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A-IFRS requires disclosures in relation to all the new or revised Accounting Standards and Interpretations that have had or may have a material impact on the annual financial report of the entity, whether they have been adopted or not. The requirements for interim financial reports are less onerous but must still be considered.
In this article, we shed some light on these disclosure requirements, answering the following commonly asked questions:
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What accounting pronouncements require these disclosures?
The disclosure requirements surrounding new or revised accounting pronouncements are specified by:
for annual reporting periods – AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors
for interim reporting periods – AASB 134 Interim Financial Reporting.
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Are non-reporting entities required to make these disclosures?
It depends on the nature of the entity:
all entities that prepare financial reports under the Corporations Act 2001 are required to make these disclosures, regardless of whether they are a reporting entity or not
other entities are only required to make these disclosures if they are a reporting entity or produce general purpose financial reports.
Therefore, only non-reporting entities that are not preparing financial reports under the Corporations Act 2001 can avoid these disclosures. In any case, to ensure that the financial report is presented fairly, these entities may wish to include certain disclosures about any material effects of new or revised accounting pronouncements.
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What disclosures are required in annual financial reports?
The following table outlines the disclosures required in annual financial reports:
| Applicability of new or revised pronouncement | Summary of disclosures required in annual financial report |
| Initial mandatory or voluntary application of a new or revised pronouncement | As required by paragraph 28 of AASB 108. Disclosures include the relevant pronouncement, the nature of the change in accounting policy, details of any transitional provisions, line-by-line analysis of the effect of the change in policy on the financial statements and the impacts on earnings per share. |
| Pronouncement on issue but not adopted | As required by paragraphs 30-31 of AASB 108. The financial report must disclose which pronouncements have been issued but not adopted in the financial report, when the pronouncements have mandatory application, when those pronouncements are going to be applied by the entity and the possible impact on the entity’s financial report (where known or reasonably estimable). |
Example disclosures of the above requirements can be found in our illustrative financial reports.
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What disclosures are required in interim financial reports?
Paragraph 16(a) of AASB 134 requires disclosure in interim financial reports of the nature and effect of any change in accounting policy compared with the most recent annual financial report.
AASB 134 does not specify the level of detail of the disclosures required, and accordingly the level of detail may be less than is presented in an annual financial report in accordance with AASB 108. However, best practice might suggest that the requirements of AASB 108 be used as a guide.
The impacts of new or revised accounting pronouncements that have not been early adopted are not explicitly required to be disclosed in interim financial reports. Entities should consider making additional disclosures where the effects of these pronouncements are expected to be material and those effects have not previously been disclosed in the prior annual financial report.
Example disclosures of the above requirements can be found in our illustrative financial reports.
Revisions to AASB 134 resulting from AASB 2007-4 Paragraph Aus27.1 of AASB 134 required disclosure of the effects on previous interim periods of changes in accounting policies that occurred during an entity’s final current interim period (i.e. the second half for entities that prepare financial reports on a half-yearly basis). AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments eliminates these disclosures, effective for annual reporting periods beginning on or after 1 July 2007. For more information, see Accounting alert 2007/09 Applying 2007-4 – new accounting policy choices, reduced disclosure. |
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Do the annual disclosures extend to the effects of Interpretations that have not been adopted?
Yes.
Due to legal restrictions, the application of an Australian Interpretation in the preparation of a financial report is mandated through the 'service standard', AASB 1048 Interpretation and Application of Standards. AASB 1048 is reissued on a periodic basis as new Interpretations are made and includes a listing of all Australian Interpretations on issue and their application date.
Accordingly, entities are required to disclose the impacts of the application of any version of AASB 1048 that is not yet effective (and which has not been early adopted). The disclosures made about AASB 1048 include the Australian Interpretations listed in that Standard that have not been applied in the preparation of the financial report.
Deciding on the early adoption of Interpretations Interpretations that merely interpret the requirements of existing Standards are often considered best practice and so would ordinarily be adopted at an entity’s next reporting date, e.g. this might apply to Interpretation 16. Other Interpretations that effectively introduce new recognition and measurement requirements not explicitly covered under existing Standards might not ordinarily be early adopted, particularly where they change established industry practice and/or require substantial effort to implement, e.g. Interpretation 13 dealing with customer loyalty programmes and Interpretation 15 dealing with agreements for the construction of real estate. Accordingly, where an Interpretation is on issue but is not yet mandatory, entities should carefully consider the requirements of each Interpretation and its potential impacts when making a decision whether early adoption is appropriate. |
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Do the annual disclosures extend to pronouncements issued by the IASB/IFRIC where an equivalent Australian pronouncement has not been made by the AASB at the date of signing the financial report?
Yes.
Although not technically required by paragraph 30 of AASB 108, for-profit entities should consider disclosing the information required by that paragraph (where material) in relation to a Standard or Interpretation issued by the IASB/IFRIC where an equivalent Australian Standard or Interpretation has not been made by the AASB at the date of signing the financial report. This approach ensures that the entity can make an unreserved statement of compliance with IFRS as required by paragraph 14 of AASB 101 Presentation of Financial Statements.
Example disclosures The following wording, amended from the wording in our illustrative annual reports, may be adapted in these circumstances: “At the date of authorisation of the financial report, the following Standards and Interpretations, including those Standards or Interpretations issued by the IASB/IFRIC where an equivalent Australian Standard or Interpretation has not been made by the AASB, were on issue but not yet effective:” Where this wording is utilised, the relevant IASB/IFRIC Standards and Interpretations should be cited by their IASB or IFRIC references and names, e.g. IFRIC X, IFRS Y, etc. Any Standards and Interpretations already issued by the AASB should be cited by their Australian references and names. |
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