Series 1: Article 4
JSE Aiming at Cutting the Red Tape
In our latest article “Abridged Report”, the Merchantec Capital Sponsor Team continues the Series “JSE Aiming at Cutting Red Tape”. As previously mentioned, the JSE is – as set out in its Consultation Paper published in March – looking to make the application of the Listings Requirements easier.
Their objective: to do away with “red tape” to facilitate a more flexible and fit for purpose application whilst supporting an environment to allow JSE listed companies to focus on their business and operations.
With the key focus of the Consultation Paper being “effective and appropriate level of regulation”, the JSE is proposing amendments around, amongst others, the:
Before we consider the proposed amendments, let’s look at the Current Listings Requirements
Paragraph 3.21(b) of the Listings Requirements requires that Issuers publish an abridged version of their results (which accord with IAS 34) on SENS when their audited annual financial statements are distributed to shareholders. These audited annual financial statements must be made available on the Issuer’s website.
Unnecessary regulatory burden?
Let’s look at some of the considerations applicable to producing IAS 34 compliant abridged reports:
– IAS 34 was intended to be applied where full annual financial statements are not available;
– the preparation of IAS 34 compliant financial results are not necessarily a simple cut & paste exercise;
– IAS 34’s explicit disclosure obligations require assessment against specific criteria of materiality;
– adds additional management time to prepare the financial results; and
– increases costs.
What has been proposed?
The JSE is proposing the removal of the Issuer’s obligation to produce an abridged report when audited annual financial statements are published.
Background to the proposed change
In 2014, when the JSE modified the provisions pertaining to press publications, it introduced the short form announcement approach pursuant to paragraph 3.46A of the Listings Requirements. Subsequently, since February 2019 Issuers need only publish their short form financial results on SENS, with the long-form financial results / abridged results being made available through a weblink.
Given that full audited annual financial statements are available, and that abridged results need not be published directly on SENS, the JSE has reconsidered the regulatory benefit of forcing Issuers to produce IAS 34 compliant results.
What is the JSE’s rationale for the proposed amendment?
By creating time delays to the publication of financial results, and incurring unnecessary internal and external costs over and above the Issuer’s obligations to produce annual financial results pursuant to IFRS, the requirement adds no regulatory benefit.
Would the proposed amendment to the Abridged Report be beneficial to your company?
The Merchantec Capital Sponsor Team is going to keep unpacking the proposals contained in the Consultation Paper over the course of the next few weeks…
We hope that you will enjoy this series, and look forward to receiving your feedback.