So what is ahead of Nishe?

What is ahead of me?

“You will become very rich.”

While having lunch with a few friends several years ago (in fact, exactly 6 years ago on this day), a friend started reading our palms for fun. He looked at my palm and said to me: “(Provided you work hard), you are going to be extremely rich.”

“Wow, how rich?” I asked.

“Very rich” he said.

“Still, how rich is very rich? Millions? Billions? What are we talking about?” I persisted.

“How rich is very rich is purely based on each person’s perspective.” He responded. “Some people may think they are not rich even with millions or billions, others may need very little to feel rich!”

I have spent countless hours reflecting on the beauty of that simple answer. And on my own perspective on richness.

It took me a long time to eventually conclude that for me, rich means those who give the most, not those who take the most.

Give, but do it sensibly.

So, am I rich?

Not rich enough. There is still a long long way to go.

And what is ahead of me?

My simple answer is – I don’t know. I am enjoying the journey. I don’t know where it will take me.

“If you want to be happy, do not dwell in the past, do not worry about the future, focus on living fully in the present.” ~ Roy Bennet

I am a curious person. I enjoy experimenting. I enjoy learning. I enjoy new experiences. I enjoy adventures. I enjoy stretching myself. I have no qualms about working hard. I have no problems about accepting if I made a mistake and correcting my course of action. And I usually have no difficulty in saying ‘no’ if I am convinced I have to.

I have a broad vision – I want to be rich! There are certain principles that guide my vision. There are many forms the vision can take. There are many paths that can take me to the vision.

I keep my mind open. I keep my eyes open. For opportunities. For Challenges.

For paths to make me rich. To make Nishe rich.

Until then….

Cheers!

(This is the last article in the series.)

[For Part 1, please click Four years on – Part 1]

[For Part 2, please click Four years on – Part 2 : Why did I walk away?]

[For Part 3, please click Four years on – Part 3 : The Idea of Nishe]

[For Part 4, please click Four years on – Part 4 : Early days of Nishe]

[For Part 5, please click Four years on – Part 5 : Entrepreneurship and decision making]

[For Part 6, please click Four years on – Part 6 : Solo or Partnership?]

[For Part 7, please click Four years on – Part 7 : Nishe the Brand]

“It’s important to realize that brand is much more than a logo and slogan. A brand is who your company is: how you function and make decisions.” ~ Joanna McFarland, Co-founder of HopSkipDrive

I think any individual who sets up a business for the first time, knowingly or unknowingly, infuses it with his or her own personality. I am no different. I moulded Nishe based on my life philosophy, my work ethic, my world view.

So here’s what you can expect from Nishe:

• Nishe wants to the do the best for everyone it deals with (and for itself) and strongly believes that it is not a zero-sum game.
• Nishe will always be fair to you, but also expects fairness back.
• Nishe strives to provide the highest quality and expects the same from anyone it deals with.
• Nishe believes in equality and equal opportunity and strives for it.
• Nishe is very logical in its approach.
• Nishe will always be honest with you and will tell you like it is (whether you like it or not).

Nishe is not a low-priced accounting firm. We charge a decent fee, but you can – you should – expect high quality, integrity, professionalism and lots of care in return. If you are not happy with your experience with Nishe, I’d like to, I’d want to, hear from you. We know we are not perfect. No one is. But we are open-minded, are ready to accept when we make mistakes and are willing to learn.

A key feature of our firm is our focus on women.

I wasn’t sure how this was going to turn out when I set off. (I mean, I wasn’t sure how anything was going to turn out when I set off, but that is beside the point.) I joke sometimes that Nishe has a “she” in it, and if the she-only model doesn’t work, it also has a “he” in it.

So how did it turn out? I think the women-only model has worked fantastically well so far. We have an excellent team of people who truly care,  are sincerely dedicated to giving quality service to our clients, and are passionate about the brand. They are strong, honest women who will speak their mind when they have to, who have the courage to acknowledge and apologise when things go wrong, who have the desire to learn and improve themselves. And most importantly they have each other’s back.

