huge mistake?

The 84th Academy Awards ceremony (the Oscars) took place last night in Los Angeles.

Pwc have looked after the balloting process of the Oscars for 78 years and since they have been involved they have counted in excess of 450,000 ballots and filled over 2,600 envelopes with the winning names.

According to pwc there has never been a single security breach but if I’m honest, I’m not so sure.

Whilst the French silent movie The Artist won best picture award, some would argue that there must have been an error by pwc when it came to counting the votes.

The US “Center for Audit Quality” organisation recently released a film which tells the 3 minute story of “Mr Ledger Lines”, a dashing external auditor and surely this should have won the best picture Oscar??

I’ll leave it up to you to decide whether the short film below, which aims to provide a brief overview of what an external auditor does, was worthy of an Oscar or not…

Underwear: should you wear them or name yourself after them?

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Tonga is a beautiful island in the South Pacific. They have great beaches and lovely weather but what they don’t have are a lot of are icy mountains with toboggan runs.

That hasn’t stopped Tongan Bruno Banani from becoming a pretty successful luger and he recently entered the luge World Championships in Altenberg, Germany.

The interesting twist to this story though is that Bruno was born Fuahea Semi but then changed his name to Bruno Banini.

So why did he change his name?

Well it just so happens that Bruno Banini is also the name of a leading men’s underwear company in Germany and they sponsor Bruno (or Fuahea as he was originally known).

A classic guerrilla or ambush marketing stunt.

Change your name to that of your sponsor so that Bruno Banini (the underwear company) doesn’t have to pay for official sponsorship at events as they are hoping that Bruno Banini (the individual) will do well at an event and get lots of mentions in the press.

Bruno, or “Pants” as he’s probably known to his friends, is hoping to enter the 2014 winter Olympics in Russia and it raises some interesting challenges for the Olympic authorities as they want to avoid any ambush marketing.

Olympic Committee Vice President Thomas Bach was asked about Pants changing his name from Fuahea Semi to Bruno Banini and called it a “perverse marketing idea.”

An interesting challenge for the Olympics as if he has legally changed his name it will be difficult for them to block it.

On a different subject though I should mention that if anyone from Ferrari is reading this I am prepared to change my name to Red Ferrari…