Introduction to GRAP Standards Study Notes (Public Sector Accounting – ASB & GRAP Standards)

A concise but complete understanding of the Generally Recognised Accounting Practice (GRAP) framework is essential for South African public sector accounting examinations at universities such as UNISA, CUT, and other institutions. These notes focus on real course codes and exam needs (for example FAC1503, FAC2601, FAC3703, FAC4864 at UNISA and ACCY376, ACCY486, ACF371 at Central University of Technology) and are aligned with the Accounting Standards Board (ASB) requirements. The emphasis is on what students most frequently encounter: definitions, recognition and measurement rules, disclosure requirements, and exam-style application.

These notes form part of the broader collection “Public Sector Accounting (ASB & GRAP Standards)” and are geared toward test and exam preparation, especially for modules dealing with public sector financial reporting, provincial and municipal accounting, and GRAP-based consolidated financial statements.

1. GRAP in the South African Public Sector Context (UNISA FAC1503 / FAC2601 Focus)

1.1 Role of GRAP in South African Public Finance

GRAP (Generally Recognised Accounting Practice) is the set of accounting standards issued by the Accounting Standards Board (ASB) for use by South African public sector entities (excluding national and provincial departments that currently apply the modified cash basis under the MCS, but including trading entities and public entities that the ASB prescribes).

Common exam modules where GRAP is core content include:

UNISA FAC1503 – Financial Accounting Principles, Concepts and Procedures
UNISA FAC2601 – Financial Accounting for Companies
UNISA FAC3703 – Financial Accounting for Entities
UNISA FAC4864 – Financial Reporting (postgraduate, includes public sector focus)
CUT ACCY376 – Public Sector Accounting
CUT ACCY486 – Advanced Public Sector Financial Reporting

In these modules, GRAP is usually tested alongside or after IFRS, requiring students to distinguish between public sector–specific requirements and private sector IFRS rules.

Why GRAP was introduced

Harmonisation: To create a consistent, transparent framework for all spheres of government (national, provincial, local) and public entities.
Accountability: To support the constitutional requirement that public funds be managed transparently and fairly.
Comparability: To allow users to compare the performance and financial position of municipalities, public entities, and other institutions.

Key institutions and legislation linked to GRAP:

Accounting Standards Board (ASB) – responsible for issuing GRAP Standards and Interpretations of Standards.
Public Finance Management Act (PFMA) – governs national and provincial public entities and departments.
Municipal Finance Management Act (MFMA) – governs municipalities and municipal entities.
Companies Act – relevant when public entities are companies but still apply GRAP if designated.

In exam questions (especially in UNISA FAC1503 and CUT ACCY376), you are often required to identify the applicable reporting framework for an entity based on its type and enabling legislation.

1.2 Which Entities Apply GRAP?

Typical entities that are required or allowed to apply GRAP:

National and provincial public entities listed in Schedules 2 and 3 of the PFMA (as designated by the ASB).
Municipalities and municipal entities as per the MFMA.
Trading entities within national/provincial departments when prescribed.
Certain constitutional institutions (e.g., some commissions) as indicated by Treasury instructions.

Remember for exams:

National and provincial departments themselves still typically apply the modified cash basis (MCS) – not full GRAP – but many exam case studies place you in the context of a municipality or public entity where full accrual-based GRAP is mandatory.
Municipalities prepare full accrual-based GRAP-compliant financial statements for their main set of financial statements, with budget comparisons as supplementary statements.

1.3 GRAP vs IFRS vs MCS – Comparison for Exams

In many public sector accounting exam questions (notably UNISA FAC2601, FAC3703, FAC4864 and CUT ACCY376), you are expected to differentiate between:

GRAP – accrual standards for public sector entities.
IFRS – accrual standards for profit-oriented private sector entities.
MCS (Modified Cash Standard) – used by national and provincial departments.

High-level comparison

Feature	GRAP	IFRS	MCS (for departments)
Basis of accounting	Accrual	Accrual	Modified cash
Sector focus	Public sector	Private sector / for-profit entities	National & provincial departments
Standard-setter	Accounting Standards Board (ASB)	IASB	National Treasury
Presentation of budget info	Required (GRAP 24)	Optional	Integrated into cash statements
Focus on service potential	Yes – key concept	Limited – mainly cash-generating entities	Not explicit
Nature of assets	Many non-cash-generating (e.g. parks, roads)	Mostly cash-generating	Mainly short-term, cash-related

Common exam angle: Provide two key differences between GRAP and IFRS in the recognition/measurement of specific items such as:

Heritage assets (GRAP 103 vs no specific IFRS standard).
Biological assets (GRAP 101 vs IAS 41).
Non-cash-generating assets (GRAP 21 vs IAS 36 impairment).

Students must be able to show how service potential in the public sector affects recognition and impairment decisions compared to purely commercial considerations under IFRS.

