From 2022, the global financial reporting agenda is set to change. How will South African companies be impacted?
This change comes as the global standard-setter, the International Accounting Standards Board (IASB), is embarking on its third agenda consultation. Much like the changes which were brought about by the second agenda consultation, the new global financial reporting agenda may result in a significant impact on how some transactions are accounted for and thereby impacting companies in various ways, writes Bongeka Nodada, SAICA Project Director for Financial Reporting.
Through this third agenda consultation, companies, auditors, regulators and users of financial statements are provided the opportunity to drive the global financial reporting agenda. Consequently, this could improve financial reporting by companies.
This process is important to South Africa because the Companies Act 71 of 2008 requires some companies to apply the global financial reporting standards, International Financial Reporting Standards (IFRS).
Furthermore, the consultation process enables all the role-players in the financial reporting ecosystem to influence the strategic direction and balance of the IASB’s activities, propose criteria for assessing which projects should be prioritised, and advise the IASB as to which projects should be taken on to the global financial reporting agenda.
Current standard-setting activities entail the development of new IFRS standards, maintenance and major amendments to IFRS standards; maintaining IFRS Standards and supporting their consistent application; developing and maintaining the International Financial Reporting standards for small and medium-sized entities (IFRS for SMEs); supporting digital financial reporting by developing and maintaining the IFRS Taxonomy; improving the understandability and accessibility of the standards; and engaging with stakeholders. The global standard-setter is seeking views to determine how its resources should be allocated among the different activities.
Initial outreach activities conducted prior to the commencement of this agenda consultation identified a myriad of potential financial reporting projects that could be added onto global financial reporting agenda. These potential projects will either serve to address gaps that exist within IFRS Standards or enhance the reporting requirements. There is no doubt that much like the major overhaul of the revenue, leases and financial instruments Standards which culminated from the second agenda consultation and which significantly impacted many companies in South Africa, some major projects taken onto the future agenda may have a similar effect on companies locally.
Projects which have been put forward thus far for consideration include accounting for cryptocurrencies, accounting for inventory, going concern disclosures and the accounting basis to apply when an entity is no longer a concern, accounting for income taxes, accounting for internally generated intangible assets such as brands, and the statement of cash flows and its relevance for companies such as financial institutions.
Companies, auditors, regulators and users of financial statements have until 27 September 2021 to provide input that will drive the financial reporting agenda for the five years commencing 2022.
More information on the third agenda consultation can be obtained from the IFRS Foundation website.