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TECHNICAL: ACCOUNTING

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URGENT AMENDMENTS TO TWO FINANCIAL INSTRUMENTS INTERPRETATIONS

The International Accounting Standards Board (IASB) has published for public comment proposals to amend IFRIC 9(AC 442) – Reassessment of Embedded Derivatives and IFRIC 16(AC 449) – Hedges of a Net Investment in a Foreign Operation. The exposure draft has been issued with a 30-day comment period. This exposure draft has been issued in South Africa as ED 256.

The proposed amendment to IFRIC 9(AC 442) is a consequential amendment that became necessary as a result of the changed definition of a business combination in IFRS 3(AC 140) – Business Combinations, issued in January 2008 and effective from January 2009. The Board proposes to exclude embedded derivatives in contracts acquired in combinations of entities or business entities under common control and in the formation of joint ventures from the scope of the Interpretation.

The proposed amendments to IFRIC 16(AC 449) aim to remove the restrictions on an entity or entities within a group that can hold hedging instruments.

The comment deadline for this exposure draft was 2 March 2009. The opportunity to submit comment has passed, however, a copy of the SAICA comment letter resulting from the deliberations of the Accounting Practices Committee sub-committee can be found on the SAICA website under submissions.

ED 256 – Post-implementation Revisions to IFRIC Interpretations – Proposed amendments to IFRIC 9 and IFRIC 16, can be downloaded from the SAICA website.

IASCF IMPROVES THE ORGANISATION’S PUBLIC ACCOUNTABILITY

The Trustees of the International Accounting Standards Committee Foundation (IASCF), the oversight body of the International Accounting Standards Board (IASB) have announced important amendments to the Constitution. This review addressed the issue of public accountability and the composition, geographical diversity and the size of the IASB. The significant changes made to the Constitution include;

•  Establishing a link to a Monitoring Board of public authorities to improve public accountability. The Monitoring Board’s main responsibilities are to ensure that the Trustees continue to discharge their duties as defined by the IASCF Constitution, as well as approving the appointment or reappointment of Trustees. The Monitoring Board will comprises the relevant leaders from the Emerging Markets and Technical Committees, the International Organisation of Securities Commission (IOSCO), the European Commission, the Japan Financial Services Agency (FSA), and the US Securities and Exchange Commission (SEC);

•  IASB to be expanded from 14 to 16 members by 2012, with criteria added to ensure geographical diversity.

•  Enhanced liaison with investor groups.

•  Free availability of core standards through the IASB website.

The International Accounting Standards Committee Foundation Constitution can be found on IASB website.

EXCHANGE CONTROL

EXCHANGE CONTROL CIRCULARS

Amendment to the Exchange Control Rulings

SARS has amended the format of the tax clearance certificate issued in respect of foreign investments.

The Exchange Control Department of the South African Reserve Bank (EXCON) has issued Exchange Control Circular No. 03/2009 – Amendment to the Exchange Control Rulings.

Authorised Dealers are advised that the South African Revenue Services (SARS) has amended the format of the tax clearance certificate issued in respect of foreign investments held by private individuals resident in the Republic.

As a result, the first paragraph of Section B.2 (B) (i) (c) of the Exchange Control Rulings has been amended.

For a replacement page of the Exchange Control Rulings incorporating the relevant amendment, please visit Exchange Control at www.reservebank.co.za or SAICA at www.saica.co.za.

Foreign exposure offered to South African investors

•  Products that offer South African investors exposure to offshore reference assets in Rand terms must be listed on the JSE Limited or Bond Exchange of South Africa.

EXCON has issued Exchange Control Circular No. 04/2009 – Foreign exposure offered to South African investors in Rand and hedging of currency risk by institutional investors.

Authorised Dealers are advised that products that offer South African investors exposure to offshore reference assets in Rand terms must be listed on the JSE Limited or Bond Exchange of South Africa. Any request for these products to be offered to South African investors on an over-the-counter basis must be referred to Exchange Control. It is important to note that securities issued by local entities in the offshore market, whether priced in Rand or foreign currency, are deemed as foreign assets for Exchange Control purposes.

Institutional investors are permitted to participate in the above instruments on condition that the requirements of the Financial Services Board are complied with and the institutional investor remains within its applicable foreign portfolio investment allowance.

Section B.2 (B) (iii) (c) and H. (A) of the Exchange Control Rulings has been amended accordingly. For replacement pages of the Exchange Control Rulings incorporating the relevant amendment, please visit Exchange Control at

www.reservebank.co.za or SAICA at

www.saica.co.za.

Sale of passenger tickets in the Republic

•  Flowing from representations made to the Exchange Control Department of SARB, parts of Section B.8 of the Exchange Control Rulings have been amended.

EXCON has issued Exchange Control Circular No. 05/2009 – Sale of passenger tickets in the Republic.

