Deemed Cost Transitional Provisions — Audit & Governance Dashboard

Why deemed cost still appears in audits

When municipalities adopted GRAP they were permitted under Directive 7 to use deemed cost as a measurement starting point where original cost records were unavailable, and those deemed-cost balances continue to underpin asset registers years later. Auditors scrutinise whether the transitional basis was applied correctly and whether subsequent depreciation and componentisation respected it. AuditPro Core preserves the link between legacy deemed-cost measurements and current carrying amounts so the transitional basis remains defensible.

The Numbers

AuditPro Core renders this view from your tenant's live, tamper-evident records. The figures below are illustrative sample data.

Assets on deemed cost

R486 m

31% of PPE

Evidence supported

78%

Unsupported balance

R107 m

Classes affected

Deemed cost reliance by asset class

Support status by class

Asset class	Supported %	Unsupported (R m)
Roads	84	29
Water	71	38
Land	92	8
Buildings	58	32

Figures shown are illustrative sample data for demonstration. AuditPro Core renders these views from your own tenant's live, tamper-evident records.

What deemed cost is

Deemed cost is a surrogate for cost used at the date of transition, typically fair value or depreciated replacement cost, where the actual historical cost could not be reliably determined. It becomes the asset's cost basis going forward.

Directive 7 relief

Directive 7 set out the transitional provisions allowing deemed cost and a three-year window to measure certain items. The relief was a one-time concession, not an ongoing measurement policy.

Subsequent measurement

After transition, a deemed-cost asset is depreciated over its remaining useful life like any other. The transitional basis does not exempt it from componentisation, impairment or revaluation requirements.

Evidence retention

The valuation or replacement-cost workings that established deemed cost must remain available to support the carrying amount. Loss of that evidence undermines the entire asset balance.

How AuditPro Core Bridges the Gap

Transitional tagging: assets measured at deemed cost are flagged with the basis and date used, keeping the transition decision visible.
Evidence linkage: the original deemed-cost workings are attached to each asset so the carrying amount traces to its transitional source.
Exception review: deemed-cost assets lacking supporting valuation evidence, or never componentised, are surfaced for remediation.
Audit-ready trail: the transitional-provisions disclosure and underlying measurements export as a single evidenced package.

Key Takeaways

Deemed cost becomes the ongoing cost basis once applied at transition.
Directive 7 relief was a one-time concession with a limited measurement window.
Depreciate, componentise and impair deemed-cost assets like any other.
Retain the original deemed-cost workings to support today's carrying amount.