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- Volume 6, Issue 2, 2013
Journal of Economic and Financial Sciences - Volume 6, Issue 2, 2013
Volume 6, Issue 2, 2013
Source: Journal of Economic and Financial Sciences 6, pp 263 –284 (2013)More Less
Small businesses have the potential to grow the economy, generate jobs and reduce poverty, but they face many constraints including high tax compliance costs and burdens. A comparison of the findings and recommendations made in small business tax compliance cost studies conducted in South Africa with initiatives introduced by the South African Revenue Service (SARS), substantiated by consultations with a SARS and a South African Institute of Chartered Accountants official, reveals that SARS has, in most cases, attempted to address the tax compliance burdens identified in these studies. However, SARS has only partially addressed the complexity of the tax law, the lack of software to assist small businesses with their record-keeping and the compliance burden associated with provisional tax. SARS has failed to address the need for a threshold below which no small business tax return is required to be submitted, the inclusion of tax in the school syllabus, the requirement for first-time offenders to attend courses instead of raising penalties and the need for a reduction in the rates of interest and penalties raised by SARS. These initiatives should be considered by SARS and it is recommended that further research into the success and effectiveness of all the initiatives already introduced by SARS be performed.
Sustainability in education : an evaluation of a new teaching and learning strategy in chartered accountancy studies - a student perspectiveSource: Journal of Economic and Financial Sciences 6, pp 285 –308 (2013)More Less
Sustainability has been described as the primary moral and economic imperative of the twenty-first century and one of the most important sources of both opportunities and risks for businesses. From an educational perspective, sustainability could be related to enhancing accurate, reliable and relevant teaching and learning in an ever-changing and evolving educational, economic and social landscape. The objective of the paper is twofold: it aims, firstly, to provide a brief overview of the higher education landscape and drivers for change in accounting education and the need for sustainable teaching and learning; and, secondly, it aims to provide evidence of the implementation of a new teaching and learning strategy in accountancy education programmes at a large SAICA-accredited residential higher education institution. This was done through a literature review and supported by empirical evidence obtained from questionnaires completed by the honours student group in chartered accountancy of the stated institution. The study found that, although initially new to students, the teaching and learning approach was well accepted and eventually created an environment conducive to teaching and learning. It was also found that students marks improved, which resulted in higher throughput rates.
Source: Journal of Economic and Financial Sciences 6, pp 309 –328 (2013)More Less
Solvency II is the new European Union (EU) legislation that will review the capital adequacy regime for the insurance industry. Considerable progress has been made in the banking sector with the implementation of the Basel Accords (Basel). The implementation of Solvency II, therefore, brings with it an opportunity for the insurance industry to assess the successes, weaknesses and shortcomings experienced by the banking sector's implementation of Basel so as to learn from them and ensure that Solvency II's implementation duplicates the successes and avoids the failures of Basel's. This article critically explores weaknesses and failures of Basel which were exacerbated and/or exploited by the financial crisis of 2007-2010 and provides advice on how these might be mitigated or avoided in the implementation of Solvency II.
An analysis of the tax implications of prospecting expenditure incurred by junior exploration companies in South AfricaSource: Journal of Economic and Financial Sciences 6, pp 329 –346 (2013)More Less
One of the consequences of the change in the mineral policy of South Africa with the promulgation of the Mineral and Petroleum Resources Development Act 28 of 2002 was the increase in junior exploration companies. Junior exploration companies are mainly involved in prospecting activities. No definition exists for either prospecting or exploration in the Income Tax Act 58 of 1962 (Income Tax Act). The lack of research and case law on the tax treatment of prospecting expenditure by junior exploration companies may result in various interpretations for the treatment of prospecting expenditure. Through critical analysis of specific sections in the Income Tax Act, applicable case law and relevant literature, it is evident that there are different interpretations by junior exploration companies of the treatment of prospecting expenditure from an income tax perspective. The perceived challenges with interpretation of the tax treatment of prospecting expenditure by junior exploration companies create an opportunity for further research.
