Botany and biology apart, in everyday life the meaning is utter, often deliberate, confusion created in the mind of the average reader. Even erudite ones at times. The aim is usually to put people off from trying to understand the imparted message for fear that they might otherwise query its logic or its acceptability.
As a result, people who should know better, politicians not excluded, tend to accept the conclusions blindly as being good once they do not really understand them, even if they pretend they do. Such twisting and rolling together of phrases and statements have rendered people disliking economics as a human science and deterring them from reading otherwise-useful material.
Sadly, it also occurs in accountancy matters, especially in compulsory periodic reports by public limited companies. Here the motive is not so much to confuse the readers’ mind and achieve their acceptance, but more likely to withhold explanations of past negative results with a view to avoiding embarrassing queries from shareholders or financial journalists that might uncover nooks of incompetence or misleadings on the part of directors and top executive management.
One of the toughest jobs I occasionally face is endeavouring to defend either of the two professions, particularly when other professionals or politicos seem to enjoy taunting me about them. Which, incidentally, is not uncommon. Let’s take some examples.
Three World Bank economists recently submitted a report on Malta’s pension system. If it wasn’t for the leader of the Opposition, we would still be deprived of its contents, at least until this very day when voting for EU parliamentarians is over. It had been kept under wraps for far too long when it should really have already been fully discussed by now. Damn politics.
Try to understand the meaning of what the three experts called the “implicit pension debt,” viz. “.. is the present value of pensions to all existing pensioners for the years they are expected to spend in retirement, taking into account indexation of pension plus the present value of prorated pensions for all contributors, prorated for their years of service to date, when compared to the total number of years expected to be accumulated by retirement age, and to be paid when the individual reaches retirement age.” Did you manage to get it right? Honestly, how many times did you have to go over it? Only three? Congratulations, you have beaten me.
If, however, you can’t be bothered, perhaps you may want a simpler definition: the government’s computed liability as of today towards all existing pensioners and pensioners-to-be should it decide suddenly to scrap the current pension system as it is. Period.
Less convoluted, the following excerpt tries to indicate possible misuses, abuses or malpractices which inevitably result from any pension system: “In addition to fiscal sustainability and adequacy, pension systems are also judged on whether the design of the pension system encourages behaviour, on the part of the labour market participants, which might be costly to society.” Who, pray, is not a labour market participant?
I am neither a stockbroker, nor an investment adviser. However, I am approached from time to time to give my views or comments on published financial reports issued by listed companies. Usually, by individuals with surplus liquidity to invest. It is not something I like doing. I usually end up merely explaining what could be behind certain figures and statements which are either too vague or too sparse or scanty in exposure, often showing signs of being no more than a laboured exercise on the part of directors/auditors to abide by conditions imposed by MFSA or MSE.
The spate of corporate bond issues over the last few years brought into focus what many small investors wrongly imagined, and probably still do now, ie the fact that a particular issue was underwritten by a bank is itself a guarantee by that same bank that at least the original investment would be repaid when the term of the loan is over.
They still feel safe in the belief that the worst that could befall their investment relates only to the interest element, not the principal. That’s why its rate is always higher than the government’s concurrent bond issues, or even the EU Bank’s.
When Farsons published their latest accounts for 2003 a substantial contribution, which effectively doubled the profitability, referred to a deprovisioning of income tax liability which was unnecessarily provided for in previous years. (Am I myself being convoluted? Perhaps a decrease in the previous tax provisions would be a simpler way of describing the phenomenon).
Of course, ideally it should not have been allowed to occur in the first place since it adversely affected the previous quoted share prices and, later, added undue value to the current ones. But, given that there was no definitive tax position until last year, was not management worthy of praise for its prudence in providing for such a possibility, even if it turned out to have been in the nature of a contingency, rather than making no provision at all and possibly later confronted with a doubling of tax liability for the following year?
Contrast this with International Hotel Investment’s latest published figures, extracted from its audited financial statements for 2003, in compliance with MFSA listing rules. One is not even sure what constitutes ‘The Group’ and ‘The Company:’ the former is described as ‘an investment company.’ Try to make sense of the following dry statement: “ The Company has a number of wholly-owned subsidiaries through which it furthers the business of the Group”. Do you feel any wiser, whether you are an existing or potential share-or-bond holder?
There is an item (around Lm10 million) which is intended to mitigate the Company’s otherwise loss (over Lm2 million) called “revaluation to fair value of available-for-sale investments.” No further explanation as to how and why a gross loss suddenly transforms itself into a handsome net profit of over Lm8 million.
In the Group’s figures, an amount (over Lm 24 million) is attributed to a revaluation of properties adjacent to a hotel in Russia. Which more than mitigates an amount (nearly Lm18 million ) by way of “impairment losses” (doubtful debts ?), additional to that already carried by the San Gorg Hotel in Malta and the Grand Hotel Royal in Hungary. Again, no explanation. Is this what investors deserve?
In the wash of all such convolution the Group’s losses increased to Lm 9.3 million from Lm1.6 million in 2002. As I write, the listed price still reflects 2002 figures. Will it change? Who knows. If it does, it will not be the small investors’ doing. They have no say, unable to comprehend convoluted figures.
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