Botswana Institute of Accountants - BICA · Surviving a BURS Audit ... the challenges of their mandate were enormous and as were ... Botswana Institute of Accountants

B o t s w a n a I n s t i t u t e o f A c c o u n t a n t s

NEW FINANCIAL REPORTING ACT

IFRS SMEsExposure Draft

Volume 1 Nov. 2007


The operations of the Corporation commenced

in 1972 with the acquisition of 1 571 houses

from government to the tune of R6.5 million. The

Corporation has developed a large estate in the

country, with the majority in the cities of Gaborone

and Francistown. The estate includes flats, town

houses and a balanced mix of high, medium and

low income houses.

The Botswana Housing Corporation was established

by an Act of Parliament in 1970 to provide housing,

office and other building needs of the Botswana

Government, Local Authorities and the general public.

The Corporation’s affairs are controlled by a Board of

Directors, the members of which are appointed by the

Minister of Lands and Housing, to whom the Corporation

is directly responsible.

Be open, honest and direct

Maintain confidentiality: no attrition/ no retribution

Manage all agreements

Maintain a supportive environment

Be prepared to stay focused

Maintain a proper attitude for learning (1% possibility)

Have fun (enjoy, laugh) OUR

GRO

UND

RULE

S

To be the best in Property Development and Estate

Management Services

To innovatively develop property and provide efficient, related

services for guaranteed stakeholders’ satisfaction.

mission

vision

BOTSWANA HOUSING CORPORATION

Telephone 3605100, Fax 3952070, Email [email protected] P. O. Box 412, Gaborone

3

It is with great pleasure that I write this message since this brings into culmination our effort

to have a newsletter issued to members. As you are probably all aware, we at the BIA have been trying to get the newsletter to be a regular feature in the Institute’s agenda but have failed many a time due to resource constraints as well as lack of articles for publication. It is with renewed vigour that we have embarked on this project again and we require the support from all BIA members to enable us to sustain this endeavour.

The intention of the newsletter is to bring to the members articles of interest from both local and international arena covering various topics such as professional, political and socio-economic issues. We need all your support to make this initiative a success. So if you have any articles that you would like to share with the rest of the membership, please forward them to the BIA. It is our intention to publish the newsletter quarterly to start with and if the response is good, we could make this a monthly publication.

In addition to the newsletter, the Institute has embarked on a number of other projects, such as the website upgrade, a good database management system and CPD monitoring system. All these are intended to improve the service delivery to the members. Although at the moment, the website is not interactive, it is our aim to make it interactive in the near

future so that members could get most of their information online.

As we approach the end of the year, I would like to remind all of you about the CPD requirements. The forms will be sent out to you soon and please ensure that you have achieved at least the minimum required number of CPD hours by the end of this year. Being the rst year, it might seem onerous, but please note that veri able and relevant CPD events are not necessarily restricted to BIA seminars. It can be anything that is of relevance to your role and your work.

Let me take this opportunity to inform members that the International Federation of Accountants (IFAC) is celebrating its 30th anniversary this year and to celebrate this milestone, IFAC is organizing a number of special events, publications and other activities around the theme “Thirty Years of Progress” and is encouraging and supporting the participation of IFAC members, associates, and regional accountancy organizations and other organizations that have played an important role in its development.

This plan outlines IFAC activities to be held throughout the year and provides suggestions on how IFAC and its member and regional bodies can collaborate to draw the world’s attention to the global profession’s values and accomplishments. We, as

a member body will also be declaring December 2 – 8 2007 as World Accountancy Week and have activities promoting the key objectives as outlined above.

We have a number of members who volunteer their services on to the various committees and with whose support the BIA has pursued many projects. I would like to thank these members since it is with their support and ideas that we have made these achievements.

Our profession is very challenging because of the constant changes that are affecting us in terms of the new standards and other developments. According to the plans of the International Accounting Standards Board (IASB), there are no major changes coming in 2008 besides the IFRS for SMEs which has aroused a lot of interest from the professional accountants across the globe. However after 2009, there are going to be major changes in many of the IFRSs with fourteen standards expected to be released in 2009/2010. So the challenge to our profession is a mammoth one as we have to keep abreast with all these changes and updates.

Let me again thank all you members for your support and urge you to send in your comments and suggestions on this newsletter to the Executive Of cer at the Institute.

With these few words let me say until next time!

Message from President

The intention of the newsletter is to bring to the members articles of interest from both local and international arena covering various topics such as professional, political and socio-economic issues.

B o t s w a n a I n s t i t u t e o f A c c o u n t a n t sContentsPresident’s Column ...............................3BIA 2007/2008 Council ..........................8Botswana unprecedented successis not luck...............................................9The Financial Reporting Act .................12What is ECSAFA ...................................16Surviving a BURS Audit ........................18New Companie’s Act ..........................21IFRS SMEs ED .....................................22

Membership MattersBIA Social & Sporting Events .........14-15 BIA full members can now be commissioners of Oath .......................19The Benefits of BIA Membership .........20Meet the past BIA Presidents .................6BIA New CEO profile ............................24Orbituary ..............................................25

Editorial TeamPublisher Simply Marketing +267 3914788

EditorsDuncan MajindaPriya Iyer - Editor in Chief

Editorial SupportRegina Ramanteba, Pinkie Modisa

Project ManagerMartin Chibanda

Art Direction/Design & LayoutTendai Bunhu

Sales and MarketingItumeleng Hirschfeld, Tebogo Sekwenyane

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6


Priya Iyer joins the heavy weights of the accounting profession in style. We were discussing the

rise of Priya to the helm of the Institute hierarchy the other day and all of us were unanimous in their views that if there was one person who has served this Institute sel essly and exceptionally, it was Priya. All the signs pointed to the reality that it was just a matter of time before she ascended to the throne. So when she became the rst woman in the history of the

Institute, to become President it came as no surprise.

