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ACCOUNTING GUIDELINE
GRAP 3
Accounting Policies,
Changes in Accounting
Estimates and Errors
All rights reserved. No part of this publication may be reproduced, stored in retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior permission of the National Treasury of South Africa.
Permission to reproduce limited extracts from the publication will not usually be withheld.
Though National Treasury (NT) believes reasonable efforts have been made to ensure the accuracy of the information contained in the guideline,
it may include inaccuracies or typographical errors and may be changed or updated without notice. NT may amend these guidelines at any time by
posting the amended terms on NT's Web site.
Note that this document is not part of the GRAP standard. The GRAP takes precedence while this guideline is used mainly to provide further
explanations on the concepts already in the GRAP.
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Contents
1. Introduction .................................................................................................................. 4
2. Scope .......................................................................................................................... 5
3. Accounting Policies ...................................................................................................... 5
3.1 Initial setting of an accounting policy ................................................................... 5
3.2 No standard of GRAP available to apply to a transaction, event or circumstance 7
3.3 Materiality ........................................................................................................... 9
3.4 Consistent application of accounting policies .................................................... 10
3.5 Subsequent change in accounting policy .......................................................... 11
3.6 Instances that will not result in a change in accounting policy ........................... 13
3.7 Applying changes in accounting policies ........................................................... 14
3.8 Impracticability and application of hindsight ...................................................... 18
3.9 Disclosure ......................................................................................................... 24
4. Accounting Estimates ................................................................................................ 26
4.1 Applying a change in an accounting policy ........................................................ 28
4.2 Disclosure ......................................................................................................... 31
5. Errors ......................................................................................................................... 33
5.1 Correction of errors ........................................................................................... 33
5.2 Disclosure ......................................................................................................... 34
6. Useful links and references ........................................................................................ 38
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1. Introduction
This document provides guidance on the bases for the presentation of financial statements.
The contents should be read in conjunction with GRAP 3.
For purposes of this guide, “entities” refer to the following bodies to which the standard of
GRAP relate to, unless specifically stated otherwise:
• Public entities
• Constitutional institutions
• Municipalities and all other entities under their control
• Trading entities and government components applying the standards of GRAP
• Parliament and the provincial legislatures
• TVET and CET colleges
Explanation of images used in manual:
Definition
Take note
Management process and decision making
Example
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2. Scope
GRAP 3 is applicable to all entities preparing their financial statements on the accrual basis of
accounting.
Changes in accounting policies, changes in accounting estimates and corrections of prior period errors relating to taxation, where applicable, must be accounted for in accordance with IAS 12® Standard on Income Taxes.
Entities will comply with GRAP 3 for all changes in accounting policies, changes in accounting
estimates and errors where no other specific standard or directive provides guidance and/or
transitional provisions, e.g. where a specific standard or directive provides transitional
provisions on adopting of a new standard of GRAP or applying amendments to a standard of
GRAP, the provisions in that standard should be followed and not GRAP 3.
3. Accounting Policies
Accounting policies are specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting its financial statements.
Accounting policies describe the manner in which an entity has elected to account for similar
types of transactions in the preparation and presentation of its financial statements.
3.1 Initial setting of an accounting policy
Where a “Standard of GRAP” applies to a material transaction, other event or circumstances,
an entity should determine the accounting policy or policies to be applied by reference to the
requirements of that Standard.
“Standard of GRAP” include the Standards of GRAP, Interpretations of the Standards of GRAP and any Directives issued by the ASB. Guidelines explain the application of the principles included in the Standards and/or Interpretations to specific transactions, events or circumstances. The authority of Guidelines is set out in each Guideline or in Directives issued by the Board.
To this end, the accounting policies embedded in the Standards will result in financial
statements that contain relevant and reliable information about the transactions, other events
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and circumstances to which they apply. Accordingly an accounting policy must always be in
line with the applicable Standard of GRAP.
Example : Accounting policy extract – Property, plant and equipment
“Items of [include types of property, plant and equipment] are recognised as assets on acquisition date and are initially recorded at cost. The cost of such items is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by the entity.……”
Where an accounting standard permits an entity to adopt one of two alternative accounting
treatments, it is important that the entity clearly indicates the alternative that has been adopted
(and which should apply consistently, unless a standard permits otherwise).
What should be included in accounting policies
Ensure that the following basic principles are addressed as a minimum when developing the policies, i.e.:
• Initial recognition, initial measurement, subsequent measurement, impairment, derecognition and presentation (where relevant).
Take note that not all of these principles will necessarily be applicable to all items in the financial statements.
A review of the accounting policies is necessary if the applicable standard of GRAP changes.
In many instances, the standard of GRAP will provide for transitional provisions which will be
used to apply the new requirements. The accounting policy therefore also needs to be
changed to be in line with the relevant accounting standard to which it relates and any
applicable transitional provisions.
How does an entity decide which accounting policies should be included in its financial
statements?
An entity includes accounting policies in its financial statements for those material transactions
or events included in the entity’s financial statements for the current or prior years (either
recognised or included in a specific component of the financial statements, e.g. the statement
of financial position or the comparison of budget and actual information, or disclosed in the
notes to the financial statements).
An entity would not include accounting policies in its financial statement that are not relevant
to the transactions and events undertaken for the current or prior years. For example, an
entity would not include an accounting policy in its financial statements for internally generated
intangible assets it is has not undertaken such transactions in the current or prior years.
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When an accounting policy is selected, any other relevant interpretations issued by the
Accounting Standards Board (ASB) need to be considered. A very important source of
information to consider is Directive 5 on Determining the GRAP Reporting Framework issued
by the ASB.
What versions of the Standards of GRAP should be applied on first time adoption?
An entity that adopts the Standards of GRAP for the first time should apply the versions of the
Standards effective for the first GRAP reporting period. The versions of the Standards that
are applicable can be determined with reference to the annexure to Directive 5 on Determining
the GRAP Reporting Framework and by reference to the ASB’s website.
An entity should use the same accounting policies, based on the versions of the Standards of
GRAP effective at the end of the entity’s first GRAP reporting period, for both the current and
comparative information presented.
