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Accounting alert 2008/15 - November 2008 AASB meeting

The AASB's November meeting saw an important concession in the board's ongoing deliberations on differential reporting and further progress in a number of other important projects.

Differential reporting

The AASB redeliberated the proposal in ITC 12 Request for Comment on a Proposed Revised Differential Reporting Regime for Australia and IASB Exposure Draft of a Proposed IFRS for Small and Medium-Sized Entities that all reports prepared in accordance with Australian Accounting Standards should be regarded as general purpose financial reports.

The Board tentatively decided that while Accounting Standards apply to general purpose financial statements, not all financial statements prepared in accordance with Accounting Standards, other legislation, or otherwise, are general purpose financial statements.

The Board also tentatively agreed that 'preparation in accordance with Accounting Standards' means the application of all Accounting Standards and not a subset of those Standards. The term 'Accounting Standards' may, at least in the future, mean the full suite of AASB standards, a future Australian version of IFRS for Private Entities or any other suite of reporting requirements that might be promulgated by the AASB for the preparation of general purpose financial statements.

The AASB's decision is consistent with the view of the IASB that the mere public filing of financial statements does not make them general purpose financial statements. The Basis for Conclusions on IAS 1 Presentation of Financial Statements (2007) notes that defining 'general purpose financial statements' to include 'a regulatory filing' as originally proposed by the IASB would "partially affect some entities (such as small private companies and subsidiaries of public companies with no external users of financial reports that are required by law to place their financial statements on a public file". Accordingly, the IASB decided that it "did not intend to extend the definition of general purposes financial statements" and used a definition for general purpose financial statements in the revised IAS 1 (and reproduced in AASB 101) that focuses on user needs.

The practical implication of the AASB's decision is not yet clear, as there is no suggestion that the AASB is backing away from its decision to eliminate the 'reporting entity' concept from Accounting Standards. However, this decision is an important concession from the AASB and will bring some hope to those entities that currently prepare special purpose financial statements.

More information

Other topics

Continuing with our practice for recent meetings, a summary table of the other matters discussed at the meeting is immediately below. Given the large number of items discussed, they have been grouped under relevant topic headings.

Topic Overview Comments and more information
Australian superannuation contributions tax The AASB considered a draft Interpretation dealing with whether, and if so how, future tax on future contributions should be included in the cash flows used in the measurement of a defined benefit liability under AASB 119 Employee Benefits.

This has been a long-running project of the AASB and is getting closer to finalisation by the AASB. If proceeding with an Interpretation, the AASB will need to take care to not undermine Australia's compliance with IFRS in its requirements. The compliance and interaction with other requirements such as Interpretation 14 and Interpretation 1019 will need careful consideration.

Agenda paper 9.4 Interpretation 10XX Australian Superannuation Contributions Tax (PDF 120kb)

Assets backing insurance liabilities The AASB is to develop an exposure draft that will propose that entities applying AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts cannot take advantage of the reclassifying requirements introduced into AASB 139 Financial Instruments: Recognition and Measurement by AASB 2008-10. This proposed ED is a consequence of the AASB's necessity to quickly release AASB 2008-10 in response to the IASB's release of equivalent amendments.
Presentation of financial statements The AASB is requesting comments on the IASB/FASB Discussion Paper Preliminary Views on Financial Statements by 24 March 2009 and will hold roundtables in Canberra, Sydney and Melbourne early in March 2009.

IAS Plus Newsletter 'Presentation of financial statements' (PDF 208kb)

Agenda paper 15.2 IASB Discussion Paper Preliminary Views on Financial Statement Presentation (PDF 1120kb)

Improvements to Australian Accounting Standards The AASB considered submissions on ED 165 Improvements to Australian Accounting Standards and agreed to finalise its submission to the IASB out of session.

