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COMPARISON OF GRAP 9 AND IAS 18 GRAP 9 IAS 18 DIFFERENCE

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COMPARISON OF GRAP 9 AND IAS 18 GRAP 9 IAS 18 DIFFERENCE Powered By Docstoc
					COMPARISON OF GRAP 9 AND IAS 18
                GRAP 9                                                                                 IAS 18                                                 DIFFERENCE
 Objective
 .01 The Framework for the Preparation and Presentation of                  Income is defined in the Framework for the Preparation and
    Financial Statements defines revenue as “the gross inflow of            Presentation of Financial Statements as increases in economic         Terminology differences – no affect on
    economic benefits or service potential during the reporting             benefits during the accounting period in the form of inflows or       initial adoption of GRAP 9.
    period when those inflows result in an increase in net assets,          enhancements of assets or decreases of liabilities that result in
    other than increases relating to contributions from owners”.            increases in equity, other than those relating to contributions
    This Standard uses the term ’revenue’ which encompasses                 from equity participants. Income encompasses both revenue
    both revenue and gains.                                                 and gains. Revenue is income that arises in the course of
                                                                            ordinary activities of an entity and is referred to by a variety of
    Certain specific items to be recognised as revenues are                 different names including sales, fees, interest, dividends and
    addressed in other Standards and are excluded from the scope            royalties.
    of this Standard. For example, gains arising on the sale of
    property, plant and equipment are specifically addressed in the
    Standard of GRAP on Property, Plant and Equipment and are
    not covered in this Standard.
 .02 The objective of this Standard is to prescribe the accounting         The objective of this Standard is to prescribe the accounting          Paragraph similar.
     treatment of revenue arising from exchange transactions and           treatment of revenue arising from certain types of transactions
     events.                                                               and events.
 .03 The primary issue in accounting for revenue is determining            The primary issue in accounting for revenue is determining when
     when to recognise revenue. Revenue is recognised when it is           to recognise revenue. Revenue is recognised when it is probable
     probable that future economic benefits or service potential will      that future economic benefits will flow to the entity and these        GRAP 9 incorporates the concept of
     flow to the entity and these benefits can be measured reliably.       benefits can be measured reliably. This Standard identifies the        service potential – public sector specific
     This Standard identifies the circumstances in which these             circumstances in which these criteria will be met and, therefore,      amendment but will not affect the initial
     criteria will be met and, therefore, revenue will be recognised. It   revenue will be recognised. It also provides practical guidance on     adoption of GRAP 9.
     also provides practical guidance on the application of these          the application of these criteria.
     criteria.
 Scope
 .04 An entity which prepares and presents financial statements            .01 This Standard shall be applied in accounting for revenue
    under the accrual basis of accounting shall apply this Standard           arising from the following transactions and events:                 Wording differences but principle in GRAP
    in accounting for revenue arising from the following exchange                                                                                 9 and IAS 18 similar – no affect on initial
    transactions and events:                                               (a) the sale of goods;                                                 adoption of GRAP 9.

 (a) The rendering of services.                                            (b) the rendering of services; and                                     (a) – (c) – sub-paragraphs similar.

 (b) The sale of goods.                                                    (c) the use by others of entity assets yielding interest, royalties
                                                                               and dividends.
 (c) The use by others of entity assets yielding interest, royalties
     and dividends.
 .05 This Standard does not deal with revenue arising from non-            .02 This Standard supersedes IAS 18 Revenue Recognition                GRAP 9 clarifies that this Standard only
     exchange transactions (see the Standard of GRAP on                       approved in 1982.                                                   applies to revenue from exchange
     Revenue from Non-exchange Transactions (Including Taxes                                                                                      transactions – public sector specific
     and Transfers)).                                                                                                                             change but no affect on initial adoption of
                                                                                                                                                  GRAP 9.
 .06 Entities may derive revenues from exchange or non-exchange                                                                                   GRAP 9 clarifies that this Standard only
     transactions. An exchange transaction is one in which the                                                                                    applies to revenue from exchange
     entity receives assets or services, or has liabilities                                                                                       transactions – public sector specific
     extinguished, and directly gives approximately equal value                                                                                   change but no affect on initial adoption of
     (primarily in the form of goods, services or use of assets) to the                                                                           GRAP 9.
     other party in exchange. Examples of exchange transactions


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                               GRAP 9                                                                 IAS 18                                                DIFFERENCE
   include:

