Introduction
Standards of Generally Accepted Municipal Accounting Practice (GAMAP)
The Accounting Standards Board (Board) is required in terms of the Public Finance Management Act, Act No. 1 of 1999, as amended (PFMA), to determine generally recognised accounting practice referred to as Standards of Generally Recognised Accounting Practice (GRAP).
The Board must determine GRAP for:
| (a) | departments (national and provincial); |
| (c) | constitutional institutions; |
| (d) | municipalities and boards, commissions, companies, corporations, funds or other entities under the ownership control of a municipality; and |
| (e) | Parliament and the provincial legislatures. |
The above are collectively referred to as "entities" Standards of GRAP.
The Board considers that the Standards of GAMAP constitute GRAP for municipalities.
GAMAP is an interim solution until such time as it is replaced by a Standard of GRAP.
Any limitation of the applicability of specific Standards is made clear in those Standards.
The Standard of GAMAP on Revenue is set out in paragraphs .01 - .65. All paragraphs in this Standard have equal authority. The authority of appendices is dealt with in the preamble to each appendix. This Standard should be read in the context of its objective, the Preface to Standards of GRAP, the Preface to Standards of GAMAP and the Framework for the Preparation and Presentation of Financial Statements.
Reference may be made here to a Standards of GRAP that has not been issued at the time of issue of this Standard. This is done to avoid having to change the Standards already issued when a later Standard is subsequently issued. Paragraph .12 of the Standard of GRAP on Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance.
Objective
The Framework for the Preparation and Presentation of Financial Statements defines revenue as "increases in economic benefits or service potential during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from owners". Certain specific items to be recognised as revenues are addressed in other statements and are excluded from the scope of this Standard. For example, gains arising on the sale of property, plant and equipment are specifically addressed in the Standard of Generally Accepted Municipal Accounting Practice on Property, Plant and Equipment and are not accounted for in accordance with this Standard.
The objective of this Standard is to prescribe the accounting treatment of revenue.
The primary issue in accounting for revenue is determining when to recognize revenue. Revenue is recognised when it is probable that future economic benefits or service potential will flow to the entity and these benefits can be measured reliably. This Standard identifies the circumstances in which these criteria will be met and, therefore, revenue will be recognised. It also provides examples on the application of these criteria.
Scope
| .01 | An entity which prepares and presents financial statements under the accrual basis of accounting shall apply this Standard in accounting for revenue including: |
| (a) | the rendering of services, |
| (c) | the exercising of legal powers and duties, and |
| (d) | the use by others of entity assets thereby yielding interest, royalties and dividends. |
| .02 | The rendering of services typically involves the performance by an entity of an agreed task over an agreed period of time. The services may be rendered within a single period or over more than one period. Examples of services rendered by entities for which revenue is typically received in exchange may include the provision of housing, management of water facilities, and management of transfer payments. |
| .03 | The exercising of legal powers and duties involves the raising of revenue, such as rates and fines, in terms of legal enactments. Revenue arising from the exercising of legal powers and duties may include the following: |
| (a) | rates, including collection charges and penalty interest, |
| (c) | application of tariff of charges, |
| (e) | government grants, and |
| (f) | regional council levies. |
| .04 | Goods include goods produced by the entity for the purpose of sale, such as electricity, and goods purchased for resale, such as merchandise or land and other property held for resale. |
| .05 | The use by others of entity assets gives rise to revenue in the form of: |
| (a) | interest - charges for the use of cash or cash equivalents or amounts due to the entity, |
| (b) | royalties - charges for the use of long term assets of an entity, for example, patents, trademarks, copyrights and computer software, |
| (c) | dividends or equivalents - distributions of surpluses to holders of equity investments in proportion to their holdings of a particular class of capital, and |
| (d) | rental income - charges for the use of community halls, sport facilities etc. |
| .06 | This Standard does not deal with revenues: |
| (a) | addressed in other Standards of Generally Accepted Municipal Accounting Practice or International Public Sector Accounting Standards or International Accounting Standards, including: |
| (i) | lease agreements (see the lnternational Public Sector Accounting Standard on Leases for guidance), |
| (ii) | dividends arising from investments that are accounted for under the equity method (see the Standard of Generally Accepted Municipal Accounting Practice on Accounting for Investments in Associates), and |
| (iii) | gains from the sale of property, plant and equipment (which are dealt with in the Standard of Generally Accepted Municipal Accounting Practice on Property, Plant and Equipment), |
| (b) | arising from changes in the fair value of financial assets and financial liabilities or their disposal (guidance on accounting for financial instruments can be found in the International Accounting Standard on Financial Instruments: Recognition and Measurement), |
| (c) | arising from changes in the value of other current assets (see the International Accounting Standard on Financial Instruments: Recognition and Measurement for guidance), arising from natural increases in herds, and agricultural and forest products (see the International Accounting Standard on Agriculture for guidance), and |
| (d) | arising from the extraction of mineral ores (currently no guidance exists). |
Definitions
| .07 | The following terms are used in this Standard with the meanings specified: |
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
Revenue is the gross inflows of economic benefits or service potential during the reporting period when those inflows result in increases in net assets, other than increases relating to contributions from owners.
