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FAQs on Modified Cash Standard (MCS) financial statements
- 07 June 2023
- Accounting
- South African Accounting Academy
The Frequently Asked Questions (FAQs) are based on queries commonly received from the stakeholders involved with preparation and finalisation of financial statements in accordance with the Modified Cash Standard (MCS).
These FAQs should be considered for preparation and finalisation of the Annual Financial Statements for the 2022/23 financial year and reporting periods thereafter (effective from 1 April 2022).
These FAQs address some of the issues relating to the following:
- Chapter 3: Financial Statement Presentation
- Chapter 14: Provisions and Contingents
- AFS Specimen
Background on the Modified Cash Standard:
The Public Finance Management Act (PFMA), No 1 of 1999, requires departments to “prepare financial statements for each financial year in accordance with generally recognised accounting practice”. The Treasury Regulations require the accounting officer of a department to ensure that the annual financial statements are prepared on a modified cash basis in accordance with the formats prescribed by the National Treasury.
The Office of the Accountant-General (OAG) in the National Treasury has accordingly developed and issued the Modified Cash Standard (hereafter ‘the Standard’) which sets out the principles for the recognition, recording, measurement, presentation and disclosure of information required in terms of the prescribed formats.
Departments that claim compliance with the modified cash basis of accounting must adhere fully with the principles, presentation and disclosure requirements contained in this Standard in order to achieve fair presentation, and compliance with the PFMA and its regulations.
Click here to download the FAQ document:
Relevance to Auditors, Independent Reviewers & Accountants:
- The PFMA is yet another piece of legislation that your relevant national and provincial departmental clients must comply with, and which you must assess compliance with. If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
- As an auditor and independent reviewer, you need to consider and assess compliance with the departments that use the MCS, as required by the PFMA.
- This FAQ provides some guidance on the considerations for preparation and finalisation of the Annual Financial Statements for the 2022/23 financial year and reporting periods thereafter.
Relevance to Your clients:
- Applies to all departments that must compile their annual financial statements in accordance with the Modified Cash Standard.
- All departments need to be aware of the clarity/guidance that is provided in the FAQs.
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https://accountingacademy.co.za/profession/monthly-legislation-update
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