All of this makes my job so much easier.

I have been asked if Nishe isn’t being discriminatory and anti-diversity because of the women-only model. I acknowledge these concerns. My take? They are true if you take a very simplistic view of things from a firm-specific perspective, but if you are looking at the wider ecosystem, we are actually bringing diversity and helping in reducing discrimination.

At present, our plan is to continue with the women-focus until and unless it becomes legally unacceptable (which is the case in certain jurisdictions).

Or if the world becomes so gender-balanced that nothing further needs to be done on this front.

Or, most importantly, we will also consider changing if the women-only model negatively impacts the growth of the Nishe team somehow.

Because our team’s wellbeing is integral for us.

And because we understand very well that a skewed balance can potentially lead to undesirable consequences, as is amply evident from the many imbalances that exist in the society right now.

[For Part 1, please click Four years on – Part 1]

[For Part 2, please click Four years on – Part 2 : Why did I walk away?]

[For Part 3, please click Four years on – Part 3 : The Idea of Nishe]

[For Part 4, please click Four years on – Part 4 : Early days of Nishe]

[For Part 5, please click Four years on – Part 5 : Entrepreneurship and decision making]

[For Part 6, please click Four years on – Part 6 : Solo or Partnership?]

“You do exceptionally well when you are fully in charge, but if you are one of the people in charge and your role is not clearly defined, you seem to struggle at times.”

This, or something to this effect, was once told to me during a performance appraisal discussion with a PwC partner I am extremely fond of.

As he spoke these words, it felt to me like a revelation of a mysterious part of me which I vaguely knew existed, which probably baffled me, but I wasn’t clearly aware of. In a flash, I knew why I was comfortable in certain scenarios and uncomfortable in others.

That comment has stayed with me. I have reflected over it extensively – analysing the reasons for why I am that way, the good and the bad of being that way and how can I overcome the bad. That comment has influenced my thoughts, my decisions, my actions. Most importantly, whenever I am in situations where roles and responsibilities are unclear, this self-awareness has ensured that I will strive to bring clarity.

Why I am talking about this? Because this awareness also had an impact on how I structured Nishe.

Many people in my family are into business and so are a lot of my personal connections. Hence, I have been able to observe many business successes (and even more failures) from a close quarter. One major realisation from such observation is how often partnership businesses fail even when the underlying business is good purely because of inter-partner relationship issues.

Before I started up, I had my own ideas of how to run a business, ideas which some may consider (actually did consider) as utopian and impractical. The fierce ‘logician’ in me refuses to accept things just because someone (or the whole world) told me it is so. But I also don’t like to force my unproven ideas on to others.

Besides, unfettered freedom to experiment was, still is, very important for me. I figured early on that it will be easier to do such experimentation if I am the sole decision maker.

Considering all of these factors, and given this “confused when there is a lack of role clarity” part of me which I was acutely conscious of, I decided to go solo when I set up the firm.

So, what about now? Four years of entrepreneurship has taught me a lot more about myself and about business successes and failures. Hence, I am no longer wary of considering partnerships.

As long as it makes sense.

But for now, I stick to being solo. Happily.

[For Part 1, please click Four years on – Part 1]

[For Part 2, please click Four years on – Part 2 : Why did I walk away?]

[For Part 3, please click Four years on – Part 3 : The Idea of Nishe]

[For Part 4, please click Four years on – Part 4 : Early days of Nishe]

[For Part 5, please click Four years on – Part 5 : Entrepreneurship and decision making]

“Constant decision making – small and big – is the crux of entrepreneurship. So, if you are not comfortable with making decisions and taking full ownership of the decisions made by you, then you might want to reconsider if entrepreneurship is really the route for you.”

I couldn’t find a good enough quote on the importance of decision making for entrepreneurship, so I made this up. Because, from my experience, it is such an integral part of entrepreneurial life.

At every step when running a business, there are choices to be made. It becomes the responsibility of the business owner(s) to make a choice at the right time. And, of course, to accept the consequences of choices made.

