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25 Oct, 21 | Finance |
PI Score and Financial Statements
At Procon Business Consultants we are one of the accounting firms in Johannesburg that offer online bookkeeping services for small business. We also assist our clients in preparing monthly Management Accounts or Annual Financial Statements (AFS). Clients often want to know the level of assurance that is required for their AFS. Is a compilation sufficient? Do we need an independent review or a full audit? Part of the answer to this question is what is called the public interest score
Public interest score
A public interest score is a score that determines the company’s public interest. This score is important because the Companies Act requires that all companies calculate their PI scores and they serve two purposes:
- To determine the type of AFS that the company should prepare i.e. (audited or independently reviewed).
- The financial reporting standards that apply to your (IFRS, IFRS for SMMEs or SA GAAP).
The calculation must be done prior to preparation of the company’s Annual Financial Statements (AFS). This can be done by either your auditor, independent reviewer or an accountant who compiles your AFS. Procon Business Consultants can assist you in determining this
To calculate your PI Score is a bit technical, but it’s really not as complicated as it sounds. You just need to grab your latest available financial information and look for your Turnover, Liabilities (external) and Assets also get information on your number of employees, shareholders and directors. Punch all that information on a PI Score calculator (provided by CaseWare SA).
How to calculate the PI score
According to the CIPC website this is how to calculate the PI score:
- a number of points equal to the average number of employees of the company during the financial year;
- one point for every R1 million (or portion thereof) in third party liability of the company, at the financial year end;
- one point for every R1 million (or portion thereof) in turnover during the financial year; and
- one point for every individual who, at the end of the financial year, is known by the company- that is the directors
- in the case of a profit company, to directly or indirectly have a beneficial interest in any of the company’s issued securities; or
- in the case of a non-profit company, to be a member of the company, or a member of an association that is a member of the company.
What do the PI score results mean?
Companies with a PI Score of less than 100 which are owner-managed only require Compilation AFS. These are usually small companies, with a couple of directors who are involved in the running of the business and they own all the shares in the company.
Owner managed means the shareholders of the company are also directors involved in the management of the company.
The PI Score does not apply to Public companies (listed or unlisted), State owned entities, companies with fiduciary assets exceeding R5 million and companies with a Memorandum of incorporation (MOI) that requires them to be audited. All of these companies are subject to an audit by registered independent auditors anyway.
For the rest of the private companies, your level of assurance and financial standard to be used depends on whether the
- company is owner managed or not and
- whether the AFS have been internally compiled or independently compiled (by an external accountant)
Using your PI Score, you can then determine your reporting standard to be used and the required assurance for your AFS
Contact Procon Business Consultants for any queries you may have regarding the drafting of your annual financial statements. We provide accounting services for companies in South Africa
At Procon Business Consultants we are one of the accounting firms in Johannesburg that offer online
what is it, what is it for and who is it for? At Procon Business Consultants we offer online