CS Holdings findings released

By Iain Scott, ITWeb group consulting editor

Johannesburg, 14 Jul 2004

The GAAP Monitoring Panel (GMP) has found that CS Holdings` financial statements for the 2002 interim period, the 2003 annual results and the 2003 interim results were deficient.

The panel, a joint initiative of the JSE and the South African Institute of Chartered Accountants, aims at ensuring compliance with generally accepted accounting principles (GAAP).

The GMP`s probe centred on CS Holdings` controversial treatment of its disposal and subsequent cancellation of the sale of a business called EDD.

Initially a restatement of the group`s results after the cancellation of the sale led to allegations that CSH had artificially boosted its profits by selling the asset for R18 million after acquiring it for R2.5 million and then reversed the sale after its financial results were published.

There were also allegations of a conflict of interest, relating to the involvement in the deal of CSH CEO Annette van der Laan`s ex-husband, Hans van der Laan.

Although an internal investigation cleared the CSH management of any wrongdoing, Annette van der Laan resigned in late February, citing negative publicity and the interests of the company as the reasons for her move.

Deficient

The GMP found that CSH`s 2002 interim results were deficient in that the EDD transaction was material and should have been disclosed separately. The proceeds of the deal were overstated by about R1.78 million because the AC133 accounting standard was not applied to the proceeds receivable.

As a result, the profit was overstated by R295 000. The GMP also found that the disclosure around the change in tax estimate was insufficient.

The CSH board says it has fully complied with AC133 in the audited 2003 annual results.

The GMP says the 2003 annual results were also deficient in that the disclosure of the cancellation of the EDD transaction was insufficient.

The 2003 interim results were also deficient for various reasons. "Save for the restatement required in terms of GAAP for the change in accounting policy in respect of the reclassification of backup equipment and maintenance stock, there was no basis in GAAP to restate the 2002 interim results for the cancellation of the EDD transaction," it says.

In CSH`s commentary on the 2003 results, "the explanation that there was a R3 651 000 adjustment for the 'write-off of certain assets` was incorrect," the GMP says. "This was, in fact, the correction of an error in the asset value and the 2002 interim results should not have been restated for this item.

CSH says except for the disclosure of the EDD transaction, it has fully complied with the JSE`s listings requirements and will continue to do so. It has now published on the JSE`s SENS news service the details of the EDD deal.

"The board is publishing this announcement at the request of the JSE and believes this now concludes the investigation into the accounting treatment of the EDD transaction," it says.