Parts of this decision making can surely be delegated. But the who, what, how and how much of delegation then become extremely important.

I am a very analytical and logical person. I mean, I try to apply logic even to emotional situations! While I identify that as my most important strength, I am also conscious that in certain situations, especially personal situations, I could appear as uncaring because of this.

This weakness notwithstanding, I like the fact that I am logical. And with a lot of practice, I have also gotten over my hesitation to speak my mind and say “no” when I am convinced I have to.

So, decision making comes pretty naturally to me. Fairness is a firm guide in my decision making. It’s extremely important that every decision that I make, and every decision that someone else makes which impacts me, is fair to both sides. The second one is not always easy to ensure – and there are times when I fight hard and there are times when I choose to let go. And those decisions are also made in a very logical fashion.

Even though I am the chief decision-maker of the firm, I expect my team to counsel me if they think things can be better or different. You can therefore expect regular chirpy discussions on various matters at Nishe office.

I also reflect on the impact of my decisions on others directly affected by them and make it a point to explain my rationale whenever I can. I find that, when grounded in fairness, it works most of the time, with the result that we as Nishe have a fantastic relationship based on trust and openness within our team and with our clients.

Difficult situations can still occasionally arise, and if I find that they are hard to fix, I have to make a choice to continue the relationship or walk away. Having done the most difficult walking away in my life (from PwC), the act doesn’t seem so daunting any more.

[For Part 1, please click Four years on – Part 1]

[For Part 2, please click Four years on – Part 2 : Why did I walk away?]

[For Part 3, please click Four years on – Part 3 : The Idea of Nishe]

[For Part 4, please click Four years on – Part 4 : Early days of Nishe]

“The relationship between work and time is similar to the relationship between air and space. If you have less work relative to the available time, work spreads out to fill it. You can keep on adding more and more work into the available time until a point beyond which it might explode.”

This, my friends, is my own quote:).

At PwC, there was no dearth of things to do and no shortage of deadlines to meet, sometimes one felt being treated like a genie. But this also gave me the mastery of compressing a lot of work into the available time. So when I left PwC, one of the things I was most scared of was getting used to working less and losing this valuable skill of compressing a lot of work into a day. (Yes, I truly think it is a valuable skill).

So what did I do? As soon as I left my job, I started working on Nishe. Meanwhile, I also enrolled for a bunch of classes including an MSc in Professional Accountancy from the University of London.

Nishe took off pretty quickly. The Professional License came within 2.5 weeks of quitting my job. Through persistent follow up, I managed to open a bank account within less than a week of obtaining the Professional License. Due to months of researching and reflecting, the idea of Nishe was fairly clear in my mind. Hence making decisions on branding wasn’t difficult. And what is more, I got a great branding mind to work with in Sajith Ansar from #Ideaspice.

I was lucky to get a good client as soon as I started. But obtaining subsequent clients took quite a bit of time and effort. The extreme emotional ups and downs that I experienced with the initial few proposals – from getting a request to drafting and sending the proposal, the agonized wait and eventually the final outcome – are simply too hard to describe.

Another thing I struggled with was stepping down several levels below my position. I managed all aspects of Nishe alone for the initial months, including performing client work. As an Assurance Director at PwC, I was a second-level reviewer and decision maker. Stepping down from that to being a preparer was incredibly hard.

Eventually I hired the first team member, after about 3-4 months of starting the firm. I have to say I got very lucky with her as she quickly grasped the versatile roles that are required in a startup and supported me well very patiently, diligently and enthusiastically – thank you, Deo😊. This made my life a lot easier.

The cramming of all my available time with multiple activities also created problems for me later when I had to juggle completing a tough (but rewarding) project for a client at the same time as my assignments for my Masters Programme (which I have to add, I managed to complete with a Distinction:)).

With certain other decisions such as arriving at the right pricing strategy, we had to grapple for a long time before we could find our balance.

“The first couple of years of entrepreneurship will be extremely hard. You will keep hearing the word “no”. But if you persevere and persist, there is no doubt you will succeed.”

