School of Accountancy

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This Department was known as the Department of Accounting until 27 June 2013.

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Accountancy students’ and lecturers’ perceptions of the effect of open-book assessments on writing examinations
(HESA, 2020) Kruger, Stephan J.
Open-book assessment (OBA) can contribute to the development of competency in handling large amounts of information in the knowledge economy. This is one of the reasons why the South African Institute of Chartered Accountants (SAICA) implemented OBA for its Initial Test of Competence. This empirical study investigated final year accountancy students’ and lecturers’ perceptions of the effect on writing examinations after their method of assessment changed from a closed-book (CBA) to an open-book assessment format. Students and lecturers perceived a change in writing behaviour, reduced anxiety, and improved performance. On some aspects the level of agreement between students and lecturers differed significantly. There is also evidence that African students perceived OBA to be less beneficial compared to the perceptions of white students. For subjects for which substantial texts were available, students perceived the least change happened for Auditing while lecturers perceived the least change for Financial Accounting. Both students and lecturers perceived the most change happened for Taxation. It is important that lecturers at departments of accountancy take cognisance of these perception gaps and to adjust their teaching to enable their students to utilise their texts as an additional resource optimally. This study is also of value to the regulatory bodies to evaluate their assessment practises
Accounting students' perceptions : internal control theory moves outside the classroom and online
(HESA, 2019) Sexton, N. D.
Many have argued that faculty should transform the way accounting programmes are presented to undergraduate students. Changes in student expectations, professional qualifications and employer demands have driven innovative experiential learning interventions. Students want to learn collaboratively, inside and outside of the classroom, they want to use information technology and have fun. In response, this article reports on an auditing assignment where students were required to identify control weaknesses in everyday life, record it and report back using Facebook. A Facebook group was created where students posted photos or videos of the control weakness they identified. Other students could “like,” comment and share posts. This was the first assignment of this nature. This research presents the accounting students’ perceptions of the assignment as a whole, the pervasive skills applied and the use of Facebook. These were generally positive and should encourage educators to keep integrating technology and real life into learning.
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.
Addressing application software package project failure : bridging the information technology gap by aligning business processes and package functionality
(Stellenbosch : Stellenbosch University, 2011-12) Kruger, Wandi; Smit, Sybil; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Accountancy.
ENGLISH ABSTRACT: An application software package implementation is a complex endeavour, and as such it requires the proper understanding, evaluation and redefining of the current business processes to ensure that the project delivers on the objectives set at the start of the project. Numerous factors exist that may contribute to the unsuccessful implementation of application software package projects. However, the most significant contributor to the failure of an application software package project lies in the misalignment of the organisation’s business processes with the functionality of the application software package. Misalignment is attributed to a gap that exists between the business processes of an organisation and what functionality the application software package has to offer to translate the business processes of an organisation into digital form when implementing and configuring an application software package. This gap is commonly referred to as the information technology (IT) gap. The purpose of this assignment is to examine and discuss to what degree a supporting framework such as the Projects IN Controlled Environment (PRINCE2) methodology assists in the alignment of the organisation’s business processes with the functionality of the end product; as so many projects still fail even though the supporting framework is available to assist organisations with the implementation of the application software package. This assignment proposes to define and discuss the IT gap. Furthermore this assignment will identify shortcomings and weaknesses in the PRINCE2 methodology which may contribute to misalignment between the business processes of the organisation and the functionality of the application software package. Shortcomings and weaknesses in the PRINCE2 methodology were identified by: • Preparing a matrix table summarising the reasons for application software package failures by conducting a literature study; Mapping the reasons from the literature study to those listed as reasons for project failure by the Office of Government Commerce (the publishers of the PRINCE2 methodology); • Mapping all above reasons to the PRINCE2 methodology to determine whether the reasons identified are adequately addressed in the PRINCE2 methodology. This assignment concludes by proposing recommendations for aligning the business processes with the functionality of the application software package (addressing the IT gap) as well as recommendations for addressing weaknesses identified in the PRINCE2 methodology. By adopting these recommendations in conjunction with the PRINCE2 methodology the proper alignment between business processes and the functionality of the application software package may be achieved. The end result will be more successful application software package project implementations.
