Accounting alert 2010/12 - October AASB meeting
The Australian Accounting Standards Board (AASB) held a two day meeting on 27-28 October 2010, much of it a joint meeting with the New Zealand Financial Reporting Standards Board (FRSB). Amongst other topics, the Boards discussed trans-Tasman convergence and their views on a number of IASB proposals.
The analysis below discusses the highlights from the meeting.
Discussions at the meeting
The AASB and FRSB discussed their proposals for the convergence of Australian and New Zealand accounting requirements. The initial phase is focussed on for-profit entity disclosures and requirements as was proposed in AASB ED 200A/FRSB ED 121 Proposals to Harmonise Australian and New Zealand Standards in Relation to Entities Applying IFRSs as Adopted in Australia and New Zealand and AASB ED 200B/FRSB ED 122 Proposed Separate Disclosure Standards. More information about the proposals can be found in Accounting alert 2010/09.
The majority of those who commented on the exposure drafts supported the high-level objective of harmonisation, however not all of the specific proposals in the exposure drafts were supported by constituents.
Key decisions made at this meeting include:
- Imputation (franking) credits. The Boards agreed to proceed with harmonisation of wording for the disclosure of imputation credits (often termed ‘franking credits’ in Australia)
- Audit fees. The Boards agreed to revise the proposed disclosure requirements for audit fees to overcome concerns raised about scope (particularly the application of the requirements within consolidated groups where subsidiaries are audited by different audit firms to the parent)
- Reconciliation of cash flows to profit or loss. Agreement to retain and harmonise the requirement to reconcile operating cash flows to profit or loss where the ‘direct method’ of presenting cash flows is presented (on the basis of constituent support, the likelihood that the IASB will propose a reconciliation disclosure in its Financial Statement Presentation Exposure Draft and that both Australian and New Zealand currently have the requirement)
- True and fair override. The AASB decided to introduce the ‘true and fair override’ into AASB 101 Presentation of Financial Statements, but only in respect of for-profit entities where this is not precluded by legislation. As the Corporations Act 2001 effectively prohibits a ‘true and fair override’, this decision is likely to have limited practical effect
- Definition of ‘entity’. The AASB decided to delete the Australian definition of ‘entity’ contained in paragraph Aus7.1 of AASB 101 Presentation of Financial Statements, but the Board does not expect this to change current practice
- Related party disclosures. The AASB decided to explore the possibility of deleting the Australian-specific requirements from AASB 124 Related Party Disclosures. Constituent comment noted this was predominantly a corporate governance issue and the requirements are duplicated. The AASB is to liaise with the Corporations and Markets Advisory Committee (CAMAC), which is currently reviewing the requirements surrounding the disclosure of executive remuneration, to inform it of the likely developments regarding AASB 124 and suggest CAMAC broaden its considerations to include year-end disclosures about KMP loans and equity holdings. It is expected the AASB will recommend individual KMP disclosures be transferred into the law if the government decides that they should be retained
The Boards expect to consider draft Amending Standards at their individual meetings in December 2010, with a view to approving finalised standards early in 2011. Staff papers presented at the meeting indicate a likely implementation date of 1 July 2011 for the new requirements.
|The proposals will have the effect of moving the wording in Australian and New Zealand Standards closer to a ‘word for word’ copy of IFRSs, subject to application and other requirements and a number of supplementary Standards (for disclosure and differential reporting purposes). However, even if these initial proposals are implemented, a significant number of ‘Aus’ or ‘NZ’ paragraphs would be retained, particularly in relation to not-for-profit requirements, but also in some for-profit areas.|
The following is a summary of the other matters discussed at the meeting:
Feedback on proposals
The Boards discussed the following topics:
|Proposal||Comments (high-level summary)||More information on proposals|
|IASB Draft Interpretation DI/2010/1 Stripping Costs in the Production Phase of a Surface Mine (AASB only)(||The AASB decided to largely disagree with the Interpretation, due to a lack of apparent diversity in practice, an inappropriate unit of account and lack of clarity on the meaning of ‘stripping campaign’||
IFRS in Focus newsletter (PDF 74k)
|IASB ED/2010/6 Revenue from Contracts with Customers (AASB only)||Support for basic features of the revenue recognition model, but concerns about how the model has been articulated||
IFRS in Focus newsletter (PDF 97kb)
|IASB ED/2010/8 Insurance Contracts||General support for the proposals with some disagreement on specific aspects||IFRS in Focus newsletter (PDF 105kb)|
|IASB ED/2010/9 Leases||Broad support for the lessee model (with cost concerns), preference for derecognition model for lessors||
IFRS in Focus newsletter (PDF 128kb)
|Proposed Amendments to IFRS 1/AASB 1 - IASB ED/2010/10 Removal of Fixed Dates for First-time Adopters (AASB only) and IASB ED/2010/12 Severe Hyperinflation||Consideration of issues identified by staff||
IFRS in Focus newsletter (fixed dates) (PDF 63kb)
IFRS in Focus newsletter (hyperinflation) (PDF65kb)
|IASB ED/2010/11 Deferred Tax: Recovery of Underlying Assets (AASB only)||The AASB decided not to support the proposals||
IFRS in Focus newsletter (PDF 67kb)
|IASB consultation The annual improvement process: Proposals to amend the Due Process Handbook (AASB only)||General support for the proposals with some recommendations to improve clarity||IAS Plus article|
Joint AASB-FRSB meeting
- Service performance reporting – consideration of an updated project plan and need for acceleration of the project
- Income from non-exchange transactions – agreed to develop a model based on the IASB’s proposals in ED/2010/6 Revenue from Contracts with Customers, focussing on how ‘performance obligations’ might be applied in the not-for-profit and public sectors
- Control in the public sector – agreed to prioritise the ‘control’ aspects of this overall project in light of the pending release of a replacement consolidation standard by the IASB
- Financial instruments (IPSASB) – with one exception (for New Zealand only), the Boards agreed not to include the guidance in International Public Sector Accounting Standards (IPSASBs) on financial instruments into Australian and New Zealand standards
- Other matters – IPSASB update and discussion on issues on the application of IAS 12 Income Taxes in New Zealand.
AASB only meeting
- New Amending Standard – the AASB approved AASB 2010-5 Amendments to Australian Accounting Standards to incorporate recent editorial and similar amendments made by the IASB (these are unlikely to have a major impact on the interpretation or application of the affected paragraphs). The new standards applies to annual reporting periods beginning on or after 1 January 2011
- GAAP/GFS harmonisation – continued work on a possible exposure draft
- Post-implementation review of AASB 1049 – exposure draft expected shortly incorporating outcomes from review to date
- Conceptual Framework – the AASB decided, as an interim step, to include the existing not-for-profit guidance in the existing Framework into the Australian equivalent of the recently released chapters of the IASB’s updated Conceptual Framework. The revised Framework is expected to be available by early December and will applicable for annual reporting periods beginning on or after 1 July 2011
- Employee benefits (RDR) – the AASB considered which of the disclosure proposals in IASB ED/2010/3 Defined Benefit Plans should not apply to Tier 2 entities – an exposure draft of these proposals will be published shortly
The next meeting of the AASB is scheduled for 8-9 December 2010 in Melbourne. This will be the last scheduled AASB meeting for the year.