GRAP 1 Presentation of Financial Statements – Comprehensive Study Guide (Public Sector Accounting: ASB & GRAP Standards)

This study guide provides detailed, exam-focused notes on GRAP 1: Presentation of Financial Statements for South African public sector students. It is tailored to common course codes and curricula at UNISA, the Central University of Technology (CUT), and other universities that follow the ASB (Accounting Standards Board) and GRAP framework. It focuses on definitions, principles, formats, and exam-style applications, including practical examples relevant to municipalities, departments, and public entities.

1. Context and Exam Relevance of GRAP 1 in South African Public Sector Courses

1.1 Where GRAP 1 Fits in Public Sector Accounting Curricula

In South Africa, GRAP 1 – Presentation of Financial Statements is a core standard in public sector accounting. It provides the overarching framework for how financial statements should be prepared and presented by:

National and provincial departments
Municipalities and municipal entities
Public entities (e.g. agencies, public corporations) that apply GRAP
Trading entities and government components applying GRAP under the PFMA or MFMA

GRAP 1 is directly examinable in many modules, for example:

UNISA
- FAC2601 – Financial Accounting for Public Sector Entities
- FAC3764 – Public Sector Financial Reporting
- FAC4863 – Advanced Public Sector Accounting and Reporting
Central University of Technology (CUT)
- PSA20AS – Public Sector Accounting and Reporting
- PSA30AS – Advanced Public Sector Accounting
Other universities and TVET colleges using courses such as:
- PSA300 – Public Sector Accounting 3
- ACC3705-style modules that integrate GRAP with IFRS and IPSAS comparisons.

In these modules, GRAP 1 is usually examined in conjunction with:

GRAP 3 (Accounting Policies, Changes in Accounting Estimates and Errors)
GRAP 24 (Presentation of Budget Information in Financial Statements)
GRAP 14 (Events After the Reporting Date)
GRAP 19 (Provisions, Contingent Liabilities and Contingent Assets)

Because GRAP 1 drives the structure and presentation of the financial statements, examiners often use it to test:

Knowledge of required components of a complete set of financial statements
Understanding of qualitative characteristics (fair presentation, going concern, consistency, etc.)
Ability to classify items as current vs non-current, revenue vs other income, expenses by nature vs by function
Preparation of statement of financial position, statement of financial performance, statement of changes in net assets, cash flow statement, and notes

1.2 Objective and Scope of GRAP 1 (ASB Standard)

Objective of GRAP 1:
To prescribe the basis for presentation of general purpose financial statements for public sector entities, so that these statements are comparable:

With the entity’s own financial statements over time; and
With those of other public sector entities that apply GRAP.

Scope of GRAP 1:

Applies to general purpose financial statements prepared and presented under the accrual basis of accounting in accordance with GRAP.
Applies to all public sector entities that are required, or choose, to apply GRAP, such as:
- Municipalities and their entities (MFMA framework)
- Public entities and trading entities (PFMA framework)
- Other entities identified by National Treasury or the Accounting Standards Board.

Does not apply to:

Cash basis financial statements prepared under the Modified Cash Standard for some national and provincial departments (although GRAP principles may still be informative).
Special purpose reports (e.g. sectoral reports, grant reports, compliance reports) that are not general purpose financial statements.
Prospective financial information or budgets (although GRAP 24 covers presentation of budget information in the financial statements).

1.3 Linkages with PFMA, MFMA and Treasury Regulations

In exams at UNISA (e.g., FAC3764) and CUT (PSA30AS), students must integrate GRAP 1 with broader government financial management frameworks:

PFMA (Public Finance Management Act) – applies to national and provincial departments, public entities and constitutional institutions. It requires preparation of annual financial statements according to standards set by the ASB (i.e., GRAP).
MFMA (Municipal Finance Management Act) – applies to municipalities and municipal entities; it similarly requires GRAP-compliant financial statements.
Treasury Regulations and National Treasury Guidelines provide detailed formats and templates, but remain aligned with GRAP 1 principles.

