AFS reporting requirements will soon be in place for SOEs and municipal-owned companies.
The Companies and Intellectual Property Commission (CIPC) provided a comprehensive update on its new annual financial statements (AFS) filing requirements during the CFO Masterclass entitled The CIPC’s new AFS filing requirements: Get to grips with all the reporting updates.
According to Hennie Viljoen, XBRL specialist at the CIPC, the Extensible Business Reporting Language (XBRL) is an open international technology standard for digital business and financial reporting.
“It started in 2013 with ROSC [report on observance of standards and codes] by the World Bank. As the CIPC is the central regulator and registrar of companies, it became the potential champion for implementation in South Africa,” he said.
Consequently, a business case was developed in 2016, including a taxonomy that is aligned with the International Financial Reporting Standards (IFRS). A year later, a technical portal for filing and client-side software on how to do reporting using business intelligence technology was developed, with the pilot starting in 2018.
The pilot, with high profile listed companies, went well and it was thereafter launched by the minister of trade and industry.
In 2019, the CIPC implemented updates of IFRS 2017, 2018 and 2019. “The aim is to stay abreast of accounting standards and in October 2020, IFRS 2020 was implemented as well as GRAP [generally recognised accounting practice],” he said.
While the Companies Act stipulates the IFRS requirements, it excludes entities defined under the Public Management Finance Act. This is where GRAP comes in, as it applies to state-owned enterprises and municipal-owned companies.
Within this context, as of 1 October 2021, the CIPC will implement IFRS 2021 and GRAP becomes mandatory, with a new data quality management (DQM) framework that is relevant to software service providers (SSPs) and filers.
“We have received more than 41,000 successful filings to date, which we can verify and validate up to a certain extent and the investigators have to apply their mind in terms of the DQM,” he said.
The new DQM has four main criteria for evaluation, being:
- Completeness: Additional metrics like hidden tagging, missing reports, lacking disclosure substance and form;
- Accuracy: Additional metrics like footnotes not valid, inconsistent calculation, Companies Act contraventions, inappropriate use of “other” tag;
- Correctness: Additional metrics like unresolved warnings, visual display insufficient, abuse of block tagging, technical issues; and
- Consistency: Additional metrics like re-use of same tags in different places, repeated issues.
“Taxonomy is like a data dictionary, so it is important to familiarise yourself with the latest taxonomy documents on the CIPC website. There is also information there that speaks to gap analysis and the data model,” he added.
Cuma Zwane, an investigator at the CIPC under the Corporate Compliance and Disclosure Regulation unit, explained that the consequences of non-compliance were similar to providing the wrong tax information to SARS.
“If there are material omissions or defectiveness to financials, we may issue a compliance notice which could end up in court. In addition, the JSE may issue a fine and the CIPC itself can also issue a fine, of a minimum of R1 million or up to 10 percent of revenue in the financial year of non-compliance,” he said.
It is important to also bear in mind that uploading any AFS to the CIPC means it is official and may be accessed by shareholders, unions and even external stakeholders not within South Africa.
“The onus of responsibility of output for the iXBRL AFS filed to CIPC lies with those charged with governance, being the directors and prescribed officers appointed by the board and shareholders,” he added.
It is expected that the taxonomy will be widened in the next year or two, to include co-operatives.
Michal Zubrycki, the head of standards consulting at the Business Reporting Advisory Group, which was tasked with the development of the XBRL taxonomy, provided a useful summary of changes in 2021. These were:
- Incorporating a new version of IFRS 2021 as published by the International Accounting Standards Board (IASB) on 24 March 2021 (246 elements have been added of which 77 are common practice, while 31 elements were removed).
- Changes to existing standards: Covid-19 related concessions, interest rate benchmark return phase 2, amendments to IFRS 17 and Institute of Accounting Science (IAS) 16.
- Additional changes to improve the information available in the primary financial statements (PFSs) and IAS 19 employee benefits.
“Updates will be published on the CIPC site to ask for input to smooth implementation when it goes live. We are not planning additional updates before 1 October 2021, however, any changes will be properly communicated before rollout and if it is not correct from a technology perspective, it will be addressed to ensure the taxonomy is valid,” he said.
Hennie concluded by reminding attendees to visit the CIPC website, and use the XBRL section that contains business guidelines, articles and FAQs. In addition, queries can be addressed to [email protected].
