Applying GRAP 109 with other Standards of GRAP

Entities are often uncertain when and how to apply GRAP 109 when they have an arrangement that involves multiple parties.

The nature of GRAP 109 is that it provides guidance on: (a) the identification of a particular type of arrangement – principal-agent arrangements – and (b) the transactions that each of the parties accounts for. GRAP 109 does not prescribe new recognition or measurement requirements for revenue, expenses, assets or liabilities.

GRAP 109 is applied before, during and after considering the other Standards of GRAP

When an entity enters into an arrangement that involves multiple parties, the entity should first apply GRAP 109 to assess whether the arrangement meets the definition of a principal-agent arrangement.

Only when an arrangement meets the definition of a principal-agent arrangement is GRAP 109 applied to identify which transactions in the arrangement each party accounts for. The principal accounts for the transactions with third parties, while the agent accounts for the revenue and expenses associated with performing the agency service. In certain circumstances, an agent may account for assets and liabilities from the arrangement. These circumstances will be explained in a future article.

The other Standards of GRAP prescribe the recognition and measurement requirements for the items related to the transactions each party accounts for. Entities provide information on these items in the financial statements by applying the presentation and disclosure requirements of the other applicable Standards of GRAP. In addition, information on the principal-agent arrangement is provided in the financial statements in accordance with GRAP 109.

The interaction of the Standards is illustrated in diagram 1 below.

The Secretariat issued two FAQs that may be helpful:

• What is the interaction between GRAP 32, GRAP 36 and GRAP 37, and GRAP 109?
• What is the interaction of Standards of GRAP where two or more Standards have similar requirements?

Comment to the Board on ED 200

The ASB is conducting its post-implementation review of GRAP 109 Accounting by Principals and Agents. ED 200 is available on the ASB website with a comment deadline of 15 September 2023.

The Board welcomes comment from all stakeholders on any aspect of GRAP 109.

Comment may be provided in writing through questionnaires (available on the ED 200 webpage on the ASB website) or in any other written form to info@asb.co.za. Comment may also be provided through roundtable discussions. Contact elizna@asb.co.za to be invited to a roundtable discussion.

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.