SHARE CATEGORIES – Equity or Liability?

When buying equity shares in a company, one can purchase different category shares, namely ‘ordinary shares’ (also referred to as ‘common stock’) and ‘preference shares’ (also referred to as ‘preferred stock’). Shares represent equity in a company. However, in certain circumstances shares may have to be recognised as a liability in stead of equity. This tip will look at when shares are equity and when it represents a liability.View PDF

LIABILITY – YES or NO? Should it be accrued or provided for?

This tip deals with the principle that a contractual or a statutory obligation in itself does not necessarily gives rise to a liability. For example, an entity is obligated by law to pay income tax – however – in terms of accrual accounting principles, there is no obligation to pay tax unless income has been earned. The earning of the income is the past event that gives rise to the obligation to pay the tax. In this example, the liability is classified as a tax liability in accordance with IAS 12.View PDF

JSE Listing Requirements 3.84(k) – CEO / CFO signoff on internal financial control

To ensure a higher level of accountability from executive management, the JSE Listing Requirement 3.84(k) requires the CEO and the financial director to sign a responsibility statement that they have implemented the necessary internal financial controls to ensure the financial statements are fairly presented and no facts have been omitted or untrue statements were made View PDF

Disclosure of Director Remuneration – CIPC Notice 38 of 2020

All companies that are required to have their annual financial statements (AFS) audited and those that have their AFS voluntarily audited in terms of Section 30(2) of the Companies Act 71 of 2008, shall disclose directors’ or prescribed officers’ remuneration and other benefits paid, payable or receivable as per Section 30 (4)(5)(6) of the Act. View PDF

IFRS 16 Lease modifications

The last few months forced many entities to renegotiate lease terms and review their current lease agreements – the question arises how and when to account for a new lease when the lease terms and/or lease payments have changed, or where it was determined that it is not a new lease but a lease modification.View PDF

8 Things you need to know about online advertising policies

  1. The Advertising Policies apply to (1) ads and commercial content served by or purchased through Facebook, on or off the Facebook services, including ads purchased under AAAA/IAB Standard Terms and Conditions, (2) ads appearing within apps on Facebook, and (3) ads on Instagram. Your use of Facebook’s advertising products and services is part of “Facebook” under Facebook’s Statement of Rights and Responsibilities (, the “SRR”) and is subject to the SRR.You may be subject to additional terms or guidelines if you use Instagram or certain Facebook advertising-related products or services.
  2. Advertisers are responsible for understanding and complying with all applicable laws and regulations. Failure to comply may result in a variety of consequences, including the cancellation of ads you have placed and termination of your account.
  3. We do not use sensitive personal data for ad targeting. Topics you choose for targeting your ad don’t reflect the personal beliefs, characteristics or values of the people who use Facebook or Instagram.
  4. Once displayed, ads are public information. Ads may be re-shared and accessed outside of the targeted audience, including from the Facebook Page running the ads or within Facebook Products. If users have interacted with your ad, your ad may remain on Facebook products (for example, shared until the users delete it or visible to users through their account tools). If your ad is a political ad, it will be displayed in our Ad Archive. This means that Facebook may display (at no cost to you) and provide access to the ad content and creative, as well as information about the ad campaign (such as total spend and delivery data) for a period of seven (7) years from the completion of your order. Facebook may disclose your advertising content, and all information associated with your advertising, to a governmental entity or body if Facebook believes that disclosure would assist in a lawful investigation.
  5. If you are managing ads on behalf of other advertisers, each advertiser or client must be managed through separate ad accounts. You must not change the advertiser or client associated with an established ad account; set up a new account. You are responsible for ensuring that each advertiser complies with these Advertising Policies.
  6. We reserve the right to reject, approve or remove any ad for any reason, in our sole discretion, including ads that negatively affect our relationship with our users or that promote content, services, or activities, contrary to our competitive position, interests, or advertising philosophy.
  7. For policies that require prior written permission, Facebook or a Facebook Company may grant these permissions.
  8. These policies are subject to change at any time without notice.

