scholarly journals The expected impact of the implementation of International Financial Reporting Standard (IFRS) 16 – Leases

2019 ◽  
Vol 12 (1) ◽  
Author(s):  
Milton Segal ◽  
Genevieve Naik
Keyword(s):  
South African ◽  
Financial Reporting ◽  
Balance Sheet ◽  
Current Standard ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Managerial Implications ◽  
Reporting Structure ◽  
Value Add ◽  
Economic Transaction

Orientation: The new standard on leases, International Financial Reporting Standard (IFRS) 16, will require the majority of lessees to account for lease arrangements on the face of the balance sheet. This is in contrast to the current standard and, as a result, the effects of this transition to on-balance sheet finance require analysis.Research purpose: The purpose of this article is to identify and examine the material change implications that may arise from the implementation of IFRS 16 and determine its effect on both preparers and users of the financial statements with a specific focus on lessee accounting.Motivation for the study: Leasing is a widely used economic transaction that affects the majority of corporates and individuals. There is a lack of formal academic literature surrounding the possible implications of the new accounting standard in a South African context.Research approach, design and method: The authors performed a detailed literature review as well as gathered information at a public debate held jointly by the International Accounting Standards Board (IASB) and the South African Institute of Chartered Accountants (SAICA) to investigate what the implications may be.Main findings: This article finds and concludes that there are potentially six change implications. The affected parties were identified as lenders, preparers and analysts with the banking and retail sectors requiring the most consideration.Practical/managerial implications: Care will need to be taken when new lease transactions are entered into so that the entity still adheres to potential liquidity and solvency targets as well as loan covenant obligations.Contribution/value-add: The normative and qualitative style sheds light on the effect of the imminent changes to South Africa’s financial reporting structure, making an important contribution to financial reporting knowledge, transparency and accountability.

scholarly journals Internal model for IFRS 9 - Expected credit losses calculation

2018 ◽  
Vol 69 (3) ◽  
pp. 269-297 ◽  
Author(s):  
Hrvoje Volarević ◽  
Mario Varović
Keyword(s):  
Financial Reporting ◽  
Internal Model ◽  
Balance Sheet ◽  
Analytic Hierarchy ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
External Data ◽  
Simple Implementation ◽  
Ifrs 9 ◽  
Credit Losses

This article explores and analyzes the implementation problem of International Financial Reporting Standard 9 (IFRS 9) which is in use from 1 January 2018. IFRS 9 is most relevant for financial institutions, but also for all business subjects with a significant share of financial assets in their Balance sheet. The main objective of this article is the implementation of new impairment model for financial instruments, which is measurable through Expected Credit Losses (ECL). The use of this model is in correlation with a credit risk of the company for which it is necessary to determine basic variables of the model: Exposure at Default (EAD), Loss Given Default (LGD) and Probability of Default (PD). Basel legislation could be used for LGD calculation while PD calculation is based on specific methodology with two different solutions. In the first option, PD is taken as an external data from reliable rating agencies. When there is no external rating, an internal model for PD calculation has to be created. In order to develop an internal model, authors of this article propose application of multi-criteria decision-making model based on Analytic Hierarchy Process (AHP) method. Input data in the model are based on information from financial statements while MS Excel is used for calculation of such multi-criteria problem. Results of internal model are mathematically related with PD values for each analyzed company. Simple implementation of this internal model is an advantage compared to other much more complicated models.

scholarly journals The Value Relevance of Aged Goodwill: A South African Study

2019 ◽  
Vol 23 ◽  
Author(s):  
Fatima Zahra Omarjee ◽  
Yaeesh Yasseen ◽  
Waheeda Mohamed
Keyword(s):  
South African ◽  
Financial Reporting ◽  
Value Relevance ◽  
Accounting Standards ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Accounting Practice ◽  
African Context ◽  
Subsequent Measurement ◽  
Is Value

