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Shaping the Future of Financial Reporting: Key Updates in South Africa's Accounting Landscape

Some of the new accounting standards and guidelines in South Africa



Accounting standards are the rules and principles that govern the preparation and presentation of financial statements. They are essential for ensuring the quality, comparability and reliability of financial information. In South Africa, accounting standards are issued by various bodies, depending on the type and nature of the entity. For example, public sector entities apply the Standards of Generally Recognised Accounting Practice (GRAP), while private sector entities apply the International Financial Reporting Standards (IFRS).

In this article, we will highlight some of the new accounting standards or guidelines that are relevant for public sector entities in South Africa, as well as the expected impact and implications for their financial reporting. These standards or guidelines are effective from 1 April 2022 or later, and have been approved by the Accounting Standards Board (ASB) and the National Treasury.


Modified Cash Standard (MCS)

The MCS is a basis of accounting that recognises revenue and expenditure when cash is received or paid, respectively, and also recognises certain assets and liabilities that arise from cash transactions or events. The MCS is applicable to all national and provincial departments, as well as constitutional institutions, as prescribed by the Public Finance Management Act (PFMA).


The MCS has been revised and updated to align with the latest GRAP standards and to address some of the challenges and issues identified in practice. The revised MCS is effective from 1 April 2022 2. Some of the key changes introduced by the revised MCS include:

  • A new chapter on accounting by principals and agents, which provides guidance on how to identify and account for transactions where one entity acts on behalf of another entity.

  • A new chapter on transfers of functions, which provides guidance on how to account for transfers of functions between entities within the same sphere of government or between different spheres of government.

  • A new chapter on mergers, which provides guidance on how to account for mergers of entities within the same sphere of government or between different spheres of government.

  • Revised guidance on accounting for capital assets, inventories, leases, provisions and contingents, related party disclosures, events after the reporting date, and consolidated financial statements.

The revised MCS is expected to improve the consistency, comparability and transparency of financial reporting by public sector entities. It will also enhance accountability and oversight by providing more relevant and reliable information to users of financial statements.


Quality Management Standards

The quality management standards are a suite of standards that deal with the quality management at both the firm and engagement level for audits, reviews and other assurance or related services engagements. The quality management standards are based on the International Standards on Quality Management (ISQMs) and International Standard on Auditing (ISA) 220 (Revised) issued by the International Auditing and Assurance Standards Board (IAASB). The quality management standards are applicable to all firms and auditors that perform such engagements.



The quality management standards comprise:

  • ISQM 1: Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements

  • ISQM 2: Engagement Quality Reviews

  • ISA 220 (Revised): Quality Management for an Audit of Financial Statements


The quality management standards introduce a new approach to quality management that is more proactive, risk-based and scalable. The quality management standards require firms to establish a system of quality management that is tailored to their specific circumstances and nature of engagements. The system of quality management should include policies and procedures that address various aspects of quality management, such as leadership, governance, culture, resources, processes, monitoring and remediation. The system of quality management should also include policies and procedures for performing engagement quality reviews for certain engagements that are identified as having a higher risk or public interest.


The quality management standards are effective from 15 December 2022. The quality management standards are expected to enhance the quality and consistency of engagements performed by firms and auditors. They will also increase the confidence and trust in the financial reporting by public sector entities.


The new accounting standards or guidelines discussed in this article are part of the ongoing efforts to improve the financial reporting by public sector entities in South Africa. They aim to address some of the emerging issues and challenges in the accounting and auditing environment, as well as to align with the international best practices. Public sector entities should familiarise themselves with these new accounting standards or guidelines and assess their impact and implications for their financial reporting. They should also plan ahead and prepare for their implementation in order to ensure a smooth transition.




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