Masters Degrees (School of Accountancy)

Permanent URI for this collection

http://hdl.handle.net/11660/150

Browse

Browsing Masters Degrees (School of Accountancy) by Author "Van Wyk, H. A."

Now showing 1 - 4 of 4
  • Thumbnail Image
    ItemOpen Access
    Algemeen aanvaarde rekeningkundige praktyk vir niewinsgewende organisasies, met verwysing na die NG Kerk in die Vrystaat
    (University of the Free State, 2006) Rossouw, Jacobus; Van Wyk, H. A.
    English: Not-for-profit organisations, and thus the congregations and welfare organisations of the Dutch Reformed Church in the Free State, exhibit certain unique characteristics, different from businesses. In essence, the primary objective of not-for-profit organisations is not to realise a profit to be distributed to equity participants (e.g. shareholders), but to meet certain religious, cultural, social and other non-commercial needs of the community. Not-for-profit organisations’ need for relevant accounting standards in fact emanates from their unique characteristics. Owing to the nature of not-for-profit organisations, the users of their financial statements require information (financial and non-financial) which is different from the information required by users of financial statements of businesses. Financial reporting which makes it possible for the users of financial statements of not-for-profit organisations to assess the stewardship of the organisation’s management, is the central focus because management are accountable to the members of the organisation, and also especially to donors. Standards of Generally Accepted Accounting Practice (GAAP) are drawn up primarily for businesses, and specifically to enable users of financial statements of companies in the international capital markets, to make economic decisions. Given this fact, and the unique nature and characteristics of not-for-profit organisations, it follows that Standards of GAAP are neither relevant nor appropriate in the case of not-for-profit organisations. Standards of GAAP therefore cannot be applied indiscriminately to not-for-profit organisations, albeit that appropriate South African legislation (Nonprofit Organisations Act) probably requires compliance with Standards of GAAP. In the international accounting environment, attempts have been made to develop unique accounting standards for small- and medium-sized entities, while unique accounting standards have also been drawn up for government institutions on the basis of their unique accounting needs. The same approach should also be followed for not-for-profit organisations since their unique nature and characteristics also necessitate typical accounting standards. Where not-for-profit organisations do indeed attempt to apply Standards of GAAP, they nonetheless experience problems in this regard. Some of these problems derive from the theoretical irrelevance of Standards of GAAP, while other problems are of a more practical nature. The fundamental problem derives from the question whether the cash or the accrual basis is the most appropriate in the case of not-for-profit organisations. Moreover, “fund accounting” is typical of not-for-profit organisations; however, an accounting standard for treatment of “funds” does not exist. In addition, various problems are also experienced with the recognition of assets, impairments and depreciation of assets, because the definition of “assets” and the recognition criteria do not consider the unique nature of not-for-profit organisations. Various questions exist with respect to the recognitio n of receipts as income. The question in particular is whether donations received for a specific purpose, donations which may only be utilised in future periods, as well as capital donations, should be recorded as income, liabilities or directly as funds. Not-for-profit organisations also experience problems with the recognition of so-called “in natura” receipts, and other forms of income. Given the nature and characteristics of not-for-profit organisations, performance reporting is also problematic because the “profit figure” and other reported financial information often do not capture the real “performance” (i.e. the achievement of objectives) of not-for-profit organisations. Furthermore, certain terminologies in GAAP are also not applicable to not-for-profit organisations. In some countries, accounting standards have been developed and issued specifically for not-for-profit organisations. The standards issued by the United States of America , the United Kingdom, Canada and Australia have been analyse d and compared to establish appropriate accounting principles for not-for-profit organisations. Accounting practice, applied in the above-mentioned countries, was reviewed by means of empirical tests among congregations and welfare organisations of the Dutch Reformed Church in the Free State. Specific aspects that were addressed and which have led to proposals for typical standards of generally accepted accounting practice for not-for-profit organisations are the following: · Presentation of financial statements; · Reporting on the restrictions imposed by donors on the utilisation of funds; · Accounting in terms of a cash basis versus the accrual basis ; · Recognition and measurement of fixed