The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Accountants have secured “some wins” over enhanced Business Licence reporting through less intensive scrutiny that will be applied to companies below the $5m annual turnover threshold.

Pretino P. Albury, the Bahamas Institute of Chartered Accountants (BICA) president, told Tribune Business the Government is permitting firms with turnover between $250,000 and $4.99m to fill out specific Business Licence “returns” developed in conjunction with the Department of Inland Revenue (DIR) rather than be subjected to more stringent financial returns;

While the Government remains adamant that all companies with turnover in excess of $5m must provide full audited financial statements, Mr Albury said: “I believe we have some, what I call wins, in the sense that the threshold between $250,000 and $4.99m, you don’t necessarily have to do a review of financial statements.

“You can do these returns. We worked along with the Department of Inland Revenue to create these returns, which are pretty robust and turn in every requirement of the Business Licence. You can fill out these returns like you see in the UK and jurisdictions in the region. Everything they want based on the [Business Licence] regulations is in there.

“We got that. We agreed to it; that the client will fill that out, and we will perform procedures to test for accuracy.... You will not be subject to a full intensive review of the financial statements. But, when it comes to $5m and above, which they consider large companies, they will attract full audited financial statements.”

When the enhanced Business Licence reporting regime was unveiled by the Prime Minister in the 2023-2024 Budget debate, businesses generating annual revenue between $2.5m and $4.999m were to require a financial review by an independent accountant. That stipulation now appears to have been eased.

Meanwhile, businesses with annual revenue between $250,000 and $499,000 were to originally require accounting certification by an independent accountant, while those with turnover between $500,000 and $2.499m needed a compilation report.

“We felt like it was a win,” Mr Albury reiterated of the financial review’s elimination. “Also, we don’t necessarily have to audit for the [company’s] fiscal year if it is different from the calendar year. We can just do a reconciliation.” Simon Wilson, the Ministry of Finance’s financial secretary, confirmed that a “reconciliation procedure” had been agreed with BICA for when a company’s financial year-end was not December 31.

One accountant, speaking on condition of anonymity, explained: “Companies that have a difference between their financial and calendar years have to do a reconciliation of their income. They can still report on their full year in the first year, but have to do a reconciliation.

“Then there is a reconciliation between the International Financial Reporting Standards (IFRS) definition of income and Business Licence determination of income. Some things required under the Business Licence are not acceptable under IFRS. There has to be a reconciliation between audited financial statements and the Business Licence revenue data.”

Timothy Ingraham, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, said this reconciliation will be another another headache for Bahamian companies and their auditors to tackle in the New Year when Business Licence reporting and verification get underway.

“While the Department of Inland Revenue requires an audit because they want to verify your revenue, they don’t accept revenue as defined by IFRS,” he added. “The Government has a separate standard for how revenue is reported, so audited financial statements don’t necessarily qualify as reporting current revenue because then they have to reconcile revenue according to the Government’s standard.

“I’m not sure the Department of Inland Revenue understands the implications of all this for business. Sure, they’ll be happy to have the fines [for late audited financials] but they’re driving revenue away from business because they’ve not had time to prepare properly.

“Let’s walk down this road slowly, not rush down it. Let’s have time for discussion on all the issues. There are issues that need to be discussed and agreed upon. A one-year delay will achieve that or could achieve that. By using revenue audits, the Government can still achieve its aims of ensuring revenue is accurate.”

The private sector is arguing that full audited financial statements for companies with turnover in excess of $5m is unnecessary, and overkill, because the Business Licence fee is based only on top-line turnover.

“We’re hopeful the Department of Inland Revenue will take the whole thing into consideration. We believe some very valid points were made at last Wednesday’s meeting with the chartered accountants. Hopefully, we will see some movement on this,” Mr Ingraham said.

The Government has not agreed to the year’s deferral sought by the Chamber and BICA. It will give companies until end-April 2024 to submit their audited financial statements. And, once they apply and it is justified, a further two-month extension will be given until end-June 2024. However, once that deadline has passed, potential sanctions - equal to 1-2 percent of revenue - may be enforced.

“He was a stickler on that,” Mr Albury said of Mr Wilson’s message at last Wednesday’s meeting. “In his eyes you’ve got until June. That was his idea of compromise. We’re really concerned. Are you listening to your local business community? It’s going to be interesting, the first and second quarter.”

Asked by this newspaper whether The Bahamas has sufficient qualified accounting manpower to perform the enhanced Business Licence verification in the time set by the Government, the BICA chief replied: “I think this. I think we have capable people, we have willing people and our licensees are sufficiently engaged.

“As far as manpower, that’s tough because we don’t know exactly what the statistics are [for how many companies need full audits] when the Department of Inland Revenue and financial secretary are telling us there’s only 20-25 people. Our internal information says it’s more like 150 or more. The financial secretary says that’s only 1 percent of entire Business Licence registrants.”

Mr Albury said privately-owned companies, that have never required a full audit before, that are most vulnerable. “We have to probably convey all that is required,” he added. “People in the business community should know if it seems they’re not audit ready, not done an audit, they’re going to require some audit preparation work to get ready before the professionals come in.

“That’s why we have concerns with six months. Give us time to get people audit ready.”