GRAP 17 vs IFRS for
SMEs
Erna Swart
CEO: ASB
25 November 2010
Disclaimer
The views and opinions expressed in this
presentation are those of the individual.
Official positions of the ASB on
accounting matters are determined only
after extensive due process and
deliberation
Background
• IASB issued IFRS for SMEs in July 2009
• ASB are considering application in public sector
– May align requirements in existing GRAPs with
IFRS for SMEs
– Discussion paper 5
• Detailed analysis and comparison
• Preliminary views and specific matters requiring
consultation
• National Treasury issued accompanying material
Background
• What is the IFRS for SMEs
– Less onerous set of accounting standards
– To be applied by entities not publicly
accountable
– Developed using full suite of IFRs
• Simplifications based on user needs
• Simplifications to recognition/measurement
and fewer disclosures
Background
• GRAP v IFRS for SMEs
– Introduce concept of “undue cost and effort”
as a test for complying with certain
requirements
– ASB is considering how this can be used in
public sector (if at all)
– Broad test: Cost of disclosure versus benefits
of increased transparency
– Specific requirements in Stds – apply unless
“impracticable”
Background
• DP addresses three areas:
– Differential reporting in the public sector
• additional reporting framework for public sector
– Standards-level simplifications
• ASB preliminary views on where Standards can be
simplified using IFRS for SMEs
– Identification of conceptual differences
• no proposed amendments to Standards of GRAP
Differential reporting considered separately from
standards-level changes
Differential reporting
Two basic questions:
• Is the IFRS for SMEs a suitable framework for
the public sector?
• Should there be more than one reporting
framework in the public sector?
Differential reporting
1. Is the IFRS for SMEs appropriate
for the public sector?
– Designed for entities that are not publicly
accountable
– Use of taxpayers & public money results in public
accountability
Differential reporting
2. Should there be more than one
reporting framework in the public
sector?
– Board’s view: No
– Legal requirements for consolidation using
GRAP
– Using two frameworks would result in an
additional reporting burden
– Adverse impact on capacity and skills
Standards-level
• In what areas can Standards of GRAP be
simplified using the IFRS for SMEs?
Assets: Common Issues
• Recognition and measurement of assets
acquired in non-exchange transactions
– GRAP requires measurement at fair value
– IFRS for SMEs no similar guidance
• Measurement of assets held for sale
– GRAP 100 applies when entity commits to a plan to
sell an asset or disposal group
– IFRS for SMEs has no specific accounting
requirements but requires assessment of impairment
Assets: Common Issues
• Treatment of borrowing costs
– GRAP 5 requires capitalisation of BC unless
inappropriate
– In IFRS for SMEs BC is always expensed
• Elimination of measurement alternatives
– IFRS for SMEs eliminated subsequent measurement
alternatives
Type of asset
IFRS for SMEs
Standards of GRAP
•
Property, plant and
equipment
Cost model
Choice of cost
revaluation model
model
or
•
Intangible assets
Cost model
Choice
of
cost
revaluation model
model
or
•
Investment property,
including property
interests held by a
lessee in an operating
lease
FV unless FV cannot be
determined reliably
without undue cost and
effort
Choice of cost model (which
comprises cost less accumulated
depreciation and accumulated
impairment losses) or fair value
model.
Where FV cannot be
determined
without Note: The same measurement
undue cost and effort, model must be applied for all
IP is measured using investment properties.
cost
model
in
accordance
with
requirements for PPE
IP under construction
measured at cost at
initial recognition
Assets: Common Issues
• Re-assessment of useful lives, depreciation
methods and residual values
– GRAP 17 = re-assessment at each reporting date
– IFRSs for SMEs = re-assessment ONLY if indication
that circumstances have changed
• Change in how asset is used
• Significant unexpected wear and tear
• Technological advancements
• Change in market price
Assets: PP&E
• Scope
– Investment property
• If fair value cannot be determined without
undue cost and effort – measure using cost
model in accordance with requirements for
PP&E
– Heritage assets
• Guidance only in GRAP 17
Assets: PP&E
• Componentisation of assets
– GRAP 17
• Separate into parts when cost significant
• Depreciate each part separately
– IFRS for SMEs
• Separate into components if parts have different
useful lives (different patterns of consumption of
economic benefits)
ASB proposes adoption of IFRS for SMEs approach
Assets: PP&E
• Disclosure requirements
– GRAP 17 has additional disclosure
requirements and encouraged disclosures
– Comparative information – not required in
IFRS for SMEs
Assets – PP&E
GRAP
Board’s proposal
Parts have different useful
lives
Significant parts (not only
when useful lives different)
Proposed approach in
IFRS for SMEs
Fewer disclosures
Additional disclosures:
Views?
• Additional line items in
reconciliation of opening
and closing balances
• Disclosure of
depreciation either in
surplus or deficit or
capitalised
• PP&E under
construction
• Compensation from third
parties for PP&E lost,
impaired or given up
IFRS for SMEs
Componentise:
Assets: Impairment
• Two GRAP Standards dealing with impairment
• GRAP 26 vs IFRS for SMEs
– Impairment approach similar
– GRAP more guidance to determine FV and value in
use
– GRAP additional disclosure requirements
Assets – Impairment
IFRS for SMEs
GRAP
Board’s proposal
Fewer disclosures
Additional disclosures:
• Impairment loss
recognised or reversed
Views?
• Recoverable amount
determined – FV less
cost to sell or value in
use
• Manner in which
recoverable amount was
determined
• Key assumptions
Contacts
•
•
•
•
www.asb.co.za
Info@asb.co.za
011 697 0660 (office)
011 697 0666 (fax)