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With the notable exceptions of Interpretations and AASB responses to IASB projects, much of AASB's November 2007 agenda related to public sector and not-for-profit issues.
In this Accounting alert we focus on the following developments:
- Interpretations - Petroleum Resource Rent Tax (PRRT), franked dividend revenue, customer contributions, superannuation contributions tax and service concession arrangements
- public sector and not-for-profit developments - new Standards arising from the review of AAS 27, AAS 29 and AAS 31, possible new not-for-profit entity definition and how not-for-profit entities should apply the forthcoming revised standard on business combinations
- other developments - SMEs, insurance, disclosure of franking credits and more.
Top | Interpretations | Public sector and not-for-profit developments | Other developments
Interpretations
Australian Petroleum Resource Rent Tax (PRRT)
The AASB considered submissions received on proposed Interpretation 10XX Australian Petroleum Resource Rent Tax and confirmed its view that the Australian PRRT is within the scope of AASB 112 Income Taxes. An out-of-session vote on making AASB Interpretation 1003 Australian Resource Rent Tax will now be made.
If made, the Interpretation will apply to financial years ending on or after 30 June 2008, with early adopting permitted. The Interpretation does not deal with how to account for PRRT in accordance with AASB 112, but requires the full application of all its requirements, i.e. definition, recognition, measurement, presentation and disclosure of current and deferred taxes relating to Australian PRRT. There are a number of difficulties in accounting for PRRT under AASB 112.
The AASB has decided to issue Interpretation 1003 following an extensive consultation process. The AASB also liaised with IFRIC staff and they agreed with the AASB that PRRT was within the scope of IAS 12, however the IFRIC staff preferred the AASB refrain from issuing an Australian Interpretation. There is diversity in how Australian PRRT is accounted for in the Australian environment and the AASB felt compelled, under its charter, to issue the Interpretation to ensure compatibility between Australian entities, even though there may be alternative treatments that are potentially equally valid (as confirmed by IFRIC staff). The draft Interpretation makes it clear that the AASB has only considered Australian PRRT. However, because of the hierarchy in AASB 108/IAS 8, it will be difficult to completely 'ring fence' the application of accounting pronouncements. Because of these factors, it will be interesting to see if this Interpretation changes the practice in accounting for other government imposts. Entities that have government imposts imposed on a measure of 'profit' should consider their current accounting in light of the Interpretation, particularly if there is diversity in practice. |
A draft copy of the Interpretation can be downloaded from the AASB web site (PDF 1106kb). A copy of the Deloitte submission to the AASB on draft Interpretation 10XX can be downloaded below.
Other Interpretative developments
Topic | High level overview | More information |
Recognition of franked dividend revenue | The AASB agreed to publish a proposed agenda rejection statement that would state that franked dividends should be accounted for on a net basis, not grossed up for the franking credit received | The Proposed Agenda Rejection Statement (PDF 16 kb) and Issue Proposal (PDF 31 kb) are available on the AASB web site. Comments close on 3 December 2007 See also the related topic below regarding the disclosure of franking credits |
Customer contributions | The IFRIC is expected to issue a draft Interpretation on customer contributions in the near future. The AASB agreed to publish the draft Interpretation on its website and indicate an intention to withdraw Interpretation 1017 should the AASB adopt an IFRIC Interpretation on this topic | IAS Plus project page on the IFRIC customer contribution project |
Superannuation contributions tax | The AASB agreed the questions to be put to an Advisory Panel on this topic | The questions will be placed on the AASB website shortly |
Service concession arrangements - public sector grantors | The AASB received an update on the activities of the Advisory Panel on this topic which is in the process of developing recommendations for consideration by the AASB | Our summary of Interpretation 12 Service Concession Arrangements |
Top | Interpretations | Public sector and not-for-profit developments | Other developments
Public sector and not-for-profit entity developments
New Standards
The AASB decided, subject to staff processing the Board's decisions and undertaking quality control checks, to vote on making the following Standards out-of-session:
The AASB will consider AASB 1051 Land Under Roads at its December 2007 meeting, after amendments are made to clarify its interaction with other Standards and to incorporate revised transitional provisions. A draft version of AASB 1051 (before amendment) can be downloaded from the AASB web site (PDF 124kb).
