INTRODUCTION
This standard was first introduced by National Board of Accountants and Auditors (NBAA) in it’s 182nd meeting held on 22nd June 2020; the standard was developed to replace TFRS 1 “the directors report” which was issued by the Board effectively on 1st January 2010.
The Director’s report was revised to consider various change which have taken place for the past ten years, the board decided to revise it for the purpose of accomodating issues for the current period. The standard has been issued after a series of stakeholders, consultant, internal assessment, and technical meetings had been conducted.
APPLICABILITY
TFRS 1, effectively begin on 1st January 2021 and the standard is applicable to all entities except those entities which apply Financial Reporting Standard for Micro Entities (“FRSME”).
The standard is designed to create best practice, it will help those charged with governance to analyse the entity’s operation and financial review with forward looking – orientation, it will also help primary users and other takehoders to assess the strategies adopted by their respective entities and potential to those strategies to succeed toward the creation of values over a short, medium, and long period of time.
Key Terminologies used in TFRS 1
Those charged with governance (TCWG)
According to Tanzania Financial Reporting Standard no 1, it defines the Those charged with governance as:” The person(s) or organization(s) with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity. This includes overseeing the financial reporting process. These may include Accounting Officers appointed under the Public Finance Act, or any other officer accountable for overseeing the entity if not appointed under the authority of the Public Finance Act i.e., Permanent Secretaries etc. (for Ministries and Independent Departments), Trustees (for Pensions); Ministerial Advisory Boards (for Executive Agencies); Boards of Directors (for parastatals); Councillors (for Local Authorities), etc. “
Who are those charged with governance?
- Directors
- Audit Commitee
- Trustee or Governing Body
Operating and Financial Review (OFR)
An OFR is a narrative explanation, provided in the report by those charged with governance, of the main trends and factors underlying the developments, operations, performance, financial position, and cash flows of an entity during the financial year covered by the financial statements, and those which are likely to affect the entity’s future developments, operations, performance, financial position and cash flows.
SCOPE OF STANDARD
The report prepared in accordance with this standard should be a balanced, narrative, and comprehensive with analytical tool, consistent with the size and complexity of the entity, covering the following areas:
- The development and performance of the entity’s operation during the financial year.
- The financial performance, financial position, and cash flows of the entity.
- The main trends and factors underlying the development, performance, financial position, and cash flows of the entity during the financial year.
- Information on how resources whether owned by the entity have been used or affected toward creating value over the short, medium- and long-term period.
- The main trends and factors underlying the business that have affected the results but are not expected in the future; and those that are likely to affect the entity’s future development.
- Known events and uncertainties that are expected to have an impact on the operation in the future, primary users, and other stakeholders.
- Information on budget performance.
- In addition to the requirements of this standard, entities are required to comply with relevant statutory requirements applicable in Tanzania.
DISCLOSURE REQUIREMENTS
Paragraph 15 of TRFS 1 sets out the key content to be addressed within the OFR, the paragraph also emphasizes that the disclosure mentioned should not be regarded as template but it’s for those charged with governance; how best to use the requirement structure of OFR depends on the nature of the entity.
The disclosure reequipment set out as follow:
- Detail of Particular matter.
- Nature of Operations.
- Objectives and strategies.
- Entity Operating model.
- Current and future development performance.
- Resources.
- Risk, uncertainty and opportunity.
- Stakeholder’s relationship.
- Capital structure and treasure policy.
- Cash flow.
- Liquidity.
- Key Performance Indicator (KPI).
- Corporate Governance Matter.
- Appointment of an Auditor.
- Auditors Responsibility.
- Statement of responsibility by those charged with governance.
- Political and charitable donation.
- Employee welfare.
- Disable person and gender balance.
- Prejudicial issues.
- Statement of compliance.
- Publication of the report by those charged with governance and audited financial statements.
- Approval.
Lucent advisory reminds our clients to comply with laws and regulations as required by National Board of Accountant and auditors (“NBAA”). The statutory requirement as per International Accounting Standard (“IAS”), International Financial Reporting Standard (“IFRS”) and Tanzania Financial reporting Standard (“TFRS”) in the preparation and presentation of the books of accounts. Since the role of those charged with governance is essential in the audit process, as they are the primary point of contact for auditors to discuss significant audit findings, risks, and recommendations; Effective communication between the auditors and those charged with governance is crucial to ensure that significant matters are appropriately addressed, and the financial statements are fairly presented.
For more support and guidance on how to comply with TFRS 1 and many other prefessional and regulatory requirements, reach out to us via details below:
Email: inquiry@lucent.co.tz
Phone call: +255 687 688711
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