KEYNOTE ADDRESS BY THE HON. FESTUS LIMBU (MP)
DEPUTY MINISTER FOR FINANCE TO A TWO DAYS
SEMINAR ON THE ADOPTION AND DISCUSSION OF
INTERNATIONAL ACCOUNTING AND AUDITING
STANDARDS HELD ON THE 19TH DECEMBER, 2003
AT THE WHITESANDS HOTEL IN DAR ES SALAAM
Chairman of the Seminar,
NBAA Governing Board Chairman,
TAA Chairperson,
NBAA/TAA Directors,
Resource Persons,
Seminar Participants,
Distinguished Guests,
Ladies and Gentlemen
Mr. Chairman, allow me to start by expressing my
sincere appreciation to the NBAA for inviting me as Guest
of Honour, to inaugurate this important occasion, during
which the wholesale adoption of International Standards
will be discussed.
Mr. Chairman, as I have been briefed, the theme of the
two days annual seminar is to discuss on the profession’s
decision to go for wholesale adoption of the accounting
and auditing standards issued by the International
Accounting Standard Board (IASB) and the International
Federation of Accountants (IFAC) respectively come July
1st 2004. This seminar and many others to follow have the
objective of preparing both practitioners and the public
on this major professional decision.
Mr. Chairman, with the passage of time, methods of
accounting and presentation of financial information have
been, and will be evolving in response to changes in
business and economic needs.
In the light of such
changing business needs and other developments, and in
the wake of continual research seeking for better and
more effective ways of recording and communicating most
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appropriate financial information, there is need, to adopt
the international standards wholly, except for those areas
in which these standards will not locally be suitable.
Mr. Chairman, adopting International Financial Reporting
Standards (IFRSs) presents challenges that many people
underestimate. Wholesale adoption of the IFRS needs well
thought planning and implementation strategies which I
believe is the objective of this seminar and others to
follow.
Mr. Chairman, it has been noted in several World Bank
and IMF studies that weaknesses in financial reporting is a
big stumbling block towards meaningful development,
both in the public and private sectors.
Inadequate
accounting and auditing disclosures has hindered the
development of financial decision making, and this has led
to ineffective monitoring of fiscal development and
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imbalances
in
public
finances.
Accounting
standards facilitate streamlined financial reporting, which
in turn enables management to reach informed financial
decision making based on a set of comparable financial
reports. Comparability of accounting records is crucial if
management is to be able to assess performance between
one period and another and between one similar entity to
another.
The use of international standards and good
practice will promote good governance.
I am indeed
gratified therefore that today we are discussing the
adoption of the international standards wholly, effective
from July 1st , 2004 next year.
Mr. Chairman, one of the major roles of the accountancy
profession in Tanzania, is to ensure the production of
reliable financial information in financial statements, in a
manner that will easily be understood and will be
easilyaccepted by all users of such information.
The
purpose of discussing the wholesale adoption of the
International Standards in Tanzania is to maintain the
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highest quality standards in financial reporting in Tanzania
as provided for under the following three objectives of the
International Accounting Standards Committee (IASC)
Foundation Constitution.
a)
To develop, in the public interest, a single set of high
quality,
understandable
and
enforceable
global
accounting standards that require high quality,
transparent and comparable information in financial
statements and other financial reporting to help
participants in the world’s capital markets and other
users make economic decisions
b)
To promote the use and rigorous application of these
standards; and
c)
To bring about convergence of national accounting
standards with International Financial Reporting
Standards to high quality solutions.
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Mr. Chairman, The International Accounting Standard
Board, (IASB) having realised the complexities of first
adoption of these standards, came up with IFRS 1, “First
Time
Adoption
of
International
Financial
Reporting
Standard” to assist countries like ours deciding for the first
time the wholesale adoption.
This standard is applied in preparing an entity’s first IFRS
financial statements. The standard already sets out what
an entity should do when first adopting the international
standards. The standard provides guidance in difficult
areas on the first adoption of the international standards
such as the use of the high sight and the application of
successive versions of the same standards. The Standard
requires first time users of international standards to: Identify the first IFRS financial statements
 Prepare an opening balance sheet at the date of
transition to IFRS
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 Select accounting policies that comply with IFRS and
apply these policies retrospectively to all periods
presented in the first IFRS financial statements
 Consider whether to apply any of the six exemptions
available
in
the
standard
from
retrospective
application
 Apply
the
three
mandatory
exceptions
from
retrospective application and;
 Make extensive disclosure to explain the transition to
IFRS
I would urge all practitioners to critically study this
standard and understand it as we prepare ourselves for
the 1st July 2004 when the profession will fully adopt the
international standards.
Mr. Chairman, the international accounting/auditing
standards are going to be applied by both the public and
private sectors. You are all aware that our government is
making all efforts to attract investors to undertake
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different economic ventures in almost all sectors of the
economy. Government efforts in this respect have started
to bear fruit, and as we can see there is a very positive
response of foreign companies of both national and multi
national stature investing in the country.
