ACC3703, FAC3764 & PSA3701 Exam Notes: Accounting for Assets in the Public Sector (GRAP 17, GRAP 31, GRAP 103)

This study guide provides integrated exam-focused notes for South African public sector accounting modules such as UNISA ACC3703 Public Sector Accounting, UNISA FAC3764 Applied Public Sector Accounting, CUT PSA3701 Public Sector Accounting, and similar courses at universities of technology and TVET colleges. It focuses on the core GRAP asset standards most frequently examined: GRAP 17 (Property, Plant and Equipment), GRAP 31 (Intangible Assets) and GRAP 103 (Heritage Assets). The notes emphasise definitions, recognition criteria, measurement, disclosures, and exam-style applications tailored to South African public sector entities applying the ASB Standards of GRAP.

1. Overview of Assets in the South African Public Sector (UNISA ACC3703 Focus)

1.1 Public Sector Reporting Framework and ASB

South African public sector entities (national, provincial, many municipal and public entities) prepare financial statements in accordance with the Standards of GRAP, issued by the Accounting Standards Board (ASB). For ACC3703, PSA3701 and similar modules, students must understand:

Who applies GRAP:
- National and provincial departments preparing on the accrual basis.
- Constitutional institutions.
- Trading entities.
- Public entities classified as Schedule 2, 3B and 3D in the PFMA, where the Minister of Finance has prescribed GRAP.
- Municipalities and municipal entities that have formally adopted GRAP.
GRAP vs IFRS:
- GRAP is largely based on IFRS/IPSAS but adapted for public-sector specific issues, e.g.:
  - Non-exchange transactions (e.g. grants, taxes).
  - Service delivery assets with no commercial return.
  - Heritage and cultural assets held for public benefit.
  - Statutory measurement and reporting requirements.
Key asset standards in this guide:
- GRAP 17: Property, Plant and Equipment – tangible service delivery and administrative assets.
- GRAP 31: Intangible Assets – identifiable non-monetary assets without physical substance.
- GRAP 103: Heritage Assets – assets of cultural, environmental, historical, natural, artistic, scientific, technological and/or educational significance.

These three standards are heavily examined in UNISA ACC3703 and FAC3764, as well as in CUT PSA3701 and TUT Public Financial Accounting 3.

1.2 Asset Definition and General Recognition Criteria

Under the GRAP Framework, an asset is:

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.

Three key elements:

Resource: Something with value, tangible or intangible.
Control: Power to obtain future economic benefits or service potential, and restrict others’ access.
Past event: A transaction or event has already occurred (e.g. purchase, construction, donation).

Future economic benefits or service potential:

Future economic benefits:
- Cash inflows (e.g. user charges).
- Savings in cash outflows (e.g. cost-saving technology).
Service potential:
- Capacity to deliver services (e.g. hospital, school, road).
- Public access to heritage and cultural assets.
- Environmental preservation or social benefits.

Recognition criteria (common across GRAP 17, 31, 103):

It is probable (more likely than not) that future economic benefits or service potential will flow to the entity.
The cost or fair value can be measured reliably.

If these are not met, expenditure is recognised as an expense.

1.3 Classification of Assets Under GRAP

In the context of ACC3703 and PSA3701, you must distinguish:

Property, plant and equipment (PPE) – GRAP 17:
- Tangible.
- Held for use in production or supply of goods and services, rental to others, or administrative purposes.
- Expected to be used more than one reporting period (i.e. more than 12 months).
Intangible assets – GRAP 31:
- Non-monetary.
- No physical substance.
- Identifiable (separable or arises from contractual/legal rights).
- Controlled by the entity and capable of generating service potential or economic benefits over more than one period.
Heritage assets – GRAP 103:
- Assets with heritage significance:
  - Cultural, environmental, historical, natural, artistic, scientific, technological or educational value.
- Held for the benefit of present and future generations.
- Typically not used for day-to-day service delivery in the same way as PPE.
- Often irreplaceable and not usually used for commercial purposes.
Investment property – GRAP 16 (outside the main scope here, but often tested in combination):
- Land or buildings held to earn rentals or for capital appreciation (or both).
- Not used in production/supply of goods or services, or for administrative purposes.
- Not held for sale in the ordinary course of operations.

1.4 Distinguishing PPE, Heritage Assets and Intangibles in Practice

Borderline classification decisions are popular in ACC3703 and FAC3764 exams.