(a) The purchase or sale of goods or services, or

(b) The lease of property, plant and equipment, at market rates.
.07 In distinguishing between exchange and non-exchange                                                                                          GRAP 9 clarifies that this Standard only
    revenues, substance rather than the form of the transaction                                                                                  applies to revenue from exchange
    should be considered. Examples of non-exchange transactions                                                                                  transactions – public sector specific
    include revenue from the use of sovereign powers (for                                                                                        change but no affect on initial adoption of
    example, direct and indirect taxes, duties, and fines), grants                                                                               GRAP 9.
    and donations.
.08 The rendering of services typically involves the performance by      .04 The rendering of services typically involves the performance
    the entity of an agreed task over an agreed period of time. The         by the entity of a contractually agreed task over an agreed          Wording differences but principle in GRAP
    services may be rendered within a single period or over more            period of time. The services may be rendered within a single         9 and IAS 18 similar – no affect on initial
    than one period. Examples of services rendered by entities for          period or over more than one period. Some contracts for the          adoption of GRAP 9.
    which revenue is typically received in exchange may include             rendering of services are directly related to construction
    the provision of housing, management of water facilities,               contracts, for example, those for the services of project            GRAP 9 includes public sector specific
    management of toll roads, and management of transfer                    managers and architects. Revenue arising from these                  example.
    payments. Some agreements for the rendering of services are             contracts is not dealt with in this Standard but is dealt with in
    directly related to construction contracts, for example, those for      accordance with the requirements for construction contracts
    the services of project managers and architects. Revenue                as specified in IAS 11 Construction Contracts.
    arising from these agreements is not dealt with in this Standard
    but is dealt with in accordance with the requirements for
    construction contracts as specified in the Standard of GRAP on
    Construction Contracts.
.09 Goods includes goods produced by the entity for the purpose          .03 Goods includes goods produced by the entity for the purpose         GRAP 9 includes public sector example.
    of sale, such as publications, and goods purchased for resale,           of sale and goods purchased for resale, such as merchandise         Rest of paragraph similar.
    such as merchandise or land and other property held for                  purchased by a retailer or land and other property held for
    resale.                                                                  resale.
.10 The use by others of entity assets gives rise to revenue in the      .05 The use by others of entity assets gives rise to revenue in the     Paragraph similar except for (c) that uses
    form of:                                                                 form of:                                                            different terminology – public sector
                                                                                                                                                 specific and therefore no affect on initial
(a) Interest — charges for the use of cash or cash equivalents or        (a)interest—charges for the use of cash or cash equivalents or          adoption of GRAP 9.
    amounts due to the entity,                                               amounts due to the entity;

(b) Royalties — charges for the use of long-term assets of the           (b)royalties—charges for the use of long-term assets of the entity,
    entity, for example, patents, trademarks, copyrights and                 for example, patents, trademarks, copyrights and computer
    computer software, and                                                   software; and

(c) Dividends or equivalents — distributions of surpluses to owners      (c)dividends—distributions of profits to holders of equity
    in proportion to their holdings of a particular class of capital.        investments in proportion to their holdings of a particular class
                                                                             of capital.
.11 This Standard does not deal with revenues arising from:              .06 This Standard does not deal with revenue arising from:
                                                                                                                                                 Paragraph similar.
(a) Lease agreements (see the Standard of GRAP on Leases),               (a) lease agreements (see IAS 17 Leases);

(b) Dividends arising from investments that are accounted for            (b) dividends arising from investments which are accounted for
    under the equity method (see the Standard of GRAP on                     under the equity method (see IAS 28 Investments in
    Investments in Associates),                                              Associates);

(c) Insurance contracts within the scope of the International            (c) insurance contracts within the scope of IFRS 4 Insurance
    Financial Reporting Standard (IFRS) on Insurance Contracts,              Contracts;



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                               GRAP 9                                                                   IAS 18                                               DIFFERENCE
(d) Changes in the fair value of financial assets and financial            (d) changes in the fair value of financial assets and financial
    liabilities or their disposal (see the relevant Standards of GRAP          liabilities or their disposal (see IAS 39 Financial Instruments:
    on Financial Instruments),                                                 Recognition and Measurement);

(e) Changes in the value of other current assets,                          (e) changes in the value of other current assets;

(f) Initial recognition and from changes in the fair value of biological   (f) initial recognition and from changes in the fair value of
     assets related to agricultural activity (see the Standard of              biological assets related to agricultural activity (see IAS 41
     GRAP on Agriculture),                                                     Agriculture);

(g) Initial recognition of agricultural produce (See the Standard of       (g) initial recognition of agricultural produce (see IAS 41); and
    GRAP on Agriculture), and
                                                                           (h) the extraction of mineral ores.
(h) The extraction of mineral ores.
Definitions
.12 The following terms are used in this Standard with the                 .07 The following terms are used in this Standard with the
   meanings specified:                                                        meanings specified:                                                 GRAP 9 incorporates the concept of
                                                                                                                                                  service potential – public sector specific
  Fair value is the amount for which an asset could be                         Fair value is the amount for which an asset could be               amendment but will not affect the initial
  exchanged, or a liability settled, between knowledgeable, willing            exchanged, or a liability settled, between knowledgeable,          adoption of GRAP 9.
  parties in an arm’s length transaction.                                      willing parties in an arm’s length transaction.
                                                                                                                                                  Terminology differences – no affect on
  Revenue is the gross inflow of economic benefits or service                  Revenue is the gross inflow of economic benefits during the        initial adoption of GRAP 9.
  potential during the reporting period when those inflows result in           period arising in the course of the ordinary activities of an
  an increase in net assets, other than increases relating to                  entity when those inflows result in increases in equity, other
  contributions from owners.                                                   than increases relating to contributions from equity
                                                                               participants.
  Terms defined in other Standards of GRAP are used in this
  Standard with the same meaning as in those other Standards.

