IFRS 13: Fair Value Measurement
IFRS 13 is the first comprehensive standard to deal with the concept of measuring fair value.
The objectives of IFRS 13 are to establish principles for fair value measurement of assets and liabilities, and set out required disclosures about fair value measurement.
In the following summary, we delve into the principles of IFRS 13 and how to apply fair value when permitted by another Standard.
IFRS 13 Fair Value Measurement
Travel deductions from allowances
If an employee uses his or her own motor vehicle for business purposes and receives an allowance from the employer to defray expenditure, the allowance is tax-free to the extent that it is expended for business purposes.
To that end, we have compiled a downloadable document covering the tax provisions surrounding travel allowances and reimbursements, together with useful tables and examples to assist you in maximising the benefits received from a travel allowance.
Deductions from Travel Allowances
IAS 7: Statement of Cash Flows
The Statement of Cash Flows is one of the primary statements that comprise a complete set of IFRS-compliant financial statements, as required by IAS 1: Presentation of Financial Statements.
This Statement classifies cash flows during a period separately into operating, investing and financing activities, and helps users to assess an entity’s ability to generate cash and cash equivalents and how such cash flows are utilised.
We have summarised the essential concepts within the Standard, and have provided this summary here for download and use.
Amendments to IFRS for SMEs
Since the issuance of the IFRS for SMEs in 2009, we have been fortunate in not being subjected to regular amendments to the issued Standards.
Since 2012, however, the IASB have carried out extensive consultations and information gathering, activities which have now resulted in the revised IFRS for SMEs issued in May 2015.
The new Standards are effective for periods beginning on or after 1 January 2017, but early adoption of all amendments is permitted.
We have included a synopsis of the amendments made to the IFRS for SMEs standards, for download and use.
Is your business able to apply IFRS for SMEs?
The ability to apply the International Financial Reporting Standards for Small and Medium-sized Entities has come as a relief to many smaller businesses. In addition to being much less onerous than Full IFRS, the application of this "smaller" framework has financial merit.
By proposing simpler accounting principles and simpler financial reporting requirements, the time spent producing a set of financial statements compliant with IFRS for SMEs has been reduced substantially. This relates to a decrease in potential assurance and accounting costs, which, simply stated, adds to the all-important bottom line.
We've provided a concise outline as to which entities are entitled to apply IFRS for SMEs, and it is recommended that this transition, should your business qualify, be participated in.
The document contains the following truncated sections:
- Criticisms of Full IFRS by small business, which led to the publishing of IFRS for SMEs
- Benefits inherent in applying IFRS for SMEs
- Provisions which need to adhered to for application of IFRS for SMEs to be possible
- Technical issues surrounding consolidated groups of entities
- Transitional provisions
IFRS 9: Financial Instruments - A Brief Summary
The IASB has issued IFRS 9: Financial Instruments, dealing with the classification, measurement and impairment of financial instruments, as well as hedge accounting.
In our brief synopsis we highlight the main points of interest in the new standard, which will apply to years beginning on or after 1 January 2018.
Please note that due the the specialised nature of Hedge Accounting, it has not been dealt with in this brief summary.
RESOURCES
Our handy tax guides for both companies and individuals are encompass the important provisions of the Income Tax Act, and incorporate the latest amendments per the Finance Minister's 2016 Budget Speech.
Both guides are downloadable and printable for ease of reference.
Detailed cash flow analysis
The Statement of Cash Flows is a mandatory inclusion in a set of IFRS-compliant financial statement, and provides users with an overview of the entity's ability to generate cash and cash equivalents and how this is utilised for operating, investing and financing purposes.
By regularly maintaining a detailed cash flow analysis the end-of-year disclosure is simplified. Apart from disclosure, however, this tool is vital for a company's cash management cycle. The same analysis can be extended into the future for forecasting purposes, allowing a company to control it's receipts and payments cycles and anticipate potential time periods where short-term financing may be required.