Flowing from representations made, Authorised Dealers are advised of the following amendments to the Exchange Control Rulings:

•  Section B.8 (B)(i)(a); the entire subsection (a) has been deleted and substituted by an entirely new paragraph.

•  Section B.8 (B)(i); a new subsection (d) has been added as follows: “(d) Agents may, alternatively, arrange that passenger tickets be purchased via internet”.

•  Section B.8 (B)(ii); the entire subsection (ii) has been deleted and substituted by an entirely new paragraph.

Replacement pages of the Exchange Control Rulings, incorporating the relevant amendments can be obtained from Exchange Control at www.reservebank.co.za or SAICA at www.saica.co.za.

BUDGET 2009: TAX GUIDE

Income Tax Rates: Natural Persons and Special Trusts

Year of Assessments Ending 28 February 2010

Taxable income

Tax rates
R
(R) R0 – 132 000 18% of each R1
132 001 – 210 000 23 760 + 25% of the amount above 132 000
210 001 – 290 000 43 260 + 30% of the amount above 210 000
290 001 – 410 000 67 260 + 35% of the amount above 290 000
410 001 – 525 000 109 260 + 38% of the amount above 410 000
525 001 and above 152 960 + 40% of the amount above 525 000

Natural persons:

Tax thresholds

2009 2010

R
Below 65 years of age 46 000 54 200
Aged 65 and over 74 000 84 200

Tax rebates

2009 2010
R
Primary – All natural persons 8 280 9 756
5 040 5 400

Corporate Tax Rates

Years of Assessment ending between 1 April 2009 and 31 March 2010

Normal Tax

2009 2010
Non-mining companies Basic rate 28% 28%
Close corporations Basic rate 28% 28%
Employment companies Basic rate 33% 33%
Other companies Basic rate 28% 28%

Secondary Tax on Companies (STC)

The STC rate remains unchanged at 10%.

Trusts

The tax rate on trusts (other than special trusts) remains unchanged at 40%.

Provisional Tax

A provisional taxpayer is any person who earns income other than remuneration or an allowance or advance payable by the person’s principal. The following individuals are exempt from the payment of provisional tax–

•  Individuals below the age of 65 who do not carry on a business and whose taxable income–

•  will not exceed the tax threshold for the tax year; or

•  from interest, dividends and rental will be R20 000 or less for the tax year.

•  Individuals age 65 and older if their annual taxable income–

•  consists exclusively of remuneration, interest, dividends or rent from the lease of fixed property; and

•  is R120 000 or less for the tax year.

Retirement fund lump sum withdrawal benefits
Taxable Income (R) Rate of Tax (R)
0 – 300 000 18% of each R1
300 001 – 600 000 54 000 + 27% of the amount above 300 000
600 001 and above 135 000 + 36% of the amount above 600 000

The taxable income from a retirement fund lump sum withdrawal benefit (lump sum from a pension, provident or retirement annuity fund on withdrawal) is determined after deducting a lifetime exemption of R22 500. The tax payable is determined by applying the rate table to the aggregate of the taxable portions of all retirement fund lump sum withdrawal benefits accrued during the current and previous years of assessment and deducting tax payable according to the current tax table on the aggregate of those lump sums accrued during previous years of assessment.

Retirement fund lump sum benefits
Taxable Income (R) Rate of Tax (R)
0 – 300 000 18% of each R1
300 001 – 600 000 54 000 + 27% of the amount above 300 000
600 001 and above 135 000 + 36% of the amount above 600 000

The taxable income from a retirement fund lump sum benefit (lump sum from a pension, provident or retirement annuity fund on retirement) is determined after deducting a lifetime exemption of R300 000. The tax payable is determined by applying the rate table to the aggregate of the taxable portions of all retirement fund lump sum benefits and retirement fund lump sum withdrawal benefits accrued during the current and previous years of assessment and deducting tax payable according to the current tax table on the aggregate of those lump sums accrued during previous years of assessment.

Foreign Dividends

Most dividends received by individuals from foreign entities are taxable.

Exemptions

Interest and dividends

•  Interest and otherwise taxable dividends earned by any natural person under 65 years of age, up to R21 000 per annum, and persons 65 and older, up to R30 000 per annum, are exempt from taxation. Foreign interest and foreign dividends are only exempt up to R3 500 out of the total exemption.

•  Interest is exempt where earned by non-residents who are physically absent from South Africa for 183 days or more per annum and who are not carrying on business in South Africa.

Deductions

Current pension fund contributions

The greater of-

•  7,5% of remuneration from retirement funding employment, or

•  R1 750.

Any excess may not be carried forward to the following year of assessment.

Arrear pension fund contributions

Maximum of R1 800 per annum. Any excess over R1 800 may be carried forward to the following year of assessment.

Current retirement annuity fund contributions

The greater of-

•  15% of taxable income other than from retirement funding employment, or

•  R3 500 less current deductions to a pension fund, or

•  R1 750.

Any excess may be carried forward to the following year of assessment.