1.4 Sources of GRAP Requirements

The ASB issues:

GRAP Standards (e.g. GRAP 1 Presentation of Financial Statements, GRAP 17 Property, Plant and Equipment).
Interpretations of GRAP – similar to IFRICs under IFRS.
Directives – transitional provisions, and guidance on the first-time adoption of GRAP.
Guidelines – (e.g. Guideline on Accounting for Public Private Partnerships – PPPs).

Exam tip for UNISA FAC4864 and CUT ACCY486: When asked to justify an accounting treatment, you must:

Identify the appropriate GRAP Standard (e.g. GRAP 17).
Refer to the type of transaction and its characteristics (e.g. infrastructure asset used in service delivery).
Apply the relevant recognition and measurement criteria.

Examiners often award marks for a clear reference to the standard, even if no paragraph number is given.

1.5 Core GRAP Standards Commonly Examined

The following GRAP Standards are most likely to be examined in introductory and intermediate modules (e.g. FAC1503, FAC2601, ACCY376):

GRAP 1: Presentation of Financial Statements
GRAP 2: Cash Flow Statements
GRAP 3: Accounting Policies, Changes in Accounting Estimates and Errors
GRAP 9: Revenue from Exchange Transactions
GRAP 11: Construction Contracts
GRAP 13: Leases
GRAP 14: Events after the Reporting Date
GRAP 17: Property, Plant and Equipment
GRAP 19: Provisions, Contingent Liabilities and Contingent Assets
GRAP 21: Impairment of Non-cash-generating Assets
GRAP 23: Revenue from Non-exchange Transactions (Taxes and Transfers)
GRAP 24: Presentation of Budget Information in Financial Statements
GRAP 31: Intangible Assets
GRAP 100: Non-current Assets Held for Sale and Discontinued Operations
GRAP 103: Heritage Assets

More advanced modules such as UNISA FAC3703 and FAC4864 and CUT ACCY486 may also test:

GRAP 104: Financial Instruments
GRAP 105–107: Transfers of Functions
GRAP 109: Accounting by Principals and Agents
GRAP 110: Living and Non-living Resources (where applicable in updated syllabi)

Each of these Standards has exam-focused elements that recur across institutions: definitions, recognition criteria, measurement bases, and presentation/disclosure themes.

2. GRAP 1, GRAP 2 and GRAP 3 – Framework and Foundational Rules (UNISA FAC1503 / FAC2601 Exam Emphasis)

2.1 GRAP 1: Presentation of Financial Statements

Objective: GRAP 1 sets out the overall requirements for the presentation of general purpose financial statements, guidelines for their structure, and minimum content requirements.

Complete set of financial statements under GRAP 1

A GRAP-compliant set of financial statements (for example in a municipal exam question) includes:

Statement of Financial Position (SFP)
Statement of Financial Performance (SFPERF)
Statement of Changes in Net Assets (SCNA)
Cash Flow Statement (GRAP 2)
Comparison of Budget and Actual Amounts (GRAP 24)
Notes, including:
- Accounting policies
- Explanatory information
- Supporting details for line items

Key presentation principles (exam key points)

Fair presentation: Financial statements must fairly present the financial position, financial performance, and cash flows.
Accrual basis: With limited exceptions, GRAP is accrual-based.
Going concern: Assume the entity will continue unless management intends or has no realistic alternative but to liquidate or cease operations.
Consistency of presentation: Classification and presentation should be consistent from period to period unless a GRAP Standard requires a change, or the change results in more reliable and relevant information.
Materiality and aggregation: Present each material class of similar items separately; aggregate immaterial items.

Important exam definitions from GRAP 1

Assets: A resource controlled by an entity as a result of past events and from which future economic benefits or service potential are expected to flow to the entity.
Liabilities: A present obligation arising from past events, the settlement of which is expected to result in an outflow of resources.
Net assets: The residual interest in the assets of the entity after deducting its liabilities.

Classification in the Statement of Financial Position

Current vs non-current: Entities must present current and non-current assets and liabilities separately (unless liquidity presentation is more appropriate).
Current asset examples: Cash, short-term investments, receivables used in operations within 12 months.
Non-current asset examples: Property, plant and equipment (GRAP 17), intangible assets (GRAP 31), heritage assets (GRAP 103).

Exam questions often present trial balances and require correct classification and identification of whether an item is current or non-current.

2.2 GRAP 2: Cash Flow Statements

Objective: To provide information on the historical changes in cash and cash equivalents, classified into operating, investing, and financing activities.

Key classifications

Operating activities: Principal revenue-producing activities (e.g. service charges, salaries paid, grants utilised).
Investing activities: Acquisition and disposal of long-term assets (e.g. purchase of vehicles, sale of equipment, acquisition of investments).
Financing activities: Activities that result in changes to the size and composition of contributed capital (net assets) and borrowings (e.g. issuing loans, repaying long-term borrowings).

