developments in accounting for assets. overview amendments to: grap 16 investment property; and grap...
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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
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.
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. a
Disclosure on capital WIP. a
Use of external valuers (professional valuer or another expert)
a
More explanations, guidance and examples to distinguish IP and PP&E.
a
Deletion of all encouraged disclosures
a
Effective date• Financial periods commencing on or after
1 April 2016. • Approval from Accountant-General.
Other issues
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
Other developmentsTo 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.
Contact details
Tel: (011) 697-0660
Fax: (011) 697-0666
Email: [email protected]
Website: www.asb.co.za
: Accounting Standards Board
: @ASB_SA