Contributions from owners is future economic benefits or service potential that have been contributed to the entity by parties external to the entity that establish a financial interest in the net assets of the entity, provided that the contributions:
| (a) | do not result in liabilities of the entity, and |
| (b) | meet the following test, that they: |
| (i) | convey entitlement both to distributions of future economic benefits or service potential by the entity during its life, such distributions being at the discretion of the owners or their representatives, and to distributions of any excess of assets over liabilities in the event of the entity being wound up; and/or |
| (ii) | can be sold, exchanged, transferred or redeemed. |
Revenue
| .08 | Revenue includes only the gross inflows of economic benefits or service potential received and receivable by the entity on its own account. Amounts collected as agent of the government or another government organisation or on behalf of other third parties, for example the collection of licence fees by the entity on behalf of the Department of Transport or value-added taxes, are not economic benefits or service potential which flow to the entity and do not result in increases in assets or decreases in liabilities. Therefore, they are excluded from revenue. Similarly, in a custodial or agency relationship, the gross inflows of economic benefits or service potential include amounts collected on behalf of the principal that do not result in increases in net assets for the entity. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission received or receivable for the collection or handling of the gross flows. |
| .09 | Financing inflows, notably borrowings, do not meet the definition of revenue, because they result in an equal change in both assets and liabilities and have no impact upon net assets. Financing inflows are taken directly to the statement of financial position and added to the balances of assets and liabilities. |
Measurement of revenue
| .10 | Revenue shall be measured at the fair value of the consideration received or receivable. |
| .11 | The amount of revenue arising on a transaction is usually determined by agreement between the entity and the purchaser or user of the asset or set out in legal enactment. It is measured at the fair value of the consideration received or receivable taking into account the amount of any discounts and rebates allowed by the entity. |
| .12 | In most cases, the consideration is in the form of cash or cash equivalents and the amount of revenue is the amount of cash or cash equivalents received or receivable. However, when the inflow of cash or cash equivalents is deferred, the fair value of the consideration may be less than the nominal amount of cash received or receivable. For example, an entity may provide interest-free credit to the purchaser or accept a note receivable bearing below-market interest rate from the purchaser as consideration for the sale of goods. When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of 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 |
| (b) | a rate of interest that discounts the nominal amount of the 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 accordance with paragraphs .55 and .56. Where an agreement is entered into between the entity and a defaulting ratepayer to settle arrears, no additional revenue is recognised unless interest is charged on arrears.
| .13 | When goods or services are exchanged or swapped for goods or services which are of a similar nature and value, the exchange is not regarded as a transaction which generates revenue. This is often the case with commodities like oil or milk where suppliers exchange or swap inventories in various locations to fulfill demand on a timely basis in a particular location. When goods are sold or services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates revenue. The revenue is measured at the fair value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred. When the fair value of the goods or services received cannot be measured reliably, the revenue is measured at the fair value of the goods or services given up, adjusted by the amount of any cash or cash equivalents transferred. |
Identification of the transaction
| .14 | The recognition criteria in this Standard are usually applied separately to each transaction. However, in certain circumstances, it is necessary to apply the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction. For example, when the selling price of a product includes an identifiable amount for subsequent servicing, that amount is deferred and recognised as revenue over the period during which the service is performed. Conversely, the recognition criteria are applied to two or more transactions together when they are linked in such a way that the commercial effect cannot be understood without reference to the series of transactions as a whole. For example, an entity may sell goods and, at the same time, enter into a separate agreement to repurchase the goods at a later date, thus negating the substantive effect of the transaction; in such a case, the two transactions are dealt with together. |
Rendering of services
| .15 | When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: |
| (a) | the amount of revenue can be measured reliably, |
| (b) | it is probable that the economic benefits or service potential associated with the transaction will flow to the entity, |
| (c) | the stage of completion of the transaction at the reporting date can be measured reliably, and |
| (d) | the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. |
This principle also applies to tariff of charges.