Example 1: Historic building used as a museum

If the primary purpose is to preserve heritage, educate the public, and not to provide ordinary administrative offices, the building is a heritage asset under GRAP 103.
If part of the building is used as municipal offices, that component may be PPE under GRAP 17 (component approach).

Example 2: Road network

Roads are tangible, used in service delivery, not primarily of heritage value.
Classified as PPE under GRAP 17, even if some have historical importance (unless specific parts are designated as heritage sites for preservation).

Example 3: Software licence

No physical substance, identifiable (contract), provides service potential over more than one year.
Classified as intangible asset under GRAP 31 (unless it is an integral part of item of PPE, e.g. operating system embedded in a server, in which case included in PPE).

Example 4: Digitised archives

Digital collection of records, photos and videos.
Typically an intangible asset under GRAP 31 if identifiable and controlled; may also have heritage characteristics but GRAP 103 applies only to tangible heritage assets.
The digital medium (e.g. hard drive) is PPE, but its value is usually insignificant relative to the content.

In exams, always:

Identify physical vs non-physical.
Identify primary purpose: service delivery/admin vs heritage vs income generation.
Determine correct standard (GRAP 17, 31, 103, or 16 for investment property).

1.5 Initial vs Subsequent Measurement Overview

Across GRAP 17, 31, and 103, you will repeatedly see the same pattern:

Initial recognition:
- Cost (for exchange transactions).
- Fair value (for some non-exchange transactions, like donated heritage assets).
Subsequent measurement:
- Cost model: cost less accumulated depreciation (or amortisation) and impairment.
- Revaluation model (permitted, not required):
  - Carrying amount = revalued amount (fair value at date of revaluation) less accumulated depreciation/amortisation and impairment.
  - Revaluations must be sufficiently regular to keep carrying amount close to fair value.
Depreciation / Amortisation:
- PPE (GRAP 17): depreciated over useful life except land with indefinite life.
- Intangibles (GRAP 31): amortised if finite life; no amortisation if indefinite life (test for impairment annually).
- Heritage assets (GRAP 103): usually not depreciated due to indefinite useful life, but tested for impairment.

These measurement models are tested in numeric questions and theoretical discussions in UNISA FAC3764 and CUT PSA3701.

2. GRAP 17 – Property, Plant and Equipment (UNISA ACC3703, CUT PSA3701 Core Content)

2.1 Scope and Examples of PPE in the Public Sector

GRAP 17 applies to tangible items that:

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

Typical examples in South African public sector entities:

Infrastructure assets:
- Road networks, bridges, dams, water and sewerage systems, electricity networks.
Community assets:
- Clinics, hospitals, schools, libraries, community halls, sports fields.
Operational assets:
- Office buildings, equipment, computer hardware, furniture, vehicles, plant and machinery.
Specialised assets:
- Fire trucks, ambulances, police equipment, waste management trucks.

PPE excludes:

Assets classified as heritage assets under GRAP 103.
Intangible items like software (GRAP 31).
Investment property (GRAP 16).
Biological assets (GRAP 101).
Inventory (GRAP 12).

2.2 Recognition of PPE

An item of PPE is recognised as an asset when:

Probable that future economic benefits or service potential will flow to the entity, and
Cost or fair value can be measured reliably.

Decision points often tested in ACC3703:

Thresholds:
- Many entities set a capitalisation threshold (e.g. R5 000 per asset). Items below this are expensed as inventory/consumables even though technically they may meet the definition of PPE.
- Thresholds are a policy decision, but must be reasonable and consistently applied.
Control:
- Assets on loan or leased may or may not be recognised depending on control (see GRAP 13 for leases).
Service potential:
- Sometimes assets do not generate direct cash inflows but are still recognised due to service potential (e.g. public clinic).

2.3 Initial Measurement of PPE

Initial measurement at cost

For exchange transactions, cost comprises:

Purchase price:
- Including import duties, non-refundable purchase taxes.
- Less trade discounts and rebates.
Directly attributable costs to bring asset to location and condition necessary for its intended use, such as:
- Employee benefits arising directly from construction or acquisition.
- Site preparation.
- Initial delivery and handling.
- Installation and assembly costs.
- Testing costs (net of proceeds from sale of samples).
- Professional fees (engineers, architects).
Initial estimate of costs of dismantling and removing the item and restoring the site (if there is an obligating requirement).