Revenue
.13 Revenue includes only the gross inflows of economic benefits           .08 Revenue includes only the gross inflows of economic benefits       GRAP 9 incorporates the concept of
    or service potential received and receivable by the entity on its          received and receivable by the entity on its own account.          service potential – public sector specific
    own account. Amounts collected as agent of the entity or on                Amounts collected on behalf of third parties such as sales         amendment but will not affect the initial
    behalf of other third parties, for example, the collection of              taxes, goods and services taxes and value added taxes are          adoption of GRAP 9.
    telephone and electricity payments by the post office on behalf            not economic benefits which flow to the entity and do not
    of entities providing such services, are not economic benefits             result in increases in equity. Therefore, they are excluded        GRAP 9 includes public sector specific
    or service potential that flow to the entity and do not result in          from revenue. Similarly, in an agency relationship, the gross      examples.
    increases in assets or decreases in liabilities. Therefore, they           inflows of economic benefits include amounts collected on
    are excluded from revenue. Similarly, in a custodial or agency             behalf of the principal and which do not result in increases in    Terminology differences – no affect on
    relationship, the gross inflows of economic benefits or service            equity for the entity. The amounts collected on behalf of the      initial adoption of GRAP 9.
    potential include amounts collected on behalf of the principal             principal are not revenue. Instead, revenue is the amount of
    and which do not result in increases in net assets for the entity.         commission.
    The amounts collected on behalf of the principal are not
    revenue. Instead, revenue is the amount of any commission
    received or receivable for the collection or handling of the gross
    flows.
.14 Financing inflows, notably borrowings, do not meet the
    definition of revenue because they result in an equal change in                                                                               GRAP 9 includes additional explanatory
    both assets and liabilities and have no impact upon net assets.                                                                               guidance – no affect on initial adoption of
    Financing inflows are taken directly to the statement of financial                                                                            GRAP 9.


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                                 GRAP 9                                                              IAS 18                                               DIFFERENCE
      position and added to the balances of assets and liabilities.
Measurement of revenue
.15     Revenue shall be measured at the fair value of the               .09 Revenue shall be measured at the fair value of the                Paragraph similar.
    consideration received or receivable.                                   consideration received or receivable.
.16 The amount of revenue arising on a transaction is usually            .10 The amount of revenue arising on a transaction is usually         Wording differences but principle in GRAP
    determined by agreement between the entity and the                      determined by agreement between the entity and the buyer or        9 and IAS 18 similar – no affect on initial
    purchaser or user of the asset or service. It is measured at the        user of the asset. It is measured at the fair value of the         adoption of GRAP 9.
    fair value of the consideration received or receivable taking into      consideration received or receivable taking into account the
    account the amount of any trade discounts and volume rebates            amount of any trade discounts and volume rebates allowed
    allowed by the entity.                                                  by the entity.
.17 In most cases, the consideration is in the form of cash or cash      .11 In most cases, the consideration is in the form of cash or
    equivalents and the amount of revenue is the amount of cash             cash equivalents and the amount of revenue is the amount of
    or cash equivalents received or receivable. However, when the           cash or cash equivalents received or receivable. However,          Terminology differences – no affect on
    inflow of cash or cash equivalents is deferred, the fair value of       when the inflow of cash or cash equivalents is deferred, the       initial adoption of GRAP 9.
    the consideration may be less than the nominal amount of cash           fair value of the consideration may be less than the nominal
    received or receivable. For example, an entity may provide              amount of cash received or receivable. For example, an entity
    interest free credit to the purchaser or accept a note receivable       may provide interest free credit to the buyer or accept a note
    bearing a below-market interest rate from the purchaser as              receivable bearing a below-market interest rate from the
    consideration for the sale of goods. When the arrangement               buyer as consideration for the sale of goods. When the
    effectively constitutes a financing transaction, the fair value of      arrangement effectively constitutes a financing transaction,
    the consideration is determined by discounting all future               the fair value of the consideration is determined by
    receipts using an imputed rate of interest. The imputed rate of         discounting all future receipts using an imputed rate of
    interest is the more clearly determinable of either:                    interest. The imputed rate of interest is the more clearly
                                                                            determinable of either:
(a) The prevailing rate for a similar instrument of an issuer with a
    similar credit rating; or                                            (a)the prevailing rate for a similar instrument of an issuer with a
                                                                             similar credit rating; or
(b) A rate of interest that discounts the nominal amount of the
    instrument to the current cash sales price of the goods or           (b) rate of interest that discounts the nominal amount of the
    services.                                                                instrument to the current cash sales price of the goods or
                                                                             services.
  The difference between the fair value and the nominal amount of
  the consideration is recognised as interest revenue in                   The difference between the fair value and the nominal amount
  accordance with paragraphs .34 and .35 and in accordance with            of the consideration is recognised as interest revenue in
  the relevant Standards of GRAP on Financial Instruments.                 accordance with paragraphs 29 and 30 and in accordance with
                                                                           IAS 39 Financial Instruments: Recognition and Measurement.
.18 When goods or services are exchanged or swapped for goods            .12 When goods or services are exchanged or swapped for
    or services which are of a similar nature and value, the                 goods or services which are of a similar nature and value, the
    exchange is not regarded as a transaction that generates                 exchange is not regarded as a transaction which generates         Paragraph similar.
    revenue. This is often the case with commodities like oil or milk        revenue. This is often the case with commodities like oil or
    where suppliers exchange or swap inventories in various                  milk where suppliers exchange or swap inventories in various
    locations to fulfil demand on a timely basis in a particular             locations to fulfil demand on a timely basis in a particular
    location. When goods are sold or services are rendered in                location. When goods are sold or services are rendered in
    exchange for dissimilar goods or services, the exchange is               exchange for dissimilar goods or services, the exchange is
    regarded as a transaction that generates revenue. The revenue            regarded as a transaction which generates revenue. The
    is measured at the fair value of the goods or services received,         revenue is measured at the fair value of the goods or services
    adjusted by the amount of any cash or cash equivalents                   received, adjusted by the amount of any cash or cash
    transferred. When the fair value of the goods or services                equivalents transferred. When the fair value of the goods or
    received cannot be measured reliably, the revenue is                     services received cannot be measured reliably, the revenue is
    measured at the fair value of the goods or services given up,            measured at the fair value of the goods or services given up,
    adjusted by the amount of any cash or cash equivalents                   adjusted by the amount of any cash or cash equivalents
    transferred.                                                             transferred.