This was the advice that I received from a successful serial entrepreneur when I was about to set up Nishe. And the effect that advice has had on me is powerful.

It won’t be an exaggeration if I say that if not for this golden advice, I may have become disheartened long ago, possibly even folded. The pressures of early days of entrepreneurship are such, that only the knowledge that it is a normal part of entrepreneurship and that I am not alone in this, and the comfort earned from that knowledge, helped me keep up my cheer.

[For Part 1, please click Four years on – Part 1]

[For Part 2, please click Four years on – Part 2 : Why did I walk away?]

[For Part 3, please click Four years on – Part 3 : The Idea of Nishe]

“Everything Begins With An Idea.” – Earl Nightengale

In my later audit days, when my motivation began its downward path and I began looking forward to getting up from my bed to go for work less and less, I have thought quite a lot about what I would do if I were to leave this job. And believe me, accounting was the last thing in the list. Actually, it didn’t even figure in the list. After more than a decade of intense work in audit, I didn’t want to have anything to do with accounting or audit anymore if I were to leave.

And then I happened to visit a bookkeeping firm as part of my work. As I stepped out after having a half hour conversation with the founder of the firm, the idea momentarily flit past me- why should I say I don’t want to do accounting? I mean, I am really good at it. So why not set up a firm of my own?

That’s where it all began. The idea…and with it, of course the doubts…

What if the idea didn’t take off? I will be walking away from a prestigious position in a firm of high repute – a position that I have worked really hard to attain – for nothing.

Will I get bored? I have a habit of getting bored quickly with repetition.

How will I survive financially meanwhile? I was also walking away from a good pay which was a major contributor to the financial stability of my family.

Where will I find the clients from? I didn’t have much confidence in my marketing skills.

Do I have it in me to cope with the trials and tribulations of entrepreneurship? Will it work well with my set of principles, my ideas, my thought process?

I have always wanted to do something which has a positive impact on society. But I also need money to survive and sustain my family. How will I combine this financial imperative with doing good? 

I spent weeks and months reading, researching, reflecting.

And eventually the name Nishe (pronounced similar to “niche”) was born. The reason there I assume is obvious.

And the idea of women-focus was born. That gave me the higher purpose to aspire for and I also hoped that it will help offset possible boredom. As a woman who has seen first-hand what conservative societies can do to kill the individuality of women, that choice too was fairly clear.

Still, the question remained throughout – should I do it?

What if?…..a 100 what ifs….

Should I do it?

What helped me decide to take the plunge?

The keen awareness that we have only one life to live on this beautiful earth. And I wouldn’t want to spend it whining, worrying.

I eventually decided I would give myself couple of years to experiment. If it works well, well and good. If it doesn’t, I would have surely learned a lot from the experience.

Which means whichever way it goes, it is going to be rewarding.

That thought, for me, was the clincher.

But the doubts remained even after it was done. For a long long time.

-Should I have done it? 

-Did I do the right thing? 

–Am I being stupid? 

[For Part 1, please click Four years on – Part 1]

[For Part 2, please click Four years on – Part 2 : Why did I walk away?]

“Some people believe holding on and hanging in there are signs of great strength. However, there are times when it takes much more strength to know when to let go and then do it.” ― Ann Lander

Why did I walk away from my position as an Assurance Director with PwC Dubai?

I keep getting this question. It’s an extremely difficult one to answer. Just as walking away was an extremely difficult decision to make. It was in fact the most painful decision that I have ever had to make. When I submitted my resignation in the June of 2016, my mindset was not unlike that of the British who voted for Brexit – 52% for, 48% against.

Born and brought up in a conventional Muslim family, married at 19, a child at 21, completed ACCA at 24, joined PwC at 26, Assurance Director at 35, resigned at 37 and started Nishe. This is my brief life history.

PwC was a revelation for me. It opened up to the hitherto naive me a world of possibilities. The learning and exposure that I gained there was tremendous. And I met and worked with so many inspiring people who have influenced me in so many ways.

