| ASB issues revised GRAP 25, reviews compliance with GRAP 2 |
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The Board met on the 25th of March 2021. The key decisions of the Board are outlined below.
Final revisions to GRAP 25 on Employee Benefits issued
The Board approved the revisions to GRAP 25 and its related Interpretation. The changes to GRAP 25 are a result of aligning the Standard with IPSAS 39 on Employee Benefits. The revisions provide: - Improved guidance on the distinction between short-term and long-term benefits.
- A better distinction between termination and other benefits.
- Revised principles for the classification of the components that comprise post-employment benefit plans.
- Improved disclosure objectives and related disclosure requirements for all employee benefits.
Once effective, the revised Standard will replace the original GRAP 25.
The ASB will make a submission to the Minister of Finance proposing an effective date of 1 April 2023 for the revised Standard.
Review of compliance with GRAP 2 on Cash Flow Statements
The Board completed a review of compliance with GRAP 2. The purpose of the review was to assess compliance with GRAP 2, identify common issues in practice and emerging trends. The review was based on the publicly available financial statements for the 2018/2019 reporting period. Findings identified from the review of the financial statements were discussed with a broad range of stakeholders to identify root causes.
The Board identified several specific issues relating to the preparation of the cash flow statement, which include the following: - There is no specific materiality applied to the preparation of the cash flow statement.
- Incorrect classification of items as operating, investing and financing.
- Non adjustment of non-cash items in various parts of the cash flow statement and/or reconciliation.
- Limited disclosures provided in the notes to the financial statements, including the statement of accounting policies.
The detail of these issues and the proposed responses will be communicated in a Research Paper. The Research Paper will be reviewed by the Board in June 2021.
The following were the most cited reasons for the issues identified in the review: - Lack of skills.
- Capacity constraints at entities.
- Human error, e.g. mathematical mistakes, omissions, etc.
- Adjustments not made by preparers to templates or automatically generated cash flow statements produced using reporting software.
The issues identified in the review indicate a broader need for improving the processes, policies and overall financial management environment within which financial statements are prepared by entities. As a result, no changes are needed to GRAP 2. Some of the issues can be resolved through communicating the results of the review as well as developing new or amending existing FAQs. Issues requiring specific implementation guidance will be communicated to the Office of the Accountant-General (OAG). |
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