ASAIN THIS ISSUE: THE CFO OF TODAY l BUSINESS IN AFRICA l IASB LEASING STANDARD - FIVEAREAS TO - Accountancy SA
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ASA FEBRUARY 2016
IN THIS ISSUE: THE CFO OF TODAY l BUSINESS IN AFRICA l IASB LEASING STANDARD
AN HOUR WITH
S H A B E E R
K H A N
CFO OF THE DTI
FIVEAREAS TO
A GLIMPSE OF NEW YORK WATCH IN 2016
Editor
Gerinda Jooste
Art Director
Ashley van der Merwe
CONtents
Editorial Administrator
Lynn Grala
Publications Administrator
Palesa Khobane
Copy Editor
Sarie Moolman
Publisher
DEVELOP LEAD Willi Coates
Address
4 Updates 57 Motoring Report 17 Fricker Rd,
Keeping you informed of business The hot hatch battle Illovo, Sandton, 2196
today 60 Travel Tel
New York, New York Local 08610 SAICA (72422)
8 Markets International +27 11 621 6660
Market commentary December 2015 62 Recruitment
Fax
10 Viewpoint +27 11 622 3321
Everything you need to know about Email
journal@saica.co.za
issues that matter to you the most
16 Analysis Advertising
Sales Manager
Auditing disclosures: Weighing our words Katie Bowden
18 Analysis Cell
Auditor focus on ‘other information’ +27 82 723 3777
21 Analysis Email
IASB releases long-awaited leasing kbadvert@iafrica.com
standard Advertising Sales
24 Analysis Michelle Baker
Five areas to watch in 2016 Cell
+27 73 137 1231
Email
michelle.baker@mediamarx.co.za
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INFLUENCE subscriptions@saica.co.za
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24 47
FEBRUARY 2016 | 1
FROM THE EDITOR
Some are resigned to being just a number.
WHO WE ARE You wrestle with them.
EDITOR’S letter INTRODUCING PRIVATE BANKING FOR PROFESSIONALS.
made many (if not most) of us wonder:
do these comments and views still
have a place in our country? And will
there ever be a day that we can all live
together as one nation, not divided by
race or colour?
I saw a video by Prince Ea (@
PrinceEA) on YouTube where he talks
about the labels we give each other. We
weren’t born black or white or Indian –
that is a label we were given by society
and we choose to wear it.
Isn’t who we really are deeper than
skin deep? Who we truly are, can
be found inside us. So he asks the
question: if society didn’t label you –
who would you be? (Follow this link to
watch the video: https://www.youtube.
com/watch?v=q0qD2K2RWkc.)
As humans, we are meant to
connect with and to care for each other.
And maybe that should be our goal in
2016 … Let’s remove the labels that
society gives us and make an effort to
see others for who they really are – and
not who we think they are.
At Accountancy SA we are also
embarking on exciting new ventures
this year. We will be launching a SAICA
blog in the next few weeks (www.
saicablog.co.za) where you can expect
W
daily content updates, video interviews,
podcasts, and much more. It will also
hat a year has 2016 already be your platform for interacting directly
turned out to be! Not only are with us. We would like to invite you to write and
we wondering what happened submit articles for publishing. When the blog is
to the first few weeks of the up and running we will bring you content and
year, our pockets are also much updates in the form of a digital app. Please watch
emptier and we are re-thinking that trip to Europe your mailbox for more news about these exciting You’re a successful registered professional, under the age of 35 and
we planned … developments. earning more than R750 000 a year. RMB Private Bank isn’t waiting for
With only four weeks of 2016 gone, this you to get to the top, because we believe you’re already there. You’re
promises to be an eventful year. We face many young, inspired and involved. That isn’t a motto to live by but it definitely
says a lot about you and your future aspirations. You are exactly the type
challenges like further interest rate hikes, of professional that RMB Private Bank is built for. It’s built to enable your
economic turmoil, and higher food prices. passion for success – now, and in the future.
The year also unfortunately also started with GERINDA JOOSTE
social media storms around racism … and it EDITOR Visit www.rmbprivatebank.com or call our 24/7 Service Suite on
087 575 9411 for more information.
2 | FEBRUARY 2016
RMB Private Bank, a division of FirstRand Bank Limited. An Authorised Financial Services and Credit Provider. NCRCP20.
DEVELOP UPDATES UPDATES DEVELOP
KEEPING YOU INFORMED OF BUSINESS TODAY
SOUTH AFRICA’S
UPdates INDEBTEDNESS STATISTICS
South Africans were the biggest borrowers in the world in 2014, according to a report issued by the World Bank.
CALCULATE YOUR CARBON FOOTPRINT Mining was one of the hardest hit sectors for debt in the last few years, with strikes driving the miners into further
debt. Anglo American is one of the mining companies looking to mitigate these statistics.
Every time you switch on a light, drive your car, to global warming; a process that scientists say
run water, or put out your rubbish you’re making has led to a rise in global average temperatures by
a decision that affects the environment. Natural over half a degree Celsius over the past 30 years South Africa’s GDP net debt growth
resources – water, coal, oil, land and fresh air – and could raise the earth’s temperatures by 1,4–
will run out if we use them up at a rate faster than 5,8oC by the end of the century. Installing an 11-watt 2008/09 2014/15
they can replenish themselves. There are many
indications that this is already happening. Each
person living day to day on earth has a carbon
compact fluorescent light (CFL) in place of a 60-watt
incandescent light bulb will save about 570 kWh
over the life of the compact fluorescent – saving
21,8% 40,8%
footprint, producing carbon emissions directly or more than 570 kg of CO2. South Africa’s debt to financial institutions – R1,63 trillion
indirectly, which have a combined negative long-
term effect on the environment. Go to Nedbank’s carbon footprint calculator and
The good news is that you can make a difference.
start calculating: http://www.nedbank.co.za/
website/content/carboncalculator/index.asp
23,37 MILLION CREDIT-ACTIVE CONSUMERS
Every kilowatt-hour (kWh) of electricity you avoid
using saves over a kilogram of carbon dioxide that
would otherwise be released into the atmosphere.