Not-for-profit entity definition
The AASB considered a draft consultative document Proposed Definition and Guidance for Not-for-Profit Entities, which is based on the New Zealand FRSB's definition and guidance on 'public benefit entities'. A copy of the document considered by the AASB can be downloaded from the AASB web site (PDF 129kb).
A revised document will be considered by the AASB at its December meeting after amendments are made to the preface to more fully explain the AASB's intentions and rationale for the proposals.
Our overview analysis of the proposals can be found in Accounting alert 2007/16.
Business combinations
The AASB considered whether the forthcoming revised AASB 3 Business Combinations would be suitable for not-for-profit entities. The AASB decided to include a statement in the preface to revised AASB 3 stating that it intends to consider the suitability of applying a revised AASB 3 to combinations of not-for-profit entities prior to its mandatory application date.
The application of revised AASB 3 creates an interesting dilemma for the AASB. Revised AASB 3 will be based on revised IFRS 3 Business Combinations, which is a result of the joint IASB/FASB project on business combinations and is expected to be issued this month. The basis for conclusions on the near-final draft of IFRS 3 Business Combinations states 'the IASB does not deal with accounting by not-for-profit organisations, which makes a scope exclusion for such combinations involving those organisations unnecessary'. It is understood that FASB will exclude combinations between not-for-profit organisations or acquisition of for-profit businesses by a not for profit organisation from the scope of its equivalent Standard. This issue is amplified by the fact that many business combinations in the not-for-profit and public sectors occur between mutual entities or by contract alone - transactions which are currently outside the scope of AASB 3 but which are expected to be brought within the scope of the revised IFRS 3/AASB 3. |
More information on the joint IASB/FASB business combinations project can be found on IAS Plus.
Other
The AASB also:
- noted the range of views on whether GAAP/GFS harmonisation principles should be applied to entities (including government departments) within the general government sector of the Federal, State and Territory Governments, and decided on further consultation
- discussed the possible amendments to the GFS manual, noting that they would have minimal impact on the AASB 1049 Whole of Government and General Government Sector Financial Reporting and that any amendments were not urgent
- noted that the IPSASB is expected to issue a consultation paper on service concession arrangements, deciding to issue the document and invite comments from constituents.
Top | Interpretations | Public sector and not-for-profit developments | Other developments
Other developments
The AASB also discussed the following topics:
Topic | Overview | Comments and more information |
IASB SME project and AASB differential reporting proposals | The AASB continued its consideration of the submissions received on the proposed IFRS for SMEs and finalised its submission to the IASB The differential reporting proposals will be considered further at the December 2007 meeting | AASB draft submission (from the AASB website, PDF 73kb) Podcast on AASB proposals Accounting alert 2007/15 - our views on the AASB differential reporting proposals |
Insurance contracts | The AASB finalised its submission to the IASB on its discussion paper | AASB draft submission (from the AASB website, PDF 446kb) IAS Plus Newsletter (PDF 1282kb) IAS Plus project page |
Franking credit disclosures | The AASB received a presentation on suggested improvements to the disclosure of franking credits requirements. The AASB requested staff to prepare an issues paper for consideration at a future meeting | The presentation recommended franking credit disclosures be amended to require a detailed schedule of franking credits movements during the period |
AASB membership | The AASB expressed appreciation for the contribution made to its activities by Brett Kaufmann on his resignation as a member of the AASB at the conclusion of the meeting | |
More information on above topics can be obtained from the AASB Action Alert (PDF 41kb) for the meeting.
The next meeting of the AASB is scheduled for 12-13 December 2007.
Top | Interpretations | Public sector and not-for-profit developments | Other developments
