Chapter five: Corporate governance
Institute of Chartered Accountants. As a member of these bodies, LIA is expected to promote the
adoption and use of international standards and best practices in the country.
510.
LIA previously issued national accounting guidelines for use in Lesotho. Allowance was made to
use the International Accounting Standards (IAS) issued by IFAC if there were no such guidelines.
However, alongside global developments, Lesotho adopted the International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB) in 2005. Evidence
on the ground, however, is that the IAS are still being used if they apply. However, there are no
material differences between the standards being used in Lesotho and international standards on
the whole. LIA no longer issues national accounting guidelines. Instead, it relies on the IFRS. There
are no simplified accounting guidelines for SMEs at the moment.
511.
Auditing is done in accordance with the Generally Accepted Accounting Principles (GAAP). None
of the large international auditing firms, like Ernst and Young, PricewaterhouseCoopers and KPMG,
are present in Lesotho. The reason given is that the market is too small to sustain their operations.
The firms do, however, operate in the country through their offices in South Africa. Entities, which
indicate that they need auditing by international firms for operational reasons, are allowed to use
them (provided that they do so in association with local firms).
Core Principles for Effective Banking Supervision
512.
The FIA of 1999, which repealed the FIA of 1973, empowers the Supervision Department of the
CBL to monitor the activities of the licensed institutions so as to safeguard the soundness of
the financial system and to ensure compliance with laws and regulations. The Act provides the
legal framework, inter alia, for the licensing, organisation, administration, financial accountability,
supervision, prudential regulation, and insolvency and liquidation of banks and financial institutions.
It therefore allows sufficient flexibility for establishing minimum capital, liquidity requirements
and loan limits, and for issuing other prudential regulations aimed at achieving full compliance
with the Basel Core Principles for Effective Banking Supervision.
Box 5.1: Some of the regulations issued by the CBL for financial supervision
The Financial Institutions (Licensing Requirements) Regulations of 1999 were intended to
establish clear and objective criteria for reviewing applications to engage in banking or credit business
and to outline the procedure to be followed in the licensing process.
The Financial Institutions (Risk-based Capital Requirements) Regulations of 1999 were
intended to ensure that each bank maintains an adequate level of capital to protect its depositors and
creditors and to promote public confidence, among other things.
The Financial Institutions (Loan Portfolio Classification) Regulations of 1999 were intended
to ensure that all loans and advances from financial institutions are regularly evaluated using
objective classification criteria; that the accounting treatment of accrued, but uncollected, interest on
nonperforming accounts of financial institutions complies with internationally accepted accounting
principles; and that the allowance for loan losses or provisioning is maintained at an adequate level
at all times.
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