Priya was the rst professional woman to head the Institute as its Executive Of cer. She was also the rst woman to become the Vice President of the Institute.

Priya left the Institute in 1999 to join Pricewaterhouse Coopers as their Training Manager where she currently holds the position of Associate Director.

However, she continued her active involvement with the Institute as member of the Education & Training and the Membership & Examination Committees. Priya was elected to Council with the largest majority of votes in 2004 and chaired the Membership & Examinations Committee in 2004 and the Education & Training Committee from 2005. For many years she was involved in projects dealing with the acceleration of citizen accountants through career guidance and various training schemes

As she planned how she was going to run the Institute as President, Priya came up with yet another unprecedented idea of putting together the past presidents in a historic lunch held at Gaborone Sun. She reasoned that all these past presidents must have dreams which they had during their tenure and which they probably could not fully realise

and she wanted to hear all of them. She also believed that the best source of wisdom would be these great men who all hold prominent positions in their organisations and have experience in abundance.

The lunch turned out to be more than a gold mine as ideas worth millions started owing in. They all appreciated what they termed a kind gesture but all pledged their support to the Institute and promised that their doors would always be open to Priya and her team.

Past Presidents’ lunchBack row: From left to right - Mr M Marinelli (President 2000-2002, Mr Duncan Majinda (BIA Executive Of c-er), Mr T S Rajaram Mohan (President 1995-1996), Butler Phirie (President 1998-2000), Mr Guru Gurumoorthi (President 2006-2007)

Front Row: From left to right-Mr L Maika (President 1990-1991), Mr John Stevens (President 1996-1998), Mrs Priya Iyer (Current President), Mr U. Corea (President 1994-1995)

Not in picture: Mr M Lesolle (Presi-dent 2004-2006), MR J Ramesh (Presi-dent 2002-2004), Mr J Saiker (President 1991-1992), Mr D Lethbridge (President 1992-1993)



The Botswana Institute of Accountants

Council members for 2007/2008

Meet The Team

9


This year’s Annual Dinner Dance was special as the former President of the Republic of Botswana

graced the occasion by being the Guest Speaker. When he was called forward to speak he received the longest standing ovation ever witnessed by such a professional gathering in the history of the Institute. The accountants welcomed him in a spectacular fashion and he did not disappoint either. Sir Ketumile kept the audience on their toes the entire evening. His speech was outstanding as he systematically analysed the subject and told his audience that the success of Botswana was architectured by its leaders, its people and common sense.

Congratulating the new Council

In his opening remarks the former President congratulated the newly elected members and wished them the best of luck in the next twelve months in of ce. He told them that the challenges of their mandate were enormous and as were the expectations of their fellow members who elected them and that the members of the public also expected them to make strategies that would protect their interest and safeguard their assets as they were their custodians. Sir Masire explained that the subject that he was asked to address was not an easy one as many people within and without the country held divergent views on it. He added that some people had perceptions that Botswana’s economic success had come about more as a factor of luck than anything and emphasised that he held a totally different view. He admitted that although luck might have played a part in the

Botswana’s unprecedented economic success – A lucky phenomenon??

10


process, he emphasised that it wasindeed more that luck that put Botswana where it was today. The former President argued that he knew for sure that luck on its own could not deliver to Batswana the goods and services they have and continue to enjoy, emphasising in the process that the success referred to could not have come about without certain policies and programmes in place. “We should not ignore the imperative factor of prudent management which we have religiously been committed to. Those of you who rub shoulders with ministers of religion will remember that they sometimes tell us that God helps those who help themselves. We are where we are today as a result of well thought development strategies enhanced by well articulated moves encored on principles of good governance.” he said. The former President continued his address on the subject at hand

by giving an analogy about the famous Gary Player. “I know of the story of a famous South African Golfer by the name of Gary Player who responded to a spectator’s jibe that it was through mere luck that he had managed to make such a dif cult put. He responded, “It is funny that the more I practise the more I get lucky”. He was admitting in a way that luck might have been involved but he was also sure that it was his practise that had achieved that feat. I believe that during his practise sessions he might have putted several of shots like that or even more dif cult ones. To come back to the question at hand, yes luck might have played a part in the economic success of Botswana, but I believe that we too played our part in this journey just like our Golfer friend. I will now go through what I believe led to the great success our country made and continues to make.”

He said Sir Ketumile explained that this was not something that was achieved over night; it was a journey that had taken decades to travel. He conceded that consequently what he was to say would only scrap the surface. With his characteristic oratory accomplishment and humour he put it this way. “For a journey that has taken decades to travel, one can not hope to do much in trying to narrate all the experiences they have gone through in the short time that I have with

you tonight. I will therefore just scrap through the surface. This might actually afford me another

opportunity to be invited to a similar grandeur occasion like this in the future so that I can come and nish my story.” He joked, to the loud applause of the audience. Sir Ketumile covered the key factors that led to Botswana’s unprecedented economic success with a combination of smoothness, eloquence, and the skill of an old race horse, well trained and very familiar with the geography of the race course. On Economic performance of our country, Sir Ketumile Masire said that the micro-economic management, institutional reforms and investment in human resources development became core factors in the country’s management tools as Government remained committed to the concept of strategic planning.He explained that Botswana had adhered to her National Development Plans which spelt out Government policies and prioritized development programmes and projects and this fundamental system continued to effectively and ef ciently work for our country. As the former President continued to talk, it became very apparent that those words did not only come from his mouth but from deep down out of his heart and soul; talking about the country that he gave his entire life to serve, abandoning his natural love for farming. On to social harmony, the former President said that, Africa had a history of social unrest, genocides, poverty and ethnic con icts; the evils that have caused untold hardships. He gave as examples the con icts that took place in the Democratic Republic of Congo, Rwanda, Sierra Leone, Liberia and many others. “In Botswana, I am happy that we have been able to avoid such occurrences. I do not think that even with this situation, there could still be someone who could attribute it to pure luck. Our determination

