Mafia Buzz Issue 3

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Accountancy SA

Note: I do not summarise these articles because you should study them in depth. My objective here is to inform you about the existence of the articles.

  1. SAICA is reviewing its CA qualification process with a politically correct team of people on its committee. Do you think that they will start making the topics relevant to real life in future, e.g. agriculture, insurance, banks?

  2. The International Auditing and Assurance Standards Board has embarked on a project to “clarify” its auditing standards.

  3. The Ethics Committee has embarked on a project to strengthen the code on independence.

  4. A trainee was disciplined for breaking his training contract with his principal by having to forfeit 13 months of training and with an add-on penalty of 6 months. [It is about time that accountants understood that contracts cannot be terminated unilaterally. They are serious undertakings.]

  5. Practice review lists the things it will watch out for on the third cycle. [I blow hot and cold on practice review. On the one hand, I find that auditors do not do audits anymore – all they do is prepare a file for practice review. Verifying fair presentation is no longer their objective. Their objective is to avoid disciplinary action. In fact they even employ experts to protect them from disciplinary action these days! And then on the other hand I see the level of some auditors in practice and I realise that the profession as a whole has to be protected against the gross incompetence of a few practitioners as their incompetence rubs off on the profession as a whole. Last night, for example, I was asked to advise on whether an auditor needs to audit the take-on balances for the conversion from a close corporation to a company. He had been advised by an auditing lecturer that it was not necessary to do this! Please read the first point in the list carefully Mr Lecturer.]

  6. I really must congratulate the tax team at SAICA for the work they are doing. The technical page is informative, the opinions given to practitioners are spot on, the tax articles in ASA are excellent and the articles written for the daily media are doing wonders for the profession’s image. Keep up the good work Jackie and her team.

  7. The auditing technical page sets out the new standards that have been re-drafted in the new format and recent amendments to existing standards.

  8. See IFRS Buzz for the details on the accounting technical page.

  9. Paul O’Flaherty asks the question whether we should retain headline earnings per share. I agree with the contents of his article. However, I think that he is missing the point: the whole objective of headline earnings per share originally was to arrive at a measure for calculating average P.E. ratios (or earnings yields) on the JSE. To ask the question: Does headline earnings represent maintainable earnings?” is a reflection of ignorance of the concept of headline earnings. The idea behind headline earnings was to eliminate capital gains and losses from earnings, e.g. profits or losses on the sale of land and buildings, to reduce the volatility of PE ratios on the JSE. The idea was never to get maintainable earnings. Should we scrap it? I think that the JSE should be asked this question as it was developed for them. It is not an accounting standard.

  10. Roger Sinclair, at every possible opportunity, tries to push accountants into fair value accounting all the items on a balance sheet. I will address this issue in a future article in ASA.

  11. Kobus Rossouw writes on how to account for changes in accounting policies and estimates. He uses IFRIC 1 to suggest that the catch-up method of accounting for changes in estimates is no longer acceptable.

  12. Linda de Beer writes about XBRL and how it will eventually, one day, improve financial reporting. [I wonder if I will be able to load it directly onto Excel and then into my valuation models? It would save me five hours per company analysed.]

  13. Gunther Hoppe, all the way from that wonderful country, Malawi, gives some ideas on keeping a balanced life. The ability to say “NO” is one of his keys.

  14. Jackie Arendse deals with the amendments to the Tax Act.

  15. Greg Fisher gives some sound advice on how to pitch a business idea to investors, customers, creditors and other stakeholders. One brilliant point he makes is that execution of the idea is everything. Ideas are two pence a dozen.

  16. My article was on the problem that accountants do not want to solve (because it generates mega fee income?), i.e. how to calculate deferred tax on the revaluation of buildings.

  17. Penelope Webb writes about when damages are tax deductible and when they were not.

Congratulations to the editorial team for their recognition as the best business-to-business magazine in RSA. I have a suggestion to make it better. All the adverts are at the end of the magazine. To ensure that the reader carries on reading, it is a good idea to have a last page article. Accountancy has a letter from the president: anything to get the readers to not bail out when the adverts start.


The Pension Funds’ Adjudicator, Mr Vuyani Ngalwana lists ten dirty little pension fund tricks that undermine pensions:

  1. Poor investment decisions resulting in poor returns.

  2. Hidden costs.

  3. Sneaky interest charges.

  4. Incestuous relationships.

  5. Funds not sticking to the spirit of the law.

  6. Trustees who don’t use their brains.

  7. Trustees who surrender their fiduciary duties to service providers.

  8. Penalties charged for pulling out.

  9. Plundering the funds.

  10. Employers pocketing savings for themselves.

[If you are forced to join a pension fund as part of your employment contract, see the contributions as an expense and not as an investment. Make your own provisions for your retirement, if that is your goal.] (21st)

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