SUNScholar - Browsing by Author "Brink, Sophia M."

Browsing by Author "Brink, Sophia M."

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The accounting treatment of credit card rewards programmes : a South African perspective (part I)
(AOSIS, 2017-04) Brink, Sophia M.
Credit card rewards programmes are a common phenomenon in the South African market. On 1 July 2007 the International Accounting Standards Board (IASB) issued IFRIC 13 Customer Loyalty Programmes to give specific guidance to suppliers on the accounting treatment of customer loyalty programme transactions. Although credit card rewards programmes are specifically included in the scope of this Interpretation, in practice not all credit card rewards programmes currently account for award credits under the revenue deferral model (IFRIC 13). During May 2014 the IASB and the United States Financial Accounting Standards Board (FASB) published IFRS 15 Revenue from Contracts with Customers intended to replace six existing Standards and Interpretations, including IFRIC 13. Currently there is uncertainty whether or not a credit card rewards programme transaction falls within the scope of IFRS 15. Despite concerns raised the Boards decided against providing any additional guidance to credit card rewards programmes and indicated that they leave it up to management.
The accounting treatment of credit card rewards programmes : a South African perspective (part II)
(AOSIS, 2017-06) Brink, Sophia M.
Most credit card issuers offer their card holders participation in a customer loyalty programme. On 1 July 2007 the IASB issued IFRIC 13 Customer Loyalty Programmes to give specific guidance to suppliers on the accounting treatment of customer loyalty programme transactions. Despite the fact that credit card rewards programmes are specifically included in the scope of this Interpretation, in practice not all credit card rewards programmes currently account for award credits under the revenue deferral model (IFRIC 13). These divergent practices make one question the relevance of the current guidance provided in IFRIC 13 to credit card rewards programmes; otherwise what is the reason behind credit card rewards programmes accounting for these transactions differently? During May 2014 the IASB and the United States Financial Accounting Standards Board (FASB), published IFRS 15 Revenue from Contracts with Customers intended to replace six existing Standards and Interpretations, including IFRIC 13. The aim of IFRS 15 is to streamline accounting for revenue across all industries and to correct inconsistencies in existing Standards and practices. Credit card rewards programme respondents raised many queries and uncertainties based on the proposed model but despite these concerns the Boards decided against providing any additional guidance to credit card rewards programmes. They indicated that they leave it up to management’s judgement to determine how to account for these transactions (in effect not achieving the aim of streamlining accounting for revenue across all industries). The main objective of the research reported in this article is to determine whether or not credit card rewards programmes should have been included in the scope of IFRIC 13 and consequently whether or not credit card rewards programmes should be included in the scope of IFRS 15. It was found that the differences between a credit card rewards programme and a typical customer loyalty programme prove that a credit card rewards programme transaction should be treated differently for accounting purposes and that these transactions should fall outside the scope of IFRIC 13 and IFRS 15.
The accounting treatment of credit card rewards programmes : a South African perspective (part III)
(AOSIS, 2017-10) Brink, Sophia M.
Most credit card issuers offer their cardholders participation in a customer loyalty programme. Currently all credit card rewards programmes fall within the scope of IFRIC 13. For annual reporting periods beginning on or after 1 January 2017 IFRIC 13 will be withdrawn and will be replaced by the new revenue Standard, IFRS 15. In the process of compiling the new revenue model, credit card rewards programmes raised various concerns and uncertainties regarding the application of IFRS 15 to credit card rewards programme transactions. Despite concerns raised, the IASB and FASB decided against providing any additional guidance to credit card rewards programmes and indicated that they leave it up to management’s judgement to determine how to account for these transactions. Although the effective date of the new revenue Standard is 1 January 2017, in view of the nature of a credit card rewards programme transaction it would be prudent for credit card rewards programmes to start collecting data immediately for the retrospective application. Given the time limit, the unanswered uncertainties and problem areas identified together with the minimal specific guidance to credit card rewards programmes, the main objective of the research reported in this article was to determine how to account for credit card rewards programme transactions, within the scope of IFRS 15 through the formulation of specific guidelines, and specifically to address the uncertainties raised by credit card rewards programme respondents. The study was also aimed at assisting credit card rewards programmes in converting from IFRIC 13 to IFRS 15 by highlighting the differences between the requirements contained in IFRIC 13 and IFRS 15.