IFRS 7 Financial instrument disclosures

Despite being effective since 2007, entities often misinterpret the most basic requirements of IFRS 7. This tip deals with what‘s “HOT” and what’s “NOT” when it comes to disclosure of the significance of financial instrument for an entity’s financial position and performance.View PDF

Tangible assets carried at nil value but still in use

IFRS (IAS 16) requires the review of the useful life, residual value and depreciation method of asset items at least at each financial year-end. IFRS for SME (Section 17) requires such a review when factors have been identified that may indicate that the residua value or useful life of an asset has changed.View PDF

The Impact of Coronavirus on Financial Reporting and Preparers of the Annual Financial Statements

All preparers of Annual Financial Statements should consider the impact of the Coronavirus (COVID-19) on interim and annual financial statements.View PDF

The Impact of Coronavirus on Audits and the Considerations by Auditors

Auditors of Financial Statements (AFS) need to consider the following during their audits:

  • Impact of COVID-19 on the entity and its operations and reporting timelines.
  • Whether those charged with governance (TCWG) performed appropriate risk assessment procedures to prepare for the impact of COVID-19 on the entity and their assessment of the appropriateness of using the going concern basis of preparation.
  • Reconsider the impact of COVID-19 on the initial audit risk assessment and whether it should be revised in terms of ISA 315.
  • Design and performing specific procedures in terms of ISA 330 in response to the risks identified.
  • Whether there is a need to revise materiality in terms of ISA 320.
  • Assessing the financial impact involving accounting estimates made by management (estimation uncertainty due to significant assumptions including projected cash flows, risk assessment and audit evidence supporting these accounting estimates and related disclosure affected by COVID-19 event)

Note: If TCWG have determined that there is no material financial impact (or reasonably expected impact) on their entity, adequate disclosure regarding the key assumptions should be included in the AFS to support conclusion.

Examples of accounting estimates for financial impact:

  • Asset impairment / changes in assumptions for impairment testing
  • Changes in the useful life of assets
  • Change in FV of assets or NRV of inventory
  • Changes in ECL for loans and other financial assets
  • Increased costs and/or reduced demand for products and services affecting impairment calculations and / or requiring recognition of provisions
  • Potential provisions and contingent liabilities arising from fines and penalties
  • Uncertainty that cast significant doubt on the ability to continue as going concern (unknown duration of the impact)


  • Assessment whether the disclosures are material to the AFS and whether it is sufficient and appropriate for the users of the AFS – If no sufficient disclosures in the AFS, the auditor needs to consider the implications on the audit report in terms of ISA 705.
  • Consider whether COVID-19 and impact of this event is a matter of most significance in the audit and if there is a need to raise a Key Audit Matter (KAM) in accordance with ISA 701.
  • Subsequent events – Consideration whether COVID-19 event should be seen as an adjusting or non-adjusting event in the AFS (with adequate disclosure in the AFS regarding the nature and the impact).
  • Going concern – Evaluate the appropriateness of management’s use of going concern basis of accounting in preparing its financial statements. If it is concluded that the basis of accounting used to prepare the AFS is inappropriate or there are insufficient disclosures in the AFS, the auditor needs to consider these implications for the audit report in terms of ISA 705.
  • For listed entities – review other information in accordance with ISA 720 and consider whether there are any material inconsistencies between the other information included in the annual report and the AFS.
  • Group reporting – consider the impact how COVID-19 may impact risk assessment, materiality and ability to obtain appropriate audit evidence – If adequate information cannot be obtained from the components, the group auditor should consider these implications on the audit report in terms of ISA 705.

Determine the following:

  1. Is the risk assessment performed by management (if any) and the impact thereof on the financial statements appropriate?
  2. Did management assess whether the subsequent event should be treated as adjusting or non-adjusting event (with relevant disclosures in the AFS) and is the assessment appropriate?
  3. Do you agree with management’s assessment as to the appropriateness of the going concern basis of preparation?
  4. Is the disclosure in the financial statements adequate?

YES – Perform appropriate audit procedures to support above

NO – Consider possible impact on the audit report in terms of ISA 705 (if material)