Issue 12 / Volume 12 / December 2016

Plus:ProfileChair of IFIAR Janine van Diggelen

OutsidersLeadership talent withnon-accounting backgrounds

LifeCharitable CPAs

CENTRES OF

ATTENTION

E-commerce is putting pressure on China’s declining malls to create innovative customer experiences

HK$70.00

CT partners.indd 4 2/2/16 12:21 PM

President’smessage

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December 2016 1

Dear members,

Departing from a post you are pas-sionate about is never easy. Still, as 2016 president, I feel fulfillment looking back at the Institute’s many achievements this year.

Among the six major tasks I identified in the beginning of the year, top of the list is our ongoing engagement with the government on audit regulatory reform.

We have been communicating with the government that more details are needed before the leg-islation process, including checks and balances to ensure sanctioning is independent from investigation and inspection; composition of the independent oversight body which should include adequate qualified audit professionals; clear sanction-ing guidelines; and more informa-tion about operation costs of the oversight body. In addition, funding should come from investors.

We expect the government will provide more details and discuss with the Institute in the first quarter of next year.

Secondly, we are making good progress in looking into the review of the Professional Accountants Ordinance to make the legislation more relevant to the profession and in line with local and international best practices.

To achieve this goal, we have been working with our relevant stakeholders to come up with a

holistic solution to modernize the ordinance, which has been enacted for more than 40 years and has since undergone piecemeal revisions over the years.

Thirdly, we have been liaising with the Ministry of Finance to establish a mechanism for the Insti-tute to access audit working papers. We also keep the Hong Kong gov-ernment informed about the progress and will keep the public informed of the outcome.

Fourthly, the Institute launched a top-to-bottom review to ensure the CPA qualification is in step with the continually evolving business envi-ronment and professional market in Hong Kong as well as international best practices.

With the strong support and constructive views received from the three-month consultation, we are developing the position paper to set out the final content, structure and design of the new Qualification Programme, which will be launched in June 2019.

Fifthly, we have continued enhancing our engagement and support to members. The Institute focused on their career development and getting them future-ready by offering the best and most relevant training possible. Initiatives included our popular CPD series on information technology and more diversified

training ranging from soft skills to specific functions.

Last but not least, we continued to tailor-make services to different membership sectors and support talent development for the business world. The Financial Controller-ship Programme, which aims to groom future business leaders, was a highlight this year. Participants in the pilot programme were provided with insights into the modern role of a financial controller. With the posi-tive feedback received, we are work-ing towards the programme’s official launch next year. Another initiative is the Mentorship Programme, which has commenced the third matching process to help aspiring members learn from their seniors.

Overall, a solid foundation has been laid out as we start to chart the Seventh Long Range Plan. By the time you read this message, the Institute’s 2017 leadership team would have been formed. With your continuous support, I am sure they will achieve even more in the coming year.

2016 was definitely one of the most memorable years of my life. I am deeply honoured to have served as your president, and I cherish the many opportunities I had to connect with you during the year.

Lastly, I want to extend my heartfelt wishes to you all – Merry Christmas and Happy New Year.

“ A solid foundation has been laid out as we start to chart the Seventh Long Range Plan.”

Ivy CheungPresident

ContentsIssue 12 / Volume 12 / December 2016

01NEWS

01 President’s message

04 Institute news

06 Accounting news

10FEATURES

10 Store of value China’s shopping malls have been in decline for nearly a decade, say experts, forcing retailers and developers to give customers new in-store experiences

15 Thought leadership: Anthony Tam The Executive Director of Mazars Tax Services asks whether the government’s new tax measure for Hong Kong’s overheated property market will work

16 Leadership: Janine van Diggelen The Chair of the International Forum of Independent Audit Regulators goes through the key global audit regulatory challenges

23 How to… Mat Ng on how to protect your business from fraud

24 Views from the outside Some firms are diversifying their leadership with non-accounting talent. We talk to partners and managers with unique perspectives

30 Success ingredient: Michael Ma The chief financial officer of Truly International Holdings explains the LCD maker’s focus on staying at the forefront of evolving technologies

36 Certified volunteers Thoughtful Institute members on the rewards of giving back

42SOURCE

42 A game changer for foreign asset managers? An overview of the Asset Management Association of China’s FAQ no. 10 and its impact on international asset managers

46 China tax Frequently asked questions about China’s replacement of business tax by value-added tax in relation to real estate

48 Technical update What members need to know about HKFRS 16 Leases

50 TechWatch 169

16The pursuit of qualityJanine van Diggelen talks about IFIAR’s mission to improve audit quality globally, and its expansion plans into Asia

About our nameA PLUS stands for excellence, a reference to our top-notch accountant members who are success ingredients in business and in society. It is also the quality that we strive for in this magazine — going an extra mile to reach beyond Grade A.

Editor Gerry HoEmail: gerry.ho@mandl.asia

Copy Editor Jemelyn Yadao

Contributors Julian Huang, George W. Russell

Editorial Assistant Queenie Lee

Production Manager Jasmine Hu

Designer Jeannie Au

Editorial Office 2/F, Wang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong

ADVERTISING ENQUIRIESAdvertising Director Derek TsangEmail: derek.tsang@mandl.asiaTel: (852) 2164-8901

A PLUS is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine.

© Hong Kong Institute of Certified Public Accountants December 2016. Print run: 7,180 copiesThe digital version is distributed to all 40,341 members, 18,812 students of the Institute and 2,293 business stakeholders every month. Subscription: HK$760 for 12 issues per year.See www.hkicpa.org.hk/aplus for details.

President Ivy Cheung

Vice Presidents Mabel Chan, Eric Tong

Chief Executive and Registrar Raphael DingEmail: ce@hkicpa.org.hk

Editorial Advisory Group Daniel Lin (Convenor), Eric Tong (Deputy Convenor), Wiley Pun, Colin Wong, Yip Ka-ki, Stanley Yuen, Raphael Ding, Chris Joy

Editorial Manager John So

Editorial Coordinator Maggie Tam

Office Address37/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong KongTel: (852) 2287-7228 Fax: (852) 2865-6603

Member and Student Services Counter27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Email: www.hkicpa.org.hk Website: hkicpa@hkicpa.org.hk

52AFTER HOURS

52 Books The Trusted Executive reviewed, and interview with author John Blakey

54 Life and everything From Hong Kong’s only Nordic seafood restaurant to ways of having a green Christmas this year, as recommended by Institute members

56 A life in the day Nury Vittachi talks to Vanessa Yeung, a compliance executive at Mercedes-Benz, about life in the fast lane

24Views from the outside

Leadership talent with non-accounting backgrounds are showing the value of diversity at large firms

Book review

News Institute news Accounting news

Institute news

Best Corporate Governance Awardsresults reflect a mixed yearThe results of the newly renamed Best Corporate Governance Awards 2016, announced last month, featured more first-time winners, as well as some disappointment, reflecting a mixed year in terms of companies’ efforts in good corporate governance.

The judges decided that only one diamond award, the highest honour, and three platinum awards should be given out this year. The solitary diamond award winner was consistent winner CLP Holdings.

At the same time, this year’s awards picked out new awardees including Bank of China in the H-share compa-nies and other Mainland enterprises category, and Hospital Authority, as the first recipient of the new award for website corporate governance informa-tion. The judges were particularly

pleased to identify a public-sector orga-nization as a winner of the new award and were impressed by the way the Hospital Authority reaches out to its public stakeholders through its multi-lingual website, and by its commitment to accountability as demonstrated, for example, through the posting of its board meeting minutes online. Lenovo Group and Airport Authority are two new faces being given recognition in the awards for sustainability and social responsibility reporting.

Besides website corporate gov-ernance information, the Institute introduced two other types of awards this year – internal control and risk management, and board and audit committee operation and function-ing. However, the judges expressed disappointment that they were not

able to find suitable candidates for both of these.

The new awards aimed to identify companies and organizations that are making good efforts in these impor-tant areas of good governance, but which may not yet have achieved the overall standard necessary to win an award in the main categories.

“Despite some disappointing results, there are a number of positive signs. The judges are pleased to see that overall there were more shortlisted companies this year, and some categories, such as H-share and other Mainland enterprises category and the sustainability and social responsibility reporting awards, were very competitive. Whistle-blowing policies are more widely seen and some progress is being made

Winners of this year’s BCG Awards together with guest of honour Secretary for Financial Services and the Treasury K.C. Chan (sixth from left, front row) and Institute President Ivy Cheung (fourth from left, front row) at the presentation luncheon on 1 December.

4 December 2016

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Resolution by AgreementWai Siu Hung, Bennett, CPA (practising), Tong Ka Yan, Augustine, CPA (practising) and Ernst & Young (firm)

Complaint: Failure or neglect to observe, maintain or otherwise apply the Fundamental Principle of Professional Competence and Due Care in sections 100.5 and 130 of the Code of Ethics for Professional Accountants.

In April 2015, Ernst & Young issued an unmodified audit report on the financial statements of a Hong Kong-listed company and its subsidiaries for the year ended 31 December 2014. The financial statements were prepared in accordance with International Financial Reporting Standards. Wai was the engagement partner and Tong was the engagement quality control reviewer.

The audited financial statements recorded the group’s disposal of a subsidiary group during the year. A premium arising from the previous acquisition of a non-controlling interest in the subsidiary group was incorrectly transferred to profit and loss on the disposal of the group, contrary to IFRS 10. As a result, the gain on discontinued operations was materially understated. In May 2015, the group issued amended financial statements for the year ended 31 December 2014 in which the misstatement was adjusted. Ernst & Young issued an unmodified audit report on the amended financial statements. In June 2015, the company issued a clarification announcement about the misstatement.

Regulatory action: In lieu of further proceedings, the Council concluded that the following should resolve the complaint:1. Wai, Tong and Ernst & Young acknowledge the facts of

the case and their non-compliance with the relevant professional standards;

2. Each of Wai and Ernst & Young pay an administrative penalty of HK$30,000, and Tong pay an administrative penalty of HK$15,000; and

3. All three respondents be reprimanded and jointly pay costs of HK$10,000.

Lam Yiu Hoi, Peter, CPA (practising), and Peter Y.H. Lam & Co. (firm)

Complaint:  Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Auditing 500 Audit Evidence, HKSA 230 Audit Documentation and the Fundamental Principle of Professional Competence and Due Care in the Code of Ethics for Professional Accountants.

Lam is the sole proprietor of Peter Y.H. Lam & Co. The firm issued an audit report on the original version and a subsequently amended version of the financial statements of a private company for the year ended 30 June 2014. The firm conducted the audit in accordance with Hong Kong Standards on Auditing and expressed a disclaimer of opinion on both sets of financial statements as a result of a limitation of audit scope. After enquiring into a complaint about deficiencies in the audit, the Institute found that Lam and the firm failed to perform sufficient appropriate audit procedures on prior period accounting errors as well as certain balances with related companies and a shareholder that were included in the financial statements. These items were material and not affected by the limitation of audit scope. Accordingly, the auditor is required to conduct audit procedures on them in accordance with auditing standards.

Regulatory action:  In lieu of further proceedings, the Council concluded that the following should resolve the complaint:1. Lam and the firm acknowledge the facts of the

case and their non-compliance with the relevant professional standards;

2. They be reprimanded; and3. They jointly pay an administrative penalty of

HK$35,000 and costs of HK$10,000.

Information on the Institute’s complaint handling process and guidelines for the resolution are available at the Institute’s website under the “Compliance” section at: www.hkicpa.org.hk.

on introducing diversity policies and objectives,” says Ivy Cheung, President of the Institute and chair of the judging panel.

“The awards organizing committee conducted a review and there are several new features in the awards this year,” says Patrick Rozario, the BCG Awards’ organizing committee chair. “We dropped the word ‘disclosure’ from the title to emphasize that disclosure is only one element of good corporate governance. We introduced new awards and also reviewed the marking

scheme taking into account the latest developments in environmental, social and governance reporting.”

This year, more than 650 annual reports were reviewed, and the judges also considered publicly-known information for further insights into candidates’ corporate conduct and actual governance practices.

Mentorship Programme2017-18The Institute’s 2017-18 Mentorship Programme is now open for appli-cation. The initiative aims to offer

aspiring CPAs the opportunity to learn from experienced members for the purpose of their career development through consultation and experience sharing. Members are welcome to join as mentees or mentors through online registration by 31 December. Visit the dedicated webpage on the Institute’s website for more details.

ObituariesThe Institute notes with regret the passing away of Lam Wan-kong, Benjamin, Lau Koon-kwan, Doris, Lau Wai-kin, and Soo Hung-sham.

December 2016 5

NewsAccounting

6 December 2016

The marijuana business is in need of accounting services as the drug becomes legal in several states across the United States at a rapid pace, reported Accounting Today this month.

Accountants looking to get into what is expected to be a booming market should understand that the legalization of weed does not mean it becomes easy to buy and sell, according to the report. “Each state in which marijuana is legal, either for medical use, recreational use, or variations therein, has its own laws surrounding the trade. Also, businesses have been moving, buying and selling marijuana on the black market for

decades. Moving a company from illegal to legitimate car-ries with it a complicated tax burden that straddles state and federal rules.”

Section 280E of the U.S. tax code forbids businesses from recording tax deductions or credits for income associated with illegal substances. How the code relates to marijuana is complex, the report adds. “An accountant taking on mari-juana-related businesses needs to have a good understanding of section 280E, possibly working in tandem with a lawyer serving the business, too.”