An investigation into the financial barriers facing women entrepreneurs operating in SMMEs in Tshwane, South AfricaAuthor Evelyn Chiloane-TsokaSource: Journal of Economic and Financial Sciences 6, pp 347 –358 (2013)More Less
The South African women emancipation policy statement and gender equality are critical tools established by government to eradicate poverty among entrepreneurs operating in small business. Khula was established to act as a financial wholesaler to emerging entrepreneurs who needed finance to start and grow businesses. The Small Enterprise Development Agency was established to provide training needs to small business operators. Lack of finance is a major stumbling block to women entrepreneurs reaching their full economic potential in South Africa. Financial collaterals are barriers for women operating in SMMEs in Tshwane. The objective of the study was to investigate the financial barriers facing women entrepreneurs in Tshwane when starting or growing businesses. In order to achieve the results a structured questionnaire and interviews were used as method of collecting data. A sample of 300 women operating SMMEs in six townships of the Tshwane metropolitan area was analysed per a quota of 50 businesses per township. The results indicate that women entrepreneurs lack the financial collateral that is demanded by financial institutions when applying for finance to start or grow their business.
Source: Journal of Economic and Financial Sciences 6, pp 359 –382 (2013)More Less
This paper focuses on the posture the oil company BP adopted when faced with a legitimacy crisis during one of the worst environmental disasters in history. Against a backdrop of a discussion of the rhetorical aspects of image repair discourse and organisational legitimacy, Hearit's strategy of corporate apologia was employed to determine the posture BP adopted in relation to the crisis. This paper adds to the literature on image repair strategies by heeding a call by Hearit for the context within which corporate apologia takes place to be taken account of, an approach that warrants a distinct line of research. The literature was further extended by complementing Hearit's strategy with semiotics and analysing its use in both the annual and sustainability reports. The additional focus on the sustainability reports is important, due to the high premium placed on sustainability in the changing business environment. On a practical level this paper contributes to an understanding of how organisations use sustainability reports to respond to legitimacy challenges.
Accounting estimates in financial statements and their disclosure by some South African construction companiesAuthor Elsje RaubenheimerSource: Journal of Economic and Financial Sciences 6, pp 383 –400 (2013)More Less
Accounting estimates form part of the preparation of financial statements and should not affect faithful representation. The use of accounting estimates does not yield exact amounts, but, rather, amounts based on assumptions. The frequency of use of accounting estimates in financial statements depends on the measurement criteria prescribed by International Financial Reporting Standards (IFRSs). For example, in the absence of prices in an active market, and if measurement is at fair value, the fair value is based on assumptions. Disclosure of the assumptions on which accounting estimates are based enables the users of financial statements to judge if amounts are faithfully represented. The objective of the research on which this article is based was to establish what IFRSs require in terms of the disclosure of assumptions and estimation uncertainty and also if listed companies in the construction and materials sector comply with these disclosure requirements.
Non-executive directors : employees or independent contractors for both income tax and employees' tax purposes?Source: Journal of Economic and Financial Sciences 6, pp 401 –420 (2013)More Less
The concept 'independent contractor' is one of the more contentious concepts contained in the Fourth Schedule to the Income Tax Act 58 of 1962, as amended. The classification of a person rendering services as either an 'employee' or an 'independent contractor' is relevant for both income tax and employees' tax purposes. The objective of this article is to determine whether non-executive directors (both resident and non-resident) are employees or independent contractors for both purposes, respectively. A comprehensive literature review was done in which the meaning of the concepts 'non-executive director' and 'independent contractor' was discussed in order to gather information needed for the classification. The statutory and common law tests were then applied to determine the classification of non-executive directors as independent contractors. The conclusion reached is that resident non-executive directors could qualify as 'independent contractors' for employees' tax and income tax purposes. Non-resident non-executive directors of companies are 'employees' for employees' tax purposes and 'independent contractors' for income tax purposes.
