Understand Your Rights. Solve Your Legal Problems
The House of Lords Constitution Committee recently proposed new measures to safeguard the rights of Parliament as the process of Brexit gets underway. The report argues that Parliament should make sure the Government does not use delegated powers in the forthcoming ‘Great Repeal Bill’ as a way of changing the law in areas currently governed by the EU, without proper parliamentary scrutiny.
The Committee, which rarely considers Government Bills before they are published, considers the issues likely to be raised by the Bill to be exceptional, for which exceptional scrutiny measures will be required.
The Committee considers that, given the deadlines imposed by the timing of the UK’s exit from the EU, the Bill is likely to include wide-ranging delegated powers. These will permit the Government to make a broad range of changes via secondary legislation to the body of EU law in preparation for its conversion into UK law. These powers will be required both because of the sheer number of changes required and the uncertainty as to what exactly the process of converting EU law into UK law will eventually entail. The Government will also need to be able to amend that law at short notice to take account of the outcome of Brexit negotiations.
The Committee draws a distinction between, firstly, the conversion of EU law into UK law, a process which will be facilitated by the ‘Great Repeal Bill’, and, secondly, a subsequent discretionary process in which the Government and Parliament choose which bits of EU law to keep and which to replace or modify. The ‘Great Repeal Bill’ should not be used as a shortcut by the Government to pick and choose which provisions of EU law it wishes to keep and which to lose. If the Government wants to change the law in areas which currently fall under the authority of EU as, just to give one example, it has said it intends to do on immigration, it should do so via primary legislation which is subject to full Parliamentary scrutiny.
The Committee argues that Parliament should seek to limit the scope of the delegated powers contained in the Bill, and develop several new processes within Parliament to ensure that the Government is using the delegated powers it acquires under the Bill appropriately.
Firstly, the report states that Parliament should limit the scope of delegated powers in the ‘Great Repeal Bill’ so that they can be used only:
Secondly, the Committee recommends that enhanced scrutiny processes should be created for secondary legislation laid under the ‘Great Repeal Bill’. These include, among others, a requirement that a Minister sign a declaration in respect of each statutory instrument affirming that it does no more than necessary to translate EU law into UK law. In addition, the Explanatory Memorandum accompanying each instrument should explain what the EU law in question currently does, the effect of any amendment and why such amendment is necessary. This will allow Parliament to have a proper say on this important legislation, rather than simply being limited to approving or rejecting it as is now the case.
The report also considers the impact of repatriating EU laws in the devolved administrations. The UK Government should consider carefully and make clear the role it sees for the Scottish, Welsh and Northern Irish Governments in preparing to incorporate EU law in areas that will, following Brexit, fall within their authority.
Commenting Lord Lang, Chairman of the House of Lords Constitution Committee, said:
"The ‘Great Repeal Bill’ is likely to be an extremely complicated piece of legislation. It will bring into UK law legislation that is not currently on our statute book but that is directly applicable to the UK. It will also provide for the amendment of literally thousands of pieces of EU law that will need to be adapted to make sense in a post-Brexit UK. No one should underestimate the challenge of that process.
"The intention should be to convert the existing body of EU law into UK law with as few changes as possible. The Government may need to be granted wide-ranging powers to accomplish that task. Those powers should not, however, be used to pick and choose which elements of EU law to keep or replace—that should be done only through primary legislation that is subject to proper Parliamentary scrutiny.
"Scrutiny must not be side-lined. There must be: a clear limit on what the delegated powers in the Bill can be used to achieve; a requirement for Ministers to provide Parliament with certain information when using those powers; and enhanced Parliamentary scrutiny of the exercise of those powers. Use may need to be made of sunset clauses to ensure that after Brexit the laws brought over from the EU are reviewed and, if necessary, amended without undue delay rather than being left to drift into permanence.
"We feel that, taken together, these measures should ensure that the cry of the Brexit campaign in the referendum, that the UK Parliament should ‘take back control’, isn’t lost before the UK has even left the EU."
(Source: House of Lords)
Alistair Kinley, Director of Policy & Government Affairs and partner at BLM, delves into the Government’s new Vehicle Technology and Aviation Bill – how does the latest legislation clarify the role of driverless technology on British roads, and what are the key questions that still surround the topic?