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                              GRAP 9                                                                IAS 18                                               DIFFERENCE
Identification of the transaction
.19 The recognition criteria in this Standard are usually applied      .13 The recognition criteria in this Standard are usually applied      Wording differences but principle in GRAP
   separately to each transaction. However, in certain                    separately to each transaction. However, in certain                 9 and IAS 18 similar – no affect on initial
   circumstances, it is necessary to apply the recognition criteria       circumstances, it is necessary to apply the recognition criteria    adoption of GRAP 9.
   to the separately identifiable components of a single                  to the separately identifiable components of a single
   transaction in order to reflect the substance of the transaction.      transaction in order to reflect the substance of the transaction.
   For example, when the price of a product includes an                   For example, when the selling price of a product includes an
   identifiable amount for subsequent servicing, that amount is           identifiable amount for subsequent servicing, that amount is
   deferred and recognised as revenue over the period during              deferred and recognised as revenue over the period during
   which the service is performed. Conversely, the recognition            which the service is performed. Conversely, the recognition
   criteria are applied to two or more transactions together when         criteria are applied to two or more transactions together when
   they are linked in such a way that the effect cannot be                they are linked in such a way that the commercial effect
   understood without reference to the series of transactions as a        cannot be understood without reference to the series of
   whole. For example, an entity may sell goods and, at the same          transactions as a whole. For example, an entity may sell
   time, enter into a separate agreement to repurchase the goods          goods and, at the same time, enter into a separate agreement
   at a later date, thus negating the substantive effect of the           to repurchase the goods at a later date, thus negating the
   transaction; in such a case, the two transactions are dealt with       substantive effect of the transaction; in such a case, the two
   together.                                                              transactions are dealt with together.
Rendering of services
.20 When the outcome of a transaction involving the rendering of       .20 When the outcome of a transaction involving the rendering of       Terminology differences – no affect on
   services can be estimated reliably, revenue associated with the         services can be estimated reliably, revenue associated with        initial adoption of GRAP 9.
   transaction shall be recognised by reference to the stage of            the transaction shall be recognised by reference to the stage
   completion of the transaction at the reporting date. The                of completion of the transaction at the balance sheet date.        GRAP 9 incorporates the concept of
   outcome of a transaction can be estimated reliably when all the         The outcome of a transaction can be estimated reliably when        service potential – public sector specific
   following conditions are satisfied:                                     all the following conditions are satisfied:                        amendment but will not affect the initial
                                                                                                                                              adoption of GRAP 9.
(a)The amount of revenue can be measured reliably.                     (a) the amount of revenue can be measured reliably;

(b) It is probable that the economic benefits or service potential     (b) it is probable that the economic benefits associated with the
    associated with the transaction will flow to the entity.               transaction will flow to the entity;

(c)The stage of completion of the transaction at the reporting date    (c) the stage of completion of the transaction at the balance sheet
    can be measured reliably.                                              date can be measured reliably; and

(d) The costs incurred for the transaction and the costs to complete   (d) the costs incurred for the transaction and the costs to
    the transaction can be measured reliably.                              complete the transaction can be measured reliably.

.21 The recognition of revenue by reference to the stage of            .21 The recognition of revenue by reference to the stage of            Terminology differences – no affect on
   completion of a transaction is often referred to as the                completion of a transaction is often referred to as the             initial adoption of GRAP 9.
   percentage of completion method. Under this method, revenue            percentage of completion method. Under this method,
   is recognised in the reporting periods in which the services are       revenue is recognised in the accounting periods in which the
   rendered. For example, an entity providing property valuation          services are rendered. The recognition of revenue on this           GRAP 9 includes public sector specific
   services would recognise revenue as the individual valuations          basis provides useful information on the extent of service          examples.
   are completed. The recognition of revenue on this basis                activity and performance during a period. IAS 11 Construction
   provides useful information on the extent of service activity and      Contracts also requires the recognition of revenue on this
   performance during a period. The Standard of GRAP on                   basis. The requirements of that Standard are generally
   Construction Contracts also requires the recognition of revenue        applicable to the recognition of revenue and the associated
   on this basis. The requirements of that Standard are generally         expenses for a transaction involving the rendering of services.
   applicable to the recognition of revenue and the associated
   expenses for a transaction involving the rendering of services.
.22 Revenue is recognised only when it is probable that the            .22 Revenue is recognised only when it is probable that the            GRAP 9 incorporates the concept of
   economic benefits or service potential associated with the             economic benefits associated with the transaction will flow to      service potential – public sector specific


