Publications
Partners
Companies operating in South Africa, who are required to submit annual financial statements according to the Companies Act, should not be intimidated by the additional financial reporting regulations required by the Companies and Intellectual Property Commission (CIPC).
The mandate of the CIPC is that all annual returns and financial statements should be submitted in the Extensible Business Reporting Language (XBRL) format from 1 July 2018.
This is according to Adiebah Moruck, senior manager of quality and risk management at Mazars, who notes that XBRL has become a global standard for presenting business information.
“It has become incredibly important for CIPC to ensure that all financial reports submitted by companies are accurate, free of errors and as transparent as possible.
“The current system allows companies to simply submit their information in PDF format. Anyone that wants to analyse the data submitted by a particular company, has to start by manually extracting the required data from the financial statements, as well as arrange it in the preferred order, before they can assess the information accurately. This increases the risk of errors, and it becomes difficult for government and regulators to analyse the error prone information.”
Moruck explains that the XBRL format will now provide a standard platform for all required business information, which will make it quicker and simpler to compare company financial reports year-on-year and identify potential anomalies in the reporting.
“In light of the recent fraud and corruption scandals involving some of the country’s biggest corporate players, introducing measures to align South Africa’s financial reporting with the rest of the world, should really be embraced by all local businesses.”
Official adoption
She adds that after the official adoption of the new format, businesses that do not submit their annual information in XBRL will find themselves in contravention of the Companies Act, possibly resulting in significant fines and penalties, or being de-registered in extreme cases if the annual return is not submitted.
“The good news is that this requirement is only applicable to companies who have to submit their financial statements according to the Companies Act, these are the companies who require statutory audits according to the Companies Act. For all private and personal liability companies, where an audit is not mandatory, they will only be required to complete the Financial Accountability Supplement, and submit this together with their annual return.”
According to Moruck, this may require that the affected businesses obtain a custom software package that allows tagging of the required data elements into the XBRL format.
“Alternatively, companies will need to start having the conversation with their service providers to determine whether they are able to provide XBRL support. Partnering with an audit firm that already has the capability to convert company information into the required format, means that the business will not need to spend additional capital or time on converting the information.”
She adds that it is important to note that the firm that conducts the audit of a company’s financial statements, will be allowed to complete the tagging of company information into XBRL format, as long as the same firm is not responsible for the compilation and drafting of the company’s financial statements.
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER
