Transcript Property, Plant and Equipment

Developments in
accounting for assets
Overview
Amendments to:
• GRAP 16 Investment Property; and
• GRAP 17 Property, Plant and
Equipment.
Amendments to Investment
Property and Property,
Plant and Equipment
Why were amendments
needed?
Consultation highlighted
the need for amendments
• Post-implementation review of GRAP 16 &
GRAP 17.
• Objective was to solicit feedback from:
– preparers → what challenges they
experience in applying Standards of GRAP.
– users → whether information in F/S meet
their needs.
Areas identified
• Issue #1 - Distinction between investment
property (IP) and property, plant & equipment
(PP&E).
• Issue #2 - Useful lives & residual values.
• Issue #3 - The use of external valuers.
• Issue #4 - Disclosure on WIP.
• Issue #5 - Encouraged disclosures.
• Issue #6 - Repairs & maintenance disclosure.
Process to revise Standards
• ED 127 issued to receive feedback
on proposed changes.
• Board approved amendments in
March 2015.
• Approval received from AccountantGeneral in June 2015 for
amendments.
• Effective date 1 April 2016.
Amendments to GRAP 16
Clarifying the application of
the definitions
• Properties are not investment property if:
– used in production or supply (social housing,
recreational facilities) → mandate specified in
legislation or similar.
– they contributing to the provision of a specific
good and service in conjunction with other
assets.
– hold for disposal as part of ordinary course of
operations.
Other areas of clarification
• Identified other areas that require
clarification:
– amount of revenue earned not important –
rather why/how property is used.
– existence of lease in itself does not mean
property is investment property.
– rent does not need to be market related for
property to be classified as investment
property.
Amendments to GRAP 17
Review of useful lives and
residual values
• Annual assessment at each reporting
date onerous.
• Introduction of indicator based approach.
• Conduct a detailed assessment if one or
more indicators triggered.
• List of indicators developed on
consultation with engineers and asset
managers.
Review of useful lives and
residual values
Indicators:
• Change in composition of asset.
• Change in use: manner; utilisation rate;
decision to dispose; technological
environmental or commercial changes;
changes in legal limits; asset idle.
• Approaching end of useful life.
• Planned R&M undertaken or delayed.
• Environmental factors.
• Change in condition.
Use of external valuers
• Misconception that Standards require the
use of a valuer.
• Not required  MAY
• Amended to clarify that can use:
- Independent member of valuation
profession or another competent
expert.
- Can be internal or external expert.
- No disclosure required.
Capital work in progress
• Users need more information.
• Disclose information on:
– Cumulative expenditure on in process assets,
per class of asset
– Construction of assets taking a significantly
longer period of time to complete than
expected
– Construction of assets stopped → reason and
if assets impaired.
– Flexibility in disclosing (ii) and (iii).
• Affects GRAP 16, 17, 31 and 103.
Repairs and maintenance
• Users need more information.
• Repairs and maintenance
– Separately disclose expenditure
incurred to repair and maintain assets
in notes (GRAP 16, GRAP 17, GRAP
103)
– Include information on how amount
determined  comparability
Encouraged disclosures
• Eliminated from GRAP 16, 17 and 31.
Transitional provisions
Amendment
Prospective
application
Separate disclosure on repairs &
maintenance on all assets.
a
Indicator based approach.
a
Disclosure on capital WIP.
a
Use of external valuers (professional
valuer or another expert)
a
Retrospective
application
More explanations, guidance and
examples to distinguish IP and
PP&E.
a
Deletion of all encouraged
disclosures
a
Effective date
• Financial periods commencing on or after
1 April 2016.
• Approval from Accountant-General.
Other issues
Other issues
• Effective dates of:
- Amendments to GRAP 5 and 100
(14/15).
- GRAP 105 to 107, and Directive 11
(15/16).
- Improvements from 2013/14 (15/16).
Other developments
Other developments
To be considered by the Board in July:
• Principals and agents.
• Amendments to GRAP 21 and GRAP 26.
Working on:
• Guidance on accounting for housing and
land.
Contact details
Tel: (011) 697-0660
Fax: (011) 697-0666
Email: [email protected]
Website: www.asb.co.za
: Accounting Standards Board
: @ASB_SA