Assess whether all liabilities have been recognised and measured correctly in response to assistance provided for COVID-19

A consequence of the COVID-19 crisis, there may be an increased need for government services and government assistance, with a resultant potential increase in expenses. The key consideration in accounting for the increased services and assistance is whether an obligation exists. Government may make promises and commitments to undertake certain activities or provide support, but until there is a clear past event that has occurred (through a contract, legislation or past practice) that means that there is no realistic alternative but to settle the obligation, there is no liability and no related expense.

There are many Standards that deal with accounting for liabilities. Entities determine the nature of any additional liabilities that should be recognised and/or disclosed, or whether the measurement of existing liabilities should be changed, based on the following Standards: financial liabilities in GRAP 104 on Financial Instruments, lease liabilities in GRAP 13 on Leases, accruals and provisions in GRAP 19 on Provisions, Contingent Liabilities and Contingent Assets, and liabilities related to employee benefits in GRAP 25 on Employee Benefits.

Particular attention should be given to recognising and/or disclosing information about financial and other guarantee contracts issued by an entity. GRAP 19 should be applied in these instances.

Access the ASB’s guidance on the accounting implications of COVID-19 here: https://www.asb.co.za/covid-19/.