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JSE Proactive monitoring report November 2021
The 2021 focus area is the impact of Covid-19, some of the Covid-19 disclosure related findings were:
- Lessor accounting for Covid-19 lease concessions
- Fair value of investment properties
- Debt covenant disclosures
- ‘Negative confirmations’ – supporting explanations on an why economic event did not significantly impact the issuer
Common disclosure omissions include:
- Presentation of financial statements – Lack of disclosure re judgements and estimates.
- Fair value measurement disclosures
- omissions of significant unobservable inputs,
- sensitivity analysis of changes in these inputs and
- over aggregation of disclosed inputs.
- Financial instrument disclosures - Weak expected credit loss disclosures.
- Impairment of assets – Omission of all or some of the minimum disclosure requirements.
- Extent of disaggregated revenue – Revenue has not been sufficiently disaggregated.
- Tax rate reconciliation – tax rate recon not meaningful, over aggregation, insufficient support for recognising deferred tax assets.
The material cases identified in the report include the following items.
- Misallocation between categories in the statement of cash flows (Lease principal payments = financing activities!)
- Incorrect classification of a financial asset
- Headline earnings per share - Circular 1/2021 is rule-based; deviations are not permitted.
- Misallocation of revaluations when investment property in one entity and PPE at group
- Structured entities – must be tested properly for control, esp where financial guarantee exist
- BEE transactions – be careful of double counting the share issues where options exist
Emerging issues for the 2022 review cycle were also discussed including:
- Income statement presented by nature v function
- Quantifying the impact of Covid-19 / the July 2021 civil unrest
For access to the full report please click here
17/11/2021
Contacts
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