What Public Interest Score means for you if you’re a company under the CIPC regime
The CIPC (Companies and Intellectual Property Commission) of South Africa has embraced the use of XBRL, the international data standard for financial information, when it requires companies to submit their Annual Financial Statements (AFS). Being an electronic format, XBRL (eXtensible Business Reporting Language) makes it easier for companies to report their business information, and improves operating efficiencies. The CIPC mandate requiring the digital reporting system for all qualifying entities goes into effect on 1 July 2018. The language facilitates the electronic communication of business information, majorly enhancing the preparation, analysis, distribution of AFSs. This digital standard will replace the submission of financial reports as PDFs, drastically easing the administrative burden companies face because of multiple required submissions to different regulators. It also simplifies the monitoring and regulation of entities for regulatory authorities, by automating a chunk of the process. Because XBRL information is machine-readable, documentation, classification, and processing of submitted reports becomes effortless.
The objectives of the XBRL programme in South Africa are to:
- Help reduce administrative burden on businesses when they report financial information to government for regulatory compliance. Achieving this goal requires reducing duplication and inconsistency in business information reported to various government agencies — thus, a nationally unified taxonomy becomes a necessity.
- Help achieve painless regulatory compliance to accomplish the mission of the government agency. The CIPC’s primary mission is to consolidate business and financial information and make it accessible to investors, for better transparency, and to reduce the administrative costs of reporting for businesses.
Public Interest Score (PIS)
In accordance with the new mandate, public companies and companies holding fiduciary funds over R5 million will be needed to carry out audits as usual. For a private company, the decision to audit or perform the newly introduced independent review is determined in part by the PIS of the company. Private businesses with a PIS of 350 or more must be audited. Non-owner companies with scores between 100 and 349 points will be reviewed if their statements are independently compiled, and they will be audited if statements are internally compiled. Owner managed companies with 100 points or less will be exempt completely from audit or review if they so choose, but they are still required to prepare financial statements. All can choose to be audited if they so desire, and these regulations apply equally to close corporations.
Why should you be worried about PIS?
There are other factors to consider when making the final decision to audit or conduct an independent review. There may be situations where, although a company does not meet the size criterion for an audit, shareholders may require one. Similarly, financiers or tender submissions may insist on an audit. Governing bodies such as the Estate Agents Board or FSB may require an audit in terms of their legislative requirements.
For companies thinking about selling their business in the foreseeable future or ones that want to apply for a loan, an audit might be the best route. In the case of a loan, the approached bank has better data from a qualified source with audited financial statements to make its decision on approving a loan, making audits the way to go.
Furthermore, an audit offers positive assurance that the financial statements are a fair representation of the operations and financial condition of the business. An independent review, in contrast, gives limited or negative assurance of the fair representation of the business.
Calculating the public interest score of a company or close corporation
The factors that contribute to PIS are:
- Number of points equal to the average employee count of the company during the financial year
- One point for every R1 million (or portion thereof) in third party liability of the company, at the end of the financial year
- One point for every R1 million (or portion thereof) in turnover during the financial year
- One point for every individual who, at the end of the financial year, is known by the company
- In the case of a profit company, to directly or indirectly have a beneficial interest in any of the company’s issued securities
- In the case of a non-profit company, to be a member of the company, or a member of an association that is a member of the company
Having prepared compliance reports for over 13 years, we at DataTracks specialise in comprehensive and accurate reporting of financial information. We’ve prepared over 150,000 XBRL reports for different regulators around the world, and we have the expertise you need to help you comply with CIPC regulations. Whether you are required to prepare XBRL statements by the regulator or if you’re trying to understand what XBRL can do for the structuring of your financial information, you can reach out to us at email@example.com. We love hearing from you!