| .16 | The recognition of revenue by reference to the stage of completion of a transaction is often referred to as the percentage of completion method. Under this method, revenue is recognised in the reporting periods in which the services are rendered. |
| .17 | Revenue is recognised only when it is probable that the economic benefits or service potential associated with the transaction will flow to the entity. However, when an uncertainty arises about the collectability of an amount already included in revenue, the uncollectable amount, or the amount in respect of which recovery has ceased to be probable, is recognised as an expense, rather than as an adjustment of the amount of revenue originally recognised. |
| .18 | An entity is generally able to make reliable estimates after it has agreed to the following with the other parties to the transaction: |
| (a) | each party’s enforceable rights regarding the service to be provided and received by the parties, |
| (b) | the consideration to be exchanged, and |
| (c) | the manner and terms of settlement. |
It is also usually necessary for the entity to have an effective internal financial budgeting and reporting system. The entity reviews and, when necessary, revises the estimates of revenue as the service is performed. The need for such revisions does not necessarily indicate that the outcome of the transaction cannot be estimated reliably.
| .19 | The stage of completion of a transaction may be determined by a variety of methods. An entity uses the method that measures reliably the services performed. Depending on the nature of the transaction, the methods may include: |
| (a) | surveys of work performed, |
| (b) | services performed to date as a percentage of total services to be performed, or |
| (c) | the proportion that costs incurred to date bear to the estimated total costs of the transaction. Only costs that reflect services performed to date are included in costs incurred to date. Only costs that reflect services performed or to be 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.
| .20 | For practical purposes, when services are performed by an indeterminate number of acts over a specified time frame, revenue is recognised on a straight-line basis over the specified time frame unless there is evidence that some other method better represents the stage of completion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until the significant act is executed. |
| .21 | When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable. |
| .22 | During the early stages of a transaction, it is often the case that the outcome of the transaction cannot be estimated reliably. Nevertheless, it may be probable that the entity will recover the transaction costs incurred. Therefore, revenue is recognized only to the extent of costs incurred that are expected to be recoverable. As the outcome of the transaction cannot be estimated reliably, no surplus is recognised. |
| .23 | When the outcome of a transaction cannot be estimated reliably and it is not probable that the costs incurred will be recovered, revenue is not recognised and the costs incurred are recognised as an expense. When the uncertainties that prevented the outcome of the contract being estimated reliably no longer exist, revenue is recognised in accordance with paragraph .I5 rather than in accordance with paragraph .21. |
Sale of goods
| .24 | Revenue from the sale of goods shall be recognised when all the following conditions have been satisfied: |
| (a) | the entity has transferred to the purchaser the significant risks and rewards of ownership of the goods, |
| (b) | the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, |
| (c) | the amount of revenue can be measured reliably, |
| (d) | it is probable that the economic benefits or service potential associated with the transaction will flow to the entity, and |
| (e) | the costs incurred or to be incurred in respect of the transaction can be measured reliably. |
| .25 | The assessment of when an entity has transferred the significant risks and rewards of ownership to the purchaser requires an examination of the circumstances of the transaction. In most cases, the transfer of the risks and rewards of ownership coincides with the transfer of the legal title or the passing of possession to the purchaser, for example the sale of prepaid electricity cards. This is the case for most sales. However, in certain other cases, the transfer of risks and rewards of ownership occurs at a different time from the transfer of legal title or the passing of possession. |
| .26 | If the entity retains significant risks of ownership, the transaction is not a sale and revenue is not recognised. An entity may retain a significant risk of ownership in a number of ways. Examples of situations in which the entity may retain the significant risks and rewards of ownership are: |
| (a) | when the entity retains an obligation for unsatisfactory performance not covered by normal warranty provisions, |
| (b) | when the receipt of the revenue from a particular sale is contingent on the derivation of revenue by the purchaser from its sale of the goods, |
| (c) | when the goods are shipped subject to installation and the installation is a significant part of the contract, which has not yet been completed by the entity, and |
| (d) | when the purchaser has the right to rescind the purchase for a reason specified in the sales contract and the entity is uncertain about the probability of return. |