So why did I walk away then?

I have spent the last four years trying to come up with a succinct response to that question, but have miserably failed. So here’s one, but mind you, it’s over-simplified.

Have you heard of the flow model? It categorises people into four types based on their skill-set and the level of challenge they are experiencing in their work.

Here’s a simple summary of the four categories in the flow model:

1.     Apathetic – low skill, low challenge

2.     Boredom – high skill, low challenge

3.     Anxiety, fear – low skill, high challenge

4.     Flow – high skill, high challenge

You can of course do an internet search if you would like to know more about the model. (I actually stumbled on the model when I once Googled “I hate timesheets” several years ago.)

When I read about the flow model, it reminded me of my initial years in PwC when I truly felt like I was in a flow. Work was tough, challenging and required long hours, but I loved it. But over the years, I had slowly stopped enjoying it so much, was possibly reaching the threshold of a “browned-out” stage. I longed to get back to the “flow” stage.

When we are really enjoying something, the issues that we face don’t bother us much. If anything, they appear as challenges to overcome. But when we stop enjoying, even small issues start stressing us out. I guess that’s human nature – plain and simple.

When I realised that I had gotten to a point where work didn’t excite me anymore as much as it used to, and that my mind was flustered by lots of things – some small and some seemingly big, I started thinking, worrying, about my life, my attitude, my future. I couldn’t conceive the possibility of living out the rest of my life without enjoying what I spend pretty much all of my waking hours on.

Being a whiner was, is, never a choice for me. In my view, if you are not happy in a given set of circumstances, there are three possible options in front of you – try to change the circumstances that make you unhappy, learn to adjust to the circumstances, or move out of those circumstances.

Having thought long and hard on these options, I felt the third option – a fresh start – might help me in getting back to the “flow”. When I say long and hard, I have to emphasise that it was years long and nerve-wrackingly hard.

It wouldn’t be an exaggeration if I say that it sometimes felt like I am jumping off the safety of a ship into the unknown sea.

Or like walking into the unknown desert, unaided.

[For Part 1, please click Four years on – Part 1]

“Life can only be understood backwards; but it must be lived forwards.”
-Søren Kierkegaard

Four years.

That’s how long it has passed since I took the momentous decision to resign my position as an Assurance Director at PwC Dubai and set up an accounting practice with a focus on employing women.

Nishe, which was just an idea that blossomed in my mind in 2015 and began taking concrete shape in 2016, has now led to:

• 5 fantastic team members;
• 40 plus clients – present and past;
• A beautiful office in the heart of Dubai (that too, owned);
• Several media coverages and an award;
• My position as a Member of ACCA members advisory committee in the UAE and of ACCA global tax forum;
• Lots and lots of new friends and connections and closer relationships with many many old friends and connections; and
• And equally or more importantly for me, self-discovery – I am finally, finally, comfortable in my own skin.

It has also been an era of:

• extreme panics, excitements and disappointments;
• Continuous decision-making and problem-solving;
• Working and living under severe financial constraints;
• Stepping down several levels in work related responsibilities before stepping back up eventually; and
• Plenty of exploring, discovering and learning.

Quiet reflection is a routine part of my life. But four years on, I wanted to reflect a bit louder. I am proud of what the idea of Nishe has come to, I am excited about its future and I am excited to share our journey.

Hence this Sunday series, which commences today.  I hope you will enjoy reading it as much as I have enjoyed writing it.

Economic Substance Regulations (“ESR”) were introduced by the UAE Government in 2019. ESR impacts all entities licensed in the UAE whether on the mainland or in the free zones. Penalties for non-compliance with ESR range from AED 10,000 to AED 50,000.

There are two reporting requirements under ESR – (1) filing of an annual Notification; and (2) filing of an annual Return. These have to be filed for financial years commencing on or after 1 January 2019.

Recently, many Regulatory Authorities in the UAE have announced 30 June 2020 as the deadline for Notification for the first financial year under ESR Rules. Deadline information for Notification is awaited from other Regulatory Authorities.