Example : Applying the correct version of a Standard of GRAP
The end of Entity A’s first GRAP reporting period is 31 March 20X8. Entity A presents comparative information in those financial statements. Therefore, its date of transition to the Standards of GRAP is 1 April 20X6. Entity A is required to apply the Standards in Directive 5 effective for the 31 March 20X8 period in preparing and presenting its:
a) Statement of financial position, statement of financial performance, statement of changes in net assets, statement of cash flows and notes for 31 March 20X8 (including comparative information for 31 March 20X7); and
b) A comparison of budget an actual amounts and notes for the year 31 March 20X8.
The transitional provisions in other Standards of GRAP apply to changes in accounting policies made by an entity that already applies the Standards of GRAP.
3.2 No standard of GRAP available to apply to a transaction, event or circumstance
In cases where no standard of GRAP is available to initially develop an accounting policy,
management must use their judgement when determining the accounting policy in line with
the hierarchy provided in GRAP 3.
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The following key principles need to be considered:
Directive 5 provides guidance on which standards to apply. Where no guidance is available,
a very strict hierarchy must be followed to determine a specific accounting policy. While
considering the above key principles, the following hierarchy is used to determine which
standard or guidance to follow:
When an entity uses pronouncements of, for example other standard-setting bodies, it should
ensure that it is not in conflict with similar standards of GRAP or the GRAP Framework. For
6th
5th
4th
3rd
2nd
1st Requirements of Standards of GRAP or Interpretations dealing with similar / related issues
The Framework for the Preparation and Presentation of Financial Statements (definitions, recognition criteria and measurement
criteria)
Pronouncements of the International Public Sector Accounting Standards Board (IPSAS)
The International Accounting Standards Board (IASB)
The International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee of the IASB
Financial Reporting Standards Council
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example an entity is not allowed to use IAS 20® Standard on Government Grants issued by
the IASB to development its accounting policy for revenue from non-exchange transactions
as the standard is in conflict with the existing standard, GRAP 23 on Revenue from Non-
exchange Transactions.
3.3 Materiality
GRAP 3 notes that policies need not be applied where the effect of applying them is
immaterial. This compliments GRAP 1 which states that disclosures required by GRAP need
not be made if the information is immaterial.
Material omissions or misstatement of items are material if they could, individually or collectively, influence the decisions or assessments of users made on the basis of the financial statements. Materiality depends on the nature or size of the omission or misstatement judged in the surrounding circumstances. The nature or size of the information item, or a combination of both, could be the determining factor.
In applying the definition of materiality, an entity should consider the characteristics of the
users of the financial statements and how the decisions of such users would reasonably be
expected to be influenced.
Also in relation to materiality, GRAP 3 notes that it is inappropriate to make or leave
uncorrected, immaterial departures from GRAP to achieve a particular presentation of an
entity’s financial position, financial performance or cash flows. This statement implies that a
departure that achieves a particular presentation may be immaterial. However, if that
particular presentation is different from the presentation that would be achieved through
compliance with the Standard, it may be likely to influence the decisions of the user and hence
be material. An example of such departure would include a situation where a small
uncorrected error could trigger a breach of borrowing covenants. Accordingly, even
departures that appear to be relatively immaterial because of its size should be considered
carefully.
Arguments that it is impracticable to apply a standard, or parts thereof, or that amounts cannot be determined, are rarely reasons for considering the effect to be immaterial, because in the absence of quantification it is generally not possible to judge materiality.
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3.4 Consistent application of accounting policies
Users of financial statements should be able to compare the current period presented to
previous periods. It is therefore crucial that the accounting policies are consistent from period
to period. Accounting policies must also be applied consistently for similar transactions. The
only exception is if a standard of GRAP specifically requires or permits items to be split into
categories and a separate accounting policy is applicable for each category.
Example: Accounting policies for different categories of inventory
Different categories of inventory may be accounted for using different accounting policies, for example:
• Finished goods – first-in-first-out method
• Raw materials – weighted average method
GRAP 17 on Property, Plant and Equipment is another excellent example. Each class of
property, plant and equipment must be categorised and a different accounting policy may be
applicable for each class of property, plant and equipment.
Categories vs. Classes
Categories are predetermined in the standards of GRAP and are fixed, for example categories of financial instruments, whilst classes are determined by management. The standards may provide examples of different classes, but it is up to management to decide which classes will be used in the financial statements. An example is items of property, plant and equipment, where a class may be office furniture, computer equipment, etc.
In addition management of an entity may elect to have different classes of motor vehicles for example, those which are used for staff/admin purposes and motor vehicles used to do inspections (like to roads or rural areas) each with differing useful lives.
The following is an extract from the accounting policy for property, plant and equipment found
in the annual financial statements of a public entity (only for illustration purposes):
Example: Accounting policy extract – Property, plant and equipment
Asset class Model Depreciation method Useful life
Office equipment Cost Straight line over useful life 5 years
Machinery and equipment
Cost Straight line over useful life 7 years
Motor vehicles Cost 20 % diminishing balance method
5 years
IT equipment Cost Straight line over useful life 3 years
Land Revaluation Not depreciable Indefinite
Buildings Revaluation Straight line over useful life 20 years
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As illustrated in the above extract, each class of property, plant and equipment has its own
accounting model and depreciation method, in other words, accounting policy for recognition
and measurement.
3.5 Subsequent change in accounting policy
After the initial accounting policy has been set, using a specific standard or judgement where
no specific standard exists, GRAP 3 will be applied. The accounting policy must ensure the
quality and reliability of all information presented in the financial statements as envisaged by
the qualitative characteristics of financial reporting in the Framework for the Preparation and
Presentation of Financial Statements. These are:
Information is relevant if it is capable of making a difference in achieving the objectives of financial reporting, i.e. when it has confirmatory value, predictive value or both. It may be capable of making a difference, and thus be relevant, even if some users choose not to take advantage of it or are already aware of it.
Understandability is the quality of information that enables users to comprehend its meaning. Financial statement should present information in a manner that responds to the needs and knowledge base of users, and to the nature of the information presented. Understandability is enhanced when information is classified, characterised, and presented clearly and concisely.
Timeliness means having information available for users before it loses its capacity to be useful for accountability and decision-making purposes. Having relevant information sooner can enhance its usefulness as input to assessments of accountability and its capacity to inform and influence decisions that need to be made. A lack of timeliness can render information less useful.
Relevance Understandability Timeliness Comparability Verifiability
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Comparability is the quality of information that enables users to identify similarities in, and differences between, two sets of phenomena. Comparability is not a quality of an individual item of information, but rather a quality of the relationship between two or more items of information.
