Implementation review of GRAP 109 disclosure in South African metropolitan municipalities

Background: Generally Recognised Accounting Practice (GRAP) 109 Standard on accounting by principals and agents became effective in the 2019 fiscal year. The Standard aims to enhance financial reporting through explicit guidance for identifying, recognising and disclosing principal and agent relationships. However, South African municipalities have continued to face challenges in complying with GRAP requirements. Aim: The aim of this study is to investigate whether South African metropolitan municipalities consistently disclose principal–agent relationships as per the GRAP 109 requirements. Setting: The study focused on the eight South African metro municipalities: large urban settlements with high population densities and complex and diversified economies. Methods: The research followed a qualitative approach to analyse the principal–agent disclosure practices of eight metropolitan municipalities’ annual reports. Results: The findings revealed disparities in GRAP 109 compliance among the eight municipalities. Six municipalities aligned with GRAP 109 requirements in their accounting policies, whereas two lacked explicit policies, affecting their ability to recognise and disclose principal–agent relationships accurately. Conclusion: Municipalities are still struggling to comply with the disclosure requirement as evidence shows a lack of improvement. Contribution: This study contributes to the post-implementation review of GRAP 109 by identifying trends and gaps in compliance across South African metropolitan municipalities.