Key implications for GRAP 1:

Authority: PFMA/MFMA specify that financial statements must be prepared; GRAP 1 specifies how they must be presented.
Consistency: Treasury guidelines (e.g., mSCOA-driven formats) are designed to comply with GRAP 1’s presentation principles, especially for statements of financial position and performance.
Compliance disclosure: GRAP 1 requires an explicit statement that financial statements comply with GRAP, which is a legal requirement under PFMA/MFMA once an entity has migrated to GRAP.

1.4 Common GRAP 1 Exam Themes and Question Types

Examiners typically use several approaches to test GRAP 1:

Theory/Discussion Questions
- Explain the objective, scope, and underlying principles of GRAP 1.
- Define fair presentation, going concern, accrual basis, and materiality.
- Discuss the qualitative characteristics of financial statements under GRAP 1.
Structure and Content of Financial Statements
- List the components of a complete set of financial statements.
- Identify which statements are mandatory and what information they must contain.
- Differentiate between statement of financial performance and statement of changes in net assets.
Classification and Presentation Issues
- Classify assets and liabilities as current or non-current based on given scenarios.
- Identify whether certain items should be disclosed in the notes, as contingent liabilities, or recognised in the main statements.
- Explain when a current/non-current distinction is not required (e.g., when assets are presented in order of liquidity).
Practical and Computational Questions
- Prepare or complete a statement of financial position from a trial balance or list of balances.
- Draft a statement of financial performance distinguishing between revenue, expenses, gains, and losses.
- Complete extracts of statement of changes in net assets and notes (e.g., policy notes, disaggregation).
Disclosure and Compliance Questions
- Identify minimum line items required by GRAP 1 on the face of the primary statements.
- Prepare or explain disclosures about going concern, judgements, and key assumptions.

A frequent exam tip from lecturers in modules like FAC2601 and PSA20AS is to memorise the key definitions and primary statement headings used in GRAP 1, as these are often tested in theory and application questions.

2. Components of a Complete Set of GRAP Financial Statements

2.1 Required Components under GRAP 1

Under GRAP 1, a complete set of financial statements includes:

Statement of financial position (at the reporting date)
Statement of financial performance
Statement of changes in net assets
Cash flow statement
Comparison of budget and actual amounts (when entity is required to budget publicly – see GRAP 24, but GRAP 1 acknowledges it)
Notes, comprising:
- Summary of significant accounting policies
- Other explanatory information

Some entities may be required to present additional statements or schedules under legislation (for example, unauthorised, irregular, fruitless and wasteful expenditure schedules under PFMA/MFMA), but these are not substitutes for the GRAP 1-required statements.

2.2 Statement of Financial Position (Balance Sheet)

The statement of financial position presents the entity’s assets, liabilities, and net assets at the reporting date (e.g., 30 June for municipalities, 31 March for national departments transitioning to GRAP).

Key principles:

Assets and liabilities are usually presented as current and non-current.
Net assets represent the residual interest, often broken down into:
- Accumulated surplus or deficit
- Reserves (e.g., revaluation reserves)
- Contributions from owners (where applicable)

Minimum line items (as appropriate to the entity) include:

Assets:
- Property, plant and equipment
- Investment property
- Intangible assets
- Heritage assets (if material)
- Biological assets (where applicable)
- Financial assets
- Inventories
- Receivables from exchange and non-exchange transactions
- Cash and cash equivalents
Liabilities:
- Employee benefit obligations
- Provisions
- Financial liabilities
- Payables from exchange and non-exchange transactions
- Unspent conditional grants and receipts
- Borrowings
Net Assets:
- Accumulated surplus or deficit
- Reserves (e.g., revaluation reserve)

Example (simplified, municipality applying GRAP 1):

At 30 June 20X5:

Total assets: R120 million
Total liabilities: R80 million
Net assets: R40 million, comprising:
- Accumulated surplus: R32 million
- Revaluation surplus: R8 million

Exam questions often provide a list of balances and ask you to:

Classify each item (asset, liability, net asset).
Determine whether it is current or non-current.
Present them correctly in a statement of financial position extract.

