LU­NATICS, ASY­LUMS AND ALL THAT

Finweek English Edition - - INSIGHT: LOCAL -

Ten years ago I was in­vited onto an ad­vi­sory panel for the In­ter­na­tional Ac­count­ing Stan­dards Board led by a well-known au­dit f irm to aid in their mis­sion to broadly try and ac­com­plish three things in the ba­sic ma­te­ri­als ac­count­ing prac­tises: 1. Con­verge re­port­ing stan­dards of oil and

gas and min­ing com­pa­nies glob­ally, 2. Con­verge re­port­ing stan­dards of US and non-US com­pa­nies in the ba­sic ma­te­ri­als sec­tor, But more fun­da­men­tally, 3. Pro­pose a move to­wards full, fair value ac­count­ing, which for min­ing busi­nesses would mean a full mark-to-mar­ket of re­serves and re­sources at least an­nu­ally. will im­prove in­vestors’ un­der­stand­ing of the value of fi­nan­cial po­si­tion of a com­pany, es­pe­cially pri­vate in­vestors. As far as I know, this still has not been en­acted. An­other is­sue that was high­lighted to me was that the way in which re­source com­pa­nies are rep­re­sent­ing fi­nances and fi­nan­cial per­for­mances to in­vestors was re­moved from re­al­ity.

For­tu­nately it was cre­at­ing all sorts of ad­di­tional work for au­dit firms that min­ing com­pa­nies would be obliged to com­ply with and pay for.

Look­ing back to about 1999, most South African min­ing com­pa­nies re­ported ac­cord­ing to an “an­ti­quated” and “thor­oughly out­dated” ac­count­ing sys­tem that was es­sen­tially based on the prin­ci­ples of cash-f low ac­count­ing. al­most all cash-f low items in the given pe­riod in which they oc­curred. For­tu­nately the tax sys­tem was broadly aligned with this is that, it was really cheap and easy to au­dit. un­der­stand and, more im­por­tantly, plain to see whether your min­ing in­vest­ment was in fact mak­ing any money or not, what its

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