Cannabis businesses need accountants

Illus

trat

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by H

arry

Har

rison

EY Switzerland to accept bitcoin next yearThe Swiss branch of EY will start accepting bitcoin for invoice payments in January, the firm announced last month. The firm will also launch a new bitcoin ATM at its office in Zurich, as well as a dedicated wallet option for EY employees. The launch comes amid an ongoing cultural bitcoin experiment, which involves a government-backed programme, announced in May, that lets citizens pay for government services of up to 200 Swiss francs with bitcoin. In October, Swiss railway service SBB announced that it would sell bitcoin through its network of ticket kiosks.

Shenzhen-Hong Kong link opensHong Kong Exchanges and Clearing unveiled the city’s second stock-trading connect with the Mainland on 5 December. Shenzhen’s exchange link will give foreign investors direct access to more than 800 stocks in China’s southern financial hub, while Chinese investors can for the first time buy more than 100 smaller companies listed in Hong Kong. The trading link should boost China’s case for inclusion in MSCI’s global indexes, Charles Li, the HKEX’s Chief Execu-tive Officer told Bloomberg. The index compiler has declined to include A-shares three times since 2014, pointing to offshore investors’ heavily restricted access to the market.

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Cybersecurity budgets shrinkfor Chinese companiesTotal cybersecurity budgets for Chinese companies in 2016 dropped 7.6 percent from the previous year to a combined US$7.3 million, reported the South China Morning Post last month, citing a survey by PwC. This is despite such companies seeing an increase in cyberse-curity incidents, driven by China and Hong Kong’s rapid adoption of connected devices. In 2014, only 241 secu-rity incidents were reported, compared with 2,577 so far this year, equal to a 969 percent increase, according to PwC’s Global State of Information Security Survey.

Charles Li

Apple fights back against EU tax rulingApple filed an appeal this month against a European Union ruling that ordered the company to pay up to €13 billion in back taxes in Ireland. Dublin will also appeal the EU’s order, the Irish government said in its formal legal submission, accusing EU competition authorities of unfairness and seeking to breach Ireland’s sover-eignty in national tax affairs. In August, the European Commissioner for Competition Margrethe Vestager called on Apple to pay the penalty for gross underpay-ment of tax on profits across the European bloc from 2003 to 2014. Apple issued a statement, pointing out that it was the largest taxpayer in the world, in the United States and in Ireland.

December 2016 7

The percentage of accounting graduates who fear their jobs

will be taken by machines over the next two decades, with

bookkeeping being the area most at risk, according to a survey

conducted by WikiJob.

75%

The percentage of internal auditors worldwide who have

been requested to change or hide an important audit finding at least once, according to a report by the Institute of Internal Auditors. Of the 14,500 practitioners across

166 countries surveyed, 33 percent claimed that refusing to comply with the requests would result in a negative consequence.

23%

A world of numbers

The amount withdrawn from Hong Kong equity funds since the start of the year due to macroeconomic shocks in Europe from Brexit, the

presidential election of Donald Trump in the United States, and

China’s unexpected currency devaluation, according to data

from the Hong Kong Investment Funds Association.

HK $7.5billion

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Cristiano Ronaldo

NewsAccounting

Former Kraft finance chief to be Gap’s CFOFollowing the announced departure of Sabrina Simmons, Gap’s Chief Financial Officer for a decade, the San Francisco-based clothing chain appointed Teri List-Stoll, the former CFO of Dick’s Sporting Goods and Kraft Foods as its new finance head starting from 17 January. List-Stoll’s appointment comes as president-elect Donald Trump’s transition team plans to dismantle the Dodd-Frank reforms, which aim to decrease various risks in the United State’s financial systems. According to List-Stoll, companies that have invested in complying with the regulations, and are satisfied with the results, will likely keep some measures, regardless if the full act is repealed.

KPMG, Microsoft boost digital transformationTo promote the digital transformation of large- and mid-market firms in India, KPMG and Microsoft India announced a strategic Internet of Things advisory partnership. The advisory will provide digital solutions such as cloud-based automation, create operational insights, provide better analytical tracking and management of cus-tomer relations, and augment organizational agility and workforce mobility. “The IoT Advisory will help define IoT usage scenarios for customers and then implement them,” says Peter Gartenberg, Gen-eral Manager of Enterprise and Partner Group, Microsoft India.

Indonesia tax net widens to target tech giantsIndonesia’s Finance Minister Sri Mulyani Indrawati is seeking to ramp up the country’s tax revenues, which have been hampered by weak commodity prices and subdued demand from China, by widening its taxation net to include global technology companies like Google, Facebook and Apple. According to Lin Neumann, Managing Director of the American Chamber of Commerce in Indonesia, this strategy may deter foreign investors because of lengthy negotiations over tax assessments, undermining President Joko Widodo’s ambitious infrastructure goals.

Ronaldo and Mourinho tax allegationsCristiano Ronaldo, the Real Madrid star, and Jose Mourinho, Man-ager of Manchester United, have been avoiding paying taxes on mil-lions of U.S. dollars of earnings by moving large sums to the British Virgin Islands, according to claims from a document leak. Both have denied these allegations, and Gestifute, the football agency that represents them, said that they are “fully compliant with their tax obligations with the Spanish and British tax authorities.” The claims were published by the European Investigative Collaborations consortium. More than two terabytes of data with original contracts relating to Ronaldo, Mourinho and other top players were included in the leaks.

December 2016 9

Retailing China’s malls

STORE OF VALUE

10 December 2016

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W hen the Guilin-based travel agency China Highlights recently updated its list of the best shop-

ping malls in the country, four out of its top five picks were located in Hong Kong. While that might be a testament to the quality of the shopping experience south of the border, it was also a sign of the continuing crisis affecting physical retailers in the Mainland.

In 2015, 83 of China’s 5,000 or so major shopping malls closed down, according to data from the Chinese Academy of Social Sciences, a state-run research organiza-tion. That might seem a drop in the ocean but real estate specialists say China’s malls have been in decline for nearly a decade. In September, the academy issued a report forecasting that up to one-third of China’s existing malls will shutter by 2020.

Much of the shopping centres’ plung-ing fortunes are due to the rise of electronic commerce. China is already the world’s largest e-commerce market, with total retail website sales reaching 3.877 trillion yuan (HK$4.354 trillion) last year, a 33.3 percent increase over 2014, according to the National Bureau of Statistics of China. Sales during the second quarter of 2016 are estimated at 1.1 trillion yuan, 27.6 percent higher than the year-earlier period.

Online sales accounted for nearly 13 percent of all retail purchases in China dur-ing the year, compared with about 8 percent of those in the United States, 7 percent in

Australia, 2 percent in Singapore and less than 1 percent in Thailand.

“Consumers opt to shop online primar-ily because of the ability to shop at all hours, compare prices and secure better deals, as well as the convenience of not hav-ing to travel to a physical store,” observes Jessie Qian, Head of Consumer Markets at KPMG China in Shanghai and an Ameri-can Institute of CPAs member.

Qian suggests that bricks-and-mortar store managers have failed to adjust to China’s maturing retail consumer. “The meteoric rise in online and mobile activity,” she adds, “points to a Chinese consumer who is increasingly sophisti-cated, hungry for information, more likely to spend, and keen on accessing a greater variety of products.”

However, the shift to online shopping is not the sole reason for the malls’ decline. “China’s economic slowdown and rising salaries and rents have also put immense pressure on traditional retailers with large networks of physical outlets,” says Daniel Zipser, Greater China Consumer and Retail Practice Leader at McKinsey & Company in Shanghai. Refreshing experiencesAny customer who has wrestled with recalcitrant websites, rejected credit cards, frustrating delays and wayward deliveries knows there are downsides to online

China’s online commerce explosion has put pressure on bricks-and-mortar stores, especially in malls. But, as George W. Russell reports, the impending demise of physical retail in the Mainland might be exaggerated: developers and retailers are creating more innovative ways – from entertainment to in-store apps – to attract visitors and turn them into purchasers

Illustrations by Benedetto Cristofani

December 2016 11

Retailing China’s malls

commerce. As a result, traditional retailers can still compete on convenience.

In addition, special offers, on-site fittings and easier exchanges still draw customers to physical stores. “Bricks-and-mortar stores are still very important,” says James Macdonald, Head of Research at Savills China, a property consultancy. “Retailers still need them to display their products and engage with shoppers.”

As a result, some online retailers are retrofitting: In January, clothier Sugar Girl opened a bricks-and-mortar store in Hang-zhou, becoming the third Taobao original brand, after Inman and Chuyu, to do so. Technology brands such as Apple, Oppo, Huawei and DJI have also opened physical outlets. “We continue to see online platforms launching pop-up shops in malls to give buy-

ers a real-world experience,” observes Qian at KPMG.

The Chinese Academy of Social Sci-ences noted in its September report that those malls that are not forced to shut down will have to transform themselves, forecasting that one-third would become wholesale marketplaces, while the other third would thrive by integrating their operations with e-commerce.

While adding the physical incarnation of online brands can bring a freshness to shopping centres, mall owners and tenants should make a more coordinated effort to promote what Yeeman Chin, Credit Rat-ings Director for Asia Corporates at Fitch Ratings, describes as more “experiential shopping,” whether online, in-store or as a combination of both channels.

A recent PwC China report, Total Retail 2016, notes that although more Mainland customers are shopping online, there is a “need for an increasingly focused, curated and engaging brick-and-mortar store experi-ence… no matter what channel ultimately records the purchase.”

Some malls are reproducing the online experience in their physical stores. “The most common facelift strategies are to not only modernize interior décor but also to install technologies to make properties friendly, intelligent and compatible with con-temporary popular communication,” notes Clement Chan, Managing Director of Assur-ance at BDO China and a former president of the Hong Kong Institute of CPAs.

That can mean adding touch-screen kiosks, providing mapping services and transmitting mobile notifications. Aeon Mall, a Japanese company that owns a dozen shopping centres in China, plans to eventu-ally roll out free wi-fi, indoor Google Maps and Google Street View as well as robotic assistants and a driverless shuttle service.

Bright malls, big citiesShopping malls won’t be relying solely on technology to compete with e-commerce. “We will also strengthen our ability to attract customers further by enhancing the experience-based stores and facilities that only real malls can provide,” Akio Mishima, Managing Director and General Manager of Aeon Mall’s leasing division, told a recent shareholders’ forum.

Interpersonal communication is one of a mall’s major strengths. “Not all people have their heads buried in the Internet,” says Milton Wong, Senior Adviser to Hong Kong-based retailer Dickson Concepts Interna-tional and a former chief financial officer of the Jin Jiang Dickson Shopping Centre mall in Shanghai’s upscale Luwan district.

12 December 2016

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“Most still have to go out dining and participating in social activities,” says Wong, an Institute member. “So the shop-ping centres may also survive by having cinemas, food courts, supermarkets, beauty salons, hair stylists and gyms, which custom-ers have to visit in person.”

Developers say different areas of China have diverse attitudes towards malls. Peter Sharp, Presi-dent of Taubman Asia, says there is strong demand for more retail space outside the tier-one cities of Beijing, Guangzhou, Shanghai and Shenzhen. “We have chosen to meet demand by opening CityOn.Xi’an in April and CityOn.Zheng-zhou in March 2017, two under-served tier-two markets with high disposable income and economic growth targets,” he says.

As such cities become richer, malls will offer more luxury retail goods. “I think the [impact on] shopping centres might happen mainly on the middle to lower sector of the market,” says Chan at BDO. “It will be much slower for the high-value items.” Indeed, high-end shopping is likely to remain the preserve of physi-cal stores. “People like to try on luxury goods before purchase,” Wong points out. “You wouldn’t buy a Rolex on the Internet.”

But even expensive retailers have to innovate: the Printemps department store within a mall in Shanghai’s Pudong district features a giant, five-storey, dragon-shaped slide for agile shoppers in a hurry. “Consumers will feel bored if malls

are too standard,” says Macdon-ald at Savills. “They want to be entertained and landlords need to provide new ideas and concepts.”

Macdonald says malls will see more regular exhibitions and activities as well as more innova-tive use of floor area. “There will be more open spaces, smaller kiosks, pop-up stores, and more decorations,” he says. “They have to make themselves stand out from the crowd and interact more directly with the consumers.”

Growth opportunitiesChina’s slowing economy has seen more sluggish sales growth, or even declining purchases, among many brands – including Louis Vuitton, Burberry, Coach, Giorgio Armani, Michael Kors, Hermès and Gap – weakening the pulling power of malls. “The market is likely to be very competitive and challenging for a number of opera-tors over the next five years,” says Macdonald.

Slowing expansion plans are no surprise, he adds, saying that many leading international brands have been in China for some years. However, there are still avenues for rapid growth. “Some of the more active retail segments such as sports or kids’ related brands are quite strong.”

Colin Currie, Managing Director at Adidas Greater China, says the role of bricks-and-mortar stores in China “is now more important than ever” to the sportswear brand despite its investment in online commerce.

“That’s why we’re planning to open a further 2,000 stores in Greater China by 2020.”

“E-commerce is hugely con-venient but nothing can compare to seeing and feeling a product first-hand in a store,” Currie adds. “More importantly, physical stores are key differentiators of our brand that help consumers get to know Adidas on a deeper level.”

