Notices > Standards of Generally Accepted Municipal Accounting Practice (GAMAP) in terms of Section 91 > Preface to the Standards of Generally Accepted Municipal Accounting Practice

This preface is issued to explain the transformation from the existing Statements of Generally Accepted Municipal Accounting Practice to the revised Standards of Generally Accepted Municipal Accounting Practice being issued at present. It also explains the application, scope and authority of the Standards of Generally Accepted Municipal Accounting Practice in relation to Standards of Generally Recognised Accounting Practice. For more guidance, this preface should be read in conjunction with the preface to the Standards of Generally Recognised Accounting Practice.

Background to the existing Statements of Generally Accepted Municipal Accounting Practice (old GAMAP)

The National Treasury commissioned a study to develop statements of generally recognised accounting practices for local government in July 1997. The statements that were developed (old GAMAP) were based on the Statements of Generally Accepted Accounting Practice (SA GAAP) as at 30 November 1997 with the exception of GAMAP 114. SA GAAP was in the process of being harmonised with International Accounting Standards at the time that old GAMAP was being developed. A number of the SA GAAP Statements on which old GAMAP is based have subsequently been revised or withdrawn.

GAMAP 114, titled Accounting for Statutory Funds, Reserves and Capital Receipts, is the only Statement of old GAMAP that is not based on SA GAAP. It was developed to give recognition to the funding of property, plant and equipment (the old GAMAP accounting model) and the National Treasury’s policy on reserving and statutory funds. There is however, no legal framework in place to support the accounting treatment adopted in GAMAP 114.

Process for issuing the revised Standards of Generally Accepted Municipal Accounting Practice (new GAMAP)

3.	The Accounting Standards Board has reviewed old GAMAP with a view to amend as appropriate or withdrawing individual Statements if considered to be in conflict with the International Public Sector Accounting Standards (IPSASs) on which the Standards that the Board is developing are based.

4.	The broad findings of the review were as follows:

(a)	Most of the SA GAAP Statements that were used as a basis to develop equivalent Statements of old GAMAP have changed.

(b)	As indicated above, there is no comparative SA GAAP for GAMAP 114.

(c)	A number of IPSASs have now been issued that cover topics addressed by old GAMAP Statements.

(d)	There are a number of new accounting statements in SA GAAP for which there are no equivalent old GAMAP Statements.

5.	The revised standards issued as a result of this review are known as Standards Of Generally Accepted Municipal Accounting Practice (new GAMAP). A table setting Out the old Statements and new Standards of GAMAP is attached as Appendix I.

Need for new GAMAP

6.	The need to issue and implement new GAMAP is driven, inter alia, by the following main factors:

•	Old GAMAP is no longer up to date.

•	Significant capacity building has taken place since the Minister of Finance approved old GAMAP in October 1998, and an anti-GAMAP sentiment has moved to an eagerness to implement it. Momentum to improve financial reporting should not be lost.

•	The enactment of the Municipal Finance Management Act, which requires the different categories of municipalities to base their financial statements on Standards of Generally Recognised Accounting Practice.

7.	The Board has therefore decided to reduce the exposure period for new GAMAP to two months in recognition of the process adopted in the development of old GAMAP and the extent of consultation and training that has taken place to date.

Replacement of new GAMAP by GRAP

8.	When issued, Standards of Generally Recognised Accounting Practice will supersede the equivalent new GAMAP Standard.

9.	More information on the Board’s strategy and process for the development of Standards of Generally Recognised Accounting Practice is set out in the Preface to Standards of Generally Recognised Accounting Practice.

Numbering of new GAMAP

10.	The numbering of new GAMAP is based on the numbering of the IPSAS Standards. Thus, a new GAMAP Standard has the same number as the equivalent IPSAS.

Application of new GAMAP

11.	New GAMAP is applicable to municipalities. Boards, commissions, companies, corporations, funds or other entities under the ownership control of a municipality are encouraged to comply with new GAMAP in order to facilitate the preparation of consolidated financial statements by municipalities.

12.	The implementation of new GAMAP will recognise that capacities will differ at the different categories of municipalities. New GAMAP will apply from a date determined in a regulation by the Minister of Finance after consultation with the Board.

Exemptions

13.	The Minister may exempt a municipality from compliance with one or Standards of GAMAP or a specific requirement thereof. The National Treasury will administer the process of applying for exemptions.

Guidance on issues not covered by new GAMAP

14.

The Board recognises that the scope of new GAMAP is incomplete and that users will seek guidance in respect of those issues not considered. The attention of preparers is drawn to the following paragraph in the exposure draft of the Standard of Generally Recognised Accounting Practice on Accounting Policies, Changes in Accounting Estimates and Errors:

"In the absence of a particular Standard of Generally Recognised Accounting Practice that specifically applies to a transaction, other event or condition, management shall use its judgement in developing and applying an accounting policy that results in information that is:

(a)	relevant to the economic decision-making needs of users; and

(b)	reliable in that the financial statements:

(i)	represent faithfully the financial position, financial performance and cash flows of the entity;

(ii)	reflect the economic substance of transactions, other events and conditions, and not merely the legal form;

(iii)

are neutral, i.e. free from bias;

(iv)	are prudent; and

(v)	are complete in all material respects.

