Understanding the Difference Between Annual Financial Statements (AFS) and Financial Accountability Supplement (FAS) for CIPC Annual Returns

When submitting an Annual Return to the Companies and Intellectual Property Commission (CIPC), companies must also provide financial information. Depending on the type of entity and its financial position, a company will be required to submit either Annual Financial Statements (AFS) or a Financial Accountability Supplement (FAS). Understanding which one applies is crucial for compliance with the South African Companies Act.

Annual Financial Statements (AFS) vs. Financial Accountability Supplement (FAS): 

What's the Difference?

1. Annual Financial Statements (AFS)

AFS refers to the formal financial reports prepared in accordance with accounting standards such as International Financial Reporting Standards (IFRS) or IFRS for SMEs. These statements provide a detailed summary of a company’s financial position and performance over the financial year.

Who Must Submit AFS?

Companies required to submit AFS as part of their Annual Return fall into the following categories:

• Public Companies (Ltd) – All public companies are required to submit AFS.
• State-Owned Companies (SOC Ltd) – All state-owned enterprises must submit AFS.
• Private or Non-Profit Companies That Are Subject to an Audit – If a company is required by law or its Memorandum of Incorporation (MOI) to be audited, it must submit AFS.
• Private or Non-Profit Companies with a Public Interest Score (PIS) of 350 or More – If a company reaches this threshold, it is subject to an audit and must file AFS.
• Private or Non-Profit Companies with a PIS of 100 or More AND Require Audited Financial Statements as per MOI or Regulations – If the PIS is between 100 and 349 and the company requires an audit due to its MOI or Regulations, it must submit AFS.

2. Financial Accountability Supplement (FAS)

The FAS is a simplified financial reporting supplement that is completed and submitted directly within the CIPC Annual Return submission process. It requires companies to declare key financial information but does not involve attaching full financial statements.

Who Must Submit FAS?

• Private or Non-Profit Companies with a PIS Below 100 – If a company’s Public Interest Score is under 100 and is not required to be audited, it will submit the FAS instead of full AFS.
• Companies That Do Not Require an Audit or Independent Review – Entities that fall outside the mandatory audit or independent review requirements can submit the FAS.

How to Determine Whether to Submit AFS or FAS?

Companies can determine whether they must submit AFS or FAS by assessing their

Public Interest Score (PIS), which is calculated using the following criteria:

• Number of Employees: 1 point per average full-time employee over the financial year.
• Turnover: 1 point for every R1 million (or portion thereof) in revenue.
• Third-Party Liabilities: 1 point per R1 million owed to outsiders (excluding shareholders and directors).
• Number of Shareholders/Members: 1 point per shareholder/member.

Key Considerations:

• If the PIS is 350 or more, the company is automatically required to be audited and must submit AFS.
• If the PIS is between 100 and 349, the requirement to submit AFS depends on whether the company’s MOI or other regulations specify an audit.
• If the PIS is below 100, the company generally qualifies to submit an FAS instead of AFS.

Why is Compliance Important?

Failing to submit the required AFS or FAS can lead to penalties, non-compliance status, or even deregistration of the company by CIPC. Understanding these requirements ensures that businesses maintain their good standing and fulfill regulatory obligations.

By using Intersect, companies can seamlessly navigate the CIPC Annual Return submission process, ensuring they meet all compliance requirements without the hassle of manual calculations or paperwork.