Conservatism in Valuation

Conservatism in valuation for financial reporting – a double-edged sword Conservatism or prudence is a major building block in financial reporting. Earning and asset value should not be overstated whilst liabilities and expenses should be accounted for in full. This helps guard against potential financial statement manipulation and misrepresentation. Asset valuation, on the oth...
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Room for Rent: A Review of Global Hotel Industry Drivers & Trends

As the middle class grows in emerging markets, with greater disposable income, travelling for leisure is becoming a natural aspiration for many. To meet this demand, expanding hotel chains in emerging markets are not only targeting western clients, but also aiming at enhanced brand awareness and loyalty among the local population who are expected to drive future growth.

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The Museum of Thai Corruption – “Showcasing Thailand corruption cases”

In Thailand, the National Anti-Corruption Commission (the "NACC") has funded and organized, The Museum of Thai Corruption (the "Museum"), which is a roaming museum to raise the awareness of fraud and corruption in Thailand. The Museum showcases ten major alleged cases in Thailand over the last 15 years which includes: the rice subsidy scheme (in more detail below), corruption i...
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Forensic Integrity Due Diligence and the Protection of Personal Data in Hong Kong

Author: Richard Batten LL.B (Hons), Barrister and Solicitor of the Supreme Court of Victoria and Director of Censere Group Co., Ltd

Richard is a Director with the Censere Group and for the past 20 years has been assisting clients in the Asia Pacific Region with Due Diligence investigations in a variety of Mergers and Acquisitions across different industries.  His projects have included clients from China, Japan, India, Korea, Australia and the USA.  

One of the significant trends in the Asia Pacific region over the last few decades has been the emergence in a number of countries of new or tightened laws on privacy of personal data or “Data Privacy”.  This trend has created a particular challenge for forensic practitioners providing integrity due diligence services to clients seeking to mitigate their risk(s) before deciding on significant investments in the region.  Not only does a forensic practitioner need to understand where and how to obtain relevant background information on a target company, and key individuals associated with the target, but is also required to have a sound knowledge of all data privacy laws and guidance in the jurisdictions relevant to particular due diligence projects.

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The Consolidation of China’s Dairy Industry

Mengniu, Yili and Bright Dairy are Market Leaders

On basis of company sizes, market players in the Chinese dairy market can be categorized into 3 tiers. The 1st tier refers to the national players, namely, Mengniu, Yili, and Bright Dairy. The 2nd tier includes regional players, such as Beijing Sanyuan Dairy, Royal Dairy, and Yantang Dairy. The 3rd tier players focus almost solely on local markets and pose no immediate threat to players in the first two tiers. There are more than 1,500 dairy companies in China, while the number of companies with operational revenues above RMB5 million is more than 400. In 2012 the dairy industry reported sales revenue of RMB246.54 billion, the top 4 dairy companies were all domestic companies and merely accounted for around 39% of market share. Foreign dairy companies, such as Danone, Mead Johnson, and Nestle, made up more than half of the market.

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An Overview of China’s Pharmaceutical Industry

China is the second largest pharmaceutical market in the world

With China’s expanding personal income and the growing medical needs of its aging population, its pharmaceutical market has become the second largest in the world. IMS Health predicts that global spending on medicines will reach around USD1,300 billion by 2018, a 30% increase over the 2013 level. During 2014-18, the compound annual growth rate (CAGR) on medicines spending will be 4% to 7%. China had a spending level of USD77.2 billion in 2012, which accounted for 8% of global medicines spending. It is forecasted that China’s spending level will reach USD155-185 billion in 2018, which would be the highest among emerging pharmaceutical markets. The key drivers for growth will be healthcare infrastructure improvements, increased access to medicines, and increases in the number of private hospitals.

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Increased Financial Stress and Fraud

Why people commit fraud

Financial stress is widely recognized as one of the key reasons why people commit fraud. Some people commit fraud for other, pathological, reasons, but these are small in number and not typically the kind of fraudsters we deal with daily.

However employees and suppliers who have had a long and trusted relationship with you may feel added pressures when there are dark clouds on the horizon. Presently with the price of oil, coal and other minerals at recent record low, many Resources and Energy Sector employers are looking to reduce costs to help mitigate any potential losses. Orders are down, inventories are being reduced, payment cycles are increasing; there is generally a greater level of uncertainty right now.

Your staff and suppliers may feel their position with you is threatened and start to worry about their short to medium term future. At the same time your staff and suppliers are seeking their cost of living and business costs increasing, with little they can do about it.

It is at exactly these times of economic uncertainty that your staff and suppliers will start to feel increased stress about how they will meet their own financial obligations. For many it is a lifestyle issue, for others it really is a matter of survival. Committing fraud is often seen as the only way.

