New Companies Act provides savings
2010-04-08
NEW amendments in the Companies Act are in line with international jurisdictions such as Australia, Canada, United States, and New Zealand, and exempts owner-managed companies from the onerous requirement to follow a single reporting standard. The new company law regulating company accounting systems, will provide significant savings to small businesses annually. This is the view of Nicolaas van Wyk, Technical and Support Executive of the Association of Chartered Certified Accountants of South Africa (ACCA) on the recent announcement by the Minister of Trade and Industry, Dr Rob Davies. This innovative provision in the act, which was approved by parliament and drafted by the Department of Trade and Industry (DTI), will enable small business to ensure tremendous savings. “The new South African Companies Act 2008 and draft regulations will, once they become effective, allow owner-managed companies to prepare their financial statements in terms of an alternative basis other than South African General Accepted Accounting Practice (SA GAAP). This basis is internationally referred to as Other Comprehensive Basis of Accounting (OCBA). “However all listed companies, public companies, and public interest private companies are required to follow International Financial Reporting Standards (IFRS), whilst non-owner managed private companies are required to follow International Financial Reporting Standards for Small and Medium Enterprises (IFRS for SME). The act therefore provides legal backing for IFRS and IFRS for SME only. “Owner-managed companies are therefore allowed to prepare special purpose financial statements tailored to the specific requirements of their stakeholders by applying OCBA. “Examples of OCBA include tax basis of accounting, cash or modified cash basis of accounting as well as Exposure Draft ED275 (commonly referred to as Micro GAAP). “The only additional requirement is that such financial statements result in fair presentation. This implies that all financial statements have to consistently apply the relevant basis of accounting chosen,” van Wyk explained. According to van Wyk the tax basis of accounting will allow an owner-managed company to prepare financial statements using the income tax act as a starting point. “Such financial statements will disclose the taxable income of the company as opposed to the net income. This will save time and reduce costs as it will combine the effort of preparing a set of financial statements and performing a tax calculation. This is a truly significant development within the South African corporate legislation as it not only provides certainty, but also flexibility in the preparation of financial statements. “ACCA South Africa will initiate a process to draft guides and disclosures requirements for companies,” he said.
More
News
|