We won’t be rolling out of bed and straight into our completely driverless car anytime soon, but advanced driver assistance technology (ADAS) will be commonplace by 2020. Manufacturers will then launch vehicles able to travel unsupervised using automated driving technology (ADT) for extended periods in defined situations (like on a motorway). By 2025 a significant percentage of private and commercial vehicles will spend part of each day responsible for themselves and their passengers.
ADAS is already in operation in many cars, covering emergency braking; cruise control; lane assistance; and self-parking. In time, they will become more sophisticated, able to deal with more complex situations, eventually controlling a vehicle to the point where they become ADT. The UK Government’s aim with the Vehicle Technology and Aviation Bill is to attempt to make the transition to ADAS and then to ADT vehicles as smooth as possible.
It is clear from discussions between Government and stakeholders that underpinning the task of legislating for ADAS and ADT were three essentials: -
The UK has long been heading towards a driverless road network and, in February this year, took another leap forward - most significantly perhaps for the insurance industry - when the Vehicle Technology and Aviation Bill was published by government.
Is this legislation a window into one possible future of cities full of driverless cars, integrated “hyperways” and robotic delivery drones? Probably not – or not yet – but what has come a little closer with the Bill is a clear statement from the government about how people injured by automated vehicles (AVs) will be protected once the technology is approved for use on UK roads.
There will be a ‘single insurer’ approach, with the insurer of the AV becoming something of a ‘proxy defendant’ (our term) for the vehicle manufacturer. This means that injured drivers - or perhaps they should now be referred to as ‘passengers’ - and other road users can continue to claim against a motor insurer and will not face having to make potentially complex product liability claims against vehicle manufacturers. This new legal regime is to be completed by giving the insurer a right of recovery against the manufacturer.
The adoption of a single insurer model here is something of a change of direction from the government which, in consultation last year, seemed to suggest that drivers would be expected to buy a clumsy combination of compulsory motor insurance and top-up product liability cover.
Of course there’s a lot of leg work still be to done around other areas of regulation and on testing the tech before we can consider sending even an autonomous mobility scooter out on UK roads, let alone interconnected fleets of AVs vehicles capable of sharing vast amounts of data with each another and with the highway infrastructure.
The challenge presented by the need for data is huge, considering the practical uses of autonomous vehicles, data protection generally and the legal consequences of an accident. Accordingly, commercial operators will find they have extended duties of care regarding training, security of personal data and disclosure.
Also, although potential interconnectivity of infrastructures and vehicles may ease congestion and reduce accidents, even a temporary failure of the communications network could see significant liability accrue in all directions. Businesses obviously will be highly dependent upon reliable data channels for operations and employee drivers will need to be trained to deal with data failures, even if they are rare. Businesses providing communication channels will themselves be at risk of damages claims too.
Key issues such as how, when and what sort of AV functionality is approved by Minsters for use on the roads are critical and are referenced in the Bill. Some serious thought also needs to be given to protecting authorised AV technologies against opportunistic or even terrorist hacks.
These matters aside, the new Bill offers an initial and workable vision of the future law applying to accidents involving AVs. Will it be a safer future? Hopefully so - surely the point of legislating to allow drivers to use expensive AV technologies is not just to free up time and reduce traffic congestion but to lower overall risks so that all of society benefits? As a force for positive change, such involvement will shape the public’s future trust in autonomous technology.
Jacquie Birkett, a divorce solicitor and former chartered accountant, who is head of Family Law at Lancashire based law firm, Barber & Co Solicitors, has spoken out about why getting a financial settlement at the same time as divorce is so important, and here below, answers several questions on the matter.
Couples who opt for a divorce without coming to a financial agreement may come to regret it in the future. Even long after a divorce, an ex-spouse may make a claim in relation to financial issues arising from the breakdown of their marriage.
What part does a financial settlement play in a divorce?
It is absolutely vital for the parties to negotiate and arrive at a financial settlement on the breakdown of their marriage. Such a settlement means that both parties can move on into the future certain of their financial position and the options they now have. Any settlement reached should be set down in a final order made by the Court within the divorce proceedings.
Why is arranging a financial settlement so important?
Arranging a financial settlement provides certainty for both parties. This can help them make important decisions as they move forward into a new life and ensure that they do not need to worry about, for example, providing stability and security for their children.