Verifiability is the quality of information that helps assure users that information in the financial statements faithfully represents the economic and other phenomena that it purports to present.
An accounting policy may change in accordance with GRAP 3 when it no longer conforms to
the above characteristics. GRAP 3 states that it will be necessary to change an accounting
policy only if:
• A change is required by a standard of GRAP; or
• A change in the current accounting policy will result in more reliable and relevant
information about the impact of transactions and events on the entity’s financial
statements.
The above two prerequisites are the only reasons when a change in accounting policy can be
justified. A change in the recognition, measurement and presentation of a transaction, event
or condition will be a change in accounting policy.
An entity should not consistently keep changing its accounting policies as this will negatively
impact the comparability of the entity’s results from one period to another. It will also limit the
ability of the user of the financial statements to establish trends in an entity’s financial position,
financial performance and cash flows.
Apart from these reasons it is also a costly and time consuming exercise.
Example : What may constitute a change in accounting policy
• An entity accounts for its property, plant and equipment on the cost basis, but decides to adopt the revaluation method in accounting for these items due to a decision on how it will manage the assets.
• An entity that previously accounted for its investments in joint ventures using the equity method decides to rather adopt the proportionate method, as management is of the view that this method provides more relevant information about the effects of the transactions.
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A change from one basis of accounting to another basis of accounting is a change in accounting policy, therefore if a department moves from the modified cash basis to the accrual basis of accounting, it will be a change in accounting policy and GRAP 3 should be applied.
3.6 Instances that will not result in a change in accounting policy
Certain events or transactions do not qualify as a change in accounting policy, namely:
Example: Application of an accounting policy to a transaction that differs in substance from the previous transaction
An entity leases equipment which, after taking substance over form into account, qualifies as an operating lease. The lease contract expires and management decides to change the contract with the lessor. After considering the substance of the new lease contract, the lease now qualifies as a finance lease. The transaction is consequently different in substance, from the previous transaction and the accounting policy for finance leases will now be applied. This will not result in a change in accounting policy.
•Another existing accounting policy will be used applicable to the specific type of transaction or substance of the transaciton
The application of an accounting policy for events or transactions or conditions that differ in substance from those previoulsy occurring
•This would represent a new accounting policy being applied to a new type of transaction or event
The application of a new accounting policy for transactions, other events or conditions that did not occur perviously or that were immaterial
•A change to the cost model when a reliable measure of fair value is not available is not a change in accounting policy in terms of this Standard, and should be accounted for prospectively (refer also to Directive 11 on Changes in Measruement Bases Following the Initial Adoption of Standards of GRAP)
A change to the cost model when a reliable measure of fair value is not available (or visa versa) for an asset that a Standard of GRAP would otherwise permit to be measured at fair value
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Example: Application of a new accounting policy
An entity acquires a building in the current period which qualifies as an investment property. The entity previously never had investment property. Other land and buildings owned by the entity, qualifies as owner-occupied property, and therefore the accounting policy for property, plant and equipment is used. No accounting policy existed for investment property; therefore this situation qualifies as an adoption of a new accounting policy, not a change in accounting policy.
3.7 Applying changes in accounting policies
GRAP 3 outlines the following important aspects:
A voluntary change in accounting policy will occur when the entity has applied an accounting
policy from other standard-setters in the absence of a standard of GRAP for a specific
transaction or event and the standard on which the accounting policy was based has been
amended.
If a standard is not yet effective, but the effective date has been determined by the Minister of
Finance, i.e. it has been issued and approved, an entity may want to early adopt the specific
standard. This decision will not be a voluntary change in accounting policy. The change in
accounting policy will be accounted for in accordance with the transitional provisions of that
particular standard.
The main objective of retrospective application is to adjust the financial statements as if the
entity had always been applying the accounting policy as in the current year. Therefore, the
change must be reflected not only in the current period, but also in the comparative periods'
figures shown in the statement of financial position, statement of financial performance,
statement of changes in net assets, cash flow statement and notes to the financial statements.
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Example: Change in accounting policy
An example of an entity’s statement of financial position (20X6 has only been included for illustrative purposes):
Extract from Statement of Financial Position
Note 20X8
20X7
20X6
Current Assets
Cash and cash equivalents 4 9,000 5,000 2,500
Deposits 5 200 1,500 1,000
Accounts receivable 6 8,400 5,700 4,800
In the above example the retrospective adjustment will be applied to ‘Accounts receivable’.
The first step in applying retrospective adjustment is to start from the earliest year presented, thus, 20X7s opening balance (thus the closing balance for 20X6). After adjusting 20X7’s opening balance, the next step will be to adjust 20X7 closing balance and then the closing balance for the current year. For each year presented the period specific adjustment must be made and the cumulative effect in each year’s closing balance must be accounted for.
The steps discussed in the above example can be illustrated as follows:
Let’s further consider the example of ‘Accounts receivable’:
Closing balance in 20X6 4,800
Plus: movement in 20X7 900
Equals: closing balance in 20X8 5,700
Plus: movement in 20X8 2,700
Equals: closing balance in 20X8 8,400
As can be seen from above, the closing balance of the previous period affects the opening balance of the current period, i.e. it has a cumulative effect, and the closing balance for 20X6 plus movements in 20X7 equals the opening balance for 20X7. Consequently if you are applying a change in accounting policy retrospectively, the opening balance for the earliest period presented, which is the closing balance for the period before that, i.e. 20X6 must be adjusted with the cumulative effect on all prior periods (20X6 and back) and then every other
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opening and closing balance thereafter must be adjusted with the cumulative effect, i.e. 20X7 and 20X8.
In addition to adjusting the opening and closing balances with the cumulative effect, the period specific adjustments, i.e. movement for the period, must also be adjusted, which will be the effect on the surplus or deficit or assets or liabilities. Remember that an adjustment to prior periods affecting surplus or deficit will always be made to accumulated surplus or deficit.
This is best illustrated by showing the journal entries. Refer to the example below.
