| Why are these changes needed? |
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When the Board developed GRAP 105 on Transfer of Functions Between Entities Under Common Control, GRAP 106 on Transfer of Functions Between Entities Not Under Common Control and GRAP 107 on Mergers (the local Standards), no equivalent International Public Sector Accounting Standard (IPSAS) existed. The Board used the IFRS Accounting Standard® on Business Combinations (IFRS 3) to develop parts of the local Standards.
The International Public Sector Accounting Standards Board (IPSASB) issued IPSAS 40 on Public Sector Combinations during 2017 with an effective date of 1 January 2019. IPSAS 40 applies to public sector combinations and classifies them as either an: amalgamation – a combination that gives rise to a resulting entity, i.e. an entity that is the result of two or more combining operations; or acquisition – a combination in which one party to the combination gains control of one or more operations, and in which there is evidence that the combination does not have the economic substance of an amalgamation. The Board compared the principles in IPSAS 40 with the local Standards to identify similarities and differences. Guidance from IFRS 3 that was issued since the approval of IPSAS 40 was also considered for the local Standards. |
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| What has changed in the local Standards |
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| The Board agreed to: update the local Standards with additional guidance from IPSAS 40 and IFRS 3; retain the format of the local guidance as three separate Standards. Local stakeholders understand which Standard to apply in specific circumstances and have not raised significant application issues to date; and retain any relevant guidance in the local Standards. The revisions to the local Standards are issued as ED 204 on Proposed Revisions to the Standards of GRAP on Transfer of Functions Between Entities Under Common Control (GRAP 105), Transfer of Functions Between Entities Not Under Common Control (GRAP 106) and Mergers (GRAP 107). |
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| New proposed guidance from IPSAS 40 |
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| The ED proposes to add the following guidance from IPSAS 40 to the local Standards: scope exclusions relating to the formation of a joint arrangement and the transfer of an investment entity as defined in GRAP 35 on Consolidated Financial Statements; an additional factor to consider whether a transaction is part of a transfer of functions or a separate transaction; additional exceptions to the recognition and measurement principles; examples of how an entity may obtain control of a function in a non-exchange transaction; additional disclosures, such as providing disclosures for immaterial transfers of functions or mergers that are collectively material, the composition of the combined entity’s first set of financial statements following a merger, and disclosures where the initial accounting for a transfer of functions or merger is incomplete and amounts have been determined provisionally; and illustrative examples on the application of principles in the local Standards. |
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| New proposed guidance from IFRS 3 |
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| The ED proposes two new areas of application guidance in GRAP 105 and GRAP 106: an optional test (the concentration test) to assess whether a transferred set of activities, assets and/or liabilities is not a function; and guidance to assess if an acquired or received set of activities, assets and/or liabilities that does not have outputs is substantive. Illustrative examples are also proposed to explain the application of the new proposed principles and guidance. |
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The comment period for ED 204 closes on 15 July 2023. Comment can be submitted to the Secretariat of the ASB at [email protected].
The Secretariat will host discussions on the proposals in ED 204 during May 2023 to obtain comment and views from stakeholders. If you are interested in joining these sessions, please contact [email protected]. |
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