Sections 40 and 41 of the Higher Education Act. 1997 (Act No. 101 of 1997), as amended, prescribe the following:

Section 40: Funds of public higher education institutions

A resolution contemplated in paragraph (a) must be approved by the Minister if the sum of the borrowings it authorises plus the borrowing previously approved but not yet taken up, plus the institution's short-term and long-term debt at that date exceeds --

Section 41: Records to be kept and information to be furnished by council

The minimum content of each of these six sections is prescribed in this manual.

The Council, in respect of its governance, and the Executive Management, in respect of its management and administration, must ensure that the institution for which they are responsible complies, as far as is relevant to higher education institutions, with the content and recommendations of the King Report on Corporate Governance for South Africa - 2002. (Reference to certain, although not all, applicable pages of the King Report will be made in appropriate sections of this manual).

Financial statements should fairly present the financial position, financial performance, and cash flows of the institution. Compliance with the South African GAAP/lnternational Financial Reporting Standards (IFRS) and the Higher Education Act, 1997 (Act 101 of 1997), as amended, will normally achieve "fair presentation".

It should be noted that since the statements of South African GAAP are harmonized with the International Financial Reporting Standards, compliance with either reporting framework is acceptable.

Compliance with the South African GAAP/lnternational Financial Reporting Standards (IFRS) requires compliance with the provisions and requirements of each of the applicable statements of generally accepted accounting practice and with the relevant approved interpretations.

Financial statements that do so comply will disclose this fact. The extent to which the financial reporting requirements for HEls are adapted to acknowledge the particular requirements within higher education should be noted.

"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of the enterprise that is useful to a wide range of users in making economic decisions."

There are two fundamental assumptions in the presentation of financial statements and governance and management reports:

There are certain "qualitative" characteristics of these statements and reports. These are:

Understandability: Given the assumption of a reasonable knowledge of corporate and economic activities and accounting terminology, as well as a willingness to study the information with reasonable diligence, financial statements and reports should be readily understandable by users. In this connection the fundamental concept of "matching" items of expenditure against relevant items of income must be applied. However, the application of the concept does not allow the recognition "of items in the balance sheet that do not match the definition of assets or liabilities" (AC101.27).

Relevance: The information presented has the quality of relevance when it influences the economic decisions of users by helping them to evaluate past, present or future events or to confirm or correct past evaluations.

Materiality: Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.

Reliability: This depends on:

Comparability: The bases of preparation should enable comparative evaluations to be made of different enterprises and of the same enterprise over time. This is reliant on the application of the concept of consistency in preparation over time.

Every HEI must disclose, in a summary of significant accounting policies or other notes, the judgments, apart from those involving estimations, that management has made in the process of applying the institution's accounting policies that have had the most significant effect on the amounts recognised in the financial statements. (lAS 1 Para. 113)

An HEI must disclose, in the notes, information about key assumptions concerning the future, and other key sources of estimation at the balance sheet date that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year. In respect of those assets and liabilities, the notes must include details of -

There are certain constraints on the presentation of relevant and reliable information. These relate to the "timeliness" with which the information is presented; the balance between "benefit" and "cost" in respect of the cost of providing the particular information; and the situations in which it is necessary to balance the various "qualitative characteristics." Finally, financial statements in particular have the essential requirement that they should be a "fair representation" of the events covered.

Higher Education institutions are expected to adopt accounting standards applicable to them and clearly identify these on their accounting policies. Furthermore, as statements of standards are issued that are applicable to an HEI, these will be mandatory from the date on which the particular statement becomes applicable.

In respect of the 'First Time Adoption of International Reporting Standards IFRS1' (harmonised with SA GAAP), this standard must be applied as a transitional provision in preparing the annual financial statements of an HEI for the respective financial year in conjunction with all relevant South African Accounting Standards (SA GAAP).

IFRS 1 requires an entity to comply with each IFRS effective at the reporting date for its first IFRS financial statements. This standard sets out the requirements and exemptions for the opening IFRS balance sheet to be prepared as a starting point under a new reporting framework.

IFRS requires disclosures that explain how the transition from the previously applied national financial reporting framework to IFRSs has affected an entity's reported financial position, performance and cash flows.

The Council of an HEI is responsible for the preparation and presentation of the institution's Annual Report as well as any interim reports, including any interim financial statements that may be specifically required.