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Editorial corrections and changes to IFRSs

The IASB has issued editorial corrections and changes to Improvements to IFRSs and Bound volume 2008 on 11 September 2008.

Please click https://www.saica.co.za/DisplayContent.asp?ContentPageID=268 to access these editorial corrections and changes to IFRSs.

Proposed amendments to the retrospective application of IFRSs

The International Accounting Standards Board (IASB) has published for public comment an exposure draft of proposed amendments to IFRS 1 – First-time Adoption of International Financial Reporting Standards. The proposals address the retrospective application of IFRSs in selected areas and are aimed at ensuring that entities applying IFRSs will not face undue cost or effort in the transition process. This has been issued in South Africa as ED 246.

The exposure draft proposes:

  • to exempt companies from retrospective application of IFRSs for oil and gas assets using the full cost method and for operations subject to rate regulation; and
  • to exempt companies with existing leasing contracts accounted for in accordance with IFRIC 4 – Determining whether an Arrangement contains a Lease from reassessing the classification of those contracts according to IFRSs when the same classification has previously been made in accordance with national GAAP.

The deadline for comment to SAICA is 19 December 2008.

ED 246 – Additional Exemptions for First-time Adopters: Proposed Amendments to IFRS 1 can be downloaded from the SAICA website.

Proposed revision to IFRS 5

The International Accounting Standards Board (IASB) has published for public comment an exposure draft of proposed amendments to IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations. The proposals are to revise the definition of discontinued operations and require additional disclosures about components of an entity that have been disposed of or are classified as held for sale. This has been issued in South Africa as ED 247.

These proposals are a result of a joint project by the IASB and the US Financial Accounting Standards Board (FASB) to develop a common definition of discontinued operations and require common disclosures about them. The FASB is publishing parallel proposals to amend its standards.

Broadly speaking, discontinued operations are operations that an entity has disposed of or holds for sale. Entities present discontinued operations separately from continuing operations because of the ongoing cash flows that continuing operations will generate. By adopting a definition for discontinued operations that reflects the definition of operating segments in IFRS 8 – Operating Segments, the proposals would also increase consistency between IFRSs and strengthen the basic principle in respect of IFRS 5. The proposed definition could result in fewer items being recognised in financial statements as discontinued operations than at present. However, the additional disclosures would give information about components of an entity that have been disposed of or are held for sale but do not meet the definition of a discontinued operation.

The deadline for comment to SAICA is 19 December 2008.

ED 247 – Discontinued Operations: Proposed Amendments to IFRS 5 can be downloaded from the SAICA website.

Removal of exposure drafts

The following Exposure Drafts (EDs) have been removed. (see Table 1)

CLOSE CORPORATIONS

A revised Accounting Officer’s Report to a Close Corporation was issued to incorporate changes to Auditing Standards.  The Guide on Close Corporations, available on the SAICA website, was also updated accordingly, and to take cognisance of amendments to the Close Corporations Act, 1984, brought about by the Corporate Laws Amendment Act, 2007.

Circular 13/2005 – reports relating to certificates prepared by a company for conveyancing purposes

The Auditing Guidance Committee of SAICA wishes to clarify for all SAICA members in public practice their responsibilities when issuing a Circular 13/2005 certificate for a company or individual required for conveyancing.

Certain members are still issuing reports to the transferring attorney in terms of Circular 2/84, which was replaced in December 2005 by Circular 13/2005. The new prescribed format should be used.   A copy of the Circular 13/2005 can be viewed on or downloaded from the SAICA website.

Requests are often being received from attorneys and/or banks to confirm the solvency of the company, compliance with S228 of the Companies Act (Disposal of major portion of the Assets of the Company), knowledge of reportable irregularities or that all shareholders are resident in South Africa. Care must be taken only to confirm factual statements when signing such a report.  (E.g. We confirm that, according to the audited financial statements of Company C Pty Ltd at 29 Feb 2008, the company had net assets of Rx.) Where you cannot establish a factual situation, your report should be appropriately qualified.