It is my hope that this decision of wholesale adoption of
the international standards is going to be a credit to NBAA
as there will be a uniform reporting of financial statements
which will reduce confusion hitherto currently existing with
foreign investors in the country. On the other hand, these
companies have principal shareholders who would like to
know how their investments are performing. However, to
avoid conflict and promote compliance, there should be
some standards which will have to be localized while
taking cognisance of the international and globalization of
trade.
Mr. Chairman, as we go for wholesale adoption of the
international standards, we must retain the few local
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accounting standards which have do not correspond to
international standards.
For example, The Tanzania
Financial Accounting Standard (TFAS) No. 12 on Director’s
Report,
TFAS
No.16
on
Accounting
for
Extractive
Industries, TFAS No. 23 on Accounting for Value Added
Tax, TFAS No.24 on Public Sector Financial reporting, and
Tanzania Statement of Recommended practice No. 1; on
Accounting for Effects of inflation, Tanzania Statement of
Recommended Practice No. 2 on Basic Record Keeping
and
Accounting
Organisations
Statement
of
Practices
(NGOs)
in
for
Non
Tanzania
Recommended
Governmental
and
Practice
Tanzania
No.3-
on
Governance in the Public sector.
It is also important to clearly understand that for Tanzania
to fully embrace the international standards, it will not
mean in any way going against the legal requirements of
the country. All legal requirements in financial reporting
unique to Tanzania will continue to be complied to e.g.
the BOT Prudential Guidelines.
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In other words, the international standards should not be
in conflict with our local environment and good practices
in place in the country. Compliance with the international
standards means that local qualified Tanzanians can easily
be employed by the multinational companies without any
need to retain them.
Mr. Chairman, at this juncture, it is important to note
further some advantages to be gained by fully adopting
the international standards: This will reduce the cost of preparing individual local
standards given the limited local human and material
resources at the disposal of the Board.
 The availability of the international standards is
assured both in hard and soft copies at affordable
prices
 The standard applies to all enterprises with IAS,
including the banking and insurance industries. The
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minimum structures are designed to be sufficiently
flexible that they can be adapted for use by any
enterprise
 It reduces the cost of doing business, as there will
be no need of preparing two sets of accounts i.e.
one on local standards and the other on international
standards
 It brings about uniformity and harmonised financial
reporting
 The NBAA resources hitherto used in coming up with
national standards will thus be available for other
commitments in the development of the profession.
 The status and repute of our locally qualified
Tanzanians will be enhanced hence improve their
employment opportunities with multinational and
international organisations.
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Mr. Chairman, as you all know the government has been
embarking on the exercise of privatising the state owned
companies and corporations for the past few years and
the exercise is continuing. The accelerated pace of
privatisation of the state controlled enterprises has
brought
with
it
increased
cross-border
business,
interaction with global financial markets as well as
increased
reliance
on
information
technology.
The
international community and investors in particular have
to rely more on the internationally acceptable accounting
standards in the preparation of their accounts.
We in the East Africa Region are now at an advanced
stage of harmonising, listing and financial reporting
standards for the sake of cross-border trading of shares
and other securities. Our colleagues in the East African
Community i.e. Kenya and Uganda have already fully
embraced the international standards. Even though it was
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our pride to have our own Financial Accounting Standards
which are 30 in total, it is high time we thought and acted
regionally and
globally for
the sake of our own
development and survival in this global village we live in.
Mr. Chairman, The stock exchange is now emerging as
an important institution
for raising capital and making
investment opportunities available to all. In this context,
the need for adoption of international standards wholly
and strict adherence to them, is necessary if they are to
serve their purpose. In this regard, I commend NBAA for
her efforts to embark on the wholesale adoption. I’m told,
this is the second seminar on the same subject after the
one conducted in Arusha two weeks ago.
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Mr. Chairman, the international standards should not
only facilitate the preparation of financial reports that are
understood by the professionals but also holders such as
the general public should also be considered. Amongst the
public are prospective investors who would wish to
compare financial reports across sectors before making
any decision to invest.
Investors for example, look for
basic benchmarks such as “accounting policies” supporting
the financial statements and also ”liquidity and profitability
ratios” before committing to invest.
Likewise, the adoption of International Standards in
corporate governance best practices is essential for
companies in Tanzania in order to maximise shareholders
value through effective and efficient management of
corporate resources.
Mr. Chairman, the desire of the profession should
constantly be to build credibility of financial reporting in
the country. It is apparent that in order to improve the
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credibility of financial reporting, action will be necessary at
all points along the information supply chain, that delivers
financial
reporting
to
the
market.
Corporate
managements and boards’ of directors who have the
prime responsibility for financial reporting as well as
auditors,
standard
setters
and
regulators
all
have
important roles to play and have improvements in
practices to make to ensure that the credibility of financial
reporting is sustained.
