AFS and Tax Return always required

The Johannesburg Stock Exchange building.

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THE new Companies Act along with the International Financial Reporting Standard (IFRS) for small-and medium-sized enterprises (SMEs) can help reduce audit costs and simplify financial statements, according to Deloitte.

“To a degree an audit is no longer a grudge purchase,” Deloitte said in a statement yesterday.

Deloitte Western Cape partner Geoff Fortuin said: “Despite the fact that the IFRS for SMEs and the new Companies Act have made financial reporting simpler and more cost- effective through less stringent financial reporting requirements, many businesses still don’t understand what options are available and how the new legislation and standards interplay to their benefit.”

The IFRS for SMEs became the first set of international accounting requirements prepared specifically for SMEs in 2009. It was devised in response to demands by users of international accounting standards for a less onerous financial reporting framework for SMEs.

After the global transition to the IFRS, issued by the International Accounting Standards Board, all JSElisted companies were required to report under IFRS to ensure firms globally made the same levels of disclosures and used the same conceptual approach when reflecting their financial results. These requirements are however not mandatory for unlisted subsidiary companies of listed entities, which may elect to use the IFRS for SMEs.

This could cause some difficulties with the group consolidation process, but suitably designed year- end group reporting packs can be used to overcome this.

The South African Institute of Chartered Accountants has said the IFRS for SMEs is suitable for all entities that prepare general purpose financial statements (not tailored to the needs of any one group). The new Companies Act, which came into effect in May, has also introduced more flexibility in the audit requirements for companies.

Whereas all public companies and parastatals will be required to conduct audits as was the case under the previous Companies Act, there are more accommodating requirements for a large proportion of private companies. These depend on their level of turnover, debt and number of employees.

These factors determine the entity’s public-interest score which in turn determines whether the company’s financial statements must be reviewed or audited. In certain limited circumstances, the new Companies Act requires neither an audit nor a review to be performed.

via BusinessDay – Company Act ‘offers way to cut costs’

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