Agenda paper 14.3 Submissions on ED 165 Proposed Improvements to Australian Accounting Standards (PDF 482kb)

Agenda paper 14.4 ED 165 Improvements to Australian Accounting Standards (PDF 300kb)

Business combinations for not-for-profit entities The AASB made AASB 2008-11 Amendments to Australian Accounting Standard - Business Combinations Among Not-for-Profit Entities, which confirms that AASB 3 Business Combinations (2008) must be applied by not-for-profit entities, other than where there is common control. However, the existing requirements for local governments have been 'rolled over'.

This Amending Standard implements the decisions made by the AASB at the joint meeting of the AASB and FRSB(NZ) held in July 2008.

Accounting alert 2008/10

Accounting alert 2008/03

Superannuation plans and approved deposit funds The AASB continued its deliberations on the draft exposure draft, considering the recognition of benefit liabilities, measurement of non-controlling interests, disclosures and the particular requirements around 'sub-plans'. Agenda paper 3.5 ED 16X Superannuation Plans and Approved Deposit Funds (PDF 627kb)
Income from non-exchange transactions The AASB discussed drafting issues concerning a forthcoming exposure draft which will be based on IPSAS 23 Revenue from Non-Exchange Transactions (Taxes and Transfers) but use definitions and terminology consistent with Australian Accounting Standards, rather than adopting an 'Aus' paragraph approach.

The AASB supported the view that revenue should be recognised by the transferee when grant monies are received in advance of the period for which they are intended to be used, unless there are performance obligations that could only be satisfied during that period.

The AASB will also need to take care to ensure that the problems with Australia's transition to IFRS are not repeated in developing not-for-profit sector standards based on IPSASB pronouncements.

Related party disclosures by not-for-profit sector entities The AASB considered an issues paper on this topic that will ultimately provide a basis for consultation with constituents in the early stage of this project. Key management personnel disclosures will be dealt with separately from other related party disclosure issues.  
Borrowing costs (IPSASB) The AASB considered its response to the IPSASB on its ED 35 Borrowing Costs, deciding that it would prefer the IPSASB to either better justify its proposed departures from IAS 23 or to develop an approach based on conceptual grounds. Agenda paper 12.3 IPSASB ED 35 Borrowing Costs (PDF 247kb)
Conceptual framework (IPSASB) The AASB considered its approach to the development of a response to the IPSASB on its Conceptual Framework Consultation Paper. The AASB is encouraging the IASB and IPSASB to work together on not-for-profit issues so that their Frameworks are as consistent as possible. The AASB is yet to decide the text of its revised Framework that would applicable to not-for-profit entities. Agenda paper 11.2 IPSASB Consultation Paper Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (PDF 250kb)
Other not-for-profit matters The AASB received an IPSASB report, an update on New Zealand developments around guidelines on modifying IFRSs for not-for-profit entities and a repost on the Financial Reporting Council's Public Sector Workshop held in Canberra on 5 November 2008.  
National Standard Setters (NSS) The Board received a report on a teleconference among NSS about issuing a communiqué supporting the IASB and its efforts in global financial reporting standards

One of the consequences of the global financial crisis is a questioning of the current requirements and procedures of accounting standards. The IASB has faced increased political pressure in recent months (e.g. the circumstances that led to recent amendment to IAS 39 without normal due process) and we expect this to continue in the short-term.

Monthly summary (October 2008) - summary of recent financial reporting developments

Policy Statements The AASB agreed to immediately withdraw Policy Statements PS 1 The Development of Statements of Accounting Concepts and Accounting Standards, PS 2 The AASB Consultative Group, PS 3 AASB Project Advisory Panels and PS 4 International Convergence and Harmonisation Policy. A separate document setting out the AASB's key policies and strategies is to be developed.
Board membership Bruce Porter, Lead Technical Partner of Deloitte in Australia, has been appointed as Acting Chairman of the AASB on a part-time basis pending the appointment of a full time Chairman. -

More information on the above topics can be obtained from the AASB Action Alert (PDF 58kb) for the meeting.

The next meeting of the AASB is scheduled for 17-18 December 2008 in Melbourne.


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