Source: City of Cape Town, Environmental Resource Management,
Carbon Footprint Calculator, 9 November 2015
12,8 MILLION 10,5 MILLION
Carbon dioxide (CO2) is the number one contributor are in good standing have impaired records
More than 11 million South African people are described as over-indebted (it was 5 million in 2013)
'Big-picture
DID YOU KNOW?
thinking and 86% of South Africans borrowed money
between 2013 and 2014
ONE OF THE HARDEST HIT AND OVER-INDEBTED INDUSTRIES IS MINING
strategic
22% of mine-workers
75% of their net salaries on
Source: Shocker! South Africa's debt stats, News24, 19 January 2016
approach are the spend more than debt instalments
most important 73% of miners were overdue on one account or more
One ton of CO2 emissions occupies 556 m of space at 3
attributes for a After the 2014 mine-workers’ strike, this percentage rose to
62% of the average miner’s accounts were considered bad
88%
CFO, say 49%
25oC at standard pressure. An Olympic size swimming
pool is 2 500 m3. The average South African household
produces 12,81 tons of CO2 per year. This can fill almost 98% of Anglo American platinum employees have been introduced to their indebtedness programme
three Olympic-size swimming pools!
Source: City of Cape Town, Environmental Resource Management, Carbon Footprint
of CEOs.' for the mining sector, reducing debt commitments from
53% to 27%
Calculator, 9 November 2015 Source: Kasia Moreno, The Future of the CFO, Forbes, R3 million has been saved or refunded to Anglo American employees since 2011.
5 January 2015 On payroll deductions, R2 million has been saved with debt relief solutions.
4 | FEBRUARY 2016 FEBRUARY 2016 | 5
DEVELOP UPDATES UPDATES DEVELOP
ACCOUNTING TAX
IFRS for SMEs training module on Other Financial The deadline to submit comments to the IASB is 26
Instruments Issues February 2016.
This module covers Section 12 of the IFRS for SMEs
which specifies the accounting for more complex The exposure draft, IASB Snapshot and the IASB press
financial instruments and transactions. Access it via release can be downloaded from the SAICA website.
e-IFRS on the SAICA website.
Three IFRSs to be amended
Accounting for investment properties under The IASB is proposing to amend IFRS 1, First-
development or construction time Adoption of International Financial Reporting
The IASB proposes to amend IAS 40 – Investment Standards; IFRS 12, Disclosure of Interests in Other
Property, to clarify the guidance on transfers to, or from, Entities; and IAS 28, Investments in Associates and
investment properties. Joint Ventures, under its Annual Improvements project.
The deadline to submit comments to the IASB is 18 The deadline to submit comments to the IASB is 17
March 2016. ED 366, Transfers of Investment Property: February 2016. ED 367, Annual Improvements to IFRSs
Proposed Amendment to IAS 40, and the IASB press 2014 – 2016 Cycle, and the IASB press release can be
release can be downloaded from the SAICA website. downloaded from the SAICA website.
Draft Guidance to assist management in applying the
concept of materiality
This draft non-mandatory guidance in the form of a
draft Practice Statement on Application of Materiality to
Financial Statements is intended to assist management
in the following three main areas:
• Understanding the characteristics of materiality
• How to apply the concept of materiality when Retirement reform – with effect from 1 March 2016 behalf of members, will be taxable in the hands of
making decisions about presenting and disclosing Due to disparity in the treatment of retirement funds the member.
information in the financial statements, and – in terms of tax deductibility of contributions, fringe • The tax deduction per annum will be available in
• How to assess whether omissions and misstatements benefits tax on employer contributions, and the form respect of contributions to all retirement funds,
of information are material to the financial statements of payment on retirement – a decision was made to limited to the lesser of 27,5% of the greater of
reform the retirement industry to achieve better parity taxable income or remuneration, or R350 000.
and fairness and to encourage savings. Historically, • Compelled annuitisation for retirement funds
provident fund members were able to withdraw all exceeding R247 500.
ASSURANCE their savings on retirement, whereas pension and
retirement annuity fund members were entitled to only To address the fact that provident fund members are
a portion of their savings as a lump sum, with the rest the most impacted by the compelled annuitisation, the
IRBA adopts Revised ISAs being paid in annuities. following concessions apply:
The IRBA board has approved for • Members who are 55 years and older on 1 March
adoption, issue and prescription There has been much uncertainty since the initial 2016 will be able to withdraw all their savings as a
by registered auditors, Addressing proposals were made. After numerous changes in the lump sum on retirement.
Disclosures in the Audit of effective date, consultation with Nedlac, industry • For members under 55 years on 1 March 2016, all
Financial Statements ‒ Revised bodies and professional organisations, final agreement retirement savings accumulated as at that date may
ISAs and Related Conforming appears to have been reached with the legislation be withdrawn as a lump sum on retirement. With
Amendments. These standards are having been made effective from 1 March 2016. respect to contributions made after 1 March 2016,
effective for audits of financial these members will only be required to annuitise if
statements for periods ending on From a tax perspective, the reforms propose the the total of the accumulated savings relating to the
or after 15 December 2016. Visit following: post 1 March 2016 contributions are R247 500 or
the IRBA website for more details. • All employer contributions to retirement funds, on less on retirement.
6 | FEBRUARY 2016 FEBRUARY 2016 | 7
DEVELOP MARKETS MARKETS DEVELOP
MARKET COMMENTARY
as 7% intra-month; however, this COMMODITIES The Swap curve widened an
was prior to a late 1% drop in US The continued prospect of a average of 150 bps; ZAR-basis
markets. slowdown in China and increased narrowed an average of 11 bps.
Closing prices for December US rates continue to make Bond yields widened an average of
were: JSE ALSI 50,693 (–1.8%); commodities wholly unattractive to 170 bps.
DECEMBER 2015 EUROSTOXX 3,279 (–6.5%);
S&P500 2,063 (–1.2%); FTSE 6,263
(–1,7%).
investors.
Oil plummeted to record lows
on the back of Opec failing to reach
agreement on a production cap.
Inflation bonds widened an
average of 30 bps.