Costs not included in PPE (expensed as incurred):

Opening a new facility (e.g. advertising, staff training).
Introducing a new product/service.
Conducting business in a new location or with a new class of customers.
Administration and general overheads not directly attributable.
Initial operating losses before achieving planned performance.
Costs of relocating or reorganising part or all of an entity’s operations.

Example (numeric):

A municipality buys a refuse truck for R1 000 000. Additional costs:

Delivery: R20 000.
Staff training on new equipment: R30 000.
Licence fees (non-refundable) for roadworthy certification: R10 000.
Initial operating losses in first month: R50 000.

Cost of PPE:

Purchase price: R1 000 000
Delivery: + R20 000
Roadworthy certification: + R10 000
Training: excluded (expense)
Initial operating losses: excluded (expense)

Total capitalised cost = R1 030 000

Self-constructed assets:

Measured at cost: direct materials, labour, overheads directly attributable to construction.
Same principles as purchased assets.
No profit is recognised on self-constructed assets.

2.4 Subsequent Measurement: Cost Model vs Revaluation Model

After initial recognition, an entity chooses either:

Cost model:
- Carry at cost less accumulated depreciation and accumulated impairment losses.
Revaluation model:
- Carry at a revalued amount, being fair value at date of revaluation less subsequent depreciation and impairment.
- Revaluations must be made with sufficient regularity such that carrying amount does not differ materially from fair value.

Key exam issues:

Once an entity chooses the revaluation model for a class of assets, it must apply it to all assets within that class (e.g. all buildings).
Fair value of infrastructure may be based on depreciated replacement cost.
Revaluation increases taken to revaluation surplus (net assets/equity), unless reversing a previous decrease recognised in surplus or deficit.
Revaluation decreases recognised in surplus or deficit, except where there is a revaluation surplus for that asset (in which case it decreases that surplus first).

Revaluation journal entries (simplified):

Increase in carrying amount:
- Dr PPE – (Revaluation)
  Cr Revaluation Surplus (Net assets/equity)
Decrease in carrying amount:
- Dr Revaluation Surplus (to extent of any existing surplus)
- Dr Surplus or Deficit (remainder)
  Cr PPE – (Revaluation)

2.5 Depreciation of PPE

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

Key concepts:

Depreciable amount = Cost (or revalued amount) – Residual value.
Useful life:
- Period over which the asset is expected to be available for use.
- Or number of production/service units expected.
Residual value:
- Estimated amount that the entity would currently obtain from disposal, after deducting estimated costs of disposal, if the asset were already of the age and in the condition expected at end of its useful life.

Depreciation methods permitted:

Straight-line.
Diminishing balance (reducing balance).
Units of production.

In the public sector, straight-line is most common and often used in exam questions.

Example:

Cost of clinic building: R10 000 000
Residual value: R500 000
Useful life: 50 years

Depreciable amount = R10 000 000 – R500 000 = R9 500 000
Annual depreciation (straight-line) = R9 500 000 / 50 = R190 000

Review of estimates:

Useful life, residual values and depreciation method reviewed at least at each reporting date.
Changes are accounted for as changes in accounting estimates (prospective application).

2.6 Subsequent Expenditure: Capitalise or Expense?

A frequent exam topic in UNISA ACC3703:

Subsequent costs related to PPE are:

Day-to-day servicing and repairs:
- Maintain asset in its current condition.
- Recognised as expense in surplus or deficit.
Replacement of parts:
- If the part is significant and will provide additional service potential or generate future benefits, capitalise and derecognise the replaced part.
Major inspections:
- If regular major inspections are required to continue operating the asset (e.g. aircraft/bridge inspections), the cost is capitalised and depreciated over the period until the next inspection. The carrying amount of any remaining previous inspection costs is derecognised.

Example: Replacement of roof on municipal office

Original roof had carrying amount of R200 000.
New roof cost R600 000 and extends building’s life with improved functionality.
Journal entries (simplified):
- Derecognise old roof:
  - Dr Loss on disposal of component (if no proceeds) R200 000
    Cr PPE – Building component R200 000
- Capitalise new roof:
  - Dr PPE – Building component R600 000
    Cr Cash/Payables R600 000

2.7 Impairment of PPE

Impairment occurs when the carrying amount exceeds the recoverable service amount of the asset.

Under GRAP 21/26, recoverable service amount is the higher of:

Fair value less costs to sell; and
Value in use (present value of remaining service potential).

Triggers for impairment:

Significant decline in asset’s condition.
Physical damage (e.g. fire, flood).
Obsolescence or technological changes.
Reductions in service utilisation (e.g. closed clinics).
Plans to discontinue or restructure service delivery.

If impairment is identified:

Calculate recoverable service amount.
Compare with carrying amount.
Recognise impairment loss in surplus or deficit, unless reversing a previous revaluation surplus.

2.8 Derecognition of PPE

An item of PPE is derecognised:

On disposal, or
When no future economic benefits or service potential are expected (e.g. abandoned, scrapped).

Gain or loss on disposal:

= Net disposal proceeds – Carrying amount.
Recognised in surplus or deficit.

Example:

Carrying amount of truck: R200 000
Sold for: R220 000

Gain on disposal = R20 000 (credit surplus or deficit).

In exam scenarios, ensure depreciation is updated to date of disposal before calculating gain or loss.

3. GRAP 31 – Intangible Assets (UNISA FAC3764 & CUT PSA3701 Advanced Topic)

3.1 Nature and Examples of Intangible Assets

GRAP 31 covers intangible assets other than:

Financial assets (GRAP 104).
Mineral rights and mineral reserves (GRAP 103/other).
Assets arising from insurance contracts.
Intangible heritage assets specifically scoped out (GRAP 103 deals with tangible heritage assets).

Definition of an intangible asset:

An identifiable non-monetary asset without physical substance, controlled by the entity, from which future economic benefits or service potential are expected to flow.

Key characteristics:

Identifiable:
- Separable (can be sold, transferred, licensed), or
- Arises from contractual or legal rights.
Non-monetary:
- Not a right to receive a fixed or determinable amount of money.
Without physical substance.
Control:
- Entity has the power to obtain the benefits and restrict access of others.

Common public sector examples, often examined in FAC3764:

Computer software (purchased or internally developed, when criteria met).
Licences and permits (e.g. spectrum rights, operating licenses).
Trademarks and logos (if acquired).
Patents and copyrights.
Development costs that meet specific recognition criteria.
Website development costs.

3.2 Recognition Criteria for Intangible Assets

An intangible asset is recognised when:

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

Additionally:

Must meet identifiability and control conditions.
Internally generated goodwill is never recognised.
Distinguish between research and development.

3.2.1 Research vs Development (Internally Generated Intangibles)

Research phase:
- Original and planned investigation to gain new knowledge.
- Examples: searching for alternatives, feasibility studies, lab research.
- All research expenditure is expensed as incurred.
Development phase:
- Application of research findings to a plan or design.
- Before the start of commercial/operational production or use.
- Development costs are capitalised only if all of the following can be demonstrated:
  1. Technical feasibility of completing the intangible asset.
  2. Intention to complete and use or sell it.
  3. Ability to use or sell it.
  4. How it will generate probable future economic benefits or service potential.
  5. Availability of adequate resources (technical, financial, other).
  6. Reliable measurement of expenditure attributable to the asset during its development.

If any condition is not met, development costs are expensed.

Typical exam trap: Candidates often capitalise all system development costs without checking these six criteria.

3.3 Initial Measurement of Intangible Assets

Purchased intangibles (exchange transactions):

Initially measured at cost:
- Purchase price, including import duties and non-refundable taxes, less discounts.
- Directly attributable costs to prepare the asset for its intended use (e.g. installation, configuration costs).

Intangibles acquired in a non-exchange transaction (e.g. donation):

Measured at fair value at acquisition date.

Internally generated intangibles:

Research costs: expensed.
Development costs: capitalised only if criteria are met, using the actual costs incurred.

Cost includes:

Directly attributable employee costs (salaries of development team).
Materials and services consumed.
Fees to register legal rights (e.g. patents).
Testing costs to make the asset ready for use.

Excluded:

Selling, administrative and other general overheads, unless directly attributable.
Training costs.
Initial operating losses.

3.4 Subsequent Measurement: Cost Model vs Revaluation Model

Similar to GRAP 17, GRAP 31 allows two models:

Cost model:
- Cost less accumulated amortisation and accumulated impairment losses.
Revaluation model:
- Fair value at date of revaluation less subsequent amortisation and impairment.
- Only if:
  - Fair value can be determined by reference to an active market.
- Active markets for intangible assets are rare (e.g. some rights and licenses, emission allowances).
- Most public sector entities therefore use cost model.

