Fac4865 - 001 - 4 - 2023 - Learning Unit 4 - King Iv

FAC4865/Learning Unit 4/KING IV/2023
FAC4865
Advanced Corporate Financial Reporting
Where Leaders Reason, Connect & Explore
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RESEARCH
2
CONCEPTS
3
ANCHORS
4
KING IV
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FAIR VALUE
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King IV
“If one was asked to summarise King IV™ in

one word, ‘transparency’ would come to
mind.”
PwC South Africa
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Transparency
“Transparency, in a business or governance context, is honesty and openness.
Transparency and accountability are generally considered the two main pillars of good
corporate governance.”
Source: https://whatis.techtarget.com/definition/transparency
Quotes from the Adventures of Pinocchio by Carlo

Collodi
“Now remember Pinocchio, be a good boy. And always let your conscience be your guide.”
Source: https://www.mywaltdisneyquotes.com
“A lie keeps growing and growing until it’s as plain as the nose on your face.”
Source: https://goodreads.com
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In recognition of the Conceptual Framework for

Ecological Economics by Capra and Jakobsen:
The society, economy and ecology are embedded in the environment …
Source:
https://upload.wikimedia.org/wikipedia/commons/e/ea/Ecology_Society_Economy_diagram_Environm
ent_background.jpg
“A human being is a part of the whole called by us universe, a part limited in time and
space. He experiences himself, his thoughts and feeling as something separated from the
rest, a kind of optical delusion of his consciousness. This delusion is a kind of prison for us,
restricting us to our personal desires and to affection for a few persons nearest to us. Our
task must be to free ourselves from this prison by widening our circle of compassion
to embrace all living creatures and the whole of nature in its beauty.”
Albert Einstein
Source: https://www.goodreads.com quotes
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Covid-19 … Did Mother Nature hit the “reset to default”
button?
The rhino is heading towards extinction; the western black rhino has already been declared
extinct.
Some of the other less known endangered species in South Africa, listed in no order of
endangerment, are the:
• Albany adder
• Cape gannet
• Cape vulture
• Cheetah
• African wild dog
• Blue crane
• Riverine rabbit
• Knysna seahorse
• Golden mole
• Oribi
• Pangolin
(This animal is illegally trafficked to Asia where its scales are used for medicine.)
Sources:
• Briefly; P Mueni. 2019. The most endangered animals in South Africa. Downloaded in 2020.
• The South African. 2020. Seven endangered South African species we should protect in 2020.
Available at:
https://www.thesouthafrican.com/lifestyle/seven-endangered-south-african-species-2020.
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King IV and the integrated reporting connection
“… much more than its previous iterations, King IV is speaking the language of integrated
reporting (IR), with the final report (released on 1 November 2016) explicitly acknowledging
the importance of IR.”
Source: Corporate Reporting Services: http://coreporting.co.za/king-iv-and-integrated-reporting/
Main objective
“The [main] objective of King IV™ is to make corporate governance more accessible and
relevant to a wider range of organisations, and to be the catalyst for a shift from a compliance-
based mindset to one that sees corporate governance as a lever for value creation.”
Source: Prof Mervyn E King in PwC South Africa
“Most importantly, with King IV, ethical and effective leadership, strategy and a company’s
creation of value now occupy centre stage.”
Source: Corporate Reporting Services: http://coreporting.co.za/king-iv-and-integrated-reporting/
Corporate governance: Centre stage
Source: Online pictures: Bing Image Search
• Ethical leadership
• Effective leadership
• Strategy
• Creation of value
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The cult of upholding economic growth at the expense

of an ailing planet
For over seventy years the advanced societies of the world have preened themselves in the
mirror and mostly admired what they saw: [economic] growth. … The economy … is all around
us. You can’t smell it or touch it. But it is the background noise of the modern world. It is the
staple fodder of the headlines, business channels and political debate. Yet, for such a
fundamental concept, surprisingly few know what an economy is or how we gauge its
progress. All we know is that it must constantly be moving forward, like a shark.
Our problem with growth is that it requires endless production and

consumption [at the expense of an ailing planet].
Unless we want more and more things and more and more experiences, growth will eventually
stall. [But] for economies to keep on moving forward, we must be insatiable.
The aim is not to declare war on growth. … Rather it is to show what is wrong with our
[perception] and measurement of growth.
… the [economic] mirror in which we have been staring is more of the fairground than the
bathroom variety. [For various reasons,] the image reflected back is grossly distorted and
increasingly at odds with reality. Our economic mirror is broken.
Source: Pilling. D. 2019. The Growth Delusion: The Wealth and Well-Being of Nations
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A look in the mirror. Are people the decisive drivers of
their own demise? A final wake-up call to us all …
A summary report of a landmark Global Assessment of natural health was issued on
6 May 2019 by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem
Services (IPBES). This report, compiled by 145 professional authors from 50 countries over
three years, with inputs from another 310 contributing authors, assessed changes over the
past five decades, and provides a comprehensive picture of the relationship between
economic developments and their impacts on nature.
According to Sir Robert Watson, the overwhelming evidence of the IPBES report presents an
ominous picture:
The health of ecosystems on which we and all other species depend is

deteriorating more rapidly than ever. We are eroding the very foundations of our
economies, livelihoods, food security, health and quality of life worldwide.
The IPBES report finds that around one million animal and plant species are now threatened
with extinction, many within decades, more than ever before in human history.
The report further states that it is not too late to make a difference, but only if we start making
transformative changes now at every level, from the local to the global. The member states of
the IPBES Plenary have acknowledged that transformative changes can expect opposition
from those with interests vested in the status quo, but also that such opposition can be
overcome for the broader public good.
"Biodiversity and nature's contributions to people are our common heritage and humanity's
most important life-supporting 'safety net'. But our safety net is stretched almost to breaking
point," said Prof Sandra Díaz from Argentina, who co-chaired the Global Assessment with
Prof Josef Settele from Germany and Prof Eduardo S. Brondízio from Brazil and the USA.
Source: EurekAlert!: IPBES: Nature's dangerous decline 'unprecedented,' species extinction

rates 'accelerating': https://www.eurekalert.org/pub_releases/2019-05/tca-ind050519.php
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Learning unit outcomes
After the successful completion of this learning unit, you must be able to do the following:
1. In your own words, discuss the economic environment of the 21st century, with
specific reference to the distinctive dynamics and attributes related to the Third and
Fourth Economies.
2. Name, and in your own words, discuss the three interconnected paradigm shifts as
presented in King IV, on which the foundation stones of King IV are based.
3. Give, and in your own words, discuss the objectives of King IV.
4. In your own words, discuss the legal status and disclosure requirements of King IV.
5. Give, and in your own words, discuss the descriptions of the basic concepts used in
King IV, relevant to FAC4865.
6. In your own words, discuss the governance outcomes stated in King IV.
7. Assess the impact of integrated reporting/King IV practices on the corporate

governance outcomes.
8. Assess the relevance of integrated reporting/King IV regarding the faithful

representation of corporate reports against the requirements of the 2021 International
Integrated Reporting (IR) Framework and King IV.
9. Assess the relevance of integrated reporting/King IV regarding the governance of the

ethicality of business policies.
10. Analyse case studies within the scope of this learning unit and suggest solutions if so
required.
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Main activities required to achieve the learning unit

outcomes
Research-and-learning activity
Prepare and study your answers to the research-and-learning activity in this learning unit.
The main aim of this activity is to expose you to critical reasoning concerning the related prescribed
study materials and/or case studies.
Other study materials

Study the other study materials as indicated in this learning unit so that you can, for example, discuss,
explain and assess it.
Assessments (Assignments)
Prepare and submit Assessments (Assignments) 03 and 04, where applicable to this learning unit,
by the due dates thereof.
Study the solutions to Assessments (Assignments) 03 and 04 (in TL 203 and TL 204), where applicable
to this learning unit.
Critical Thinking/Reasoning
Critically assess the study materials related to this learning unit from the systems theory or another
transdisciplinary perspective. (To enhance your critical thinking skills, in FAC4865, transdisciplinary
approaches such as the systems theory are applied where applicable.)
Critical thinking
The intellectually disciplined process of actively and skillfully conceptualising, applying, analysing,
synthesising, and/or evaluating information gathered from, or generated by, observation, experience,
reflection, reasoning, or communication, as a guide to belief and action.
Source: Defining Critical Thinking – Foundation for Critical Thinking
Available from: http://www.criticalthinking.org/pages/defining-critical-thinking/766
Critical reasoning questions

test your ability to put forth and analyse logical arguments.
Source: GMAT Critical Reasoning: Practice Tests and Information
Available from http://www.majortests.com/gmat/critical_reasoning.php
Transdisciplinary research
Efforts conducted by investigators from different disciplines working jointly to create new conceptual,
theoretical, methodological, and translational innovations that integrate and move beyond discipline-
specific approaches to address a common problem.
Source: Why Cross-Disciplinary Research Matters | Global Arts and Humanities.
Available from: https://globalartsandhumanities.osu.edu/research/cross-disciplinary-research
Systems theory
The transdisciplinary study of the organisation of phenomena, independent of their type ... of
existence. It investigates both the principles common to all complex entities, and the (usually
mathematical) models that can be used to describe them.
Source: Principia Cybernetica Web
Available from: http://pespmc1.vub.ac.be/SYSTHEOR.html
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Do not study the above four descriptions for the
examination, but make sure that you understand the
meanings of the terms for answering questions.
In FAC4865, the terms “critical thinking” and “critical

reasoning” are used interchangeably. Your critical
assessments must always include your points of view by
means of discussions, explanations, comparisons etc., and
they should be motivated convincingly.
Learning unit assessment

