Update on Standards of GRAP July 2019

Disclaimer The views and opinions expressed in this presentation are those of the individual. Official positions of the ASB on accounting matters are determined only after extensive due process and deliberation.

Overview A three-year reporting landscape. New developments.

Reporting frameworks – 2018 to 2020 Effective 1 July 2018 Effective 1 July 2019 Effective 1 July 2020 Mandatory Voluntary Improvements 2016 IGRAP 18 GRAP 20 GRAP 34 to 38 GRAP 18 GRAP 21 and 26 IGRAP 19 GRAP 32 GRAP 110 Guideline on Housing Arrangements GRAP 108 IGRAP 20 GRAP 109 IGRAP 17, 18, 19, Guideline on Housing IFRIC 22

Key changes Period Change 2018/19 Impairment of assets 2019/20 Accounting for land Accounting housing arrangements Statutory receivables Service concession arrangements

At a glance Standard What to consider? GRAP 21 and GRAP 26 Impairment of cash and non-cash generating assets Designate assets as cash or non-cash generating on initial recognition of asset (or adoption of changes). CG = generate commercial return = positive cash flows from continuing use and disposal that are significantly higher than the cost. Not an ongoing assessment – initial recognition or when use of asset changed. Dual purpose assets If unsure NCG. Non-cash generating asset can be network. Apply prospectively.

At a glance Standard What to consider? Guideline Accounting for arrangements in terms of National Housing Programme Decide if functions are that of project manager or contractor. Change to what revenue, expenses, assets and liabilities recognised in the financial statements. IGRAP 18 Recognition and Derecognition of Land Recognition based on control, not legal title  need to assess all arrangements. NB: Land not buildings. Examples: land used in national housing programme, arrangements with public works as custodian, arrangements with others for use of land. Transition – Prospective adjustment to land controlled on effective date.

At a glance Standard What to consider? IGRAP 19 Liabilities to Pay Levies Levies = non-exchange transactions imposed by government on entities i.a.w. legislation or similar. Liability = when activity that triggers payment of liability occurs. Review payments to other levels of government. GRAP 32 Service Concession Arrangements: Grantor Replaces Guideline on PPPs. Scope wider, not only PPPs as outlined in legislation  arrangements where an operator provides a mandated function of the grantor using service concession assets. Review all arrangements to assess if SCA. Transition – Retrospective.

At a glance Standard What to consider? GRAP 108 Statutory Receivables Receivables that arise from legislation or similar means. Accounted for differently and separately from contractual receivables. Review current accounting policies and identify statutory receivables and change measurement principles, systems to identify presentation and disclosure requirements. Transition: 3 years for classification and measurement.

At a glance Standard What to consider? GRAP 109 Accounting by Principals and Agents Assess whether a principal-agent arrangement exists. Who is principal and agent. Disclosure. Transition – Retrospective, but not for transactions completed on effective date. IGRAP 20 Adjustments to Revenue Statutory revenue transactions, subject to an appeal, objection or similar process  how to adjust revenue already recognised based on outcome of decision. Error or change in estimate. Review policies, systems to identify when each scenario occurs. Transition.

Preparing for implementation GRAP Guidelines still need to be developed by OAG. If Standard is effective from 1 July 2019, do not wait until 30 June 2020 to understand the implications. Start early so that there is time to adjust policies, processes, systems. GRAP 20 – As entities had a choice of using IPSAS 20 or GRAP 20, the changes to the related party disclosures should be minimal.

Newly issued Pronouncement Status Guideline on Accounting for Landfill Sites Final Guideline. Mandatory – date linked to amendments to GRAP 17 in proposed Improvements Guideline on The Application of Materiality in Financial Statements Final Guideline. Voluntary initially, will become mandatory Amendments to GRAP 1 Final amendments approved. Proposed 1 April 2020

Newly issued Pronouncement Status Amendments to GRAP 104 Financial Instruments Final changes issued. Transitional provisions and effective date issued for comment Proposed Transitional Provisions for the Standard of GRAP on Financial Instruments Exposure Draft – comment deadline 29 November 2019

Newly issued Pronouncement Status Feedback on GRAP for ‘small entities’ Research Paper being developed Transversal issues emerging on the application of GRAP: Measurement of non-current assets. Technicality and relevance of aspects of Standards. Keeping up to date with changes. Applying materiality. Financial instruments. Disclosures for (small) entities. Year-end adjustments. Measurement of assets: Determining fair value – ongoing challenge not just once off. Applying judgements – useful lives, residual values. Fully depreciated assets still in use.

Newly issued Pronouncement Status Proposed Improvements to Standards of GRAP (2019) Exposure Draft – comment deadline 31 October 2019 Work programme 2021-2023 Final to be published with new 5 year strategic plan

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