The Annual Return has to be filed within twelve months from the financial year-end.

WHAT IS ESR AND WHY IS IT INTRODUCED IN THE UAE?

The objective of ESR is to ensure that the UAE entities which earn income from “Relevant Activities” as defined in the ESR are able to demonstrate that they have economic substance in the UAE.

The ESR has been enacted primarily as a result of two developments in recent years:

(1) The blacklisting of the UAE by European Union as a non-cooperative tax jurisdiction; and

(2) The UAE’s commitment as a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”).

WHAT IS BEPS? WHAT IS THE RELATIONSHIP BETWEEN ESR AND BEPS?

BEPS project was undertaken by OECD mainly to address the concerns that large multinational groups are shifting their profits around the world using various tax loopholes available in order to (legally) take advantage of the low/no tax jurisdictions and thereby reduce the overall tax expense for the group.

BEPS project also focused on the concerns that the legacy tax rules are not compatible with the new technology-driven business model which has upended many traditional business practices and introduced new products and new ways of delivering products.

Both these issues potentially resulted in: (1) many multi-national groups not contributing their ‘fair share’ of taxes; and (2) inequity between countries in collecting and benefiting from the tax incomes.

The outcome of the BEPS project is a 15-point multi-pronged action plan which was published by OECD in 2013. BEPS has taken the international tax world by storm in recent years. Many countries have signed up and there are sweeping changes happening including changes to domestic tax rules and international tax treaties, increased reporting requirements, significantly increased cooperation between tax authorities in different countries etc.

ESR requirements have been imposed only on some countries which are considered as at higher risk of having licensed entities without economic substance, i.e. purely for the purpose of tax avoidance. Other countries that have had to introduce ESR include Bahrain, Bermuda, Seychelles, Bahamas, British Virgin Islands etc.,

The objective of ESR is to ensure that the profits earned by entities licensed by these jurisdictions reflect the real economic activity within the jurisdictions. This is why ESR has focused only on certain activities which are considered at risk (i.e. the Relevant Activities). Relevant Activities are essentially those which deal with “geographically mobile” income.

WHAT ARE THE OBLIGATIONS OF BUSINESSES UNDER ESR?

Under the Economic Substance Regulations, an entity licensed in the UAE is required to:

(1)   Submit an annual notification to the respective Regulatory Authority IF it has performed any of the “Relevant Activities” as defined in the Regulations; and

(2)   Subsequently, file an annual return to substantiate the entity’s economic substance in the UAE IF it has generated income during the year from the Relevant Activities. Entities which earn income from Relevant Activities in a financial period also have to meet the economic substance test.

HOW CAN WE DEMONSTRATE ECONOMIC SUBSTANCE IF WE ARE ENGAGED IN ONE OR MORE RELEVANT ACTIVITIES?

ESR provides guidance on how to meet the economic substance test. Broadly, this involves assessing and proving that, in relation to the Relevant Activity,

• The Core Income Generating Activities (“CIGA”) are carried out in the UAE;
• The entity is directed and managed in the UAE; and
• There are adequate expenditure, qualified full-time employees and physical assets in the UAE.

WHO ARE THE REGULATORY AUTHORITIES?

The Regulatory Authorities for the purpose broadly are:

• The UAE Ministry of Finance for the onshore entities; and
• The respective Free zone authority for entities registered in the free zones.
• In some cases, other authorities are also designated as such (for e.g. Central Bank in respect of Banking Business).

The UAE Ministry of Finance is the Competent Authority responsible for overseeing the ESR compliance.

WHAT ARE THE “RELEVANT ACTIVITIES?”

Relevant Activities are:

• Banking Business
• Insurance Business
• Investment Fund management Business
• Lease – Finance Business
• Headquarters Business
• Shipping Business
• Holding Company Business
• Intellectual property Business (“IP”)
• Distribution and Service Centre Business

Definitions and details on Relevant Activities are provided in the Regulations and related guides.

