GAAP MONITORING PANEL FEEDBACK
The GAAP Monitoring Panel (GMP) is a joint initiative between the South African Institute of Chartered Accountants (SAICA) and the JSE Limited (JSE). It was created in 2002 as an oversight body to enhance compliance with accounting standards.
A total of six companies listed on the JSE were referred to the GMP during 2007. Of the six companies, five were required to re-publish their financial results and one company was required to correct its disclosure in its subsequent annual financial statements. The six companies referred to the GMP last year brings to 34 the number of companies thus referred since the GMP was launched in September 2002.
Prof. Harvey Wainer, GMP chairman, has identified a common theme running through most of the 2007 GMP cases as an erroneous accounting for acquisitions and a lack of appreciation of the disclosure requirements of IFRS. This was especially relevant where one company acquired another and the acquisition agreement recorded a contractual effective date far earlier than the date upon which the acquisition was concluded. The company accounted for this acquisition using the date in the contract despite the fact that it did not control the acquired company at that date. This accounting results in the erroneous inclusion of the acquired subsidiary’s results in the group financial statements, thereby artificially boosting the reported group profits and generating a misleading result.
Prof. Harvey Wainer identified a lack of appreciation of the detailed disclosure requirements for interim and provisional reports as other common problems in 2007.
With the changes to, and complexity of, accounting standards it is essential that persons involved in the preparation and presentation of financial statements keep abreast of all the current accounting requirements.
Jan Dijkman, SAICA’s Project Director: Ethics and Discipline, reports that five disciplinary cases against company directors and/or auditors had been finalised during the past calendar year, the most serious of which had resulted in a fine of R100 000 being imposed on the financial director of the company in question, R75 000 of which was suspended by SAICA’s disciplinary committee. The auditors, who had given a clean audit opinion on its financial statements, were referred to a full disciplinary hearing by the IRBA.
For more detailed information on all the matters dealt with by the GMP, please refer to the GAAP Monitoring Panel section on our website.
PROPOSED AMENDMENTS TO THE LISTINGS REQUIREMENTS OF THE JSE LIMITED (THE JSE) FOR AUDITORS AND REPORTING ACCOUNTANTS
The JSE has decided to explore the feasibility of establishing a process by which auditors would be approved before being allowed to perform statutory audits or other assurance engagements for issuers listed on the JSE. The Listings Requirements at present include certain requirements relating to the acceptance of auditors. There is, however, a need to enhance those requirements to ensure the fairness, transparency and objectivity of the current criteria.
The proposed draft listings requirements envisage the establishment of a JSE Register for Auditors, which was issued on 18 April 2008. A copy is available on the JSE website under the “How to list”, “Listing Requirements”.
Interested parties were invited to attend public information sessions held on 14 May 2008. A high-level overview aimed at issuers, sponsors, advisors and other interested parties, with a more detailed session for auditors and other parties that may consider applying to be placed on the register.
ACCOUNTING STANDARDS BOARD
The standards, exposure drafts, discussion papers and updates of the Board are available on the Board’s website, www.asb.co.za.
MICRO-INSURANCE DISCUSSION PAPER
National Treasury has released a discussion paper on The Future of Micro-insurance Regulation in South Africa.
Micro-insurance refers to insurance that is accessed by, or accessible to, the low-income population.
The discussion paper proposes that a regulatory space for the provision of micro-insurance products be carved out within the broader regulation of insurance provision in South Africa.
Accordingly, the goal of the discussion paper is to develop a coherent and clear regulatory framework that will encourage and facilitate the provision and distribution of good value, low-cost products that are appropriate to the needs of low-income consumers.
The discussion paper is available on
www.pmg.org.za, and comments can be emailed to Katherine.email@example.com by 31 July 2008.
PENSION FUND INFORMATION CIRCULARS
Information circular 3 – Foreign Exposure Limit for Pension Funds
The amendment to Regulation 28 to give effect to the announcement by the Minister of Finance that the foreign exposure limit for pension funds will increase from 15% to 20% will be effected at the same time as the proposed broader amendments to Regulation 28, which are currently under consideration. It is anticipated that these amendments are to be finalised within the next three months.
Funds that wish to avail themselves of the increased exposure may apply to the Registrar of Pension Funds to be exempted in terms of Regulation 28(5) from the 15% limit, subject to a maximum limit of 20%.
Information circular 4 – Specialist Tribunals
This Information Circular sets out general guidance from the Registrar of Pension Funds relating to the appointment of a Specialist Tribunal in terms of section 15K.
The information circulars are available on the retirement funds page of the Financial Services Board website, www.fsb.co.za.
WHAT’S NEW AT SARS?
The latest updates can be viewed on the SARS website, www.sars.gov.za.
TAX PRACTITIONER REGISTRATION – CLARITY
The current Regulation of Tax Practitioners’ Bill envisages a new body to govern tax practitioners.
SAICA, through its National Tax Committee, has submitted comment on the proposed Bill. SAICA and SAIPA further made a joint submission to SARS in this regard. In essence the joint submission recommends that existing structures, such as SAICA and SAIPA, should be used and in this manner a double layer would not be created, as is the case with the current proposed draft Bill, which sees members having to be registered with a number of different bodies.
If the proposals contained in this joint submission are accepted, only tax practitioners that are not already members of such a professional body would need to join a new body for tax practitioners. During recent meetings, SARS has indicated that it is seriously considering the recommendations made in the joint submission.
SAICA and SAIPA, made a further joint submission to SARS regarding a new institute named the ‘South Africa Institute of Tax Practitioners’ (hereinafter referred to as ‘SAIT’), and the confusing effect it has, not only on our members, but more importantly, the public. In light of the introduction and release of the Regulation of Tax Practitioners Bill administered by the Commissioner of SARS, the establishment of such an institute may be premature.
As a result of this confusion, we confirm the present position as follows. SARS has confirmed during recent meetings that it has not yet accredited any professional bodies. There is presently no legal obligation to register with SAIT to be a tax practitioner. The only requirement is that one registers with the Commissioner (SARS) as a tax practitioner in terms of section 67A of the Income Tax Act.
VAT REGISTRATION THRESHOLD
The Minister announced in the budget (20 February 2008) that the turnover threshold above which VAT registration is compulsory is to be increased from R300 000 p.a. to R1 million p.a. This change was to take effect on 1 July 2008. The Taxation Laws Amendment Bill, 2008 did not give effect to such change. Hence the turnover threshold above which VAT registration is compulsory remains unchanged at R300 000 p.a.
It is anticipated that this change will become effective together with the introduction of the proposed “presumptive tax system”.
Edited by: Ewald Muller
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