Macdonald notes that the best malls aren’t always new. “There may also be some opportunities for the smaller, older projects in prime locations,” he adds, although noting that many such centres are facing stiff competition from larger, better quality malls in decentralized locations.

The mall’s changing role is having a wider effect on the Chinese real estate sector. “The shift from offline to online has also impacted the way rent is col-lected,” observes Kenneth Rhee, Chief Executive Officer of Huhan Advisory, a real estate consultancy in Shanghai. “Landlords increas-ingly are phasing out collection of a percentage of sales and instead only relying on base rent.”

Cultural considerations could also serve to keep physical stores alive. Sharp at Taubman Asia points to the practice of guangjie (逛街), roughly translated as “window shopping.” “Malls in China are evolving their retail experience – from a shopping destination to a social and entertainment destination. Bricks-and-mortar stores’ days are far from over.”

“They have to make themselves stand out from the crowd and interact more directly with the consumers.”

One-third of all shopping centres in

China will close their doors by 2020, a

recent report by the Chinese Academy of Social Sciences,

predicted.

December 2016 13

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Thought leadershipAnthony Tam

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December 2016 15

Due to demand-supply imbalance in the local housing market and ultra-low interest rates

in the global monetary environment, local property prices have been rising exponentially over the past years leading to a heightened risk of a bubble. To tame the runaway property prices, the government has introduced several rounds of demand-side management measures to combat short-term speculative activities and curb external demands. These included special stamp duty in November 2010 and October 2012, buyer’s stamp duty in October 2012 and double stamp duty in February 2013.

Nevertheless, the “spicy” effect of the above-mentioned measures lasted for a brief period only. Since April this year, the residential market has showed renewed signs of exuberance again. During the first nine months of 2016, only about 25 percent of residential transactions were subject to DSD (i.e. buyers already owned one or more residential properties at the time of the transaction). This suggested the investment demand for residential properties has re-accelerated probably due to repeated delays in the United States interest rate hike and continued devaluation of the yuan. As a result, the government proposed to increase the ad valorem duty to a flat rate of 15 percent for residential properties effective from 5 November.

In contrast to the old progress rate regime, the AVD applies to different value bands at a flat rate of 15 percent. Under the new regime, the AVD for a property, say, at HK$3 million will be HK$450,000, compared with the old rate at HK$90,000, representing an increase of 400 percent. The new

measure apparently has a larger impact on lower-priced residential properties. This indeed will address the over-heated small-flat market but its effectiveness remains to be seen.

Each time the government announced a new round of demand-side management measures, property developers responded by offering different kinds of promotions to potential buyers in order to neutralize the “spicy” effect. This time is no exception. Shortly after the government’s announcement of the 15 percent AVD, certain property developers have been offering full or partial AVD refunds to potential buyers. Coupled with developers offering financing to buyers to get around the loan-to-value ceiling imposed by the Hong Kong Monetary Authority, many aspiring home buyers have been lured into the first-hand market. The surge in investment demand this time also seemed to have emanated from the first-hand market. Therefore, the government should consider restricting developers from offering stamp duty refunds and high loan-to-value ratio financing to potential buyers. The latter also aims to preserve stability in our financial system by reducing default risks should home prices drop significantly in future.

While some welcome the new measure, property agents in general consider that the new AVD will only result in low transaction volume but not a drop in home prices. This is because for those investors already holding more than one residential property, they will become even more reluctant to sell their properties as it will be increasingly difficult to invest in residential property again in future. As such, this will lead to a decline in supply which results in

an increase in home prices. This may be true amid today’s market awash with liquidity where people desperately seek investments that can combat inflation. Introducing taxation capital gains on real property could reduce the attractiveness of investing in residential properties.

In the expectation of continuous devaluation of yuan, the capital inflow from the Mainland is more likely to persist rather than not. Despite a hefty stamp duty (i.e. 15 percent BSD plus 15 percent AVD), residential properties still look appealing to Mainland investors. The government should consider restricting non-Hong Kong permanent residents from buying residential properties. Similar measures restricting foreign buyers are in place in other countries, such as Australia and China.

Housing problems should be addressed with a multi-pronged approach but the ultimate solution must rest with the housing supply in the long run. It is generally expected that the demand-supply situation will remain tight in the near term. The government should therefore consider alternative measures to increase the housing supply in the short and medium terms.

For example, the government may consider introducing vacant property tax to discourage property developers from hoarding completed properties and thereby increasing housing supply in the private sector. In addition, revitalization and conversion of vacant or under-utilized buildings, e.g. abandoned school premises for provision of temporary housing, may also be worth exploring. Although these measures may not have a significant boost to the housing supply, given that housing is the most critical livelihood issue in Hong Kong, every penny should count.

The Executive Director of Mazars Tax Services Limited and the Chairman of the Institute’s Taxation Faculty Executive Committee, examines the mixed reactions brought by a new measure that aims to address Hong Kong’s overheated residential property market

Will the new 15 percent ad valorem duty work?

Leadership profileJanine van Diggelen

16 December 2016

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THE PURSUIT OF QUALITYJanine van Diggelen will be the last Chair of the International Forum of Independent Audit Regulators under its current structure. In this interview with George W. Russell, she addresses the key global audit regulatory challenges and IFIAR’s future as it prepares to move into its new Tokyo headquartersPhotography by Ruud Baan

W hen it comes to accounting firms’ most mentioned rea-sons for substandard audits,

Janine van Diggelen has heard them all before. “Lack of understanding, insufficient supervision and direction, excessive workload, deadline pres-sures, fee pressures, resources issues, high attrition rates,” she says, reeling off the most common responses.

However, the Chair of the Inter-national Forum of Independent Audit Regulators remains unimpressed. “If we hear these things, we say these are more symptoms than underlying root causes,” says van Diggelen, who has led the organization since April 2015.

“Firms need to deepen their root cause analysis and really get to the why of the why,” she says, reached at her office in Amsterdam. “They have to find the underlying causes that drive behaviour in their audit teams and firms, and should include culture, structure, processes and governance in their analysis.”

IFIAR, which is celebrating its 10th anniversary this year, provides

a forum for audit regulators from 52 jurisdictions to share their knowledge and experiences on their markets, and on audit oversight practices.

In March, IFIAR issued its fourth audit inspection report. Surveys returned by member organizations showed that 43 percent of audits of listed public interest entities had at least one negative finding. Such findings do not necessarily mean that financial statements contain material misstatements, but there is a higher risk that such misstatements have not been detected.

Van Diggelen – who is also head of international auditing and accounting, policies and standard setting at the Netherlands Authority for Financial Markets – concludes that the rate of improvement is too sluggish. “The previous year, the percentage was 47 percent, so there has been a slight improvement, which is promising, but I think the pace is too slow.”

Another unsatisfactory issue for IFIAR is that the major problem areas remain consistent. “The top three

Janine van Diggelen is head of international

auditing and accounting, policies

and standard setting at the Netherlands

Authority for the Financial Markets

December 2016 17

Leadership profileJanine van Diggelen

remain the same: fair value measure-ment, internal control testing and rev-enue recognition,” she says. “And there is a fourth topic that emerged in our last survey: risk assessment.”

Van Diggelen expects over time that inspection survey results will show a positive trend, supported by the agreed inspection findings reduction target with the six largest global accounting network firms. This year, IFIAR set its first hard quality goal: to reduce the number of audits with at least one negative finding by 25 percent between 2016 and 2019. “That’s the first measurable target and the first step on the path to considerable improvement of audit quality globally.”

In the future, van Diggelen says, IFIAR will increase its engagement with its members, the six largest accounting firms, its advisory group of investor and audit committee representatives and its other stakeholders through meetings, thought leadership, sharing of informa-tion and workshops. “Our mission is to serve the public interest and to enhance investor protection by improving audit quality globally.”

Current environmentThat mission means IFIAR has broad-ened its engagement with the global accounting and financial community in recent years. “We liaise with dif-ferent stakeholders, including other international organizations like the International Organization of Securi-ties Commissions, Financial Stability Board and the Basel Committee,” says van Diggelen.

An increasingly important col-laborator is the audit committee. “We operate in an environment where audit committees play a crucial role and have more involvement in interacting with the audit firm,” she points out. “In many jurisdictions, regulation has changed so it is the audit committee and no longer company management that deals with the auditor and also with the selection of the auditor.” Mandatory firm rotation has changed the audit environment in many juris-dictions and underlines the role audit committees can play in improving audit quality. “Evaluation of quality of

the audit by the audit committees, and their role in selecting a new auditor, are very important to further drive audit quality,” says van Diggelen. “We also engage with them to promote a situa-tion where competition is more about quality rather than factors like fees.”

The IFIAR chair says the same inspection findings tend to pop up across the 52 jurisdictions represented in the IFIAR survey. “There are differences in culture that could have an impact on the type of issues our members come across in different parts of the world,” van Diggelen acknowledges. “But overall, the most striking thing, if you look at our inspection surveys, is that there is a lot of commonality in the findings.”

IFIAR is in regular communication with the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants over ways to strengthen auditing and ethics standards.

“We’ve asked IAASB and IESBA to focus on what they can do to further drive consistency in the execution of audits in areas where IFIAR members have the most common inspection findings,” van Diggelen says. “One central theme that pops up is lack of professional scepticism,” she adds. “Enhancing professional scepticism is very important to further drive audit quality, and we’ve asked both the audit firms and the international standard setters to look at that.”

Audits of multinational corporations continue to be a focus area for IFIAR. “As audits are cross-border in nature and most of the group audit work is done by foreign audit teams, while mandates of audit regulators are mostly limited to their own jurisdiction, we need to work together and share information on the quality of multinational group audits and risks thereto. In order to facilitate this, IFIAR has agreed a multilateral memorandum of understanding for the exchange of confidential information to which its members can become signato-ries. Besides, several IFIAR members have recently engaged in joint multi-jurisdictional group audit inspections. “We are doing a couple of those, firstly to learn from one another about how we

do these inspections, and secondly to learn more about the concept of a group audit in particular the role of the group auditor in relation to the components’ auditors,” says van Diggelen.

Structural changesOne of IFIAR’s most significant devel-opments occurred in April when mem-bers meeting in London voted to change IFIAR’s structure. That vote means that van Diggelen is presiding over the organization at a critical juncture in its 10-year history.

From April next year, a board will lead IFIAR while a permanent secre-tariat will be established. Until then the chair and vice chair lead IFIAR and must provide support staff from their respective organizations, so IFIAR is effectively administered by van Dig-gelen’s own Dutch staff, assisted by those of Vice Chair Brian Hunt, who is the Chief Executive Officer of the Canadian Public Accountability Board. “Going forward, this is not ideal in terms of continuity with the rotation of the chair and vice chair every two years,” she points out.

IFIAR will be headquartered in Tokyo. “We will implement a new board structure – a new governance structure – for IFIAR and this will significantly enhance our organizational capabili-ties,” says van Diggelen. “The Tokyo market is the third largest capital market, and Tokyo is a city with a solid infrastructure, sophisticated business environment, economic and political stability and a fairly large audit sector.”

Tokyo is expected to also serve as a gateway for IFIAR’s outreach to expand in the neighbourhood. IFIAR members are mainly concentrated in Europe and the Americas, and only 10 Asia-Pacific jurisdictions – Australia, Indonesia,

“ Evaluation of quality of the audit by the audit committees, and their role in selecting a new auditor, are very important to further drive audit quality.”

18 December 2016

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December 2016 19

Leadership profileJanine van Diggelen

Japan, Korea, Malaysia, New Zealand, Singapore, Sri Lanka, Taiwan and Thai-land – are represented at IFIAR. “We will be better positioned to expand our membership in Asia and Africa, where we have light coverage,” she notes.

Several major economies are not members of IFIAR, such as Argentina, India, Mexico and Saudi Arabia, and, perhaps most notably, China and Hong Kong. “We are in touch with the authori-ties in both China and Hong Kong and we hope in time to welcome them as members,” says van Diggelen.

Hong Kong has proposed regula-tory reform to ensure audit oversight

independence by empowering the Financial Reporting Council to exercise inspection and disciplinary powers in addition to its existing investigation power in regard to listed entity auditors. Such reforms are important to meet IFIAR’s requirements for membership. (According to the proposals, the Hong Kong Institute of CPAs would continue to perform statutory functions including registration, continuing professional development and setting standards on professional ethics, auditing and assurance but under the independent oversight of the FRC in regard to listed entity auditors.)

“We have recently learned that proposals are on the way from the Hong Kong government to improve the regulatory regime and as IFIAR chair I welcome these proposals,” says van Diggelen. “In my personal view it is very important to have a ‘strange and inde-pendent pair of eyes’ to look at what’s happening in the audit profession.”

Innovating togetherThere are no signs of a regulatory hiatus for the audit profession, van Diggelen warns. “The global financial crisis and its aftermath have shown the need for further strengthening of the

Prior to joining the AFM in 2004, van Diggelen had worked at Ernst & Young (now EY) for 17 years

20 December 2016

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information technology and data analytics and how innovations could contribute to improvement of audit quality.”

IFIAR is a grouping of diverse national regulators and van Diggelen stresses that different countries have different regula-tions, standards and legal frameworks in place. “From an investor protection and public interest perspective it would be ideal if at a certain point of time there were a single set of global auditing standards,” she muses. “Likewise if there would be further consistency in audit oversight approaches.”

