Developments in accounting for assets

Overview Amendments to: GRAP 16 Investment Property; and GRAP 17 Property, Plant and Equipment.

Amendments to Investment Property and Property, Plant and Equipment 3

Why were amendments needed?

Consultation highlighted the need for amendments Post-implementation review of GRAP 16 & GRAP 17. Objective was to solicit feedback from: preparers → what challenges they experience in applying Standards of GRAP. users → whether information in F/S meet their needs.

Areas identified Issue #1 - Distinction between investment property (IP) and property, plant & equipment (PP&E). Issue #2 - Useful lives & residual values. Issue #3 - The use of external valuers. Issue #4 - Disclosure on WIP. Issue #5 - Encouraged disclosures. Issue #6 - Repairs & maintenance disclosure.

Process to revise Standards ED 127 issued to receive feedback on proposed changes. Board approved amendments in March 2015. Approval received from Accountant-General in June 2015 for amendments. Effective date 1 April 2016.

Amendments to GRAP 16

Clarifying the application of the definitions Properties are not investment property if: used in production or supply (social housing, recreational facilities) → mandate specified in legislation or similar. they contributing to the provision of a specific good and service in conjunction with other assets. hold for disposal as part of ordinary course of operations. No changes to the principles needed, just explain how the definitions should be applied.

Other areas of clarification Identified other areas that require clarification: amount of revenue earned not important – rather why/how property is used. existence of lease in itself does not mean property is investment property. rent does not need to be market related for property to be classified as investment property.

Amendments to GRAP 17

Review of useful lives and residual values Annual assessment at each reporting date onerous. Introduction of indicator based approach. Conduct a detailed assessment if one or more indicators triggered. List of indicators developed on consultation with engineers and asset managers.

Review of useful lives and residual values Indicators: Change in composition of asset. Change in use: manner; utilisation rate; decision to dispose; technological environmental or commercial changes; changes in legal limits; asset idle. Approaching end of useful life. Planned R&M undertaken or delayed. Environmental factors. Change in condition.

Use of external valuers Misconception that Standards require the use of a valuer. Not required  MAY Amended to clarify that can use: - Independent member of valuation profession or another competent expert. - Can be internal or external expert. - No disclosure required.

Capital work in progress Users need more information. Disclose information on: Cumulative expenditure on in process assets, per class of asset Construction of assets taking a significantly longer period of time to complete than expected Construction of assets stopped → reason and if assets impaired. Flexibility in disclosing (ii) and (iii). Affects GRAP 16, 17, 31 and 103.

Repairs and maintenance Users need more information. Repairs and maintenance Separately disclose expenditure incurred to repair and maintain assets in notes (GRAP 16, GRAP 17, GRAP 103) Include information on how amount determined  comparability

Encouraged disclosures Eliminated from GRAP 16, 17 and 31.

Transitional provisions Amendment Prospective application Retrospective application Separate disclosure on repairs & maintenance on all assets. a Indicator based approach. Disclosure on capital WIP. Use of external valuers (professional valuer or another expert) More explanations, guidance and examples to distinguish IP and PP&E. Deletion of all encouraged disclosures

Effective date Financial periods commencing on or after 1 April 2016. Approval from Accountant-General.

Other issues 20

Other issues Effective dates of: - Amendments to GRAP 5 and 100 (14/15). - GRAP 105 to 107, and Directive 11 (15/16). - Improvements from 2013/14 (15/16).

Other developments 22

Other developments To be considered by the Board in July: Principals and agents. Amendments to GRAP 21 and GRAP 26. Working on: Guidance on accounting for housing and land.

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