the Abacus | OCTOBER 2015 Intelligence & Insight from CA Sri Lanka 1

october 2015 | www.casrilanka.com

Innovation is more fun when you collaborate on it: Greg Bernada P.28

Quality always wins: Olivia Kirtley Page. 22

ISSN 2279-3860

9 772279 386000 vol.2 • Issue. 7 WHAT EVERY CFO MUST KNOW ABOUT AGILE ERP. JUST THIS. The number of business opportunities out there is infi nite. Becoming truly successful is all about focusing. And with IFS Applications, there are virtually no limitations to what you can do. Or become. A full-suite ERP system, it supports every aspect of your business, every process in your company. www.IFSWORLD.com

Talk to us for your Enterprise Resource Planning (ERP) requirement Contact No.: +94 112379020 / +94 112364400 FOR AGILE BUSINESS email: [email protected] the Abacus | OCTOBER 2015 3 Contents OCTOBER 2015

Features

COVER STORY 22 | Quality always wins: Olivia Kirtley The global federation president thinks the accountancy profession has a world leadership role to play

28 | Innovation is more fun when you collaborate on it: Greg Bernada Sri Lankan accountants have the potential to effect change within their organisations and in society.

36 | Adapt to change: Vusi Thembekwayo Accountants need to alter their perspective to accord with the business realities of the new world.

Olivia Kirtley, president IFAC, says accountants can be world leaders. 16 | Transfer Pricing: (PAGE 22) could Sri Lanka learn from India? India has grappled with Transfer Pricing for nearly one and a half decades and is drafting new laws which could cut legal disputes by half. But Sri Lanka is starting from where India was 15 years ago.

The co-author of Value Proposition Design Greg Adapt to change: Vusi Thembekwayo Bernada says innovation can be fun. (PAGE 28) (PAGE 36) 4 the Abacus | OCTOBER 2015 Contents OCTOBEr 2015

IAASB presents proposal for reporting CA Sri Lanka launches integrated reporting imple- Technology That Travels on summary financial statements(PAGE 13) mentation guide for corporate sector (PAGE 44) (PAGE 51)

10 | Periscope IAASB presents proposal for reporting on summary financial statements MARKET 42 | CA Sri Lanka hosts IFAC MARKET President and CFO’s visit to Sri MARKET Lanka President of the International Federation of Accountants (IFAC) Ms. Olivia Kirtley and Chief Financial Officer Mr. Russell Guthrie were given a grand welcome at CA Sri Lanka on Sunday evening (26 July 2015) when they visited the institute for a reception dinner hosted by CA Sri Lanka in honour of Ms. Kirtley.

Simplifying financial reporting for smaller entities (PAGE 62) 51 | Technology That Travels Being away from the luxuries at home is one of the biggest drawbacks of frequent travel. But now you can get the best of both worlds.

62 | Simplifying financial reporting for smaller entities CA Sri Lanka unveils new Sri Lanka Accounting Standard (SLFRS) for Smaller Entities

56 | Italy’s Northern Capital The second largest city in Italy, Milan is the major economic centre of southern Europe.

Italy’s Northern Capital (PAGE 56) the Abacus | OCTOBER 2015 5

Intelligence & Insight from CA Sri Lanka Regulatory consistency and accounting standards Institute of Chartered Accountants of Sri Lanka (CA he International Federation of Accountants (IFAC) is focusing on two Sri Lanka) is one of the largest priorities – setting up and facilitating the adoption of global account- professional organizations ing standards, and helping to harmonize the regulatory environment in Sri Lanka in which 5,400 across the world. The fact that the IFAC leads global accounting stan- chartered accountants have Tdards setting is common knowledge and the process it follows in establishing obtained membership. The these standards is well know. Institute provides insight and Its second function is far more challenging and a role over which it has no leadership to the accountancy moral authority as it does over creating accounting standards. IFAC’s President and finance profession in Sri Olivia Kirtley, who was in Sri Lanka recently, explained that the IFAC serves as Lanka as well as globally. the global voice on things that are important to the world, where accountants have particular knowledge and expertise, with organisations such as the G20. Our well qualified members The IFAC identifies issues where it can be particularly impactful and effective are trained to provide financial such as government accounting and transparency – it has an initiative called “Ac- knowledge and guidance based countability Now”, and has been speaking out from two perspectives: regarding on the highest professional, the government’s responsibility to have good accounting, where they account technical and ethical for everything and are transparent; and about the need to have qualified ac- standards, thereby assisting countants who can identify, prepare and participate in how that information is communities and organizations used. This ties in with the consistency of regulation, which ensures that rules gain long-term sustainable and regulations put in place are in the best interest of quality. economic growth. Kirtley explains that the IFAC’s strategic plan to meet this challenge is to pro- mote the strength of the standard-setting model and to ensure that all stakehold- ers understand its value. Its greatest strengths are independence from undue influence, not only from the profession but regulators, governments and other stakeholders, and the robust due process that it goes through in maintaining that independence. One of the most important values that the IFAC brings to the global profession is to be that central point, ensuring the strength of the model and its credibility with regulators, governments and the investment community around the world.

Contributors PHOTOGRAPHY CA SRI LANKA © 2015 CA SRI LANKA. All rights reserved. No Avanti Samarasekera Saaliya Thilakarathna 30A, Malalasekera Mawatha, part of this publication may be reproduced or Devan Daniel Shafraz Farook Colombo 7, Sri Lanka distributed in any form without the prior writ- Isankya Kodithuwakku T : 0094-11-2352000 ten permission of the publisher. The views and Shamindra Kulamannage F : 0094-11-2352060 opinions expressed in this publication are those Vinod Moonesinghe E : [email protected] of the authors. CA Journal’s publications con- DESIGN & LAYOUT sultant is Capital Media (Pvt) Ltd., Indika Sriyan Gammudali 22, Flower Terrace, Colombo 7. Phone 0112577387 Blue Ocean Group of Companies An Eminent Property Developer with Sri Lanka’s Most Dynamic and Investment Destinations

Central Bank, the Board of Investment Sri Lanka By investing in unique development projects being and relevant ministry officials are striving to constructed by reputed entities such as Blue provide support and encouragement to develop- Ocean Group of Companies, the investor is ers to inject high standards and raise the profile of guaranteed timely delivery, international quality the housing market in the country. homes, and a definite appreciation in property even before he has taken possession of the Any Sri Lankan, whether residing in the island or condominium. Statistics indicate that buyers of abroad is familiar with the resilience the country Blue Ocean apartment projects have reported a has shown time and again despite political and 25-30% increase in value annually. Further, at economic turmoil. If anything, it is the property present the secondary market for apartments in market that has effective “shock absorbers” to act particular are said to be having brisk sales as a hedge against inflation and other economic reselling at more than 100% the original purchase concerns. price 3 – 4 years ago.

Despite the ethnic conflict that has dogged the Considering the official 32% increase in construc- island for several decades in the past resulting in tion costs per annum the world over, buyers who economic ups and downs, the prices in the city’s put off investing in a home in Sri Lanka because of apartment market have appreciated steadily over a variety of eco-political reasons find themselves the past several years and proved to be a lucrative completely out priced by the market years down investment. the line. The reality is that building homes is never going to get cheaper, even if the economy starts Of course the reliability of the developer is a key skyrocketing upwards. Not to mention the fact that factor that determines the success of the project. land prices too have gone through the roof in The developers credentials and past track records residential areas in Colombo. More and more wise are of paramount importance and needs to be investors realize that buying a ready condominium given due attention prior to making investments in in a premier residential area is much cheaper the real estate market. Aside from the Group has than just buying land in that vicinity, leave alone branched out extensively with a number of subsid- factoring in the cost of constructing a home. Rents The trend of condominium development in Sri iaries. To name a few of its vast portfolio; The have also been registering growth of 18% year on Lanka’s property market has been given a boost Group’s fully owned subsidiary Link Engineering year, which is another encouraging factor that by Blue Ocean Group of Companies one of Sri (Pvt) Limited, which has gained great reputation affects the buyer’s decision to invest in a high Lanka’s largest and most respected conglomer- locally and internationally, has already cemented profile development in an excellent location, as it ates, headed by Chairman Mr.Thumilan, with the position of the Blue Ocean Group in construc- guarantees a return on investment. some unique Investment Property, Holiday tion as its leader. It has over 35 years of Home and Luxury Living concepts. experience of the construction field through which Moreover, unique projects such as those it has gained many accolades for the excellence. developed by Blue Ocean Group of Companies The Group’s Chairman S. Thumilan, who owns offer not just a home but a “lifestyle” – with an an illustrious portfolio himself, is instrumental to Blue Ocean Group is an expert at quality construc- array of sports and recreation facilities and other the Group’s extensive diversification that tions and their every project is BOI (Board of utilities and conveniences at their fingertips, all include Education, Engineering and Construc- Investment, Sri Lanka) certified. All apartments within the confines of the condominium complex tion, Real estate, corporate Consultancy, that Blue Ocean has constructed are monitored itself! In the race to simplify our lives, cut down Trading, Electrical and Engineering Consultancy. and governed by ISO 9001-2008 quality systems commuting time to and from work/school and “To be the most respected, ethically sound and and they are in most prestigious locations in Sri spend more time with loved ones, a conveniently socially responsible company,” has been the Lanka. Their assets grew in the past few years located condominium offering recreation and base of conglomerate’s many endeavours, recording a turnover of more than billions. The comfort seems like an opportunity too good to be explains S. Thumilan. Embracing the “Blue company now engages in building private and missed. Blue Ocean’s projects offer hi-tech Ocean Strategy” that helped achieve generation public mixed project-portfolio which smoothens security equipment and trained security person- of growth and profit through innovation, in a and stabilizes their financial flow and profitability. nel to guarantee safety for its residents, another created and uncontested environment, the With this growth, they will further strengthen their feature that is much appreciated by investors. It is Group engages in its key markets in Asia Pacific, position and will approach high revenue projects after all a buyers’ market and buyers are savvy European, Middle East and East Asian regions. thereby assuring their brand an enviable position when it comes to recognizing which project will Covering all aspects of construction, its services not only in Sri Lanka but in the international prove lucrative. encompass an umbrella solution to contractors market as well. and customers. The company offer both The booming property market, Thumilan notes, construction and consulting including for the One of the Company invaluable assets is human “Of which owners now experience higher appreci- construction of private houses. resource: Chartered Architects, Chartered ation, is due to the Government’s timely vision Engineers, Chartered Accountants, Interior targeting the economic growth. It in turn Some recent analysts of the real estate market Designers and other professionals in varied fields increased the demand for the property,” he have predicted a downturn in the housing and who have garnered extensive exposure and stressed. Low lending rates, low cost loans for condo market in the country, which does not industry experience locally and abroad over the property buyers, high increase in the number of appear to be so, for the fundamental reason years. “In comparison with present market long-stay tourists have greatly contributed to that they do not take into account the target standards, our professionals are highly capable of ascending the demand for property, particularly groups for which these properties are being contributing to improving real estate value” for apartments. “We are very happy that we were constructed. By using a ‘one-size-fits-all stressed Thumilan. Clients are further attracted able to create wealth for our customers through approach’, the analysts misinform readers and by the sheer volume of work undertaken and property. While enhancing rental income as well skew the reality of the state of affairs in the delivered within a scheduled time-frame by the property market today. company. Due to its unconventional expert consultation services on property management, It is important to recognize that more than 70% development schemes, real estate investment buyers of condominiums in Colombo are expatri- options and other related aspects, Blue Ocean ate Sri Lankans, who would like to own a proper- Group has gradually gained prominence in both ty they could call their own back home. The local and international arenas.

8 the Abacus | OCTOBER 2015

A word from the President

More regulations won’t narrow the expectations gap

y message in the last tions’ cost of doing business. There edition of the journal is no doubt that good regulation was about the earnest can ensure fairness, efficiency and need to bridge the transparency in any economy. Mak- Mexpectations gap between society, ing it work is a neverending mission. policymakers and the accountancy At the same time, economic growth profession. Ignoring this expecta- is a challenge globally as it is in Sri tions gap will erode the profession’s Lanka. These two, regulation and credibility in the eyes of policymak- economic growth, impact each oth- ers and the society, and the market er and this is a wake-up call for us and economy will feel the negative to examine the impact of regulation, effects of this. This expectations gap including those proposed reforms in seems to be creating pressure for Sri Lanka. more regulations to be introduced. Urgent questions surround- While I fully agree the expecta- ing regulation’s impact on growth tions gap has to be bridged, I am not and innovation, as well as how its sure whether the answer to this is complexity is affecting the agility more regulations. Increased regula- needed to face emerging risks, must tions can undermine core objectives be addressed. of the profession’s work, and stifle It is also important to note the business development and growth market will always be ahead of in the corporate sector. regulations and the response to that The Global Regulation Survey shouldn’t be rigid regulation, but to recently carried out by the Interna- create greater awareness and spread tional Federation of Accountants knowledge among affected stake- (IFAC) shows that regulation has holders. It is also important to have become immensely complex and principles-based responsibility on is impairing organisations’ oppor- businesses and business leaders. tunities to grow and innovate. In Ross Levine of the Bank of Arjuna Herath fact, an overwhelming two-thirds International Settlements said, in President - CA Sri Lanka of respondents to this survey said relation to governance of financial regulation is having a significant regulations, that there is a danger or very significant impact on their that past misdeeds will result or organisations’ opportunities to has resulted in excessive politiciza- grow and innovate. Approximately tion of regulatory issues in a quest four in five respondents reported to ensure that someone is seen to that the regulation impacting their be responsible for those misdeeds. organisations is complex or very This is true in the local context as complex; that it has become more well. While those responsible for or much more significant over the misdeeds should be brought to jus- past five years, and that it has had a tice, we must not politicize regula- substantial impact on their organisa- tory issues. Conflicting regulations the Abacus | OCTOBER 2015 9

with political biases will create new build the required confidence and issues. trust with a view to reconcile the Urgent questions CA Sri Lanka is committed to expectations gap. We have taken a continue the initiatives taken so far few significant steps in this direc- surrounding to collaborate with policymakers, tion, which includes the introduc- regulation’s impact regulators and organizations to tion of an Audit Quality Monitoring examine these questions and probe and Review Programme, review of on growth and any impacts as a priority, with the the existing Best Practice Corporate innovation, as well as intention of identifying appropriate Governance Code, introduction of and mutually acceptable solutions. a Corporate Directors Programme how its complexity In this endeavour, it is important to train and accredit directors for for policymakers and regulators to sound corporate governance, and is affecting the be open-minded and innovative in implementation guidelines for agility needed to finding solutions to existing issues Integrated Reporting. We have also and to those that may arise, in con- reviewed our Ethics Code to bring face emerging risks, sultation with concerned parties, about more accountability and must be addressed... so that markets and the economy transparency in the work of our will not suffer. It is also pertinent to members, review of the Auditors It is also pertinent reevaluate the capacity and skills Report with a view to talk about to reevaluate the of the regulators to monitor and significant matters relating to audit enforce regulations, so that each of in the face of the Audit Report, capacity and skills the regulators is able to be effective besides introducing new accounting to ensure that the market as a whole standards for smaller enterprises to of the regulators to is better governed. facilitate the preparation of accurate monitor and enforce As it stands today, it appears the financial statements by small and lack of monitoring and enforcement micro enterprises, and many other regulations, so that as opposed to inadequate regula- initiatives to educate, build capac- each of the regulators tions is one of the main causes for ity and skills, and create market market woes. The other reason is awareness. is able to be effective the expectations gap I addressed We trust the continuing dialogue to ensure that the above. Therefore, it is critical that we have established with the regula- regulators are strengthened with re- tory bodies will result in an upgrade market as a whole is sources and required skills, and that of responsibilities and, in turn, better governed. they collaborate with each other improve their resources and capaci- effectively to tightly monitor and ties, which will enable Sri Lanka to enforce the rules so that existing become the most conducive place regulations are effective in all fronts. to conduct business and, if not As a regulatory body, CA Sri eliminate, minimize the expecta- Lanka is committed to play its role tions gap. and to assist, co-operate and col- laborate with all market regulators to achieve the desired state, and 10 the Abacus | OCTOBER 2015

Periscope S&P affirms Sri Lanka rating Sri Lanka’s economy is ex- about 109% of CAR this year. consolidation, we expect net pected to grow slightly below In our view, external net debt general government debt to Gross external financing 6% during the next few years stock measure will gradually needs as a percentage of fall to 66% of GDP by year- amid concerns of weaknesses decline to below 100% by current account receipts end 2018 from 70% in 2013,” in fiscal management, exter- 2018. (CAR) plus usable re- Standard & Poor’s noted. nal liquidity and institutional “The risks associated with serves will average However, the rate of capacity, Standard and Poor’s the country’s moderately decline could slow if the new said. In August, Standard weak external settings are government departs from