However, she adds, “IFIAR has no mandate to issue standards or authoritative guidelines or rules for members or the pro-fession. We respect the national standards so promotion of standards or rules is not an explicit objective.”

International auditing standards, van Diggelen notes, are the bedrock of cross-border cooperation. “We see the standards as very important as they could further drive consistency in the execution of high quality audits. We are focusing on the standards, with the aim of strengthening them, in the way that how could they be improved? Are they sufficiently clear? Can they be enforced and are they in the public interest?”

The key to IFIAR’s success, van Dig-gelen believes, is member organizations’ sense of common purpose. “Through our cooperation and exchange of information and workshops we do on enforcement and inspection, we exchange a lot of informa-tion on approaches in audit oversight – how we do oversight, what is important to focus on, what works and what doesn’t work.”

While there is no explicit attempt at convergence, member organizations inevi-tably learn from each other. “Our members pick up things they hear and see from others so there is further alignment over time over approaches to audit oversight,” she says.

regulatory mechanism and independent audit oversight,” she says.

“There were a lot of questions asked during the crisis, about where were the auditors when there were banks that needed to be bailed out. In Europe there was a new directive and regula-tion that resulted from it, strengthening audit independence and enhancing the independence of audit regulators.”

Auditors should not claim they are suf-fering from regulatory fatigue. “We need to be careful because there is a further need to improve audit quality and we should not be relaxing now,” says van Diggelen. “We also need to look at other aspects, like rapidly changing trends in financial reporting,

“We also need to look at other aspects, like rapidly changing trends in financial reporting, information technology and data analytics and how innovations could contribute to improvement of audit quality.”

The International Forum of

Independent Audit Regulators was

established on 15 September 2006 by independent audit regulators from 18 jurisdictions.

Since then, IFIAR’s membership

has grown to 52 jurisdictions.

December 2016 21

57 December 2016

A life in the day…. with Nury Vittachi

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How to...Mat Ng

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December 2016 23

“Fraud is everywhere. How can I protect my business?” – a question often asked by owners of small- and medium-sized enterprises.

Significant financial losses have been caused by fraudulent acts every year. According to a recent report conducted by Association of Certified Fraud Examiners, frauds between 2014 and 2015 resulted in the following:• Total loss exceeded US$6.3

billion (average loss per case was US$2.7 million); and

• Median loss was US$150,000, 23.2 percent of which caused losses of US$1 million or more.

Big corporations can hire consultants or professionals to design detailed and meticulous policies and procedures to prevent, detect and investigate fraud. SMEs can consider the following general recommendations to reduce the threat of fraud.

PoliciesEmployees at all levels, upon hiring, should be provided with an employee handbook with code of conduct and company policies in relation to:• What behaviour and actions are

prohibited;• How to seek advice when

they are uncertain of ethical decisions; and

• Where to report fraudulent acts.

Regular trainingRegular training should be provided to employees in respect of: • Case studies;• Regulatory requirements; and• Refresh of company policies and

code of conduct.

Active monitoring Procedures should be established to prevent and detect fraudulent activities. Examples of some basic prevention measures include segregation of duties, rotation of duties, periodic internal control review conducted by the internal audit department, etc. Here are some typical red flags:• Regular payments in rounded

amounts to same persons or entities;

• Payments made one or two days before month-end;

• Employees do not take leave;• Employees do not regularly

change or update computer login passwords; and

• Employees responsible for both fund application and approval.

CommunicationA communication system should be established to:• Promote ethical behaviour, deter

wrongdoing and communicate ethical issues;

• Enable employees to seek advice prior to making difficult ethical decisions; and

• Report concern about known or potential wrongdoing.

Examples:• A designated compliance officer

responsible for promoting ethical behaviour, encouraging reporting on wrongdoing (not only within the company but also to suppliers and customers), and investigating reported issues; and

• A designated hotline or email to receive anonymous reports of wrongdoing.

Professional helpIn some cases, it may be more appropriate to hire external professionals, for example:• Covert investigation if you

receive a whistle-blower report, but do not want to alert the fraudsters of any internal investigation.

• Potential investigation by local or overseas regulators because your suppliers or customers were involved in fraud.

• Advice on any weaknesses and improvements of current internal control procedures, employee handbook or code of conduct.

There is no one-size-fits-all fraud prevention manual, but we hope these recommendations can serve as some basic initial steps that SMEs may start considering.

…protect your business from fraud

The Managing Director of JLA Asia, looks particularly at how smaller companies, which can be highly susceptible to incidents of fraud, can better protect themselves. This article was co-authored by Gabriel Tsui, Associate Director of JLA Asia

“ Procedures should be established to prevent and detect fraudulent activities.”

Accounting firmsDiversified leadership

In a bid to diversify, many accounting firms are looking outside the profession for their leadership talent. Jemelyn Yadao talks to partners and managers who aren’t equipped with accountancy skills, but have unique know-how that adds value to the organization

VIEWS FROM THE OUTSIDE

Illustrations by Kouou Sakai

24 December 2016

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to execution for its clients. “There’s an understanding among global brands entering the China market that this part of the business world is starting to appreciate brand.”

At the experience centre, launched earlier this year, tools such as virtual reality headsets and three-dimensional printers are used for rapid prototyping to test out such solutions, while creative-led thinkers, like Smith, regularly collaborate with business analysts.

This trend of professional services firms, including the accounting firms, moving into the creative and digital communications space has been happening in parallel with firms diversifying their management, with some directors and partners having no formal training in accounting and audit. While the experience of a qualified CPA still are impera-tive, external expertise at the leadership level is proving to give firms the multidisciplinary skills and competitive advantage needed in today’s changing and technology-driven busi-ness landscape.

The storytellerFor Smith, the former senior vice president for digital and social media at Weber Shandwick Shandwick Asia-Pacific, working at a Big Four gives him the chance to do work outside the usual scope of most creative agencies. “Understanding the impact that brand strate-gies have on these companies is incredible, whether it’s a brand entering China, or a Chinese leaving China and going global. It is something that is very rare from an agency standpoint. But because of the way PwC oper-ates, you get the chance to consult businesses on what branding will mean to them in a new marketplace,” says Smith, who had been at Weber Shandwick for six years, starting in Sydney before moving to Hong Kong. “How the Chinese customer perceives a client’s brand influences whether or not they purchase their products, and will ultimately define

whether that merger and acquisition was suc-cessful,” he adds.

His background in PR and “storytelling” is critical to the firm, especially as companies in Asia Pacific, as he points out, are keen to engage with consumers through interesting content, both physical and digital. “Creat-ing customer experiences as they transition between online to offline – this holy grail of omnichannel – is where brands are falling down at the moment I think.”

As well as serving as head of digital at Weber Shandwick, Smith worked for the company’s crisis communication and issues management division for Asia Pacific, helping clients prepare for and manage negative events on social media, as well as other communication channels, to protect their reputation. “I was understanding the speed in which crises and issues exist online, and the demands audiences have of how you communicate around issues and crises. That part of work allowed me to understand things much more strategically,” he says.

This, along with his experience in launching the agency’s content-creation and distribution unit, and expanding it to six markets across the region, were experiences and skills that were easily transferrable to PwC. “It was like a smaller ‘experience centre,’ but at Weber Shandwick,” he says. But this was not the main reason he joined the firm. Most of the blame goes to his curiosity. “One of the reasons why I wanted to do it at the Big Four was because they have a true foundation of customer insights and understanding audience and I think those things are really important. They have an understanding that this is about guiding future direction, far more than it is about spending time on campaigns,” he says. “That’s not to say campaigns are not important, but for someone like me, you’re constantly curious, you want to be challenged, and the idea that you can apply your skills to a completely new

U p until last year, Jye Smith worked mostly with marketers, addressing issues around public relations at one

of the world’s top communication agencies. Nowadays, he finds himself sitting across the table from business executives and decision-makers, and saying things he never thought he would say.

“If you asked me the day before I came if I would be excited about mergers and acquisi-tions, it would’ve been a flat-out no. But now that’s become a really exciting field for me,” says Smith, Consulting Director of Brand and Marketing at PwC Hong Kong’s Experience Centre, which provides business and digital solutions ranging from strategy right through

December 2016 25

Accounting firmsDiversified leadership

26 December 2016

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set of challenges is one of the most enticing things.”

The engineerSteve Lo at EY is always on the look-out for diverse, bright new recruits, whether or not they have accounting backgrounds. “Because of the digital economy, our clients are facing new challenges, so there’s a significantly high demand for advisory services to not miss out on the opportunities out there,” says the Managing Partner of Technology, Media and Telecom-munications at EY. “We need talents with problem solving, analytical skills, excellent interpersonal com-munication skills and, more impor-tantly, curiosity about the industry and passion about the work we do.”

Lo himself graduated with bachelor and master degrees in electrical engineering, which helped him land a job at an international management consulting firm. “We are helping clients with performance improvement initiatives. In fact, this fits well with my background as people tend to say engineering is about creating solutions to real world problems, which is pretty much what the management consulting industry is all about,” he says.

While Lo rarely uses what he learned at university in his current role, he believes his educational background in science, technology, engineering and mathematics (STEM) has been

key in helping him constantly keep abreast of innovation and new technologies, and deal with business transformation for clients. “My education in STEM and my work experiences outside of accounting firms trained me very well in disciplines like critical and analytical thinking and complex problem solving. These are essential to helping organizations tackle increasingly complex problems that they are facing in the market right now, and helping entrepreneurs in all aspects, from starting a business to product development.”

Attracting more students from non-accounting majors to join the profession won’t be too difficult, notes Lo. “Digital is the buzzword now and a lot of the graduates are keen to get their foot in the door, and advisory is one good avenue for them to participate in this new business environment. Of course, I think most people in the engineering field may prefer being entrepreneurs. But when it comes to this industry of providing

professional services, I think this is also one huge attraction to them.”

The tech expertWith advances in technology chang-ing the way companies do business, many firms are now looking for lead-ers with the right skills to help their teams, as well as clients, navigate through the changes. Eva Kwok is one such leader.

With a degree in computer science, and more than 16 years of experience in information sys-tems, Kwok calls herself a typical programming and IT person. Yet she had an unusual drive to leave the software industry and join the con-sultancy world. “There were three motives: One is the exposure to dif-ferent organizations and industries. Secondly, the consulting skills that I wanted to build up. Thirdly, the clear career path that I was aiming for in terms of career progression and potential future partnership,” she says. That vision became reality for Kwok, who is now Partner of Risk Advisory and a Cyber Risk Leader at Deloitte China, focusing on cyber security and privacy assessment, consultancy and implementation services for enterprises in industries including financial services, hospi-tality and gaming.

Kwok worked at a software company after graduating from the University of Waterloo in Canada, developing web applications and

More than a third of KPMG

Australia’s 389 audit graduate intake in 2016

do not have an accounting

background. Ten percent of them have no formal

commerce, economics or

business degree. Instead, they have

qualifications in a range of areas from

environmental science and Mandarin, to

counter-terrorism and social work,

reported the Financial Review earlier this year.

“ There were three motives: One is the exposure to different organizations and industries.”

December 2016 27

Accounting firmsDiversified leadership

28 December 2016

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interactive voice response technology, which allows customers to interact with a company’s host system via a telephone keypad or by speech recognition to enquire about services. “I did that type of development work for banks and government, in order for people to, for example, process online banking transactions or driving license applications by phone or web,” she explains. “Afterwards, I moved to one of the major banks in Toronto, doing IT and security projects. At that point I luckily partnered up with Deloitte, which was the service provider at the time.”

There have been several cases where Kwok has found her in-depth expertise in programming and cyber security risk management to be a valuable asset, including when an organization lacks the understanding of the importance of security solutions or is having trouble implementing such solutions. “Typically, the challenge may reside in stakeholder communication, alignment and requirements compilation, for instance, one stakeholder wants to implement a security solution but the other business stakeholders may not have the same level of understanding, priority or capability to express security requirements. The real value-added piece is helping enterprises align those stakeholders, gather the right requirements, provide advice, and help them shape up a successful deployment,” she says.

Her expertise also helps clients identify hidden dangers. “There’s a sense of achievement when I find a security breach. Sometimes when we go in and have a look at their application or network, for example, we can bypass their security login layer, and extract customers’ information. When we show this kind of finding to a company, they have tremendous appreciation because we are helping them mitigate the problem in advance, instead of dealing with a real hacker later.”

She also utilizes her skills to conduct technical training for boardroom members and security practitioners. For her, the benefit she brings to the firm as “a regular IT type” comes about because she approaches from another perspective other than accounting. “It is these experiences that help practices grow, and to see things through different lenses,” she says.

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“ It is these experiences that help practices grow, and to see things through different lenses.”

December 2016 29

Success ingredient

Michael Ma, Chief Financial Officer of the Hong Kong-listed LCD manufacturer Truly International Holdings, tells George W. Russell how the company focuses on R&D to stay innovative in a rapidly evolving industrial, technological and financial environment

Like any technology executive, Michael Ma is enthusiastic about new developments.

Ma’s company, Truly International Holdings, is a leading manufacturer of digital displays in smartphones, smart watches, tablets, home appliances, industrial products, medical equipment and vehicles.

Truly has long been attuned to technological sea changes, such as the plateauing of smartphone sales in recent years. As a result, automotive components have become more important. The company now boasts a customer roll call that includes European luxury marques and mass-market automobiles .