FORWARD-LOOKING
RATES Closing prices for December MARKET COMMENTARY
The uncertainty created by the were: Gold $1,062 (+0.4%), retaining January has been a bloodbath
This market commentary is intended to provide readers with insight into what happened change of Finance Minister its value despite being at multi-year in the markets, both locally and
effectively raised RSA debt-servicing lows. Brent crude 36.72 (–13.0%). internationally, as crude oil trades at
over the period of review, even though the data may be somewhat dated owing to the costs by between R1.5 billion and R2 a 13-year low. By 20 January when
timeframe of the publishing process. By Garth Saunders billion a year, as bond prices tumbled ANNUAL ASSET RETURNS we went to print, the equity markets
the most on record before staging a FOR 2015 were breaking below August 2015
mild recovery into the end of the year. lows (MTD: S&P –10%, JSE ALSI
T
To put 2015 in context, the various
The Swap curve widened 100 currencies/indices had the following –8%) and EM and commodity
he South African bps on average across all tenors; full-year percentage movements: currencies were under severe
economy was riled
Weekly US D ZA R closing rate JS E A ll S hare Index Closing Price basis narrowed 7 bps on average USDZAR +35%; EURUSD –10.1%; pressure (MTD vs USD: ZAR –9%,
£ GBP m A L SI
across all tenors; government bond
NA C, Fees & Comms Carry, Market Based, Other
by the unexpected 16.00
USD ZA R
52,000
5
Δ MT D Budget Budget GBPUSD –4.9%; ALSI +1.85; S&P CAD –5.75%, AUD –5.8%).
decision by President 51,000
4
yields widened strongly, 116 bps on –0.8%; FTSE –4.6%; Gold –10.4%;
Jacob Zuma to
15.50
3
50,000 average across all issuances. Crude oil –30%. AUTHOR | Garth Saunders, CA(SA), CFA
change the Finance Minister twice.
15.00 2
49,000
1
As a result, the rand weakened 14.50 48,000
dramatically, losing as much as 14.00
47,000
1
D ec-14 Jan-15 Feb-15 Mar-15
10% to the US dollar and 14% to 13.50
46,000
2
the euro, as investor confidence fell 3
through the floor. At its December
Government Bonds Yields Government Index Linked Bond Yields
meeting, the European Central 30/ 11/ 2015 11/ 12/ 2015 31/ 12/ 2015 30/ 11/ 2015 11/ 12/ 2015 31/ 12/ 2015
% %
Bank (ECB) underwhelmed the 3 3
global market by announcing easing 2.5 2.5
measures that were considerably 2
2
below expectations. As a result, the 1.5
1.5
euro rallied strongly. The US hiked 1
1
rates at its December meeting, as 0.5
0.5
was widely anticipated. The glut in 0
0
the commodity markets and weak
Chinese trade data continued to
FRA / Swap curve US D|ZA R Basis
pressure commodity currencies 30/ 11/ 2015 11/ 12/ 2015 31/ 12/ 2015
%
(AUD, CAD, ZAR). %
30/ 11/ 2015 11/ 12/ 2015 31/ 12/ 2015
9.50 0.80
CURRENCIES
The lack of a significant change in 0.30
the ECB’s easing measures resulted 7.50 -0.20
in a sharp euro rally against the -0.70
majors. The USD remained mixed
after the widely anticipated rate 5.50 -1.20
1w
1d
18m
10y
15y
20y
25y
30y
1y
2y
5y
6y
7y
8y
9y
3m
6m
9m
1m
3m
9m
3y
5y
7y
9y
15m
21m
12y
20y
30y
hike. Locally, the fallout from the
unexpected changes in the Finance
All prices/rates shown are indicative and not necessarily where the market was trading
Minister led to a collapse in the ZAR
which touched 16.08 against the
USD on the day.
Closing rates for December EQUITIES failed to deliver any significant
were: EURZAR R17.06 (+12.1%); Global equity markets sold off changes in easing measures as the
USDZAR R15.62 (+8.5%); GBPZAR strongly on negative investor Fed raised rates. In South Africa,
R23.16 (+7.1%); EURUSD $1.09 sentiment and weak growth equities recovered towards the end
(+3,3%); GBPUSD $1.48 (–1.3%). indicators. Both the ECB and Japan of the month after falling as much
8 | FEBRUARY 2016 FEBRUARY 2016 | 9
DEVELOP VIEWPOINT VIEWPOINT DEVELOP
BUSINESS ADVISOR WEALTH ADVISOR LEADERSHIP ADVISOR Designed to optimise
Kevin Phillips CA(SA) is
Managing Director
of idu Software
Mike Lledo CA(SA) is
the CEO at Consolidated
Brett Tromp CA(SA) is
CFO of
Discovery Health
the Practice Ecosystem
Financial Planning
We work hard at understanding how you
GOING MOBILE PHASING MANAGE
E
work, so we can build in efficiencies for
T R
A TREND TAKEN FLIGHT RIGHT OR WRONG? AS YOU’D LIKE TO BE MANAGED
every step, in every process
here are so many benefits to arely does a topic create as much veryone has heard the saying, ‘People
having your financial information controversy for asset managers and don’t leave jobs; they leave managers.’
and reports on hand whenever planners as ‘phasing’. If one has a lump But knowing the saying doesn’t always
they are needed, that this shift has sum, should one invest it at once or mean that we respond appropriately to its TOUCH ONCE.
been inevitable. phase it in over 3 –12 months? implications. Drives efficiencies by giving
Taking your business mobile is no longer The answer depends largely on market volatility and To draw an analogy, we were once all learner drivers. you the functionality to touch CLIENTS
just a trend; it is more efficient and more pricing. A study by US asset manager Vanguard shows But it’s amazing how quickly after we obtain our driver’s any piece of work only once
effective; in much the same way that you that in 66% of the ten-year rolling periods during 1926 -– licence that we forget the insecurity, the hesitance, the
choose to fly rather than drive to Joburg. 2011, lump sum investing produced better returns than panicked fumbling and stress we ourselves experienced
In a world where time is our greatest phasing. Similar local research by Glacier produced a when first learning to drive. So soon afterwards we
commodity, not having access to whatever 75% positive result. become impatient, ungracious and easily exasperated
you need, when you need it, seems incredibly This means that phasing was successful 25–33% on the road, despite honest mistakes and an
wasteful. of the time. Phasing takes the emotion out of investing: understandable lack of experience in others. Deliberately
FINANCIAL
STATEMENTS
AUDIT
There is a reason the mobile device industry otherwise, when the bulls are running, investors can’t remembering what it feels like to be a learner driver every
has exploded – we want everything on hand, we invest fast enough; and when markets are collapsing time we see a large red L pasted on a car in front of us
want it now, and, to coin Billy Connolly, ‘we want they can’t get out fast enough. should evoke in us patience and empathy.
