Harmonising user needs with reporting requirements of close corporations

[摘要] English: The Close Corporations Act requires that the annual financial statements of closecorporations must, in conformity with generally accepted accounting practice appropriateto the business of the corporation, fairly present the state of affairs of the corporation atthe end of the financial year concerned, and the results of its operations for that year.According to generally accepted accounting practice, the objective of financial statementsis to provide useful information about the enterprise to the primary user groups of thefinancial statements, independent of the size of the entity. The primary user groups ofthe financial statements of close corporations are the members, SARS and bankers.The recognition, measurement and disclosure requirements contained in the Statementsof GAAP do not give rise to cost-effective and useful information being provided to theusers of financial statements of close corporations and other small entities, because theseusers do not require the extensive information provided in general purpose financialstatements. Consequently, an accounting standard is required to differentiate betweengeneral and limited purpose financial statements.In South Africa, the Limited Purpose Financial Reporting Standards (LPFRS) weredeveloped. The modifications stipulated in this LPFRS mainly relate to the disclosurerequirements that were reduced, with only a few alternatives allowed to the recognitionand measurement criteria relating to deferred tax and financial instruments. Thesedevelopments may not be sufficient enough for the purposes of close corporations.Accordingly, the study recommends that a formal, separate set of simplified differentialreporting standards be developed for the purpose of close corporations. To beacceptable, the reporting method should meet most of the information needs of the usersof the financial statements of close corporations and other small entities, andsimultaneously provide cost-effective information that is a fair presentation of the results, taking into consideration the additional costs that may result from adopting differentialreporting standards.

[发布机构] University of the Free State