As the ASB, we always receive comments from stakeholders that accounting for assets using Standards of GRAP is too difficult, and as a result, the requirements in the Standard should be reviewed, or should be made less onerous for certain entities.

Over the years, the Board has undertaken various projects to uncover exactly what issues preparers have with applying the Standards of GRAP on assets. These projects include:

• A post-implementation review of GRAP 17 on Property, Plant and Equipment and GRAP 16 on Investment Property
• A post-implementation review of GRAP 103 on Heritage Assets.
• A review to identify if certain entities should have different reporting requirements.

Based on feedback from both users of the financial statements and preparers during the reviews, changes were made to GRAP 16, 17 and 103 to ensure better, more consistent application of the Standards. Based on the issues raised by stakeholders about the need for different reporting, most issues raised were practical rather than conceptual.

All three of these projects highlighted systemic issues that cannot be addressed through changing accounting Standards. These include:

Poor record keeping
One of the most common questions we get is how the Standards deal with valuing assets when the supporting documents cannot be found. This is not a Standards-issue; this is a practical issue that preparers need to solve in a way that best satisfies the accounting principles.

Poor control environments
As examples, entities do not update asset registers on an ongoing basis, do not reconcile the physical asset register with the system generated asset register.

Poorly designed policies and processes
Entities should design asset management policies that adhere to planning and asset management disciplines, and reporting policies that reflect how assets are managed. Asset and financial reporting functions need to collaborate and co-operate on an ongoing basis to ensure that they both understand how assets are managed and how they need to be reported. Processes should be designed accordingly.

Severe lack of skill and capacity in both financial reporting and asset management disciplines
Entities need to ensure that they have skilled staff that understand (a) how assets should be managed to achieve service delivery commitments, and (b) how the Standards of GRAP should be applied to reflect the way in which assets were managed for a reporting period.

Using consultants to execute activities which should have been performed by the staff at the respective entity.
Consultants – who are appointed to assist with the more complex areas of the Standards – are often used to address the issues highlighted in the points above. Where there are officials in an entity to perform these tasks, consultants should not be used to do, re-perform or re-create these activities or records. 

It is true that aspects of the Standards are complex and require judgement, for example, assessing useful lives and determining impairments. However, there are aspects that good management of assets should identify, e.g. whether assets can be used for as long as, or in the manner, anticipated. The Standards of GRAP are not intended to explain how assets should be managed, but are a tool used to report on these issues in the financial statements.

So what needs to be done? There are several municipalities, public entities, colleges and others that are able to report relevant, credible information about their assets in the financial statements. Their ability to do so is getting the basics right. If entities cannot get the basics right, it does not matter what accounting framework is used.