A company’s financial statement is important; let us assist
A company’s financial statement is constructed to give an indication of a company’s finances – both its activity and performance. The statement illustrates where your money came from, where money went, and what your current accounts look like. Companies are required to submit financial statements annually as these statements allow government agencies to ensure that companies are staying compliant with tax and financing regulations.
Investors and governing bodies rely on the data provided in your company’s financial statement to understand what is going on in your business’ finances. This transparency increases your company’s credibility and reputation. Therefore, it is crucial that your statements are done correctly and are submitted on time. To ensure that your company stays compliant and that your financial statements are correct and up to date, you can rely on the professional team at MMS Group.
There are four main types of financial statements; these include:
- Balance sheets Balance sheets provide in-depth information about your company’s current financial status. It will provide information on your company’s assets, liabilities and shareholders’ equity. The balance sheet gives a clear indication of a company’s financial position at the end of a reporting period.
- Income statements Income statements show how much revenue a company generated within a specific timeframe. The statement also indicates costs and expenses associated with every income. A company’s income statement will therefore show its gross income, and then its income after tax and other deductions, to determine whether you made a profit or not.
- Cash flow statements Cash flow statements are important because a company should always have sufficient cash on hand to pay its expenses. These statements will illustrate your company’s incoming and outgoing cash transactions.
- Statements showing shareholders’ equity
These four statements are all related and together they form your business’ financial statement. When seeking investment, a company’s financial statement is often the first thing that investors will turn to as it gives a clear indication of your business’ financial history, performance and future growth, which is why it is so important that your statement is put together professionally – and contains all the relevant information.
Is your company required to submit a financial statement?
On 1 July 2018, the Companies and Intellectual Property Commission (CIPC) announced that companies must now submit their Audited Financial Statements (AFS) in a new format known as iXRBL. This new format was introduced to make is easier for companies to submit annual statements electronically. The objectives of the iXBRL programme are:
- To minimise the administrative burden on companies when having to submit financial information for regulatory compliance
- To reduce duplication and inconsistencies in submitted business information
- To achieve compliance and to provide accurate business information to investors with improved transparency
Many business owners are unsure whether they are required to have an AFS. iXBRL stands for eXtensible Business Reporting Language and allows the CIPC to read all submitted data more effectively.
According to Regulation 30 of the Companies Act, the following business are required to submit an Audited Financial Statement:
- If your company’s Memorandum of Incorporation (MOI) prescribes Audited Financials – an AFS is in the new XBRL format will be required
- For Private or Personal Liability Companies
- If the business holds assets in fiduciary capacity for unrelated persons, and assets exceed R5 million over the Financial Year – AFS in the new XBRL format is required; or
- If a Public Interest Score is 100 or more and Financial Statements are compiled internally – AFS in the new XBRL format is required; or
- If the business is not managed by owners and Public Interest Score is below 100 and Financial Statements are compiled internally – Only Independent Reviewed Financials may be required, which means that the submission in new XBRL format is not mandatory; or
- If your business’ Public Interest Score is over 349 and your Financial Statements are compiled by an independent party – AFS in the new XBRL format is required; or
- Your business is not managed by owners and the Public Interest Score is between 100 and 349 and Financials are compiled by an independent party – Only Independent Reviewed Financials may be required and submission in new XBRL format will not be mandatory.
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