Addressing some of the challenges faced by small and medium-sized entities during the selection and implementation of accounting software packages
(Stellenbosch : Stellenbosch University, 2016-03) Bishop, William Arthur; Steenkamp, Len P.; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accountancy.
ENGLISH SUMMARY : Alignment between an entity’s strategic business objectives and its information system (IS) has been a popular research area over the last couple of years. There is a considerable amount of literature on how to solve this alignment issue in larger entities, but limited research is available on the challenges that small and medium-sized entities (SMEs) face when having to align their strategic business objectives with their ISs. Various small generic accounting software packages are available for purchase by SMEs. These accounting packages all have functionalities that enable SMEs to keep proper accounting records; however, due to their generic nature, these accounting packages do not always have sufficient functionalities to drive the SMEs’ strategic business objectives, resulting in IS misalignment. Newly established SMEs face the challenge of both selecting the correct accounting software package at the start of their establishment and proper implementation of the selected package. The same challenge is faced by growing SMEs that are planning to replace, improve or expand their current accounting software. Not selecting the correct accounting software package and not managing the package installation and configuration processes properly will result in the accounting software not addressing the strategic business needs of the SME. These are two of the main reasons why small generic accounting software packages often fail to drive the entire business system of SMEs. The purpose of this research assignment was to review and discuss the two main challenges faced by SMEs when selecting and implementing generic accounting packages. The purpose was further to develop a mapping between strategic business objectives commonly found within SMEs and software package functionalities that SMEs can refer to during the selection and implementation of new accounting software packages. It also examined the potential of (PRINCE2) Projects in Controlled Environments as a project-management framework for application by SMEs during the implementation of new accounting software. A non-empirical approach was followed throughout this assignment, whereby a literature review was performed on strategic alignment issues faced by SMEs, the strategic business objectives of SMEs, the functionalities required for strategic alignment within SMEs and the tailoring potential of PRINCE2. It was found that in order for an SME to select the correct accounting software package, it is important that it invests time and effort in considering the software functionalities provided by the software package and maps it against its strategic business drivers to prevent failure of the package. It was further concluded that the level of innovation the SME strives towards has a direct impact on the software package functionality requirement. PRINCE2 was found to be a suitable framework for use by SMEs in the implementation of accounting software packages only if tailored properly to incorporate the specific needs of the SME and adjusted to specifically address strategic alignment issues.
Addressing the challenge of strategic alignment faced by small and medium-sized entities during the selection of accounting software packages
(Clute Institute, 2016-12-27) Bishop, William Arthur
ENGLISH SUMMARY : Alignment between an entity’s strategic business objectives and its information systems (ISs) has recently received research attention. Currently, small and medium-sized entities (SMEs) still face the challenge of successfully aligning their strategic business objectives with their ISs. Various small generic accounting software packages are available for purchase by SMEs. These accounting packages all have functionalities that enable SMEs to keep proper accounting records. However, due to their generic nature, these accounting packages do not always have sufficient functionalities to drive the SMEs’ strategic business objectives, resulting in IS misalignment. Not selecting the correct accounting software package will result in the accounting software not addressing the strategic business needs of the SME. The purpose of this study is to review and discuss the challenges faced by SMEs when selecting generic accounting packages and to develop a mapping between strategic business objectives commonly found within SMEs and software package functionalities that SMEs can refer to during the selection and implementation of new accounting software packages. This is accomplished on a non-empirical basis through a review of pertinent literature. In order for a SME to select the correct accounting software package, it is important that it invest time and effort in considering the software functionalities provided by the software package and map it against its strategic business imperatives to prevent failure of the package.
