Mafia Buzz Issue 3

Tit Bits

SA Airways’ Audited Group Results: “As a consequence of the S258 enquiry, an amount of R6 089 million relating to shares issued to Transnet and previously shown as issued shares in prior financial years has now been reversed and reflected as a holding company loan.” [Whew! What the dickens happened here? This is the second time I have come across a situation where a share issue has been found to be irregular. Should SAICA/IRB not consider the publication of guidelines on how to audit share issues?]

Tax Snippets

In volume 45 part 3 2006 of the Income Tax Reporter, two cases caught my eye:

1. 
   ITC 1797 deals with a taxpayer who invested the proceeds from a pension fund into a “life annuity” with a financial services company. The taxpayer contended that the annuity received was not an annuity but a reduction in the capital sum invested and income thereon, and won. If you have clients with life annuities, you had better check this case out.
   
2. 
   In CIR v Conhage SARS challenged a sale and leaseback of plant and equipment as being of the nature of the loan and wanted to disallow the “rent” payments. SARS lost the case. GAAP has clearly got this wrong and I empathise with SARS on this. Mr. Andrews used this “error” in GAAP to coin it when working for SA Airways. The standard setters should really reconsider this issue.
   

Taxgram

The exemption portion of an estate has increased from R1,5m to R2,5m.

Small assets purchased for business purposes on or after 1 March 2006 costing up to R5 000 can now be depreciated in full.

August 2006 (30 Minutes)

Accountancy

The IASB has, as a result of pressure from users of the standards, stated that no new standards will be imposed on companies before 2009. (Page 6)

As a result of a massive outcry, the UK government backed down on its proposal to bring forward the tax filing date. The lesson learnt from this debacle was that consultation needed to be more effective. (Page 8)

Ken Lay’s death has sparked anger among former employees and shareholders of Enron as they feel that they have been robbed of justice. [Death is better than jail?] His death could result in his conviction being dismissed and his conviction erased. Ken’s strategy was superb: by dying he was able to cheat his accusers! (Page 12)

Andrew Ramsay, who it was thought would appear as a witness in a High Court case, has been abducted from his home town in Scotland and has disappeared into thin air. [Do not get involved in forensic work unless you are looking for real excitement!] (Page 12)

Accountants in the UK have swamped the authorities with reports as a result of the money laundering act. The authorities are begging them to stop sending in trivial items but accountants are ignoring their pleas and the avalanche continues unabated! (Page 21)

Allen Lane, the man that started Penguin Books had a simple philosophy: people will choose the best if they can afford it. Out of this idea he made a small fortune. (Page 25)

I have said it before and will continue to say it: Emile Woolf is tops! He writes: “Why is convergence more fashionable that diversity? The latter reflects the natural order.” What he is against is the “one-size-fits-all” approach that the IASB has adopted. His solution to the problem is to lobby the government to allow the profession to set up a dedicated standards board catering for the reporting needs of the 95% of companies not catered for by these standards. (Page 26)

There is the awful story about a respected 59 year old UK accountant who has landed up in a US jail with hardened criminals as his cell mates because of something he allegedly did in the US which is perfectly acceptable in the UK. The description in this article of his existence in jail is horrendous. Can you just imagine how more horrendous this experience would be in a SA jail? Well, brace yourself because one of these days you may do something quite innocently in your financial statements such as to state that you capitalise internally generated development costs and because of poor legal representation and ignorance of your accusers and the judge, you may have to face such an experience. (Page 40)

You do not want to know how close we came to a new system of capitalising borrowing costs. The idea was to capitalise “borrowing costs” at a rate that would reflect the current market assessment of time value of money and the risks specific to the asset regardless of whether or not borrowing costs were incurred. This would have resulted in capitalising to the cost of the asset a return for the risk incurred in the funds tied up during the process of constructing the asset. It is getting weirder by the day. Fortunately, sanity has prevailed for now (don’t count on it) and the exposure draft only requires one to capitalise borrowing costs actually incurred. (Page 84)

The proposals contained in the new conceptual framework presently being developed deals with the broader notion of financial reporting rather than the narrower notion of financial statements contained in the existing framework. (Page 87)

The IASB has published an exposure draft on puttable financial instruments and obligations arising on liquidation. From my first reading of this ED, it appears as if it is not going to be of assistance in the typical BEE deal. (Page 87)

Usually the letters requesting assistance in this journal are intelligent. But this one must take the cake: “Will discounting using pre-tax rates and post-tax rates give the same answer? Get a calculator you nit! (Page 89)

Want to improve the mood of your staff, thereby improving their productivity? Set them challenging goals. The things that make staff happy are good colleagues, receiving praise, undertaking challenging work and making progress. The things that make staff unhappy are high workloads, poorly performing colleagues, poor leadership, failure to achieve results and office politics. (Page 123)

There are many ways to measure a person’s reputation, one of which is the OCEAN method:

Openness to experience – measures a person’s need to seek new intellectual stimulation.

Conscientiousness – measures the individual’s need to be responsible, structured and organised in how they live their lives.

Extroversion – measures a person’s need for social interaction.

Agreeableness – measures a person’s need to avoid conflict and to seek harmony with others.

Neuroticism – measures an individual’s level of trait anxiety and tendency to worry.

[I only passed 2 out of the five! Now I know why I have such a poor reputation, i.e. am so infamous, ignominious and opprobrious – gee did not even know that these words existed.] (Page 127)