Furthermore, where no mortgage bond is involved, the paragraphs dealing therewith should be deleted.

Continued application of circular 8/99 – compliance with section 286(3) and paragraph 5 of schedule 4 to the Companies Act, 61 of 1973 and statements of Generally Accepted Accounting Practice (GAAP)

The Corporate Laws Amendment Act, No. 24 of 2006 (CLAA) became effective on 14 December 2007. The CLAA amends various sections of the Companies Act, No. 61 of 1973 (the Companies Act), including general requirements for the financial statements of ‘Widely Held Companies and Limited Interest Companies’ (the Companies Act, Section 285A) and amendments to a company’s duty to prepare annual financial statements (the Companies Act, Section 286).

Circular 8/99 provides guidance to directors of companies to meet their obligations in respect of financial reporting in terms of Section 286(3) and Paragraph 5 of Schedule 4 of the Companies Act and Statements of GAAP. Furthermore, the circular provides guidance to auditors concerning their audit responsibility in this regard.

Effective 14 December 2007, Section 286(3) and Paragraph 5 of Schedule 4 of the Companies Act have been deleted through the CLAA. The newly introduced Section 285A contains the following general requirements for the financial statements of companies: see table below.

Widely Held Companies

In accordance with the transitional provisions in section 56 of the CLAA, a Widely Held Company may delay compliance with section 285A(1) until its first financial year beginning after the commencement date of the CLAA.

The above provision implies that Widely Held Companies with financial years ended up to 30 November 2008, which have exercised the option, may still be preparing their financial statements in accordance with the Companies Act prior to its amendment by the CLAA.

A company that elects to delay compliance with section 285A(1) until its first financial year beginning after 14 December 2007 is required to continue to comply with sections 286, 288 to 291 and Schedule 4 to the Companies Act, as was provided before the CLAA took effect. This includes compliance with Section 286(3) and Paragraph 5 of Schedule 4 of the Companies Act, before their deletion. The guidance provided in Circular 8/99 will be applicable in these instances.

Widely Held Companies with financial years ended 31 December 2008, and thereafter, must comply with the requirements of section 285A(1). In these instances, the guidance provided in Circular 8/99 ceases to apply.

Limited Interest Companies

A Limited Interest Company must comply with section 285A(2) from 14 December 2007.

However, section 56 of the CLAA contains transitional provisions relating to the accounting standards developed for Limited Interest Companies. In this regard members should refer to Circular 9/2007, “Statements of Generally Accepted Accounting Practice for Small and Medium-sized Entities”, which provides, inter alia, guidance with respect to the financial reporting frameworks for Limited Interest Companies.

Circular 8/99 ceases to apply to Limited Interest Companies, effective 14 December 2007.

International Standards on Auditing (ISAs)

Members are reminded that the statutory requirements for the financial statements of companies in accordance with the Companies Act, including Schedule 4 of the Companies Act, constitute legislative and regulatory requirements, which supplement the applicable financial reporting framework, as provided for in ISA 200, “Objective and General Principles Governing an Audit of Financial Statements”.

ISA 200, par. 42 states:  “In some jurisdictions, legislative and regulatory requirements may supplement a financial reporting framework adopted by management with additional requirements relating to the preparation and presentation of financial statements. In these jurisdictions, the applicable financial reporting framework, for the purposes of applying the ISAs, encompasses both the identified financial reporting framework and such additional requirements, provided they do not conflict with the applicable financial reporting framework.

This may, for example, be the case when additional requirements prescribe disclosures in addition to those required by the identified financial reporting framework or when they narrow the range of acceptable choices that can be made within the identified financial reporting framework. If the additional requirements conflict with the applicable financial reporting framework, the auditor discusses the nature of the requirements with management and whether the additional requirements can be met through additional disclosures. If this is not possible, the auditor considers whether it is necessary to modify the auditor’s report, see ISA 701, Modifications to the Independent Auditor’s Report”.