WHAT ARE THE DEADLINES? WHAT CHANGED NOW?

The Return filing deadlines have already been announced some time ago. But until recently, there had not been any firm announcements of deadline with respect to the Notification. Further, the related guides and forms/templates were also largely unavailable.

However, recently, various Free Zone authorities have announced 30 June 2020 as the deadline for filing first Notification. The UAE Ministry of Finance has also announced on press that 30 June 2020 is the deadline communicated to all regulators for Notification. The related notification forms also seem to be now in place in a number of Free Zones.

However, do note that some Regulatory Authorities may have a different deadline (quite likely earlier than 30 June 2020). Hence you are advised to check with the respective Regulatory Authority on the deadline. And certain other Regulatory Authorities have not yet announced any deadlines.

WHAT SHOULD THE BUSINESSES DO FROM A REPORTING PERSPECTIVE?

All the entities licensed in the UAE, without fail, must:

(1) Undertake an assessment of:

(1.1) Whether the entity performs any of the “Relevant Activities” as defined by the ESR Rules; and

(1.2) Whether it has earned income in 2019 from the Relevant Activities.

(2) If the answer to 1.1 is yes, then perform an Economic Substance Notification to the designated Regulatory Authority by the relevant deadline (mostly 30 June 2020 for the first financial year);

(3) If the answer to 1.2 is also yes, then

(3.1) Perform a detailed assessment to demonstrate adequate economic substance in the UAE; and

(3.2) File Economic Substance Return to the Relevant Authority by the deadline (within 12 months from the end of the financial year).

Such Notifications and Returns will have to be submitted on an annual basis.

DO THESE NOTIFICATIONS AND RETURNS HAVE TO BE AUDITED?

No.

WHAT ARE THE OUTCOMES OF NON-COMPLIANCE?

Non-compliance could mean non-compliance with the reporting requirements and/or failing the economic substance test.

The financial penalties for non-compliance for both are severe. The financial penalties for failure and inaccuracies in reporting range from AED 10,000 to AED 50,000 while the financial penalties for failing economic substance test range from AED 10,0000 up to AED 300,000 for repeated failures.

Further, there are provisions in ESR allowing the Ministry of Finance to exchange information about entities who fail the economic substance test with other relevant Foreign Competent Authorities.

There are also provisions for cancelling or non-renewal of licenses for non-compliance.

HOW NISHE CAN HELP?

If you need assistance in complying with ESR, please contact Nishe.

We can provide the following services in relation to ESR:

• Assessing whether your business is undertaking any Relevant Activity;
• Preparing and filing the Notification with the respective Regulatory Authority;
• Assessing whether economic substance requirements are met;
• Identifying gaps in meeting economic substance requirements, if any, and providing recommendations to fill the gaps identified; and
• Preparing and filing the Economic Substance Return.

KEY CONTACTS:

Nasheeda CC

Managing Director

Email : nish@nishe.me

Phone : +971 55 4567134

Nisha Parakanni

Tax Consultant

Email : isha@nishe.me

Phone : +971 58 1231587

You can download a copy of the alert here.

“The chief enemy of creativity is good sense.” – Pablo Picasso

Well, well, Mr. Picasso. You aimed that at accountants, didn’t you?

For an accountant, creativity and good sense simply don’t go together. They are indeed mortal enemies. (See how I killed that beautiful quote with my unimaginative clarification? This is one of the exasperating things that accountants do, unfortunately!)

Back to the topic – Who wouldn’t like to be creative? I feel awe and more than a tinge of envy when I meet a truly creative person or come across some inspired piece of work.

But for an accountant, creativity is considered bad. Really bad. And that is not necessarily because

“Creativity is intelligence having fun.”

as Albert Einstein apparently said, irrespective of what you think about accountants and fun.

Pablo Picasso once, very dramatically, pointed out that

“everything you can imagine is real.”

Accounting is definitely one place where you don’t want that. Nor the other way round, i.e., you don’t want anything real to vanish due to an accountant’s imagination. Hence, anything to do with imaginative bends and creative mindsets and artistic tendencies – when it comes to accounting – please leave them at the door, thank you very much.

