| ASB practicing what it preaches by publishing simple, understandable financial statements |
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Over the last year you would have heard, seen and read about our drive for entities to publish simple, understandable financial statements. At the ASB, we strive to practice what we preach and this is evident in our latest audited financial statements.
Our preparation process starts with a materiality framework that identifies what transactions and events we consider material, both quantitatively and qualitatively. This drives which Standards we consider to be material in the preparation of our financial statements. This informs what accounting policies we provide in our financial statements, what we present in the various statements, and what we disclose in the notes. Importantly, this framework is discussed with our Audit Committee and Operations Committee, and ultimately approved by our Board.
Applying materiality is best demonstrated by our approach to financial instruments. We often hear from small public entities that the Standard on financial instruments is difficult to apply and results in “information overload” in the financial statements. The ASB is a small public entity (our budget is R15 million) but by applying materiality and thinking about what is relevant to our users, we are able to significantly scale down what we present on financial instruments. We have a transactional bank account, an account with the Corporation for Public Deposits, and creditors. We present and/or disclose these items, and provide limited accounting policy information and limited note disclosures.
Another example of how to streamline the information disclosed in the financial statements is to think about the presentation of accounting policies. GRAP 1 on Presentation of Financial Statements requires that ‘significant’ accounting policies need to be disclosed (it will change to ‘material’ accounting policies in 2023). We present our material accounting policies in the financial statements and disclose a full list of all our accounting policies on our website. This is an easy way to focus readers’ attention to the most important and relevant transactions and events.
While thinking about, planning and executing materiality can take time, it is worth the effort. Apart from demonstrating how to prepare user-friendly financial statements, I am very proud to report that we once again have an unqualified audit. This was achieved through the hard work of a dedicated team of ladies who are committed to strong internal controls, policies and processes.
As we move towards the end of the year, its time to start planning for the next reporting cycle. We hope that you will make planning for the preparation of your financial statements a priority. We have a few publications on our website that may help your thought process:
Guideline on Applying Materiality to Financial Statements
Fact Sheet on Materiality
IGRAP 21 on The Effect of Past Decisions on Materiality |
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