& Poor’s Ratings Services mitigated by growing reserve 101% the current fiscal consolida- over 2015-2018 affirmed its ‘B+’ long-term buffers that improve Sri tion path, efforts to improve ------and ‘B’ short-term sovereign Lanka’s external resilience. revenue disappoint, or if the credit ratings on the Demo- We expect Sri Lanka’s Annual growth in general rupee depreciates further cratic Socialist Republic of Sri gross international reserves government debt to av- against major currencies (as erage 6.1% of GDP over 61% of government debt was Lanka. The outlook remains (US$7.5 billion at June 2015) 2015-2018, compared stable. The transfer and to remain at more than four with denominated in foreign cur- convertibility risk assessment months’ coverage of current rencies as of May 2015). on Sri Lanka was unchanged account payments during Standard & Poor’s expects at ‘B+’. 2016-2018. We expect growth 7.6% low progress in reducing The rating reflects the in foreign currency reserves over 2010-2014 debt-servicing costs, which country’s relatively low to outpace the expansion of accounted for 37% of govern- wealth, improving but still current account payments, ------ment revenue in 2014. This moderately weak external given increasing remittances is the second-highest ratio Net general government liquidity, and high govern- by overseas Sri Lankans and debt to fall to 66% of among all 129 sovereigns ment debt and interest bur- the country’s rising earnings GDP by year-end 2018 that Standard & Poor’s rates, den. “Uncertainty over the from tourism”. from second only to Lebanon. The government’s commitment Other factors that mitigate growth outlook continues to to reforms after the August 17 external risks include its be underpinned by govern- parliamentary elections and low banking sector external 70% ment investment (including gaps in institutional capacity borrowings, adequate market in 2013 rebuilding the war-torn north- pose risks to Sri Lanka’s insti- access and pricing, some ern districts), rising tourist ar- tutional and governance effec- exchange rate flexibility, and rivals, garment sector activity tiveness, which we consider a contingent currency-swap After completion of the In- (typically the production of to be a credit weakness,” the facility of US$1.1 billion with ternational Monetary Fund’s high-quality knits and woven rating agency said. the Reserve Bank of India. Standby Loan Programme in apparels) and declining infla- “These rating constraints That facility supplements July 2012, Sri Lanka agreed tion, which is expected to weigh against what we the US$400 million available with the IMF for ‘Post-Pro- remain in single digits. consider to be robust growth under the financing facility gramme Monitoring’. “We ex- “The gaps we observe in prospects, which are above for the South Asian Associa- pect the country to continue Sri Lanka’s policymaking average for sovereigns at tion for Regional Cooperation to secure new external liquid- capacity partly reflect the similar levels of develop- member country Central ity support from the IMF or political uncertainty associ- ment”. Standard & Poor’s Banks. bilateral sources, if needed”. ated with two election cycles projects Sri Lanka’s external Fundamental weaknesses within seven months. We liquidity [measured by gross Retrospective taxes remain in the government’s believe this hinders respon- external financing needs as a fiscal metrics despite continu- siveness and predictability percentage of current account also violate the ing improvements over the in policymaking, and weighs receipts (CAR) plus usable re- rule of law. While past five years. particularly on business con- serves] will average 101% over ignorance of the law “We project annual growth fidence, investment plans and 2015-2018, with an improving is not an excuse, no in general government debt overall growth prospects”. trend. man can be subject to average 6.1% of GDP over The rating agency be- “We also forecast the 2015-2018, compared with lieves the Central Bank of country’s external debt (net to a rule that did 7.6% over 2010-2014. In view Sri Lanka’s (CBSL) ability to of official reserves and finan- not exist in the first of Sri Lanka’s robust nominal sustain economic growth cial sector external assets) at place. GDP growth and some fiscal while attenuating economic the Abacus | OCTOBER 2015 11

New GDP data shows a or financial shocks has improved somewhat. bigger services role “Although the CBSL is not independent of other policymak- ing institutions, and we continue The size of Sri Lanka’s economy was Contribution to GDP to consider monetary policy estimated at Rs2.7 trillion in the first credibility and effectiveness as quarter of 2015, under a new method Sector Old Series New Series a weakness, the central bank is of calculating gross domestic product, Agriculture 13.3% 7.8% building a record of credibility, which also shows how it has diversi- shown in reducing inflation fied, with a bigger contribution from Industry 32.6% 28.7% through the use of market-based services. instruments to conduct mon- The census and statistics department Services 54.1% 56.5% etary policy”. “We continue to said the rebased national accounts expect Sri Lanka’s growth pros- estimates, which takes 2010 as the base pects to be favourable. We be- year (against 2002 used earlier), shows overall growth rate in the first quarter of lieve the country will most likely the economy 5% bigger than under 2015. maintain growth in real per the previous calculation. The new “GDP and economic growth in the new capita GDP of 5.4% per year over data series captures several economic series theoretically represent the real 2015-2018 (6% real GDP growth). activities not counted under the earlier size and real rate of movement in the Sri Stronger growth may be possible method and shows that the level of Lankan economy,” the census and statis- if the business environment im- annual GDP is significantly higher than tics department said. proves after the August election, under the old series with the size of the Agricultural activities in the new data European export markets pick economy 14.4% bigger in the 2010 base series included “plant propagation” and up, the government addresses year. “agricultural supporting activities”, which shortfalls in labour skills and net The structural composition of the were not covered earlier. foreign direct investment rises economy has changed after the rebas- “Dissemination categories are decided above its current pace of about ing due to the revision of the reference by considering the production pattern 1% of GDP. year and other improvements made to and the importance of each crop in the “Combining our view of Sri the system in the rebasing process, the Sri Lankan economy.” Lanka’s state-owned enterprises statistics department said. The manufacturing industry is identi- and its financial system, we view “The most significant implication fied in the most disaggregated level so the country’s contingent fiscal is the reduction of the contribution of that user convenience is enhanced, risks as limited, as defined in our agricultural activities to total GDP from the department said. New data include criteria.” 2010.” sewerage and waste collection, which “The stable outlook reflects The contribution of agricultural and were completely ignored in the old series. our expectation that Sri Lanka’s industrial activities decreased to 7.8% Financial activities are classified into two credit metrics will remain broad- and 28.7%, respectively, under the new main activities namely, “financial services ly unchanged over the next 12 data series at current prices for the first except insurance and pension funding months. We may raise the rating quarter of 2015, compared with 13.3% and auxiliary activities” and “insurance if Sri Lanka’s external and fiscal and 32.6% under the old series. and pension funding activities”. indicators improve faster than The contribution of services activi- In the old series, all banking, insurance we project, or if we believe the ties increased to 56.5% in the new series and real estate activities were grouped in strength of Sri Lanka’s institu- from 54.1% in the old series, represent- one single activity. tions and governance practices ing the trend towards a services-dom- In the new series, real estate is clas- are on a significant and sus- inated economy. The contribution to sified as a separate activity and not tained improving trend. the GDP growth rate has also changed. regarded as a financial activity. “Conversely, we may lower Under the old series agricultural, “Health and education services the rating if the country’s ex- industrial and services activities made gross output and gross value added are ternal liquidity deteriorates or contributions of 1.3%, 33.3% and 65.4%, calculated and disseminated separately, if Sri Lanka’s growth and fiscal respectively, to the overall growth rate as these are crucial in the Sri Lankan consolidation prospects worsen of 6.4%. economy.” significantly,” Standard & Poor’s But in the new series, industrial said. activities contributed negatively to the (EconomyNext) 12 the Abacus | OCTOBER 2015

Periscope Fitch affirms seven finance companies

Fitch Ratings has affirmed the (AMW), which owns 90% of AMCL, capitalisation levels compared Fitch’s expectation of sup- ratings of People’s Leasing & Fi- given the finance company’s stra- with its peers amid modest loan port from its ultimate parent, nance PLC (PLC), Central Finance tegic importance to the parent. growth and improved asset- Distilleries Company of Sri Lanka Company PLC (CF), Melsta Regal This is based on AMCL’s role in quality metrics. (DIST; AAA(lka )/Stable). DIST Finance Ltd (MRF), Siyapatha Fi- the group, given strong synergies Siyapatha’s A- rating reflects has full effective ownership of nance PLC (Siyapatha), Senkada- and operational integration. While Fitch’s view that support would MRF through Melstacorp Limited, gala Finance PLC (Senka), AMW its share of financing of AMW’s be forthcoming from its parent, the investment holding com- Capital Leasing And Finance PLC vehicle sales has remained Sampath Bank PLC (SB; A+(lka)/ pany for DIST’s non-beverage (AMCL) and Singer Finance PLC moderate, AMCL accounted for Stable), which owns 100% of Si- assets. DIST’s ability to support (SFL). a substantial share of group yapatha, and involvement in the the entity is based on its market PLC’s Issuer Default Rating profit and assets at end-2014. strategic direction of Siyapatha leadership in alcoholic beverage (IDR) and National Long-Term About 46% of its advances com- through board representation. production in Sri Lanka, a highly Rating (AA-) reflect Fitch’s view prised vehicle finance facilities profitable sector characterised that PLC’s parent, the state- provided to its parent’s clients by relatively stable demand owned and systemically impor- at end-2014. Fitch believes that through economic cycles and tant People’s Bank [PB; AA+(lka)/ additional incentives for AMW to PLC is the high entry barriers. Stable], has a high propensity but provide support to AMCL stem largest non- MRF is rated four notches limited ability to provide extraor- from the common AMW brand, lower than DIST due to MRF’s in- dinary support to PLC if required. which could have high reputa- bank financial significant role in the group. MRF PB’s high propensity to provide tional impact on AMW should institution (NBFI) has limited synergies with the support to PLC stems from its AMCL default. In addition, AMCL’s group’s core business, a low level 75% shareholding in PLC and a funding relies on the parent, in Sri Lanka in of operational integration, and a common brand. In addition, PLC which provided 48% of AMCL’s terms of assets, lack of a common brand with the accounted for 12.6% of PB’s loan borrowings at end-March 2015. group. MRF accounted for just book and 24.4% of PB’s consoli- SFL is rated at BBB, two with a 1.3% of group revenue, 1.2% of dated post-tax profit at end-2014. notches below its parent, retail- consolidated net profit and 5.3% PLC has 108 window offices ing company Singer (Sri Lanka) 12.6% of group assets in the financial within branches of PB. PLC (Singer; A-(lka)/Stable). This year ended March 2015. Although PB’s limited ability to provide reflects Singer’s majority owner- not planned, the disposal of MRF support to PLC is evident from ship in SFL, the common Singer share of sector would not materially alter the its own ‘AA+(lka)’ rating, which brand and Singer’s influence on assets at March group’s operations or earnings. is driven by the government of SFL’s strategic direction through CF’s A+ rating continues to be Sri Lanka’s (BB-/Stable) high representation on the finance 2015 supported by its strong capitali- propensity but moderate ability company’s board. The two-notch sation, which stems from robust to provide support to the bank differential also reflects SFL’s profitability and high profit under extraordinary situations. limited role in the group; SFL Siyapatha is rated two retention, and a better funding The two-notch differential finances a low proportion of notches below its parent because profile than its peers due to a between the National Long- Singer’s sales (2010-2014: an of Siyapatha’s limited role in the higher proportion of depos- Term Ratings of PLC and PB average of 8% of Singer’s sales). group’s core business. SB’s leas- its that are sourced from its reflects Fitch’s view that timely Fitch expects SFL’s contribution ing book accounted for just 4% of established franchise. However, support from the state may to Singer’s sales to remain low group advances at end-2014, of these strengths are counterbal- be constrained by regulatory over the medium term. which Siyapatha provided 29%. anced by weakening asset quality restrictions between the entities Although not planned, the Since its conversion to a licensed and lower provisioning levels (such as maximum exposure disposal of SFL would not mate- finance company, Siyapatha compared to peers. CF’s outlook limits) or administrative delays rially alter the group’s opera- ceased to share a common brand has been maintained at Stable on usually seen in layered support tions or earnings as the parent’s with its parent, while branches Fitch’s expectation of a sustained structures. sales growth is supported by the situated within SB’s premises improvement in asset quality. PLC is the largest non-bank presence of a well-managed, have also decreased. Siyapatha’s Senka’s BBB+ rating reflects financial institution (NBFI) in Sri in-house hire purchase portfolio. contribution to group profit its satisfactory credit profile Lanka in terms of assets, with a SFL contributed an average 16% remains low, averaging 5% of through economic cycles, strong 12.6% share of sector assets at to group EBIT over 2011-2014. group profit over 2012-2014. franchise and access to long- March 2015. SFL’s rating also reflects its Fitch does not view a potential term institutional funding. SFC’s AMCL’s BBB+ rating reflects standalone credit profile, which disposal of Siyapatha, which asset quality remains weak Fitch’s view that support would Fitch has assessed to be at the is not being planned, as being due to its inability to dispose of be forthcoming from Associ- same rating level. SFL’s National material to the group. repossessed vehicles in a timely ated Motorways Private Limited Long-Term Rating reflects higher MRF’s A+ rating reflects manner. the Abacus | OCTOBER 2015 13

New report pinpoints top factors driving the audit profession

Rapidly increasing amounts heightened professional sta- of data and the technology tus. In fact, audit should be capable of analyzing it are more than a job, and career the driving forces in audit, tracks should be made more according to a newly released rewarding. survey by Forbes Insights and Technology has the biggest Big Four firm KPMG LLP. impact on audit, according But the audit profes- to 58% of respondents. Most sion needs to grow beyond young auditors considered specific technology tools or technology’s biggest benefit analytical methods, survey to be the tools it provides respondents indicated. It’s for sophisticated analysis. critical thinking and the inter- Of all survey respondents, pretation of the information 59% say the biggest benefit is the technology provides that should go beyond numbers, creates resistance to change. efficiency. will increase auditors’ value, and 59% say the auditors’ Auditors of the future will Respondents equally a news report on the IFAC role should stay the same but have to be more proactive. weighed three top skills for website says. their performance should Half of the respondents indi- auditors: experience in the Here are six key findings evolve. cated that this would provide client’s industry, investigative from the survey of 151 finan- The biggest challenges more insights, almost half financial skills and critical cial executives, audit com- to audit enhancement are cul- said it would increase quality thinking. Adaptability is the mittee chairs and members, ture (66%) and the regulatory and 41% said value would be foundation for those skill academics, audit associates, environment (59%). The two enhanced. sets. and accounting students. are linked by intense regula- More than half of young Most of the respondents tion that fosters a structured, auditors and students believe (93%) say audit must evolve. process-oriented working the most important way for A third believe auditors environment. That, in turn, audit to evolve is through (IFAC/Accounting Web) IAASB presents proposal for reporting on summary financial statements In August, The International Au- IAASB believes it is also in the statements are prepared and diting and Assurance Standards public’s interest to provide users presented may vary on national Board (IAASB) released an Ex- of summary financial statements basis depending on the criteria posure Draft proposing changes with greater transparency in used, and therefore national to the International Standard on circumstances when additional auditing standard setters may Auditing (ISA) 810, Engagements information, such as key audit further tailor ISA 810 in their to Report on Summary Financial matters, are communicated in jurisdictions,” noted Kathleen Statements. the related auditor’s report on Healy, IAASB Technical Direc- ISA 810 deals with the audi- the audited financial state- tor. “The board is, therefore, tor’s responsibilities relating ments,” explained Prof. Arnold particularly interested in hearing to an engagement to report on Schilder, IAASB Chairman. “The from stakeholders in those summary financial statements proposed changes to ISA 810 jurisdictions where ISA 810 derived from financial state- represent a balanced approach reports are frequently issued Prof. Arnold ments audited in accordance Schilder, considering the objective of an to understand whether its pro- with ISAs by that same auditor. IAASB engagement to report on sum- posed changes will be capable Chairman The IAASB is proposing limited mary financial statements and of being implemented and would conforming amendments to ISA general purpose financial state- the report that is required to be be expected to benefit users of 810 as a result of the issuance ments, the auditing body said in issued.” these reports.” of its new and revised Auditor a statement. “The board’s approach also The IAASB issued its propos- Reporting Standards, which “In light of its overall efforts recognizes that the manner als with a 90-day comment address auditor reporting on to enhance auditor reporting, the in which summary financial period. 14 the Abacus | OCTOBER 2015

Periscope

British Virgin Islands The UK launches International uprated for tax compliance Corruption Unit