The purpose of this study was to determine whether goodwill, which is measured in accordance with International Financial Reporting Standard 3 (IFRS 3), is value relevant at acquisition and as time progresses, for a period of two years after acquisition. Using the Ohlson model, 126 JSE firm-year observations were tested. It was subsequently found that goodwill was not value relevant at acquisition date but did become value relevant as time progressed. The possible reasons for goodwill not being value relevant at acquisition are attributed to the manner in which IFRS 3 requires goodwill to be measured, the allowance of provisional values under IFRS 3, and the complexities associated with complying with IFRS 3. Goodwill being value relevant as time progresses is attributed to the subsequent measurement requirements of IFRS 3, in particular the annual impairment testing requirement as opposed to the previous amortisation requirements. This study was conducted in a South African context where limited studies on goodwill have taken place. The results are deemed to be useful to investors and standard setters as they hold implications for goodwill accounting practice and changes to goodwill accounting standards.

scholarly journals A critical analysis of the meaning of the term ‘value’ in Section 30(6)(e) of the Companies Act

2018 ◽  
Vol 21 (1) ◽  
Author(s):  
Mareli Dippenaar
Keyword(s):  
South African ◽  
Financial Reporting ◽  
Intrinsic Value ◽  
Historical Analysis ◽  
Fair Value ◽  
Research Approach ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Intended Meaning ◽  
African Context

Background: Sections 30(4) and 30(5) of the Companies Act 71 of 2008 (the Act) require, inter alia, disclosure of the remuneration received by each director in a company’s annual financial statements. Section 30(6) defines the term ‘remuneration’, which includes, inter alia, in Section 30(6)(e) the ‘value’ of any option or right granted to a director, as contemplated in Section 42, which deals with options for the allotment or subscription of securities or shares of a company. It is uncertain what the intended meaning of the term ‘value’ is in this context and it is interpreted differently by different companies in practice. Aim: The objective of this study was to understand the meaning of the term ‘value’ in Section 30(6)(e) of the Act (including the date of measurement thereof), as intended by the legislature. Setting: This article examined existing literature in a South African corporate and legislative environment. Method: A non-empirical study of existing literature was conducted by performing a historical analysis within a South African context. A doctrinal research approach was followed. Results: Possible interpretations of the term ‘value’ include the grant date fair value of the rights, the fair value at reporting date, the fair value on vesting date, the expense calculated in terms of the International Financial Reporting Standard on share-based payments, the gain on exercise of the rights and the intrinsic value on reporting date. It is submitted that the most likely meaning is the grant date fair value. Conclusion: It was found that the meaning of the term ‘value’, for purposes of Section 30(6)(e) of the Act, is unclear and interpreted differently by different companies. It is, therefore, recommended that the wording of Section 30(6)(e) is amended to reflect the meaning intended by the legislature.

scholarly journals The rules for the Cash Flow Statement in the International Financial Reporting Standard

2013 ◽  
Vol 7 (1-2) ◽  
pp. 71-73
Author(s):  
Anikó Türkössy
Keyword(s):  
Cash Flow ◽  
Financial Reporting ◽  
Balance Sheet ◽  
Cash Flows ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Historical Changes ◽  
Income Statement ◽  
Cash Flow Statement ◽  
Statement Of Cash Flows

Cash flow statement may provide considerable information about what is really happening in a business beyond that contained in either the income statement or the balance sheet. Analyzing this statement should not present an intimidating task; instead it will quickly become obvious that the benefits of understanding the sources and uses of a company’s cash far outweigh the costs of undertaking some very straightforward analyses. The objective of IAS 7 is to require the presentation of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows, which classifies cash flows during the period according to operating, investing, and financing activities.

scholarly journals Perceived Benefits and Challeges of IFRS Adoption in Ghana: Views of Members of Institute of Chartered Accountants, Ghana (ICAG)

2017 ◽  
Vol 9 (1) ◽  
pp. 99
Author(s):  
Joseph Mbawuni
Keyword(s):  
Cross Section ◽  
Financial Reporting ◽  
Perceived Benefits ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Ifrs Adoption ◽  
Body Of Knowledge ◽  
Managerial Implications ◽  
Sub Saharan ◽  
Chartered Accountants

