Milton Segal | Executive Director | Standards | South African Institute of Chartered Accountants (SAICA) | mail me |
We are all only too aware of the dire state of South Africa’s state-owned power provider – Eskom. We now live in permanent load shedding, and only the stages of load shedding alternate depending on the time of day, energy consumption and how much, or little power is available on the grid at a time.
Eskom has long stated that load shedding is only implemented as a last resort to protect the national grid. That is a concern; This last resort seems to have been implemented for a very long time, with no sign or even speculation of it ending in the near future. So just how long can this ‘last resort’ continue to be implemented?
Eskom does not have significant assets on its statement of financial position other than its Property Plant and Equipment (PPE). The note to its financial statements splits that between its various plants, i.e., generating, transmission and distribution, and work in progress. These are by far the largest assets on its balance sheet.
International Accounting Standard (IAS)
IAS 16, the IAS for Property, Plant and Equipment, does not require an entity to perform an annual impairment test on its PPE. It would be far too costly to do so, and most likely the costs incurred would far outweigh the benefits thereof. Happy days for the accountants then. However, the standard does require impairment testing to be carried out if indicators of impairment exist.
Impairment
The standards further go on to explain that indicators could be direct as well as indirect.
Perhaps the easiest way to explain the difference is as follows:…
The full article is reserved for our subscribers!
Read the full article by Milton Segal, Executive Director Standards, South African Institute of Chartered Accountants (SAICA), as well as a host of other topical management articles written by professionals, consultants and academics in the February/March 2023 edition of BusinessBrief.
admin@bbrief.co.za | +27 (0)11 788 0880 |