even more tomorrow!’ This applies not just to investment markets but Similarly, every manager has been through a series of
Having your secure real-time reports currency markets and offshore investing as well. Many other managers to get to their position. Hopefully, each TIME AND
TAX
available, easily accessible and easy to South Africans will painfully recall moving money experience taught us either a good example to adopt BILLING
MANAGEMENT
understand, allows decision-makers to review offshore at the nadir of rand weakness and the peak of or, at least, what not to do. A person’s relationship with
whatever they need to from wherever they are the offshore equity bull market, thereafter to wallow for their direct manager is often a telling indicator of their
and make quick, properly informed decisions. ten years while the rand appreciated back to R6/USD. job performance and success. In cases where there is
As a business owner or senior management, Portfolios were literally halved. a strained or superficial relationship, many employees MONTHLY
having access to your financial information at all are not motivated to perform, no matter how good a MANAGEMENT
times also allows you remain in the know and in TO PHASE OR NOT? company’s other perks or benefits may be. REPORTS
control; you are more likely to spot something The above research studies indicate that except for But there’s also a positive side to that coin. I know
SECRETARIAL
that’s amiss and be able to head it off before it times of extreme market volatility, even in expensive of someone who just turned down a bigger package to
gets out of hand. markets lump sum investments will generally outperform another department – not because they were incapable
As human beings, we are constantly phasing. Equity markets generally rise in tandem with of it, but because they wanted to remain under their
developing the way we do things to allow us to improving company profit, provide a better return than current manager who they knew and trusted to develop 3rd PARTIES
be better and faster and more efficient. cash and make it an expensive decision to be out the them even further. This can seem counterintuitive, but e.g. AUDITORS
REGULATORS & BANKS
Just as transport evolved and opened the market. many employees stay loyal to good managers, not for a OPERATIONAL
e.g. SARS
world up to us, so technology keeps evolving, The real issue is often an emotional one whereby want of choice, but because they believe these managers
& CIPC EFFECTIVENESS.
allowing us to take the world with us wherever investors accept the price of lower returns so as to have their back and act in their interests.
Makes sure you spend the
we go. sleep better at night. In addition, most financial advisers Great managers know their direct reports well.
right time, on the right things
Mobile devices have made working suggest when investing in equities that one adopt a They set clear goals, encourage them, have their back,
wherever you are simple. time horizon of at least five years – a factor which then upskill them, motivate them and use their strengths. All
If you choose financial software that is completely obviates the discussion around short-term of this brings personal fulfilment and satisfaction to an TAKES CARE OF THE
designed to scale with your business and volatility and phasing. Multi-asset class funds also employee in a way that can never be fully met through NON-NEGOTIABLES.
adjust to ever-changing technologies, you will provide comfort, where professional managers optimise a salary or other company perks. The choice we daily With built-in validation at every step, we don’t
be able to take advantage of deeper business tactical asset allocation between cash, bonds, property make as managers is how to create and sustain the kind compromise on quality and compliance
capabilities and insights. and equity. Finally, country and currency risks are of relationship with our team members that engenders
Don’t let those brave enough to take a increasingly hedged by offshore fund managers. accountability, loyalty and that brings out the best in
plane leave you in their shadow as they soar
overhead.
There’s rarely a right or wrong decision. Rather, one
needs to understand the decision being taken.
people. Remember – manage others as you would like to
be managed. Contact us today!
10 | FEBRUARY 2016 www.caseware.co.za | 011 FEBRUARY
507 0000 2016 | 11
DEVELOP VIEWPOINT
BUSINESS ADVISOR PUBLIC SPEAKING TAX SPECIALIST
Stanford Payne CA(SA) is
TRAINER Muneer Hassan CA(SA) is a
an ICF-accredited executive Dineshrie Pillay CA(SA) is a business Tax Consultant and a Senior
and business coach owner and public speaker trainer Lecturer in Taxation at UJ
MY PERFECT STORM MOVIE MAGIC OFFICE OF THE TAX OMBUD
2 A P
BE PREPARED FOR 2016 IMPROMPTU SPEAKING WITH A STRUCTURE INFLUENCE MUST BE FURTHER STRENGTHENED
016 has certainly started with a huge bang: s leaders in business, whether you need to rior to the enactment of the constitution, SARS
our currency hitting records lows, political deliver a mini-speech or respond to someone had wide and far-reaching powers in terms
uncertainty, terror attacks and serious conflict on the cuff in the passageway, your ability to of the Income Tax Act (ITA). The constitution
among the beautiful people of our homeland. communicate on demand will set you apart resulted in significant changes to the ITA to
Forecasts worldwide are pointing towards from others. Most people shy away from on- align SARS powers with taxpayer’s rights. A
a very challenging 2016. What does it mean for you the-spot speeches. This is where we can learn something taxpayer’s charter was published for the first time in 1997.