This paper provides an empirical evidence regarding the perceived benefits and challenges of International Financial Reporting Standard (IFRS) adoption in Ghana. It draws on rich body of knowledge in IFRS from both developed and developing countries to develop a conceptual framework for the perceived benefits and challenges that come with IFRS adoption. It used data from a cross-section of 762 members of the Institute of Charted Accountants, Ghana. This study found that a number of perceived benefits and challenges with the adoption of IFRS in Ghana, notable among the benefits was the ease of comparability of financial data across borders, and the top-most challenge was the continuous amendments to IFRS. There were few differences in evaluation between old and young accountants among the respondents. The theoretical and managerial implications are discussed. This study contributes to the limited empirical research regarding the perceived benefits and challenges of IFRS adoption in Sub-Saharan African in general and Ghana in particular.

scholarly journals International Financial Reporting standard for Small and Medium-sized entities

2012 ◽  
Vol 5 (1) ◽  
pp. 54
Author(s):  
Z Koppeschaar
Keyword(s):  
South African ◽  
Financial Reporting ◽  
Financial Statements ◽  
Financial Accounting ◽  
International Accounting Standards ◽  
Small Companies ◽  
Small Company ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Accounting Standard

<p>The International Financial Reporting Standard for Small and Medium-sized entities (IFRS for SMEs) was published as a standard by the International Accounting Standards Board (IASB) during July 2009. During 2007 South Africa became one of the first countries and the first country in Africa to early accept the proposed accounting standard (exposure draft of an IFRS for SMEs). The accounting standard will probably also be accepted by numerous other countries. The aim of this article is to investigate the applicability of this accounting standard. The results indicated that the IFRS for SMEs remains too comprehensive for the majority of small companies. The IFRS for SMEs does not satisfy the needs of South African users of small company financial statements, and as a result the accounting requirements should be simplified.</p><p><strong>KEYWORDS:</strong> Financial accounting; Financial reporting requirements; IFRS for SMEs; Small companies; Users of financial statements; Small company financial statements.</p>

Ambiguities in Accounting and their Impact on Regulatory Arbitrage: A Study on the Anchoring of the Rights and Obligations Approach in the IASB’s Conceptual Framework

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Tessa Kunkel
Keyword(s):  
Conceptual Framework ◽  
Financial Reporting ◽  
Balance Sheet ◽  
Accounting Standards ◽  
International Accounting ◽  
Regulatory Arbitrage ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Conceptual Foundation ◽  
Playing Field

AbstractThe revision of the asset and liability definitions is at the core of the International Accounting Standards Board’s (IASB) efforts to reflect more truthfully the economic substance of the underlying business transactions. In the IASB’s revised Conceptual Framework (CF) from 2018, the board redefined assets and liabilities in terms of rights and obligations, thereby explicitly abstaining from a notion of indivisible balance sheet items. This alteration lays the conceptual foundation for carving out pieces of an item in accounting standards, enabling the removal of arbitrary bright line tests, and, eventually seeks to tackle regulatory arbitrage. Drawing upon 18 expert interviews as well as a document analysis, this study sheds light on the process that led to the anchoring of the rights and obligations model in the IASB’s CF. Using literature on ambiguities in accounting as a theoretical frame, this study goes on to show that removing ambiguities in the asset and liability definitions creates new ambiguities and additional discretionary leeway in turn. The paper argues that the perpetual cycle of ambiguity reduction and creation in accounting (Davie, 2000) also includes ambiguity shifting between the conceptual basis of financial reporting and accounting standards. By comparing the previous International Accounting Standard (IAS) 17: Leases, which followed a physicalist, ownership-based notion of assets, with the revised International Financial Reporting Standard (IFRS) 16, the paper demonstrates that the explicit anchoring of the rights and obligations approach does not fully solve the issue of regulatory arbitrage. Instead it shifts the playing field for structuring activities from the evasion of precise rules to the bending of interpretations.

scholarly journals Adapting the Default Weighted Survival Analysis Modelling Approach to Model IFRS 9 LGD

Risks ◽  
2021 ◽  
Vol 9 (6) ◽  
pp. 103
Author(s):  
Morne Joubert ◽  
Tanja Verster ◽  
Helgard Raubenheimer ◽  
Willem D. Schutte
Keyword(s):  
Survival Analysis ◽  
Financial Reporting ◽  
Proportional Hazards ◽  
Proportional Hazards Model ◽  
Survival Curve ◽  
Cox Proportional Hazards ◽  
Cox Proportional Hazards Model ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Ifrs 9