The UK launched a special- Development Secretary ist unit, backed with funding Justine Greening said, worth £21 million, to inves- “Corruption is not only tigate cases of international picking the pockets of the corruption across the devel- poor, it is an enemy of oping world, Public Finance prosperity and a brake on International reported. The a country’s development. Department for International Through the International Development’s International Corruption Unit, the best Corruption Unit (ICU) would of British law enforce- draw on the success of anti- ment will step up our aid corruption work undertaken work combating corrup- by other UK investigative and tion head-on across the intelligence units, including developing world.” London’s Metropolitan Police The unit will be based The British Virgin Islands of responses to Exchange of Service and the National at the National Crime had the highest rate of tax Information requests had Crime Agency. ICU will probe Agency and be the central compliance out of 12 countries improved, although timeli- bribery and money launder- point for investigating reviewed by the OECD’s Global ness had declined. Austria ing involving developing international corruption Forum on Transparency and was upgraded from “partially Exchange of Information for compliant” to “largely compli- Tax Purposes. ant” because it introduced The forum, which has 127 incentives and sanctions to member nations, implements ensure that the identity of all internationally agreed trans- holders of shares in unlisted parency standards and the joint-stock companies would exchange of tax information. be known. It carries out in-depth peer re- Lithuania and Sint Maarten, views to check that members were given “compliant” and are complying with standards. “partially compliant” ratings, According to a report by respectively, due to their work Public Finance International, on improving Exchange of these peer reviews take place Information practices. in two phases: Phase 1 reviews Albania, Burkina Faso, the legal and regulatory frame- Cameroon, Dominican work for transparency and the Republic, Lesotho, Pakistan exchange of information for and Uganda – countries that tax purposes, while Phase 2 recently joined the global fo- looks at the implementation of rum – were found to have legal the standards in practice. frameworks in place to enable Twelve reviews (both Phase them to move to Phase 2 of 1 and Phase 2) were published the review process, which will nations and help introduce in the UK, including money recently for countries includ- assess Exchange of Informa- a greater focus on pre- laundered through Britain. ing Pakistan, Albania and tion practices. The Marshall ventative action. The push It will also investigate UK to set up the unit follows nationals and companies who Austria as well as the British Islands, which in 2012 was a steady and substantial engage in bribery or other Virgin Islands. blocked from moving to Phase increase in individuals and corrupt practices in develop- The islands had initially 2 of the rating process because companies who see de- ing countries. been assessed as “non- of major gaps, asked for extra veloping countries as “fair Jon Benton, Joint Head of compliant” but have been recommendations to amend game” for overseas bribery the ICU, said, “The work we’re subsequently upgraded to the legal framework governing and corruption. doing is absolutely vital for “largely compliant”. Peer as- the availability of accounting Launching the ICU last helping countries get back sessors found that the quality records. August, UK International what is rightfully theirs.” the Abacus | OCTOBER 2015 15

Tunisia lost billions to import China’s debt twice the tax dodges - World Bank size of its GDP

While China’s economy expand- very hard to slow the pace of ed at a faster-than-expected the leveraging, but they are not pace in the year to June, some- deleveraging. The debt-to-GDP thing else accelerated even ratio will continue to go up.” quicker: private-sector debt. Last month, the fund man- According to Bloomberg, ager BlackRock noted that there outstanding loans for compa- were only four other credit nies and households stood at a booms of similar magnitude record 207% of gross domestic to that seen in China over the product at the end of June, past 50 years, and all of them Zine El Abidine Ben Ali was the second President of Tunisia nearly double the 125% level resulted in a banking crisis oc- A new World 2002 and 2009, based strictly on seen in 2008. curring within three years. Bank report has allowing the the underreport- Having delivered four rate While the growing debt bur- estimated that connected firms ing of prices, and cuts and three reserve-ratio den is creating amplified finan- evasion of import to evade import do not factor in requirement reductions, and cial risks, BlackRock believes duties by some taxes amount- other forms of implementing debt-swap facili- the fallout of any potential debt of the wealthiest ing to billions of tax fraud such as ties to reduce financing costs crisis could be limited by the for local government authorities Chinese government’s effective firms in Tunisia dollars. Eileen underreporting in the past nine months, the re- ownership and control of the may have cost the Murray, World the quantity of newed stimulus push by China’s nation’s banks, and the fact economy US$1.2 Bank Country imports, or the central bank, the People’s Bank that China’s economy remains billion over the Manager for Tuni- bypassing of past decade. sia, said together customs entirely Its political the Ministry of through smug- Outstanding loans connections and Finance and the gling.” Non-performing loans for companies and climbed a record tariff evasion World Bank have He added, households stood at a report, published been preparing a “The revolu- record 207% of gross late last week, set of customs re- tion has led to a domestic product at the end of June, nearly double ¥140 examined the forms, to simplify decline in price the practice of paying procedures and underreporting artificially low make them more by previously bn duties by falsify- transparent. connected firms, 125% (A$23 billion) in the first quarter of 2015 ing the prices “These mea- but this has been level seen in 2008 paid for imports, sures will boost coupled with especially for exports and leave a rise in tariff goods attracting fewer opportu- evasion among of China, risks creating condi- relatively closed off. higher duties. The nities for tariff ordinary firms tions that will encourage more Still, given that Chinese debt bank’s investiga- evasion.” and an increase in debt to be taken on, potentially levels continue to grow, it’s de- tion uncovered To identify tar- informal trade.” increasing risks of instability in batable whether anyone would a wider-than- iff gaps, the report Tunisia’s China’s financial system. like to see this theory tested. average shortfall compared exports former president Adding credence to this view, Global markets were rattled among compa- from Tunisia’s Zine El Abidine nonperforming loans climbed in recent weeks on the back of nies with strong trade partners Ben Ali was a record ¥140 billion (A$23 a 30% plus decline in China’s billion) in the first quarter of stock market. If the plunge in connections to with the value of ousted in January 2015 as the expansion in gross the market was enough to see the regime of imports reported 2011 as a result domestic product slowed. international investors head to ousted Tunisian at Tunisian cus- of the so-called Bo Zhuang, a Chinese econo- the exits, one can only hypoth- president Zine El toms. Jasmine Revolu- mist at the London research esize the scale and destruction Abidine Ben Ali. Bob Rijkers, tion that began 18 firm Trusted Sources, says the a full-blown debt crisis would The report said lead author of the December 2010. rise in private-sector indebt- have on international markets. prices of imports report, added, edness is “quite an alarming were “underre- “The fiscal losses (Public Finance issue”. (Business Insider UK) ported” between we calculated are International) “The government is trying 16 the Abacus | OCTOBER 2015

Transfer Pricing: Could Sri Lanka learn from India? India has grappled with Transfer Pricing for nearly one and a half decades and is drafting new laws that could cut legal disputes by half. But Sri Lanka is starting from where India was 15 years ago. the Abacus | OCTOBER 2015 17

PerspectivePerspective

ri Lanka had for some time a They have brought about the transfer price vague law meant to prevent related concept because transactions are so intercon- companies from entering into Although nected around the world, and every country is transactions with each other in such these rules keen to get its fair share of the economic pie. a way that profits would end up being weren’t there, Whatever a company pays or buys should be at Sunderstated to minimize taxes. But new rules the arm’s length price. But the transfer pricing our Inland have been introduced, for instance, transfer concept is new in Sri Lanka. It started to be pricing, which brings much more clarity and Revenue Act implemented only in 2013/14. structure. has a general Now companies are required to report on anti-avoidance Weren’t there any checks and balances in this related party transactions and prove that finan- provision, regard before that? cial transactions are carried out at arms-length, which says Charmaine: Although these rules weren’t there, that the companies are not related when it you can’t our Inland Revenue Act has a general anti- comes to financial dealings. Transfer pricing ap- avoidance provision, which says you can’t have plies to related party transactions both domestic have artificial artificial or fictitious transactions or any transac- and cross-border. But there are problems. India or fictitious tions that would amount to reducing the profits introduced transfer pricing a decade and a half transactions that come to Sri Lanka or to companies in Sri ago, and is still struggling with it. Sri Lanka’s or any Lanka. But there were no guidelines on how to new laws are a mirror image of India’s transfer transactions go about it or ascertain it. Transfer pricing has pricing laws. brought a codified, structured way of ensuring India has teething problems and, 15 years that would that the correct price is charged. after introducing transfer pricing, new laws amount to In 2006,the Inland Revenue Act introduced are being drafted to address a few contentious reducing the transfer pricing for the first time, stating that issues that have the potential to cut litigation profits that related party pricing should be at arm’s length by half. But Sri Lanka is starting where India come to Sri and that they will issue the regulations subse- started 15 years ago. Lanka or to quently. They introduced the first set of regula- Charmaine Tillekeratne, Director Tax Ser- tions, covering mostly transactions between vices, PricewaterhouseCoopers (Pvt) Ltd spoke companies in multinationals –cross-border transactions to Abacus about the advent of Transfer Pricing Sri Lanka. But mainly. These didn’t cover transactions between in Sri Lanka; and Kunj Vaidya, Partner Transfer there were domestic entities. Pricing, Price Waterhouse and Co LLP, relates no guidelines They introduced further regulations in 2008, India’s experience, or struggle, with Transfer on how to go but they weren’t strictly enforced. They were Pricing. Here are excerpts of the interview: highly technical. Companies needed a lot of about it or help, so they were never really implemented. What is transfer pricing? ascertain it. Then in 2013, they issued another gazette, Charmaine: Today, 60% of the world’s commer- which was more or less the same as in 2008 cial transactions occur between related parties except that it was also applicable to transactions because companies span across the world. Take between domestic entities. apparel manufacturers. They have factories in In 2015,they introduced another gazette, Sri Lanka or India, purchase their raw material which mandated a certificate to be signed off by from one company and give their sales to an- a chartered accountant that had to be submit- other. Then they have intangibles like research ted with annual income tax returns. If that and development, trademark, etc. in other certificate is not there, a company’s income tax companies. This all involves a lot of payments returns can be rejected. There are thresholds back and forth between these companies within that companies will need to apply. the same group, even cross-border. In that certification, the chartered accoun- According to transfer pricing, when a com- tant needs to certify all the documentation and pany deals with a related party, it has to use the all the factors given in the 2013 gazette that same price as in the open market when it deals the company has followed. The 2015 gazette with third parties. A company needs to consider brought in this new certification, which now whether it would have paid the same price for makes it mandatory to follow all the rules. So that service or good to a third party. Transfer now companies have no choice. That is the big pricing regulations have been around for about difference. They need to have all the documen- 20 years in other parts of the world. tation in place to prove that. 18 the Abacus | OCTOBER 2015

How will it change things for companies? of transfer pricing and the need to get things Charmaine: It shouldn’t change things. The in order. It’s new even to the department and objective of transfer pricing is not to change how While they’re being helped by foreign consultants. they do business. Companies just need to make management The first couple of years will probably be a big sure that they’re in line with the regulations. and senior learning curve for everyone. There’ll be things They need to have a transfer pricing policy. All management that need to be discussed and refined, but it’s a of that is part of the documentation. They need starting point. to get their housekeeping in order and make appreciate and sure that while they apply transfer pricing, they accept transfer I know you’re working closely with your Indian can still follow their business model. They just pricing, some colleagues on this. What were the actual practi- need to do that and have a trail of documents people aren’t cal issues they faced? which will document that. willing to Charmaine: We have actually started some work Companies will incur an initial compliance change what with Sri Lankan clients on this. One practical cost because most companies will be starting to issue we have run into has to do with practices do this from scratch. And then of course there’ll they’ve been that companies have been engaged in year after be an annual compliance cost. But it will work doing all these year, especially where domestic transactions are both ways. This will also help companies to years. When concerned. lessen the disputes they have with the depart- it comes to Nobody really knows a reason for them so ment because otherwise in a year-on-year basis cross-border they pay a certain price. Sometimes they’ll say, the department can ask the same question over “We got an invoice from a foreign company to and over again. Now, once companies get every- transactions, pay this amount, so we paid it. We don’t know thing in order and prove it, at least for a certain we also what it is for.” So one of the biggest problems time they can be comfortable and not hear the have to get we’re facing is that they’ve been carrying out same question over and over again. the other transactions, but there’s no documentary proof companies for the underlying commercial verification. How familiar are accountants with transfer involved. Basically, there has been no transfer pricing pricing? Is it something completely new? policy, no policy within the group that says Charmaine: As I said, transfer pricing has been what kind of pricing needs to be used when a around globally for more than two decades. certain transaction is done. The time factor is These transfer pricing rules are mostly similar also an issue. Approved accountants won’t sign globally. There are a lot of papers published off on the certificate if things are not in place. and rules established by the OECD, and over The income tax return is due in November 2016, 20 years, they’ve refined it. Each country has so there’s time for that. But company financials customized its regulations, but broadly the con- close in December or March so things have to be cept is the same worldwide. So accountants are in place by then. While management and senior aware of the concept. The difference now is that management appreciate and accept transfer because of the gazette, transfer pricing started pricing, some people aren’t willing to change to be implemented in Sri Lanka from 2013/14. what they’ve been doing all these years. When The rules are the same, the concepts are the it comes to cross-border transactions, we also same. We have just adopted it only recently. have to get the other companies involved. There’s no difference to the global rules, but knowing the theory and applying it practically It’s going to be a bit of a scramble for these com- are two very different things. We’ve had a lot of panies. Do you think the tax department will seminars etc. in order to educate accountants give them some leeway? here, but it’s not easy. The section related to Charmaine: I don’t think the department will of- transfer pricing in the income tax act is very ficially say so, but I think that in the first year or small. so, they won’t be too harsh. Anyway, our rules An accountant can’t understand every- are not too bad. In India, if a company doesn’t thing by just reading that. They require a lot of have the proper documentation, there’s a heavy research and discussion papers globally on this penalty. But in Sri Lanka, we don’t have a pen- subject. We’ve been holding seminars that try to alty for not maintaining the documentation. At summarize all that and present it in a digestible the beginning, they won’t be too harsh; they will form. Right now people are getting educated also need time to settle in. on the topic. They appreciate the importance the Abacus | OCTOBER 2015 19

Perspective

eral rule is that the profits of a particular tax jurisdiction must be reflective of the business carried out in such jurisdiction. The TP provi- sions provide a framework to regulate pricing of transactions between related parties to ensure the above balance is maintained when MNEs carry out cross border transaction with related parties. After studying global best practices, India introduced TP regulations in 2001 which is broadly in line with the globally accepted TP fundamentals, but for two major gaps. The first one was the use of the arithmetic mean when compiling comparable data. Globally, median is used which is a better representative of the comparable set. Presence of outlier data points in a comparable set could significantly skew the arithmetic mean. Further, without the concept of an inter-quartile range, one cannot exclude such outlier data points. The second aspect in which the India TP regulations departs from the global TP funda- mentals, is the insistence that current year data be used; a company may use two prior years of data if there is influence on pricing, which is difficult to prove. The challenge in this regard is that current data for the comparables would not be available when tax returns are filed. Globally, regulations allow the use of multiple year aver- ages; three year or five year averages. Had India addressed these two aspects while introducing the TP regulations, a significant number of TP disputes in India could have been avoided.