personally? In what way will it affect your career? What from the movie industry to deliver our movie magic moment. The SARS Service Monitoring Office (SSMO) was launched
impact will it have on your business? in 2002 to deal with complaints of an administrative nature
This reminds me of the Wolfgang Petersen movie THE OPENING SCENE encountered by taxpayers (the SSMO has been replaced by
The Perfect Storm starring George Clooney, which is Every movie follows the same plot. The first 10–20 minutes is the SARS Complaints Management Office). During 2005 the
based on true events. In short, a commercial fishing dedicated to setting the opening scene. During this time we SARS Service Charter was released (currently not available
boat from Gloucester, Massachusetts, working the are introduced to the key characters of the movie, the place, on SARS website). The Tax Administration Act (TAA) took
waters of the North Atlantic, returns home after a bad timing and context in which the story will develop. Whether effect on 1 October 2012. One of the objectives of the TAA
catch. Distressed about survival, their captain convinces
all crew to head out and make up for their loss before
your unprepared speech is 5 minutes or 20 minutes,
ensure that you spend around 20% of the total time on
was to promote a better balance between the powers and
duties of SARS and the rights and obligations of taxpayers BUSINESS Cortell works with your
finance team to automate
and streamline the systems
PERFORMANCE and
season closes. contextualising the topic of your speech. to make this relationship more transparent. The Office of the
They decide to fish further than usual, as fishing is Tax Ombud was officially launched in 2014. processes for planning,
poor. Unfortunately their ice machine breaks and they THE PROBLEM In the context of the historical developments, we have budgeting and forecasting.
are forced to head home to sell what they have. But a
monster of a storm is building. The crew decides to face
Every movie transitions into a secondary phase that presents
a challenge to the leading characters. Therefore, for your
therefore come a long way in terms of taxpayer rights.
The objective of the Tax Ombud is to review and
MANAGEMENT predictive
Scenario management and
analytics may be
the storm. After continuous warnings from other ships,
they loose their antenna and all communication is lost.
No one survives.
impromptu speech, spend about 30% of your time allocation
to define the problem. Use facts, statistics, examples,
stories, demonstrations, props or physical evidence like
address complaints by taxpayers regarding service,
procedural or administrative issues relating to their dealings
with SARS. Although the Tax Ombud’s recommendations
PARTNERS of rolling forecasts.
used to improve the reliability
One can only imagine how hard this must have been photographs, spreadsheets and documentation to clarify are not binding on taxpayers or SARS, it is evident that Cortell uses purpose built software which incorporates
as a crew member. First there is the fact that without why the challenge or obstacle exists. You must elaborate SARS takes these recommendations seriously. workflow management to allow your team to focus on the
facing the ocean for another catch, they might not on the impact of the problem and the need to resolving the The influence of the office will, however, be further content rather than managing, collating and aggregating all
survive the winter. Then they have to face new waters situation sooner rather than later. strengthened if a numbers of issues can be addressed. contributions - taking most of their time ensuring the
with new challenges. Then comes the tough decision to • Independence of the office: Currently the office is accuracy of the data rather than participating in the
head home through the storm. Then all communication THE RESOLUTION funded by SARS and the staff are appointed in terms of management of performance of the business.
is lost. All movies move on to the third phase that is all about finding the SARS Act and seconded at the request of the Tax
What might have happened with the crew had they a solution to the problem. Just as a movie would do, in Ombud in consultation with the SARS Commissioner. All in much less time than the traditional methods used for
had more information about the storm? What if they had your mini-speech you should spend the bulk of your time For taxpayers to have full confidence in the system, it this important function!
continuous communication with a rescue ship? allocation – around 45% – to expand on what is being done would be best if the Office of the Tax Ombud is to be
Lots of ifs with no real answers ever, but if you were to pacify the situation. In this phase, present an option or totally independent of SARS. At Cortell we recruit and develop finance professionals who
to view 2016 with all the unknown challenges that are 2–3 options if relevant, and justify your option/s with relevant • Broadening of powers of the Tax Ombud’s office: The are skilled in the deployment of relevant technology to
guaranteed to come your way in the same way – what facts, statistics, third-party endorsements, testimonials and Tax Ombud should have the power to award costs to improve business processes and solve business problems.
would you be doing right now to be best prepared for feedback that could include quotations and cited reference taxpayers. Further, the office should have the power
this storm? material. to suspend SARS’ actions while complaints are
Think about your business? Your career? Your investigated.
personal finances, maybe? THE MORAL OF THE STORY • Annual reporting process: Although the Tax Ombud’s
There is an old saying that goes ‘prevention is better A movie ends with any of the following outcomes: it will make annual report must be tabled in Parliament, there is no
than cure’. Be prepared for 2016 and the challenges that you think differently about a subject matter; it will make you clarity as to the process of considering the report. The
are heading your way and don’t find yourself needing to feel emotional; or it will inspire you to take action. Your last Standing Committee on Finance should consider the
cure whilst in your storm. Be your own storm-owner and 5% of time allocated needs to be dedicated to what you want report, as it does with the National Treasury and SARS
sail your ocean! your audience to think, feel, or take action on. annual reports.
12 | FEBRUARY 2016
DEVELOP VIEWPOINT VIEWPOINT DEVELOP
B-BBEE SPECIALIST PERSONAL FINANCE ADVISOR MANAGEMENT ADVISOR RETIREMENT ADVISOR
Anton de Wet CA(SA) Gizelle Willows CA(SA) MCom Finance Gugu Mtetwa CA(SA) Tiffany Boesch CA(SA) is
is Managing Director of is Senior Lecturer in Financial Reporting is a Non-executive Director Group Financial
Net Value Holdings at the University of Cape Town (former Audit Partner at PwC) Director of PPS
LAST-MINUTE CONTRIBUTIONS NEW YEAR’S RESOLUTIONS EXPOSURE IS KEY UNDERSTANDING
T A I S
DON’T BURN YOUR FINGERS LET’S KEEP TO THEM THIS YEAR GAINING A WIDE RANGE OF EXPERIENCE TAX-FREE SAVINGS PRODUCTS
housands of companies will be making ccording to the Gregorian calendar, 1 once read a quote that ‘if experience is the ince the introduction of tax-free savings
empowerment contributions before January is the official start of the new teacher, then exposure is the classroom’. As account (TFSA) legislation in 2015, many
Please note that the author of this article (Gizelle Willows CA(SA)) of this article is not a certified financial advisor in terms of the Financial Advisory and Intermediary Services Act 37 of 2002.
the end of February 2016 if this is their year. January is named after the Roman a young professional it is key to not only do products have been launched by different
financial year-end. This is because god Janus. He is the god of gates and your work well, but to not do the same work service providers. A TSFA is a long-term
Accountancy SA and the author cannot be held liable for any loss (including indirect and consequential loss) arising from your reliance on the opinions given in this article. Should you
contributions will only qualify if they fall doors, beginnings and endings, and as repeatedly without gaining new skills. investment vehicle with a significant tax
nevertheless elect to rely on this article, you do so at your own risk and agree to indemnify Accountancy SA and the author from any loss or damage that you may suffer as a result.
within the measurement year which is the financial year a result of this, he is represented with a double-faced Once you have mastered a skill, learn other new advantage.
of the company. head, each looking in an opposite direction. He looks skills. The TFSA regulations are part of a broader
What ‘emergency’ measures can still be taken simultaneously to the past and the future. When you start your career it is easy to follow the government policy to encourage South Africans to save
under each scorecard element before 28 February This is something we to seem to do as the old year path most people have taken and to continue to do the and to help investors receive maximum benefit from their
2016 that will qualify in terms of the amended codes? draws to an end and the new year is upon us. And with same work you did the year before. savings.