I am told that accountants are quite boring but excuse me because I am not. The former President seems to be saying


and sustained efforts to have social harmony in our country; adherence to our culture of consultation and mutual tolerance; and our belief in Unity in Diversity have brought and kept us to where we are today. In Botswana, we live in harmony and we respect each other’s cultures and traditions. We do this with the full knowledge that there can not be any socio-economic development in the absence of peace and stability. It is an imperative that we fully recognize.” He emphasised. Sir Ketumile warned of the danger of corruption if left uncontrolled. He explained how Africa had been dissipated by this evil and he had this to say: “A couple of weeks ago, the South African President, His Excellency Mr. Thabo Mbeki speaking at

a global anti-corruption forum, said that corruption was crippling worldwide efforts to eradicate poverty and that it denied the poorest in society access to basic services. I subscribe to this view. Corruption has great potential to bleed the economy and cause extreme poverty. It can create a situation where economic and political opportunities are a privilege of the few, the few who ultimately form themselves into formidable cabals that will stop at nothing to defend and safeguard their sel sh interests, and their ill gotten political and economic advantage. The former President was at pains to observe that unfortunately, our continent, Africa, had not been spared from the iron grip of this evil. He explained that corruption was an evil that we in Botswana

have tried to ght and prevent from setting in our society.��“We have put in place everything that could assist us in this regard.I am pleased to state that, although Botswana can not claim to be immune from corruption, we have been ranked very highly, by international transparency organisations, in the list of less corruptive countries. If we are to go by statistics, Botswana is doing well in this respect. As a country we have been very vocal against corrupt practices in our society.It was for this reason that the Directorate on Corruption and Economic Crime was established.Bagaetsho, these are the basic and crucial strategies that we in Botswana have always relied on and not just luck.” He explained. Going back to the Botswana Institute of Accountants itself

Continued on page 13

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12


Addressing the Account-ants on their 5th International Confe-rence, the Minister of

Finance and Development Planning Mr Gaolathe warned that the Financial Reporting Act, due to go through Parliament later this year would revolutionise the accounting profession in Botswana. A message to those y by night accountants was that there should be wary because the FRA was on its way to uncover them. He had this to say: “It is perhaps opportune for me to say a word or two on the current efforts to review the accountants Act. The proposed Financial Reporting Act, an act which establishes the Botswana Accounting Oversight Board and reconstitutes the Botswana Institute of Accountants is indeed a milestone in refocusing the future strategic direction of professional bodies in Botswana, in particular, the Botswana Institute of Accountants. The Act shall at the same time establish and strengthen the regulatory framework and facilitate oversight of professional bodies. This is more like a case of policing the policeman so to speak,” He said.

The Botswana Financial Reporting Act, 2007

A synopsisThis Act repeals the Accountants Act, 1988 and replaces it with the Financial Reporting Act (FRA). The new Act establishes the Botswana Accounting Oversight Board (BAOB) and reconstitutes The Botswana Institute of Accountants. The major emphasis of the new Act is two fold. First, it imposes a public interest obligation on professional accountants

and requires them to report on how they have ful lled that objective in their reports to the Board. Secondly, it establishes the BAOB as a superior body independent of the professional bodies in Botswana, in order to monitor their activities. The Board ful ls this by regulating the reporting of nancial matters of public interest entities and the corporate sector and entrusting the Botswana Institute of Accountants with the responsibility to represent its members’ interests, develop the accounting profession, protect the public interest and ensure observance of the highest ethical standards by its members. The FRA rst reconstitutes the BIA and comes up with new responsibilities of the protection of public interest through promotion of the highest standards of professional ethics consistent with IFAC principles and promoting high quality accounting, auditing and nancial reporting standards

and practices. The Act strengthens the technical aspects of the Institute by creating the post of Technical Director to administer ethical and disciplinary matters and also strengthens the training and professional development by creating a director post to drive continuing professional development requirements, conducting examinations, establishing accounting quali cations and developing the status of Certi ed Public Accountant in Botswana. Perhaps the most telling addition to the old act is the clari cation that all professional accountants in Botswana be registered with the BIA or any other professional accountancy body accredited by the Board for this purpose. Since BIA is the only accredited body in

Botswana at the moment, all accountants should therefore be registered with it. In the language of the Act, everybody who holds himself/herself out as a professional accountant, or renders accounting services for a salary or fee or use any description or designation likely to create the impression that he/she is a professional accountant shall register with the Institute. Instead of listing the other professional accountancy quali cations that would qualify for registration with BIA as previously done in schedule 4 of the Botswana Institute of Accountant 1988, the new Act refers to a professional accountancy quali cation of an IFAC – recognised professional accountancy body. The new Act also incorporates a requirement that for a professional accountant to be allowed to remain in practice, he/she must comply with any continuing education and professional requirements as the institute may specify from time to time in its rules.

AccountabilityThe Accountability of the Institute is changed to prescribe the contents of the annual report to include an over view of its activities and a strategic plan; a pro le of Council members and their attendance at Council meeting. All this to be led with the BAOB. The Institute is expected to furnish the Board within 90 days with its activities regarding the ful lment of its public interest obligation and a discussion of its performance indicators.

THE BOTSWANA FINANCIAL REPORTING ACT 2007

The Honorable Minister of Finance

and Development Planning Mr Baledzi

Gaolathe offi ciating opening The BIA

Biennial International Conference.


the former president said that it should not be forgottenthat night was our night and not his. He said that he was heartened that almost 17 years from the time that the Institute was launched in 1990, we have now begun to localise the key posts of Chief Executives of the Botswana Institute of Accountants and that of the Botswana Accountancy College and that for the past two years, the Presidency of the Eastern, Central and Southern African Federation of Accountantshad been held by a Motswana who was President of its Council. “I applaud you for this development.” He said with a smile of victory on his face. In his concluding remarks, he put the whole matter into perspective in a language that he believed the accountants could better understand. “In concluding my remarks tonight, I want to say to you

in a language that most of you will understand better, that a well run country is like a well run company. In well run companies, the management and the employees are happy. The customers, suppliers and the public (through the company’s social responsibility) are happy. The pro ts are high and therefore, the shareholders are happy as well. By the same token, a well run country will also have similar manifestations of satisfaction by its citizens. There will be consistent economic growth and political stability, which we have invariably enjoyed over the past four decades. We have performed and continue to perform relatively well. As I said earlier, God helps those who help themselves and luck usually goes to those who attract it. If Botswana was lucky to

From on page 11

....well run

country is like a well run company. In well run companies, the management and the employees are happy.