2.3 Statement of Financial Performance

The statement of financial performance summarises income (revenue and gains) and expenses (including losses) for the reporting period, showing how the accumulated surplus or deficit changed due to operational results.

Key features:

Income is generally split between:
- Revenue from exchange transactions (e.g., sale of goods/services, rental income)
- Revenue from non-exchange transactions (e.g., taxes, grants, fines)
Expenses can be presented:
- By nature (e.g., salaries, depreciation, impairment losses), or
- By function (e.g., general administration, community services, public safety)

GRAP 1 requires:

Presentation of surplus or deficit for the period.
Separate disclosure of material items of income and expense.
Identification of financing costs, depreciation, and impairment losses as separate line items where material.

Example extract:

Revenue from non-exchange transactions: R90 million
Revenue from exchange transactions: R20 million
Total revenue: R110 million
Employee-related costs: (R50 million)
Depreciation: (R10 million)
Finance costs: (R5 million)
Other expenses: (R30 million)
Surplus for the year: R15 million

In an exam context (e.g., UNISA FAC3764):

You may be required to distinguish between exchange and non-exchange revenue.
You may have to allocate expenses correctly under function categories (e.g., Housing, Roads and Transport, Finance and Administration) based on a trial balance and additional information.

2.4 Statement of Changes in Net Assets

The statement of changes in net assets shows movements in each component of net assets during the period, including:

Surplus or deficit for the period
Direct entries in net assets (e.g., revaluation gains, corrections of prior period errors)
Contributions from and distributions to owners (if any)
Transfers between reserves

Typical components:

Accumulated surplus/deficit
Revaluation surplus
Other reserves (e.g., capital replacement reserve)

Illustrative structure:

Component	Opening Balance	Surplus/Deficit	Other Movements (e.g. Revaluation)	Closing Balance
Accumulated surplus	R25 million	R15 million	R(3) million (prior period error)	R37 million
Revaluation surplus	R5 million	–	R3 million (revaluation gain)	R8 million
Total net assets	R30 million	R15 million	R0 (net)	R45 million

Exam questions may require you to:

Prepare the statement of changes in net assets from given information.
Reflect prior period errors (GRAP 3) and changes in accounting policies.
Show how surplus/deficit from the statement of financial performance feeds into net assets.

2.5 Cash Flow Statement

The cash flow statement (GRAP 2) is integrated into GRAP 1 because it is a required component of a complete set of financial statements. It provides information about cash and cash equivalents inflows and outflows classified by:

Operating activities
Investing activities
Financing activities

GRAP 1 focuses on:

Requiring the cash flow statement as part of the complete set.
Ensuring consistent presentation across years.
Linking the closing cash and cash equivalents to the amounts in the statement of financial position and notes.

In exam settings, GRAP 2 is often tested separately, but GRAP 1 knowledge is necessary to:

Ensure linkage between cash flows and other statements.
Understand disclosures about cash and cash equivalents (e.g., bank overdrafts, restricted cash).

2.6 Budget Information and GRAP 24 Link

Many public sector entities are required to present a comparison of budget and actual amounts in the financial statements. While the detailed requirements are in GRAP 24, GRAP 1 recognises:

The importance of budget information for public sector accountability.
The need to ensure that the financial statements provide users with both actual and budget perspectives.

For exam purposes (e.g., CUT PSA30AS):

You must know that budget comparison is a required component for entities that are required by legislation (such as MFMA, PFMA) to publicly present their approved budget.
The budget comparison is usually presented either as:
- A separate statement of comparison of budget and actual amounts, or
- Additional columns in the primary statements (although the separate statement approach is more common in practice).

