CIPC requests Voluntarily Disclosure of Solvency and Liquidity Test performed in the AFS

CIPC requests Voluntarily Disclosure of Solvency and Liquidity Test performed in the AFS

• 08 March 2021
• South African Accounting Academy

The notice issued by CIPC in this regard recaps on the entities that should disclose the solvency and liquidity test in their AFS.

The CIPC, through its compliance monitoring activities stemming from Regulation 30(5), has observed a trend where some companies are not adhering to section 4 of the Act, the solvency and liquidity test. It was also observed during the reviews of annual financial statements that the solvency and liquidity tests were not performed consistently across all types of entities by the board of directors.

In certain instances, the board of directors were not aware that they should satisfy the requirements of the section 4, the solvency and liquidity test. The lack of knowledge and due care by the board of directors are some of the main reasons for the continuous non-compliance with the Companies Act.

CIPC recommends that entities disclose in their annual financial statements that they have performed a solvency and liquidity test as prescribed in terms of the Companies Act, for transactions mentioned above.

CIPC proposes that the Directors’ Report should include a statement in the AFS, and have provided an example in this Notice.

It is an offense to disclose false information in the annual financial statements, CIPC is legally obliged to investigate such matters in terms of the Companies Act

Click here to download the Notice:

http://www.cipc.co.za/za/wp-content/uploads/2021/03/Notice-15.pdf

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