Black Equity Ownership will only be measured at that backward and forward looking, comes those all too Assess what your medium- to long-term career A TFSA allows the investor to contribute a maximum
date of verification, so there is possibly still some time presumptuous new year’s resolutions. Generally, they goals are and the skills you will need. Then try and amount without being charged capital gains tax (CGT)
to implement a transaction that makes commercial involve an improvement of our health, either physically, obtain the skills through different types of experiences. when accessing these savings or switching funds,
sense. Management Control will also only be measured emotionally or financially. Acquiring skills comes with experience, not age. It is dividend tax when receiving dividends, or income tax on
at date of verification. The three remaining elements will Look up any list of ‘most popular new year’s important to distinguish between the two. If you do not interest earned on these contribution amounts. All the
be verified based on what was done during the 2016 resolutions’ and you’re bound to find somewhere in the feel anxious now and again about a new experience proceeds are tax-free.
financial year. top three: ‘spend less, save more’ or ‘get out of debt then you are not learning. These maximum amounts are R30 000 per tax year
Training under the Skills Development element can and save money’. So instead of ensuring that these also It is not about doing something once and assuming or a total of R500 000 over the investor’s lifetime. This
still be booked and paid for before 28 February. Ensure make the list of ‘most commonly broken new year’s you’ve acquired the skill. It is about building on the translates into a maximum recurring payment of R2 500
that the training programme itself is properly accredited resolutions’, let’s rather get it right in 2016. skills you acquire each time. Top performers are not per month. Hefty penalties are payable to SARS should
and NQF aligned to avoid the spend being capped at Do this first! Figure out exactly how much it is that only comfortable with discomfort, they actively seek these contribution limits be breached. Withdrawals from
15% of actual spend. you need to be putting away each month to get out of discomfort. They are actively looking for ways to grow the account will also impact the investor’s maximum
For Enterprise and Supplier Development, debt or to save that targeted amount. That should be the and improve themselves. annual and lifetime contributions.
qualifying contributions are listed in the codes. very first thing we do after pay day. Pay off our debt or If the investor intends to use the TFSA for short-term
Ensure that the beneficiary actually qualifies and invest our savings. GETTING EXPOSURE goals they could compromise the favourable taxation
that it can be proven that the contribution reached You might have heard Julie on Bruce Whitfield’s As a manager, try to expose yourself to different and miss out on tax-free capital growth. This type of
the end-beneficiary. Beware of some so-called Money Show talk about ‘paying yourself first’. That experiences. Expand your worldview. Limited savings vehicle can be a beneficial addition to investors’
‘third-party facilitators’ that claim that they will do couldn’t be more correct. experiences can lead to a limited worldview. Broad long-term savings plan if it is used optimally.
ED ‘on your behalf’ but that are then unable to later What’s left after you’ve paid yourself is what you exposure allows you to see the world beyond your Consumers looking to invest in a TFSA should have a
provide evidence that the funds flowed to a qualifying have for the month. If you were suddenly retrenched, immediate surroundings. conversation with a financial planner to discuss taxes and
beneficiary. you’d make a plan. If you work on a commission basis Remember you do not need to know it all on your to determine how this product would fit into the investor’s
For Socio-Economic Development it is always a and you have a bad month, you’ll make plan. In the own. A skill great leaders acquire is that of being able overall financial plan, to take full advantage of its tax
good idea to simply donate the target amount to a NPO same light – you’ll make a plan after you pay yourself to put together great teams. It’s about having the best concessions. It is vital that investors ensure that their
or PBO that can prove that it benefits at least 75% black first. people in your team and getting the best out of them so annual contribution total of R30 000 is made before the
people. As an incentive, think of how rewarding it’s going that their talents are utilised. The book Good to Great by end of each tax year in February.
Both the requirements of the Amended Codes and to be when you’re finally debt free or when you’re Jim Collins highlights what great companies did to be Investors should also be wary of questionable
the onus placed on verification professionals are now rewarding yourself with whatever it was that you were great. high fee structures that seem inexpensive at first. High
much stricter. Quick decisions can often go wrong and saving for. Put a picture in your wallet that encapsulates One of the principles highlighted is ‘getting the right fee costs can easily erode the tax benefit of a TFSA
lead to money wasted. I have often seen this to be the that so you see it every time you open your wallet to people on the bus’. This principle is about building contribution over a normal discretionary savings
case with last-minute contributions to beneficiaries take out your credit card. Perhaps put that picture great teams. Rely on your team’s skills. contribution.
chosen at the last minute. Either the amount somewhere that triggers that emotion before you even In summary, seek to expose yourself where there TFSA products can be highly beneficial for investors
contributed where insufficient or the contribution get to your wallet (in my case, next to my computer, so are opportunities, feel comfortable with discomfort, do a due to the significant tax advantages. However, it is vital
itself or beneficiary did not qualify in terms of the very I see it every time I get those Yuppiechef emails). If it’s skills audit of yourself often, and don’t be complacent. that investors conduct proper research before investing
specific requirements in the codes. It is worth obtaining your new year’s resolution – surprise yourself – and Your career is your own private company. Manage it to ensure that they invest in a fairly priced, high-calibre
some advice here. keep to it! as such. TFSA.