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                              GRAP 9                                                                IAS 18                                                DIFFERENCE
   transaction will flow to the entity. However, when uncertainty          the entity. However, when an uncertainty arises about the           amendment but will not affect the initial
   arises about the collectability of an amount already included in        collectability of an amount already included in revenue, the        adoption of f GRAP 9.
   revenue, the uncollectible amount, or the amount in respect of          uncollectible amount, or the amount in respect of which
   which recovery has ceased to be probable, is recognised as an           recovery has ceased to be probable, is recognised as an             Rest of paragraph similar.
   expense, rather than as an adjustment of the amount of                  expense, rather than as an adjustment of the amount of
   revenue originally recognised.                                          revenue originally recognised.
.23 An entity is generally able to make reliable estimates after it    .23 An entity is generally able to make reliable estimates after it     Paragraph similar.
   has agreed to the following with the other parties to the               has agreed to the following with the other parties to the
   transaction:                                                            transaction:

(a)Each party’s enforceable rights regarding the service to be         (a)each party’s enforceable rights regarding the service to be
    provided and received by the parties.                                  provided and received by the parties;

(b) The consideration to be exchanged.                                 (b) the consideration to be exchanged; and

(c) The manner and terms of settlement.                                (c) the manner and terms of settlement.

It is also usually necessary for the entity to have an effective       It is also usually necessary for the entity to have an effective
internal financial budgeting and reporting system. The entity          internal financial budgeting and reporting system. The entity
reviews and, when necessary, revises the estimates of revenue as       reviews and, when necessary, revises the estimates of revenue
the service is performed. The need for such revisions does not         as the service is performed. The need for such revisions does not
necessarily indicate that the outcome of the transaction cannot be     necessarily indicate that the outcome of the transaction cannot
estimated reliably.                                                    be estimated reliably.
.24 The stage of completion of a transaction may be determined by      .24 The stage of completion of a transaction may be determined          Paragraph similar.
    a variety of methods. An entity uses the method that measures           by a variety of methods. An entity uses the method that
    reliably the services performed. Depending on the nature of the         measures reliably the services performed. Depending on the
    transaction, the methods may include:                                   nature of the transaction, the methods may include:

(a) Surveys of work performed,                                         (a) surveys of work performed;

(b) Services performed to date as a percentage of total services to    (b) services performed to date as a percentage of total services
    be performed, or                                                       to be performed; or

(c) The proportion that costs incurred to date bear to the estimated   (c) the proportion that costs incurred to date bear to the
    total costs of the transaction. Only costs that reflect services       estimated total costs of the transaction. Only costs that reflect
    performed to date are included in costs incurred to date. Only         services performed to date are included in costs incurred to
    costs that reflect services performed or to be performed are           date. Only costs that reflect services performed or to be
    included in the estimated total costs of the transaction.              performed are included in the estimated total costs of the
                                                                           transaction.
  Progress payments and advances received from customers
  often do not reflect the services performed.                           Progress payments and advances received from customers
                                                                         often do not reflect the services performed.
.25 For practical purposes, when services are performed by an          .25 For practical purposes, when services are performed by an           Paragraph similar.
    indeterminate number of acts over a specified time frame,              indeterminate number of acts over a specified period of time,
    revenue is recognised on a straight line basis over the                revenue is recognised on a straight-line basis over the
    specified time frame unless there is evidence that some other          specified period unless there is evidence that some other
    method better represents the stage of completion. When a               method better represents the stage of completion. When a
    specific act is much more significant than any other acts, the         specific act is much more significant than any other acts, the
    recognition of revenue is postponed until the significant act is       recognition of revenue is postponed until the significant act is
    executed.                                                              executed.
.26 When the outcome of the transaction involving the rendering of     .26 When the outcome of the transaction involving the rendering         Paragraph similar.
    services cannot be estimated reliably, revenue shall be                of services cannot be estimated reliably, revenue shall be
    recognised only to the extent of the expenses recognised that          recognised only to the extent of the expenses recognised that


Page 6 of 11
                               GRAP 9                                                                  IAS 18                                                DIFFERENCE
    are recoverable.                                                         are recoverable.
.27 During the early stages of a transaction, it is often the case that   .27 During the early stages of a transaction, it is often the case      Terminology differences – no affect on
    the outcome of the transaction cannot be estimated reliably.             that the outcome of the transaction cannot be estimated              initial adoption of GRAP 9.
    Nevertheless, it may be probable that the entity will recover the        reliably. Nevertheless, it may be probable that the entity will
    transaction costs incurred. Therefore, revenue is recognised             recover the transaction costs incurred. Therefore, revenue is
    only to the extent of costs incurred that are expected to be             recognised only to the extent of costs incurred that are
    recoverable. As the outcome of the transaction cannot be                 expected to be recoverable. As the outcome of the
    estimated reliably, no surplus is recognised.                            transaction cannot be estimated reliably, no profit is
                                                                             recognised.
.28 When the outcome of a transaction cannot be estimated                 .28 When the outcome of a transaction cannot be estimated               Paragraph similar.
   reliably and it is not probable that the costs incurred will be           reliably and it is not probable that the costs incurred will be
   recovered, revenue is not recognised and the costs incurred               recovered, revenue is not recognised and the costs incurred
   are recognised as an expense. When the uncertainties that                 are recognised as an expense. When the uncertainties that
   prevented the outcome of the contract being estimated reliably            prevented the outcome of the contract being estimated
   no longer exist, revenue is recognised in accordance with                 reliably no longer exist, revenue is recognised in accordance
   paragraph .20 rather than in accordance with paragraph .26.               with paragraph 20 rather than in accordance with paragraph
   Sale of goods                                                             26.
Sale of goods
.29 Revenue from the sale of goods shall be recognised when all           .14 Revenue from the sale of goods shall be recognised when all         Terminology differences – no affect on
    the following conditions have been satisfied:                             the following conditions have been satisfied:                       initial adoption of GRAP 9.

