IFRS - there's nowhere to hide - Grant Thornton

2
Volume 2. November 2005
The sheer volume of the various standards can make implementing
IFRS a daunting task in any entity, particularly where management
are not familiar with the new IFRS implications. To assist you in
understanding the standard conversions a little better, we have
enclosed a handy reference card for you.
AC statements and South African GAAP
Should you adopt IFRS
What most people don't realise is that, as a result of the
All listed companies and public reporting institutions are required
harmonisation process undertaken by the South African Institute to adopt IFRS with effect from 1 January 2005. Other entities
of Chartered Accountants (SAICA) over the years, our South may choose to either convert IFRS or to remain on SA GAAP. So
African statements were already closely aligned to the IASs. Thus, what should these other entities do
many of the transitional changes and implications envisaged by
the IASB in other countries are not applicable to South Africa. Convert to IFRS: On conversion to IFRS the entity will have to
make an explicit and unreserved statement that it has now
At the time of the “improvements project” in March 2004, SAICA converted to IFRS and it can then apply IFRS 1. This allows
made the South African aligned AC statements the same as the certain exemptions that make it easier to handle the effect of the
amended IASs and the new IFRSs. Thus, all old AC statements implementation on prior year balances.
have been improved (in accordance with the improvements
project), revised (in addition to the improvements project) or Remain on SA GAAP: An unlisted entity may choose to continue
aligned (to align the text thereof with the equivalent international to prepare its financial statements in terms of SA GAAP. As SA
statement).
GAAP has been aligned with international standards the entity
will, in effect, still have to implement the same accounting policies
All new IFRS statements are now issued as South African
as under IFRS. The implementation exemptions allowed by IFRS
statements without any amendments with a dual AC number (e.g. 1 will however, not be available to the entity and all changes will
IFRS3 was issued in South Africa as AC 140).
have to be made retrospectively. We therefore encourage our
clients to convert to IFRS.
It is the practice of the various accounting bodies to issue
interpretations which provide further guidance and clarity to
existing standards. In South Africa, these have been issued by
What is the likely impact of the new standards
SAICA within the AC 400 category. The historical international To bring an entity's accounting policies either in line with IFRS or
equivalents were known as SICs. Under the new IASB,
the newly aligned South African Standards (which, as set out
interpretations are now known as IFRICs.
above, are identical to IFRS with the exception of IFRS 1), a
company needs to perform a detailed review of existing
As part of the improvements project, many existing SICs were accounting policies. Experience has shown that the following
incorporated into the actual body of the standards and have thus areas require the most attention:
now fallen away. There are currently eleven SICs and four IFRICs.
These interpretations have the same force as the related property plant and equipment
accounting standards. introduction of component accounting
reassessment of useful lives and expected residual values
Statements in the AC 500 series are issued to address South
annually
African specific matters which are not addressed in the goodwill is assessed for impairment and no longer amortised
international standards. AC 501 - Secondary Taxation on accounting for share options and the recognition of the related
Companies - is currently the only standard issued in this series.
expense and liability in terms of IFRS2
the requirements of IFRS 3 to allocate the purchase price in
Re-looking at existing standards
any business combinations after 1 March 2004 to the fair
The increased focus on the content of the existing standards
values of the underlying identifiable assets tangible and
during the current year has identified various areas where South intangible, liabilities and contingent liabilities.
African companies were incorrectly applying these standards. The financial instruments
accounting profession is, therefore, currently experiencing a the removal of alternative accounting treatments for foreign
refinement of opinions on paragraphs in the standards. Even
operations.
though the wording of the standards has not changed, the opinion reclassifying non-current assets held for sale.
of what they mean has changed. An example of this is the wider related party definitions and disclosure requirements.
requirement to recognise operating lease income or expenditure
on a straight-line basis over the period of the lease.
The Grant Thornton IFRS implementation team:
Frank Timmins ftimmins@gt.co.za Jeanette Hern jhern@gt.co.za Jessica Saayman jsaayman@gt.co.za
Chris Paul cpaul@gt.co.za Stephen Bruce sbruce@gtec.co.za Rudi Scholtz rscholltz@gtec.co.za
Neil Adams nadams@gtct.co.za Catherine Tillard ctillard@gtdbn.co.za Anabel Vieira av@gtpta.co.za