Addressing the incremental risks associated with adopting a Bring Your Own Device program by using the COBIT 5 framework to identify keycontrols
(Stellenbosch : Stellenbosch University, 2014-04) Weber, Lyle; Smit, Sybil; Boshoff, W. H.; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accountancy.
ENGLISH ABSTRACT: Bring Your Own Device (BYOD) is a technological trend which individuals of all ages are embracing. BYOD involves an employee of an organisation using their own mobile devices to access their organisations network. Several incremental risks will arise as a result of adoption of a BYOD program by an organisation. The research aims to assist organisations to identify what incremental risks they could potentially encounter if they adopt a BYOD program and how they can use a framework like COBIT 5 in order to reduce the incremental risks to an acceptable level. By means of an extensive literature review the study revealed 50 incremental risks which arise as a result of the adoption of a BYOD program. COBIT 5 was identified as the most appropriate framework which could be used to map the incremental risks against. Possible safeguards were identified from the mapping process which would reduce the incremental risks to an acceptable level. It was identified that 13 of the 37 COBIT 5 processes were applicable for the study.
Addressing the incremental risks associated with adopting Bring Your Own Device
(AOSIS, 2018) Weber, Lyle; Rudman, Riaan J.
Bring Your Own Device (BYOD) involves allowing employees to use their own mobile devices to access their organisations’ networks. Many organisations are embracing this trend as a means to cut information technology (IT) expenditure, enhance employee satisfaction, etc. However, these and other benefits come at a cost in the form of exposing an organisation to new risks. The aim of this research was to assist organisations to identify the incremental risks they could potentially encounter if they implement a BYOD programme and how they can reduce the risks directly related to BYOD to an acceptable level. An extensive literature review was performed to identify the risks which arise as a result of the adoption of a BYOD programme. COBIT 5 was identified as the most appropriate framework which could be used to develop possible safeguards to mitigate the incremental risks associated with a BYOD programme to an acceptable level. Safeguards were developed to address the risks.
Addressing the incremental risks associated with social media by using the cobit 5 control framework
(Stellenbosch : Stellenbosch University, 2015-04) Gerber, Petro; Steenkamp, Gretha; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accounting.
ENGLISH ABSTRACT: Social media offers great opportunities for businesses and the use thereof will increase competitiveness. However, social media also introduce significant risks to those who adopt it. A business can use existing IT governance control framework to address the risks introduced by social media. However a business should combine existing control frameworks for adequate and complete IT governance. This study was undertaken to help businesses to identify incremental risks resulting from the adoption of social media and to develop an integrated IT governance control framework to address these risks both at strategic and operational level. With the help of the processes in COBIT 5, this study provides safeguards or controls which can be implemented to address the IT risks that social media introduce to a business. By implementing the safeguards and controls identified from COBIT 5, a business ensures that they successfully govern the IT related risks at strategic level. This study also briefly discuss the steps that a business can follow to ensure IT related risks at operational level is addressed through the implementation of configuration controls.
Die aftrekbaarheid van werknemerverwante voorwaardelike aanspreeklikhede, met spesifieke verwysing na die verkoop of beeindiging van 'n besigheid
(Stellenbosch : University of Stellenbosch, 2010-12) Kieviet, Suzanne; Van Wyk, E.; University of Stellenbosch. Faculty of Economic and Management Sciences. Dept. of Accountancy.
