🚦The Board gives the green light: GRAP 20 Related Party Disclosures desktop review next steps

In a recent meeting, the Board reviewed and discussed feedback on the desktop review on GRAP 20 on Related Party Disclosures (the review). The review identified the pervasive issues and application challenges with GRAP 20 faced by entities. The Board evaluated the necessity for changes to the Standard, additional guidance, Frequently Asked Questions (FAQs), and/or other potential measures.

What were the identified issues?

The following key issues were identified from the review:

• Identification of related parties and related party transactions: Entities face challenges with determining which individuals and entities qualify as related parties. This was particularly identified for audit and risk committee members, traditional leaders, councillors and entities under common control.
• Disclosure of related parties and related party transactions: Inconsistent practices were observed in the disclosure of councillors’ remuneration, balances and commitments, and in-kind benefits provided to related parties. In certain instances, these inconsistencies were driven by misinterpretation of the Standard.
• Use of boilerplate information: Accounting policies were not reflective of the specific accounting treatment applied to related party transactions and events within the entity. Instead, these policies largely consisted of boilerplate information, such as definitions from GRAP 20.
• Application of materiality: Materiality was not evidently applied, leading to the disclosure of irrelevant information.

What did the Board decide?

The Board decided on the following actions:

Identification of related parties and related party transactions Develop FAQs to provide clear guidance on identifying related parties and disclosing the related transactions.  Incorporate guidance in the Standard to explain the relationships between the three spheres of government. Disclosure of related parties and related party transactions Update the Standard to clarify the disclosure of related party transactions, outstanding balances and commitments. Develop FAQs to provide guidance on specific disclosure requirements. Use of boilerplate information Increase awareness of the previously published recording on Improving the quality of financial statements.  Engage trilateral parties and consider further opportunities to inform and educate preparers about the process and best practices for developing accounting policies. Application of Materiality Address the root causes identified in a materiality project proposed for the next work programme.

What is next?

The next steps involve the Secretariat preparing a review report that outlines the findings of the review and includes the actions agreed by the Board.

We look forward to sharing more updates on this important topic and welcome your thoughts and feedback.

Disclaimer

The article has been prepared by the Secretariat of the ASB for information purposes only. It has not been reviewed, approved, or otherwise acted on by the Board.