Survival analysis is one of the techniques that could be used to predict loss given default (LGD) for regulatory capital (Basel) purposes. When using survival analysis to model LGD, a proposed methodology is the default weighted survival analysis (DWSA) method. This paper is aimed at adapting the DWSA method (used to model Basel LGD) to estimate the LGD for International Financial Reporting Standard (IFRS) 9 impairment requirements. The DWSA methodology allows for over recoveries, default weighting and negative cashflows. For IFRS 9, this methodology should be adapted, as the estimated LGD is a function of in the expected credit losses (ECL). Our proposed IFRS 9 LGD methodology makes use of survival analysis to estimate the LGD. The Cox proportional hazards model allows for a baseline survival curve to be adjusted to produce survival curves for different segments of the portfolio. The forward-looking LGD values are adjusted for different macro-economic scenarios and the ECL is calculated for each scenario. These ECL values are probability weighted to produce a final ECL estimate. We illustrate our proposed IFRS 9 LGD methodology and ECL estimation on a dataset from a retail portfolio of a South African bank.

scholarly journals Lobbying na Regulação Contábil: Evidências do Setor Petrolífero

2014 ◽  
Vol 25 (65) ◽  
pp. 124-144 ◽  
Author(s):  
Odilanei Morais dos Santos ◽  
Ariovaldo dos Santos
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Status Quo ◽  
International Accounting ◽  
International Accounting Standards ◽  
Discussion Paper ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
International Accounting Standards Board

Este trabalho tem como objetivo identificar os fatores determinantes à submissão de cartas comentários, como estratégia de lobbying no contexto da regulação contábil, à audiência pública do Discussion Paper Extractive Activities do International Accounting Standards Board IASB).Os resultados mostram o tamanho como fator determinante, em todas as modelagens utilizadas, indicando que grandes empresas petrolíferas possuem maior probabilidade para realizar lobbying. Essa propensão é verificada para posicionamentos essencialmente desfavoráveis às propostas apresentadas pelo IASB, o que implica em considerar que a revisão/substituição do International Financial Reporting Standard -IFRS6 será um processo complexo e sujeito a pressões por parte das empresas petrolíferas para manter o status quo.

scholarly journals Prevalence of workplace bullying of South African employees

2012 ◽  
Vol 10 (3) ◽  
Author(s):  
Leanri Cunniff ◽  
Karina Mostert
Keyword(s):  
South African ◽  
Workplace Bullying ◽  
Demographic Characteristics ◽  
Negative Effects ◽  
Cross Sectional ◽  
Demographic Groups ◽  
Diversity Experiences ◽  
Managerial Implications ◽  
Value Add ◽  
Survey Approach

Orientation: Workplace bullying has negative physical and psychological effects on employees and several negative effects on organisations. Research purpose: The purpose of the research was to determine the prevalence of workplace bullying in South Africa and whether there are differences in employees’ experiences of bullying with regard to socio-demographic characteristics, sense of coherence (SOC) and diversity experiences.Motivation for the study: This study intended to draw attention to the implications and negative effects of workplace bullying and to determine whether employees with certain socio-demographic characteristics, SOC levels and diversity experiences experience higher levels of bullying than others do.Research design, approach and method: The researchers used a cross-sectional field survey approach. They used an availability sample (N = 13 911). They computed frequencies to determine the prevalence of workplace bullying and used a multivariate analysis of variance (MANOVA) and analyses of variance (ANOVAs) to determine the differences between the groups.Main findings: The results showed that 31.1% of the sample had experienced workplace bullying. The researchers found significant differences between all the socio-demographic groups. Participants with higher levels of SOC, and who experienced diversity positively, reported lower levels of workplace bullying.Practical/managerial implications: Employers need to realise that workplace bullying is a common problem amongst South African employees and should ensure that they have the necessary prevention methods.Contribution/value-add: This study contributes to the limited research on the prevalence of workplace bullying and its relationship with SOC and diversity experiences in the South African workplace.

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