In ACC3703/FAC3764 exams, you are often required to state why the revaluation model is not common for intangibles.

3.5 Useful Life: Finite vs Indefinite

An intangible asset’s useful life is either:

Finite: A fixed or determinable period.
- Example: Software licence valid for 5 years.
Indefinite: No foreseeable limit to the period over which the asset is expected to generate benefits or service potential.
- Example: Some rights with indefinite renewal at negligible cost, where renewal is almost certain.

Finite-life intangible assets:

Amortised over the useful life.
Amortisation method should reflect the pattern in which the asset’s future economic benefits or service potential is consumed. If not determinable reliably, use straight-line.
Residual value is usually zero, except where:
- There is a commitment by a third party to purchase the asset at the end of its useful life, or
- There is an active market and it can be reliably estimated.

Indefinite-life intangible assets:

Not amortised.
Tested for impairment annually (and whenever there is an indication of impairment).
Useful life should be reviewed each period. If circumstances change and finite life is determined, start amortisation prospectively.

3.6 Amortisation and Impairment

Amortisation:

Similar concept to depreciation, but for intangibles.
Starts when the asset is available for use (when it is in the location and condition necessary for it to be capable of operating in the manner intended).
Stops at the earlier of:
- Date it is classified as held for sale, or
- Date of derecognition.

Example:

Software licence cost: R600 000
Useful life: 3 years
Residual value: R0
Amortisation (straight-line) = R600 000 / 3 = R200 000 per year

Impairment:

Apply GRAP 21/26.
Indicators similar to PPE:
- Decline in usage.
- Technological obsolescence.
- Legal changes that restrict asset use.
For indefinite-life intangibles and those not yet available for use, test annually for impairment irrespective of indicators.

3.7 Subsequent Expenditure on Intangible Assets

Subsequent expenditure after recognition is:

Capitalised only if:
- It increases future economic benefits or service potential beyond the originally assessed standard of performance, and
- It meets recognition criteria.
Otherwise, recognised as expense.

Examples:

Upgrades adding significant new functionality to an existing software system: may be capitalised.
Routine maintenance, minor bug fixes: expensed.

3.8 Derecognition of Intangible Assets

Derecognise when:

Disposed of, or
No future economic benefits or service potential are expected.

Gain or loss on derecognition:

= Net disposal proceeds – Carrying amount.
Recognised in surplus or deficit.

4. GRAP 103 – Heritage Assets (UNISA ACC3703, FAC3764 & CUT PSA3701 Core Heritage Topic)

4.1 Definition and Characteristics of Heritage Assets

GRAP 103 applies to heritage assets, defined as:

Assets with cultural, environmental, historical, natural, artistic, scientific, technological or educational significance and are held indefinitely for the benefit of present and future generations.

Heritage assets:

Are generally protected, cared for, or preserved.
Often unique, rare or irreplaceable.
Typically not used for day-to-day service delivery or administrative purposes.
May be used in a limited way for commercial purposes (e.g. museum entrance fees), without changing their primary heritage nature.

Examples in South African public sector entities:

Historical buildings (e.g. declared monuments).
Monuments, memorials, statues.
Art collections (paintings, sculptures).
Archaeological sites.
Natural heritage sites under protection (parks, forests with heritage designation).
Scientific, technological collections in museums.

Important: GRAP 103 covers tangible heritage assets. Intangible heritage (songs, oral traditions) is outside its direct scope and may be accounted for under GRAP 31 if it meets intangible asset criteria.

4.2 Scope and Exclusions

GRAP 103 does not apply to:

Heritage assets held by other entities strictly as inventory for sale (e.g. art gallery trading in artworks).
Biological assets related to agricultural activity (GRAP 101).
Intangible heritage assets (e.g. traditions, languages) that do not meet intangible asset recognition criteria.

Assets sometimes have multiple attributes:

A building may be partly used as:
- A museum (heritage function).
- Municipal offices (administrative PPE).
Entity may split into components:
- Heritage component: GRAP 103.
- PPE component: GRAP 17.

4.3 Recognition of Heritage Assets

Heritage assets are recognised when:

It is probable that future economic benefits or service potential associated with the asset will flow to the entity; and
The cost or fair value can be measured reliably.