Direct vs indirect method (exam focus in UNISA FAC2601 and CUT ACCY376)

Direct method: Discloses major classes of gross cash receipts and gross cash payments.
Indirect method: Starts with surplus/deficit and adjusts for:
- Non-cash items (depreciation, impairments)
- Non-operating items (e.g. gains/losses on disposal)
- Changes in working capital (inventories, receivables, payables)

Most exam questions use the indirect method for operating activities.

Example exam-style adjustments (for an entity applying GRAP):

Add back depreciation on property, plant and equipment.
Adjust for changes in receivables: Increase in receivables decreases cash from operations; decrease increases cash.
Adjust for changes in payables: Increase in payables increases cash; decrease reduces cash.
Remove gains on disposal of PPE from the surplus/deficit (gains are non-cash and included in SFPERF).

Typical exam layout for a simplified cash flow calculation might show:

Surplus for the year: R1 200 000
Depreciation: R300 000
Gain on disposal: R50 000
Increase in receivables: R100 000
Increase in payables: R80 000

Calculation of cash from operating activities (indirect method):

Start: Surplus R1 200 000
Add back non-cash depreciation: +R300 000 ⇒ R1 500 000
Deduct gain on disposal: −R50 000 ⇒ R1 450 000
Deduct incr. in receivables: −R100 000 ⇒ R1 350 000
Add incr. in payables: +R80 000 ⇒ R1 430 000

Cash generated from operations = R1 430 000.

Students should practise this type of step-by-step working as it frequently appears in UNISA FAC2601 and CUT ACCY376 exam questions.

2.3 GRAP 3: Accounting Policies, Changes in Accounting Estimates and Errors

Objective: To define how entities should select and apply accounting policies, and deal with changes in those policies, changes in accounting estimates, and the correction of prior period errors.

Accounting policies:

Specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements.
They are chosen based on:
- Requirements of specific GRAP Standards.
- If no specific standard applies, then management uses judgement to develop and apply a policy that results in information that is:
  - Relevant to users’ decision-making needs.
  - Reliable, meaning faithfully represented, neutral, complete, and prudent.

Changes in accounting policies (exam emphasis)

Allowed only if:
1. Required by a new or revised GRAP Standard, or
2. Results in financial statements providing more reliable and relevant information.
Treatment: Apply changes retrospectively:
- Adjust the opening balance of each affected component of net assets as if the new policy had always been applied.
- Restate comparatives for prior periods presented.

Example: If a municipality changes from the cost model to the revaluation model under GRAP 17 for certain assets, it may be treated as a revaluation under the Standard rather than a change in accounting policy (depending on interpretation and transitional provisions). But a change in depreciation method is considered a change in accounting estimate.

Changes in accounting estimates

Result from new information or new developments and, therefore, are not corrections of errors.
Examples:
- Revision of useful life of an asset.
- Changes in the estimated residual value of an asset.
- Revision of the amount of a provision.
Treatment: Account for changes in estimates prospectively:
- Include in surplus or deficit in the period of change and future periods affected.

Errors

Omissions or misstatements in financial statements from the misuse or failure to use reliable information that was available when the financial statements were authorised for issue.
Material prior period errors must be corrected retrospectively, in the first set of financial statements authorised for issue after their discovery, by:
- Restating the comparative amounts, or
- If the error occurred before the earliest period presented, restating the opening balances of assets, liabilities, and net assets for the earliest period presented.

Exam tip (UNISA FAC1503, FAC2601)

Understanding the difference between change in accounting policy, change in accounting estimate, and prior period error is a common source of exam questions. You must:

Classify the change correctly.
State whether the treatment is retrospective or prospective.
State the effect on comparatives.

3. GRAP 17, GRAP 21 and GRAP 31 – Non-Current Assets, Depreciation and Impairment (UNISA FAC2601 / FAC3703 & CUT ACCY376 Focus)

3.1 GRAP 17: Property, Plant and Equipment

Objective: Prescribes accounting treatment for property, plant and equipment (PPE) so that financial statement users can understand information about an entity’s investment in PPE and the related movements.

Definition of PPE

Tangible items:

Held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and
Expected to be used during more than one reporting period.

Recognition criteria

An item of PPE should be recognised as an asset when:

It is probable that future economic benefits or service potential associated with the item will flow to the entity, and
The cost (or fair value in some cases) can be measured reliably.

Measurement at initial recognition

Measured at cost, which includes:
- Purchase price (including import duties and non-refundable taxes).
- Costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating (e.g. site preparation, delivery and handling, installation, professional fees).
- Initial estimate of the costs of dismantling and removing the item and restoring the site (if applicable) – present value of future obligations included in cost with a corresponding provision.

Exam questions often provide a list of costs, and students must decide what belongs in the initial cost of PPE (e.g. exclude staff training, general overheads, and administrative costs, unless they can be specifically attributed).