AFRIKAANSE OPSOMMING: Die belastingaftrekbaarheid van werknemerverwante voorwaardelike aanspreeklik-hede, met spesifieke verwysing na die verkoop of beëindiging van ŉ besigheid, is in meegaande studie ondersoek. Dit word bevind dat in die geval van die beëindiging van ‘n besigheid, alle voorwaardelike aanspreeklikhede op datum van beëindiging van die besigheid, waarskynlik nooit vervul kan word nie, spesifiek in geval waar dit gekoppel is aan die vereiste dat ŉ werknemer op ŉ toekomstige datum steeds in diens moet wees van die besigheid. Die voorwaardelike verpligting word dus nooit vervul nie en geen betalings hoef aan voormalige werknemers gemaak te word nie. Geen aftrekking aan die voormalige werkgewer word dus toegestaan in gevalle waar verlof- of bonusbetalings gemaak word na beëindiging van die besigheid, indien die verpligting nie reeds onvoorwaardelik bestaan het voordat die beëindiging van die besigheid plaasgevind het nie. Dit word verder bevind dat in die geval waar ŉ besigheid gelikwideer word, die voormalige en voornemende werkgewer se verpligting teenoor die werknemers se voorwaardelike aanspreeklikhede verval. Verder is dit ook waarskynlik dat geen belastingaftrekking toegestaan sal word nie, omrede die voorwaardelike aanspreeklikheid nie vervul is op datum van likwidasie nie. Dit word verder bevind dat in die geval waar ŉ besigheid as lopende saak verkoop word, die voornemende werkgewer ingevolge Artikel 197 van die Wet op Arbeidsverhoudinge verplig word om alle dienskontrakte, tesame met alle regte en verpligtinge wat bestaan tydens die oordrag, oor te neem asof hy in wese in die skoene tree van die voormalige werkgewer. Voorts word die voormalige werkgewer ook gebind aan die betaling van bedrae, soos deur die verkoopskontrak bepaal, of andersins in gevalle waar die voornemende werkgewer nie die verpligting om te betaal, kan nakom nie. Beide die voormalige en voornemende werkgewer bly dus wetlik aanspreeklik vir die betaling van bedrae soos uitgestippel in die verkoopskontrak, in gevalle waar ‘n besigheid as lopende saak verkoop word. Dit word verder bevind dat die Inkomstebelastingwet ‘n belastingaftrekking moet toestaan aan die voormalige of voornemende werkgewer wat ‘n werknemerverwante-betaling maak uit hoofde van die wette soos neergelê deur die Wet op Arbeidsverhoudinge. Sodoende sal die Inkomstebelastingwet die oogmerke van die Wet op Arbeidsverhoudinge onderskraag, met gevolglike voordelige uitwerking op die ekonomie en beskerming van werknemers se werksekuriteit.
Agentskapsteorie
(Stellenbosch : Stellenbosch University, 2001-12) Du Toit, C. E. (Catherina Elizabeth); De Jager, W.; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accounting.
ENGLISH ABSTRACT: The most basic principle of agency theory is that an individual will always serve his own interest best. According to Eisenhardt (1989) agency theory describes individuals as rational, risk averse en motivated by egotism. Agency theory also deals with the conflict that exists between different parties in an organization due to people's egoism. This self-interest can lead to goal incongruence if a person is placed in an environment where he has to serve somebody else's interest. Ownership and management vested in the same party until about 130 years ago. These roles were however separated with the development of the modem organization. The principal or owner is now represented by the shareholder and management serves as the agent. The principal thus appoints the agent to serve and manage his interest in the organization optimally. The principal's goal is the maximising of his shareholders' wealth. The agent's goal to carry out his task with the minimum effort and or to obtain maximum benefit for himself. It is thus clear that the goals of the principal and agent might often differ and this will give rise to goal Incongruence. This goal incongruence may give rise to some managerial actions which will be detrimental to optimal value of the company. The agency conflict, which is caused by man's self interest, manifests in the modem organization in a number of ways. These are referred to agency problems in this assignment. Agency problems are found both on a micro- and macroeconomical level. Agency cost is the sum of the difference between the real and optimal value of the company, the monitoring costs of the principal and the bonding costs of the agent. This cost is to the disadvantage of the principal and might even be to the disadvantage of the agent. It is thus essential that agency conflict and agency costs are reduced to a minimum. A number of measures are taken to address the agency problems and to reduce their negative effect on the organization. None of these measures will be efficient enough ifused in isolation. An optimal combination of solutions will depend on the company's specific circumstances. An empirical study was conducted to determine to what extent the agency problems manifest during the demutualisation of a big insurance business. The measures taken to address these problems were also investigated as well as the extent to which these were successful.
