IPSASB issues new proposals for assets held for sale….

The IPSASB recently issued a proposed IPSAS (ED 79) for comment based on IFRS 5 on Non-current Assets Held for Sale and Discontinued Operations. The comment deadline is 25 October 2021.

History of the project locally

The ASB has debated over many years whether there should be accounting requirements for assets or disposal groups held for sale similar to those in IFRS 5.

The requirements in IFRS 5 indicate that assets and/or disposal groups that will be sold should be measured at the lower of their carrying amount or fair value less costs to sell, and separately presented as held for sale on the balance sheet. As assets held for sale are presented as current assets, the assets should be available for sale immediately and the sale transaction should be completed within a year from classification.

An equivalent of IFRS 5 was issued as GRAP 100 in 2010. Locally, stakeholders indicated that the regulatory requirements related to the disposal of assets are so onerous, that it is difficult to demonstrate the criteria that (a) the assets are immediately available for sale, and (b) that the sale transaction will be completed in a year. Typical examples include multiple levels of approval needed from various departments and agencies to sell land and other fixed property. These approvals take years to complete. Issues were also raised with disposal groups, which are typically entities that are acquired because of government policies. For example, entities are acquired because they are given as collateral for concessionary loans, and entities or parts of entities such as lending operations are acquired because the government agrees to a “bailout”. These entities are generally not in a saleable condition, and therefore would not meet the definition to be classified as held for sale without significant changes.

Given these concerns, the ASB decided to repeal the principles in GRAP 100 that dealt with non-current assets held for sale in 2013.

Proposed IPSAS

The proposed IPSAS is substantially aligned with IFRS 5, so many of the issues outlined above would potentially exist in the application of the IPSAS. There are two areas where the IPSASB has provided additional guidance or additional requirements:

• The IPSASB has clearly indicated that transfers of assets or disposal groups are not in the scope of the proposed IPSAS. This is because the transaction to dispose of the asset will not be completed by way of a sale.
• IFRS 5 requires the measurement of non-current assets or disposal groups at the lower of their carrying amount or fair value less costs to sell. The IPSASB proposes that disclosure be provided of fair value when this is higher than the carrying amount.

Why is this relevant locally?

The ASB has a policy of converging with IPSAS when this is consistent with its mandate and strategic objectives. Given past concerns raised with the application of IFRS 5, the Board will carefully consider what it should do going forward. As a result, stakeholder feedback will again be critical in (a) commenting to the IPSASB on local experiences, and (b) informing the Board’s future work – if any – in this area.

 How to access the documents?

ED 79 was issued as part of package of documents dealing with inter-related issues. This packages includes:

• ED 76 on Conceptual Framework Update: Chapter 7, Measurement of Assets and Liabilities in Financial Statements (published locally as ED 188);
• ED 77 on Measurement (published locally as ED 189); and
• ED 78 on Revisions to IPSAS 17 on Property, Plant and Equipment (published locally as ED 190).

ED 76 to ED 79 (locally published as ED 188 to ED 191) are available on the ASB’s website and can be accessed here: https://www.asb.co.za/comment-on-proposals/.

Comment can be submitted to the Secretariat of the ASB at info@asb.co.za, by 1 October 2021.