The accounting treatment of single-company client loyalty programme transactions
(AOSIS, 2013-10) Brink, Sophia M.
Client loyalty programmes have been prevalent in South Africa since the 1980s, but the popularity of these programmes has increased drastically over the past few years, with more than 100 suppliers in South Africa currently making use of them. On 1 July 2007 the IASB issued IFRIC 13 to give specific guidance to suppliers on the accounting treatment of client loyalty programme transactions. The IASB is currently compiling a new revenue standard. This single new revenue standard will replace six existing standards or interpretations, including IFRIC 13. A critical analysis of IFRIC 13 will assist the development of this new revenue standard. The main objective of the research was therefore to determine whether the guidance in IFRIC 13 regarding the accounting treatment of a single-company client loyalty programme transaction is consistent with other accounting standards and recent developments. The accounting treatment of each component of a client loyalty programme transaction with a change in estimate was considered. It was found that inconsistencies exist in the initial measurement of the fair value and how a change in accounting estimate is recognised.
Belasbaarheid van klientelojaliteitsprogramtransaksies in Suid-Afrika
(Stellenbosch : Stellenbosch University, 2012-03) Brink, Sophia M.; Viviers, H.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Accountancy..
ENGLISH ABSTRACT: Client loyalty programmes are a common phenomenon in the South African market. Despite the fact that client loyalty programmes have been prevalent in South Africa since the 1980‟s, the South African Revenue Service has issued no guidance on the treatment of client loyalty programme transactions in the hands of the consumer. Benefits received in the form of goods, services or discounts from a client loyalty programme are not subject to normal South African income tax based on the current practice in South Africa. The main objective of this study was to determine whether or not the current practice applied in South Africa is correct. In order to obtain a better understanding of the functioning of client loyalty programmes a selection of the most popular client loyalty programmes in South Africa was made and the terms and conditions of these respective client loyalty programmes were analysed. Taking into account the way client loyalty programmes function, the taxability of client loyalty programme transactions were reviewed and analysed with reference to relevant tax law sections and case law. In order to investigate a client loyalty programme transaction as a whole, the tax treatment of the supplier that grants points or miles was included in the scope of the study. The tax treatment of the supplier could potentially shed more light on the tax treatment of the consumer who earn points or miles. The consumer and the supplier have possible income tax (which includes capital gains tax) and VAT implications, consequently both the income tax treatment and the VAT treatment for the consumer and the supplier were considered. In addition, the tax treatment of client loyalty program transactions in South Africa was compared with a country (Australia) whith similar tax laws to South Africa and income tax principles or practices were identified which might be useful within a South African context. It was found that client loyalty programme transactions satisfy the general gross income definition and that the value of the transaction must be included in the consumer's gross income. Only when employees earn points or miles in their own name by virtue of goods or services purchased by their employer, a possible employees‟ tax obligation arises. It was found that within an employee/employer relationship, the requirements of paragraph (c) and paragraph (i) of the "gross income" definition are not met due to the fact that there are no causal connection or direct relationship between the benefit received and the services rendered and also because the client loyalty programme supplier is not an associated institution of the employer. Australian case law confirms the above conclusions in a South African context. The VAT implications of a client loyalty programme transaction occur for the consumer when the consumer exchange points or miles for benefits at a programme partner and not when the points or miles are earned. Capital gains tax implications will only be applicable if a consumer disposes of a capital asset obtained in terms of a client loyalty programme transaction. It was found that the current practice in South Africa of not taxing benefits received from a client loyalty programme is incorrect. To implement the taxability of client loyalty programme transactions in South Africa it is recommended that SARS should formulate guidelines regarding the tax treatment of client loyalty programme transactions. The study includes recommendations to facilitate the implementation of the taxability of client loyalty programme transactions.