An analysis of issues relating to the taxation of cryptocurrencies as financial instruments
(AOSIS, 2020) Basson, Remerta
Orientation: This article examines the normal tax treatment of cryptocurrency transactions performed by natural persons in South Africa. Research purpose: The aim of this article was to document the normal tax treatment of cryptocurrency transactions subsequent to the inclusion of cryptocurrency in the definition of ‘financial instrument’ in section 1(1) of the Income Tax Act No. 58 of 1962, and to determine whether this inclusion gives rise to unanticipated issues. Motivation for the study: This investigation was necessitated by the distinguishing features of cryptocurrency that differentiate it from other financial instruments. Research approach/design and method: This article falls within the reform-orientated genre of doctrinal research. A desktop literature review was conducted to determine the normal tax treatment of cryptocurrency transactions, based on an interpretation of relevant legislation and a review of secondary commentary. Key issues identified in the normal tax treatment of cryptocurrency transactions were documented, and recommendations were made for addressing the issues identified. Main findings: A misalignment may occur between taxable incomes and economic gains of taxpayers engaged in cryptocurrency mining. Practical/managerial implications: The South African Revenue Service (SARS) should allow for a deduction equivalent to the market value of cryptocurrency acquired through cryptocurrency mining in terms of section 22(2)(a). Contribution/value-add: A risk of misalignment between taxable incomes and economic gains of taxpayers performing cryptocurrency mining has been identified and documented, which may inform legislative amendment, or the practice of the SARS.
An analysis of Section 80A(C)(ii) of the Income Tax Act no. 58 of 1962 as amended
(Stellenbosch : University of Stellenbosch, 2009-03) Geldenhuys, Bernard; Van Schalkwyk, Linda; University of Stellenbosch. Faculty of Economic and Management Sciences. Dept. of Accountancy.
ENGLISH ABSTRACT: In November 2006 section 103(1) of the Act was abolished and replaced by a new Part IIA, containing sections 80A to 80L, which targets impermissible tax avoidance arrangements. Section 80A(c)(ii) introduced a new concept to the South African tax law: a misuse or abuse of the provisions of the Act, including Part IIA thereof. The objective of this study was to establish the origin, meaning, application and effect of section 80A(c)(ii) of the Act. The evolution of section 80A(c)(ii) was therefore examined where after the enacted version was analyzed. It was essential to determine the origin of section 80A(c)(ii) in order to establish some point of reference from which inferences could be drawn as to the possible application and effect thereof. Case law, practice statements and articles relating to its proposed root was then examined. A ‘misuse or abuse’ of a provision, it was found, implies, frustrating or exploiting the purpose of the provision. This contention was confirmed by existing Canadian precedent. Such an interpretation, however, has a strong resemblance to the words in which the draft version of section 80A(c)(ii) was couched. It is therefore in contrast to the presumption that different words (in the enacted version) imply a different meaning. The precise meaning of the words ‘misuse or abuse’ is thus still elusive. It was established that section 80A(c)(ii) has its roots in section 245 of the Canadian Act. Section 245(4) was regarded as an effective comparative to section 80A(c)(ii) as it also contained a so-called misuse or abuse rule. The application of this rule in the Canadian tax environment required the following process: - Interpret (contextually and purposively) the provisions relied on by the taxpayer, to determine their object, spirit and purpose. - Determine whether the transaction frustrates or defeats the object, spirit or purpose of the provisions. Section 245(4) had the effect of reviving the modern approach (a contextual and/or purposive theory) to the interpretation of statutes in Canada. Reference to the ‘spirit’ of a provision (above) was found not to extend the modern approach to statutory interpretation: it does not require of the court to look for some inner and spiritual meaning within the legislation. As section 245(4) was regarded as an effective comparative to section 80A(c)(ii) it was contented that it would have a similar effect, than that of its Canadian counterpart, on the approach to statutory interpretation in South Africa. However, it was established that a modern approach to statutory interpretation was already authoritative in South Africa. This finding led the author to the conclusion that section 80A(c)(ii) could at best only reinforce the case for applying such an approach. Such a purpose for section 80A(c)(ii) was however found to be void in the light of the Constitution of the Republic of South Africa, which was enacted in 1996, and provides a sovereign authority for the application of the modern approach. It was also found that the practical burden of showing that there was a ‘misuse or abuse of the provisions of this Act (including the provisions of this Part)’ will rest on the shoulders of the Commissioner, notwithstanding section 82 of the Act.
