| The Board commenced a Post-implementation Review of GRAP 108 on Statutory Receivables |
|
|
| As part of its 2024-2026 work programme, the Accounting Standards Board (the Board) is undertaking a Post-implementation Review (hereafter “PIR”) of the Standard of GRAP on Statutory Receivables (GRAP 108). |
|
| What transactions are addressed in GRAP 108? |
|
|
GRAP 108 sets out the recognition, measurement, presentation and disclosure requirements for statutory receivables. A statutory receivable is a receivable that arises from legislation, supporting regulations or similar means (hereafter “legislation or similar means”). A statutory receivable is required to be settled by another entity in cash or another financial asset.
Statutory receivables differ from contractual receivables. Contractual receivables arise from transactions that are entered into voluntarily, for example where an entity provides goods and services in return for a cash payment (receivable). These receivables are accounted for using GRAP 104 on Financial Instruments. Statutory receivables arise from compulsory transactions based on legislative requirements. Examples include receivables for taxes, fines, penalties, appropriations, grants and fees charged in terms of legislation or similar means. |
|
| Issues identified to date |
|
|
The PIR commenced with research to understand how entities apply the principles in GRAP 108, and what information is presented and disclosed in the financial statements on statutory receivables.
General issues
The review noted two general issues with the preparation of financial statements using GRAP 108, namely: - the accounting policy and/or the note on statutory receivables do not provide information specific to the entity’s circumstances. Entities often use boilerplate information from templates and wording from the definitions and principles in GRAP 108, instead of explaining how the principles in GRAP 108 apply to the entity’s circumstances. For example, the definition of a statutory receivable is used as the accounting policy without explaining how the receivable arises with reference to legislation or similar means; and
- information presented in the financial statements is inconsistent. For example, entities sometimes do not include an accounting policy for statutory receivables, but the financial statements and notes present information on statutory receivables.
Specific issues
Among others, some of the specific issues with the application of GRAP 108 noted from the review include: - Entities are unsure about the distinction between a statutory receivable and a contractual receivable.
- Where statutory receivables are presented as a separate line item on the face of the statement of financial position, the relevant policy and/or note does not always indicate whether the statutory receivable arises from an exchange or non-exchange transaction. In other instances, receivables are classified on the face of the statement of financial position as either exchange or non-exchange, but the note does not indicate which of the exchange and non-exchange receivables are statutory or contractual in nature.
- Entities’ accounting policies incorrectly indicate that statutory receivables are initially recognised at fair value and subsequently measured at amortised cost that approximates fair value.
- Some of the information required to be presented and disclosed on statutory receivables is omitted from either the accounting policy or note. Examples include explaining:
- how the statutory receivable’s transaction amount is determined with reference to the applicable legislation or similar means;
- how accrued interest and other charges (i.e. fines and penalties) are levied;
- the basis and rate used to recognise interest and other charges levied on the statutory receivable; and
- how and when a statutory receivable is derecognised.
These results will be used to identify the specific issues on which the Board needs respondents’ views. |
|
| The next phase of the PIR |
|
|
The Board will next seek comment from stakeholders to understand:
(a) the challenges experienced with the application of GRAP 108; and
(b) if the disclosure requirements in GRAP 108 provide relevant and useful information to hold entities accountable and for decision-making.
If you are interested to participate in the PIR of GRAP 108, subscribe to the ASB’s Newsletter, follow us on social media, or contact Amanda Botha on amandab@asb.co.za for updates on this project. |
|
|
|
