Professional Accountant - Mar / Apr 2008

Specific accounting standards for small and medium-sized entities (smes) have long been needed and may we say, begged for. The burden for small and medium-sized entities to comply with the principles of statements of Generally Accepted Accounting Practice (GAAP), which basically constitute the International Financial Reporting standards (IFRSs), has raised concerns from accounting practitioners across the globe over the past decade. And finally it is here - specific accounting standards for the smaller non-listed entity.

The enactment of the Companies Bill (B61 - 2008) is immanent. The Bill will replace the current Companies Act and as a result introduce many changes to the formation, administration, and maintenance of companies and close corporations. Some of these changes relate to the role and function of accountants, accounting officers and auditors.

Section 13 of the Companies Act 61 of 1973 provides as follows-

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"Where a company or other body corporate is the plaintiff or applicant in any legal proceedings, the Court may at any stage, if it appears by credible testimony that there is reason to believe that the company or body corporate ... will be unable to pay the costs of the defendant or respondent if successful in his defence, require sufficient security to be given for those costs and may stay all proceedings till the security is given."

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This provision seeks to pre-empt the mischief that would occur if shareholders who would benefit financially if their company were successful in litigation as plaintiff or defendant were to shield behind its separate corporate identity and their own limited liability as shareholders if the company turned out to be unsuccessful in that litigation and was ordered to pay the defendant's legal costs, and was then unable to do so.

Companies will only have to comply to the provisions of the bill when it becomes effective. It is expected that the Bill will become effective during July 2010.

This media statement issued by the National Treasury is the product of information uncovered during the consultation process associated with the recently introduced Taxation Laws Amendment Bills, 2008. One of the main issues addressed is the closure of avoidance involving section 45 rollover relief. More specifically, intra-group rollover relief had inadvertently become a means of obtaining tax-free sales to independent parties, and the Bills are designed to close this practice.

During 2008 the SAIPA Technical and Standards Department commissioned Cornelie Crous to perform research on the Audit and Independent review as proposed in the new Companies Act. A series of 3 articles was drafted. This is the last of the articles and provides feedback on the results of the survey.

In recent years, there have been significant efforts to change and improve financial reporting. What is the result of these efforts? Has the financial reporting process become better or worse? Have financial reports become more or less relevant, reliable and understandable? What should be done next?

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These were the central questions in this independent global survey commissioned by the International Federation of Accountants (IFAC) among the participants in the financial reporting supply chain.

The anticipated Companies Bill - replacing the Companies Act of 1973 and expected to be implemented by 2010 - constitutes a commendable commitment and effort on the part of the Department of Trade and Industry.

Robert L. Bunting, President of the International Federation of Accountants (IFAC), was recognized for his contributions to accounting ethics, governance, and the public interest by the Loyola Marymount University's (LMU) College of Business Administration in Los Angeles on March 17. In accepting the award from Dr. Lawrence Kalbers of the Center for Accounting Ethics, Governance, and the Public Interest, he offered some views on ways to solve the current worldwide financial crisis and discussed the role that the international accounting community must play in the global recovery.

The Companies Bill development process began in earnest over four years ago using guidance developed in the Department of Trade and Industry (the dti) policy document titled South African Company Law for the 21st Century : Guidelines for Corporate Law Reform (May 2004). The ultimate goal of the reform was to ensure that the regulatory framework for enterprises (of all types and sizes) promoted "growth, employment, innovation, stability, good governance, confidence and international competitiveness."

Black holes in organisations can be defined as : "An area of an organisation where, unbeknownst to management, an abundance of undesirable activities occur or a lack of desirable activities occur in abundance, both of which destroy organisations."

The Tax Court - Pretoria recently delivered a judgement on the effect of an arbitration award on amounts previously included by a taxpayer in its gross income.

The month of march has come to be regarded as Human Rights month in South Africa. The Credit information Ombudsman suggests we take a moment to remind each other that Consumer Rights are also Human Rights.