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Accounting alert 2008/06 - April 2008 AASB meeting highlights

The AASB's April 2008 meeting was a one-day affair. Although the Board focussed mainly on its 2008-2009 business plan and strategy, the meeting also saw the AASB agree to address the issue of duplication of KMP disclosure between Accounting Standards and the law and considered other matters.

In this Accounting alert we focus on the following developments:

Key management personnel disclosures

The AASB agreed to issue an exposure draft that would exempt disclosing entities that are companies from complying with certain key management personnel (KMP) disclosures in AASB 124 Related Party Disclosures.

These companies are already required to provide KMP disclosures in the remuneration report under section 300A of the Corporations Act 2001 and Corporations Regulation 2M.3.03. Existing ASIC Class Order relief will not be available for 30 June 2008 year ends.

Because timing is short, the AASB will approve the exposure draft out-of-session so that it is available by the end of April. The closing date for comments is expected to be 19 May 2008 and the revised Standard is expected be in place by 30 June 2008.

The proposed relief will exempt disclosing entities that are companies from complying with paragraphs Aus25.2 to Aus25.7.2 of AASB 124. However, these entities will still be required to comply with the other 'Aus' paragraphs of AASB 124, dealing with KMP holdings and transactions in options, rights and equity instruments, loans from the entity and other transactions and balances.

Furthermore, disclosing entities that are not companies will continue to be required to comply with all the 'Aus' paragraphs of AASB 124, i.e. continue to provide KMP compensation disclosures under AASB 124 rather than the Corporations Act 2001 and Corporations Regulation 2M.3.03, along with complying with the other requirements of the 'Aus' paragraphs.

In addition, it is proposed that paragraph 16 of AASB 124 will continue to apply. It requires disclosure of KMP compensation in total and for each prescribed category (short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits and share-based payment).

The duplication of KMP disclosures between Accounting Standards and the other requirements of the Corporations Act 2001 has been a long-running issue. The AASB had previously decided to issue an exposure draft on this proposal at its June 2007 meeting (see Accounting alert 2007/12), however this was not proceeded with whilst negotiations continued between the Federal Government Treasury, ASIC and the AASB. The result has been a confusing array of amendments to the law, class order relief and potentially conflicting requirements.

Whilst we welcome the AASB's decision to address the duplication issue for disclosing entities that are companies, we question whether this action goes far enough. KMP disclosures can be controversial, sensitive and sometimes politically charged, e.g. consider the current debate around whether directors of companies should disclose margin lending arrangements over their shares.

KMP disclosures are, in our view, predominantly a corporate governance issue. Any requirements should be developed in a principle-based manner, be flexible enough to deal with changing economic and other circumstances and be cognisant of the need to find a balance between too much and too little disclosure.

The corporate governance arena is current filled with many participants - the Federal Government Treasury, ASIC, ASX and the AASB, amongst others. We do not necessarily believe that Accounting Standards are the best place to deal with corporate governance issues such as KMP disclosures, particularly given the due process requirements of the AASB and the number of other players in this space.

Accordingly, we believe that the AASB should consider withdrawing the Australian-specific KMP disclosure requirements from AASB 124 in their entirety.

Other developments

Topic Overview Comments and more information
Superannuation plans and approved deposit funds (ADFs)

The AASB agreed that accrued members benefits should be recognised as liabilities of the plan or ADF and that the recent puttable instruments amendments should not apply

Further consideration will be given to whether a deficiency in a fund gives rise to an asset of the fund, and if so, its nature and how it should be measured

Accounting alert 2008/03 (includes links to previous discussions on this topics)
Interpretations

The AASB considered its submissions on IFRIC D23 Distributions of Non-cash Assets to Owners and IFRIC D24 Customer Contributions

The AASB decided that the subject matter of IFRIC D23 would be better dealt with in the IASB's common control project, or as an amendment to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

In relation to IFRIC D24, the AASB decided that the Draft Interpretation should be narrower in scope and more clearly defined, or the Interpretation should not be issued in its current form.

Comment letters received by the AASB on IFRIC Draft Interpretation D24 Customer Contributions

IAS Plus Newsletter 'IFRIC's D23 (Distributions of Non-cash Assets) and D24 (Assets Contributed by Customers)' 

IAS Plus project page on IFRIC D23 

IAS Plus project page on IFRIC D24 

Planning The AASB discussed its key strategies and business plan for 2008-2009 (in private).  The plan will be publicly released after consideration by the Financial Reporting Council.

More information on above topics can be obtained from the AASB Action Alert (PDF 54kb) for the meeting.

The next meeting of the AASB is scheduled for 21-22 May 2008.

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