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Understanding GRAP 104: Financial Instruments & ECL Requirements

September 23, 2026

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GRAP 104 Explained: Financial Instruments in South African Public Sector Accounting

Financial instruments are a significant part of financial reporting for South African public-sector entities. Cash and bank balances, receivables, loans, investments and payables all need to be correctly recognised, classified, measured and disclosed.

GRAP 104 on Financial Instruments sets out the accounting requirements for financial instruments for entities applying the Standards of Generally Recognised Accounting Practice (GRAP). The revised Standard introduced important changes to the classification and subsequent measurement of financial instruments, as well as impairment.

The revised GRAP 104 became effective for different entities from different reporting dates. Public entities apply GRAP from 1 April 2025, municipalities, municipal entities and water boards from 1 July 2025, and TVET and CET Colleges from 1 January 2026.

For finance teams, the requirements should be considered throughout the financial year rather than only when preparing annual financial statements.

What Is GRAP 104?

GRAP 104 is the Standard of GRAP on Financial Instruments. It establishes requirements for accounting for financial assets, financial liabilities and residual interests, subject to its scope and exclusions.

In practice, finance teams need to determine:

  1. Whether an item falls within GRAP 104.
  2. How it should be classified.
  3. How it should be measured initially and subsequently.
  4. Whether impairment requirements apply.
  5. What needs to be disclosed.

GRAP 104 does not apply to every item that appears to be a financial asset or liability. Certain items are excluded from its scope or are accounted for under another Standard. Statutory receivables, for example, are accounted for under GRAP 108 on Statutory Receivables.

When Did the Revised GRAP 104 Become Effective?

The revised GRAP 104 applies from the following dates:

EntityEffective for years commencing on
Entity Effective for years commencing on or after
Public entities 1 April 2025
Municipalities, municipal entities and water boards 1 July 2025
TVET and CET Colleges 1 January 2026

These dates reflect the different financial years applicable to entities within the GRAP reporting framework. The ASB has also published implementation guidance and other resources to assist entities with applying the revised requirements.

Who Does GRAP 104 Apply To?

GRAP 104 applies to entities that prepare financial statements in accordance with the Standards of GRAP, subject to its specific scope requirements and exclusions.

This can include:

  • Municipalities
  • Municipal entities
  • Public entities
  • Water boards
  • TVET and CET Colleges
  • Other entities within the GRAP reporting framework

The applicable accounting treatment depends on the nature of the transaction and whether another Standard of GRAP applies.

What Are Financial Instruments?

A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or residual interest of another entity.

Financial instruments commonly encountered in the public sector include:

Financial assets

  • Cash and bank balances
  • Contractual receivables
  • Loans receivable
  • Certain investments
  • Contractual rights to receive cash or another financial asset

Financial liabilities

  • Trade payables
  • Loans payable
  • Borrowings
  • Certain financial guarantee contracts
  • Other contractual obligations to deliver cash or another financial asset

Correct identification is important because the classification and measurement requirements depend on the characteristics of the instrument.

Contractual vs Statutory Receivables

The distinction between contractual and statutory receivables is particularly important for public-sector entities.

Contractual receivables arise from voluntary transactions where parties enter into a contract creating rights and obligations. Statutory receivables arise from compulsory transactions governed by legislation, regulations, by-laws, ministerial orders or municipal council decisions.

Contractual receivables fall within GRAP 104, while statutory receivables are accounted for under GRAP 108.

The distinction is not always straightforward. A transaction may be governed by legislation but subsequently involve a contract, so the existence of a contract does not automatically make a receivable contractual. Entities need to assess how the rights and obligations arise.

This assessment should take place before applying the GRAP 104 classification, measurement and impairment requirements. Using the wrong Standard can result in the wrong accounting treatment being applied.

How Are Financial Instruments Classified Under
GRAP 104?

Classification determines how a financial instrument is subsequently measured.

Under the revised GRAP 104, financial instruments are generally classified at:

  • Amortised cost
  • Fair value through surplus or deficit
  • Cost, in exceptional circumstances for certain financial assets

For financial assets, classification depends primarily on the entity’s management model and the characteristics of the contractual cash flows. A financial asset may qualify for amortised cost where it is managed to collect contractual cash flows and those cash flows meet the relevant criteria. Otherwise, fair value measurement generally applies.

Investments in residual interests are generally measured at fair value, although cost may be used in limited circumstances where fair value cannot be reliably measured.

Financial liabilities are generally measured at amortised cost, subject to specific exceptions.

How Are Financial Instruments Measured?

Initial Measurement

Financial instruments are initially measured at fair value. For instruments not subsequently measured at fair value, directly attributable transaction costs are generally included in the initial carrying amount. Receivables and payables that do not contain a material financing transaction are initially measured at their transaction price.

The amount stated in a contract or invoice is therefore not automatically the appropriate accounting measurement. Where terms are not market-related, the entity may need to consider the effect of discounting and other measurement requirements.

Subsequent Measurement

Subsequent measurement depends on the instrument’s classification. Instruments measured at amortised cost are generally adjusted for repayments, interest using the effective interest method and applicable impairment losses. Instruments measured at fair value are remeasured in accordance with the Standard.

What Is the Expected Credit Loss Model?