An analysis of sections 11D(1)(A) and 11D(5)(B) of the income tax Act No. 58 of 1962 as amended
(Stellenbosch : Stellenbosch University, 2011-12) Strauss, Carien; Van Schalkwyk, C. J.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Accountancy.
ENGLISH ABSTRACT: In February 2007 section 11D was inserted into the Income Tax Act 58 of 1962 as amended. The aim of the section was to encourage private-sector investment in scientific or technological research and development (R&D). This was an indirect approach by National Treasury to increase national scientific and technological R&D expenditure in order to complement government expenditure on the subject matter. Although section 11D provides generous income tax incentives, the interpretation thereof was found to be a hindrance in attaining the goal sought by National Treasury. This is due to the fact that this section demands a firm grasp of intellectual property (IP) law, principles of tax, and technology in general. This is clearly shown by the lapse in time (i.e. three years) between the passing of section 11D into law and the release of the South African Revenue Services’ (SARS) final interpretation of section 11D, i.e. Interpretation Note 50. The release of Interpretation Note 50 in August 2009 sparked wide-spread controversy among many a patent attorneys and tax consultants. The interpretation of the section by SARS was found by many to be so draconian that it destroyed the incentive entirely. The objective of this study is to provide greater clarity on the areas of section 11D which have been found to be onerous to taxpayers. Hence the meaning of “new” and “non-obvious” in the context of a discovery of information as eligible R&D activity1 was examined. Hereafter the ambit of the exclusion of expenditure on “management or internal business process”2 from eligibility for the incentive in the context of computer program development was examined. It was established that the meaning of “novel” and “non-obvious” as construed by IP jurisprudence could mutatis mutandis be adopted for purposes of interpreting section 11D(1) of the Income Tax Act. Therefore, information would be regarded as “new” if it did not form part of the state of the art immediately prior to the date of its discovery. The state of the art was found to comprise all matter which had been made available to the public (both in the Republic and elsewhere) by written or oral description, by use or in any other way. Information would also be regarded as non-obvious if an ordinary person, skilled in the art, faced with the same problem, would not have easily solved the problem presented to him by having sole reliance on his intelligence and what was regarded as common knowledge in the art at the time of the discovery. It was submitted that in construing the meaning of the “management or internal business process” exclusion, the intention of the lawgiver should be sought and given effect to. The Explanatory Memorandum issued on the introduction of section 11D states that the lawgiver’s intention with the section was to ensure that South Africa is not at a global disadvantage concerning R&D. The R&D tax legislation of Australia, the United Kingdom and Canada was therefore examined to establish the international bar set in this regard. SARS is of the view that the “management or internal business process” exclusion applies to the development of any computer program (with the said application) irrespective of whether the program is developed for the purpose of in-house use, sale or licensing. However, it was found that such a restrictive interpretation would place homebound computer development at a severe disadvantage when compared with the legislation of the above mentioned countries. In order to give effect to the intention of legislature, it was submitted that the exclusion provision should be construed to only include the development of computer programs for in-house management or internal business process use. Computer programs developed for the said application, but for the purpose of being sold or licensed to an unrelated third party, should still be eligible for the R&D tax incentive.
