I. FIVE AREAS FOR A PREPARER TO WATCH IN 2016

The top five areas a preparer should keep an eye on this year

As the saying goes “the only constant is change”… 2016 is no different.  Luckily there aren’t too many accounting-related changes that are applicable for 2016, but there are huge changes coming.  Here are my top five areas to keep an eye on in 2016.

IFRS changes

Every year there are a few IFRS changes that need to be taken into account in preparing financial statements.  For 2016 there are a 16 amendments (after removing duplications) that have been made that have become applicable over and above the 11 items that became applicable from 1 July 2014 that are only now being applied by many companies.

The list of these changes should be assessed to determine which are applicable to your entity and how they will affect your reporting.

King IV: Corporate Governance

No, it is not out yet; actually it is only in the drafting phase and is expected to be completed in the second half of 2016, effective from the middle of 2017. The intention is that the new code will be more applicable to all types of entities across all sectors, so even if your entity is not applying King III currently, you will want to keep an eye on this space and play your part in their “consultative process” that they have committed to in the writing thereof where it is likely to affect your business.

The JSE

Even if you are not in the listed environment you should be watching this area. Five years ago the JSE stared what they call “proactive monitoring” where they review financial statements and sometimes even require entities to restate their financial statements where they believe the IFRSs or regulations have not been properly applied.  In February each year they issue a report on the common findings from their focus areas for that year.  The IFRS findings can be considered good application guidance and should be on any preparer’s reading list for 2016.

If you are in the listed environment or are looking to enter it, the JSE listings requirements changes are also an important area to watch.  Towards the end of 2015 a few changes to the listings requirements were made and numerous far reaching changes proposed.  The changes that were made became effective almost immediately, so, with the proposed changes in the offing, it would be very important to keep an eye on the listing requirements in the year ahead.

The proposed change that caused some major concern was the requirement that audited Annual Financial Statements will need to be published with a copy sent to the JSE within three (3) months of year-end, with the full annual report being distributed to shareholders within four (4) months.  Interim reports would need to be issued within two (2) months of the period end.

The main change to the financial reporting requirements that became applicable from 1 October 2015 that affects issuers are the new requirement to confirm in the annual report how the entity’s policy on gender diversity at board level was considered and applied together with a progress report on any agreed voluntary targets.

New standards for which 2016 will be the opening balance…

IFRS 15 Contracts with Customers and IFRS 9 Financial Instruments have been extended to be effective for years beginning on or after 1 January 2018. There is a lot of work that needs to already begin if the implementation of these standards into your day-to-day accounting will be a smooth one.

1. • IFRS 15 Contracts with Customers
     The new revenue standard, as you will know by now, includes a 5-step approach to recognising revenue.  Although these appear fairly innocuous, there is a lot of work and interpretation that needs to go into applying them. 
   • IFRS 9 Financial Instruments
     The biggest expected impact on most businesses of this standard is the application of the new expected loss impairment model.  Start collecting your data now about the types of clients or customers and their write-offs or impairments as well as what impacts on these.