The revised GRAP 104 introduced an expected credit loss (ECL) model for financial assets measured at amortised cost. Unlike an incurred-loss approach, ECL is forward-looking and considers past, current and reasonable, supportable expectations about future conditions.

For financial assets subject to the general model, the assessment distinguishes between 12-month and lifetime expected credit losses, depending on changes in credit risk.

For receivables measured at amortised cost, GRAP 104 uses a simplified approach. This means lifetime expected credit losses are recognised without first assessing whether credit risk has increased significantly since initial recognition.

A provision matrix can be used to calculate ECL on groups of receivables, applying appropriate loss rates to outstanding balances. Historical experience should be adjusted where necessary for current conditions and reasonable forecasts of future economic conditions.

The resulting loss allowance is recognised against the receivable, with movements recognised in surplus or deficit.

Why Does Data Quality Matter?

Reliable data is central to a credible ECL assessment. Finance teams may need accurate information on debtor balances, ageing, historical collection patterns and relevant current and forward-looking conditions.

The ASB has specifically identified good-quality underlying data and appropriate forward-looking factors as important implementation considerations.

What Does GRAP 104 Require Entities to Disclose?

GRAP 104 requires entities to disclose information about the significance of financial instruments and the nature and extent of the risks arising from them.

Depending on the circumstances, disclosures include:

  • Relevant accounting policies and measurement bases
  • Carrying amounts by appropriate class of financial instruments
  • Credit, liquidity and market risk
  • Impairment information
  • Significant judgements and assumptions
  • Other information required for specific financial instruments

Financial instruments must be grouped into classes according to their nature and characteristics, with sufficient information to reconcile the disclosures to the relevant statement of financial position line items.

GRAP 104 vs IFRS 9: What Is the Difference?

GRAP 104 was revised with reference to IFRS 9, but it is not simply IFRS 9 under another name. The ASB made departures and simplified or added guidance where appropriate for the South African public-sector environment.

One notable difference is hedge accounting: GRAP 104 does not contain its own hedge accounting requirements. Where an entity chooses to apply hedge accounting, it applies the relevant IFRS Accounting Standards requirements in full.

GRAP 104 also contains public-sector-specific guidance, including requirements relevant to concessionary loans.

Entities reporting under GRAP should therefore apply GRAP 104 and the other applicable Standards of GRAP rather than automatically transferring an IFRS 9 treatment to their financial statements.

What Are the Common GRAP 104 Implementation
Challenges?

Implementing GRAP 104 requires more than updating an accounting policy. Entities need appropriate processes, reliable data and supporting documentation to apply the classification, measurement, impairment and disclosure requirements consistently.

Common challenges include:

  • Identifying all financial instruments and confirming which Standard applies
  • Supporting classification and measurement decisions
  • Obtaining reliable data for expected credit loss calculations
  • Selecting appropriate forward-looking information for impairment assessments
  • Preparing complete and accurate disclosures
  • Ensuring accounting records and supporting schedules reconcile

The ASB has identified good-quality underlying data as a key requirement for successful implementation, particularly when determining the forward-looking factors used in impairment assessments. These factors may differ between entities depending on debtor behaviour, risk and geographic circumstances.

GRAP 104 should therefore be incorporated into normal financial management processes rather than treated solely as a year-end exercise.

How Does GRAP 104 Affect Annual Financial
Statements?

GRAP 104 can affect both the amounts reported in the annual financial statements and the disclosures provided to users.

Before finalising the AFS, finance teams should ensure that:

  • Financial instrument balances reconcile to supporting records
  • Classification decisions and judgements are documented
  • Impairment calculations are supported by appropriate data
  • Accounting policies reflect the treatment actually applied
  • Required financial instrument and risk disclosures are complete

Considering these requirements throughout the year can reduce the risk of significant adjustments during AFS preparation.

GRAP 104 Compliance Checklist

A practical review should include:

  • Identify financial instruments within the entity.
  • Confirm whether GRAP 104 or another Standard applies.
  • Distinguish contractual from statutory receivables.
  • Confirm classification and measurement.
  • Assess expected credit losses where applicable.
  • Review the quality of impairment data.
  • Reconcile balances to supporting records.
  • Review accounting policies and disclosures.
  • Document significant judgements and calculations.

How Can Ducharme Support GRAP Implementation?

Applying GRAP 104 may require technical accounting expertise, practical implementation support and staff capacity building. Ducharme Consulting provides public-sector accounting support, GRAP training and assistance with annual financial statement preparation.

Where AFS preparation is part of the requirement, DynamicAFS provides cloud-based automation for GRAP, IPSAS and Modified Cash annual financial statements and management accounts. The solution can convert electronic financial data into reporting formats and includes linked working papers and disclosure support.

The appropriate approach will depend on the entity’s circumstances, but the objective should be the same: sound accounting processes, reliable supporting information and financial statements that accurately reflect the entity’s financial instruments.

Conclusion

GRAP 104 requires public-sector entities to understand not only what financial instruments they hold, but also how those instruments should be classified, measured, impaired and disclosed.

With the revised Standard now effective for the applicable entities, implementation should be treated as an ongoing financial reporting responsibility rather than a once-off year-end exercise. Strong processes, reliable data and well-documented accounting judgements provide the foundation for accurate and defensible GRAP reporting.