Ramani & AssociatesCerti ed Public Accountants

* Audit * Accounting * Taxation*Business Cosultancy

Plot 61687 unit 1 Block 3 Industrial Gaborone. PO Box 601369, Gaborone.Tel: 3919210 Fax:3180716

E-mail: [email protected]

A &R enjoy such remarkable success then

we deserved it because, in all respects, we run our country very well,” he said.

Earlier on, the President of the Botswana Institute of Accountants had talked about the Sir Ketumile Masire Foundation in his introductory remarks but our guest speaker could not be drawn to speak more about it except that he only had this to say. “Lastly, before I sit down, I must thank the President of Botswana Institute of Accountants for the lucid brief he gave on the newly established Sir Ketumile Masire Foundation. He has ably narrated its objectives. What remains for me is to thank the Institute for its support.We appreciate it very much.”He said as the audience stood up for another long ovation to acknowledge its former president.

14


The BIA Sporting Events

Since its inception, the Botswana Institute of Accountants through its Public Relations

Committee has been hosting different sporting events with the assistance of various audit rms. The main objective for these

events are to bring the accounting fraternity together on a social level and also publicise the Institute. A sporting calendar is drawn every year where the sponsoring rms would communicate their interest in sponsoring a particular event to BIA and pay a minimal fee foradministration to BIA.

The audit rms in mention ed include Pricewaterhouse Coopers, BDO Spencer Steward, Ernst & Young, KPMG, Grantthornton

Acumen, Deloitte, Botswana Accountancy College, Moores Rowland and Howarth Gurugroup and the different activities include soccer, darts, pub quiz and volleyball just to mention a few.

BIA would like to take this opportunity to thank all the various sponsoring rms, stakeholders & the participants for making these events succeed.

All work and no play makes Jack a

dull boy

Even the accountants subsribe to that idiom

15


Month Event Sponsor Location BIA Coordinator

Feb-07 Pool PWC Bull & Bush Boemo

Mar-07 Squash BAC Notwane Club Boemo

Apr-07 Badminton Moores Rowland Boyce

Jun-07 Pub Quiz Guru Group Gaborone Sun Gaositwe

Jul-07 Darts Ernst & Young GCC Kylie

Aug-07 Soccer PWC National Stadium Boemo

Aug-07 Volleyball BDO BNPC Gadifele

Sep-07 Kgale Hill KPMG Kgale Hill Kgomotso

Oct-07 Golf Deloitte Phakalane Pinkie

Oct-07 Cricket GT Acumen Cricket Club Mokeresete

Above and left-picturesque of the cocktail after the New President’s Election.

16


Many accountants across the country often wonder what exactly ECSAFA

is and what exactly does it represents and stands for? The following paragraphs will attempt to clear all these questions.

ECSAFA Mission Statement

To build and promote the accountancy profession in the Eastern, Central and Southern regions of Africa in order that it is perceived by accountants, business, nanciers and governments to

be an important factor in the economic development of the region.

The main objective of ECSAFA is to co-ordinate development

of the accountancy profession and to promote internationally recognised standards of professional competence and conduct within the region.

ECSAFA meets on a regular basis to discuss and consider issues pertaining to the above, and reports its activities to IFAC.

Background and Membership

The Eastern Central and Southern African Federation of Accountants (ECSAFA) is one of the regional organisations which are recognised by the International Federation of Accountants (IFAC).

Activities in the Region

Communication – ECSAFA provides a channel through which information is communicated and disseminated to member countries and relevant international bodies.

Professional Standards – the promotion and adoption of professional standards, issued by IFAC, IASC and other relevant bodies.

Legal and economic framework – promoting the adoption of appropriate, common economic and legal systems.

Education and training – supporting the establishment of appropriate education and training facilities.

Capital markets – Liaising with international and regional organisations to in uence the development of ef cient capital markets and promote trade and services in the region.

Reciprocity – supporting the establishment of reciprocity agreements between member bodies.

Public relations – improvement of the image of the profession in the region, and the role of the accountant in promoting accountability and

Development – assistance in the establishment of accountancy bodies in the countries where none exist.

Corporate Governance – Promoting corporate governance in association with relevant local and international bodies.

ECSAFA Eastern Central and Southern African Federation of Accountants

If you are an accountant and

you are not registrered with

the Botswana Institute of

Accountants, the Financial

Reporting Act is coming after

you. so beat it to the gun

by registering now.

The ECSAFA Secretariat is

located at:2nd FLOOR, HUGHES BUILDINGKENYATTA AVENUE,P. O. BOX 42432 – 00100 GPONAIROBIKENYA

Tele: 254 20 219151Fax: 254 20 229284E-mail: [email protected]: www.ecsafa.org

The above information courtesy of the ECSAFA Secretariat

NAME COUNTRY PERIOD

Ndung’u Gathinji Kenya 1989 – 1992E S Mangoma Zimbabwe 1993 – 1994Ernest Massawe Tanzania 1995 – 1996D C Arnold South Africa 1997 – 1998Sammy Onyango Kenya 1999 – 2000Darly Benecke Zimbabwe 2001 – 2002George Egaddu Uganda 2003 – 2005Butler Phirie Botswana 2006 – 2007Morgan Tembo Malawi 2007 – 2008

Executive Committee 2007/8

NAME INSTITUTE POSITIONMorgan Tembo Society of Accountants of Malawi (SOCAM) President

Jacobus De La Rey Du Toit Institute of Chartered Accountant of Namibia (ICAN) Deputy President

Joseph W Wangai Institute of Certi ed Public Accountants of Kenya (ICPAK) EXCOM member

Mohamed Saleem Kharwa South African Institute of Professional Accountants (SAIPA) EXCOM member

Jaucoline (Jackie) Dorinda The South African Institute of Chartered Accountants (SAICA) EXCOM memberTong

The EXCOM will serve for a period of one year.