An analysis of the discretion of the SARS and the relevant factors considered following a request for the suspension of the payment of disputed tax in terms of section 164(3) of the Tax Administration Act 28 of 2011
(Stellenbosch : Stellenbosch University, 2015-12) Van Wyk, Danielle; Van Zyl, Linda; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accounting.
ENGLISH ABSTRACT: Section 164(3) of the Tax Administration Act gives a senior SARS official (‘the SARS’) the discretion to suspend the payment of disputed tax or a portion thereof, having regard to relevant factors, including a list of specified factors. In this study the uncertainties regarding the discretion of the SARS and the meaning and relevance of the specified factors were examined. The objectives were to determine whether the amendments to section 164(3) addressed some of the concerns and uncertainties, to establish a basic understanding of the term ‘relevant factors’ and the impact thereof, to analyse the impact of the constitutional right to just administrative action on the manner in which the section 164(3)-discretion is exercised by the SARS, and to determine whether the ‘suspension of the payment’ of disputed tax constitutes the granting of ‘credit’ in terms of the NCA. It was established that the SARS has made several amendments to the specified factors, which resulted in some of the original concerns and uncertainties being addressed, many remaining unaddressed and creating new ones. For a factor to be considered ‘relevant’ it was determined that a close and logical sufficient connection must exist between the evidence provided by the taxpayer (factor) and the issue (request), which will make the granting of the request possible. The factor will most probably be considered with reference to all the other specific relevant factors in total. The relevance of a factor is also based upon the discretion of the SARS which adds an element of subjectivity. However, if the decision in terms of section 164(3) is unlawful, unreasonable or procedurally unfair, a taxpayer has the right to a review in terms of the PAJA. It was established that the request will form the foundation of a review application and the taxpayer therefore needs to ensure that all relevant information is included when submitting a request in terms of section 164(3). It was also concluded that a request for the suspension of payment can be equated with a credit transaction and, consequently with a ‘credit agreement’ in terms of section 8(4)(f) of the NCA. It was established that although the Tax Administration Act does contain some similarities to the relevant provisions in the NCA, the NCA can be used as guidance to simplify the process and specified factors in terms of section 164(3). The Legislator’s original intention with section 164(3) was to formalise the circumstances where the payment of tax will be required, despite objection or appeal. Based upon the existing concerns and uncertainties regarding the factors, as well as the impact of the discretion exercised by the SARS, it is however questionable whether section 164(3) in its current form endorses the Legislator’s original intention. It remains to be seen whether the Legislator will take the effect of the right to just administrative action, the unresolved concerns and uncertainties and the recommendations based on the provisions of the NCA into account in future amendments to section 164(3).
An analysis of the interaction between section 7(8) and section 31(2) of the Income Tax Act No. 58 of 1962 when applied to non-interest-bearing loans from resident natural persons to connected non-resident trusts
(Stellenbosch : Stellenbosch University, 2020-03) Hewitt, Mark John; Malan, Monique; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accountancy.