assets and accompanying expenses, such as depreciation and impairments, as well as the recognition and measurement of inventory; · Recognition and measurement of income in general, and in particular, recognition of donations and contributions, “restricted donations received”, and donations “in natura”; · Performance reporting by not-for-profit organisations; and · Aspects related to fund accounting. The core recommendations derive from the position that existing and formal Standards of GAAP should be used as a basis, and these standards should be modified to deal with the typical accounting concerns that pertain to not-for-profit organisations. The accounting profession, not-for-profit organisations, and other stakeholders must take note of the irrelevance of GAAP for not-for-profit organisations, the accounting problems experienced in the context, as well as the need for, and the recommendations made with respect to typical accounting standards for not-for-profit organisations. Like some other countries, South Africa should also play an active role in developing accounting standards which are applicable and relevant to not-for-profit organisations.
  • Thumbnail Image
    ItemOpen Access
    The effect of estimates in financial statements
    (University of the Free State, 2008) Raubenheimer, Elizabeth Johanna; Van Wyk, H. A.
    The International Financial Reporting Standards (IFRSs) requires a number of accounting estimates for the preparation of financial statements. The purpose of this study is to establish the effect of estimates in financial statements. The possible increases in required accounting estimates in the IFRSs are examined by comparing the IFRSs of 2003 to 2006. With this comparison it is established that the requirements of the IFRSs for fair value accounting is mainly responsible for the increases in allowed accounting estimates. The IFRSs of 2006 is examined to establish the frequency of use of estimates in financial statements. In order to get a better picture of the frequency of use of accounting estimates in financial statements, a list of allowed accounting estimates for each of the components on the Balance Sheet (also referred to as the “statement of financial position”) has been compiled. It is concluded that the components on the balance sheet are to a significant extent influenced by accounting estimates. The literature on earnings management and creative accounting are examined to determine if there is any risk that accounting estimates could be used to manipulate financial statements. This gives an indication of the reliability of accounting estimates within financial statements. It is concluded that the difference between fair presentation and creative accounting seems to be the intention of management which is difficult to assess. The “corporate reporting supply chain” has some responsibilities to prevent and detect creative accounting practices and fraud. These responsibilities can limit the risk that accounting estimates may be used in creative accounting and financial statement fraud. In the wake of some financial disasters, these checks and balances should restore public trust in financial reporting. An empirical study is performed on five companies that form part of the Construction and Materials sector of the JSE to establish the effect of estimates on their financial statements. The study indicated that: • the average percentages of assets, including cash and cash equivalents, of the five companies affected by accounting estimates are 60% for 2004, 60% for 2005 and 59% for 2006. If cash and cash equivalents are excluded from the calculation of assets affected by accounting estimates, the average percentages are 72% for 2004, 77% for 2005 and 76% for 2006; • there is an increase in the number of “estimate” hits from 2004 to 2006 in the financial statements of the five companies in the empirical group; and • the disclosure provided on key sources of estimation uncertainty is however, limited. A number of recommendations are made to limit the risk that accounting estimates could be used for creative accounting purposes. The negative effect of the use of accounting estimates in financial statements is a loss of reliability. The positive effect of the use of accounting estimates in financial statements is that of relevance.
  • Thumbnail Image
    ItemOpen Access
    Harmonising user needs with reporting requirements of close corporations
    (University of the Free State, 2004-11) Kruger, Renshia; Van Wyk, H. A.
