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Markus Jooste: A Tale Of Greed And How It Always Comes Back To Bite
The lessons evident in a tale of greed and financial scandals.
Xavier Prospero
March 26, 2024
Markus Jooste: A Tale Of Greed And How It Always Comes Back To Bite
8 Min Read
Welcome to the latest edition of "The Journal Entry”! In this issue, we explore the intricacies of financial accounting, focusing on International Accounting Standard 38 (IAS 38) and its implications for intangible assets.
Furthermore, we'll address the recent news of Markus Jooste’s death, and the lessons present in his tale of greed through the Steinhoff scandal.
Table of Contents
Financial Accounting
IAS 38: Intangible Assets
Intangible assets play a significant role in modern business operations, yet their treatment under accounting standards often poses challenges for companies. Let's delve into the key aspects of understanding and accounting for intangible assets as outlined by the International Accounting Standard 38 (IAS 38).
Key Definitions/Principles:
An intangible asset is an identifiable non-monetary asset without physical substance
An asset is a resource:
(a) controlled by an entity as a result of past events; and
(b) from which future economic benefits are expected to flow to the entity
Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production or use.
Research is original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding.
Definition and Recognition
IAS 38 defines intangible assets as identifiable non-monetary assets without physical substance. These assets are recognised if they meet specific criteria, including identifiability, control by the entity, and expected generation of future economic benefits.
Measurement at Initial Recognition
Intangible assets are initially measured at cost, comprising all directly attributable expenses necessary for acquisition or development. In cases of acquisition through business combinations, fair value is utilised.
Measurement after Recognition
Post-recognition, intangible assets are measured at cost less accumulated amortisation and impairment losses. Two measurement models exist:
Cost Model: Most intangible assets are amortised over their useful lives.
Revaluation Model: Rarely, assets may be adjusted to fair value.
Amortisation
Intangible assets with finite useful lives undergo amortisation, allocating their cost systematically. Useful life is determined based on factors such as cash flows and technological obsolescence.
The methods for amortisation are as follows:
1. Straight-line Method: The straight-line method of amortisation is the most commonly used method. Under this approach, the cost of the intangible asset is evenly allocated over its estimated useful life. This means that equal amortisation expenses are recognised in each accounting period.
2. Declining Balance Method: The declining balance method, also known as the accelerated method, allocates a higher portion of the intangible asset's cost as an amortisation expense in the earlier years of its useful life. The amount allocated decreases over time. This method recognises that the asset is likely to generate higher economic benefits in the earlier years.
3. Units-of-Production Method: The units-of-production method spreads the amortisation expense of an intangible asset based on its usage or production output. This method is particularly suitable when the asset's value is directly linked to its usage or production levels. The cost of the asset is divided by the estimated total units or production output expected over its useful life, and the amortisation expense is calculated based on units or output achieved in each accounting period.
Amortisation in its simplicity is the depreciation of intangible assets.
Impairment
Impairment tests are conducted when indicators arise. If the carrying amount exceeds the recoverable amount, impairment losses are recognised, impacting the income statement and decreasing the carrying amount of the asset.
Impairment has been further discussed in previous editions of the newsletter, please refer to the previous editions.
Disclosure
Comprehensive disclosures are mandated, including asset nature, useful lives, amortisation methods, carrying amounts, and any significant events affecting their value.
In Practice
In practice, companies face hurdles in distinguishing between intangible assets and expenses. Judgments on useful life and recoverable amount, especially in tech-related assets, pose challenges. Professional guidance ensures proper compliance with IAS 38.
Check out the video below for a comprehensive cover of the topic:
Markus Jooste: A Look Into Greed And How It Always Comes Back To Bite
The recent news of Markus Jooste's tragic demise has once again brought to light the perils of unchecked greed and its devastating consequences. Jooste, the former CEO of Steinhoff International Holdings NV, was at the center of one of the most significant corporate scandals in recent history. His story serves as a stark reminder of how the pursuit of wealth and power can lead to ruin, not only for oneself but for countless others affected by one's actions.
Markus Jooste's journey from a successful businessman to a figure of infamy is a cautionary tale. As the head of Steinhoff, Jooste was instrumental in driving the company's rapid expansion and global reach. However, behind the facade of success lay a web of deceit and financial manipulation. The accounting scandal that ultimately brought Steinhoff to its knees revealed the extent of Jooste's greed and disregard for ethical business practices.
Jooste's downfall was not merely the result of a single bad decision or moment of weakness. It was the culmination of years of unchecked ambition and a relentless pursuit of profit at any cost. In the pursuit of ever-greater wealth and power, Jooste and others involved in the scandal engaged in fraudulent accounting practices, deceiving investors and regulators alike. The consequences were catastrophic, leading to billions of dollars in losses for shareholders and tarnishing the reputation of an entire industry.
The tragic end to Markus Jooste's story serves as a sobering reminder that greed, in the end, always comes at a price. Despite the temporary allure of wealth and success, the consequences of unethical behavior can be severe and far-reaching. Jooste's decision to take his own life rather than face the legal consequences of his actions is a testament to the weight of guilt and remorse that accompanies such behavior.
As we reflect on the lessons of Markus Jooste's life, let us not forget the importance of integrity, honesty, and ethical conduct in both business and life. It also provides us an opportunity take a look at the reforms, involving a major focus on ethics competencies implemented by SAICA to combat the ethical scandals present in today’s business landscape. The pursuit of wealth should never come at the expense of our values and principles. In the end, greed takes more than it gives.
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