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China Iron Market 1Q2015 Review

Australia holds the largest amount of iron ore reserves

According to the U.S.Geological Survey (USGS), world total reserves of iron amount to about 81,000 million tonnes contained within 170,000 million tonnes of crude ore. Australia and Brazil are among the world’s largest iron ore holders and hold a large portion of the world’s iron ore reserves. As of 2013, Australia had reserves of 17,000 million tonnes of iron content and 35,000 million tonnes of crude ore while the figures for Brazil were 16,000 million tonnes and 31,000 million tonnes respectively.

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Coal Consumption in Asia Pacific Power Sector

Overview of coal power generation in Asia Pacific countries

Coal is a crucial fuel for the generation of electricity and it is reported that over 40% of electricity generated worldwide in 2013 was fueled by coal. Mongolia and South Africa used coal to generate more than 90% of each country’s total electricity in 2013. Coal is also a major source in some Asia Pacific countries; China, Australia, and India generated more than half of their electricity by coal. In Indonesia and Japan, coal is used to generate 48% and 21% of electricity respectively. 

  

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Fair Value Management

‘You can only manage what you can measure.’

Since the adoption of International Financial Reporting Standards (IFRS), the underlying principles of financial reporting have been moving towards the concept of fair value from historical cost.  Advocates believe fair value based reporting can provide more relevant, useful, and comparable information on the value of a company and its assets and liabilities.  Critics counter that earnings and other financial metrics are too vulnerable to short term changes in market expectation and sentiment, which have an impact on fair value.  Regardless whether you agree or disagree with the fair value concept, the best approach is to be proactive when dealing with it, so that there are no surprises.  Instead of passively waiting for, and being adversely affected by valuation results, it is wise to plan and prepare in advance.  In what follows we will examine several critical areas of valuation for financial reporting that should be considered.

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Asia Pacific Nickel Market

With its high melting point and corrosion resistance, nickel is a diversely used metal. Nickel could be found from over 300,000 products, from daily used coins to aerospace application. In the present article, Censere examines the structure of global nickel market and market dynamic in the Asia Pacific Region. 

Asia Pacific Region Nickel Outputs Accounts for more than half of the World’s Production

It is estimated that the total nickel reserves in the world is 75 million tonnes with major reserves is located at Asia Pacific Region. The two largest holders of nickel reserves are Australia and New Caledonia; their reserves are 20 million tonnes and 12 million tonnes respectively. In 2012, the world total mine production of nickel was 2.1 million tonnes, and the Philippines was the largest nickel producer in the year. In the Asia Pacific Region, Australia, China, Indonesia, New Caledonia and the Philippines, produced 54.6% of mine production of nickel and held 51.4% of nickel reserves in the world. 

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Leveraging Intellectual Property for Financing

As some of us may know, Malaysia announced an Intellectual Property (IP) financing scheme in 2013. The main idea being that the IP could be used as collateral for loans by small and medium enterprises (SMEs) for business expansion. A number of government agencies, some sector/ industry focused, are encouraging innovation by providing support, training and funding ecosystem for sound business ventures. 

For an IP financing scheme to succeed, the government support and participation was always going to be important. After all the government has largely a social and nation building motive unlike other financiers including, banks or investment funds/ venture capitalists, etc. which are answerable to their shareholders with profit maximization being the main motive. As such there is a difference between how risk may be perceived by the government vs other lenders. Although social agenda does not equate to lending to any venture or losing money and still requires careful consideration of the risks involved in lending. The valuation of the IP thus becomes important to understand the future potential, risks involved, amongst other things. 

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Measuring the Benefits of the MICE Industry: Hong Kong Case

The Global MICE Industry is Growing

The Meetings, Incentives, Conventions and Exhibitions (MICE) industry is an important segment of the tourism industry, and is a growing sector with great potential. The MICE industry comprises of the upper-stream (such as MICE activity organizers), midstream (such as accommodation, facilities and services suppliers) and downstream (such as adverting agencies, logistics services providers and travel agencies) industries. Therefore, the MICE industry involves a wide range of sectors such as tourism, hotels, transportation, catering, real estate and retail. A successful MICE industry is believed to have significant positive impact on a country’s economy. Apart from bringing significant economic benefits, such as national income and job opportunities, it also benefits a destination by providing opportunities for knowledge sharing, country brand development and network building. 

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Mongolia – a Rising Coal Market

Mongolia is one of the major coking coal producers

By the end of 2011 total global proved recoverable coal reserves stood at 982,744 million tons. Europe (30.8%) and North America (27.5%) held the major recoverable coal reserves. At the country level, USA, Russia, China, Australia and India held the largest coal reserves and,in aggregate, held around 72.4% of the world’s total recoverable reserves. Mongolia has also proven to possess vast resources of coal. According to the Mineral Resources Authority of Mongolia, coal deposits can be found throughout the country.

