New standards and interpretations effective 1 January 2019 – Are you ready?


There has been a number of new standards and amendments issued by the IASB that will become effective from 1 January 2019.

Standard or Interpretation and Details


IFRS 16 ‘Leases’ was issued by the IASB on 13 January 2016 and is effective for periods beginning on or after 1 January 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has also been applied.

IFRS 16 will primarily affect the accounting by lessees and will result in the recognition of almost all leases on the balance sheet. The standard removes the current distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for almost all lease contracts. The accounting by lessors, however, will not significantly change.

The changes under IFRS 16 are significant and will have a pervasive impact, particularly for lessees with operating leases.

AMENDMENT: IFRS 9: Financial Instruments (Prepayment features)

On 12 October 2017, the IASB published Prepayment Features with Negative Compensation (Amendments to IFRS 9) to address the concerns about how IFRS 9 Financial Instruments classifies particular prepayable financial assets. In addition, the IASB clarified an aspect of the accounting for financial liabilities following a modification.

These amendments are: 

  1. Changes regarding symmetric prepayment options: Prepayment Features with Negative Compensation amends the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. Under the amendments, the sign of the prepayment amount is not relevant, i. e. depending on the interest rate prevailing at the time of termination, a payment may also be made in favour of the contracting party effecting the early repayment. The calculation of this compensation payment must be the same for both the case of an early repayment penalty and the case of a early repayment gain.
  2. Clarification regarding the modification of financial liabilities: It clarifies that an entity recognises any adjustment to the amortised cost of the financial liability arising from a modification or exchange in profit or loss at the date of the modification or exchange. A retrospective change of the accounting treatment may therefore become necessary if in the past the effective interest rate was adjusted and not the amortised cost amount.

 The amendments are to be applied retrospectively for financial years beginning on or after 1 January 2019.

AMENDMENT: IAS 28: Investments in Associates and Joint Ventures (Long term Interests)

The amendments in Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) are:

  • Paragraph 14A has been added to clarify that an entity applies IFRS 9 including its impairment requirements, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.
  • Paragraph 41 has been deleted because the Board felt that it merely reiterated requirements in IFRS 9 and had created confusion about the accounting for long-term interests.

The amendments are to be applied retrospectively for financial years beginning on or after 1 January 2019.

AMENDMENT: IAS 19: Employee benefits (Plan Amendment, Curtailment or Settlement)

On 7 February 2018, the IASB published Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) to harmonise accounting practices and to provide more relevant information for decision-making. An entity applies the amendments to plan amendments, curtailments or settlements occurring on or after the beginning of the first annual reporting period that begins on or after 1 January 2019.

The amendments in Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) are:

  • If a plan amendment, curtailment or settlement occurs, it is now mandatory that the current service cost and the net interest for the period after the remeasurement are determined using the assumptions used for the remeasurement.
  • In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.

NEW INTERPRETATION: IFRIC 23: Uncertainty over Income Tax Treatments

The interpretation is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.

IFRIC 23 is effective for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted.

Annual Improvements to IFRS Standards 2015-2017 Cycle

The IASB has issued ‘Annual Improvements to IFRS Standards 2015–2017 Cycle’. The pronouncement contains amendments to four International Financial Reporting Standards (IFRSs) as result of the IASB’s annual improvements project. These amendments are effective for annual periods beginning on or after 1 January 2019.

The amendments made during the 2015–2017 cycle are as follows:

Amended Standard The amendments clarify that:

IFRS 3 Business Combinations

A company remeasures its previously held interest in a joint operation when it obtains control of the business.

IFRS 11 Joint Arrangements

A company does not remeasure its previously held interest in a joint operation when it obtains joint control of the business.

IAS 12 Income Taxes

A company accounts for all income tax consequences of dividend payments in the same way.

IAS 23 Borrowing Costs

A company treats as part of general borrowings any borrowing originally made to develop an asset when the asset is ready for its intended use or sale.

Companies Amendment Bill 2018 – Proposed changes

On Friday, 21 September 2018 the Department of Trade and Industry published the draft Companies Amendment Bill 2018 for comment and comments closed on 20 November 2018. The following is a summary of the more significant changes proposed by the Bill.

