EXPERT ADVICE WHERE IT COUNTS - JSE MAGAZINE

EXPERT ADVICE WHERE IT COUNTS

W.Consulting provides appropriate, high-quality financial reporting solutions that never compromise compliance or auditor independence

If you had to sign off on your finance director’s expert knowledge regarding International Financial Reporting Standards (IFRS), how confident would you be that they are up to date with all the latest requirements and au fait with some of the more complex concepts?

In the past, companies relied on their auditors to support and advise them on IFRS application. However, with more stringent requirements on auditor independence in terms of best practice and company law, that approach is now redundant and potentially even illegal.

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So where do you turn?
Getting an expert IFRS advisor who is not constrained by the barrier of auditor independence is crucial for companies to remain abreast of continually changing IFRS requirements.

Presently, companies are confronted with new standards on revenue and financial instruments as well as the highly anticipated standard on leases expected to be finalised this year. Put bluntly – if you are in business and expect to remain in business for the foreseeable future, it is virtually certain that the most significant factors affecting your reported profits and net asset value will arise from these three new standards.

‘Global accounting continues to change at a rapid pace,’ says Bruce Mackenzie, W.Consulting director, IFRS expert and member of the International Accounting Standards Board (IASB) Interpretations Committee (IFRIC) in the UK. ‘Companies can’t wait until year-end to consider if there have been any changes impacting their accounts. They need to be proactive in monitoring changes, with some changes requiring several years of preparation before successful implementation.’

The impact on locally listed companies
Tapiwa Njikizana, W.Consulting director and member of the Accounting Practices Committee (APC) of SAICA for the past 10 years, says: ‘There are two important aspects of IFRS that impact listed entities – IFRS compliance and IFRS optimisation.

‘Any experienced finance director will tell you that IFRS is, in certain parts, more an art than a science, and companies need to understand the full array of policy options available to them before deciding on the appropriate application of IFRS. Doing this requires access to expert IFRS resources that can offer you an unbiased and professional perspective of what can be achieved. This is an advisory and consulting role, which is unlikely to be easily compatible with auditor independence.’

SA has achieved a number-one rating globally for auditing standards for three consecutive years. This should tell us something about the uncompromising attitude of the independent regulator for auditors’ attitude towards matters of auditor independence.

If not, then perhaps the IRBA’s stated intention to monitor auditor independence with respect to the requirements of the Companies Act with vigour should be informative to auditors and directors alike of listed companies.

The very reason there is an IFRS Interpretations Committee is because, notwithstanding the efforts of the IASB to research and publish high-quality standards, there remain many circumstances under which the appropriate application of a standard remains unclear or is complicated for the average (competent) professional accountant to apply. There is also abundant evidence in the observed differences in IFRS application across industries and/or jurisdictions.

This situation of uncertainty is not unlike those that arise with respect to taxation or other regulations that affect business operations (such as laws that impact mergers and acquisitions). Lest we forget, IFRS is the law on financial reporting for listed entities.

In circumstances of uncertainty with respect to tax or takeover matters, directors do not hesitate to approach expert advisors who assist them in navigating these complex challenges, yet somehow when it comes to financial reporting they either assume their own knowledge is sufficient or they rely on the auditor to take a leading role for the appropriate and compliant application of IFRS.

Njikizana, who has experience as a non-execu-tive director of JSE-listed entities, says: ‘The same way I would not be comfortable going to shareholders to recommend a major acquisition without undertaking proper due diligence and making use of expert advisers where required, I would equally not be comfortable publishing financial statements without a thorough process involving confirming IFRS compliance from the perspective of the company itself, in addition to whatever assurance one might get from a clean audit opinion.’

In addition to the directors’ duties, we also find ourselves in a highly regulated environment in SA.

‘To be a leading exchange in Africa, the JSE needs to ensure that the quality of the information provided to shareholders is of a high standard, and with this in mind, the JSE proactively monitors listed company financial statements,’ says Raymond Chamboko, director at W.Consulting and member of the JSE’s Financial Reporting Investigations Panel (FRIP).

The JSE’s monitoring of IFRS compliance has matured steadily from what was initially seen as a checklist-driven approach to one that even the most drudging observers will admit is a high-quality process.

