ACCOUNTING

Accountancy SA,  Jun 2006  

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AFRIKAANS TRANSLATION - ILLUSTRATIVE FINANCIAL STATEMENTS

SAICA has issued Circular 4/2006 - Afrikaans Translation - Illustrative Financial Statements/ Afrikaanse Vertaling - lllustrerende Voorbeeld van Finansiële State, to replace Circular 8/2004. The circular provides an Afrikaans translation of the illustrative financial statements structure per the IAS 1 - Presentation of Financial Statements, and the IFRS Glossary of Terms and can be accessed on the SAICA website.

HEADLINE EARNINGS AND BEE TRANSACTIONS

The Accounting Practices Committee (APC) has issued a further addendum to Circular 7/2002 - Headline Earnings, as a result of the issuing of AC 503 - Accounting for Black Economic Empowerment (BEE) Transactions.

Issue 7 is entitled Application of Circular 7/2002 - Headline Earnings to the expensing of the cost of BEE equity credentials in terms of IFRS 2 (AC 139) - Share-based Payment, and concludes that the expense arising from a BEE transaction relating to BEE equity credentials, should be included in headline earnings.

APPROVED IFRIC 9 - REASSESSMENT OF EMBEDDED DERIVATIVES

IFRIC 9(AC 442) - Reassessment of Embedded Derivatives, clarifies certain aspects of the treatment of embedded derivatives under IAS 39(AC 133) - Financial Instruments: Recognition and Measurement.

IAS 39(AC 133) describes an embedded derivative as a component of a hybrid (combined) instrument that also includes a non-derivative host contract - with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. With certain exceptions, IAS 39(AC 133) requires embedded derivatives to be separately recognised and measured when the entity first becomes a party to the contract.

The IFRIC was asked whether the treatment of an embedded derivative has to be reassessed subsequently if certain events occur. IFRIC 9(AC 442) concludes that reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required.

PERFORMANCE REPORTING ED

ED 212 - Amendment To IAS 1 - Presentation Of Financial Statements: A Revised Presentation, has been issued as proposals to improve the presentation of entities' financial statements.

The ED results from the first stage (segment A) of the lASB's project on performance reporting and, if confirmed, would bring IAS 1(AC 101) - Presentation Of Financial Statements, largely into line with the equivalent US standard. The second stage is being undertaken jointly with the US Financial Accounting Standards Board (FASB), and includes a reconsideration of the presentation and display of information in the financial statements. The FASB and the IASB have established an advisory group to provide advice to the boards in working towards a discussion paper.

The proposed amendments to IAS 1(AC 101) are aimed at enabling entities to present more clearly the financial information, in particular income and expenses, which is already required to be presented in accordance with the lASB's standards. Under the proposals an entity would present all income and expenses separately from changes in its equity that arise from transactions with its owners. Entities would have a choice of presenting income and expenses in a single statement or in two statements. An entity would also be required to include in its set of financial statements a statement showing its financial position (or balance sheet) at the beginning of the previous period, i.e. for three years. The deadline for comment to SAICA is 26 June 2006.

Copyright South African Institute of Chartered Accountants Jun 2006
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