Public companies required to disclose managers' salaries
-says international accounting body
Business September 3, 2004
Stabroek News
September 3, 2004
The International Accounting Standards (IASC) Committee has clarified that public companies in Guyana and elsewhere are currently required to disclose the salaries of their managers.
This declaration was prompted by a query from local auditors, Ram and McRae and comes amidst disagreement among local accountants over the issue.
The Institute of Chartered Accountants of Guyana (ICAG) had a few weeks ago sent out a circular that the disclosures were not required under the local Companies Act 1991 and one official had declared that companies that did not disclose salaries were still complying with IAS guidelines.
In correspondence between the Ernst & Young representative on the Interna-tional Financial Reporting Interpretations Committee (IFRIC), a committee appointed by the IASC, and Ram and McRae, the representative says "the conclusion of the IFRIC agenda committee was that the IAS 24 (the current standard) is clear in that it requires the disclosure of emoluments of key management personnel."
Stabroek Business understands that the committee had clarified that the original standard (1994) does require a public company to declare compensation for management personnel as they would fall under the definition of a related party. The committee is said to have concluded that the amended IAS (2003) which comes into effect in January 2005 was intended to make explicit that the disclosures are necessary as a previous draft had proposed eliminating the requirement and this had caused some confusion.
Partner in Ram and McRae, Christopher Ram told Stabroek Business that "because of its stubbornness, the ICAG is now in the embarrassing position of having to apologise for misleading the public with a wrong interpretation it issued despite the persistent caution from Ram & McRae.
"As a result of poor advice, companies which are required under the Companies Act 1991 to comply with IASs, have not been doing so in respect of a key provision of a very important Standard (IAS 24 - Related Parties) that is relevant not only in respect of accounting issues but perhaps even more importantly governance. Regrettably, the fault lies with those in the profession who are keener to pander to their clients than to enhance the standards of reporting and governance."
We contacted Ramesh Lall, President of the ICAG, who said the institute would be holding its regular meeting on September 14 and would discuss and arrive at a decision on all the issues surrounding disclosure. He said he was yet to see any official correspondence from the IASC on the issue. He believed most accountants were trying to convince their clients that disclosure of as much information as possible was the way to go.
He said it was partly a question of the culture and he was not aware of any company in the Caribbean declaring directors' salaries including those in Trinidad and Tobago. He added that his accounting firm, Deloitte and Touche had always taken a position to call for more information rather than less.
Ram's partner Robert McRae had raised the issue some weeks ago with the ICAG and he told Stabroek Business then that while it is complex it is vitally important because it goes to accountability given that directors are paid by shareholders who must have the right to know whether or not salaries are excessive in relation to performance.
The current practice internationally is for disclosure but locally no public company does so and McRae has said the accounting profession in Guyana is reluctant to insist on this because their firms do not wish to offend their clients and lose fees.
ICAG will also have to look at the minutes of its technical committee's meeting held on November 26, 2003 which stated that members unanimously concluded that the Companies Act 1991 and IAS 24 independently requir-ed the disclosure of the compensation of executive directors.
"It was agreed that the council be advised to seek a second legal opinion on the Companies Act and to inform members that IAS 24 requires disclosures and that in the event that the company fails to make the required disclosures under IAS 24 their audit opinion should be qualified accordingly."