A POST-IMPLEMENTATION REVIEW OF THE ADOPTION OF IFRS 10 AND IFRS 12 ON THE FINANCIAL STATEMENTS OF SOUTH AFRICAN ENTITIES

Abstract

New accounting standards were implemented by the International Accounting Standards Board (IASB) that have a potential effect on consolidated financial statements. The new consolidation standards, International Financial Reporting Standard (IFRS) 10: Consolidated Financial Statements and IFRS 12: Disclosure of Interest in Other Entities, were introduced in response to issues highlighted by the 2008 global financial crisis. This empirical study is a post-implementation review of the adoption of IFRS 10 and IFRS 12 on the financial statements of listed entities in South Africa and specifically aims to determine if the adoption led to a change in the scope of consolidation, whether it was adequately disclosed in the notes and if the adoption has had any effect on the items presented in the financial statements. The study found that the adoption of the consolidation standards affected a minority of the entities sampled, with a minimal effect on the financial statement line items. The changes in the scope of consolidation were adequately disclosed and were mainly due to an increase in the number of entities consolidated, especially the inclusion of special purpose entities. Although the standards provided clearer definitions and improved guidance, the effect of the financial statements, as expected by the IASB, was minimal.