Do you support the definition of a tangible natural resource in the proposed IPSAS on Tangible Natural Resources?

The Board concurrently issued a proposed International Public Sector Accounting Standard (IPSAS) to provide guidance on the recognition, measurement, presentation and disclosure of tangible natural resources (see ED 212). Examples of such resources include subsoil resources, living resources and water before extraction, cultivation or harvest.

The ED defines a natural resource as an item that is naturally occurring and embodies service potential, or the capacity to generate economic benefits, or both. To satisfy this definition, an entity needs to demonstrate that there is a plan to generate service potential or economic benefits. The plan should also demonstrate that the entity is able and intends to carry out this plan, and if necessary, how resources necessary to carry out the plan, will be obtained.

An alternative view

The article on 25 November 2024 on Scoping requirements in the IPSAS Exposure Draft dealing with tangible natural resources [add link to article on 25 November] highlighted that, based on the scoping requirements of the proposed IPSAS, tangible natural resources held for conservation fall within the scope of the exposure draft. The article also highlights the alternative view that the scope of the IPSAS should be limited to tangible natural resources held for conservation, as it is unlikely that other tangible natural resources will fall within the scope of the proposed IPSAS.

Holding tangible natural resources for conservation implies that the items are primarily not held to generate economic benefits as the entity does not intend to explore or sell the asset. Tangible natural resources held for conservation are therefore held for their operational capacity, rather than to generate economic benefits.

Based on the definition and scoping requirements of the proposed IPSAS, the alternative view concludes that there is a risk of inappropriate financial reporting for those tangible natural resources that meet the definition and fall within the scope of the proposed IPSAS. These risks will be highlighted in a future article.  

Share your views

ED 212 requests stakeholder to share their views on the proposed IPSAS as input into the IPSASB’s standard-setting process. Comments can be shared in writing to info@asb.co.za, or by participating in roundtable consultations. Look out for the “ASB Engage” post on Fridays to participate in one of these discussions.

The local comment deadline for ED 212 is 14 February 2025.

Disclaimer

The article has been prepared by the Secretariat of the ASB for information purposes only. It has not been reviewed, approved, or otherwise acted on by the Board.