What problems can arise if you do not arrange a financial settlement?
If an agreement is not reached as to how financial issues are to be dealt with on the breakdown of a marriage, then this can make it extremely difficult for both parties to move on. In principle either party can make a claim against the other in relation to those financial issues at any time in the future unless the party who wishes to make the claim has since remarried. If a claim is made then the assets of each party will be valued at that time and not at their value when the marriage broke down thus including lottery wins, inheritances, the fruits of business success and the increase in value of property in the intervening period.
Does not having a financial settlement affect how the marital home is divided up?
If there is no financial settlement, then it is likely that one of the parties remains in the former matrimonial home often with the children of the family. In these circumstances, it is very unlikely that the spouse who has left the home will have any lump sum with which to pay a deposit on a new property for themselves. This may cause problems when the children come to stay or may prevent them staying at all if it has not been possible to source suitable alternative accommodation.
For the spouse who remains in the property there may also be problems in the future. If they stay there until the children reach 18 then the equity in the property will usually be split equally at this time. If the property has increased in value and the spouse who has remained cannot afford to buy the other out, then the property will need to be sold. If a financial settlement was reached at the time of the divorce it may have been possible to argue that equality should be departed from and for the property to have been transferred into that spouse’s sole name.
What consideration is given to spousal maintenance in a financial settlement?
This is a complex area and very much depends on the particular circumstances of each individual case. Recent decided cases have concentrated much more on the needs of the spouse who is to be paid spousal maintenance and the need to set that spouse on the road to independence rather than earlier cases when much more generous decisions were made. It is vital to get expert legal advice in this area to ensure a fair outcome.
If I own a business, is my spouse legally entitled to half of it or any future earnings?
This is another complex area and very much depends on the type of business you own and how you own it. The Court is unlikely to deprive a spouse of his or her means of earning a living. It will not kill the “golden goose” but nonetheless the business will be considered along with all the other relevant circumstances of an individual case.
Are financial assets always split 50/50?
No. The starting point is that matrimonial assets should be split on a 50/50 basis however this may be departed from after considering the children’s needs, the length of the marriage, the ages, health and income earning capacity of the parties, the standard of living enjoyed during the marriage, needs and any other relevant circumstances. As always everything depends on the facts of the individual case and there is no set formula which can be applied.
What happens if I re-marry and do not have a financial settlement from my previous marriage?
Re-marriage will have an effect on your needs and obligations as well as your resources and this will be taken into account when reaching any financial settlement.
You should also note that in certain circumstances it is not possible to make a financial claim once you have re-married so it is important to take legal advice before you do.
With all the latest changes to compensation and claim limits in the UK, Lawyer Monthly here benefits from an analysis by Amanda Cunliffe, Founder and Chief Officer for Legal Practice at Amanda Cunliffe Solicitors, on the Government’s far-reaching reform to personal injury law.
It’s been a bruising few weeks for the world of personal injury law.
Following their consultation into wide-ranging personal injury reforms, the Ministry of Justice (MoJ) has opted to surge ahead with a raft of changes to legislation over the next 18 months. The witch-hunt against a perceived ‘compensation culture’ looks to have won out and, as ever, it is the honest majority which loses.
While most lawyers would admit that they could get on board with a balanced, understanding and evidence-based approach to reforms, it is the government’s aggressive targeting of whiplash claimants which has lost all sense of comparison or reality.
Westminster’s ire towards those involved in road traffic accidents (RTAs) – the vast majority of which are honest claimants – has fuelled the production of a series of reforms which, if implemented, will put the sector well at odds with many other areas of civil law.
In just over 18 months from now, those claiming compensation for a 4-6 month injury sustained from an RTA will be entitled to a maximum payment of just £450, down from £2,150. That’s barely more than the insurance awards for a three hour flight delay (£330), and less than a quarter of the £2,000 a victim of food poisoning on holiday could be entitled to.
And what next? The chancers among the crowds will simply turn to dropping undercooked chicken into their beachside paella. The reforms should focus on the due process – ensuring that dishonest claims are exposed and thrown out. This outcome is something that both insurers and lawyers should be able to agree on.
The government’s position has been taken entirely on the presumption that whiplash claimants are lying. It’s an astounding assumption to make, undermining due process of our justice system, the effectiveness of our civil courts and, most importantly, rejecting the notion of honesty among the Great British Public.
