The standard setting process | Our process
About Accounting Standards, The Board, Project Groups, Secretariat and the development of Standards
What are Accounting Standards?
Accounting standards are authoritative standards for financial accounting and reporting developed through an organised standard-setting process and issued by a recognised standard setting body (the Accounting Standards Board (Board)). The accounting standards as set by the Board specify how transactions and other events are to be recognised, measured, presented and disclosed in government financial statements. The objective of such standards is to meet the needs of users of financial statements by providing the information needed for accountability and decision making.
Who should apply these Standards?
The Standards set by the Board applies to departments (national and provincial); public entities; constitutional institutions; municipalities and boards, commissions, corporations, funds or other entities under the ownership control of a municipality; and Parliament and the provincial legislature and is referred to as Statements of Generally Recognised Accounting Practice (GRAP).
The Board has approved the application of Statements of Generally Accepted Accounting Practice (GAAP), as codified by the Accounting Practices Board and issued by the South African Institute of Chartered Accountants, to be GRAP for: government business enterprises (as defined in the PFMA); Trading entities (as defined in the PFMA); any other entity, other than a municipality, whose ordinary shares, potential ordinary shares or debt are publicly tradable on the capital markets; and entities under the ownership control of any of these entities.
The introduction to Standards of GRAP describes who should apply the Standards of GRAP.
The Board has the authority to set accounting standards for all spheres of government. The responsibilities of the Board are set out in its Regulations.
In meeting its objectives, the Board:
- Are committed to serve the public interest.
- Respect and encourage input from all its stakeholders.
- Bring objectivity to the consideration of issues.
- Respect the ability of its stakeholders to exercise professional judgment.
- Be committed to timeliness in its responses to stakeholder needs.
The Board normally meets four times a year for full Board meetings. The Board may have additional meetings to meet their objectives.
Structure and Members of the Board
The Board consists of a maximum of 10 members including the Chair.
The Board's standards are developed by the people who prepare, audit and use government financial statements and reports — i.e., those who will be governed by the standards. These groups are called project groups.
Members of Board and its project groups are not appointed by other organisations. The Board recruits individuals, and all Board and project group members serve as individuals and not as representatives of their organisations. This policy allows for a full and open debate on issues.
Members are recruited based on the following criteria: their commitment to the Board objectives, their technical knowledge, their ability to consider the practical aspects of issues being considered, and their ability to influence the adoption of standards and the building of consensus on the Board's positions.
It is the aim of the Board to draw project group members from the ranks of senior government officials, including CFO’s and municipal managers, auditors, budget directors, and municipal and provincial treasurers and auditors, as well as academics, bond-raters and other experts in government accounting and auditing.
Secretariat of the Accounting Standards Board
The day to day operations of the Accounting Standards Board are managed by Chief Executive Officer, Erna Swart and a professional team of five staff members.
How do Topics Get on the Board’s Agenda?
Topics may be added to the Board’s agenda in a variety of ways:
The process followed for the development of Standards
- Staff may become aware of a particular accounting issue and draw it to the attention of the Board. Staff are usually alerted to an issue through research, monitoring of domestic and international developments and ongoing discussions with the government community.
- Members of Board, with their varied backgrounds, provide valuable insight in identifying accounting issues for the Board to consider.
- Requests from stakeholders who require guidance on a specific accounting issue.
The Board reviews its work programme regularly to assess the status of ongoing projects, and potential projects, and to identify priority projects. If the Board identifies an area that it believes is a potential project, The Board will appoint a Chair from its ranks and a project leader from the secretariat.
Statements of GRAP and other publications are developed through a due process that involves accountants, auditors, preparers, regulators, legal authorities and users of financial statements in the public sector.
The Board remains relevant to its constituents only if it carefully weighs their views so that the concepts and standards developed by the Board meet the accountability and decision-making needs of the users of government financial statements. Due process is the vehicle through which the Board is able to ensure its continued relevance and the quality and independence of its recommendations.
Generally, the due process is considered to be the Board's request for and consideration of comments on proposed standards. However, due process actually starts when a project is being considered for addition to the Board’s technical agenda. The Board regularly identifies the priority issues that should be addressed. To the extent possible within the limited resources the Board has to work with, these priorities are considered and the work programme adjusted as appropriate.
Once a project has formally been added to the work programme, a Board member is assigned to chair the project group and a secretariat staff member is assigned to lead the project and basic research begins. This research, conducted by the secretariat staff, includes identification and review of all the issues associated with the topic and consideration of the application of the Framework to the issues. They also study other national accounting requirements and practices and Standards issued by other national or international standard setters. Constituent participation is fundamental to the relevance and success of all stages of the Board's deliberations.
Shortly after a project is started, the project leader will solicit nominations for project group members. The project group reflects the broad range of the Board’s constituency. The CEO takes special care to ensure that the project group is representative of all stakeholders. The number of members on a given project group ranges from six to eight, depending on the complexity of the project. Project group members give advice on the project and where no IPSAS exists, assist in preparing a discussion document.
For some projects the first document is a discussion paper. This document is intended to present various accounting and financial reporting alternatives for each identified issue and propose principles for addressing the issue. A discussion paper is approved by the Board and released for comment by stakeholders for a period of up to six months.
For most projects, the first document is an Exposure Draft requesting comments from interested parties including auditors, preparers (including treasuries), standard setters and individuals. The Board approves the exposure draft for a reasonable time (normally at least three months) to allow stakeholders to consider and comment on its proposals. The length of the exposure period is often dictated by the complexity of, or controversy surrounding the project. The exposure draft will be published on the Board’s website and notice of its publication will be given in the Government Gazette. Those affected by the Board’s pronouncements will be afforded an opportunity to present their views before the pronouncements are finalised and approved by the Board. Comments on exposure drafts may be submitted either by mail or e-mail.
When a comment letter is submitted, it is received by the secretariat. Comments are incorporated into one document and responses are included providing reasons for either accepting or rejecting comments. Every comment received is presented and considered by the Board.
The penultimate step is for the exposure draft to be updated, incorporating the relevant comments received. The Board considers all the issues in the exposure draft. Proposals are normally accepted unless compelling arguments are made in the exposure period, which highlights the need for stakeholders to actively participate in the process.
The Board does not know stakeholders’ position on a given issue unless they receive feedback. Generally the number of comments that the Board receives is relatively low. For most projects, between 5 and 10 comment letters are submitted, primarily from firms, the National Treasury and professional institutions. Comment letters can result in substantial changes to the final standard. Often, stakeholders only comment when they have concerns about a proposal. However, feedback should not be limited to concerns. It is equally important for the Board to know when stakeholders support a proposal. Comments that express either support or concern can assist the Board in developing its final conclusions. One compelling comment can make a difference.
The Board relies on the comments of those who prepare or audit government financial statements, as well as government budget officers and others with expertise in government financial affairs, for feedback on the conceptual soundness, technical accuracy, practicality and appropriateness of its proposals. Comment letters can also indicate to the Board whether the information provided by the proposals will be useful to users for decision making purposes and relevant for accountability.
The Board recognises that respondents have different backgrounds and experience from which valuable feedback can be obtained, and that not all respondents will have comments on every issue addressed in a document. In general, the more comprehensive the response, the more assistance it provides to the Board, but all input, general or specific, comprehensive or targeted, is appreciated by the Board.
To all of our stakeholders that have provided comment letters in the past: thank you very much. We hope that we can count on your continued support. To those who have not responded in the past: please do so — we look forward to hearing from you!