We have compiled a useful cash flow analysis template, which can be downloaded and tailored as needed.
B-BBEE Status Levels of EMEs and QSEs
With the new B-BBEE Amended Codes of Good Practice coming into effect for entities with years ending on or after 30 April 2015, clarity is required regarding the necessity for Verification Certificates on enterprises yielding less than R 50 million annual turnover.
The Amended Codes, in effect, do away with the need for Verification Certificates, replacing these documents with sworn affidavits regarding certain information.
We have compiled a brief summary as to what is now required, as well as downloadable affidavits to assist entities in obtaining B-BBEE Status Levels.
Handy Taxation Guides for Companies and Individuals
The old adage states that the only certainties in life are death and taxes.
While that may indeed by true, it is somewhat debatable as to which of those two experiences frightens people most.
We can, at least, assist you with taxes.
To that end, please find these two handy, printable tax guides for the 2015/2016 year for your use.
And should you need additional tax advice, don't hesitate to contact us.
Audits or Independent Reviews?
The Companies Act, 2008 (Act 71 of 2008), which became effective on 1 May 2011, permits companies in South Africa (within certain parameters) to completely replace the annual statutory audit with a statutory independent review.
Section 30 (2)(b)(ii)(bb) of the Act, as amended, states that those companies that satisfy specific criteria will need to have their annual financial statements independently reviewed in a manner that satisfies the regulations set by the Minister of Trade and Industry.
Approaching this amendment from a purely cost-based view, this is certainly good news for a myriad number of small businesses. The costs inherent in a full statutory audit oft-times outweigh the benefits and values added (if any).
However, a decrease in audit fees is not the only difference in these two types of assurance reports.
The main differences are highlighted below:
It is advisable that you assess which of these two levels of assurance are required. Third parties, such as financial institutions, may require audited financial statements even though you do not require an audit by law. As such, each set of financial statements should be analyses individually.
To assist you, please access our easy-to-use Public Interest Score Calculator below:
Business Essentials - The Need for a Business Plan
"If you can dream it, you can do it. Always remember that this whole thing was started with a dream and a mouse." - Walt Disney
A business plan is, at its core, a written description of your business's future. An essential document that describes what you plan to do and how you plan to do it. Business plans comprise the important first step towards growing your successful venture. They're used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also be used by firms that are trying to attract key employees, prospect for new business, deal with suppliers or simply to understand how to manage their companies better.
A business plan conveys your business goals, the strategies you envision employing in order to meet them, potential risks and problems that may confront your business and ways to solve them, the organizational structure of your business (including titles and responsibilities), and finally, the amount of capital required to finance your venture and keep it going until it breaks even. It encapsulates your vision for your business, and without that vision any venture is inevitably doomed to failure.
A good business plan is composed of three parts:
- The Business Concept - this where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success. Your business "in a nutshell", effectively.
- The Marketplace Section - where you describe and analyze potential customers: who and where they are, what makes them buy and so on. Here, you also describe the competition and how you'll position yourself to beat it.
- The Financial Section - here's where you start putting numbers down. This section contains your budget and cash flow forecast, balance sheet and other financial ratios, such as break-even analyses.
Breaking these three major components down even further, your detailed business plan will consist of the following sections:
- Executive Summary
- Business Description
- Market Strategies
- Competitive analysis
- Design and development plan
- Operations and management plan
- Financial Factors
Remember, the only person who doesn't need a business plan is one who doesn't plan on going into business.
Your business plan is fluid, meaning that it will require updating as frequently as factors (both external and internal) change. Don't be afraid to pull out and panel-beat your original business plan annually, or when there is a major change in your industry. Your business plan will provide you with the focus and direction you need to succeed.
To that end, we have included a template for your next venture. Feel free to download and use this template in taking your first entrepreneurial step. And keep Phoenix Accounting Solutions in mind when you decide to build that dream business. We pride ourselves on adding value and becoming your perpetual business partner.