Belasting op toegevoegde waarde : gevolge van klientelojaliteits-programtransaksies vir verskaffers
(AOSIS, 2013-10) Brink, Sophia M.
Client loyalty programmes are a common phenomenon in the South African market. Despite the fact that client loyalty programmes have been prevalent in South Africa since the 1980s, the South African Revenue Service has issued minimal guidance on the value-added tax treatment of client loyalty programme transactions. The main objective of the research was to determine whether South African client loyalty programme suppliers correctly account for client loyalty programme transactions for value-added tax purposes. In order to meet this objective, available local literature was analysed to determine the proposed value-added tax treatment of a client loyalty programme transaction. The proposed correct value-added tax treatment was compared with a survey circulated to a population of client loyalty programme suppliers in South Africa. The comparison indicated that in practice the Value-Added Tax Act 89 of 1991 is not always interpreted correctly. This incorrect tax treatment could result in financial loss to the client loyalty programme supplier as taxpayer.
The effect of the new revenue standard on client loyalty programmes
(AOSIS, 2014-07) Brink, Sophia M.
The popularity of client loyalty programmes has increased drastically over the past few years, with more than 100 suppliers in South Africa currently making use of them. On 1 July 2007 the IASB issued IFRIC 13 to give specific guidance to suppliers on the accounting treatment of client loyalty programme transactions. In the process of compiling a new revenue standard, the International Accounting Standard Board published Exposure Draft ED/2011/6 Revenue from Contracts with Customers on 14 November 2011 to supersede virtually all existing revenue standards and interpretations under IFRS, including IFRIC 13. Although the effective date of the new revenue standard is 1 January 2017, in view of the nature of a client loyalty programme transaction it would be prudent for suppliers to start collecting data immediately for the retrospective application. Given the time limit and the minimal specific reference to client loyalty programme transactions in the proposed new model, the main aim of the research was to investigate the proposed new model’s impact on the accounting treatment of client loyalty programme transactions. The similarities and differences between the guidelines in IFRIC 13 and those of the proposed new model as well as the specific paragraphs in the proposed new model that are applicable to client loyalty programme transactions were considered. A specific recognition difference and a presentation difference has been identified between the accounting treatment of a client loyalty programme transaction under IFRIC 13 and that of the proposed new model.
An evaluation of the income tax treatment of client loyalty programme transactions by South African suppliers
(AOSIS, 2015-04) Brink, Sophia M.
The popularity of client loyalty programmes has increased drastically over the past few years, with more than 100 suppliers in South Africa currently making use of them. Despite the fact that client loyalty programmes have been prevalent in South Africa since the 1980s, the South African Revenue Service has issued no specific guidance on the income tax treatment of client loyalty programme transactions. The main objective of the research was to determine whether South African client loyalty programme suppliers treat client loyalty programme transactions correctly for income tax purposes. In order to meet this objective, available local and international literature were analysed to determine the proposed income tax treatment of a client loyalty programme transaction expenditure incurred by supplier for purposes of the client loyalty programme. The proposed correct income tax treatment was compared with a survey circulated to a population of client loyalty programme suppliers in South Africa. The comparison indicated that in practice the Income Tax Act No. 58 of 1962 is treated differently from the proposed treatment. This incorrect tax treatment could result in possible financial loss to the client loyalty programme supplier as taxpayer.
Inkomstebelastinghantering van klientelojaliteitsprogram-transaksies in Suid-Afrika
(AOSIS, 2012-10) Brink, Sophia M.; Viviers, Herman A.
Client loyalty programmes are a common phenomenon in the South African market and, although prevalent in South Africa since the 1980s, the South African Revenue Service has issued no guidance on the income tax treatment of client loyalty programme transactions in the hands of the consumer. Benefits received in the form of goods, services or discounts from a client loyalty programme are currently not subject to normal South African income tax. The main objective of the research was to investigate whether the existing provisions in the Income Tax Act and related case law provide the basis for taxing client loyalty programmes in the hands of the consumer as natural person. In order to meet this objective local and international literature was analysed to determine the correct income tax treatment and it was found that points or miles received by a consumer meet all the requirements of the “gross income” definition and as a result should be taxable.
