CIGFARO WC Branch Seminar 5 to 6 June 2017
GRAP Implementation for 2016/17 & what is
coming in 2017/18 & 2018/19
Presented by: George Ducharme CA (SA)
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GRAP Implementation
Topics for discussion
• What is new in the 2016/17 GRAP Reporting
Framework and what are the related
implementation challenges?
• What changes will take place to the 2017/18 and
2018/19 GRAP Reporting frameworks and what
are the related implementation challenges
municipalities can expect?
• Are there any recently developed, not yet
effective Standards of GRAP that a municipality/
municipal entity should consider at this point in
time?
CIGFARO WC Seminar
5 to 6 June 2017
2
GRAP Reporting Framework
2016/17
• ASB Directive 5 Appendix C lists the Standards of
GRAP and other promulgations effective for
2016/17.
• Municipalities and municipal entities apply
Appendix C2
• The GRAP Reporting Framework for 2016/17 is the
same as what it was for 2015/16, except as
amended for:
• Standards amended: GRAP 16 and 17
CIGFARO WC Seminar
5 to 6 June 2017
3
ASB Directive 5 Appendix C2 – Applicable to
Municipalities, municipal entities
Standards
GRAP 1 – 14,
16, 17, 19,
20, 21, 23 –
27, 31, 100,
103 – 107
IFRS 4, 6
IAS 12
Directives
Directive
1 – 11
Interpretations
IGRAP
1 – 16
Guide
Guide
1
Accounting
policies
GRAP
32, 108, 109
IGRAP 17
Disclosure
GRAP 20 or
IPSAS 20
SIC 25, 29
IFRIC 12, 20, 21
Standards also available in: isiZulu, Sesotho and Afrikaans
CIGFARO WC Seminar
5 to 6 June 2017
4
GRAP Reporting Framework
2016/17 – Amendments
Amendments to GRAP 17 Property, Plant and
Equipment
Review of Residual Value and Useful Life
– OLD: The residual value and the useful life of an asset
shall be reviewed at least at each reporting date
– NEW: An entity shall assess at each reporting date
whether there is any INDICATION that the entity’s
expectations about the residual value and the useful life
of an asset have changed since the preceding reporting
date. If any such indication exists, the entity shall revise
CIGFARO WC Seminar
5 to 6 June 2017
5
GRAP Reporting Framework
2016/17 – Amendments
Amendments to GRAP 17 Property, Plant and
Equipment
Disclosure of repairs and maintenance
– OLD: Users measure the adequacy of repairs and
maintenance by comparing this expenditure to the
value of assets recognised in the statement of financial
position. There WAS however no requirement to
separately present this information in the financial
statement
– NEW:R&M incurred on PPE to be disclosed separately in
the notes to the AFS. Disclose in notes to AFS information
about the specific costs included in the amount of R&M, e.g.
amounts paid to service providers, amounts spent on
materials, time spent by employees. GRAP 17.88 and 89.
CIGFARO WC Seminar
5 to 6 June 2017
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GRAP Reporting Framework
2016/17 – Amendments
Amendments to GRAP 17 Property, Plant and
Equipment
Use of external Valuers when using FV
– OLD: The standard was ambiguous about whether
external valuers must be used to determine the fair
values of assets or whether this is encouraged.
– NEW: An appraisal of the value of the asset may be
undertaken by a member of the valuation profession,
who holds a recognised and relevant professional
qualification, or by another expert with the requisite
competence to undertake such appraisals in accordance
with the requirements of the applicable Standards of
GRAP. The valuer or other expert may be employed by
the entity. GRAP 17.35
CIGFARO WC Seminar
5 to 6 June 2017
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GRAP Reporting Framework
2016/17 – Amendments
Amendments to GRAP 17 Property, Plant and
Equipment
More comprehensive disclosure required for capital WIP
• The cumulative expenditure recognised in the carrying value
of property, plant and equipment. These expenditures shall
be disclosed in aggregate per class of asset.
• The carrying value of property, plant and equipment that is
taking a significantly longer period of time to complete than
expected, including reasons for any delays.
• The carrying value of property, plant and equipment where
construction or development has been halted either during
the current or previous reporting period(s). The entity shall
also disclose reasons for halting the construction or
development of the asset and indicate whether any
impairment losses have been recognised in relation to these
assets.
