New Exposure Drafts issued by the IPSASB

At its September meeting, the IPSASB approved two Exposure Drafts for comment.

• Proposed IPSAS on Non-Current Assets Held for Sale and Discontinued Operations.
• Proposed amendments to IPSAS 5 on Borrowing Costs.

Non-Current Assets Held for Sale and Discontinued Operations

The IPSASB decided that guidance is needed on how to measure assets that are held for sale, as well as provide information in the financial statements on discontinued operations. As a result, the IPSASB has issued a proposed equivalent of IFRS 5 on Non-current Assets held for Sale and Discontinued Operations.

As the transactions supporting the sale of assets in the public and private sectors are the same, the IPSASB decided that this should be a convergence project. This means that limited changes have been made to the concepts in IFRS 5 in developing the proposed IPSAS. The IPSASB agreed that additional information should be disclosed in the notes to the financial statements when the fair value less costs to sell of an asset is materially higher than the carrying amount recognised in the financial statements. The IPSASB agreed that the disclosure of the fair value less costs to sell in these circumstances would provide useful information to users of the financial statements.

The ASB revised GRAP 5 on Non-current Assets Held for Sale and Discontinued Operations in 2013 by deleting the requirements for assets held for sale. Stakeholders locally expressed concerns about applying the requirements for assets to be held for sale, particularly the requirement that the sale should be executed within one year from the reporting date. Given the regulatory environment within which entities operate, it is difficult for entities to demonstrate that they meet this requirement.

When the Exposure Draft is discussed locally, this issue – among others – will need to be revisited to assess whether they are appropriate for the environment in South Africa.

Proposed amendments to IPSAS 5 on Borrowing Costs

As part of the IPSASB’s Consultation Paper on Measurement, it requested respondents’ views on whether borrowing costs should only be expensed, i.e. eliminate the allowed alternative accounting treatment which permits the capitalisation of borrowing costs. Respondents’ views varied, with support expressed by some, and disagreement expressed by others.

The IPSASB agreed to retain both options, which means there are no changes proposed to the authoritative material in IPSAS 5. The basis for conclusions has been updated to reflect the IPSASB’s deliberations on the expensing or capitalisation of borrowing costs. Respondents raised a number of application issues with IPSAS 5 in their responses. The IPSASB has developed non-authoritative implementation guidance and illustrative examples to address these issues.

How to access the Exposure Drafts

The Exposure Drafts – once published - can be accessed on the IPSASB’s website by following this link.

Locally, the Secretariat will arrange roundtable discussions to discuss the proposals in the IPSASB’s Exposure Drafts.