12 IMPROVEMENTS TO STANDARDS ISSUED AS STATEMENTS OF GAAP
The Accounting Practices Board (APB) has approved 12 Improvements as Statements of Generally Accepted Accounting Practice (GAAP). The annual improvements project is aimed at making necessary, but non-urgent, amendments to Statements of GAAP that will not be included as part of another major project. The Standards and Interpretations affected include: see table below.
The Improvements to IFRSs can be found on the SAICA Handbook online.
LESS COMPLEX GUIDANCE ON FAIR VALUE MEASUREMENTS
The International Accounting Standards Board (IASB) has published for public comment proposals to replace the fair value measurement guidance currently contained in individual International Financial Reporting Standards (IFRSs). This exposure draft has been issued in South Africa as ED 262.
The objectives of these proposals are;
• to establish a single set of authoritative guidance on the application of fair value measurement principles in inactive markets that can be applied consistently across all IFRSs;
• to refine and replace the current definition of fair value. As a result, a single, unified definition of fair value will be introduced;
• to establish a fair value hierarchy that priorities inputs to valuation techniques into three levels in order to improve consistency and comparability in fair value measurements; and
• to enhance the disclosures about fair value to enable users of financial statements to assess the extent to which fair value is used, and to inform users about the inputs to derive those fair values. The proposals prescribe minimum disclosure requirements with respect to fair value measurement in addition to those required by IFRS 7(AC 144) – Financial Instruments: Disclosures.
A copy of the SAICA comment letter resulting from the deliberations of the Accounting Practices Committee sub-committee can be found on the SAICA website under submissions.
ED 262 can be downloaded from the SAICA Website.
EDITORIAL CORRECTIONS TO AC 504
Editorial corrections have been made to AC 504 – IAS 19(AC 116) – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction in the South African Pension Fund Environment, in the SAICA Handbook on-line.
These editorial corrections include;
• Footnotes have been included in the document and listed after section 35. These were erroneously deleted from the SAICA on-line handbook;
• Subsections (i) to (iv) of paragraph 13, which were erroneously deleted, have been included; and
• Font size changes to the word ‘ESA’ in paragraph BC12(e).
AC 504 can be found in the SAICA handbook on-line.
|IFRS||Subject/or summary of the amendment|
|IFRS 2(AC 132) – Share-based Payment||Broadening the scope exclusions to common control transactions as defined in the revised IFRS 3(AC 140) – Business Combinations (revised 2008) and joint ventures as defined in IAS 31(AC 119) – Interests in Joint Ventures. The amendment is effective for annual periods beginning on or after 1 July 2009.|
|IFRS 5(AC 142) – Non-current Assets Held for Sale and Discontinued Operations||Providing guidance in respect of disclosures of Non-current assets Held for Sale (or disposal groups) and Discontinued Operations required by IFRS 5(AC 142). The amendment is effective for annual periods beginning on or after 1 January 2010.|
|IFRS 8(AC 145) – Operating Segments||An amendment made to the disclosures of information about profit or loss, assets and liabilities of a reportable segment. The amendment is effective for annual periods beginning on or after 1 January 2010.|
|IAS 1(AC 101) – Presentation of Financial Statements||Classification of convertible instruments as either non-current or current. The amendment is effective for annual periods beginning on or after 1 January 2010.|
|IAS 7(AC 118) – Statement of Cash Flows||Only expenditure resulting in a recognised asset in the statement of financial position can be recognised as investment activities. The amendment is effective for annual periods beginning on or after 1 January 2010.|
|IAS 17(AC 105) – Leases||Leases of land and buildings need to be considered separately for all transactions. In establishing whether the land component is an operating or finance lease the entity should take into account that the land has an indefinite economic life. The amendment is effective for annual periods beginning on or after 1 January 2010.|
|IAS 18(AC 111) – Revenue||Guidance has been provided to assess whether, in an agency relationship, an entity is acting as an agent or principal.|
|IAS 36(AC 128) – Impairment of Assets||Unit of accounting for goodwill impairment. The amendment is effective for annual periods beginning on or after 1 January 2010.|
|IAS 38(AC 129) – Intangible Assets||Consequential amendments arising from the revisions to IFRS 3(AC 140).|
Measuring the fair value of an intangible asset acquired in a business combination. The amendment is effective for annual periods beginning on or after 1 July 2009.
|IAS 39(AC 133) – Financial Instruments: Recognition and Measurement||Scope exemption for business combination contracts.|
Treating loan prepayment penalties as closely related embedded derivatives.