Service potential from heritage assets includes:

Education and research.
Tourism and cultural value.
Preservation of history and culture.
Environmental preservation.

Non-recognition:

Some heritage items cannot be measured reliably at cost or fair value (e.g. an ancient artefact with no observable market).
In such cases, they are not recognised as assets in the statement of financial position, but disclosures may be required (nature and reason why not recognised).

4.4 Initial Measurement of Heritage Assets

Acquired in exchange transactions:

Measured initially at cost, including purchase price and directly attributable costs to place in location and condition necessary for intended use (or display/preservation).

Acquired through non-exchange transactions (e.g. donation, bequest, transfer):

Measured at fair value at acquisition date.
Fair value might be obtained from:
- Recent market transactions for similar items.
- Professional valuation (e.g. art experts, valuers).

Example:

A municipality receives a donated statue from a private collector. An independent valuer estimates fair value at R2 000 000.
Initial recognition:

Dr Heritage Assets – Statues R2 000 000
Cr Accumulated Surplus (or Revenue – Donations) R2 000 000
(Depending on how the transfer is classified under GRAP 23)

4.5 Subsequent Measurement: Cost Model vs Revaluation Model

After initial recognition, heritage assets are accounted for using either:

Cost model:
- Cost less accumulated impairment losses.
Revaluation model:
- Fair value at revaluation date less subsequent impairment.
- Revaluations should be made with sufficient regularity to ensure carrying amount does not differ materially from fair value.

Key points:

Heritage assets are generally not depreciated because:
- Useful life often considered indefinite.
- They may appreciate rather than depreciate.
Even if not depreciated, they must be assessed for impairment.

In exam questions, clearly state:

Depreciation is not required if the asset has an indefinite useful life and there is no limit to the period over which it is expected to provide service potential.
But impairment testing is still necessary.

4.6 Impairment of Heritage Assets

Impairment identified when:

Physical damage occurs (fire, vandalism).
Environmental factors degrade asset (pollution, erosion).
Loss of heritage significance (e.g. severe alteration by owners).

The recoverable service amount is the higher of:

Fair value less costs to sell; and
Value in use (for heritage, often measured using cost of replacing the remaining service potential, or other surrogate measures).

Impairment losses are recognised in surplus or deficit, except when they reverse revaluation surpluses.

4.7 Special Issues: Inalienability, Restrictions and Control

Many heritage assets:

Are subject to legal or cultural restrictions on disposal or transfer.
Cannot be easily sold (or at all).
Are required by law to be preserved.

These restrictions do not prevent recognition as assets, provided:

The entity controls the asset (can direct its use, manage access, and benefit from it, even if not through sale).
Future service potential exists.

Control may be evidenced by:

Legislation assigning responsibility to an entity.
Custodianship arrangements.
Legal title.

In ACC3703 theory questions, you may be asked to discuss how restrictions impact recognition. Key answer: restrictions affect measurement and disclosure, not whether an item qualifies as an asset, as long as service potential and control exist.

4.8 Disclosures for Heritage Assets

Entities must disclose:

Accounting policy:
- Whether using the cost model or revaluation model.
- Basis for determining fair value.
Reconciliations of the carrying amount at the beginning and end of the period, showing:
- Additions.
- Disposals.
- Acquisitions through non-exchange transactions.
- Impairment losses and reversals.
- Revaluation increases and decreases.
- Other changes.
Description and significance of major heritage asset classes.
Existence and amounts of restrictions on title and disposal.
Heritage assets not recognised because fair value cannot be measured reliably:
- Description and reason for non-recognition.
If using the revaluation model:
- Effective date of revaluation.
- Whether an independent valuer was involved.
- Methods and significant assumptions.

These disclosure requirements frequently appear in UNISA FAC3764 written questions and CUT PSA3701 case study scenarios.