It incorporates all aspects of reporting – from IFRS compliance in the annual report itself to monitoring of consistency across an array of communications, from the entity to stakeholders including the chairman’s and CEO’s reports, circulars and other announcements on its SENS throughout the relevant reporting period.

Financial reporting has become more than simply getting the numbers to balance – it is about communicating lucidly with the market.

How W.Consulting can help
Founded in 2007, W.Consulting was established to advance the understanding and application of IFRS as a key component of stakeholder communications, starting with annual financial statements. We have sought to achieve this through a combination of providing training on IFRS and assisting companies more directly by consulting to them on IFRS matters.

‘We saw a need in the market for expert IFRS advisors not conflicted by issues of auditor independence. The ability to assist clients where their auditors cannot permits us to consider all the possible and responsible IFRS options available,’ says Njikizana. ‘We have the depth of experience and expertise that allow us to confidently develop and recommend solutions for our clients.’

W.Consulting has the largest team of independent JSE-accredited IFRS advisors in the country, which we view as indication of our quality and competence in this field. ‘We occupy a narrow niche in that we are able to directly assist companies to develop high-quality IFRS solutions and this leaves the auditor truly free to scrutinise and comment on the company’s IFRS compliance with the assistance of the auditor’s own in-house IFRS experts,’ says Chamboko. ‘The outcome, in our opinion, is more appropriate IFRS choices by companies without compromising compliance, and hopefully fewer sleepless nights for directors.

‘We’ve spent a lot of time investing in a top-notch team to ensure that we can assist companies with IFRS, whether this be corporate transactions, financial statement preparation, accounting opinions or helping directors to understand the impact of new standards.’

The team has managed to maintain its edge through considerable investment achieved by being actively engaged on everything IFRS-related, such as being represented on professional bodies and committees that deal with financial reporting.

We are particularly proud of the participation of our IFRS experts on bodies such as IFRIC, the FRIP, SAICA APC and Financial Reporting Standards Council (FRSC).

‘These positions are unpaid. We volunteer our time on these bodies to ensure that not only are our clients’ needs being heard, but also that we can influence the development of new standards. All this ensures that our team is on the leading edge of accounting developments,’ says Njikizana.

Global expertise, local team
W.Consulting’s team of IFRS experts has extended its reach beyond the local market with major assignments across the African continent, the UK and the Middle East. The company is able to leverage this global experience back into the local market.

‘IFRS is a global language,’ says Mackenzie. ‘Listed entities must ensure their advisors are on the leading edge of accounting developments worldwide. We therefore spend a considerable amount of time and effort supporting the maintenance of those standards through our close relationships with organisations such as SAICA, the JSE and FRSC’

W.Consulting has permanent representation in Johannesburg, Cape Town, London and Mauritius.

Using the skills in other ways
W.Consulting is currently the largest IFRS training provider globally for the SAICA, providing more than 15 000 hours annually of CPD directly to SAICA members on behalf of the institute across SA, the UK and Australia.

‘We’re not academics – we do this for a living,’ says Chamboko. ‘Our trainers are all dealing with IFRS issues daily, giving our sessions a very practical bias. If we haven’t done it, we don’t train it’.

Outside of the training provided on behalf of institutes, W.Consulting offers customised in-house IFRS training to many companies globally.

‘Our CPD Sorted offering gives the accounting professional access to over 150 training events in Johannesburg, Pretoria, Cape Town, Stellenbosch and Durban, all for an annual subscription less than most gym memberships. It is simply the best value for money you will get.’

Moving forward
As businesses continue to grow and become more dynamic, the accounting required will continue to change to meet this need. W.Consulting finds itself in a market where it can add value to any company.

‘The question on the minds of any director or audit committee chairman reading this should be whether the company has mitigated its IFRS risk appropriately. If the answer is reliance on the auditors, there’s a problem,’ says Mackenzie. ‘But there is a solution. Give us a call.’

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W. Consulting
Head office: 10th Floor, Sinosteel Plaza,
159 Rivonia Road, Sandton,
Johannesburg, SA
Tel: +27 (0)11 568 0370
www.wconsulting.co.za