Contact Us	Latest News	FAQ's	GRAP Application

Accounting Standards Board Meeting held on 25 February 2011

At its meeting held on 25 February 2011, the Accounting Standards Board (the Board) considered the following matters.

The proposed Standard of GRAP on Segment Reporting (GRAP 18). The proposed GRAP Reporting Framework for 2011/2012. Proposed amendments to the Preface to the Standards of GRAP and the Preface to the Interpretations of the Standards of GRAP. An Issues Paper on assets and liabilities arising from non-contractual arrangements that have the features of financial instruments

Technical Activities

Segment Reporting (2011)

The Board considered the written and verbal comment received on the Exposure Draft of the revised Standard of GRAP on Segment Reporting (GRAP 18). The Board noted concerns raised by respondents regarding the implementation date. It concluded, however, that no system changes are required in complying with the requirements in this Standard due to the simplification of the Standard compared to the previously approved Standard of GRAP on Segment Reporting issued in 2005. Before approving GRAP 18 (2011) as a final Standard of GRAP, the Board agreed to a further scope clarification. The Board also proposed amendments to the basis for conclusions to explain why the scope of the private sector equivalent, IFRS 8 Operating Segments, is not appropriate for the public sector. The basis for conclusions will also explain that some of the additional disclosure requirements proposed by respondents are already required by other Standards of GRAP. Subject to other minor editorial amendments, the Board unanimously approved GRAP 18 as a final Standard of GRAP to replace the Standard of GRAP on Segment Reporting issued in 2005.

GRAP Reporting Framework for 2011/2012

In addition to considering the comment on the Exposure Draft of the proposed GRAP Reporting Framework for 2011/2012 (ED 82), the Board also discussed the impact of the publication, by the Minister of Finance, in the Government Gazette of 2 February 2011 of the effective dates for the Standards of GRAP on.....

Impairment of Non-cash-generating Assets (GRAP 21), Revenue from Non-exchange Transactions (Taxes and Transfers) (GRAP 23), Presentation of Budget Information in Financial Statements (GRAP 24), Impairment of Cash-generating Assets (GRAP 26), and Heritage Assets (GRAP 103). The Board noted that publication of the effective dates for these Standards by the Minister of Finance meant that entities could effectively early adopt them for the 2010/11 reporting period. It was agreed that the impact of an earlier adoption should be discussed at the next trilateral meeting. The Board further noted that the appendix prescribing the GRAP Reporting Framework for Parliament and the provincial legislatures may need to be revised. This was as a result of the notice, published by the Minister in the Government Gazette prescribing the effective dates of the Standards of GRAP, excluding the Standards of GRAP on Borrowing Costs (GRAP 5), Non-current Assets Held for Sale and Discontinued Operations (GRAP 100), Agriculture (GRAP 101) and Intangible Assets (GRAP 102). Should the notice in the Government Gazette not be amended to include these Standards of GRAP or an additional notice not be issued by the Minister, the appendix to Directive 5 would need to address this exclusion. In addition, the Board agreed to strengthen the wording in the appendices to Directive 5. The wording clarifies that entities need to develop an appropriate accounting policy for all material transactions and events in the absence of an effective Standard of GRAP, either by considering a Standard of GRAP that is not yet effective, an International Financial Reporting Standard (IFRS), or an International Public Sector Accounting Standard (IPSAS) in cases where the entity applied such an IFRS or IPSAS in a previous reporting period. Subject to the resolution of the issues pertaining to the early adoption of GRAP 21, 23, 24, 26 and 103 with the trilateral parties, and the effective dates of GRAP 5, 100, 101 and 102 for Parliament and the provincial legislatures, the Board unanimously approved the GRAP Reporting Framework to be applied by entities for financial periods commencing on or after 1 April 2011. While discussing the GRAP Reporting Framework, the Board confirmed its approach not to issue the supplement to Directive 5 for comment as there are no issues of interpretation involved in preparing the supplement. The Board’s Secretariat will thus continue to issue the supplement to Directive 5 as non-authoritative guidance to assist users of Directive 5.

