Mafia Buzz Issue 3



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Finance Week


Britain’s Financial Services Authority fined Lloyds R22 million and ordered it to pay R1 billion in compensation for selling a failed financial product. (1st, page 6)

“One of my most important tasks is to make each of our 16 700 employees realise that the more innovative and entrepreneurial they are, the more successful we will be.” (Mark Lamberti of Massmart) (1st, page 59)

Robert Shiller’s book “Irrational Exuberance” explains that humans punish themselves for doing the wrong thing so tend to sell winning stocks too soon to avoid the pain of losing later and hold onto losing stocks to avoid making paper losses real. Investors do not learn from their mistakes as they do not want to admit that they made them in the first place. (The answer is to base investment decisions on well-researched facts using a scientific model that crystallises value from the views formed.) (15th, page 38)

With reference to the Hefer commission, if journalists allow themselves to be unduly influenced, they lose the right to protect their sources. (The view of the editor.) (22nd, page 4)

Mark Shuttleworth says that it is ironic that entrepreneurship, regarded by Government as the solution for the creation of much-needed jobs – is hampered by red tape. (Anybody out there listening?) (22nd, page 4)

And talking about red tape, the JSE is to embark on a sustainable development-reporting project that will result in a sustainable reporting index (SRI). This index will provide a scorecard for the three elements of the triple bottom-line, environmental, social and financial sustainability. The levels of compliance will be policy and strategy, management systems and performance reporting. The work in collecting the data will be outsourced and to qualify for the index a company must achieve an overall score of at least 70. (One day we will realise that a successful business is one that is allowed to focus on satisfying its customer needs without all the surrounding garbage that goes with being listed or being a company – my comment!) (22nd, page 17)

The labour court in Durban ruled that employees are entitled to accumulate leave if the employer does not insist that the employee take leave. (This has repercussions on the leave pay provision. If it affects you, get hold of the details. I was told that there were special circumstances in this case that lead to this judgement.) (29th, page 8)

Fortune


Sir Richard Branson’s five rules for success are: (6th, page 30)

  1. Follow your passions.

  2. Keep it simple – it keeps you focused.

  3. Get the best people to help you.

  4. Re-create yourself.

  5. Play (and does he know how to do this!).

“The key thing I’ve learned is to listen. You don’t have to have the last word. You don’t have to get credit for anything. I’ve always led people around a table when discussing issues. But now I hold back what I think. I say to myself ‘not now, not now! Wait, wait!’ This new approach has changed my life. I avoid publicity like the plague. I am trying to live in the here and now instead of wondering what the next job will be. That is a very freeing thing.” (Debby Hopkins, who was forced out of Lucent as CFO) (13th, page 62)

“The big four auditing firms have been fighting off one public-relations crisis after another. There’s a good reason: They keep starting them.” The article goes on to list the problems PwC are having with MicroStrategy and Tyco, E&Y’s destruction of documents relating to the audit of a consumer loan company, KPMG for problems at Xerox and D&T for failing to notice that the founders of Adelphia were looting the company of Billions of dollars. And all four are facing litigation from wealthy clients who bought into complex and possibly illegal tax shelters. The auditing profession has been complaining that it cannot make money from auditing. They have the best franchise in the world, clients have to buy their services and no one else can offer them. How much better can it get? (When greed surfaces, professionalism drowns.) (13th, page 81)

When it comes to saving for your retirement, it’s not what you know but rather what you do with what you know. Retirement planning is an action sport. Your portfolio requires hands-on, disciplined and very regular maintenance to grow as it is supposed to. The problem is that most people are either paralysed by the sheer number of options or too intimidated by the market to engage. (How true. Do not neglect this aspect of your life.) (27th, page 79)

Noseweek


Dear Noseweek, I am a small-town chap that tends to get to the truth. I am often drawn into messy confrontations. Whom do you use for legal support? I’d also be interested to know how you handle the reactions emotionally. Telling the truth can be draining. El Cid

Dear El Cid, Do you want to sue or are you being sued? Are you rich? Whichever, my best all-purpose advice is to stay away from lawyers. Talk/negotiate your way out of the mess yourself. You know the facts better than they do. You know what you can afford. Be humble. Even take a loss – it will be smaller and less humiliating than the loss you will most certainly suffer at the hands of your own, let alone your opponent’s, lawyers. You owe us a lunch. Noseweek

Dear Noseweek, You did not answer the second part of his question. CPH.

Techtalk


The following two EDs have been issued for comment:

164: Disposal of non-current assets and presentation of discontinued operations.

165: Insurance contracts.

The IASB is getting involved in accounting for SMEs. They should stick to what they know, and that is focus on setting standards for general-purpose financial statements. I am going to guess that RSA will follow whatever they say and we will be burdened with complex accounting standards for private companies. It is really time for the Government to step in and put a stop to this madness.

Auditing EDs on (1) The auditor’s responsibility to consider fraud in an audit of financial statements (ISA240) and (2) Planning an audit (ISA300) were published for comment – see the PAAB’s website.

IFAC has recommended changes to its code of ethics and is suggesting that the code becomes a standard.

IFAC has published a document called “Rebuilding public confidence in financial reporting: an international perspective.”

If you are into public sector accounting, read pages 26 and 27.

The August issue of Integritax looks informative. Do you download and read this on a regular basis? I must admit that I have been neglecting this aspect of my education. You can get it on www.saicacolleges.co.za. (Who would have thought that this is where to find it!) By now they should have their tax website up and running.


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