Sri Lanka has recently introduced TP regula- tions. Do we have these issues in Sri Lankan law as well? Kunj: The TP regulations introduced in Sri Lanka closely mirror the Indian TP regulations If there’s no penalty, what’s the incentive for a but for a few differences which are relatively company to do it? lenient in Sri Lanka’s TP regulations. As a result, Charmaine: Their tax documents won’t be ac- the aforementioned concerns on arithmetic cepted. And if the documentation isn’t right, the mean and current year data are also valid for the tax department can always make a tax adjust- Sri Lankan TP regulations. ment. It’ll be a tax outflow for them. We have spoken to the Sri Lankan Inland Revenue Department (IRD) and shared these Why did Sri Lanka introduce transfer pricing concerns with them so that they can avoid the (TP) and what were the pain points along the needless TP litigation which hurts the country’s way? What’s India’s experience with TP? reputation. As we discuss, India is modifying Kunj: Today, more than 60% of the global cross its laws with regard to these two aspects. Draft border trade takes place within multinational legislation is already in place and the final rules enterprises (MNE) which may result in certain should come out soon. Sri Lanka could consider complex arrangements between companies these modifications when the rules are finalised belonging to the same MNE Group. The gen- and notified. 20 the Abacus | OCTOBER 2015

TP rules prevent MNEs from making use of low party. It’s not as simple as comparing prices with tax jurisdictions at the expense of other coun- those prevailing in the market, as there could be tries; but do TP rules also apply to companies A company several other considerations to be mindful of. with domestic related-party transactions? in the group Tax officials in India do their own research and Kunj: The TP exercise is meant to ensure that may enjoy compile their own data. Sri Lanka has formed a tax revenue of a particular jurisdiction is not tax holiday, separate TP division and tax officers are being affected, so the same TP principles apply to both so profits can trained in this regard. multinational and domestic companies. For example, one company in the group may make change hands You said earlier that Sri Lanka’s TP laws were a loss and the group may transfer some profits to increase the lenient compared with India. How so? from other companies in the group to this loss profit of the Kunj: Under the Indian TP regulations, the making company. This will not change the net tax holiday ownership threshold for related party is 26%, profit of the group, but would reduce its tax company and whereas it’s 50% in Sri Lanka. This is a signifi- outflow. Similarly, a company in the group may cant difference in scope of what gets covered. enjoy tax holiday, so profits can change hands to reduce the E.g., in Sri Lanka you can have an equal three- increase the profit of the tax holiday company taxable profits party joint venture and not be subject to the and reduce the taxable profits in the group. The in the group. complexities of TP. TP rules for domestic transactions attempt to The TP rules In India, even though you may not control curb these potential situations. for domestic pricing with a 26% holding, you have to prove transactions that your transactions are arms-length. There Are there many disputes around TP in India? are other clauses on guarantees where the Kunj: An internal circular requires the tax of- attempt to thresholds are more lenient than the Indian ficer to audit every company with related party curb these TP regulations. Also, India has 13 clauses for transactions of 150 million Indian rupees or potential deemed related party but Sri Lanka has only more. In a multinational scenario, this threshold situations. 11.Further, the Sri Lankan regulations do not is significantly low. This has resulted in a single have any penalty provisions. However, India has TP officer having to handle, in some cases, as stringent penalty provisions. many as 80 to 100 matters a year which is not practical. Probably, the top 15% to 20% of TP Is the Sri Lankan corporate sector ready for cases in litigation represent 80% of the total TP? adjustment value. Kunj: Inbound MNCs are used to dealing with However, the other 80% of tax payers too TP in other parts of the world, but companies suffer prolonged years of litigation. These domiciled in Sri Lanka may find the provisions concerns have been shared with the IRD as well. onerous. Also, there is a concern about compli- There has to be a risk-based approach which has ance costs but this is not a new thing. Main- been adopted successfully in other jurisdictions taining arm’s length for transactions between like Australia. Taking away blanket thresholds related parties has always been a requirement could help bring down the number of avoidable in the Inland Revenue Act, but now it is more disputes in India, and a risk based case selection structured with clear guidelines to follow. I for audit would allow the tax authorities to bet- understand that the companies have accepted ter channel their resources. that it is here to stay and they are dealing with it to the best of their abilities. How easy is it to compare prices and compile comparable data? How is it working in the US and Australia? Kunj: The universe of comparables (i.e., the Kunj: It is a constant area of focus in both starting) may more or less be the same across an countries and they have matured because they industry, but two businesses are never the same have been doing it for several years. There is a and proving that the transfer price is at arm’s lot more mutual faith between tax payer and length is not easy. This requires thorough under- the authority. It comes through learning and ex- standing of the business, the functional profile perience. It would certainly help all the parties around the covered transaction, careful review involved if the jurisdictions newly implementing of the comparables, and making necessary TP borrow from others’ experiences. adjustments. TP regulations create an artificial fiction that the transactions between related par- ties are carried out as if the other party is a third

22 the Abacus | OCTOBER 2015

Olivia Kirtley, president of ifac, says accountants can be world leaders the Abacus | OCTOBER 2015 23

Audit

Quality always wins: Olivia Kirtley The global federation president thinks the accountancy profession has a leadership role to play globally By Vinod Moonesinghe

he first woman President of the International Federation of Accountants (IFAC), Olivia Kirtley takes the responsibility, of ensuring that the organisation and the profession will be better off at the end of her term than when she began very seriously. It takes Ttime, she says, and much travelling to different countries to meet different people and learn about their challenges to bring together the collective strength of the global organisation to help solve these issues. 24 the Abacus | OCTOBER 2015

As companies operate around the world and the economy becomes more global, it is a more difficult environment for the accounting profession to operate in because of regulatory fragmentation.

Casl CEO Aruna Alwis, IFAC CFO Russel Guthrie, president IFACT Olivia Kirtley, Minister of Finance Ravi Karunanayake, President of CAsl Arjuna Herath and, Secretary to the Ministry of Finance Dr. R H S Samaratunga

Her professional career has covered all play,” she said stakeholder groups with which the profession In a constantly changing world, it takes is concerned. She spent the first decade of people with unique insights, capabilities and her career doing auditing and tax with what is know-how to analyse what is going on today, now EY, before going to the corporate world, and to determine trends, in order to advise and ultimately becoming CFO of a global people on what steps are required for future publicly traded company. She was Chair of the success. That includes measures in place to American Institute of CPAs, and subsequently ensure a sustainable business model, and the Chair of the Board of Examiners for the CPA right information being provided to the right exam. She has worked for the past 15 years as decision-makers. Accountants have a tre- a governance, risk management and business mendous leadership role to play and should strategy consultant, and for the past 20 as a view their role as broader than just supplying non-executive director on several public com- financial information. pany boards. Her experience has given her a broad global understanding of the profession Challenges and what needs to be done. Kirtley views facilitating the setting of “The accounting profession is uniquely standards as one of the organisation’s highest qualified in times of uncertainty, because we priorities and primary contributions to the are trained and have a knowledge base to global economy, given the importance of con- understand not only what has gone on in the sistent standards across the world, enabling past, but to anticipate the issues and chal- members to have high standards to follow in lenges we might face going forward, not only their individual countries. from a financial point of view, but also from “The development, adoption and imple- a strategic and planning one. Our profession mentation of the International Standards can be world leaders for others, because we is central to our strategic plan. We provide have experience across many businesses, the funding for international standards in about what works, what has been successful, the fields of auditing and assurance, ethics, and what the metrics need to be in order to education and public sector accounting. see trends. We have a world leadership role to Volunteers from our profession are critical to the Abacus | OCTOBER 2015 25

We take our role of speaking out on behalf of the profession very seriously, not only about our own professional issues but issues that we believe are critical and in the public’s interest where we have unique insights and perspectives from an accounting point of view. those boards.” country so their issues are critical to the IFAC’s strategic plan to meet this challenge, profession. These issues are embedded in she explains, is to promote the strength of every area of IFAC, which ensures representa- the standard-setting model, and to ensure all tion of champions for issues which might be stakeholders understand its value. Its greatest unique to them on every board and commit- strengths are independence from undue influ- tee, and has a committee specifically focussed ence, not only from the profession but from on it. The small and medium practice (SMP) regulators, governments and other stakehold- committee has started commenting on every ers; and the robust due process that it goes standard that is proposed by IFAC standards- through in maintaining that independence. setting boards from a SMP/SME perspective. One of the values of greatest importance that Kirtley says “We will continue to embed IFAC brings to the global profession is to be SME and SMP issues, and the appropriate that central point, ensuring the strength of representation throughout every aspect the model and its credibility with regulators, of our work.” governments and the investment community around the world. Public interest Equally important is consistency of regula- Another major challenge is advocacy in the tion across the various jurisdictions, with so public’s interest. IFAC serves as the global many different rules in different countries. voice speaking on things that are impor- As companies operate around the world and tant for the world where accountants have the economy becomes more global, it is a particular knowledge and expertise with more difficult environment for the accounting organisations such as the G20. IFAC identifies profession to operate in because of regulatory issues where it can be particularly impactful fragmentation. IFAC spends a lot of time talk- and effective, such as government accounting ing to regulators regarding the importance to and transparency – it has an initiative called stakeholders of consistency of regulation and “Accountability Now”, and has been speaking consistent information across countries. out from two perspectives: the government’s Small and medium enterprises (SMEs) are responsibility to have good accounting, where the majority of economic drivers in every they account for everything and are very 26 the Abacus | OCTOBER 2015

Kirtley thinks it is important for the general public to understand what is unique about the members of the accountancy profession: that they have standards and ethics to follow, and not a commodity to be hired

Olivia Kirtley addressing students and lecturers of CA Sri Lanka, CIMA, CMA, ACCA, AAT and universities

transparent, and the need to have qualified transparency and accountability in the accountants who can identify, prepare and private sector, an area where governance and participate in how that information is used. oversight has a very strong role to play, in This ties in with the consistency of regula- addition to the advancement of risk manage- tion: ensuring that rules and regulations put ment practices – which the global financial in place are in the best interests of quality. crisis showed as one area that needs to be She says “We have been participants since strengthened. the inception of the Integrated Reporting “We are very active on both those fronts, Council. We believe that integrated re- and we are very strong proponents of good porting, but more importantly integrated governance. In the US, for instance, after thinking, is something that companies and some scandals such as Enron and WorldCom, governments need to move towards on. We we implemented new laws and regulations realise that this is a journey; it is not going to that really strengthened corporate govern- happen overnight. But we believe it is impor- ance. Such regulations and laws have been tant that everyone realise its importance and adopted in different ways around the world.” start moving in the right direction.” She considers integrated reporting a IFAC and the profession by-product of integrated thinking, enabling We take our role of speaking out on behalf of better decisions for business sustainabil- the profession very seriously, not only about ity, business stewardship, and being better our own professional issues but issues that corporate citizens and making decisions that we believe are critical and in the public’s are in the best interest of the public and the interest where we have unique insights environment. and perspectives from an accounting and Through IFAC participation in the IRC, finances point of view. there have been pilot projects and compa- “We certainly have the training and nies to give examples for how this can be capabilities that no other profession does,” achieved. she opines. “Training and education as a IFAC speaks out about ways to increase professional accountant is a foundation the Abacus | OCTOBER 2015 27

to many things, not just accountancy work: and the quality of the profession, particularly it empowers you with a knowledge base to in areas where it needs to be strengthened. contribute at many different levels. Everything Building reputation and trust in the profes- in life has its trends and its challenges, but the sion is dependent on the quality of the work value of a PA will be recognised over a long accountants do to serve the public. Account- Sri Lanka’s time regardless of some trends that might be in ants must hold themselves to certain standards accounting the marketplace today. There are plenty of op- in order to be a member of IFAC and adhere profession is on portunities for them despite moves to try and to the statement of membership obligations, commoditise accountancy work. So I think which is extremely important to assure the the cutting edge their future is bright and they will have plenty quality of membership. of integrated of employment opportunities. I would say that IFAC needs to contribute to the quality reporting in the general principle of quality always wins. It and capacity of the profession all around is true anywhere in the world.” the world, particularly in countries that do particular, The role of accountants in many parts of not have a strong professional accountancy providing the world has moved completely away from a organisation (PAO). The PAO Development leadership bean-counter role to being an integral part of Committee, which operates within IFAC, tries strategy-setting and decision-making pro- to identify areas of the world where the profes- to developed cesses. sion is not as well developed by doing gap countries who She says “We should not be restricted to pre- analysis to see how to assist them, and engag- paring only reports we have always prepared. ing with the World Bank, Asian Development are trying to We should identify information needs in order Bank and other donors for funds and technical make strides in to make better decisions and customise or support. Recently, IFAC received a grant from that area. supplement the reports we are giving with that the development authority in the UK to help information and start engaging others through- advance the profession in 10 countries. IFAC out the company in those conversations.” provided the technical expertise, and set out She provides the example of the CEO of The specific objectives and action items to try to Coca-Cola Company who, when he was CFO strengthen the infrastructure of those PAOs. previously, would spend three or four hours She says “You are very fortunate in Sri Lanka every week talking to different leaders in the to have a very strong accountancy profession organisation, asking “What information, if you and very strong PAOs. One of our challenges is had it, would make you more successful and to make sure that other countries that aren’t how can we provide that for you?” With that as strong get assistance and knowledge. CASL, the whole finance and accounting department knowing how to get stronger and better, has started to be viewed differently, as part of the been a big contributor in partnering or twin- strategic management decision-making team, ning with other PAOs in the region who need as opposed to someone who simply provided assistance. The CASL President, in particular, historical data. who serves on our PAO development com- Kirtley thinks it is important for the general mittee, has been a tremendous contributor to public to understand what is unique about the advancing the strength of the profession in this members of the accountancy profession: that region. CASL is a very advanced professional they have standards and ethics to follow, and accountancy organisation,not only strong not a commodity to be hired. One of IFAC’s within the country but a leader in the region roles is promoting the value of the profession and in providing leaders on a global basis.” and its uniqueness. Sri Lanka’s accounting profession is on “Professional Accountancy will remain the cutting edge of integrated reporting in united,” she says. “We may work in different particular, providing leadership to developed ways, but we always had our membership countries who are trying to make strides in distributed broadly through advisers, con- that area. She thinks CASL should be extremely sultants, within firms, outside firms, within proud of having a strong organisation provid- businesses and governments, and as long as ing global leadership. And she is in a position we stay focussed on what unites us: adherence to know. to consistent standards and adherence to our “This is not my first visit to Sri Lanka,” ethical standards and our educational require- she says. “I was here, in a private capacity, 10 ments, then I think we will remain a united years ago, trying to put people back to work profession.” and build businesses after the tsunami. So it has been an absolute privilege and very inspir- Capacity building and quality ing to see how Sri Lanka has not only survived IFAC is very focussed on capacity building but thrived following the catastrophe.” 28 the Abacus | OCTOBER 2015

Innovation

Innovation is more fun when you collaborate on it: Greg Bernada Sri Lankan accountants have the potential to effectchange within their organisations and in society.

ailing from Lausanne, in the French-speaking part of Switzerland, Greg Bernarda lives in Hong Kong but is planning to move to Singapore. He worked for the World Economic Forum (Davos Forum) for eight years, engaging with members to address global issues using collaborative innovation. HIn 2010, he took the concept of bringing different people together, in different contexts to work collaboratively within organisations, not-for-profit, across organisations and social sectors to design a future that employees, customers, and communities would recognise as their own. the Abacus | OCTOBER 2015 29

The co-author of Value Proposition Design Greg Bernada says innovation can be fun. 30 the Abacus | OCTOBER 2015

Greg Bernada addressing the CA Sri Lanka Strategy Summit 2015

He works with business models, look- thing that didn’t exist before, which adds to ing not only at products and services, but at our culture, to the flow of what we are doing inventing or re-inventing the entire system. as humanity. Starting from that premise, one The co-author of Value Proposition Design, path is to work on ourselves, personally and Bernada counts Colgate-Palmolive, the Nokia individually, as leaders and innovators to be Group, Volkswagen, Solvay, ABB, SCA, Tetra able to play a role towards this. I also real- Pak, Michelin, Capgemini Consulting, Har- ised that we cannot do things alone, we have vard Business School, Sunstone Capital, the to work with other people, which is fun and Richemont Group, Beijing University, China’s you achieve more together. The whole idea People’s Daily and China Fashion Forum of collaboration is to design the tools, the among his clients. We spoke to him at the business models and value propositions to Strategy Summit 2015. do a better job at inventing the new future.

What caused you to focus on the area of So are you looking at the impact of a collaborative innovation? business, in a holistic fashion, on the A: I realised that I am not your pure busi- environment and the economy? ness. I am really impassioned by seeing how A: I don’t think you can create a business and we can add value to society to create some- then, separately, have to look at externali- the Abacus | OCTOBER 2015 31

of the market and being potential threats to Michelin’s position. So Michelin said “we should also be playing in the low-cost mar- ket, to defend ourselves, but also to create value, because we think we have a role to play there”. So we first had a three-day workshop, gathering a global team together. They invented prototypes of business models and value propositions. Then we had a three- month process where we tested these busi- ness models by going to the customers with technical people and all sorts of different stakeholders.

We cannot do things alone, we have to work with other people, which is fun and you achieve more together. The whole idea of collaboration is to design the tools, the business models and value propositions to do a better job at inventing the new future.

Then we had another workshop where we considered what we had learnt, made some decisions and started an implementa- tion process. That was an accelerated way of inventing a new business, very intense, very collaborative, and which generated very good results for them. We do that for all ties and things like that. My thinking is more sorts of organisations in different parts of the about how you can create value out of the world. problems or aspirations that exist in society. I think that every business is in the busi- What do you see as the biggest challeng- ness of human wellbeing, and if you take es to this collaborative effort? that thread far enough, you understand that A: I think one challenge is the first contacts there are new opportunities for value crea- that should happen within organisations tion, which are not disconnected at all from themselves. To do so, you need to create the a better environment and a better society: right type of cultural environment so that ultimately these things are one and the same. people are not acting only out of their own silos. But there are places, processes and Are there any practical case studies that cultures that allow cross pollination inside you could enlighten our readers on? the organisation. A: What jumps to mind is the whole process Steve Jobs, who headed Pixar for some that we did for Michelin, the French tyre time, created a big building where the space company. Their problem was that they were is designed so people bump into each other, very good in the luxury tyre market. They and will start to talk about what they can do were selling very well, but they saw all of together and so on. So I think you have to these low-cost players increasing their share create that type of cultural environment. You 32 the Abacus | OCTOBER 2015

also have to do the same kind of thing sorts of different things. Obviously, that is outside the boundaries of the organisa- an amazing environment to be educated tion, across organisations, and potentially in, to understand yourself a bit better and across professions - business together to see how you can contribute to society. with politics, society and artists; that is If you do that, you have a better chance when you start creating interesting value. to replicate the type of very open and flexible environment and mindsets in One speaker today highlighted the workplaces. fact that we have developed fixed ways of doing things that become an You have worked in completely dif- obstacle to innovation. ferent cultures. How has that shaped A: Mindsets are the toughest things to your perception of how to get people crack and they are the most powerful working together? ways of breaking through something. It A: When I do workshops in Switzerland, is both the responsibility of people (like the US, Europe or Asia, I feel there is myself) organising a workshop, and of always a cultural stratum which is differ- the participants themselves, to change ent, but ultimately people are people. It mindsets. I think you have to choose to be sounds like an easy thing to say, but once open and to see things in a different way. you actually get people into the position The responsibility of the process de- of being themselves in the workplace or forgetting their roles at a workshop, and become genuine authentic human beings, they can contribute to a problem. There I like montessori or steiner schools, because are many ways to do so, through games, they look at individuals holistically, not as a playing with your hands and your senses. nation of factory workers in society, but more When we get to that place, I don’t see a lot of differences between people. as human beings, also recognizing You have worked in China for many that we can do all sorts of years. What can we learn from them? A: In China, there is an ambition to be different things. more creative. You see a lot in the media about China wanting to move away from being just the factory of the world, to go signer or the workshop designer is not in from “made in China” to “designed and trying to change people (I don’t think you created in China”. This is the aspiration can), but in trying to change the environ- and sometimes people are not sure how ment in which people work, and perhaps to go about it. the tools, the ideas and the inspiration. By Having said that, there is a lot of creating an environment and an example, flexibility in the way Chinese profession- you put everything at reach for people als work, which can, at least from the to see for themselves, whatever they feel Western point of view, be seen as a little moved by, and then the process of open- threatening; there is uncertainty about ing, of changing mindsets starts. You can whether people adhere to processes or do that in a workshop, but ultimately you ways of doing business. But it is part of should do that in an organisation or in a their Taoist tradition – being flexible, go- culture. ing with the flow, mingling with people, and being comfortable in uncertain and Do you think it is something that very fluid environments. should be inculcated in students at I think that is a very good skill that the learning stage itself? echoes both the deep tradition and what A: Definitely. I like montessori or steiner you hear about creativity and innovation schools, because they look at individu- in the most advanced places in the world. als holistically, not as a nation of factory It is interesting that both modern and workers in society, but more as human ancient themes talk about the same way beings, also recognizing that we can do all of working and of creating value.