If we take the same information as in the example above and assume the following:
Previously shown:
Should be: Adjustment:
Closing balance in 20X6 4,800 5,000 200
Plus: movement in 20X7 900 1,000 100
Equals: closing balance in 20X7 5,700 6,000 300
Plus: movement in 20X8 2,700 2,500
Equals: closing balance in 20X8 8,400 8,500
The journal entries to adjust the accounts receivable balance will be as follows:
20X7 Debit Credit
R R
Accounts receivable 200
Accumulated surplus/deficit (opening balance) 200
Adjust the opening balance for 20X7
20X7 Debit Credit
R R
Accounts receivable 100
Revenue (against surplus/deficit) 100
Account for the movement in 20X7
20X8 Debit Credit
R R
Accounts receivable 2,500
Revenue (against surplus/deficit) 2,500
Account for movement in 20X8
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As can be seen, any adjustments that affect surplus or deficit should be made against accumulated surplus or deficit (see first journal entry in 20X8). In 20X8, the total movement for the period is journalised as it is the current reporting period.
The diagram below summarises the application of a change in accounting policy:
Specific transitional provisions contained
in relevant GRAP Standard?
Apply specific transitional
provisions
Apply change
retrospectively
YES NO
Does the standard require
retrospective application?
Apply change prospectively
YES
NO
Impracticable?
• Adjust opening balance of each
affected component of net assets for
earliest period presented
• Adjust comparative amounts disclosed
for each prior period presented as if
the new policy had always applied
Practicable?
Impracticable to
determine period-specific
effect
Impracticable to
determine cumulative
effect of changes
• Apply new accounting policy to carrying
amount of assets and liabilities as at the
beginning of the earliest period for which
the retrospective application is possible
• Make a corresponding adjustment to the
opening balance of each of the affected
components of net assets
• Adjust comparative
information to apply
new accounting policy
prospectively from the
earliest date possible
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3.8 Impracticability and application of hindsight
As highlighted in the figure above, full retrospective application can be impracticable. To this
end, full retrospective application of a new policy is not required.
Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. For a particular period, it is impracticable to apply a change in an accounting policy retrospectively or to make a retrospective restatement to correct an error if:
a) the effects of the retrospective application or retrospective restatement are not determinable;
b) the retrospective application or retrospective restatement requires assumptions about what management’s intent would have been in that period;
c) the retrospective application or retrospective restatement requires significant estimates of amounts and it is impossible to distinguish objectively information about those estimates that:
i. provides evidence of circumstances that existed on the date(s) as at which those amounts are to be recognised, measured or disclosed; and
ii. would have been available when the financial statements for that prior period were authorised for issue from other information.
One circumstance that might give rise to impracticability is where data may not have been
collected in the prior period in a way that enables retrospective application of a new accounting
policy and where it may not be practicable to create, or recreate, the information.
Significant estimates are often required when adjusting comparative information for prior
periods. When making these estimates the basis of the estimation should reflect the
circumstances that existed in the prior period. However, it is recognised that with the passage
of time, it becomes increasingly difficult to define those circumstances.
In addition, with the passage of time, the estimates are increasingly likely to be unduly
influenced by knowledge of events and circumstances that have arisen since that prior period.
However, the basis of making estimates related to prior periods remains the same as for that
for the current period i.e. the estimates reflect the circumstances that existed when the
transaction, other event or condition occurred.
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The definition of impracticable requires information to
a) have been available at the time of issue of the prior period’s financial statements; and
b) that gives evidence of circumstances that existed at the time when the transaction, other event or condition existed.
Such information should be capable of being distinguished from other information, such as information that only became available after the financial statements for that period had been issued.
Use of hindsight is not permitted when applying a new accounting policy, either to second
guess management’s intentions in the earlier period or in estimating amounts recognised,
measured or disclosed in the prior period.
Where full retrospective application is impracticable, an entity would account for the
retrospective application as follows:
An accounting policy may be changed even if it is impracticable to apply it retrospectively (i.e. to adjust figures) for any prior period. It would, however, be rare that an entity would voluntarily adopt an accounting policy that could it could not apply retrospectively because the lack of comparability would make the information less relevant. Accordingly, the conditions for a change in accounting policy are not met.
Impracticable to determine the period-specific effects of the change on
comparative information for one or more periods presented in the financial
statements
Impracticable to determine the cumulative effect of retrospective application to all
prior periods
The new policy is applied retrospectively from the beginning of the earliest reported period for which it is possible to do so (this may be one of the reported prior periods or
the current period)
Adjust the comparative information from the earliest practical date (the portion of the
cumulative adjustment before that date is disregarded).
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Example: Change in accounting policy (with retrospective application)
An entity decided to change its accounting policy for valuing inventory from weighted average to first-in-first-out (FIFO). Management is of the opinion that changing to the FIFO method will provide more reliable information for users of financial statements.
The entity kept full history of all inventory purchased and issued to other departments and sales to the public, therefore, it is able to determine the effect of the change in accounting policy on prior periods.
The change was made at the end of the 20X8 financial period (31 March 20X8). The effect of the change in accounting policy on the two comparative periods presented (only for illustration purposes) was determined and the value of inventories on the different bases is as follows:
30 June 20X8
Inventory closing balance - Weighted average method 4,750
Inventory closing balance - FIFO method 4,900
Surplus from operating activities using FIFO method 101,200
30 June 20X7
Inventory closing balance - Weighted average method 3,500
Inventory closing balance - FIFO method 3,800
Surplus from operating activities using Weighted average method 90,500
30 June 20X6
Inventory closing balance - Weighted average method 2,100
Inventory closing balance - FIFO method 2,300
Surplus from operating activities using Weighted average method 88,400
30 June 20X5
Inventory closing balance - Weighted average method 1,900
Inventory closing balance - FIFO method 2,150
Surplus from operating activities using Weighted average method 81,600
Opening accumulated surplus/deficit 250,000
Note that inventory was first purchased in 20X5
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Extract from Statement of Financial Performance
Restated
Note 20X8 20X7 20X6
R R R
Surplus for the period 1 101,050 90,600 88,350
(90,500-200+300) (88,400-250+200)
Note that the applicable expense line item will also be affected, for this example, only the effect on surplus has been shown
Notes on the calculation of the adjustments to be made to the applicable expense line item and ultimately surplus:
20X6: R
Surplus for the period (previously reported in 20X6) 88,400
Deduct difference between weighted average and FIFO – opening balance of inventory in 20X6
R1,900 – R2,150 (250)1
Add difference between weighted average and FIFO – closing balance of inventory in 20X6
R2,100 – R2,300 2002
1Opening balance of inventory increased due to change from weighted average to FIFO, the effect on surplus will be a decrease
2Closing balance of inventory increased due to change from weighted average to FIFO, the effect on surplus will be an increase
20X7: R
Surplus for the period (previously reported in 20X7) 90,500
Deduct difference between weighted average and FIFO – opening balance of inventory in 20X7
R2,100 – R2,300 (200)1
Deduct difference between weighted average and FIFO – closing balance of inventory in 20X7
R3,500 – R3,800 3002
1Opening balance of inventory increased due to change from weighted average to FIFO, the effect on surplus will be a decrease
2Closing balance of inventory increased due to change from weighted average to FIFO, the effect on surplus will be an increase
In order to know what the effect on surplus will be due to an increase or decrease in inventory, one needs to understand how the amount for the expense line item in the statement of financial performance is calculated. The following formula is used:
Opening balance (inventory) + purchases – closing balance (inventory) = cost of sales (the expense line item in the statement of financial performance)
Therefore an increase in the closing balance of inventory will increase the surplus, or reduce the deficit, as the amount for the expense will be lower.