2.7 Notes to the Financial Statements

Notes are an essential component under GRAP 1 and are highly examinable, especially:

Summary of significant accounting policies:
- Basis of preparation (GRAP framework, historical cost, fair value where applicable)
- Revenue recognition policies (exchange vs non-exchange)
- PPE, investment property, intangible assets policies (cost vs revaluation, depreciation)
- Employee benefits and provisions policies
Other explanatory notes:
- Disaggregation of primary statement line items (e.g., detail of “Other income”, “Other expenses”)
- Detailed movements in assets and liabilities (e.g., PPE movement table)
- Disclosure of contingent liabilities, contingent assets, and commitments
- Related party disclosures (if applicable)

Exam tasks might include:

Drafting policy notes from given information.
Presenting movement schedules for PPE and net assets.
Explaining why certain items must be disclosed in notes rather than recognised in the primary statements.

3. Fundamental Presentation Principles in GRAP 1

3.1 Fair Presentation and Compliance with GRAP

Fair presentation under GRAP 1 means that the financial statements:

Faithfully represent the transactions, events, and conditions they purport to represent.
Reflect the substance of transactions and other events, not merely their legal form.
Are neutral, prudent, and complete in all material respects.

To achieve fair presentation, GRAP 1 requires:

Compliance with all applicable GRAP Standards.
Additional disclosures when compliance with GRAP is insufficient to achieve fair presentation.

Entities must make an explicit and unreserved statement of compliance with GRAP in the notes. This is only permitted if the financial statements fully comply with all applicable GRAP Standards and Interpretations issued by the ASB.

Exam tip:
For UNISA FAC2601 or CUT PSA20AS theory questions, remember to:

Quote that the financial statements must “present fairly the financial position, financial performance, and cash flows of the entity.”
Point out the requirement for an explicit statement of compliance.

3.2 Going Concern Assumption

The going concern assumption means that the entity will continue in operation for the foreseeable future (usually at least 12 months from the reporting date), and has neither the intention nor the need to liquidate or cease trading.

Under GRAP 1, management must:

Assess the entity’s ability to continue as a going concern.
Disclose any material uncertainties related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern.
If the financial statements are not prepared on a going concern basis, this fact, the reasons, and the basis of preparation must be disclosed.

Public sector-specific considerations:

Entities often receive ongoing funding from government, but this does not remove the need to consider going concern (e.g., risk of restructuring, amalgamation of municipalities, loss of service delivery capacity).
Going concern may be affected by:
- Severe financial difficulties, e.g., high levels of unpaid consumer debt.
- Legal challenges (litigation, compliance failures).
- Non-compliance with MFMA/PFMA leading to interventions by higher spheres of government.

Example:
If a municipality has incurred deficits for three consecutive years and has negative net current assets, but has a written commitment from provincial government to provide financial support, the financial statements may still be prepared on a going concern basis, but the support letter and financial difficulties must be disclosed.

In exams, you may be asked to:

Discuss whether the going concern assumption is appropriate in a given scenario.
Identify required disclosures for going concern uncertainties.

3.3 Accrual Basis of Accounting

Under GRAP 1, financial statements must be prepared using the accrual basis of accounting, meaning:

Assets, liabilities, net assets, revenue, and expenses are recognised when they meet the definition and recognition criteria, not when cash is received or paid.
Revenue is recognised when earned, and expenses when incurred.

Contrast with cash basis (used in some centres under the Modified Cash Standard), where:

Transactions are recognised only when cash is received or paid.

Exam significance:

Many intermediate public sector accounting courses (e.g., UNISA FAC2601) test the difference between accrual and cash basis, especially in the context of the move from the cash basis to accrual GRAP.
Understanding accrual basis is essential when preparing statements of financial performance and financial position from cash-based records.

3.4 Consistency of Presentation

GRAP 1 states that the presentation and classification of items in the financial statements must be consistent from one period to the next unless:

A change in presentation is required by a new GRAP Standard, or
A change in presentation results in financial statements that provide more reliable and relevant information.

When there is a change in presentation:

Reclassification of comparative amounts is required, unless impracticable.
The nature, amount, and reason for reclassification must be disclosed.

Exam scenario:
A municipality previously grouped “Water revenue” and “Sanitation revenue” under “Service charges”, but now presents them as separate line items. Students must:

Reclassify prior year comparatives for consistency.
Disclose the change in the notes.

3.5 Materiality and Aggregation

Materiality is a key concept under GRAP 1:

Information is material if omitting, misstating, or obscuring it could influence users’ decisions.
Material items must be presented separately, not aggregated, in the statements or notes.

GRAP 1 requires:

Aggregation of immaterial amounts with similar items.
Separate presentation of material classes of similar items.
Separate disclosure of items of dissimilar nature or function, unless they are immaterial.

Public sector-specific examples:

“Other income” should not include large, unusual items such as a major insurance refund or a significant gain on sale of property; such items should be presented separately if material.
“Other expenses” should not conceal large legal claims, impairment losses, or significant irregular expenditure write-offs.

In exams:

Students may be asked to identify material items in a trial balance and present them separately.
Theory questions may ask for a definition of materiality and its implications for presentation.

3.6 Offsetting Prohibition

GRAP 1 generally prohibits offsetting of assets and liabilities or income and expenses, except when:

Required or permitted by another GRAP Standard (e.g., certain financial instruments under GRAP 104).
A transaction or event results in a net gain or loss, and presenting gross amounts would not provide useful information.

Examples of prohibited offsetting:

Offsetting debtors and creditors balances.
Offsetting revenue against expenses to present only a net amount (e.g., netting fines revenue against bad debts written off).

Examples where offset is allowed under specific guidance:

Presentation of gains and losses on the disposal of PPE (presented as net profit or loss on disposal in the statement of financial performance, with supporting note).

Exam questions may test offsetting by:

Presenting a trial balance where revenue has been shown net of discounts and asking you to gross up and show the correct presentation.
Asking for a theoretical explanation of why offsetting is generally not allowed.

3.7 Comparative Information

GRAP 1 requires comparative information for all amounts reported in the financial statements, usually for the preceding period (one year). This includes:

Comparative amounts for narrative and descriptive information when relevant.
Restated comparatives when there is:
- A change in accounting policy (GRAP 3)
- Correction of a prior period error (GRAP 3)
- Reclassification of items

Examinable points:

When an entity changes the classification of an item (e.g., from non-current to current), comparatives must be adjusted for consistency.
If restatement is impracticable, the entity must disclose this fact, along with the nature of the adjustments that would have been made.

4. Detailed Line-Item Presentation and Classification Issues

4.1 Current vs Non-Current Classification

GRAP 1 requires separate presentation of current and non-current assets and liabilities, except when a presentation based on liquidity is more appropriate due to the nature of the entity’s operations.

Current assets are those:

Expected to be realised in, or intended for sale or consumption in, the entity’s normal operating cycle;
Held primarily for the purpose of trading;
Expected to be realised within 12 months after the reporting date; or
Cash or cash equivalents, unless restricted from being exchanged or used to settle a liability for at least 12 months.

Non-current assets are all other assets.

Current liabilities are those:

Expected to be settled in the entity’s normal operating cycle;
Held primarily for the purpose of trading;
Due to be settled within 12 months after the reporting date; or
The entity does not have an unconditional right to defer settlement for at least 12 months.

Non-current liabilities are all other liabilities.

Public sector examples:

Receivables from service charges: usually current, as part of normal operating cycle.
Unspent conditional grants: often current if expected to be utilised in the following year, but some may be long-term depending on grant conditions.
Long-term borrowings: non-current, with current portion presented separately as current.

