The exam is over, time to study

Ever finish an exam and then decide to study? Me neither, until the UFE came along.

Don’t get me wrong, I studied (hard) before writing the exam too. I wrote every case from the past three years’ UFEs, and some more after that. But now I want to study the ones from the 2006 UFE.

The UFE is pretty unique amongst professional exams, as far as my limited knowledge is concerned, in that the results are available in significant detail. The “answers” to the “questions” come in the form of the Evaluation Guide.

(What I mean by the UFE’s uniqueness is that a friend recently wrote – and passed – the bar exam and I was surprised to hear how shrouded in secrecy the entire thing is.)

The Guide begins by explaining the marking process and makes some general comments about the responses received. It then delves into each case in great detail and provides a highly competent response to all the issues in the case, as well as commenting on where candidates went wrong and what they did right.

Now that I know I passed, I want to see what the Board of Evaluators has to say about the exam I wrote. I want to see what I did right and what I missed. It won’t be easy since I won’t have my official response to look at – it was encrypted immediately after I was finished each day and isn’t returned to writers.

Unfortunately, the Guide to the 2006 UFE won’t come out till late February or early March 2007, which I find a little strange since the content of the Guide is basically already set in stone. What I mean is they can’t go back and fail someone if they change their minds about a certain indicator, so why can’t the Guide be published sooner? Why doesn’t it come out on results day?

I await its publication with bated breath. Once it’s out, it’s back to studying for me!

Back to work after passing the UFE

It was my first day back to work today after passing the UFE on Friday, and I have to say it was pretty much like last Thursday. New client, but one I was at last year around this time. I can’t say as I felt more competent than last week, although inside I felt more confident.

I guess that’s why the work experience requirement exists. You can only learn so much through the UFE study process, writing cases and studying the Handbook. With each new engagement you see different aspects of a business and there is always something that you haven’t seen before.

That being said, I sure learned a lot this past summer, and it was all worth it when the results came down on Friday. Having risen to the challenge of the UFE, I’m searching for the next one. Where does one go from here? I had a short-term goal, but had deferred thinking about anything long-term, partially out of superstition. I didn’t want to count my chicks before they’d hatched, but now that they’re out there, I need my trusty calculator!

Time is on my side, luckily. I still have at least 12 months to go before I can call myself a C.A. In the meantime, consider me looking for a new challenge.

Income trust standards (or lack thereof) and risk

So everyone and their grandpa is still upset about the recent change to income trusts introduced by the Canadian federal government. The change was, of course, to implement a tax on trust income similar to corporate income tax.

The outrage epicentre is Bay Street, Canada’s version of Wall Street, in the heart of the financial district in downtown Toronto. But in the radiating waves of anger from that focal point, senior citizens seem to be most upset. Could that be because they are more likely to be Conservative party supporters, the party that pledged no trust tax in the last election? Possibly, but it also has to do with retirement savings and poor investment advice.

The most apoplectic are the ones who concentrated their investments in the risky vehicles.

This violates the sacred first rule of investing – diversify your holdings. Unfortunately, it seems that the only diversification many people paid attention to was in the underlying nature of the trust business – i.e. natural resources (oil and gas trusts are huge). It didn’t occur to anyone to diversify amongst vehicles – some trusts, some equities, some bonds, some derivatives, etc.

The risky nature of trusts is related to the relative lack of policing by either securities regulators, or accounting standards setters. Distributable cash is a key metric for trusts, because they are by design supposed to distribute nearly all cash generated, and one that has to this point been ignored by both parties above.

The accounting standards body in Canada, the AcSB, has no guidance on trust disclosure, and the national securities regulator, the CSA, has only suggestions as to disclosing that distributable cash is estimated based on reasonable assumptions. As Al Rosen, a popular Canadian accountant and frequent contributor to various business publications, points out: “Is any company about to admit that their predictions of distributable cash are completely unrealistic?”

Trusts need more attention from accounting standards setters and securities regulators, that much is certain. But investors also need to be aware that diversification should be done across investment vehicles, as well as industries. Both carry different types of risks.

Vista not even out yet but still pirated

Microsoft’s upcoming operating system, the successor to XP, isn’t out yet but it has still managed to be cracked (in a sense). Vista will be out Jan. 30, 2007 to consumers, earlier for Microsoft’s preferred big business clients.

With Windows Vista only just going “gold” … the first cracked versions have already hit the pirate boards. [It’s] called Vista BillGates. It doesn’t feature any activation cracks itself, and the supplied product key is just for the installation. The activation crack is a separate download, and works by replacing the licensing components with components from beta builds. Then using a product key from Beta 1, Beta 2, RC1 or RC2, the Gold version of Vista can be activated online. In this sense, it’s not a true crack.

It’s going to be a lot harder this time around to crack Windows and continue running the cracked version for any extended period of time, because Microsoft has tightened up their activation requirements. Windows XP got increasingly more difficult to maintain if you were running an illegal version, and I have a feeling Vista will carry the trend.

A full version of Office 2007 Enterprise was released on the boards a few hours after Vista. Unlike Vista, Office 2007 uses Volume Activation 1.0 (no activation required), so it’s unclear how Microsoft is going to be able to counter its dissemination in future.

It looks like Microsoft’s problems with piracy aren’t going to go easily. Not only do they have the lion’s share of users, making for a nice big target, but the software still doesn’t seem airtight. Not to mention all the features they scrapped just to bring it to market. Not like they have anything to worry about at my firm – we’re still tightly wedded to the Windows regime.