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
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Similarly, a decrease in the closing balance of inventory will decrease the surplus, or increase the deficit, as the amount for the expense will be higher.
The opposite will be happen for an increase or decrease in the opening balance of inventory.
Extract from Statement of Financial Position
Restated
Note 20X8 20X7 20X6
R R R
Current assets
Inventory 4,900 3,800 2,300
(closing balance using the FIFO method)
Extract from Statement of Changes in Net assets
Restated
Note 20X8 20X7 20X6
R R R
Opening accumulated surpluses as previously reported
510,500 (420,000+90,500)
420,000 (331,600+88,400)
331,600 (250,000+81,600)
Change in accounting policy with respect to the measurement of inventory
1 300 (3,800-3,500)
200 (2,300-2,100)
250 (2,150-1,900)
Opening accumulated surpluses as restated
510,800 420,200 331,850
Surplus for the period 101,200 90,600 88,350
Closing accumulated surpluses 612,000 510,800 420,200
Extract from Notes to the Financial Statements
Change in accounting policy
Management decided to voluntarily change the method of valuation of inventory during the period from weighted average cost to first-in-first-out method as the latter method provides a more reliable estimate of the valuation of inventory. The change in accounting policy was applied retrospectively and the corresponding comparative figures were restated.
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
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The effect of the individual line items on the financial statements is as follows:
20X8 20X7 20X6
R R R
Increase / (Decrease) in cost of sales 150 (100) 50
Increase / (Decrease) in surplus for the period (150) 100 (50)
Increase inventory – opening balance 300 200 250
Increase in inventory – closing balance 150 300 200
Increase in accumulated surplus (250) 150 (50)
Example: Change in accounting policy (retrospective application impracticable)
A public entity owned land previously recognised at cost. The entity decided in 20X8 to change the accounting policy to revalue the land as it will provide a more reliable value for the land at year end. After various attempts, management could not obtain enough information to establish the revaluation amounts for the previous periods. Therefore, retrospective application is impracticable. The following information applies:
31 March 20X7
Land at cost R100,000
Land at revaluation R500,000
The difference in the cost as previously measured and the revaluation is R400,000. The application of the new accounting policy should be applied in the earliest period possible, which is the beginning of 20X8 financial period. According to GRAP 17 on Property, Plant and equipment the increase in the value of land carried at revaluation will be recognised in the statement of changes in net assets.
Therefore, in the 20X8 financial period, a revaluation reserve of R400,000 will be created on 1 April 20X7. No retrospective adjustments will be done in the previous period as it is not practicable.
Extract from Notes to the Financial Statements
Change in accounting policy
From the start of 20X8, the entity changed its accounting policy for land from the cost model to the revaluation model. Management takes the view that this policy provides more reliable and relevant information, because it is based on up-to-date values. The policy has been applied prospectively from the start of 20X8, as it was not practicable to estimate the effects of applying the policy either retrospectively or prospectively from any earlier date.
The adoption of the new policy has no effect on prior periods. The effect on the current period is to increase the carrying amount of property, plant and equipment at the beginning of the period by R400,000 and to create a revaluation reserve at the beginning of the period of R400,000.
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3.9 Disclosure
Disclosures relating to accounting policies is divided into three basic groups:
Below are examples illustrating the disclosure required relating to accounting policies for the three basic groups as indicated above (refer to the standard for detail):
Example: Initial adoption of a Standard of GRAP
Extract from Notes to the Financial Statements
1) New standards
Standards effective and adopted in the current period
In the current period the entity has adopted the following standards that are effective for the current period:
GRAP x
Insert nature of new standard or change, for example, the standard prescribes the accounting treatment, recognition measurement and disclosure requirements for employee benefits.
Insert impact of standard adopted, for example, the adoption of the standard has had no material impact on the results of the entity, but has resulted in increased disclosure.
Insert reference to the note where the effect is disclosed, if the adoption of the standard had an impact of the results of the entity, for example, refer to note x for the effect on the current and prior periods on initial adoption of the standard.
The effect on the current and prior periods are disclosed below:
20X1 R
20X0 R
Statement of Financial Position
Asset XX XX
Liability XX XX
Statement of Financial Performance
Revenue XX XX
Expense XX XX
Statement of Changes in Net Assets
Opening accumulated surplus/deficit XX
Initial adoption of a Standard of GRAP
Voluntary change in accounting policy
New Standard of GRAP that has been issued but
is not effective
Would have an effect or may have an effect on current
and prior periods
No effect on current and prior periods
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
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Example: Voluntary change in accounting policy
Extract from Notes to the Financial Statements
1) Change in accounting policy
Insert nature of change, for example, the entity has changed its accounting policy on xxx with regards to the measurement of xxx as management is of the view that it will provide reliable and more relevant information; the reason being xxx.
The effect on the current and prior period is shown below.
The effect on the current and prior period are disclosed below:
20X1 R
20X0 R
Statement of Financial Position
Asset XX XX
Liability XX XX
Statement of Financial Performance
Revenue XX XX
Expense XX XX
Example: standards of GRAP issued, but not yet effective
Extract from Notes to the Financial Statements
1) New standards
Standards issued, but not yet effective
The entity has not early adopted the following standards of GRAP for which an effective date has been determined and/or has not yet applied the following standards of GRAP due to the fact that the Minister of Finance has not yet determined the effective dates thereof:
GRAP x
Insert nature of impending change, for example, the standard prescribes the accounting treatment, recognition measurement and disclosure requirements for financial instruments.