Your uniquely prepared answers to the research-and-learning activity in this
learning unit
Formative and/or Summative:
Can be assessed by the same and/or similar theoretical and/or critical reasoning questions.
Other study materials in this learning unit

Formative and/or Summative:
Theoretical and/or critical reasoning questions can be asked.
Prepared and studied formative assessments (assignments)

Formative: The marking of Assignments 03 and 04, where applicable to this learning unit.
Summative: Theoretical and/or critical reasoning questions can be asked from (and/or based on):
TLs 203 and 204, where applicable to this learning unit.
Critical reasoning from the systems theory or another transdisciplinary

perspective
Formative and/or Summative
Based on the prescribed study materials, transdisciplinary critical reasoning questions can be asked
where you must assess theories and/or accounting practices pertaining to this learning unit from your
point of view, convincingly motivated.
NB: All questions must be answered in your own words, except where indicated otherwise.
Concerning your answers to assessments, all information that you draw from a resource, whether
quoted or written in your own words, must be referenced according to the Harvard Referencing
System.
Formative assessment
Assessments by assignments.
Summative assessment
Assessments by online (non-venue based) examinations.
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The economic environment of the 21st century
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The King Reports: A historical snapshot
3
King IV: Objectives
4
King IV: Important changes
4
Universal applicability
From “apply or explain” to “apply and explain”
Sector supplements
King IV: Legal status and disclosure requirements

5
King IV: Descriptions of basic concepts
6
King IV: Principles, practices and governance outcomes
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Principles
Practices
Governance outcomes
The impact of integrated reporting/King IV practices on corporate governance

outcomes
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RESEARCH-AND-LEARNING ACTIVITY
On the shoulders of Prof Mervyn E. King: A synopsis

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Study materials on Learning Unit 4 for examination purposes
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Checklists: Learning unit activities and outcomes
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References
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CONTENTS
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4.1 The economic environment of the 21st century

As the economic, social and natural environments of organisations change, so the practice of
organisational reporting should align to sustain its relevance. One finds that over time corporate
reporting evolved from retrospective, financial reporting to integrated reporting, which includes a
forward-looking approach. Integrated reports disclose sustainability from a much broader
perspective than do financial reports.
In 2005, Johnsson and Kihlstedt referred to the global economic environment as the “Fourth
Economy” (2005:15, 86). Table 1 shows a few distinctive dynamics and attributes of the
“industrial” Third Economy and the “informative” Fourth Economy. A reporting system aligned with
the Third Economy cannot be relevant in the Fourth Economy, and vice versa. The question
therefore arises: “How relevant is current financial reporting theory, with its narrow and
retrospective focus, in the Fourth Economy where the PPP’s (people, planet and profits) bottom
line and the interconnectedness thereof play a far more important role in respect of sustainability
than was the case in respect of the Third Economy?”
In Table 1, the “people” and “planet” dynamics are not as emphasised as the “profit-making”
dynamics. From an integrated and systems perspective, however, it is crucial that the “people”
and “planet” dynamics be included as core dynamics for promoting sustainability in the Fourth
Economy. From an integrated and systems perspective, a major prerequisite for publishing
relevant and faithfully represented reports is that all core dynamics in the Fourth Economy must
be identified and reported on. Hereby the economic and reporting systems would align/connect
in such a manner that the usefulness of organisational and financial reports are maximised. In
South Africa, the application of the International Integrated Reporting (IR) Framework and the
King Reports have contributed much towards achieving such alignment.
Table 1: Distinctive dynamics and attributes related to the Third and Fourth Economies
THIRD ECONOMY FOURTH ECONOMY
Period 19th century 20th/21st century
Technology Industrial/automation Communication/ information/
knowledge
Market changes Slow and linear Fast and unpredictable
Production Mass Flexible and lean/customised
Business cycle Long Short
Competitive scope Local Global
Competitive edge Size: The big eats the small Speed: The fast eats the slow
Competitive alliance Isolated Merged
Key scarce resource Financial capital Financial and intellectual capital,
time
Marketing Mass marketing Differentiation
Operational focus Supplier Customer
Performance measure Comprehensive income Market capitalisation
Management Bureaucratic Decentralised
Time Little impact High impact
Source: Adjusted from Kotelnikov (n.d.)
The fundamental changes occurring worldwide during the 21st century concerning the well-being
of the planet, peoples and profits have significantly influenced both the approach that is applied
to reporting in King IV, as well as the contents thereof.
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It is not necessary to download King IV from the website of The
Institute of Directors in Southern Africa NPC.
In the foreword to King IV (IoDSA: 2016), it is stated that the foundation stones thereof are
based on three interconnected paradigm shifts that have occurred in the corporate/governing
world, namely:
• The shift from financial capitalism to inclusive capitalism

It is generally accepted that financial capital represents only a fraction of the capitals that
are actually employed by organisations. On the other hand, inclusive capitalism includes
the six capitals as stated in the International Integrated Reporting Framework (IIRC: 2021),
namely financial capital, manufactured capital, intellectual capital, human capital, social and
relationship capital, and natural capital. The rationale put forth by the Institute of Directors
in Southern Africa NPC (IoDSA) for including more capitals is as follows: “The more an
organisation’s business model positively impacts on society and the environment, the more
the quality of life in developing economies will improve. This improvement, in turn, will
positively affect the prospects for those organisations” (IoDSA: 2016).
• The shift from short-term capital markets to long-term, sustainable capital markets
The shift from short- to long-term thinking was driven by the aim to create value in a
sustainable manner. The financial crisis of 2007 to 2009, for example, was mainly caused
by the aim to achieve short-term financial profits, with little consideration – if any – given to
the long-term impact that this endeavour could have on the community. (Refer to paragraph
1.1 of the scientific essay: INTEGRATED REPORTING STANDARDS in Learning Unit 3:
Anchors, ANNEXURE B.)
• The shift from siloed reporting to integrated reporting

The increasing prominence given to the improvement of transparency in corporate and
other organisational reports by means of integrated reporting is evident in various leading
directives on governance that were issued, on a national and global scale. For example,
the directive on environmental, social and governance (ESG) reporting issued by the
European Union, the Operating Financial Review published in Australia, and the listing
requirements of several stock exchanges, including the Johannesburg Stock Exchange
(JSE).
Recent advances in integrated triple P (PPP: people, planet and profits) reporting
methodologies have also provided a strong impetus for the shift from siloed to integrated
reporting. Consequently, the transparency and usefulness of institutional reports have
notably improved.
Since the different capitals as disclosed in integrated reports consistently interrelate in

practice, their methods and levels of interconnection ought also to be reflected in
corporate/institutional reports. In other words, the practice of corporate and integrated
reporting must aim to represent reality from a dynamic rather than a static perspective, that
is, in line with the sequence and volume of events that typically occur within the scope of
the relationships/connections of an organisation.
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VOLUNTARY READING: Three shifts towards better decision-

making by Jonothan Labrey.
Available from: https://integratedreporting.org/news/three-shifts-

towards-better-decision-making/
4.2 The King Reports: A historical snapshot

During July 1993, the Institute of Directors in Southern Africa (IoDSA) invited Professor
Mervyn E King, who retired from the Supreme Court in South Africa, to chair a committee on
corporate governance in South Africa. Prof King viewed this as an opportunity to educate the South
African public on the workings of a free but sustainable economy, and accepted the invitation.
Consequently, four reports have been issued by the King Committee on Corporate Governance of
South Africa, namely King I in 1994, King II in 2002, King III in 2009, and King IV in 2016. The
objectives of the King Reports on corporate governance have successfully guided the governance
activities of various organisations in South Africa. The King Reports and Codes have contributed
much towards South Africa being recognised as a global leader in the field of corporate
governance.
In comparison with the previous King Reports and Codes, King IV breaks new ground by offering
an integrated approach to corporate governance that more stringently interrelates the sustainability
of the economic, social and natural environments of an organisation. Further, the scope of King IV
has been broadened to impact not only on listed and/or large business entities, but also on state-
owned enterprises, local governments, non-profit entities, SMEs and retirement funds.
Responsible organisational behaviour offers a way out of many of the economic and sustainable
development challenges that are currently being experienced throughout the world (IoDSA: 2016).
The link between the 2021 International <IR> Framework and King IV is that the framework serves
as a foundation upon which King IV builds through specialisation. In this respect, the Integrated
Reporting Committee (IRC) of SA (http://integratedreportingsa.org/king-iv-report-on-corporate-
governance/) stated that: “South African organisations should refer to the principles and
recommended practices of the King IV Report on Corporate Governance for South Africa 2016
(King IV). ... The report highlights the importance of integrated thinking, integrated reporting and
value creation and uses the definitions contained in the International <IR> Framework”.
[Note to student: For more information on the IRC of SA, refer to ANNEXURE B in Learning Unit 3:
Anchors.]
Voluntary viewing: Opening address by Prof. Mervyn King on

