Identifying principal-agent arrangements – the nature of transactions with third parties

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

GRAP 109 defines a principal-agent arrangement as:

A binding arrangement in which one entity (an agent), undertakes transactions with third parties on behalf, and for the benefit of, another entity (the principal) [own emphasis added]

What are transactions with third parties in GRAP 109?

GRAP 109 explains that the nature of transactions between a principal and third parties is linked to the type of activities carried out by the agent in accordance with the binding arrangement. Based on these activities, “transactions with third parties” in the context of GRAP 109 includes both the following:

(a).  The agent executing a specific financial transaction between a principal and a third party.

For example, a sale or purchase transaction between a principal and a third party, and delivery of goods or services such as houses in the reconstruction and development programme.

(b).  The agent interacting with third parties by representing the interest of the principal.

For example, an agent negotiating a contract with third parties on the principal’s behalf, and an agent managing beneficiaries of goods or services delivered by the principal.

Comment to the Board on ED 200

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 format 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.