So much for ‘innocent until proven guilty’.
In addition, Justice Secretary Liz Truss and her colleagues have neglected to consider a series of important facts. Firstly, the MoJ rubbished evidence that the number of whiplash claims is reducing, when proof of as much can be found in their own Compensation Recovery Unit figures - a decrease of 22% since 2008.
Next, the MoJ has stated that one key benefit for the consumer will be that insurance premiums will be reduced as a consequence. Meanwhile, motor insurance premiums rose by £100 in 2016, and look set to go up by another £75 following the recent reduction of the insurers’ ‘discount rate’. Whatever the outcome of any reforms, it won’t be the insurers counting the cost. The disconnect between the MoJ’s assertions and the evidence-based reality is a cause for concern for the consumer.
In addition, a victim of an RTA will need to have a claim worth in excess of £5,000 before they will be able to benefit from traditional legal representation; with the small claims limit being raised from £1,000 to £5,000. It isn’t just motorists that will feel the pinch, either. Anybody making a claim for any personal injury, however suffered, will see a rise in the small claims limit from £1,000 to £2,000, preventing a huge portion of lower-earners from having the means to claim a lifeline in compensation following an accident. It is, therefore, evident that tough times lie ahead for personal injury sufferers.
It’s crucial that the honest victims remain the focus for the government in the personal injury argument.
Recently, the Ministry of Justice announced a change in the way compensation payments for those who suffer long-term injuries are calculated by slashing the ‘discount rate’ for the first time since 2001. The ruling is likely spell higher insurance premiums and has incurred the wrath of insurers, but is expected to result in significantly higher pay-outs for victims of personal injuries.
While larger pay-outs would obviously provide a greater degree of financial security for victims, it is still imperative they have a structured plan in place, as Andy Cowan – head of financial planning at Tilney – outlines.
“For those who suffer catastrophic long-term injuries this ruling could mean that they get materially higher pay outs than we have seen in past years. However, it is still imperative that anyone who finds themselves in such circumstances has a specialist financial plan in place that carefully examines income and expenditure to model future cash flow needs and then builds an appropriate investment portfolio.
“Compensation is usually given to make up for a loss of earnings through the duration of your working life, and therefore you need to ensure that the money you receive doesn’t run out too soon.
“Claimants need to be aware that the story doesn’t end with a financial lump sum. Getting dedicated financial advice from a planner who specialises in personal injury or clinical negligence is essential to ensure there is a plan in place, giving you peace of mind for the future.”
(Source: Tilney Group)
Focusing on the overall impact of US tax policy on Canadian businesses, here Rhonda Sisco, US Corporate Tax Consulting Leader at Grant Thornton LLP in Toronto, tells Lawyer Monthly readers all about the potential impacts, both direct and indirect, of the expected US administration’s reviewed policies, in what Rhonda describes as a straightforward tax philosophy with complex repercussions.
Preparing for the storm
Canadian companies can expect a flurry of US tax policy changes.
Although many of the specific details remain unclear, significant changes to US tax legislation are definitely on the way under the new Trump administration. With his clearly stated mission to bring jobs and business back to the country, President Trump is planning to introduce a number of policies essentially designed to lower tax rates across the board.
As far as business and the economy are concerned, Canada can expect to be significantly impacted by the Trump administration’s anticipated changes to US corporate and personal tax rates, overall changes to the US tax system and a potential shift from an income tax to a VAT-like tax referred to as a destination-based cash-flow tax. In order to support “America First,” a border tax is also being discussed to ensure the intended effects of the VAT-like tax. In this shifting landscape, what measures will have the most significant impact and what should executives across the country be focusing on as they consider how to respond?
Tax changes directly impacting business and the economy
Canadian companies will be most concerned by tax changes that directly impact operations, earnings, trade and repatriation of financial assets, as well as the overall economic and competitive environment. For example, potential changes to how US companies’ foreign profits are taxed could lead many US headquartered corporations to repatriate cash from Canada, which may lead to reduced investment in Canadian operations and possible Canadian job losses. Should skilled Canadian workers follow the jobs across the border, we could see a “brain drain”—and resulting negative effects with which we’re already familiar.
Moreover, tax mismatches could result which, while creating some opportunities, could also create many pitfalls for those not closely following the changing environment.