Mr. Chairman, the enactment of the Public Finance Act
in 2001 and the Public Procurement Act in 2001 together
with their related regulations is a clear testimony of this
fact. The Public Finance Act of 2001 clearly comes out
with more refined roles between the various players in the
financial management and control of public funds. These
laws call for professionalism in the way we do things and
advocates
for
the
adoption
of
Generally
Accepted
Accounting and Auditing Standards. Further, compliance
with Generally Accepted Accounting/Auditing Standards in
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the public sector, financial reporting is now a legal
requirement under the provisions of the Public Finance
Act.
Mr. Chairman, the efforts and resources utilised to
develop and introduce these standards are significant. In
this respect, the Board must endeavour to enforce
compliance to these standards in a bid to promote
transparency and reliability in financial reports prepared
by accountants. The Board must also impose sanctions for
non-compliance as enshrined in the Board’s Code of Ethics
By- laws. The government, regulatory agencies, members
of the profession and the public in general are being
requested to render whatever support is necessary to
promote compliance to these standards.
Mr. Chairman, The Government plans to continue
enhancing financial management and accountability, as
part of strengthening good governance in the country.
This will involve strengthening the capacity of NBAA and
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the relevant parliamentary committees, responsible for the
control and management of public funds in their work of
regulating and overseeing the accounting and auditing
functions in the country. On that score, the Government
intends to provide necessary intervention in priority areas
of the NBAA corporate plan targeted at enhancing good
governance,
accountability,
within
the
context
transparency
Government.
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and
of
the
integrity
overall
of
the
I am also aware that the first assistance towards this goal
was dispensed through the World Bank funded FILMUP
project which was concluded in June 2000. The NBAA,
through the government, has requested the assistance of
the
World
Bank
through
the
proposed
Tanzania
Accountability, Transparency and Integrity Project (ATIP)
for funding aimed at strengthening good governance and
enhancement of professionalism in the public financial
management systems.
Mr. Chairman, the government will continue to support
NBAA to enforce compliance with the newly introduced
international standards. Non compliance with the generally
acceptable
accounting/
auditing
standards
or
the
international standards has many repercussions including
the following:
 Similar entities ending up with the un-comparable
financial statements hence making it impossible to
gauge performance
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 Distortion of financial reports
 Loss of government revenue arising from distorted
financial reports etc.
Mr. Chairman, strict compliance to the adopted
international standards will minimize the possibilities of
fraud and other improprieties in financial reporting. You
accountants have words to describe corruption, but
ordinary
masses
would
like
to
call
“fraud
and
improprieties” as pure corruption in its varied forms. The
3rd phase government of CCM is committed to wipe out all
corruption in whatever form it takes. The government
believes that corruption is a cost or tax to the economy,
which must be fought by any means. This comes about in
the form of over-invoicing, fictitious expenditure and nonadherence to financial regulations. We know accountants
are represented in all sectors of the economy. We count
on you professionals as our good ambassadors, to combat
this terrible disease and to report on any employees or
management betraying this crusade.
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Non compliance or departure from these standards is an
offence punishable under the provisions of the NBAA Act
and its By-laws.
Mr. Chairman, I would like to take this opportunity to
thank IASB for facilitating the availability of the standards
in both hard and soft copies at very hefty discounts. May
I, on behalf of the Government of Tanzania, extend my
sincere thanks also to the World Bank who financed the
consultancy in promoting good governance in the country,
through ATIP. Our local consultants, Deloitte and Touché,
are the ones who won the tender to review and update
the NBAA Corporate Plan 200/1 – 2004/5. We wish them
all the best and hope that at the end of their assignment
they will be able to come up with a report, which will
contain a clear description of best practice and practicable
recommendations for the profession and for our economy.
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Mr. Chairman, I’m told this event today is a series of
such seminars to be conducted in preparing for the d-dayi.e 1st July 2004. In the course of the preparatory period,
it is important to clearly understand the implications of the
wholesale adoption of the international standards. Is 1st
July, 2004 the date when accountants have to start
preparing
financial
reports
based
on
international
standards, or is it the date for preparation for financial
reporting under IFRS?
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Will it be right to say that our transition period will be
from 1st July 2004 to 30th June, 2005 when all entities in
the country will be required to prepare financial reports
based on the IFRS? It is also hoped that during this
transition period, the Board will render whatever advice
and support necessary to ensure that this transformation
takes off smoothly.
In this challenge, we look forward to the international
practising firms, having their presence in the country, to
generously come forward and assist the Board and the
profession, in bringing about a successful transformation.
Institutions of higher learning involved in teaching
accountancy and related subjects will also have a vital role
to play in this endeavour including incorporating these
standards in their curricula.
Mr. Chairman, since I see you have a busy programme
covering very technical sessions, I would like to end my
keynote address and wish you very fruitful deliberations.
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As Christmas is just by the corner, may I take this
opportunity to wish you all a very Merry X-mas and
Prosperous New Year.
With these remarks may I thank you for your attention
and I now declare this seminar officially open.
T H A N K Y O U!
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