The FSCA has exempted retirement funds from using the formats in Board Notice 77 when preparing financial statements as long as they use the revised report formats approved by the Independent Regulatory Board for Auditors (Irba), the Authority said in a communication dated 14 April.
Board Notice 77 of 2014 prescribes the format of the financial statements that must be completed by funds in terms of section 15(1) of the Pension Funds Act (PFA).
The FSCA said retirement funds are exempt from using the Board Notice 77 schedules when preparing their financial statements if they use the appropriate Irba revised report format, as set out below:
- Large funds that are ordinary funds are exempt from completing Schedule I1 on condition that Irba’s “March 2022: ordinary funds” report is completed.
- Small funds that are ordinary funds are exempt from using Schedule I2 if they use Irba’s “ordinary funds” report.
- Large funds and small funds that are umbrella funds do not have to use Schedule I3 if they complete Irba’s “March 2022: umbrella funds” report.
- Large funds and small funds that are retirement annuity funds or preservation funds are exempt from using Schedule I4 if they complete Irba’s “March 2022: retirement annuity funds and preservation funds” report.
- Audit exempt funds do not have to use Schedule I5 if they complete Irba’s “ordinary funds” report.
The above exemptions apply to the preparation of financial statements in respect of financial year-ends beginning after 1 January 2022.
New prudential standard required
The FSCA said it supports the use of Irba’s revised report formats and will replace Board Notice 77 with a prudential standard to incorporate these revised formats into the prescribed formats for preparing financial statements.
However, in terms of section 1A(4) of the PFA, a prescribed matter must take the form of a prudential standard, conduct standard or joint standard.
Accordingly, the format of financial statements prescribed under section 15 of the PFA would constitute a prudential standard, and amendments to a prudential standard must follow the consultation processes set out in chapter 7 of the Financial Sector Regulation Act. The process of amending the Board Notice will therefore take a number of months to finalise.
In the meantime, the FSCA recognises the need to facilitate the use of Irba’s revised report formats by exempting funds from using the relevant prescribed reports on the condition that Irba’s revised report formats are used.
In order to acknowledge funds that submit financial statements through the use of Irba’s revised report formats and facilitate compliance with Board Notice 77, the exemption will apply from the Irba effective date of the revised report formats.
The effect of this approach is that any fund that:
- Submitted financial statements in accordance with Irba’s revised report formats after the Irba effective date can rely on the exemption and is therefore in compliance with the requirements of the Board Notice; or
- Did not submit financial statements in accordance with Irba’s revised report formats after the Irba effective date will still be in compliance with the requirements of the Board Notice.
The FSCA said the exemption does not absolve funds from the requirements of section 15 of the PFA or Board Notice 77, and all funds must still prepare financial statements and other relevant documents per section 15 and the Board Notice.
For more information, please contact Wilma Mokupo at Wilma.Mokupo@fsca.co.za.
A copy of the FSCA’s communication and Retirement Fund Notice 5 of 2022 can be downloaded from the FSCA’s website. Go to www.fsca.co.za > Regulatory framework > Notices > Retirement funds > 2022