Exam tasks:

Classify various balances (e.g., “Long-term portion of employee benefits”, “Trade creditors”, “Retention money payable”) into current vs non-current.
Explain implications when a long-term loan breaches a covenant, becoming immediately payable (turning non-current into current).

4.2 Minimum Line Items on the Statement of Financial Position

GRAP 1 requires certain minimum line items in the statement of financial position, where they are relevant and material. Common exam-expected items include:

Assets:
- Property, plant, and equipment (GRAP 17)
- Investment property (GRAP 16)
- Intangible assets (GRAP 31)
- Heritage assets (GRAP 103)
- Biological assets (GRAP 101)
- Investments accounted for using the equity method
- Inventories (GRAP 12)
- Receivables (from exchange and non-exchange transactions)
- Cash and cash equivalents
Liabilities:
- Payables (from exchange and non-exchange transactions)
- Employee benefit obligations (GRAP 25)
- Provisions (GRAP 19)
- Borrowings
- Unspent conditional grants and receipts
- Deferred revenue (if applicable)
Net Assets:
- Contributions from owners (where applicable)
- Accumulated surplus or deficit
- Reserves (e.g., revaluation reserve)

In many exams, you will be expected to:

Present a properly formatted statement of financial position, using these headings and grouping items appropriately.
Distinguish clearly between exchange and non-exchange receivables and payables if the question requires such classification.

4.3 Minimum Line Items on the Statement of Financial Performance

For the statement of financial performance, GRAP 1 specifies minimum line items, such as:

Revenue, presented separately as:
- Revenue from non-exchange transactions
- Revenue from exchange transactions
Finance costs
Depreciation and amortisation
Impairment losses
Employee-related costs
Surplus or deficit for the period

Expenses may be classified by nature or by function. In South African public sector practice and exams:

Many questions are structured around a classification by function, in line with mSCOA segments (e.g., Governance and Administration, Community and Public Safety, Economic and Environmental Services).
However, you must still know the by nature classification (salaries, depreciation, professional fees, etc.) and how to map these to functions.

Example classification by function:

Finance and administration: R40 million
Community and public safety: R35 million
Economic and environmental services: R25 million
Trading services: R10 million
Total expenses: R110 million

If required, the function classification must be supported by extra note disclosures of expenses by nature.

4.4 Other Comprehensive Income in the GRAP Context

In pure IFRS, the statement includes “Other Comprehensive Income (OCI)”. In GRAP, the focus is generally on surplus or deficit, but some items may be recognised directly in net assets (e.g., revaluation surpluses) and not routed through surplus or deficit.

GRAP 1 requires that:

All items of revenue and expense recognised in a period are included in the surplus or deficit, unless a GRAP Standard requires otherwise.
Items taken directly to net assets (e.g., revaluation gain on PPE) must be disclosed in the statement of changes in net assets.

Exam questions may:

Ask whether a revaluation gain is included in surplus or deficit or taken directly to net assets.
Require presentation of such movements in either the statement of financial performance or statement of changes in net assets, as appropriate.

4.5 Classification of Revenue: Exchange vs Non-Exchange Transactions

One of the most critical classification issues in public sector GRAP accounting is distinguishing between:

Exchange transactions: each party to the transaction gives and receives approximately equal value (e.g., selling goods or services).
Non-exchange transactions: one party receives value without directly giving approximately equal value in exchange (e.g., taxes, grants, fines).

GRAP 1 incorporates this split into presentation and line items on the statement of financial performance.

Examples:

Exchange revenue:
- Service charges for water, electricity, solid waste (user charges)
- Rental of facilities and equipment
- Agency services where fees are earned
Non-exchange revenue:
- Property rates
- Government grants and subsidies
- Fines, penalties, and forfeits
- Donated assets

In exams:

You will often need to classify items in a trial balance as exchange or non-exchange revenue and present them under separate headings.
Detailed knowledge of GRAP 23 (Revenue from Non-Exchange Transactions) is often tested in combination with GRAP 1.