Subsequent measurement models

After recognition, PPE is carried using one of two models:

Cost model: Cost less accumulated depreciation and accumulated impairment losses.
Revaluation model: Fair value at the date of revaluation less subsequent accumulated depreciation and impairment.

When applied, the revaluation model must be applied to an entire class of PPE (e.g. all infrastructure assets, or all vehicles). Revaluations must be done with sufficient regularity so that the carrying amount does not differ materially from fair value.

Depreciation

PPE is depreciated over its useful life.
Depreciation begins when the asset is available for use (i.e. in the location and condition necessary).
Depreciation ceases when the asset is derecognised or when it is classified as held for sale under GRAP 100 (if applicable).
Common methods:
- Straight-line
- Diminishing balance
- Units of production

Public sector exam questions often use straight-line depreciation for simplicity.

Example:

A municipality buys a refuse truck on 1 July 20X1 for R1 200 000 (including directly attributable costs). Useful life is 6 years, residual value is R60 000. Straight-line depreciation is:

Depreciable amount: R1 200 000 − R60 000 = R1 140 000
Annual depreciation: R1 140 000 / 6 = R190 000

For a year-end of 30 June (common for South African public entities), the depreciation expense each year is R190 000.

Derecognition

An item of PPE is derecognised upon:

Disposal, or
When no future economic benefits or service potential is expected from its use or disposal.

Gain or loss on derecognition is calculated as:

Proceeds from disposal − Carrying amount of the asset, recognised in surplus or deficit.

3.2 GRAP 21: Impairment of Non-cash-generating Assets

Objective: To prescribe procedures for determining whether a non-cash-generating asset is impaired and to ensure impairment losses are recognised.

Non-cash-generating asset: An asset that does not generate cash inflows that are largely independent of those from other assets or groups of assets. In the public sector, many assets fall into this category (e.g. roads, schools, parks).

Impairment indicators

Entities must consider both external and internal indicators. Examples:

External:
- Significant decline in demand for services.
- Adverse changes in legal or policy environment.
Internal:
- Physical damage to the asset.
- Evidence of obsolescence.
- Underutilisation of the asset.

Recoverable service amount

For non-cash-generating assets, the recoverable service amount is the higher of:

Fair value less costs to sell, and
Value in use (which in GRAP 21 is often based on depreciated replacement cost, or sometimes the present value of remaining service potential).

If an asset’s carrying amount exceeds its recoverable service amount, an impairment loss must be recognised.

Impairment loss recognition

Recognise immediately in surplus or deficit, except where the asset is carried at revalued amount; then impairment is treated as a decrease in revaluation surplus to the extent of any credit balance, with the remainder in surplus or deficit.

Example exam scenario

A municipality owns a community hall that has a carrying amount of R5 000 000. Due to structural damage, the hall can no longer be fully used. An assessment gives:

Depreciated replacement cost: R3 200 000
Fair value less costs to sell: R3 000 000

Recoverable service amount = higher of R3 200 000 and R3 000 000 = R3 200 000.

Impairment loss = Carrying amount − Recoverable service amount = R5 000 000 − R3 200 000 = R1 800 000.

This R1 800 000 is recognised in surplus or deficit (unless part of it reduces an existing revaluation surplus).

Reversal of impairment

If there is an indication that an impairment loss from prior periods may no longer exist or may have decreased, the entity must estimate the recoverable service amount again.

If recoverable service amount exceeds carrying amount, an impairment loss must be reversed, but:
- The carrying amount after reversal cannot exceed the carrying amount that would have been determined (net of depreciation) had no impairment been recognised.

Reversal is recognised in surplus or deficit unless the asset is carried at revalued amount, in which case reversal increases the revaluation surplus.

3.3 GRAP 31: Intangible Assets

Objective: To prescribe the accounting treatment for intangible assets that are not dealt with specifically by other Standards.

Definition

An intangible asset is an identifiable non-monetary asset without physical substance that:

Is controlled by the entity as a result of past events, and
From which future economic benefits or service potential are expected to flow to the entity.

Identifiability:

It can be separated and sold, transferred, licensed, rented, or exchanged, or
It arises from contractual or other legal rights, regardless of whether those rights are transferable or separable.

Examples in the public sector: software, licences, certain research and development assets (development phase), rights to water use, etc.

Recognition criteria

An intangible asset should be recognised if:

It is probable that the expected future economic benefits or service potential will flow to the entity, and
The cost can be measured reliably.

Internally generated intangible assets

This is a frequent exam hotspot (UNISA FAC3703, FAC4864, CUT ACCY376):

Distinguish between research and development phases.
Expenditure on research must be expensed as incurred.
Expenditure on development can be capitalised as an intangible asset if specified criteria are met, such as:
- Technical feasibility of completing the intangible asset.
- Intention to complete and use/sell it.
- Ability to use or sell it.
- Adequate resources to complete.
- Ability to measure reliably the expenditure.

