The Future of Financial Reporting in South Africa and what framework to apply
There are various financial reporting frameworks available to entities in South Africa. With the ending of the ‘Statements of Generally Accepted Accounting Practice' (SA GAAP) for financial periods commencing on or after 1 December 2012 , ‘SA GAAP for SMEs' (Exposure Draft [ED] on IFRS for SMEs issued in 2007) in May 2012 and ‘Micro GAAP' , many entities will need to make a decision on which framework to apply in the future.
In addition, for those that have been waiting for a Micro GAAP standard (also referred to as the Financial Reporting Framework for Non-public Entities), the recent decision not to issue such a standard in South Africa will mean that these entities will now need to consider an alternative framework should they still be using SA GAAP, SA GAAP for SMEs, or currently reporting under full IFRS.
In response to these recent developments, SAICA has prepared a short video to explain the various financial reporting frameworks available to entities in South Africa. This video can be downloaded from the SAICA website. Furthermore, a table that sets out the remaining financial reporting frameworks and how SAICA can assist members in the application of these frameworks can be downloaded from the SAICA website.
Headline Earnings Circular amended
Two amendments were made to Circular 3/2009 - Headline Earnings, resulting in a replacement circular, Circular 3/2012 - Headline Earnings, being issued. The first amendment made to the rule table ensures that the tax effects of items excluded from headline earnings are also excluded regardless of the period in which these were recognised.
The second amendment, also made to the rule table, relates to the compensation received from third parties for items of property, plant and equipment that were impaired, lost or given up. It ensures that the treatment of this compensation is consistent with the related impairment or other loss recognised. Circular 3/2012 is effective for financial periods (annual or interim periods) ending on or after 31 July 2012. The new circular can be downloaded from the SAICA website.
New Guide on Applying IFRS for SMEs for Micro Entities
SAICA has developed a guide on applying ‘IFRS for SMEs' for micro entities. This guide is in the form of an easy-to-use electronic toolkit that comprises a user checklist, the requirements of the standard, an application guide with practical examples, illustrative financial statements, and a disclosure checklist for micro entities.
The guide is aimed at assisting with the practical application of the IFRS for SMEs standard for micro entities such as close corporations, companies with a public interest score below 100 points, partnerships and sole proprietorships.
This guide enhances the micro entity user's understanding of how to apply the IFRS for SMEs standard by focusing on the most expedient accounting policies permitted and by reducing emphasis on the many elements of the standard that are not likely to be applicable for a micro entity (in the rare circumstances where such elements are still applicable, the guide contains a user checklist which will draw the attention of the user to the standard itself for further guidance). Find out more information about this guide from the SAICA website. SAICA will also be running seminars on ‘Applying IFRS for SMEs for Micro Entities' during September and October 2012.
IASB amends new consolidation standards
The International Accounting Standards Board (IASB) has issued amendments to clarify the transitional provisions of IFRS 10 - Consolidated Financial Statements. These amendments also provide entities with an additional relief in IFRS 10, IFRS 11 - Joint Arrangements and IFRS 12 - Disclosure of Interests in Other Entities, by restricting the requirement to provide adjusted comparative information to only the preceding comparative period.
The amendments are effective for annual periods beginning on or after 1 January 2013, and this has been aligned with the effective date of IFRS 10, IFRS 11 and IFRS 12.
Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance, can be downloaded from eIFRS and the IASB press release can be found on the SAICA website.
IASB and FASB agree on lease accounting
The IASB and the United States Financial Accounting Standards Board (US FASB) have agreed on an approach for accounting for lease expenses as part of a project to revise the leases standards in International Financial Reporting Standards (IFRSs) and the United States Generally Accepted Accounting Principles (US GAAP). These Boards decided on an approach in which some lease contracts would be accounted for based on a model similar to that proposed in the 2010 leases exposure draft (ED 288), while other leases would be accounted for by using the straight-line method. The IASB and FASB plan to release a revised leases exposure draft in the fourth quarter of this year. Their joint press release can be downloaded from the SAICA website.
IFRS Briefing for Chief Executives, Audit Committees and Board of Directors issued
The IASB has issued the ‘IFRS Briefing for Chief Executives, Audit Committees and Boards of Directors 2012'. This briefing provides summaries of all IFRSs issued at 1 January 2012, including those with an effective date after 1 January 2012, but does not include IFRSs they will replace. A downloadable version of the 2012 Briefing for Chief Executives can be ordered from the IASB website.
FIC warns on scam notices
The Financial Intelligence Centre warns of notice scams bearing the Government coat of arms, the logo of South Africa's Parliament and the FIC's name being used in attempts to defraud the public through bogus e-mails. Members of the public are urged to not respond to such notices and report these to the South African Police Services (SAPS). For more information and examples of scam letters, visit the FIC website.
Regulation 28: Conditions for securities lending transactions
The Registrar of Pension Funds has extended the implementation date for pension funds to be compliant with the securities lending transactions until 31 December 2012. For more information refer to Notice 4 of 2012 on the FSB website.
Raubenhaimer v Raubenhaimer
In a decision handed down by the Supreme Court of Appeal (on 1 June 2012), the judge criticised people who rely on untrained advisors when preparing their wills, which according to the judge is one of the most important documents they are ever likely to sign. When one looks at the mistakes made by the testator and the planner, it is clear that they delayed the winding up of the estate, added to the emotional stress of the surviving family members of the deceased and were costly to fix. The same principle is true when one attends to your duties for file tax returns.
Lessons to be learned from this case:
Consult only persons who are suitably trained in the drafting and execution of wills. This is not only done to ensure that proper legal procedures are followed, but also to make certain that the normal tax consequences (particularly in respect of the capital gains that may arise on death) and estate duty consequences were considered. It is also important to make sure that there is cash in the estate to meet the costs of winding it up and to pay the taxes due. Mistakes delay the winding up of the estate, they add to the emotional stress of the surviving family members of the deceased and are costly to fix.
The case report is available on the Tax Suite website under Raubenhaimer v Raubenhaimer. asa