PAAB is a member of International Federation of Accountants
PAAB is a member of International Federation of Accountants (IFAC), PAFA (Pan African Federation of Accountants) and Chartered Accountants Worldwide (CAW) 17 April 2015 IFRS Foundation 30 Cannon Street London EC4M 6XH United Kingdom Email: [email protected] Dear Sir/Madam PAAB SUBMISSION ON ED 2014/6- DISLOSURE INITIATIVE: AMMENDMENTS TO IAS 7 In response to your request for comments on ED/2014/6- PAAB SUBMISSION ON ED 2014/6DISLOSURE INITIATIVE: AMMENDMENTS TO IAS 7, attached is the comment letter prepared by the Zimbabwe Accounting Practices Board (ZAPB) of Public Accountants and Auditors Board (PAAB). This comment letter results from deliberations of the ZAPB, which comprises members from reporting organisations, regulators, auditors, IFRS specialists and academics. We are grateful for the opportunity to provide our comments on this project. Please do not hesitate to contact us should you wish to discuss any of our comments. Yours faithfully, Brian Njikizana (KPMG) Chairperson of the ZAPB Anesu Daka (CAA) Project Director Cc: Admire Ndurunduru (PAAB Secretary) Prepared by Chartered Accountants Academy (CAA) Technical www.caazim.org Page 1 PAAB is a member of International Federation of Accountants (IFAC), PAFA (Pan African Federation of Accountants) and Chartered Accountants Worldwide (CAW) PAAB SUBMISSION ON ED 2014/6- DISLOSURE INITIATIVE: AMMENDMENTS TO IAS 7 SPECIFIC COMMENTS Question 1—Disclosure Initiative amendments This Exposure Draft of proposed amendments to IAS 7 forms part of the Disclosure Initiative. Its objectives are to improve: (a) Information provided to users of financial statements about an entity’s financing activities, excluding equity items; and (b) Disclosures that help users of financial statements to understand the liquidity of an entity. Do you agree with the proposed amendments (see paragraphs 44A and 50A)? Do you have any concerns about, or alternative suggestions for, any of the proposed amendments? We agree with the proposed amendments. The amendment of the standard (IAS 7) is also very appropriate as it gives due authority to the amendments. However, with regards to the amendment on para 44A, it may be appropriate to include a mechanism to encourage users to disclosure this reconciliation together with those required by IFRS 7 Financial Instruments: Disclosures, especially liquidity analysis in a single note. Most preparers disclose ‘financial risk management’ disclosures separately from related financial instruments balance disclosures. E.g. Note 20 in an annual report would contain financial liabilities disclosures, whilst, note 35 would include IFRS 7 risk management disclosures. This practice may distort understanding of financial information. We strongly feel that the IFRS7 disclosures e.g. liquidity analysis provides forecast of the future financing activities. Hence, the reconciliation required by para 44A of IAS 7 as amended together with IFRS7 disclosures would convey clearer and understandable financial information if disclosed as part of a single note. Prepared by Chartered Accountants Academy (CAA) Technical www.caazim.org Page 2 PAAB is a member of International Federation of Accountants (IFAC), PAFA (Pan African Federation of Accountants) and Chartered Accountants Worldwide (CAW) Question 2—Transition provisions Do you agree with the proposed transition provisions for the amendments to IAS 7 as described in this Exposure Draft (see paragraph 59)? If not, why and what alternative do you propose? We disagree with proposed transition provisions for the amendments to IAS 7 as descried in paragraph 59. We propose that the amendments be immediately effective on pronouncement. We believe that these disclosures should not be delayed into a future debt whilst at the discretion of the preparer to disclose or not to disclose due to the following reason: Whilst the amendment on para 50A is more of an enhancement of IAS 7. 50, the para 44A disclosure is so critical to understanding the changes in financing activities other than equity, especially debt instruments and lease liabilities. This information is useful in understanding the going concern status of an entity together with its ability to raise debt. Users need to know how much the entity used to serviced its debt and other movements cash or otherwise which occurred during the accounting period. (E.g. if the debt of an entity at end of 2013 was FC200 million and FC160 million at end of 2014, one might assume that the entity is doing well to service its debt. However, if information that shows that part of the debt was converted into equity due to lack of cash resources or cancelled due to foreclosure on collateral. This may be insightful on the going concern issues of the entity) We believe that the reconciliation of the financing activities is very critical to achieve relevance and faithful representation of financial information required by users now rather than later. An immediate effective date would be most appropriate in this regard. Prepared by Chartered Accountants Academy (CAA) Technical www.caazim.org Page 3
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