Insert possible impact on the entity’s financial statements on application of the standard once it will be adopted initially, for example, the adoption of the standard will result in financial instruments to be recognised, measured and disclosed differently than currently required.
The standard has been approved by the Accounting Standards Board, but its effective date has not yet been determined by the Minister of Finance.
The entity expects to adopt the standard once an effective date has been determined.
OR
The effective date of the standard is for financial periods beginning on or after xxx.
The entity expects to adopt the standard in the xxx financial period.
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A change in accounting policy must be disclosed in the period the change occurred. The financial statements for subsequent periods need not repeat the required disclosure relating to changes in accounting policies.
4. Accounting Estimates
The use of accounting estimates is an essential part in the preparation of financial statements.
They arise as a result of uncertainties inherent in delivering goods, services and conducting
operating activities.
The use of estimates does not undermine the reliability of the information presented as the
estimate should be made using the latest available and most reliable information.
As and when the information on which the estimate is based changes, it also becomes
necessary to revise the previous estimate. By nature, the revision of an estimate does not
have an effect on prior periods and is therefore not a correction of a prior period error. A
revision of an accounting estimate won’t be seen to be a correction of an error provided the
estimate was based on the latest and most reliable information available at the time that the
estimate was made. An example of a change in accounting estimate will be the reassessment
of the prior period impairment loss based on new information available in the current financial
period.
The diagram below illustrates the distinction between a change in accounting estimate and
correction of an error:
When the estimate was
originally made, was it based
on information that was only
available at that point in time?
Was the information used
reliable and accurate?Is the change in estimate as a result of information
that can reasonably be expected to have been
available at the time when the estimate was made?
YES NO
Change in
accounting
estimate, apply
prospectively
Consider error,
apply
retrospectively
YES NO
YES Change in
accounting
estimate, apply
prospectively
NO
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
Issued February 2020 Page 27 of 39
Other examples of estimations, especially at period end, can include:
• Estimation of the amount of inventory to be written off due to obsolescence (GRAP 12 on
Inventories);
• The fair value of accounts receivable and accounts payable (GRAP 104 on Financial
Instruments);
• Useful lives and residual values of property, plant and equipment (GRAP 17 on Property,
Plant and Equipment);
• Estimation of the amount for provisions such as provision for rehabilitation of landfill sites
(GRAP 19 on Provisions, Contingent Liabilities and Contingent Assets);
• The percentage of completion for construction contracts (GRAP 11 on Construction
Contracts).
Most standards of GRAP requiring estimations lay out certain conditions on how and when
estimates need to be reviewed. For example, according to GRAP 31 on Intangible Assets,
the value of an intangible asset with an indefinite useful life, must be reviewed in every financial
period for possible impairment. To review the balance, estimates are necessary to evaluate
if impairment occurred. These estimates will be made every period and reviewed in
subsequent periods for possible changes based on conditions and other relevant factors that
exist at the date of subsequent review.
Revision of estimates will also in most instances be made at the same time in each period, for
example management can decide to have a policy to review useful lives and residual values
of property, plant and equipment at the end of each financial period. The revision will then
take place for each period at the end of the financial period.
Remember that a change in a measurement basis is not a change in accounting estimate. This is rather a change in accounting policy as in the previous section. A change in accounting estimate results from a change in the underlying, e.g. assumptions/judgements used to determine the amount. If the measurement basis for buildings changes from cost to revaluation, this represents a change in accounting policy. Where the useful life for buildings changes from 20 years to 15 years, this will represent a change in accounting estimate.
A change in the depreciation method from, for example, the straight-line method to the reducing balance method, will also represent a change in accounting estimate as the change in the method of depreciation is often rooted in a change in an asset’s estimated future cash flows.
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
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4.1 Applying a change in an accounting policy
A change in accounting estimate will be accounted for in the current period and in the future
periods if it affects the future periods. The effect of the change in estimate would be accounted
for in surplus or deficit or against the asset or liability, where applicable, in the specific period
in which the change occurs. The other side of the accounting entry will be the applicable asset
or liability in the period of change.
Example: Change in accounting estimate affecting only the current financial period
“Allowance for impairment” is the same as “provision for bad debt”
The illustration above demonstrates how a change in estimate only affects the current period in which the specific event or transaction occurred. The journal entries for the above will be as follows:
20X6 Debit Credit
R R
Impairment loss on debtors (statement of financial performance) 1,000
Allowance for impairment (statement of financial position) 1,000
20X7 Debit Credit
R R
Impairment loss on debtors (statement of financial performance) 500
Allowance for impairment (statement of financial position) 500
20X8 Debit Credit
R R
Impairment loss on debtors (statement of financial performance) 300
Allowance for impairment (statement of financial position) 300
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
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Note that the amounts for the change in estimate in this example only refers to the change in
the underlying information on which the estimate was based; therefore it does not include
changes due to amounts reversed and/or amounts written off.
Note that the change in the amount for the provision recognised is not accounted for retrospectively, i.e. the balance for 20X6 for example is not restated in the 20X7 financial period due to the change in estimate, only the 20X7 balance will be adjusted in the 20X7 financial period and the corresponding expense debited or credited with the increase or decrease in the provision, therefore prospectively.
Example: Change in accounting estimate affecting current and future financial periods
20X6 20X7 20X8
• Cost of IT equipment at the beginning of the year: R60,000
• Useful life at acquisition: 6yrs
• Depreciation pa: R10,000
• Carrying amount at end of 20X6: R50,000
• Carrying amount at end of 20X7: R40,000
• Remaining useful life: 4
• Carrying amount at end of 20X8: R30,000
• New estimate of useful life at end of 20X8: 1 year
• Therefore change in estimate from 4 years to 2 years (at beginning of 20X8)
From the second illustration it is clear that the change in accounting estimate in 20X8 had an effect on the carrying amount in the future period, i.e. 20X9.
A change in accounting estimate will always be made at the beginning of the period and the depreciation for that period onwards will be based on the revised estimate, i.e. over the remaining useful life. Change in estimate was made at the end of 20X9, therefore the effect will be calculated based on the carrying amount at the end of 20X7 (beginning of 20X8) divided by the revised remaining useful life (remaining useful life at the end of 20X8 plus one year).
