Abstract
Even though the IFRS for SMEs does provide some relief in respect of the financial reporting burden for non-public entities, there still seems to be a need for an even lower level of financial reporting. In recent years South Africa embarked upon the development of a financial reporting framework for non-public entities and various versions of this so-called micro GAAP have been issued. However, the Accounting Practices Board raised some concerns about the then proposed micro GAAP. This article highlights the South African accounting practitioners’ views from different professional bodies on micro GAAP. They generally believe that micro GAAP will represent fair presentation and that the financial statements prepared under micro GAAP can still be regarded as general purpose financial statements. Furthermore, the majority of accounting practitioners believe that there is a definite need for a third tier of financial reporting in South Africa and indicated their preference of which entities may apply micro GAAP. Legal backing of micro GAAP is also considered appropriate by the practitioners.
Highlights
AND BACKGROUNDThe issue of the so-called differential reporting (or big Generally Accepted Accounting Practice (GAAP) and little GAAP as it is referred to in the United States of America (USA)) (Burton & Hillison, 1979; Christopher, Price & Saunders, 2005) is nothing new in accounting
In related prior research it was argued that the justification for differential reporting mainly lies in the consideration of the users’ needs, in the cost/benefit constraint (Christopher et al, 2005; Wise, Faux & Fisher 2005; Stainbank, 2008; Greeff, 2008; Eierle & Haller, 2009, Van Wyk & Rossouw, 2009 and SA Institute of Chartered Accountants (SAICA), 2009a) and in the burden to comply with the complexity of International Financial Reporting Standards (IFRSs) (Wise et al, 2005; Van Wyk & Rossouw, 2009; SAICA 2009a) or the US GAAP (Christopher et al, 2005)
In terms of the new Conceptual Framework for Financial Reporting, fair presentation “describe information that has the qualitative characteristics of relevance and representational faithfulness enhanced by comparability, verifiability, timeliness and understandability” (IASB, 2010b)
Summary
AND BACKGROUNDThe issue of the so-called differential reporting (or big GAAP and little GAAP as it is referred to in the United States of America (USA)) (Burton & Hillison, 1979; Christopher, Price & Saunders, 2005) is nothing new in accounting. In related prior research it was argued that the justification for differential reporting mainly lies in the consideration of the users’ needs, in the cost/benefit constraint (Christopher et al, 2005; Wise, Faux & Fisher 2005; Stainbank, 2008; Greeff, 2008; Eierle & Haller, 2009, Van Wyk & Rossouw, 2009 and SAICA, 2009a) and in the burden to comply with the complexity of International Financial Reporting Standards (IFRSs) (Wise et al, 2005; Van Wyk & Rossouw, 2009; SAICA 2009a) or the US GAAP (Christopher et al, 2005). Standard setters in various countries acknowledged the need for differential reporting by diverting from the technical and complex IFRSs and embarking upon the development of differential reporting (Van Wyk & Rossouw, 2009; SAICA 2009a)
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