What the Board heard from stakeholders on GRAP 108 on Statutory Receivables so far

Stakeholders remain uncertain about the classification of receivables as contractual or statutory where transactions are regulated by legislation or similar means, and subsequently initiated by a contract. For example, where a Council adopts electricity tariffs regulated by NERSA and a customer enters into a contract with a municipality to receive electricity services, there is uncertainty about whether the receivable from supplying the electricity service should be classified as statutory or contractual.

It was also observed that in some instances, entities incorrectly classify a receivable as contractual because they perceive the arrangement as entered into willingly. For example, property rates are levied in terms of the Property Rates Act. Because a consumer willingly decides to purchase a property, the property rates receivable are incorrectly classified as a contractual receivable.

Guidance on these areas is included in Frequently Asked Question (FAQ) 11.1 on How do statutory receivables arise?.

With the revised Standard of GRAP on Financial Instruments (GRAP 104 (2019)) becoming effective on 1 April 2025, a new impairment model, namely the expected credit loss (ECL) model, will be introduced. Stakeholders expressed different views on whether the impairment model in GRAP 108, i.e. the incurred loss model, should be replaced with the ECL model. For more information on the difference between the ECL model and the incurred loss impairment model in GRAP 108, please refer to this article [add link to the article on 30 April 2024]

·       Stakeholders supporting the adoption of the ECL model for impairing statutory receivables note that it will be difficult to apply different impairment models for the same debtor when an account comprises of a contractual and statutory receivable component.

·       Stakeholders that support retaining the incurred loss model in GRAP 108 noted that from 1 April 2025, entities will already be required to apply different impairment models to impair a receivable that has a contractual and statutory component. Stakeholders also noted that practice on applying the ECL model should first develop before the Board introduces the model for statutory receivables.

Entities remain uncertain if, on the face of the statement of financial position, separate line items should be reflected for:

(a)  receivables from exchange and non-exchange transactions, with details on statutory or contractual receivables presented in the notes, or

(b)  statutory and contractual receivables, with details explaining whether the receivables are exchange or non-exchange in nature in the notes.

FAQ 4.8 on When should an entity present revenue and receivables from exchange and non-exchange transactions on the face of the financial statements or in the notes? provides guidance in this area.