Proposed Amendment and Details

Memorandum of Incorporation (section 16)
The Bill proposes that amendments will take effect 10 business days after receipt of the notice of amendment, if the Companies Commission, after the expiry of the 10 business days, has not endorsed the notice of amendment sooner or has failed to reject the amendment with reasons. The notice of rejection also needs to be supplemented with reasons.

Disclosure of Remuneration and Benefits (section 30)
The requirement to disclose the remuneration and benefits received by a director would apply to prescribed officers, and it would be a requirement that each individual is named

A ‘prescribed officer’ is typically an executive who is in a position to influence the management of the company or one of its significant divisions.

Remuneration Report (section 30A)
In line with King IV, public companies would be required to prepare a remuneration report with details of the remuneration and benefits awarded to individual directors, for approval by the Board and presentation at the AGM.

Annual Returns (section 33) (i) A company would have to submit a copy of its Annual Financial Statements (“AFS”) where it is required to have its AFS audited; and (ii) A company would be required to file a copy of its securities register with the CIPC each year along with its Annual Return.

Share capital structure – Court Order (section 38A)
Currently the Companies Act does not allow for a company to fix its share capital structure where it contains errors.

The proposed new amendments is to include the power of the court, upon application by an interested person or by the company, to order that shares that were created, allotted or issued invalidly or in an unauthorised manner, to be validly created, allotted or issued if it is “just and equitable” to do so.

Financial Assistance (section 45)
Presently, any financial assistance granted by a company to its subsidiary must be authorised by the board and the shareholders by way of a special resolution.

The Bill proposes to limit the net of financial assistance transactions that fall within section 45 by excluding “the giving by a company of financial assistance to, or for the benefit of, its own subsidiary.”

The restrictions on financial assistance would therefore not apply to the giving by a company of financial assistance to or for the benefit of its subsidiary.

Share Buy Backs (section 48) A Board decision for a company to acquire its own shares would require approval by a shareholder special resolution:
(i) where the shares are to be acquired by a director, prescribed officer or person related to either a director or a prescribed officer;
(ii) but not where the acquisition is by way of:
– a pro rata offer to all shareholders; or – a transaction in the ordinary course on a recognised stock exchange.

Social and Ethics Committee (sections 61 & 62)
In addition to the requirements in the current Regulations, all public and state-owned companies would be required to appoint a Social and Ethics Committee at each annual general meeting, which must meet specified composition criteria. The Social and Ethics Committee would be required to prepare a formal report which must be externally assured, for presentation to the shareholders at a shareholders meeting.

It also allows companies to apply to the Companies Tribunal for an exemption from these requirements if the company has another mechanism within its structures to perform the functions of the committee or if it is not necessary in the public interest to require the company to have a committee, having regard to the nature and extent of the activities of the company.

Auditor Requirements (section 90)
(i) A company which is required to have its Annual Financial Statements audited, would have to appoint an auditor annually, at a shareholders meeting (not necessarily the AGM); and
(ii) The disqualification period for auditors would be reduced from five years to two years.

Limitation of the takeover provisions to private companies (section 118)
The current section 118(1)(c)(i) of the Companies Act mainly regards private companies as regulated companies if more than 10% of its issued securities had been transferred, other than between related or inter-related persons, within a 24-month period prior to the date of the affected transaction.

The amendment proposes to only regard private companies as regulated companies if the private company is required by the Companies Act or the regulations to have its annual financial statements audited every year.

Business rescue and the treatment of landlords (sections 135 & 145)
The Bill provides that any amounts due by a company under business rescue to a landlord for rent or services will be regarded as ‘post commencement financing’ and the landlord will have a voting interest in the business rescue proceedings to the extent of its claim. Post commencement finance, whether secured or unsecured, enjoys preference over unsecured creditors.

Disputes concerning company names (section 160)
In terms of the Companies Act, the Companies Tribunal may deal with disputes regarding company names.

It is proposed that where a company has been ordered to change its name, and it fails to do so, the Companies Commission may substitute its registration number as the name of the company in question.

Black economic empowerment (section 195)
The Bill seeks to give the Companies Tribunal the power to adjudicate cases referred to it by the B-BBEE Commission.