ECSAFA GUIDANCE ON FINANCIAL REPORTING …

1 Namibian Statement of Generally Accepted Accounting Practice NAC 001 Issued September 2006 Page 1 of 1 ECSAFA GUIDANCE ON FINANCIAL REPORTING FOR small AND medium sized entities THE EASTERN, CENTRAL AND SOUTHERN AFRICAN FEDERATION OF ACCOUNTANTS Every effort is made to ensure that the advice given in the Guide is correct. Nevertheless that advice is given purely as GUIDANCE to members of ECSAFA to assist them with particular problems relating to the subject matter of the Guide and ECSAFA will have no responsibility to any person for any claim of any nature whatsoever that may arise out of or relate to the contents of the Guide.

2 PDF created with pdfFactory Pro trial version Statement of Generally Accepted Accounting Practice NAC 001 Issued September 2006 Page 2 of 2 Acknowledgement The International Accounting Standards Board (IASB) has issued a comprehensive body of International FINANCIAL REPORTING Standards (IFRSs), which has been used to prepare this ECSAFA GUIDANCE on FINANCIAL REPORTING for small and medium sized entities . This Guide is drawn primarily from the IASB Framework for the Preparation and Presentation of FINANCIAL Statements, IAS 7 Cash Flow Statements and certain principles set out in IAS 1 Presentation of FINANCIAL Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

3 Extracts of IFRSs (referred to above) are either reproduced or referenced to in this GUIDANCE with the permission of the IASB. The approved text of the IFRSs is published by the IASB in the English language. The IFRSs are contained in the IASB Handbook of International FINANCIAL REPORTING Standards and are available from: The International Accounting Standards Board 30 Cannon Street London EC4M6XH United Kingdom Publication email: Internet: Copyright on IFRSs, exposure drafts and other publications of the IASB are vested in the IASB and terms and conditions attached should be observed.

4 The Eastern, Central and Southern African Federation of Accountants PO Box 42423 00100 Nairobi, Kenya PDF created with pdfFactory Pro trial version Statement of Generally Accepted Accounting Practice NAC 001 Issued September 2006 Page 3 of 3 Table of Contents Paragraphs Preface Introduction The need for GUIDANCE for small and medium sized entities 01 04 Objective of the Guide 05 Scope Authority of the Guide 06 07 Description of an SME 08 09 FINANCIAL REPORTING Principles for SMEs 10 Framework for the Preparation of FINANCIAL Statements for SMEs 11 Elements of FINANCIAL Statements Definition

5 Of elements of FINANCIAL statements 12 13 Recognition of elements of FINANCIAL statements 14 15 Derecognition of elements of FINANCIAL statements 16 17 Measurement of elements of FINANCIAL statements 18 20 Selection and application of accounting policies 21 24 Offsetting 25 Components of FINANCIAL Statements Presentation of FINANCIAL statements 26 Balance sheet 27 32 Income statement 33 38 Statement of changes in equity 39 40 Cash flow statement 41 Notes to FINANCIAL statements 42 44 Consolidated FINANCIAL statements 45 Transitional provisions 46 47 Appendix 1 Illustrative FINANCIAL statement structure PDF created with pdfFactory Pro trial version Statement of Generally Accepted Accounting Practice NAC 001 Issued September 2006 Page 4 of 4 PREFACE The Eastern, Central and Southern African Federation of Accountants ( ECSAFA ) has developed this Guide primarily to assist small and medium sized entities (SMEs)

6 That are required to prepare FINANCIAL statements in those countries that have adopted International FINANCIAL REPORTING Standards (IFRSs) and which would not necessarily be required to comply with any of the International Accounting Standards Board (IASB) REPORTING frameworks full IFRS or IFRS for SMEs to be issued in future. The Guide endeavours to assist in reducing FINANCIAL REPORTING complexities for SMEs not required to apply IFRS for SMEs, when issued by the IASB by proposing that such SMEs apply only the IASB Framework for the Preparation and Presentation of FINANCIAL Statements, IAS 7 Cash Flow Statements and certain principles set out in IAS 1 Presentation of FINANCIAL Statement, and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

7 The Guide should be used in conjunction with reference to these standards. This Guide will only have authority when adopted and issued by the institution or regulator in every jurisdiction that is responsible of issuing accounting standards in that jurisdiction (referred to as standard-setter in the Guide). Compliance with the Guide will not result in compliance with IFRSs. As stated in paragraph 14 of IAS 1, an entity whose FINANCIAL statements comply with IFRSs shall make an explicit and unreserved statement of such compliance in the notes.

8 FINANCIAL statements shall not be described as complying with IFRSs unless they comply with all requirements of IFRSs. Therefore, should an SME comply with the Guide, such an SME would not be able to state compliance with IFRSs. ECSAFA has no authority to set accounting standards or to issue mandatory FINANCIAL REPORTING GUIDANCE within the region. ECSAFA encourages each standard-setter in the region to use the Guide as a framework to be used by SMEs, not required to apply the IASB frameworks, as defined in the jurisdiction. ECSAFA encourages that the Guide be issued as a standard.

9 It is proposed that ECSAFA member bodies in the various countries and REPORTING jurisdictions use their best endeavours to encourage the necessary regulatory and other changes to ease the REPORTING burden of SMEs within the various jurisdictions. Furthermore, each standard-setter should consider the use of the Guide by SMEs that will be required to comply with IFRS for SMEs as an interim measure until such time as the IASB issues such standards PDF created with pdfFactory Pro trial version Statement of Generally Accepted Accounting Practice NAC 001 Issued September 2006 Page 5 of 5 INTRODUCTION The need for GUIDANCE for small and medium sized entities 01 Standard-setters in most jurisdictions in the ECSAFA region have already adopted IFRSs issued by the IASB.

10 In many instances, this is the only set of accounting standards to be applied by preparers of FINANCIAL statements in their respective countries. 02 IFRSs are intended for general purpose FINANCIAL statements that are intended to meet the needs of users not in a position to demand reports tailored to meet their particular information requirements. Therefore, IFRSs are best suited for entities of which the shares are publicly traded or fairly widely held. 03 IFRSs are intended for public interest companies and, are therefore, not necessarily ideal for owner-managed businesses or entities of which the shares are closely held.