Evaluation of corporate integrated reporting in South Africa post King III release South Africa - an exploratory enquirySource: Journal of Economic and Financial Sciences 6, pp 421 –438 (2013)More Less
Following the release of the King III report on Corporate Governance for South Africa, which became effective in March 2010, South African companies are expected to embrace the concept of integrated reporting in terms of which they are required to provide details of their strategies, corporate governance, risk management processes, financial performance and sustainability. More importantly, companies need to show how these components of integrated reporting are linked to one another so that stakeholders can make informed decisions about such companies' current performance as well as their ability to create and sustain value in the future. The purpose of this study was to determine whether the level of reporting by South African listed companies has improved since the release of the King III report. It was subsequently found that there have been some progress in this regard, but there is still much room for improvement if the objectives of integrated reporting are to be fully met.
Source: Journal of Economic and Financial Sciences 6, pp 439 –458 (2013)More Less
This article will determine the socio-economic impact of South Africa's largest urban national park, and the one that attracts the most visitors. Because national parks have more functions than mere conservation, the following questions arise: "What economic and social impacts are created by such parks?" and "How do communities benefit from allocating land for conservation?" Little research on this topic has been conducted in Southern Africa, and this research therefore contributes to our knowledge. Two surveys were conducted. One focused on the communities surrounding the park and the other on visitors to the park. A Social Accounting Matrix (SAM) determined the economic value. Results showed that, although the park attracts the most visitors, it does not generate the greatest income when compared to other national parks. Results concerning the community survey revealed that the surrounding communities have very positive perceptions, although they believe the impacts to be more economic than social. Problem areas were also identified.
The need for specific accounting principles for non-profit organisations' assets without economic benefits, restricted donations and fundsAuthor Cobus RossouwSource: Journal of Economic and Financial Sciences 6, pp 459 –478 (2013)More Less
Non-profit (or "not-for-profit") organisations are faced with specific challenges in their financial reporting when they are required to or chose to apply formal financial reporting standards. The IFRSs or the IFRS for SMEs are meant for business entities and are not specifically developed to be applicable to non-profit organisations. Prior research suggested that the main problems of non-profit accounting centre on the recognition of assets with no future economic benefits, but with service potential, the recognition of restricted income and the so-called fund accounting. This research analyses the requirements of IFRSs, IFRS for SMEs and the Australian accounting standards for non-profit organisation relating to these aspects. The article then presents the views of South African accounting practitioners who are involved in the financial reporting of non-profit organisations on these issues.
Productivity, technical progress and scale efficiency in Indian manufacturing : post-reform performanceAuthor Ewert KleynhansSource: Journal of Economic and Financial Sciences 6, pp 479 –494 (2013)More Less
This article studies the effects of the economic reforms on the Indian manufacturing industries. Data Envelopment Analysis was used to estimate technical and scale efficiency changes after the 1991 reform initiatives. The estimates suggest, however, that the efficiency of manufacturing industries declined during the post-reform era. The variations are different across industries, and the findings demonstrate the importance of technological progress for improving manufacturing efficiency and productivity in India.
The impact of COSO control components on internal control effectiveness : an internal audit perspectiveSource: Journal of Economic and Financial Sciences 6, pp 495 –518 (2013)More Less
Boards of directors have the ultimate responsibility for governance - including internal control - in their organisations. Management is tasked with the design, implementation and maintenance of internal control systems. Internal auditors play a key role in independently evaluating these controls, acting as agents on behalf of the board of directors in order to mitigate the possibility of management not acting in the best interest of the organization, leaving gaps in the internal control system, and, in some instances, doing so in order to enable unlawful personal gain. The Committee of Sponsoring Organisations' Integrated Framework for Internal Control (hereafter referred to as the COSO framework) is used as a recognised framework, which, if implemented, could result in an effective internal control system and served as the basis for the design of the research instrument of the research. The questionnaire was distributed to internal audit practitioners. Responses were obtained from 31 participants from the Eastern Cape and Western Cape regions in South Africa. The majority of the participants provide internal audit services to the local government sphere of the South African government. This article identifies which characteristics should exist in an organization's control system that, in the opinion of internal auditors, improve the effectiveness of the internal control system. This study concludes that internal auditors are of the opinion that control characteristics as outlined in the COSO framework for 'risk assessment', 'information and communication', 'control activities' and 'monitoring' components of internal control, do contribute to an effective internal control system.