It was Truly’s commitment to its core business that attracted Ma to the position that he has held since 2011. “Truly has been listed in Hong Kong since 1991 and is still growing,” says

Ma, its Chief Financial Officer and Company Secretary, in his office in the industrial Kowloon neighbourhood of Kwai Fong. “The company’s focus is developing its display manufacturing and does not involve any significant speculative businesses.”

Ma says the company’s success has been due to continuous investment in research and development. In 1991, it was making only black-and-white displays but became a pioneer of mass production of “colour super-twisted nematic” display modules developed by Sharp Corporation (now part of Foxconn) in the early 2000s.

Today, Truly produces display modules, touch panels, cover lenses, compact camera modules and fingerprint identification systems. Its main facility is located in Shanwei, Guangdong province, about 170 kilometres east of Shenzhen.

Photography by Anthony Tung

SCREEN STAR

Michael Ma visits Truly International Holdings’ Huizhou and Shanwei factories two to three times a month, addressing cost challenges such as the raw material yield rate.

Michael Ma

30 December 2016

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December 2016 31

Success ingredientMichael Ma

Truly’s current R&D programme includes small- and medium-sized displays. The company recently opened a new factory in Huizhou, about 90 km north of Shenzhen, to make the latest in active-matrix organic light-emitting diode displays, or AMOLED, recently pioneered by Samsung of South Korea.

AMOLED is hot technology. In November, The Wall Street Journal reported that Apple is expected to roll out its next iPhone with a curved AMOLED screen in 2017 that could rival Samsung’s versions.

Ahead of the curveStaying at the cutting edge of technology has earned Truly plaudits: it was one of only two Hong Kong entries on the Forbes Fab 50 list of innovative Asia-Pacific companies this year. “This type of recognition gives our global customers and supply chain partners strong confidence in Truly,” says Ma.

When Truly began operations, its earliest products were liquid-crystal displays, which work by adjusting the amount of light blocked. The next major development was a thin-film transistor attached to each pixel. All computer screens have used TFT since the early 2000s.

Unlike light-blocking LCDs, light-emitting diodes created brighter, sharper screens. The next innovation was organic LED, or OLED, which could be printed on a wider range of materials, such as plastic, instead of expensive silicon or germanium. Passive matrix displays emit light when electricity is applied while the active matrix, or AMOLED, displays can operate continuously due to an in-built storage capacitor.

“There is quite a lot of demand for AMOLED but supply is very limited,” says Ma. “In fact it was coming only from Samsung, so many other manufacturers of smartphones find it very difficult to get

the continuous and stable supply.” Truly’s Huizhou plant produces both AMOLED display panels and TFT displays panels. The Shanwei facility is devoted to TFT displays.

Ma says longstanding smartphone customers in overseas and the Mainland market welcomed Truly expanding the AMOLED supply. “I think this is a great time for us in terms of AMOLED technology.”

While Truly has been able to utilize the inventions of others, and purchases TFT panels for smartphones from both South Korean and Taiwanese suppliers, Ma says the company has stressed its own innovative capabilities, such as advanced lamination technology and anti-glare and other coating technology applications.

To promote its indigenous R&D, Truly has created staff awards for projects and products, and built up its intellectual property. “Truly has enhanced its patent portfolio over the past few years,” says

32 December 2016

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Ma. Truly’s factories in China can also provide tailor-made product solutions for different components including LCD modules, touch modules, compact camera modules and fingerprint identification systems. “Our product integration can provide one-stop solutions,” he adds.

Financial evolutionThe factories and R&D labs are not the only sources of Truly’s innovation, says Ma, who looks to his own department for new ideas and processes. “I think CPAs in Hong Kong need to be innovative also,” he says. “Accounting standards are constantly updated and we need to learn more things.”

Ma has seen the Mainland

financial system reach higher levels of sophistication. “We have learned already about structured products from financial institutions to help our company, and how to recognize these financial instruments into our financial statements.”

Although Truly’s Hong Kong staff is small compared to its workforce in the Mainland, it provides the company with vital administrative support. “We have staff in Hong Kong to help the company do its hedging and many new ideas come from banks or financial institutions, and after discussions we need to select the appropriate financial instruments for the group.”

Ma leads the accounting and financing team, which has three core missions: presenting

timely and accurate financial information; managing the group’s working capital, foreign exchange, capital structure and accessing to loans; and ensuring compliance.

To perform those tasks, Ma draws on his previous experience at audit firms and two listed companies. “At Truly I had a big jump to CFO,” he says. “Previously I needed to take care only of an accounting department in Hong Kong and mainly worked with accounting colleagues; now it’s both Hong Kong and the PRC factories for the whole group, reporting to the board of directors and communicating with directors with an understandable presentation, and not the technical accounting wordings.”

“I think CPAs in Hong Kong need to be innovative also. Accounting standards are constantly updated and we need to learn more things.”

Active-matrix organic light-

emitting diode displays, or

AMOLED, attach a thin-film transistor

and capacitor to each LED. This way, when electricity is applied to access a pixel, the capacitor at the correct pixel

can retain its charge in between refresh

cycles, allowing for faster and more

precise control. The AMOLED panel market is expected to be worth close to US$30 billion in 2022, according to

Android Authority, an Android news blog.

December 2016 33

Success ingredientMichael Ma

Ma, who grew up in Hong Kong, was a keen student of mathematics. “I was very interested in figures, so I thought quite early as a secondary school student that I might be an accountant,” he recalls. “I believed that this career choice would satisfy both myself and my parents.”

His A-Level results, including a distinction in accounting, were good enough to secure an offer from the Hong Kong Polytechnic University, his first choice. “Actually, I never considered another career,” he says.

Upon his graduation, Kwan Wong Tan & Fong (which later merged with Deloitte) hired Ma as an audit junior and, after ob-taining his CPA qualification, he left to join Ernst & Young (now EY). Like many of his peers, he was lured into business, working for a local garment company as a manage-ment accountant. He has continued to work for private companies ever since, apart from a brief stint at a local auditing firm.

Meeting the challengesMa believes display screens will continue to evolve rapidly as new technologies, processes and materials become available. “The business is going to be challenging in the foreseeable future,” he says, and “small- and medium-sized manufacturers are going to find it very difficult to survive.”

That will mean that only larger manufacturers such as Truly can thrive, according to Ma. “Capital expenditure investment is very critical and it is not easy to maintain continuously huge capital investments, especially given the increas-ing difficulties of fundraising.”

“I go two or three times a month to our Huizhou and Shanwei factories,” he says. There, he addresses major cost challenges, such as the production yields, a measure of production efficiency. “We keep those costs under control by budgeting and carrying out monthly reviews with budget comparisons,” he adds.

Labour costs are another major issue. Ma says most of the processes are almost fully automated. “Yet our Shanwei factory has more than 20,000 workers,” he points out, noting that the quality control and assembly of components is largely a manual process.

The company’s new Huizhou plant, which began production in September, employs just 1,500. The approximately

6 billion yuan facility was established in cooperation with the prefectural-level city government of Huizhou. “During last year we secured a syndicated loan in Huizhou, so I was in frequent discussions with bank-ers in the Mainland,” says Ma.

Ma says Truly will continue to focus on its own R&D and enhance its strategic Hong Kong and Mainland partnerships. Collabora-tion, he says, is a key policy. “The company

“During last year we secured a syndicated loan in Huizhou, so I was in frequent discussions with bankers in the Mainland.”

34 December 2016

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is working with Hong Kong Applied Science and Technology Research Institute to de-velop better heads-up displays (a transparent display of data in the car that allows users to not look away from their usual viewpoints) and undertakes joint research with the University of Hong Kong and South China University of Technology in Guangzhou.”

Truly’s cross-border structure means that Ma visits the Mainland regularly to

meet with tax, customs and other gov-ernment officials who welcome Truly’s high-value manufacturing. “This kind of manufacturing business can run for the long term,” he says, “which is also very important for me to develop my career in the long term.”

He says his CPA qualification is a criti-cal asset, especially when working in a Hong Kong-listed company with opera-

tions in China. “It equips me with updated accounting knowledge through the Insti-tute’s continuing professional development programme,” he says.

Ma believes that there is a bright future ahead for rapidly evolving LCD tech-nology. “The display interface between machinery and humans is very critical and cannot be replaced in the foreseeable future.”

Truly International Holdings is one of only two Hong Kong entries on the Forbes Fab 50 list of innovative Asia-Pacific companies this year

December 2016 35

Work and lifeCharitable CPAs

Christmas is a time of giving. Julian Hwang talks to several Institute members to find out how volunteering

inspires them in their lives and careers

CERTIFIED

36 December 2016

Victor Tam regularly participates in coastal cleanups, where the collected items are then cataloged and reported

back to the organizer for analysis

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For Victor Tam, an Assistant Audit Manager at Grant Thornton and member of the Hong Kong Institute

of CPAs, volunteer work has been an integral part of his life since primary school. “I joined the scouts when I was a primary four student,” recalls Tam. “On the first day, the scout leader told me ‘scouts do a good turn everyday’.”

To this day, that slogan resides in Tam’s mind and inspires him to do more volunteering. He also works as an assistant leader and treasurer of the 6th Kowloon Scout Group.

Institute members like Tam are not only dedicated to their work as professional accountants, but as volunteers as well. Whether through firm-organized events or out on their spare time, these members

find joy in the improvement of Hong Kong’s social welfare.

Apart from being an active member of his scout group, Tam regularly participates in community-enriching activities like coastal cleanups and visiting the elderly. “Volunteer work offers a great opportunity to meet people of all backgrounds,” says Tam. In particular, he enjoyed his moments with the elderly, as both the preparation process and the meet-up provided him with a special insight into their lives. “We brought them handmade rice dumplings, and they shared many interesting stories with us,” he recalls.

The elders reminisced in their memories and talked about their past in great detail, including how the rice dumplings they used to make were different from the ones made

by Tam and the other volunteers. “They didn’t use gasoline stoves back then, but used kerosene stoves for cooking, and often included lard in the mixing process to make them tastier,” Tam says. “When they were young, they would always snack on some of the ingredients during the preparation process, so they’d usually make fewer rice dumplings than their intended amount.” By maintaining communication with the elders, their memories, no matter how insignificant they may seem, will never truly be forgotten.

Nurturing the next generationSuccess to Kenneth Chan can be viewed in two ways: one is how successful you are in your career, and the other is in your volun-teer work. For the Audit Partner at Deloitte

December 2016 37

Kenneth Chan, front and third from left (top image), is passionate about working

with students to help them establish a clear career path through programmes

like Life Buddies and Pass the Torch

Work and lifeCharitable CPAs

and Institute member, work success is an obligation that he upholds to the profes-sion, his firm and his personal standards. Conversely, Chan likens volunteering to a hobby, and succeeding at one that he is passionate about brings a great sense of satisfaction.

Having been raised in a lower-income family, Chan spent much of his childhood and summers with the Boys’ & Girls’ Club Association of Hong Kong. “I wouldn’t be where I am today without the kindness of the people at the club, so I try to give back to the community whenever I can,” says Chan.

Through the Deloitte Foundation and the government-organized Life Buddies programme, Chan enjoys many opportunities to support the youth of Hong

Kong. “I’m currently a mentor for three secondary school students,” he says. “Apart from clarifying the roles of accountants, I get to pass my business experience to them as well as talk about their career paths.”

Recently, Chan’s mentees were invited to his office to shadow him for half a day to witness the real life of an accountant. “They weren’t the only ones learning something that day,” he says. “They pointed out that I wasn’t drinking enough water throughout the day, and it was true!”

Chan also enjoys providing assistance, like teaching English, to young students of new immigrant families. “People tend to have a negative perception towards immigrants because of the documented cases of people who leech off of Hong Kong’s resources,” he says, “but when

you meet them, especially students, and know that they are at a disadvantage and how hard they work to fit in, your preconceptions will clear up. These people are appreciative of the help they receive and I am glad to help.” The joys of givingOscar Chow is an avid member of the Rotary Club of Mandarin Hong Kong. He, along with other passionate Rotarians, serve the international humanitarian orga-nization with the intent to add colour and life to the various communities of Hong Kong in need.

The Rotary Club consists of members from all walks of life, and they all bring something unique to the organization’s table. Chow, the Senior Manager at

38 December 2016

Oscar Chow (right) enjoys attending home visit service projects, where he distributes essential supplies like clothing and food to

disadvantaged households, and listens to their stories

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Mazars, an Institute Member and one of the charter directors for the club, uses his skills and connections as a CPA to support crucial fundraisers.

“CPAs have a great network, which makes finding like-minded friends and potential donors less strenuous,” says Chow. “People often don’t know that they can help by simply participating at the events, no matter how short, but if you keep them informed, you’ll find that there are many eager and willing candidates.”

Having been an active volunteer since primary school and a member of the Rotary Club for a year, Chow finds joy through the happiness of others. “The longer you work as a volunteer, the more you realize that there are many people in need of assistance, whether they may be

the elderly, disadvantaged households or people with disabilities,” he says.

When not busy working behind the scenes at fundraisers, Chow can be found at club-organized events like visits to the elderly. “Many elders are simply looking for a companion to chat with, and you can just see their eyes light up as you converse with them,” he says. During a home visit for a disabled elderly man, the man was so glad to have a conversational partner that he attempted to stand up and see Chow off when it was over. Chow cherishes the look of happiness on the old man’s face.