The calculation will be as follows:
Depreciation for 20X6 R60,000 / 6 R10,000
Depreciation for 20X7 R60,000 / 6 R10,000
Carrying amount end of 20X7 R60,000 – R20,000 R40,000
Remaining useful life assessed to be 2 years and not 4 years at the beginning of 20X8
New depreciation for 20X8 R40,000 / 2 R20,000
The depreciation for 20X8 based on original estimate R60,000 / 6 R10,000
Change in estimate R20,000 – R10,000 R10,000
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
Issued February 2020 Page 30 of 39
The journal entries for the above will be as follows:
20X6 Debit Credit
R R
Depreciation (statement of financial performance) 10,000
Accumulated depreciation (statement of financial position) 10,000
20X7 Debit Credit
R R
Depreciation (statement of financial performance) 10,000
Accumulated depreciation (statement of financial position) 10,000
20X8 Debit Credit
R R
Depreciation (statement of financial performance) 20,000
Accumulated depreciation (statement of financial position) 20,000
20X9 Debit Credit
R R
Depreciation (statement of financial performance) 20,000
Accumulated depreciation (statement of financial position) 20,000
The following will be disclosed in the financial statements:
Extract from Notes to the Financial Statements
Change in accounting estimate
The useful life of IT equipment was estimated in 20X6 to be 6 years. At the beginning of the current period management has revised their estimate from 4 years to 2 years. The effect of this revision has increased the depreciation charge for the current and the future period by R10,000.
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
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4.2 Disclosure
Below is an illustration of disclosure required relating to a change in accounting estimates
(refer to the standard for detail).
Extract from Notes to the Financial Statements
Change in accounting estimate
Insert the nature and amount of the change in accounting estimate for current and future periods (if applicable), for example, the entity has reassessed the useful lives and residual values of property, plant and equipment which resulted in certain infrastructure assets’ remaining useful lives to change from x to x years on average. The effect of the change in accounting estimate has resulted in an increase in depreciation amounting to Rx for the current period. The effect on future periods could not reasonably be determined (only if the effect on future periods cannot reasonably be determined should this be disclosed).
A change in accounting estimate must be disclosed in the period that the change occurred. The financial statements for subsequent periods need not repeat the above disclosure.
Further take note that GRAP 1 on Presentation of Financial Statements also requires disclosure on key sources of estimation uncertainty, i.e. the natures of the assumption or other estimation uncertainty used in determining estimates as part of the accounting policies or in the relevant note (refer to the Accounting Guideline on GRAP 1 for detail).
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
Issued February 2020 Page 32 of 39
Example: Change in an accounting estimate – prospective application
The management of a public entity realised, during their annual assessment of useful lives and residual values, in the beginning of 20X8 financial period that the pattern of service potential derived from depreciable assets has changed from that in previous periods. These depreciable assets are currently depreciated using the straight line method over a useful life of 10 years. As a result, management decided to change the remaining useful life of the depreciable assets to 5 years.
The following information regarding the depreciable assets is available:
Carrying amount at the beginning of the 20X8 financial period R80,000
Original cost price (purchased beginning of 20X6) R100,000
Depreciation per year R10,000
Changing the remaining useful life of the asset from 8 to 5 years, will affect the current period, i.e. 20X8, as well as future periods in the following way:
Depreciation for 20X8 period based on 5 years’ remaining useful life (R80,000 / 5)
R16,000
Carrying amount at the end of 20X8 R64,000
Depreciation for future periods R16,000
The 20X8 financial statements will reflect the new depreciation expense. No adjustment will be made to prior periods as this represents a change in accounting estimate which is applied prospectively.
Extract from Notes to the Financial Statements
Change in accounting estimate
Depreciable assets’ original remaining useful life of 8 years has been changed to 5 years in the beginning of the current period to reflect the actual pattern of service potential derived from the assets.
The effect on the current and future periods will be an increase in the depreciation charge of R6,000 in the current period and an equal decrease in the depreciation charge of R6,000 over the next 4 periods.
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
Issued February 2020 Page 33 of 39
5. Errors
Prior period errors are omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:
• was available when financial statements for those periods were authorised for issue; and
• could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.
Errors can be made in the recognition, measurement, presentation and disclosure of
information in the entity’s financial statements. Errors in the current period can be corrected
before the financial statements are issued; therefore they are not relevant in this case.
It is important to keep in mind that an omission or misstatement is an error only if the
information was available at the time the particular transaction or event occurred, but not used
at all, or used incorrectly.
Financial statements do not comply with GRAP when:
• material errors exist; or
• immaterial errors exist, which were made intentionally to achieve a specific presentation
of the entity’s financial position, performance and cash flow situation.
In determining whether or not an error is material; management should assess the error in the
context of the affected entity’s financial statements.
Example: Examples of what may constitute an error
• omission of amounts from the financial statements e.g. revenue or expenditure items are not included in the financial statements;
• calculation errors e.g. incorrect casting of a note; or
• incorrect application of an accounting policy.
5.1 Correction of errors
All errors must be corrected in the financial statements of the entity. Retrospective application
will be applied for all errors discovered in subsequent periods. These errors will be corrected
by:
• Restating the comparative amounts for the prior period(s) presented in which the error
occurred; or
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
Issued February 2020 Page 34 of 39
• If the error occurred before the earliest period presented, restate the opening balances of
the earliest period’s assets, liabilities and net assets.
The diagram below summarises the correction of an error:
Error
Correct financial
statements prior to
authorisation for issue
Current period
Material Immaterial
Prior period
Do not adjust
financial statementsRetrospective restatement
Impracticable Practicable
Correct financial
statements prior to
authorisation for issue
Impracticable to determine
period-specific effect
Impracticable to determine
cumulative effect of changes
Restate opening balances of
assets, liabilities and net
assets for the earliest period
for which retrospective
restatement is practicable
(this may be the current
period)
Restate comparative
information to correct the
error prospectively from the
earliest date possible
5.2 Disclosure
The disclosure of a prior period error is very similar to the disclosure required for a change in
accounting policy as both will result in retrospective adjustment of financial figures, unless
impracticable. Refer to the disclosure section of change in accounting policy for an example.
The only difference is that there will be no disclosure in the current period column as is the
case with a change in accounting policy.
The results from the correction of an error must be disclosed in the period in which the financial
statements were restated. The financial statements for subsequent periods need not repeat
the required disclosure.