34 the Abacus | OCTOBER 2015

What lessons do your experiences pro- Science fiction writers such as Isaac vide for Sri Lankan accountants? Asimov assumed that automation A: I must confess I do not know much and robots would make life easier for about Sri Lanka, but it sounds like, looks people by taking the drudgery out of like and feels like this is a country whose work, leaving them free for creative time has come. There is energy here, even work. But in fact robots have been tak- at this summit, about inventing the future. ing over the better paid, creative jobs. It is not everywhere that you can feel this. A: This is typically one thing where you If you go to Europe, there is a morose at- could go in all sorts of directions. There mosphere, people are feeling “what is go- is a great opportunity in what technology ing to happen to us?” In other places there can do for us. What you see right now is is a different mood. However, here it feels that it is creating value, but the value is very optimistic. That is a great environ- not being shared. ment. Accountants could play their role It is held basically by the guys with the as accountants in supporting the collabo- biggest computers – the Googles, the rative process within their organisations. Amazons, and so on. Having said that, you But then I would go a little beyond the role also see, on the margins, people who are of an accountant as an accountant. And organising themselves to branch off from that is what you are doing here. You have this commercial, high-powered world. a group of chartered accountants, but You have things like Linux and all man- they are thinking not only about financial ner of sharing schemes – not the Airb&bs processes and regulations, but also talking of the world, which are also monopolies about strategy. It would be interesting to – but other more grassroots initiatives, see how accountants could, with that vi- such as crowdsourcing, which are putting sion in mind, play more of a strategic role values at the core of what they are doing. within their organisations to support this We don’t know what will happen, because move forward, not just in the traditional the guy with the biggest computer can role of the accountant. take advantage of these platforms – Airb&b is a great organisation, but it is concentrat- Where do you think the world will be ing a lot of wealth right now. in five years? A: I have no idea! Of course, China will probably be present more everywhere, digitisation is changing everything that If you go to Europe, there is a morose people do. However, beyond that, we do not know what will happen. There are atmosphere, people are feeling “what is many things I could say about it and other going to happen to us?” In other places people could say a number of things about, there is a different mood. However, here it but I don’t think we can really predict what will happen. In this changing environ- feels very optimistic. ment, we must always go back to one thing, which is how can we, as individuals That is a great and groups, develop ourselves so that we are more aware of what is going on, more environment. aware of ourselves, in touch with our crea- tivity, in touch with our openness, being able to sense things a bit better, and from There are people who are using tech- that point, being healthy and wholesome nology to pursue opportunities in a purely as individuals, groups and organisations. commercial model; and there are people If we focus on this, we can be in a posi- doing this in a manner closer to the princi- tion to take on whatever is happening and ples of sharing and building communities get some good out of it. That is my hope and being wholesome communities, re- for the future, that we can, all of us, go distributing value. I don’t know where the in the direction of being more aware and future is going, but it will be interesting to ultimately doing something that takes the watch the tussle between these world forward. two polarities.

36 the Abacus | OCTOBER 2015

Vusi Thembekwayo thinks what is needed in the new world is a different way of doing things. the Abacus | OCTOBER 2015 37

Vusi Thembekwayo: adapt to change

Accountants need to alter their perspective to accord with the business realities of the new world.

By Vinod Moonesinghe

Zulu by ethnicity and proud of it, Vusi Thembekwayo was the youngest director of the Johannesburg Stock Exchange. Trained in corporate finance, he is an expert in venture capital and equity, specifically in emerging markets in Africa. He was invited as an investor to Dragons Den, owing to his impressive track record in Abuilding businesses. Recognized globally as the “Rock Star of Public Speaking”, he won hearts and minds at CASL’s Strategy Summit 2015. Afterwards, we asked him what he did, how he did it and what he had learnt. 38 the Abacus | OCTOBER 2015

Vusi Thembekwayo addressing the CA Sri Lanka Strategy Summit 2015

What we have done is build the Titanic— of the territory that we are in. For instance, a competitor of mine, who works in the layers upon layers of organisation. And venture capital space, doing some fascinating stuff in you want to know what is in every part of emerging markets such as South America, Ecuador, Chile, Brazil and Argentina very different to what it, you want to try and manage this chaos, we are doing in South Africa, Ghana, Benin, Nigeria, to implement some sort of ERP system Kenya, Tanzania and Rwanda – is learning the same that is lessons we are. So I think the narrative of distance creating a differ- going to give you that ent story is not true. Sri Lanka, for instance can learn a lot from some of the experiences we have had in South knowledge and nuance. Africa. We went through a fairly peaceful transition process when we ended what was essentially 400 years of subjugation and prejudice. Nobody was referred to What have your experiences taught you about the ICC, we dealt with it completely internally, without businesses? any external assistance. When I look at what you have My expertise is research that relates to how organisa- experienced, I think there is a lot of learning there that tions can differentiate themselves and perform with can be exchanged. Obviously, the model needs to be excellence against their competitors, or looking at adapted to your environment. the performance of two businesses operating in the I think we still have to learn (and this is a human same markets, selling the same commodities to the precondition) that we are better working together than same customers and questioning why what one does apart. Humans come from a deep history of separate- the other does not. It is really about how you build a ness, of us and them, black and white, Jews and Pal- great business and how you deploy capital in emerging estinians, Buddhists, Hindus, Muslims and Catholics. markets to get a good return. I think the principles are What we are having to learn now is that share a des- universal. One of the interesting things about business tiny; we all want a sustainable world, we want growing is that the experiences we share are similar, regardless markets, we want a well-educated population, strong the Abacus | OCTOBER 2015 39

GDP growth, women’s rights, proliferation of rights for layers it has, the deeper the hierarchy, the more dis- the minorities, we all want the same things, regardless tant the executive level becomes from the operational of where we are. And it is sharing in that destiny that is level. What we have done is build the Titanic— layers going to enable us to succeed in the future. upon layers of organisation. And you want to know what is in every part of it, you want to try and manage People consider Africa as a single place, whereas this chaos, to implement some sort of ERP system that it is a huge and diverse continent. is going to give you that knowledge and nuance. We Absolutely, and it is arguably the most diverse part of implement massive ERP systems, which are never on the world, with fifty two countries, over 2,000 tribes time and never in budget, because of the complexity of and over 3,000 indigenous languages. It is extraor- this thing we have built. dinary that in a country like Sierra Leone, the lingua I think what is needed in the new world is a differ- franca is French, because due to the variety of tribes ent way of doing things. For instance, when the son in Sierra Leone, there is a language disconnect. In took over Semcor in Brazil, a steel manufacturer, the South Africa, I drive three or four hours from where company was on the verge of bankruptcy. I think it is I stay to get to the northernmost part, on the borders now the second-largest steel producer in Brazil, a size- of Zimbabwe, and I can’t understand the language; I don’t understand Tshivenda, and I can’t make head or tail of Xitsonga! I might as well be in Sri Lanka when Accountants who are worried about they speak Tamil. We have to learn to attune ourselves to the environments we are working in. risk, internal audit and governance will fall over and die over this, because Do you find that cultural practices affect the way risk, internal audit and governance are businesses operate? I think what cultural practices tend to do is give an essentially about standardising and interesting nuance to businesses. For instance, draw- sanitising: ing on my own experience from Dubai, they shut down for sometime in the middle of the day, because it gets cleaning things up. really hot, so they shut down for three or four hours. In my country you can’t shut down for one minute. We are a deep resource-based economy, our pro- duction output is about minimising cost per tonnage, able business. He said the first thing he had to do was whether you are in Iron, Platinum, Gold, Aluminium, give power back to line managers. Copper or whatever. It is an extractive economy, so the He broke down the complete corporate structure, longer you run, the lower is the cost of running. Cul- took business units and made them teams, and gave tural practices give a nuance to different economics, them responsibilities and said “It is your business, and global capital (what we are) is learning to be hum- you drive it. All that I measure at the end of the year ble to those nuances. The Americans are really bad at is your net contribution to the business. You can work this, because the Americans come with a “we are going when you want to, pay yourself whenever you want to, to tell you how to do it” approach. If you come into a out-source, in-source. All we are giving you is the space local environment, you must humble yourself to learn and franchise, and at the end of the year you must how the people here operate, think and work. meet a number. How you meet it is up to you.”

Why do you think businesses with good strategies What role will accountants play in this new and good products fail? world? I think one reason is that they are still thinking about Accountants who are worried about risk, internal audit new problems in the old way. It is the problem, not the and governance will fall over and die over this, because solution, that is broken – the way you thought about risk, internal audit and governance are essentially what the problem you have is, that is the problem. I about standardising and sanitising: cleaning things up. am becoming more and more convinced that hierarchy If you create that sort of agile environment, you cannot is the enemy. We have constructed a business structure standardise, which means you have very little opportu- based on military structures. nity for sanitisation. The most efficient form of organisation in the So my theory is that what accountants are doing 1800s was military: you went in one line and came out will have to change over the next 50 years. It will have the other line, a production line producing sausages: to evolve into a more agile profession, which is not the sausages just turned out to be well-trained soldiers. about compliance and assurance, as it is today: how In the military this works, but then we applied it in many clients are sitting in front of me and how many business: the larger any organisation gets, the more assurance reports can I issue? For a business to be 40 the Abacus | OCTOBER 2015

competitive going forward, it is going to require a dif- ferent kind of perspective and skill for accountants.

What was your experience with new entrepre- neurs in “Dragon’s Den”? Dragon’s Den is an extraordinary platform to meet en- trepreneurs who are running businesses, who want to do things: they have great ideas, they are innovative, and they are fresh. But there are lesser truths. The first I have seen in Sri Lanka: after the tsunami, there was a flood of cheap (it was zero-cost, really) foreign aid that came into the country. You had aid funders who felt compelled to do something and, as the West does when they have a guilty conscience, they threw money at it so they would not feel bad. It has created an NGO sector that thinks it is entitled to free capital. That is not only a Sri Lankan problem: in all emerging markets where we operate, people think money must come free. In Nigeria, you tell a young entrepreneur running a small business, who needs growth capital, “I am happy to do business with you and give you growth capital and these are my terms”. He replies “Why must I Vusi Thembekwayo addressing the CA Sri take those terms from you when USAID or IFC or any Lanka Strategy Summit 2015 of these development funding institutions is happy to give me the capital at much reduced rates?” The problem is,they will only apply capital to your busi- or Los Angeles, or Denver, Colorado, to find out what ness for three, perhaps four years: after that, they will is happening at the other end of the world. And I think, as emerging economies, one of the things we are going to have to do is to learn to build I think, as emerging economies, one of the our own communications system. So that I can con- nect and find out what is happening in your world; things we are going to have to do is to learn what is your equivalent of the Wall Street Journal or to build our own communications system... the Financial times or Forbes Magazine; who is writing what is your equivalent of the Wall Street it, and where can we find that information. Because there can be no denying that these markets need those Journal or the Financial times or Forbes information resources. Magazine; who is writing it, and I am very passionate about this: so much so that I am looking deeply for an opportunity for us to get where can we find that actively involved in shaping the narrative we have in the market space, so that we can connect to each information. other directly, without somebody at CNN or Fox News having to overlay their “what is the truth” and their pull the capital out because they must show returns in implicit prejudice. Washington. Finally, I would have to believe that there is hope. Whereas we are saying let us build for the future For me, it is the fact that there are still people who – if I give you my capital, I am with you for 10 years; wake up every morning and think about cool things to I take a 25-year view on your business. There is a dis- do, think about what to try, and go out and try them. tinct need for re-education of what it means to be an My country has an unemployment rate of people entrepreneur in emerging markets. The second is that below the age of 25 (and that is the predominant age our education system is broken. We are still teaching group) of over 60%. people a set of skills that worked 40-50 years ago; in Today’s government understands the problem. the new world, different skills are needed to succeed. They are doing a lot to fix it, putting things in place We, as leaders in emerging markets, must start to address the problem; it is just going to take time. thinking about who is going to tell the story. The These are the very same young people who are saying Americans have become very good at telling the story: “If I can’t find a job, I will need to make one, I will if I want to find out if there has been a tsunami in Sri have to go out into the market and ply a trade”. And Lanka, I must connect to a news agency in New York that is what they do. And it is a good start. the Abacus | OCTOBER 2015 41

Update

CA Sri Lanka to assist the CA Sri Lanka inducts 544 new Maldives to develop and strengthen accounting and Chartered Accountants at auditing profession 2015 convocation

CA Sri Lanka recently The agreement paves the Boosting the country’s ac- tute’s 55-year history that over 500 signed a Memorandum of way for CA Sri Lanka and counting profession, CA Sri Lanka new ACAs were inducted at a single Understanding (MoU) with the the Maldivian AG’s Office to achieved a new record by induct- convocation. This record is a result Maldivian Auditor General’s work towards developing and ing 544 new Associate Chartered of the groundbreaking CA syllabus (AG) Office to strengthen and strengthening the accounting Accountants (ACAs) at its 2015 launched last year and the three develop the accounting and profession in both countries, convocation. case study exams conducted by the auditing profession in the while adhering to the princi- The convocation was held under Institute. Maldives. ples of the International Fed- the patronage of Mr. Ajith E Tudawe, Extending his congratulations At a ceremony held in eration of Accountants and the Maldivian Capital Malé, the International Organisation Chairman of Ceylon Hospitals PLC to the new members, Mr. Herath President of CA Sri Lanka Mr. of Supreme Audit Institutions. (Durdans Healthcare Group) and said that Members of CA Sri Lanka Arjuna Herath and the Auditor CA Sri Lanka will offer its Group Director of Tudawe Brothers command respect across the world, General of the Maldives Mr. expertise to the Maldivian Ltd., and Mr. Arjuna Herath, Presi- and locally CA Sri Lanka members Hassan Ziyath signed the MoU government, while providing dent of CA Sri Lanka at the BMICH give leadership and sit in the nerve in the presence of the Minis- necessary technical as- Colombo on 10 September 2015. centre of organisations in their pro- ter of Economic Development sistance to the AG’s Office The new chartered accountants fessional capacity as accountants. of the Maldives Mr Mohamed particularly in relation to were officially granted associate “We also have a strong international Saeed, Madivian government International Financial Re- membership during the convo- presence with over 30 percent of officials, senior officials of porting Standards (IFRS) and cation, which also signified the our members located in 42 coun- the AG’s Office, practicing International Standards on Chartered Accountants in the Auditing (ISA), and setting up completion of their professional tries across all continents. Hence, Maldives and CA Sri Lanka a Professional Accountancy qualification in chartered account- opportunities are immense for your council members. Institute in the Maldives. ing at CA Sri Lanka. career progression both here and This is the first time in the Insti- abroad,” he said.