Arrear retirement annuity fund contributions

Maximum of R1 800 per annum. Any excess over R1 800 may be carried forward to the following year of assessment.

Medical and disability expenses

Taxpayers 65 and older may claim all qualifying expenditure.

Taxpayers under 65 are not taxed on, or may deduct, monthly contributions to medical schemes up to R625 for each of the first two dependants on their medical scheme and R380 for each additional dependant. In addition they can claim a deduction for medical scheme contributions above the caps and any other medical expenses limited to the amount which exceeds 7,5% of taxable income (excluding retirement fund lump sum).

Taxpayers under 65 may claim all qualifying medical expenses, where the taxpayer or the taxpayer’s spouse or child is a person with a disability.

Donations

Deductions in respect of donations to certain public benefit organisations are limited to 10% of taxable income before deducting medical expenses.

Allowances

Travelling allowance

Rates per kilometer which may be used in determining the allowable deduction for business travel, where no records of actual costs are kept:

Value of the vehicle Fixed cost Fuel cost Maintenance
(including VAT) (R) (R p.a.) (c/km) cost (c/km)
0 – 40 000 14 672 58.6 21.7
40 001 – 80 000 29 106 58.6 21.7
80 001 – 120 000 39 928 62.5 24.2
120 001 – 160 000 50 749 68.6 28.0
160 001 – 200 000 63 424 68.8 41.1
200 001 – 240 000 76 041 81.5  46.4
240 001 – 280 000 86 211 81.5 46.4
280 001 – 320 000 96 260 85.7 49.4
320 001 – 360 000 106 367 94.6 56.2
360 001 – 400 000 116 012 110.3 75.2
exceeding 400 000 116 012 110.3 75.2

Note:

The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.

IAS 69: ACCOUNTING FOR GIRLFRIENDS

OBJECTIVE: The objective of IAS 69 is to prescribe the accounting treatment for girlfriends. The principal issues are the timing of recognition of a female friend as a girlfriend, the number of days the relationship can be carried on and any write down in this romantic relationship. It also provides guidance on the methods to be employed to make a girlfriend.

SCOPE: This IAS applies to all girlfriends except those whose father, brother, ex-boyfriends or prospective boyfriends work in police, army, intelligence agencies or political organisation or are 6+ feet tall, have a muscular body and know kung fu, judo or any other marshal art.

DEFINITIONS:

The following terms are used in this Standard with the meanings specified:

LOVE is a serious mental disease, mostly found in old Indian movies, dramas and literature.

FLIRTING is the modern form of love, this disease came from Hollywood movies, new Indian movies, internet, mobile phones, and English literature.

MARRIAGE is a long term liability as a result of past events that is expected to be settled by increasing the population, decreasing the health and money.

GIRLFRIEND is a current asset as a result of past efforts that are likely to generate future dates, physical contact and gifts. If not properly handled, may become long-term liability, i.e. wife.

BOYFRIEND-SPECIFIC VALUE is the present value of the future dates that a boyfriend expects to realise from continuing use of the girlfriend over its useful life and from its disposal to another friend at the end of the flirting term. FLIRTING TERM is the higher of the following:

a.  From your first conversation till the time the girlfriend’s father catches you.

b. From the time of your first date till your girlfriend gets married to another person, in which case she will become your ex-girlfriend.

c.  From the time of your first date till you get married to your girlfriend, afterwards it will become a suffering term.

RECOGNITION

A girl shall be recognised as a girlfriend if, and only if:

a. it is probable that future physical benefits associated with the girlfriend will flow to the boyfriend, and

b. the expenditures to be incurred (eg. in respect of gifts, cards etc.) can be measured reliably.

Female cousins, younger sisters, and other female friends associated with the girlfriend should not be recognised. However, beautiful and bold ones should be declared in the flirting statement if and only if it is probable that they are expected to result in prospective girlfriends.

MEASUREMENT OF USEFUL LIFE OF GIRLFRIEND

All the following factors shall be considered in determining the useful life of a girlfriend:

a. Expected “usage” of the girlfriend.

b. Expected “physical” wear and tear, which depends on “operational” factors such as the number of “shifts” the girlfriend is to be used.

c.  Technical or commercial obsolescence arising from changes in fashion or “service output” of the girlfriend.

d. “Legal” or similar limits on the “use” of the girlfriend.

DERECOGNITION

The girlfriend shall be derecognised:

a. at the end of the useful life of the girlfriend or flirting term whichever is earlier, or

b. when no future physical benefits are expected from her use or her disposal to your friend.

DISCLOSURE

The flirting statement shall disclose, for each “class” of girlfriend:

a. age of girlfriend

b. complexion, face cut and “other” necessary “cuts”

c.  the useful life of each girlfriend

d. email address, residential address and mobile no. of each girlfriend

e. any “special” benefits that may have been derived from the girlfriend

f.  and we will send you a copy of the Disclaimer.

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