| .27 | If an entity retains only an insignificant risk of ownership, the transaction is a sale and revenue is recognised. For example, a seller may retain the legal title to the goods solely to protect the collectability of the amount due. In such a case, if the entity has transferred the significant risks and rewards of ownership, the transaction is a sale and revenue is recognised. Another example of an entity retaining only an insignificant risk of ownership may be a retail sale when a refund is offered if the customer is not satisfied. Revenue in such cases is recognised at the time of sale provided that the seller can reliably estimate future returns and recognises a liability for returns based on previous experience and other relevant factors. |
| .28 | Revenue is recognised, only when it is probable that the economic benefits or service potential associated with the transaction will flow to the entity. In some cases, this may not be probable until the consideration is received or until an uncertainty is removed. For example, the revenue may be dependent upon the ability of another entity to supply goods as part of the contract and if there is any doubt that this will occur, recognition may be delayed until it has occurred, or it may be uncertain that a foreign governmental authority will grant permission to remit the consideration from a sale in a foreign country. When the goods are supplied, or permission is granted the uncertainty is removed and revenue is recognised. However, when an uncertainty arises about the collectability of an amount already included in revenue, the uncollectable amount or the amount in respect of which recovery has ceased to be probable is recognised as an expense, rather than as an adjustment of the amount of revenue originally recognised. |
Rates, including collection charges and penalty interest
| .29 | Revenue from rates, including collection charges and penalty interest, shall be recognised when: |
| (a) | it is probable that the economic benefits or service potential associated with the transaction will flow to the entity, |
| (b) | the amount of the revenue can be measured reliably, and |
| (c) | there has been compliance with the relevant legal requirements. |
| .30 | Changes to property values during a reporting period, which are referred to as "interims", are valued by a suitably qualified valuator and adjustments are made to rates revenue, based on a time, proportion basis. Adjustments to rates revenue already recognised are processed or additional rates revenue is recognised. |
| .31 | In certain circumstances, interim rates revenue adjustments will relate to previous accounting periods. If such adjustments are significant, the Standard of Generally Recognised Accounting Practice on Accounting Policies, Changes in Accounting Estimates and Errors will apply. |
| .32 | Collection charges should be recognised once the period legally prescribed for the levying of the charge has elapsed. Legal fees actually incurred in recovering nonpayment of rates should be recognised as an expense and not offset against revenue from collection charges. |
| .33 | A second collection is levied once a court order has been obtained to attach a defaulting ratepayer's property. This collection charge should be recognised when the due legal processes have been performed. |
| .34 | Penalty interest is levied on unpaid amounts each month. This revenue should be recognised when leviable in terms of law. |
| .35 | When uncertainty arises about the collectability of an amount already included in revenue, the uncollectable amount, or the amount in respect of which recovery has ceased to be probable, is recognised as an expsnse, rather than as an adjustment of the amount of revenue originally recognised. |
Service charges
| .36 | There are two types of service charges: flat rate service charges and services based on consumption. Flat rate service charges relate to the levying of a fixed amount for the rendering of services, regardless of consumption. Consumption based service charges are based on the consumption by consumers/users. |
| .37 | Flat rate service charges and consumption-based service charges shall be recognised when: |
| (a) | it is probable that the economic benefits or service potential associated with the transaction will flow to the entity, and |
| (b) | the amount of the revenue can be measured reliably. |
| .38 | Usually consumption-based service charges are based on meter readings. Where meter readings are done frequently, the revenue can be measured reliably. However, it is common practice for entities to read meters on a quarterly or less frequent basis. Consumers are invoiced based on estimates of consumption where no meter reading has taken place during the billing period. These invoices are best estimates and enable revenue to be measured reliably. Ideally, internal records should be maintained whereby actual consumption is compared to estimated consumption to provide additional assurance that significant adjustments are not required to reverse excessive estimates. |
Fines
| .39 | Revenue from the issuing of fines shall be recognised when: |
| (a) | it is probable that the economic benefits or service potential associated with the transaction will flow to the entity and |
| (b) | the amount of the revenue can be measured reliably. |
| .40 | There are two types of fines: spot fines and summonses. Municipalities will usually issue both types of fines. There is uncertainty regarding the probability of the flow of economic benefits or service potential in respect of spot fines as these fines are usually not given directly to an offender. Further legal processes have to be undertaken before the spot fine is enforceable. |
