Accounting alert 2010/01- February AASB meeting highlights
The promise of substantial change
The AASB kicked off the year setting timelines and objectives in a number of key projects, many of which are due to be completed in the near term: the new differential reporting regime, New Zealand convergence and superannuation fund accounting.
Timetable set for finalisation and implementation
The AASB has agreed to work towards the issue of the final exposure draft on the ‘reduced disclosure regime during February, with the objective of finalising revised standards in time for early adoption in 30 June 2010 financial reports.
The AASB agreed that the new regime will apply to periods beginning on or after 1 July 2012. For companies with June reporting dates, this means the first financial reports mandatorily prepared in accordance with the new requirements will be for 30 June 2013.
|Although the commencement date appears quite distant, the grace period is not a long as it appears. If the proposed implementation date is retained, entities currently preparing special purpose financial reports will be required to prepare additional disclosures (such as movement schedules) in many cases from 1 July 2011. Affected entities should carefully consider the need to adapt systems in time to accumulate the new information required from around this date.|
Could transitional issues derail the project?
The creation of the new ‘reduced disclosure regime’ (RDR) highlights an interesting issue around transitional arrangements and the possible application of AASB 1 First-time Adoption of Australian Accounting Standards.
AASB 1 links its application to entity making an unreserved statement of compliance with Australian Accounting Standards or International Financial Reporting Standards (IFRSs). IFRS 1 First-time Adoption of International Financial Reporting Standards merely mentions the entity making an unreserved statement of compliance with IFRSs.
As a result, a technical reading of the standards would require an entity moving to the ‘Tier 1’ reporting regime (i.e. full IFRS with all disclosures) to apply AASB 1/IFRS 1 on transition, notwithstanding that the entity’s previous reports (special purpose financial reports or ‘Tier 2’/RDR reports) were fully compliant with the recognition and measurement requirements of IFRSs.
It will be interesting to see how the AASB proposes to deal with these transitional issues in the forthcoming exposure draft.
|The AASB may need to consider requesting the IASB to amend IFRS 1 to accommodate these circumstances to ensure Australia’s ongoing full compliance at the ‘Tier 1’ level.|
- Accounting alert 2009/11 – our summary of the key differential reporting and Corporations Act proposals
- Accounting alert 2009/12 – additional discussions and analysis of the AASB’s decisions on this topic at its December meeting
The other topics discussed at the meeting were as follows:
- Australia-New Zealand convergence - An exposure draft is expected by the end of the March, which will propose changes to converge Australian and New Zealand accounting standards in relation to for-profit entities. Phases two and three will consider not-for-profit entities and differential reporting
- Treasury corporate reporting reform proposals –AASB submission will include comments about parent entity information, application of the ‘solvency test’, the IFRS declaration and other matters
- Issued AASB 2010-1 Amendments to Australian Accounting Standards – Limited Exemption from Comparative AASB 7 Disclosures for First-time Adopters, applicable to annual reporting periods beginning on or after 1 July 2010
- IASB Update – preliminarily concerns expressed about the liabilities measurement project (need for consistent measurement of all liabilities and inclusion of profit and risk margins), noted the IASB/FASB discussion on emissions trading
- ASIC Consultation Paper 126 Facilitating debt raising – directed staff to discuss the proposals in relation to issues related to general purpose financial statements
- Management commentary – consideration of the AASB submission, issues identified include the need to update the Conceptual Framework, need for guidance rather than a standard, impact on safe harbour provisions for forward-looking information, and audit requirements
- National cooperatives law submission – the AASB is to make a brief submission on the proposed revised reporting regime for cooperatives in light of its differential reporting project
- GAAP/GFS harmonisation – a possible new approach was discussed, aimed at substantively improving the financial reporting of, and comparability between, entities within the General Government Sector. The revised proposals would requiring re-exposure
- Work program – the AASB considered correspondence from the Australasian Council of Auditors-General (ACAG) and the Heads of Treasuries Accounting and Reporting Advisory Committee (HoTARAC) on possible future agenda topics
- Related party disclosures – consideration of a draft project plan and consideration of whether AASB 124 Related Party Disclosures should be applied
- IPSASB – update on December meeting, impact of disclosures included in new financial instruments standards (to be considered in light of the Process for Modifying IFRSs for PBE/NFP)
- Superannuation reporting – continuation of deliberations of the proposals in ED 179 Superannuation Plans and Approved Deposit Funds – largely confirming the proposals in relation to recognition and measurement, presentation of financial statements, measurement of defined benefit members’ accrued benefits, and disclosures. Agreed to proceed with the project notwithstanding APRA deferral of its related review and requirements
The next meeting of the AASB is scheduled for 17 March 2010, a joint meeting with the New Zealand Financial Reporting Standards Board (FRSB) in Auckland.