Corporate Governance for the ecoDa/PwC joint conference on the
topic: Long-term sustainability: Can corporate governance bring
magic solutions?
Available from: https://www.youtube.com/watch?v=WNAgbcvXnZM
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4.3 King IV: Objectives
The objectives of King IV guide the activities of organisations from a holistic perspective. The
objectives stated in King IV (IoDSA: 2016) are as follows:
i. To promote corporate governance as integral to running an organisation and delivering

outcomes such as an acceptable ethical culture, good performance, effective control, and
legitimacy.
ii. To broaden the acceptance of King IV by making it accessible and fit for implementation
across a variety of sectors and types of organisations.
iii.To reinforce corporate governance as a holistic and interrelated set of arrangements, to be

implemented in an integrated manner.
iv. To encourage transparent and meaningful reporting to stakeholders.
v. To present corporate governance as being concerned with not only structure and process, but
also with responsible, ethical consciousness and conduct.
4.4 King IV: Important changes

To enhance the simplicity of King IV, the number of reporting principles was reduced from 75 in
King III, to 17 in King IV. The following subparagraphs address three further main differences between
King IV and King III.
4.4.1 Universal applicability
King IV was drafted to be more relevant to all types of organisations: public and private, large and
small, as well as for-profit and not-for-profit organisations. Therefore, in King IV, reference is made
to all-inclusive concepts such as an organisation or a governing body, rather than to a company
or a board of directors.
4.4.2 From “apply or explain” to “apply and explain”
The “apply or explain” reporting requirement in King III was replaced with an “apply and explain” reporting
requirement in King IV. Among other things, the provision of explanations in integrated reports
encourages an organisation to view corporate governance as something that will yield positive
results only if it is approached mindfully, with a sincere consideration of its circumstances.
4.4.3 Sector supplements

To motivate and support organisations other than the listed companies on the JSE to apply
King IV, separate sector supplements are included in King IV that relate to i) municipalities, ii)
non-profit-organisations, iii) retirement funds, iv) small and medium enterprises, and v) state-
owned entities.
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4.5 King IV: Legal status and disclosure requirements

The legal status of King IV is the same as that of the previous King Reports and Codes, namely
that it is a set of voluntary principles and guiding practices.
In respect of the management of corporate governance by various other countries, i) a full

application of statutory rules is sometimes required, or ii) the voluntary application of selected
governance principles and practices is allowed, or iii) a combination of the first and second
methodologies is required.
In South Africa, a combined management system on corporate governance has developed over
time. For example, by making the application of the King Report a listing requirement on the JSE,
while the King Reports/Codes grant the disclosure of voluntary principles and guiding practices in
governance reports. A main argument against the compulsory application of all the King principles
and practices, is the possibility that it could be mindlessly adhered to by means of a tick-box
approach, rather than an organisation being sincere in its attempts towards achieving good
corporate governance.
A governing body has the discretion to decide where the King IV disclosures will be made in its
reports, for example, in an integrated report, a sustainability report, or in another kind of report.
King IV disclosures can also be made in more than one report. For the purpose of cost efficiency,
it is recommended in King IV that duplications of King IV disclosures be avoided by making cross-
references instead.
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4.6 King IV: Descriptions of basic concepts
The following are descriptions of basic concepts, relevant to FAC4865, as provided in the
Glossary of Terms (Part 1) in King IV (IoDSA 2016).
Study ONLY the material indicated in RED/SHADED for the examination.
You may, however, if so preferred, refer to/or apply the other descriptions in
your answers to critical reasoning questions.
King IV Report
Full title: The King IV Report on Corporate Governance for South Africa, 2016.
This title refers to the complete document, inclusive of all its parts.
(The King IV Code is included as Part 5 of the King IV Report.)
2016: The Institute of Directors in Southern Africa NPC (King IV Report: Part 1)
Accountability
The obligation to answer for the execution of responsibilities. Accountability cannot be delegated,
whereas responsibility can be delegated without abdicating accountability for that delegated
responsibility.
Business model
An organisation’s system of transforming inputs through its business activities into outputs and
outcomes that aims to fulfil the organisation’s strategic purposes and [to] create value over the short,
medium and long term.
Conflict of interest
A conflict of interest, used in relation to the members of a governing body and its committees,
occurs when there is a direct or indirect conflict, in fact or in appearance, between the interests of
such member[s], and that of the organisation. These interests apply to financial, economic and
other interests in any opportunity from which the organisation may benefit, as well as to the usage
of the property of the organisation, including its information. Conflict of interest also applies to the
related parties [of the members] who are holding such conflicting interests.
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Corporate governance
For the purposes of King IV, corporate governance is defined as the exercise of ethical and effective
leadership by the governing body towards the achievement of the following governance outcomes:
• Ethical culture
• Good performance
• Effective control
• Legitimacy
Good performance
Good performance is an organisation achieving its strategic objectives and positive outcomes in
terms of its effects on the capital it uses ... and on the triple context in which it operates.
Governing body
The governing body is the structure that has primary accountability for the governance and
performance of [an] organisation. Depending on context, it includes, for example, the board of
directors of a company, the board of a retirement fund, the accounting authority of a state-owned
entity, and a municipal council.
Integrated report
Concise communication about how an organisation’s strategy, governance, performance and

prospects, in the context of its external environment, leads to the creation of value in the short,
Risk
Risk is about the uncertainty of events; including the likelihood of such events occurring and their
[possible] effect, both positive and negative, on the achievement of [an] organisation’s objectives.
Risk includes uncertain events with a potential positive effect on the organisation (i.e. opportunities)
not being captured or not materialising.
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Stakeholders
Those groups or individuals that can reasonably be expected to be significantly affected by an

organisation’s business activities, outputs or outcomes, or whose actions can reasonably be
expected to significantly affect the ability of the organisation to create value over time.
“Internal stakeholders” are directly affiliated with the organisation and include its governing body,
management, employees and shareholders.
“External stakeholders” could include trade unions, civil society organisations, government[s],
customers and consumers.
Internal stakeholders are always material stakeholders, but external stakeholders may or may not
be material.
Transparency
The unambiguous and truthful exercise of accountability such that decision-making processes and
business activities, outputs and outcomes (both positive and negative) are easily able to be discerned
and compared with ethical standards.
Triple context
The combined context of the economy, society and the [natural] environment in which an organisation
operates.
Note how, in respect of the triple context above, the three Ps, namely
profit, people and planet, relate to
economy, society and the [natural] environments, respectively.
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4.7 King IV: Principles, practices and governance outcomes

PricewaterhouseCoopers (PwC; https://www.pwc.co.za/en/assets/pdf/king-iv-steering-point.pdf),
in its publication, Steering point: November 2016: A summary of the King IV Report on
Corporate Governance™ for South Africa, summarised the principles, practices and
governance outcomes that are stated in King IV as below.
4.7.1 Principles
The 17 principles stated in King IV guide organisations to develop and apply sound corporate
governance practices. The principles are described in such a way that they are i) applicable to all
organisations, and ii) fundamental to attaining good corporate governance practices. The
principles build on one another; therefore they are complementary and interconnected.
(PwC: 2016: https://www.pwc.co.za/en/assets/pdf/king-iv-steering-point.pdf)
Table 2: The King IV reporting principles