In making the judgement described in the paragraph above, management shall refer to and consider the applicability of the following sources in descending order:

(a)	the requirements and guidance in the Standards of Generally Recognised Accounting Practice, dealing with similar and related issues; and

(b)	the definitions, recognition criteria and measurement concepts for assets, liabilities, revenue and expenses set out in the Framework for the Preparation and Presentation of Financial Statements.

In making the judgement prescribed in the paragraph above, management may also consider the most recent pronouncements of other standard-setting bodies and accepted public or private sector practices to the extent, but only to the extent, that these are consistent with the requirements in the paragraph above. For example, pronouncements of, in descending order, the International Federation of Accountants - Public Sector Committee, the international Accounting Standards Board (including the Framework for the Preparation and Presentation of Financial Statements), the South African Accounting Practices Board and the South African Institute of Chartered Accountants’ Accounting Practices Committee."

15.

A table of such available sources is set out in Appendix II. The Board has not yet considered the guidance contained in these Standards, nor has it determined the appropriateness of applying these Standards in a municipality. Accordingly, there is no requirement to comply with the guidance in this list to claim compliance with new GAMAP.

16.

Fair presentation of financial statements depends, inter alia, on the appropriateness and application of the accounting policies adopted in their preparation. Whilst applying GAMAP will assist in achieving fair presentation, the adoption of these Standards will not by itself achieve that objective, as the scope of new GAMA? is not comprehensive.

17.	Additional disclosures in the financial statements that are required by legislation are not repeated in new GAMAP.

Effective date

18.	New GAMAP is effective for annual financial statements covering periods beginning on or after a date to be determined by the Minister of published in accordance with section 91(1)(b) of the Act, Act No. 1 of 1999 (PFMA), as amended.

Appendix I : New GAMAP

The table below lists the new GAMAP Standards that replaced the old GAMAP Statements. The table sets out the statements that comprised old GAMAP and the status of the topics included under new GAMAP and, where relevant, GRAP where a Standard in the latter series is already being developed.

Old GAMAP reference	Title	New reference
GAMAP 000	Framework for the Preparation and Presentation of Financial Statements	GRAP 01
GAMAP 100	Presentation of Financial Statements	GRAP 1
GAMAP 101	Net Surplus or Deficit for the Period, Fundamental Errors and Changes in Accounting Policies (now Accounting pOLICIES, CHANGES IN aCCOUNT	GRAP 3
GAMAP 102	Accounting for Leases in the Financial Statements of Lessees	Withdrawn
GAMAP 103	Provisions, Contingent Liabilities and Contingent Assets and Events Occurring After the Balance Sheet Date (now Provisions, Contingent Liabilities and Contingent Assets)	GAMAP 19
Not a separate statement	Events After the Balance Sheet Date	Withdrawn
GAMAP 104	Inventories	GAMAP 12
GAMAP 105	Accounting for Investments in Associates and Subsidiaries (now Accounting for Investments in Associates)	GAMAP 7
Not a separate statement	Consolidated Financial Statements and Accounting for Controlled Entities	GAMAP 6
GAMAP 106	Revenue	GAMAP 9
GAMAP 107	The Effects of Changes in Foreign Exchange Rates	GAMAP 4
GAMAP 108	Lessor Accounting	Withdrawn
GAMAP 109	Research and Development Costs	Withdrawn
GAMAP 110	Retirement Benefit Costs	Withdrawn
GAMAP 111	Cash Flow Statements	GRAP 2
GAMAP 112	Financial Reporting of Interests in Joint Ventures	GAMAP 8
SAMAP 113	Property, Plant and Equipment	GAMAP 17
SAMAP 114	Accounting for Statutory Funds, Reserves and Capital Receipts	Withdrawn

Appendix II2

Guidance on issues not covered by GAMAP

The table below provides a list of available sources where the items are not covered by the scope of new GAMAP.

Reference	Title
IPSAS 5	Borrowing Costs
IPSAS 11	Construction Contracts
IPSAS 13	Leases
IPSAS 14	Events After the Reporting Date
IPSAS 15	Financial Instruments: Disclosure and Presentation
IPSAS 16	Investment Property
IPSAS 18	Segment Reporting
IPSAS 20	Related Parties
IAS 12	Income Taxes
IAS 19	Employee Benefits
IAS 22	Business Combinations
IAS 35	Discontinuing Operations
IAS 36	Impairment of Assets
IAS 38	Intangible Assets
IAS 39	Financial Instruments: Recognition and Measurement
IAS 41	Agriculture

1	In the process of finalisation

2	There is no requirement to comply with the guidance set out in this appendix to claim compliance with GAMAP.

Public Finance Management Act, 1999 (Act No. 1 of 1999)

Notices

Standards of Generally Accepted Municipal Accounting Practice (GAMAP) in terms of Section 91

Preface to the Standards of Generally Accepted Municipal Accounting Practice