e-IFRSline March 06 - There's nowhere to hide by sdsdfqw21


									                                                                         Issue 1
                                                                         March 2006

By Jeanette Hern, Partner, Johannesburg

e-IFRS line is the newest publication from Grant Thornton which will provide you
with technical updates on International Financial Reporting Standards (IFRS).
IFRS has been compulsory for companies listed on the JSE for just over a year
but it is not only the listed entities that should be applying the standards, all
companies should strongly consider implementing IFRS for the reasons outlined
below. We hope that this monthly publication will provide you with a better
understanding of IFRS.

This article which was entitled ‘IFRS – there’s nowhere to hide’ appeared in the
last issue of the Bottomline but is worth repeating because it explains IFRS in a
nutshell. This introductory outline will assist you in deciphering the alphabet
soup of standards and translating them into the real meaning they have for your

1    IFRS and IAS
                                            2   AC statements and South African

3    Re-looking existing standards
                                            4   Should you adopt IFRS?

5    What is the likely impact of the new
     standards?                             6   The ABC of IFRS – a user-friendly
                                                reference guide

7    Get in touch with IFRS – client
     workshops                              8   Our national IFRS implementation
“Health related statement”
1 IFRS and IAS

In 2001 the International Accounting Standards Board (IASB) replaced the International Accounting
Standards Committee. The main objective of the IASB is to improve the existing international
standards and harmonise various international accounting frameworks.

On its inception, the IASB adopted the existing International Accounting Standards (IAS) issued by its
predecessor and kept the names and numbers of the existing statements.

These standards are known as IASs.

An “improvements project” was then initiated to reduce or eliminate alternatives, redundancies and
conflicts within the Standards in order to deal with some convergence issues and to make other
improvements. As part of this project, fifteen IASs were improved and two were revised. There are
now approximately thirty IAS statements which are still in force.

Any new standards issued by the IASB are referred to as International Financial Reporting Standards
(IFRS). Since its inception, the IASB has released seven IFRS standards.

2 AC statements and South African GAAP

What most people don't realise is that, as a result of the harmonisation process undertaken by the
South African Institute of Chartered Accountants (SAICA) over the years, our South African
statements were already closely aligned to the IASs. Thus, many of the transitional changes and
implications envisaged by the IASB in other countries are not applicable to South Africa.

At the time of the “improvements project” in March 2004, SAICA made the South African aligned AC
statements the same as the amended IASs and the new IFRSs. Thus, all old AC statements have
been improved (in accordance with the improvements project), revised (in addition to the
improvements project) or aligned (to align the text thereof with the equivalent international

All new IFRS statements are now issued as South African statements without any amendments with
a dual AC number (e.g. IFRS3 was issued in South Africa as AC 140).

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 SAICA within
the AC 400 category. The historical international equivalents were known as SICs. Under the new
IASB, interpretations are now known as IFRICs.

As part of the improvements project, many existing SICs were incorporated into the actual body of
the standards and have thus now fallen away. There are currently eleven SICs and four IFRICs.
These interpretations have the same force as the related accounting standards.

Statements in the AC 500 series are issued to address South African specific matters which are not
addressed in the international standards. AC 501 - Secondary Taxation on Companies - is currently
the only standard issued in this series.

3 Re-looking existing standards

The increased focus on the content of the existing standards during the current year has identified
various areas where South African companies were incorrectly applying these standards. The
accounting profession is, therefore, currently experiencing a refinement of opinions on
paragraphs in the standards. Even though the wording of the standards has not changed, the
opinion of what they mean has changed. An example of this is the requirement to recognise
operating lease income or expenditure on a straight-line basis over the period of the lease.
4 Should you adopt IFRS?

All listed companies and public reporting institutions were required to adopt IFRS with effect from
1 January 2005. Other entities may choose to either convert IFRS or to remain on SA GAAP. So
what should these other entities do?

Convert to IFRS: On conversion to IFRS the entity will have to make an explicit and unreserved
statement that it has now converted to IFRS and it can then apply IFRS 1. This allows certain
exemptions that make it easier to handle the effect of the implementation on prior year balances.

Remain on SA GAAP: An unlisted entity may choose to continue to prepare its financial statements
in terms of SA GAAP. As SA GAAP has been aligned with international standards the entity will, in
effect, still have to implement the same accounting policies as under IFRS. The implementation
exemptions allowed by IFRS 1 will however, not be available to the entity and all changes will have to
be made retrospectively or in terms of the transitional provisions of each standard. We therefore
encourage you to convert to IFRS.

5 What is the likely impact of the new standards?

To bring an entity's accounting policies either in line with IFRS or the newly aligned South African
Standards (which, as set out above, are identical to IFRS with the exception of IFRS 1), a company
needs to perform a detailed review of existing accounting policies. Experience has shown that the
following areas require the most attention:

•   property plant and equipment
     o introduction of component accounting
      o reassessment of useful lives and expected residual values annually
•   goodwill is assessed for impairment and no longer amortised
•   accounting for share options and the recognition of the related expense and liability or equity in
    terms of IFRS2
•   the requirements of IFRS 3 to allocate the purchase price in any business combinations after
    1 March 2004 to the fair values of the underlying identifiable assets tangible and intangible,
    liabilities and contingent liabilities.
•   financial instruments
•   the removal of alternative accounting treatments for foreign operations.
•   reclassifying non-current assets held for sale.
•   wider related party definitions and disclosure requirements.
6 The ABC of IFRS – a user-friendly reference guide
We have prepared an easy reference guide that outlines the changes in IFRS and IAS standards.
You will do well to print it out and keep it handy.

Click here to view.

7 Get in touch with IFRS

To assist you to get in touch with IFRS we will be hosting a series of workshops during April and May
at the Grant Thornton offices in Sandton.

The workshops will be presented by the highly skilled members of our IFRS technical implementation
team and the programme consists of four morning sessions as follows:

Grant Thornton office park
137 Daisy Street, Cnr Grayston Drive

Session 1:   25 April 2006   -   Introduction of IFRS and the changes from GAAP
Session 2:   2 May 2006      -   IFRS 3 (Business combinations & implementation)
Session 3:   9 May 2006      -   IAS 16 (Property, plant and equipment) & IAS24 (Related Parties)
Session 4:   16 May 2006     -   IAS 32, IAS 39 and IFRS 7 (Financial instruments)

08h00 for 08h30

Who should attend:
Attendance is recommended but not restricted to financial directors or managers and accounting staff.

•   R3 000 per delegate (for 4 sessions)
•   Discount will apply if more than 3 delegates register from the same company.

To register your attendance go to www.gt.co.za

8 Our national IFRS implementation team

Cape Town                                           Johannesburg
Neil Adams                                          Jeanette Hern; Frank Timmins;
T +27 (0) 21 481 9000                               Chris Paul; Jessica Saayman;
                                                    T +27 (0) 11 322 4500
Catherine Tillard                                   Port Elizabeth
T +27 (0) 31 576 5500                               Rudi Scholtz
                                                    T +27 (0) 41 373 4200
East London
Stephen Bruce                                       Pretoria / Tshwane
T +27 (0) 43 726 9898                               Anabel Vieira
                                                    T +27 (0) 12 346 1430

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