Over 25 teams compete at the CA Sri Lanka Cricket Fiesta The annual Members Cricket Fiesta organized by CA Sri Lanka was held at the Bloomfield Grounds on 8 August 2015. A total of 25 teams took part in the day- night cricket fiesta. The team ‘Unstoppable’ was adjudged the winners, while the ‘CA Smashers’ came in as the first runners up followed by ‘SLIC Gindara’ a second runners up. The event, which was organized by the Member Relations Committee for the fourth time, also features a friendly encounter match between the CA Sri Lanka Council and the AAT Council. Members and their families were entertained by DJ music, fireworks and food stalls, as well as face painting and a special children’s play area. 42 the Abacus | OCTOBER 2015

Update

CA Sri Lanka hosts IFAC President and CFO’s visit to Sri Lanka

President of the International Federation of Accountants (IFAC) Ms. Olivia Kirtley and Chief Financial Officer Mr. Russell Guthrie were given a grand welcome at CA Sri Lan- ka on Sunday evening (26 July 2015) when they visited the institute for a reception din- ner hosted by CA Sri Lanka in honour of Ms. Kirtley. Ms. Kirtley and Mr. Guthrie were welcomed to the institute and were invited to light the traditional oil lamp. CA Sri Lanka President Mr. Arjuna Herath, Vice Presi- dent Mr. Lasantha Wickre- masinghe and CEO Mr. Aruna Alwis were at the institute to welcome Ms. Kirtley and Mr. Guthrie. IFAC is the world apex body of the accounting pro- fession. Ms. Olivia Kirtley and CFO Mr. Russel Guthrie, who Lanka, paid a courtesy call on remesinghe on Tuesday, 28 President of CMA Sri Lanka are on an official visit to Sri Prime Minister Ranil Wick- July 2015, at Temple Trees. Prof. Lakshman R. Watawala, During the meeting, Ms. Kirt- Chairman of CIMA Sri Lanka ley explained the role of IFAC Mr. Vipula Gunatilleka and in developing the profession CIMA Regional Director Mr. and helping to maintain the Bradly Emerson were also standard of local bodies at present at the meeting. Ms. an international level. Mat- Olivia Kirtley also met the ters in connection with the Minister of Finance Hon. Ravi progression of the accounting Karunanayake on 28 July 2015 profession in the Sri Lankan to discuss the role of IFAC in context were also discussed enhancing the accounting at length. profession in Sri Lanka. President of CA Sri Lanka IFAC CFO Mr. Russel Mr. Arjuna Herath, Vice Guthrie, Secretary to the President Mr. Lasantha Ministry of Finance Dr. R H Wickremasinghe, CEO Mr. S Samaratunga, President Aruna Alwis, Vice President of CA Sri Lanka Mr. Arjuna of the South Asian Federa- Herath and CEO Mr. Aruna tion of Accountants (SAFA) Alwis were also present at the Mr. Naeem Akhtar Sheikh, meeting. the Abacus | OCTOBER 2015 43

Update

CA Sri Lanka awards 130 outstanding students with scholarships The Institute of Chartered Ac- countants of Sri Lanka (CA Sri Lanka) recently rewarded 130 outstanding students, includ- ing the top achievers at the 2014 Advanced Level exami- nations, with scholarships to embark on a globally sought after career in chartered ac- counting. The scholarships were awarded to a total of 30 students including the top 10 students from the four streams at the 2014 GCE A/L examinations and the district first in the commerce stream. They were awarded in the Aruna Alwis, Chief Execu- were granted to business chartered accountants. The presence of Mr. Piyasena tive Officer of CA Sri Lanka; level trainees along with a foundation is tasked with Ranepura, Secretary to the and representatives from the Rs. 3000, a monthly allow- awarding the scholarships Ministry of Higher Education; corporate sector. A total of 60 ance that will be paid for 18 every year, following an inter- Mr. Arjuna Herath, President scholarships were also award- months. The CA Foundation view process by a committee of CA Sri Lanka; Mr. Lasantha ed under the L.A. Weerasing- was established in 2010 with of chartered accountants to Wickremasinghe, Vice Presi- he scholarship scheme where the aim of helping thousands choose exceptionally talented dent of CA Sri Lanka; Mr. B. students are waived off from of students from across the students annually based on R. L. Fernando, Chairman paying all compulsory fees, country to help realize their their requirements and finan- of the CA Foundation; Mr. and another 36 scholarships future ambition of becoming cial hardships.

Students who pursue CA Sri Lanka’s BSc. Degree in Applied Accounting can follow internships at leading companies Students who follow CA Sri programme impresses me to a Furthermore, the lecturers provide Lanka’s BSc. Degree in Applied great extent. The student-lecturer guidance to students through a Accounting have the opportunity interaction is much greater here in student-based learning environ- to intern for one year with leading comparison to other universities; ment. companies in the country. and the lecturers are always will- Students who have suc- The internship and skills ing to assist, are very friendly and cessfully completed their local development programme is a are flexible to students’ require- GCE Advanced Level or London major component of the BSc. In ments.” Advanced Level (Edexcel/Cam- Applied Accounting General/Spe- Another area Nilupul found re- bridge) examination with three cial degree programme, which is warding was the ability to continue passes can register for the degree also recognized by the University his studies through the exemp- programme, while students who Grants Commission, and has been tion. “Even the course structure is have completed the London A/L developed to ensure employ- comprehensive, including several examination and are currently able graduates with the required modules with which students awaiting results can also register. skills, competencies and industry can specialize in accounting and Additionally, professionals who knowledge to have a successful pass out as professionals with the are employed and have fulfilled the accounting career. Nilupul Weerasinghe, a student adequate skills to be employable,” basic entry requirements can also The internship and skills devel- pursuing the CA Sri Lanka degree he added. follow the degree programme on opment component helps students and currently interning at WNS The BSc. in Applied Account- part-time basis. reach their full potential as they Global Services, said, “I am cur- ing degree is conducted by a The BSc. in Applied Account- pursue training at prestigious rently studying for my second fully-fledged faculty compris- ing degree also offers a range firms, while also gaining sufficient year, while simultaneously being ing qualified professors, senior of exemptions for CA Sri Lanka, practical exposure in technical and employed at WNS Global Ser- lecturers and industry profession- CIMA, ACCA, AAT and SLIATE HND professional skills. vices. The flexibility of this degree als who are experts in the area. qualifications. 44 the Abacus | OCTOBER 2015

Update

CA Sri Lanka launches integrated reporting implementation guide for corporate sector

In its capacity as the sole authority to promulgate accounting and auditing standards in the country, CA Sri Lanka unveiled the ‘Preparer’s Guide to Inte- grated Corporate Reporting’, an illustrative implementa- tion guide to help corporates produce comprehensive integrated reports. The implementation guide, which incorporates relevant developments and emerging trends on inte- grated corporate reporting worldwide, was launched on 24 July 2015 in the presence of Mr. Thilak Karunaratne, Chairman of the Securities and Exchange Commission; the chief guest; and Mr. Yaya W Junardy, member of the UN Global Compact Board (UNGCB), the guest of honour ensure corporate reporting in financial markets. The role He also disclosed that the at the event. Sri Lanka remains both cur- we play at a public level goes guide incorporates principles President of CA Sri Lanka, rent and relevant. beyond facilitating reliable enunciated by the Interna- Mr. Arjuna Herath said that “In our capacity as the financial information, and the tional Integrated Reporting the institute has always been national body of accountants institute facilitates adequate Council, Global Reporting mindful of local and global and the national standard reporting needs of investors Initiative and UN Global changes and trends, and has setter in financial reporting, and its stakeholders. In this Compact, thereby providing taken every step necessary to CA Sri Lanka is committed to context, CA Sri Lanka thought a comprehensive framework adapt with these changes to building the required trust in it was important to issue an for corporate reporting with implementation guide on In- greater transparency and tegrated Corporate Reporting accountability relevant to all to ensure that annual reports stakeholders and society. produced by corporate enti- Chairman of the CA Sri ties in this country fulfil the Lanka Integrated Corporate expectations of investors Reporting Committee, Mr. and other stakeholders. This Asite Talwatte emphasized implementation guide will that integrated reporting facilitate the preparation of has gathered momentum, annual reports that are con- acceptance and adoption in sistent, comparable, possess many capital markets, with greater clarity and indicate Sri Lanka too being an early value creation that takes adapter with several large place in the enterprise,” listed corporates adopting the President of CA Sri Lanka Mr. International Integrated Re- Arjuna Herath said. porting Council framework. the Abacus | OCTOBER 2015 45

“CA Sri Lanka took Georg Kell said, “As the initiative to set up a business has gone CA Sri Lanka strengthens its presence Committee to deliber- global, it’s relationship globally with chapter in Kuwait ate the fundamentals to society is changing of the framework in a fundamentally. The Sri Lankan context, to ability to proactively set the foundation for a manage environmental, concise and yet compre- social and governance hensive communication issues is increasingly of how an organization’s critical for long-term value creation strat- success, and a growing egy, business model, number of companies, performance, govern- investors and policy ance, risk management makers understand the and outlook could be importance of trans- presented to demon- parent reporting on strate how value is cre- these issues. Integrated ated to stakeholders in reporting is rapidly CA Sri Lanka recently inaugurated yet He also expressed hope that the the short, medium and becoming indispensable another overseas chapter in Kuwait CA Sri Lanka chapters can be an longer term,” he noted. for companies to navi- as it continues to strengthen its pres- important platform that could help ence globally. position Sri Lanka in the world by Mr. Talwatte gate this transition.” The chapter was officially opened facilitating trade and investments emphasized that the Mr. Jonathan Labrey, in the presence of CA Sri Lanka between Sri Lanka and the respective implementation guide Chief Strategy Officer of President Mr. Arjuna Herath, the act- countries. also recognizes the the International Inte- ing High Commissioner of Sri Lanka President of the CA Sri Lanka co-existence of in- grated Reporting Coun- in Kuwait, office bearers of several Sri Kuwait Chapter Mr. Sajad Abdul Cader Lankan associations, over 40 mem- said that, with the establishment of tegrated reporting, cil (IIRC), welcoming the bers of the institute, representatives the chapter, chartered accountants sustainability reporting publication said, “The of the Kuwaiti corporate community in Kuwait will be united locally and and financial report- IIRC hopes that this and managing partners of leading au- the chapter will be used by CA Sri ing alongside strategy, document will support dit firms.Speaking on the importance Lanka as the sole window to engage of establishing overseas chapters, with members more closely for its governance and risk and encourage business Mr. Herath said that although CA Sri future activities. “The strategic initia- management to provide in Sri Lanka, as they be- Lanka takes pride as a national body, tives include redefining Sri Lanka sustainable value and gin the journey towards the institute commands an inter- as a knowledge exporter, being the capital enhancement. (IR) adoption. It is clear national outlook, with a significant foundation and acting as liaison for “Under these guide- that the momentum presence at a global level. “CA Sri Kuwait-Sri Lanka business initia- Lanka is recognized by international tives, establishing an examination lines integrated reports towards the adoption of accounting professional organizations center, and looking at the possibil- will encompass key (IR) globally is build- as world class.” ity of following compulsory training performance indicators ing, and organisations He also emphasized that of the for aspiring CAs working in Kuwait; in an integrated, com- such as CA Sri Lanka are 4,600 members at present, over 30% thereby offering a solid platform for serve in overseas positions spanning continuous professional development prehensive, cohesive crucial in offering prac- some 40 countries, which is a signifi- of members,” he said. and concise manner. tical tips as businesses cant achievement for a local account- Chief Executive Officer of CA Sri We expect this guide to evolve their reporting ing body. “Professional development Lanka Mr. Aruna Alwis said that a take away the mystique to communicate a clear, is imperative if one is to enjoy success large Sri Lankan community works of integrated report- concise and integrated in today’s complex and evolving in the Middle East, and a significant world; therefore, we understand the contribution to our foreign exchange ing, enabling a wider story that explains how importance of overseas chapters in comes from professionals hailing group of corporates to all of their resources are countries where a significant number from multiple sectors, including char- embark on this journey creating value.” of our members are present. The tered accountants. “Therefore, it is im- of inclusive, responsive, The launch ceremo- main aim of our chapters, including perative that we enhance the standing the chapter in Kuwait, is to enhance of our professionals in this region, relevant and reliable ny also saw the partici- professional competencies through so they can enjoy greater success in corporate reporting.” pation of Vice President CPD programmes for CA Sri Lanka their profession, apart from playing Meanwhile, in a spe- of CA Sri Lanka Mr. Las- members; provide an opportunity for an important role in helping develop cial message featured in antha Wickremasinghe, social and community interaction; our national economy,” he said. He the CA Sri Lanka guide, CEO of CA Sri Lanka Mr. advocate and promote the value that added that, apart from Kuwait, CA Sri members add to the business; and Lanka also established a chapter in Executive Director of Aruna Alwis and mem- work closely with the members and the United Arab Emirates this year, the United National bers of the corporate the Sri Lanka community in Kuwait,” and plans are underway to establish Global Compact Mr. community. Mr. Herath said. chapters in several other countries. 46 the Abacus | OCTOBER 2015

Update

CA Sri Lanka Strategy Summit educates corporate leaders on the important nexus between creativity, innovation and strategy

Success doesn’t come over- emphasizing the need to growing; and competitors be known for just one good night, nor does it happen by understand the requirements are weak, not innovating and thing. There are lots of ways accident. To achieve success and aspirations of custom- not thinking out of the box. to do things right. Stand out and sustainability, businesses ers. “We must create value Instead, it’s about whether in an unexpected way, and must create, innovate, strat- for customers.” Bernarda or not you can compete at be very very visible,” he egise and execute the plan consults for companies such corners and whether or not advised. “Eventually, it’s not with diligence. as Colgate-Palmolive, Nokia you can compete at the edge about who you know, but Seven internationally re- Group, Volkswagen, Harvard of chaos,” Thembekwayo who knows you,” Avrin, who nowned speakers on strategy Business School and the noted. is also an acclaimed author, addressed Sri Lankan and World Economic Forum. David Avrin, popularly added. Jeroen De Flander, regional business leaders on He stressed that initiatives known as the ‘Visibility known as one of the world’s the importance of creativity, such as the Xerox machine, Coach’ and a well-known most influential thinkers innovation and strategy; and Google, Facebook and Airbnb international speaker, empha- on strategy execution, said how leaders can strategise are all successful initiatives sized that the current trend is that it is always important to and execute a well-thought- today because they were a no longer about why a person reach for the head, heart and out plan to achieve long-term requirement. “Business plans or an organisation is a ‘good hands of the consumer. success at the Strategy Sum- are great when there is crea- choice’, but rather why they He emphasized that mit organized by the Business tivity,” Bernarda added. are the better choice. strategy execution covers School of CA Sri Lanka on Vusi Thembekwayo, who He stressed that, unlike eight areas: strategy focus, 29th and 30th July 2015 at the is known globally as the ‘Rock in the past, the modern day strategy communication, Mount Lavinia Hotel. Star of Public Speaking’, consumer is educated, and initiative management, “The lack of innovation is citing grand prix motorcycle it’s not about informing or individual objective setting, perhaps the number one rea- racing (MotoGP) as an exam- persuading, but convincing skilled managers, support for son why businesses fail,” said ple, said that in the current them. “You must stand out in managers, engaging people & Greg Bernarda, who works business context, it’s not a way that will make some- performance and a perfor- with individuals, teams and about how fast one can go one speak or think about mance-driven culture, and organizations on strategy, in a straight line, but how to you,” Avrin said, adding performance-related pay. creativity and innovation. manoeuvre and compete at that, while market share is “People need to be “We build something all corners. important, another impor- aware,” he said, adding that that nobody wants. Even if “In today’s business, it’s tant factor is mindshare. He a successful strategy also we spend years building it, not about how fast you can also said that the road to depends on rethinking and there is no point if nobody go straight, but how well you success can depend on doing revaluating on a regular wants it,” he noted, while can do when markets are one good thing. “You have to basis. the Abacus | OCTOBER 2015 47