    English: The Close Corporations Act requires that the annual financial statements of close corporations must, in conformity with generally accepted accounting practice appropriate to the business of the corporation, fairly present the state of affairs of the corporation at the end of the financial year concerned, and the results of its operations for that year. According to generally accepted accounting practice, the objective of financial statements is to provide useful information about the enterprise to the primary user groups of the financial statements, independent of the size of the entity. The primary user groups of the financial statements of close corporations are the members, SARS and bankers. The recognition, measurement and disclosure requirements contained in the Statements of GAAP do not give rise to cost-effective and useful information being provided to the users of financial statements of close corporations and other small entities, because these users do not require the extensive information provided in general purpose financial statements. Consequently, an accounting standard is required to differentiate between general and limited purpose financial statements. In South Africa, the Limited Purpose Financial Reporting Standards (LPFRS) were developed. The modifications stipulated in this LPFRS mainly relate to the disclosure requirements that were reduced, with only a few alternatives allowed to the recognition and measurement criteria relating to deferred tax and financial instruments. These developments may not be sufficient enough for the purposes of close corporations. Accordingly, the study recommends that a formal, separate set of simplified differential reporting standards be developed for the purpose of close corporations. To be acceptable, the reporting method should meet most of the information needs of the users of the financial statements of close corporations and other small entities, and simultaneously provide cost-effective information that is a fair presentation of the results, taking into consideration the additional costs that may result from adopting differential reporting standards.
  • Thumbnail Image
    ItemOpen Access
    Die openbaarmaking van finansiële instrumente in die finansiële state van mikro-gelduitleners
    (University of the Free State, 2000-05) Jasper, Zuleka; Van Wyk, H. A.
    English: Since 1992 the micro lending industry experienced significant growth. The industry is now in the position where it forms an integral part of the financial sector in South Africa. Very little formal research has been undertaken in die micro lending industry. It appears that no research what so ever has been done with respect to the financial presentation by micro lenders. It is very important to understand the micro lending industry. A short overview of the industry, as well as an overview of the regulatory body: the MicIO Finance Regulatory Council, are presented in this thesis. The purpose of financial reporting is to provide information to the stakeholders of an entity. In the South African context the King report is the most important document that defines and addresses the term stskeholder. In chapter 12 of the King report it defines stakeholders as /I any person, entity OI interest gIOUp that has some association with the en terprise," It was found necessary to identify the most important stakeholders of micro lending entities due to the wide span of the term stakeholders. The following stakeholders were identified as being the most important: o The owners o The suppliers of long term funds o The loan debtors o The employees. Stakeholders need sufficient information to make informed decisions. The quality of this information is imperative. Financial statements are the main source of information. It is important that the information in these financial statements are of outstanding quality. A number of business types are found in the micro lending industry. This study has shown that the most important and often used types are the close corporation and the company. Both the Company's Act and the Close Corporation's Act refer to Generally Accepted Accounting Practice (GAAP) as the basis for financial presentation. However, the interpretation of the term does not necessarily mean that statements on GAAP need to be applied. Fortunately this position is changing. This thesis was thus based on the assumption that reference to GAAP in die Company's Act and Close Corporation's Act means that statements on GAAPhave to be applied. The core of the study involves a discussion of the presentation requirements regarding the financial instruments that have been identified during the empirical study. Special reference was given to AC12S - Financial instruments: disclosure and presentation. The definitions in this document were detailed as it was used as a measure to identify the financial instruments included in the financial statements of micro lenders. The following financial instruments were identified: o Bank and cash balances o Debtors (other than loan debtors) o Loan debtors o Long term loans ,0 Creditors. In view of all relevant statements, legislation and corporate requirements a wide-ranging summary including all relevant presentation requirements regarding financial instruments have been incorporated. In the second section of the thesis the scope and results of the empirical study are discussed. The empirical study was performed on a sample of close corporations and companies that have been registered or provisionally registered with the Micro Finance Regulatory Council. The selected micro lenders' financial statements were analysed to establish the degree of compliance with the proposed financial reporting requirements. The writer thoroughly believes that the micro lenders' financial statements do not comply to the prescribed financial reporting requirements and leave much to be desired. Substantial enhancement is of crucial importance before these entities will effectively address the needs of all their stakeholders.