SUMMARY OF STATEMENT OF GAAP FOR SMEs
SAICA, with the permission of ACCA, has loaded a brief and ‘easy-to-use’ summary of the Statement of GAAP for SMEs on its website.
This summary is endorsed by Paul Pacter, the Director of Standards for SMEs at the International Accounting Standards Board (IASB) and is based on the IASB’s IFRS for SMEs ED issued in South Africa as a Statement of GAAP for SMEs.
The summary can be found in the Statement of GAAP for SMEs section of the SAICA website.
REVISED ED ON ‘DEEMED COST’ OF INVESTMENTS
The IASB published an ED of proposed amendments to IFRS 1 – First-time Adoption of International Financial Reporting Standards and IAS 27 – Consolidated and Separate Financial Statements. This has been issued as ED 231 Amendments to IFRS 1 – First-time Adoption of International Financial Reporting Standards and IAS 27 – Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate.
The ED was developed in response to comment received on a related ED published in January 2007. In light of those comments and further consultation with interested parties, the IASB reconsidered its proposals and, in accordance with its due process, now invites comment on the revised proposals.
The proposals address concerns that retrospectively determining cost in accordance with IAS 27 on the first-time adoption of IFRS cannot, in some circumstances, be achieved without undue cost or effort. Consequently, this might create a barrier to entities’ adoption of IFRS in their separate financial statements. Additionally, the proposals respond to enquiries received about the measurement of cost in the separate financial statements of a new parent entity.
Amendments to IFRS 1
- a proposal to allow entities, in their separate financial statements, to use a deemed cost option for determining the cost (in accordance with paragraph 37 of IAS 27) of an investment;
- the use of either fair value (determined in accordance with IAS 39 – Financial Instruments: Recognition and Measurement) or the carrying amount at that deemed cost under previous national standards; and
- a change in scope of the applicability of the deemed cost option to include jointly controlled entities and associates as well as subsidiaries.
Amendments to IAS 27
- the removal of the ‘cost method’ from paragraph 4 of IAS 27; and
- a proposal to require a new parent to measure cost using the carrying amounts of the existing entity at the date when the new parent is formed.
ED 231 is available on the SAICA website.
The SAICA deadline for comment was
25 February 2008.
SAICA SUBMITS COMMENT LETTERS
SAICA’s Auditing Guidance Committee (AGC) agreed to submit comment letters on the ISAs that are exposed for comment to the IFAC from 1 September 2007 onwards. This will ensure that practitioner’s views on auditing standards are considered when drafting the final versions of auditing standards.
The AGC’s brief includes effectively commenting, as a member body, on auditing standards. This is critical given the current review of auditing standards globally. Our input into the global process as South Africa practitioners is important to ensuring the development of standards that are global with local relevance.
SAICA will issue documents for comment as they become available. Members are invited to comment and will be made aware of the comment period through a Communiqué as these arise.
Comment letters submitted to IFAC are available on the SAICA website.
ACCOUNTING STANDARDS BOARD
Latest standards, EDs, discussion papers and updates of the Board are available and can be viewed on the ASB website (www.asb.co.za).
AUDITOR-GENERAL ISSUES GUIDANCE ON AUDITING OF PERFORMANCE INFORMATION FOR 2007/8 CYCLE
The Auditor-General (AG) has issued technical memorandum 42 of 2007 that serves to confirm the audit approach, audit programmes, procedures and related working papers to be used for the auditing of performance information for the 2007/2008 Public Finance Management Act (PFMA) cycle. The audit programmes, procedures and related worksheets are attached to the memorandum.
The information relating to the performance against predetermined objectives is subject to auditing by the AG in terms of section 20(2)(c) of the Public Audit Act, 2004 (PAA). Section 13 of the PAA requires the AG to determine the standards to be applied in performing such audits. The AG has adopted a phasing-in approach to compliance with the relevant section of the PAA until the necessary standards have been developed and the environment promotes a state of readiness to provide reasonable audit assurance in the form of an opinion or conclusion. The memorandum has been issued as part of the phasing-in approach.
The AG will in future issue guidance for audit periods after 2007/2008. They can be found on the SAICA website, Services to members>technical information>public sector.
SOUTH AFRICAN REGULATORY REPORTING FRAMEWORK FOR RETIREMENT FUNDS
The FSB has released for comment the draft South African Regulatory Reporting Framework for Retirement Funds.
Currently the financial statements of retirement funds are prepared on the basis of South African Statements of Generally Accepted Accounting Practice (SA GAAP) with a number of departures. This has proved difficult to define.
Internationally, it is accepted that IFRS are not wholly appropriate for the retirement funds industry. It is anticipated that when global standards are developed for retirement funds, South Africa will follow those standards. However, it has been suggested that a regulatory reporting framework be developed as an interim step.
The regulatory reporting framework will be based on IFRSs and will be tailored to the retirement funds industry. It will be updated annually for changes in IFRSs appropriate to retirement fund reporting.
Once the comment has been processed and the framework updated, the framework will become effective for retirement funds. Funds that currently apply a non-accrual basis of accounting will be required to start applying an accrual basis of accounting. This will be required for all 2009 year-ends, and early adoption will be encouraged.
