Mafia Buzz Issue 3

Accountancy SA

Martin Prozesky advocates teaching ethics at university. (I have been calling for this for the last 20 years but no one listened. In the 35 years I prepared candidates for the Q.E. I could count the number of ethical questions in the Q.E. on one hand. You try to teach someone a topic that they know will not be asked in the Q.E. In the CFA examinations approximately 20% of the marks are awarded for ethics.) (Page 2)

Alison White sets out the proposals for business combinations (no more goodwill amortisation, no more negative goodwill, detailed guidance on reverse take-overs and tightening up on provisions on acquisitions and subsequent changes. (Page 10)

Graeme Tosen deals with the tainting provisions where a company classifies a financial instrument as a held-to-maturity financial asset. (Page 13)

My article was about a nightmare financial advisor. (Page 23)

A UK commentator made the comment I made in the “Just Pondering” letter in the March journal. It was not my idea. The editor never gave me an opportunity to answer the letter criticising my comment. Willi Coates on the same page was given this opportunity. Why not me? (Page 25)

Business Day

SAICA has published a discussion paper on contingency fees. Ethically, they believe that such fees should not be charged. The banning of contingency fees could result in a loss of work to non-qualified accountants because they will not be subjected to the same rules as us. (10^th)

Risk management is management’s responsibility. They should:

1. 
   Understand the risks to the company’s assets.
   
2. 
   Establish the vulnerability of the company to these risks.
   
3. 
   Measure the potential effect of risk.
   
4. 
   Assess controls in place to mitigate the risks.
   
5. 
   Decide whether to accept, mitigate or transfer those risks.
   
6. 
   Develop and implement a risk management strategy. (19^th)
   

Only 20% of black candidates passed part 1 of the QE (overall pass rate 45%). SAICA says that they will have to raise more money to throw at the problem. (I wonder if they have done a detailed study of the causes of the problem. Money won’t help. They need to get to the bottom of the problem before throwing money at it. I know what the problem is and have tried to tell SAICA but they will not listen.) (23^rd)

A newly created pension fund of Transnet is already in trouble and ways and means of propping it up are being considered, e.g. the issue of a bond. Pensioners have called on the public protector to investigate the state of the fund amid claims that it has sustained losses of R4bn in the past two years. (Again, they are not getting down to the cause of the problem and rectifying the cause. The trustees guaranteed returns of 16,5% on assets. Are they out of their minds? Who is advising these people?) (27^th)

A taxpayer may only use the valuation method for the tax base for capital gains tax purposes if a valuation is done within two years of 1 October 2001. If such a value is not done, one of the other two methods will have to be used when the asset is “sold”. (30^th)

Citizen

The FSB is suing Deutcsche Securities for R54 million for insider trading. (Be careful what you do with inside information. Mr. Barrow is serious about this misdeed.) (7^th)

According to a study done by Harvard, sell-side analysts talk up share prices where they are involved with the company. (Do your own research when taking investment decisions.) (7^th)

Andrew Kenny, who has just turned 55, has the following to say regarding the lessons he has learned about money (read this carefully!): “I have allowed various insurance salesmen to make an idiot of me. If I had managed my money better over the last 30 years I would be facing the prospect of a comfortable retirement rather than a precarious one. When I realised what a con my disastrous retirement annuity was I stopped paying in. The insurance company deducted an enormous fee. What is left over has been shrinking ever since. I have lost money on endowment policies, unit trusts and managed investments. It is always the same story: warm smiles to get you to pay your money in and icy contempt when your investment matures and you find that you’ve lost half of it. The lesson I have learnt is to manage your own investments. Pay off your house as soon as you can.” (Shortened) (10^th)

Financial Mail

Dutch retailer Ahold, which earlier revealed $880 million in overstated earnings, says it has found further intentional accounting irregularities. (6^th, page 8)

A London high court judge ruled that Deloitte and Touche was negligent in auditing Barings Bank and is liable for damages. (20^th, page 8)

Maxiprest pays SARS R42,6 million iro tax frauds resulting from advice given by Mr Grant Ramsay. (How many more companies are we going to read about? 399?) (27^th, Page 8)

General Motors is to raise $10 billion to plug a $19 billion pension fund hole. (And the other $9 billion?) (27^th, page 8)

If we want to attract foreign investment to our country, we should make the environment attractive to the investors and not to the employees. (Letter to editor, 27^th, page 10)

The JSE does not give up easily: after failing with its development capital market and its venture capital market, it is trying again under a new banner: ALT^x. This Alternative Exchange is designed to promote small, medium BEE enterprises. (Good luck. At my age and risk profile, count me out!) (27^th, page 12)

The FM has published its list of top companies. It is based 40% on actual past performance and 60% on the view of the FM. The top 20 are, in order, Impala, Sasol, Pick ‘n Pay, African Bank, Anglo Platinum, MTN, Harmony, Sappi, Energy Africa, Mr. Price, Reunert, Delta, Afrox Health, Chemserve, BHP Billiton, Trnashex, Ceramic Industires, Oceana, Altech, and ABI. From 1 March 2003 to 11 July this portfolio is making a loss of 7,2% compared to a market gain of 5,2%! (27^th, page 46)