Measurement

Initially at cost.
Subsequent measurement: either cost model (cost less accumulated amortisation and impairment) or revaluation model (like GRAP 17, but only if active market exists, which is rare for many intangibles).

Amortisation

Intangible assets with finite useful lives are amortised over their useful life.
Amortisation is similar to depreciation for tangible PPE.
Intangible assets with indefinite useful lives are not amortised but tested annually for impairment.

Public sector exam application example

A municipality develops its own billing software system.

Research phase costs: R200 000 – expensed.
Development phase costs: R800 000 – if criteria are met, capitalised as intangible asset.

If the entity can demonstrate that the development costs meet all the GRAP 31 criteria, the intangible asset (software) is initially recognised at R800 000.

4. GRAP 9, GRAP 23 and GRAP 24 – Revenue and Budget Information (UNISA FAC2601 / FAC3703 & CUT ACCY376 / ACF371 Focus)

4.1 GRAP 9: Revenue from Exchange Transactions

Objective: To prescribe the accounting treatment for revenue arising from exchange transactions, where each party receives and gives approximately equal value.

Exchange vs non-exchange

Exchange transaction: Municipality provides services (e.g. water, electricity) and receives payment at arm’s length.
Non-exchange transaction: Entity receives value without directly giving approximately equal value in exchange (e.g. taxes, grants, transfers).

Recognition criteria for revenue (exchange)

Revenue from exchange transactions is recognised when:

Significant risks and rewards of ownership of goods have been transferred or the services have been rendered.
The amount of revenue can be measured reliably.
It is probable that economic benefits or service potential will flow to the entity.
Costs incurred or to be incurred in respect of the transaction can be measured reliably.

Examples of exchange revenue in public entities

Sale of goods (materials, publications).
Rendering of services (service charges for water, electricity).
Rental income from properties at commercial rates.
Fees, fines where the value returned approximates the consideration (some fines may be closer to non-exchange, depending on the nature and whether it is punitive).

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of:

Trade discounts,
Volume rebates,
VAT (if recoverable).

Multiple-element transactions

In some exam questions, you must separate the components of a transaction (e.g. selling goods plus a service component) and allocate revenue appropriately.

4.2 GRAP 23: Revenue from Non-exchange Transactions (Taxes and Transfers)

Objective: To prescribe requirements for the recognition, measurement, and disclosure of non-exchange revenue, particularly relevant to public sector entities.

Key categories of non-exchange revenue

Taxes: Property rates, personal income tax, VAT (when government is the collecting entity).
Transfers:
- Grants from national government (equitable share, conditional grants).
- Donations, gifts.
- Fines and penalties, where there is no direct exchange of approximately equal value.

General principle

An entity recognises an asset arising from a non-exchange transaction when it gains control of resources, and recognises revenue when it recognises the asset, unless a liability is also recognised for conditions attached to the resource.

Conditions vs restrictions

This is a critical point often examined in UNISA FAC3703, FAC4864, CUT ACCY376:

Condition: A stipulation that specifies that the future economic benefits or service potential must be consumed in a particular way or must be returned to the transferor if not used as specified.
- Presence of a refund obligation.
- Results in the recognition of a liability (deferred revenue), which is released to revenue as conditions are satisfied.
Restriction: A stipulation that limits or specifies the purposes for which a resource may be used, but does not require return of the resources if not used as specified.
- Does not give rise to a liability.
- The full amount is recognised as revenue when control is obtained.

Example exam scenario

Municipality receives a conditional grant of R10 000 000 on 1 July 20X1 to build a community clinic. Any unspent portion must be returned to the national department of health.
- On initial receipt:
  - Dr Cash R10 000 000
  - Cr Liability (unearned revenue) R10 000 000
- During the year, municipality incurs R4 000 000 on the project fulfilling part of the conditions.
  - Dr Liability R4 000 000
  - Cr Revenue (non-exchange) R4 000 000
- Carrying liability at year-end: R6 000 000.

This logic is central to many exam questions in public sector accounting modules.

Taxes

Recognise assets and revenue from taxes when:

The taxable event occurs (for example, the taxable sale, earning of income, holding of property).
The entity has a legal claim to the tax and can measure the amount reliably.

Allowances for uncollectible amounts (impairment of receivables) must also be considered.

4.3 GRAP 24: Presentation of Budget Information in Financial Statements

Objective: To require entities to provide a comparison of:

Budgeted amounts and
Actual amounts

for the budget period in their financial statements, and to explain material differences.

Who applies GRAP 24?

Public sector entities that are required to make publicly available their approved budgets.
For example, municipalities and many public entities.

Required presentation

Entities must present:

A comparison of budget and actual amounts as either:
1. A separate additional financial statement (most common approach), or
2. Columns on the face of the primary financial statements (less common).