Discussion Paper 6 - The process followed for the development of Standards of GRAP

The Board considered the comment received on Discussion Paper 6 that analysed the process adopted for the development of Standards of GRAP. As a result of comment received, the Board also considered proposed amendments to the Preface to the Standards of GRAP and the Preface to the Interpretations of the Standards of GRAP. Subject to editorial amendments, the Board unanimously approved the publication of an Invitation to Comment on proposed amendments to the Preface to the Standards of GRAP and the Preface to the Interpretations of Standards of GRAP. This Exposure Draft will have a comment period of three months. The Board also requested the Secretariat to develop a media policy for its consideration and suggested that the Secretariat liaise with the MEC of Finance and Local Government to facilitate workshops and meetings in provinces that do not currently participate in the Standard setting process of the Board.

Issues Paper on assets and liabilities arising from non-contractual arrangements that have the features of financial instruments

The Board considered an Issues Paper that outlines the Secretariat’s research on the treatment of assets and liabilities arising from non-contractual arrangements that have the features of financial instruments. In proceeding with this project, the Board agreed to the following principles as a basis for formulating a Discussion Paper. The scope of the revised document would be limited to those transactions that are settled in cash or another financial asset. The principle of a “contractual arrangement”, as described in the Standard of GRAP on Financial Instruments (GRAP 104) in Application Guidance AG29, should be used to analyse which transactions form part of the scope of the project. The substance of the transaction, and not merely its legal form, should form the basis of an analysis as to whether a transaction is contractual or not. After discussion on the various types of transactions dealt with in the Issues Paper, the Board debated whether a new Standard of GRAP or alternatively, new principles, would need to be developed. The following found general agreement in the Board. Assets (receivables) arising from arrangements which, in substance, are contractual in nature, could be accommodated within the existing principles of GRAP 104. There may be little difference between the treatment of assets arising from arrangements which are contractual and non-contractual in nature. Assets arising from non-contractual arrangements are relatively short-term in nature and, as a result, there is likely to be little difference between cost and fair value on initial recognition. Subsequent measurement using an amortised cost model with the consideration of impairment would provide useful information to the users of the financial statements. Consequently, the treatment of such transactions could be accommodated within the existing principles of GRAP 104, but amendments may be needed to the existing text of the Standard. Liabilities that arise from arrangements which are, in substance, contractual, could be dealt with in the Standard of GRAP on Provisions, Contingent Liabilities and Contingent Assets (GRAP 19). It was noted that most of the liabilities outlined in the Issues Paper are already accounted for using GRAP 19, and consequently little or no amendment may be needed in this area. As a result of GRAP 19 being applied to most of the liabilities outlined in the Issues Paper, the Board agreed that the project should focus on assets. The rationale for focusing on assets, rather than liabilities will be explained in the Discussion Paper. The proposed Discussion Paper will thus consider the accounting principles for assets arising from arrangements which, in substance, are contractual. It will also propose accounting principles for those assets that arise from arrangements that are non-contractual in nature, (eg taxes, fines and appropriations receivable). Reference will, as far as possible, be made to the principles and guidance in existing Standards of GRAP. While the outcome of the project may be the amendment of existing Standards of GRAP, rather than the development of a separate Standard, the Board noted that it may be useful to develop a further document, eg a Guideline or Interpretation, outlining the Board’s rationale for the accounting treatment of the various transactions. It was also decided that the development of a decision tree documenting the proposed accounting treatment of the various transactions would be useful.

General

Next ASB Meeting

The next meeting of the Board is scheduled for 2 June 2011.  Observers are welcome at these meetings, but space is limited. In order to accommodate observers at ASB meetings interested parties are asked to complete the registration form available on our website

Accessing documents issued by the ASB

Persons and organisations interested in the activities of the ASB should monitor the website, www.asb.co.za, or contact info@asb.co.za, to be advised of the release of the latest Exposure Drafts for public comment.