In South Africa, compiled financial statements are not compulsory for all entities. However, certain entities may be required to prepare compiled financial statements based on regulatory or contractual obligations. Here’s a breakdown of the situations where compiled financial statements may be required:
Companies Act, 2008 (Act No. 71 of 2008): Under the Companies Act in South Africa, private companies may be required to prepare financial statements annually. While the Act does not specifically mandate the preparation of compiled financial statements, it requires companies to maintain accurate accounting records and prepare financial statements that fairly present the financial position and performance of the company. In practice, many private companies opt to have compiled financial statements prepared to meet these requirements.
Credit Providers: Credit providers in South Africa, such as banks and financial institutions, are often required by regulatory authorities to submit compiled financial statements as part of their regulatory reporting obligations. These statements may be used by regulatory authorities to assess the financial health and stability of the credit provider and to ensure compliance with applicable regulations.
Contractual Obligations: In some cases, entities may be required to prepare compiled financial statements as part of contractual agreements with lenders, investors, or other stakeholders. For example, a lender may require a borrower to provide compiled financial statements as part of the loan agreement to assess the borrower’s financial position and creditworthiness.
Tax Reporting: While compiled financial statements may not be required for tax reporting purposes in South Africa, entities are required to maintain accurate accounting records and prepare financial statements that comply with tax regulations. In some cases, entities may choose to prepare compiled financial statements to facilitate tax compliance and reporting.
Overall, while compiled financial statements may not be compulsory for all entities in South Africa, they may be required in certain situations based on regulatory or contractual obligations. It’s important for entities to understand their specific reporting requirements and obligations and to seek guidance from accounting professionals to ensure compliance.