Border tax implications
The US plan is to tax all goods and services entering the US while avoiding taxing goods or services exiting. This “destination tax,” designed to keep manufacturing jobs in the US, could negatively affect Canadian businesses that currently leverage trade agreements to sell and ship to the US “tax-free.”
Personal Income tax changes will affect business as well
In Canada, the combined effect of federal and provincial taxes puts the top marginal tax rate for high-income earners over 50% in six provinces. Under the new US plan, the top personal rate—already lower than Canada’s—could decrease still further from 39.6% to 33%. A newly-lowered top US federal tax rate, combined with a strong US dollar and recent Canadian tax increases on high-income earners, could make the US more attractive to highly-skilled Canadian workers—and ex-pat US citizens—potentially compounding the talent drain.
The federal government would face pressure to move in similar directions to the US, not only to retain investment and jobs, but simply to reap the gains of having a tax system aligned with that of our largest trading partner. One possible result could be our federal or provincial governments considering lowering our top tax rates to be more in line and more competitive with the US.
A straightforward tax philosophy with complex repercussions
Ultimately, the US plan comes down to reducing taxes, broadening the tax base and simplifying tax filing, with Trump’s promise to reduce the corporate tax rate having the biggest effect on Canada. If any or all of these “America first” measures are implemented, it could significantly impact Canadian businesses. Though the measures could spur on US economic activity that Canadian companies could significantly benefit from, certain of the tax measures may be harmful for Canadian exporters and may lead to a loss of investment in Canada and a loss of top talent to the US
Canadian companies will be facing a new economic reality when it comes to doing business in the US, conducting trade with the US and staying generally competitive with a country planning to substantially trim down both personal and corporate tax obligations.
A survey carried out by, Skills for Health, Skills for Justice and the National Skills Academy for Health has revealed that 31% of those surveyed are not aware of the forthcoming Apprenticeship Levy.
Commissioned to coincide with National Apprenticeship Week, the survey aimed to find out how much organisations know about the Levy, the opportunities it will offer and how it will affect their business.
Over 500 individuals from the UK’s public sector answered the survey. Alongside those that were not aware of the Apprenticeship Levy, a further 55% did not think or were unsure if it would have an impact on their business.
83% of respondents said their experiences with apprenticeships had been positive. However, many respondents commented on the barriers they face when taking on new apprentices. The top three issues cited were the difficulty in finding suitable candidates, a lack of funding and a lack of time to develop apprenticeship roles.
John Rogers, Chief Executive of Skills for Health and Justice, said: “Taking on and training apprentices is a fantastic way for organisations to shape the future of their business and its imperative they know how to make the most of new opportunities.”
“With less than a month to go until the Levy is introduced, some of the results are concerning. It is really important that organisations know how the incoming Apprenticeship Levy is going to affect them and how to make sure their organisation is adequately prepared. Conducting this survey has revealed just how many organisations in the health and justice sectors are not ready for the significant changes coming and will need support to be ready when the Levy comes in to force.”
Skills for Health, Skills for Justice and the National Skills Academy for Health have the knowledge and skills to help make the transition as smooth as possible when the Apprenticeship Levy is introduced next month. Offering a wide range of services including developing a sustainable apprenticeship strategy for your organisation, support with finding suitable apprenticeships, creating new roles and acting as a mentor, the three bodies are equipped to provide support at every step of the process.
(Source: Skills for Health)
With more than 25 years of experience, V.S. Raj is Head of Banking and Financial Services at Syntel, responsible for the strategic direction and operations of the Company’s largest industry group. Here he tells Lawyer Monthly readers everything you need to know about the newly brushed up Payments Services Directive (PSD2) rules.
With the revised PSD2 on the horizon, banking institutions are increasingly eager to take action to get ahead of this new regulation and the storm of industry disruption it may cause.
The new rules are to be implemented at the beginning of next year and constitute a significant change in the way payments services are offered to customers. PSD2 has been designed to inject competition into the market by enabling new types of payment services, increased security and consumer protection.
By requiring banks to allow access to their customers by opening up their Application Programming Interfaces (APIs), non-bank entities will be entitled to offer payment services. This change will have the effect of democratising the market and giving consumers greater choice in who they choose to provide them with payments services.