(a) The entity has transferred to the purchaser the significant risks     (a) the entity has transferred to the buyer the significant risks and
    and rewards of ownership of the goods.                                    rewards of ownership of the goods;
                                                                                                                                                  GRAP 9 incorporates the concept of
(b) The entity retains neither continuing managerial involvement to       (b) the entity retains neither continuing managerial involvement to     service potential – public sector specific
    the degree usually associated with ownership nor effective                the degree usually associated with ownership nor effective          amendment but will not affect the initial
    control over the goods sold.                                              control over the goods sold;                                        adoption of GRAP 9.

(c) The amount of revenue can be measured reliably.                       (c) the amount of revenue can be measured reliably;

(d) It is probable that the economic benefits or service potential        (d) it is probable that the economic benefits associated with the
    associated with the transaction will flow to the entity.                  transaction will flow to the entity; and

(e) The costs incurred or to be incurred in respect of the                (e) the costs incurred or to be incurred in respect of the
   transaction can be measured reliably. .                                    transaction can be measured reliably.
.30 The assessment of when an entity has transferred the                  .15 The assessment of when an entity has transferred the                Terminology and wording differences but
   significant risks and rewards of ownership to the purchaser                significant risks and rewards of ownership to the buyer             principle in GRAP 9 and IAS 18 similar –
   requires an examination of the circumstances of the                        requires an examination of the circumstances of the                 no affect on initial adoption of GRAP 9.
   transaction. In most cases, the transfer of the risks and rewards          transaction. In most cases, the transfer of the risks and
   of ownership coincides with the transfer of the legal title or the         rewards of ownership coincides with the transfer of the legal
   passing of possession to the purchaser. This is the case for               title or the passing of possession to the buyer. This is the
   most sales. However, in certain other cases, the transfer of               case for most retail sales. In other cases, the transfer of risks
   risks and rewards of ownership occurs at a different time from             and rewards of ownership occurs at a different time from the
   the transfer of legal title or the passing of possession.                  transfer of legal title or the passing of possession.
.31 If the entity retains significant risks of ownership, the             .16 If the entity retains significant risks of ownership, the
   transaction is not a sale and revenue is not recognised. An                transaction is not a sale and revenue is not recognised. An         Terminology differences but principle in
   entity may retain a significant risk of ownership in a number of           entity may retain a significant risk of ownership in a number of    GRAP and IAS 18 similar – no affect on
   ways. Examples of situations in which the entity may retain the            ways. Examples of situations in which the entity may retain         initial adoption of GRAP 9.
   significant risks and rewards of ownership are:                            the significant risks and rewards of ownership are:

(a) When the entity retains an obligation for unsatisfactory              (a) when the entity retains an obligation for unsatisfactory
   performance not covered by normal warranty provisions,                    performance not covered by normal warranty provisions;



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                               GRAP 9                                                                   IAS 18                                                 DIFFERENCE
(b) When the receipt of the revenue from a particular sale is              (b) when the receipt of the revenue from a particular sale is            (b) - GRAP 9 includes public sector specific
    contingent on the derivation of revenue by the purchaser from              contingent on the derivation of revenue by the buyer from its        examples.
    its sale of the goods (for example, where a government                     sale of the goods;
    publishing operation distributes educational material to schools
    on a sale or return basis),                                            (c) when the goods are shipped subject to installation and the
                                                                               installation is a significant part of the contract which has not
(c) When the goods are shipped subject to installation and the                 yet been completed by the entity; and
    installation is a significant part of the contract which has not yet
    been completed by the entity, and                                      (d) when the buyer has the right to rescind the purchase for a
                                                                               reason specified in the sales contract and the entity is
(d) When the purchaser has the right to rescind the purchase for a             uncertain about the probability of return.
    reason specified in the sales contract and the entity is
    uncertain about the probability of return.
.32 If an entity retains only an insignificant risk of ownership, the      .17 If an entity retains only an insignificant risk of ownership, the    Terminology differences but principle in
    transaction is a sale and revenue is recognised. For example, a            transaction is a sale and revenue is recognised. For example,        GRAP and IAS 18 similar – no affect on
    seller may retain the legal title to the goods solely to protect the       a seller may retain the legal title to the goods solely to protect   initial adoption of GRAP 9.
    collectibility of the amount due. In such a case, if the entity has        the collectibility of the amount due. In such a case, if the
    transferred the significant risks and rewards of ownership, the            entity has transferred the significant risks and rewards of
    transaction is a sale and revenue is recognised. Another                   ownership, the transaction is a sale and revenue is
    example of an entity retaining only an insignificant risk of               recognised. Another example of an entity retaining only an
    ownership may be a sale when a refund is offered if the                    insignificant risk of ownership may be a retail sale when a
    purchaser is not satisfied. Revenue in such cases is                       refund is offered if the customer is not satisfied. Revenue in
    recognised at the time of sale provided the seller can reliably            such cases is recognised at the time of sale provided the
    estimate future returns and recognises a liability for returns             seller can reliably estimate future returns and recognises a
    based on previous experience and other relevant factors.                   liability for returns based on previous experience and other
                                                                               relevant factors.
.33 Revenue is recognised only when it is probable that the                .18 Revenue is recognised only when it is probable that the              GRAP 9 incorporates the concept of
   economic benefits or service potential associated with the                  economic benefits associated with the transaction will flow to       service potential – public sector specific
   transaction will flow to the entity. In some cases, this may not            the entity. In some cases, this may not be probable until the        amendment but will not affect the initial
   be probable until the consideration is received or until an                 consideration is received or until an uncertainty is removed.        adoption of GRAP 9.
   uncertainty is removed. For example, the revenue may be                     For example, it may be uncertain that a foreign governmental
   dependent upon the ability of another entity to supply goods as             authority will grant permission to remit the consideration from      GRAP 9 includes public sector specific
   part of the contract and if there is any doubt that this will occur,        a sale in a foreign country. When the permission is granted,         examples.
   recognition may be delayed until it has occurred. When the                  the uncertainty is removed and revenue is recognised.
   goods are supplied, the uncertainty is removed and revenue is               However, when an uncertainty arises about the collectability
   recognised. However, when an uncertainty arises about the                   of an amount already included in revenue, the uncollectible
   collectability of an amount already included in revenue, the                amount or the amount in respect of which recovery has
   uncollectible amount, or the amount in respect of which                     ceased to be probable is recognised as an expense, rather
   recovery has ceased to be probable, is recognised as an                     than as an adjustment of the amount of revenue originally
   expense, rather than as an adjustment of the amount of                      recognised.
   revenue originally recognised.
                                                                           .19 Revenue and expenses that relate to the same transaction or
                                                                               other event are recognised simultaneously; this process is           Matching of revenue not included in GRAP
                                                                               commonly referred to as the matching of revenues and                 9 – but principle not allowed in GRAP or
                                                                               expenses. Expenses, including warranties and other costs to          IAS thus principle similar and therefore no
                                                                               be incurred after the shipment of the goods can normally be          affect on initial adoption of GRAP 9.
                                                                               measured reliably when the other conditions for the
                                                                               recognition of revenue have been satisfied. However,
                                                                               revenue cannot be recognised when the expenses cannot be
                                                                               measured reliably; in such circumstances, any consideration
                                                                               already received for the sale of the goods is recognised as a
                                                                               liability.