Principle 1 The governing body should lead ethically and effectively.
The governing body should govern the ethics of the organisation in a way that
Principle 2
supports the establishment of an ethical culture.
The governing body should ensure that the organisation is, and is seen to be a
Principle 3
responsible corporate citizen.
The governing body should appreciate that the organisation’s core purpose, its
Principle 4 risks and opportunities, strategy, business model, performance and sustainable
development are all inseparable elements of the value creation process.
The governing body should ensure that reports issued by the organisation enable
Principle 5 stakeholders to make informed assessments of the organisation’s performance
and [of] its short, medium and long-term prospects.
The governing body should serve as the focal point and custodian of corporate
Principle 6
governance in the organisation.
The governing body should comprise the appropriate balance of knowledge,

Principle 7 skills, experience, diversity and independence for it to discharge its governance
role and responsibilities objectively and effectively.
The governing body should ensure that its arrangements for delegation within its
Principle 8 own structures promote independent judgement, and assist with [the] balancing
of power and the effective discharge of its duties.
The governing body should ensure that the evaluation of its own performance
Principle 9 and that of its committees, its chair and its individual members, support continued
improvement in its performance and effectiveness.
The governing body should ensure that the appointment of, and delegation to
Principle 10 management contribute to role clarity and the effective exercise of authority and
responsibilities.
Table 2: The King IV reporting principles to be continued on the next page.
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Table 2: The King IV reporting principles continued.
The governing body should govern risk in a way that supports the organisation in
Principle 11
setting and achieving its strategic objectives.
The governing body should govern technology and information in a way that
Principle 12
supports the organisation in setting and achieving its strategic objectives.
The governing body should govern compliance with applicable laws and adopted,
Principle 13 non-binding rules, codes and standards in a way that supports the organisation
in being ethical and a good corporate citizen.
The governing body should ensure that the organisation remunerates fairly,
Principle 14 responsibly and transparently so as to promote the achievement of strategic
objectives and positive outcomes in the short, medium and long term.
The governing body should ensure that assurance services and functions enable
an effective control environment, and that these support the integrity of
Principle 15
information for internal decision-making and of the organisation’s external
reports.
In the execution of its governance role and responsibilities, the governing body
should adopt a stakeholder-inclusive approach that balances the needs, interests
Principle 16
and expectations of material stakeholders in the best interest of the organisation
over time.
The governing body of an institutional investor organisation should ensure that

Principle 17 responsible investment is practiced by the organisation to promote good
governance and the creation of value by the companies in which it invests.
4.7.2 Practices
The practices stated in King IV are aimed at giving effect to the principles. The practices related
to a specific principle should be applied to give effect to the aim as expressed in that principle.
4.7.3 Governance outcomes

The four (4) governance outcomes stated in King IV are interpreted as the benefits that
organisations could realise if the principles have been applied. These governance outcomes are:
• Ethical culture
• Good performance
• Effective control
• Legitimacy
10
4.8 The impact of integrated reporting/King IV practices on

corporate governance outcomes
The impact of integrated reporting/King IV practices on corporate governance outcomes is studied
by means of the research-and-learning activity below.
RESEARCH-AND-LEARNING ACTIVITY (65 marks)
CASE STUDY ON: Steinhoff International Holdings N.V. (Steinhoff): Business and accounting
irregularities pertaining to lacking corporate governance practices: Main financial period under
review: 2016 (before and/or after restatement).
1. FOCAL AREAS
With this case study, focus on
• the ethicality of the remuneration policies and practices concerning the management board
and the supervisory board of Steinhoff;
• the significant shareholders during the 2016 financial period, and the impact of their
shareholdings on their independence from Steinhoff (conflict of interest);
• the connections of a small group of Steinhoff’s former executives with other parties that
transacted with Steinhoff, and which allowed for the occurrence of indirect transactions with
Steinhoff by these executives via these other parties (see the information in respect of the PwC
2019 Investigation Report given on the next page of this learning unit);
• the impact of estimating forward‒looking values on the financial position of Steinhoff when
entering into business combinations. (Refer to the acquisition of Mattress Firm by Steinhoff,
and pay attention to the valuation of the goodwill and intangible assets of Mattress Firm by
Steinhoff for acquisition purposes);
• the scope, complexity and type of restatements of financial information that had to be made
owing to i) the accounting irregularities that were identified by Deloitte (the external auditor of
Steinhoff during the financial periods under review, that is 2016), and ii) the outcome of the
investigation of PricewaterhouseCoopers (PwC) (appointed to investigate the alleged business
and accounting irregularities that occurred at Steinhoff); and
• the litigation procedures that arose in consequence of the exposure of the business and
accounting irregularities that were ascribed to Steinhoff, as well as the probable impact thereof
on the sustainability of the entity.
2. STUDY MATERIALS FOR THE CASE STUDY
Use the following study materials:
a. Background information: Steinhoff International Holdings N.V. (Short name: Steinhoff)

(See paragraph 2.1 below.)
b. Extract: 2016 Annual Report: Steinhoff International Holdings N.V.
(before restatement) (See paragraph 2.2. below Information concerning the 2015, 2016 (after
restatement), and the 2017 Annual Reports of Steinhoff is given in this paragraph for
comparative purposes.)
Research-and-learning activity to be continued on the next page.
11
Research-and-learning activity continued.
2.1 Background information: Steinhoff International Holdings N.V. (Short name: Steinhoff)
On 5 December 2017, Steinhoff announced that its audited 2017 financial statements could not be
released as planned, because its external auditor, Deloitte, refused to sign off the statements owing
to identified potential accounting irregularities and questionable business transactions. On the same
date, the then CEO of Steinhoff, Markus Jooste, announced that he was stepping down “with
immediate effect”, which caused the share price of Steinhoff to fall precipitously.
From 4 December 2017 to 6 December 2017, the Steinhoff share price declined by around 65%.
On 4 December 2017, the Steinhoff shares ‒ listed on the JSE ‒ were trading at R50.25 per share
at the closure of trade, and at R17.61 per share at the closure of trade on 6 December 2017.
Thereafter, the share price traded from around R1.00 to R2.00 per share, for example, at R1.15 per
share on 1 June 2018 at the closure of trade by the JSE, R1.70 per share on 9 May 2019 at the
closure of trade, and at R0.99 per share on 2 April 2020 at the closure of trade, amidst the South
African COVID-19 lockdown period. On 26 February 2021, the shares traded at R1.95 at the closure
of trade by the JSE. On 25 February 2022, the shares traded at R3.93 at the closure of trade by the
JSE.
The radical decline in Steinhoff’s share price caused the market capitalisation of Steinhoff (in 2016
still referred to in the press as "The Ikea of Africa", and formerly one of the JSE’s ten biggest firms
by market capitalisation) to decrease to around R5 bn in early June 2018, in comparison with a
market capitalisation of approximately R240 bn at the closure of trade by the JSE on
1 December 2017. On 9 May 2019, the market capitalisation of Steinhoff amounted to
approximately R6 bn at the closure of trade by the JSE. On 2 Apr 2020, 26 Feb 2021 and 7 Jun
2022, the market capitalisation of the entity amounted to around R4,4 bn, R8.4bn and R11.5bn,
respectively, at the closure of trade by the JSE.
In consequence of the serious concerns raised by Deloitte, PricewaterhouseCoopers (PwC) was

instructed in December 2017 by the supervisory board of Steinhoff to urgently conduct an
independent forensic investigation into the alleged irregularities.
On 11 March 2019, PwC submitted its Investigation Report to Steinhoff. Accounting irregularities
and questionable business transactions were stated in this report, including that:
• A small group of the Steinhoff group’s former executives and other non-Steinhoff executives
implemented various transactions over a number of years which resulted in inflated profit and
asset values of the Steinhoff group.
• Complex, fictitious and/or irregular transactions were entered into that involved many entities
over a number of years, including parties said to be, and made to appear to be, third party
entities independent of the Steinhoff group and its executives. However, these entities appeared
to be closely related to and/or have indications of control by the small group of people mentioned
above.
On 7 May 2019, shortly before midnight, Steinhoff released its long awaited audited 2017 annual
report, as well as the restated annual report of its 2016 financial period. This resulted in a 15% drop
of its share price from R2.01 per share (at the closing of the JSE on 7 May 2019) to R1.70 per share
(at mid-day, on 9 May 2019). Among other things, a consolidated net loss of €3 994 million was
reported for the 2017 financial year, with a restated consolidated net loss of €237 million for the 15
months ended 30 September 2016. Prior to the issuing of its restated 2016 results, Steinhoff
reported a profit of €1 442 million for the 15 months ended 30 September 2016.
Information was released in Steinhoff’s 2017 annual report that indicated neglected corporate
governance, which questions the usefulness (in terms of relevance and faithful representation) of
the corporate governance reports that were issued by Steinhoff over time.
12
2.1 Background information: Steinhoff International Holdings N.V. (Short name: Steinhoff)
(continued)
The management of Steinhoff determined that certain other transactions, which were not part of the
PwC investigation, required further consideration as they were also viewed as having been
inappropriately recognised in the consolidated financial statements, and therefore required
correction.
One can ask: If financial reports of companies listed on the JSE are being audited and approved,
only to thereafter being significantly restated, what is the usefulness of unaudited, corporate
governance/integrated reports?
2.2 Extract: 2016 Annual Report: Steinhoff International Holdings N.V.