| .41 | In respect of summonses the public prosecutor can decide whether to waive the fine, reduce it or prosecute for non-payment by the offender. An estimate should be made for the revenue amount collected from spot fines and summonses based on past experience of amounts collected. Where a reliable estimate cannot be made of revenue from summonses, the revenue from summonses should be recognized when the public prosecutor pays over to the entity the cash actually collected on summonses issued. |
Government grants
| .42 | Government grants can be in the form of grants to acquire or construct fixed assets (capital grants), grants for the furtherance of national and provincial government policy objectives and general grants to subsidise the cost incurred by entities in rendering services. Capital grants and general grants for the furtherance of government policy objectives are usually restricted revenue in that stipulations are imposed on their use. |
| .43 | Government grants are recognised as revenue when: |
| (a) | it is probable that the economic benefits or service potential associated with the transaction will flow to the entity, |
| (b) | the amount of the revenue can be measured reliably, and |
| (c) | to the extent that there has been compliance with any restrictions associated with the grant. |
| .44 | An entity needs to assess the degree of certainty attached to the flow of future economic benefits of service potential on the basis of the available evidence. Certain grants payable by one level of government to another are subject to the availability of funds. Revenue from these grants should only be recognised when it is probable that the economic benefits or service potential associated with the transaction will flow to the entity. An announcement at the beginning of a financial year that grants may be available for qualifying entities in accordance with an agreed programme may not be sufficient evidence of the probability of the flow. Revenue should only be recognised once evidence of the probability of the flow becomes available. |
| .45 | Restrictions on government grants may result in such revenue being recognised on a time proportion basis. For example, equitable share grants per the Division of Revenue Act where the period of use of such funds is stated, should be recognized on a time proportion basis, Le. over the stated period. Where there is no restriction on the period, such revenue should be recognised on receipt or when the Act becomes effective, which-ever is earlier. |
| .46 | In certain circumstances government will only remit grants on a re-imbursement basis. Revenue should therefore be recognised when the qualifying expense has been incurred and to the extent that any other restrictions have been complied with and not when the grant is received. |
Other grants and donations received
| .47 | Other grants and donations shall be recognised as revenue when: |
| (a) | it is probable that the economic benefits or service potential associated with the transaction will flow to the entity, |
| (b) | the amount of the revenue can be measured reliably, and |
| (c) | to the extent that there has been compliance with any restrictions associated with the grant. |
| .48 | Grants funded by public contributions should only be recognised when it is probable that economic benefits or service potential associated with the transaction will flow to the entity. For example, a manufacturer may require a road to be built to his/her factory. The municipality may not have sufficient funds to build the road or because the road will be for the primary benefit of the manufacturer, may enter into an agreement whereby it will construct the road only if the manufacturer pays a portion of the construction. The grant received from the manufacturer to construct the road, should only be recognised when it is probable that the economic benefits or service potential associated with the transaction will flow to the entity, the amount of the grant can be measured reliably, and to the extent that the entity has complied with the agreement to construct the road. |
| .49 | should be measured at the fair value of the consideration received or receivable when the amount of the revenue can be measured reliably. For example, a developer donates land for a community hall in the development of a new suburb on condition that the land is rezoned from agricultural to residential. The donation is recognised when the restrictions have been met, i.e the land has been rezoned. |
Levies
| .50 | Levies shall be recognised as revenue when: |
| (a) | it is probable that the economic benefits or service potential associated with the transaction will flow to the entity, and |
| (b) | the amount of the revenue can be measured reliably. |
| .51 | Levies are based on declarations completed by levy payers. Levies are payable one month in arrears, for example levies based on a levy payer's February payroll are payable by the end of March. |
| .52 | A reliable, measurement of levies can usually only be made on the due date of payment. The revenue will be determined from declarations actually received by due date of the payment, together with an estimate of levies due when a levy payer has not submitted a declaration in the reporting period where payment was due. |
