Knowledge Centre
1. Accounting Standards: How to Prepare Financial Statements
Clear, compliant financial statements are the foundation of trust — for clients, regulators, and your professional reputation.
2. Explainer Video (top of page)
In this short video, we explain:
What financial statements are and why they matter: the official record of a business’s performance and financial health, prepared in line with recognised frameworks such as IFRS, IFRS for SMEs, or IPSAS for the public sector.
Why members must understand the correct standards: selecting and applying the right framework ensures compliance with the Companies Act and public sector requirements, builds credibility, and strengthens client trust.
How proper preparation protects you: accurate, standard-compliant statements prepared under IFRS, IFRS for SMEs, or IPSAS safeguard you from SARS penalties, CIPC issues, and client disputes, while also enhancing your professional reputation.
3. What You Need to Know (Definition & context)
Financial statements are more than a compliance exercise. They are the official record of a business’s financial health, prepared according to accounting standards that make them credible and comparable.
For CIBA members, preparing financial statements correctly is a core professional responsibility. In South Africa, this means applying the International Financial Reporting Standards (IFRS), the IFRS for SMEs Standard, or, in the case of government and municipalities, the International Public Sector Accounting Standards (IPSAS). Each framework has specific recognition, measurement, and disclosure rules that must be applied consistently.
In practice, this means knowing whether a client requires full IFRS, the simplified IFRS for SMEs, or IPSAS for public entities. For example, revenue recognition will differ across these frameworks, and disclosures must be tailored to meet compliance requirements under each.
4. Why It Matters to You (Impact section)
Grow your practice and your income: Preparing financial statements that comply with IFRS, IFRS for SMEs, or IPSAS is not just a compliance exercise. It is a service clients will pay for because it protects them and adds credibility to their business. Done well, it positions you as a professional who delivers real value.
Protect yourself and your clients: Using the correct framework helps you avoid penalties from SARS, CIPC, and regulators. It also prevents the costly disputes that arise when statements are incomplete or misleading. Compliance protects your reputation as much as it protects your clients.
Strengthen your professional standing: When you can interpret IFRS, IFRS for SMEs, or IPSAS with confidence, you move from being a number-cruncher to a trusted advisor. Clients, boards, and stakeholders look to you for assurance that the financial story is accurate, reliable, and decision-ready.
5. Frameworks, Standards, or References (if relevant)
When preparing financial statements, you need to know which framework applies. Using the wrong one can put both you and your client at risk. These are the core references every member should be familiar with:
Companies Act, 2008 (South Africa)
Sets out the legal requirements for companies and close corporations, including when to use IFRS, IFRS for SMEs, or other reporting frameworks.International Financial Reporting Standards (IFRS)
The global standard for larger and more complex entities that need full disclosure. If your client has public accountability or requires detailed reporting, IFRS is the framework to follow.IFRS for SMEs Standard
A simplified standard designed for small and medium-sized entities. This is the most commonly applied framework for CIBA members in practice. It reduces disclosure requirements while still ensuring compliance and credibility.International Public Sector Accounting Standards (IPSAS)
Used by government departments, municipalities, and public entities. IPSAS ensures transparency and accountability in the use of public funds.CIBA Technical Guidance on Financial Reporting
Member-only support that helps you apply these frameworks in real practice. Here you’ll find checklists, templates, and technical notes that make compliance easier. (insert PDF or resource link).
6. How to Apply (Action steps)
Preparing financial statements correctly is about following a clear process. Whether you are using IFRS, IFRS for SMEs, or IPSAS, these steps will keep you compliant and confident:
Confirm the correct framework
Use the Companies Act or client mandate to determine if full IFRS, IFRS for SMEs, or IPSAS applies.
Example: A listed company must use IFRS, a small private entity can usually use IFRS for SMEs, and a municipality will apply IPSAS.
Collect and organise client records
Ensure the trial balance is accurate, supporting schedules are complete, and reconciliations are up to date.
Missing or incomplete records are a red flag, get them sorted before moving forward.
Prepare working papers
Document adjustments, accruals, provisions, and tax entries.
Keep clear working paper trails. Remember: good working papers protect you if your statements are challenged.
Apply the recognition and measurement rules
Follow the framework’s requirements for revenue, expenses, assets, and liabilities.
Example: IFRS may require fair value adjustments, while IFRS for SMEs may allow cost-based measures. IPSAS may require disclosures unique to public funds.
Draft the financial statements
Use recognised and trusted Drafting Software such as CIBA partner Draftworx
Include the Statement of Financial Position, Statement of Profit or Loss (or equivalent for IPSAS), Cash Flow Statement, and full Notes.
Use disclosure checklists for IFRS, IFRS for SMEs, or IPSAS to ensure completeness.
Review and finalise
Check compliance against the chosen framework.
Confirm that notes align with recognition policies and that all required disclosures are included.
Share the draft with your client or entity, address queries, and finalise.
File and submit
File with CIPC, SARS, or the relevant public authority, depending on the type of entity.
7. Common Mistakes to Avoid (if applicable)
Even experienced professionals can slip up when preparing financial statements. Here are the pitfalls we see most often, and how you can avoid them:
Choosing the wrong framework
Too many members start preparing statements before confirming if IFRS, IFRS for SMEs, or IPSAS applies.
Do this instead: Always check the Companies Act requirements or entity type first. This one step protects you from major compliance issues down the line.Incomplete disclosures
Cutting corners on notes or leaving out disclosures may seem like a time-saver, but it can make your statements non-compliant.
Do this instead: Use a disclosure checklist specific to IFRS, IFRS for SMEs, or IPSAS every single time.Not using accounting software
One of the biggest mistakes is trying to prepare financial statements manually. Without software like Draftworx, or similar tools, it is easy to miss disclosures, misapply a framework, or produce statements that lack professional polish.
Do this instead: Always use approved accounting software to prepare financial statements. It automates compliance with IFRS, IFRS for SMEs, and IPSAS, while you provide the professional judgement and interpretation that software cannot replace.Weak working papers
Skipping proper documentation makes it difficult to defend your work if questioned by SARS, CIPC, or a client.
Do this instead: Keep clear, well-organised working papers for every adjustment. They are your first line of protection.Treating preparation as a “tick-box” exercise
Clients and regulators see more than just compliance — they see the professionalism behind the numbers.
Do this instead: Approach each set of statements as an opportunity to showcase your expertise and add value to your client’s business.