Cash Flow Hedge Accounting.
The amendments are effective for annual periods beginning on or after 1 January 2010.
|IFRIC 9(AC 442) – Reassessment of Embedded Derivatives||Scope exclusions extended to businesses under common control, business combinations as defined in the revised IFRS 3(AC 140) and joint ventures as defined under IAS 31(AC 119), arising from the revisions to IFRS 3(AC 140) made in 2008. The amendment is effective for annual periods beginning on or after 1 July 2009.|
|IFRIC 16(AC 449) – Hedges of Net Investment in a Foreign Operation||Amendment to the restriction on the entity that can hold hedging instruments. The amendment is effective for annual periods beginning on or after 1 July 2009.|
REPORTS BY THE AUDITOR TO THE MASTER OF THE HIGH COURT
SAICA wishes to clarify for all its members in public practice, their responsibilities when issuing audit reports relating to the administration of trusts.
Requests are often received from trustees for auditors to confirm or certify the proper administration of trusts, presumably in terms of the Trust Property Control Act. Care must be taken by members, when signing such reports, to make only factual statements. Where you cannot establish a factual situation, your report should be appropriately qualified.
An appropriate report, based on the requirements of the trustees (i.e. agreed upon procedures, factual findings, assurance reports) and on what the auditor can offer, should be produced – and all these requirements should be written into the client engagement letter.
If there is any uncertainty on the part of the practitioner, queries should be directed to IRBA or SAICA through the query system found on the SAICA website (www.saica.co.za).
SAICA’S NATIONAL TAX COMMITTEE SUBMISSIONS
SAICA made the following submissions to SARS/National Treasury during April/May 2009:
|Submission name||Comment Deadline||Comment Submitted|
|SAICA Submission to Treasury on s121 Additional investment and training allowances in respect of industrial policy projects||N/A||29 May 2009|
|SAICA Submission to SARS on s16(3) Draft Interpretation Note Documentary Requirements||1 June 2009||27 May 2009|
|SAICA Submission to SARS Draft Interpretation Note on Self Invoicing||1 June 2009||22 May 2009|
|SAICA Submission to SARS Draft VAT Interpretation Note s8(25) of the Act||N/A||22 May 2009|
|SAICA Submission to SARS Call for comment Interpretation Note 35 Personal Service Providers||N/A||15 May 2009|
|SAICA Submission to SARS on VAT Interpretation Note 30 Issue 2||N/A||22 May 2009|
|SAICA Submission to SARS on Call for comment Draft Interpretation Note 17 Independent Contractors||N/A||15 May 2009|
|SAICA Submission to SARS on Differential Timelines for Tax Practitioners|
New Zealand extension dates
|N/A||8 May 2009|
|SAICA Submission to Treasury on PAYE Issues||N/A||5 May 2009|
|SAICA Submission to SARS on PAYE Issues||N/A||5 May 2009|
|SAICA Submission to National Treasury on Dividends Tax||N/A||23 April 2009|
|SAICA Submission to National Treasury on Learnership Allowances: Section 12H of the Income Tax Act||17 April 2009||21 April 2009|
|SAICA Submission to SARS on changes to Provisional Tax: Paragraph 20 of the Fourth Schedule to the Income Tax Act||N/A||9 April 2009|
Copies of these and previous submissions are available on our website at
DRAFT TAXATION LAWS AMENDMENT BILLS 2009
National Treasury released for public comment the 2009 Taxation Laws Amendment Bill to give effect to the tax proposals announced in the 2009 Budget and outlined in the 2009 Budget Review . The draft can be found on the websites of the National Treasury (www.treasury.gov.za) or SARS (www.sars.gov.za).
