In focus – Research Paper on Review of Amendments to the Standards of GRAP on Investment Property and Property, Plant and Equipment

Were the changes to the classification of land and buildings as investment property or property, plant and equipment effective? 

The Board completed a review of the implementation of the amendments made to GRAP 16 on Investment Property and GRAP 17 on Property, Plant and Equipment in 2018. The amendments to GRAP 16 and GRAP 17 were those made to the Standards to address issues identified during the post-implementation review of these Standards undertaken in 2014. The results of the 2018 review of the implementation of the amendments were published by the Board in a Research Paper issued in December 2019. 

During the post-implementation review in 2014, stakeholders indicated that it is difficult to classify land and buildings as either investment property or property, plant and equipment when these assets are used and revenue is received in return. The key question is whether the assets are used to provide goods or services, or whether they are used for rental purposes or capital appreciation. In response, the Board amended GRAP 16 to indicate that land and buildings that are used to execute an entity’s mandate – as outlined in legislation (or similar) – should be classified as property, plant and equipment. A number of examples were provided, and additional guidance was added regarding the classification of land held for “strategic” purposes. 

Stakeholders that participated in the 2018 review indicated that the changes were useful. While the examples provided in the Standard were also seen as helpful, additional examples were identified for potential clarification by the Board. These included: 

• The distinction between inventories and investment properties. 
• Classification of airports and stadiums. 
• Classification of cemeteries. 
• Accounting for transfers to, or from, investment property where there is a change in use. 

The Board considered the proposed examples, and agreed the following: 

• The asset decision tree developed by the Secretariat provides guidance on the distinction between investment property and inventory, and the classification of airports and stadiums. The decision tree can be accessed on the ASB’s website by following this link: https://www.asb.co.za/asset-decision-tree/
• An existing FAQ on the classification of assets as heritage assets or not will be updated to include cemeteries. 
• The accounting for transfers of land and buildings to, or from, investment property is dealt with in ED 176 on Improvements to Standards of GRAP (2019). 

Read more by accessing he Research Paper on the ASB’s website: https://www.asb.co.za/wp-content/uploads/2019/12/Research-Paper-on-Review-of-Amendments-to-GRAP-16-and-17-11122019.pdf