ACCOUNTING STANDARDS BOARD
COMPARISON OF THE STANDARD OF
GENERALLY RECOGNISED ACCOUNTING
PRACTICE ON FINANCIAL INSTRUMENTS (GRAP
104) TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS
Issued by the
Accounting Standards Board
October 2009
Comparison of the Standard of GRAP on Financial Instruments to
International Financial Reporting Standards
The Standard of GRAP on Financial Instruments (GRAP 104) has been drawn primarily from the
equivalent International Financial Reporting Standards (IFRSs) issued by the International Accounting
Standards Board (IASB). In particular, the Board has considered the following IFRSs in developing its
Standard:
•
IAS 32 on Financial Instruments: Presentation;
•
IAS 39 on Financial Instruments: Recognition and Measurement;
•
IFRS 7 on Financial Instruments: Disclosure; and
•
IFRS for Small and Medium-sized Entities.
In developing a Standard of GRAP on Financial Instruments, the Board’s objective was to simplify and
streamline existing accounting principles for financial instruments as far as possible and, develop
guidance that is appropriate for the public sector. As a result, the Board has deviated from the
principles in the equivalent IFRSs in certain areas.
This document compares, at a high level, the principles in the Standard of GRAP on Financial
Instruments to the equivalent IFRSs. This comparison does not form part of the Standard of GRAP on
Financial Instruments, but accompanies it and provides additional information to the users of the
Standard, particularly those entities that have historically applied Statements of Generally Accepted
Accounting Practice (GAAP). This comparison should be read with the basis for conclusions published
with GRAP 104 as these outline the Board’s rationale for deviating from certain requirements in IFRSs.
Area
Scope
Deviation of the Standard of GRAP on Financial Instruments from the
equivalent IFRSs
GRAP 104 excludes the recognition, measurement and presentation of
financial guarantees from its scope. There is also no option to treat financial
guarantees as insurance contracts, unless the entity is primarily engaged in
insurance activities. Financial guarantees are accounted for in accordance
with the Standard of GRAP on Provisions, Contingent Liabilities and
Contingent Assets and, if a guarantee fee is charged, the Standard of
GRAP on Revenue from Exchange Transactions.
The Standard excludes the recognition, measurement and presentation of
all loan commitments from its scope. Loan commitments are accounted for
in accordance with the Standard of GRAP on Provisions, Contingent
Liabilities and Contingent Assets and, if a guarantee fee is charged, the
Standard of GRAP on Revenue from Exchange Transactions.
The Standard includes the subsequent measurement, derecognition,
presentation and disclosure of assets and liabilities arising out of contractual
non-exchange revenue transactions.
Issued October 2009
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Comparison of GRAP 104
to equivalent IFRSs
The Standard does not provide guidance on hedge accounting. Entities are
required to comply with the hedge accounting requirements of IAS 39 if they
wish to apply hedge accounting.
Definitions
Definitions of a financial instrument, financial asset and a financial liability
The definition of an “equity instrument” has been replaced with the definition
of a “residual interest”. The term “equity instrument” has therefore replaced
the term “residual interest” in the definition of a financial instrument and a
financial asset and throughout the document (where appropriate).
The definition of a financial asset and a financial liability does not refer to
settlement of a transaction in an entity’s own equity instruments. Entities are
however required to apply the relevant IFRSs if they enter into such
transactions.
Categories of financial instruments
The definitions of the various categories of financial instruments in IAS 39
have been streamlined and replaced with the following definitions:
• Financial instruments at fair value.
• Financial instruments at amortised cost.
• Financial instruments at cost.
These categories are discussed further in the subsequent measurement
section.
Other definitions
The definition of regular way purchases and sales has been deleted.
The following definitions have been added:
• Concessionary loans: A concessionary loan is a loan granted to or
received by an entity on terms that are not market related.
• Loan commitments: A loan commitment is a firm commitment to provide
credit under pre-specified terms and conditions.
Initial recognition
Regular way purchases of financial assets
This Standard does not distinguish between regular way purchases and
sales of financial assets and other financial assets (such as derivatives) as
the Standard prescribes that trade accounting must be used for the
purchases and sales of any financial assets.
Initial measurement
Issued October 2009
The Standard includes guidance on concessionary loans.
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Comparison of GRAP 104
to equivalent IFRSs
Subsequent
measurement
Categories of financial instruments
There are only three categories of financial instruments, i.e.:
Financial instruments at fair value. This category comprises financial assets
and financial liabilities that are:
•
derivatives;
•
combined instruments designated at fair value, i.e. instruments that
include a derivative and a non-derivative host contract;
•
held-for-trading;
•
non-derivative instruments with fixed or determinable payments that
are designated at initial recognition to be measured at fair value;
•
investments in a residual interest for which fair value can be measured
reliably; and
•
other instruments that do not meet the definition of financial
instruments at amortised cost or cost.
Financial instruments at amortised cost. These are non-derivative financial
assets or financial liabilities that have fixed or determinable payments.
Financial instruments at cost. These are investments in residual interests,
for which fair value cannot be measured reliably.
Reclassifications
Reclassification are only allowed in the following instances:
Derecognition
•
a combined instrument that is required to be measured at fair value
because the fair value of the derivative cannot be measured reliably; or
•
an investment in a residual interest for which fair value can be
determined after initial recognition, or for which fair value can no longer
be determined reliably.
Derecognition of financial assets
The derecognition requirements of GRAP 104 are based on the principles in
the IFRS for SMEs, although additional guidance is provided on
derecognising parts of financial assets. ‘Pass through’ testing is not required
and the recognition and derecognition of assets based on a continuing
involvement approach is not allowed.
Waiver of debt owing to and by an entity
Principles have been added to explain how to treat the waiver of debt either
owing to or by an entity.
Issued October 2009
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Comparison of GRAP 104
to equivalent IFRSs
Presentation
The equivalent IFRSs refer to a “statement of comprehensive income” for
the presentation of certain gains and losses. As the Board has not
considered the revisions to IAS 1, this Standard refers to the “statement of
financial performance”.
GRAP 104 does not include any principles on the presentation of treasury
shares. Where treasury shares exist, entities are required to apply the
relevant IFRSs.
Disclosures
The disclosures have been modified for the new categories introduced. The
following disclosures are encouraged rather than required:
•
The disclosure of fair values for financial instruments.
•
Certain disclosures about the use of the fair value using the three tiered
hierarchy.
•
A market sensitivity analysis.
Application guidance Both the application guidance and illustrative examples have been modified
and illustrative
for transactions and circumstances that exist in the South African public
examples
sector.
Additional explanatory guidance has been added in the following areas:
Terminology
•
The initial measurement of financial instruments at fair value,
particularly in the identification of material financing transactions and
the determination of market related rates of interest.
•
The initial measurement of concessionary loans.
•
Waiver of debts either owing by or to an entity.
This Standard uses the following terminology, which is different from the
equivalent IFRSs:
•
•
Issued October 2009
“Net assets” instead of equity.
“Statement of financial performance” instead of “income statement”.
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Comparison of GRAP 104
to equivalent IFRSs