The competitors are technology companies such as Google and Amazon who have a wealth of experience in digitally engaging with customers. They are far more agile than large banks, whose digital offerings can be overshadowed by the feature-rich applications developed by technology firms. The challenge that banks face is to avoid becoming the ‘custodians’ of customer data for new providers to exploit.
To avoid this pitfall, banks should look to collaborate with FinTech companies who are increasingly nibbling away at the corners of the traditional banking business model. By choosing to collaborate rather than compete, banks can stay at the forefront of the market and benefit from the innovations that FinTech firms offer. Banks can use this more open environment to their advantage by bringing third parties on board to adopt new services and open up new income streams to offset the risks created by PSD2.
For example, an experienced bank with existing money transfer and payments infrastructure may invest more time and effort in developing their cross-border payment offering. Smaller regional banks may wish to cultivate stronger customer connections, using their physical presence in local markets entities to offer a unique selling point that FinTech firms cannot replicate.
Another strategy is simply to improve service levels for their current offerings. The vast majority of banks offer online services, but clicking a button in a mobile app does not inherently make an experience ‘digital.’ For example, even though a loan application may have been submitted online, waiting 10 days or more for approval can make the experience feel distinctly ‘old tech’ and contradict consumer expectations. A truly digital service occurs when all parts of a bank’s infrastructure are brought up to date and operating at digital speed.
In my work at Syntel, this is one of the issues that we face frequently when working with traditional banks. We have found that most often, the path to success is to focus on evolving the core banking systems to modernize them so they can stay ahead in this journey.
One of the biggest challenges posed by PSD2 is how to incorporate the additional security measures required to safeguard sensitive customer data while allowing third-parties to provide payment services. Right or wrong, tech firms are already trusted by customers to keep their data secure, as evidenced by the massive numbers of people that have entrusted Facebook and Amazon with their personal details.
The key for banks will be to ensure they do not open themselves up to the possibility of large-scale data breaches with a poorly executed PSD2 implementation. A multi-layered cybersecurity approach is critical to provide airtight APIs and maintain the trust of their customer base.
In order to capitalise on PSD2 and fight off Fintech competitors, traditional banks’ mobile solutions also need to add new functionality and increase penetration among their customer base. The next generation of consumers has a strong appetite for digital and speed, meaning that banks must offer the same range of digital solutions available from technology-only companies.
This appetite is perhaps greatest in the 20–30 age bracket. Because these consumers grew up in a connected world, they have less loyalty to individual banks and are less reliant on personal relationships with their local banker. For the time being, switching providers is a great pain point for consumers and few can be bothered to make the switch for small gains. However, PSD2 will make switching service providers easier, meaning it represents both a risk and an opportunity for the banking world.
To succeed in this new environment, collaboration is the key. PSD2 offers a wealth of challenges and opportunity, and to secure a bright future, banks should expand their horizons, look to offer an innovative array of new products, and learn from new partners who come to the industry with a fresh pair of eyes.
The new leasing regulations are just around the corner, and preparations for implementation should have already have begun in your business. Cameron Nokes, Senior Product Marketing Manager at Accruent here tells Lawyer Monthly all about it and gives expert tips on how you can get ready for the shift.
It’s official. New established guidelines for both FASB (ASC 842) and IASB (IFRS 15, 16 and 9) are approaching quickly and it’s essential that finance and facilities management teams start preparing now. But according to Deloitte, over 55% of professionals surveyed are not prepared for these upcoming changes. Not only will the FASB accounting standard see a name change from FAS-13 to Topic-842, but operating leases will be included on the balance sheet, and as a result, some companies will have to change the way that they manage their leases.
Each new standard represents its own challenge for finance departments, real estate and facilities management teams. Public enterprise companies with large operating lease obligations will be most affected by the new standards and face the highest risk of failing audits.
So, what do organizations need to know before Topic-842 goes into full effect?
Know the facts
The Financial Accounting Standards Board was established in 1973 to “establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision-useful information to investors and other users of financial reports.”
Nongovernmental companies and organizations must comply with these established standards. The most recent of these standards is Topic-842, which was introduced in February 2016, and requires that organizations include lease obligations on their balance sheet.
