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The June 2007 AASB was only a one day affair but was not without its interesting developments. The AASB decided to propose the elimination of certain KMP Australian paragraph disclosures from Accounting Standards, made the seventh Amending Standard for 2007 and advanced a number of other projects.
In this Accounting alert we focus on the following developments:
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Key management personnel disclosures
The AASB debated the merits of paragraphs Aus25.1-Aus25.9.3 of AASB 124 Related Party Disclosures in light of recent amendments to the Corporations Act 2001 made by the Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007.
The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 received Royal Assent on 28 June 2007. Accordingly, the amendments to the financial reporting thresholds for small/large proprietary companies and the changes to the distribution of financial reports are effective for 30 June 2007 financial reports. For more information, refer to Accounting alert 2007/11. |
The Board agreed to develop an Exposure Draft that would propose deleting the KMP-related Aus paragraphs from AASB 124 and include a Basis for Conclusions that notes the role of government policy in matters of governance and the Board’s focus on consistency with IFRSs.
The elimination of these requirements from AASB 124 is consistent with the AASB’s recent direction of moving towards strict consistency with IFRS for for-profit entities and leaving policy matters (such as the reporting mandate and corporate governance issues) for the government to determine.
However, the ‘pure’ IFRS KMP disclosure requirements will remain in AASB 124 to ensure Australia’s compliance with IFRS. This would mean that a table of aggregate KMP compensation will still be required to be included in the notes to the financial statements, but the details of individual compensation and other matters would only be included in the remuneration report.
Due to the drafting of the Corporations Act 2001 requirements, it is possible that the aggregate compensation disclosed in the remuneration report would not agree to the amounts disclosed as these requirements do not necessarily accord with the measurement basis under IFRS.
We strongly support the AASB’s decision to remove the Aus paragraph KMP disclosures from AASB 124. Reconciling the differences between Accounting Standards and the law on KMP compensation has been a long running issue, causing uncertainty for entities and their auditors. Having all the KMP requirements in only one place will represent a substantial improvement in this matter. |
More information
For more information, see the following:
- Memorandum dated 13/6/07 re "Key Management Personnel Disclosures" as considered by the AASB at the meeting (from the AASB website, PDF 29 kb – this include a line by line analysis of the differences between AASB 124 and the Corporations Act 2001)
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Seventh Amending Standard for 2007
The AASB made AASB 2007-7 Amendments to Australian Accounting Standards, which is applicable to annual reporting periods beginning on or after 1 July 2007. Whilst this Amending Standard is largely editorial, it changes six Standards, as follows:
| Standard | Nature of the amendments |
| AASB 1 | Editorial amendment to terminology in paragraph 34B |
| AASB 2 | Editorial amendment to Implementation Guidance |
| AASB 4 | Deletion of the Implementation Guidance |
| AASB 107 | Removal of the Aus paragraph which encourages the adoption of a particular format for the cash flow statement |
| AASB 128 | Editorial amendment to paragraph 35 |
This seventh Amending Standard for 2007 brings to the total to more than 20 since Australia’s transition to A-IFRS. The ability of entities to keep track of the numerous changes made to Standards and their applicability is a key challenge for entities under A-IFRS.
More information
For more information, see the following:
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Other developments
Superannuation fund accounting
The AASB continued its debate around the appropriate accounting requirements for superannuation entities.
The AASB appears to have all but concluded that superannuation entities should prepare consolidated financial statements. The key issue debated at this meeting was whether these consolidated financial statements should be prepared using a fair value model or in accordance with the ‘normal’ IFRS requirements of AASB 3 Business Combinations and AASB 127 Consolidated and Separate Financial Statements. A third option of a proportionate consolidation model was rejected.
The use of a fair value model would presumably result in the recognition of internally generated goodwill and intangible assets, reminiscent of the ‘EMVONA’ asset recognised by insurance entities under A-GAAP prior to the transition to A-IFRS.
The Board will consider a revised version of a draft consultation paper on these matters at its August 2007 meeting.
The AASB’s project on financial reporting by superannuation plans is both complex and important, particularly given the growing superannuation industry in Australia and the likely ‘once in a generation’ opportunity to amend accounting in this area. The difficulties issues faced by the AASB are evident in the long time frame being tentatively considered, with final proposals not expected before 2009. However, constituent consultation is expected during the development of the proposals and affected entities should closely monitor the AASB’s project. |
More information
For more information, see the following:
Accounting alert 2006/12 – earlier AASB discussions on how superannuation funds should account for assets and liabilities
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Public sector developments
The AASB approved a Supplement to ED 155 Financial Reporting by Whole of Governments – Illustrative Example.
The Illustrative Example is expected to be made available on the AASB website shortly. The comment period for both ED 155 and the Illustrative Example ends on 17 August 2007.
More information
For more information, see the following:
ED 155 Financial Reporting by Whole of Governments (from the AASB web site, PDF 251 kb)
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Interpretations
The AASB:
noted that the Petroleum Resource Rent Tax (PRRT) Advisory Panel had made its recommendation (for comment by 16 July 2007)
decided to write to the IASB encouraging it to include emission rights on its agenda (the New Zealand FRSB has decided to do the same)
agreed to refer to an Advisory Panel the issue of whether contributions taxes should be factored into the calculation of defined benefit liabilities and assets of employers under AASB 119 Employee Benefits.
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Insurance contracts
An educational session was held for the Board to discuss the proposals in the IASB Discussion Paper Preliminary Views on Accounting for Insurance Contracts. The Board also decided to circulate the staff notes from the insurance roundtables held on 7 and 8 June.
More information
For more information, see the following:
Papers considered by the AASB at this meeting (from the AASB web site):
Agenda Paper 3 - Memorandum dated 20/6/07 re Insurance Contracts (PDF 15kb)
Agenda Paper 3.2 - AASB Preface to IASB Preliminary Views Paper (PDF 95kb)
Agenda Paper 3.4 - Presentation on "Discussion Paper: Preliminary Version on Insurance Contracts" (PDF 521kb)
Agenda Paper 3.5 - Recommendation 8 of the HIH Royal Commission (PDF 12kb)
Agenda Paper 3.6 - Examples relating to the IASB Model re Insurance Contracts (PDF 57kb)
IAS Plus Newsletter "Phase II of IFRS for Insurance Contracts: IASB Discussion Paper" (PDF 1,282kb)
More information on above topics can be obtained from the AASB Action Alert (PDF 28kb) for the meeting.
The next meeting of the AASB is scheduled for 1-2 August 2007.
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