Accounting Standards Board Newsletter #3

Accounting Standards Board
Newsletter #3 - March 2024

In this edition of the Newsletter

Do you understand the difference between the impairment and derecognition of a statutory receivable?

After initial recognition, an entity’s statutory receivable balance, as reflected in the statement of financial position, may be reduced by an impairment or derecognition. These two concepts are distinct economic phenomena that impact the statement of financial position differently.

Impairment of a statutory receivable

A statutory receivable is impaired when the cash flows that an entity expects to receive is less than the value reflected on its statement of financial position. This may be, for example, due to financial difficulty experienced by a debtor. Impairment results in the loss of future economic benefits associated with an asset, i.e, the cash or another financial asset that will be received to settle the receivable.

GRAP 108 on Statutory Receivables requires an entity to assess, at each reporting date, if there are any indications that a statutory receivable, or group of statutory receivables may be impaired.

When a statutory receivable is impaired, it continues to be reflected on the entity’s statement of financial position as the entity still has a right to the future economic benefits associated with the receivable.

Derecognition of a statutory receivable

Derecognition of a statutory receivable means that the entity no longer controls the right to future economic benefits associated with the receivable. This will be, for example, when a debtor settles its debt, or when the entity no longer has a right to collect the amount owed to it.

GRAP 108 includes criteria to determine if a statutory receivable should be derecognised. Derecognition of a statutory receivable will result in the removal of the receivable from the entity’s statement of financial position.

Share your challenges to distinguish the impairment and derecognition of a statutory receivable with the Board

The Accounting Standard Board is undertaking a post-implementation review (PIR) of GRAP 108 [ED 207] to assess if the Standard meets its objectives in providing relevant and useful information to users, and to understand preparers’ difficulties and implementation challenges with applying the Standard.

If you have any challenges to distinguish whether a statutory receivable should be impaired or derecognised, the Board would like to hear from you.

How can you share your comments?

You can share your views by submitting written comment on ED 207, or by participating in roundtable consultations. Please contact amandab@asb.co.za if you want to participate in these consultations.

Disclaimer

The article has been prepared by the Secretariat of the ASB for information purposes only. It has not been reviewed, approved, or otherwise acted on by the Board.