SAICA, through its National Tax Committee, provided detailed written comments that are available on our website at www.saica.co.za.
SAICA also made oral presentations to the Standing Committee on Finance (previously the Portfolio Committee on Finance) on 23/24 June 2009.
National Treasury has pointed out that the draft legislation deals with a number of matters, notably:
1. Provisional tax: In 2008, the provisional tax system was tightened to require 80 per cent accuracy in respect of the second provisional payment when compared to final assessed taxes due. Amid concerns that this requirement may not always be possible (especially for smaller businesses), the 20 per cent penalty will be waived in certain circumstances.
2. Travel (car) allowances: Repeal of the deemed kilometre method: The deemed kilometer method for deducting travel expenses will be repealed with effect from 1 March 2010. Individuals that use their private vehicles for businesses purposes and receive a travel (car) allowance will still be able to claim such expense by maintaining a logbook of business kilometres travelled. The PAYE system for travel (car) allowances will be adjusted so that 80 per cent of this allowance will be subject to PAYE.
3. Conversion of the Secondary Tax on Companies to the new Dividends Tax: In 2008, the basic rubric for the new Dividends Tax was enacted. The proposed 2009 legislation contains supporting amendments. These amendments prevent taxpayers from converting the taxable sale of shares into tax-exempt pre-sale dividends, and impose the new Dividends Tax in respect of deemed dividends (e.g. loans to connected persons). The legislation also creates an equal playing field for both domestic and foreign shares listed on the JSE, and hence the 10 per cent charge on dividends will also apply to foreign shares listed on the JSE.
4. Environmental incentives: The Income Tax Act contains two incentives in support of the environment. The sale of certified emission reductions (also known as carbon emission reductions credits) will be exempt from income tax. Secondly, businesses will obtain notional deductions for income tax purposes for energy efficiency savings from certified baselines based on energy efficiency certificates issued by the National Energy Efficiency Agency. Note that the implementation of the environmental levy of 2 cents per kWh on electricity generated from non-renewable resources as announced in 2008 was delayed and will now take effect on 1 July 2009. The imposition of this levy does not require any new legislation in these draft bills.
5. Learnership tax allowance: The tax incentive to encourage employers to train/up-skill their employees through registered learnerships or apprenticeships will be streamlined and further enhanced. If an employee successfully completes a 12 month learnership, his or her employer will be able to claim an additional deduction of R60 000. This will result in a tax relief for the employer of R16 800 per employee. Where an employee successfully completes a three year apprenticeship, the employer will be able to claim an additional allowance of R180 000 at the end of the third year, resulting in a tax relief of R50 400 per employee. A more generous dispensation applies to employers that train employees with disabilities, with employers qualifying for a 66.67 per cent higher tax relief than for that for employees without disabilities.
6. Retirement withdrawals: The proposed legislation completes the reform process set in motion in 2008 regarding the taxation of retirement and pre-retirement withdrawal lump sums. Most of the proposed legislation dealing with lump sum tables and clarification of anomalies was published in the first batch of draft legislation in February 2009. The proposed legislation also seeks to simplify the taxation of minor beneficiary funds subject to regulation by the Financial Services Board, and to clarify the law when employers legitimately withdraw employer surpluses from retirement funds.
7. Estate Duty: The proposed amendments seek to assist middle-income families while deterring Estate Duty avoidance at the upper end. In terms of assisting the middle class, the proposed amendments allow the R3.5 million deduction from Estate Duty to rollover from the deceased to a surviving spouse (so that the surviving spouse can use a R7 million deduction amount on death). In terms of anti-avoidance, the rules close a commonly used 1-year usufructory arrangement that artificially seeks to undermine the value of inherited property.
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