A helping handCandy Cheung, the Transaction Tax Manager at EY and Institute member, discovered her interest for charity work

when she joined EY’s Helping Hands volunteer group three years ago.

One of the most memorable moments of Cheung’s volunteering experience was at the Stargaze Camp for All and the Blind event in 2014. “It was my first time volunteering, and the event was a very large two-day one-night camp with over 2,000 participants, including those who were elderly, physically handicapped, vision impaired or of different ethnicities,” she recalls.

There, volunteers could watch the stars and sunrises together with the participants. “You might think that it’s counter-productive for visually impaired people to attend, but we made sure to have very detailed speakers with meteorological and astrology backgrounds to describe the

December 2016 39

Candy Cheung, left (left image), became inspired to pursue volunteer work after attending the Stargaze Camp for All and the Blind in 2014. It was the perfect opportunity to share beautiful moments with the participants and to better understand their needs

Work and lifeCharitable CPAs

The oldest and the largest charitable

organization in Hong Kong is the Tung Wah Group of Hospitals. It started off as a

small temple built at Tai Ping Shan

Street in 1851 for people to house the spirit-tablets

of their ancestors. As the temple was

gradually taken by the sick and the poor as a refuge, a group of Chinese

community leaders proposed to raise funds and build a hospital in the neighbourhood.

events as they happened,” she says. “We even had touchable models available to help solidify the image for them.”

At the camp, she was deeply inspired and moved by the participants. Their determination to not let their disadvantages ruin the experience immediately gained Cheung’s respect. “The director of the Social Welfare Department gave a very moving speech there that I still remember today whenever I go volunteering,” said Cheung. “She said: ‘For a community to be truly obstacle-free, we not only need to provide the handicapped with the right tools, but we also need the people of the community to bear tolerance, acceptance and respect towards them’.”

Cheung began to take volunteering more seriously despite her busy schedule. She would see that other people at the firm, including audit managers, would still find and make time for volunteering even during peak seasons. “Think of volunteering as a way of unwinding stress,” she says. “You’ll notice that you become much more efficient and passionate about your work afterwards.”

Forging discipline Douglas Kwan relishes an active lifestyle, but he enjoys raising funds for charity even more. A Partner at ShineWing and an Institute member, events such as the UNICEF Charity Run,

40 December 2016

Douglas Kwan, second from right (top image), finds joy when participating in volunteer work with his fellow colleagues. Regardless how simple or strenuous the task may be, he believes in team spirit and crossing the line together

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Moontrekker, and the Oxfam Trailwalker provide the perfect opportunity for him to get involved.

His journey with charity work began with the St. John’s Ambulance Cadets during secondary school. “There were many different organizations available to choose from,” he recalls, “But I ended up with St. John’s because all volunteers were required to learn first-aid. Together with their better looking uniform, they just felt more professional overall.”

With the cadets, he learned the basics of event planning. “During 1993, we were planning a carnival for both the Ping

Shek Estate and the Kai Yip Estate,” he remembers. “It was one of the largest events we had ever planned for elders, children and people from all walks of life.” From training to event rundowns and running stalls to coordinating and delegating work with the involved parties, this was an event that required immense collaboration between the many groups within the cadets. Since then, he’s become a role model for younger members.

Kwan transfers his planning experience to his work at the firm, devising training regimes for himself and his colleagues. “Physically intensive events like Oxfam

Trailwalker need weeks of disciplined training,” says Kwan. Such events, he adds, are not only a great way to raise funds, but also an easy way to build relationships with other colleagues. “We began in 2013, and had two full teams who managed to complete the trail the year after, which was really an achievement for us.”

“Since 2010, we have joined the UNICEF Charity Run every year, and in 2012, we even had over 100 colleagues participate in it,” said Kwan. “When you and your friends sign up for something that you like, you become so much more motivated to see things through to the end.”

December 2016 41

On 30 June, the Asset Management Association of China released the 10th FAQ Regarding the Registration and Record Filing of Private Funds (FAQ no. 10), confirming that foreign financial institutions are permitted to engage in private securities investment fund management business in China via setting up wholly foreign-owned enterprises (WFOE) or joint ventures.

History of the opening up of China’s asset management industryIn the past, foreign financial institutions were only allowed to engage in the public securities investment fund business via Joint ventures, with a 49 percent ceiling on foreign shareholding. Large asset managers entered the Chinese mutual fund market via this route with varying degrees of success. There were a total of 50 joint ventures up to September. The opening up of the Chinese fund management business has a history of over 10 years – with the implementation of the Qualified Foreign Institutional Investors scheme in 2002 and Qualified Foreign Limited Partner scheme in 2010, allowing foreign investors to invest in public securities and private equity funds respectively. The Qualified Domestic Institutional Investors scheme in 2004 and Qualified Domestic Limited Partner scheme in 2013 respectively allowed Chinese investors to invest in offshore markets and offshore hedge funds via an onshore feeder.

Now, with the introduction of FAQ no. 10, foreign financial institutions have

been given the opportunity to enter the domestic market through a wholly owned entity.

Private securities fund industry landscapeThe onshore private securities fund management business has developed rapidly over the past five years, with total assets under management recently reaching 2.4 trillion yuan, and prompting the set up of the AMAC in 2012 to regulate the industry. The number of registered private securities fund managers reached a peak of over 11,000 in March. This fell to just under 8,000 in October (Chart 1 on page 43). This occurred as AMAC tightened its requirements over the industry by issuing various regulations and guidance, including measures that require the fund manager’s senior management to pass examinations; the fund manager to have risk management and internal control systems in place for key processes; and for the fund to launch a registered product within six months of registration in order to stay registered with AMAC.

Out of this group of close to 8,000 private securities fund managers, only about 230 fund managers managed assets over 1 billion yuan as at end of October (See Chart 2 on page 43). It is clear that the private securities industry is still fragmented, with a limited number of large players. At this juncture in the industry’s development, China has decided to open up its private securities management business to foreign players. Part of the reason can be attributed to the ongoing

strategic and economic dialogues with the United States and the United Kingdom during 2015 to 2016, which saw China making a commitment to fully open up this market to foreign capital.

At the same time, the regulators and industry associations can reap the benefits of bringing in international players to share best practices and beef up industry standards. For foreign players, the opening up of the private securities investment management business in this early stage of the industry presents a more level playing field, where they can compete on an equal footing with domestic players. However, it is not without challenges. Foreign players have to grapple with fund raising in a market dominated by high-net-worth investors who are used to buying their wealth management products from banks or wealth managers. Getting on the distributors’ shelves can be challenging for some foreign players, whose brands are yet to be established.

Practical considerations for foreign playersFAQ no. 10 sets out the general requirements for setting up WFOEs or joint ventures by foreign players (see Table 1 on page 45), including the requirement that the foreign shareholder should be a financial institution regulated in a jurisdiction that has signed a memorandum of understanding with the China Securities Regulatory Commission and should not be subject to any recent severe sanctions. The applicant can apply to AMAC with the required documents

A game changer for foreign asset managers?

Josephine Kwan assesses the impact of the AMAC’s FAQ no. 10 on foreign financial institutions that are considering to enter the

Chinese private securities market as a fund manager

42 December 2016

SourceChina asset management

Fund managers by investment scope

Funds by investment scope

AUM by investment scope (Trillion yuan)

Equity investment fund 8,019 13,720 3.56

Securities investment fund 7,981 24,147 2.42

Other investment fund 475 1,413 0.33

Venture capital fund 1,235 1,950 0.35

Total 17,710 41,230 6.66

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December 2016 43

(Source: PwC, Asset Management Association of China)

4,000

0

2,000

Chart 2 – Private fund distribution by assets under management (October 2016)

Chart 1 – Private funds in China (October 2016)

<0.1 bn yuan >0.1 bn - <1 bn yuan

>1 bn - <2 bnyuan

>2 bn - <5 bnyuan

>5 bn yuan

Investment advisor

Fund manager

5601,048

459 117 82 77 67 40 39

5,862

1,000

3,000

5,000

6,000

C

M

Y

CM

MY

CY

CMY

K

1065_Comm_HKICPA_sourceAD_1_output.pdf 1 5/11/15 3:03 PM

Josephine Kwan is

Audit Partner at PwC

Hong Kong

and a legal opinion by a Chinese law firm. While this sounds straightforward enough, foreign players do have other practical considerations to take note of. One of them would be the location of the WFOE. As the WFOE would need to hire local people or have existing employees transferred to China, the attractiveness of the location to expatriates plus the ease of hiring talent are important considerations.

The ease and speed of setting up the WFOE and doing business can be other drivers in deciding where to set up in China. Foreign managers should also consider the operating model of the WFOE. Part of the AMAC’s requirements is for the WFOE to make independent investment decisions in China. Also, it cannot place trading orders through foreign institutions or platforms. With that in mind, which functions can be carried out by the WFOE rather than outsourced, or whether the

foreign shareholder can be appointed as an investment advisor to the private securities funds launched in China, should also be considered. Of course, proper tax planning and transfer pricing considerations are always part of a business plan for setting up a foreign subsidiary.

One area that needs to be further clarified is whether hedge fund managers that are ultimately owned by individuals rather than corporates (which is a common phenomenon in the hedge fund industry), are eligible to set up a WFOE under FAQ no. 10. The requirements that the actual controller, if any, of the foreign financial institution needs to meet the same criteria as the applicant itself (i.e. to be regulated in a CRSC-recognized jurisdiction and to have a clean record) poses the question as to how this will apply where the hedge fund manager has a natural person as the actual controller.

Looking aheadWhile FAQ no. 10 was issued just five months ago, a number of large international asset managers have reportedly already been successful in setting up their investment management WFOE and are in the process of registering with AMAC. Undoubtedly, the opening up of the private securities investment management business is a key milestone in the development of China’s fund management industry, and the landscape will definitely change, with reputable international asset managers joining the competition. While it is too early to tell how successful the newcomers will be, there is no doubt that the appetite for high quality investment management products will only grow in China, with its middle class and high-net-worth investors growing at remarkable speed. This is definitely a market that one cannot ignore.

Qualification criteria

1. The WFOE or joint ventures should be incorporated as a company in China; 2. The foreign shareholders of the entity are financial institutions approved or licensed by the financial

regulator of the country or region where they domicile; and the securities regulatory authority of that country or region shall have entered into a Memorandum of Understanding for Securities Regulatory Cooperation with CSRC or other institutions recognized by the CSRC;

3. Neither the WFOE or joint ventures, nor its foreign shareholders have been subject to any material punishment by any regulatory authority or judicial authority in the preceding three years; and

4. The foreign effective controllers (if any) of the WFOE or joint ventures should also satisfy the aforementioned criteria (2) and (3).

Additional requirements on business operations

1. The WFOE or joint ventures should comply with relevant foreign exchange regulations;2. The WFOE or joint ventures should make independent decisions for its securities and futures trading

business, and should not place trading orders according to the instruction of foreign institutions or foreign systems.

Table 1 – FAQ no. 10 overview

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December 2016 45

In addition to the common requirements of general private fund managers, WFOEs and joint ventures applying to engage in private securities fund management business in China should register as a private securities fund manager with AMAC by satisfying the following:

營業稅改徵增值稅(營改增)試點工作於2016年 5月1日正式實施後，已經平穩運行一段時間。雖然大部分業務已移交國稅徵收，但地稅仍保留了部分徵收業務，我們現就地稅保留的相關業務作出解答：

營改增後哪些納稅人要到地稅機關辦理增值稅業務？營改增後有兩類業務由地稅機關代徵增值稅或代開增值稅發票。一是納稅人銷售其取得的不動產所應繳的增值稅暫由地稅機關代徵。 「取得的不動產 」是指包括以直接購買、接受捐贈、接受投資入股、自建以及抵債等各種形式取得的不動產，主要是已經在房地產管理機關備過案、完成初始登記和總登記，或已計入單位的固定資產，再上市進行交易的房產，但並不包括房地產開發或企業自行開發的房地產項目。二是其他個人出租不動產所應繳的增值稅暫由地稅機關代徵。單位和個體工商戶出租不動產，則由國稅機關負責徵收增值稅。

營改增後，一般納稅人轉讓其取得的不動產應如何申報繳稅？ 一般納稅人轉讓其取得的不動產，應按照以下規定繳納增值稅： • 納稅人轉讓其2016年4月30日前取得（不含

自建）的不動產，可選擇採用簡易計稅方法計稅，以取得的全部價款和價外費用扣除不動產購置原價或者取得不動產時的作價後的餘額為銷售額，按照5%的徵收率計算應納稅額。納稅人應按照上述計稅方法向不動產所在地主管地稅機關預繳稅款，並向機構所在地主管國稅機關申報納稅。

• 納稅人轉讓其2016年4月30日前自建的不動產，可選擇用簡易計稅方法計稅，以取得的全部價款和價外費用為銷售額，按照5%的徵收率計算應納稅額。納稅人應按照上述計稅方法向不動產所在地主管地稅機關預繳稅款，並向機構所在地主管國稅機關申報納稅。

• 納稅人轉讓其2016年4月30日前取得（不含

自建）的不動產，適用一般計稅方法計稅，以取得的全部價款和價外費用為銷售額計算應納稅額。納稅人應以取得的全部價款和價外費用扣除不動產購置原價或者取得不動產時的作價後的餘額，按照5%的預徵率向不動產所在地主管地稅機關預繳稅款，並向機構所在地主管國稅機關申報納稅。