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
Issued February 2020 Page 35 of 39
Example: Correction of error – retrospective restatement
A municipality discovered in 20X8 that the revenue from property rates recognised in the prior period has been incorrectly calculated and recognised. An amount of R6,200,000 was not recognised as revenue due to an error in the calculation.
The municipality’s accounting records before adjustment of the error for 20X7 and 20X8 are as follows:
Extract from Statement of Financial Performance
Before restatement
20X8 20X7
R R
Revenue from property rates 50,000,000 40,500,000
Other operating revenue 20,100,000 18,000,000
Total revenue 70,100,000 58,500,000
Expenses (55,000,000) (45,000,000)
Surplus 15,100,000 13,500,000
Extract from Statement of Financial Performance
Restated
Note 20X8 20X7
R R
Revenue from property rates 50,000,000 46,700,000 (40,500+6,200)
Other operating revenue 20,100,000 18,000,000
Total revenue 70,000,000 64,700,000
Expenses (55,000,000) (45,000,000)
Net surplus for the period 15,100,000 19,700,000
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
Issued February 2020 Page 36 of 39
Extract from Statement of Changes in Net assets
Before restatement
Note 20X8 20X7
R R
Opening accumulated surpluses 103,500,000 90,000,000
Surplus for the period 15,100,000 13,500,000
Closing accumulated surpluses 118,600,000 103,500,000
Extract from Statement of Changes in Net assets
Restated
Note 20X8 20X7
R R
Opening accumulated surpluses as previously reported
103,500,000 90,000,000
Correction of error 1 6,200,000 -
Opening accumulated surpluses as restated 109,700,000 90,000,000
Surplus for the period 15,100,000 19,700,000
Closing accumulated surpluses 124,800,000 109,700,000
Extract from Notes to the Financial Statements
Errors
During the 20X8 financial period the municipality’s management realised that property rates amounting to R6,200,000 was not recognised in 20X7 in the statement of financial performance due to a calculation error. The prior period was adjusted retrospectively.
The effect of the error on the individual line items in the financial statements is as follows:
20X8 20X7
R R
Increase in revenue from property rates - 6,200,000
Increase in surplus for the period - 6,200,000
Note that for a prior period error, only the effect on the prior period is disclosed. As the current period has not been reported on yet, it will not be necessary to disclose the effect on the current period as well as the correction was made in the prior period.
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
Issued February 2020 Page 37 of 39
Example: Correction of errors - retrospective restatement (to the extent practical)
A municipality realised only in the current period (20X8) that they have not complied with the provisions of GRAP 17 on Property, Plant and Equipment relating to componentisation of property, plant and equipment. The municipality needs to correct its financial statements to comply with the standard. The effect on the prior periods’ (effect on opening balance of 20X7) carrying amounts of property; plant and equipment cannot be established as no records are available to enable calculations for componentisation purposes. Therefore the effect on surplus or deficit for 20X7 cannot be determined. Detail information of the property, plant and equipment were destroyed in a fire in the previous financial period.
Management determined that it is not practicable to determine the effect of the error for the prior periods and there are no other realistic alternatives available to determine the effect of the restatement. The earliest period the effect can be determined is the closing balance for the 20X7 financial period.
Property, plant and equipment’s carrying amount at the beginning of 20X7 financial period using the componentisation approach:
Carrying amount at the beginning of 20X8:
Old basis R120,000
New basis R115,000
Depreciation expense for 20X8:
Old basis R25,000
New basis R27,000
The effect on prior periods (opening balance for 20X7) cannot be determined, therefore only the current period is adjusted, resulting in the opening balance for 20X8 to be recorded based on the new carrying amount (R115,000) and the closing balance for the prior period will still be recorded based on the old carrying amount (R120,000).
Extract from Notes to the Financial Statements
Errors
The entity has corrected its financial statements to comply with the requirement of GRAP 17 on Property, Plant and Equipment regarding the componentisation of assets; this has resulted in a prior period error due to non-compliance with the standard. It is not possible to fully account for the correction of this error retrospectively as the annual effect on 20X6 and 20X7 cannot be determined. Consequently the error has been corrected retrospectively from the beginning of the 20X8 financial period with an adjustment of R5,000 against the opening balance of accumulated surplus.
Note that for a prior period error only the effect on the prior periods are disclosed and not on the current period as well. As comparatives were not restated, there is no disclosure apart from the adjustment against opening accumulated surplus.
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
Issued February 2020 Page 38 of 39
6. Useful links and references
Reference Location of reference
Frequently Asked Questions (FAQs)
on the Standards of GRAP
ASB website:
http://www.asb.co.za/frequently-asked-questions/
IGRAP 2 on Changes in Existing
Decommissioning, Restoration and
Similar Liabilities
ASB website:
http://www.asb.co.za/interpretations-approved-
and-effective/
IGRAP 3 on Determining Whether
an Arrangement Contains a Lease
IGRAP 4 on Rights to Interests
Arising from Decommissioning,
Restoration and Environmental
Rehabilitation Funds
IGRAP 6 on Loyalty Programmes
IGRAP 7 on The Limit on a Defined
Benefit Asset, Minimum Funding
Requirements and their Interaction
IGRAP 8 on Agreements for the
Construction of Assets from
Exchange Transactions
IGRAP 10 on Assets Received from
Customers
IGRAP 11 on Consolidation –
Special Purpose Entities
IGRAP 12 on Jointly Controlled
Entities -Non-Monetary Contributions
IGRAP 13 on Operating Leases –
Incentives
IGRAP 14 on Evaluating the
Substance of Transactions Involving
the Legal Form of a Lease
IGRAP 15 on Revenue - Barter
Transactions Involving Advertising
Services
IGRAP 19 on Liabilities to Pay
Levies
Directive 11 on Changes in
Measurement Basis Following the
ASB website:
http://www.asb.co.za/directives/
GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors
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Reference Location of reference
Initial Adoption of Standards of
GRAP
Guideline on The Application of
Materiality to Financial Statements
ASB website:
http://www.asb.co.za/guidelines/
Standard Chart of Accounts for Local
Government (mSCOA)
National Treasury website:
http://mfma.treasury.gov.za
(mSCOA – Municipal Standard Chart of Accounts)
Illustrative Financial Statements for
local government
National Treasury website:
http://mfma.treasury.gov.za
(mSCOA – Municipal Standard Chart of Accounts)