| .53 | The estimate of levies revenue when a levy payer has not submitted a declaration will need to be made taking into account the following factors: |
| (a) | the extent and success of procedures to investigate the non-submission of a declaration by defaulting levy payers, |
| (b) | internal records maintained of historical comparisons of estimated levies with actual levies received from individual levy payers, |
| (c) | historical information on declarations previously submitted by defaulting levy payers, and |
| (d) | the accuracy of the database of levy payers as well as the frequency by which it is updated for changes. |
| .54 | Changes to estimates made when more reliable information becomes available should be processed as an adjustment to levies revenue. Where such changes are significant and relate to different reporting periods, reference should be made to the Standard of Generally Recognised Accounting Practice on Accounting Policies, Changes in Accounting Estimates and Errors. |
Interest, royalties and dividends
| .55 | Revenue arising from the use by others of entity assets yielding interest, royalties and dividends shall be recognised on the bases set out in paragraph .56 when |
| (a) | it is probable that the economic benefits or service potential associated with the transaction will flow to the entity, and |
| (b) | the amount of the revenue can be measured reliably. |
| .56 | Revenue shall be recognised using the following accounting treatment: |
| (a) | interest shall be recognised on a time proportion basis that takes into account the effective yield on the asset, |
| (b) | royalties shall be recognised as they are earned in accordance with the substance of the relevant agreement, and |
| (c) | dividends or their equivalents shall be recognised when the shareholder's right or the entity's right to receive payment is established. |
| .57 | The effective yield on an asset is the rate of interest required to discount the stream of future cash receipts expected over the life of the asset to equate to the initial carrying amount of the asset. Interest revenue includes the amount of amortisation of any discount, premium or other difference between the initial carrying amount of a debt security and its amount at maturity. |
| .58 | When unpaid-interest has accrued before the acquisition of an interest-bearing investment, the subsequent receipt of interest is allocated between pre-acquisition and post-acquisition periods, and only the post-acquisition portion is recognised as revenue. When dividends on equity securities are declared from pre-acquisition net retained surpluses, those dividends are deducted from the cost of the securities. If it is difficult to make such an allocation except on an arbitrary basis, dividends are recognised as revenue unless they clearly represent a recovery of part of the cost of the equity securities. |
| .59 | Royalties accrue in accordance with the terms of the relevant agreement and are usually recognised on that basis unless, having regard to the substance of the agreement, it is more appropriate to recognise revenue on some other systematic and rational basis. |
| .60 | Revenue is recognised only when it is probable that the economic benefits or service potential associated with the transaction will flow to the entity. However, when an uncertainty arises about the collectability of an amount already included in revenue, the uncollectable amount, or the amount in respect of which recovery has ceased to be probable, is recognised as an expense, rather than as an adjustment of the amount of revenue originally recognised. |
Disclosure
| .61 | An entity shall disclose the following: |
| (a) | The accounting policies adopted for the recognition of revenue including the methods adopted to determine the stage of completion of transactions involving the rendering of services, |
| (b) | The amount of each significant category of revenue recognised during the period including revenue arising from: |
| (i) | the rendering of services, |
| (v) | application of tariff of charges, |
| (viii) | other grants and donations received, |
| (xii) | dividends or their equivalents, and |
| (c) | The amount of revenue arising from the exchange of goods or services included in each significant category of revenue. |
| .62 | The financial statements shall also disclose: |
| (a) | unfulfilled conditions and restrictions attaching to transfers and government grants, and |
| (b) | significant decreases expected in the level of government grants. |
| .63 | Guidance on disclosure of any contingent assets and contingent liabilities can be found in the Standard of Generally Accepted Municipal Accounting Practice on Provisions, Contingent Liabilities and Contingent Assets. Contingent assets and contingent liabilities may arise from items such as warranty costs, claims, penalties or possible losses. |
Transitional Provisions
| .64 | On the occasion of first-time application of this Standard all provisions of the Standard shall be applied prospectively. However, when the first-time application of this Standard results in a change in accounting policy or estimate, reference shall be made to the Standard of Generally Recognised Accounting Practice on Accounting Policies, Changes in Accounting Estimates and Errors. |
Effective date
| .65 | This Standard of Generally Accepted Municipal Accounting Practice becomes effective for annual financial statements covering periods beginning on or after a date to be 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, Act No. 1 of 1999 as amended. |