The standard goes into full effect for public companies in the 2019 fiscal year. Private companies must bring all operating expenses onto the balance sheet by fiscal year 2020. For most organizations, the changes will create a greater compliance burden and have a material change on corporate financial statements. In order to meet these standards, it’s important to invest in a lease administration solution that can simplify the process of adhering to key requirements set forth by FASB.
Do your homework
Right now, there’s an initial adoption surge as organizations are looking to make their buying decision in the next 6 to 9 months. While the new standard doesn’t go into effect until 2019, some organizations want to use 2018 as a reporting and parallel year to ensure they are ready once the standards are officially implemented. These organizations see 2018 as a pre-test - a year of transition without the concern of a failing grade.
Prior to adopting the new standards, businesses should compare old numbers to new numbers in order to gauge the overall impact on the business. Businesses should also educate themselves on the types of leases they are managing by creating a classification test to determine if a lease is a finance or operating lease. In the past operating leases were not included on the balance sheet and therefore reduced administrative efforts. With Topic-842 bringing operating leases onto the balance sheet it’s important that these leases are properly categorized so the reporting will be compliant.
It's a Group Project
With key stakeholders - lease administrators, IT, legal and finance - all trying to solve different problems, communication within the organization is integral to adopting these new standards seamlessly. The lease administrators are charged with managing existing leases, IT is responsible for the technology system and the legal side is ensuring that the business is compliant with the new standards. But it’s the finance team and the CFO who make the final decisions since they are the ones controlling the money spent on the adoption process and ultimately responsible for disclosing and demonstrating financial compliance.
Businesses should see this FASB change as an opportunity to strengthen process automation so the business can operate better as a whole. Part of this process is getting rid of things like spreadsheets which make it harder to improve controls and find errors. Since implementing a technology system does come with a cost, it’s also important that the organization is aligned internally and selects partners or vendors who can grasp the details without disrupting business practices. All departments must work with accountants and auditors in order to streamline business controls and communicate any changes in processes. This communication will help ensure that the accounting is done right within the system. If teams work together to purchase a technology system and establish a process Topic-842 should not change how the business is running.
Ready or not, the new FASB leasing standards are coming. These changes don’t have to be an arduous process though. Preparing early, knowing what needs to be done and investing in a lease administration solution can simplify the process of adhering to key requirements set forth by FASB, so organizations can resume business as usual.
The International SOS Foundation, the global not-for-profit organization striving to improve the safety, security, health and welfare of the mobile workforce and US based labor legal experts Fisher Phillips, in partnership with the American College of Occupational and Environmental Medicine (ACOEM), have published a white paper advising United States organizations of the "Legal Perspective on the Health, Safety & Security Responsibilities for a Mobile Workforce."
The new White Paper explores the evolving legal structure that governs US organizations and their responsibility to their mobile workforce on short or long term assignments overseas. The White Paper also includes a practical Travel Risk Mitigation Checklist self-assessment tool for health and travel risk security processes.
"We are in an era where new business markets are growing rapidly and international business travel has increased exponentially," says Lauren Cell, an attorney with Fisher Philips. "While this increase is certainly welcome, it brings with it the challenge of managing and maintaining the health, safety and security of employees traveling or working abroad – otherwise known as an employer's Duty of Care."
As the study analyzes the evolving Duty of Care obligations in the US, as well as emerging International trends evident in the United Kingdom and Canada, several case studies are examined. These demonstrate the complexities and potential liabilities US organizations may face, and how this may vary depending on local regulations.
Laurent Fourier, Executive Director of the International SOS Foundation adds: "In today's volatile global environment, US based companies need to ensure they are taking care of their travelers to be legally compliant and ensure business continuity. Following travel risk management is best practice and vital components of this are: assessing travel risks, developing policies and procedures, communicating to and training employees, as well as effectively responding to incidents. By providing a jointly developed White Paper with the legal experts at Fisher Phillips, our aim is to help educate organizations of the real legal implications they face and, in turn, provide a practical framework that can be implemented to mitigate their risks."
In addition to implementing travel risk policies, proactively and effectively assessing risks, and clearly and frequently communicating risks and their associated policies, the guidance also calls on companies to develop training and assessment measures.
Cell continues: "Perhaps most importantly, the paper outlines the best practices all employers – large, medium, and small – should take in developing a strong and effective travel risk management plan."
(Source: The International SOS Foundation)