• 納稅人轉讓其2016年4月30日前自建的不動產，適用一般計稅方法計稅，以取得的全部價款和價外費用為銷售額計算應納稅額。納稅人應以取得的全部價款和價外費用，按照5%的預徵率向不動產所在地主管地稅機關預繳稅款，並向機構所在地主管國稅機關申報納稅。

• 納稅人轉讓其2016年5月1日後取得（不含自建）的不動產，適用一般計稅方法，以取得的全部價款和價外費用為銷售額計算應納稅額。納稅人應以取得的全部價款和價外費用扣除不動產購置原價或者取得不動產

營業稅改徵增值稅後的不動產稅項問題

Frequently asked questions on China's value-added tax replacing business tax in the real estate sector

46 December 2016

SourceChina tax

時的作價後的餘額，按照5%的預徵率向不動產所在地主管地稅機關預繳稅款，並向機構所在地主管國稅機關申報納稅。

• 納稅人轉讓其2016年5月1日後自建的不動產，適用一般計稅方法，以取得的全部價款和價外費用為銷售額計算應納稅額。納稅人應以取得的全部價款和價外費用，按照5%的預徵率向不動產所在地主管地稅機關預繳稅款，並向機構所在地主管國稅機關申報納稅。

營改增後，小規模納稅人轉讓其取得的不動產應如何申報繳稅？ 小規模納稅人轉讓其取得的不動產，除個人轉讓其購買的住房外，應按照以下規定繳納增值稅： • 小規模納稅人轉讓其取得（不含自建）的不

動產，應以取得的全部價款和價外費用扣除不動產購置原價或者取得不動產時的作價後的餘額為銷售額，按照5%的徵收率計算應納稅額。

• 小規模納稅人轉讓其自建的不動產，應以取得的全部價款和價外費用為銷售額，按照5%的徵收率計算應納稅額。

小規模納稅人應按照以上規定的計稅方法向不動產所在地主管地稅機關預繳稅款，並向機構所在地主管國稅機關申報納稅；而其他個人則應按照以上規定的計稅方法向不動產所在地主管地稅機關申報納稅。

對個人轉讓住房，營業稅有稅收優惠政策，營改增後，原稅收優惠政策還延續嗎？ 營改增後，對個人出售住房徵收增值稅，基本延續了原營業稅的優惠政策，具體為：

• 全額徵稅：個體工商戶和其他個人(個人）將購買不足兩年的住房對外銷售，應以取得的全部價款和價外費用為銷售額，按照5%徵收率計算應納稅額。

• 分地區適用優惠政策： － 於北京、上海、廣州和深圳，個人將購買

兩年以上（含兩年）的普通住房對外銷售，可免徵增值稅；將購買兩年以上（含兩年）非普通住房對外銷售，應以取得的全部價款和價外費用扣除購買住房價款後的餘額為銷售額，按照5%的徵收率計算應納稅額。

－ 於北京、上海、廣州和深圳以外的地區，個人將購買兩年以上 (含兩年）的住房對外銷售，可免徵增值稅。

納稅人按規定從取得的全部價款和價外費用中扣除不動產購置原價或者取得不動產時的作價，需要提供哪些憑證？ 納稅人按規定從取得的全部價款和價外費用中扣除不動產購置原價或者取得不動產時的作價，應當取得符合法律、行政法規和國家稅務總局規定的合法有效憑證；否則不得扣除。有效憑證是指：稅務部門監製的發票；法院判決書、裁定書、調解書，以及仲裁裁決書、公證債權文書，以及國家稅務總局規定的其他憑證。

個人銷售二手住房徵收增值稅後，稅負比以前徵收營業稅時是上升了，還是下降了呢？營業稅下，個人銷售二手住房需繳納5%的營業稅，符合規定條件的，可免徵營業稅。營改增後，增值稅延續了原營業稅優惠政策，二手住房交易增值稅稅負較原營業稅稅負沒有增加，反而略有下降。

本篇文章由廣東省地方稅務局 嚴浩、周子灧、邢小華所提供

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December 2016 47

In May, the Institute issued HKFRS 16 Leases, the equivalent of IFRS 16 Leases issued by the International Accounting Standards Board. This new standard is effective for annual periods beginning on or after 1 January 2019. Early applica-tion is permitted for entities that also apply HKFRS 15 Revenue from Contracts with Customers.

Many companies lease assets, for example, property and equipment for their own use. HKFRS 16 is therefore expected to have material impact to most, if not all, entities. This article pro-vides an overview of the new standard.

Why we need a new lessee accounting model? The current HKAS 17 Leases classi-fies leases into two categories: finance leases and operating leases. Finance leases are recorded on the balance sheet but operating leases are not recorded on the balance sheet. The classification is based largely on whether significant risks and rewards of the leased asset are incidental to ownership of the underlying asset. The IASB noted that, currently, listed companies around the world have around US$3 trillion worth of leases over 85 percent of these leases are classified as operating leases, and are therefore off-balance sheet.

The absence of information about off-balance sheet leases meant that investors or users of financial reports do not have a complete picture of the financial position of a company. Users are also unable to properly compare companies that borrow to buy assets with those that lease assets, without making adjustments. In his article Shin-ing the Light on Leases, IASB Chairman Hans Hoogervorst explains that finan-cial statements of an airline that leases most of its airplane fleet looks very

different from its competitor that bor-rows to buy most of its fleet, even when in reality their financing obligations may be very similar.

The new leases standard changes this.

At a glance: lessee accounting modelHKFRS 16 defines a lease as “a contract, or part of a contract that conveys to the customer the right to use an asset (the underlying asset) for a period of time in exchange for consideration.” HKFRS 16 eliminates the dual lease classification operating and finance – and, instead, introduces a single lessee accounting model. Under the new model, a lessee recognizes a right-of-use asset rep-resenting its right to use the underly-ing leased asset and a lease liability representing the obligation to make lease payments. Assets and liabilities arising from a lease are initially measured on a present value basis. The right-of-use asset is measured similarly to other non-financial assets and the lease liability is measured similarly to other financial liabilities. (See Table 1 on page 49)

Are there any exemptions?Some respondents had commented to the IASB that the new recognition and measurement requirements can be cum-bersome and costly to apply for short-term leases and low-value assets, and provide little benefit to users of financial reports. These respondents explain that the effect of the new requirements on profit or loss is about the same as the cur-rent treatment for operating leases.

Consequently, for lessee accounting, leases that are (a) short-term (i.e. leases of 12 months or less) and (b) low-value assets (for example, a personal com-puter) are exempted from applying the requirements of HKFRS 16. A lessee

may recognize lease payments of exempted leases in profit or loss on a straight-line basis (or another system-atic basis) over the lease term.

What are the implications for a company’s income statement?There will no longer be a typical straight-line operating lease expense when reporting under HKFRS 16. A depreciation charge over the life of the right-of-use asset is required to be recognized most likely within operating costs. The lease liability is required to be amortized as interest expense most likely within finance costs in accordance with the effective interest method under HKFRS 9 Financial Instruments.

The depreciation charge is expected to be evenly distributed. Interest expense is expected to reduce over the life of the lease as lease payments are made. This results in a reducing total expense as an individual lease matures. (See Table 2 on page 49)

What are the implications for cashHKFRS 16 will not have any effect on the total amount of cash flows reported but it is expected to have an effect on the presentation of cash flows.

HKFRS 16 is expected to reduce operating cash outflows, with a corresponding increase in financing cash outflows, compared to reporting under HKAS 17. This is because, when applying HKAS 17, entities presented cash outflows on former off-balance-sheet leases as operating activities. When applying HKFRS 16, principal repayments on all lease liabilities are included within financing activities. Interest payments can be included either within operating or financing activities in accordance with HKAS 7 Statement of Cash Flows.

What you need to know about the new leases standard

–

–

flows?

48 December 2016

SourceTechnical update

What about lessor accounting?The accounting requirements for lessors are substantially the same as the lessor accounting requirements in HKAS 17. A lessor, therefore, continues to classify its leases as operating leases or finance leases, and continues to account for those two types of leases differently.

Benefits outweigh costs?When IFRS 16 was issued, Hoogervorst highlighted that costs are expected in updating systems to implement IFRS 16. However, the IASB expects the benefits

of IFRS 16 to greatly outweigh its costs. The new visibility of all leases will lead to better informed investment decisions by investors and will better reflect the lease-versus-buy decisions by manage-ment. The improved capital allocation will benefit the economic growth.

Get in touch with the Institute’s Stand-ard Setting Department (outreachhk@hkicpa.org.hk) if you have any questions or issues with implementing the new leases standard. Also, look out for more Institute seminars on implementing HKFRS 16.

IAS 17 IFRS 16

Finance leases Operating leases All leases

Assets

Liabilities

Off balance sheet rights/obligations

$$$$$$$$$

$$$$$

IAS 17 IFRS 16

Finance leases Operating leases All leases

Revenue X X X

Operating costs (excluding depreciation and amortization)

Single expense

EBITDA

Depreciation and amortization Depreciation Depreciation

Operating profit

Finance costs Interest Interest

Profit before tax

This article is

contributed by the

Institute’s Standard

Setting Department.

(Source: IASB’s project summary of IFRS 16 issued in January 2016)

Table 1

Table 2

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December 2016 49

Members’ handbook

Handbook updates nos. 189 and 190• No. 189 contains updated

Statement 1.102 Corporate Practices (Registration) Rules and Statement 1.103 Corporate Practices (Professional indemnity) Rules.

• No. 190 contains Practice Notes for the changes resulting from new and revised Auditor Reporting Standards.

Audit and assurance

Bank confirmation request forms for use in ChinaPlease be reminded that examples of bank confirmation request forms for use in China have been published by the Ministry of Finance.

New Q&As, FAQ and circularsThe Institute has issued new questions and answers on audit of financial statements of owners’ corporation of building and a frequently asked question in relation to the signature of engagement partner when issuing an auditor’s report under HKSA 700 (Revised).

New auditing circulars are now available:• Circular on reporting on the audit of

schools;• Circular on reporting to grantees of

the Quality Education Fund; and• Circular on reporting to grantees of

the Language Fund.

International updatesThe International Auditing and Assurance Standards Board has issued ISA 250 (Revised) Consideration of Laws and Regulations in an Audit of Financial Statements, and conforming amendments to other international standards, in response to new requirements in the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants addressing non-compliance with laws and regulations.

Financial reporting

International updatesAmendments to IFRS 4 Insurance Contracts have been issued by the IASB to address concerns arising from implementing IFRS 9 Financial Instruments. The amendments are effective for annual periods beginning on or after 1 January 2018.

Professional accountants in business

SFC seeks compensation and disqualification orders against former and current directors The Securities and Futures Commission has commenced legal proceedings to seek disqualification orders against 10 former and current directors of a listed company, Freeman FinTech Corporation, for breaching their director duties in approving transactions. It is also seeking a compensation order against

the managing director and a former non-executive director who caused the company to suffer loss and damage.

Corporate finance

HKMA and InvestHK publish case studies on corporate treasury activities In order to encourage a greater level of corporate treasury activities, the Hong Kong government amended the Inland Revenue Ordinance to allow, under specified conditions, the deduction of interest expenses in calculating profits tax for intra-group financing business of corporations, and reduce profits tax for specified treasury activities by 50 percent for qualifying corporate treasury centres. The Inland Revenue (Amendment) (No. 2) Ordinance 2016 was gazetted and came into operation on 3 June.

The Hong Kong Monetary Authority and InvestHK have recently produced a booklet consisting of nine stories to elaborate how multinational corporations make use of their corporate treasury centres in Hong Kong to support their overseas business growth.

Taxation

Announcements by the Inland Revenue DepartmentMembers may wish to be aware of the following matters:• Further measure to address the

overheated residential property

The latest standards and technical developments

TechWatch 169

50 December 2016

SourceTechWatch

market;• Advance ruling case no. 59 on

amalgamation, and no. 60 on the treatments of distributions of investment portfolios;

• Consultation on measures to counter base erosion and profit shifting launched. Comments are requested by 31 December ; and

• Hong Kong to commence automatic exchange of financial account information in tax matters with Japan and United Kingdom in 2018.

Legislation and other initiatives

Anti-money laundering noticesMembers may wish to note the following notices and publications in relation to anti-money laundering/combating the financing of terrorism:• Government notice 5651: An updated

list of terrorists and terrorist associates has been specified under the United Nations (Anti-Terrorism Measures) Ordinance.

• Government notice 5904: A list of relevant persons has been specified under the United Nations Sanctions (South Sudan) Regulation 2016.

• Government notice 5905: A list of relevant persons and entities has been specified under the United Nations Sanctions (Democratic Republic of the Congo) Regulation 2016.

• Government notice 6031: An updated list of terrorists and terrorist associates has been specified under the United Nations (Anti-Terrorism

Measures) Ordinance.• Legal notice 157: The United Nations

Sanctions (Democratic Republic of the Congo) Regulation 2016 has been published in the Gazette.

• Legal notice 158: The United Nations Sanctions (South Sudan) Regulation 2016 has been published in the Gazette.

• High-risk and non-cooperative jurisdictions: In October, the Financial Action Task Force issued two documents: - FATF public statement, identifying

jurisdictions with strategic AML/CFT deficiencies that pose risk to the international financial system.

