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Accounting alert 2008/11 - August 2008 AASB meeting highlights

At the AASB's August 2008 meeting, the AASB played 'catch up' with the IASB and also advanced its own project plan, approving two Standards, two Interpretations and two exposure drafts. It also made substantial progress towards the issue of an exposure draft on superannuation plans and approved deposit funds (ADFs).

In this Accounting alert we focus on the following developments:

New pronouncements

We will update our What's new in financial reporting for June 2008 guide when the AASB publicly releases the documents referred to below. Click here to access the What's new guide .
Playing catch up with the IASB

The AASB approved the issue of a number of pronouncements equivalent to those released recently by the IASB.

As we're previously covered these pronouncements in our Accounting alerts and IAS Plus Newsletters, in this Accounting alert we provide an overview summary of the new pronouncements and links to more information:

Pronouncement Comments and more information
AASB 2008-8 Amendments to Australian Accounting Standards - Eligible Hedged Items

Clarifies the hedge accounting provisions of AASB 139 to address inflation and one-sided risks in a financial hedged item.

Applicable to annual reporting periods beginning on or after 1 July 2009.

 IAS Plus Newsletter (PDF 140kb) 

 IAS Plus project page 

 Agenda Paper 4.2 'Draft AASB 2008-8 Amendments to Australian Accounting Standards - Eligible Hedged items' (AASB website, PDF 171kb) 

Interpretation 15 Agreements for the Construction of Real Estate

Clarifies when an agreement for the construction of real estate meets the definition of a 'construction contract'.

Applicable to annual reporting periods beginning on or after 1 January 2009.

  IAS Plus Newsletter (July 2008, PDF 133kb) 

 IAS Plus project page 

 Agenda Paper 5.4 'Draft AASB Interpretation 15 Agreements for the Construction of Real Estate'  (AASB website, PDF 537kb) 

Interpretation 16 Hedges of a Net Investment in a Foreign Operation

Provides guidance on net investment hedging.

Applicable to annual reporting periods beginning on or after 1 October 2008.

 IAS Plus Newsletter (July 2008, PDF 122kb) 

 IAS Plus project page 

 Agenda Paper 5.6 'Draft AASB Interpretation 16 Hedges of a Net Investment in a Foreign Operation' (AASB website, PDF 617kb) 

ED 165 Proposed Improvements to Australian Accounting Standards

The exposure draft includes 12 separate proposed amendments impacting eight different Standards. The proposed guidance on agent vs. principal may have implications for not-for-profit entities.

Comments on the Australian ED close on 20 October 2008.

 IAS Plus Newsletter (August 2008, PDF 146kb) 

 Agenda Paper 6.2 'Draft AASB Preface to IASB ED' (PDF 48kb) 

 Agenda Paper 6.3 'IASB Exposure Draft of Proposed Improvements to IFRSs' (PDF 502kb) 

ED 166 Simplifying Earnings per Share: Proposed Amendments to AASB 133

The proposals will be seen by many as a welcome simplification to many aspects of the EPS calculation.

Comments on the Australian ED close on 31 October 2008.

 IAS Plus Newsletter (August 2008, PDF 146kb) 

 Agenda Paper 6.5 'Draft AASB Preface to IASB ED' (AASB website, PDF 242kb) 

 Agenda Paper 6.6 'IASB Exposure Draft Simplifying Earnings per Share' (AASB website, PDF 1.06MB) 

Concise financial reporting

The AASB approved a revised AASB 1039 Concise Financial Reports, which includes amendments to achieve consistency with the requirements of AASB 101 Presentation of Financial Statements (September 2007) and AASB 8 Operating Segments. A draft copy of the revised Standard is available as Agenda Paper 7.3 (PDF 105kb) on the AASB website.

The revised Standard will apply to annual reporting periods beginning on or after 1 January 2009. Early adoption will be permitted, but we understand that entities will be required to adopt AASB 101 and AASB 8 at the same time.

The number of entities that are producing concise financial reports appears to be decreasing, especially after Australia's transition to IFRS and as a result of amendments to the member financial reporting requirements under the Corporations Act 2001. Accordingly, we understand that the AASB is discussing with Treasury whether the concise reporting requirements should be retained in the Corporations Act.

In the event that the concise reporting requirements are retained, we also understand that the AASB may undertake a comprehensive project on the concise reporting standard to bring it more into line with recent developments and to align the information presented more closely with shareholder interests.

Superannuation plans and approved deposit funds (ADFs)

Much of the AASB's one-day meeting was devoted to finalising a number of issues in preparation for the release of an exposure draft that will propose a replacement Standard for AAS 25 Financial Reporting by Superannuation Plans.

The tentative decisions made at this meeting covered a vast array of topics, from recognition and measurement to presentation and disclosure.

Some of the key highlights included the following:

  • A decision that superannuation contributions, transfers and rollovers are not in the nature of revenues (similarly benefit payments are not in the nature of expenses)
  • The nature of the financial statements that must be presented, including a statement of changes in members' accrued benefits
  • The establishment of a principle that assets and liabilities should be recognised by reference to other applicable Standards, but measured at fair value adjusted for estimated costs to sell
  • Determining exceptions to the requirement to measure based on fair value for income taxes and members' accrued benefits
  • A requirement to prepare consolidated financial statements only, in which the recognised assets and liabilities of a subsidiary are measured at fair value adjusted for estimated costs to sell and a 'balancing item' is recognised representing the difference between the market value of a subsidiary and the fair value of its recognised net assets (this may mean for example that intangible assets of a subsidiary would only be required to be measured at fair value adjusted for estimated costs to sell if they are recognised in the subsidiary's financial statements)
  • Disclosures of assumptions, uncertainties and risks but not the disclosure of a management expense ratio.

For more information, see the following agenda papers considered at the meeting (from the AASB website):

More information on the above topics can be obtained from the AASB Action Alert (PDF 51kb) for the meeting.

The next meeting of the AASB is scheduled for 24 September 2008 in Melbourne. This will be a one-day meeting, with an additional meeting now scheduled for 10 October 2008.

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