Your measurement concerns – we heard you!

The ASB has embarked on their measurement project. The purpose of the project is to develop guidance on the measurement of assets and liabilities in the Standards of GRAP. The IPSASB’s Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities and IPSAS 46 Measurement will be considered when drafting the GRAP requirements. The project will also consider other measurement issues on assets and liabilities raised by local stakeholders.

To date, the Secretariat held consultations with stakeholders to test whether the adoption of the measurement principles in IPSAS will be appropriate for the local environment and to identify the measurement issues stakeholders experience while applying the requirements of the Standards of GRAP.

What we heard

The following common concerns were raised by stakeholders:

• Some entities continue to discover old assets that are not accounted for in the entity’s records. There is no documentation available to recognise these assets.
• There is a misunderstanding on how the indicator assessment is intended to be applied. Impairment on physical assets is calculated at every year end and not when indicators are present.
• There is divergent practice on accounting for land invasions. Some stakeholders impair land to Rnil, while others believe that carrying the land at Rnil is not a fair reflection of the value, even though the land is invaded.
• The accounting of infrastructure is challenging as the Standards of GRAP do not provide detailed guidance on the measurement of infrastructure assets.
• It is difficult to determine the measurement of items in non-exchange transactions. The concessionary element usually gets ignored because of the lack of guidance on measuring it.
• IPSAS 46 has insufficient guidance on what constitutes operational capacity versus financial capacity. Entities need to make this assessment in order to determine which measurement basis is appropriate to subsequently measure assets, and the standard is not clear when entities hold assets to deliver services or to make a profit.

The next step in the project is to determine how to address the issues raised, for example, through the proposed Standard of GRAP on Measurement or through other authoritative or non-authoritative guidance.

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.