(before restatement)
2.2.1 Highlights
In August 2016, Steinhoff and Mattress Firm Holdings Corporation (Mattress Firm in short; the
entity is based in the USA), announced a possible merger, with Steinhoff purchasing Mattress
Firm. This investment would result in Steinhoff becoming the world’s largest multi-brand
mattress retail distributor, with retail entrance into the USA, which aligned with the expansion
strategy of Steinhoff into the core product category of manufacturing and selling beds and
mattresses.
2.2.2 Extract: Letter by the CEO (Markus Jooste)
“Bedding strategy
The acquisition of Mattress Firm will form the world’s leading multi-brand mattress retail
distribution network … . The North American mattress industry is a healthy industry and has
demonstrated long-term stability and consistent growth over nearly three decades.
Mattress Firm represented an attractive investment proposition to Steinhoff through its national
footprint and leadership in the USA mattress retail market. [Also], the addition gives us
[Steinhoff] access to a great management team in this territory that demonstrates exceptional
ambition and energy to further grow market share and increase margins.
Employees
As of 30 September 2016, Steinhoff [International Holdings] N.V. and its subsidiaries employed
approximately 105 800 employees across the world … . This employee base adequately reflects
the level of resource[s] necessary to manage and trade the business worldwide, and
management expects this level of capacity and organisation to continue in the coming year.”
2.2.3 Extract: Financial review (Ben la Grange, CFO)

Financial review from October 2015 to September 2016
Mattress Firm Holdings Corporation (Mattress Firm)
“Steinhoff [International Holdings] N.V. and Mattress Firm entered into a definitive merger
agreement under which Steinhoff [International Holdings] N.V. acquired Mattress Firm for an
equity value of US$2.4 billion. The acquisition date was 19 September 2016 and only the
statement of financial position was consolidated from 30 September 2016.”
13

(before restatement) (continued)
2.2.4 Extract: Steinhoff’s corporate governance report
“Corporate governance involves a set of relationships between a company’s management,

its shareholders and other stakeholders. Corporate governance also provides the
structure through which the objectives of the company are set and the means of attaining
those objectives and of monitoring performance are determined.
The aim of this annual report is to provide stakeholders with an overview of the approach
of the Steinhoff International Holdings N.V. group (the group) to corporate governance …
and to demonstrate that the group’s businesses and assets across the globe are managed
responsibly and in a sustainable manner.”
Corporate responsibility
“Decisions on material matters are reserved by the management board, which is the
executive body entrusted with the management of the company’s operations and strategy,
as well as the operations of the group, subject to supervision by the supervisory board.
These decisions on material matters include, but are not limited to, decisions on the
allocation of capital resources to optimise the return on shareholders’ funds … . In order
to create value in the short, medium and long term for its stakeholders in a balanced,
ethical and sustainable manner and to ensure compliance with the applicable laws and
regulations governing its operations, Steinhoff [International Holdings] N.V. remains
committed to ensuring the maintenance of effective and sustainable corporate governance
and ethical practices across all group operations.”
Two-tier board structure
“… the company has adopted a two-tier board structure, consisting of the management
board and the supervisory board. The management board and the supervisory board are
accountable to Steinhoff [International Holdings] N.V.’s shareholders.”
14

2.2.4 Extract: Steinhoff’s corporate governance report (continued)
Responsibilities of the management board

“The management board’s responsibilities include, inter alia, subject to submission to the
supervisory board for approval, [the] setting and achieving [of] the company’s objectives,
determining the company’s strategy and risk profile, … ensuring the ensuing delivery of
results and addressing corporate social responsibility issues that are relevant to the group.
The management board … may perform all acts necessary or useful for achieving the
company’s objectives, save for such acts as may be prohibited by law or by the company’s
articles of association.”
Activities of the management board during the period under review
“The management board has confirmed that [the] group’s internal risk management [and]
internal control systems provide reasonable, albeit not absolute, assurance that [the]
company’s business objectives will be achieved within the risk tolerance levels defined by
the management board and approved by the supervisory board.”
“The management board has a reporting line to the supervisory board and furnishes the
supervisory board with … information required … . The management board is required to
inform the supervisory board in writing, at least once a year, of the main aspects of the
company’s strategic policy, the general and financial risks and the company’s management
and auditing systems.”
Composition, appointment, removal and suspension of the management board/managing

directors
“The management board currently consists of three executive managing directors as

follows:
MJ Jooste: Chief executive officer
AB la Grange: Chief financial officer
DM van der Merwe: Chief operating officer”
Authority to represent the company

“The company is represented by the management board and each managing director has
the individual authority to represent the company.”
Conflict of interest
During the period under review, an entity owned and/or controlled by the chairman of the
supervisory board, Mr CH Wiese, through a private placement at a market related price,
subscribed for 314 000 000 shares in the company, [the] full details of which were
announced by the company [Steinhoff].
15

Remuneration of managing directors
“[The] remuneration for managing directors consists of a base salary, a performance-
related incentive bonus, retirement contributions, medical scheme membership and
participation in long-term incentive schemes.
The governance of the managing directors’ remuneration is undertaken by the human
resources and remuneration committee, which makes recommendations to the
supervisory board. The responsibility for ensuring that the managing directors are fairly
and responsibly remunerated has been formally delegated to the supervisory board.”
Supervisory board report

Responsibilities of the supervisory board
“The supervisory board, which is accountable to the general meeting, supervises the
management of the management board and the general course of affairs of the company
and its businesses and provides advice to the management board, including, but not
limited to:
Achievement of the company’s objectives;
The corporate strategy and risks inherent in the business activities;
The structure and operation of the internal risk management and control systems;
The financial reporting process;
Compliance with applicable laws and regulations; and
Relations with shareholders.”
“The supervisory board meets at least four times a year … . Corporate strategy meetings
are held as an integral part of the supervisory board meetings and corporate strategy is a
specific agenda item. The supervisory board also reviews [i)] the main risks of the business
and, [ii)] at least once a year, the result of the assessment by the management board of
the design and effectiveness of the internal risk management and control systems, as well
as any significant changes [made] thereto.
The supervisory board meets with the management board as often as the chairman, the
deputy chairman[,] the company secretary or the management board deem[s] necessary.”
Activities of the supervisory board during the period under review
“During the financial period ended 30 September 2016, the supervisory board met as
indicated above and fulfilled its responsibilities. The supervisory board was actively
involved in advising the management board in the decision-making process, and more
specifically with the identification of potential risks associated with acquisitions considered
by the company over the reporting period. In particular, the supervisory board advised on
the acquisitions of Mattress Firm Holdings Corporation, [and other entities].
During the period under review, the supervisory board reviewed and approved the
company’s strategy and risk profile [that was] submitted by the management board. The
supervisory board concurs with the assessment by the management board that, during
this period, the design and effectiveness of the group’s internal risk management and
internal control systems were satisfactory and that no significant changes to these
systems had been required.”
16

Composition, appointment, removal and suspension of supervisory directors
“The supervisory board shall consist of at least five supervisory directors. Details of the
current supervisory board … are given below. The supervisory board, the composition of
which is such that the members are able to act critically and independently of one another,
and [also of] the management board …
SF Booysen #
CE Daun
TLJ Guibert
D Konar: Deputy chairman #
A Krüger-Steinhoff
MT Lategan #
HJ Sonn
BE Steinhoff
J van Zyl #
CH Wiese: Chairman
JD Wiese
# Financial experts with relevant knowledge and experience of financial administration and
accounting for large legal entities or listed companies.”
“The supervisory board is comprised of persons collectively possessing … a broad

knowledge of international business and governance requirements and trends.”
Remuneration of supervisory directors
“The authority to establish the remuneration for supervisory directors is vested in the
general meeting.
Supervisory directors … receive an annual fee for their board … participation.”
Supervisory board meetings and attendance
[SF Booysen, D Konar: Deputy chairman, A Krüger-Steinhoff, MT Lategan, BE Steinhoff

and CH Wiese: Chairman, attended all five the meetings that were scheduled during the
period under review.]
Major shareholders [of Steinhoff]:

CH Wiese 23.10%
Public Investment Corporation 8.48%
Coronation Fund Managers Ltd 5.24%
BE Steinhoff 4.60%
Black Rock Investment Management 4.08%
17