ENGLISH SUMMARY: Uncertainty exists regarding the normal tax consequences for a resident natural person where a transaction falls within the ambit of both section 7(8) and section 31(2) of the Income Tax Act No. 58 of 1962 (‘the Act’), and in particular, whether or not the simultaneous application of these sections could result in domestic economic double taxation for the resident natural person. This study analyses the interaction between section 7(8) and section 31(2) of the Act in order to conclude on the normal tax consequences where a resident natural person has advanced a non-interest-bearing loan to a connected non-resident trust (‘the specified transaction’). This study set out to, firstly, conclude whether, and if so, under which circumstances, the application of section 7(8) of the Act influences whether or not a tax benefit is derived by the resident in the case of the specified transaction, which is a prerequisite for section 31(2) of the Act to apply. Secondly, this study set out to determine whether or not, once all the requirements of section 31(2) of the Act are met, the application of section 31(2) of the Act influences whether or not the requirements of section 7(8) of the Act are still met. In respect of the first enquiry, it was established through case law that the non-charging of interest is regarded as a gratuitous disposition (‘donation’). This study analysed the three, collectively exhaustive, possible instances that can arise and affect the normal tax consequences of section 7(8) of the Act to the specified transaction. The income received by or accrued to the non-resident trust, by reason of or in consequence of the donation made by the resident natural person, in a particular year of assessment, can be (1) more than or equal to the value of the donation in that year of assessment (‘full attribution’); (2) less than the value of the donation in that year of assessment (‘partial attribution’); or (3) zero in that year of assessment (‘zero attribution’). Section 31(2) of the Act will be applicable to the specified transaction if the resident derives a tax benefit. This study found that in the case of full attribution, the resident would not derive a tax benefit and therefore section 31(2) of the Act would not apply. However, in the case of zero attribution and in certain cases of partial attribution, the resident would derive a tax benefit and therefore section 31(2) of the Act would apply. In respect of the second enquiry, this study concluded that, if section 31(2) of the Act applies, the requirement that a donation must be made by the resident in order for section 7(8) of the Act to apply, has not been met. For this reason, section 7(8) of the Act would not apply where section 31(2) of the Act applies. The findings of this study substantiate and conclude that domestic economic double taxation would not occur in the case of the specified transaction.
Analysis of the interaction between the income tax and capital gains tax provisions applicable to share dealers
(Stellenbosch : Stellenbosch University, 2013-12) Smit, Jacobus Gideon; Van Schalkwyk, L.; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accounting.
ENGLISH ABSTRACT: The interaction between the income tax provisions contained in sections 9B, 9C, 11(a) and 22 of the Income Tax Act No. 58 of 1962 (the Act), and the capital gains tax (CGT) provisions of the Eighth Schedule of the Act, are complex and share dealers should approach the tax consequences of share dealing profits with caution. The objective of the assignment was to ensure that the share dealing profits of share dealers (who transact on revenue account) are taxed correctly, with specific reference to the interaction between the aforementioned provisions. This was achieved by considering tax cases, the interpretation notes of the South African Revenue Services (SARS) and commentary of tax writers. Examples of share disposals were incorporated to illustrate that consistency is required between the calculation of profits for income tax and CGT purposes. The guidelines laid down by case law to determine the revenue nature of share disposals were investigated. It was concluded that share dealing profits which are designedly sought for and worked for, either as part of a business operation or not, are of a revenue nature and taxable as such. The method of identification of shares sold as trading stock is important when calculating the income tax profit, since it is used in order to determine both which shares are sold as well as the cost of the shares sold. It was concluded that the method of identification applied in terms of generally accepted accounting practice (GAAP) is generally also acceptable from an income tax perspective. Section 9C of the Act provides a share dealer income tax relief when a ‘qualifying share’ is disposed of. Any amount received or accrued as a result of the disposal of a qualifying share is deemed to be of a capital nature, regardless of the revenue intention of the share dealer. Prior to 1 October 2007, section 9B of the Act provided similar relief to the disposal of an ‘affected share’. It was concluded that section 9C of the Act has a wider scope of application compared to section 9B of the Act. Because the proceeds received on the disposal of affected or qualifying shares are excluded from gross income, the acquisition costs previously incurred and deducted in respect of such shares must be included in taxable income. It was determined that the amount to be included in income is the actual cost of such shares and not the opening trading stock value determined in terms of GAAP and claimed in terms of section 22(2) of the Act. It was concluded that the first-in-first-out (FIFO) method of identification should be applied to determine which affected or qualifying shares have been disposed of. From a CGT perspective, it was illustrated that a share dealer loses the opportunity to choose which identification method to apply and is obliged to also apply the FIFO method in calculating the CGT base cost of the shares. It is concluded that the Eighth Schedule of the Act should be amended to clarify that the FIFO method should be applied for CGT purposes where sections 9B or 9C of the Act find application. Only then will the tax profits of a share dealer be in sync with his or her cash benefit.