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                                GRAP 9                                                                    IAS 18                                            DIFFERENCE
Interest, royalties and dividends
.34 Revenue arising from the use by others of entity assets               .29 Revenue arising from the use by others of entity assets           GRAP 9 incorporates the concept of
   yielding interest, royalties and dividends shall be recognised            yielding interest, royalties and dividends shall be recognised     service potential – public sector specific
   using the accounting treatments set out in paragraph .35 when:            on the bases set out in paragraph 30 when:                         amendment but will not affect the initial
                                                                                                                                                adoption of GRAP 9.
(a) It is probable that the economic benefits or service potential        (a) it is probable that the economic benefits associated with the
    associated with the transaction will flow to the entity, and              transaction will flow to the entity; and                          Rest of paragraph similar.

(b) The amount of the revenue can be measured reliably.                   (b) the amount of the revenue can be measured reliably.
.35 Revenue shall be recognised using the following accounting            .30 Revenue shall be recognised on the following bases:               Wording differences but principle in GRAP
    treatments:                                                                                                                                 9 and IAS 18 similar – no affect on initial
                                                                          (a) interest shall be recognised using the effective interest         adoption of GRAP 9.
(a) Interest shall be recognised using the effective interest rate           method as set out in IAS 39, paragraphs 9 and AG5–AG8;
    method as set out in the Standards of GRAP on Financial
    Instruments.                                                          (b) royalties shall be recognised on an accrual basis in
                                                                             accordance with the substance of the relevant agreement;
(b) Royalties shall be recognised as they are earned in accordance           and
    with the substance of the relevant agreement.
                                                                          (c) dividends shall be recognised when the shareholder’s right to
(c) Dividends or their equivalents shall be recognised when the               receive payment is established.
    owner’s or the entity’s right to receive payment is established.
                                                                          .31 (deleted)
.36 When unpaid interest has accrued before the acquisition of an         .32 When unpaid interest has accrued before the acquisition of        Terminology differences – no affect on
    interest-bearing investment, the subsequent receipt of interest           an interest-bearing investment, the subsequent receipt of         initial adoption of GRAP 9.
    is allocated between pre-acquisition and post-acquisition                 interest is allocated between pre-acquisition and post-
    periods; only the post-acquisition portion is recognised as               acquisition periods; only the post-acquisition portion is
    revenue. When dividends on equity securities are declared                 recognised as revenue. When dividends on equity securities
    from pre-acquisition surpluses, those dividends are deducted              are declared from pre-acquisition profits, those dividends are
    from the cost of the securities. If it is difficult to make such an       deducted from the cost of the securities. If it is difficult to
    allocation except on an arbitrary basis, dividends are                    make such an allocation except on an arbitrary basis,
    recognised as revenue unless they clearly represent a recovery            dividends are recognised as revenue unless they clearly
    of part of the cost of the equity securities.                             represent a recovery of part of the cost of the equity
                                                                              securities.
.37 Royalties, such as petroleum royalties, accrue in accordance          .33 Royalties accrue in accordance with the terms of the relevant     GRAP 9 includes public sector specific
   with the terms of the relevant agreement and are usually                   agreement and are usually recognised on that basis unless,        examples.
   recognised on that basis unless, having regard to the                      having regard to the substance of the agreement, it is more
   substance of the agreement, it is more appropriate to recognise            appropriate to recognise revenue on some other systematic         Rest of paragraph similar.
   revenue on some other systematic and rational basis.                       and rational basis.
.38 Revenue is recognised only when it is probable that the               .34 Revenue is recognised only when it is probable that the           GRAP 9 incorporates the concept of
   economic benefits or service potential associated with the                 economic benefits associated with the transaction will flow to    service potential – public sector specific
   transaction will flow to the entity. However, when an uncertainty          the entity. However, when an uncertainty arises about the         amendment but will not affect the initial
   arises about the collectability of an amount already included in           collectability of an amount already included in revenue, the      adoption of GRAP 9.
   revenue, the uncollectible amount, or the amount in respect of             uncollectible amount, or the amount in respect of which
   which recovery has ceased to be probable, is recognised as an              recovery has ceased to be probable, is recognised as an           Rest of paragraph similar.
   expense, rather than as an adjustment of the amount of                     expense, rather than as an adjustment of the amount of
   revenue originally recognised.                                             revenue originally recognised.
Disclosure
.39 An entity shall disclose:                                             .35 An entity shall disclose:                                         Disclosures similar except for terminology
                                                                                                                                                differences – no affect on initial adoption of
(a) The accounting policies adopted for the recognition of revenue        (a) the accounting policies adopted for the recognition of            GRAP 9.
    including the methods adopted to determine the stage of                  revenue, including the methods adopted to determine the
    completion of transactions involving the rendering of services;          stage of completion of transactions involving the rendering of