4.6 Presentation of Prior Period Errors and Changes in Accounting Policies

Under GRAP 3, changes in accounting policies and corrections of prior period errors usually require retrospective restatement. GRAP 1 governs how this restatement is presented:

Adjust opening accumulated surplus or deficit in the statement of changes in net assets.
Restate comparative figures as if the new policy or corrected error had always been applied.
Disclose the nature and amount of the adjustment in the notes.

Exam questions (especially at advanced level like UNISA FAC4863):

Provide a scenario where an error (e.g., capitalised operating expense) was discovered.
Require you to show:
- Adjusted opening balances in the statement of changes in net assets.
- Restated comparative amounts in the statement of financial position and statement of financial performance.
- Necessary note disclosures.

5. Disclosure Requirements, Common Pitfalls, and Exam Strategies

5.1 General Disclosure Principles under GRAP 1

GRAP 1 sets out general disclosure requirements designed to enhance transparency and usefulness of financial statements. Key disclosures include:

Statement of compliance with GRAP
An explicit and unreserved statement that the financial statements comply with GRAP.
Basis of preparation
- Statement that the financial statements have been prepared on the accrual basis.
- Measurement base used (usually historical cost, with some assets at fair value or revalued amount).
Reporting date and period covered
Typically 12 months, with disclosure if the period is longer or shorter and the reason.
Functional and presentation currency
In South Africa, this is usually the South African Rand (ZAR), with disclosure of rounding (e.g., nearest Rand or thousand).
Use of judgements and estimates
- Disclosure of significant judgements in applying accounting policies.
- Disclosure of key sources of estimation uncertainty.

5.2 Significant Accounting Policies

The notes must include a summary of significant accounting policies, which should cover, at a minimum:

Basis of accounting and preparation:
- Statement that the entity applies GRAP.
- Basis of measurement (historical cost, revaluation, fair value where applicable).
Revenue recognition policies:
- Policy for exchange transactions (e.g., when service charges are recognised).
- Policy for non-exchange transactions (e.g., when grants are recognised under GRAP 23).
Property, plant, and equipment:
- Measurement model (cost or revaluation).
- Depreciation methods and useful lives.
Investment property, intangible assets, heritage assets.
Financial instruments (GRAP 104).
Employee benefits (GRAP 25), provisions (GRAP 19), and contingencies.
Foreign currency transactions (if applicable).

In an exam:

You may be asked to draft the accounting policy note for significant areas, based on a scenario.
You must use GRAP-specific language, not IFRS-only terminology.

5.3 Disclosure of Judgements, Estimates, and Assumptions

GRAP 1 requires entities to disclose:

Judgements management has made in applying accounting policies that have the most significant effect on amounts recognised in the financial statements (other than those involving estimates).
Key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities.

Examples in public sector context:

Judgements:
- Determining whether control exists over certain entities (for consolidation under GRAP 6).
- Determining whether a grant is conditional or unconditional.
Estimates:
- Useful lives and residual values of PPE.
- Measurement of provisions for environmental rehabilitation, landfill closure.
- Actuarial assumptions for post-employment benefits.

Exam questions may ask you to:

Identify judgements and estimates in a case study.
Draft the related note disclosure.

5.4 Going Concern and Events After the Reporting Date

Disclosure requirements include:

Material uncertainties related to going concern.
Events after the reporting date that are:
- Adjusting events: Those that provide further evidence of conditions that existed at the reporting date (adjust amounts in the financial statements).
- Non-adjusting events: Those indicative of conditions that arose after the reporting date (disclose if material).

While GRAP 14 governs events after the reporting date, GRAP 1 ties in through:

Reference in the basis of preparation note.
Managing the cut-off between recognition in current period vs disclosure only.

In exams, events after the reporting date may be tested together with GRAP 1 by:

Asking whether financial statements need to be adjusted or merely disclose the event.
Requiring appropriate note disclosures.

