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The Accounting Standards Board (ASB) recently issued a communication: Are you ready to implement the new standards of GRAP?', which challenges preparers of generally regulated accounting practice (GRAP) annual financial statements to consider the impact of several new standards and accounting issues for the 2012 reporting period and beyond.
Certain South African public sector entities, however, have for some years been struggling with specific GRAP standards and ASB directives. This article discusses incoming GRAP implementation challenges and offers ideas on how these may be resolved.
The following text is primarily sourced from documents and communications issued by the ASB, with explanatory comments by the writers of this article.
Challenges relating to the new standards of GRAP
The 2011/12 year
1. Revised GRAP standards applicable for the 2012 year end and Interpretations of the standards of GRAP (iGRAPs).The ASB approved the amendments to the GRAP standards in February 2010 (effective for periods starting after 1 April/1 July 2011) as part of its first improvements project. Furthermore, the ASB has issued 14 new iGRAPs, of which 12 are applicable together with iGRAP 1, for the 2011/2012 year.
Preparers of annual financial statements will need to study these revised GRAP and iGRAP standards to ensure that compliance is achieved - where applicable to their entities -for the 2012 year-end onwards.
2. Measurement exemptions in Directive 4 for low capacity municipalities have ended. Low capacity municipalities that made use of the measurement exemptions in 2011 can no longer apply these exemptions for the year ending 30 June 2012. In accordance with the requirements contained in Directive 4, these low capacity municipalities should retrospectively measure these assets to which the exemptions applied in the past.
The writers are of the opinion that a large majority of the low capacity municipalities that previously utilised the exemptions, may measure their assets as at 30 June 201 2 and that retrospective measurement need not be performed. This is due to a combination of a lack of capacity and financial resources to perform the exercise, as well as a lack of detailed accounting records. Because of the aforementioned factors, we anticipate that many low capacity municipalities may receive negative audit opinions for the year ending 30 June 2012.
The 2012/13 year
3. For reporting...