Financial statements… getting it right

Part 6 – What lies ahead

The financial statements are meant to have predictive value by providing information about amounts receivable or payable in specific periods, or how certain expenses or revenue could affect future periods. Any changes to the accounting policies resulting from the future adoption of new Standards affect the predictability of the information presented at year end. As a result, entities are required to provide information about the effect of future changes in the accounting policies to the financial statements. 

GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors requires entities to disclose (a) the existence of issued but not yet effective Standards of GRAP, and (b) known or reasonably estimable information relevant to assessing the possible impact of the application of the new Standard of GRAP on the entity’s financial statements in the period of application.

Entities frequently just disclose a list of Standards that are not yet effective, with some Standards on the list that are not relevant to an entity’s activities. As the purpose of the disclosure is to provide predictive information to the users of the financial statements about potential changes to an entity’s financial performance, financial position and cash flows, disclosure of a list of not yet effective Standards is insufficient.

An entity should disclose information about those Standards that are not yet effective, and which are relevant to its activities. The information should include information about the possible impact of the Standard on the entity’s financial statements. Entities should refer to the list of not yet effective Standards of GRAP included in Directive 5 on Determining the GRAP Reporting Framework. Entities should also consult FAQ 1.14 on What disclosures should an entity provide on newly effective Standards of GRAP? issued by the Secretariat.

Useful links:

FAQs: access.

Disclaimer

This content has been prepared by the Secretariat of the ASB for information purposes only. It has not been reviewed, approved or otherwise acted on by the Board.