A company’s compliance with the applicable financial reporting framework and its effect on the auditor’s opinion must be considered in accordance with the principles and requirements with respect to the independent auditor’s report issued as a result of an audit of a complete set of general purpose financial statements prepared in accordance with a financial reporting framework that is designed to achieve fair presentation as contained in ISA 700, “The Independent Auditor’s Report on a Complete Set of General Purpose Financial Statements”.

Withdrawal of Circular 8/99

Once Circular 8/99 ceases to apply to both Widely Held Companies and Limited Interest Companies, the Circular will be withdrawn.  (see Table 2)

LEGAL AND COMPLIANCE

The finalised SAICA Guide on the Corporate Laws Amendment Act (CLAA) was issued after Senior Counsel’s views were obtained on seven issues. The Guide is available on the SAICA website and deals with the reporting requirements, directors’ liability and 44 other issues arising from the CLAA.

PUBLIC SECTOR

Accounting

IPSASB proposes modification to borrowing cost accounting

The International Public Sector Accounting Standards Board (IPSASB) has issued an exposure draft (ED 35, Borrowing Costs) for comments. The ED proposes that entities recognise borrowing-related expenses, such as interest or loan origination fees, during the period in which they are incurred. It also proposes that where entities borrow funds specifically to acquire, construct or produce a qualifying asset, the entity has the option to capitalize those costs as part of the cost of that asset. The proposals are a departure from both current IPSAS 5 and the International Accounting Standards Board’s International Accounting Standard 23, Borrowing Costs. Comments on ED 35 are requested by 7 January 2009. A copy can be downloaded from the SAICA website.

Auditor-General: how to access AG technical memos

The AG has included his technical memos in his website www.agsa.co.za. The memos contain technical information that is critical in auditing public sector entities. Therefore, it is important for the members of registered firms performing audit engagement in the public sector to be conversant with the information therein.

Access is password controlled. You need to register in order to obtain your password details.

To be registered, send your request to Brian Zimba (brzimba@agsa.co.za) clearly indicating the following:

  • Firm name
  • Province
  • Key contact person

Brian will send the password details to the contact person in your firm. Registrations will be limited to one person per firm per region.

Should you require further clarification, please contact Brian per the email address above.

QUERIES

In October 2008 the Standards Division established a web-based Queries system.  The system is accessible, by members only, from the SAICA home page and commences with a page of frequently-asked questions that should ultimately allow members to solve many issues without having to lodge a query.

The advantages of the web-based system include detailed query tracking and the ability for the development and maintenance of frequently-asked questions on an ongoing basis, with the added advantage of keeping users informed on the development of training initiatives identified through recurring problem areas.

Members are still able to lodge fax and email queries, but are encouraged to use the web-based system to allow for extraction of the many inherent advantages.

REGULATED INDUSTRIES

No. 17/2008 – Southern African Development Community (SADC)

Authorised Dealers are advised that Seychelles has been admitted a full member of the Southern African Development Community and this name has been added to the list of SADC member countries as defined in Section A.1 of the Exchange Control Rulings.

No. 18/2008 – Nominated branches to transact insurance business

Authorised Dealers are advised that the name “International Trade Centre, Hillcrest, Pretoria” has been added to the list of names contained in Section B.10 (K) of the Exchange Control Rulings, under the heading of ABSA Bank Limited

Please direct any specific queries regarding the Exchange Control Circulars or Rulings to standards@saica.co.za.

TAX

WHAT’S NEW AT SARS?

SAICA’s National Tax Committee submissions

SAICA made the following submissions to SARS/National Treasury during August. See table 1 below. (see Table 3)

Copies of these and previous submissions are available on our website at www.saica.co.za.

Tax Practitioners

SARS has confirmed the escalation process for tax practitioners to lodge an official complaint.

These procedures are contained in “Practitioners: Engaging with SARS – An overview guide August 2008”. A copy of this guide is available on the SARS website at www.sars.gov.za.