The comparison is typically presented on the same basis as the approved budget (e.g. cash basis, modified cash, or accrual), but the financial statements themselves are prepared on accrual GRAP. This creates exam questions related to reconciliation.

Key exam points

Identify budgeted figures (e.g. in R000’s or R million) for key line items.
Show actual figures from the GRAP-compliant financial statements.
Calculate variance (actual − budget).
Provide a narrative explanation for material variances.

Example

Assume a municipality’s operating revenue budget for property rates is R150 000 000, and actual recognised revenue is R140 000 000. The variance is R10 000 000 (unfavourable).

Possible exam explanation:

The shortfall arose due to higher than expected non-payment of rates and an increase in property valuation objections, reducing the billed amount.

For exam purposes, be concise and link the explanation to underlying economic or operational events (e.g. recession, billing system issues, policy changes).

Reconciliation between budget and actual (different bases)

If budgets are prepared on a different basis (e.g. cash basis) from financial statements (accrual GRAP basis), then the entity must provide a reconciliation that:

Explains the difference in basis of accounting.
Adjusts budgeted cash flows and balances to a comparable accrual basis for major elements.

This concept is tested mainly in higher-level modules (e.g. UNISA FAC4864, CUT ACCY486) but understanding the principle is useful in intermediate exams as well.

5. Consolidated GRAP Applications and Advanced Topics (UNISA FAC3703 / FAC4864 & CUT ACCY486 Focus)

5.1 GRAP 19: Provisions, Contingent Liabilities and Contingent Assets

Objective: To ensure appropriate recognition measures are used for provisions and that sufficient information is disclosed for contingent liabilities and contingent assets.

Provision

A provision is a liability of uncertain timing or amount.

Recognition criteria:

Present obligation (legal or constructive) as a result of a past event.
It is probable (more likely than not) that an outflow of resources will be required to settle the obligation.
A reliable estimate can be made of the amount.

Examples in public sector:

Reinstatement obligations for landfill sites.
Legal claims where the municipality is likely to lose.
Rehabilitation obligations for infrastructure projects.

Measurement:

Best estimate of the expenditure required to settle the present obligation.
Discounting if the effect of the time value of money is material.

Contingent liability

A possible obligation arising from past events whose existence will be confirmed only by the occurrence/non-occurrence of uncertain future events not wholly within the entity’s control; or
A present obligation that is not recognised because:
- It is not probable that an outflow of resources will be required, or
- The amount cannot be measured reliably.

These are disclosed in notes but not recognised as liabilities on the SFP.

Contingent asset

A possible asset from past events whose existence is confirmed only by uncertain future events not entirely under the entity’s control.
Not recognised in SFP; disclosed where inflow is probable.

Exam scenarios often require students to decide whether to recognise a provision, disclose a contingent liability, or make no entry/disclosure.

5.2 GRAP 100: Non-current Assets Held for Sale and Discontinued Operations

Objective: To specify accounting for non-current assets (or disposal groups) held for sale and for the presentation and disclosure of discontinued operations.

Non-current asset held for sale

An asset is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use, and:

It is available for immediate sale in its present condition.
The sale is highly probable (management is committed to a plan to sell, active programme to locate buyer, etc.).

Measurement

Measure at the lower of carrying amount and fair value less costs to sell.
Depreciation ceases when asset is classified as held for sale.

Discontinued operation

A component of an entity that has been disposed of, or is classified as held for sale, and
Represents a separate major line of operations or geographical area of operations.

In GRAP-based statements, results of discontinued operations are presented separately in the Statement of Financial Performance.

Exam questions are more likely at advanced level (e.g. UNISA FAC4864, CUT ACCY486), testing classification and basic measurement.

5.3 GRAP 103: Heritage Assets

Objective: To prescribe accounting for heritage assets in the public sector.

Definition of heritage asset

A heritage asset is a cultural, environmental, or historical asset with the following characteristics:

Held for public exhibition, education, or research.
Protected, kept unencumbered, cared for, preserved, and commonly not for sale.
Significant historical, environmental, or cultural importance.

Examples: museums’ collections, monuments, historical buildings, artworks in public museums.

Recognition and measurement

Recognise a heritage asset if:
1. It meets the definition and recognition criteria (probable service potential, reliable measurement).
Initially measure at cost where acquired.
Where cost cannot be determined reliably (e.g. donated assets), measure at fair value if it can be reliably determined.

Subsequent measurement

Either cost model (cost less accumulated impairment losses) or revaluation model.
Heritage assets are generally not depreciated if their useful life is considered indefinite. Assessment of impairment may still be required.

This area often appears in UNISA FAC3703 and CUT ACCY376 exam papers in multiple-choice or scenario-based questions, especially regarding whether an asset qualifies as heritage and whether depreciation is applicable.