Page 9 of 11
                              GRAP 9                                                               IAS 18                                               DIFFERENCE
                                                                          services;
(b) The amount of each significant category of revenue recognised
      during the period including revenue arising from:                (b) the amount of each significant category of revenue
(i) The rendering of services,                                               recognised during the period, including revenue arising from:
(ii) The sale of goods,                                                (i)the sale of goods;
(iii) Interest,                                                        (ii)the rendering of services;
(iv) Royalties, and                                                    (iii)interest;
(v) Dividends or their equivalents, and                                (iv)royalties;
                                                                       (v)dividends; and
(c) The amount of revenue arising from exchanges of goods or
    services included in each significant category of revenue.         (c) the amount of revenue arising from exchanges of goods or
                                                                           services included in each significant category of revenue.
.40 Guidance on disclosure of any contingent assets and                .36 An entity discloses any contingent liabilities and contingent
   contingent liabilities can be found in the Standard of GRAP on          assets in accordance with IAS 37 Provisions, Contingent           Terminology differences – no affect on
   Provisions, Contingent Liabilities and Contingent Assets.               Liabilities and Contingent Assets. Contingent liabilities and     initial adoption of GRAP 9.
   Contingent assets and contingent liabilities may arise from             contingent assets may arise from items such as warranty
   transactions such as warranty costs, claims, penalties or               costs, claims, penalties or possible losses.
   possible deficits.
Transitional provisions
Initial adoption of accrual accounting
.41 The effect of adopting this Standard on its effective date shall                                                                         The transitional provision in paragraph .41
    be reported as an adjustment to the opening balance of                                                                                   is not applicable to public entities.
    accumulated surpluses or deficits for the period in which the
    Standard is first adopted. Entities are encouraged, but not                                                                              A     directive   containing  transitional
    required, to adjust the opening balance of accumulated                                                                                   provisions was issued for comment.
    surpluses or deficits for the earliest period presented and to
    restate comparative information. If comparative information is
    not restated, this fact shall be disclosed.
Initial adoption of this Standard for entities                                                                                               GRAP require retrospective application
                                                                                                                                             where accounting policy has changed on
already on accrual accounting                                                                                                                initial adoption of GRAP 9.

.42 Entities that are already on accrual accounting shall apply the
    Standard of GRAP on Accounting Policies, Changes in
    Accounting Estimates and Errors when the first-time
    implementation of this Standard results in a change in an
    accounting policy or estimate.
.43 Prior to initial implementation of this Standard, an entity may
    have recognised its revenue on a basis other than fair value of
    the consideration received or receivable. The Standard of
    GRAP on Accounting Policies, Changes in Accounting
    Estimates and Errors applies to any change in accounting
    policies that occurs when an entity first implements this
    Standard of GRAP.
Effective date
.44 An entity shall apply this Standard of GRAP for annual financial   .37 This Standard becomes operative for financial statements          Standard   paragraph    in   Standards   of
    statements covering periods beginning on or after a date to be        covering periods beginning on or after 1 January 1995.             GRAP.
    determined by the Minister of Finance in a regulation to be
    published in accordance with section 91 (1) (b) of the Public
    Finance Management Act No. 1 of 1999, as amended.
Withdrawal of other pronouncements


Page 10 of 11
                             GRAP 9                                  IAS 18             DIFFERENCE
.45 When this Standard becomes effective, it will supersede the               Withdrawal of GAMAP Standard.
   Standard of Generally Accepted Municipal Accounting Practice
   (GAMAP) on Revenue (May 2004) except for paragraphs .29 -
   .35 and .39 - .54 and the relevant disclosure requirements that
   will remain in effect until the Standard of GRAP on Revenue
   From Non-exchange Transactions (Including Taxes and
   Transfers) becomes effective.




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