Ethics
“Steinhoff [International Holdings] N.V. has adopted a code of ethics committing … to the
highest standards of conduct. … This code has been endorsed by the supervisory directors
and a formal ethics programme has been rolled out across the group.
… Any material contraventions of the code are reported at divisional board level and are
escalated to the supervisory board. … During the period under review, there were no
material incidences of non-compliance with the code of ethics that were brought to the
attention of the supervisory board.”
Going concern statement

“The directors report that, … they have a reasonable expectation that the group has
adequate resources to continue its operational existence for the foreseeable future. For
this reason, they continued to adopt the going concern basis in preparing the financial
statements for the financial period ended 30 September 2016.”
2.2.5 Steinhoff’s remuneration policy

“… dictates that all employees are fairly rewarded for their individual and joint contributions
in the execution of the Steinhoff business strategy and [the] delivery of the group’s operating
and financial performance. Steinhoff’s remuneration philosophy is to remunerate all
employees in a competitive manner to attract, motivate and retain individuals of the
necessary calibre.”
Link to performance
“A significant element of senior management remuneration is performance related. A
substantial portion of short-term performance incentives is directly linked to challenging
annual group performance targets. The balance of these incentives [is] specifically
measured against individual performance objectives which are aligned with the group’s
strategic priorities. The target for long-term incentives are guided by reference to industry
and market benchmarked performance targets as outlined below.
Such benchmarks are determined annually and [related] … budgets are presented to the
supervisory board and approved annually.
Remuneration for junior and middle management employees is governed … by country
specific benchmarks for similar positions and responsibility levels. A robust remuneration
review process is in place which is aligned with [the] business strategy.”
Remuneration policy
“Incentive-based awards are earned through achieving demanding performance measures
and targets with due regard for the sustainable wellbeing of all stakeholders over the short,
… The design of long-term incentives is prudent and does not expose stakeholders to a
position where the sustainability of the group is placed at risk.”
Elements of remuneration
“The four elements of remuneration consist of a base salary, benefits, annual incentive
bonus and long-term incentives.
… The fixed element of remuneration is referred to as the base salary.”
18

2.2.6 Annual financial statements
STEINHOFF INTERNATIONAL HOLDINGS N.V.: CONSOLIDATED FINANCIAL STATEMENTS
2016 2016 2015
Before Before
Restated restatement restatement
€m €m €m
Extract from the statement of profit or
loss/income statement
Revenue 16 130 16 439 9 818
Finance costs (452) (443) (279)
(Loss)/Profit for the period (237) 1 442 959
Extract from the statement of financial position
Non-current assets 16 466 23 902 16 123
Includes, among other items:
Goodwill* 7 178 9 157 5 933
Intangible assets* 3 544 7 351 4 022
Current assets 4 558 8 279 6 986

Inventories (and vehicle rental fleet before
restatement) 2 594 2 715 1 945
Trade and other receivables 1 075 1 714 1 343
Investments and loans 202 989 656
Cash and cash equivalents 687 2 861 2 794
Assets and disposable groups classified as held for
sale ‒ ‒ 248
TOTAL ASSETS 21 024 32 181 23 109
EQUITY AND LIABILITIES

Total equity 6 090 15 967 13 428
Non-current liabilities 1 967 9 997 5 515

Interest-bearing loans and borrowings ‒ 7 142 4 152
Deferred taxation liabilities 1 195 2 094 1 001
Current liabilities 12 967 6 217 4 166
TOTAL EQUITY AND LIABILITIES 21 024 32 181 23 109

Extract from the statement of cash flows
Net cash inflow from operating activities 257 1 475 1 475
Cash generated from operations 998 2 036 1 943
Net cash outflow from investing activities (3 957) (4 185) (1 536)

Acquisition of businesses (2 938) (2 926) (971)
Net cash inflow from financing activities 3 905 2 898 1 721

Proceeds of ordinary shares issued 1 688 1 683 1 325
* In 2017 there was an impairment charge on the Mattress Firm cash-generating unit (CGU) (excluding
Sherwood), namely a goodwill impairment charge of €2.5 billion (2016: €nil), and a brand name
impairment charge of €652 million (2016: €nil). The goodwill of Mattress Firm was fully impaired during
the 2017 financial reporting period.
19

2.2.6 Annual financial statements (continued)
Extract from the accounting policies for the period ended 30 September 2016
Goodwill
“All business combinations are accounted for by applying the purchase method. …
Goodwill is initially recognised as an asset at cost and subsequently measured at cost less
any accumulated impairment losses.
…. Goodwill is allocated to cash-generating units (CGUs), and is tested annually for
impairment, or more frequently when there is an indication that the unit may be impaired.”
Judgements and estimates for the period ended 30 September 2016
Impairment of assets
“Investments, goodwill, property, plant and equipment, investment property and intangible
assets that have an indefinite useful life, … are assessed annually for impairment.”
Fair values in business combinations
“Management uses valuation techniques to determine the fair value of assets, liabilities
and contingent liabilities acquired in business combination[s].”
Extract from the notes to the annual consolidated financial statements
2017* 2016 2016 2015
Before Before
Restated restatement restatement
2.2 Auditor’s remuneration €m €m €m €m
Audit fees 14 11 11 6
* The audit fees for 2017 includes the accrual for normal audit fees expected at 30 September 2017.
It does not include extraordinary fees incurred during the 2018 financial year to re-audit and
complete the 2017 audit.
2.9 Number of employees: 105 866 for the 2016 financial period, and 91 114 for the 2015
financial period.
2016 2015
Before Before
restatement restatement
8. Goodwill €m €m
Carrying amount at the beginning of the period 5 933 1 908

Arising on business combinations 3 754 3 965
Additional goodwill raised and transferred on completion of
IFRS 3 valuation 18 20
Impairments ‒ (60)
Exchange differences on consolidation of foreign
subsidiaries (548) 100
Carrying amount at the end of the period 9 157 5 933
20

Extract from the notes to the annual consolidated financial statements (continued)
25. Net cash flow on acquisition of subsidiaries and businesses
Extract: Fair values of the assets and liabilities of Mattress Firm as at 30 September 2016
(before restatement):
Assets
€m
Intangible assets 1 335
Property, plant and equipment 384
Investments and loans 10
Cash on hand 25
[Minus] Liabilities
Non-current interest-bearing loans and borrowings (1 241)
Deferred taxation liability (506)
[Other] (156)
[Add] Goodwill attributable to acquisition (determined by Steinhoff) 2 339
Total consideration [Equity*] 2 190
Cash on hand on date of acquisition (25)
Net cash outflow on acquisition (2 165)
* Equity of Mattress Firm = €m[(1 335 + 384 + 10 + 25 + 2 339) – (1 241 + 506 + 156)] = €m(4 093
– 1 903) = €2 190 million
25.4 Acquisition of Mattress Firm

On 19 September 2016, Steinhoff acquired Mattress Firm for a total equity value of
approximately US$2.4 billion.
31.1.2 Remuneration of the Supervisory Board
On 30 November 2015, Dr CH Wiese was appointed as a supervisory board director
of Steinhoff, and on 31 May 2016 he was appointed as the chairman of the
supervisory board.
Dr CH Wiese was remunerated as follows for his services rendered as a member of
the supervisory board:
€1 981 000 during the 2016 reporting period, which amounted to 59.57% of the total
remuneration allotted to the supervisory board, and
€248 000 during the 2015 reporting period, which amounted to 16.55% of the total
remuneration allotted to the supervisory board. (Dr D Konar acted as chairman of
the supervisory board for the period 30 November 2015 to 31 May 2016. For his
services rendered as a supervisory board member, Konar earned €119 000 in 2016
(which amounted to 3.58% of the total remuneration allotted to the supervisory board
for 2016), and €121 000 in 2015 (which amounted to 8.08% of the total remuneration
allotted to the supervisory board in 2015).
The remuneration payments to Dr CH Wiese were made to “various” entities as
management fees.
(Dr CH Wiese earned €300 000 during the 2017 reporting period, which amounted
to 18.87% of the total remuneration allotted to the supervisory board. He resigned
from the supervisory board on 14 December 2017.)
21

Extract from the notes to the annual consolidated financial statements (continued)
31.3 Interest in Steinhoff [International Holdings] N.V. share capital

