Mafia Buzz Issue 3



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Accountancy SA


Note: I do not summarise these articles because you should read them in full. I merely draw your attention to them.

Jayne Mammatt writes about the “get tough” attitude of the authorities to white collar crime, e.g. the 25 year prison sentence given to the 63 year old Bernie Ebbers. [Just to update you, the Porritt/Bennett case that was due to start on 23 January 2006 was postponed once again.]

Tersia Booyzen writes about the problems minorities face in the workplace.

Rob Cooper discusses the annual bonus and tax implications thereof.

Theo Vermaak discusses the proposed changes to corporate law. His second last sentence is good news, i.e. it is on the cards that an inter vivos trust will be allowed to be a member of a cc, provided that no body corporate is a beneficiary of the trust. There will also be a number limit. [I think that this will result in 100’s of private companies converting to close corporations. However, I was speaking to the partners of PKF and they tell me that few of their clients will benefit from this.] [Note: This has now been gazetted – more next month. The total of the beneficiaries and members shall not exceed 10. There is a big scramble to convert to CCs to avoid audits for the 28 February 2006 year ends!]

Dave Lubbe and Cobus Rossow, my colleagues from the University of the Free State, write about the shocking culture of non-payment in local authorities.

Greg Fisher looks at funding a start-up business.

Beric Croome writes about the relationship between SARS and the taxpayer, e.g. registration, audits, the taxpayer’s charter, etc.

Billy de Beer, Chris Blair and Mark Bussin write about designing incentives for executives.

There were some nice letters to the editor supporting me regarding the straight lining of leases. One last word on the matter: CAs don’t seem to know when to let sleeping dogs lie. They are prepared to cause absolute chaos for no reason whatsoever. No wonder we are one of the most disliked professions!

My article this month was conspicuous by its absence – you can view it on my website. In the previous Mafia Buzz I implied that Accountancy SA did not like “free speech”. Tersia Booyzen, the editor of this journal, has assured me that “Accountancy SA is constantly striving for editorial independence to ensure that all views are given a fair hearing without compromising editorial integrity.” Not to put her under too much pressure, I will tone the rhetoric down (a little bit)! [For more on “free speech, see ‘Other Tit Bits’ below.]

The ever delightful Penelope Webb writes about the dangers of tax collecting and tax evasion.

Cees Bruggemans discusses the current economic situation.

Financial Mail


According to PwC research, intellectual intangibles accounted for about 75% of Fortune 500’s total market capitalisation in the late 1990s. PwC says that companies should:

  1. Prepare an inventory of trademarks, patents, trade names, copyrights, protected works and know-how.

  2. Objectively value these assets.

  3. Develop cultures, rules and procedures for protecting this commodity.

[I would go further. You cannot manage something you cannot measure. And you need to know what the value of the intangible assets are from year to year to evaluate whether the expenditure on these assets is having its desired effect. My only problem is that valuing intangibles is highly subjective. PwC says that their valuation techniques overcome this problem.] (20th, page 40)

The fraud trials of Gary Porritt and Sue Bennett of Tigon and Jeff Levenstein of Regal have, once again, been postponed. [These are very clever people! One wonders whether the judicial service has the resources to take them on.] (27th, Page 8)

Mr Pravin Gordhan’s thoughts on success are:


  1. Listen and learn (get the facts).

  2. Analyse and strategise.

  3. Have the humility to say “I don’t know.”

  4. Keep the goal in mind.

  5. Build a good support base.

Some complaints about SARS’s policies and actions are:

  1. They seem to have a bad attitude in that they are trying to make an example of the big companies.

  2. Their intransigent attitudes seem to be motivated by their performance bonuses.

  3. Their “pay-now-argue-later” approach is causing much unhappiness.

  4. They expect prompt responses to their queries but do not reciprocate.

SARS is trying to attack impermissible tax avoidance (ITA) schemes, which Lord Templeton says mostly involves some pretence. Some schemes are so intricate that a law would need to be specifically designed for each one. [I am on SARS’s side on this one! You would think that tax advisors would have learnt from what happened to KPMG in the US with their tax schemes!] (27th, page 16)

Tony Balshaw, of Grant Thornton, well known for his involvement in family business, gives us some insight into Anton Rupert’s beliefs, some of which are that business should be based on mutual trust, partnership with equal shareholdings, a willingness to share responsibility and accountability, clear vision and values and transparency resulting in lasting relationships. [Tony’s book called Cracking Broad-Based Black Economic Empowerment, Codes and Scorecard Unpacked, written with Jonathan Goldberg, has just hit the book shelves. It is on my reading list.] (27th, page 26)


Economist


This journal did a survey on financial literacy. Here are some of the findings:

  1. In Australia it was found that 37% of people who owned investments did not know that they could fluctuate in value.

  2. In America, 31% did not know that the finance charge on a credit card statement is what they paid to use credit.

  3. Few people keep track of how their investments are performing.

  4. Once people take decisions, they tend to stick with those decisions, e.g. about 50% of Britons do not change their allocations for their defined contribution plans as they get older.

  5. In the US they get outside consultants to run seminars for their staff to help them plan for their retirement. The problem is that many of these experts are also sales persons for financial products! [That is where I can be of service – I am not tied to anyone and do not earn commission on the ideas I sell. Or would I have to register with FAIS before I do this?] (14th, page 71)


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