Inkomstebelastinghantering van korting ontvang in die hande van 'n nie-handeldrywende persoon
(AOSIS, 2014-04) Brink, Sophia M.
For income tax purposes, a taxpayer operating a business will account for discount received differently from a taxpayer not operating a business. When a taxpayer operating a business obtains goods or services at a discount, the taxpayer can claim a section 11(a) deduction at the value of the goods or services, net of the discount received. The discount reduces the value of the net reduction of taxable income and the taxpayer is effectively taxed on the discount received. A taxpayer who is not operating a business will not qualify for a section 11(a) deduction (read together with section 23(g)) for goods or services obtained (it does not meet the requirements ‘for the purposes of trade’ and ‘in the production of income’). Discount received in the hands of a non-trading person (often a natural person) is currently not subject to normal South African income tax. The main objective of this article is to investigate whether the existing provisions in the Income Tax Act No. 58 of 1962 and related case law provide a basis for taxing discount received in the hands of the non-trading individual. In order to meet this objective, local literature was analysed to determine the correct income tax treatment and it was found that discount received by a non-trading person meets all the requirements of the ‘gross income’ definition and consequently should be taxable.
An investigation into the future of discretionary trusts in South Africa - an income tax perspective
(AOSIS, 2014-10) Brink, Sophia M.; Willemse, Leonard
Trusts have long been associated with elaborate tax avoidance schemes, primarily as a result of their flow-through nature. In the National Budget the Minister of Finance indicated that the government was proposing several legislative measures during 2013/2014 regarding trusts to control abuse. At this stage the proposals are vague and confusing, but it is intimated that the conduit pipe principle may be under review as the proposals state that trusts should no longer act as a flow-through vehicle, meaning that the amounts distributed to the beneficiaries will no longer retain their original identity. The main objective of the research was to clarify the proposed changes to the taxation of trusts, to investigate the potential impact(s) of these proposals (albeit unclear and consequently based on certain assumptions), and to assess whether discretionary trusts still have a future in South Africa given these proposals. In order to meet this objective, a qualitative approach based on a literature study of pure theoretical aspects was used. It was found that should the proposals become law the beneficiaries will be worse off.
An investigation into the future of discretionary trusts in South Africa : an income tax perspective : part 2
(AOSIS, 2017-03) Brink, Sophia M.
Background: Trusts have long been used as an estate planning mechanism, including the avoidance of estate duty and donations tax. In the 2016 National Budget the Minister of Finance indicated that Government was proposing several legislative measures during 2016/2017 to prevent individuals from using a trust to avoid estate duty (and donations tax to a certain extent). Unexpectedly, the 2016 draft Taxation Laws Amendment Bill and the final Amendment Bill did not give effect to any of these proposals, but introduced other less drastic measures to control the abuse of trusts for tax purposes, albeit with the same stated purpose. Aim: The main aim of the study was to clarify the reform proposals (albeit unclear and consequently based on certain assumptions) and to compare the reform proposals with the final amendments. This comparison will shed some light on the fairness and appropriateness of the final amendments and, more importantly, on the possibility that the reform proposals published by National Treasury in February 2016 not included in the final amendments will be enacted in the future. This investigation will assist tax practitioners and taxpayers in effective tax and estate planning, given that the reform proposals and final amendments have a possible impact on the future of discretionary trusts in South Africa. Setting: This article examines existing literature in a South African income tax environment. Methods: In order to meet this objective a qualitative approach based on a literature study of pure theoretical aspects was used. Results and conclusion: It was found that should the reform proposals become law, many trusts would become ineffective from a tax-planning perspective and these changes might erode other benefits trusts offer, jeopardising the future of discretionary trusts in South Africa.

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