Total shares Total shares Total shares
30 Sept 2017 30 Sept 2016 30 June 2015
Before Before
restatement restatement
Management Board
MJ Jooste 69 932 113 68 947 287 67 056 504
AB la Grange 1 900 568 1 546 957 1 289 376
DM van der Merwe 6 649 621 6 143 144 5 711 982
Total shares 78 482 302 76 637 388 74 057 862
Supervisory Board
SF Booysen* 109 074 218 148* 213 907
DC Brink (retired on 30 May 2016) n/a 203 965 200 000
CE Daun 2 421 830 2 419 856 2 399 856
TLJ Guibert 1 524 592 666 155 300 000
D Konar: Deputy chairman 363 335 363 335 356 271
MT Lategan 360 569 355 599 392 821
JF Mouton n/a 7 000 000 7 000 000
J Naidoo 118 452 224 n/a n/a
BE Steinhoff 196 881 808 195 653 808 191 850 000
A Krüger-Steinhoff 825 664 825 664 809 612
PDJ van den Bosch (retired on
30 May 2016) n/a 710 043 669 561
J van Zyl 248 067 152 067 ‒
CH Wiese: Chairman 983 009 150 982 859 150 654 874 971
Total shares 1 304 196 313 1 191 427 790* 859 066 999
* The restated figures for the reporting period ended 30 September 2016 discloses the shares
of SF Booysen as 109 074, and the total shares issued as 1 191 318 716.
Independent auditor’s report
An independent auditor’s report was issued for the period ended 30 September 2016 by
Deloitte Accountants B.V. Deloitte stated that: “In our opinion the consolidated financial
statements give a true and fair view of the financial position of Steinhoff International
Holdings N.V. as at 30 September 2016.”
[Note: Since this is a case study in retrospect, it is unnecessary to consult the actual 2017
or later dated annual reports of Steinhoff, but you may do so on own initiative to support
your reasoning.]
22
3. CASE STUDY QUESTIONS
After having read the study materials for this case study, answer the three questions on the next
page in as much motivational detail as possible. All answers must be prepared according to the
Harvard Referencing System.
The case study materials provide more information than what may be required to do the research-
and-learning activity. Select the information as per your preference to answer the questions.
You may also, on own initiative, search for and use additional information when answering the
questions of this research-and-learning activity, provided that it is legit, applied within context, and
cited and referenced according to the Harvard Referencing System.
23
Study your authentic answers to the three questions below for the
examination.
REQUIRED: Case study questions:
1. In your own words, summarise the background information as given in paragraph 2.1 of this
research-and-learning activity to reflect the main events and points of interest concerning the
accounting and business irregularities of Steinhoff International Holdings N.V. during especially
the 2016 and 2017 financial periods of the entity.
(10 marks)
2. From the study materials for this case study, identify and discuss four irregularities
concerning the accounting policies and/or practices, and the business policies and/or practices
of Steinhoff in respect of its 2016 and/or other related financial periods. Discuss each irregularity
a. by explaining what the irregularity entails, motivated by one or more factual example/(s);
b. by identifying which of the six capitals as stated in the 2021 International Integrated
Reporting (IR) Framework (refer to the scientific essay: INTEGRATED REPORTING
STANDARDS in Learning Unit 3: Anchors, ANNEXURE B) was/were highly impacted on as
a result of the irregularity (identify a maximum of two capitals). As part of your answer,
describe the capital/(s) that you deem as having been highly affected. Motivate your
discussion by means of one or more factual examples; and
c. by identifying which of the basic concepts as mentioned in the Glossary of Terms of King IV,
(see paragraph 4.6 of this learning unit), and which of the principles in King IV (see
paragraph 4.7.1 of this learning unit) were highly impacted on as a result of the irregularity
(identify a maximum of two basic concepts and a maximum of two principles). As part of
your answer, describe the basic concept/(s) and the principle/(s) that you deem as having
been highly affected. Motivate your discussion by means of factual examples.
Conclude your answer to this question by discussing the impact that the irregularities that you
have identified and discussed had on the governance outcomes of Steinhoff (see paragraph
4.7.3 of this learning unit).
(45 marks)
[10 marks for the discussion of each irregularity in line with the format above (a, b and c), and
5 marks for the conclusion.]
3. Debate the ethicality of Steinhoff linking its remuneration policies concerning its
senior/top/executive management to its financial performance. Motivate your arguments
convincingly with detailed discussions, including factual examples. Give descriptions of the main
concepts, principles, etc that you use in your answer. For example, the description of “ethics”.
(In the Glossary of Terms in King IV, ethics is described as: “Considering what is good and right
for the self and the other, and [ethics] can be expressed in terms of the golden rule, namely, to
treat others as you would like to be treated yourself. In the context of organisations, ethics refers
to ethical values applied to decision-making, conduct, and the relationship between the
organisation, its stakeholders and the broader society.”)
(Note: Debate at least four arguments and then, based on your arguments, conclude.)
(10 marks)
24
4.9 On the shoulders of Prof Mervyn E. King: A synopsis

Prof King made significant contributions, worldwide, towards corporate governance and integrated
reporting.
You do NOT have to study the information below on Prof King for
examination purposes, but it is interesting to note that a former judge,
rather than an accountant, significantly influenced the reporting
methodologies in the fields of corporate governance and integrated
reporting.
The following reflects some of the achievements by Prof Mervyn E. King SC (Senior Counsel):
Prof King is a Senior Counsel and former Judge of the Supreme Court of South Africa, he also is
a Professor Extraordinaire at the University of South Africa on Corporate Citizenship, and an
Honorary Professor at the Universities of Pretoria and Cape Town, as well as a Visiting Professor
at Rhodes University.
Prof King holds an honorary Doctorate of Laws from i) the University of the Witwatersrand in South
Africa, and from ii) the University of Leeds in the United Kingdom, an honorary Doctorate from
Deakin University in Australia, and an honorary Doctorate in Commerce from the Stellenbosch
University in South Africa.
He is Chair Emeritus of the King Committee on Corporate Governance in South Africa (the King
Committee, in short). This committee produced King I, II, III and IV. Prof King has been the Chair
of the King Committee since its inception in 1992. On 1 October 2018, Prof Dr Suresh P. Kana
succeeded Prof King as the Chair of the King Committee. Prof Dr Kana resigned as the Chair,
effective from 31 January 2021, and Ms Ansie Ramalho was appointed as the new Chair of the
King Committee, effective from 16 February 2021.
Further, Prof King is a member of the Private Sector Advisory Group to the World Bank on
Corporate Governance, he chaired the United Nations Committee of Eminent persons on
Governance and Oversight, and he chairs the Integrated Reporting Committee of South Africa.
He served as the Chair, Director and Chief Executive of several companies listed on the London,
Luxembourg, and the Johannesburg Stock Exchanges. Prof King has consulted on legal, business,
advertising, sustainability and corporate governance issues in over sixty countries and has
received many awards around the world, including from the World Federation of Stock Exchanges
and the International Federation of Accountants.
Prof King is the author and co-author of a number of books on governance, sustainability and
reporting. A notable book, titled The Auditor: Quo Vadis? was published by him in 2018.
Source: https://www.mervynking.co.za/
25
VOLUNTARY VIEWING/READING:
• Visit https://integratedreportingsa.org/mervyn-king-on-the-role-of-
integrated-reporting-and-industrial-revolutions/ to view/read:
Mervyn King on the role of integrated reporting and
industrial revolutions
• Visit https://integratedreportingsa.org/presentations_irc-annual-
conference-2021-international-developments-in-reporting-a-
practical-look-for-preparers to read:
The presentations that were made during the 2021 IRC Annual
Conference in respect of the international developments in
reporting: A practical look for preparers. (You can also view the
conference if you register.)
4.10 Study materials on Learning Unit 4 for examination

purposes
Study the following for the examination:
1. Paragraph 4.1 of this learning unit. (The economic environment of the 21st
century)
2. Paragraph 4.3 of this learning unit. (King IV: Objectives)
3. Paragraph 4.5 of this learning unit. (King IV: Legal status and disclosure
requirements)
4. Paragraph 4.6 of this learning unit. (King IV: Descriptions of basic concepts;
only the descriptions indicated in RED/SHADED.)
5. Paragraph 4.7.1 of this learning unit. (Principles)
6. Paragraph 4.7.3 of this learning unit. (Governance outcomes)

7. Paragraph 4.8 of this learning unit. (Your answers to the three questions in
the research-and-learning activity.)
8. The solutions to Assignments 03 and 04, where applicable to this learning
unit. (TLs 203/0/2023 and 204/0/2023 will be uploaded under the Solutions to
Assessments (Assignments) tab on the FAC4865 website.)
Comments
Any resource or additional resource that you had to use to do the research-and-learning activity in
this learning unit and Assignments 03 and 04 must not be studied in its entirety. Study only the
section/(s) of the resource as required of the research-and-learning activity and/or the
assignment/(s).
Since the examination is only a three-hour question paper, not ALL the prescribed study materials
can be assessed during the examination.
26
4.11 Checklists: Learning unit activities and outcomes
YES NO UNCER-
Learning unit activities TAIN
√ X ?
1 Did you prepare the research-and-learning activity?
2 Did you read the study material meticulously, and do you understand it?
3 Did you prepare the relevant section(s) of Assignments 03 and 04?
4 Did you reflect how transdisciplinary reasoning impacted on the development
of King IV?
5 Did you reflect how the application of the systems theory could impact on the
revision of King IV, or on the development of future King Reports?
6 Did you master the application of critical reasoning skills?
7 Did you study the prescribed study materials for examination purposes?
Learning unit outcomes YES NO UNCER-

