Comparison of PI Score and Eligibility for CIPC iXBRL Mandate
The PI Score Approach
Not only does the CIPC (Companies and Intellectual Property Commission) require that all audited financial statements be submitted via iXBRL, Regulation 26(2) states that every company must calculate its Public Interest (PI) score at each financial year ending. The Public Interest score takes into account various matters such as employees, shareholders, turnover, liability, etc. This regulation has brought South Africa in line with similar practices in other countries.
PI Score Categories
Public companies and enterprises holding fiduciary funds over 5 million will carry out orders as usual. Whether a private company’s annual financial statements must be audited or independently reviewed is determined partly by its PI score. The PI score also determines what financial reporting standards need to be adopted and whether a company needs to appoint a social and ethics committee.
Companies that are managed by the owners with 100 points or less will be exempted completely from review audits if they so choose. Companies that are not managed by the owners with scores between 100 and 349 points will be reviewed if the statements are independently compiled. In case their statements are internally compiled, they will be audited. Private businesses with a Public Interest score of 350 or more must be audited and need to submit their annual returns using iXBRL.
Public Interest Score Factors
The calculation of PI scores depends on certain factors, namely:
- The average number of employees of the company during the financial year
- The total third-party liability of the company at the financial year-end
- The total turnover during the financial year
- The maximum number of individuals with a beneficial interest in securities of the company, or members of a non-profit company as the case may be.
What does a Company’s PI Score Determine?
A company’s PI score essentially determines:
- If the company’s financial statements should be audited or independently reviewed.
- Whether the financial reporting standards apply to the company. For example, a PI score would help to determine whether FIRS reporting standards apply or IFRS for SMEs apply.
The Objective of the iXBRL Program in South Africa
The reasons for the CIPC to use iXBRL are many. Some of which include:-
- It will help reduce the administrative burden on businesses when they report financial information to the government for regulatory compliance. One rational and unified taxonomy becomes a necessity as a reduction in duplication and inconsistency in business information reported to various government agencies is required.
- Consolidation of business and financial information and making it accessible to investors is CIPCs principal mission. The iXBRL program will help achieve this. It aims at transparency and reduction in administrative costs.
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