5. Integrated Exam Application: Comparing GRAP 17, 31 and 103 (UNISA ACC3703 & CUT PSA3701 Exam Strategy)

5.1 Comparative Overview of GRAP 17, 31 and 103

The following table summarises key aspects often tested comparatively:

Aspect	GRAP 17 – PPE	GRAP 31 – Intangibles	GRAP 103 – Heritage Assets
Nature	Tangible	Non-monetary, no physical substance	Tangible with heritage significance
Main purpose	Service delivery / admin / rental	Service potential or economic benefits (e.g. software)	Cultural, environmental, historical, educational, etc. value
Useful life	Finite (except some land)	Finite or indefinite	Usually indefinite
Depreciation / Amortisation	Yes, over useful life (except land)	Finite life: amortise; indefinite: no amortisation	Generally no depreciation (indefinite life)
Initial measurement	Cost (or fair value for some non-exchange)	Cost (or fair value for non-exchange)	Cost (exchange) or fair value (non-exchange)
Subsequent measurement models	Cost or revaluation	Cost or revaluation (active market required)	Cost or revaluation
Impairment	Yes, per GRAP 21/26	Yes, annual test if indefinite life or not yet available	Yes, particularly for damage or loss of significance
Examples	Roads, buildings, vehicles, equipment	Software, licences, patents, development costs	Museums, monuments, heritage sites, art collections

5.2 Typical Exam Question Types and Approaches (UNISA ACC3703/FAC3764)

In UNISA ACC3703 and FAC3764, as well as CUT PSA3701 and similar modules, questions typically fall into:

Classification questions:
- “Classify each of the following assets as PPE, heritage or intangible and justify your answer with reference to the relevant GRAP standard.”
- Approach:
  - Check tangible vs intangible.
  - Assess primary purpose (service delivery vs heritage vs economic).
  - Identify standard: GRAP 17, 31, 103.
  - Provide 1–2 line justification referencing the standard definition.
Measurement and journal entries:
- Acquisition, subsequent expenditure, depreciation/amortisation, revaluation, impairment, disposal.
- Approach:
  - Identify whether initial recognition or subsequent measurement.
  - Identify cost components (capital vs expense).
  - Apply correct model (cost or revaluation).
  - Use clear, structured journals.
Theory discussion:
- Compare and contrast GRAP 17, 31, 103.
- Discuss recognition challenges for heritage assets.
- Explain accounting for internally generated intangibles.
Case studies:
- Integrated scenarios involving multiple standards.
- Approach:
  - Break down into sub-questions (classification, recognition, measurement).
  - Reference relevant paragraph numbers (if required) or at least the correct standard.

5.3 Integrated Case Study Example

Consider this integrated scenario for ACC3703 or CUT PSA3701:

The City of Ubuntu, applying GRAP, has the following items at 30 June 20X5:

New public library building:
- Construction completed 1 July 20X4 at a total cost of R40 000 000 (all costs attributable).
- Useful life: 40 years, residual value: R0.
- Straight-line depreciation.
Library management software:
- Purchased and implemented 1 October 20X4 for R2 400 000.
- Licence valid for 6 years, no residual value.
- Straight-line amortisation.
Historic statue in the city square:
- Donated to the municipality on 1 January 20X5.
- Fair value at that date: R5 000 000.
- Management expects indefinite use and preservation; fair value can be reliably measured.

Required:

a) Classify each item and identify which GRAP standard applies.
b) Calculate the carrying amount of each item at 30 June 20X5.
c) Prepare the journal entries for acquisition and end-of-year depreciation/amortisation (where applicable) for the year ended 30 June 20X5.

5.3.1 Part (a): Classification and Applicable Standards

Public library building:
- Tangible, used for delivering library services.
- Expected to be used for more than one year.
- Classified as PPE under GRAP 17.
Library management software:
- Non-monetary, no physical substance.
- Identifiable (software licence agreement).
- Provides service potential over more than one period.
- Classified as intangible asset under GRAP 31.
Historic statue:
- Tangible item with historical and cultural significance.
- Held for current and future generations.
- Classified as heritage asset under GRAP 103.

5.3.2 Part (b): Carrying Amounts at 30 June 20X5

Public library building (PPE – GRAP 17):

Cost: R40 000 000.
Acquisition date: 1 July 20X4 (start of reporting period).
Useful life: 40 years.
Residual value: R0.
Depreciation method: straight-line.

Annual depreciation:

R40 000 000 / 40 = R1 000 000 per year.

Carrying amount at 30 June 20X5:

Cost R40 000 000 – Accumulated depreciation R1 000 000 = R39 000 000.

Library management software (Intangible – GRAP 31):

Cost: R2 400 000.
Acquisition date: 1 October 20X4.
Useful life: 6 years.
Residual value: R0.
Amortisation method: straight-line.

Amortisation per full year:

R2 400 000 / 6 = R400 000 per year.