TAIN
Are you able to do the following?
√ X ?
1 In your own words, discuss the economic environment of the 21st century,
with specific reference to the distinctive dynamics and attributes related to the
Third and Fourth Economies.
2 Name, and in your own words, discuss the three interconnected paradigm
shifts as presented in King IV, on which the foundation stones of King IV are
based.
3 Give, and in your own words, discuss the objectives of King IV.
4 In your own words, discuss the legal status and disclosure requirements of
King IV.
5 Give, and in your own words, discuss the descriptions of the basic concepts
used in King IV, relevant to FAC4865.
6 In your own words, discuss the governance outcomes stated in King IV.
7 Assess the impact of integrated reporting/King IV practices on corporate
governance outcomes.
8 Assess the relevance of integrated reporting/King IV regarding the faithful
representation of corporate reports against the requirements of the 2021
International Integrated Reporting (IR) Framework and King IV.
9 Assess the relevance of integrated reporting/King IV regarding the
governance of the ethicality of business policies.
10 Analyse case studies within the scope of this learning unit and suggest
solutions if so required.
General for FAC4865 YES NO UNCER-

TAIN
Are you able to do the following?
√ X ?
11 Read research articles methodically.
12 Select relevant information from published work for your own research
projects.
13 Incorporate the viewpoints of other authors with your own, without
committing plagiarism.
27
References
IMAGES
The above image and derivatives thereof are used throughout this document. It is sourced as follows:
Anastasia Mazeina/Shutterstock.com, under the enhanced licence obtained by Unisa from
Shutterstock.com.
The above image and derivatives thereof are used throughout this document. It is sourced as follows:
Viktoriia Panchenko/Shutterstock.com, under the enhanced licence obtained by Unisa from
Shutterstock.com.
THEORETICAL
Corporate Reporting Services. 2016. King IV and integrated reporting.

Available from: http://coreporting.co.za/king-iv-and-integrated-reporting/
Downloaded on 15 December 2018.
EurekAlert!. IPBES: Nature's dangerous decline 'unprecedented,' species extinction rates 'accelerating'.
Available from: https://www.eurekalert.org/pub_releases/2019-05/tca-ind050519.php
Downloaded on 9 May 2023.
GMAT Critical Reasoning. GMAT Critical Reasoning: Practice Tests and Information.
Available from: www.majortests.com/gmat/critical_reasoning.php
Downloaded on 9 May 2023.
Globalartsandhumanities.osu.edu. (n.d.). Why Cross-Disciplinary Research Matters | Global Arts and

Humanities. [online] Available at: https://globalartsandhumanities.osu.edu/research/cross-disciplinary-
research. Accessed 23 June 2023
Institute of Directors in Southern Africa NPC (IoDSA). 2016. King IV: Report on Corporate Governance for
South Africa.
Available from:
https://c.ymcdn.com/sites/www.iodsa.co.za/resource/resmgr/king_iv/King_IV_Report/IoDSA_King_IV_Report_-
_WebVe.pdf
Downloaded on 1 February 2018.
Integrated Reporting Committee of South Africa (IRC of SA). 2017. King IV report on corporate governance.
Available from: http://integratedreportingsa.org/king-iv-report-on-corporate-governance/
Downloaded on 1 March 2018.
28
References (continued)
International Integrated Reporting Council (IIRC). 2021. International Integrated Reporting <IR> Framework.
Available from:
https://integratedreporting.org/wp-
content/uploads/2021/01/InternationalIntegratedReportingFramework.pdf
Johnsson, HVA & Kihlstedt, E. 2005. Performance-Based Reporting: New Management Tools for
Unpredictable Times. Hobokem, New Jersey, John Wiley & Sons.
Kotelnikov, V. [n.d]. New Economy: Key Features of the New Rapidly Globalizing and Changing
Knowledge Economy.
Available from:
http://www1000ventures.com/business_guide/crosscuttings.new_economy_transition.html
Downloaded on 1 November 2010.
Mervyn King SC. 2013 – 2020. Mervyn E King SC. Available from: https://www.mervynking.co.za/
Downloaded on 20 December 2021.
Pilling. D. 2019. The Growth Delusion: The Wealth and Well-Being of Nations. Bloomsbury Publishing, Great
Britain.
PricewaterhouseCoopers (PwC). 2016. Steering point: November 2016: A summary of the King IV Report
on Corporate Governance™ for South Africa.
Available from: https://www.pwc.co.za/en/assets/pdf/king-iv-steering-point.pdf
Principia Cybernetica Web. Systems theory.

Available from: http://pespmc1.vub.ac.be/SYSTHEOR.html
Downloaded on 23 June 2023
Steinhoff International Holdings N.V. 2016. 2016 Annual report.

Available from: http://www.steinhoffinternational.com.
Steinhoff International Holdings N.V. 2017. 2017 Annual report.

Available from: http://www.steinhoffinternational.com.
Downloaded on 1 April 2020.
© UNISA 2023
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FAC4865/Learning Unit 4/KING IV/2023

Where Leaders Reason, Connect & Explore

“If one was asked to summarise King IV™ in

PwC South Africa

“Transparency, in a business or governance context, is honesty and openness.

Quotes from the Adventures of Pinocchio by Carlo

In recognition of the Conceptual Framework for

The society, economy and ecology are embedded in the environment …

• African wild dog

King IV and the integrated reporting connection

Source: Corporate Reporting Services: http://coreporting.co.za/king-iv-and-integrated-reporting/

Source: Prof Mervyn E King in PwC South Africa

Source: Corporate Reporting Services: http://coreporting.co.za/king-iv-and-integrated-reporting/

Corporate governance: Centre stage

Source: Online pictures: Bing Image Search

The cult of upholding economic growth at the expense

Our problem with growth is that it requires endless production and

The health of ecosystems on which we and all other species depend is

Source: EurekAlert!: IPBES: Nature's dangerous decline 'unprecedented,' species extinction

7. Assess the impact of integrated reporting/King IV practices on the corporate

8. Assess the relevance of integrated reporting/King IV regarding the faithful

9. Assess the relevance of integrated reporting/King IV regarding the governance of the

Main activities required to achieve the learning unit

Other study materials

Critical reasoning questions

In FAC4865, the terms “critical thinking” and “critical

Learning unit assessment

Other study materials in this learning unit

Prepared and studied formative assessments (assignments)

Critical reasoning from the systems theory or another transdisciplinary

King IV: Legal status and disclosure requirements

The impact of integrated reporting/King IV practices on corporate governance

On the shoulders of Prof Mervyn E. King: A synopsis

4.1 The economic environment of the 21st century

• The shift from financial capitalism to inclusive capitalism

• The shift from siloed reporting to integrated reporting

Since the different capitals as disclosed in integrated reports consistently interrelate in

VOLUNTARY READING: Three shifts towards better decision-

Available from: https://integratedreporting.org/news/three-shifts-

4.2 The King Reports: A historical snapshot

Voluntary viewing: Opening address by Prof. Mervyn King on

i. To promote corporate governance as integral to running an organisation and delivering

iii.To reinforce corporate governance as a holistic and interrelated set of arrangements, to be

iv. To encourage transparent and meaningful reporting to stakeholders.

4.4 King IV: Important changes

4.4.1 Universal applicability

4.4.2 From “apply or explain” to “apply and explain”

4.4.3 Sector supplements

4.5 King IV: Legal status and disclosure requirements

In respect of the management of corporate governance by various other countries, i) a full

Study ONLY the material indicated in RED/SHADED for the examination.

(The King IV Code is included as Part 5 of the King IV Report.)

Concise communication about how an organisation’s strategy, governance, performance and

Those groups or individuals that can reasonably be expected to be significantly affected by an

4.7 King IV: Principles, practices and governance outcomes

Table 2: The King IV reporting principles

The governing body should comprise the appropriate balance of knowledge,

Table 2: The King IV reporting principles to be continued on the next page.

The governing body of an institutional investor organisation should ensure that

(PwC: 2016: https://www.pwc.co.za/en/assets/pdf/king-iv-steering-point.pdf)

4.7.3 Governance outcomes

4.8 The impact of integrated reporting/King IV practices on

RESEARCH-AND-LEARNING ACTIVITY (65 marks)