14 | FEBRUARY 2016 FEBRUARY 2016 | 15
DEVELOP ANALYSIS ANALYSIS DEVELOP
The auditor’s consideration should that those same assertions may be required to reconcile the information
AUDITING DISCLOSURES
include areas where there have been used to evaluate the risks related in the financial statements not only to
changes in the environment and to disclosures that are not directly the general and subsidiary ledgers,
areas over which it has been difficult related to classes of transactions but also to any other sources from
to obtain sufficient appropriate or account balances (that is, other which the information contained in
audit evidence in the past. Auditors disclosures), for example the risk the disclosures is drawn. Further,
WEIGHING OUR WORDS are reminded that disclosures may
come from information systems
outside the general and subsidiary
ledgers. Useful examples help
management disclosures.
Auditors are comfortable in
applying the concept of quantitative
materiality to the audit of accounts
procedures around assessing the
adequacy of presentation of the
financial statements require the
auditor to assess and respond to
the auditor understand other and disclosures in the financial the classification and presentation
Financial statement disclosures continue to expand and are increasingly possible sources of disclosures statements. The application of assertions for the financial
qualitative and subjective. We examine the IAASB’s recent amendments to the and highlight the importance of judgement in determining qualitative statements.
judgement in determining the level of materiality is decidedly trickier. The
International Auditing Standards (ISAs), which are intended to support a more understanding required over these amendments to ISA 320, Materiality in CONSIDERATIONS WHEN
robust, consistent process of auditing disclosures. By Lindsay Croeser additional information systems. Planning and Performing an Audit, as FORMING AN OPINION AND
Most importantly, the well as changes to ISA 315, provide REPORTING ON THE FINANCIAL
I
amendments have introduced a new guidance on the application of STATEMENTS
assertion for classes of transactions materiality to qualitative disclosures Finally, the new requirements in ISA
n order to drive improved AUDITOR CONSIDERATIONS required disclosures. ISA 240 and events, and related disclosures, to determine whether they are of 700 (Revised), Forming an Opinion
focus on disclosures WHEN COMMENCING THE highlights that the audit team’s named ‘presentation’. In addition to such importance to the users as and Reporting on the Financial
throughout the audit process ENGAGEMENT discussion of the susceptibility of the existing assertions of occurrence, to potentially affect their decisions Statements, include evaluating
and to clarify the audit work ISA 210, Agreeing the Terms of Audit the entity’s financial statements to completeness, accuracy, cut-off taken on the basis of the financial whether the financial statements
effort required on disclosures, Engagements, recommends that the material misstatement due to fraud and classification, the auditor must statements as a whole. For example, appropriately disclose the significant
the IAASB undertook a specific engagement agreement requests that needs to include assessment of this consider whether ‘transactions and qualitative disclosures regarding accounting policies selected and
project to update the ISAs to enhance management provides the financial risk in relation to disclosures. events are appropriately aggregated liquidity or debt covenants, events applied and whether they have been
the requirements for auditors. The statement information early in the ISA 300, Planning an Audit of or disaggregated and clearly that lead to impairment losses or key presented in an understandable
more significant new and amended audit process, including information Financial Statements, focuses auditor described, and related disclosures sources of estimation uncertainty manner. The new requirements also
requirements for auditors, and related that is obtained from outside the attention on the need for the timely are relevant and understandable’. if misstated or omitted may paint require that the auditor evaluate
guidance, are summarised below. general and subsidiary ledgers. consideration of disclosures in When expressed in relation to a fundamentally different picture whether the information presented
The definition of ‘financial ISA 260 (Revised), developing the overall audit strategy. account balances and related of the entity. Amendments to ISA in the financial statements is
statements’ in ISA 200, Overall Communication with Those Charged Given the wide range of information disclosures, the presentation 450, Evaluation of Misstatements relevant, reliable, comparable and
Objectives of the Independent with Governance, focuses auditor and the level of detail that may be assertion describes how ‘assets, Identified during the Audit, explain understandable.
Auditor, and the Conduct of an Audit attention on communicating an encompassed in management’s liabilities and equity interests that each misstatement of a The effect of these changes will be
in Accordance with International overview of the planned scope and disclosures, determining the nature, are appropriately aggregated or qualitative disclosure, other than most keenly felt in entities where the
Standards on Auditing says that timing of the audit. This may also timing and extent of planned risk disaggregated and clearly described, those that are clearly trivial, should be disclosure process is onerous and
financial statements are a ‘structured include addressing the implications assessment and audit procedures and related disclosures are relevant accumulated and evaluated. The new where historically this process has
representation of historical financial on disclosures of any significant as they relate to disclosures is an and understandable’. Auditors and application guidance also reminds not been prioritised early on in the
information, including disclosures’. changes within the applicable important consideration at the start of preparers must ensure that their us that misleading disclosures financial statement closing process.
This definition has been expanded financial reporting framework, or in the audit. Early consideration assists processes specifically address the resulting from management bias or Preparers and auditors will need
through addition of the following the entity’s environment, financial the auditor in planning adequate new presentation assertion. This will extensive duplication or uninformative to engage, from an early stage, in
clarification relating to disclosures: condition or activities. time for addressing disclosures establish a more consistent work disclosures that may obscure a effective dialogue around disclosures
’Disclosures comprise explanatory in the same way as for classes of effort for auditing disclosures. proper understanding of matters throughout the audit process. Users
or descriptive information, set out CONSIDERATIONS WHEN transactions and events, and account The existing assertions on may also be considered a material of the financial statements ought to
as required, expressly permitted or PERFORMING THE AUDIT RISK balances. both classes of transactions and misstatement. rest assured knowing that not only
otherwise allowed by the applicable ASSESSMENT AND PLANNING ISA 315, Identifying and Assessing account balances have also been the numbers, but also the words have
financial reporting framework, on THE AUDIT the Risks of Material Misstatement modified to make more specific CONSIDERATIONS FOR been appropriately weighed.