Disclosure and presentation is governed by the format of the financial statements issued by the Financial Services Board (FSB). The regulatory reporting framework document focuses on recognition and measurement principles, but also provides guidance relating to disclosure and presentation in the prescribed format. The focus of this round of consultation is on the recognition and measurement principles. The financial statements are being updated in a separate project.
The regulatory reporting framework deals with principles (as far as possible). Further guidance and examples will be provided separately once the regulatory reporting framework is finalised.
The framework is available on the regulated industries page of the SAICA website. The deadline for comment was 29 February 2008.
MEDICAL SCHEMES ACCOUNTING GUIDE
The Medical Schemes Accounting and Auditing Guide for the Year End 31 December 2006 has been withdrawn from the SAICA website and replaced by the Medical Schemes Accounting Guide for the Year End 31 December 2007.
The auditing guidance has been removed from the revised guide and will be issued by the Independent Regulatory Board for Auditors.
AUDIT REQUIREMENTS ON STATEMENT G14 OF THE LONG-TERM INSURANCE ANNUAL STATUTORY RETURN (LT2007)
The FSB has received numerous enquiries regarding the audit requirements for Statement G14 of the LT2007.
Statement G14 should be read together with Directive 147 and deals with discretionary participation products – specifically regarding the insurer’s compliance with Directive 147 and its Principles and Practices of Financial Management.
The external auditors are required to initial Statement G14. This means that that the auditor needs to confirm that it is the final statement that forms part of the submitted statutory return. (Please refer to the “Information regarding the return” section of the Guidance Manual of the LT2007, which is available on the FSB’s website.) No further audit requirement is required.
WITHDRAWAL OF CIRCULAR 6/98
Circular 6/98 – The retention of records and audit working papers is out of date and has been withdrawn. Members are referred to guidance provided by document storage entities, which is up to date with relevant laws and regulations relating to document retention and storage.
EXCHANGE CONTROL CIRCULARS
The Exchange Control department of the South African Reserve Bank (EXCON) has issued the following Exchange Control Circulars:
- No.25/2007 – Amendments to Exchange Control Rulings
This circular advises of various amendments to the Exchange Control Rulings following representations made.
- No.26/2007 (issued previously as Exchange Control Circular No 26/2006) – United Nations Security Council resolutions against Iraq, Liberia, Democratic Republic of Congo, Cote d’lvoire and Sudan.
This circular advises that in keeping with South Africa’s commitment to act in accordance with the United Nations Security Council (UNSC) resolutions, the lists of names of persons and/or entities that are subject to financial/economic restrictions imposed by the UNSC are published on the United Nations website.
Specific queries regarding the Exchange Control Circulars or Rulings can be sent to firstname.lastname@example.org.
INFORMATION CIRCULAR PF NO. 6 OF 2007 – AMALGAMATIONS AND TRANSFERS OF BUSINESS IN TERMS OF SECTION 14(8) OF THE PENSION FUNDS ACT
The Financial Services Board (FSB) has issued this information circular to provide guidance on the process that should be followed when effecting amalgamations and transfers in terms of section 14(8) of the Pension Funds Act, 1956, as amended.
The information circular is available on the retirement funds page of the FSB website (www.fsb.co.za).
CIRCULAR 02P/2007 (REPLACING CIRCULAR 01P/2006) – GUIDANCE FOR AUDITORS REPORTING IN TERMS OF THE CENTRAL SECURITIES DEPOSITORY (CSD) RULES AND THE SECURITIES SERVICES ACT (SSA)
Strate has issued Circular 02P/2007, which replaces Circular 01P/2007 with immediate effect.
The purpose of the Circular is to provide guidance for external auditors when reporting in terms of the CSD Rules and the SSA on the Participant’s compliance with the relevant sections of the SSA. The Circular contains the ‘agreed-upon procedures’ to be performed by the external auditor of a Participant regarding the implementation and operating effectiveness of key controls (identified by management of the Participant), that are designed to meet the control objectives (specified by Strate), for transactions relating to the settlement, custody and administration, of Strate eligible securities. The format for the external auditor’s factual findings report is set out in the appendix of the circular.
The circular is available on the Strate website (www.strate.co.za).
WHAT’S NEW AT SARS?
The latest updates can be viewed on the SARS website (www.sars.gov.za).
TRAINING: TAX WORKSHOP 2008
The Tax workshop planned for 2008 will cover the following areas:
- The taxation of trusts revisited – covering section 25B, amounts deemed to be received by the donor (the application of section 7), attribution of capital gains and distributions by trusts. Interest free loans and paragraph 12(5) implications will also be covered. The decision in Brumeria and its impact on the use of interest free loans will also be covered.
- The new three year rule relating to the disposal of equity shares – section 9C.
- The new tax regime relating to lump sums from retirement funds and an update on the format for calculating the taxable income and tax payable by natural persons.
- Changes to capital allowances – covering commercial buildings, intellectual property, rolling stock, port assets, environmental assets and the new way to determine the amount qualifying for allowances where the asset was obtained from a connected person.
- Amendments to Section 31 – transfer pricing.
- Secondary tax on companies – the changes to the dividend definition, changes to calculation of the secondary tax on companies and the rate, and effective dates. Capital distributions and the tax treatment of extraordinary dividends.
- The new Securities Transfer tax and an update on the company formation rules.
Edited By: Tonia Jackson
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