5.5 First-Time Adoption and Transitional Provisions (High-Level)

When entities first adopt GRAP, there may be transitional provisions in individual GRAP Standards. GRAP 1 interacts with these by:

Requiring clear disclosure of the transition date and the effects of transition on the financial position, performance, and cash flows.
Presenting comparative figures, with explicit indication if some comparative information is not fully GRAP-compliant due to transitional provisions.

In advanced courses, students may need to:

Explain how first-time adoption affects comparatives and opening balances in the statement of changes in net assets.
Draft disclosures explaining the transition from modified cash or other frameworks to GRAP.

5.6 Common GRAP 1 Exam Pitfalls

Confusing GRAP with IFRS or IPSAS terminology
- Not distinguishing between public sector-specific concepts (e.g., non-exchange transactions) and IFRS-style commercial language.
- Forgetting public sector presentation requirements such as separate disclosure of service charges, property rates, government grants.
Incorrect or incomplete set of financial statements
- Omitting the statement of changes in net assets.
- Forgetting to include notes, especially accounting policies.
Poor classification of items
- Misclassifying non-exchange revenue as exchange revenue, or vice versa.
- Incorrectly classifying assets/liabilities as current/non-current, especially unspent conditional grants, provisions, and employee benefit obligations.
Offsetting items incorrectly
- Presenting revenue net of discounts or bad debts instead of separately disclosing these as expenses or adjustments.
- Netting receivables and payables.
Omitting essential disclosures
- Not including the statement of compliance with GRAP.
- Failing to disclose basis of preparation and significant accounting policies.
Not handling comparatives correctly
- Not restating comparatives when there is a change in accounting policy or correction of a prior period error.
- Failing to clearly label and present comparative information.

5.7 Exam Strategy Tips for UNISA, CUT and Similar Courses

Memorise the structure and key definitions
- Components of a complete set of financial statements.
- Definitions of asset, liability, net assets, revenue, expense, materiality, going concern, accrual basis.
- Differences between exchange and non-exchange transactions.
Understand public sector-specific line items
- Learn typical line items for municipalities and public entities (service charges, agency services, property rates, grants and subsidies, fines, unspent conditional grants).
- Practise classification of assets/liabilities and revenue/expenses using public sector examples.
Practice preparing statements from trial balances
- For courses like UNISA FAC2601 and CUT PSA20AS, exam papers often provide:
  - Trial balance
  - Adjustments (e.g., depreciation, accruals, provisions)
- You must prepare at least:
  - Statement of financial performance
  - Statement of financial position
  - Statement of changes in net assets
  - Selected notes
Be precise with presentation
- Use correct headings and sub-headings, as per GRAP 1 wording.
- Avoid mixing up IFRS-terms such as “Other Comprehensive Income” unless specifically required by the question and standard.
Link GRAP 1 with other GRAP Standards
- For example:
  - Use GRAP 17 for PPE line items.
  - Use GRAP 23 for non-exchange revenue recognition and note disclosure.
  - Use GRAP 19 for provisions and contingent liabilities.
Time management in exams
- Allocate time proportional to marks.
- For a 30-mark GRAP 1 question that includes both theory and preparation of statements, spend approx. 45–50 minutes at most.
- Answer theory sub-questions first, then move to statement preparation.
Use past papers and tutorial letters
- For UNISA courses such as FAC2601 and FAC3764, tutorial letters include sample questions involving GRAP 1.
- For CUT’s PSA20AS and PSA30AS, lecturers often provide previous years’ tests that demonstrate typical GRAP 1 application.

This comprehensive guide situates GRAP 1 – Presentation of Financial Statements within the broader Public Sector Accounting (ASB & GRAP Standards) framework used by South African universities such as UNISA and CUT, and highlights the core principles, required components, presentation rules, disclosure requirements, and exam-focused strategies needed to master this standard.