| The ASB approves changes to GRAP 103 on Heritage Assets |
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ED 195 on Proposed Amendments to the Standard of GRAP on Heritage Assets proposed amendments to GRAP 103. The objective of the amendments is to better explain what heritage assets are, provide more guidance on their measurement, and require additional disclosures to better inform decision making.
At is meeting held in June 2022, the ASB approved the final amendments to GRAP 103. A recommendation will be made to the Minister of Finance to determine an effective date for the revised GRAP 103. |
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Definition of a heritage asset
To better align with the relevant heritage resource legislation, the definition of a heritage asset is amended to focus on assets that have “cultural significance”. “Cultural significance” means that an item has “aesthetic, architectural, historical, scientific, social, spiritual, linguistic or technological value or significance”. The revised definition remains broad enough to allow for the recognition of heritage assets that are not designated as a heritage resource in legislation.
The characteristics often displayed by a heritage asset, and the range of assets that could be regarded as a heritage asset, are also aligned with the relevant legislation. Additional guidance clarifies that items of significance to a particular community or cultural group in South Africa can also meet the definition of a heritage asset, even if the item has an international origin.
Classification of dual purpose heritage assets
Even though some heritage assets can have cultural significance while being used in delivering services, GRAP 103 now requires that all heritage assets be accounted for using GRAP 103.
A consequence of this amendment is that a heritage asset will no longer be depreciated. Instead, a heritage asset should be tested for impairment when an impairment indicator has been triggered.
Measurement of heritage assets
The amendments to GRAP 103 includes additional guidance on measurement of heritage assets, to explain: - a heritage asset need not be recognised in the financial statements if the variability in the range of reasonable fair value estimates is significant, and/or the probabilities of the various estimates cannot be reasonably assessed. Instead, information about the heritage asset can be disclosed, if material; and
- that an entity may use peer data to determine a heritage asset’s fair value, i.e., consider the value of a comparable heritage asset, held by another entity that has similar characteristics, and are held under similar circumstances.
Protective rights
GRAP 103 emphasises that a protective right, resulting from an ethical, legal and/or statutory obligation, should not prohibit an entity from determining a reliable value for a heritage asset.
The revised GRAP 103 introduces new disclosures that require an entity to (a) present information on heritage assets on which external protective rights are imposed; and (b) explain the circumstances permitting the entity to dispose a heritage asset that is subject to an external protective right. These disclosures are required for all heritage assets controlled by the entity, irrespective of whether the heritage asset is recognised.
Re-assessing if a value becomes available after initial recognition
An entity may hold a heritage asset that does not meet the recognition criteria on initial recognition. The revised GRAP 103 introduces a principle that requires an entity to assess at each reporting date if a reliable value becomes available subsequently. If one of the following indicators are triggered, this may mean that a value can be determined, and the entity should recognise the heritage asset: - changes in the condition of the heritage asset, for example when the heritage asset is restored into a useable condition, and the restored heritage asset can be compared to similar heritage assets sold in a market;
- information about the fair value of a heritage asset becomes available using new valuation techniques; or
- changes in the market’s demand for a specific heritage asset because of new technology that becomes available to authenticate the asset.
This GRAP 103 amendment also introduces a requirement for the entity to disclose (a) the events or circumstances resulting in a reliable value becoming available after initial recognition; (b) a description of the heritage asset; and (c) the value at which the heritage asset is subsequently recognised.
Disclosure of heritage assets borrowed from, or on loan to, other entities
A new disclosure for heritage assets borrowed from, or on loan to other entities is introduced. When any of an entity’s heritage assets are borrowed, or on loan at the reporting date, a description of such heritage assets should be provided. Details should also be presented of the entity that borrowed the heritage assets, or to which the heritage asset is on loan, along with the period of the arrangement.
Deletion of encouraged disclosures
The revised GRAP 103 no longer includes encouraged disclosures. Stakeholders shared with the Board that there is insufficient information to support these disclosures, and the insufficiency of the disclosures often resulted in unnecessary audit queries and conclusions.
Transitional provisions and guidance
GRAP 103 requires the retrospective application of amendments relating to the definition of a heritage asset, the classification of dual purpose heritage assets and the deletion of the encouraged disclosures. All other amendments are applied prospectively from the effective date of the revised GRAP 103.
Transitional guidance explains that, when a dual purpose heritage asset is reclassified following the amendments to GRAP 103, any previously recognised depreciation is adjusted against accumulated surplus or deficit. The heritage asset is reclassified at its cost on initial recognition.
The transitional guidance also explains that the resulting difference for a heritage asset that is recognised when a value becomes available after initial recognition, is recognised in surplus or deficit. |
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