JSE announces three big changes for listed companies

JSE-listed companies will no longer be required to disclose diluted headline earnings per share (HEPS) figures in any of their financial reporting.

This is one of three changes the bourse announced on Wednesday, 19 August, and forms part of the JSE’s ongoing Simplification Project.

The Simplification Project was first proposed in May 2022 and aims to simplify the JSE’s Listings Requirements.

These requirements apply to all companies listed on the local bourse and have often been accused of being needlessly complex and onerous.

Over the past five years, 130 companies have dropped off the JSE. Some of these delistings were due to mergers or liquidity constraints.

However, many companies also chose to delist, citing the high administrative and financial burden of being a listed entity.

To stem the tide of delistings, the JSE implemented its Simplification Project, aimed at making it simpler and less expensive for companies to list and remain listed on the bourse.

Since the project has been implemented, the JSE has slashed the volume of its Listings Requirements by 50%.

The project has cut red tape, lowered compliance costs, eased equity capital raises, and replaced the heavy old rulebook with a plain-language, intuitive structure.

The Simplification Project’s latest amendment concerns the HEPS figures that JSE-listed entities are required to report in their interim and full-year results.

The changes set to be introduced are driven by the upcoming introduction of IFRS 18 in January 2027. IFRS 18 is the new international accounting standard issued by the International Accounting Standards Board. 

Once in effect, this standard will be mandatory for annual reporting periods starting on or after 1 January 2027.

The JSE requires all listed entities to prepare their financial statements in accordance with these standards and has begun introducing changes to its Listings Requirements to align them.

New JSE HEPS rules

On Wednesday, 19 August, the JSE announced three major shifts that will change how listed companies report certain figures in their financial results.

The first change is moving HEPS outside the boundaries of a company’s audited financial statements.

IFRS 18 bans per-share figures from being included in annual financial statements unless they are classified as Management Performance Measures (MPMs).

An MPM is a specific subtotal of income and expenses that companies include in reports to show how their leaders view the business’s overall financial health.

Therefore, because IFRS 18 prohibits non-MPM per-share figures, the JSE cannot include HEPS in the main body of the audited IFRS results.

To solve this problem, the JSE is separating the definitions of “headline earnings” and “headline earnings per share”. 

While headline earnings and their reconciliation must still be disclosed, HEPS will now be placed outside the boundaries of the IFRS results.

For interim results, this means HEPS can be presented outside the officially prepared information. For annual results, HEPS can be presented outside of the information on which an auditor issues their opinion.

Notably, HEPS must still be disclosed simultaneously with the interim and annual financial statements.

The second change is far simpler, and concerns diluted HEPS figures, which JSE-listed companies will no longer be required to disclose in their reporting.

This is simple because, when the South African Institute of Chartered Accountants updated its headline earnings circular to align with IFRS 18, it was unable to preserve the sections on diluted headline earnings.

The third change is also simple and centralises the requirement for headline earnings reconciliation in the JSE’s Listings Requirements. 

Previously, the requirement for JSE-listed companies to provide an itemised reconciliation between earnings and headline earnings was repeated multiple times in the bourse’s rules.

Now, the requirement is stated only in the Listings Requirements’ Definitions section, providing greater clarity and preventing redundancy.

The rule is now simple: when headline earnings are disclosed, an itemised reconciliation to the earnings used in the calculation must be included.