IFRS stands for International Financial Reporting Standards. It is essential to make use of the expertise offered by IFRS consultants to ensure that your firm’s financial reporting is in compliance with statutory and IFRS requirements.
We’ve provided a brief overview of the application of the standard in South Africa.
The South African Institute of Chartered Accountants
SAICA is the national organisation for governing the actions of CAs in the country. The institute was formed in 1973 and develops the standard for accounting practices in the South Africa. SAICA along with other organisations established the Accounting Practices Board, known as APB, and published the code for accounting practice known as the Generally Accepted Accounting Practice referred to as SA GAAP.
APB was discontinued in 2011 and replaced by the Financial Reporting Standards Council, known as FRSC. The FRSC gained the role of advisor on financial reporting standards. At present, companies in South Africa follow the IFRS guidelines, though SMEs are allowed to use IFRS for SMEs.
The APB from 1995 worked on harmonising SA GAAP with the requirements of IFRS and by 2003 the IFRS was issued as SA GAAP. The companies in the country followed SA GAAP, but by 2005 JSE listing requirements made it compulsory for companies in the country to follow IFRS instead of SA GAAP. With SA GAAP already endorsing IFRS there was no longer any reason to have both standards and the SA GAAP was withdrawn in 2012, leaving IFRS as the only standard for accounting and financial reporting practices.
Companies that have their securities trade on public platforms are required to follow IFRS practices in the reporting of their financial statements. The Companies Act Regulations require companies according to their public interest score to use either IFRS for SMEs or the IFRS for consolidation of their financial statements.
Public interest score is a total awarded to a company according to the turnover, the company’s third party liabilities, shareholders and number of employees. Where a company’s equities are not publicly traded, it can still be required to use IFRS. Where an SME has a score below 100 points and internally compiles their own financial reports, they may choose to follow their internal accounting policies even if they have a public interest, provided they are not by law required to meet other related reporting standards. This also applies to foreign companies trading in South Africa, except where a company’s listings on the JSE is secondary with its primary listing in another country, in which case it is allowed to use the GAAP of the country where their primary listing is.
With the above complexities in mind, it is recommended that companies make use of IFRS consultants to explain the requirements for compliance in financial reporting. Such consultants are SAICA members and thus adhere to the principles contained in IFRS. By following IFRS for SMEs or full IFRS companies now follow a global standard in financial reporting.
The above is important as it helps to ensure standardisation worldwide, reduce errors and ensures that international players can review company financial statements without misunderstandings.
Although it is possible to have an internal financial report compilation if the company falls within the allowable category, it is still essential to ensure full compliance. The IFRS consultants provide guidelines, assist in interpreting results, review current practices in the company and compare such practices with the requirements of IFRS.
Apart from following the required standard, SMEs must ensure full compliance with tax and payroll requirements in South Africa. With many smaller companies not having full time CAs on their HR profile, they choose to outsource the functions of financial reporting, payroll management and tax reporting completely. This holds several benefits including, but not limited to:
We recommend making use of our IFRS consultants to help your firm meet reporting standard requirements whether for IFRS for SMEs or for full IFRS.