Andrew Grant, who has The CA Sri Lanka unique brands. “If you don’t served in managerial positions create brands of your own, for a wide range of Fortune chapters hope to you will go nowhere,” said Ethics and Disciplinary 500 companies, disclosed that be an important Kapoor, President and CEO of Committees creativity was imperative if platform to help India Council on Competitive- businesses were to come up ness, and the Chair for the The Ethics Committee with the best strategy. “Origi- position Sri Lanka Social Progress Imperative received and inquired into nality is a must. You must in the world by and the Shared Value Project six complaints during the focus on something that no facilitating trade in India. period of 1 January 2014 one else can come up with,” “You don’t need large to 30 June 2015. Out of he said. and investments conglomerates or laboratories six cases, four were dis- Grant, CEO of Tirian Inter- with the respective to come up with something missed and the remaining national, which specializes innovative. Skype was devel- two cases are still being in organization innovation countries where oped in a small room by two inquired. These complaints through strategic leadership the chapters are students,” he maintained, were primarily regard- ing the alleged violation and team development, also while disclosing that most established. of professional conduct noted that although children French-branded perfumes are as stated in the Second are very creative in school, actually developed in India. Schedule of the Institute’s they lose this creativity, Arjuna Herath, President of Act of Incorporation. and attributed a number of CA Sri Lanka, in his welcome environmental factors that kill speech emphasized that the creativity. institute in its capacity as a Disciplinary “Creativity is linked to black gold, ilmenite, and professional organisation and Committees strategy, and is important for instead of branding and sell- the national body of account- a successful strategy execu- ing it, we are exporting it to ants was keen to enable the During the period, on the recommendation of the tion,” he added. other countries, who instead country become a destination Ethics Committee, four brand and sell it. He added for investment. Sri Lanka’s very own Disciplinary Committees Ravi Fernando, Operations that Sri Lanka also possesses “Our knowledge and were appointed. Three of Director at the Malaysian graphite reserves, but we are literacy is very high in com- the Disciplinary Commit- Blue Ocean Strategy Institute not branding it and marketing parison to other countries in tees concluded its pro- and recipient of the “Global it as we should. According to the region, and we have good ceedings and recommend- Strategy Leadership award” Fernando, by just implement- IT skill levels, but where are ed that the Council take at the World Strategy Summit, ing a simple processing step, we today? I think our answer appropriate action. Based speaking on the lack of Sri Sri Lanka can earn billions of lies in strategy,” he said, on this, the Council com- Lankan brands in the global dollars, as Sri Lanka stakes adding that innovation and municated the outcome to the complainants and the market, claimed that Sri claim for among the best strategy are important areas respondent members. ilmenite and graphite in the to enhance Sri Lanka’s stand- Lanka is caught in a red ocean The three Disciplinary commodity trap that prevents world. ing and help achieve holistic Committee proceedings it from creating new market “If Sri Lanka needs to success. that were concluded re- places.“We are happy to be create market spaces, it has Russell Guthrie, Chief lated to the violation of the complacent and just export to eliminate the commod- Financial Officer of the laid-down procedures in our products instead of creat- ity and bulk mindset,” he International Federation of accepting an assignment ing brands,” he said. advised. Fernando also noted Accountants (IFAC), who was for professional services. He warned that if Sri Lanka that Sri Lanka must create a a special guest at the summit, The Council warned the doesn’t get its act together, global mindset by scaling up emphasized on the greater respondent members to adhere to all requirements it will soon lose out, because processing capabilities. role accountants can play in as stated in the Act when “As a country, we are not contributing towards the strat- more and more countries and accepting an audit assign- companies are taking compe- short of talent and resources, egy of an organisation. ment, and in the event any tition much more seriously, but we are short of the leader- “We are trained to have a further complaint is made and are developing innova- ship to see this talent and har- very deep financial knowledge against them, the Council tions that were unthinkable ness it,” Fernando added. and we are trained to be good would take immediate at one point. He cites the 3D Dr. Amit Kapoor, who de- technicians, so we do have a steps to suspend and/or printer as one such innova- livered the final session at the good understanding of busi- dis-enroll their member- tion. Fernando disclosed that two-day summit, emphasized ness from beginning to end,” ship. Sri Lanka has its very own that it was important to create Guthrie added. 48 the Abacus | OCTOBER 2015

Update

First Capital Holdings powers 36th IFAC President meets students & National Conference of Chartered lecturers of accounting bodies Accountants with gold sponsorship

President of the Inter- engaging in a question and national Federation of answer session focused on Accountants (IFAC) Ms. accountancy education. Olivia Kirtley met with the The welcome speech students and lecturers of was delivered by CA Sri CA Sri Lanka, CIMA, CMA, Lanka CEO Mr. Aruna ACCA, AAT and universi- Alwis.The panel discus- First Capital Holdings PLC, a the next phase of growth, the ties on the morning of 27 sion comprised of IFAC leading investment bank in Sri theme of ‘Collaborate to Com- July 2015 at the Institute of President Ms. Olivia Kirt- Lanka, recently came onboard pete’ becomes significant to the Chartered Accountants of ley, IFAC CFO Mr. Russell to power the 36th National Con- industry.” Sri Lanka for an interac- Guthrie, Partner of Ernst ference of Chartered Account- “In our commitment tive session on ‘Corporate & Young and Chairman of ants with a gold sponsorship. towards becoming the coun- Governance, Ethics and Education & Curriculum The conference, which will try’s leading investment bank, Accountancy Education’. Development Committee be held from the 4th to the 6th we are constantly seeking to During the session, Ms. of CA Sri Lanka Mr. Manil of November 2015, is CA Sri sharpen our competitive edge Kirtley also spoke on IFAC’s Jayasinghe, and Head of Lanka’s flagship event. It is one by collaborating with our inves- strategic priorities for 2015 Group Internal Audits of of the most sought after events tor base, regulatory authori- and global trends in the Brandix Lanka Limited Mr. in the country’s corporate cal- ties and governing bodies in profession, in addition to L. L. Suranga Indunil. endar, attended by high profile offering innovative investment business leaders and chartered solutions.” He added. accountants, including chair- This is the first time, First men, directors, CEOs, CFOs Capital Holdings PLC is on- CA EVENT CALENDAR and partners. board as a gold sponsor. This year’s conference will President of CA Sri Lanka Budget Seminar Training Partners Awards be held on the theme ‘Col- Mr. Arjuna Herath said that To be informed in due Ceremony laborate to Compete’, and is ex- over the years the conference course (October/November) 20th November 2015 pected to attract around 1,500 has built a reputation as a Contact: Tax Division Contact: Training Division participants. The conference, business summit that focuses (2352000 Ext. 1407) (2352000) which will be held at BMICH extensively and spurs insights Colombo, will comprise two into broad economic and busi- 36th National Conference Annual Report Awards days of technical sessions. ness issues, apart from its core of Chartered Accountants Ceremony Chief Executive Officer of emphasis on finance-related 4th-6th November 2015 03rd December 2015 Contact: Wayomi Contact: Chathurani First Capital Holdings PLC Mr. topics. Gunathilaka (2352000 Ext. Jayanetti (2352000 Ext. Dilshan Wirasekara said, “We “Every year, we attract some 1441) 1456) at First Capital are delighted of the leading companies in the to sponsor a benchmark event country who come onboard MBA Convocation such as the National Confer- as sponsors for this important 20th November 2015 ence of Chartered Accountants. corporate event. I take pleasure (4.30pm) We believe this forum is being in welcoming First Capital Contact: Business School held at the right moment. As Sri Holdings PLC as a gold sponsor (2352000) Lanka’s capital market enters this year,” Mr. Herath said. the Abacus | OCTOBER 2015 49

September intake now on for CA Sri Lanka launches novel e-learning the BSc. Applied Accounting certificate course on SLFRS degree approved by UGC Although the percentage of also offers degree scholar- those who qualify increases ships for students who have every year, opportunities performed exceptionally well available for students to at the local and London A/L enter university are very low Examinations. Furthermore, given limited educational students who are in their facilities. CA Sri Lanka has third year of the course will filled a much-needed gap in be integrated into some of the education by offering the BSc. country’s leading companies Applied Accounting degree. for the purpose of ‘industrial Approved by the University training’. Grants Commission (UGC) Registrations are currently of Sri Lanka, the three-year open for the September 2015 degree moves away from intake, which is offered on the traditional method and full-time and part-time basis. encourages self-study by Loan facilities have also students, and is designed to been arranged with leading sharpen their soft skills, com- banks in the country to enable munication and presentation students to follow this degree skills, and the use of technical program. CA Sri Lanka’s methods. This ensures that BSc. degree in Applied Ac- the student is a well-rounded counting has also received graduate, fully equipped with endorsements from leading entrepreneurial capabili- universities abroad such as ties necessary for the world Australia’s La Trobe Univer- of business. CA Sri Lanka sity and CPA Australia. People’s Insurance and Assetline Leasing onboard as training partners CA Sri Lanka recently unveiled He also applauded CA Sri an online certificate course on Lanka for being among the the Sri Lanka Financial Report- first countries in South Asia to ing Standards (SLFRSs), designed adopt the IFRSs. Mr. Munoz also for the professional advance- highlighted that, with the launch ment of accounting and finance of the e-learning course, CA Sri professionals in Sri Lanka and Lanka has proved that the ac- overseas. counting profession is also good The online course was at innovation. launched in the presence of President of CA Sri Lanka, Mr. Two leading companies, People’s Insurance Ltd and Assetline Mr. Emanuel Salinas Munoz, Arjuna Herath said that every Leasing Company Ltd came onboard to further boost CA Sri Lanka’s training partner portfolio. At a ceremony held at the Programme Leader - Growth and effort has been taken to ensure Institute’s Colombo 7 premises, President of CA Sri Lanka, Mr. Competitiveness of the World that all implementation with re- Arjuna Herath awarded the Business & Corporate Level Train- Bank. He commented, “In to- gard to financial reporting, audit- ing Partner Certificate to People’s Insurance’s Chief Operating Officer Mr. Nimal Perera and Senior Manager of Finance Mr. N. day’s world, online education is ing standards and best practices D. P. Somarathna. Mr. Herath also awarded the Training Partner rapidly gaining importance and in corporate governance has Certificate to Mr. H. M. A. Senevirathne, Director/Chief Executive will be one of the main channels been carried out in true spirit Officer, and Mr. R. Rajeshkumar, Manager of Finance and Ac- counting, of Assetline Leasing. Accordingly, People’s Insurance to educate people. The potential and as effectively as possible. and Assetline Leasing will provide practical training to students for mass online courses is widely The SLFRS Bound Volume who are following CA Sri Lanka’s chartered accounting quali- fication at the business and corporate levels.Vice President of recognized as part of the future 2015 was also launched at the CA Sri Lanka Mr. Lasantha Wickremasinghe, Chairman of the in the provision of education, event, and Partner of KPMG Mr. Training and Development Committee Mr. Manil Jayesinghe, and we are pleased to see that Suren Rajakarier gave a detailed Chief Executive Officer of CA Sri Lanka Mr. Aruna Alwis, and Director - Education and Examinations Mr. Harsha Gunasena CA Sri Lanka is adapting to this overview on the ‘Latest update were also present at the event. modern learning technology.” on SLFRSs’. 50 the Abacus | OCTOBER 2015

Update

CA Sri Lanka-qualified chartered accountants are known for their honesty and integrity Chartered accountants “The chartered account- are well known as a brand of ancy profession is a prestig- unique and versatile profes- ious one. We were chosen sionals sought after both local- to work in audit firms as ly and globally. However, CA unpaid interns after a vigor- Sri Lanka-qualified chartered ous application process that accountants are known and involved an interview and an respected, and are in demand introductory course, followed for their honesty, integrity by an exam. This allowed us and high work among other to learn from the best practic- notable skills. ing accountants (principals) in CA Sri Lanka Member Mrs. these firms. During our time, Shantha Fonseka, FCA, who is only seven of us passed the now retired and domiciled in final exam. It was not about Sydney, Australia, attributes the numbers, but the quality,” the demand for Sri Lankan- she said. Mrs. Fonseka said qualified chartered account- that punctuality was a must ants to the rigorous training during her articleship at the they had to undergo at audit audit firm. “If we got late, we firms for four years and the to the quality of their training. chartered accounting quali- were called in to give an ex- technical knowledge imparted “We were respected for our fication from Sri Lanka, and planation. We worked late. We by their study facilitators. high quality of ethics, work we were recognized solely for couldn’t hang on the phone “We had to submit man- output, honesty and integrity, our performance and abilities, talking for long as well,” she datory tutorials that were as well as good command of which were due to the CA said. sourced from Foulks Lynch, the English language, as our qualification,” she said. “Even when we go to a a company in London. We language of study was English. However, Mrs. Fonseka’ client’s office, we needed to had the advantage of past We were like the ambassadors journey to be a recognized adhere to a proper dress code question papers known as of the institute,” she added. chartered accountant didn’t and behave properly, because chartered telephones, also Following a work stint in come easy, and required a lot the client reports back to our from London, which helped Fiji, she along with her hus- of hard work, commitment principal about our conduct. us prepare. Later, the tutori- band Rienzie Fonseka, also and dedication. “The four If we did not conduct our- als were locally prepared by a chartered accountant, was years of articleship I under- selves in accordance with the our Director of Studies Mr. A transferred to the Australian went at Lawrie Muthu Krishna necessary ethical standards, T Benedict. His directorship head office of the company and Company is what helped then the principal will not was followed by Miss Piyaseeli they worked for. “The only me to excel. The chartered sign the document that allows Jayaratne who continued the qualification we had was the accounting qualification is re- us to sit for our exams; this dedicated service for our spected and the institute is a meant delays in the com- benefit,” she said. brand in itself, and our senior pletion of our study,” Mrs. The training was a value “The training we principal Mr. Kandasamy was Fonseka noted. addition that helped them equally committed to ensure She said the rigorous train- progress and go overseas. underwent was that we excel in our work, as ing she underwent at the audit Mrs. Fonseka, a former absolutely super; it ultimately people rely on what firm helped her perform well finance manager at a pharma- was rigorous and we say,” she said. at commercial establishments ceutical company in Australia, more like a school, “The training we under- later on. “I have no regrets said that Sri Lanka-qualified very disciplined. Our went was absolutely super; it in all the hard work I had to chartered accountants were principal at the audit was rigorous and more like a put in and I am proud to be a very much in demand in school, very disciplined. Our member of the institute.” She countries like Zambia, Fiji firm was very tough, principal at the audit firm was added that all members of the and other similar developing but gave us very very tough, but gave us very institute must act as ambassa- countries in the early 70s due good training,” good training,” she said. dors of CA Sri Lanka. the Abacus | OCTOBER 2015 51 TECHNOLOGY THAT TRAVELS Noise-cancelling headphones Harmon Kardon NC It may seem trivial, but on-ear/in-ear noise can- Being away from the luxuries on a long and noisy flight, celling models, but the at home is one of the biggest noise-cancelling head- built-in rechargeable bat- drawbacks of frequent travel. phones can be a godsend. tery that powers the noise From Sennheiser to AKG, cancellation (NC) circuitry But now you can get the best of there are many good ensures impressive sound both worlds. brands and versions avail- quality. The headphones able in the Sri Lankan are also versatile, as they Today, people are taking their business, leisure market. These cans work fold flat and come with a and passions around while travelling, and they via advanced electronics detachable cable that can prefer to do so while enjoying the comforts of that sense the surround- all be neatly packed into home. From a power supply to a camera that ings and reduce the its carrying case. can literally be attached to you wherever you ambient noise to enable It is also a plus that the go, technology can now fit into your travel bag. a truly noiseless listening Harman Kardon NC We have compiled a list of items that will keep environment. produces sound with or you comfortable and connected no matter where The Harman Kardon NC’s without the NC turned on you go. 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Price: Rs27,990 Available on Amazon.com and at Abans (Kollupitiya, Race Course or The Arcade – Independence Square) 52 the Abacus | OCTOBER 2015

Camera GoPro Hero4 Silver

Features include 1080p60 and 720p120 video, 12MP photo quality with up to 30 frames per second, built-in Wi-Fi and Bluetooth, and Protune for photos and video. It’s amazing what this pocket-sized device can do. If you are a travel junkie al- ways on the go, the GoPro is a must have. The GoPro is the ultimate action sports camera with a whole host of accessories that will leave you amazed at its sheer portability. From the headstrap and the Handler to the chest harness (Chesty) and handlebar/pole mount, it will go every- where you go, without any additional weight. The GoPro HERO4 Silver combines versatility and high-performance capture with the convenience of a touch display. It’s waterproof, can take some pretty hard knocks and video quality is just a notch under a regular DSLR.

Price: Rs63,500 Available at Open Road Equipe

Headphones Bose QuietComfort® 25 Another option that how noisy the world recently entered the around you gets, it Sri Lankan market, al- will be just you and beit at a heftier price, your music. The light- is the Bose QuietCom- weight ear cushions fort® 25. But the offer that allow comfort for is worth the price. longer listening also The QuietComfort® add an extra level of 25 was designed for quiet by sealing out three things – better the noise. The inline sound, comfort and microphone/remote portability. Bose is puts music and call known for its deep, controls at your powerful and bal- fingertips. The head- anced sound, and phones are designed the noise-cancelling for Apple models, QuietComfort® 25 while a version is also gives it an added available for Samsung edge. No matter and Android devices.

Price: Rs48,990 Available at Siedles the Abacus | OCTOBER 2015 53

Power Silicon Power Portable

Are you constantly look- to top up a Samsung S4 ing for a power source to 100% twice. There are to charge your phone? If two models in this series; you are always on the go, Silicon Power P20 is chances are sometimes built for portability and you will not be able to the P50 for high battery recharge your phone. capacity. With a battery Technology solved capacity of 2200mAh, this problem with the the P20 is the size of a ci- introduction of portable gar and ideal for business power banks. people and travelers. The The Silicon Power P50 P50, on the other hand, is a 5200mAh lithium-ion offers high battery capac- rechargeable battery. ity of 5200mAh, and is Plug in your smartphone equipped with dual USB and it’ll charge up your ports, allowing users to battery – the Silicon recharge two different Power P50 holds enough devices at the same time.

