All directors’ emoluments will have to be disclosed from 2005
-President of accountants group tells manufacturers luncheon By Gitanjali Singh
Stabroek News
August 6, 2003

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All directors’ emoluments will have to be disclosed from January 2005, when a revised version of the compulsory International Accounting Standard (24) becomes effective, putting an end to the current wide-spread practice of disclosing directors’ fees only.

For those directors concerned over the disclosure of their emoluments, they should either resign as directors or “work for free”, says Harryram Parmesar, President of the Institute of Chartered Accountants of Guyana (ICAG).

As it is, there are different interpretations by accountants of the requirements of the Companies Act of 1991 relating to directors and related parties disclosures. The sides differ on whether both the salaries and fees of related parties ought to be disclosed or just the fees. The IAS 24 also deals with related parties and directors’ disclosures and also comes with varied interpretations.

But all of this ends in 17 months when the revised IAS 24 makes it explicit that all directors’ emoluments have to be disclosed in the financial statements of a company.

Parmesar, in the key-note address to a Guyana Manufacturers’ Association (GMA) luncheon yesterday on the accounting framework in Guyana, said the IAS 24 was recently revised as it related to the issue of directors’ remuneration.

“..[It} has been clearly identified as an item to be disclosed. So to those of you who may anticipate problems with this disclosure, you have just about 17 months more to go,” Parmesar told businessmen.

Section 104 of the Companies’ Act defines directors’ remuneration as salary, fees, commissions, shares or percent of profit, expense allowances and any other form of emolument, whether in cash or not and relating to the “services” as a director of a company or any other subsidiary. Section 163 speaks of the disclosure of emoluments, which is defined as fees, commissions, shares, or percent of profit, contributions paid in respect of a pension scheme and the amount of emoluments of each director.

However, a legal opinion given to the ICAG over the two sections, said the disclosure requirements of the Companies’ Act only relates to fees paid to directors. This is the position of the ICAG. However, at least one accounting firm in the city, Ram & McRae, requires its clients to disclose both the directors’ fees and other emoluments.

Parmesar told the audience that the position of not disclosing the salaries of directors in their capacities as employees of companies, is also the approach taken by a number of Caribbean businesses such as Grace Kennedy Limited and the Neal & Massy Group.

Compliance with the international accounting standards is compulsory for countries and applies to both the private and public sectors.

Parmesar highlighted that it was not the responsibility of auditors to prepare financial statements and also pointed out that there has never been a qualified audited opinion in Guyana as a result of the non-disclosure of directors’ salaries.

He said the greatest difficulties faced by accountants are the interpretation of the accounting standards and he recognised the need to improve the accounting framework in Guyana. He said the stronger the accounting framework, the greater will be the opportunity for businesses to succeed and for them to contribute to the development of Guyana.

The accounting framework in Guyana is governed by a number of laws and regulations such as the Companies’ Act of 1991, the Financial Institutions Act (FIA), the Income Tax Act and the Securities Industry Act (SIA). The Insurance Act will also have an impact on the sector as well once it is fully implemented. The ICAG also has a say in the framework.

Parmesar in his luncheon address also noted the greater scrutiny of the accounting profession, since the Arthur Andersen/Enron scandal in the US and also alluded to the implementation of the Securities Industries Act with its new disclosure requirements and new reporting timetable locally. The new timetable requires companies to publish more timely interim statements (within four months of the end of the half year).

“These are all welcome developments that will contribute to a better investment climate,” Parmesar said.

He also spoke on corporate governance, which, while not an accounting practice, is a related process. He cautioned that Guyana should not just adopt what is out there but should look at the local situation and identify what is most suitable.

GMA’s President, Ramesh Dookhoo, in opening remarks recognised the growing importance of the concept of corporate governance and revealed that both the GMA and the Private Sector Commission have established corporate governance sub-committees. The PSC is to hold workshops on the issue as well.

Parmesar said good corporate governance principles are inherent in the Companies Act, the FIA and the SIA. However, he noted that the concept has been evolving.

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