The Accounting Standards Board 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.
A previous article on Identifying roles in a principal-agent arrangement – who is acting on behalf of who? explained the criteria in GRAP 109.25 to determine if an entity is the agent in a principal-agent arrangement. If all three the criteria are not met, the entity is the principal.
The exception to the rule
There is one exception to an agent meeting all three criteria in paragraph .25. This is explained in GRAP 109 paragraph .26:
Where an entity has been granted specific powers in terms of legislation to direct the terms and conditions of particular transactions, it is not required to consider the criteria in paragraph .25(a) to conclude that is an agent.
[.25(a) The entity does not have the power to determine the significant terms and conditions of the transaction.]
Entities shall apply judgement in determining whether such powers exist and whether they are relevant in assessing whether an entity is an agent.
This is particularly the case where an entity acts in a regulatory capacity or as an enforcement agency. Even though these entities may have the power to determine the significant terms and conditions of the transaction(s), they are often unable to use all, or substantially all, of the resources that result from the transaction (.25(b)), and are not exposed to variability in the results of the transaction (.25(c)).
An entity that applies paragraph .26 should ensure sufficient information is provided in the financial statements to meet the disclosure requirement for information on whether the entity is the principal or agent and any significant judgement applied in making this assessment.
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.