The Board concurrently issued a proposed International Public Sector Accounting Standard (IPSAS) that provides guidance on accounting for tangible natural resources – see ED 212. Previous articles discussed the proposed scope and definitions. This article explains the proposed recognition, measurement, presentation and disclosure requirements.  

When to recognise and how to measure a tangible natural resource 

Initial recognition and measurement 

The proposed IPSAS explains that a tangible natural resource is recognised when it is probable that future economic benefits or service potential associated with the resource flows to the entity, the entity controls the resource, and it can be measured reliably. The IPSAS proposes that information about the resource be disclosed in the financial statements when it meets the definition of an asset, but cannot be reliably measured. Information is disclosed until the resource becomes reliably measurable, whereafter the recognition and measurement principles in the proposed IPSAS are applied. 

The IPSAS proposes that when a tangible natural resource is acquired in an exchange transaction, it is initially measured at cost. The guidance in IPSAS 45 on Property, Plant and Equipment is applied to determine the cost. Deemed cost is applied to determine the cost of a tangible natural resource when it is acquired in a non-exchange transaction. IPSAS 46 on Measurement is applied to determine the deemed cost.  

Subsequent measurement 

The IPSAS proposes that a tangible natural resource is subsequently measured using either the historical cost model or the current value model from IPSAS 46.  IPSAS 46 requires that the resource is measured at current operational value if it is held for its operational capacity, or at fair value if it is held for its financial capacity.  

The proposed IPSAS includes a rebuttable presumption that tangible natural resources within the scope of the IPSAS have indefinite useful lives on the basis that they are generally not used or consumed like other tangible assets within the scope of other IPSAS. This means that resources within the scope of the IPSAS may not be depreciated.  

Presentation and disclosure  

The IPSAS proposes that tangible natural resources are presented as a separate line item on the face of the statement of financial position. Sufficient information needs to be disclosed to enable users to evaluate the nature of, and risks associated with the tangible natural resource. Users should also be able to evaluate the effect that the tangible natural resource has on the entity’s financial position, financial performance and cash flows. Disclosures, such as difficulties in obtaining a reliable measurement, are required for those tangible natural resources that are not recognised because they cannot be reliably measured.  

The proposed IPSAS exempts an entity from disclosing certain information about tangible natural resources if such information may lead to further degradation of a tangible natural resource that is rare or endangered.  

Want to share your views? 

Share your comment on the proposals in ED 212, or on the alternative view by submitting written comment to info@asb.co.za. You can also participate in roundtable consultations – the “ASB Engage” post on Friday includes dates of planned consultations. Comment received on the proposed IPSAS will be shared as input into the IPSASB’s standard-setting process.  

Time to submit your comment is running out – the local comment deadline for ED 212 is 14 February 2025.