18


An audit by the Botswana Uni ed Revenue Service (BURS) can be an extremely time

consuming, disruptive, stressful and expensive experience – one to be avoided where possible.

BURS is increasingly building capacity and expertise in the area of Income Tax, Withholding Tax (WHT) and Value Added Tax (VAT) audits and investigations. This is in line with the move over the past few years to a “self assessment” system of taxation in Botswana, where returns submitted by Taxpayers will be acknowledged and logged onto their systems, but no formal assessment issued.

Those businesses who have been registered for VAT since 2002 (the year VAT commenced in Botswana) are likely to have experienced a VAT audit by BURS (previously the Department of VAT). The main triggers for a VAT audit were:

1 Where a VAT return resulted in a refund claim;

2 Where a business applied for de-registration for VAT;

3 Any unusual trends or transactions which appeared in the VAT return.

The VAT audits were however carried out in isolation, and did not seek to look into other areas such as Income Tax or Withholding Tax.

Following the establishment of BURS in 2005, the audit function was streamlined and centralised with a view to carrying out holistic tax audits. This allows the various BURS

team members to compare ndings and discuss issues

resulting in a more effective audit (from BURS viewpoint!).

The selection of a taxpayer for an audit is based on a number of different criteria including historical compliance record, size (larger companies are more likely to be audited based on the 80:20 principal), industry practices and volatile earnings / pro t trends. It is the intention of BURS that every registered taxpayer should be audited at least once in every four years to ensure 100% coverage.

The key to surviving a BURS audit is to ensure that you have all the necessary documentation led in such a manner to allow for easy access.

Some of the most common ndings in tax audits include:

VAT

• Incomplete tax invoices – apart from the usual details required on an invoice, the most common problem is where the customer’s VAT number is missing;

• Prohibited claims for Input VAT such as hotel bills, car rentals and repairs, non-business related expenditure;

• Claims for VAT payable on imports at the border prior to settling the amount due on the deferred VAT account;

• Claiming for invoices which are “out of time” – i.e. are dated earlier than the immediately preceding four months;

• Free or subsidised goods or services for employees – the output VAT on the

bene t should be declared (or alternatively the input VAT on the cost of that bene t should not be claimed).

Withholding Tax (including PAYE)

• The required WHT has not been deducted from payments to non-residents of management and technical fees, interest, royalties, commercial royalties (including hire charges) and entertainment fees;

• Employee bene ts are not taxed through the monthly payroll process e.g. provision of housing, company car, furniture, utilities, free or subsidised goods and services and employee share schemes;

• Withholding Tax of 10% has not been deducted from payments of interest to resident individuals or companies (except recognised nancial institutions);

• Directors fees have not had PAYE deducted (including Directors fees accrued but not yet paid)

• Incorrect rates of withholding tax applied

• Late remittance of tax

Income Tax

Audits of a company’s income tax records are different to VAT and WHT in that they are less about checking compliance and documentation, and more about looking at the nancial statements and underlying records to see whether there are areas of concern. The

SURVIVING A BURS AUDIT

N Dixon-WarrenPartner - KPMG

19


most common issues arising include:

• Related party transactions – any transactions with shareholders, directors or related companies / businesses are reviewed almost automatically. Higher risk transactions will include loans to and from related parties, and payments of management / consulting / technical fees to related parties. You should be able to show that these transactions are on a commercial basis, on commercial terms;

• Claims for any provisions as expenditure for tax purposes including provisions for bad debts, leave pay, severance bene t and future expenses. Provisions that are not a result of a legal obligation will often be queried;

• Continuous reporting of losses will raise queries as to whether there are good reasons for this, and why the business continues to operate;

• Volatile gross margins when compared to the industry and previous years may result in a request for additional information;

The penalties for non-compliance or submission of incorrect information in returns can be very high. Such penalties include:

1 Non payment of WHT – this will result in penalty interest of 2% per month on the unpaid amount;

2 Over claims / Incorrect claims of Input VAT or under declaration of Output VAT – this will result in the amounts

being claimed by BURS as payable together with a penalty of up to 100% of the original tax payable;

3 Errors / omissions in Income tax returns will result in penalty interest at the rate of 1.5% per month, together with a penalty charge of up to 100% of the tax involved.

BURS have stated publicly that where a business can show that it has made every effort to comply with the various tax laws and regulations, a more lenient stand will be taken where areas of non-compliance are identi ed. To prove to BURS that such efforts have been made, it is advisable to engage your professional tax advisors or consultants to undertake a review of your business with a view to identifying problematic areas.

COMMISSIONERS OF OATH ACT (CAP. 05:03)In exercise of the powers conferred on him by Section 3(2) of the Commissioners of Oaths Act, Mr D K Kwelagobe, Honourable Minister of Presidential Affairs and Public Administration made an order amending the schedule to the Commissioners of Oaths Act. The order substituted the existing Part II for a new Part II. This order was made on May 25, 2007.

By this order both Associate and Fellow members of the Botswana Institute of Accountants can now be Commissioners of Oaths in the Districts or Towns within which they are based. It is important to note that the observance of the area of jurisdiction prescribed above is very important. For example, an Of cer based in Gaborone can only be a Commissioner of Oaths in the whole of Gaborone and not in Francistown, Masunga or Maun.