Price: Rs5,720 Available at Takas.lk

eReader Kindle

Even if you are a hard- each downloadable in core paperback fanatic, just 60 seconds via its chances are you would built-in wi-fi. Kindle also have heard about the has up to one-month Kindle. A Kindle is an battery life on a single eReader launched by charge. Additions to Amazon some 8 years the product line such ago. Despite competi- as Kindle Fire, Voyage tors following close with and Paperwhite prove similar devices, Kindle the eReader’s growing has enjoyed top position popularity. in the eReader market. Sri Lankans are slowly Kindle is a lightweight adapting to eReaders device that fits into your as opposed to lugging pocket and reads like around paperbacks. real paper with no glare, While Kindle is not avail- even in bright sunlight. able at a particular store The Kindle Store boasts in Sri Lanka, Kapruka of over 3.6 million e- and Amazon deliver it to books as of June 2015, your doorstep.

Price: US$65 Available on Amazon.com (or Kapruka)

56 the Abacus | OCTOBER 2015 Italy’s Northern Capital The second-largest city in Italy, Milan is the major economic centre of southern Europe.

Milan, Italy Prada Store located in the Galleria Vittorio Emanuele II which is a magnificent 19th century glass and iron covered gallery with shops in Milan. People standing and talking or walking around the store window display. the Abacus | OCTOBER 2015 57

ounded about 400 BC, Milan (Me- diolanum) was, after the decline of Rome, the capital of the Western Roman Empire for a couple of centuries – until it was overrun Fby the Lombards, a Germanic people. In the Middle Ages, it became a hub for pawning, money-lending and money-transfer – hence the term “Lombard Banks”. It was also as- sociated with textiles and clothing – the term ‘millinery’ comes from the city’s name. Under the Visconti and Sforza families, Milan became 58 the Abacus | OCTOBER 2015

Santa Maria delle Grazie is a church and Dominican convent in Milan, northern Italy, included in the UNESCO World Heritage sites list. The church contains the mural of The Last Supper by Leonardo da Vinci, which is in the refectory of the convent.

a focal point of the Renaissance, attract- St Ambrose and remodelled in the Romanesque ing Caravaggio, Leonardo and other such style in the 11th-12th centuries; the 14th century masters. The city’s financial sector played The heart Milan Charterhouse of the Carthusian order, a big part in the diffusion to the rest of of Milan is the Certosadi Garegnano, rebuilt in the 16th- Europe of double-entry book-keeping: Luca the Piazza 17th centuries in the baroque style; and San Pacioli, the first person to write a work on Maurizio al Monastero Maggiore, founded in the the subject, was invited here by the Sforzas; del Duomo Lombard era on the basis of Roman buildings and the Milanese Borrommeibank opened a (Cathedral (and reconstructed in the renaissance and ba- branch in Bruges, which spread the system roque eras), attached to a Benedictine convent in the Low Countries. Today it is once again Square) in – which is now the Archaeological Museum. the commercial and financial epicentre of which is the Italy. cathedral, La Scala The cultural centre of Milan is La Scala, Milan Churches the Duomo di (Teatroalla Scala), built by the Austrian Empress The heart of Milan is the Piazza del Duomo Milano. Maria Theresa in 1778. It is one of the three top (Cathedral Square) in which is the cathedral, opera destinations in the World (besides Cov- the Duomo di Milano. The third-largest church ent Garden and the Vienna State Opera), it is in Europe, seating 10,000 people, and contain- closely associated with Guiseppe Verdi, as well ing 2000 statues, it was first built on an ancient as Gioachino Rossini, Vincenzo Bellini, Maria church site in the 14th century, and added to Callas and Arturo Toscanini (and of course until 1965. Beneath is the 4th century Battistero the fictitious Bianca Castafiore from the Tintin Paleocristiano, one of the oldest Christian struc- books).Part of the same complex is La Scala tures in Europe. The roof, accessible to visitors, Museum, which contains musical instruments, provides a wonderful vista of the city. paintings and mementos of great operas, The fifteenth century church and Dominican composers and artists. Facing the opera house convent of Santa Maria delle Grazie is a UN- is the Piazza alla Scala, a garden-square centred ESCO World Heritage site. Its refectory contains on a large statue of Leonardo Da Vinci, who did Leonardo’s iconic mural The Last Supper, much of his work in Milan. which survived French soldiers and British and US bombers, the greatest of several masterpiec- Museums es in the church, which is the cultural centre of The Archaeological Museum is housed in the the Dominican Order. former Benedictine convent of Monastero Other important churches are the Basilica di Maggiore di San Maurizio, which was built on Sant Ambrogio, first built in the 4th century by the ruins of the old Roman circus, some of the Abacus | OCTOBER 2015 59

which have been preserved and which form the Canaletto, Corregio, Tintoretto and Titian; the basis of the ground-floor Mediolanum antiqui- Museod’ Arte Antica, which contains ancient, ties exhibition. The cellars contain Gandharan The Leonardo mediaeval and renaissance sculptures, includ- art as well. A new extension houses exhibits da Vinci Science ing Michelangelo’s Rondanini Pietá; and the of ancient Palestine, Etruria and Greece. The and Technology Museum of Musical instruments. prehistoric and ancient Egyptian collections are in the Castello Sforza. Museum, Other attractions The Leonardo da Vinci Science and Technol- housed in the The Porto Giovia ( Jovian Gate) was part of the ogy Museum, housed in the old monastery of old monastery Roman walls of Mediolanum. Near its site, San Vittore al Carpo, contains a splendid collec- Napoleon began to build his “arch of peace”, tion of models of the genius’ scientific inven- of San Vittore al the Arco della Pace, at the point where the tions. It also contains many other technological Carpo, contains brand-new Simplon Highway entered Milan. It exhibits, covering topics such as communica- was completed subsequently, being renamed tions, energy, materials, space and transport a splendid Porta Sempione (Simplon Gate). The sprawling – the highlights of the last being a Second World collection Parco Sempione (Simplon Park) was created so War Maiale two-man submarine, a Gina (Fiat of models of that panoramas of the adjacent Sforza Castle G91 fighter) and the diesel-electric submarine and Porto Sempione could be viewed from its Enrico Toti. the genius’ precincts. It contains its own sculptural display The Castello Sforzesco(Sforza Castle) was scientific as well as the Civic Aquarium of Milan. A large built in the 14th century by the Visconti dukes. inventions. bronze statue of a horse, Gran Cavallo, can be It was destroyed, but was rebuilt by Duke found outside the Hippodrome, based on Leon- Francesco Sforza the following century. Its ardo’s sketches for the world’s largest eques- interior was decorated by several renaissance trian statue – which was never made. masters, including Leonardo. Today it is the site of many museums, in- Brera District cluding the prehistoric and ancient Egyptian The narrow streets and cafes of the “bohemian collections of the Archaeological Museum; the quarter” of Milan were once hotbeds of artistic Pinacoteca del Castello Sforzesco, a picture gal- and intellectual activity. Here can be found lery containing works of masters such as Bellini, the Brera Academy of Fine Arts, the Brera Art

San Maurizio al Monastero Maggiore is a church in Milan, northern Italy. It was originally attached to the most important female convent of the Benedictines in the city, Monastero Maggiore, which is now in use as an archaeological museum. 60 the Abacus | OCTOBER 2015

Gallery, the observatory, the Braidense National Library and the Botanical Gardens. Nowadays it is notable for its great open-air markets and independent and more local fashion stores and avant-garde fashion houses.

Shopping The place for luxury shopping is the late 19th century glass-and-cast-iron-roofed Galleria Vittorio Emanuele (nicknamed “Milan’s living room”), a shopping arcade connecting the Piazza alla Scala to the Piazza del Duomo. Its shops sell books, paintings, jewellery and haute Mall housed in a glass- culture, catering to every palate on earth, and covered 19th-century arcade couture. Its greatest attraction is a mosaic bull contains a large range of places to eat. When with luxury clothing brands & we think of Italian food, Pizzas and other dishes on the floor of the hexagonal core – folklore has upscale dining. it that spinning with a heel on the bull’s genitals based on tomato and olive-oil – the tastes of brings luck. The Quadrilaterod’Oro (Golden southern Italy – generally come to mind. While Square) is the heart of Italy’s fashion sector. these are available, however, Lombard cuisine One of the world’s leading shopping areas, it uses rather more meat and butter – specialities hosts the headquarters of Armani, Dolce &Gab- being Risotto alla Milanese and Cotolettaalla bana, Moschino, Prado and Versace. Via Monte Milanese. The traditional drink is wine, but Napoleone is the World’s sixth most expensive beer is a speciality. Every evening, at 6-9 pm shopping street. However, it also has smaller- there is a traditional Aperitivo – a free appe- scale outlets giving new, vintage and second- tiser, ranging from nuts to a three-course meal, hand off-runway designer items at tremendous accompanied by a cocktail, generally based on discounts. Milan’s main shopping street, Corso Chianti or Vermouth. For the homesick, there Buenos Aires, which has the biggest concen- are several Sri Lankan restaurants. tration of retail outlets on a single avenue in Europe, consists of the type of high street shops Transport found everywhere in Europe. Corso Vittorio Milan is well served by airlines. Milan Mal- Emanuele II, connected to the Via Dante pedes- pensa, Italy’s second biggest airport, handles trian street by the Piazza San Babila, is the area flights from intercontinental destinations as of choice for most budget shoppers. well as European ones, and is Northern Italy’s major airway hub. Although 50 km north-west Cuisine of the city, express trains and shuttle buses Milan is one of the world centres of culinary link it to Milan’s main railway and bus station. The main airport for European flights,Linate is linked by city bus and coach services to the centre. Low-cost and charter airlines use Il Caravaggio(Bergamo-Orio al Serio), linked to Milan by bus and (from Bergamo)train.Milan can be reached from European cities by trains, which mostly arrive at Centrale railway station, but also stop at other stations such as Porto Genova, Lambrate or Rogeredo. High speed trains, such as the TGV from Paris and the ItaloTreno, stop at Porto Garibaldi. The city can also be reached by coach, arriving at the Lampugnano bus station. Milan has some of the best transport infrastructure in the world (one of the cheapest in Europe), comprising bus, tram (including a few vintage cars) and metro Cotoletta is an Italian word (underground train)networks, on which up for veal breaded cutlet. to two 6-10 year children, accompanied by an Various breaded meat adult, may travel free. The city centre (within dishes prepared in Latin America were inspired the mediaeval walls) contains most of Milan’s by the cotoletta and are attractions, so walking is one of the best ways to known as milanesa. see them and feel this wonderful metropolis. Bank of Ceylon A one-stop shop to make all your lifestyle dreams come true

Never hesitate to live the life you have permanently employed in either a govern- industry that would benefit customers. The always wanted to live when you have the ment statutory body or a listed private sector bank has taken multiple steps in cut long opportunity to make smart choices. Building company whose take home salary is above procedures to assure customers a speedy the right financial partnership will always Rs.30,000, or employed on contract basis disbursement and best-in-class service. ensure that you enrich your life. With over with a take home salary of above Rs.50,000. BOC Loans is truly a one-stop solution for 75 years of undisputed leadership in the By providing a few essential documents, any individual or business. country’s banking and financial industry, customers can enjoy the benefits of this BOC credit cards provide the best interna- Bank of Ceylon (BOC) offers attractive credit facility without delay. tional Visa and Master cards with exclusive and leasing facilities that provides the best BOC’s Leasing is one of the most con- offers with the lowest interest rates and with- solutions to bridge all your financial gaps as venient lease facilities in the country for out hidden charges. Among the array of ben- you go on to realize your ambition. motor vehicles ranging from cars to heavy efits linked to these cards are free life insur- BOC has an array of loan facilities that are vehicles. BOC Leasing offers a flexible ance cover, permanent disability cover (Gold designed to suit the needs of individuals rental scheme decided case by case to Card Rs.100,000, Classic Card Rs.50,000), who pursue excellence. BOC education suit the customer’s repayment capacity. free lost baggage insurance cover during loan plans for aspiring youth who want to Provided that the necessary documents are air travel, emergency hospitalization limit complete their higher education or sharpen in order, the facility can be obtained within a enhancement facility, loyalty points and point their competitive edge by earning a profes- few hours from a BOC branch anywhere in redemption facilities, 52 days (maximum) sional qualification have many attractive the country. Apart from the regular leasing interest-free credit, supplementary card for features such as the availability of a grace scheme, understanding the lifestyle needs third party with a flexible limit, free SMS period in repayment where either the capital of professionals, the bank has formulated a alert facility, easy arrangement plans at our or the interest component could be arranged special leasing scheme with extended privi- merchant network up to 60 months, speedy to be repaid after the degree is completed. leges that match their capacity. Apart from a credit evaluation for government servants A BOC education loan is a smart choice, leasing facility for individuals, BOC Leasing and BOC customers, and easy bill payment as it is offered at the most competitive rates has also extended its benefits for commer- facilities. in the market without hidden charges. 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With Brands in 2013 by the Chief Marketing Whether you are a seasoned executive or the trust and stability of a state bank, and Officer’s Council based in Mumbai, India. new to your field, an academic or profes- flexibility and convenience, BOC Siri-Medura Brand Finance Lanka ranked BOC the sional educational background will be an housing loan will be disbursed in 15 days country’s No. 1 brand for the past seven investment as you work towards your goals. provided that most required documents consecutive years. The bank has passed BOC education loans also facilitate those are in place. The bank will also assist you exceptional milestones in recent years such who wish to pursue their postgraduate stud- to obtain the required documents from as becoming the first to gain over Rs.1.0 tril- ies in recognized universities. This facility relevant authorities, and you will be updated lion in assets. BOC has over 1,000 customer can be arranged by producing fixed salary on the loan status from time to time. With touch points all over Sri Lanka. Recognizing details obtained from the employer. the streamlining of the loan disbursement its achievements, Fitch Rating Lanka ranked As you get ready to take the next step process with the implementation of regional BOC at AA+(lka), the highest rating awarded forward, a cash shortage should not stop loan centers, BOC ensures that the cus- to a local commercial bank, and ICRA (Lk) you from realizing your dream. Whether it is tomer will only have to visit twice to obtain awarded an AAA rating, the highest credit to add glamour to your house, buy house- the home loan. Interestingly, all these value quality rating issued by ICRA Lanka. BOC hold items or have your dream wedding, additions are in place under minimal service maintains an international presence with a BOC personal from would be the best charges and attractive interest rates. branches in Chennai, Male, Seychelles and option to bridge the gap at a very reason- Apart from the bank’s credit facilities for a subsidiary in London. able service charge and low interest rate for individuals, BOC provides extensive and a maximum repayment period of five years. exclusive credit facilities for corporates, You could obtain the maximum loan amount SMEs and micro businesses through its based on your salary, with the option of island-wide network. Being the Bankers to a flexible repayment period. BOC offers the Nation, BOC adheres to its commitment this privilege to those aged 18 to 55 years by spearheading changes in the banking 62 the Abacus | OCTOBER 2015

Focus On - Technical

Simplifying financial reporting for smaller entities

MARKET MARKET MARKET

CA Sri Lanka unveils new Sri Lanka are excluded Accounting Standard (SLFRS) for Smaller b. Complex requirements relating to fair value, value in use Entities and actuarial valuations are excluded c. Measurement of items are further simplified: For example, CA Sri Lanka introduced a new Sri Lanka Accounting Stand- by the measurement of most leases on a straight line basis, ard (SLFRS) for Smaller Entities with the objective of providing the exclusion of overheads from the cost of inventory, a simple, cost effective financial reporting standard for small the exclusion of borrowing costs from the cost of assets, businesses. The requirements stated in the SLFRS for Smaller the measurement of retirement gratuity at the amount Entities recognise the size, level of complexity, availability of payable if the employees leave on the reporting date, and resources and their effect on cost effectiveness in the prepara- the recognition of the cost of leave in the period in which tion and presentation of financial statements. The principles leave is taken of presentation, recognition and measurement stated in this standard are simpler than those stated in SLFRSs and SLFRS d. Changes in accounting policies and corrections of prior for SMEs. period errors to be presented as adjustments to retained earnings at the beginning of the reporting period, without This SLFRS for Smaller Entities could be applied by an the need to change comparative information entity that is not any of the following: e. Transition to the SLFRS for Smaller Entities has been a. An entity that has revenue in excess of Rs100 million in made easier, by having the transition date as the beginning the reporting period of the first reporting period of the financial statements b. An entity that has equity in excess of Rs50 million at the prepared in compliance with SLFRS for Smaller Entities end of the previous reporting period f. Requirements relating to disclosure substantially reduced; c. A company that is required to prepare group financial g. A statement of profit or loss and retained earnings to be statements by the law relating to companies presented in place of the statement of comprehensive d. An entity that holds assets in a fiduciary capacity as one of income and the statement of changes in equity its primary businesses h. Not including requirements relating to activities and trans- actions not likely to be carried out by a smaller entity The standard includes, among others, the following simpli- The SLFRS for Smaller Entities will be effective in the Sri fications: Lankan context from the financial periods beginning on or a. Complex requirements relating to financial instruments after 01 January 2016.

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