Or handle with super-extreme care and caution.

Which is why creative accounting and ‘window-dressing’ are such dirty words.

‘But if double-entry book-keeping is pure science, where is the scope for creativity in accounting?’ – you may ask.

The answer lies in the ‘some more’. Remember the definition of accounting in Part 1 of this series?

Accounting = book-keeping + some more

Alright, so let’s explore the ‘some more’ some more.

Actually, an accountant sets the ground work before the bookkeeping begins; and then continues from where the bookkeeper’s job ends. Hence, the definition should more logically be something like:

Accounting = some + bookkeeping + some more

Let’s first look at the initial ‘some’.

Even before a bookkeeper sits down to record a transaction, there are a number of questions to be answered. Such as,

Which transaction(s) should I record?
When, i.e., in which period, should I record them?
At what amounts should I record them?
Hidden in these questions are many ways in which accounting could possibly be “managed.”

Say, there’s a legal case against your company and it looks like you may end up paying some hefty fines which could range anywhere from $100 million to $500 million. (With the amounts of fines that the likes of Facebook and Google are paying, this is not unrealistic at all.)

(“Also, technically, this is an event, not a transaction. Accounting is recording not just transactions, but also events.” – Clarification from my boring accountant self)

Back to the case at hand – The first dilemma from an accounting point of view is when should you record this fine in your accounting books. Do you record it only if and once the court has ruled on the amount of the fine? If yes, what if you decide to appeal? Would you delay it further? Alternatively, do you record the fine when you know there is a likelihood to be slapped with one? If yes, what level of likelihood should you consider? How do you measure that likelihood?

Remember – recording that fine means a serious dent to your profit especially if you are having a bad year already.

So, a creative accountant will try to push that into another year – at least partly. This is one of the games that creative accountants love to play. Push entries into or pull entries from another year depending on how you ‘want’ your numbers to look this year.

Yes, that’s right. Creative accountants always play with a purpose. No wonder Abraham Maslow said that

“Almost all creativity requires purposeful play.”

And almost always, the purpose is to show the company in better lights – hence, the term ‘window-dressing.’

Accounting standard setters tend to be rather prudish and prudent about such things. Hence, they will try to force you to record such fines earlier rather than later. But therein lies the next dilemma. Until the court decides, you may not know exactly how much is the fine. So what amount do you record?

In these and similar dilemmas lie plenty of opportunity for dazzling displays of creative skills by the fun-loving super-intelligent accountants.

Like the opportunities to decide:

– when to record an income,

– when to record an expense,

– whether to record an item as an asset or expense,

– whether to record an item as an income or liability,

– whether to record a transaction at all or keep it out of the books,

– whether to write off something,

– whether to write back something,

– how much to record,

– etc. etc. etc.

Mind you, the bookkeeper hasn’t even begun his/her work yet.

And the creative accountant has only begun… because, the ‘some more’ is still waiting.

Lurking gleefully. Just around the corner.

In the next part of this series, we will explore the ‘some more’ opportunities for the creative accountants to enjoy themselves…

Meanwhile, if you are one of those who struggle (or don’t care) to understand accounting, know that you are not alone. Such apathy and ignorance are common enough and that’s why firms like ours are in business. Whether you are a small or large company and whether you are a start-up or well established, we are just a phone call or email away if you need any guidance, support or assistance with any aspects of accounting or bookkeeping. In fact, call us even if you are not sure what it is exactly that is bothering you. We are experts in diagnosis, detection, prevention and treatment of all your accounting issues. We promise not to act elitist when we speak to you. We will step down to your level, and won’t show our innate arrogance and “know-it-all” attitude one bit! In fact, our modesty will blow your minds away – just give us a try.

Cheers

Nish

For Part I of the series, go to Do You Really Understand the Language of Business?

For Part II of the series, go to The Science of Bookkeeping.

Note: My blogs are also published in my Linkedin Page.