The need for authentication of documents especially for us accountants has increased signi cantly over the years to an extent that visits to the traditionally known Commissioners of Oaths such as the Police was becoming a problem as queues for such services were becoming the order of the day.

The recognition that the Minister has bestowed on the full members of the Institute is testimony of the trust that the people of Botswana are beginning to have on professional accountants. We therefore urge all members of the Botswana Institute of Accountants to continue to uphold the code of ethics that govern them and to maintain the high professional standards that have become the hallmark of the Accounting profession in our country.

For your information, the detail of this order was published in the Government Gazette of June 1, 2007. More information on Commissioner of Oaths can be found in the Commissioners of Oath Act (Cap 05:03) Sections 1 to 6.

20


1. Boikanyo PekeOperations DirectorThe Executive Gym Pty LtdP O Box 3009GaboroneTel: 3180590 Fax : 3121033E-mail: [email protected] 50676 Fairgrounds Of ce Park

2. F Mulenga Dynamic Insurance BrokersP O Box 10907GaboroneTel: 3906490 Fax 3957594E-mail: [email protected] Plot 101 Unit 8 Merlin BuildingGaborone International Commerce Park

3. Gabriel SegokgoManager-Merchants AcquiringFirst National BankPrivate Bag 1552GaboroneTel: 3642700 Fax 3004260E-mail: [email protected]

We look forward to a long lasting relationship and we hope you will give us the opportunity to serve you

1. Recognition for job placementsand reference for good standing and clearances to labour Department for permits

2. Eligibility for holding a practicing certi cate as a Public Accountant

3. Subsidised CPD fees together with necessary CPD support

4. Higher credit limits with FNB card division depending on membership category:

i) Fellow - P15000

ii) Associate - P10000

3) Registered/Licentiate - P5000

5. Competitive insurance rates with Dynamic Insurance Brokers:

i) Vehicles valued above P200 000 @ 4.5 % minimum P2500 Vat inclusive ii) Vehicles valued above P100 000 to P199 999 @ 5.5 % Vat inclusiveiii) Vehicles valued below P100 000 @ 6% minimum P2500 vat inclusive

6. Eligibility to become a ‘Commissioner of Oaths’ for Fellow & Associate Members

7. Recognition by other ECSAFA countries

8. Recognition by other IFAC af liated bodies and countries

9. Tax up-dates through e-mail to Tax Consultants

10. Scope to participate in local standard setting and legislative workshops

11. 20 % discount rate with the Executive Gym Pty Ltd

The Botswana Institute of Accountants (BIA) has been tasked by the Botswana Government to regulate all Accountants within the country. It is in the best interest of all quali ed

accountants, both technicians and professionals to register themselves as members and be of cially recognised as an individual providing accounting services of the internationally required standard.

The BIA ensures that its members retain their professional competence and edge and provide high quality services as comparable to the best in the world.

If you are an accountant and not already a BIA member, we extend you a warm welcome and urge you to complete and submit the membership appli-cation form, which you could download from our website: www.bia.org.bw, at the earliest.

In its efforts to raise awareness and promotion of the accountancy profession in Botswana, the BIA through its Public Relations Committee is working hard towards achieving this objective by forming partnerships with different organisations and companies to ensure that our members reap the maximum bene ts of being members of the Institute.

MEMBER BENEFITS

Please contact Pinkie Modisa at BIA or the following people for more information on benefits:

Below is a summary of benefi ts that are currently available to our members:

21


This circular is provided to BIA members only and is for their internal usage only. It sets out particular

important changes and matters from the new Companies Act 2003. Members are advised to obtain a copy of the actual Act and Regulations from the government printers and read it thoroughly as it is critical knowledge for every BIA member.

1) Implementation

♦ The Companies Act itself was brought before parliament in December 2003 and passed in 2004.♦ The Regulations (mainly forms) were only fi nalised in June 2007, as the Companies Regulations 2007.♦ The effective date was 3 July 2007.♦ The Act is now in force and must be followed.♦ The Registrar has confi rmed to the BIA that all events occurring before 3 July, should still be effected with the old forms of the old Act. I.e. If a director change occurred on 30 June 2007 then the old Form 2 should be submitted. This is particularly important for Annual Returns.However note that most forms need to be submitted within 42 days to avoid penalties, and so this only covers the period to mid-August.

2) Exempt private company (i.e. small) - only if it satis es all of (a) to (c)

a) total assets less than P2 mb) annual turnover less than P5 mc) no shareholder is a company♦ Auditor need not be appointed♦ Simplifi ed annual fi nancial statements for the members (gaap and not IFRS)

Audit (for public and Nonexempt companies)

♦ Performed by BIA members holding a valid Practising Certifi cate♦ Audit required for all Public, and for Non-exempt companies♦ Will apply for all year ends after 3 July so effectively if year end is 31 July 2007.♦ Financial statements must be in accordance with IFRS♦ Material irregularities in the

conduct of the company’s fi nancial affairs to be reported by the auditor to the Board of Directors within 7 days, who must then remedy the matter or report to Stock Exchange (public co's) or shareholders (private co’s). If not remedied or reported within 30 days then the auditor must report to the Stock Exchange or for non-listed companies report to Registrar of Companies

♦ Financial statements to be prepared within 5 months for public companies and 7 months for private companies after balance sheet date of the company

4) 5) Close company

♦ 1 to 5 members ♦ No directors♦ No share capital♦ No fi ling of annual returns ♦ No company secretary♦ Must have accounting offi cer (member of BIA)♦ Corporate body cannot be member♦ Audit requirement still applies if Assets > P2m or Turnover > P5m

6) Dormant company♦ Shall be exempt from

requirement that accounts be audited& fi ling annual returns

♦ Shall pay lesser fee prescribed for dormant companies

7) Company Secretaries

♦ For Public and Non-exempt companies - must be a member of BIA, CIS or a legal practitioner.♦ s.163 of the new act: company secretaries are advised by BIA to incorporate an indem- nity clause in their engage- ment letter♦ s.209 of the new act: company

secretaries must write to directors of public companies and their subsidiaries informing them of the requirement to fi le fi nancial statements with the Registrar of Companies

♦ Filing of such audited fi nancial statements should be within 20 days of signing; and applies to every Public company, and any company in which a public company holds >25% of the share capital

8) Shares

♦ all shares issued shall be shares of no par value, those issued prior to commencement of the Act shall be converted into shares of no par valuei.e. No share premium accounts anymore

♦ Filing fees of just P20 for any issue of shares. No longer the P8,000 per P1million shares issued

♦ the value of shares issued or to be issued shall be determined by the board of directors on the basis of what is fair and reasonable to the company and all existing shareholders .

