Thesis (MAcc (Accountancy))--University of Stellenbosch, 2005. / The fact that investors increasingly invest in companies from another country than
the investor himself and the consequential globalisation of capital markets, resulted
in the European Parliament and Council (EP) accepting Regulation No. 1606/2002
during 2002. The consequence of the regulation was that uniform accounting
standards had to be implemented throughout the European Union (EU). The
accounting standards that were accepted, are the International Financial Reporting
Standards (IFRS) (previously known as International Accounting Standards (IAS)).
The regulation further determined that the effective date of this required compliance
with IFRS was 1 January 2005. At the time when the regulation was accepted, most
companies that were listed on the JSE Securities Exchange of South Africa (JSE) still
prepared their financial statements in accordance with South African Statements of
Generally Accepted Accounting Practice (South African SGAAP). The implication of
the acceptance of the regulation by the EP was that in the event that a company was
not only listed on the JSE but also on a stock exchange in the EU, the financial
statements of that company would have to be prepared in accordance with IFRS.
In this study two groups of companies were selected for evaluation. The one group
consists of companies with a primary listing on the JSE and a secondary listing in the
EU (first group) and the other group has a primary listing in the United Kingdom (UK)
and thus the EU, with a secondary listing on the JSE (second group). The purpose of
the study is to identify the implications of the acceptance of abovementioned
regulation on the financial reporting of the selected companies.
Firstly, a study was made of the differences between the Generally Accepted
Accounting Practice of the United Kingdom (UK GAAP) and IFRS. The reason for this
largely relates to the fact that there are still substantial differences between these two
sets of accounting standards. No such study was conducted in respect of differences
between South African SGAAP and IFRS as South African SGAAP was completely
replaced by IFRS during 2004 and hence no differences exist any more. The only
exception relates to the 500 series of standards that are unique to South Africa.
There are, however, only two issued standards in this series and hence no further
attention was paid to that. Hereafter the 2002 financial statements of all the selected companies were evaluated
by measuring it against an IFRS disclosure checklist for 2002. The purpose was to
identify the extent to which the selected companies comply with IFRS by focusing on
the areas with regards to which they do not comply with IFRS. It was found that the
companies of the first group largely fail to comply with IFRS in respect of matters of
disclosure, whilst the second group of companies sometimes also, in their application
of recognition requirements and measurement guidelines, used different practices to
those suggested by IFRS. This was largely attributable to the fact that there are
substantial differences between UK GAAP and IFRS, whilst South African SGAAP
and IFRS already were very similar until recently.
Consequently, questionnaires were sent to interested selected companies in which
they could give feedback on their level of awareness and perceptions of the required
transition to IFRS by 2005 as well as the procedures that they have followed or will
follow in their process of transition to IFRS.
Fourthly the 2003 financial reports of the selected companies were evaluated for
compliance with IFRS by measuring it against the IFRS disclosure checklist that
would be applicable on their 2004 financial periods. This was done in order to
determine whether the selected companies showed any progress in their level of
compliance with IFRS. This process also identified which IFRS, which were issued
during 2003/2004, will be applicable on the 2004 or later financial periods of the
selected companies, as these are further areas that will demand the attention of the
selected companies in their process of becoming IFRS compliant. It was found that
all selected companies showed rather little progress in their level of IFRS
compliance. It is however concerning that even though South African SGAAP were
previously very narrowly aligned with IFRS, the companies of the first group still fail to
comply with fairly simple disclosure requirements. It would thus appear that they do
not take the process of transition to IFRS serious enough. The fact that the second
group of companies also did not make much progress can still be justified by the fact
that UK GAAP were not aligned closer to IFRS during 2003 and most of the selected
companies were still busy with the planning process for the transition to IFRS. It is
expected that the financial statements of these companies will display substantial
progress in their 2004 financial periods. Finally the compliance mechanisms were studied in order to determine which
processes are in place to ensure that companies will indeed comply with IFRS. This
study was done in respect of the EU, the UK and South Africa. All three these
regions either already have or will have bodies in the near future that will have the
task of evaluating the financial statements of listed companies for IFRS compliance.
The conclusion is however that as a result of the negative consequences of noncompliance
with IFRS sufficient factors do exist that will motivate companies to fully
comply with IFRS. In addition, the listing requirements of the JSE has changed and
financial reporting in accordance with IFRS is now a requirement.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/1911 |
| Date | 12 1900 |
| Creators | Smith, Heidi Helette |
| Contributors | Van Schalkwyk, C. J., University of Stellenbosch. Faculty of Economic and Management Sciences. Dept. of Accountancy. |
| Publisher | Stellenbosch : University of Stellenbosch |
| Source Sets | South African National ETD Portal |
| Language | Afrikaans |
| Detected Language | English |
| Type | Thesis |
| Rights | University of Stellenbosch, Dissertations -- Accountancy, Theses -- Accountancy |
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