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Portfolio Committee on Trade and Industry - Comments on the Co-

operatives Amendment Bill

24 July 2012 Juanita Steenekamp

Project director: Governance and Non-IFRS Reporting

SAICA

The South African Institute of Chartered Accountants

Voluntary professional body

Members – Chartered Accountants

To qualify – 4 year degree + articles (3 yrs) + 2 board

exams

32 000 members

SAICA - members

Co-operatives – regulatory scheme

Prefer same schemes for company, close corporation and

co-operative in terms of accounting and assurance

Bill

• Category A – annual accounting report

• Category B – independent reviewer’s annual accounting

report

• Category C – auditor’s annual accounting report

Co-operatives - accounting

Definitions

• Annual accounting report – defined as financial statements, social

report and management report

• Financial statements • Statement of financial position (balance sheet)

• Statement of comprehensive income (income statement)

• Statement of changes in equity

• Statement of cashflows

• Notes

• Management report and social report not defined

Co-operatives - accounting

Minister must publish within 3 months after commencement publish a

cooperative reporting system framework•Difficult, if framework not published then no framework exist and no audit or review could be

done on annual financial statements using the framework

•In some instances can use frameworks prescribed by Financial Reporting Standards

Council if prescribed in Co-operatives Act

•Category A co-operatives might only use an annual return, compilation of financial

statements, social and management reports more onerous than for small private companies

Co-operatives - assurance

• Auditors annual accounting report – annual accounting report examined and

evaluated by auditor - no such report

Auditor provides an audit report, based on prescribed framework

• Independent reviewer’s annual accounting report - annual accounting report

examined and evaluated by independent reviewer – no such report

Independent reviewer’s report, based on prescribed framework

Refer to Companies Act – audit report & independent review report

Co-operatives - assurance

Definitions:

• Audit – not same as Auditing Professions Act

• Independent review – not same as Companies Act

• Independent reviewer - means a person registered with an accredited

professional body contemplated in Chapter III of the Auditing Profession Act,

who does not have a personal financial interest in the co-operative or a

related or inter-related co-operative.• More restrictive than Companies Act

• Possibly allow members of other professional bodies

Definitions already exists in other laws – to have other definitions would confuse

the public, members and people identified to perform the functions.

Companies Act vs Co-Operatives Amendment

Co-operatives - assurance

Categories of primary co-operatives:

Minister must prescribe monetary threshold for revenue (looking back) or

projected annual revenue (forward looking)

Revenue not defined

Is this sufficient to identify “public interest”?

Every employee –

average number

Every R1m turnover

Every R1m 3rd party liabilities

Every beneficial interest holder

1 Point

11

Companies Act – Public Interest Score

Co-operatives – other

• Consideration of audited or independent reviewed financial statements –

AGM chairperson accepts report • Not possible as auditor / IR prepares report. Co-op cannot decide to accept or not

• Annual Financial Statements and audit / independent review report must be presented at

AGM

• Governance principles – not identified, in SA KING III recognised principles,

too onerous for many co-operatives

• Co-operatives must retain records for 7 years, thereafter must archive –

more onerous than Companies Act

Co-operatives – conclusion

• Separate accounting and assurance, allow for exemption for certain

categories of co-operatives

• Use of terminology as per Companies Act, 2008 where possible

• Do not have more onerous requirements for co-operatives than companies

• Use of accounting frameworks as per Financial Reporting Standards

Council, where possible

Thank you