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The relevance and importance of International Financial Reporting Standards

The relevance and importance of International Financial Reporting Standards

By James Chapman

Chief Financial Officer at Bank Windhoek

I often receive questions relating to the International Financial Reporting Standards (IFRS) and why it plays such an important role when it comes to reporting on the financial performance and financial position of a company.

The world economy has become increasingly interdependent over time, but this process of economic globalisation has accelerated significantly over recent years. The growing scale of cross-border trade and flow of international capital has, however, brought about some of its own challenges, with one being the presentation and interpretation of financial information.

Historically (and to a certain extent even today still) different countries maintained and applied their own sets of national accounting and reporting standards, resulting in transactions being treated and financial information reported and interpreted differently in various jurisdictions.

Unpicking this complexity involves studying the minutiae of different accounting standards applied, as what might seem to be minor differences in accounting standards could have a major impact on a company’s reported financial performance and financial position. This patchwork of accounting requirements therefore often add cost, complexity and ultimately risk to those preparing financial statements and those using the financial statements to make economic decisions.

The need therefore arose for financial information that is relevant, reliable and comparable across borders as companies seeking capital and investors and lenders seeking investment opportunities look beyond borders. The IFRS Foundation (the Foundation) was established to address this need and is an international organisation responsible for developing a single set of high-quality global accounting standards, known as the IFRS Standards. The mission of the Foundation is to bring transparency, accountability and efficiency to financial markets around the world by developing the IFRS Standards.

The IFRS Standards is set by the Foundation’s standard-setting body, the International Accounting Standards Board (IASB). The IASB is an independent, private-sector body that develops and approves these standards. The IFRS Standards constitute a globally recognised set of standards for the preparation of financial statements that prescribe: the items that should be recognised as assets, liabilities, equity, income and expenses; how to measure these items; how to present these items in a set of financial statements; and the related disclosures required for each of these items.

Part of the Foundation’s mission statement states that the IFRS Standards:

Bring transparency by enhancing the international comparability and quality of financial information, enabling investors and other market participants to make informed economic decisions.

Strengthen accountability by reducing the information gap between the providers of capital and the people to whom they have entrusted their money. The standards provide information needed to hold management to account. As a source of globally comparable information, IFRS Standards are also of vital importance to regulators around the world.

Contribute to economic efficiency by helping investors to identify opportunities and risks across the world, thus improving capital allocation. Use of a single, trusted accounting language lowers the cost of capital and reduces international reporting costs for businesses.

The IFRS Standards have therefore been developed to address the challenge regarding the presentation and interpretation of financial information in today’s world of borderless financial markets. Namibia is one of 166 jurisdictions globally and one of 38 jurisdictions in Africa where IFRS are applied.

Applying one set of high-quality standards by companies throughout the world improves the comparability and transparency of financial information and reduces financial statement preparation costs. When these standards are applied rigorously and consistently, capital market participants receive higher quality information for decision-making.

Bank Windhoek is a member of Capricorn Group whose shares are listed on the Namibian Stock Exchange and also has debt instruments listed on the Johannesburg Stock Exchange. With Capricorn Group’s shares publicly traded and to inform our various local and international stakeholders, Bank Windhoek and the Capricorn Group prepare their financial statements in accordance with the IFRS Standards, interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) as well as the Namibian Companies Act.


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Following reverse listing, public can now acquire shareholding in Paratus Namibia

Promotion

20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.