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India Water Security and Wastewater Treatment Market 

India Suffers from Water Security Problem

With the second largest population in the world and a growing economy, India is a big water consumer. However, as a result of limited water availability and poor infrastructure, India faces a number of challenges. The Water Security Index, created by the Asian Development Bank (ADB), gives India an overall score of 1.6 which is low compared to other Asian countries. Among the five components of the index India gets the lowest scores for household water security, urban water security, and environmental water security. This indicates that India suffers from serious water problems including: (1) poor ability to satisfy household water and sanitation needs, and poor ability to meet hygiene requirements for public health in all communities; (2) insufficient urban water-related services, such as water supply, wastewater treatment, and drainage; and (3) river basins that are in poor health. 

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Cleantech Market Review – Recent Developments in Fuel Cells

Major Applications of Fuel Cells

The evolution of the concept of the fuel cell can be traced back as far as 1801. However, the practical usage of fuel cells only began in the mid 20th century and significant commercialization of fuel cell has only occurred in the past decade.  Nevertheless, fuel cells are expected to play a more important role as power sources in the future due to its desirable characteristics. First of all, unlike conventional power sources, hydrogen fuel cells are emission free as they produce electricity by electrochemical reaction instead of combustion. Secondly, compared to other renewable sources, such as solar energy and wind energy, fuel cells are more reliable as they are not dependent on energy sources which might be periodically short of supply. Theoretically, a fuel cell can run indefinitely as long as it is supplied with source of hydrogen and oxygen.

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Intellectual Property Rights in China – An Introduction of Enterprise Name Right

Composition of Enterprise Name

Following the development of the market economy in China, enterprise name rights have become an important type of intangible asset for companies, and play an important role in the long-term development of companies. Moreover, companies now attach more importance to the publicity and promotion of their names. As a consequence, enterprise name disputes have become more frequent. This article aims to introduce enterprise name rights in China and some associated legal issues. An enterprise name right is the right, available to a lawfully established enterprise, to lawfully use its name. The administrative area, name, trade, and form of the organization are four composites of an enterprise name. 

  • Administrative area: refers to place where the enterprise is located, for example: Beijing or Shanghai
  • Name: refers to the “name” an enterprise uses to distinguish itself from other individuals or entities, such as Jiaduobao or Panasonic
  • Trade: refers to the enterprise’s business field, such as construction or pharmaceuticals 
  • Form of organization: refers to whether an enterprise is a limited company, joint stock limited company, or some other form of organization
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Food Security Problem in China

The “Food Security” Concept Evolved since 1970

The term “food security” evolved in the mid-1970s at the time of a global food crisis. Primarily, it focused on food supply problems such as the assurance of availability of food and maintenance of stability of price of basic foodstuffs. As time progressed, the definition of food security has also been reviewed and redefined to fit with the changing circumstances. In 1996, new elements, such as safety and nutrition have been incorporated into the definition emphasizing their importance for maintaining a healthy population. Therefore, according to the World Health Organization (WHO), food security consists of three main components:

  • Food availability: sufficient quantities of food available on a consistent basis.
  • Food access: having sufficient resources to obtain appropriate foods for a nutritious diet.
  • Food use: appropriate use based on knowledge of basic nutrition and care, as well as adequate water and sanitation.
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China Coal Industry 3Q2013 Update

Current Status of the Chinese Coal Industry

The Chinese coal industry is facing a challenge arising from the long term control of the electricity price. This is due to coal being the major resource used in power generation in China. In order to provide a stable electricity price to consumers, the PRC government has closely monitored the volatility of the coal market price. In Dec 2012, China's state council announced it would reduce the stringent monitoring of the coal and electricity dual-pricing system. The major coal producers and government have agreed to take the Bohai-rim Steam-Coal Price Index as the reference for the coal price for power generators. This places a limitation on the development of coal enterprises in China. Maintaining a healthy environment for the coal enterprises to survive has become a controversial and important issue for the industry participants and Government to explore. The coal industry is a traditional industry in China and has played an essential role in economic development and a key role in the supply chain of China. However, this industry has already entered its mature stage and it is difficult to make a great change in the current stage. The Government plays an important role in the development of the coal industry because the industry needs strategic support and guidance from the Government.

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SGX New Requirement in IPR Disclosure

The disclosure requirements for listing in Singapore Stock Exchange (SGX) have increased with the recent request of making public all material information related to Intellectual Property Rights (IPR).

IPRs have always been a source of long standing competitive advantage and often companies have been reluctant at providing such information. However, with the updated Listing Rule 703, Singapore is imitating a similar guideline issued by the Hong Kong counterpart a few months earlier.

The new rule aims at creating a safer environment for investors – the stock market house ensures. As modern companies base their success and growth increasingly on IP and other forms of intangible assets, SGX wish to replicates this situation in the documents available to investors. By knowing how much of the business depends on IPRs and how risky these assets are, investors can get a clearer idea on where to put their money.

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