- Improving global AML/CFT compliance: on-going process, identifying jurisdictions with strategic AML/CFT deficiencies, for which they have developed an action plan with the FATF.

• FATF guidance on correspondent banking explains the FATF’s requirements in the context of correspondent banking services. It also highlights that not all correspondent banking relationships carry the same level of money laundering or terrorist financing risks, hence any enhanced due diligence measures have to be commensurate to the degree of risks identified.

• United States executive order 13224: The list relating to “Blocking property and prohibiting transactions with persons who commit, threaten to commit or support terrorism.”

Please refer to the

full version of

TechWatch 169,

available as a PDF on

the Institute’s website:

www.hkicpa.org.hk

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December 2016 51

In a world seemingly plagued by fake news, “post-truth” pontificating and financial scandals – whether related to accounting, financial, or just plain fraud – it’s timely to read a book about how execu-tives can lead their organizations through fostering trust.

John Blakey, a British leadership coach, has culled extensive academic research and interviewed a broad array of executives to argue that the best strategy for building trust is through a set of key pillars: ability, integrity and benevolence. He further divides these pillars into nine habits of trustworthiness.

The author notes economist Milton Friedman’s famous definition of the limits of corporate social responsibility in

Capitalism and Freedom (University of Chicago Press, 1962). “There is… only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

That limited definition is no longer applicable in our globalized, technological and increasingly sceptical world, Blakey argues, noting that according to a recent poll by Ipsos MORI, a research company in the United Kingdom, only 29 percent of the public believe that their national lead-ers, whether politicians or chief executive officers, know best – and this percentage is dropping with each successive generation.

However, Blakey is stumped in devising an acceptable definition of trust. “Despite a universal view as to its importance, there is little agreement among academic researchers as to the definition of trust,” he writes, suggesting definitions that embrace confident reliance on a person when there is an element of risk and uncertainty; a psychological state that comprises the intention to accept vulnerability based upon positive expectations; or being able to recognize and protect the rights and inter-ests of all others engaged in a joint venture or economic exchange.

Some of Blakey’s examples of trustwor-thiness are contentious. John F. Kennedy, while possessing formidable charm, was hardly universally considered “a man of

Book review

After hours Book review Life and everything A life in the day

Title: The Trusted Executive: Nine Leadership Habits That Inspire Results, Relationships and Reputation Author: John Blakey Publisher: Kogan Page

Leadership means doing good, not just doing well

52 December 2016

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great trustworthiness.” General Electric shareholders may have trusted former CEO Jack Welch, but the tens of thousands of employees he culled wouldn’t have put their faith in him. Sometimes the author is naive: his gift of free chocolate from a chocolate company suggests marketing skills, not the trustworthiness he trumpeted.

To simplify his theory, Blakey proposes a formula: “trustworthiness = ability × integrity × benevolence.” By the laws of maths, there are two consequences of this set of relationships: The multiplication means that if you score a zero on any factor, your total score will be zero and a decent score on all three will most likely put you ahead of executives who excel in two pillars yet have a blind spot with the third.

Blakey acknowledges that many believe trustworthiness to be innate, and not an acquired trait. “I don’t think you can build trustworthiness in people,” one respondent tells him. “You either have it or you don’t and so we test for it when we recruit people into the business.” Blakey advocates open-ness as the first step on the road to trust, while personal humility is another key executive trait.

The mechanics of Blakey’s philosophy are even more daunting. Many accountants might raise their eyebrows at his proposed “triple bottom line” of results, relationships and reputation. Popularized by the British management consultant John Elkington in the late 1990s, the triple bottom line broadens financial reporting into a mission statement. Blakey suggests that beyond profits, the triple bottom line could embrace diverse goals such as improved employee satisfaction, reduced turnover and greater executive engagement with staff.

Blakey says reinventing perceptions of leadership can accelerate trust. “Under the guidance of trusted executives, our organizations can be transformed into pow-erhouses of triple bottom line productivity underpinned by high trust relationships.” Legal coercion, he argues, is not enough. “Certainly, governance rules, standards and legal frameworks can help or hinder, but they are no guarantee nor a substitute for trusted executives.”

John Blakey says a cranky senior colleague who accused him of being too nice was the inspiration for his own career as a businessman and executive coach, and which led ultimately to the genesis of The Trusted Executive: Nine Leadership Habits That Inspire Results, Relationships and Reputation.

“From that point onwards, I committed myself to demonstrating that ‘nice guys’ who also deliver superb results and who also play it straight will claim their place in the boardrooms of tomorrow,” he writes early in the book.

Today, Blakey works for the chief executive officers coaching faculty at the Institute of Directors in London, as well as the National Health Ser-vice and the Alliance Manchester Business School at the Univer-sity of Manchester.

He believes that putting trustworthiness at the top of the social agenda is an achievable goal – but not without effort. “I believe we all start with a trustworthy worldview but this can easily get corrupted when there is a lack of transparency in our institutional systems,” he tells A Plus. “Transparency holds our leaders to account and reduces the risk of self-deception. Transparency keeps us true to our original trustworthiness.”

Blakey says the recent political changes in the United Kingdom and the United States bolster his contention that authority is no longer a surrogate for trust. “Populism keeps us on our toes,” he says.

“It prevents complacency in the mainstream of leadership and is a beautifully uninformed yet uncannily precise hand on the collar.”

From a corporate standpoint, promoting trust is primarily in the hands of shareholders who care, he believes. “The greatest contribution that activist shareholders could make to the trust agenda is to tackle the issue of excessive executive remuneration,” Blakey says. “If activist shareholders can expose the lie that talented leaders only follow the money then they will do us all a great service. How does leadership exist without a higher moral calling at its core?”

Blakey believes Hong Kong Institute of CPAs members, whether

chief financial officers, financial professionals or trusted advisers, can effect significant change. “What gets measured is treasured and what gets measured is what serves the purpose of the organization.”

The purpose of the company should shift from profit, the “single bottom line,” to profit, people and the planet, the “triple bottom line”, Blakey

argues. “Only then will we measure different things. The CFOs will do that job as efficiently as they measure the single bottom-line today.”

Blakey believes the overarching theory of management is ultimately the overarching theory of life. “How do people work together to bring peace, love and joy into as many lives as possible? The world of business is a good practice ground for the real game. It is a modern parable that has captured my interest.”

Author interview: John Blakey

December 2016 53

Life and everythingAs recommended by Institute members

Shoes don’t have to just be for everyday footwear. Take

for example one of my favourite

Hong Kong comedy movies, From Beijing with

Love (國產凌凌漆), featuring Stephen Chow and Anita Yuen. The shoes of the

leading actor are not only his footwear, but also his hairdryer, allowing him to stay handsome and tidy all the time.

In reality, shoes can be used in many ways, including as home decoration. They can be used as a hip and cool candleholder and book holder, or as an eye-catching vase filled with plants or colourful flowers. Just use your imagination, nothing is impossible!

Home

Eat

A Nordic restaurant to try out on the weekend or for the next business meeting by Simon Kwok, Group Financial Controller at GR8 Leisure Concept Ltd

One of my favourite restaurants in Hong Kong is FINDS. Headed by celebrity chef Jaakko Sorsa, the restaurant is famous for being the city’s first and only authentic Nordic restaurant. The ambience here is very unique as it manages to be both contemporary chic and sophisticated while still allowing you to dine in a relaxing and easy-going manner. This makes the restaurant very good for all

occasions, including business meetings and family dinners.

Drawing on the cuisines of the five Nordic countries of which FINDS takes its name (Finland, Iceland, Norway, Denmark and Sweden) the food here is unlike anything else on offer in Hong Kong at the moment. There is a great seafood selection in keeping with the Nordic countries’ famous reputation for fresh fish dishes. Indeed,

the signature dish is the Salmon in Six Ways, which showcases six different salmon prep methods. For this dish, the salmon is imported fresh from Norway twice a week for that authentic Nordic experience. The drinks list, which includes a number of Nordic-inspired beverage choices, is also quite impressive – I recommend the Aalborg Jubilaeum from Denmark as it offers a strong and spicy kick with a warming finish.

Shoes aren’t just made for walking, says Mandy Wong, Financial Audit Manager of The Lane Crawford Joyce Group

FINDS

54 December 2016

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Princess CruisesLast year, I explored the long coastline of New Zealand with Princess Cruises. It was a memorable and comfortable cruise journey with great views of beautiful fjords and all-nature landscapes, insights into Māori culture, as well as gourmet goodness.

Silversea CruisesSilver Shadow, operated by Silversea Cruises, is an ultra-luxury ship with

its top-level suites. Shenzhen Prince Bay will become its homeport, and it will sail to various Asian countries between January and April 2017. What is impressive is the high space-per-guest ratios and personalized butler service onboard. As a world famous luxury cruise line, Silversea offers all-inclusive service, complimentary beverages throughout the ship and an open-seating dining option.

Travel

Welcome the new year with a relaxing cruise experience, writes Henry Chu, Chief Financial Officer at Westminster Travel

Green Christmas

Ways of reducing waste this Christmas by Alex Wong, Business Administrator at The Salvation Army (Hong Kong and Macau Command)

Christmas may be the most joyful time of the year, however much wastage may be generated from parties. How can we celebrate a wonderful yet green Christmas?

First, check what Christmas deco-rations you have already and only buy items you need. Be creative – reuse old Christmas decorations and use less wrapping paper. If you really need something, visit The Salvation Army’s Family Stores to pick from a wide range of both brand new and used Christmas items donated by companies and households. Make a green purchase at our shops to support recycling.

Secondly, after Christmas, you can donate your unwanted Christmas gifts and decorations to us for recycling. This is a meaningful way to contribute to society and reduce waste to help save the earth. We distribute these collected items as Christmas gifts to the needy. Our organization also helps raise funds for community services, creating employment and training opportunities for middle-aged women and the socially disadvantaged.

Lets celebrate a green Christmas this year and share the joy. For more details, please visit www.salvationarmy.org.hk.

Princess Cruises Silver Shadow by Silversea Cruises

December 2016 55

Hong Kong’s humorist talks to Vanessa Yeung at Mercedes-Benz Hong Kong about the joys of

taking a different route

56 December 2016

A life in the day…. with Nury Vittachi

S cience can be super-tough, but one junior scientist worked really hard at

school, and was thrilled to score A grades in her Biology and Chemis-try exams. Then she took an even more difficult step – she gave up science to do something else.

You see, some families suffer from sibling rivalry, but not the Yeung family. Young Vanessa Yeung saw her older sister as a role model.

The older girl had chosen accountancy and the younger one felt that she should follow in her footsteps.

Some of her relatives were aghast – why would a girl who scored so well at biology and chem-istry refuse to do the obvious thing, and go into medicine? “What a waste!” they said.

But Vanessa had confidence in following her instincts. As a child, she already had a vision of herself as an adult: She saw a happy, work-ing mother with a husband and two lovely children.

The course she chose, Bachelor of Business Administration in Accounting at Hong Kong Univer-sity of Science and Technology, felt like the right next step – and destiny seemed to agree. Not only did she get the qualifications she needed for success in life, but she met “Mr. Right” there, too.

In 2004, after graduating, Vanessa joined PwC as an auditor. Her first-year tasks were straight-forward enough and she aced them. This gave her a reputation as a good team player, and she quickly

developed great relationships with managers and senior staff.

In 2007, one of the senior staff members had a question for her. “Would you be interested in doing something more dynamic and innovative, helping clients to solve their business and operational problems?” she asked.

It sounded like a challenge – but a worthwhile one. So the young CPA switched from the assurance department to advisory services and became a consultant. A wise colleague gave Vanessa some advice that she turned into her motto: “Learn faster, read faster, react faster, but still professionally.”

She found herself assigned to a 15-month compliance project at the Hong Kong offices of Mercedes-Benz, the inventor of the motor car. Founder Carl Benz is listed in history books as the inventor of the “horseless carriage” in 1886.

Her role included designing the control activities and conduct-ing walk-through testing. “I had a lot of chances to talk to almost every department head there,” she recalled.

A year later, she received an invitation: to join Mercedes-Benz full time as an executive respon-sible for compliance, risk manage-ment, policy management and internal controls, which she did in March of 2011.

Her motto continued to turn out to be a great help. She achieved things as fast as possible while never allowing professional stan-dards to fall.

Vanessa discovered that her new role came with a bonus. Auditors often have to burn the midnight oil as they serve outside clients, but as an in-house staff member, she was able to enjoy a work-life balance. This was vital, because by that time she had the two wonderful children she had dreamed of.

After a hard day’s work, laugh-ter and bonding over board games turned out to be the perfect form of relaxation.

But there was something else to celebrate too. As well as being one of the world’s pre-eminent car manufacturers, Mercedes-Benz was strongly focused on advanced technologies. And the Stuttgart-based company also promotes work-life balance.

So not only did Vanessa end up with the perfect family of mum, dad, and two children that she dreamed of, but her new role even feeds the love of science that she had as a child.

Sometimes it really does pay to follow your instincts!

Nury Vittachi is a bestselling author,

columnist, lecturer

and TV host. He wrote

three storybooks for the

Institute, May Moon and

the Secrets of the CPAs,

May Moon Rescues the

World Economy and May

Moon’s Book of Choices

The fast life

C

M

Y

CM

MY

CY

CMY

K

HKICPA_Cork_Back cover.pdf 1 12/29/14 5:38 PM

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