Accounting Standards Board
The accounting standards board (ASB) has published a notice in the Government Gazette calling for comment on its latest discussion paper.
The discussion paper is entitled “Assets and liabilities arising from non-contractual arrangements that have the features of financial instruments”.
The ASB is responsible for developing and maintaining financial reporting standards that result in effective performance levels within the public sector.
According to the notice, the discussion paper “focuses on accounting proposals for receivables and payables which are not within the scope of GRAP 104 on financial instruments”.
Written comment is invited until 18 May 2012.
The paper focuses on “possible accounting approaches for assets and liabilities that are similar to financial instruments because they require settlement in cash or another financial asset, but arise from legislation or similar requirements”.
The need to deal with the above arose during the development of the standard of GRAP on financial instruments.
The discussion paper focuses on:
• Current prescribed accounting requirements for receivables and payables
• The contractual or non-contractual nature of a transaction or arrangement
• How to account for non-contractual receivables
• How to account for non-contractual payables
The paper seeks to formulate “requirements for the recognition, initial and subsequent measurement, derecognition, presentation and disclosure of receivables and payables that arise from non-contractual arrangements”.
The existing requirements of the standards of GRAP are outlined.
The distinction between a contractual and a non-contractual arrangement is explained.
Contractual arrangements flow from an agreement between parties whereas non-contractual arrangements flow from legislation.
“Financial assets and financial liabilities arising from contractual arrangements include deposits with financial institutions, loans and other debt instruments, derivative instruments and receivables and payables for goods and services. Assets and liabilities arising from non-contractual arrangements that have the features of financial instruments include receivables and payables for taxes, fines, appropriations and fines”.
During initial discussions on how to deal with the problem, the ASB decided that the amending of the definition of a financial instrument to include non-contractual arrangements that produce an asset or a liability that possesses the features of a financial instrument was not feasible.
It was decided to address the issues by means of a separate project.
The paper seeks to establish whether existing requirements in the standards are adequate or whether a new guidance should be developed.
The paper contains detail on practices in other countries and calls for stakeholder comment on a number of proposals.
Sabinet Cape Town Office
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