The impact of Generally Recognised Accounting Practices (GRAP) on the quality of financial statements of the South African municipalities: Evidence of pre-grap adoption compared to post-grap adoption periods
Sidwell Lithole · Vusani Moyo ORCID ↗ · Muhali Piet Ndou
International Journal of Research in Business and Social Science · 2025 · Vol. 14 / Issue 8 · 169-177
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Abstract
The Republic of South Africa (RSA) adopted the move to accrual-based accounting in 1999, and the implementation of GRAP standards by the Municipalities has been affected since 2006. The expected benefits were improving transparency, accountability, quality, and efficiency of municipal financial reporting. The aim of this study is to investigate the impact of GRAP standards on the quality of financial reporting in RSA municipalities during the period of Pre-GRAP (2005/06 to 2009/10) compared to Post-GRAP (2010/11 to 2015/16). This study employed a quantitative approach wherein secondary data was sourced online from the National Treasury database. A panel dataset split into two subpanels (pre and post), drawn from a sample of 125 municipalities, was used to test the study’s hypothesis. The data were winsorized to eliminate outliers, and a multicollinearity test was conducted to identify and eliminate variables that could have resulted in model misspecification. A Hausman Test was used to select the study’s regression model, which was estimated using the STATA 15 software. The residuals of the regression model were used as a measure of accrual quality and, hence, financial reporting quality. A larger standard deviation of residuals indicates poorer accruals quality and financial reporting quality. The findings indicated a standard deviation of 0.061 (pre-GRAP) and 0.084 (post-GRAP) for the adoption periods, which indicates higher financial reporting quality. These relatively unchanged standard deviation results suggest that GRAP did not significantly improve the quality of financial reporting by municipalities after its adoption.
Authors & affiliations
Sidwell Lithole
University of Venda
Vusani Moyo
University of Venda
Muhali Piet Ndou
University of Venda
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