Accounting for heritage assets is under review internationally

Accounting locally for heritage assets

GRAP 103 Heritage Assets is applied to recognise, measure and disclose information on heritage assets. Heritage assets are typically those assets that are held indefinitely, with the objective to protect and preserve them for present and future generations. These assets are often irreplaceable, are kept unencumbered, with their value appreciating over time due to their cultural, environmental, historical, natural, scientific, technological or artistic significance. Some entities have a custodial responsibility for heritage assets that require them to hold, manage, and preserve the assets in terms of legislation or similar means. Other entities may use heritage assets to meet their service delivery objectives, for example, a building such as the Union Buildings which is used for administrative purposes, but which also has a heritage value.

Currently there is no international accounting standard for heritage assets

IPSAS 17 Property, Plant and Equipment does not require an entity to recognise its heritage assets.  An entity may choose to apply the principles in IPSAS 17 to recognise these assets. When IPSAS 17 is applied for the recognition of heritage assets, the entity is required to also apply the disclosure requirements in IPSAS 17. The application of the measurement principles in IPSAS 17 remains optional.

Other than the guidance in IPSAS 17, no international accounting standard currently exists for heritage assets. The International Public Sector Accounting Standards Board (IPSASB) issued a Consultation Paper on Financial Reporting for Heritage in the Public Sector in April 2017. The Consultation Paper requested views on whether the special characteristics of heritage assets prevent entities from recognising them as assets. Views were also requested on whether heritage assets should be recognised as an asset.

How does the IPSASB intend to address the lack of guidance on accounting for heritage assets?

Based on feedback on the Consultation Paper, the IPSASB intends providing guidance on heritage assets by including application guidance in IPSAS 17. This guidance will explain how the principles in IPSAS 17 should be applied to account for heritage assets.

Areas that will be addressed include:

• assessing control of a heritage asset when a person, or other entity, has stewardship over that asset;
• considering how the measurement of the heritage asset is impacted when there is a restriction on the sale of the asset, or when the asset is used by the entity to provide a service;
• determining the period over which the heritage asset is expected to be available for use by the entity, taking into consideration that the entity is required to hold, manage, and preserve the heritage asset indefinitely; and
• assessing whether all subsequent expenditure incurred will enhance the heritage asset’s ability to generate future economic benefits or service potential.

The IPSASB is likely to issue an Exposure Draft with the application guidance in June 2020, with the guidance to be finalised in 2021. As part of the Accounting Standards Board’s ongoing commitment to influence the international standard setting process, the proposed guidance on heritage assets will be issued concurrently for input to the IPSASB. If you are interested in these developments, subscribe to the ASB’s newsletter to receive further updates.   

The views expressed in this article are those of the author and is not an official position of the ASB.