the face of a financial statement, or ISA 240, The Auditor’s through Understanding the Entity and reference to the disclosure aspect RESPONDING TO THE
in the notes, or incorporated therein Responsibilities Relating to Fraud its Environment, includes some of of each assertion. For example, the ASSESSED AUDIT RISKS
by cross-reference.’ This serves in an Audit of Financial Statements, the more fundamental changes. As completeness assertion now contains ISA 330, The Auditor’s Responses to
to highlight that disclosures are draws the auditor’s attention to the part of understanding the business, ‘all related disclosures that should Assessed Risks, contains expanded
an important element of financial possibility of fraudulent financial the auditor is required to reflect on have been included in the financial requirements for substantive AUTHOR |Lindsay Croeser CA(SA) is
reporting, whether presented within reporting through intentionally those disclosures where the risk statements have been included’. The procedures on the financial statement Senior Manager – Africa Assurance
the financial statements or otherwise. omitting, obscuring or misstating of material misstatement is high. application guidance also highlights closing process. The auditor is Enablement at Ernst & Young
16 | FEBRUARY 2016 FEBRUARY 2016 | 17DEVELOP ANALYSIS ANALYSIS DEVELOP
WHAT IS THE SCOPE OF ISA with information on the entity’s the amounts or other items to
720 (REVISED)? operations, financial results and compare)
AUDITOR FOCUS ON
The introduction to the standard financial position as set out in the o Remain alert for indications that
asserts that the standard is written financial statements. An annual the other information not related
in the context of an audit of financial report contains or accompanies to the financial statements or the
statements by an independent the financial statements and auditor’s knowledge obtained
auditor. The auditor’s opinion on the the auditor’s report and usually in the audit appears to be
financial statements does not cover includes information about the materially misstated
‘OTHER INFORMATION’
the other information, nor does this entity’s developments; its outlook, • Introducing documentation
ISA require the auditor to obtain risks and uncertainties; a statement requirements in terms of which
audit evidence beyond that required by the entity’s governing body; the auditor includes in the audit
to form an opinion on the financial and reports covering governance documentation:
statements. matters. o The procedures performed
{ }
The auditor needs to read under this ISA, and
and consider other information o The final version of the other
Ashika Mohan gives an overview of the auditor’s revised responsibilities under for material inconsistency with
THE STANDARD
information on which the
the financial statements or the auditor has performed the work
international standards to read and report on other information included in an auditor’s knowledge obtained
DOES NOT CONSTITUTE required under this ISA
entity’s annual report, focusing on the continued importance of the auditor’s during the audit. Any material
AN ASSURANCE • Providing transparency by
ENGAGEMENT ON OTHER requiring reporting on the auditor’s
responsibilities in this area and the main changes inconsistency may either indicate
INFORMATION, NOR DOES work relating to other information
a material misstatement of the
financial statements or of the other IT REQUIRE THE AUDITOR Importantly, the IAASB has retained
information, either of which may TO OBTAIN ASSURANCE the concept that the standard
ABOUT THE OTHER
T
undermine the credibility of the does not constitute an assurance
financial statements and the auditor’s INFORMATION engagement on other information
he International Standard on Auditing (ISA) 720 (Revised), The report. nor does it require the auditor to
Auditor’s Responsibilities Relating to Other Information, was The revised standard assists the obtain assurance about the other
issued by the International Auditing and Assurance Standards auditor in avoiding being knowingly • Enhancing and explaining the information.
Board (IAASB) in April 2015 and is effective for audits of financial associated with information the auditor’s work effort with respect
statements for periods ending on or after 15 December 2016 auditor believes contains materially to other information. The auditor is WHAT WAS THE IAASB
(early adoption is allowed). false or misleading statements. required to: TRYING TO ACHIEVE
ISA 720 (Revised) does not apply o Obtain in a timely manner and, if IN UNDERTAKING THIS
WHAT IS ‘OTHER INFORMATION’ IN THE CONTEXT OF ISA 720 to preliminary announcements of possible, prior to the date of the PROJECT?
(REVISED)? financial information or securities auditor’s report, the final version As the range of other information
‘Other information’ is financial or non-financial information other than offering documents, including of the other information (that is, has diversified, the IAASB aims to
financial statements and the auditor’s report thereon included in an entity’s prospectuses. the document(s) comprising the improve audit quality by broadening
annual report. annual report) and clarifying the scope of other
In recent years the amount of detail included in entities’ annual reports, WHAT ARE THE MAIN o Read the other information and information, in addition to enhancing
and other corporate and external reports, besides the audited financial CHANGES IN RELATION TO consider whether a material and explaining the auditor’s work
statements and the auditor’s report, has changed significantly. THE SCOPE AND AUDITOR’S inconsistency exists between effort. This will help bring greater
Annual reports now include more narrative and qualitative information, WORK EFFORT? the other information and the consistency around the world
such as descriptions of the entity’s business model and integrated reports. The main changes to the ISA are: financial statements, and the regarding auditors’ consideration of
Users have been attaching more importance to such information and • Broadening and clarifying the auditor’s knowledge obtained other information.
disclosures, using these to analyse the risks of the business and for decision- scope of other information by in the audit. As the basis for The intentions are to increase the
making purposes. There has also been a movement towards exploring ways relating it to the concept of an this consideration the auditor value of the audit, without changing
in which to better integrate information in financial statements with other parts ‘annual report’. In the ISA an is also required to compare its scope, in a cost beneficial manner,
of an entity’s public reporting package. annual report is defined as a selected amounts or other through enhancing the auditor’s
document, or combination of items in the other information responsibilities with respect to
WHY WAS EXTANT ISA 720 REVISED? documents, prepared typically on with such amounts or other other information, and improve
The IAASB’s revised extant ISA 720 to ensure that the ISA continues to an annual basis by management or items in the financial statements transparency by requiring auditors
enhance the credibility of financial statements through specifying appropriate those charged with governance in (paragraph A27 in the revised to articulate in their reports their
responsibilities of the auditor relating to the range of other information in accordance with law, regulation or standard provides additional responsibilities under ISA 720
documents containing audited financial statements, taking into account how custom, the purpose of which is to guidance with respect to (Revised) and the outcome of their
such information is distributed. provide owners (or stakeholders) factors to consider in selecting work relative to the other information.
18 | FEBRUARY 2016 FEBRUARY 2016 | 19You can also read
