New FAQs
The Secretariat published new FAQs during November. These are as follows:
1. What disclosures should an entity provide on newly effective Standards of GRAP?
Entities are required to disclose (a) the existence of issued but not yet effective Standards, and (b) known or reasonable estimable information about the possible impact of the application of the new Standards on the entity’s financial statements. Entities frequently provide a list of Standards, but seldom disclose their potential impact on the financial statements.
The FAQ explains what should be disclosed, as well as which ‘issued but effective Standards’ should be included in the list.
2. Should all errors be accounted for using GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors?
A trend has been observed that entities provide extensive information in the financial statements on the correction of immaterial prior period errors. Providing information for immaterial errors can detract from the overall quality of the financial statements as it may not be relevant to users. The FAQ discusses what errors are, and how they should be dealt with in the financial statements.
3. Are all adjustments related to the adoption of a new pronouncement a change in accounting policy in accordance with GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors?
When entities are required to apply new or amended Standards of GRAP, these changes are accounted for using the transitional provisions. If there are no transitional provisions, the amendments are accounted for as a change in accounting policy or a change in accounting estimate.
It may happen that not all the previous requirements are repealed or amended. It has been observed that entities may identify that they incorrectly applied the previous requirements and treat this as either a change in an accounting policy or a change in estimate along with the adoption of the amendments. As a result, it may be appropriate to consider whether a prior period error exists. The existence of a change in an accounting policy, estimate or a prior period error is explained in the FAQ.
4. When should GRAP 109 Accounting by Principals and Agents be applied? Some entities have applied GRAP 109 to any arrangement with more than two parties. Principal-agent arrangements are a particular type of arrangement where one entity acts on behalf of another in dealing with third parties. The FAQ explains the process that needs to be followed to assess whether an arrangement is a principal-agent arrangement and in the scope of GRAP 109.
