Research to understand the local landscape of measuring assets and liabilities when applying Standards of GRAP commenced in 2024. Stakeholders were requested to:
- identify the issues they experience when applying the current GRAP requirements on measurement of assets and liabilities; and
- consider the appropriateness of the IPSAS principles on measurement, contained in the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (IPSAS Conceptual Framework) and IPSAS 46 Measurement, for the local environment.
The following main points are highlighted from the research:
- The guidance on deemed cost in IPSAS will assist with the initial measurement of assets in non-exchange transactions.
Stakeholders indicated that it is difficult to measure assets received in non-exchange transactions. These assets are usually held for their operational capacity, i.e. to deliver services, and it is difficult to obtain a fair value in an active market for an asset with a similar use.
- The guidance on current operational value in IPSAS will assist with the subsequent measurement of public sector assets.
Assets unique to the public sector, such as infrastructure assets, heritage assets and community assets, were identified as those assets that pose the biggest challenges to measure when entities choose to apply the revaluation model. Entities experience difficulty finding similar assets in an active market to determine their fair values. This is primarily due to the fact that public sector assets are often held to achieve a specific policy objective rather than to generate economic benefits.
- The guidance in IPSAS on selecting the appropriate measurement model will assist stakeholders in deciding on the measurement model best suited for a particular transaction, event or condition.
While there were no issues identified with applying the historical cost model, stakeholders raised questions about the usefulness of the information from applying the model. They noted that assets valued at current value may provide better information than when they are valued at historical cost. For example, some heritage assets and community assets seem undervalued in entities’ financial statements because they have long life spans and with the passage of time the difference between the historical cost and the current value of the assets increase.
The Board concluded that using the IPSAS principles as a starting point for the amendments to the Conceptual Framework for General Purpose Financial Reporting (GRAP Conceptual Framework) and the development of a Standard of GRAP on Measurement meets stakeholders’ needs.
The amendments to the GRAP Conceptual Framework will be drafted and exposed for comment first, whereafter the development of the Standard of GRAP on Measurement will follow. The first project group meetings will be held in September 2025. If you would like to be a project group member, or part of the consultation process later on, please reach out to the measurement project manager on nabeelai@asb.co.za.
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.