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Kelly Group entitled to silence

Johannesburg - The South African Institute of Chartered Accountants (Saica) this week vindicated recruitment firm Kelly Group’s decision not to publish in its financial statements that it had been facing court battles.

This comes after Themba Mahlangu, the director of Ndaba Ekude – Kelly Group’s black economic empowerment (BEE) partner – accused Kelly of breaching accounting standards by failing to disclose the legal disputes in its financial results.

Kelly Group has been involved in court battles with its BEE partners to liquidate the JSE-listed company’s subsidiaries.

Mahlangu argued that as a JSE-listed entity, Kelly should have disclosed information on the court case in its financial statements.

“Disclosing this information would make Kelly’s shareholders and potential shareholders aware of the financial risks the company was facing,” he said.

City Press last week revealed that Kelly faced court battles against Ndaba Ekude and Solly Tshiki and Associates regarding labour-broking contracts at the South African Post Office worth R372m.

Solly Tshiki owned 51% in Workforce Management – which is currently under liquidation – and Ndaba Ekude owned 51% of Marula Staffing. Kelly owned 49% in Marula Staffing and Workforce Management.

In a recent interview, Kelly chief operating officer Ferdie Pieterse said it was not necessary to write in its financial report nor to issue a Sens notification about the court battles.

“You don’t need to declare. Why do you need to?” asked Pieterse.

Saica project director of financial reporting Sue Ludolph said a company is only required to disclose and estimate in its financial statement the losses it would suffer from a court case if the action was still taking place.

“Usually we would expect a company to recognise a liability provision in its statement of financial position for the consequences of such lawsuit,” said Ludolph.

“The amount would be estimated and recognised.

“Instead, disclosure of the possible liability might be required in the notes only ie there is no recognition of an amount in the statement of financial position – it is then called a contingent liability,” she said.

 - City Press
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