The escalation procedures are as follows (note: contact details of the relevant staff members are included in the Contact Lists which are attached to this document):

Complaints about service in branches

After logging the initial service request at a branch, SARS recommends that you escalate the issue to the relevant Practitioner Liaison staff member (*where applicable – not all offices have a dedicated Practitioners’ Liaison staff member yet). Should this fail to resolve your issue, SARS recommends that you escalate the matter to the Branch Manager, and subsequently to the Regional Operations Manager. If these channels have failed to resolve your service-related issues, you can then escalate your concern to the SARS Service Monitoring Office.

Complaints about service in the Practitioners Call Centre

After logging the initial service request, SARS recommends that you follow up on your service request with a second call or email to the Practitioners Call Centre, quoting your initial call reference number. Should this fail to resolve your issue, we recommend that you escalate the matter to the Practitioners Call Centre complaints escalation address at pccescalations@sars.gov.za (you must be in possession of an earlier unresolved call reference number to escalate issues to this email address). If these channels have failed to resolve your service-related issues, you can then escalate your concern to the SARS Service Monitoring Office.

Complaints about returns not yet assessed

SARS recommends that you contact the Call Centre for a status update. Should you still have remaining concerns about returns that have not been assessed within the stated turnaround times, SARS recommends that you escalate your concern to the SSMO (SARS Service Monitoring Office).

Complaints about service in the Enforcement Division

The Enforcement Division is responsible for audits and criminal investigations. Should your complaint or concern relate to these business areas, SARS recommends that you first address these to the relevant auditor or investigator, and then to escalate your concern to the relevant Enforcement Centre Manager, and then to the Senior Operations Manager in Enforcement. If these channels have failed to resolve your service-related issues, you can then escalate your concern to the SARS Service Monitoring Office.

Complaints about apparent systems errors

If you encounter an issue where you believe that there is a trend or pattern of a systems-based issue or error, and which is not an isolated incident that affects only a few taxpayers, you may log a call with SARS to investigate whether there is in fact an error on the SARS system. In order for SARS to investigate systems-based complaints they need a completed “Request to Investigate a Suspected Systems Error”, which can be accessed on the SARS webpage.

Please note that without at least five examples SARS unfortunately cannot investigate a suspected systems error. Completed “Request to Investigate a Suspected Systems Error” forms can be sent to the Practitioners Unit (practitionersunit@sars.gov.za), although SARS advise that you first check with the Call Centre about the status of your query.

Raising an issue with the SSMO

Step One

When you wish to raise an issue, it is usually best to do it in writing, or by fax, or by visiting your local Taxpayer Service Centre/Branch Office, which will try to resolve the issue as quickly as possible.

Step Two

If your issue has not been resolved within a reasonable time, you can ask the SSMO to look into the issue.  (see Table 4)

What information will the SSMO need?

There are a number of different ways to make contact with the SSMO. Whichever way you choose, the SSMO will need information from you to ensure that it responds to you within the deadlines it sets for itself.

The information the SSMO will need is:

  • your name and contact details;
  • your tax reference number or identity number, if it is available;
  • details of what you are unhappy about;
  • the branch office that you have been dealing with; and
  • the steps you have taken to resolve the issue with the branch office.

How will the SSMO deal with the issue?

The SSMO will:

  • log the details of your call;
  • provide you with a tracking number;
  • immediately, if you contact them telephonically, or
  • within one working day, if you contact them using another channel.
  • refer your issue to a SARS SMO Branch Office Agent;
  • provide you with feedback on the resolution of your issue;
  • ensure that your issue is resolved within 15 working days or make contact with you within this period if they are unable to meet the deadline;
  • obtain feedback from the SARS SMO Branch Office Agent; and
  • close the call, if appropriate.

SSMO contact details:

Call centre: 0860 12 12 16 Tel: (012) 431 9695/431 9124

Website: ssmo@sars.gov.za Operational Hours: 07:30 to 16:30. Monday to Friday

Edited by: Ewald Muller

Technical queries: standards@saica.co.za

Ethics and Discipline queries: standards@saica.co.za

Information Centre: pelmag@saica.co.za

Telephone: 011 621 6641 | Telefax: 011 621 6819

Website: http://www.saica.co.za