Source: Karabo Motsemme - BDO Company Secretarial Executive

22


For Botswana, this standard is without doubt going to be the most important one, or

rather the most relevant one of all IASs, or IFRSs that have ever been passed. This is so because the standard is going to become the fi nancial reporting framework for the majority of entities in Botswana.

Why SME Standards are needed?For the listed companies, the global standards are important for those companies listed in many different countries and having access to globalised fi nancial markets.

Even for non listed companies, fi nancial statements prepared in accordance with IFRSs are useful as they are understandable across international boundaries. They are particularly important for the following stakeholders:

Banks rely on fi nancial statements, in order to make lending decisions.

Vendors use fi nancial statements to evaluate the fi nances of buyers.

Credit rating agencies use fi nancial statements for their reports.

Overseas customers, foreign venture capitalists and development institutions all need fi nancial statements that are internationally acceptable.

Comparability is really the operative word but SME Standards go beyond that. The Standard will improve the quality of reporting compared to existing generally accepted accounting principles. It will ease the burden on SMEs where full IFRSs or full national GAAPs are currently required. It will facilitate education and training and also result in signifi cant auditing effi ciencies.The standard once passed will be simplifi ed, self-contained and accessible to preparers of fi nancial statements in both developed and emerging markets.

•

•

•

•

Who is not affected by IFRS for SMEsCompanies with a public accountability such as public companies, companies which are publicly traded and fi nancial institutions can not benefi t from the provisions of the IFRS for SMEs even if they qualify based on the size test. Just because they have public accountability and the need for investor protection, these companies are expected to continue to comply with the full International Financial Reporting Standards,

Size TestThe Standard will not go into the details of what constitutes a small medium enterprise but each jurisdiction will have to come up with its own guidelines to determine this fact before they can apply IFRS for SMEs. However, the IASB has focussed on a typical SME with about 50 employees in deciding the content of this standard.

The SME Reporting FrameworkThe standard promotes the preparation of general purpose fi nancial statements for external users including non-manager owners, existing and potential lenders and creditors and credit rating agencies.

The auditor could then give an opinion on fair presentation (true/fair view) of fi nancial position, results and cash ows.

Since the standard will be a stand alone document, in case there are questions which require answers not readily available, the SME may fi nd answers in the IFRS for SMEs by analogy, or using what the IASB calls pervasive principles or it may look to full IFRSs if the answer cannot be found in the IFRS for SMEs. But there is no mandatory fallback to full IFRSs.

The standard is signifi cantly simplifi ed based on user needs and cost – benefi t analysis. Consequently, some topics which are not relevant to SMEs are excluded. Where an IFRS

has options, the simpler option is adopted; there are recognition and measurement principles simplifi cations as well, and the drafting of the standard is also simplifi ed.

Micro – SMEs (Tiny Companies)The question to ask before deciding on whether micros could also use IFRS for SMEs is whether the micro enterprise prepares general purpose fi nancial statements that present fairly, the company’s position, performance and cash ows. Again the answer to this should be determined by the jurisdictions themselves. The IASB’s view is that the standard can be used for micros as well. They argue that full IFRSs are currently required for micros in about 25 countries and permitted in another 50. So why not use the standard for this category.

Way forwardIt should be noted that this is still only an exposure draft. A standard is probably still a year or so away. This is the time to come forth with ideas and comments through the Botswana Institute of Accountants or even directly to the IASB before October 1, 2007. The different countries and jurisdictions have also been tasked with the responsibility to carryout fi eld tests to test the Exposure Draft. Many countries, even some in the ECSAFA region have taken up this challenge to carryout fi eld tests in their own jurisdictions. The Audit fi rms in Botswana are kindly requested to also take up this challenge and conduct voluntary fi eld tests to see what areas would be problematic in practice once the Standard is released. The guidelines on fi eld testing are available in the IASB website or contact BIA secretariat for a link with ECSAFA for assistance in this regard.

This paper is made from extracts from the presentation by Paul Pacter at the standard setters meeting in Namibia

INTERNATIONAL FINANCIAL REPORTING STANDARD EXPOSURE DRAFT ON SMALL & MEDIUM ENTERPRISES (SMEs)

AGN DOBSON & CO

Certi ed Public Accountants Audit/Assurance Services Accountants Corporate Services/Company Secretarial Services Tax Consultants Management Consultants Financial Consultants Insolvency Services

Tel: 319 0839/Fax: 319 0840

AGNINTERNATIONAL

P.O. Box 21321, GaboronePlot 119 , Unit 4F,Tswene DriveGaborone International Finance ParkEmail: [email protected]:www.dobson.co.bw

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24


The Council of the Botswana Institute of Accountants (BIA) recently appointed A new Executive Offi cer

Duncan Dankie Majinda to take over from Mr Tirtha Sen whose contract came to an end on March 31, 2007.

Duncan comes with an impressive Accounting and Finance pedigree, being a Fellow of the Chartered Association of Certifi ed Accountants (FCCA) and the holder of Masters Degree in Business Administration (MBA) from the University of Manchester in England. He is also a Fellow member of the Botswana Institute of Accountants (FCPA) Bots.