For the year ended 30 June 20X5:
From 1 October 20X4 to 30 June 20X5 = 9 months (¾ of year).

Amortisation for 9 months:

R400 000 × 9/12 = R300 000.

Carrying amount at 30 June 20X5:

Cost R2 400 000 – Accumulated amortisation R300 000 = R2 100 000.

Historic statue (Heritage asset – GRAP 103):

Acquired via donation on 1 January 20X5.
Initial measurement: fair value = R5 000 000.
Indefinite useful life and no depreciation.
No impairment assumed.

Carrying amount at 30 June 20X5:

R5 000 000.

5.3.3 Part (c): Journal Entries

1. Acquisition of library building (1 July 20X4)

Assuming cash payment:

Dr PPE – Library Building R40 000 000
Cr Cash/Bank R40 000 000

2. Depreciation of library building (year ended 30 June 20X5)

Dr Depreciation Expense – Buildings R1 000 000
Cr Accumulated Depreciation – Buildings R1 000 000

3. Acquisition of library management software (1 October 20X4)

Dr Intangible Asset – Software R2 400 000
Cr Cash/Bank R2 400 000

4. Amortisation of software (9 months to 30 June 20X5)

Dr Amortisation Expense – Software R300 000
Cr Accumulated Amortisation – Software R300 000

5. Acquisition of historic statue (donation) (1 January 20X5)

Accounting for non-exchange transaction per GRAP 23 may be:

Dr Heritage Assets – Statue R5 000 000
Cr Non-exchange Revenue – Donations R5 000 000

6. No depreciation for statue (indefinite life; test for impairment if indicators exist).

5.4 Common Exam Pitfalls and How to Avoid Them

Misclassification:
- Confusing heritage assets with PPE (e.g. heritage buildings used as museums).
- Treating software as PPE instead of an intangible, unless it is an integral part of hardware.
Depreciation of heritage assets:
- Automatically depreciating all tangible assets.
- Remember: most heritage assets have indefinite useful lives and are not depreciated, but must be tested for impairment.
Internally generated intangible assets:
- Capitalising research costs.
- Ignoring the six development recognition criteria.
- Always separate research (expense) and development (potentially capitalised).
Revaluation model misunderstandings:
- Forgetting that if one asset within a class is revalued, all in that class must be revalued.
- Treating revaluation increases as income in surplus or deficit (instead of other changes in net assets).
Not updating depreciation to disposal date:
- When calculating gains or losses on disposal of PPE or intangibles, ensure depreciation/amortisation is recorded up to the date of disposal.
Ignoring non-exchange fair value measurement:
- Donated assets (e.g. heritage assets, PPE) must be measured at fair value, not zero.

5.5 Study and Exam Strategy for ACC3703, FAC3764, PSA3701

For UNISA ACC3703, FAC3764, CUT PSA3701, and similar public sector accounting modules:

Master key definitions:
- Asset, PPE, intangible asset, heritage asset, research, development, impairment, service potential.
- Be prepared to reproduce and explain them.
Link theory to standards:
- Always reference the correct standard:
  - GRAP 17 for PPE.
  - GRAP 31 for intangibles.
  - GRAP 103 for heritage assets.
Practice classifications:
- Create your own list of 20–30 asset examples (e.g. road, city hall, statue, software, park) and classify each.
Work through full numeric problems:
- Acquisition, subsequent costs, revaluation, impairment, disposal.
- Include integrated scenarios: PPE + heritage + intangibles in a single question.
Memorise core journal entry formats:
- Acquisition (cost vs fair value).
- Depreciation/amortisation.
- Revaluation (increase and decrease).
- Impairment.
- Disposal.
Use past exam papers:
- For modules like UNISA ACC3703, UNISA FAC3764, and CUT PSA3701, focus on:
  - Past exam questions on GRAP 17, 31, 103.
  - Tutorial letters with exam hints.
- Time yourself to simulate exam conditions.
Understand not just “how”, but “why”:
- For written questions, explain the reasoning: why a heritage asset is not depreciated, why research is expensed, why restrictions do not prevent recognition.

By mastering these GRAP asset standards and practising both theory and numerical application, students in UNISA ACC3703, FAC3764, CUT PSA3701, and other public sector accounting courses will be well-prepared to handle exam questions on Accounting for Assets in the Public Sector (GRAP 17, 31, 103).