Immovable Assets
Unbundling
Purpose
• The Fixed Asset Register does not function independently of
the other financial and management systems.
• A comprehensive asset register is integral to effective asset
management.
• It is the basis of an Asset management information system
and contains relevant data beyond that required for financial
reporting.
Results
• It can be used as a very good budgeting tool in terms of
capital expenditure requirements in the future years as well
as repairs and maintenance requirements.
• Condition assessments of assets are vitally important to
ensure effective utilisation of these assets and compliance
with the necessary accounting standards regarding
impairment of assets.
Background
• The City of Cape Town was a pilot site in the implementation
of GAMAP.
• The two GAMAP statements at that time to consider were:
 GAMAP 113 – Accounting for Fixed Assets
 GAMAP 114 – Financing of Fixed Assets. (This was never
accepted by the Accounting Standards Board)
Audit Opinion at that Time
• The City of Cape Town received for two consecutive financial
years a disclaimer audit opinion from the Auditor General.
• One of the underlying causes were validity and the existence
of globular assets in the City’s Fixed Asset Register.
• Non Compliance to the Accounting Standards regarding
Fixed Assets.
GAMAP Implementation Team
• The City formed a GAMAP Implementation Team.
• It was headed up by the Director: Treasury.
• It comprised of the Accounting and Asset , Budget and SAP
ERP staff.
• Supported by an external audit company and the Office of
the Auditor General.
Why a Team
• It was to look at the GAMAP implementation from a holistic
point of view and not in silos.
• Improve communication between departments.
• Ensure better understanding and impact the GAMAP had on
the entire organisation.
Various Projects
• In the unbundling of the globular assets different projects
were embarked upon:
• Land and Buildings Project
• Housing Project
• Roads Project
• Infrastructure Project:
 Water and Sanitation
 Electricity
 Solid Waste
• Heritage Assets
Stage 1
• This entailed purification of data





Asset Classes
Asset Life Span
Breaking down of the globular assets (componentisation)
Investment Profile Categories
Determine the backlog depreciation adjustments required
Stage 2
• Details required of the reporting level

















Asset Description
Asset Location
Functional Location Code
Asset Class and Asset Type (GAMAP list)
Discipline (Mechanical/Electrical/Civil)
Quantity (where applicable)
Unit ERV
Year Commissioned
Year Refurbished
Asset Age
Condition Grading
GAMAP Asset Life
Residual GAMAP Asset Life
Depreciated GAMAP Value
Alternative Asset Life
Residual Alternative Asset Life
Depreciated Alternative Value
Stage 3
• There were various scenarios which existed at the onset of
the project which form part of the projects methodology:
1.
2.
3.
4.
5.
No assets in the FAR – too many immovable assets.
Many asset in the FAR - too no immovable assets.
One asset in the FAR - too one immovable asset.
One asset in the FAR - too many immovable assets.
Many assets in the FAR - too one immovable asset.
Like with Like Concept
• Wherever possible, assets within FAR will be matched to the
actual assets identified.
• This will be achieved using the first and second descriptions
within FAR and the information supplied for the physical
asset.
• In the review the cost centre manager would be required to
indicate reasons why these assets have been included
originally in their physical asset returns.
Auditor-General Input
• We confirmed the process of “spreading” with the
Auditor-General in cases where the like to like concept was
not possible – the balance after the like to like exercise were
insignificant .
• The method of application was fair and acceptable and was
called “deemed cost” and should be disclosed in the
Accounting policy.
• The current replacement value was identified and will be
used as a basis.
• All previously written off assets were reinstated at the
engineering estimated replacement value.
Opening Balance Challenges
• Assets purchased before 30/06/2002
• Assets purchased after 30/06/2002
• It was decided that the spreading exercise for each of the 4
projects cannot commence until the 2002/03 capitalisation
process has been completed.
Valuation of Assets
• The assets will be valued at estimated 2002 replacement value. The ERV will
be calculated using cost functions complied for the respective asset types.
• Where the age of the asset is available, a depreciated value will be calculated
using the asset’s life as defined in GAMAP and the remaining useful life.
• Should the asset be older than the GAMAP Asset life. A nil value will be
allocated.
• Where the age of the asset is unknown, and estimate of its age will be made.
• Condition of the asset will be used to determine or adjust the remaining useful
life.
• Asset under construction should not be valued. These assets should,
however, also be listed and brought to the attention of City of Cape Town
finance department. The intention is to capitalise these assets but only bring
them into the financial system once construction is completed.
• With the implementation of GRAP 17 asset useful lives had to be reviewed and
assets fully depreciated during the implementation period were reinstated and
respread over the remaining useful lives.
Current Practise
• Annual verification of movable and immovable assets.
• Insurance Asset Register aligned to the Fixed Asset Register.
• Standardised operating processes for the accounting register
and equipment register.
• Roll up of assets to a more management level but not
comprising componentisation of assets.
• Planning of Capital budget.
• Yearly conditioning assessments and revision of useful lives.
• Updating asset categories to be aligned with:
• NERSA
• Construction industries.
THANK YOU