Note: I do not summarise these articles because you should read them yourself. Earn additional CPD points by doing so.
On page 5 is a summary of the difference between GAAP and IFRS. I will never know why SAICA did not just adopt IFRS 10 years ago. At least one company in SA would have saved R25m had it done so. There is an interesting comment stating that SAICA is working on a circular on how to handle clients who refuse to go GAAP.
Pieter von Wielligh wrote an excellent article explaining the difference between a material irregularity under the old PAAA and the new reportable irregularity under the new APA. If you are an auditor, you had better read this carefully – jail time if you slip up – no joking!
An article, written by Andrea Roberts from New Zealand, talks about what generation Y people want. [I have such a problem with making generalisations such as this.]
Sue Ludolph writes about the advantages of having a global standard. She touches on an important issue being different interpretations around the world and mentions straight lining operating lease payments/receipts as an example. How can you have the same accounting standard for the UK with a 1% p.a. inflation rate and Zim with a 1 000% inflation rate??? There is clearly something wrong with a standard if it cannot be tailor-made to apply to different situations. Another example is having one standard for deferred tax where the asset is tax deductible v one where the asset is not tax deductible. We won’t even start mentioning the same standards for Anglo American v the corner stationery shop.
Good to read something from Paul Sulcas again. He describes the problems one can experience in a family business. Interestingly he mentions a family business expert who came to the rescue. He called this expert “Tony”. Is this too much of a coincidence to be Tony Balshaw from Grant Thornton who wrote an excellent book called “Making family business work”? If your family business is experiencing problems, get the book or, better still, get the man who wrote the book to sort the problem/s out!
It is such a pleasure to see sanity being expressed in the manner that only Doug Brooking can do. He quite rightly points out, in my opinion, that headline earnings per share is not a GAAP issue but a necessity for the JSE on which to base certain statistics. The original idea was (I was on the committees at the time) to arrive at a meaningful measure of operating performance. The principle was simple: Include operating profits and exclude capital profits. However, the principle was undermined by committees tampering with the idea. The worst case was to argue that profits or losses on equity investment fairly valued through profit or loss were operating profits (i.e. treat the same as dividends received) but that gains and losses on investment properties revalued through profit and loss were of a capital nature. Had we stuck to the old “tree and fruit” story you were taught in tax law, there would not have been so much controversy. However, I like Doug’s alternative solution and that is to eliminate all revaluations from profit, i.e. headline earnings will be the bottom line in the income statement before these adjustments. The only problem with this is that this can be manipulated by selling shares and buying them back the next day. Why not simplify and leave all realised and unrealised capital gains and losses out of headline earnings, as the concept was originally conceived?
Jackie Arendse, in her usual clear style, discusses the government’s initiative to reduce tax avoidance.
My article caused quite a stir – don’t they always. It was about people that are too lazy to think and plan before they act.
The new Auditing Profession Act was passed into law on 1 April, an auspicious date if any. Here are some pointers:
Members of the profession will be in the minority on the Board. Organisations such as the JSE and FSB will be members.
Garth Coppin says that audit fees are expected to increase by between 30% and 40% because of the new regulations. [Nice money if you can get it.]
Practice reviews will in future focus on auditing firms rather than on individuals – the big four are being reviewed at a cost of R1m per review. [Nice money if you can get it.]
Auditors will now have to report irregularities (without giving their client an opportunity to rectify the matter) or face 10 years in jail. [Who needs the money if you are sitting in jail?]
This could open the door to bodies other than SAICA being accredited with performing audits. ACCA are in the forefront of applicants.
What happens when you dig a hole for yourself and decide that you like it so much down there you would like to stay there? Why, you call on the Government to get you out knowing full well that this process could take forever! Accountants are calling for relief from accounting red-tape for SMEs, according to this and other newspapers. SAICA was the body that pushed for full compliance with GAAP for SMEs in the first place. I know this because I was on the committees at the time. In fact, they even tried to force close corporations to comply but found that they did not have jurisdiction over CCs so had to back off. Now they are calling on Government to help them out of the hole they dug for themselves. You have no idea what this has cost our economy. (11th)
Alick Costa, a Director of Werksmans, says that if you are considering moving in with your partner, before you are lured into the lion’s den, sign a cohabitation agreement that governs your rights and obligations on termination of the relationship. (11th)
Prof Alex Watson, Chairman of the APC writes: As things stand at present, SMEs are obliged to comply with IFRS, though there is a move to a simpler form of accounting for SME companies. Such a move will, however, only eventuate once the necessary changes are made to our Companies Act after which we will require a body of standards to be issued. Two comments:
SMEs in RSA do not have to comply with IFRS, i.e. they do not have to have an opening balance sheet as if they had always complied in the past. They have to comply with SA Statements of GAAP.
On the very same page as her article was an article by Clive Simpkins. His opening sentence is: “The days of responding to a business or personal crisis only as and when it occurs are gone.” Is the APC going to wait for the Companies Act to be published and then say: “Well, we had now better take the next ten years writing GAAP for SMEs but in the meantime they must comply with IFRS.”? Do you get the impression that this is a conspiracy? See more on this topic below. (11th)