Are all social benefits the same and should they be accounted for the same?

The Accounting Standards Board approved an Exposure Draft (ED) on Social Benefits at its July 2023 meeting. As part of considering the appropriate accounting treatment for social benefits, the Board considered whether the accounting treatment should be the same for all social benefits, or whether there are different types of benefits that should be treated differently.

A previous article on The ASB approves an Exposure Draft on Social Benefits  explained the proposed definition of social benefits for Standards of GRAP and the scope of the ED. The benefits that could meet the definition include, for example, unemployment benefits, injury on duty benefits and social grants.

The Board identified clear differences in the way in which benefits in the South African environment are managed. The way in which benefits are managed is called the “management model” in the ED. The way in which benefits are managed and funded are entrenched in legislation, and differ. Entities’ responsibilities towards benefits also differ based on the management model. Some benefits are managed in a manner similar to insurance contracts, while others are managed by government on an ongoing basis. The Board agreed that these differences result in different information needs of users so that entities can be held accountable for what they are responsible for, and effective decisions can be made about government’s social policies and the allocation of resources thereto. It is therefore necessary to distinguish benefits so that different accounting treatments can be prescribed.

The Board considered options to describe the types of benefits and noted an advantage to leveraging existing terminology to ensure stakeholders would already be familiar with them. Many preparers and users such as the National Treasury and South African Reserve Bank are familiar with statistical reporting requirements as set out in the Government Finance Statistics Manual. As a result, the ED proposes to distinguish benefits using terminology from the Government Finance Statistics Manual, as follows:

Provide your comment on the proposals

Comment is due by 17 November 2023. Contact elizna@asb.co.za for more information.

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.