5.4 GRAP 104: Financial Instruments (Brief Intro for Examinations)

Students at UNISA FAC3703, FAC4864 and CUT ACCY486 may encounter summarised GRAP 104 content. Key exam-level concepts:

Financial asset: Cash, a contractual right to receive cash or another financial asset, or to exchange instruments on potentially favourable terms.
Financial liability: A contractual obligation to deliver cash or another financial asset, or to exchange instruments on potentially unfavourable terms.
Measurement categories at initial recognition:
- At cost (for certain unquoted instruments where fair value cannot be reliably measured).
- At amortised cost (using the effective interest method).
- At fair value through surplus or deficit (for trading instruments).

Public sector exam questions usually keep the focus on:

Recognition of receivables and payables.
Basic amortised cost calculations (e.g. for loans).
Presentation and basic disclosure.

5.5 Consolidations and Related GRAP Standards (GRAP 6, 7, 8 – High-level)

Although some South African universities (including UNISA and CUT) integrate consolidations primarily through IFRS (e.g. IFRS 10, IAS 28, IFRS 11), students in advanced public sector modules may need a basic understanding of GRAP equivalents:

GRAP 6: Consolidated and Separate Financial Statements.
GRAP 7: Investments in Associates.
GRAP 8: Interests in Joint Arrangements.

At exam level, focus is on:

Identifying control relationships in the public sector (e.g. a municipality and its municipal entities).
Determining when consolidation is required.
Eliminating inter-entity balances and transactions.

Control in GRAP 6 refers to:

The power to govern the financial and operating policies of another entity so as to obtain benefits from its activities (or service potential).

For municipal environments (e.g. studied in CUT ACCY376 and UNISA FAC4864):

Municipalities usually consolidate their municipal entities, such as water utilities, housing entities, and other service delivery organisations.

The exam may provide:

Separate financial information for the municipality and entity.
You are required to perform simple consolidation adjustments (e.g. eliminate inter-entity loans and balances).

6. University-Specific Exam Strategies and Integrated GRAP Application

6.1 UNISA Public Sector / GRAP-Focused Modules – Exam Strategies

Core modules where GRAP features strongly at UNISA:

FAC1503 – Financial Accounting Principles, Concepts and Procedures
FAC2601 – Financial Accounting for Companies
FAC3703 – Financial Accounting for Entities
FAC4864 – Financial Reporting (includes advanced and public sector issues)

While not every module is entirely public sector oriented, exam papers frequently include a GRAP‑based question or segment.

Common question types

Definitions and principles:
- Explain the difference between exchange and non-exchange revenue (GRAP 9 vs GRAP 23).
- Define a provision and list three conditions for its recognition (GRAP 19).
Journal entries:
- Initial recognition of a conditional grant (GRAP 23).
- Capitalisation of PPE and depreciation (GRAP 17).
Short scenarios (calculation + discussion):
- Compute depreciation under the cost model.
- Identify and compute impairment for a non-cash-generating asset (GRAP 21).
Presentation and disclosure:
- Extract from Statement of Financial Position or Statement of Financial Performance.
- Budget vs actual tables and variance explanations (GRAP 24).

Study approach for UNISA exams

Focus on illustrative examples from prescribed materials.
Summarise each relevant GRAP Standard on:
- Objective
- Definitions
- Recognition criteria
- Measurement rules
- Key disclosure items
Use past exam questions and solutions for FAC2601, FAC3703, FAC4864 to see how marks are allocated.

6.2 CUT and Other Universities (ACCY and ACF Modules) – Exam Strategies

At the Central University of Technology (CUT), GRAP content is most directly examined in:

ACCY376 – Public Sector Accounting
ACCY486 – Advanced Public Sector Financial Reporting
ACF371 – Financial Accounting and Reporting (where GRAP topics may be integrated)

These modules typically use case studies based on municipalities or public entities applying GRAP.

Typical CUT GRAP exam themes

Preparation of GRAP-compliant financial statements from trial balances and additional information:
- Statement of Financial Position.
- Statement of Financial Performance.
- Cash Flow Statement (GRAP 2).
- Budget vs actual Statement (GRAP 24).
Application of:
- GRAP 17 (PPE – infrastructure, buildings, vehicles).
- GRAP 23 (non-exchange revenue – grants, rates).
- GRAP 21 (non-cash-generating asset impairment).
- GRAP 19 (provisions for site rehabilitation).

Exam-specific tips

Practice time management: Consolidated questions combining multiple Standards (e.g. GRAP 17 + GRAP 23 + GRAP 24) can be long.
Carefully read the basis of accounting given in the scenario (GRAP vs MCS vs hybrid).
When calculating non-exchange revenue from conditional grants:
1. Identify grant received during the year.
2. Determine conditions and the extent to which they are satisfied.
3. Calculate revenue recognised vs liability carried forward.