CIGFARO WC Seminar
5 to 6 June 2017
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GRAP Reporting Framework
2016/17 – Amendments
Amendments to GRAP 17
Property, Plant and Equipment
– Encouraged disclosures on PPE removed, i.e. the following no
longer required:
• municipalities no longer need to disclose PPE that
remained idle for significant period;
• CA of fully depreciated assets still in use;
• CA of assets retired from use & not classified as part of
discontinued operation and
• FV of PPE where FV is significantly different from CA of PPE
measured on cost model.
• Apply these amendments retrospectively in accordance
with GRAP 3.
CIGFARO WC Seminar
5 to 6 June 2017
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GRAP Reporting Framework
2016/17 – Amendments (cont.)
Amendments to GRAP 16 Investment Property.
• Review of residual value and useful life. Same principles
apply as for PPE where IP is accounted for on cost model.
• Disclosure of repairs & maintenance on IP for properties
that generated rental revenue and separately for those
that did not generate rental revenue.
• Use of external valuer when using FV. Same as for GRAP
17. See GRAP 16.45
• Disclosure for WIP. Same as for GRAP 17.
• Encouraged disclosure of FV of properties accounted for
according to the cost model longer required.
CIGFARO WC Seminar
5 to 6 June 2017
10
GRAP Reporting Framework
2017/18 – What is coming?
• The amended ASB Directive 5 becomes effective from 1
Apr 2017 (1 July 2017).
• An appendix prescribing the GRAP Reporting Framework
for financial periods commencing on or after 1 April 2017,
approved by the Board on 29 September 2016, has been
added to Directive 5 as Appendix B2.
• There are no changes to Directive 5 for 2017/18
compared to 2016/17.
• For 2017/18 municipalities and municipal entities will
have to ensure that their AFS disclosure and presentation
adheres to the requirements of MSCOA for that year and
where practical retrospectively.
CIGFARO WC Seminar
5 to 6 June 2017
11
GRAP Reporting Framework
2018/19 – What is coming?
• The amended ASB Directive 5 that will become effective for
2018/19 is not yet available, however the following
amendments to certain Standards of GRAP become effective
for financial periods commencing on or after 1 April 2018
(i.e. 1 July 2018 for municipalities and municipal entities):
– Amendments to GRAP 21 Impairment of non-cash
generating assets and GRAP 26 Impairment of cash
generating assets; and
– Improvements to the Standards of GRAP (2016).
CIGFARO WC Seminar
5 to 6 June 2017
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Amendments to GRAP 21 &
GRAP 26
 ASB has amended GRAP 21 & GRAP 26 and the crux of the amendment lies in
the amended definition of a cash-generating asset:
 “Cash-generating assets” are assets used with the objective of generating
a commercial return. Commercial return means that positive cash flows
are expected to be significantly higher than the cost of the asset.
 Definition of non-cash generating assets remains the same, i.e.:
 “Non-cash-generating assets” are assets other than cash-generating
assets.
 Above distinction is important to determine which Standard is applied to
calculate potential impairment loss on asset.
CIGFARO WC Seminar
5 to 6 June 2017
13
Amendments to GRAP 21 &
GRAP 26 (cont.)
• Classification will be done at initial recognition of the asset, therefore
municipalities will have designate assets as cash generating or non cash
generating at initial recognition. NB therefore for all new assets acquired.
• Develop classification criteria for the following:
– Objective of using the asset (commercial return or service delivery)
– Calculation of the positive cash flows
– What does “Significantly higher” mean
– What is the Cost of the asset. Historical cost or FV
• Determining commercial return:
– At initial recognition, analyse the positive cash flows that will be
generated from the asset over its useful life. Estimates,
assumptions and judgement will be required and will need to be
substantiated for auditing purposes.
CIGFARO WC Seminar
5 to 6 June 2017
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Improvements to Standards of
GRAP
• Improvements affected by the Board are periodic
revisions to effective Standards of GRAP.
• Last improvements to GRAP were made in 2013.
• Improvements that will become effective from 1 April
2018 (1 July 2018) include changes resulting from:
– general improvements
– IPSASB’s amendments
– IASB’s amendments
• Transitional provisions: improvements are either retrospective or
prospectively applicable, depending on the specific improvement –
refer to the detailed text found on ASB website www.asb.co.za.
