STANDARDS c o n t .
IFRS 9: Financial Instruments –
The International Accounting Standards Board (IASB)
published the final version of the
International Financial
Reporting Standard (IFRS) 9: Financial Instruments
(IFRS 9),
as part of Phase II: Impairment Methodology of the IASB
project to replace International Accounting Standard (IAS) 39,
Financial Instruments: Recognition and Measurement
(IAS 39), in July 2014. IFRS 9 will be effective from 1 January
2018. The main objective of the new impairment requirements
contained in IFRS 9 is to provide users of financial statements
with more useful information about an entity's expected credit
losses on financial instruments. The model requires an entity
to recognise expected credit losses at all times and to update
the amount of expected credit losses recognised at each
reporting date to reflect changes in the credit risk of the
financial instruments.
IFRS 9 requires the recognition of expected losses whereas
under IAS 39, only incurred losses were recognised. The
requirement for entities to recognise 12-month expected
losses from the outset will mean that from 1 January 2018
(should the entities not choose to early adopt the standard),
there could be significant changes in portfolio impairments.
The change from IAS 39 to the new IFRS 9 requirements will
have a significant impact on financial institutions. This is owing
to the fact that the process followed to assess credit
impairment will be amended to be more forward-looking and
also require significant assumptions and judgement, together
with statistical impairment models to be constructed and will
also necessitate consideration of the design of the entity's
systems and processes.
The Bank Supervision Department (BSD) of the SouthAfrican
Reserve Bank (SARB) is taking a proactive approach to
ensure that both financial institutions and auditors of financial
institutions are ready for all the new requirements imposed to
ensure that the requirements are implemented consistently
a c r o s s t h e l o c a l f i n a n c i a l i n s t i t u t i o n s .
In this regard, the BSD issued
Guidance Note 2 of 2015
on
2 February 2015 (issued under the Banks Act 94 of 1990),
which will require the boards of financial institutions to provide
a detailed update on their implementation-readiness of IFRS 9
through on-site discussions during 2015. The BSD will also,
through its interaction at the SAICA Banking Project Group,
monitor the implementation and readiness of the various role-
players in the industry (financial institutions and auditors)
around the adoption of IFRS 9 and the guidance released by
Alert to auditors
Basel Committee on Banking Supervision (BCBS), of which
SouthAfrica is amember.
The auditors of financial institutions and other entities that will
be affected by these amendments to IFRS 9, the issue of the
BCBS guidance and the guidance note issued by the BSD are
alerted to these fundamental changes and the effect thereof
on their audit of financial institutions and other entities.
Revision of the SouthAfricanAuditing Practice Statement
(SAAPS) 3,
Illustrative Reports
In response to the proposed new and revised Auditor
Reporting Standards issued by the IAASB in January 2015 –
and in anticipation of the IRBA adopting these standards – the
CFAS approved a project to revise SAAPS 3,
Illustrative
Reports
. It is anticipated that the revised SAAPS 3 will be
issued on exposure for comment later this year.
The Auditor-General South Africa (AGSA) is in the process of
developing a new audit methodology. The PSSC is providing a
platform for consultation with registered auditors on
methodology issues related to the planned changes.
Illustrative engagement letter and assurance report –
GRI G4
The CFAS has approved a project for a task group of the SSC
to develop illustrative report(s), engagement letter(s) and any
necessary guidance to be used by registered auditors when
required to issue an ISAE 3000 (Revised) sustainability
assurance report on a Sustainability Report prepared in terms
of GRI G4. It is anticipated that the illustrative engagement
letter(s), assurance reports(s) and related guidance will be
issued on exposure later this year.
South African Standard on Assurance Engagements
(SASAE) 3502 not to be aligned with the amended 2013
CFAS Regulated Industries and Reports Standing
Committee (RIRSC)
CFAS Public Sector StandingCommittee (PSSC)
CFAS Sustainability StandingCommittee (SSC)
CFASB-BBEEAdvisory Committee (BAC)
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Issue 29 March - April 2015
