South African Local Government Association
Schedule 3A public entity i. t. o. the Public Finance Management Act, 1999 and recognised i. t. o. the Organised Local Government Act, 1997 Annual Financial Statements for the year ended 31 March 2017
Accounting Policies
1.14 Conditional grants and receipts
Revenue received from conditional grants, donations and funding are recognised as revenue and a corresponding asset to the extent that SALGA has complied with any of the criteria, conditions or obligations embodied in the agreement. To the extent that the criteria, conditions or obligations have not been met, a liability is recognised.
1.15 R evenue from exchange transactions
Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets.
An exchange transaction is one in which SALGA receives assets or services, or has liabilities extinguished, and directly gives approximately equal value( primarily in the form of goods, services or use of assets) to the other party in exchange.
Measurement
Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.
Rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is 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:
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits or service potential associated with the transaction will flow to SALGA;
• the stage of completion of the transaction at the reporting date can be measured reliably; and
• the costs incurred for the transaction and the costs to complete the transaction can reliably be measured.
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.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
Stage of completion for membership levies
The membership levy entitles members to‘ services’ or‘ benefits of association’ for the financial period of SALGA. Although the formula for fees is based on annual budgeted salary, this is not relevant in terms of revenue recognition. The recognition of revenue depends, rather, on the timing, nature and value of benefits provided.
On the basis of the Accounting Standard GRAP 9, the stage of completion needs to be determined at year end, and revenue recognised in accordance with the stage of completion of the transaction.
The guidance in GRAP 9 par A11 of the Appendix also states that the membership levies should be recognised on the basis which reflects the timing of benefits provided.
“ Revenue recognition depends on the nature of the services provided. If the fee permits only membership, and all other services or products are paid for separately, or if there is a separate annual subscription, the fee is recognised as revenue when no significant uncertainty as to its collectability exists. If the fee entitles the member to services or publications to be provided during the membership period or to purchase goods or services at prices lower than those charged to non-members, it is recognised on a basis that reflects the timing, nature and value of the benefits provided”.
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