CIGFARO WC Seminar
5 to 6 June 2017
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Improvements to Standards of
GRAP
Improvements have been made to:
•
•
•
•
•
•
•
•
•
•
•
GRAP 12
GRAP 16
GRAP 17
GRAP 18
GRAP 21
GRAP 26
GRAP 27
GRAP 31
GRAP 103
GRAP 106
GRAP 110
CIGFARO WC Seminar
5 to 6 June 2017
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Summary of Improvements to
Standards of GRAP
GRAP 12,16,17,31,103,110 all contain similar improvements.
• To clarify the treatment of transaction costs and other
costs incurred on assets acquired in non-exchange
transactions to be in line with the principle in GRAP 23
(paragraph .12).
•
To clarify the measurement principle when assets may be
acquired in exchange for a non-monetary asset or assets,
or a combination of monetary and non-monetary assets.
CIGFARO WC Seminar
5 to 6 June 2017
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Summary of Improvements to
Standards of GRAP
GRAP 12 Improvement as an example.
• An international aid agency may donate medical
supplies to a public hospital in the aftermath of a natural
disaster. Under such circumstances, the cost of the
inventory is its fair value as at the date it is acquired. Any
transaction costs incurred are recognised in accordance
with the requirements of paragraphs .25 to .26 of GRAP
12.
• Paragraph 25 lists transaction costs that may be
included in the cost of the asset.
• Paragraph 26 lists examples of costs that are expensed.
CIGFARO WC Seminar
5 to 6 June 2017
18
Important not yet effective
Standards of GRAP to consider
iGRAP 18 Recognition and De-recognition of Land
•
iGRAP 18 effective from 1 April 2019 (1 July 2019), i.e. for 2019/20
•
Will be read along with Standards of GRAP also dealing with land, e.g. GRAP 13, 16, 17 etc.
•
Even though only effective in 2019/20, due to uncertainties on how to establish control over land,
consider indicators of control outlined in iGRAP 18.
•
iGRAP 18 states that there are uncertainties experienced in practice about legal title versus
control when accounting for land.
CIGFARO WC Seminar
5 to 6 June 2017
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Important not yet effective
Standards of GRAP to consider
iGRAP 18 Recognition and De-recognition of Land (cont.)
•
•
In assessing control over land, the following two control indicators exist –
apply judgment in applying these indicators:
– legal ownership, e.g. holding the existing title deed.
– the right to direct access to land, and to restrict or deny the access of
others to land. (Custodianship)
If one entity has the right to direct access to, and restrict or deny the access
of others to land while another entity is the legal owner of land, substance
over form determines that the land is controlled by the entity that has the
right to direct access to land, and to restrict or deny the access of others to
land.
CIGFARO WC Seminar
5 to 6 June 2017
20
Important not yet effective
Standards of GRAP to consider
iGRAP 18 Recognition and De-recognition of Land (cont.)
•
Legal ownership versus custodianship over land:
– Custodian responsibilities in terms of legislation or similar means typically
involve acquiring land, managing the land throughout its life cycle, and
disposing of land subject to the relevant legislative requirements.
– These responsibilities therefore give the custodian the right to direct access to
and restrict or deny access of others to land. As such the custodian, rather
than the legal owner, controls the land.
CIGFARO WC Seminar
5 to 6 June 2017
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Important not yet effective
Standards of GRAP to consider
GRAP 110 Living and non-living resources
•
•
•
Living resources are resources that undergo a biological transformation, e.g. animals
and plants used for research which are not accounted for by another Standard of
GRAP.
Non-living resources are those resources that occur naturally and have not been
extracted, e.g. land, and water, minerals, oils and gas and other non-regenerative
resources which have not been extracted.
Recognition and measurement of living resources very similar to requirements of
GRAP 17 PPE, i.e. relating to initial costs part of initial measurement, subsequent
measurement models (cost or revaluation models, which includes depreciation,
impairment etc.) & de-recognition requirements.
CIGFARO WC Seminar
5 to 6 June 2017
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Important not yet effective
Standards of GRAP to consider
GRAP 110 Living and non-living resources (cont.)
• Non-living resources, other than land, shall not be recognised as assets.
Instead, certain information shall be disclosed in the notes to the AFS on
such resources (i.e. type, liabilities arising from such resources &
compensation received on disposal).
• Transitional provisions currently in ED format – ED 154, closing for
comment 31 July 2017. Proposes retrospective application in accordance
with GRAP 3 with 3 year measurement relief period.
CIGFARO WC Seminar
5 to 6 June 2017
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ANY QUESTIONS?
Thank you for listening to this presentation
CIGFARO WC Seminar
5 to 6 June 2017
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