His work experience started way back in 1976 with the Department of Local Government Audit and he went on to have long stints with Anglo American Corporation (9 years), Deloitte and Touche (4 years) and Bank of Botswana (9 years).

His non executive directorships included, amongst others, serving in the boards of The Botswana Stock Exchange, Botswana Internal Auditors, Botswana Accountancy College, Botswana Institute of Accountants and the International School of Stockholm in Sweden.

Duncan Majinda is married to Naomi Ellen Majinda, Botswana’s Ambassador to China, and they have two children a boy and a girl. Duncan’s passion is with the amazing beauty of nature in the forests in the form of wild life, the wonderful diverse species of birds and insects. He enjoys watching Golf, Soccer and Athletics on television and keeps fi t through body building and aerobics

On his new responsibilities, Duncan admits that he could not have come at a better time; a time of change in the profession with

the Government taking the initiative to pass legislation that lays the platform for the profession to propel itself into the forefront of global fi nancial reporting and auditing. He believes that by legislating compliance with International Financial Reporting Standards and International Standards on Auditing for example, the new companies Act removed a huge hurdle which had for a long time frustrated compliance with the requirements of international accountancy bodies. He adds that the proposed Financial reporting Act also creates a new challenge of the professions public interest obligation and the regulation of Accountancy bodies themselves in Botswana. He explains that at the moment his major role is one of regulation of BIA members and also member fi rms. He

observes that the situation now has changed as it is no longer freewheeling anymore. “It is like the police are all of sudden being policed themselves and that thrills me,” he said.

Duncan explains that he likes the direction that the Accounting profession is taking from a global perspective, the drive towards harmonisation and convergence. “I like it even more because Botswana is not being left behind. We are there as well having a say in all that. Regionally, we are quite active and have for the past two years chaired the Council of ECSAFA. Internationally, we want to drive towards representation at international bodies like IFAC. We are already a member in good standing of the organisation but what I mean is that we have to be represented in the board structures of these bodies, their decision making

Botswana Institute of Accountants Appoints A New Chief

Looking on and enjoying the proceedings is Bank of Botswana

Deputy Governor Mr Moses Pelaelo


mechanisms so that we in uence important decisions that benefi t our country and the continent at large, “ he explains.

From the domestic front, Duncan has a vision of an orderly profession. “We want to clean the profession in Botswana of y by night accountants. We don’t propose to do so by instituting a man hunt to catch them and take them to prison or anything like that. We want to educate the public to know who they should go to if they need accounting services. We want the public to use licensed accountants. By licensed we do not mean only professional Accountants but we mean accountants that can be monitored and regulated. You don’t have to be professionally qualifi ed to be a licentiate member of BIA for example but once you are a member we have to ensure that you comply with the code of ethics that we subscribe to and we

also make sure that you receive the required continuing professional education that makes you good at the job that you do whether as an employee, a consultant or any private service provider. Employers have to ask us to help them choose what is good for them by asking us to help. A simple policy that all accountants hired should be members of BIA and should be cleared by the BIA would do the trick.

Finally Duncan said that he was very appreciative of the support that he was getting from the Council.” My Council has laid down the platform for me to achieve all these things I am talking about. They have given me fi nancial support to lay the infrastructure that would enable me to deliver in accordance with my mandate. Highly experienced professionals have given me their valuable expert advice and guidance. About fi fty members

volunteered to serve in various committees of the Institute this year in addition to dozens already serving and that is very reassuring for me indeed”.

The Accounting Fraternity mourns the loss of three prominent members of the Institute, Mr Raju

Parameswaran, Founding Partner & Chairman of

Moores Rowland. Tom Piper of Tom Piper & Associates

and former partner at KPMG. Mrs Agnes Bulawa who

passed away on 8 September after a short illness. She was laid to rest in Gaborone on 15 September. Mrs Bulawa

completed her CIMA in 2000.

26


BOTSWANA INSTITUTE OF ACCOUNTANTSVACANCY: TECHNICAL MANAGER

The Botswana Institute of Accountants (‘BIA’) has a challenging opportunity for a recently quali ed and highly motivated professional accountant to play a key role in the development of the accountancy profession within Botswana.

The successful candidate must be a minimum of “Associate” member in good standing of a recognized professional institute of accountants.

The ideal candidate will have the following attributes:Demonstrable knowledge of International Financial Reporting Standards (IFRS), International Standards on Auditing (ISA) and an understanding of public sector nancial reporting standards. A good working knowledge of relevant legislation including the Companies Act and the Income Tax Act.A good awareness of current developments both within Botswana, regionally and internationally.

Reporting directly to the Executive Of cer of the Institute, the primary responsibility of the Technical Manager is to co-ordinate the Institute’s technical activities on a day-to-day basis. This will include (but not necessarily be limited to)

Preparing regular technical brief’s to the members;Implementing decisions of the Institutes Technical Committee and prepare monthly reports;Providing assistance to members on technical issues;Liaising with the Eastern Central and Southern African Federation of Accountants (ECSAFA) on behalf of the Institute;Monitor compliance by the Institute with the International Federation of Accountants (IFAC) requirements;Assist with development and monitoring of Continuous Professional Development (CPD) activities and requirements;Provide the necessary support to both members and reviewers in the quality review programme.

If you are a highly organized individual with excellent people skills, and believe you meet the above requirements, the Institute would like to hear from you.

An attractive and highly competitive remuneration package is on offer to the right candidate.

Please forward your application and detailed Curriculum Vitae to:

Mr. Duncan Majinda, Executive Of cerBotswana Institute of Accountants

Email address: [email protected] number +267 3972992.

Postal Address: Private Bag 0021, Gaborone, Botswana

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Documents

Botswana Institute of Accountants - BICA · Surviving a BURS Audit ... the challenges of their mandate were enormous and as were ... Botswana Institute of Accountants