6.3 Integrated GRAP Case Study Example (Municipality Scenario)

To connect the different GRAP Standards in practice, consider a concise integrated scenario similar to what might appear in UNISA FAC3703 or CUT ACCY376:

Scenario summary

Nelson Local Municipality (NLM) applies GRAP Standards. For the year ended 30 June 20X3:

It received an equitable share grant of R50 000 000 (non-conditional).
It also received a conditional capital grant of R20 000 000 on 1 July 20X2 to build a new library, with unspent amounts to be returned to the national department.
During the year, NLM spent R12 000 000 on constructing the library (PPE under GRAP 17).
NLM charges property rates and service charges, which are exchange transactions (GRAP 9), with total billed revenue of R80 000 000 for rates and R100 000 000 for services.
Estimated uncollectible amounts on receivables at year-end are R5 000 000 (impairment).
A community hall (non-cash-generating asset) with carrying amount R7 000 000 is assessed at a recoverable service amount of R5 500 000 (GRAP 21).
A provision is required for the rehabilitation of a landfill site at the end of its life, estimated at a present value of R3 000 000 (GRAP 19).

Key GRAP applications

GRAP 23 – Equitable share grant (R50 000 000):
- No conditions requiring refund; recognise as non-exchange revenue when control obtained:
  - Dr Cash R50 000 000
  - Cr Revenue – non-exchange R50 000 000
GRAP 23 – Conditional capital grant (R20 000 000):
- Initially on 1 July 20X2:
  - Dr Cash R20 000 000
  - Cr Liability – unspent conditional grants R20 000 000
- By year end NLM has spent R12 000 000 on the library:
  - Dr PPE – Library (GRAP 17) R12 000 000
  - Cr Cash/Payables R12 000 000
- Recognise revenue as conditions met:
  - Dr Liability – unspent conditional grants R12 000 000
  - Cr Revenue – non-exchange R12 000 000
- Closing liability: R8 000 000 (unspent).
GRAP 17 – Library (PPE):
- Library capitalised at cost (R12 000 000).
- If ready for use during the year, begin depreciation based on useful life; exam problems may specify a useful life, say 30 years. Annual depreciation = R12 000 000 / 30 = R400 000.
GRAP 9 – Revenue from exchange:
- Property rates R80 000 000, service charges R100 000 000, less impairment (allowance for uncollectibles) R5 000 000:
  - Dr Trade receivables R180 000 000
  - Cr Revenue – property rates R80 000 000
  - Cr Revenue – service charges R100 000 000
- At year-end adjustment for expected credit losses of R5 000 000 (in simplest form):
  - Dr Impairment loss (expense) R5 000 000
  - Cr Allowance for doubtful debts R5 000 000
GRAP 21 – Impairment of community hall:
- Carrying amount: R7 000 000
- Recoverable service amount: R5 500 000
- Impairment loss = R1 500 000:
  - Dr Impairment loss (expense) R1 500 000
  - Cr Accumulated impairment – community hall R1 500 000
GRAP 19 – Provision for landfill rehabilitation:
- Present value of obligation: R3 000 000
- Recognise provision and typically capitalise the cost to the related asset (e.g. landfill PPE, if approach used from GRAP 17 and GRAP 19 guidance):
  - Dr PPE – Landfill site R3 000 000
  - Cr Provision – landfill rehabilitation R3 000 000

In a full exam question, you would then:

Prepare extracts of the Statement of Financial Position:
- PPE (library R12 000 000, landfill site with rehabilitation component, hall original cost less accumulated depreciation and impairment).
- Provisions R3 000 000.
- Liability – unspent conditional grants R8 000 000.
Prepare extracts of the Statement of Financial Performance:
- Revenue (exchange and non-exchange).
- Depreciation on PPE.
- Impairment losses.
Provide notes with reconciliations and explanations.

6.4 High-Level Study Plan for GRAP-Based Modules

To effectively prepare for GRAP in UNISA and CUT modules:

Map your syllabus:
- Link each module (e.g. FAC2601, FAC3703, FAC4864, ACCY376, ACCY486, ACF371) to relevant GRAP Standards.
Summarise each Standard in your own words:
- Definition(s).
- Recognition criteria.
- Measurement rules.
- Presentation and disclosure.
Work through numerical examples:
- Depreciation and impairment calculations.
- Grant revenue recognition.
- Provisions and contingencies.
- Cash flow adjustments.
Practise integrated exam questions:
- Use past papers or lecturer handouts to practise case studies (especially municipal or public entity scenarios).
Revise concepts of exchange vs non-exchange, conditions vs restrictions, and cash basis vs accrual basis, as these are conceptual issues that frequently cause errors in exams.

By rigorously applying these GRAP principles across practical case studies—while aligning them with course-specific expectations at universities such as UNISA (FAC1503, FAC2601, FAC3703, FAC4864) and CUT (ACCY376, ACCY486, ACF371)—students can build a strong foundation in public sector accounting and be well prepared for examinations in “Public Sector Accounting (ASB & GRAP Standards)”.